<PAGE>
- -------------------------------------------------------------------------------
THE STRONG
MUNICIPAL INCOME FUNDS
SEMI-ANNUAL REPORT o FEBRUARY 28, 1998
[PHOTO OF MAN AND WOMAN WALKING]
THE STRONG HIGH-YIELD MUNICIPAL BOND FUND
-----------------------------------------------
THE STRONG MUNICIPAL BOND FUND
-----------------------------------------------
THE STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
-----------------------------------------------
THE STRONG SHORT-TERM MUNICIPAL BOND FUND
[STRONG LOGO]
STRONG FUNDS
<PAGE>
8
EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING
These common-sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here
24 hours a day, seven days a week to take your call.
- -------------------------------------------------------------------------------
[PICTURE OF FOLDER LABELED INVESTMENTS]
1. HAVE A PLAN. Even a simple plan can help you take control of your financial
future. Review your plan once a year, or if your circumstances change.
- -------------------------------------------------------------------------------
[PICTURE OF CLOCK]
2. START INVESTING AS SOON AS POSSIBLE. Make time a valuable ally. Let it put
the power of compounding to work for you, while helping to reduce your
potential investment risk.
- -------------------------------------------------------------------------------
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION]
3. DIVERSIFY YOUR PORTFOLIO. By investing in different asset classes - stocks,
bonds, and cash - you help protect against poor performance in one type of
investment while including investments most likely to help you achieve your
important goals.
- -------------------------------------------------------------------------------
[PICTURE OF MEMO REMINDER TO INVEST]
4. INVEST REGULARLY. Investing is a process, not a one-time event. By
investing regularly over the long term, you reduce the impact of short-term
market gyrations, and you attend to your long-term plan before you're tempted
to spend those assets on short-term needs.
- -------------------------------------------------------------------------------
[PICTURE OF GRAPH SLOPING UPWARD]
5. MAINTAIN A LONG-TERM PERSPECTIVE. For most individuals, the best discipline
is staying invested as market conditions change. Reactive, emotional investment
decisions are all too often a source of regret - and of principal loss.
- -------------------------------------------------------------------------------
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION EMPHASIZING STOCKS]
6. CONSIDER STOCKS TO HELP ACHIEVE MAJOR LONG-TERM GOALS. Over time, stocks
have provided the more powerful returns needed to help the value of your
investments stay well ahead of inflation.
- -------------------------------------------------------------------------------
[PICTURE OF DOLLAR SIGN]
7. KEEP A COMFORTABLE AMOUNT OF CASH IN YOUR PORTFOLIO. To meet current needs,
including emergencies, use a money market fund or a bank account - not your
long-term investment assets.
- -------------------------------------------------------------------------------
[PICTURE OF MAGNIFYING GLASS]
8. KNOW WHAT YOU'RE BUYING. Make sure you understand the potential risks and
rewards associated with each of your investments. Ask questions...request
information...make up your own mind. And choose a fund company that helps you
make informed investment decisions.
<PAGE>
- -------------------------------------------------------------------------------
THE STRONG
MUNICIPAL INCOME FUNDS
SEMI-ANNUAL REPORT o FEBRUARY 28, 1998
TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong High-Yield Municipal Bond Fund................................2
The Strong Municipal Bond Fund...........................................4
The Strong Short-Term High Yield Municipal Fund..........................6
The Strong Short-Term Municipal Bond Fund................................8
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong High-Yield Municipal Bond Fund............................10
The Strong Municipal Bond Fund.......................................14
The Strong Short-Term High Yield Municipal Fund......................16
The Strong Short-Term Municipal Bond Fund............................18
Statements of Assets and Liabilities....................................22
Statements of Operations................................................23
Statements of Changes in Net Assets.....................................24
Notes to Financial Statements...........................................25
FINANCIAL HIGHLIGHTS.........................................................27
<PAGE>
THE STRONG HIGH-YIELD MUNICIPAL BOND FUND
THE FUND'S STRONG PERFORMANCE OVER THE LAST SIX MONTHS RESULTED FROM ITS
DURATION, AND CAREFUL SECTOR AND QUALITY POSITIONING.
The Strong High-Yield Municipal Bond Fund seeks total return by investing for a
high level of federally tax-exempt current income.
A STRONG START TO THE FISCAL YEAR
The Strong High-Yield Municipal Bond Fund got off to a strong start in the
first half of its fiscal year, returning 7.27% for the six months ended
February 28(1). This performance compares quite favorably with both our
benchmark index*, which returned 6.50%, and our peer group of funds as measured
by the Lipper High Yield Municipal Debt Funds Index, which returned 5.35%.
========================================
PORTFOLIO STATISTICS
========================================
As of 2-27-98
30-DAY ANNUALIZED YIELD (2) 5.35%
AVERAGE MATURITY (3) 10.6 YEARS
AVERAGE QUALITY RATING (4) BBB
========================================
The environment surrounding municipal bonds remained positive during the first
six months of the Fund's fiscal year, with the fixed-income market continuing
to enjoy a rally. The continued decline in long-term interest rates
contributed to the positive environment, along with a healthy US economy
bolstered by little evidence of inflation. Bond prices increased sharply during
the last two months of 1997, as instability in the Asian markets unfolded and
expectations grew about a potential cut in interest rates by the Federal
Reserve. Ultimately, the Federal Reserve held short-term rates steady.
===============================================================================
EQUIVALENT TAXABLE YIELDS
===============================================================================
As of 2-27-98
YOUR TAX-EXEMPT EFFECTIVE
MARGINAL YIELD OF 5.35% IS EQUIVALENT
JOINT RETURN SINGLE RETURN TAX RATE TO A TAXABLE YIELD OF:
- -------------------------------------------------------------------------------
$42,351-102,300 $25,351-61,400 28.0% 7.43%
...............................................................................
$102,351-155,950 $61,401-128,100 31.0% 7.75%
...............................................................................
$155,951-278,450 $128,101-278,450 36.0% 8.36%
...............................................................................
Over $278,450 Over $278,450 39.6% 8.86%
...............................................................................
The chart reflects 1998 marginal federal tax rates before limitations and
phase-outs. Individuals with adjusted gross income in excess of $124,500
should consult their tax advisor to determine their actual 1998 marginal tax
rate. The Fund's income may be subject to state and local taxes and, depending
on your tax status, the Alternative Minimum Tax.
===============================================================================
A LOOK BACK AT OUR STRATEGY
The Strong High-Yield Municipal Bond Fund's strong performance over the last
six months resulted from its duration, and careful sector and quality
positioning. We held the Fund's duration throughout the six-month period--
longer than that of our benchmark, but a reasonable level given the prevailing
strong US market. This duration level helped the Fund's performance as interest
rates declined.
The Fund was overweighted in lower-quality securities that turned out to be
strong municipal market performers for the period. Investors turned to these
bonds seeking higher yields in a climate of falling interest rates, resulting
in the low-rated securities having an increased value relative to higher-
quality instruments. Favorable state and local economic conditions also helped
these lower-rated securities deliver strong financial performance.
The Fund also benefited when several securities it held were refunded. During a
climate of falling interest rates, an issuer may choose to refund existing
bonds which are then backed by Treasury bonds. As such, they are guaranteed by
the full faith and credit of the US government, but are tax free. When this
happens, a bond experiences substantial price appreciation. Typically, we
replace these refinanced bonds with another security, since the Fund's
objective is to invest in high-yield issues.
An important part of our strategy is that we don't rely solely on traditional
municipal securities, but include corporate-backed bonds as well. At the end of
February, the highest industry holding in the Fund is industrial development
revenue bonds. This type of security includes bonds backing airlines, an area
that has benefited from lower fuel prices, and a strong economy encouraging
more business and pleasure travel.
Other areas of emphasis within the Fund's portfolio include: facilities serving
the needs of an aging American population, such as assisted living and continued
care facilities. rural hospitals, that typically face low competition and avoid
the increased overhead that more specialized treatments can entail, by providing
only basic "bread and butter" services.
2
<PAGE>
the rebuilding of America's infrastructure, such as through the construction of
new toll roads for overburdened areas.
WE'RE OPTIMISTIC ABOUT THE MARKET AHEAD
Looking ahead, we anticipate an attractive economic environment for longer-
term, lower-rated municipal securities. We believe that the economy will
continue on a path of more moderate growth with low inflation, as effects from
the Asian financial crisis are slowly played out. Economic gains from sectors
such as labor, housing, and manufacturing should be offset by less demand for
US goods in Asia. Although it seems unlikely at this point, more pronounced
effects from the Asian crisis could move the Federal Reserve to cut interest
rates. Given this outlook, we plan to follow the same proven strategy that we
have thus far, running the portfolio's duration 10% to 20% longer than our
benchmark. We also plan to continue overweighting non-rated securities--which
can be attractive investments in a positive market environment.
Thank you for your investment in the Strong High-Yield Municipal Bond Fund. We
appreciate your continued confidence in our investment management.
[PHOTO OF MARY-KAY H. BOURBULAS]
Sincerely,
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 10-1-93 to 2-28-98
[GRAPH]
THE STRONG Lipper High Yield
HIGH-YIELD MUNICIPAL High-Yield Municipal Municipal Debt
BOND FUND Bond Fund Index* Funds Index*
9-93 10,000 10,000 10,000
12-93 10,266 10,164 10,141
12-94 10,165 9,609 9,637
12-95 11,651 11,362 11,245
12-96 12,248 11,867 11,647
12-97 13,949 13,165 12,751
2-98 14,174 13,408 12,898
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
High-Yield Municipal Bond Index and the Lipper High Yield Municipal Debt Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares.
- -------------------------------------------------------------------------------
==================================
AVERAGE ANNUAL
TOTAL RETURNS(1)
==================================
As of 2-28-98
1-YEAR 13.87%
3-YEAR 10.60%
SINCE INCEPTION 8.22%
(on 10-1-93)
==================================
* The High-Yield Municipal Bond Index is comprised of the Lehman Brothers Baa
Municipal Bond Index from inception through December 31, 1995, and the Lehman
Brothers High-Yield Municipal Bond Index from January 1, 1996 to present. The
Lehman Brothers Baa Municipal Bond Index is an unmanaged index generally
representative of municipal bonds rated Baa. The Lehman Brothers High-Yield
Municipal Bond Index, which was instituted on January 1, 1996, is an
unmanaged index generally representative of municipal bonds rated below Baa.
The Lipper High Yield Municipal Debt Funds Index is an equally-weighted
performance index of the largest qualifying funds in this Lipper category.
Source of the High-Yield Index data is Lehman Brothers. Source of the Lipper
index data is Lipper Analytical Services, Inc.
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.
2 Yield is annualized for the 30 days ended 2-27-98, is historical, and will
vary.
3 The Fund's average maturity includes the effect of futures and when-issued
securities.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned long-term ratings by the Advisor.
3
<PAGE>
THE STRONG MUNICIPAL BOND FUND
OVER THE PAST SIX MONTHS, WE CONTINUED TO EMPHASIZE ISSUE SELECTION ABOVE ALL
ELSE IN OUR MANAGEMENT STRATEGY.
The Strong Municipal Bond Fund seeks total return by investing for a high
level of federally tax-exempt current income with a moderate degree of share-
price fluctuation.
For the six months ended February 28, 1998, the Fund posted a return of
6.36%(1). That's well ahead of the 5.04% return of the Lehman Brothers
Municipal Bond Index and the 5.03% return of the Lipper General Municipal Debt
Funds Index.*
=======================================
PORTFOLIO STATISTICS
=======================================
As of 2-27-98
30-DAY ANNUALIZED YIELD(2) 4.69%
AVERAGE MATURITY(3) 10.6 YEARS
AVERAGE QUALITY RATING(4) A
=======================================
DECLINING INTEREST RATES
Short- and long-term municipal rates stayed in a state of gradual decline for
most of the past six months, though not to the same degree as Treasury yields.
Inflation remained at bay, contained largely by an anticipated slowing in the
economy. These conditions served to boost bond markets overall. On the
municipal front, favorable state and local economic conditions have bolstered
the health of muni issuers--leading to improved bond ratings and, in turn,
price appreciation.
In this environment, we have made only slight modifications to the Fund's
interest-rate sensitivity (as measured by duration), after having shortened it
in the previous year. The Fund's duration now stands at 6.2, a negligible
change from its level at the beginning of the fiscal year in September.
===============================================================================
EQUIVALENT TAXABLE YIELDS
===============================================================================
As of 2-27-98
YOUR TAX-EXEMPT EFFECTIVE
MARGINAL YIELD OF 4.69% IS EQUIVALENT
JOINT RETURN SINGLE RETURN TAX RATE TO A TAXABLE YIELD OF:
- -------------------------------------------------------------------------------
$42,351-102,300 $25,351-61,400 28.0% 6.51%
...............................................................................
$102,301-155,950 $61,401-128,100 31.0% 6.80%
...............................................................................
$155,951-278,450 $128,101-278,450 36.0% 7.33%
...............................................................................
Over $278,450 Over $278,450 39.6% 7.76%
...............................................................................
The chart reflects 1998 marginal federal tax rates before limitations and
phase-outs. Individuals with adjusted gross income in excess of $124,500
should consult their tax advisor to determine their actual 1998 marginal tax
rate. The Fund's income may be subject to state and local taxes and, depending
on your tax status, the Alternative Minimum Tax.
===============================================================================
YIELD, WITH A FOCUS ON QUALITY
One of the primary goals investors have when choosing a municipal bond fund is
tax-exempt income--so we seek to provide yield while maintaining a reasonable
level of risk. In our pursuit of the municipal issues with the greatest
potential for the portfolio, we have continued to work with smaller, regional
brokerages as well as large, established Wall Street firms. Because these
specialized brokers don't have the same high profile as some of their larger
competitors, the issues they sponsor often offer higher yields in order to
attract investor attention.
The Fund also continues to incorporate issues whose income may be subject to
the Alternative Minimum Tax. As AMT paper makes up an ever-increasing
proportion of the municipal market, to completely reject these issues would be
to cut our shareholders off from many of the market's more attractive
securities. We are conscious of the tax implications of these holdings for some
of our shareholders, but believe that overall the benefits outweigh the costs.
