[STRONG LOGO]
THE STRONG
INCOME FUNDS
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SEMI-ANNUAL REPORT o APRIL 30, 1999
[PICTURE OF STRONG FUNDS BUILDING]
The Strong Corporate Bond Fund
The Strong Government Securities Fund
The Strong High-Yield Bond Fund
The Strong Short-Term Bond Fund
The Strong Short-Term High Yield Bond Fund
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Strong Investor,
The other day, in the space of less than 24 hours, you could have heard that:
o The bull-market run for big Blue Chip stocks is over.
o The bull-market run for big-company stocks could last another five years.
o Small cap stocks will outperform big-company stocks for the next 10
years.
o Small-caps will lag large caps for the foreseeable future.
o Inflation is coming back with a vengeance.
o There's no real sign of inflation on the horizon.
o Rates will rise for the rest of the year.
o The Fed has no plans to touch rates for the rest of 1999.
o Asia is on the mend.
o Asia is still in the tank.
Interestingly, all of those observations were all provided by well-respected
professionals in the investment community -- which goes to show that in the
world of investing, even smart people differ. Nobody has a corner on the market
for insight but practically everyone has an opinion. And there are more ways
than ever today to share your convictions. Technology has seen to that.
Nowadays, information travels faster than the speed of thought, which is both a
blessing and a curse. On the one hand, it's wonderful to have such resources
literally at the tip of your fingers. On the other hand, it's overwhelming to
have so much information, much of it conflicting, coming at you like a bullet
train.
The trick is to have a plan that will keep you on the right financial track.
Figure out where you're going, how much time you have to get there, and
calculate your tolerance for risk. Then set your financial goals and stick with
them. Don't get derailed by the whirl of information that technology offers.
Meanwhile, day trading is fast replacing baseball as the national pastime. If
you believe just a small percentage of what you read, anyone with a laptop and a
modem is practically guaranteed financial independence overnight. Don't believe
it. There is a mountain of research out there that demonstrates conclusively
that the success rate of investors day trading in the securities and commodities
markets is pretty low.
Money--relative to history--just isn't that easy to make, or keep.
Do you want to increase your chances for financial success? Set your goals.
Devise an intelligent plan that suits your profile. Then discipline yourself to
ignore all that informational clutter.
The realization of long term financial goals requires a lot of planning and even
more patience.
/s/Dick
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THE STRONG
INCOME
FUNDS
--------------------------------------------------
SEMI-ANNUAL REPORT o APRIL 30, 1999
TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong Corporate Bond Fund ..........................................2
The Strong Government Securities Fund ...................................4
The Strong High-Yield Bond Fund .........................................6
The Strong Short-Term Bond Fund .........................................8
The Strong Short-Term High Yield Bond Fund .............................10
BOND GLOSSARY ............................................................12
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Corporate Bond Fund ......................................13
The Strong Government Securities Fund ...............................16
The Strong High-Yield Bond Fund .....................................18
The Strong Short-Term Bond Fund .....................................20
The Strong Short-Term High Yield Bond Fund ..........................24
Statements of Assets and Liabilities ...................................26
Statements of Operations ...............................................27
Statements of Changes in Net Assets ....................................28
Notes to Financial Statements ..........................................31
FINANCIAL HIGHLIGHTS .....................................................34
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==============
THE STRONG CORPORATE BOND FUND
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FUND
HIGHLIGHTS
o For the six months ended April 30,1999, the Strong Corporate Bond Fund
produced a total return of 3.68% versus 3.05% for the Lehman Brothers
Corporate Bond Index.*
o The Baa corporate bond market outperformed the Treasury market by 489 basis
points on a relative basis.
o The large divergences in returns between different industries and issuers
allowed our team to add excess returns by rotating toward undervalued
names, such as Starwood, Qwest, and Occidental Petroleum.
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AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 4-30-99
1-year 5.84%
5-year 10.52%
10-year 7.72%
Since Inception 9.67%
(on 12-12-85)
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PORTFOLIO STATISTICS
As of 4-30-99
30-day annualized
yield(2) 6.53%
Average maturity(3) 11.9 years
Average
quality rating(4) BBB
PERSPECTIVES
FROM THE MANAGERS
/s/Jeffrey A. Koch /s/John T. Bender /s/Ivor Schucking
Jeffrey A. Koch John T. Bender Ivor Schucking
Portfolio Co-manager Portfolio Co-manager Portfolio Co-manager
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U.S. fixed income markets have quickly reversed the price movements that were
brought about by the global credit contraction in 1998. Investors no longer
believe that the Federal Reserve Board will need to ease monetary policy to
avert a recession. The liquidity premium formerly priced into the Treasury
market is no longer present. And this renewed investor confidence has led to an
historic outperformance of corporate bond prices relative to Treasury bond
prices.
Over the past six months, U.S. Treasury prices declined and yields rose across
the yield curve. At the same time, corporate bonds quietly outperformed
Treasuries. In fact, some corporate bond prices actually increased during the
period.
The divergences of returns among industries and individual companies has been
extreme, and has enabled us to increase the Fund's return by rotating industries
and identifying undervalued companies. Many of our best-performing bonds were
found in out-of-favor industries such as energy and lodging.
A good example is our recent investment in Starwood Hotels and Resorts, one of
the largest hotel and gaming companies in the world. Their corporate bonds had
performed very poorly in 1998 due to a debt-financed acquisition of ITT Corp.,
which lowered their credit ratings to Ba1/BB. We began to purchase the debt with
market yields that were in excess of four full percentage points greater than
-------------------------------------
...RENEWED INVESTOR
CONFIDENCE HAS
LED TO A HISTORIC
OUTPERFORMANCE OF
CORPORATE BOND PRICES
RELATIVE TO TREASURY
BOND PRICES.
-------------------------------------
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1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2 Yields are historical and do not represent future yields, which will
fluctuate.
3 The Fund's average maturity includes the effect of futures, options and
when-issued securities.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
2
<PAGE>
U.S. Treasuries of comparable maturity. The rationale behind the investment was
that high occupancy levels and modest room rate increases would lead to improved
cash flow and debt reduction.
We also analyzed the potential asset value in the company's hotel and gaming
franchises, which convinced us that they would be both willing and able to sell
their gaming assets to reduce debt. In April, Starwood announced an agreement to
sell their gaming franchise for $3.1 billion. Proceeds from this sale will be
used to reduce debt. The improved prospects for Starwood credit ratings have
caused the bonds to improve in price by nearly 10 basis points versus U.S.
Treasuries of comparable maturity. There are very few opportunities like this in
a given year. Capitalizing on these types of situations is a way we try to
generate attractive returns in your Fund.
Looking forward to the remainder of 1999, we anticipate a generally stable
interest rate environment underpinned by a continuation of generally stable
consumer price inflation. We continue to feel that the best opportunities for
the fixed income markets reside in the U.S. corporate bond sector. Thank you for
your continued confidence in the Strong Corporate Bond Fund and our investment
strategy.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-12-85 to 4-30-99
[GRAPH]
THE STRONG Lehman Brothers Lipper Corporate
CORPORATE Corporate Baa Debt Funds BBB
BOND FUND Bond Index* Rated Index*
11-85 10,000 10,000 10,000
12-85 10,300 10,162 10,184
12-87 13,997 12,323 11,882
12-89 15,800 15,521 14,342
12-91 17,013 19,497 17,909
12-93 21,732 24,087 21,839
12-95 26,892 28,617 25,052
12-97 31,752 33,072 28,800
4-99 34,410 35,582 30,681
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Lehman Brothers Corporate Baa Bond Index and the Lipper Corporate Debt Funds BBB
Rated Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares. To equalize the time periods, the indexes' performance was
prorated for the month of December 1985.
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* The Lehman Brothers Corporate Baa Bond Index is an unmanaged index
comprised of all issues within the Lehman Brothers Corporate Bond Index
that are rated Baa by Moody's Investors Services, Inc. The Lipper Corporate
Debt Funds BBB Rated Index is an equally-weighted performance index of the
largest qualifying funds in this Lipper category. Source of the Lehman
index data is Standard & Poor's Micropal. Source of the Lipper index data
is Lipper Inc.
YOUR FUND'S
APPROACH
THE STRONG CORPORATE BOND FUND INVESTS FOR HIGH CURRENT INCOME WITH MODERATE
SHARE PRICE FLUCTUATION. THE FUND IS DESIGNED FOR LONGER-TERM INVESTORS SEEKING
HIGHER INCOME THAN SHORTER-TERM BONDS OFFER AND WHO ARE WILLING TO ACCEPT
MODERATELY HIGHER SHARE PRICE CHANGES. THE FUND INVESTS PRIMARILY IN INVESTMENT
GRADE CORPORATE BONDS, BUT MAY INVEST UP TO 25% OF ITS ASSETS IN ANY OTHER BOND
CATEGORIES, INCLUDING GOVERNMENT AND MORTGAGE-BACKED BONDS. NORMALLY, THE FUND'S
AVERAGE MATURITY WILL BE BETWEEN 7 AND 12 YEARS, WHICH MEANS ITS SHARE PRICE HAS
HEIGHTENED SENSITIVITY TO CHANGES IN INTEREST RATES.
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MARKET
HIGHLIGHTS
o After aggressive rate reductions last fall, investors regained confidence
in the corporate market. The global credit contraction further faded from
prominence as economic uncertainty abroad had little lasting impact on U.S.
fixed income markets.
o As the U.S. economy continued to grow faster than Wall Street expectations,
investors began to realize that further reductions in the federal funds
rate were unlikely, which led to the increase in market interest rates
during the period.
o November was the best month on record for relative corporate bond
performance. Corporate bonds outperformed Treasury securities of equal
maturity by 221 basis points in November.
3
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=====================
THE STRONG GOVERNMENT SECURITIES FUND
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FUND
HIGHLIGHTS
o For the six months ended April 30,1999, the Strong Government Securities
Fund produced a total return of 0.26% versus 0.69% for the Lehman Brothers
Aggregate Bond Index.*
o Strong U.S. economic growth and an easing of the global credit contraction
caused interest rates to rise across the yield curve.
o During the period, the Fund's interest rate profile was kept fairly
constant, with a modestly defensive bias. However, we were able to add
value by increasing our exposure to the mortgage-backed securities market
and off-the-run Treasury bonds.
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AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 4-30-99
1-year 5.69%
5-year 7.81%
10-year 8.76%
Since Inception 8.60%
(on 10-29-86)
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PORTFOLIO STATISTICS
As of 4-30-99
30-day annualized
yield(2) 5.42%
Average maturity(3) 7.1 years
Average
quality rating(4) AAA
PERSPECTIVES
FROM THE MANAGERS
/s/ Bradley C. Tank /s/ Thomas Sontag
Bradley C. Tank Thomas Sontag
Portfolio Co-manager Portfolio Co-manager
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Over the past six months, U.S. fixed income markets have quickly reversed much
of the price movements brought about by the global credit contraction in 1998.
Investors no longer believe that the Federal Reserve Board will need to ease
monetary policy to avert a recession. The liquidity premium formerly priced into
benchmark Treasury notes is no longer present. Mortgage securities have
outperformed Treasury securities as markets have continued to move back towards
more normal price relationships and investors have started to seek
higher-yielding assets.
U.S. Treasury prices declined and yields rose across the yield curve as
investors became convinced that the federal funds rate was unlikely to continue
falling. Two-year Treasury yields increased by 93 basis points to 5.05%. 10-year
yields increased by 74 basis points to 5.35%.
During the period, our interest-rate risk was held relatively constant, with a
slightly defensive bias versus the benchmark. In addition, we increased the
Fund's total return through sector rotation and yield-curve trading strategies.
By adding to our mortgage exposure, we were able to increase the yield on the
Fund and avoid some of the price declines experienced in the Treasury market as
mortgage securities generally declined less in price than Treasury securities of
similar maturity.
-------------------------------------
...WE INCREASED
THE FUND'S
TOTAL RETURN
THROUGH SECTOR
ROTATION AND
YIELD-CURVE
TRADING STRATEGIES.
-------------------------------------
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1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2 Yields are historical and do not represent future yields, which will
fluctuate.
3 The Fund's average maturity includes the effect of futures and options.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
4
<PAGE>
We were also able to add value by adjusting the maturity profile of the Fund.
For example, last fall, we sold 30-year current coupon Treasury securities and
bought Treasury bonds maturing in 22 years. Since year-end, the yield on the
22-year bond has increased by 15 basis points less than the 30-year bond. The
decrease in the yield differential on the two securities caused the 22-year bond
to outperform the 30-year bond by approximately two points.
By actively managing our sector weights and yield-curve exposure, we have added
additional returns to the portfolio without a significant increase in portfolio
risk. These types of strategies are constantly reviewed as part of our daily
investment process.
Thank you for your continued investment in the Fund and the opportunity to help
you pursue your financial objectives.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 10-29-86 to 4-30-99
[GRAPH]
THE STRONG Lehman Brothers Lipper General U.S.
GOVERNMENT Aggregate Government
SECURITIES FUND Bond Index* Funds Index*
9-86 10,000 10,000 10,000
12-86 10,218 10,187 10,171
12-88 11,683 11,294 10,903
12-90 13,953 14,092 13,239
12-92 17,781 17,557 16,102
12-94 19,364 18,706 16,615
12-96 23,873 22,963 19,849
12-98 28,153 27,368 23,357
4-99 28,071 27,318 23,161
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Lehman Brothers Aggregate Bond Index and the Lipper General U.S. Government
Funds Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value will vary, and you may have a gain or
loss when you sell shares. To equalize the time periods, the indexes'
performance was prorated for the month of October 1986.
- --------------------------------------------------------------------------------
* The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of
investment-grade securities from the Lehman Brothers Government/Corporate
Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities
Index. The Lipper General U.S. Government Funds Index is an
equally-weighted performance index of the largest qualifying funds in this
Lipper category. Fund shares are neither insured nor guaranteed by the U.S.
Government. Source of the Lehman index data is Standard & Poor's Micropal.
Source of the Lipper index data is Lipper Inc.
YOUR FUND'S
APPROACH
THE STRONG GOVERNMENT SECURITIES FUND USUALLY INVESTS 90% OR MORE (AND ALWAYS AT
LEAST 80%) OF ITS ASSETS IN BONDS ISSUED BY THE U.S. GOVERNMENT OR ITS AGENCIES.
THESE ARE AMONG THE HIGHEST QUALITY OF BONDS AVAILABLE. THE FUND GENERALLY KEEPS
AN AVERAGE MATURITY OF FIVE TO TEN YEARS, SO ITS SHARE PRICE WILL SHOW
SENSITIVITY CHANGES IN INTEREST RATES. THE FUND MAY ALSO MAKE SMALL INVESTMENTS
IN HIGH-QUALITY BONDS FROM OTHER SECTORS IN AN EFFORT TO IMPROVE YIELD AND TOTAL
RETURN. ANALYSIS OF THE ECONOMY, INTEREST RATE TRENDS, AND BOND MARKETS DRIVE
OUR INVESTMENT PROCESS.
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MARKET
HIGHLIGHTS
o After aggressive rate reductions last fall, investor's regained confidence
in the mortgage and corporate bond sectors. The movement of assets from
Treasury notes to these sectors contributed to the increase in Treasury
rates during the six-month period.
o Gross Domestic Product (GDP) grew faster than Wall Street anticipated in
the last two quarters of 1998. As that economic strength continued into
1999, investors began to realize that further reductions in the federal
funds rate were unlikely.
o By the end of April, fears of a modest increase in inflation had become
common as commodity prices rose and labor markets remained tight.
5
<PAGE>
===============
THE STRONG HIGH-YIELD BOND FUND
- ------------------------------------===============-----------------------------
FUND
HIGHLIGHTS
o The Strong High-Yield Bond Fund returned 11.85% for the six months ended
April 30, 1999 compared to 8.25% for the Lehman Brothers High-Yield Bond
Index.*
o We increased our investments in the energy sector, as we believe bonds of
energy-related companies represent an attractive relative value.
o Our investments in the tele-communications sector continue to represent
some of our best performers, as credit quality has improved among many
high-yield issuers due to a high level of merger and acquisition activity.
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AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 4-30-99
1-year 4.10%
3-year 13.56%
Since Inception 15.33%
(on 12-28-95)
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PORTFOLIO STATISTICS
As of 4-30-99
30-day annualized
yield(2) 9.17%
Average maturity(3) 7.9 years
Average
quality rating(4) B
PERSPECTIVES
FROM THE MANAGERS
/s/Jeffrey A. Koch /s/Thomas M. Price
Jeffrey A. Koch Thomas M. Price
Portfolio Co-manager Portfolio Co-manager
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What a difference six months makes! At the last writing of this report in
October 1998, the financial markets were reeling from the spillover effects of
the Asian crisis, a Russian debt default, the collapse of major hedge funds and
an impending devaluation of Brazil's currency. Global credit markets became
chaotic as investors attempted to lower their risk. And some observers feared
the world was on the verge of slipping into a deflationary spiral.
Then, the U.S. Federal Reserve lowered interest rates. Not once, but three times
in a six week period ending November 16. Other central banks around the world
followed suit, lowering interest rates in an effort to bring liquidity back into
the financial system. Stock markets responded first--and what a response it was.
The rally in the equity markets was breathtaking, as it took only until November
23 for the S&P 500 to erase all of its losses and set a new record. Recovery
also took hold in other markets, including high-yield bonds.
What this demonstrates is that investors can benefit a great deal by approaching
the market in a thoughtful, deliberate manner, where emotion does not play a
part. Investors who sold high-yield bonds in the turmoil of last Fall probably
succumbed to emotion. But when you analyze their basic elements, high-yield
bonds are bonds, first and foremost. When their price goes down, their yield
-------------------------------------
CONTINUED
STRENGTH IN
THE DOMESTIC
ECONOMY RENEWED
THE CONFIDENCE
OF HIGH-YIELD
INVESTORS.
-------------------------------------
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1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2 Yields are historical and do not represent future yields, which will
fluctuate.
3 The Fund's average maturity includes the effect of futures, options and
when-issued securities.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
6
<PAGE>
goes up--making them more attractive, not less. And if you are able to keep your
emotions in check, major price declines like we witnessed last Fall can become
an attractive opportunity.
We continue to seek out attractive high-yield bonds for our shareholders. A
fertile ground for us has been the telecommunications sector. Tremendous growth
in communications, especially data, has made it attractive for us to invest in
rapidly growing companies at the forefront of this growth. MetroNet
Communications, Global Crossing, NTL and United International Holdings are all
examples of investments we have made to benefit from this trend. Another area we
find attractive is the energy sector. As the price of oil fell into the $10
range, the bonds of high-yield energy companies fell out of favor. We began to
increase our holdings in some of the better companies, and the subsequent
rebound in oil prices has resulted in strong price performance in these bonds.
We appreciate your confidence in the Fund and our efforts to produce consistent
investment results.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-28-95 to 4-30-99
[GRAPH]
THE STRONG Lehman Brothers Lipper High
HIGH-YIELD High-Yield Current Yield
BOND FUND Bond Index* Funds Index*
11-95 10,000 10,000 10,000
12-95 10,031 10,015 10,015
6-96 11,425 10,361 10,440
12-96 12,724 11,152 11,314
6-97 13,607 11,800 11,968
12-97 14,758 12,575 12,805
6-98 15,652 13,141 13,418
12-98 15,211 12,810 12,795
4-99 16,110 13,299 13,545
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Lehman Brothers High-Yield Bond Index and the Lipper High Current Yield Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares. To equalize the time periods, the indexes' performance was
prorated for the month of December 1995.
- --------------------------------------------------------------------------------
* 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.