A CHANGE TO THE FUND'S PROSPECTUS
Nearly half of the Fund's assets are invested in AAA and AA bonds or their
equivalents, and quality remains a priority in the portfolio. However, to give
the Fund greater flexibility to pursue attractive yields, the Fund's prospectus
was changed effective January 1, 1998 to increase the percentage of assets that
may be allocated to non-investment-grade issues to 15% from 5%. The Fund's 6.5%
position in non-investment-grade issues is best viewed in the context of that
heavy weighting in the top two levels of credit quality. We do not treat the
non-investment-grade allowance cavalierly, and intend to use it selectively.
ISSUE SELECTION IS OUR FOCUS
Over the past six months, we continued to emphasize issue selection above all
else in our management strategy. We start with a thorough macroeconomic
evaluation that leads us to look more closely within those sectors and
industries for which we believe conditions appear particularly favorable. This
initial research leads us to look more closely within those sectors and
industries for which we believe conditions appear particularly favorable. We
don't deliberately overweight these sectors for their own sake--rather we look
for the individual issues within them that appear most likely to outperform
over the long term.
Our issue-by-issue research is at the center of our investment process. The
market presents us with
4
<PAGE>
thousands of alternatives, and we sort through them to find those that appear
to offer the best potential. To our minds, issue selection is not secondary to
duration positioning or any other element of bond portfolio management; it is
critical to performance. We believe our focus on issue selection is the reason
that this Fund has outperformed its benchmark and peer group by such a wide
margin over the past six months.
LOOKING AHEAD
It's not easy to tell exactly what's on the immediate horizon for interest
rates. The economy has proven to be more robust than expected, so any easing of
rates by the Federal Reserve is likely to be put off for a while. Nonetheless,
it's hard to believe the so-called Asian flu won't have some impact in the U.S.
The difficulties in that region suggest that we can expect a degree of economic
slowing here in the future, with a subsequent decline in interest rates.
That said, unless interest rates become unusually volatile, we don't anticipate
making any significant changes to our approach. Our strategy has continued to
deliver strong, sustainable tax-exempt yield to shareholders, without incurring
undue risk. We intend to continue to consider issues from regional brokerages
as well as AMT paper, and to maintain our intense focus on issue selection. We
believe this is the most effective way to add value for shareholders.
Thank you for your investment in the Strong Municipal Bond Fund. We look
forward to helping you pursue your important investment goals in the years to
come.
[PHOTO OF STEVEN D. HARROP]
Sincerely,
/s/ Steven D. Harrop
Steven D. Harrop
Portfolio Manager
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 10-23-86 to 2-28-98
[GRAPH]
Lipper General
THE STRONG Lehman Brothers Municipal Debt
MUNICIPAL BOND FUND Municipal Bond Index* Funds Index*
9-86 10,000 10,000 10,000
12-86 10,129 10,216 10,253
12-88 10,705 11,423 11,370
12-90 11,995 13,578 13,253
12-92 15,257 16,568 16,170
12-94 16,275 17,640 17,083
12-96 18,570 21,641 20,701
2-98 21,098 23,881 22,781
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Lehman Brothers Municipal Bond Index and the Lipper General Municipal Debt
Funds Index. Results include the reinvestment of all dividends and capital
gains distributions. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you may have a gain
or loss when you sell shares. To equalize the time periods, the indexes'
performance was prorated for the month of October 1986.
- -------------------------------------------------------------------------------
==================================
AVERAGE ANNUAL
TOTAL RETURNS(1)
==================================
As of 2-28-98
1-YEAR 12.34%
5-YEAR 5.79%
10-YEAR 7.39%
SINCE INCEPTION 6.80%
(on 10-23-86)
==================================
* The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of investment-grade, tax-exempt bonds. The Lipper General
Municipal Debt Funds Index is an equally-weighted performance index of the
largest qualifying funds in this Lipper category. Source of the Lehman index
data is Standard & Poor's Micropal. Source of the Lipper index data is Lipper
Analytical Services, Inc.
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.
2 Yield is annualized for the 30 days ended 2-28-98, is historical, and will
vary.
3 The Fund's average maturity includes the effect of futures and when-issued
securities.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned long-term ratings by the Advisor.
5
<PAGE>
THE STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
AN IMPORTANT PART OF OUR STRATEGY IS THAT WE DON'T RELY SOLELY ON TRADITIONAL
MUNICIPAL SECURITIES, BUT INCLUDE CORPORATE-BACKED BONDS AS WELL.
The Strong Short-Term High Yield Municipal Fund seeks total return by investing
for a high level of federally tax-exempt current income with a moderate degree
of share-price fluctuation.
STRONG RETURNS TO DATE
In the three-month period since its November 30, 1997 inception through
February 28, 1998, the Strong Short-Term High Yield Municipal Fund has achieved
a total return of 2.25%(1). This compares favorably with our benchmark index*,
which returned 1.55% for the period.
========================================
PORTFOLIO STATISTICS
========================================
As of 2-27-98
30-DAY ANNUALIZED YIELD(2) 5.08%
AVERAGE MATURITY(3) 2.8 YEARS
AVERAGE QUALITY RATING(4) BB
========================================
The Fund opened in a positive environment for municipal bonds. A continued
decline in long-term interest rates contributed to this positive environment,
along with a healthy US economy bolstered by little evidence of inflation. Bond
prices increased sharply at the end of 1997, as instability in the Asian
markets unfolded and expectations grew about a potential cut in interest rates
by the Federal Reserve. Ultimately, the Federal Reserve held short-term rates
steady. While there was market instability during the first two months of
1998, the short-term nature of this Fund served to shelter it from much of the
fluctuation that troubled longer-term securities during this period.
===============================================================================
EQUIVALENT TAXABLE YIELDS
===============================================================================
As of 2-27-98
YOUR TAX-EXEMPT EFFECTIVE
MARGINAL YIELD OF 5.08% IS EQUIVALENT
JOINT RETURN SINGLE RETURN TAX RATE TO A TAXABLE YIELD OF:
- -------------------------------------------------------------------------------
$42,351-102,300 $25,351-61,400 28.0% 7.06%
...............................................................................
$102,301-155,950 $61,401-128,100 31.0% 7.36%
...............................................................................
$155,951-278,450 $128,101-278,450 36.0% 7.94%
...............................................................................
Over $278,450 Over $278,450 39.6% 8.41%
...............................................................................
The chart reflects 1998 marginal federal tax rates before limitations and
phase-outs. Individuals with adjusted gross income in excess of $124,500
should consult their tax advisor to determine their actual 1998 marginal tax
rate. The Fund's income may be subject to state and local taxes and, depending
on your tax status, the Alternative Minimum Tax.
===============================================================================
A STRATEGY BASED ON CAREFUL RESEARCH
We manage the Strong Short-Term High Yield Municipal Fund with a focus on
yield, and seek to minimize share price fluctuation. Our investment strategy is
based on rigorous research, including a broad analysis of the economy and
prevailing interest rates. We evaluate securities to uncover those benefiting
from experienced management, as well as those supporting projects that
demonstrate solid potential for economic success.
An important part of our strategy is that we don't rely solely on traditional
municipal securities, but include corporate-backed bonds as well. At the end of
February, the highest industry holding in the Fund was industrial development
revenue bonds. This type of security includes bonds backing airlines, an area
that has benefited from lower fuel prices, and a strong economy encouraging
more business and pleasure travel.
Other areas of emphasis within the Fund's portfolio include:
o rural hospitals, that typically face low competition and avoid the increased
overhead that more specialized treatments can entail, by providing only basic
"bread and butter" services.
o facilities serving the needs of an aging American population, such as
assisted living and nursing home facilities.
6
<PAGE>
WE'RE OPTIMISTIC ABOUT THE MARKET AHEAD
Looking ahead, we anticipate an attractive economic environment for longer-
term, lower-rated municipal securities. We believe that the economy will
continue on a path of more moderate growth with low inflation, as effects from
the Asian financial crisis are slowly played out. Economic gains from sectors
such as labor, housing, and manufacturing should be offset by less demand for
U.S. goods in Asia. Although it seems unlikely at this point, more pronounced
effects from the Asian crisis could move the Federal Reserve to cut interest
rates. Given this outlook, we plan to continue overweighting non-rated
securities--which can be attractive investments in a positive market
environment.
Thank you for your investment in the Strong Short-Term High Yield Municipal
Fund. We appreciate your continued confidence in our investment management.
[PHOTO OF MARY-KAY H. BOURBULAS]
Sincerely,
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 11-30-97 to 2-28-98
[GRAPH]
THE STRONG SHORT-TERM Lehman Brothers 1-3 Lipper High-Yield
HIGH YIELD Year Non-Investment Municipal Debt
MUNICIPAL FUND Grade Municipal Bond Index* Funds Index*
11-97 10,000 10,000 10,000
12-97 10,083 10,053 10,158
1-98 10,163 10,107 10,253
2-98 10,225 10,155 10,275
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers 1-3 Year Non-Investment Grade Municipal Bond Index and the
Lipper High Yield Municipal Debt Funds Index. Results include the reinvestment
of all dividends and capital gains distributions. Performance is historical
and does not represent future results. Investment returns and principal value
will vary, and you may have a gain or loss when you sell shares.
- -------------------------------------------------------------------------------
===============================
TOTAL RETURN(1)
===============================
As of 2-28-98
SINCE INCEPTION 2.25%
(on 11-30-97)
===============================
* The Lehman Brothers 1-3 Year Non-Investment Grade Municipal Bond Index is an
unmanaged index generally representative of municipal bonds rated below Baa
with maturities of one to three years. The Lipper High Yield Municipal Debt
Funds Index is an equally-weighted performance index of the largest
qualifying funds in this Lipper category. Source of the Lehman index data is
Lehman Brothers. Source of the Lipper index data is Lipper Analytical
Services, Inc.
1 Total return is not annualized and measures aggregate change in the value of
an investment in the Fund, assuming reinvestment of dividends.
2 Yield is annualized for the 30 days ended 2-27-98, is historical, and will
vary.
3 The Fund's average maturity includes the effect of when-issued securities.
4 For the purposes of this average rating, the Fund's short-term debt
obligations have been assigned long-term ratings by the Advisor.
7
<PAGE>
THE STRONG SHORT-TERM MUNICIPAL BOND FUND
WE BELIEVE OUR FOCUS ON ISSUE SELECTION IS THE REASON THAT THIS FUND HAS
OUTPERFORMED ITS BENCHMARK AND PEER GROUP OVER THE PAST TWO YEARS.
The Strong Short-Term Municipal Bond Fund seeks total return by investing for a
high level of federally tax-exempt current income with a low degree of share-
price fluctuation. The Fund invests primarily in short- and intermediate-term
investment-grade municipal obligations. It maintains an average portfolio
maturity of three years or less.
======================================
PORTFOLIO STATISTICS
======================================
As of 2-27-98
30-DAY ANNUALIZED YIELD(2) 4.22%
AVERAGE MATURITY(3) 2.8 YEARS
AVERAGE QUALITY RATING(4) A
======================================
As of February 27, 1998, the Fund's annualized 30-day yield was 4.22%.(2) For
investors in the 36% tax bracket, this translates into a taxable equivalent
yield of 6.59%.
LOOKING BACK AT THE PAST SIX MONTHS
Short- and long-term municipal rates stayed in a state of gradual decline for
most of the past six months, though not to the same degree as Treasury yields.
Inflation remained at bay, contained largely by an anticipated slowing in the
economy. These conditions served to boost bond markets overall. On the
municipal front, favorable state and local economic conditions have bolstered
the health of muni issuers--leading to improved bond ratings and, in turn,
price appreciation.
In this environment, we have continued to keep the Fund near the long end of
its three-year average maturity range, though we have recently trimmed it back
a bit. In our pursuit of the short-term municipal issues with the greatest
potential for the portfolio, we also have continued to work with smaller,
regional brokerages as well as large, established Wall Street firms. Because
these specialized brokers don't have the same high profile as some of their
larger competitors, the issues they sponsor often offer higher yields in order
to attract investor attention.
===============================================================================
EQUIVALENT TAXABLE YIELDS
===============================================================================
As of 2-27-98
YOUR TAX-EXEMPT EFFECTIVE
MARGINAL YIELD OF 4.22% IS EQUIVALENT
JOINT RETURN SINGLE RETURN TAX RATE TO A TAXABLE YIELD OF:
- -------------------------------------------------------------------------------
$42,351-102,300 $25,351-61,400 28.0% 5.86%
...............................................................................
$102,301-155,950 $61,401-128,100 31.0% 6.12%
...............................................................................
$155,951-278,450 $128,101-278,450 36.0% 6.59%
...............................................................................
Over $278,450 Over $278,450 39.6% 6.99%
...............................................................................
The chart reflects 1998 marginal federal tax rates before limitations and
phase-outs. Individuals with adjusted gross income in excess of $124,500
should consult their tax advisor to determine their actual 1998 marginal tax
rate. The Fund's income may be subject to state and local taxes and, depending
on your tax status, the Alternative Minimum Tax.
===============================================================================
The Fund also continues to incorporate issues whose income may be subject to
the Alternative Minimum Tax. As AMT paper makes up an ever-increasing
proportion of the municipal market, to reject these issues out of hand would be
to cut our shareholders off from many of the market's more attractive
securities. We are conscious of the tax implications of these holdings for some
of our shareholders, but believe that overall the benefits outweigh the costs.
ISSUE SELECTION IS OUR FOCUS
Over the past six months, we continued to emphasize issue selection above all
else in our management strategy. We start with a thorough macroeconomic
evaluation that leads us to look more closely within those sectors and
industries for which we believe conditions appear particularly favorable.
We then undertake issue-by-issue research, sorting through the hundreds of
alternatives to find those that appear to offer the best potential. It is our
belief that issue selection is not secondary to duration positioning or any
other element of bond portfolio management; it is critical to performance. We
believe our focus on issue selection is the reason that this Fund has
outperformed its benchmark and peer group over the past two years.
A CHANGE TO THE FUND'S PROSPECTUS
Effective January 1, 1998, the Fund's prospectus was changed to increase the
percentage of assets that may be allocated to non-investment-grade issues.
Raising this limitation to 15% from 5% gives the Fund greater flexibility to
seek out the bonds that offer the most attractive potential. To put this change
in context, some of our peer short-term muni funds allow as much as 35% of
assets to be invested in non-investment-grade issues.
8
<PAGE>
We do not treat this allowance cavalierly, and intend as always to be selective
in its use. Currently, we've placed only 2.4% of assets into BB or equivalent
issues.
LOOKING AHEAD
It's not easy to tell exactly what's on the immediate horizon for interest
rates. The economy has proven to be more robust than expected, so any easing of
rates by the Federal Reserve is likely to be put off for a while. Nonetheless,
it's hard to believe the so-called Asian flu won't have some impact in the U.S.
The difficulties in that region suggest that we can expect a degree of
economic slowing here in the future, with a subsequent decline in interest
rates.
That said, unless interest rates become unusually volatile, we don't anticipate
making any significant changes to our approach. Our strategy has continued to
deliver strong, sustainable tax-exempt yield to shareholders, without incurring
undue risk. We intend to continue to consider issues from regional brokerages
as well as AMT paper. The aim of all of these steps is to identify and purchase
the municipal securities that can best serve our shareholders.
Thank you for giving us the opportunity to serve your investment needs. We look
forward to helping you pursue your important investment goals in the years to
come.
[PHOTO OF STEVEN D. HARROP]
Sincerely,
/s/ Steven D. Harrop
Steven D. Harrop
Portfolio Manager
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 12-31-91 to 2-28-98
[GRAPH]
THE STRONG Lehman Brothers Lipper Short
SHORT-TERM MUNICIPAL Municipal 3-Year Municipal Debt
BOND FUND Bond Index* Average*
12-91 10,000 10,000 10,000
12-92 10,716 10,643 10,576
12-93 11,441 11,305 11,117
12-94 11,256 11,383 11,156
12-95 11,861 12,396 11,946
12-96 12,439 12,946 12,395
12-97 13,301 13,655 12,968
2-98 13,421 13,775 13,065
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers Municipal 3 Year Bond Index and the Lipper Short Municipal Debt
Average. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value will vary, and you may have a gain or
loss when you sell shares.
- -------------------------------------------------------------------------------
==================================
AVERAGE ANNUAL
TOTAL RETURNS(1)
==================================
As of 2-28-98
1-YEAR 6.68%
3-YEAR 5.45%
5-YEAR 4.17%
SINCE INCEPTION 4.89%
(on 12-31-91)
==================================
* The Lehman Brothers Municipal 3 Year Bond Index is an unmanaged index
generally representative of three-year, tax-exempt bonds. The Lipper Short
Municipal Debt Average represents funds that invest in municipal debt issues
with dollar-weighted average maturities of less than three years. Source of
the Lehman index data is Standard & Poor' s Micropal. Source of the Lipper
index data is Lipper Analytical Services, Inc.
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.
2 Yield is annualized for the 30 days ended 2-27-98, is historical, and will
vary.
3 The Fund's average maturity includes the effect of when-issued securities.
4 For the purposes of this average rating, the Fund's short-term debt
obligations have been assigned long-term ratings by the Advisor.
9
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES FEBRUARY 28, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD MUNICIPAL BOND FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS 100.4%
ALABAMA 1.9%
West Jefferson, Alabama Amusement and Public
Park Authority First Mortgage Revenue -
Visionland, Alabama Project, 8.00%,
Due 12/01/26 $ 9,345,000 $ 9,975,788
ALASKA 0.7%
Seward, Alaska Revenue - Alaska Sealife Center
Project, 7.65%, Due 10/01/16 3,500,000 3,780,000
ARIZONA 2.8%
Maricopa County, Arizona IDA Senior Living
Facilities Revenue - Christian Care
Mesa, Inc. Project, 7.875%, Due 4/01/27 1,745,000 1,910,775
Navajo County, Arizona IDA IDR - Stone Container
Corporation Project:
7.20%, Due 6/01/27 5,675,000 6,391,469
7.40%, Due 4/01/26 6,000,000 6,772,500
-----------
15,074,744
ARKANSAS 1.7%
Northwest Arkansas Regional Airport Authority
Airport Revenue, 7.625%, Due 2/01/27 7,000,000 8,006,250
Pope County, Arkansas Residential Housing
Facilities Board Student Housing Revenue -
Arkansas Technical University Project, 6.00%,
Due 12/01/27 1,250,000 1,243,750
-----------
9,250,000
CALIFORNIA 9.4%
California Department of Water Resources -
Central Valley Project, 4.75%, Due 12/01/25 (c) 5,000,000 4,718,750
California Housing Finance Agency Home
Mortgage Revenue, 5.25%, Due 2/01/28 3,250,000 3,233,750
California Statewide Communities Development
Authority Special Facilities Revenue -
United Airlines, Inc. - Los Angeles International
Airport Project, 5.625%, Due 10/01/34 (c) 10,000,000 10,137,500
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue:
Zero %, Due 1/01/17 5,000,000 1,850,000
Zero %, Due 1/01/26 7,000,000 1,592,500
Zero %, Due 1/01/28 24,000,000 4,890,000
Zero %, Due 1/01/29 8,335,000 1,614,906
Los Angeles County, California Metropolitan
Transportation Authority Proposition A Sales
Tax Revenue, 5.00%, Due 7/01/19 (b) 5,465,000 5,253,231
Millbrae, California Residential Facilities
Revenue - Magnolia of Millbrae Project, 7.375%,
Due 9/01/27 5,000,000 5,225,000
San Francisco, California Redevelopment Agency
Residential Facilities Revenue - Coventry Park
Project, 8.50%, Due 12/01/26 5,000,000 5,525,000
San Joaquin Hills, California Transportation
Corridor Agency Toll Road Revenue Refunding,
Zero %, Due 1/15/07 (c) 10,000,000 6,400,000
-----------
50,440,637
COLORADO 4.4%
Arapahoe County, Colorado E-470 Public Highway
Authority Capital Appreciation:
Zero %, Due 9/01/18 5,000,000 1,743,750
Zero %, Due 9/01/19 3,000,000 990,000
Zero %, Due 9/01/22 2,000,000 562,500
Zero %, Due 9/01/24 3,000,000 753,750
Arapahoe County, Colorado E-470 Public Highway
Authority Senior Revenue, 4.75%, Due 9/01/23 2,000,000 1,877,500
Bachelor Gulch, Colorado Metropolitan District
GO, 7.00%, Due 12/01/15 1,100,000 1,160,500
Black Hawk, Colorado Device Tax Revenue,
5.625%, Due 12/01/17 1,500,000 1,477,500
Colorado Health Facilities Authority Health
Facilities Revenue - National Benevolent
Association - Village at Skyline Project:
5.20%, Due 1/01/18 530,000 522,050
5.25%, Due 1/01/27 1,330,000 1,306,725
Colorado Health Facilities Authority Hospital
Revenue - Steamboat Springs Health Care
Association Project, 5.75%, Due 9/15/22 5,000,000 5,100,000
Colorado Health Facilities Authority Revenue
Refunding - National Benevolent Association
Project, 5.25%, Due 2/01/28 1,700,000 1,649,000
Denver, Colorado Urban Renewal Authority Tax
Increment Revenue - Pavilions Project, 7.75%,
Due 9/01/16 1,760,000 1,960,200
Eaglebend, Colorado Affordable Housing
Corporation MFHR Refunding - Housing Project,
6.45%, Due 7/01/21 1,000,000 1,067,500
Englewood, Colorado MFHR Refunding - Marks
Apartments Project, 6.65%, Due 12/01/26 3,000,000 3,251,250
-----------
23,422,225
CONNECTICUT 2.4%
Mashantucket (Western) Pequot Tribe Subordinated
Special Revenue:
5.75%, Due 9/01/18 3,500,000 3,640,000
5.75%, Due 9/01/27 7,000,000 7,271,250
6.40%, Due 9/01/11 1,710,000 1,883,138
-----------
12,794,388
FLORIDA 6.3%
Arbor Greene, Florida Community Development
District Special Assessment Revenue, 7.00%,
Due 5/01/03 2,225,000 2,280,625
Cory Lakes, Florida Community Development
District Special Assessment Revenue,
8.375%, Due 5/01/17 3,500,000 3,784,375
Grand Haven, Florida Community Development
District Special Assessment:
6.30%, Due 5/01/02 3,200,000 3,300,000
6.90%, Due 5/01/19 1,000,000 1,060,000
Largo, Florida Sun Coast Health System Revenue -
Sun Coast Hospital Issue, 6.30%, Due 3/01/20 8,045,000 8,165,675
Miami, Dade County, Florida Subordinated Special
Obligation Bonds, Zero %, Due 10/01/28 8,000,000 1,530,000
Orange County, Florida Health Facilities Authority
First Mortgage Revenue - RHA/Princeton
Hospital, Inc. Project, 9.00%, Due 7/01/21
(Defaulted Effective 1/01/98) 5,000,000 2,500,000
Palm Beach County, Florida Solid Waste IDR -
Okeelanta Power LP Project:
6.375%, Due 2/15/07 (Purchased in Default on
1/28/98) 1,300,000 1,014,000
6.70%, Due 2/15/15 (Purchased in Default on
2/04/98) 500,000 390,000
Palm Beach County, Florida Solid Waste IDR -
Osceola Power LP Project, 6.85%, Due 01/01/14
(Purchased in Default on 1/13/98 - 2/04/98) 450,000 337,500
Pensacola, Florida Airport Revenue:
6.00%, Due 10/01/12 (b) 1,500,000 1,606,875
6.125%, Due 10/01/18 (b) 1,250,000 1,351,563
Pinellas County, Florida Educational Facilities
Authority Revenue - College Harbor Project,
8.50%, Due 12/01/28 5,185,000 5,580,356
10
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Polk County, Florida HFA Subordinated Revenue -
Lake Wales Gardens Project, Zero %,
Due 4/01/20 $ 4,840,000 $ 701,800
-----------
33,602,769
GEORGIA 3.3%
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Evergreen Village
Estates Project, 6.625%, Due 5/01/28 605,000 619,369
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Franciscan Club Apartments
Projects, 7.75%, Due 4/01/22 (Defaulted Effective
10/01/96) 4,840,000 3,388,000
Dekalb County, Georgia Residential Care Facilities
for the Elderly Authority First Lien Revenue -
King's Bridge Retirement Center, Inc. Project:
8.00%, Due 7/01/06 650,000 710,125
8.15%, Due 7/01/16 2,380,000 2,618,000
8.25%, Due 7/01/26 5,250,000 5,775,000
Savannah, Georgia Hospital Authority Revenue
Refunding and Improvement - Candler Hospital,
7.00%, Due 1/01/23 (c) 2,000,000 2,145,000
Washington, Georgia Wilkes Payroll Development
Authority Subordinated Revenue - Southern
Care Corporation Facility Project, Zero %,
Due 12/01/21 8,125,000 2,335,938
-----------
17,591,432
HAWAII 1.5%
Hawaii Department of Transportation Special
Facility Revenue - Continental Airlines, Inc.
Project, 5.625%, Due 11/15/27 8,205,000 8,215,256
IDAHO 0.5%
Idaho Housing and Finance Association SFMR,
5.75%, Due 7/01/27 2,500,000 2,546,875
ILLINOIS 6.9%
Illinois HDA MFHR, 5.00%, Due 7/01/25 (c) 3,750,000 3,210,937
Illinois Health Facilities Authority Revenue -
Delnor Community Residential Project, 6.15%,
Due 11/15/27 1,000,000 1,008,750
Illinois Health Facilities Authority Revenue -
Victory Health Services:
5.375%, Due 8/15/16 2,105,000 2,091,844
5.75%, Due 8/15/27 1,000,000 1,023,750
Illinois Metropolitan Pier and Exposition Authority
Refunding - McCormick Place Expansion
Project, 7.00%, Due 7/01/26 6,000,000 7,365,000
Riverdale, Illinois Environmental Improvement
Revenue - Acme Metals, Inc. Project, 7.95%,
Due 4/01/25 5,000,000 5,700,000
Robbins, Illinois Resource Recovery Revenue:
8.375%, Due 10/15/10 4,000,000 4,245,000
8.375%, Due 10/15/16 11,250,000 11,939,063
-----------
36,584,344
INDIANA 4.2%
Indiana Health Facility Financing Authority
Hospital Revenue Refunding - Jackson County
Schneck Memorial Hospital Project, 5.25%,
Due 2/15/22 1,200,000 1,179,000
Indiana HFA SFMR, 5.90%, Due 1/01/27 2,000,000 2,062,500
Indiana IDFA PCR Refunding - Inland Steel
Company Project, 7.25%, Due 11/01/11 5,540,000 6,260,200
Indianapolis, Indiana EDR MFHR - Post Pointe
Apartments Project:
8.30%, Due 3/01/06 480,000 503,400
8.40%, Due 3/01/11 710,000 753,487
8.75%, Due 3/01/27 6,540,000 6,956,925
St. Joseph County, Indiana Hospital Authority
Health System Revenue - Memorial Health
System, 4.625%, Due 8/15/28 5,000,000 4,506,250
-----------
22,221,762
IOWA 2.9%
Cedar Rapids, Iowa First Mortgage Revenue -
Cottage Grove Place Project, 9.00%, Due 7/01/25 6,000,000 6,907,500
Iowa Finance Authority First Mortgage Elder Care
Facility Revenue - Amity Fellowserve-Iowa, Inc.
Project, 8.75%, Due 10/01/25 7,785,000 8,339,681
-----------
15,247,181
KENTUCKY 1.2%
Morgantown, Kentucky Solid Waste Disposal
Facilities Revenue - IMCO Recycling,
Inc. Project, 7.65%, Due 5/01/16 5,740,000 6,263,775
LOUISIANA 1.5%
Iberia Parish, Louisiana Hospital Service District
Number 1 Revenue, 8.00%, Due 5/26/16 2,100,000 2,212,875
Louisiana Public Facilities Authority Senior Lien
Revenue - Progressive Healthcare Providers, Inc.