YOUR FUND'S
APPROACH
THE STRONG HIGH-YIELD BOND FUND SEEKS TO MAXIMIZE TOTAL RETURN THROUGH A
DISCIPLINED APPROACH TO THE HIGH-YIELD BOND MARKET. OUR INVESTMENT PROCESS
COMBINES A TOP-DOWN OUTLOOK OF BROAD ECONOMIC AND INTEREST RATE TRENDS WITH A
BOTTOM-UP ANALYSIS OF INDIVIDUAL BONDS. THE FORMATION OF OUR MACRO-ECONOMIC
OUTLOOK PROVIDES THE BASIS FOR STRUCTURING OVERALL PORTFOLIO RISK. THE FUND'S
INTEREST RATE SENSITIVITY AND THE CREDIT QUALITY OF ITS SELECTIONS ARE
CONSISTENT WITH THIS OUTLOOK. RIGOROUS CREDIT ANALYSIS AND ADHERENCE TO STRICT
VALUATION CRITERIA PROVIDE THE FOUNDATION FOR BUILDING THE PORTFOLIO FROM THE
BOTTOM-UP.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o After reaching its highest level since the 1990 recession, the yield
premium on high-yield bonds began to decrease during the semi-annual
period. Continued strength in the domestic economy renewed the confidence
of high-yield investors.
o Lower-quality bonds outperformed higher-quality bonds during the period.
Bonds rated BB returned 5.59% for the six months ended April 30, 1999.
Bonds rated B returned 9.62% and bonds rated CCC returned 18.32% for the
same time period.
o The Federal Reserve eased interest rates in November, bringing the federal
funds rate down from 5.00% to 4.75%.
7
<PAGE>
===============
THE STRONG SHORT-TERM BOND FUND
- -----------------------------------===============------------------------------
FUND
HIGHLIGHTS
o For the six months ended April 30, 1999, the Strong Short-Term Bond Fund
returned 3.51% versus 1.43% for the Lehman Brothers 1-3 Year Government/
Corporate Bond Index.*
o Stronger-than-anticipated economic growth and an easing of the global
credit contraction caused two-year note yields to increase to 5.05% from
4.12%.
o The Fund's index-beating return was generated by overweighting assets in
the corporate and mortgage sectors. Sound fundamental research also helped
us invest in some of the best performing individual issues, including
Cendant, Qwest and Starwood.
- ---------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 4-30-99
1-year 4.84%
5-year 6.61%
10-year 7.15%
Since Inception 7.54%
(on 8-31-87)
- ---------------------------------------
PORTFOLIO STATISTICS
As of 4-30-99
30-day annualized
yield(2) 6.41%
Average maturity(3) 2.8 years
Average
quality rating(4) A
PERSPECTIVES
FROM THE MANAGERS
/s/Bradley C. Tank /s/John T. Bender
Bradley C. Tank John T. Bender
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
In the second half of 1998, Treasury rates declined rapidly as fears of a
recession and global credit contraction caused investors to seek the safety and
liquidity of the U.S Treasury market. 1998's bond rally caused two-year note
yields to decline below 4% by October. Corporate and mortgage bonds meaningfully
underperformed Treasuries as normal market-price relationships broke down. The
last six months, however, have seen a complete reversal in last year's market
trends.
Stronger-than-expected growth in the fourth quarter (6% real gross domestic
product) and diminishing expectations of Federal Reserve rate cuts drove
Treasury rates higher across the yield curve. The persistence of economic
strength boosted investor confidence in the corporate and mortgage sectors.
Investors became much more willing to accept both credit and volatility risk
during the last six months, which led to extremely strong performance from the
"spread" sectors. The yields of investment grade corporate bonds and mortgage
securities converged toward those of the Treasury market. We were able to
generate additional returns for the Fund by maintaining our commitment to these
sectors.
Despite the strong performance in the corporate bond market, the divergences of
returns among industries and individual issuers was still very large versus
historical norms. Many of last year's poor performers have done very well in
1999. Our commitment to credit research helped us rotate into some very
undervalued credits at the right time.
-------------------------------------
THE CORPORATE
AND MORTGAGE
SECTORS PROVIDED
RECORD
OUTPERFORMANCE
RELATIVE TO
TREASURIES.
-------------------------------------
- --------------------------------------------------------------------------------
1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2 Yields are historical and do not represent future yields, which will
fluctuate.
3 The Fund's average maturity includes the effect of futures, options and
when-issued securities.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
8
<PAGE>
One example, is Cendant, a service company whose primary businesses include real
estate and travel-related companies. They own well-known companies such as
Coldwell Banker and Avis Rent-a-Car, and are also known for their vacation
time-share and hotel-franchise businesses. However, during 1998, they discovered
serious financial irregularities in a company that they had recently acquired.
Many market participants would not even consider the company's new debt offering
in November 1998 due to fears that company management could not address the
challenge of turning around its recent acquisition.
As part of our research, we met with top management, including Chairman Henry
Silverman, and found a company with strong leadership, tremendous free cash
flow, and a detailed plan to manage through their problems. That combination
convinced us to invest--and our Cendant bonds have exceeded our expectations
with a market yield that has converged toward Treasury yields in excess of 1.5%.
Our credit research is geared toward identifying undervalued opportunities, such
as Cendant. It's but one example of how we work to increase your returns. Thank
you for your continued confidence in the Fund. We're pleased to provide you with
this update.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 8-31-87 to 4-30-99
[GRAPH]
THE STRONG Lehman Brothers 1-3 Lipper Short
SHORT-TERM Year Government/ Investment Grade
BOND FUND Corporate Bond Index* Debt Average*
8-87 10,000 10,000 10,000
12-87 10,318 10,303 10,250
12-89 12,295 12,156 12,113
12-91 14,837 14,913 14,499
12-93 17,302 16,743 16,297
12-95 19,064 18,677 17,971
12-97 21,809 20,946 19,980
4-99 23,359 22,646 21,376
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Lehman Brothers 1-3 Year Government/Corporate Bond Index and the Lipper Short
Investment Grade Debt Average. Results include the reinvestment of all dividends
and capital gains distributions. Performance is historical and does not
represent future results. Investment returns and principal value will vary, and
you may have a gain or loss when you sell shares.
- --------------------------------------------------------------------------------
* The Lehman Brothers 1-3 Year Government/Corporate Bond Index is an
unmanaged index generally representative of government and investment-grade
corporate securities with maturities of one to three years. The Lipper
Short Investment Grade Debt Average represents funds that invest at least
65% of assets in investment-grade debt issues (rated in the top four
grades) with dollar-weighted average maturities of less than three years.
Source of the Lehman index data is Bloomberg. Source of the Lipper index
data is Lipper Inc.
YOUR FUND'S
APPROACH
THE STRONG SHORT-TERM BOND FUND PURSUES TOTAL RETURN WITH A HIGH LEVEL OF
CURRENT INCOME BY INVESTING PRIMARILY IN SHORT-TERM, INTERMEDIATE- AND
HIGH-QUALITY BONDS ISSUED BY U.S. COMPANIES. THE FUND'S AVERAGE MATURITY IS
NORMALLY BETWEEN ONE AND THREE YEARS, WHICH HELPS TO KEEP SHARE-PRICE
FLUCTUATIONS LOW. THE PORTFOLIO MANAGEMENT TEAM WORKS TO ADD VALUE WITH AN
INVESTMENT PROCESS THAT FOCUSES ON FUNDAMENTAL MACROECONOMIC RESEARCH, AS WELL
AS RIGOROUS ANALYSIS OF INDIVIDUAL BONDS.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o Investor preferences shifted dramatically throughout the period. The market
witnessed a reallocation of funds away from the safety of Treasuries into
the corporate and mortgage sectors.
o Two-year Treasury rates rose by almost one percent despite a 25-basis point
decrease in the federal funds rate, indicating that investors no longer
anticipate further decreases in the federal funds rate.
o The corporate and mortgage sectors provided record outperformance relative
to Treasuries.
9
<PAGE>
==========================
THE STRONG SHORT-TERM HIGH YIELD BOND FUND
- ------------------------------==========================------------------------
FUND
HIGHLIGHTS
o The Strong Short-Term High Yield Bond Fund returned 7.09% for the six
months ended April 30, 1999 compared to 4.93% for the Short-Term High Yield
Bond Index.*
o Our focus continued to be high-coupon, callable bonds, which helps limit
share price volatility. Several of the higher-coupon issues have been
retired early at premium prices.
o The gaming sector has been a strong contributor to performance. The prices
of gaming issues in general have appreciated as numerous gaming companies
have retired high-interest debt early.
- ---------------------------------------
AVERAGE ANNUAL
TOTAL RETURN(1)
As of 4-30-99
1-year 8.28%
Since Inception 10.93%
(on 6-30-97)
- ---------------------------------------
PORTFOLIO STATISTICS
As of 4-30-99
30-day annualized
yield(2) 7.34%
Average maturity(3) 2.6 years
Average
quality rating(4) BB
PERSPECTIVES
FROM THE MANAGERS
/s/ Jeffrey A. Koch /s/ Thomas M. Price
Jeffrey A. Koch Thomas M. Price
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
The Strong Short-Term High Yield Bond Fund started in July 1997 with a goal of
providing investors the attractive yields offered by high-yield bonds, but with
less share-price volatility than the standard high-yield fund. As we near the
Fund's second anniversary, we're pleased to report that investment strategy and
performance have met our expectations in both strong and weak markets.
The Fund's short maturity helped it to perform well relative to other high-yield
bond funds. We would expect this to be the case in weak bond markets like we saw
last fall.
Generally, we invest in bonds that are expected to be retired within the next
three years. These bonds typically fit into one of two categories. The first is
simply bonds with a maturity date within three years. The second is bonds with
high coupons that the issuing company is likely to retire in the next three
years. The short-term nature of these bonds means they typically entail less
risk and offer a lower yield than the longer-term issues that are the focus of
standard high-yield funds. During the last six months, the Fund's shareholders
-------------------------------------
...INVESTMENT
STRATEGY AND
PERFORMANCE HAVE
MET OUR
EXPECTATIONS IN
BOTH STRONG AND
WEAK MARKETS.
-------------------------------------
- --------------------------------------------------------------------------------
1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2 Yields are historical and do not represent future yields, which will
fluctuate.
3 The Fund's average maturity includes the effect of futures, options and
when-issued securities.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
10
<PAGE>
benefited as several bonds were retired early at premium prices. Examples
include Allied Waste, Casino America, Echostar, and Showboat Marina.
We will continue to search for investments that fit the Fund's lower-risk
profile, offer an attractive level of yield, and have the potential for price
appreciation due to early debt retirement.
Thank you for your confidence in the Fund and its short-term, high-yield
investment strategy.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 6-30-97 to 4-30-99
[GRAPH]
THE STRONG SHORT- Short-Term Lipper High Merrill Lynch High
TERM HIGH YIELD High Yield Current Yield Yield BB-Rated, 1-
BOND FUND Bond Index* Funds Index* 2.99 Years Index*
6-97 10,000 10,000 10,000 10,000
9-97 10,530 10,192 10,539 10,237
12-97 10,777 10,334 10,699 10,416
3-98 11,096 10,544 11,169 10,587
6-98 11,324 10,736 11,211 10,744
9-98 11,387 10,616 10,365 10,823
12-98 11,680 10,897 10,691 11,088
3-99 11,946 11,026 11,032 11,140
4-99 12,094 11,140 11,317 11,226
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, the Lipper High Current Yield Funds Index, and
the Merrill Lynch High Yield BB Rated, 1-2.99 Years Index. Results include the
reinvestment of all dividends and capital gains distributions. Performance is
historical and does not represent future results. Investment returns and
principal value will vary, and you may have a gain or loss when you sell shares.
- --------------------------------------------------------------------------------
* The Short-Term High Yield Bond Index is a market value weighted blend of
the Merrill Lynch High Yield, BB Rated, 1-2.99 Years Index and the Merrill
Lynch High Yield, B Rated, 1-2.99 Years Index. It is an unmanaged index
generally representative of corporate debt rated below investment-grade
with maturities of one to three years which more closely approximates the
performance of the Short-Term High Yield Bond Fund. The Lipper High Current
Yield Funds Index is an equally-weighted performance index of the largest
qualifying funds in this Lipper category. The Merrill Lynch High Yield BB
Rated, 1-2.99 Years Index is an unmanaged index generally representative of
corporate debt rated BB with maturities of one to three years. Source of
the Short-Term High Yield Bond Fund Index and the Merrill Lynch index is
Bloomberg. Source of the Lipper High Current Yield Funds Index is Lipper
Inc.
YOUR FUND'S
APPROACH
THE STRONG SHORT-TERM HIGH YIELD BOND FUND SEEKS TOTAL RETURN WITH MODERATE
VOLATILITY. THE FUND FOCUSES ON SHORT- TO INTERMEDIATE-TERM HIGH-YIELD BONDS IN
AN EFFORT TO PRODUCE A HIGH LEVEL OF CURRENT INCOME, WHILE LIMITING CHANGES IN
SHARE PRICE. OUR INVESTMENT PROCESS COMBINES A TOP-DOWN OUTLOOK OF BROAD
ECONOMIC AND INTEREST RATE TRENDS WITH A BOTTOM-UP ANALYSIS OF INDIVIDUAL BONDS.
OUR OUTLOOK PROVIDES THE BASIS FOR STRUCTURING OVERALL PORTFOLIO RISK, INCLUDING
THE FUND'S INTEREST RATE SENSITIVITY AND THE CREDIT QUALITY OF ITS SELECTIONS.
RIGOROUS CREDIT ANALYSIS AND ADHERENCE TO STRICT VALUATION CRITERIA PROVIDE THE
FOUNDATION FOR INDIVIDUAL SELECTIONS.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o After suffering through its weakest period since the early 1990s, the
high-yield bond market recovered during the past six months and investor
confidence returned to the market in both stocks and corporate bonds.
o The recovery in the overall market has allowed companies to again access
the new issue market for high-yield bonds, using this opportunity to
refinance higher-interest, short-term paper with lower-interest,
longer-term debt.
o The Federal Reserve eased interest rates in November, lowering the federal
funds rate from 5.00% to 4.75%.
11
<PAGE>
- --------------------------------------------------------------------------------
BOND
GLOSSARY
BOND QUALITY RATINGS--There are services that analyze the financial condition of
a bond's issuer and then assign it a rating. The best-known rating agencies are
Standard and Poors and Moody's. The highest-quality bonds are rated AAA (S&P) or
Aaa (Moody's.) The scale descends to AA, A, then BBB and so on, down to D. Bonds
with a rating of BBB or higher are considered investment-grade. Bonds rated CC
and below are considered "junk bonds." Typically, the lower a bond's rating, the
higher yield it must pay in order to compensate the bond-holder for the added
risk.
MATURITY--Like a loan, a bond must be paid off on a certain date. A bond's
maturity is the time remaining until it is paid off. Bonds typically mature in a
range from overnight to 30 years from now. Typically, bonds with longer
maturities will have higher yields and larger price changes in reaction to
interest rate changes. In rare situations, shorter-term bonds will have higher
yields; this is known as an inverted yield curve (see definition that follows.)
DURATION--Duration is similar to maturity, but also accounts for the semi-annual
interest payments made by most bonds. Duration is a useful tool for determining
a bond or a bond fund's sensitivity to interest rate changes. The higher the
duration, the more a bond's price will fluctuate when interest rates change.
TREASURY SPREAD--The Treasury spread is the difference in yield between a
Treasury bond (issued by the federal government) and a bond with an equal
maturity, but from another category, such as a corporate bond. This calculation
is used to measure the prices of corporate bonds, mortgage-backed securities and
other non-government issues relative to Treasuries. Higher spreads occur in
uncertain times when investors buy Treasuries for their safety and sell other
types of bonds.
YIELD--Yield is the income your investment is generating. It is calculated by
taking the income paid by a bond in a given period of time, often 30 days,
annualizing it and stating it as a percentage of the money invested.
YIELD CURVE--The yield curve is a graph that plots the yields of Treasury bonds
against their maturities. Under normal circumstances, this line will slope
upward, reflecting longer-maturity bonds having higher yields. In rare
circumstances, such as in a time of deflation, the yield curve may slope
downward, or "invert." The steepness of the yield curve shifts depending on
economic trends and outlooks. Properly positioned, a bond investor can profit
from these shifts.