Developmental Centers, 8.00%, Due 1/01/13 5,375,000 5,556,406
-----------
7,769,281
MASSACHUSETTS 2.7%
Massachusetts Health and Educational Facilities
Authority Revenue - Saints Memorial Medical Center:
5.50%, Due 10/01/02 2,400,000 2,433,000
5.75%, Due 10/01/06 1,885,000 1,894,425
Massachusetts Industrial Finance Agency Assisted
Living Facility Revenue - TNG Marina Bay, LLC
Project, 7.50%, Due 12/01/27 3,000,000 3,030,000
Massachusetts Industrial Finance Agency Health
Care Facility Revenue - Metro Health Foundation
of Massachusetts, Inc. Project:
6.25%, Due 12/01/03 700,000 709,625
6.75%, Due 12/01/27 3,000,000 3,071,250
Massachusetts State Industrial Finance Agency
Revenue - Institute for Developmental
Disabilities Project, 9.25%, Due 6/01/09 3,135,000 3,248,644
-----------
14,386,944
MINNESOTA 0.9%
Northern Municipal Power Agency Electric System
Revenue, 5.40%, Due 01/01/16 (b) 3,035,000 3,088,112
Southern Minnesota Municipal Power Agency
Power Supply Systems Revenue, 4.75%,
Due 1/01/16 2,000,000 1,905,000
-----------
4,993,112
MISSISSIPPI 0.5%
Mississippi Development Bank Special Obligation
Refunding - Diamond Lakes Utilities and
Improvements District Project, 6.25%,
Due 12/01/17 2,500,000 2,556,250
MISSOURI 1.4%
Columbia, Missouri IDR - American Air Filter
Company, Inc. Project, 7.45%, Due 7/01/04 400,000 401,668
Saline County, Missouri IDA Hospital Revenue -
John Fitzgibbon Memorial Hospital, Inc. Project,
7.375%, Due 5/01/11 3,550,000 3,723,062
Springfield, Missouri Land Clearance Redevelopment
Authority Industrial Revenue Refunding -
University Plaza Redevelopment Corporation
Project, 6.90%, Due 10/01/16 3,440,000 3,581,900
-----------
7,706,630
11
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) FEBRUARY 28, 1998(UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
MONTANA 0.4%
Crow Finance Authority Tribal Purpose Revenue,
5.70%, Due 10/10/27 $1,000,000 $ 1,031,250
Toole County, Montana Health Facilities Revenue -
Marias Heritage Center Assisted Living Project:
6.375%, Due 11/01/22 400,000 406,000
6.50%, Due 11/01/27 530,000 537,950
-----------
1,975,200
NEBRASKA 0.2%
Nebraska IFA SFHR, 5.85%, Due 9/01/28 1,000,000 1,033,750
NEVADA 0.9%
Clark County, Nevada IDR - Nevada Power
Company Project, 5.60%, Due 10/01/30 4,650,000 4,650,000
NEW JERSEY 1.5%
Camden County, New Jersey Improvement Authority
Lease Revenue - Kaighn Port Marine Terminal
A Project, 8.00%, Due 6/01/27 4,890,000 5,311,762
New Jersey EDA - Leisure Park Project, 5.875%,
Due 12/01/27 2,800,000 2,838,500
-----------
8,150,262
NEW MEXICO 0.2%
Chaves County, New Mexico Hospital Revenue -
Eastern New Mexico Medical Center Project,
7.25%, Due 12/01/10 750,000 825,000
Santa Fe, New Mexico Educational Facilities
Improvement Revenue - College of Santa Fe
Project:
5.40%, Due 10/01/17 200,000 197,250
5.50%, Due 10/01/28 250,000 245,938
-----------
1,268,188
NEW YORK 4.5%
New York Dormitory Authority Secured Hospital
Revenue - Interfaith Medical Center, 5.40%,
Due 2/15/28 1,250,000 1,251,563
New York Energy Research and Development
Authority PCR - Rochester Gas and Electric
Corporation Project, 5.95%, Due 9/01/33 (b) 2,000,000 2,102,500
New York, New York GO:
5.00%, Due 8/01/22 5,000,000 4,812,500
5.00%, Due 8/01/23 7,000,000 6,693,750
New York, New York Industrial Development
Agency IDR - Brooklyn Navy Yard Cogeneration
Partners LP Project, 5.65%, Due 10/01/28 2,000,000 2,045,000
United Nations Development Corporation
Refunding, 5.60%, Due 7/01/26:
Series B 1,400,000 1,405,250
Series C 5,700,000 5,721,375
-----------
24,031,938
NORTH CAROLINA 2.6%
Charlotte, North Carolina Charlotte/Douglas
International Airport Special Facilities
Refunding Revenue - US Airways, Inc. Project,
5.60%, Due 7/01/27 (b) 1,250,000 1,240,625
Macon County, North Carolina HFC Revenue -
Chestnut Hill Highlands Project, 8.50%,
Due 7/01/27 8,145,000 8,542,069
North Carolina Eastern Municipal Power Agency
Power System Revenue Refunding, 5.00%,
Due 1/01/21 4,250,000 4,037,500
-----------
13,820,194
NORTH DAKOTA 2.4%
Grand Forks, North Dakota Senior Housing
Revenue - 4000 Valley Square Project,
6.25%, Due 12/01/34 1,000,000 1,020,000
North Dakota Housing Finance Agency Revenue
Housing Finance Program Home Mortgage,
5.90%, Due 1/01/29 1,000,000 1,036,250
Ward County, North Dakota Health Care Facility
Revenue - St. Joseph's Hospital Corporation
Project:
8.875%, Due 11/15/14 690,000 846,975
8.875%, Due 11/15/24 8,210,000 10,057,250
-----------
12,960,475
OHIO 4.5%
Akron, Ohio COP - Akron Municipal Baseball
Stadium Project, Zero%, Due 12/01/01 1,500,000 1,329,375
Cleveland, Ohio Airport Special Revenue -
Continental Airlines, Inc. Project, 5.375%,
Due 9/15/27 (b) 4,500,000 4,398,750
Cleveland, Ohio Airport Special Revenue
Refunding - Continental Airlines, Inc. Project:
5.25%, Due 12/01/02 (b) 3,000,000 2,992,500
5.70%, Due 12/01/19 (b) 7,000,000 6,886,250
Cuyahoga County, Ohio MFHR - The Park Lane
Apartments Project:
7.80%, Due 7/01/07 470,000 489,975
7.90%, Due 7/01/12 680,000 714,000
8.25%, Due 7/01/28 1,930,000 2,026,500
Franklin County, Ohio Health Care Facilities
Refunding Revenue - Ohio Presbyterian
Retirement Services, 5.50%, Due 7/01/17 1,000,000 1,001,250
Medina County, Ohio EDR MFHR - Camelot Place,
Ltd. Project, 8.375%, Due 10/01/23 400,000 413,500
Pike County, Ohio Hospital Facilities Revenue - Pike
Health Services, Inc. Project, 6.75%, Due 7/01/17 3,660,000 3,902,475
-----------
24,154,575
PENNSYLVANIA 8.3%
Bucks County, Pennsylvania IDA CDR - Attleboro
Associates, Ltd. Nursing Facility Project:
8.00%, Due 12/01/05 745,000 823,225
8.25%, Due 6/01/11 3,410,000 3,785,100
Delaware County, Pennsylvania Authority Health
Care Facility First Mortgage Revenue -
GF/Longwood Care, Inc. Project:
8.50%, Due 4/15/10 530,000 573,063
9.00%, Due 4/15/25 5,860,000 6,328,800
Horsham, Pennsylvania IDA CDA Health Care
Facilities Revenue - GF/Pennsylvania
Properties, Inc. Project:
7.375%, Due 9/01/08 440,000 448,800
8.375%, Due 9/01/24 6,000,000 6,442,500
Montgomery County, Pennsylvania IDA Revenue -
Wordsworth Academy Project, 8.00%,
Due 9/01/24 6,840,000 7,233,300
Mount Pleasant, Westmoreland County,
Pennsylvania Business District Authority
Hospital Revenue - Frick Hospital:
5.70%, Due 12/01/13 500,000 509,375
5.75%, Due 12/01/17 500,000 508,125
5.75%, Due 12/01/27 1,000,000 1,011,250
Pennsylvania EDA Qualified Residential Rent
Project Revenue - RSI Properties/Butler LLC
Project, 8.00%, Due 9/01/27 3,000,000 3,086,250
Pennsylvania EDA Qualified Residential Rent
Project Revenue - RSI Properties/Greensburg
LLC Project, 8.00%, Due 9/01/27 3,000,000 3,090,000
Philadelphia, Pennsylvania Hospitals and Higher
EFA Hospital Revenue - Graduate Health System
Obligated Group Project:
6.625%, Due 7/01/21 325,000 315,656
7.00%, Due 7/01/05 2,000,000 2,017,500
12
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Philadelphia, Pennsylvania IDA CDR Refunding -
Doubletree Guest Suites Project, 6.50%,
Due 10/01/27 $ 3,500,000 $ 3,714,375
Scranton-Lackawanna, Pennsylvania Health and
Welfare Authority Hospital Revenue - Marian
Community Hospital Project, 7.125%, Due 1/15/13 1,000,000 1,088,750
Wilkinsburg, Pennsylvania Municipal Authority
Health Facilities Revenue - Monroeville Christian
Project, 8.25%, Due 3/01/27 3,000,000 3,288,750
------------
44,264,819
SOUTH CAROLINA 5.2%
Connector 2000 Association, Inc. Subordinate
Capital Appreciation Toll Road Revenue -
Southern Connector Project:
Zero %, Due 1/01/23 7,400,000 1,609,500
Zero %, Due 1/01/24 7,500,000 1,537,500
Zero %, Due 1/01/25 8,700,000 1,674,750
Zero %, Due 1/01/26 9,000,000 1,620,000
Zero %, Due 1/01/27 9,100,000 1,535,625
Zero %, Due 1/01/28 9,300,000 1,476,375
Zero %, Due 1/01/29 10,500,000 1,561,875
Zero %, Due 1/01/30 10,800,000 1,512,000
Zero %, Due 1/01/31 11,000,000 1,443,750
Zero %, Due 1/01/32 11,200,000 1,386,000
Zero %, Due 1/01/33 11,500,000 1,336,875
Zero %, Due 1/01/34 11,700,000 1,272,375
Zero %, Due 1/01/35 12,000,000 1,230,000
Zero %, Due 1/01/36 12,200,000 1,174,250
Zero %, Due 1/01/37 12,400,000 1,116,000
Zero %, Due 1/01/38 17,200,000 1,462,000
5.375%, Due 1/01/38 2,000,000 1,912,500
Florence County, South Carolina IDR - Stone
Container Corporation Project, 7.375%,
Due 2/01/07 2,650,000 2,898,437
------------
27,759,812
SOUTH DAKOTA 0.3%
Mobridge, South Dakota Health Care Facilities
Revenue - Mobridge Regional Hospital Project,
6.50%, Due 12/01/22 1,860,000 1,878,600
TENNESSEE 0.4%
Shelby County, Tennessee Health, Educational and
Housing Facility Board Health Care Facilities
Revenue - Kirby Pines Retirement Community
Project, 6.375%, Due 11/15/25 2,100,000 2,147,250
TEXAS 4.0%
DeSoto, Texas IDA IDR - Wintergreen Commercial
Partnership Project, 7.00%, Due 1/01/17 3,857,997 3,896,577
Hidalgo County, Texas Health Services Corporation
Hospital Revenue - Mission Hospital, Inc. Project,
6.75%, Due 8/15/16 3,000,000 3,318,750
Houston, Texas Airport System Special Facilities
Revenue - Continental Airlines, Inc. Airport
Improvement Projects, 6.125%, Due 7/15/27 1,450,000 1,517,063
Houston, Texas Airport System Subordinated Lien
Revenue Forward Refunding, 5.50%, Due 7/01/17 (b) 5,940,000 6,058,800
Jefferson County, Texas Health Facilities
Development Corporation Hospital Revenue -
Baptist Health Care System Project:
8.30%, Due 10/01/14 4,630,000 4,925,162
8.875%, Due 6/01/21 1,300,000 1,379,625
------------
21,095,977
UTAH 0.5%
Utah Housing Finance Agency SFMR, 5.75%,
Due 7/01/27 2,625,000 2,687,344
VIRGINIA 1.4%
Loudoun County, Virginia IDA IDR Refunding -
Dulles Airport Marriott Hotel Project, 7.125%,
Due 9/01/15 5,000,000 5,500,000
Virginia Small Business Financing Authority IDR -
Albion Enterprises, LLC Project, 6.40%,
Due 1/01/14 1,750,000 1,754,375
------------
7,254,375
WEST VIRGINIA 0.6%
Marion County, West Virginia County Commission
Solid Waste Disposal Facility Revenue -
Adirondack Recycling:
8.00%, Due 12/01/25 1,389,734 1,389,734
10.00%, Due 12/01/25 193,916 193,916
Weirton, West Virginia PCR - Weirton Steel
Project, 8.625%, Due 11/01/14 1,630,000 1,727,800
------------
3,311,450
WISCONSIN 5.0%
Brookfield, Wisconsin IDR Refunding - Midway
Motor Lodge Project, 8.40%, Due 4/01/12 5,290,000 5,878,512
Wisconsin Health and Educational Facilities
Authority Revenue - Aurora Medical
Group, Inc. Project, 9.00%, Due 11/15/25 2,480,000 2,678,400
Wisconsin Health and Educational Facilities
Authority Revenue - National Regency of New
Berlin, Inc. Project:
7.75%, Due 8/15/15 5,000,000 5,600,000
8.00%, Due 8/15/25 6,500,000 7,288,125
Wisconsin Housing and EDA Home Ownership
Revenue:
6.20%, Due 3/01/27 3,000,000 3,180,000
7.10%, Due 9/01/15 1,920,000 2,109,600
------------
26,734,637
WYOMING 0.4%
Wyoming Community Development Authority
Housing Revenue, 5.85%, Due 6/01/28 (c) 2,000,000 2,070,000
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $508,774,401) 535,672,239
- ------------------------------------------------------------------------------
VARIABLE RATE PUT BONDS 0.3%
ARIZONA 0.3%
Maricopa County, Arizona IDA IDR-Borden, Inc.
Project, 4.39%, Due 10/01/12 (Puttable at $100
and Rate Reset Effective 10/01/2000) 1,700,000 1,668,125
- ------------------------------------------------------------------------------
TOTAL VARIABLE RATE PUT BONDS (COST $1,648,456) 1,668,125
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 4.1%
MUNICIPAL MONEY MARKET
MULTIPLE STATES
Strong Municipal Money Market Fund (d) 22,000,000 22,000,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $22,000,000) 22,000,000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $532,422,857) 104.8% 559,340,364
Other Assets and Liabilities, Net (4.8%) (25,712,369)
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $533,627,995
==============================================================================
13
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) FEBRUARY 28, 1998(UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
- -------------------------------------------------------------------------------
FUTURES
- -----------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation/
Date at Value Depreciation
- -----------------------------------------------------------------------------
Sold:
200 Municipal Bond Index 3/98 ($24,637,500) ($175,625)
10 Municipal Bond Index 6/98 (1,219,063) 2,187
===============================================================================
STRONG MUNICIPAL BOND FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS 98.6%
ALABAMA 1.8%
Courtland, Alabama IDB Solid Waste Disposal
Revenue - Champion International Corporation
Project, 6.375%, Due 3/01/29 $ 3,145,000 $ 3,357,287
Valley, Alabama Special Care Facilities Financing
Authority Revenue - Lanier Memorial Hospital
Project, 5.65%, Due 11/01/22 1,500,000 1,505,625
-----------
4,862,912
ALASKA 2.0%
Alaska HFC Capital Appreciation Mortgage
Revenue, Zero %, Due 12/01/27 8,500,000 1,370,625
Valdez, Alaska Marine Terminal Revenue
Refunding - BP Pipelines (Alaska), Inc.
Project, 5.65%, Due 12/01/28 4,000,000 4,095,000
-----------
5,465,625
ARIZONA 1.9%
Arizona Health Facilities Authority Revenue -
Bethesda Foundation - Bethesda Gardens
Project, 6.40%, Due 8/15/27 1,000,000 1,027,500
Phoenix, Arizona IDA Mortgage Revenue Refunding -
Christian Care Retirement Apartments, Inc.
Project, 6.25%, Due 1/01/16 3,740,000 3,927,000
-----------
4,954,500
ARKANSAS 1.9%
Northwest Arkansas Regional Airport Authority
Airport Revenue, 7.625%, Due 2/01/27 3,000,000 3,431,250
Pulaski County, Arkansas Public Facilities Board
MFHR - Plantation House and Indian Hills
Apartments Project, 6.05%, Due 8/01/27 1,500,000 1,539,375
-----------
4,970,625
CALIFORNIA 2.6%
California Tri-City Housing Finance Agency
SFMR - FNMA and GNMA Collateralized,
6.45%, Due 12/01/28 1,975,000 2,125,594
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue:
Zero %, Due 1/01/28 12,060,000 2,457,225
Zero %, Due 1/01/30 4,110,000 755,212
Los Angeles, California MFHR - Earthquake
Rehabilitation Projects, 5.85%, Due 12/01/27 1,535,000 1,663,556
-----------
7,001,587
COLORADO 6.4%
Arapahoe County, Colorado E-470 Public Highway
Authority Capital Improvement Trust Fund
Highway Revenue:
Zero %, Due 8/31/08 4,500,000 2,705,625
Zero %, Due 8/31/10 15,000,000 7,762,500
Castle Rock Ranch, Colorado Public Improvements
Authority Public Facilities Revenue, 6.25%,
Due 12/01/17 5,000,000 5,643,750
Colorado Health Facilities Authority Retirement
Housing Revenue - Liberty Heights Project,
Zero %, Due 7/15/20 2,900,000 895,375
-----------
17,007,250
CONNECTICUT 0.6%
Connecticut Health and Educational Facilities
Authority Revenue - Edgehill Issue, 6.875%,
Due 7/01/17 1,500,000 1,606,875
DELAWARE 0.9%
Delaware EDA Revenue, 6.30%, Due 5/01/22 2,250,000 2,385,000
FLORIDA 0.8%
Manatee County, Florida HFA SFMR, 7.45%,
Due 5/01/27 950,000 1,084,188
Pinellas County, Florida EFA Revenue - College
Harbor Project, 6.50%, Due 12/01/20 1,020,000 1,078,650
-----------
2,162,838
GEORGIA 4.9%
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Evergreen Village Estates
Project:
5.875%, Due 5/01/07 855,000 896,681
6.375%, Due 5/01/17 1,675,000 1,769,219
6.50%, Due 5/01/27 2,965,000 3,131,781
Washington, Georgia Wilkes Payroll Development
Authority Subordinated Revenue - Southern Care
Corporation Facility Project, Zero %,
Due 12/01/21 25,595,000 7,358,563
-----------
13,156,244
IDAHO 0.8%
Idaho Housing Agency SFMR, 6.45%, Due 7/01/27 2,000,000 2,145,000
ILLINOIS 13.0%
Granite City, Illinois Hospital Revenue Refunding -
Saint Elizabeth Medical Center, 8.125%,
Due 6/01/08 5,685,000 6,018,994
Illinois Educational Facilities Authority Revenue
Refunding - DePaul University Project, 5.50%,
Due 10/01/19 4,365,000 4,479,581
Illinois Health Facilities Authority Refunding
Revenue - Lutheran Social Services of Illinois,
6.125%, Due 8/15/20 9,160,000 9,366,100
Illinois Health Facilities Authority Revenue -
Trinity Medical Center Project, 7.00%,
Due 7/01/12 2,000,000 2,230,000
Illinois Metropolitan Pier and Exposition Authority
Capital Appreciation - McCormick Place
Expansion Project, Zero %, Due 6/15/16 1,250,000 487,500
Illinois Metropolitan Pier and Exposition Authority
Refunding - McCormick Place Expansion Project,
7.00%, Due 7/01/26 1,500,000 1,841,250
Kane, Cook and DuPage Counties, Illinois School
District Number U-46 Capital Appreciation
School Building:
Zero %, Due 1/01/11 1,800,000 969,750
Zero %, Due 1/01/13 2,500,000 1,200,000
Will County, Illinois Exempt Facilities Revenue -
Mobil Oil Refining Corporation Project, 6.40%,
Due 4/01/26 5,000,000 5,437,500
Zion, Illinois Park District GO Revenue, 6.50%,
Due 12/30/17 2,485,000 2,590,612
-----------
34,621,287
14
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
INDIANA 8.9%
Fishers, Indiana EDR First Mortgage Revenue -
United Student Aid Funds, Inc. Project, 8.25%,
Due 9/01/09 $10,000,000 $10,388,400
Indiana Health Facility Financing Authority
Hospital Revenue - Jackson County Schneck
Memorial Hospital Project, 7.50%, Due 2/15/22 6,790,000 7,723,625
Indiana Health Facility Financing Authority
Hospital Revenue Refunding - Jackson County
Schneck Memorial Hospital Project, 5.25%,
Due 2/15/22 1,200,000 1,179,000
Petersburg, Indiana PCR Refunding - Indianapolis
Power & Light Company Project, 5.50%,
Due 10/01/23 4,425,000 4,485,844
-----------
23,776,869
IOWA 2.1%
Iowa Finance Authority Hospital Facility Refunding
and Revenue - Jennie Edmundson Memorial
Hospital Project, 7.65%, Due 11/01/16 4,850,000 5,522,938
MASSACHUSETTS 1.4%
Massachusetts IFA IDR - Welch Foods, Inc., 5.60%,
Due 12/01/17 1,700,000 1,731,875
Massachusetts Municipal Wholesale Electric
Company Power Supply System Revenue, 4.75%,
Due 7/01/11 2,000,000 1,977,500
-----------
3,709,375
MICHIGAN 2.0%
Dearborn, Michigan EDC Hospital Revenue
Refunding - Oakwood Obligated Group, 5.25%,
Due 8/15/21 2,765,000 2,771,912
Michigan Hospital Finance Authority Hospital
Revenue Refunding - Pontiac Osteopathic
Hospital, 6.00%, Due 2/01/14 2,500,000 2,593,750
-----------
5,365,662
MINNESOTA 1.9%
Golden Valley Minnesota Governmental Facilities
Revenue - Local Government Information Systems
Association Project, 6.10%, Due 12/01/17 1,125,000 1,144,688
Southern Minnesota Municipal Power Agency Power
Supply Systems Revenue, 4.75%, Due 1/01/16 4,000,000 3,810,000
-----------
4,954,688
MISSOURI 2.4%
St. Louis, Missouri Municipal Finance Corporation
Leasehold Revenue Refunding, 5.85%, Due 7/15/09 3,600,000 3,780,000
Springfield, Missouri Land Clearance Redevelopment
Authority Industrial Revenue Refunding -
University Plaza Project, 6.60%, Due 10/01/11 2,465,000 2,572,844
-----------
6,352,844
MONTANA 0.4%
Crow Finance Authority Tribal Purpose Revenue,
5.70%, Due 10/01/27 1,000,000 1,031,250
NEW HAMPSHIRE 0.9%
New Hampshire Higher Educational and Health
Facilities Authority Revenue - Franklin Pierce
College Issue, 5.30%, Due 10/01/28 2,500,000 2,437,500
NEW MEXICO 1.7%
Albuquerque, New Mexico Industrial Revenue -
MCT Industries, Inc. Project, 6.50%, Due 4/01/17 4,330,000 4,606,037
NEW YORK 3.6%
Erie County, New York IDA Life Care Community
Revenue - Episcopal Church Home and Affiliates
Life Care Community Inc. Project:
5.875%, Due 2/01/18 1,500,000 1,496,250
6.00%, Due 2/01/28 2,500,000 2,509,375
New York Housing Corporation Revenue
Refunding, 5.00%, Due 11/01/13 1,000,000 1,001,250
New York, New York GO, 5.875%, Due 3/15/14 1,720,000 1,818,900
New York Urban Development Corporation
Revenue, 5.50%, Due 4/01/19 (c) 1,500,000 1,550,625
New York Urban Development Corporation
Revenue - University Facilities Grants Project,
5.875%, Due 1/01/21 1,045,000 1,135,131
-----------
9,511,531
NORTH DAKOTA 0.6%
North Dakota Housing Finance Agency Housing
Finance Program - Home Mortgage Finance
Program, 6.40%, Due 1/01/28 1,395,000 1,513,575
OHIO 6.5%
Medina County, Ohio EDR MFHR - Camelot Place,
Ltd. Project, 8.375%, Due 10/01/23 3,800,000 3,928,250
Montgomery County, Ohio Health Care Facilities
Revenue Refunding - Friendship Village of
Dayton Project, 6.25%, Due 2/01/22 1,250,000 1,290,625
Ohio Housing Finance Agency Residential
Mortgage Revenue, 5.95%, Due 9/01/27 1,955,000 2,033,200
Toledo, Ohio MFMR - Commodore Perry Apartments
Project, 7.00%, Due 12/01/28 7,500,000 7,500,000
Toledo, Ohio Multifamily Housing Mortgage GO -
Commodore Perry Apartments Project, 5.45%,
Due 12/01/28 2,680,000 2,680,000
-----------
17,432,075
OKLAHOMA 2.0%
Oklahoma Ordinance Works Authority PCR Refunding -
Ralston Purina Company Project, 6.30%,
Due 9/01/15 1,500,000 1,635,000
Shawnee, Oklahoma Hospital Authority Revenue -
MidAmerica HealthCare, Inc., 8.00%, Due 4/01/04 2,590,000 2,748,637
Washington County, Oklahoma Medical Authority
Revenue - Bartlesville Jane Phillips Episcopal
Hospital Project, 6.125%, Due 11/01/14 1,000,000 1,045,000
5,428,637
OREGON 0.4%
Washington County, Oregon MFHR - Bethany
Meadows Project, 6.25%, Due 8/01/10 1,000,000 1,022,500
PENNSYLVANIA 3.1%
Montgomery County, Pennsylvania IDA First
Mortgage Revenue Refunding - The Meadowood
Corporation, 6.25%, Due 12/01/17 1,500,000 1,541,250
Pennsylvania EDA Qualified Residential Rent
Project Revenue - RSI Properties/Butler LLC
Project, 8.00%, Due 9/01/27 2,360,000 2,427,850
Pennsylvania EDA Qualified Residential Rent
Project Revenue - RSI Properties/Greensburg
LLC Project, 8.00%, Due 9/01/27 2,655,000 2,734,650
Scranton-Lackawanna, Pennsylvania Health and
Welfare Authority Hospital Revenue - Marian
Community Hospital Project, 6.50%, Due 1/15/07 1,500,000 1,603,125
-----------
8,306,875
RHODE ISLAND 0.6%
Rhode Island Health and Education Building
Corporation Hospital Financing Revenue - South
County Hospital Project, 6.00%, Due 11/15/17 1,630,000 1,723,725
15
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) FEBRUARY 28, 1998(UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
SOUTH CAROLINA 2.6%
Connector 2000 Association, Inc. Toll Road Revenue
Senior Capital Appreciation - Southern Connector
Project, Zero %, Due 1/01/26 $10,000,000 $ 2,025,000
York County, South Carolina Exempt Facility
Industrial Revenue - Hoechst Celanese
Corporation Project, 5.70%, Due 1/01/24 4,890,000 5,030,588
------------
7,055,588
SOUTH DAKOTA 4.0%
Education Loans, Inc. South Dakota Student Loan
Revenue Tax Exempt Subordinated Asset-Backed,
5.60%, Due 6/01/20 4,000,000 4,020,000
South Dakota HDA Homeownership Mortgage,
6.40%, Due 5/01/16 1,000,000 1,076,250
South Dakota Student Loan Corporation Student
Loan Revenue, 7.625%, Due 8/01/06 5,195,000 5,552,156
------------
10,648,406
TEXAS 10.4%
Austin, Texas Combined Utility Systems Revenue
Refunding, 6.50%, Due 11/15/05 (b) 1,000,000 1,131,250
El Paso, Texas Property Finance Authority, Inc.
SFMR - GNMA Mortgage-Backed, 8.70%,
Due 12/01/18 585,000 637,650
Grape Creek-Pulliam, Texas Independent School
District Public Facility Corporation School
Facility Lease Revenue:
7.00%, Due 5/15/10 1,000,000 1,107,500
7.25%, Due 5/15/21 1,300,000 1,439,750
Guadalupe-Blanco River Authority, Texas Sewage
and Solid Waste Disposal Facility - E.I. du Pont
de Nemours and Company Project, 6.40%,
Due 4/01/26 4,000,000 4,375,000
Harris County, Texas Revenue Refunding, 5.55%,
Due 8/15/07 (b) 3,300,000 3,510,375
Lufkin, Texas Health Facilities Development
Corporation Health System Revenue and
Refunding - Memorial Health System of East
Texas Project, 6.875%, Due 2/15/26 8,175,000 9,043,594
Port Arthur, Texas HFC Mortgage Revenue
Refunding - FHA Insured Mortgage Loans - Port
Arthur UDAG Projects, 6.40%, Due 1/01/28 3,565,000 3,832,375
Ranger, Texas Housing Corporation MFMR
Refunding - FHA Insured Mortgage Loans -
Ranger Apartments Project, 8.80%, Due 3/01/24 1,160,000 1,315,150
Texas Department of Housing and Community
Affairs SFMR, 6.00%, Due 9/01/17 1,315,000 1,398,831
------------
27,791,475
UTAH 1.7%
Eagle Mountain, Utah Special Assessment, 5.90%,
Due 12/15/07 1,455,000 1,463,541
Salt Lake County, Utah College Revenue -
Westminster College of Salt Lake City Project,
5.75%, Due 10/01/27 1,700,000 1,748,875
Salt Lake County, Utah Housing Authority MFHR -
Millcreek Pines Apartments Project, 6.80%,
Due 9/01/17 1,390,000 1,445,600
------------
4,658,016
WASHINGTON 1.2%
Chelan County, Washington Public Utility District
Number 1 - Chelan Hydro Consolidated System
Revenue, 5.60%, Due 7/01/32 1,000,000 1,018,750
Washington EDFA Nonrecourse Revenue - Lindal
Cedar Homes, Inc. Project, 5.80%, Due 11/01/17 2,175,000 2,221,219
------------
3,239,969
WISCONSIN 2.6%
Wisconsin Health and EFA Revenue - Howard
Young Medical Center, Inc. Project, 5.75%,
Due 8/15/13 1,250,000 1,295,313
Wisconsin Health and EFA Revenue - St. John's
Home of Milwaukee and Sunrise Care Center, Inc.