12
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG CORPORATE BOND FUND
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
CORPORATE BONDS 82.7%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 $ 8,654,000 $ 8,946,124
Anadarko Petroleum Corporation Debentures,
7.20%, Due 3/15/29 10,000,000 9,870,240
Atlas Air, Inc. Pass-Thru Certificates:
Series 1998-1, Class C, 8.01%, Due 1/02/10 11,502,744 11,475,080
Series 1999-1, Class C, 8.77%, Due 1/02/11 2,000,000 2,019,890
Banco Sud Americano Subordinated Notes, 7.60%,
Due 3/15/07 (Acquired 7/15/97 - 7/23/97;
Cost $10,317,698) (b) 10,060,000 7,710,437
Bank United Corporation Subordinated Notes,
8.875%, Due 5/01/07 3,500,000 3,631,015
Beaver Valley Funding Corporation Debentures,
8.625%, Due 6/01/07 8,254,000 8,893,685
CE Generation LLC Senior Secured Bonds, 7.416%,
Due 12/15/18 (Acquired 2/24/99 - 2/25/99;
Cost $10,101,470) (b) 10,000,000 10,082,260
CMS Energy Corporation Senior Notes, 6.75%,
Due 1/15/04 (Acquired 1/29/99;
Cost $5,000,000) (b) 5,000,000 4,925,210
CSC Holdings, Inc. Debentures, 7.625%,
Due 7/15/18 10,000,000 10,137,500
CSC Holdings, Inc. Senior Notes, 7.25%,
Due 7/15/08 4,500,000 4,612,500
CSX Corporation Debentures, 6.95%, Due 5/01/27 3,000,000 3,080,688
Cabot Industries Notes, 7.125%, Due 5/01/04 4,600,000 4,555,472
CalEnergy, Inc. Senior Bonds, 8.48%, Due 9/15/28 8,800,000 10,008,654
CalEnergy, Inc. Senior Notes, 7.63%, Due 10/15/07 2,500,000 2,636,430
Camden Property Trust Senior Notes, 7.00%,
Due 4/15/04 6,500,000 6,477,081
Cendant Corporation Notes, 7.75%, Due 12/01/03 17,920,000 18,499,103
Cleveland Electric/Toledo Edison Notes,
Series B, 7.67%, Due 7/01/04 3,500,000 3,678,080
Coastal Corporation Senior Debentures:
7.42%, Due 2/15/37 5,036,000 5,079,989
7.75%, Due 10/15/35 7,100,000 7,479,637
Coca-Cola Bottling Notes, 6.375%, 5/01/09 5,000,000 4,912,485
Colonial Capital I Securities, Series A, 8.92%,
Due 1/15/27 2,600,000 2,450,604
Colonial Realty LP Senior Notes, 7.00%,
Due 7/14/07 4,785,000 4,604,735
Republic of Colombia Global Bonds, 9.75%,
Due 4/23/09 6,900,000 6,710,250
Continental Airlines, Inc. Pass-Thru Certificates,
Series 1998-2B, 6.465%, Due 10/15/04 2,866,454 2,870,395
Continental Cablevision, Inc. Senior Notes,
8.30%, Due 5/15/06 4,500,000 4,936,554
Delta Air Lines, Inc. Equipment Trust Certificates:
Series 1991-A, 10.14%, Due 8/14/12
(Acquired 9/10/96; Cost $2,257,280) (b) 2,000,000 2,476,044
Series 1991-B, 10.14%, Due 8/14/12
(Acquired 9/10/96; Cost $2,257,280) (b) 2,000,000 2,476,044
Series 1991-E, 10.14%, Due 8/26/12
(Acquired 9/10/96; Cost $2,257,680) (b) 2,000,000 2,476,934
Series 1992-B1, 9.375%, Due 9/11/07 2,958,801 3,250,524
Developers Diversified Corporation Medium
Term Senior Notes, 6.625%, Due 1/15/08 10,000,000 9,042,730
EOP Operating LP Notes, 6.80%, Due 1/15/09 3,500,000 3,501,750
EOP Operating LP Senior Notes, 6.763%,
Due 6/15/07 5,700,000 5,601,926
East Coast Power LLC Senior Secured Notes,
Tranche C, 7.536%, Due 6/30/17
(Acquired 4/14/99; Cost $3,800,000) (b) 3,800,000 3,757,360
El Paso Electric Company First Mortgage Notes,
Series E, 9.40%, Due 5/01/11 10,698,000 12,284,118
Empresa Nacional de Electricidad Chile Bonds,
8.50%, Due 4/01/09 (Acquired 4/20/99;
Cost $6,867,648) (b) 6,400,000 6,759,091
Enron Corporation Notes, 6.725%, Due 11/15/37
(Rate Reset Effective 11/17/08) 3,000,000 3,030,948
Export-Import Bank Korea Yankee Notes:
6.50%, Due 2/10/02 11,250,000 11,002,117
7.10%, Due 3/15/07 4,950,000 4,888,001
First Nationwide Bank Subordinated Debentures,
10.00%, Due 10/01/06 3,460,000 3,975,848
First Republic Bank Subordinated Notes,
7.75%, Due 9/15/12 5,000,000 4,906,190
Fresenius Medical Care Capital Trust II Guaranteed
Preferred Securities, 7.875%, Due 2/01/08 7,000,000 6,895,000
GB Capital Trust Capital Securities, 10.25%,
Due 1/15/27 (Acquired 1/24/97; Cost
$3,000,000) (b) 3,000,000 3,540,000
GS Escrow Corporation Floating Rate Senior
Notes, 5.9697%, Due 8/01/03 8,000,000 7,872,168
GS Escrow Corporation Senior Notes:
6.75%, Due 8/01/01 1,000,000 1,001,480
7.00%, Due 8/01/03 18,490,000 18,578,105
Global Crossing Holding, Ltd. Senior Notes,
9.625%, Due 5/15/08 5,000,000 5,600,000
HRPT Properties Trust Senior Notes, 6.75%,
Due 12/18/02 5,000,000 4,924,885
Harrahs Operating, Inc. Guaranteed Senior
Subordinated Notes, 7.875%, Due 12/15/05 9,000,000 9,123,750
Tommy Hilfiger USA, Inc. Guaranteed Notes,
6.50%, Due 6/01/03 4,000,000 3,957,344
Hilton Hotels Corporation Senior Notes, 7.00%,
Due 7/15/04 8,100,000 8,057,880
Homeside, Inc. Senior Secured Second Priority
Notes, 11.25%, Due 5/15/03 1,796,000 2,063,155
ITT Corporation Notes, 6.75%, Due 11/15/03 2,500,000 2,414,372
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 7,200,000 7,178,674
Imperial Tobacco Overseas BV Guaranteed
Yankee Notes, 7.125%, Due 4/01/09 10,000,000 9,826,280
Korea Development Bank Yankee Bonds, 7.375%,
Due 9/17/04 5,000,000 4,976,480
Korea Electric Power Corporation Notes, 8.00%,
Due 7/01/02 5,000,000 5,073,900
LCI International, Inc. Senior Notes, 7.25%,
Due 6/15/07 8,800,000 9,048,019
Lehman Brothers Holdings, Inc. Notes:
6.625%, Due 2/05/06 6,095,000 6,027,943
7.375%, Due 5/15/07 5,000,000 5,097,860
Lehman Brothers Holdings, Inc. Senior Notes,
7.25%, Due 10/15/03 5,000,000 5,145,575
Leucadia Capital Trust I Pass-Thru Securities,
8.65%, Due 1/15/27 3,250,000 2,850,962
Loral Corporation Senior Debentures, 8.375%,
Due 6/15/24 4,500,000 5,111,041
Lumbermens Mutual Casualty Company Surplus
Notes, 8.30%, Due 12/01/37 (Acquired 5/27/98;
Cost $10,914,400) (b) 10,000,000 10,000,110
Market Hub Partners Storage LP/Market Hub
Partners Finance, Inc. Senior Notes, 8.25%,
Due 3/01/08 1,000,000 1,030,000
MetroNet Communications Corporation Senior
Discount Notes:
Zero %, Due 11/01/07 (Rate Reset Effective
11/01/02) 1,500,000 1,173,750
Zero %, Due 6/15/08 (Rate Reset Effective
6/15/03) 7,000,000 5,495,000
13
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30,1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG CORPORATE BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority Senior
Notes, 8.125%, Due 1/01/06 (Acquired 2/24/99;
Cost $8,000,000) (b) $ 8,000,000 $ 8,230,000
NWA Trust Number 2 Mezzanine Aircraft Notes,
Class C, 11.30%, Due 6/21/14 8,609,692 10,226,705
News America Holdings, Inc. Debentures, 7.90%,
Due 12/01/95 6,175,000 6,401,166
Niagara Mohawk Power Corporation Senior Notes:
7.625%, Due 10/01/05 8,500,000 8,743,219
Series B, 7.00%, Due 10/01/00 11,000,000 11,107,305
Series C, 7.125%, Due 7/01/01 5,000,000 5,067,715
Noble Drilling Corporation Senior Notes:
6.95%, Due 3/15/09 4,850,000 4,881,777
7.50%, Due 3/15/19 4,500,000 4,566,618
North Fork Capital Trust I Capital Trust Pass-Thru
Securities, 8.70%, Due 12/15/26 500,000 529,434
Occidental Petroleum Corporation Senior Notes,
8.45%, Due 2/15/29 12,000,000 13,014,948
P&L Coal Holdings Corporation Senior Notes,
8.875%, Due 5/15/08 6,500,000 6,776,250
PXRE Capital Trust I Pass-Thru Securities,
8.85%, Due 2/01/27 5,750,000 5,302,086
Riggs Capital Trust Preferred Securities:
Series A, 8.625%, Due 12/31/26 200,000 201,352
Series A, 8.625%, Due 12/31/26 (Acquired
12/10/96 - 2/16/99; Cost $16,573,108) (b) 16,220,000 16,329,631
Riggs Capital II Trust Preferred Securities:
Series B, 8.875%, Due 3/15/27 500,000 511,203
Series C, 8.875%, Due 3/15/27 (Acquired 5/06/98;
Cost $751,027) (b) 685,000 700,348
Saks, Inc., Guaranteed Notes:
7.25%, Due 12/01/04 2,610,000 2,674,438
7.375%, Due 2/15/19 7,790,000 7,568,133
Simon Property Group LP Notes, 7.125%,
Due 2/09/09 3,500,000 3,468,570
Skandinaviska Enskilda Banken Subordinated
Notes, 7.50%, Due 3/29/49 (Rate Reset
Effective 3/29/09) (Acquired 4/14/99;
Cost $4,994,950) (b) 5,000,000 4,989,255
Skandinaviska Enskilda Banken Variable Rate
Subordinated Yankee Notes, 6.50%, Due 12/29/49
(Acquired 3/1/99; Cost $9,515,000) (b) 10,000,000 9,785,120
Sonat, Inc. Debentures, 7.00%, Due 2/01/18 8,530,000 8,463,381
Southdown, Inc. Senior Subordinated Notes,
Series B, 10.00%, Due 3/01/06 12,000,000 13,440,000
Sprint Capital Corporation Guaranteed Senior
Notes, 6.875%, Due 11/15/28 9,000,000 8,750,268
Sprint Capital Corporation Notes:
6.125%, Due 11/15/08 4,000,000 3,871,928
6.90%, Due 5/01/19 10,000,000 9,865,400
Starwood Hotels & Resorts Worldwide, Inc.:
6.75%, Due 11/15/05 9,000,000 8,549,442
7.375%, Due 11/15/15 4,000,000 3,633,776
Stop & Shop Companies, Inc. Senior Subordinated
Notes, 9.75%, Due 2/01/02 12,100,000 13,170,330
Texas Utilities Company Senior Notes, Series E,
6.50%, Due 8/16/04 (Remarketing Date 8/16/02) 16,250,000 16,409,315
Time Warner, Inc. Pass-Thru Asset Trust
Securities, Series 1997-1, 6.10%, Due 12/30/01
(Acquired 11/18/98; Cost $3,026,700) (b) 3,000,000 3,010,317
Tosco Corporation First Mortgage Bonds,
Series B, 9.625%, Due 3/15/02 6,000,000 6,485,688
Tricon Global Restaurants, Inc. Senior Notes,
7.65%, Due 5/15/08 9,350,000 9,638,588
Turner Broadcasting System, Inc. Senior Notes,
8.375%, Due 7/01/13 6,200,000 7,103,991
Ultramar Diamond Shamrock Corporation Senior
Notes, 7.20%, Due 10/15/17 11,000,000 10,822,350
USX-Marathon Group Debentures, 9.125%,
Due 1/15/13 2,000,000 2,314,720
USX-Marathon Group Notes:
6.65%, Due 2/01/06 9,830,000 9,786,601
6.85%, Due 3/01/08 3,300,000 3,288,895
Union Carbide Corporation Notes, 6.70%,
Due 4/01/09 8,500,000 8,448,754
Union Pacific Corporation Medium Term Notes,
Tranche 00165, 6.34%, Due 11/25/03 5,000,000 5,009,380
Union Pacific Resources Group, Inc. Notes,
7.00%, Due 10/15/06 4,235,000 4,170,886
United Air Lines, Inc. Debentures, Series A,
10.67%, Due 5/01/04 4,305,000 4,963,015
United States Filter Corporation Variable Rate
Remarketable or Redeemable Securities:
6.375%, Due 5/15/11 (Remarketing Date 5/15/01) 3,000,000 3,004,935
6.50%, Due 5/15/13 (Remarketing Date 5/15/03) 7,000,000 6,959,827
Univision Network Holding LP Subordinated Notes,
7.00%, Due 12/17/02 4,155,000 5,256,075
Vastar Resources, Inc. Notes, 6.50%, Due 4/01/09 4,500,000 4,562,375
Williams Holdings of Delaware, Inc. Notes, 6.125%,
Due 12/01/03 5,500,000 5,439,330
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $721,591,992) 719,272,296
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS 0.2%
CUC International, Inc. Subordinated Notes,
3.00%, Due 2/15/02 2,000,000 1,897,500
- --------------------------------------------------------------------------------
Total Convertible Bonds (Cost $1,847,443) 1,897,500
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 6.7%
BCF LLC Mortgage Pass-Thru Certificates,
Series 1997-R2, Class 3-A1, 7.00%, Due 12/25/35
(Acquired 6/17/97; Cost $2,952,984) (b) 2,950,998 2,953,772
Bear Stearns Mortgage Securities, Inc. Mortgage
Pass-Thru Certificates, Series 1995-1, Class 2-P,
Principal Only, Due 7/25/10 587,004 500,125
Commercial Trust I Lease-Backed Certificates,
Series 1993-K-A, Class A2, 7.63%, Due 12/15/13
(Acquired 4/20/99; Cost $8,221,993) (b) (d) 8,441,298 8,111,665
DLJ Mortgage Acceptance Corporation Variable
Rate Multi-Family Mortgage Pass-Thru
Certificates, Series 1993-MF10, Class A-1,
Interest Only, 0.80%, Due 7/15/03 31,522,033 264,470
DLJ Mortgage Acceptance Corporation Variable
Rate Trust Certificates, Series 1997-E, Class A,
7.55%, Due 12/26/26 (Acquired 12/18/97;
Cost $5,521,753) (b) 5,499,412 5,245,064
FMAC Loan Receivables Trust Notes, Series
1997-C, Class B, 7.15%, Due 12/15/19 7,239,000 7,058,025
Merrill Lynch Mortgage Investors, Inc. Asset-
Backed Certificates, Series 1998-GNI, Class M-2,
8.02%, Due 2/25/27 6,000,000 6,042,180
Mid State Trust Virgin Islands Asset-Backed Notes:
Series 6, Class A-1, 7.34%, Due 7/01/35 2,618,456 2,685,030
Series 6, Class A-2, 7.40%, Due 7/01/35 3,068,503 3,123,153
Norwest Asset Securities Corporation Mortgage
Pass-Thru Certificates, Series 1999-4, Class B3,
6.50%, Due 3/25/29 3,145,932 2,792,518
PNC Mortgage Securities Corporation Mortgage
Pass-Thru Certificates, Series 1999-1, Class 1B3,
6.25%, Due 2/25/29 3,746,707 3,253,921
14
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
STRONG CORPORATE BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
RTC Mortgage Pass-Thru Securities, Inc.
Commercial Mortgage Certificates, Series
1995-C1, Class D, 6.90%, Due 2/25/27 $12,000,000 $11,913,720
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage Bonds,
Series 1992-C, Class 3-A, 11.6352%, Due 11/25/30 108,133 107,813
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Thru Certificates, Series 1997-A,
Class B-3, 7.3887%, Due 10/01/25 (Acquired
7/09/97; Cost $4,306,978) (b) 4,823,746 4,151,460
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed Securities
(Cost $59,123,243) 58,202,916
- --------------------------------------------------------------------------------
FOREIGN BONDS 1.0%
Shaw Communications, Inc. Debentures,
8.54%, Due 9/30/27 14,000,000 CAD 9,158,654
- --------------------------------------------------------------------------------
Total Foreign Bonds (Cost $9,136,758) 9,158,654
- --------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY
ISSUES 0.5%
FHLMC Participation Certificates:
14.00%, Due 9/01/12 $ 22,791 26,368
14.75%, Due 3/01/10 11,863 13,867
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates, 13.50%,
Due 4/01/11 (c) 78,783 89,094
GNMA Guaranteed Pass-Thru Certificates, 15.00%,
Due 8/15/11 thru 10/15/12 68,160 81,308
Small Business Administration Guaranteed Loan
Pool, #40013, Interest Only Strips, 2.419%,
Due 9/30/17 5,650,069 291,318
United States Treasury Bonds, 5.25%, Due 11/15/28 1,080,000 1,014,525
United States Treasury Notes:
4.75%, Due 2/15/04 110,000 107,834
5.75%, Due 4/30/03 3,000,000 3,051,564
- --------------------------------------------------------------------------------
Total United States Government & Agency Issues
(Cost $5,677,058) 4,675,878
- --------------------------------------------------------------------------------
OPTIONS 0.1%
MCI Worldcom, Inc. Call Options 25,000,000 362,500
- --------------------------------------------------------------------------------
Total Options (Cost $562,500) 362,500
- --------------------------------------------------------------------------------
PREFERRED STOCKS 5.7%
California Federal Preferred Capital Corporation
9.125% Series A Exchangeable 100,000 2,684,375
Centaur Funding Corporation Series B
(Acquired 12/09/98 - 4/13/99; Cost $17,562,590) (b) 16,450 18,290,262
Indosuez Holdings SCA Sponsored ADR 10.375%
Representing 1/10 Series A (Acquired 2/05/98;
Cost $5,660,000) (b) 200,000 5,325,000
News Corporation Finance Trust Originated 5.00% 85,000 5,514,375
Norwest Corporation Series A Cumulative
Tracking/Residential Home Mortgage LLC
(Acquired 12/16/94; Cost $2,000,000) (b) 10,000 2,026,920
Parmalat Capital Finance 8.1523% Series B 253,000 5,913,875
TCI Communications Financing II Trust 10.00% 166,128 4,495,922
Webster Capital Corporation 7.375% Series A 5,000 5,046,850
- --------------------------------------------------------------------------------
Total Preferred Stocks (Cost $49,428,235) 49,297,579
- --------------------------------------------------------------------------------
WARRANTS 0.0%
EOP Operating LP Warrants, Expire 1/18/00 7,500 41,250
- --------------------------------------------------------------------------------
Total Warrants (Cost $60,000) 41,250
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 0.9%
Commercial Paper 0.2%
Interest-Bearing, Due Upon Demand
General Mills, Inc., 4.51% 100 100
Pitney Bowes Credit Corporation, 4.51% 2,076,100 2,076,100
-----------
2,076,200
Corporate Notes 0.6%
Walt Disney Company Euro-Dollar Senior
Participating Notes, 2.00%, Due 3/01/00
(Acquired 9/19/96; Cost $6,250,000) (b) 5,000,000 4,900,000
United States Government Issues 0.1%
United States Treasury Bills, Due 5/06/99
thru 7/22/99 (c) 1,120,000 1,113,737
- --------------------------------------------------------------------------------
Total Short-Term Investments (Cost $8,251,266) 8,089,937
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investments in Securities (Cost $855,678,495) 97.8% 850,998,510
Other Assets and Liabilities, Net 2.2% 18,548,627
- --------------------------------------------------------------------------------
Net Assets 100.0% $869,547,137
================================================================================
FUTURES
- --------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- --------------------------------------------------------------------------------
Purchased:
40 Five-Year U.S. Treasury Notes 6/99 $ 4,445,625 ($ 9,020)
84 Ten-Year U.S. Treasury Notes 6/99 9,633,750 (95,130)
377 U.S. Treasury Bonds 6/99 45,310,688 (284,826)
Sold:
151 Two-Year U.S. Treasury Notes 6/99 31,643,938 90,883
100 Ten-Year U.S. Treasury Notes 6/99 11,468,750 31,437
27 U.S. Treasury Bonds 6/99 3,245,063 43,875
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------------
Settlement Value Unrealized
Date in USD Depreciation
- --------------------------------------------------------------------------------
Sold:
13,500,000 CAD 6/17/99 $9,279,243 $514,148
SWAPS
- --------------------------------------------------------------------------------
Open index rate swap contracts at April 30, 1999 consisted of the following:
- --------------------------------------------------------------------------------
Notional Termination Interest Index Unrealized
Amount Date Sold Bought Appreciation
- --------------------------------------------------------------------------------
$15,000,000 8/01/99 1 mo. LIBOR Lehman Brothers Baa $134,817
15
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG GOVERNMENT SECURITIES FUND
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY
ISSUES 84.4%
FHA Insured Project Loan #956-55054, 2.93%,
Due 11/01/12 $ 3,569,176 $ 2,859,802
FHA Project Loan, 7.40%, Due 3/01/09 20,699,086 21,908,740
FHA Project Loan Section 223(f) - Hampshire Tower
Apartments, 7.50%, Due 11/15/30 8,958,458 9,182,419
FHLMC Guaranteed Multiclass Variable Rate
Mortgage Participation Certificates:
Pool #865496, 7.552, Due 5/01/26 3,372,353 3,423,676
Series 1539, Class FB, 5.262%, Due 6/15/05 2,832,308 2,834,271
Series 1572-B, Class SA, 5.4175%, Due 10/15/00 3,000,000 2,940,125
FHLMC Multiclass Mortgage Guaranteed
Participation Certificates, Series 144, Class 144-A,
8.75%, Due 6/15/00 73,021 73,021
FHLMC Participation Certificates:
6.00%, Due 1/01/13 12,368,771 12,308,952
6.25%, Due 9/15/22 5,705,000 5,686,887
6.59%, Due 6/25/12 11,907,506 11,943,050
7.00%, Due 1/25/21 2,980,772 3,010,088
7.25%, Due 7/01/08 994,891 1,010,754
7.26%, Due 6/01/06 6,729,401 7,036,464
7.625%, Due 8/25/22 8,498,293 8,461,155
8.00%, Due 7/01/08 thru 12/01/10 4,751,889 4,939,462
8.50%, Due 10/01/05 thru 6/01/17 23,529,645 24,616,863
9.00%, Due 8/01/09 thru 4/01/17 5,898,592 6,311,167
9.30%, Due 7/15/21 4,417,895 4,647,820
9.50%, Due 4/01/07 thru 12/01/19 2,565,201 2,678,016
9.75%, Due 8/01/02 645,750 670,233
10.00%, Due 10/01/05 thru 6/01/20 3,020,640 3,192,300
10.50%, Due 6/01/04 thru 8/01/20 4,968,677 5,416,064
11.00%, Due 1/01/01 6,391 6,595
11.25%, Due 1/01/01 34,798 35,945
11.75%, Due 10/01/15 111,978 123,090
12.00%, Due 11/01/15 24,810 27,844
12.25%, Due 7/01/15 thru 12/01/15 284,388 315,406
12.50%, Due 10/01/09 thru 1/01/15 160,786 179,924
13.00%, Due 7/01/14 46,164 52,430
13.75%, Due 5/01/02 36,481 39,331
14.00%, Due 6/01/11 thru 4/01/16 465,828 538,151
14.50%, Due 3/01/11 thru 12/01/11 6,725 7,850
14.75%, Due 8/01/11 thru 4/01/13 6,959 8,126
15.00%, Due 8/01/11 26,298 30,968
16.00%, Due 6/01/12 6,558 7,889
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates:
5.60%, Due 5/01/04 thru 11/01/05 2,285,478 2,251,968
6.00%, Due 9/01/12 thru 2/01/29 26,187,817 26,116,656
6.125%, Due 11/25/03 1,356,836 1,365,038
6.292%, Due 5/01/05 9,312,255 9,384,984
6.30%, Due 12/25/15 3,094,986 3,111,560
6.32%, Due 8/25/08 10,000,000 10,069,150
6.50%, Due 6/18/27 thru 8/01/28 32,929,552 32,544,923
6.74%, Due 8/25/07 20,890,000 21,615,614
7.00%, Due 9/01/15 thru 6/25/22 21,053,412 21,267,462
7.50%, Due 7/01/03 thru 10/01/18 35,574,680 36,462,198
8.00%, Due 4/01/17 thru 11/01/26 33,287,308 34,615,697
8.305%, Due 4/01/01 5,363,986 5,556,401
8.40%, Due 2/25/09 27,539,775 28,732,109
8.43%, Due 4/01/01 10,355,055 10,745,885
8.50%, Due 7/01/10 thru 5/01/26 37,616,095 39,820,855
8.55%, Due 8/25/26 5,734,000 6,008,143
8.75%, Due 1/01/10 993,066 1,065,286
9.00%, Due 9/01/21 thru 11/01/21 7,614,138 8,167,545
9.25%, Due 4/25/18 1,357,766 1,446,301
9.40%, Due 10/25/19 5,176,541 5,543,400
9.50%, Due 6/01/05 thru 7/01/28 16,870,770 18,015,666
10.00%, Due 4/01/20 2,490,759 2,690,779
11.00%, Due 2/01/19 2,234,251 2,487,291
11.50%, Due 2/01/19 1,417,045 1,594,430
11.75%, Due 12/01/10 90,969 100,151
12.00%, Due 1/01/16 thru 2/01/19 2,024,276 2,246,247
12.25%, Due 7/01/14 20,086 22,083
12.50%, Due 2/01/11 145,395 161,635
13.25%, Due 4/01/12 3,293 3,788
13.50%, Due 1/01/11 thru 1/01/12 24,220 26,323
13.75%, Due 10/01/10 6,241 6,971
14.00%, Due 1/01/12 thru 11/01/14 79,592 89,224
14.25%, Due 12/01/14 32,831 37,027
14.50%, Due 1/01/12 6,761 7,642
14.75%, Due 11/01/10 thru 3/01/12 135,350 157,987
15.00%, Due 10/01/12 10,009 11,435
15.50%, Due 10/01/12 9,764 11,248
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Variable Rate Certificates:
Pool #54844, 5.905%, Due 9/01/27 16,154,988 16,249,955
Pool #66414, 6.842%, Due 9/01/28 10,844,796 10,993,912
Pool #70279, 6.84%, Due 4/01/19 985,414 1,005,157
Pool #70843, 6.407%, Due 4/01/20 1,813,801 1,826,541
Pool #73310, 6.09%, Due 1/01/03 4,967,229 4,975,456
Pool #73312, 6.09%, Due 1/01/03 7,713,637 7,726,094
Pool #92068, 7.212%, Due 1/01/18 917,564 943,093
Pool #109031, 6.695%, Due 8/01/05 10,000,000 10,268,685
Pool #110238, 6.363%, Due 1/01/16 4,138,346 4,165,583
Pool #124013, 7.447%, Due 10/01/21 1,384,636 1,421,698
Pool #176367, 7.159%, Due 4/01/15 1,981,578 2,019,198
Pool #181826, 7.45%, Due 10/01/22 856,881 879,771
Pool #201427, 6.777%, Due 1/01/23 1,429,025 1,477,380
Pool #323127, 5.708%, Due 8/01/15 19,099,556 19,093,636
Pool #457277, 7.406%, Due 10/01/27 26,976,445 28,029,220
Series 1996-M6, Class A, 7.3875%, Due 8/17/03 646,786 650,922
Series 1997-M4, Class C, 7.2984%, Due 8/17/18 5,683,000 5,837,322
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Variable Rate Mortgage Securities, 5.90%,
Due 3/01/18 2,920,808 2,948,497
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Variable Rate Pass-Thru Certificates, Pool
#313629, 8.50%, Due 11/01/02 596,359 615,400
FNMA Stripped Mortgage-Backed Securities:
Series B, Class B-1, 6.00%, Due 5/01/09 2,665,407 2,663,755
Series C, Class C-1, 6.00%, Due 5/01/09 2,112,318 2,111,008
Series K, Class K-1, 6.00%, Due 11/01/08 13,813,403 13,804,839
Series 161, Class 2, 8.50%, Due 7/25/22 3,789,193 892,732
Federal Agricultural Mortgage Corporation
Guaranteed Mortgage Variable Rate
Pass-Thru Certificates:
Series BA -1001, Class 1, 7.012%, Due 1/25/03 2,860,199 2,939,427
Series CS -1001, Class 1, 7.185%, Due 7/25/01 2,089,416 2,137,661
Series CS -1010, Class 1, 7.421%, Due 7/25/02 7,688,370 7,979,067
Federal Home Loan Banks Consolidated Bonds,
Series H, 4.875%, Due 3/17/00 8,000,000 7,999,656
GNMA Guaranteed Pass-Thru Certificates:
8.35%, Due 9/01/19 18,772,642 19,887,362
9.00%, Due 12/15/06 thru 12/15/09 10,699,841 11,184,773
12.50%, Due 4/15/19 2,893,702 3,303,335
13.00%, Due 11/15/10 thru 11/15/14 514,276 589,868
13.50%, Due 7/15/10 thru 10/15/12 107,310 124,452
14.00%, Due 6/15/11 thru 12/20/14 124,339 144,012
14.50%, Due 6/15/11 thru 11/15/12 229,739 270,417
15.00%, Due 1/15/12 thru 9/15/12 123,156 145,332
16.00%, Due 4/15/12 9,489 11,311
16
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
STRONG GOVERNMENT SECURITIES FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
GNMA Guaranteed Variable Rate Pass-Thru
Certificates:
Pool #8333, 6.875%, Due 3/20/18 $ 1,075,313 $ 1,100,760
Pool #8489, 6.875%, Due 4/20/19 241,126 ,247,373
Pool #8678, 6.625%, Due 8/20/20 8,395,961 8,618,979
Pool #8714, 6.125%, Due 11/20/20 6,177,162 6,302,992
HHS Project Loan, 7.83%, Due 11/01/01 1,454,706 1,475,159
Small Business Administration Guaranteed Loan
Interest Only Custodial Receipts:
Series 1992-6A, 2.473%, Due 10/15/17 28,244,358 1,246,424
Series 1993-1A, 2.5312%, Due 2/15/18 25,770,054 1,127,440
Student Loan Marketing Association Student Loan
Trust Floating Rate Bonds, Series 1995-1, Class
A1, 5.032%, Due 4/25/04 2,738,699 2,739,123
USGI FHA Insured Project Pool #2040, 3.025%,
Due 11/01/06 5,699,110 5,339,382
United States Department of Veterans Affairs
Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates - Vendee
Mortgage Trust:
Series 1995-1, Class 4, 8.8517%, Due 2/15/25 7,800,225 8,393,053
Series 1995-2, Class 3, 8.7925%, Due 6/15/25 17,054,557 18,333,598
United States Treasury Notes:
4.625%, Due 11/30/00 7,000,000 6,956,250
4.75%, Due 2/15/04 thru 11/15/08 29,005,000 28,021,354
5.25%, Due 11/15/28 thru 2/15/29 61,465,000 57,643,809
5.50%, Due 12/31/00 thru 8/15/28 45,605,000 45,714,391
5.625%, Due 5/15/08 9,775,000 9,918,575
5.875%, Due 11/15/05 21,000,000 21,590,625
6.00%, Due 7/31/02 95,740,000 97,924,117
6.125%, Due 8/15/07 thru 11/15/27 14,825,000 15,333,233
7.00%, Due 7/15/06 39,755,000 43,482,031
7.25%, Due 5/15/16 24,225,000 27,699,786
7.875%, Due 11/15/04 10,105,000 11,317,600
8.125%, Due 8/15/21 43,715,000 55,408,763
- --------------------------------------------------------------------------------
Total United States Government & Agency Issues
(Cost $1,158,999,166) 1,153,337,324
- --------------------------------------------------------------------------------
CORPORATE BONDS 5.6%
Atlas Air, Inc. Pass-Thru Certificates,
Series 1998-1, Class B, 7.68%, Due 1/02/14 9,936,467 9,939,995
Bank United Corporation Subordinated Notes,
8.875%, Due 5/01/07 10,000,000 10,374,330
GS Escrow Corporation Senior Notes, 7.00%,
Due 8/01/03 19,400,000 19,492,441
Riggs Capital Trust Preferred Securities, Series A,
8.625%, Due 12/31/26 (Acquired 12/10/96;
Cost $9,490,000) (b) 9,490,000 9,554,143
Sprint Capital Corporation Guaranteed Bonds,
6.90%, Due 5/01/19 13,000,000 12,825,020
United Air Lines, Inc. Debentures, 10.25%,
Due 7/15/21 10,735,000 13,061,801
Vastar Resources, Inc. Notes, 6.50%, Due 4/01/09 1,100,000 1,115,247
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $77,725,987) 76,362,977
- --------------------------------------------------------------------------------
MUNICIPAL BONDS 0.3%
Arkansas Development Finance Authority GNMA
Guaranteed Bonds, 9.75%, Due 11/15/14 3,100,000 3,848,752
- --------------------------------------------------------------------------------
Total Municipal Bonds (Cost $3,778,286) 3,848,752
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 0.6%
Bear Stearns Commercial Mortgage Securities, Inc.
Variable Rate Mortgage Pass-Thru Certificates,
Series 1999-C1, Class A-2, 6.02%, Due 2/14/09 7,500,000 7,272,675
Community Program Loan Trust Bonds, Series
1987-A, Class A5, 4.50%, Due 4/01/29 980,000 791,350
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed Securities
(Cost $8,350,932) 8,064,025
- --------------------------------------------------------------------------------
OPTIONS 0.1%
MCI Worldcom, Inc. Call Options 25,000,000 362,500
Merrill Lynch Swaption (The option to receive a
fixed interest rate of 7.75%; exercisable at a
strike price of 100 beginning 4/09/04 and
expiring 4/09/25.) 7,166,667 751,067
- --------------------------------------------------------------------------------
Total Options (Cost $894,340) 1,113,567
- --------------------------------------------------------------------------------
PREFERRED STOCKS 2.4%
Centaur Funding Corporation 9.08% Series B
(Acquired 12/09/98 - 4/13/99; Cost $21,217,983) (b) 20,000 22,237,400
Norwest Corporation Series A Cumulative
Tracking/Residential Home Mortgage LLC
(Acquired 12/16/94; Cost $10,000,000) (b) 50,000 10,134,600
- --------------------------------------------------------------------------------
Total Preferred Stocks (Cost $31,217,983) 32,372,000
- --------------------------------------------------------------------------------
WARRANTS 0.0%
EOP Operating LP Warrants, Expire 1/18/00 7,500 41,250
- --------------------------------------------------------------------------------
Total Warrants (Cost $60,000) 41,250
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 6.1%
Commercial Paper 0.0%
Interest Bearing, Due Upon Demand
Warner Lambert Company, 4.50% 437,100 437,100
Repurchase Agreements 6.0%
ABN-AMRO Tri-Party (Dated 4/30/99), 4.85%,
Due 5/03/99 (Repurchase Proceeds $81,833,061);
Collateralized by: FHLB Bonds and Discount
Corporate Notes, FHLMC Bonds and Discount
Notes, FNMA Notes, Federal Farm Credit
Bank Notes and SLMA Notes (d) 81,800,000 81,800,000
United States Government Issues 0.1%
United States Treasury Bills, Due 5/06/99
thru 7/29/99 (c) 1,545,000 1,537,063
- --------------------------------------------------------------------------------
Total Short-Term Investments (Cost $83,774,241) 83,774,163
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investments in Securities (Cost $1,364,800,935) 99.5% 1,358,914,058
Other Assets and Liabilities, Net 0.5% 7,951,081
- --------------------------------------------------------------------------------
Net Assets 100.0% $1,366,865,139
================================================================================
FUTURES
- --------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- --------------------------------------------------------------------------------
Purchased:
46 Five-Year U.S. Treasury Notes 6/99 $ 5,112,469 ($ 33,408)
84 Ten-Year U.S. Treasury Notes 6/99 9,633,750 (107,614)
486 U.S. Treasury Bonds 6/99 58,411,125 (1,164,247)
Sold:
100 U.S. Treasury Bonds 6/99 12,018,750 302,344
17
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG HIGH-YIELD BOND FUND
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
CORPORATE BONDS 83.3%
AP Holdings, Inc. Senior Discount Notes, Zero %,
Due 3/15/08 (Rate Reset Effective 3/15/03) $ 7,950,000 $ 4,571,250
APCOA/Standard Parking, Inc. Senior
Subordinated Notes, 9.25%, Due 3/15/08 11,210,000 10,607,462
Adelphia Communications Corporation Senior
Notes, 7.875%, Due 5/01/09 5,000,000 5,000,000
Allegiance Telecom, Inc. Senior Discount Notes,
Zero %, Due 2/15/08 (Rate Reset Effective
2/15/03) 11,000,000 7,466,250
Anchor Glass Container Corporation First
Mortgage Notes, 11.25%, Due 4/01/05 6,500,000 6,898,125
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 4,231,500
Atlas Air, Inc. Senior Notes, 10.75%, Due 8/01/05 11,725,000 12,399,187
BankUnited Capital Trust Preferred Securities,
Series A, 10.25%, Due 12/31/26 4,300,000 4,224,750
Bay View Capital Corporation Subordinated Notes,
9.125%, Due 8/15/07 4,975,000 4,744,906
Bresnan Communications Group LLC/Bresnan
Capital Corporation Senior Discount Notes,
Zero %, Due 2/01/09 (Rate Reset Effective
2/01/04) (Acquired 1/25/99; Cost $4,773,300) (b) 7,500,000 5,175,000
Bresnan Communications Group LLC/Bresnan
Capital Corporation Senior Notes, 8.00%,
Due 2/01/09 (Acquired 1/25/99;
Cost $2,000,000) (b) 2,000,000 2,065,000
Building One Services Corporation Senior
Subordinated Notes, 10.50%, Due 5/01/09
(Acquired 4/23/99; Cost $3,421,110) (b) 3,500,000 3,430,000
Capstar Radio Broadcasting Partners, Inc.
Senior Subordinated Notes, 9.25%, Due 7/01/07 4,150,000 4,399,000
William Carter Senior Subordinated Notes, Series A,
10.375%, Due 12/01/06 7,000,000 7,498,750
Chancellor Media Corporation Senior Notes, 8.00%,
Due 11/01/08 (Acquired 11/11/98;
Cost $4,957,550) (b) 5,000,000 5,175,000
Charter Communication Holdings LLC/Charter
Communication Holdings Capital Corporation
Senior Notes, 8.25%, Due 4/01/07
(Acquired 3/12/99; Cost $1,495,995) (b) 1,500,000 1,541,250
Cumulus Media, Inc. Senior Subordinated Notes,
10.375%, Due 7/01/08 7,000,000 7,612,500
Del Monte Corporation Senior Subordinated Notes,
12.25%, Due 4/15/07 2,600,000 3,042,000
e.spire Communications, Inc. Senior Notes, 13.75%,
Due 7/15/07 2,000,000 1,940,000
Everest Healthcare Services Corporation Senior
Subordinated Notes, 9.75%, Due 5/01/08 3,000,000 3,063,750
Exide Corporation Senior Notes, 10.00%,
Due 4/15/05 2,000,000 2,030,000
Florida Panthers Holdings, Inc. Senior Subordinated
Notes, 9.875%, Due 4/15/09 (Acquired 4/15/99;
Cost $5,000,000) (b) 5,000,000 5,037,500
Formica Corporation Senior Subordinated Notes,
10.875%, Due 3/01/09 (Acquired 2/18/99;
Cost $3,985,000) (b) 4,000,000 4,065,000
Fresenius Medical Care Capital Trust II Guaranteed
Preferred Securities, 7.875%, Due 2/01/08 11,590,000 11,416,150
GST Network Funding, Inc. Senior Secured
Discount Notes, Zero %, Due 5/01/08 (Rate
Reset Effective 5/01/03) (Acquired 1/07/99 -
4/07/99; Cost $1,681,875) (b) 3,500,000 2,143,750
General Binding Corporation Senior Subordinated
Notes, 9.375%, Due 6/01/08 5,000,000 5,143,750
Genesis Health Ventures, Inc. Senior Subordinated
Notes, 9.875%, Due 1/15/09 (Acquired 4/15/99;
Cost $860,000) (b) 1,000,000 900,000
Global Crossing Holding, Ltd. Senior Notes, 9.625%,
Due 5/15/08 8,850,000 9,912,000
Graham Packaging Holdings Company/GPC
Capital Corporation II Senior Discount Notes,
Zero %, Due 1/15/09 (Rate Reset Effective 1/15/03 8,150,000 5,735,563
Grove Holdings LLC/Grove Holdings Capital, Inc.