Obligated Group Project, 5.625%, Due 12/15/22 3,950,000 3,979,625
Wisconsin Housing and EDA Home Ownership
Revenue, 6.20%, Due 3/01/27 1,480,000 1,568,800
------------
6,843,738
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $244,596,565) 263,273,016
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 2.5%
DAILY VARIABLE RATE PUT BONDS 1.4%
CALIFORNIA
Los Angeles County, California IDA IDR:
353 Properties LP Project 500,000 500,000
Gregory H. Kloenne and Son Project 400,000 400,000
Komax Systems, Inc. Project 1,000,000 1,000,000
Socransky Children's Trust Project 750,000 750,000
Walter and Howard Lim Project 1,120,000 1,120,000
------------
3,770,000
MUNICIPAL MONEY MARKETS 1.1%
MULTIPLE STATES
Strong Municipal Money Market Fund (d) 3,000,000 3,000,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $6,770,000) 6,770,000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $251,366,565) 101.1% 270,043,016
Other Assets and Liabilities, Net (1.1%) (3,049,577)
- ------------------------------------------------------------------------------
NET ASSETS, 100.0% $266,993,439
==============================================================================
FUTURES
- -----------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Depreciation
- -----------------------------------------------------------------------------
Purchased:
10 U.S. Treasury Bonds 3/98 ($1,207,813) ($16,563)
===============================================================================
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS 95.3%
CALIFORNIA 0.4%
Los Angeles, California Regional Airports
Improvement Corporation Lease Revenue
Facilities - Continental Airlines, Inc.
Project, 9.25%, Due 8/01/24 $ 85,000 $103,488
COLORADO 2.6%
Colorado Health Facilities Authority Hospital
Revenue - Steamboat Springs Health Care
Association Project:
4.80%, Due 9/15/01 245,000 246,838
4.90%, Due 9/15/02 230,000 230,863
Denver, Colorado Airport System Revenue, 6.65%,
Due 11/15/05 145,000 158,412
--------
636,113
16
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
FLORIDA 7.5%
Arbor Greene, Florida Community Development
District Special Assessment Revenue, 7.00%,
Due 5/01/03 $1,765,000 $1,809,125
Orlando and Orange County, Florida Expressway
Authority Revenue Refunding, 5.95%, Due 7/01/23 10,000 10,275
----------
1,819,400
HAWAII 0.2%
Hawaii Department of Transportation Special
Facility Revenue - Continental Airlines, Inc.
Project, 9.60%, Due 6/01/08 50,000 55,813
IDAHO 0.0%
Idaho Student Loan Fund Marketing Association, Inc.
Student Loan Revenue, 5.10%, Due 10/01/02 10,000 10,012
ILLINOIS 2.4%
Carol Stream, Illinois First Mortgage Revenue -
Windsor Park Manor Project, 6.25%, Due 12/01/01 250,000 256,250
Chicago, Illinois O'Hare International Airport Special
Facilities Revenue - American Airlines, Inc. Project,
7.875%, Due 11/01/25 165,000 181,912
Illinois DFA Industrial Revenue Refunding - Great
Plains Hotel Corporation of Illinois Project,
7.50%, Due 4/01/16 150,000 152,763
--------
590,925
INDIANA 1.1%
Indianapolis, Indiana Economic Development
MFHR - Post Pointe Apartments Project, 8.20%,
Due 3/01/01 270,000 276,075
IOWA 0.1%
Ottumwa, Iowa Hospital Facility Revenue Refunding
and Improvement - Ottumwa Regional Health
Center, Inc., 6.00%, Due 10/01/18 25,000 25,906
KANSAS 6.9%
Lawrence, Kansas CDR Refunding - Holiday Inn Project:
7.00%, Due 7/01/99 180,000 186,075
7.00%, Due 7/01/00 190,000 196,650
Manhattan, Kansas CDR Refunding - Holiday Inn
Project:
7.00%, Due 7/01/99 180,000 186,075
7.00%, Due 7/01/00 190,000 196,650
Topeka, Kansas Industrial Revenue Refunding -
Reser's Fine Foods, Inc. Project:
5.00%, Due 4/01/01 (b) 300,000 300,000
5.20%, Due 4/01/03 (b) 300,000 300,750
5.30%, Due 4/01/04 (b) 300,000 300,750
----------
1,666,950
LOUISIANA 0.5%
Hodge, Louisiana Utility Revenue - Stone Container
Corporation Project, 9.00%, Due 3/01/10 100,000 108,750
Louisiana Public Facilities Authority Revenue -
Health and Higher Education Project, 7.90%,
Due 12/01/15 10,000 10,473
----------
119,223
MARYLAND 0.5%
Howard County, Maryland IDR Refunding - Keebler
Company Project:
5.70%, Due 3/01/99 50,000 50,493
5.95%, Due 3/01/00 65,000 66,056
----------
116,549
MASSACHUSETTS 13.8%
Massachusetts Health and Educational Facilities
Authority Revenue - New England Memorial
Hospital Project, 5.90%, Due 7/01/03 85,000 84,787
Massachusetts Health and Educational Facilities
Authority Revenue - Saints Memorial Medical
Center, 5.50%, Due 10/01/02 1,100,000 1,115,125
Massachusetts Industrial Finance Agency Health
Care Facility Revenue - Metro Health Foundation
of Massachusetts, Inc. Project, 6.25%,
Due 12/01/03 1,300,000 1,317,875
Massachusetts Industrial Finance Agency Revenue -
Institute for Developmental Disabilities Project,
9.25%, Due 6/01/09 800,000 829,000
----------
3,346,787
MISSOURI 4.3%
Columbia, Missouri IDR - American Air Filter
Company, Inc. Project, 7.45%, Due 7/01/04 1,045,000 1,049,358
MONTANA 1.3%
Crow Finance Authority Tribal Purpose Revenue,
4.75%, Due 10/01/00 290,000 292,175
Montana Board Housing Revenue Single Family
Program, 4.60%, Due 12/01/99 10,000 10,012
----------
302,187
NEW MEXICO 5.0%
Chaves County, New Mexico Hospital Revenue -
Eastern New Mexico Medical Center Project,
7.25%, Due 12/01/10 1,110,000 1,221,000
NEW YORK 4.9%
Tompkins County, New York Industrial Development
Agency Life Care Community Revenue - Kendal at
Ithaca, Inc. Project, 7.25%, Due 6/01/03 90,000 92,925
United Nations Development Corporation
Refunding, 5.60%, Due 7/01/26 1,100,000 1,104,125
----------
1,197,050
NORTH CAROLINA 1.3%
North Carolina Medical Care Commission Health
Care Facilities First Mortgage Revenue - DePaul
Community Facilities Project, 5.75%, Due 1/01/03 325,000 325,406
OHIO 5.3%
Cleveland, Ohio Airport Special Revenue Refunding -
Continental Airlines, Inc. Project, 5.25%,
Due 12/01/02 (b) 1,000,000 997,500
Cuyahoga County, Ohio MFHR - The Park Lane
Apartments Project, 7.70%, Due 7/01/02 270,000 276,075
----------
1,273,575
OKLAHOMA 3.7%
Leflore County, Oklahoma Hospital Authority
Hospital Revenue:
4.90%, Due 6/01/00 185,000 185,694
5.05%, Due 6/01/01 205,000 206,025
5.25%, Due 6/01/02 235,000 236,469
5.45%, Due 6/01/03 260,000 261,950
----------
890,138
PENNSYLVANIA 11.5%
Bucks County, Pennsylvania IDA CDR - Attleboro
Associates, Ltd. Nursing Facility Project, 8.00%,
Due 12/01/05 800,000 884,000
Lancaster County, Pennsylvania Solid Waste
Management Authority Resource Recovery
System Revenue, 8.375%, Due 12/15/04 300,000 309,705
Luzerne County, Pennsylvania IDA IDR, 6.25%,
Due 3/15/08 900,000 900,108
17
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) FEBRUARY 28, 1998(UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Pennsylvania EDA Qualified Residential Rent
Project Revenue - RSI Properties/Butler LLC
Project, 7.00%, Due 9/01/02 $ 300,000 $ 304,125
Pennsylvania EDA Qualified Residential Rent
Project Revenue - RSI Properties/Greensburg
LLC Project, 7.00%, Due 9/01/02 300,000 304,125
Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Revenue -
Graduate Health System Obligated Group,
5.75%, Due 7/01/02 100,000 95,250
-----------
2,797,313
TEXAS 9.6%
DeSoto, Texas IDA IDR - Wintergreen Commercial
Partnership Project, 7.00%, Due 1/01/17 1,163,890 1,175,530
Jefferson County, Texas Health Facilities
Development Corporation Hospital Revenue -
Baptist Health Care System Project, 8.875%,
Due 6/01/21 1,080,000 1,146,150
-----------
2,321,680
VIRGINIA 1.9%
Virginia Housing Development Authority
Commonwealth SFMR, 6.625%, Due 1/01/10 200,000 209,750
Virginia Small Business Financing Authority IDR -
Albion Enterprises LLC Project, 6.00%,
Due 1/01/02 250,000 250,625
-----------
460,375
WEST VIRGINIA 4.7%
Harrison County, West Virginia CDR Refunding -
Kmart Corporation Project, 7.625%, Due 12/01/04 80,000 87,500
Weirton, West Virginia PCR - Weirton Steel Project,
8.625%, Due 11/01/14 1,000,000 1,060,000
-----------
1,147,500
WISCONSIN 5.8%
Wisconsin Health and Educational Facilities
Authority Revenue - Linden Grove, Inc. Project,
6.15%, Due 11/01/19 405,000 405,494
Wisconsin Health and Educational Facilities
Authority Revenue - Lutheran Home for the
Aging Project, 7.00%, Due 9/01/25 30,000 31,575
Wisconsin Health and Educational Facilities
Authority Revenue - Oconomowoc Memorial
Hospital, Inc. Project, 6.20%, Due 7/01/12 950,000 966,625
-----------
1,403,694
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $23,071,346) 23,156,517
- ------------------------------------------------------------------------------
VARIABLE RATE PUT BONDS 5.3%
ARIZONA
Maricopa County, Arizona IDA IDR - Borden, Inc.
Project, 4.39%, Due 10/01/12 (Putable at $100 and
Rate Reset Effective 10/01/00) 1,300,000 1,275,625
- ------------------------------------------------------------------------------
TOTAL VARIABLE RATE PUT BONDS (COST $1,274,300) 1,275,625
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 4.2%
MUNICIPAL BONDS 0.1%
ILLINOIS 0.0%
East Chicago Heights, Illinois Waterworks and
Sewer Revenue, 7.00%, Due 5/01/98 15,000 15,058
MASSACHUSETTS 0.1%
Massachusetts Health and Educational Facilities
Authority Revenue - Norwood Hospital Project,
7.30%, Due 7/01/98 15,000 15,121
-----------
Total Municipal Bonds 30,179
MUNICIPAL MONEY MARKET 4.1%
MULTIPLE STATES
Strong Municipal Money Market Fund (d) 1,000,000 1,000,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,030,137) 1,030,179
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $25,375,783) 104.8% 25,462,321
Other Assets and Liabilities, Net (4.8%) (1,174,604)
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $24,287,717
==============================================================================
===============================================================================
STRONG SHORT-TERM MUNICIPAL BOND FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS 82.9%
ALABAMA 0.3%
Bessemer, Alabama IDB IDR - Berman Brothers
Project, 7.65%, Due 9/01/00 $ 505,000 $ 511,565
ARIZONA 0.8%
Maricopa County, Arizona IDA MFHR - Mercy Bond
Properties Arizona I-A, 5.20%, Due 1/01/04 1,000,000 1,031,250
Phoenix, Arizona IDA Hospital Revenue - John C.