Senior Discount Debentures, Zero %, Due 5/01/09
(Rate Reset Effective 5/01/03) 9,500,000 3,467,500
Hyperion Telecommunications, Inc. Senior Secured
Notes, 12.25%, Due 9/01/04 2,000,000 2,185,000
Hyperion Telecommunications, Inc. Senior
Subordinated Notes, 12.00%, Due 11/01/07
(Acquired 2/25/99; Cost $3,000,000) (b) 3,000,000 3,165,000
ICG Holdings, Inc. Senior Discount Notes, Zero %,
Due 9/15/05 (Rate Reset Effective 9/15/00) 4,000,000 3,660,000
IXC Communications, Inc. Senior Subordinated
Notes, 9.00%, Due 4/15/08 2,800,000 2,817,500
Imax Corporation Senior Yankee Notes, 7.875%,
Due 12/01/05 6,150,000 6,157,688
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 6,000,000 5,982,228
Insight Health Services Corporation Senior
Subordinated Notes, 9.625%, Due 6/15/08 2,000,000 2,060,000
Interep National Radio Sales, Inc. Senior
Subordinated Notes, 10.00%, Due 7/01/08 4,000,000 4,185,000
Intermedia Communications, Inc. Senior Notes:
8.875%, Due 11/01/07 1,750,000 1,771,875
Series B, 8.50%, Due 1/15/08 2,000,000 2,005,000
Jackson Products, Inc. Senior Subordinated Notes,
Series B, 9.50%, Due 4/15/05 8,300,000 8,341,500
Jordan Telecommunication Products, Inc. Senior
Subordinated Discount Notes, Zero %,
Due 8/01/07 (Rate Reset Effective 8/01/00) 11,615,000 9,611,413
Key Energy Services, Inc. Units, 14.00%, Due
1/15/09 (Acquired 1/19/99; Cost $3,000,000) (b) 3,000 2,880,000
La Petite Academy, Inc./LPA Holding Corporation
Senior Notes, Series B, 10.00%, Due 5/15/08 6,300,000 6,331,500
MJD Communications, Inc. Senior Subordinated
Notes, 9.50%, Due 5/01/08 3,000,000 3,048,750
Market Hub Partners Storage LP/Market Hub
Partners Finance, Inc. Senior Notes, 8.25%,
Due 3/01/08 4,300,000 4,429,000
Metromedia Fiber Network, Inc. Senior Notes,
10.00%, Due 11/15/08 (Acquired 11/20/98;
Cost $8,065,000) (b) 8,000,000 8,680,000
MetroNet Communications Corporation Senior
Discount Notes:
Zero %, Due 11/01/07 (Rate Reset Effective
11/01/02) 1,000,000 782,500
Zero %, Due 6/15/08 (Rate Reset Effective
6/15/03) 1,375,000 1,079,375
MetroNet Communications Corporation Senior
Yankee Notes, 10.625%, Due 11/01/08
(Acquired 12/02/98 - 12/04/98;
Cost $6,975,625) (b) 6,500,000 7,661,875
Mohegan Tribal Gaming Authority Senior Notes,
8.125%, Due 1/01/06 (Acquired 2/24/99;
Cost $3,000,000) (b) 3,000,000 3,086,250
Motors and Gears, Inc. Senior Notes, Series C,
10.75%, Due 11/15/06 7,500,000 7,762,500
18
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
STRONG HIGH-YIELD BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
NTL, Inc. Senior Notes:
Zero %, Due 4/01/08 (Rate Reset Effective
4/01/03) $ 5,500,000 $ 3,884,375
11.50%, Due 10/01/08 (Acquired 10/26/98 -
11/30/98; Cost $5,720,000) (b) 5,500,000 6,242,500
NTL, Inc. Senior Notes, Series B, 10.00%,
2/15/07 2,500,000 2,700,000
National Wine & Spirits, Inc. Senior Notes,
10.125%, Due 1/15/09 (Acquired 1/20/99;
Cost $8,300,313) (b) 8,250,000 8,559,375
Nextel Communications, Inc. Senior Discount
Notes, 10.125%, Due 1/15/04 4,500,000 4,725,000
Nextlink Communications, Inc. Senior Discount
Notes, 10.75%, Due 11/15/08 (Acquired 11/04/98;
Cost $10,000,000) (b) 10,000,000 10,800,000
Ono Finance PLC Units, 13.00%, Due 5/01/09
(Acquired 4/29/99; Cost $3,000,000) (b) 3,000 3,075,000
Orbital Imaging Corporation Senior Notes:
11.625%, Due 3/01/05 6,500,000 6,240,000
11.625%, Due 3/01/05 (Acquired 4/19/99;
Cost $2,833,290) (b) 3,000,000 2,880,000
PSINet, Inc. Senior Notes, 11.50%, Due 11/01/08 7,000,000 7,805,000
Packaged Ice, Inc. Senior Notes, Series B, 9.75%,
Due 2/01/05 5,040,000 5,140,800
Pogo Producing Company Senior Subordinated
Notes, 10.375%, Due 2/15/09 5,815,000 6,105,750
Prime Succession Acquisition Corporation Senior
Subordinated Notes, 10.75%, Due 8/15/04 4,500,000 3,240,000
Quorum Health Group, Inc. Senior
Subordinated Notes, 8.75%, Due 11/01/05 3,000,000 3,022,500
RBF Finance Company Senior Secured Notes,
11.00%, Due 3/15/06 (Acquired 3/19/99;
Cost $4,000,000) (b) 4,000,000 4,200,000
RCN Corporation Senior Discount Notes:
Zero %, Due 10/15/07 (Rate Reset Effective
10/15/02) 1,400,000 974,750
Zero %, Due 2/15/08 (Rate Reset Effective
2/15/03) 3,000,000 1,950,000
R.H. Donnelley, Inc. Senior Subordinated
Notes, 9.125%, Due 6/01/08 7,000,000 7,490,000
Repap New Brunswick Senior Yankee Notes,
10.625%, Due 4/15/05 5,500,000 4,482,500
Rhythms Netconnections, Inc. Senior Notes,
12.75%, Due 4/15/09 (Acquired 4/16/99;
Cost $6,000,000) (b) 6,000,000 6,015,000
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Notes, Series B, 10.00%, Due 3/15/05 8,000,000 9,040,000
SF Holdings Group, Inc. Senior Secured Discount
Notes, Zero %, Due 3/15/08 (Rate Reset
Effective 3/15/03) 5,000,000 1,575,000
SFX Entertainment, Inc. Senior Subordinated Notes,
9.125%, Due 12/01/08 (Acquired 11/19/98 - 2/26/99;
Cost $7,020,000) (b) 7,000,000 7,297,500
Sabreliner Corporation Senior Notes, 11.00%,
Due 6/15/08 (Acquired 6/19/98; Cost
$6,000,000) (b) 6,000,000 5,280,000
BF Saul Real Estate Investment Trust Senior
Secured Notes, 9.75%, Due 4/01/08 7,000,000 6,825,000
Schuff Steel Company Senior Notes, 10.50%,
Due 6/01/08 2,240,000 2,100,000
The Scotts Company Senior Subordinated Notes,
8.625%, Due 1/15/09 (Acquired 1/14/99;
Cost $8,621,656) (b) 8,500,000 8,850,625
Snyder Oil Corporation Senior Subordinated Notes,
8.75%, Due 6/15/07 6,000,000 6,075,000
Spectrasite Holdings, Inc. Senior Discount Notes,
Zero %, Due 4/15/09 (Rate Reset Effective 4/15/04)
(Acquired 4/13/99; Cost $4,925,070) (b) 8,500,000 5,015,000
Station Casinos, Inc. Senior Subordinated Notes,
9.75%, Due 4/15/07 3,750,000 4,012,500
Steel Heddle Manufacturing Company Senior
Subordinated Notes, 10.625%, Due 6/01/08 5,000,000 2,625,000
Superior National Capital Trust I Notes, 10.75%,
Due 12/01/17 5,405,000 5,296,900
Telecommunications Techniques Company LLC
Senior Subordinated Notes, 9.75%, Due 5/15/08 6,000,000 6,180,000
Telecorp PCS, Inc. Senior Subordinated Discount
Notes, Zero %, Due 4/15/09 (Rate Reset
Effective 4/15/04) (Acquired 4/20/99;
Cost $2,564,100) (b) 4,500,000 2,565,000
Telemundo Holdings, Inc. Senior Discount Notes,
Zero %, Due 8/15/08 (Rate Reset Effective
8/15/03) 10,400,000 5,668,000
Telewest Communications PLC Senior Discount
Notes, Zero %, Due 4/15/09 (Rate Reset Effective
4/15/04) (Acquired 4/01/99; Cost $1,590,700) (b) 2,500,000 1,706,250
Time Warner Telecom LLC Senior Notes, 9.75%,
Due 7/15/08 5,000,000 5,475,000
Town Sports International, Inc. Senior Notes,
Series B, 9.75%, Due 10/15/04 7,100,000 6,993,500
Transwestern Publishing Company LP/TWP
Capital Corporation II Senior Subordinated Notes,
Series D, 9.625%, Due 11/15/07 12,380,000 12,999,000
Tri-State Outdoor Media Group, Inc. Senior Notes,
11.00%, Due 5/15/08 6,300,000 6,520,500
Triarc Consumer Products Group LLC/Triarc
Beverage Holdings Corporation Senior
Subordinated Notes, 10.25%, Due 2/15/09
(Acquired 4/13/99; Cost $6,191,300) (b) 6,130,000 6,206,625
United Industries Corporation Senior Subordinated
Notes, 9.875%, Due 4/01/09 (Acquired 3/19/99;
Cost $3,000,000) (b) 3,000,000 3,127,500
United International Holdings, Inc. Senior Secured
Discount Notes, Series B, Zero %, Due 2/15/08
(Rate Reset Effective 2/15/03) 11,750,000 8,107,500
Universal Compression, Inc. Senior Discount Notes,
Zero %, Due 2/15/08 (Rate Reset Effective 2/15/03) 5,500,000 3,602,500
Verio, Inc. Senior Notes, 13.50%, Due 6/15/04 6,500,000 7,572,500
Versatel Telecom BV Senior Yankee Notes, 13.25%,
Due 5/15/08 3,000,000 3,255,000
Viatel, Inc. Senior Notes, 11.50%, Due 3/15/09
(Acquired 4/22/99; Cost $5,325,000) (b) 5,000,000 5,350,000
Vintage Petroleum, Inc. Senior Subordinated Notes,
9.75%, Due 6/30/09 (Acquired 1/20/99;
$7,075,000) (b) 7,075,000 7,464,125
Winstar Communications, Inc. Senior Discount
Notes, Zero %, Due 10/15/05 (Rate Reset Effective
10/15/00) 1,880,000 1,626,200
Winstar Communications, Inc. Senior Subordinated
Deferred Interest Notes:
Zero %, Due 3/01/07 (Rate Reset Effective 9/01/02) 2,000,000 2,150,000
Zero %, Due 3/15/08 (Rate Reset Effective 9/15/03) 4,000,000 3,340,000
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $510,120,950) 516,055,122
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 3.4%
Aircraft Lease Portfolio Securitization Pass-Thru
Trust Certificates, Series 1996-1, Class D, 12.75%,
Due 6/15/06 4,489,834 4,444,936
Blaylock Mortgage Capital Corporation Subordinated
Bonds, Series 1997-A, Class B3, 6.425%, Due
10/25/03 (Acquired 3/11/98; Cost $3,158,335) (b) 3,351,574 2,838,381
CS First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates, Series 1992-4,
Class A-5, Interest Only, 0.625%, Due 10/25/22 12,768,483 131,643
19
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG HIGH-YIELD BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
Chase Mortgage Finance Trust Mortgage Pass-Thru
Certificates, Series 1999-S2, Class B3, 6.50%,
Due 3/25/29 (Acquired 4/14/99; Cost
$1,175,160) (b) $1,572,449 $ 1,150,844
Merrill Lynch Mortgage Investors, Inc. Variable
Rate Mortgage Pass-Thru Certificates,
Series 1994-M1, Class E, 8.3367%, Due 6/25/22
(Acquired 11/19/98; Cost $4,850,000) (b) 5,000,000 5,027,925
Norwest Asset Securities Corporation Mortgage
Pass-Thru Certificates:
Series 1998-29, Class B4, 6.25%, Due 12/25/28
(Acquired 4/14/99; Cost $2,324,264) (b) 3,158,236 2,266,034
Series 1998-30, Class B4, 6.25%, Due 12/25/28
(Acquired 4/14/99; Cost $880,290) (b) 1,196,148 858,237
Series 1999-4, Class B4, 6.50%, Due 3/25/29
(Acquired 4/14/99; Cost $1,568,390) (b) 2,098,619 1,531,992
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Thru Certificates, Series 1997-A,
Class B-3, 7.3887%, Due 10/01/25
(Acquired 7/09/97; Cost $2,803,622) (b) 3,140,012 2,702,388
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed Securities
(Cost $21,455,208) 20,952,380
- --------------------------------------------------------------------------------
FOREIGN BONDS 0.8%
Shaw Communications, Inc. Debentures, 8.54%,
Due 9/30/27 8,000,000 CAD 5,233,516
- --------------------------------------------------------------------------------
Total Foreign Bonds (Cost $5,227,995) 5,233,516
- --------------------------------------------------------------------------------
PREFERRED STOCKS 8.7%
Capstar Communications, Inc. 12.625% Exchangeable 54,821 6,770,394
Capstar Radio Broadcasting Partners, Inc. 12.00%
Senior Exchangeable 67,416 8,039,358
e.spire Communications, Inc. 14.75% 3,466 2,529,906
Global Crossing Holdings, Ltd. 10.50% Senior
Exchangeable 40,000 4,650,000
IXC Communications, Inc. 12.50% Junior 3,203 3,339,150
Intermedia Communications, Inc. 13.50% Series B
Exchangeable 6,873 7,440,066
Jordan Telecommunications Products, Inc. 13.25%
Series B Senior Exchangeable 2,515 2,590,143
NTL, Inc. 13.00% Series B 6,794 7,719,505
Nextlink Communications, Inc. 14.00% Senior
Exchangeable 50,929 2,801,081
R&B Falcon Corporation 13.875% Units
(Acquired 4/15/99 - 4/28/99; Cost $7,125,000) (b) 7,000 7,332,500
21st Century Telecom Group, Inc. 13.75% Senior
Exchangeable 1,147 573,378
- --------------------------------------------------------------------------------
Total Preferred Stocks (Cost $55,945,830) 53,785,481
- --------------------------------------------------------------------------------
COMMON STOCKS 1.2%
Cumulus Media, Inc. 180,000 2,913,750
Jordan Telecommunications Products, Inc. (Acquired
2/25/98; Cost $0) (b) 2,000 400,000
OpTel, Inc. Non-Voting (Acquired 2/07/97 - 5/07/98;
Cost $596,280) (b) 17,175 85,875
SF Holdings Group, Inc. Class C (Acquired 3/05/98;
Cost $20,000) 10,000 20,000
Verio, Inc. 61,540 4,369,340
- --------------------------------------------------------------------------------
Total Common Stocks (Cost $3,950,550) 7,788,965
- --------------------------------------------------------------------------------
WARRANTS 0.2%
American Telecasting, Inc. Warrants, Expire 8/10/00 150 0
e.spire Communications, Inc. Warrants,
Expire 11/01/05 1,500 19,500
MetroNet Communications Corporation Warrants,
Expire 8/15/07 3,000 195,000
NTL, Inc. Warrants, Expire 10/14/08
(Acquired 10/28/98; Cost $50,000) (b) 3,800 171,000
Orbital Imaging Corporation Warrants,
Expire 3/01/05 (Acquired 2/20/98 - 5/04/98;
Cost $1) (b) 6,500 260,000
Powertel, Inc. Warrants, Expire 2/01/06 3,264 28,560
21st Century Telecom Group, Inc. Warrants,
Expire 2/15/10 (Acquired 2/02/98; Cost $55,000) (b) 1,000 20,000
Versatel Telecom International NV Warrants,
Expire 5/15/08 (Acquired 5/20/98; Cost $40,000) (b) 4,000 300,000
- --------------------------------------------------------------------------------
Total Warrants (Cost $240,656) 994,060
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 0.8%
Commercial Paper 0.2%
Interest Bearing, Due Upon Demand
General Mills, Inc., 4.51% 839,200 839,200
Pitney Bowes Credit Corporation, 4.51% 87,900 87,900
Warner Lambert Company, 4.50% 60,100 60,100
Wisconsin Electric Power Company, 4.50% 42,800 42,800
----------
1,030,000
Repurchase Agreements 0.6%
Goldman, Sachs & Company, Inc. (Dated 4/30/99),
4.80%, Due 5/03/99 (Repurchase Proceeds
$4,001,600); Collateralized by: United States
Treasury Bonds (d) 4,000,000 4,000,000
- --------------------------------------------------------------------------------
Total Short-Term Investments (Cost $5,030,000) 5,030,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investments in Securities (Cost $601,971,189) 98.4% 609,839,524
Other Assets and Liabilities, Net 1.6% 9,947,570
- --------------------------------------------------------------------------------
Net Assets 100.0% $619,787,094
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------------
Settlement Value Unrealized
Date in USD Depreciation
- --------------------------------------------------------------------------------
Sold:
7,700,000 CAD 6/17/99 $5,292,605 $293,255
================================================================================
STRONG SHORT-TERM BOND FUND
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
CORPORATE BONDS 51.6%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 10,600,000 $10,957,814
Allied Waste North America, Inc. Senior Notes,
7.375%, Due 1/01/04 8,400,000 8,232,000
Amerco Asset-Backed Bonds, 6.89%, Due 10/15/00
(Acquired 10/17/97; Cost $10,000,000) (b) 10,000,000 9,916,000
Atlas Air, Inc. Pass-Thru Certificates, Series 1998-1,
Class C, 8.01%, Due 1/02/10 18,887,922 18,842,496
Beaver Valley Funding Corporation Debentures,
8.625%, Due 6/01/07 9,860,000 10,624,150
Blackstone Hotel Acquisitions Company Debt Unit
(Medium Term Structured Enhanced Return
Trusts 1998), Series R-38, 5.91%, Due 6/30/03
(Acquired 7/30/98; Cost $14,000,000) (b) 14,000,000 13,912,500
CMS Panhandle Holding Company Senior Notes,
6.125%, Due 3/15/04 (Acquired 3/23/99;
Cost $4,984,200) (b) 5,000,000 4,961,275
20
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
STRONG SHORT-TERM BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
CalEnergy, Inc. Senior Notes, 7.63%, Due 10/15/07 $ 5,000,000 $ 5,272,860
Call-Net Enterprises, Inc. Senior Discount Notes,
Zero %, Due 12/01/04 (Rate Reset Effective
12/01/99) 9,000,000 9,303,750
Cendant Corporation Notes:
7.50%, Due 12/01/00 10,000,000 10,186,560
7.75%, Due 12/01/03 11,540,000 11,912,927
Continental Airlines, Inc. Senior Notes, 9.50%,
Due 12/15/01 14,750,000 15,487,500
Continental Airlines Pass-Thru Certificates:
Series 1997-2D, 7.522%, Due 6/30/01 10,306,974 10,217,870
Series 1998-2A, 6.41%, Due 4/15/07 2,388,721 2,395,183
Custom Repackaged Asset Vehicle Trusts - CRAVE
Trust Certificates, Series 1997-800, 6.86%, Due
8/12/00 (Acquired 8/14/97; Cost $4,999,200) (b) 5,000,000 5,027,000
Custom Repackaged Asset Vehicle Trusts -
Walt Disney Credit-Linked Trust Certificates,
Series 1996-403, 7.20%, Due 1/10/07
(Acquired 12/18/96; Cost $3,906,482) (b) 3,909,062 4,010,275
Custom Repackaged Asset Vehicle Trusts -
Wal-Mart Credit-Linked Trust Certificates,
Series 1996-401, 7.35%, Due 7/17/06
(Acquired 10/16/96; Cost $4,079,373) (b) 4,091,976 4,203,233
Delta Air Lines, Inc. Pass-Thru Certificates:
Series 1992-B1, 9.375%, Due 9/11/07 17,327,480 19,035,883
Series 1993-A1, 9.875%, Due 4/30/08 16,308,449 18,391,445
Duke Realty LP Notes, 7.05%, Due 3/01/16
(Putable at $100 and Rate Reset Effective 3/01/06) 3,000,000 3,022,134
EOP Operating LP Senior Notes, 6.375%,
Due 2/15/03 1,000,000 991,737
East Coast Power LLC Senior Secured Notes,
Tranche A, 6.737%, Due 3/31/08
(Acquired 4/14/99; Cost $12,000,000) (b) 12,000,000 11,963,604
El Paso Electric Company First Mortgage Notes,
Series E, 9.40%, Due 5/01/11 10,718,000 12,307,083
Empress Entertainment Inc., Senior Subordinated
Notes, 8.125%, Due 7/01/06 10,000,000 10,062,500
First Industrial LP Notes, 6.50%, Due 4/05/11
(Rate Reset Effective 3/15/01) 10,000,000 9,904,660
GS Escrow Corporation Floating Rate Senior Notes,
5.995%, Due 8/01/03 5,000,000 4,920,105
GS Escrow Corporation Senior Notes:
6.75%, Due 8/01/01 34,500,000 34,551,060
7.00%, Due 8/01/03 5,000,000 5,023,825
Gulf Canada Resources, Ltd. Senior Yankee Notes,
8.35%, Due 8/01/06 5,030,000 5,155,750
HRPT Properties Trust Senior Notes, 6.75%,
Due 12/18/02 5,000,000 4,924,885
Homeside, Inc. Senior Secured Second Priority Notes,
11.25%, Due 5/15/03 27,468,000 31,553,865
Homeside Lending, Inc. Senior Notes, Tranche
00010, 6.20%, Due 5/15/03 8,740,000 8,603,193
Huntington Capital I Variable Rate Capital Income
Securities, 5.6963%, Due 2/01/27 16,500,000 16,183,365
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 5,000,000 4,985,190
ITT Corporation Notes:
6.25%, Due 11/15/00 5,500,000 5,434,511
6.75%, Due 11/15/03 10,400,000 10,043,790
Korea Electric Power Company Debentures, 6.00%,
Due 12/01/26 11,000,000 10,646,955
LCI International, Inc. Senior Notes, 7.25%,
Due 6/15/07 3,750,000 3,855,690
Lehman Brothers Holdings, Inc. Notes, 6.625%,
Due 4/01/04 10,000,000 10,058,360
Niagara Mohawk Power Corporation Senior
Notes, Series C, 7.125%, Due 7/01/01 51,000,000 51,690,693
NWA Trust Structured Enhanced Return
Trusts 1998, 7.9763%, Due 4/15/11
(Acquired 4/06/98; Cost $15,240,000) (b) 15,000,000 13,425,000
Panamerican Beverages, Inc. Senior Yankee Notes,
8.125%, Due 4/01/03 6,300,000 6,188,654
Qwest Communications International, Inc. Senior
Notes, 7.50%, Due 11/01/08
(Acquired 10/27/98; Cost $6,207,750) (b) 6,250,000 6,570,312
Riggs Capital Trust Preferred Securities, Series A,
8.625%, Due 12/31/26 (Acquired 12/20/96 -
1/15/97; Cost $11,565,210) (b) 11,500,000 11,577,729
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Notes, 9.625%, Due 8/01/02 7,230,000 7,844,550
Saks, Inc. Notes, 7.25%, Due 12/01/04 6,000,000 6,148,134
Simon Debartolo Group LP Notes,
6.625%, Due 6/15/03 10,000,000 9,920,470
Skandinaviska Enskilda Banken Subordinated
Reset Notes, 7.50%, Due 3/29/49
(Rate Reset Effective 3/29/09)
(Acquired 4/14/99; Cost $4,994,950) (b) 5,000,000 4,989,255
Skandinaviska Enskilda Banken Variable Rate
Subordinated Yankee Notes, 6.50%, Due 12/29/49
(Rate Reset Effective 6/04/49) (Acquired 6/29/98 -
8/19/98; Cost $12,434,625) (b) 12,500,000 12,231,400
Spintab AB Floating Rate Subordinated Yankee
Notes, 5.6263%, Due 12/29/49 (Acquired
11/21/97; Cost $30,000,000) (b) 30,000,000 30,272,160
Sprint Capital Corporation Guaranteed Notes,
5.875%, Due 5/01/04 (e) 11,385,000 11,266,368
Sprint Spectrum LP/Sprint Spectrum Finance
Corporation Senior Notes, 11.00%, Due 8/15/06 14,648,000 16,918,440
Star Capital Trust I Floating Rate Securities,
5.765%, Due 6/15/27 10,000,000 9,910,160
Starwood Hotels & Resorts Worldwide, Inc., 6.75%,
Due 11/15/05 3,750,000 3,562,267
Superior Financial Corporation Senior Notes,
8.65%, Due 4/01/03 (Acquired 3/27/98;
Cost $1,250,000) (b) 1,250,000 1,243,750
Swedbank Floating Rate Debt Unit (Medium Term
Structured Enhanced Return Trusts 1996,
Series R-35), 5.85%, Due 11/10/02
(Acquired 10/16/96; Cost $10,000,000) (b) 10,000,000 9,600,000
TKR Cable I, Inc. Senior Debentures, 10.50%,
Due 10/30/07 10,940,000 11,743,652
Texas Utilities Company Senior Notes, Series D,
6.375%, Due 8/16/01 14,000,000 14,098,756
Tricon Global Restaurants, Inc. Senior Notes,
7.45%, Due 5/15/05 2,250,000 2,300,828
Union Pacific Corporation Medium Term Notes,
Tranche 00165, 6.34%, Due 11/25/03 6,000,000 6,011,256
United Air Lines, Inc. Debentures, 10.25%,
Due 7/15/21 4,850,000 5,901,233
United States Filter Corporation Variable Rate
Remarketable or Redeemable Securities:
6.375%, Due 5/15/11 (Remarketing Date 5/15/01) 4,705,000 4,712,740
6.50%, Due 5/15/13 (Remarketing Date 5/15/03) 11,000,000 10,936,871
Univision Network Holding LP Subordinated
Notes, 7.00%, Due 12/17/02 8,000,000 10,120,000
Valero Pass-Thru Asset Trust 1997-1 Securities,
6.75%, Due 12/15/02
(Acquired 12/05/97; Cost $4,992,800) (b) 5,000,000 5,021,055
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $679,448,053) 681,288,716
- --------------------------------------------------------------------------------
21
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG SHORT-TERM BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 21.3%
BCF LLC Mortgage Pass-Thru Certificates, Series
1997-R2, Class 3-A1, 7.00%, Due 12/25/35
(Acquired 6/17/97; Cost $4,429,476) (b) $ 4,426,498 $ 4,430,659
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 1990-G, Class A-Z1,
9.50%, Due 12/25/21 1,047,055 1,077,158
Chase Mortgage Finance Corporation Variable Rate
Multiclass Mortgage Pass-Thru Certificates,
Series 1992-2, Class B2, 7.95%, Due 8/28/23
(Acquired 9/27/96 - 9/03/97; Cost $2,824,751) (b) 2,812,256 2,802,582
Cistron Biotechnology, Inc. Asset-Backed Notes,
Series 1997-A, Class A-6, 6.35%, Due 4/15/11 17,955,000 18,181,143
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates:
Series 1988-8, Class A-1, 8.4747%, Due 6/25/18 3,630,848 3,715,513
Series 1993-3, Class B-1, 7.00%, Due 3/25/08
(Acquired 10/23/96; Cost $1,824,193) (b) 1,851,532 1,863,595
Cityscape Home Loan Owners' Trust Asset Backed
Notes, Series 1997-1, Class A-3, 6.63%,
Due 3/25/18 5,350,000 5,356,982
Collateralized Mortgage Obligation Trust 47, Class E,
Principal Only, Due 9/01/18 763,366 490,676
Collateralized Mortgage Obligation Trust 61, Class Z,
9.10%, Due 1/01/20 1,637,842 1,636,185
Collateralized Mortgage Obligation Trust Inverse
Floating Rate Collateralized Mortgage Obligation,
Series 13, Class Q, 16.763%, Due 1/20/03 610,686 625,648
ContiMortgage Home Equity Loan Trust Interest
Only Senior Strip Certificates, Series 1996-2,
Class A, 0.9671%, Due 7/15/27
(Acquired 6/14/96; Cost $2,298,789) (b) 79,694,647 1,554,046
ContiSecurities Residual Corporation ContiMortgage
Net Interest Margin Notes, Series 1997-A, 7.23%,
Due 7/16/28 (Acquired 9/18/97;
Cost $2,008,184) (b) 2,008,184 2,006,297
CS First Boston Mortgage Securities Corporation
Mortgage Backed Certificates, 7.25%, Due 8/25/27 2,107,849 2,120,233
DLJ Mortgage Acceptance Corporation Variable
Rate Multifamily Mortgage Pass-Thru
Certificates, Series 1993-MF10, Class A-1,
Interest Only, 0.80%, Due 7/15/03 22,046,089 184,967
Drexel Burnham Lambert Collateralized Mortgage
Obligation Trust, Series T, Class T-4, 8.45%,
Due 9/20/19 6,600,000 6,793,697
FirstPlus Global Issuance Corporation Asset-Backed
Notes, Series 1998-4, Class A, Interest Only,
6.10%, Due 8/10/00 52,379,000 3,781,240
GMBS, Inc. Countrywide Funding Certificates,
Series 1990-1, Class Z, 9.25%, Due 1/28/20 2,310,108 2,347,647
GS Mortgage Securities Corporation Variable Rate
Mortgage Participation Securities, Series 1998-1,
Class A, 8.00%, Due 9/20/27 (Acquired 5/19/98;
Cost $9,091,201) (b) 8,676,362 9,110,181
GS Mortgage Securities Corporation II Commercial
Mortgage Pass-Thru Certificates, Series 1999-C1,
Class X, Interest Only, 1.1662%, Due 11/18/30 119,600,516 7,119,819
Greenwich Capital Acceptance, Inc. Mortgage
Securities, Series 1993-P01, Class E, Principal
Only, Due 11/26/17 5,492,688 4,009,662
Greenwich Capital Acceptance, Inc. Variable Rate
Mortgage Pass-Thru Certificates, Series 1991-1,
Class A, 6.6535%, Due 2/25/21 (Acquired 4/18/96;
Cost $7,362,426) (b) 7,218,065 7,290,246
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 9/29/98; Cost
$10,478,043) (b) 10,478,043 10,478,043
Kmart CMBS Financing, Inc. Floating Rate
Commercial Mortgage Pass-Thru Certificates,
Series 1997-1, Class D, 6.0013%, Due 3/01/07
(Acquired 3/10/97; Cost $4,516,875) (b) 4,500,000 4,410,293
Merrill Lynch Home Equity Acceptance, Inc.
Subordinated Variable Rate Mortgage-Backed
Certificates, Series 1994-A, Class A-1, 5.9375%,
Due 8/17/23 7,085,471 7,024,607
Merrill Lynch Mortgage Investors, Inc. Mortgage
Pass-Thru Certificates, Series 1994-C1,
Interest Only, 0.5379%, Due 11/25/20 23,313,194 342,471
Merrill Lynch Mortgage Investors, Inc. Senior
Subordinated Pass-Thru Certificates,
Series 1994-A, Class A-5, 7.035%, Due 2/15/24 13,666,284 13,807,213
Merrill Lynch Mortgage Investors, Inc. Variable
Rate Mortgage Pass-Thru Certificates,
Series 1994-M1, Class E, 8.3367%,
Due 6/25/22 (Acquired 11/19/98;
Cost $6,663,900) (b) 6,870,000 6,908,369
The Money Store, Inc. Securitized Net Interest
Margin Trust 1997-1 Notes, 7.36%, Due 6/20/25
(Acquired 12/23/97; Cost $2,343,772) (b) 2,343,773 2,283,725
Morgan Stanley Capital I, Inc. Variable Rate
Commercial Mortgage Pass-Thru Certificates:
Series 1997-RR, Class A, 6.8688%, Due 4/28/39
(Acquired 11/21/97; Cost $4,491,015) (b) 4,492,313 4,451,613
Series 1999-WF1, Class X, 1.0162%, Due 10/15/18
(Acquired 2/10/99; Cost $4,983,129) (b) 96,746,646 4,809,759
NPF XI, Inc. Health Care Receivables Program 97-1
Notes, Class A, 6.815%, Due 7/01/01
(Acquired 6/19/97; Cost $4,999,944) (b) 5,000,000 5,031,250
Option One Mortgage Securities Corporation Net
Interest Margin Trust, Series 1999-2, 9.66%,
Due 6/25/29 (Acquired 4/23/99;
Cost $5,500,000) (b) 5,500,000 5,500,000
Oregon Commercial Mortgage, Inc. Variable Rate
Commercial Mortgage Pass-Thru Certificates,
Series 1995-1, Class E, 9.2066%, Due 6/25/26
(Acquired 5/13/98; Cost $7,997,923) (b) 7,688,000 7,611,120
Prudential Home Mortgage Securities Company
Mortgage Pass-Thru Certificates, Series 1992-26,
Class A-18, 7.50%, Due 8/25/07 1,745,062 1,746,161
Prudential Home Thirty-Year Mortgage Trust
Subordinated Mortgage Securities, Series 1992-A,
Class B2-2, 7.90%, Due 4/28/22
(Acquired 10/03/96 - 3/18/98; Cost $5,017,799) (b) 5,009,477 5,030,542
RTC Mortgage Pass-Thru Securities, Inc.
Commercial Certificates:
Series 1994-C2, Class E, 8.00%, Due 4/25/25 11,375,471 11,404,421
Series 1995-C2, Class D, 7.00%, Due 5/25/27 5,070,493 5,068,592
RTC Pass-Thru Securities, Inc. Variable Rate
Certificates:
Series 1991-11, Class 1-L, 8.625%, Due 10/25/21 8,024,858 8,002,750
Series 1992-1, Class A-2, 7.7592%, Due 8/25/20 1,741,608 1,737,227
Residential Funding Mortgage Securities I, Inc.
Mortgage Pass-Thru Certificates, Series 1993-M23,
Class A-1, 6.97%, Due 8/28/23 1,154,505 1,156,312
Rural Housing Trust 1987-1 Senior Mortgage
Pass-Thru Certificates, Series 1, Class D, 6.33%,
Due 4/01/26 357,573 357,449
22
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
STRONG SHORT-TERM BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
Rural Housing Trust 1987-1 Senior Mortgage
Pass-Thru Subordinated Certificates, Class 3B,
7.33%, Due 4/01/26 $ 9,272,586 $ 9,410,558
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage Bonds, Series
1992-C, Class 3-A, 11.6352%, Due 11/25/30 753,596 751,365
Ryland Mortgage Securities Corporation IV Variable
Rate Collateralized Mortgage Bonds, Series 2,
Class 3-A, 12.0461%, Due 6/25/23 1,304,819 1,329,284
Ryland Mortgage Securities Corporation Variable
Rate Mortgage Participation Securites:
Series 1991-1, 6.7847%, Due 3/25/20 1,797,074 1,805,555
Series 1992-3, Class A-2, 6.8988%, Due 6/25/20 4,722,330 4,730,943
SL Commercial Mortgage Trust Mortgage Pass-Thru
Certificates, Series 1997-C1, Class A, 6.875%,
Due 7/25/04 (Acquired 3/23/99; Cost
$19,633,947) (b) 19,242,335 19,608,613
SWP Mortgage Securities Trust Mortgage Pass-Thru
Certificates Series 1993-1, Class A, 6.54%,
Due 12/15/02 (Acquired 1/23/98; Cost
$3,100,400) (b) 3,081,143 3,082,098
Salomon Brothers Mortgage Securities VI, Inc.