Lincoln Hospital and Health Center Project,
4.65%, Due 12/01/99 450,000 453,375
----------
1,484,625
CALIFORNIA 2.2%
California Health Facilities Financing Authority
Hospital Revenue - Downey Community Hospital,
4.90%, Due 5/15/00 2,325,000 2,356,969
Sacramento County, California MFHR Refunding -
Fairways II Apartments, 5.35%, Due 8/01/25 1,950,000 2,028,000
----------
4,384,969
COLORADO 2.1%
Arapahoe County, Colorado E-470 Public Highway
Authority Capital Improvement Trust Fund
Highway Revenue, Zero %, Due 8/31/03 500,000 396,875
Eaglebend, Colorado Affordable Housing
Corporation MFHR Refunding Housing Project,
5.45%, Due 7/01/02 1,250,000 1,273,437
Mesa County, Colorado IDR Refunding - Joy
Technologies, Inc. Project, 8.50%, Due 9/15/06 1,020,000 1,162,800
Miners Mesa, Colorado Commercial Metropolitan
District GO, 6.75%, Due 12/01/02 1,200,000 1,201,200
----------
4,034,312
CONNECTICUT 0.7%
Connecticut IDA - The Olympic Hotel Corporation
Project, 6.95%, Due 8/01/03 1,397,871 1,471,259
DISTRICT OF COLUMBIA 1.6%
District of Columbia Hospital Revenue Refunding -
Medlantic Healthcare Group, Inc., 6.50%,
Due 8/15/02 2,925,000 3,129,750
FLORIDA 1.1%
Florida Housing Finance Agency MFMR -
Hammocks Place Project, 6.25%, Due 12/01/06 2,000,000 2,115,000
18
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
GEORGIA 3.4%
Athens-Clarke County, Georgia Residential Care
Facilities for the Elderly Authority Revenue -
Wesley Woods of Athens, Inc. Project, 5.30%,
Due 10/01/01 $1,000,000 $ 1,012,500
Atlanta, Georgia Urban Residential Financing
Authority MFHR Refunding - Ford Factory
Square Apartments Project, 6.00%, Due 12/01/30 5,655,000 5,711,550
-----------
6,724,050
GUAM 7.8%
Guam Airport Authority General Revenue:
5.80%, Due 10/01/99 1,450,000 1,479,000
6.00%, Due 10/01/00 2,300,000 2,374,750
6.40%, Due 10/01/05 7,045,000 7,696,663
Guam Government GO, 5.70%, Due 9/01/03 3,630,000 3,681,619
-----------
15,232,032
ILLINOIS 2.5%
Illinois EFA Revenue - Lewis University Project:
4.50%, Due 10/01/99 470,000 471,762
5.30%, Due 10/01/04 1,390,000 1,424,750
Naperville, DuPage County and Will County,
Illinois EDR Refunding - Illinois Hospital &
Health Systems Association Project, 5.70%,
Due 5/01/04 2,790,000 2,922,525
-----------
4,819,037
IOWA 4.0%
Cedar Rapids, Iowa First Mortgage Revenue -
Cottage Grove Place Project, 7.25%, Due 7/01/02 6,000,000 6,156,600
Iowa Finance Authority Mortgage Revenue
Refunding - Friendship Village Project,
4.95%, Due 11/01/00 1,700,000 1,734,000
-----------
7,890,600
KENTUCKY 1.8%
Mount Sterling, Kentucky League of Cities
Funding Trust Lease Program Revenue,
5.625%, Due 3/01/03 3,250,000 3,428,750
LOUISIANA 0.2%
Louisiana Public Facilities Authority Student
Loan Revenue, 6.75%, Due 9/01/06 410,000 441,775
MAINE 1.4%
Maine Educational Loan Marketing Corporation
Student Loan Revenue Refunding, 6.90%,
Due 11/01/03 2,570,000 2,785,238
MASSACHUSETTS 5.5%
Massachusetts Education Loan Authority
Education Loan Revenue, 7.45%, Due 1/01/02 1,320,000 1,371,348
Massachusetts Industrial Finance Agency
Refunding Revenue - Emerson College
Issue, 8.50%, Due 1/01/03 3,900,000 4,304,625
Massachusetts Industrial Finance Agency Water
Treatment Revenue - Massachusetts-American
Hingham Project, 6.25%, Due 12/01/10 4,695,000 5,094,075
-----------
10,770,048
MICHIGAN 1.4%
Flint, Michigan Hospital Building Authority
Revenue Refunding - Hurley Medical
Center:
5.75%, Due 7/01/03 1,000,000 1,051,250
6.00%, Due 7/01/04 1,005,000 1,072,837
6.00%, Due 7/01/05 510,000 546,338
-----------
2,670,425
MISSISSIPPI 2.5%
Mississippi Higher Education Assistance
Corporation Student Loan Revenue:
5.60%, Due 9/01/04 2,505,000 2,636,512
5.80%, Due 9/01/06 2,050,000 2,157,625
-----------
4,794,137
MISSOURI 1.7%
Springfield, Missouri Land Clearance Redevelopment
Authority Industrial Revenue Refunding -
University Plaza Project, 6.30%, Due 10/01/06 1,790,000 1,863,838
St. Louis County, Missouri IDA MFHR Refunding -
Heatherbrook Gardens Project, 5.10%, Due 3/01/05 1,355,000 1,380,406
-----------
3,244,244
NEW JERSEY 0.7%
New Jersey Health Care Facilities Financing
Authority Revenue - Southern Ocean County
Hospital Project, 5.75%, Due 7/01/01 1,400,000 1,442,000
NEW YORK 0.8%
New York, New York GO, 5.875%, Due 8/01/03 1,500,000 1,605,000
OHIO 8.3%
Akron, Ohio COP - Akron Municipal Baseball
Stadium Project:
Zero %, Due 12/01/01 1,000,000 845,000
Zero %, Due 12/01/02 1,240,000 1,052,450
Cleveland, Ohio Airport Special Revenue
Refunding - Continental Airlines, Inc. Project,
5.25%, Due 12/01/02 (b) 2,475,000 2,468,812
Cleveland, Ohio City School District Energy
Conservation Improvement GO:
6.53%, Due 3/15/00 650,000 676,813
6.53%, Due 9/15/00 670,000 704,337
6.53%, Due 3/15/01 690,000 729,675
6.53%, Due 9/15/01 715,000 762,369
6.53%, Due 3/15/02 740,000 791,800
6.53%, Due 9/15/02 760,000 817,000
6.53%, Due 3/15/03 785,000 842,894
6.53%, Due 9/15/03 815,000 875,106
6.53%, Due 3/15/04 840,000 900,900
6.53%, Due 9/15/04 865,000 927,712
Cuyahoga County, Ohio IDR Refunding - Joy
Technologies, Inc. Project, 8.75%, Due 9/15/07 1,000,000 1,148,750
Montgomery County, Ohio Health Care Facilities
Revenue Refunding - Friendship Village of
Dayton Project, 5.15%, Due 2/01/03 1,000,000 1,003,750
Montgomery County, Ohio Health Care Facilities
Revenue Refunding EXTRAS - Friendship Village
of Dayton Project, 5.375%, Due 2/01/22 1,050,000 1,059,188
Wood County, Ohio IDR - Abbey Etna Machine
Company Project:
7.55%, Due 7/01/99 290,000 298,337
7.625%, Due 7/01/01 285,000 296,400
-----------
16,201,293
OREGON 3.0%
Hillsboro, Oregon Hospital Facility Authority
Revenue and Advance Refunding - Tuality
Healthcare Project, 4.80%, Due 10/01/00 5,775,000 5,861,625
PENNSYLVANIA 5.0%
Delaware County, Pennsylvania Authority Health
Facilities Revenue - Mercy Health Corporation of
Southeastern Pennsylvania Obligated Group,
6.00%, Due 11/15/07 5,075,000 5,626,906
19
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) FEBRUARY 28, 1998(UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM MUNICIPAL BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Horizon Hospital System Authority Hospital
Revenue, 5.40%, Due 5/15/01 $2,180,000 $ 2,226,325
Sharon, Pennsylvania Regional Health Systems
Authority Hospital Refunding Revenue - Sharon
Regional Health Systems Project:
6.40%, Due 12/01/00 705,000 741,131
6.50%, Due 12/01/01 255,000 272,531
6.60%, Due 12/01/02 800,000 868,000
------------
9,734,893
SOUTH CAROLINA 1.6%
Charleston County, South Carolina First Mortgage
Health Facilities Revenue - The Episcopal Church
Home Project, 5.40%, Due 4/01/04 3,020,000 3,053,975
SOUTH DAKOTA 0.9%
South Dakota EDFA EDR Refunding - Pooled Loan
Program - Technical Ordinance Project, 5.75%,
Due 4/01/07 1,625,000 1,744,844
TEXAS 11.6%
Brazos, Texas Higher Education Authority, Inc.
Student Loan Revenue Refunding:
5.95%, Due 6/01/02 2,915,000 3,068,038
6.50%, Due 3/01/99 1,345,000 1,368,833
Falcons Lair Utility and Reclamation
District COP, 7.10%, Due 10/15/03 5,855,000 5,964,781
Hidalgo County, Texas Health Services Corporation
Hospital Revenue - Mission Hospital, Inc. Project,
5.75%, Due 8/15/01 1,760,000 1,808,400
Odessa, Texas Housing Authority MFMR - Section
8 Assisted Project:
5.875%, Due 10/01/03 1,385,000 1,405,775
6.375%, Due 10/01/11 2,735,000 2,796,537
Trinity River Authority Variable Rate Refunding -
Texas Industries, Inc. Project, 6.375%,
Due 9/01/07 1,585,000 1,638,494
Trinity River Authority Variable Rate Refunding -
Texas Industries, Inc. Project, Series A, 6.375%,
Due 9/01/07 4,325,000 4,470,969
------------
22,521,827
UTAH 2.5%
Eagle Mountain, Utah Water and Sewer Revenue
BAN, 5.375%, Due 9/01/01 4,910,000 4,934,550
VIRGINIA 4.7%
James City County, Virginia IDA Residential Care
Facility First Mortgage Revenue - Williamsburg
Landing, Inc. Project, 5.75%, Due 3/01/26 3,000,000 3,049,050
Prince William County, Virginia IDA Residential
Care Facility First Mortgage Revenue -
Westminster Presbyterian Retirement Project,
6.00%, Due 1/01/25 6,000,000 6,037,260
------------
9,086,310
WASHINGTON 2.7%
Walla Walla, Washington Housing Authority
Revenue - Wilbur Manor Project, 6.25%,
Due 12/01/11 1,510,000 1,560,963
Washington Health Care Facilities Authority
Revenue - Sisters of Providence, 5.375%,
Due 10/01/00 3,500,000 3,613,750
------------
5,174,713
WISCONSIN 0.1%
Wisconsin Rapids, Wisconsin GO, 6.10%,
Due 9/01/99 225,000 227,527
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $155,744,287) 161,520,373
- ------------------------------------------------------------------------------
VARIABLE RATE PUT BONDS 1.3%
ARIZONA
Scottsdale, Arizona IDA First Mortgage Revenue
Refunding - Westminster Village, Inc., 5.50%,
Due 6/01/17 (Rate Reset Effective 12/01/99) 2,500,000 2,556,250
- ------------------------------------------------------------------------------
TOTAL VARIABLE RATE PUT BONDS (COST $2,522,268) 2,556,250
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 15.7%
MUNICIPAL BONDS 3.2%
ILLINOIS 0.6%
Collinsville, Illinois Madison County IDR
Refunding - Drury Inn-Collinsville Project,
5.25%, Due 11/01/98 260,000 261,669
Illinois Health Facilities Authority Revenue -
Trinity Medical Center Project, 6.15%,
Due 7/01/98 1,000,000 1,006,070
------------
1,267,739
SOUTH DAKOTA 2.4%
South Dakota Student Loan Corporation Student
Loan Revenue, 7.35%, Due 8/01/98 4,565,000 4,629,093
WISCONSIN 0.2%
Glendale, Wisconsin IDR - Autorol Corporation
Project:
7.00%, Due 9/30/98 100,000 101,899
7.50%, Due 9/30/98 250,000 255,432
------------
357,331
------------
Total Municipal Bonds 6,254,163
VARIABLE RATE PUT BONDS 5.1%
NEW MEXICO
Santa Ana Pueblo GO Public Improvement 5.30%,
Due 12/01/13 (Putable at $100 and Rate Reset
Effective 3/26/98) 10,000,000 10,013,200
WEEKLY VARIABLE RATE PUT BONDS 2.6%
MICHIGAN 0.8%
Michigan Strategic Fund Limited Obligation
Revenue - Wilke Metal Products Project 1,600,000 1,600,000
MINNESOTA 1.8%
Golden Valley, Minnesota IDR Refunding -
Graco, Inc. Project 3,500,000 3,500,000
------------
Total Weekly Variable Rate Put Bonds 5,100,000
DAILY VARIABLE RATE PUT BOND 3.2%
NORTH CAROLINA
Puttable Floating Option Tax-Exempt Receipts,
Series PPT-4 6,150,000 6,150,000
MUNICIPAL MONEY MARKETS 1.6%
MULTIPLE STATES
Strong Municipal Money Market Fund (d) 3,000,000 3,000,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $30,461,566) 30,517,363
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $188,728,121) 99.9% 194,593,986
Other Assets and Liabilities, Net 0.1% 262,083
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $194,856,069
==============================================================================
20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LEGEND
- -----------------------------------------------------------------------------
(a) Short-term investments include any security which has a maturity of less
than one year.
(b) All or a portion of security is when-issued.
(c) All or a portion of security pledged to cover margin requirements for
futures contracts.
(d) Affiliated issuer. (See Note 6 of notes to financial statements.)
All costs are stated in thousands.
Percentages are stated as a percent of net assets.
See notes to financial statements.