Stripped Coupon Mortgage Pass-Thru Certificates,
Series 1987-3, Class A, Principal Only,
Due 10/23/17 1,207,854 1,044,085
Sequoia Mortgage Trust Adjustable Rate Asset-
Backed Certificates, Series 3, Class M-1, 6.85%,
Due 6/25/28 11,127,300 11,349,846
Shearson Lehman Pass-Thru Securities, Inc. Asset
Trust Variable Rate Pass-Thru Certificates,
Series 88-3, 7.2929%, Due 9/15/18 4,487,141 4,467,532
Structured Mortgage Asset Residential Trust
Multiclass Pass-Thru Certificates, Series 1992-5,
Class BO, Principal Only, Due 6/25/23 583,809 518,943
Structured Mortgage Trust Commercial Mortgage-
Backed Securities, 10.7492%, Due 1/30/06
(Acquired 5/12/98; Cost $10,592,586) (b) 10,712,139 10,263,622
Triumph Capital CBO I, Ltd./Triumph Capital
CBO I, Inc. Senior Secured Floating Rate Notes,
Class A-2, 5.8342%, Due 6/15/11
(Acquired 4/15/99; Cost $18,000,000) (b) (e) 18,000,000 18,000,000
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed Securities
(Cost $280,541,797) 280,022,537
- --------------------------------------------------------------------------------
FOREIGN BONDS 0.9%
Shaw Communications, Inc. Debentures, 8.54%,
Due 9/30/27 18,091,000 CAD 11,834,943
- --------------------------------------------------------------------------------
Total Foreign Bonds (Cost $11,806,650) 11,834,943
- --------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY
ISSUES 16.6%
FHLMC Participation Certificates:
6.50%, Due 5/01/04 946,801 937,627
8.50%, Due 4/01/01 thru 1/01/05 498,411 514,575
8.75%, Due 10/01/01 410,449 422,581
9.00%, Due 5/01/06 thru 08/01/18 9,289,093 9,950,744
9.50%, Due 3/01/11 326,614 349,061
9.75%, Due 8/01/02 1,150,242 1,193,853
10.25%, Due 7/01/09 thru 1/01/10 443,899 481,014
10.50%, Due 11/01/17 thru 07/01/19 9,813,401 10,727,123
10.75%, Due 9/01/10 thru 11/01/10 460,349 497,546
11.25%, Due 11/01/09 374,571 411,326
FHLMC Variable Rate Participation Certificates,
7.516%, Due 5/01/26 6,095,426 6,188,190
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
7.00%, Due 6/25/22 8,029,505 8,107,676
8.00%, Due 12/01/13 thru 9/01/23 36,116,363 37,728,616
8.50%, Due 4/01/08 thru 2/01/23 22,708,044 24,061,689
9.00%, Due 11/01/24 2,263,560 2,424,708
9.40%, Due 10/25/19 11,092,588 11,878,714
9.50%, Due 2/01/11 thru 3/01/15 7,979,082 8,535,351
10.00%, Due 7/01/04 thru 6/25/19 13,269,825 14,373,220
11.00%, Due 10/15/20 21,710,170 24,281,522
12.00%, Due 3/01/17 4,377,855 4,856,481
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 12,115 14,276
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Pass-Thru
Certificates, Series 1995-G2, Class IO, Interest
Only, 4.7460%, Due 5/25/20 8,233,706 1,790,908
FNMA Stripped Mortgage-Backed Securities:
Series 107, Class 1, Principal Only, Due 10/25/06 1,724,658 1,538,217
Series 1993-M1, Class N, Interest Only, 0.84%,
Due 4/25/20 4,271,029 25,370
GNMA Guaranteed Pass-Thru Certificates:
7.50%, Due 12/15/07 5,232,423 5,424,191
8.00%, Due 12/15/08 1,926,310 2,017,196
8.50%, Due 5/15/10 1,649,079 1,729,679
9.00%, Due 11/15/24 1,750,995 1,883,311
9.75%, Due 9/15/05 thru 11/15/05 1,278,729 1,347,853
10.00%, Due 2/20/18 408,173 446,279
11.50%, Due 4/15/13 40,218 45,202
12.50%, Due 4/15/19 20,217,805 23,079,838
Small Business Administration Guaranteed Loan
Group #0190 Variable Rate Interest Only
Certificates, 3.136%, Due 7/30/18 13,280,197 1,062,416
USGI FHA Insured Project Pool Banco 85,
7.4402%, Due 11/24/19 3,184,546 3,149,707
United States Treasury Notes:
4.75%, Due 2/15/04 5,665,000 5,553,473
5.75%, Due 4/30/03 2,000,000 2,034,376
- --------------------------------------------------------------------------------
Total United States Government & Agency Issues
(Cost $217,760,033) 219,063,909
- --------------------------------------------------------------------------------
PREFERRED STOCKS 6.1%
California Federal Preferred Capital Corporation
9.125% Series A Exchangeable 320,000 8,590,000
Indosuez Holdings SCA Sponsored ADR 10.375%
Representing 1/10 Series A (Acquired 11/15/96 -
5/21/98; Cost $16,309,146) (b) 574,479 15,295,503
News Corporation Finance Trust Originated 5.00% 100,000 6,487,500
Norwest Corporation Series A Cumulative Tracking/
Residential Home Mortgage LLC
(Acquired 12/16/94; Cost $23,000,000) (b) 115,000 23,309,580
Parmalat Capital Finance 8.1523% Series B 300,000 7,012,500
TCI Communications Financing IV Trust 9.72% 347,300 9,550,750
Webster Capital Corporation 7.375% Series A 10,000 10,093,700
- --------------------------------------------------------------------------------
Total Preferred Stocks (Cost $80,866,129) 80,339,533
- --------------------------------------------------------------------------------
OPTIONS 0.3%
Merrill Lynch Swaption (The option to receive a
fixed interest rate of 7.75%; exercisable at a
strike price of $100 beginning 4/09/04 and
expiring 4/09/25.) $39,583,333 4,148,333
- --------------------------------------------------------------------------------
Total Options (Cost $1,832,839) 4,148,333
- --------------------------------------------------------------------------------
23
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG SHORT-TERM BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 2.6%
Commercial Paper 0.1%
Interest Bearing, Due Upon Demand
General Mills, Inc., 4.51% $ 203,000 $ 203,000
Pitney Bowes Credit Corporation, 4.51% 159,200 159,200
Warner Lambert Company, 4.50% 9,800 9,800
Wisconsin Electric Power Company, 4.50% 500,000 500,000
--------------
872,000
Corporate Bonds 2.0%
Amerco Asset-Backed Bonds, 6.65%, Due 10/15/99
(Acquired 10/17/97; Cost $9,996,500) (b) 10,000,000 9,981,400
Bay View Capital Corporation Senior Debentures,
8.42%, Due 6/01/99 (Acquired 5/13/96 - 5/28/96;
Cost $7,000,000) (b) 7,000,000 7,009,023
Walt Disney Company Euro-Dollar Senior
Participating Notes, 2.00%, Due 3/01/00
(Acquired 9/19/96; Cost $12,500,000) (b) 10,000,000 9,800,000
--------------
26,790,423
Repurchase Agreements 0.4%
ABN-AMRO Tri-Party (Dated 4/30/99), 4.85%, Due 5/03/99
(Proceeds $4,501,819); Collateralized by: SLMA
Notes, FNMA Notes, FHLMC Bonds and
Discount Notes, Federal Home Loan Bank
Bonds and Discount Corporate Notes, and
Federal Farm Credit Bank Notes (d) 4,500,000 4,500,000
United States Government Issues 0.1%
United States Treasury Bills, Due 5/06/99
thru 7/29/99 (c) 1,645,000 1,637,730
- --------------------------------------------------------------------------------
Total Short-Term Investments (Cost $34,104,054) 33,800,153
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investments in Securities (Cost $1,306,359,555) 99.4% 1,310,498,124
Other Assets and Liabilities, Net 0.6% 7,891,909
- --------------------------------------------------------------------------------
Net Assets 100.0% $1,318,390,033
================================================================================
FUTURES
- --------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- --------------------------------------------------------------------------------
Purchased:
27 Five-Year U.S. Treasury Notes 6/99 $ 3,000,797 ($ 14,515)
Sold:
50 Two-Year U.S. Treasury Notes 6/99 10,478,125 17,500
89 Five-Year U.S. Treasury Notes 6/99 32,119,641 216,723
629 Ten-Year U.S. Treasury Notes 6/99 72,138,418 807,626
180 U.S. Treasury Bonds 6/99 21,633,750 257,088
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------------
Settlement Value Unrealized
Date in USD Depreciation
- --------------------------------------------------------------------------------
Sold:
14,475,000 CAD 6/17/99 $12,011,465 $665,53
================================================================================
STRONG SHORT-TERM HIGH YIELD BOND FUND
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
CORPORATE BONDS 83.8%
Adelphia Communications Corporation Senior
Debentures, 11.875%, Due 9/15/04 $1,000,000 $1,065,000
Adelphia Communications Corporation Senior
Notes, 7.50%, Due 1/15/04 (Acquired 1/06/99;
Cost $3,000,000) (b) 3,000,000 2,992,500
Argosy Gaming Company First Mortgage Notes,
13.25%, Due 6/01/04 2,000,000 2,277,500
Aztar Corporation Senior Subordinated Notes,
13.75%, Due 10/01/04 3,950,000 4,325,250
Benedek Broadcasting Corporation Senior Notes,
11.875%, Due 3/01/05 2,000,000 2,230,000
Call-Net Enterprises, Inc. Senior Discount Notes,
Zero %, Due 12/01/04 (Rate Reset
Effective 12/01/99) 2,600,000 2,687,750
Century Communications Corporation Senior
Discount Notes, Zero %, Due 3/15/03 4,000,000 2,900,000
Chancellor Media Corporation Senior Subordinated
Notes, 9.375%, Due 10/01/04 5,000,000 5,256,250
Coinmach Corporation Senior Notes, Series D,
11.75%, Due 11/15/05 2,000,000 2,212,500
Continental Airlines, Inc. Senior Notes, 9.50%,
Due 12/15/01 2,000,000 2,100,000
Day International Group, Inc. Senior Subordinated
Notes, Series B, 11.125%, Due 6/01/05 2,500,000 2,675,000
Dial Call Communications, Inc. Senior Discount
Notes, Series B, 10.25%, Due 12/15/05 1,000,000 1,042,500
Empress Entertainment Inc., Senior Subordinated
Notes, 8.125%, Due 7/01/06 4,500,000 4,528,125
Frontiervision Operating Partners LP/Frontiervision
Capital Corporation Senior Subordinated Notes,
11.00%, Due 10/15/06 2,500,000 2,818,750
Graham Packaging Company/GPC Capital
Corporation I Floating Rate Notes, 8.6552%,
Due 1/15/08 1,000,000 983,750
Horseshoe Gaming LLC Senior Notes, Series B,
12.75%, Due 9/30/00 4,314,000 4,572,840
Huntsman Specialty Chemicals Corporation
Floating Rate Term Loans, 8.4375%, Due 3/17/07
(Acquired 5/28/98; Cost $3,048,000) (b) 3,000,000 3,000,000
IDT Corporation Senior Notes, 8.75%, Due 2/15/06 3,000,000 3,060,000
ISP Holdings, Inc. Senior Notes, 9.00%,
Due 10/15/03 2,000,000 2,070,000
ITT Corporation Notes, 6.25%, Due 11/15/00 7,000,000 6,916,651
Keebler Corporation Senior Subordinated Notes,
10.75%, Due 7/01/06 5,000,000 5,600,000
MJD Communications, Inc. Floating Rate Notes,
9.1597%, Due 5/01/08 5,000,000 5,025,000
MetroNet Communications Corporation Senior Notes,
12.00%, Due 8/15/07 3,000,000 3,585,000
Mobile Telecommunication Technologies
Corporation Senior Notes, 13.50%, Due 12/15/02 6,500,000 7,410,000
Mohegan Tribal Gaming Authority Senior Notes,
8.125%, Due 1/01/06
(Acquired 2/24/99; Cost $2,950,000) (b) 2,950,000 3,034,813
NL Industries Senior Secured Notes, 11.75%,
Due 10/15/03 5,355,000 5,756,625
NS Group, Inc. Senior Notes, 13.50%, Due 7/15/03 3,600,000 3,762,000
NTL, Inc. Senior Deferred Coupon Notes, Series A,
Zero %, Due 4/15/05 (Rate Reset Effective 4/15/00) 2,500,000 2,387,500
NTL, Inc. Senior Yankee Discount Debentures,
Zero %, Due 11/15/07 (Rate Reset Effective
11/15/00) 2,500,000 2,312,500
Nextel Communications, Inc. Senior Discount Notes:
9.75%, Due 8/15/04 2,000,000 2,085,000
10.125%, Due 1/15/04 2,000,000 2,100,000
24
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
STRONG SHORT-TERM HIGH YIELD BOND FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
Nextlink Communications LLC Senior Notes,
12.50%, Due 4/15/06 $2,000,000 $ 2,160,000
Pathmark Stores, Inc. Subordinated Notes:
11.625%, Due 6/15/02 4,000,000 4,130,000
12.625%, Due 6/15/02 2,000,000 2,065,000
Pegasus Media & Communications, Inc. Senior
Subordinated Notes, Series B, 12.50%,
Due 7/01/05 3,000,000 3,352,500
Pharmamerica, Inc. Senior Subordinated Notes,
8.375%, Due 4/01/08 2,000,000 2,130,000
Premier Parks, Inc. Senior Notes, Series A, 12.00%,
Due 8/15/03 2,000,000 2,155,000
Qwest Communications International, Inc. Senior
Notes, Series B, 10.875%, Due 4/01/07 3,250,000 3,778,125
Rifkin Acquisition Partners LLP Senior
Subordinated Notes, 11.125%, Due 1/15/06 2,060,000 2,317,500
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Notes, 9.625%, Due 8/01/02 1,975,000 2,142,875
SC International Services, Inc. Senior Subordinated
Notes, 9.25%, Due 9/01/07 4,500,000 4,837,500
SD Warren Company Senior Subordinated Notes,
Series B, 12.00%, Due 12/15/04 4,500,000 4,882,500
SFX Broadcasting, Inc. Senior Subordinated Notes,
10.75%, Due 5/15/06 2,000,000 2,245,000
Santa Fe Energy Resources, Inc. Senior
Subordinated Debentures, 11.00%, Due 5/15/04 2,000,000 2,080,000
Selmer Company, Inc. Senior Subordinated Notes,
11.00%, Due 5/15/05 3,945,000 4,260,600
Sprint Spectrum LP/Sprint Spectrum Finance
Corporation Senior Notes, 11.00%, Due 8/15/06 3,945,000 4,556,475
Star Markets Company Senior Subordinated Notes,
13.00%, Due 11/01/04 1,530,000 1,679,175
Statia Terminals International/Statia Terminals
Canada, Inc. First Mortgage Notes, Series B,
11.75%, Due 11/15/03 3,900,000 4,319,250
Superior Financial Corporation Senior Notes, 8.65%,
Due 4/01/03 (Acquired 3/27/98; Cost
$2,000,000) (b) 2,000,000 1,990,000
Triton Energy, Ltd./Triton Energy Corporation
Senior Notes, 8.75%, Due 4/15/02 5,000,000 4,962,500
Twin Laboratories, Inc. Senior Subordinated
Notes, 10.25%, Due 5/15/06 1,412,000 1,496,720
US Air, Inc. Senior Notes, 9.625%, Due 2/01/01 3,660,000 3,758,238
Unisys Corporation Senior Notes, 12.00%,
Due 4/15/03 2,700,000 2,990,250
United Stationers Supply Senior Subordinated
Notes, 12.75%, Due 5/01/05 4,000,000 4,460,000
Univision Network Holding LP Subordinated
Notes, 7.00%, Due 12/17/02 6,000,000 7,590,000
Young Broadcasting, Inc. Senior Subordinated
Notes, 11.75%, Due 11/15/04 2,200,000 2,373,250
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $183,761,998) 185,485,262
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS 2.1%
CUC International, Inc. Subordinated Notes, 3.00%,
Due 2/15/02 2,000,000 1,897,500
Corporate Express, Inc. Subordinated Notes, 4.50%,
Due 7/01/00 3,000,000 2,692,500
- --------------------------------------------------------------------------------
Total Convertible Bonds (Cost $4,710,246) 4,590,000
- --------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 3.9%
Blaylock Mortgage Capital Corporation Subordinated
Bonds, Series 1997-A, Class B3, 6.425%, Due
10/25/03 (Acquired 3/11/98; Cost $1,884,688) (b) 2,000,000 1,693,760
Lehman Relocation Mortgage Trust Subordinated
Variable Rate Mortgage-Backed Certificates,
Series 1997-2, Class B1, 7.1263%, Due 6/28/26
(Acquired 10/26/98; Cost $2,046,401) (b) 2,450,780 2,038,068
Merrill Lynch Mortgage Investors, Inc. Variable
Rate Mortgage Pass-Thru Certificates, Series
1994-M1, Class E, 8.3367%, Due 6/25/22
(Acquired 11/19/98; Cost $2,910,000) (b) 3,000,000 3,016,755
Oregon Commercial Mortgage, Inc. Variable Rate
Commercial Mortgage Pass-Thru Certificates,
Series 1995-1, Class E, 9.2066%, Due 6/25/26
(Acquired 5/13/98; Cost $2,080,625) (b) 2,000,000 1,980,000
- --------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed Securities
(Cost $8,960,718) 8,728,583
- --------------------------------------------------------------------------------
PREFERRED STOCKS 1.1%
CSC Holdings, Inc. 11.125% Series M 21,128 2,466,660
- --------------------------------------------------------------------------------
Total Preferred Stocks (Cost $2,338,586) 2,466,660
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 8.8%
Commercial Paper 0.4%
Interest Bearing, Due Upon Demand
General Mills, Inc., 4.51% 596,700 596,700
Pitney Bowes Credit Corporation, 4.51% 135,300 135,300
Warner Lambert Company, 4.50% 118,500 118,500
------------
850,500
Corporate Bonds 0.9%
Key Plastics, Inc. Senior Notes, 14.00%,
Due 11/15/99 1,900,000 1,938,000
Repurchase Agreements 7.5%
ABN-AMRO Tri-Party (Dated 4/30/99), 4.85%,
Due 5/03/99 (Repurchase proceeds $16,506,669);
Collateralized by: SLMA Notes, FNMA Notes,
FHLMC Bonds and Discount Notes, Federal
Home Loan Bank Bonds and Discount Corporate
Notes, and Federal Farm Credit Bank Notes (d) 16,500,000 16,500,000
- --------------------------------------------------------------------------------
Total Short-Term Investments (Cost $19,313,738) 19,288,500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investments in Securities (Cost $219,085,286) 99.7% 220,559,005
Other Assets and Liabilities, Net 0.3% 762,632
- --------------------------------------------------------------------------------
Net Assets 100.0% $221,321,637
================================================================================
LEGEND
- --------------------------------------------------------------------------------
(a) Short-term investments include any security which has a remaining maturity
of less than one year.
(b) Restricted security
(c) All or a portion of security pledged to cover margin requirements for
futures contracts.
(d) See Note(I) of Notes to Financial Statements.
(e) All or a portion of security is when-issued.
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
25
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITES
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
April 30, 1999 (Unaudited)
(In Thousands, Except Per Share Amounts)
Strong Corporate Strong Government Strong High-Yield
Bond Fund Securities Fund Bond Fund
---------------- ----------------- -----------------
ASSETS:
<S> <C> <C> <C>
Investments in Securities, at Value (Cost of $855,678, $1,364,801
and $601,971, respectively) $850,998 $1,358,914 $609,840
Receivable for Securities and Forward Foreign Currency Contracts Sold 83,110 12,377 12,676
Receivable for Fund Shares Sold 622 1,145 398
Dividends and Interest Receivable 15,124 15,156 12,316
Other Assets -- -- 29
-------- ---------- --------
Total Assets 949,854 1,387,592 635,259
LIABILITIES:
Payable for Securities Purchased 74,739 12,961 10,682
Payable for Fund Shares Redeemed 202 753 31
Dividends Payable 4,743 5,931 4,698
Accrued Operating Expenses and Other Liabilities 623 1,082 61
-------- ---------- --------
Total Liabilities 80,307 20,727 15,472
-------- ---------- --------
NET ASSETS $869,547 $1,366,865 $619,787
======== ========== ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $884,071 $1,377,034 $621,268
Accumulated Net Investment Loss (212) -- (128)
Accumulated Net Realized Loss (9,032) (3,279) (8,929)
Net Unrealized Appreciation (Depreciation) (5,280) (6,890) 7,576
-------- ---------- --------
Net Assets $869,547 $1,366,865 $619,787
======== ========== ========
Capital Shares Outstanding (Unlimited Number Authorized) 78,102 129,592 54,576
NET ASSET VALUE PER SHARE $11.13 $10.55 $11.36
====== ====== ======
</TABLE>
<TABLE>
Strong Short-Term Strong Short-Term
Bond Fund High Yield Bond Fund
----------------- --------------------
ASSETS:
<S> <C> <C>
Investments in Securities, at Value (Cost of $1,306,359
and $219,085, respectively) $1,310,498 $220,559
Receivable for Securities and Forward Foreign Currency Contracts Sold 36,978 --
Receivable for Fund Shares Sold 338 183
Dividends and Interest Receivable 18,552 4,923
Other Assets 1,345 12
---------- --------
Total Assets 1,367,711 225,677
LIABILITIES:
Payable for Securities and Foward Foreign Currency Contracts Purchased 42,138 2,824
Payable for Fund Shares Redeemed 41 51
Dividends Payable 7,062 1,378
Accrued Operating Expenses and Other Liabilities 80 102
---------- --------
Total Liabilities 49,321 4,355
---------- --------
NET ASSETS $1,318,390 $221,322
========== ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $1,414,548 $219,558
Accumulated Net Investment Loss (933) --
Accumulated Net Realized Gain (Loss) (99,948) 290
Net Unrealized Appreciation 4,723 1,474
---------- --------
Net Assets $1,318,390 $221,322
========== ========
Capital Shares Outstanding (Unlimited Number Authorized) 137,532 21,141
NET ASSET VALUE PER SHARE $9.59 $10.47
===== ======
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Six Months Ended April 30, 1999 (Unaudited)
(In Thousands)
Strong Corporate Strong Government Strong High-Yield
Bond Fund Securities Fund Bond Fund
---------------- ----------------- -----------------
INCOME:
<S> <C> <C> <C>
Interest $30,186 $41,269 $27,128
Dividends 1,197 306 2,715
-------- ---------- --------
Total Income 31,383 41,575 29,843
EXPENSES:
Investment Advisory Fees 2,676 4,041 1,826
Custodian Fees 30 44 17
Shareholder Servicing Costs 802 1,076 319
Other 157 188 163
-------- ---------- --------
Total Expenses 3,665 5,349 2,325
-------- ---------- --------
NET INVESTMENT INCOME 27,718 36,226 27,518
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 2,545 2,057 (8,014)
Futures Contracts, Options and Forward Foreign Currency Contracts (3,858) (3,341) 473
Foreign Currencies 4 -- 2
-------- ---------- --------
Net Realized Gain (Loss) (1,309) (1,284) (7,539)
Net Change in Unrealized Appreciation/Depreciation on:
Investments 5,270 (29,106) 45,049
Futures Contracts, Options and Foward Foreign Currency Contracts (841) (2,468) (1,361)
Foreign Currencies 2 -- 1
-------- ---------- --------
Net Change in Unrealized Appreciation/Depreciation 4,431 (31,574) 43,689
-------- ---------- --------
NET GAIN (LOSS) ON INVESTMENTS 3,122 (32,858) 36,150
-------- ---------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,840 $3,368 $63,668
======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Strong Short-Term Strong Short-Term
Bond Fund High Yield Bond Fund
----------------- --------------------
INCOME:
<S> <C> <C>
Interest $45,837 $ 6,654
Dividends 2,192 129
------- -------
Total Income 48,029 6,783
EXPENSES:
Investment Advisory Fees 4,139 503
Custodian Fees 43 4
Shareholder Servicing Costs 939 74
Federal and State Registration Fees 7 47
Other 245 23
------- -------
Total Expenses 5,373 651
------- -------
NET INVESTMENT INCOME 42,656 6,132
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (2,840) 420
Futures Contracts, Options and Forward Foreign Currency Contracts 2,681 170
Foreign Currencies 5 __
------- -------
Net Realized Gain (Loss) (154) 590
Net Change in Unrealized Appreciation/Depreciation on:
Investments 2,464 4,063
Futures Contracts, Options and Forward Foreign Currency Contracts 400 (362)
Foreign Currencies (35) --
------- -------
Net Change in Unrealized Appreciation/Depreciation 2,829 3,701
------- -------
NET GAIN ON INVESTMENTS 2,675 4,291
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $45,331 $10,423
======= =======
See Notes to Financial Statements.
27
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(In Thousands)
Strong Corporate Strong Government
Bond Fund Securities Fund
------------------------------ -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
April 30, 1999 Oct. 31, 1998 April 30, 1999 Oct. 31, 1998
---------------- -------------- ----------------- -------------
(Unaudited) (Unaudited)
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 27,718 $ 44,943 $ 36,226 $ 58,933
Net Realized Gain (Loss) (1,309) 13,301 (1,284) 25,249
Net Change in Unrealized Appreciation/Depreciation 4,431 (18,536) (31,574) 8,357
-------- -------- ---------- ----------
Net Increase in Net Assets Resulting from Operations 30,840 39,708 3,368 92,539
DISTRIBUTIONS:
From Net Investment Income (27,931) (44,943) (36,226) (58,933)
In Excess of Net Investment Income -- (605) -- --
From Net Realized Gains -- -- (27,673) --
-------- -------- ---------- ----------
Total Distributions (27,931) (45,548) (63,899) (58,933)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 220,687 594,283 442,647 834,332
Proceeds from Reinvestment of Distributions 24,609 38,336 58,165 51,706
Payment for Shares Redeemed (197,305) (300,425) (382,318) (454,209)
-------- -------- ---------- ----------
Increase in Net Assets from Capital Share Transactions 47,991 332,194 118,494 431,829
-------- -------- ---------- ----------
TOTAL INCREASE IN NET ASSETS 50,900 326,354 57,963 465,435
NET ASSETS:
Beginning of Period 818,647 492,293 1,308,902 843,467
-------- -------- ---------- ----------
End of Period $869,547 $818,647 $1,366,865 $1,308,902
======== ======== ========== ==========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 19,739 52,726 41,224 76,823
Issued in Reinvestment of Distributions 2,201 3,400 5,400 4,773
Redeemed (17,674) (26,709) (35,636) (41,806)
------- ------- ------- -------
Net Increase in Shares of the Fund 4,266 29,417 10,988 39,790
===== ====== ====== ======
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
STRONG HIGH-YIELD STRONG SHORT-TERM
BOND FUND BOND FUND
------------------------------ ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
April 30, 1999 Oct. 31, 1998 April 30, 1999 Oct. 31, 1998
---------------- ------------- ---------------- -------------
(Unaudited) (Unaudited)
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 27,518 $ 54,306 $ 42,656 $1,390,390
Net Realized Gain (Loss) (7,539) 3,082 (154) (19,898)
Net Change in Unrealized Appreciation/Depreciation 43,689 (48,330) 2,829 (9,276)
-------- -------- ---------- ----------
Net Increase in Net Assets Resulting from Operations 63,668 9,058 45,331 61,216
DISTRIBUTIONS:
From Net Investment Income (27,639) (54,306) (42,967) (90,390)
In Excess of Net Investment Income -- (353) -- (224)
From Net Realized Gains (4,243) (14,785) -- --
-------- -------- ---------- ----------
Total Distributions (31,882) (69,444) (42,967) (90,614)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 375,880 675,258 286,395 576,621
Proceeds from Reinvestment of Distributions 24,536 56,535 36,725 75,870
Payment for Shares Redeemed (274,915) (718,871) (336,229) (603,753)
-------- -------- ---------- ----------
Net Increase (Decrease) in Net Assets from Capital Share Transactions 125,501 12,922 (13,109) 48,738
-------- -------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 157,287 (47,464) (10,745) 19,340
NET ASSETS:
Beginning of Period 462,500 509,964 1,329,135 1,309,795
-------- -------- ---------- ----------
End of Period $619,787 $462,500 $1,318,390 $1,329,135
======== ======== ========== ==========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 33,871 56,756 29,883 59,071
Issued in Reinvestment of Distributions 2,212 4,758 3,833 7,768
Redeemed (24,619) (61,112) (35,085) (61,901)
------- ------- ------- -------
Net Increase (Decrease) in Shares of the Fund 11,464 402 (1,369) 4,938
======= ======= ======= =======
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
STRONG SHORT-TERM HIGH
YIELD BOND FUND
-------------------------------
Six Months Ended Year Ended
April 30, 1999 Oct. 31, 1998
---------------- -------------
(Unaudited)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 6,132 $ 6,444
Net Realized Gain 590 332
Net Change in Unrealized Appreciation/Depreciation 3,701 (1,991)
-------- --------
Net Increase in Net Assets Resulting from Operations 10,423 4,785
DISTRIBUTIONS:
From Net Investment Income (6,132) (6,444)
From Net Realized Gains (632) (256)
-------- --------
Total Distributions (6,764) (6,700)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 179,406 153,366
Proceeds from Reinvestment of Distributions 5,123 5,490
Payment for Shares Redeemed (73,100) (95,526)
-------- --------
Net Increase in Net Assets from Capital Share Transactions 111,429 63,330
-------- --------
TOTAL INCREASE IN NET ASSETS 115,088 61,415
NET ASSETS:
Beginning of Period 106,234 44,819
-------- --------
End of Period $221,322 $106,234
======== ========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 17,262 14,716
Issued in Reinvestment of Distributions 494 527
Redeemed (7,031) (9,203)
------ ------
Net Increase in Shares of the Fund 10,725 6,040
====== ======
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
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 Corporate Bond Fund, Inc. (1) (2)
- - Strong Government Securities, Inc. (1) (2)
- - Strong High-Yield Bond Fund (2) (a series of Strong Income Funds, Inc. (1))
- - Strong Short-Term Bond Fund, Inc. (1) (2)
- - Strong Short-Term High Yield Bond Fund (2)
(a series of Strong Income Funds, Inc. (1))
(1) An open-end management investment company registered under the
Investment Company Act of 1940.
(2) Diversified fund
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. Amortized cost for federal income tax
and financial reporting purposes is the same.
The Funds may own certain investment securities which are restricted
as to resale. These securities are valued after giving due
consideration to pertinent factors including recent private sales,
market conditions and the issuer's financial performance. The Funds
generally bear the costs, if any, associated with the disposition of
restricted securities. Aggregate cost and fair value of these
restricted securities held at April 30, 1999 are as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Percent of
Cost Fair Value Net Assets Liquid*
------------ ------------ ----------- --------
<S> <C> <C> <C> <C>
Strong Corporate Bond Fund $152,110,539 $148,252,304 17.0% 98.6%
Strong Government Securities Fund 40,707,983 41,926,143 3.1% 75.8%
Strong High-Yield Bond Fund 169,028,226 174,605,301 28.2% 95.1%
Strong Short-Term Bond Fund 357,618,589 350,846,707 26.6% 70.2%
Strong Short-Term High Yield Bond Fund 19,919,714 19,745,896 8.9% 76.1%
</TABLE>
*Percentage of restricted securities which are either Section 4(2)
commercial paper or are eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 and also have been determined to be
liquid by the Advisor based upon guidelines established by the Fund's
Board of Directors.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
The Funds intend to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or 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 the net asset value is calculated, except for bank holidays.
(C) Realized Gains and Losses on Investment Transactions -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) Certain Investment Risks -- The Funds may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with
the Fund's investment objectives and limitations. The Funds intend to
use such derivative instruments primarily to hedge or protect from
adverse movements in securities prices or interest rates. The use of
these instruments may involve risks such as the possibility of
illiquid markets or imperfect correlation between the value of the
instruments and the underlying securities, or that the counterparty
will fail to perform its obligations.
To the extent the fund has foreign denominated assets or forward
currency contracts, these investments may involve greater risks than
domestic transactions, including currency, political and economic,
regulatory and market risks.
31
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
(E) Futures -- Upon entering into a futures contract, the Funds pledge to
thebroker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Funds may be designated as collateral on open futures contracts.
The Funds also receive from or pay to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin," and are recorded
as unrealized gains or losses. When the futures contract is closed, a
realized gain or loss is recorded equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
(F) Options -- The Funds may write put or call options. Premiums received
by the Funds upon writing put or call options are recorded as an asset
with a corresponding liability which is subsequently adjusted to the
current market value of the option. When an option expires, is
exercised, or is closed, the Funds realize a gain or loss, and the
liability is eliminated. The Funds continue to bear the risk of
adverse movements in the price of the underlying asset during the
period of the option, although any potential loss during the period
would be reduced by the amount of the option premium received.
(G) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted to U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income are converted to
U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses.
(H) Forward Foreign Currency Exchange Contracts -- Forward foreign
currency exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the Funds record
an exchange gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(I) Repurchase Agreements -- The Funds may enter into repurchase
agreements with institutions that the Funds' investment advisor,
Strong Capital Management, Inc. ("the Advisor"), has determined are
creditworthy pursuant to criteria adopted by the Board of Directors.
Each repurchase agreement is recorded at cost. The Funds require that
the collateral, represented by securities (primarily U.S. Government
securities), in a repurchase transaction be maintained in a segregated
account with a custodian bank in a manner sufficient to enable the
Funds to obtain those securities in the event of a default of the
repurchase agreement. On a daily basis, the Advisor monitors each
repurchase agreement to ensure the value of the collateral, including
accrued interest, is at least equal to the amounts owed to the Funds
under each repurchase agreement.
(J) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts in these financial statements. Actual results could differ
from those estimates.
(K) Other -- Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premiums and discounts.
3. RELATED PARTY TRANSACTIONS
The Advisor, with whom certain officers and directors of the Funds are
affiliated, provides investment advisory services and shareholder
recordkeeping and related services to the Funds. Investment advisory fees,
which are established by terms of the Advisory Agreements, are based on the
following annualized rates of the average daily net assets: Strong
Government Securities Fund 0.60%, Strong Corporate Bond Fund, Strong
High-Yield Bond Fund, Strong Short-Term Bond Fund, and Strong Short-Term
High Yield Bond Fund 0.625%. Based on the terms of the Advisory Agreements,
advisory fees and other expenses will be waived by the Advisor if the
Fund's operating expenses exceed 2% of the average daily net assets of the
Fund. In addition, the Fund's Advisor may voluntarily waive or absorb
certain expenses at their discretion. Shareholder recordkeeping and related
service fees are based on contractually established rates for each open and
closed shareholder account. The Advisor is compensated for certain other
services related to costs incurred for reports to shareholders.
The 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 agreement with the money market funds.
32
<PAGE>
- --------------------------------------------------------------------------------
Certain information regarding related party transactions, excluding the
effects of waivers and reimbursements, for the six months ended April 30,
1999 is as follows:
<TABLE>
<CAPTION>
Payable to Shareholder Servicing Unaffiliated
Advisor at and Other Expenses Directors'
April 30, 1999 Paid to Advisor Fees
-------------- -------------------- ------------
<S> <C> <C> <C>
Strong Corporate Bond Fund $ 66,753 $ 870,541 $3,866
Strong Government Securities Fund 108,236 1,158,962 5,721
Strong High-Yield Bond Fund 42,490 436,818 3,279
Strong Short-Term Bond Fund 42,927 1,082,367 6,698
Strong Short-Term High Yield Bond Fund 89,113 89,488 1,031
</TABLE>
4. Line of Credit
The Funds have established a line of credit agreement ("LOC") with certain
financial institutions to be used for temporary or emergency purposes,
primarily for financing redemption payments. Combined borrowings among all
participating Strong Funds are subject to a $350 million cap on the total
line of credit. For individual Funds, borrowings under the LOC are limited
to either the lesser of 15% of the market value of total assets or any
explicit borrowing limits in the Fund's prospectus. Borrowings under the
LOC bear interest based on prevailing market rates as defined in the LOC. A
commitment fee of .07% per annum is incurred on the unused portion of the
line of credit and is allocated to all participating Strong Funds. At April
30, 1999, there were no borrowings by the Funds outstanding under the LOC.
5. Investment Transactions
The aggregate purchases and sales of long-term securities for the six
months ended April 30, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------------- ---------------------------------
U.S. Government U.S. Government
and Agency Other and Agency Other
---------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C>
Strong Corporate Bond Fund $653,326,640 $1,273,879,969 $675,259,251 $1,199,222,662
Strong Government Securities Fund 806,852,499 312,358,560 836,939,907 278,073,478
Strong High-Yield Bond Fund __ 557,174,533 __ 438,758,736
Strong Short-Term Bond Fund 296,172,848 541,200,847 310,565,913 532,897,267
Strong Short-Term High Yield Bond Fund __ 155,936,696 __ 57,977,968
</TABLE>
6. Income Tax Information
The investment cost, gross unrealized appreciation and depreciation on
investments and capital loss carryovers (expiring in varying amounts
through 2006) for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
at April 30, 1999 at October 31, 1998
------------------------------------------------------------------ ----------------
Net
Federal Tax Unrealized Unrealized Appreciation/ Net Capital Loss
Cost Appreciation Depreciation (Depreciation) Carryovers
-------------- ------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Strong Corporate Bond Fund $ 856,214,818 $ 8,548,543 $13,630,034 ($5,081,491) $ 7,180,022
Strong Government Securities Fund 1,368,357,715 7,765,939 17,209,597 (9,443,658) __
Strong High-Yield Bond Fund 602,160,982 26,420,929 18,742,386 7,678,543 __
Strong Short-Term Bond Fund 1,310,655,512 15,519,031 15,676,418 (157,388) 96,417,466
Strong Short-Term High Yield Bond Fund 219,085,965 2,642,992 1,169,952 1,473,040 __
33
</TABLE>
<TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period Ended
----------------------------------------------------------
April 30, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Dec. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996 1995(c) 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.09 $11.08 $10.64 $10.56 $9.36 $10.24
Income From Investment Operations
Net Investment Income 0.36 0.73 0.74 0.73 0.63 0.73
Net Realized and Unrealized Gains (Losses) on Investments 0.05 0.02 0.44 0.08 1.22 (0.87)
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.41 0.75 1.18 0.81 1.85 (0.14)
Less Distributions
From Net Investment Income (0.37) (0.73) (0.74) (0.73) (0.63) (0.73)
In Excess of Net Investment Income -- (0.01) -- -- (0.02) (0.01)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.74) (0.74) (0.73) (0.65) (0.74)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.13 $11.09 $11.08 $10.64 $10.56 $ 9.36
======================================================================================================================
Ratios and Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------
Total Return +3.7% +6.8% +11.5% +8.0% +20.3% -1.3%
Net Assets, End of Period (In Millions) $870 $819 $492 $298 $218 $123
Ratio of Expenses to Average Net Assets 0.9%* 0.9% 1.0% 1.0% 1.0%* 1.1%
Ratio of Net Investment Income to Average Net Assets 6.5%* 6.5% 6.8% 7.0% 7.5%* 7.6%
Portfolio Turnover Rate 224.2% 366.9% 542.4% 672.8% 621.4% 603.0%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1999 (unaudited).
(c) In 1995, the Fund changed its fiscal year end from December to October.
</TABLE>
<TABLE>
STRONG GOVERNMENT SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period Ended
----------------------------------------------------------
April 30, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Dec. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996 1995(c) 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.04 $10.70 $10.44 $10.60 $ 9.63 $10.61
Income From Investment Operations
Net Investment Income 0.29 0.60 0.65 0.63 0.54 0.62
Net Realized and Unrealized Gains (Losses) on Investments (0.26) 0.34 0.26 (0.16) 0.99 (0.98)
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.03 0.94 0.91 0.47 1.53 (0.36)
Less Distributions
From Net Investment Income (0.29) (0.60) (0.65) (0.63) (0.54) (0.62)
In Excess of Net Investment Income -- -- -- -- (0.02) --
From Net Realized Gains (0.23) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.60) (0.65) (0.63) (0.56) (0.62)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.55 $11.04 $10.70 $10.44 $10.60 $ 9.63
======================================================================================================================
Ratios and Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------
Total Return +0.3% +9.1% +9.1% +4.6% +16.2% -3.4%
Net Assets, End of Period (In Millions) $1,367 $1,309 $843 $638 $456 $277
Ratio of Expenses to Average Net Assets 0.8%* 0.8% 0.8% 0.9% 0.9%* 0.9%
Ratio of Net Investment Income to Average Net Assets 5.4%* 5.5% 6.2% 6.0% 6.2%* 6.2%
Portfolio Turnover Rate 87.5% 284.1% 474.9% 457.6% 409.2% 479.0%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1999 (unaudited).
(c) In 1995, the Fund changed its fiscal year end from December to October.
See Notes to Financial Statements.
34
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period Ended
------------------------------------------
April 30, Oct. 31, Oct. 31, Oct. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996(c)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.73 $11.94 $11.26 $10.00
Income From Investment Operations
Net Investment Income 0.53 1.05 1.05 0.84
Net Realized and Unrealized Gains (Losses) on Investments 0.72 (0.89) 0.81 1.26
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.25 0.16 1.86 2.10
Less Distributions
From Net Investment Income (0.53) (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 (0.62) (1.37) (1.18) (0.84)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.36 $10.73 $11.94 $11.26
====================================================================================================
Ratios and Supplemental Data
- ----------------------------------------------------------------------------------------------------
Total Return +11.9% +0.9% +17.3% +21.7%
Net Assets, End of Period (In Millions) $ 620 $ 462 $ 510 $217
Ratio of Expenses to Average Net Assets without
Waivers or Absorptions 0.8%* 0.8% 0.8% 1.0%*
Ratio of Expenses to Average Net Assets 0.8%* 0.8% 0.6% 0.0%*
Ratio of Net Investment Income to Average Net Assets 9.5%* 8.8% 8.9% 9.6%*
Portfolio Turnover Rate 78.8% 224.4% 409.3% 390.8%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1999 (unaudited).
(c) For the period from December 28, 1996 (Inception) to October 31, 1996.
</TABLE>
<TABLE>
STRONG SHORT-TERM BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period Ended
----------------------------------------------------------
April 30, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Dec. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996 1995(c) 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.57 $9.78 $9.75 $9.77 $9.42 $10.23
Income From Investment Operations
Net Investment Income 0.31 0.66 0.69 0.69 0.56 0.64
Net Realized and Unrealized Gains (Losses) on Investments 0.02 (0.21) 0.03 (0.02) 0.35 (0.80)
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.33 0.45 0.72 0.67 0.91 (0.16)
Less Distributions
From Net Investment Income (0.31) (0.66) (0.69) (0.69) (0.56) (0.65)
In Excess of Net Investment Income -- 0.00(c) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.66) (0.69) (0.69) (0.56) (0.65)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.59 $9.57 $9.78 $9.75 $9.77 $ 9.42
======================================================================================================================
Ratios and Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------
Total Return +3.5% +4.7% +7.6% +7.1% +9.9% -1.6%
Net Assets, End of Period (In Millions) $1,318 $1,329 $1,310 $1,148 $1,083 $1,041
Ratio of Expenses to Average Net Assets 0.8%* 0.8% 0.9% 0.9% 0.9%* 0.9%
Ratio of Net Investment Income to Average Net Assets 6.5%* 6.7% 7.0% 7.1% 7.0%* 6.5%
Portfolio Turnover Rate 64.6% 138.3% 193.8% 191.5% 317.1% 249.7%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1999 (unaudited).
(c) Amount calculated is less than $0.01.
35
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD BOND FUND
- -----------------------------------------------------------------------------------------
Period Ended
------------------------------
April 30, Oct. 31, Oct. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997(c)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.20 $10.24 $10.00
Income From Investment Operations
Net Investment Income 0.39 0.77 0.25
Net Realized and Unrealized Gains (Losses) on Investments 0.32 0.01 0.24
- ----------------------------------------------------------------------------------------
Total from Investment Operations 0.71 0.78 0.49
Less Distributions
From Net Investment Income (0.39) (0.77) (0.25)
From Net Realized Gains (0.05) (0.05) --
- ----------------------------------------------------------------------------------------
Total Distributions (0.44) (0.82) (0.25)
- ----------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.47 $10.20 $10.24
=========================================================================================
Ratios and Supplemental Data
- ----------------------------------------------------------------------------------------
Total Return +7.1% +7.7% +4.9%
Net Assets, End of Period (In Millions) $221 $106 $45
Ratio of Expenses to Average Net Assets 0.8%* 0.9% 1.0%*
Ratio of Net Investment Income to Average Net Assets 7.6%* 7.4% 7.7%*
Portfolio Turnover Rate 37.8% 190.1% 96.2%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1999 (unaudited).
(c) For the period from June 30, 1997 (Inception) to October 31, 1997.
See Notes to Financial Statements.
36
</TABLE>
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Mary F. Hoppa, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
John W. Widmer, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
DISTRIBUTOR
Strong Investments, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Bank Milwaukee, N.A.
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management fees
and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030.
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863.
--------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE ON COMPUTER]
Strong On-line
www.strong-funds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds Distributors, Inc. 11910F99 SINC
<
<PAGE>