ABBREVIATIONS
- -----------------------------------------------------------------------------
The following is a list of abbreviations that may be used in the Schedules
of Investments in Securities:
BAN -- Bond Anticipation Notes
CDA -- Commercial Development Authority
CDR -- Commercial Development Revenue
COP -- Certificates of Participation
DFA -- Development Finance Authority
EDA -- Economic Development Authority
EDC -- Economic Development Corporation
EDFA -- Economic Development Finance Authority
EDR -- Economic Development Revenue
EXTRAS -- Extendable Rate Adjustable Securities
GO -- General Obligation
HDA -- Housing Development Authority
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
HFC -- Housing Finance Corporation
IBA -- Industrial Building Authority
IBR -- Industrial Building Revenue
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDC -- Industrial Development Corporation
IDFA -- Industrial Development Finance Authority
IDR -- Industrial Development Revenue
IFA -- Investment Finance Authority
MFHR -- Multi-Family Housing Revenue
MFMR -- Multi-Family Mortgage Revenue
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
SFHR -- Single Family Housing Revenue
SFMR -- Single Family Mortgage Revenue
TAN -- Tax Anticipation Notes
TRAN -- Tax and Revenue Anticipation Notes
21
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
(In Thousands, Except Per Share Amounts)
STRONG HIGH-YIELD STRONG MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
------------------- ----------------
ASSETS:
Investments in Securities, at Value
Unaffiliated Issuers (Cost of
$510,423 and $248,367, respectively) $537,340 $267,043
Affiliated Issuers (Cost of $22,000
and $3,000, respectively) 22,000 3,000
Receivable from Brokers for Securities Sold 1,583 13,345
Receivable for Fund Shares Sold 425 10
Interest Receivable 8,855 3,558
Other Assets 313 554
-------- --------
Total Assets 570,516 287,510
LIABILITIES:
Payable to Brokers for Securities Purchased 34,395 19,399
Payable for Fund Shares Redeemed 251 40
Dividends Payable 2,208 1,041
Accrued Operating Expenses and Other Liabilities 34 37
-------- --------
Total Liabilities 36,888 20,517
-------- --------
NET ASSETS $533,628 $266,993
======== ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital)$506,258 $279,020
Undistributed Net Realized Gain/Accumulated
Net Realized Loss 626 (30,687)
Net Unrealized Appreciation 26,744 18,660
-------- --------
Net Assets $533,628 $266,993
======== ========
Capital Shares Outstanding (Unlimited Number
Authorized) 50,831 27,048
NET ASSET VALUE PER SHARE $10.50 $9.87
====== =====
STRONG SHORT-TERM
HIGH YIELD STRONG SHORT-TERM
MUNICIPAL FUND MUNICIPAL BOND FUND
----------------- -------------------
ASSETS:
Investments in Securities, at Value
Unaffiliated Issuers (Cost of $24,375
and $185,728, respectively) $24,462 $191,594
Affiliated Issuers (Cost of $1,000
and $3,000, respectively) 1,000 3,000
Receivable for Fund Shares Sold 135 5
Interest Receivable 401 3,110
Other Assets 465 354
------- --------
Total Assets 26,463 198,063
LIABILITIES:
Payable to Brokers for Securities Purchased 2,102 2,471
Dividends Payable 69 722
Accrued Operating Expenses and Other Liabilities 4 14
------- --------
Total Liabilities 2,175 3,207
------- --------
NET ASSETS $24,288 $194,856
======= ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital)$24,201 $201,628
Accumulated Net Realized Loss -- (12,638)
Net Unrealized Appreciation 87 5,866
------- --------
Net Assets $24,288 $194,856
======= ========
Capital Shares Outstanding (Unlimited Number
Authorized) 2,402 19,626
NET ASSET VALUE PER SHARE $10.11 $9.93
====== =====
22
See notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
For the Period Ended February 28, 1998 (Unaudited)
(In Thousands)
STRONG HIGH-YIELD STRONG MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
------------------- ----------------
INCOME:
Interest $14,017 $ 7,144
Dividends - Affiliated Issuers 22 6
------- -------
Total Income 14,039 7,150
EXPENSES:
Investment Advisory Fees 1,289 723
Custodian Fees 9 5
Shareholder Servicing Costs 111 125
Other 100 54
------- -------
Total Expenses 1,509 907
------- -------
NET INVESTMENT INCOME 12,530 6,243
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 2,129 1,074
Futures Contracts (69) (54)
------- -------
Net Realized Gain 2,060 1,020
Change in Unrealized Appreciation/Depreciation on:
Investments 15,069 7,645
Futures Contracts (173) (16)
------- -------
Net Change in Unrealized Appreciation/
Depreciation 14,896 7,629
------- -------
NET GAIN 16,956 8,649
------- -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $29,486 $14,892
======= =======
STRONG SHORT-TERM
HIGH YIELD STRONG SHORT-TERM
MUNICIPAL FUND MUNICIPAL BOND FUND
----------------- -------------------
INCOME:
Interest $140 $4,860
Dividends - Affiliated Issuers 1 4
---- ------
Total Income 141 4,864
EXPENSES:
Investment Advisory Fees 14 447
Custodian Fees -- 4
Shareholder Servicing Costs 4 77
Federal and State Registration Fees 6 25
Other 2 19
---- ------
Total Expenses before Waivers and Absorptions 26 572
Voluntary Expense Waivers and Absorptions
by Advisor (11) --
---- ------
Expenses, Net 15 572
---- ------
NET INVESTMENT INCOME 126 4,292
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments -- (37)
Futures Contracts -- (319)
---- ------
Net Realized Gain (Loss) -- (356)
Change in Unrealized Appreciation/Depreciation on:
Investments 87 2,164
Futures Contracts -- 116
---- ------
Net Change in Unrealized Appreciation/
Depreciation 87 2,280
---- ------
NET GAIN 87 1,924
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $213 $6,216
==== ======
23
See notes to financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
STRONG HIGH-YIELD STRONG MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
--------------------------------- ---------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEB. 28, 1998 AUG. 31, 1997 FEB. 28, 1998 AUG. 31, 1997
---------------- ------------- ---------------- -------------
(UNAUDITED) (UNAUDITED)
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 12,530 $ 17,258 $ 6,243 $ 12,625
Net Realized Gain (Loss) 2,060 5,612 1,020 (2,375)
Change in Unrealized Appreciation/Depreciation 14,896 12,919 7,629 15,504
-------- -------- -------- --------
Increase in Net Assets Resulting from Operations 29,486 35,789 14,892 25,754
DISTRIBUTIONS:
From Net Investment Income (12,530) (17,258) (6,243) (12,625)
From Realized Gains (743) -- -- --
-------- -------- -------- --------
Total Distributions (13,273) (17,258) (6,243) (12,625)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 260,151 262,534 60,434 47,584
Proceeds from Reinvestment of Distributions 9,486 12,353 4,779 9,701
Payment for Shares Redeemed (113,704) (169,577) (38,990) (85,630)
-------- -------- -------- --------
Increase (Decrease) in Net Assets from Capital
Share Transactions 155,933 105,310 26,223 (28,345)
-------- -------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 172,146 123,841 34,872 (15,216)
NET ASSETS:
Beginning of Period 361,482 237,641 232,121 247,337
-------- -------- -------- --------
End of Period $533,628 $361,482 $266,993 $232,121
======== ======== ======== ========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 25,099 26,701 6,168 5,134
Issued in Reinvestment of Distributions 920 1,264 493 1,052
Redeemed (10,997) (17,300) (4,008) (9,293)
------ ------ ----- -----
Net Increase (Decrease) in Shares of the Fund 15,022 10,665 2,653 (3,107)
====== ====== ===== =====
</TABLE>
<TABLE>
STRONG SHORT-TERM
HIGH YIELD STRONG SHORT-TERM
MUNICIPAL FUND MUNICIPAL BOND FUND
------------------- --------------------------------
<CAPTION>
PERIOD ENDED SIX MONTHS ENDED YEAR ENDED
FEB. 28, 1998 FEB. 28, 1998 AUG. 31, 1997
-------------------- ---------------- -------------
(UNAUDITED) (NOTE 1) (UNAUDITED)
OPERATIONS:
<S> <C> <C> <C>
Net Investment Income $ 126 $ 4,292 $ 7,326
Net Realized Gain (Loss) -- (356) (740)
Change in Unrealized Appreciation/Depreciation 87 2,280 2,965
------- -------- --------
Increase in Net Assets Resulting from Operations 213 6,216 9,551
DISTRIBUTIONS FROM NET INVESTMENT INCOME (126) (4,292) (7,326)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 28,188 80,927 96,449
Proceeds from Reinvestment of Distributions 43 3,541 5,990
Payment for Shares Redeemed (4,030) (56,488) (76,061)
------- -------- --------
Increase in Net Assets from Capital Share Transactions 24,201 27,980 26,378
------- -------- --------
TOTAL INCREASE IN NET ASSETS 24,288 29,904 28,603
NET ASSETS:
Beginning of Period -- 164,952 136,349
------- -------- --------
End of Period $24,288 $194,856 $164,952
======= ======== ========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 2,798 8,185 9,881
Issued in Reinvestment of Distributions 4 358 615
Redeemed (400) (5,714) (7,801)
----- ----- -----
Net Increase in Shares of the Fund 2,402 2,829 2,695
===== ===== =====
24
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
1. ORGANIZATION
The accompanying financial statements represent the Strong Municipal Income
Funds, which include the following diversified, open-end management
investment companies registered under the Investment Company Act of 1940:
- Strong High-Yield Municipal Bond Fund, Inc.
- Strong Municipal Bond Fund, Inc.
- Strong Short-Term High Yield Municipal Fund (a series of Strong Municipal
Funds, Inc.)
- Strong Short-Term Municipal Bond Fund, Inc.
The inception date for Strong Short-Term High Yield Municipal Fund is
November 30, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) Security Valuation -- Securities of the Funds for which market
quotations are readily available 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 current
value.
The Funds may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration
to pertinent factors, including recent private sales, market conditions
and the issuer's financial performance. The Funds generally bear the
costs, if any, associated with the disposition of restricted securities.
The Funds held no restricted securities at February 28, 1998.
(B) Federal Income and Excise Taxes and Distributions to Shareholders -- It
is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no federal income or excise tax provision is required.
The character of distributions made during the year from net investment
income or net realized gains may differ from the characterization for
federal income tax purposes due to differences in the recognition of
income and expense items for financial statement and tax purposes.
Where appropriate, reclassifications between net asset accounts are made
for such differences that are permanent in nature.
(C) Realized Gains and Losses on Investment Transactions -- Gains or losses
realized on investment transactions are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
(D) Futures -- Upon entering into a futures contract, the Funds pledge to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. The Funds also receive from or
pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as
"variation margin," and are recorded as unrealized gains or losses.
When the futures contract is closed, a realized gain or loss is recorded
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(E) Options -- The Funds may write put or call options (none were written
during the period). Premiums received by the Funds upon writing put or
call options are recorded as an asset with a corresponding liability
which is subsequently adjusted to the current market value of the
option. When an option expires, is exercised, or is closed, the Funds
realize a gain or loss, and the liability is eliminated. The Funds
continue to bear the risk of adverse movements in the price of the
underlying asset during the period of the option, although any potential
loss during the period would be reduced by the amount of the option
premium received.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
(F) Additional Investment Risks -- The Funds may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with the
Fund's investment objectives and limitations. The Funds intend to use
such derivative instruments primarily to hedge or protect from adverse
movements in securities prices or interest rates. The use of these
instruments may involve risks such as the possibility of illiquid
markets or imperfect correlation between the value of the instruments
and the underlying securities, or that the counterparty will fail to
perform its obligations.
(G) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(H) Other -- Investment security transactions are recorded as of the trade
date. 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
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Funds are affiliated, provides investment advisory
services and shareholder recordkeeping and related services to the Funds.
Investment advisory fees, which are established by terms of the Advisory
Agreements, are based on the following annualized rates of the average daily
net assets: Strong Short-Term Municipal Bond Fund 0.50%, Strong Municipal
Bond Fund, Strong High-Yield Municipal Bond Fund and Strong Short-Term High
Yield Municipal Fund 0.60%. Advisory fees are subject to reimbursement by
the Advisor if a Fund's operating expenses exceed certain levels.
Shareholder recordkeeping and related service fees are based on
contractually established rates for each open and closed shareholder
account. In addition, the Advisor is compensated for certain other
services related to costs incurred for reports to shareholders.
The Funds may invest cash reserves in money market funds sponsored and
managed by the Advisor, subject to certain limitations. The terms of such
transactions are identical to those of non-related entities except that, to
avoid duplicate investment advisory fees, advisory fees of each Fund
invested in such money market funds are reduced by an amount equal to
advisory fees paid to the Advisor under its investment advisory agreement
with the money market funds.
Certain information regarding related party transactions for the six months
ended February 28, 1998, is as follows:
<TABLE>
<CAPTION>
PAYABLE TO OTHER SHAREHOLDER UNAFFILIATED
ADVISOR AT SERVICING EXPENSES DIRECTORS'
FEBRUARY 28, 1998 PAID TO ADVISOR FEES
----------------- ------------------ ------------
<S> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $ 837 $1,824 $2,530
Strong Municipal Bond Fund 8,935 1,862 2,293
Strong Short-Term High Yield Municipal Fund 2,742 -- 775
Strong Short-Term Municipal Bond Fund 76 945 1,905
</TABLE>
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the six months
ended February 28, 1998, were as follows:
PURCHASES SALES
------------ ------------
Strong High-Yield Municipal Bond Fund $354,906,242 $186,130,193
Strong Municipal Bond Fund 97,567,052 75,500,537
Strong Short-Term High Yield Municipal Fund 25,143,052 778,413
Strong Short-Term Municipal Bond Fund 31,777,044 11,648,914
26
<PAGE>
- -------------------------------------------------------------------------------
5. INCOME TAX INFORMATION
The investment cost, gross unrealized appreciation and depreciation on
investments and capital loss carryovers (expiring in varying amounts through
2005) for federal income tax purposes were as follows:
<TABLE>
AT FEBRUARY 28, 1998 AT AUGUST 31, 1997
--------------------------------------------------------- ------------------
<CAPTION>
FEDERAL TAX UNREALIZED UNREALIZED NET NET CAPITAL LOSS
COST APPRECIATION DEPRECIATION APPRECIATION CARRYOVERS
------------ ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $532,447,147 $30,330,553 ($3,437,336) $26,893,217 $12,397,948
Strong Municipal Bond Fund 251,476,245 18,566,771 -- 18,566,771 31,581,529
Strong Short-Term High Yield Muncipal Fund 25,375,783 98,589 (12,051) 86,538 --
Strong Short-Term Municipal Bond Fund 188,728,717 5,867,596 (2,326) 5,865,270 657,110
</TABLE>
6. INVESTMENTS IN AFFILIATES
Affiliated issuers, as defined under the Investment Company Act of 1940,
include those in which the Fund's holdings of an issuer represent 5% or more
of the outstanding voting securities of the issuer and any other Strong
Fund. A summary of transactions in the securities of these issuers during
the period ended February 28, 1998 is as follows:
<TABLE>
<CAPTION>
BALANCE OF DIVIDEND
SHARES GROSS GROSS SALES SHARES OR PAR VALUE INCOME
HELD PURCHASES AND VALUE HELD FEB. 28, SEPT. 1, 1997 -
SEPT. 1, 1997 AND ADDITIONS REDUCTIONS FEB. 28, 1998 1998 FEB. 28, 1998
------------- ------------- ---------- ------------- ----------- ---------------
Strong High-Yield Municipal Bond Fund
- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Strong Municipal Money Market Fund -- $22,000,000 -- $22,000,000 $22,000,000 $22,358
Strong Municipal Bond Fund
- --------------------------
Strong Municipal Money Market Fund -- 10,500,000 ($7,500,000) 3,000,000 3,000,000 5,852
Strong Short-Term High Yield Municipal Fund
- -------------------------------------------
Strong Municipal Money Market Fund -- 1,000,000 -- 1,000,000 1,000,000 992
Strong Short-Term Municipal Bond Fund
- -------------------------------------
Strong Municipal Money Market Fund -- 6,500,000 (3,500,000) 3,000,000 3,000,000 3,684
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
--------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- -------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total Net Asset
Value, Net Gains from From Net From Net Value,
Beginning Investment (Losses) on Investment Investment Realized Total End of
Period Ended of Period Income Investments Operations Income(b) Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) $10.09 $0.30 $0.43 $0.73 ($0.30) ($0.02) ($0.32) $10.50
Aug. 31, 1997 9.45 0.61 0.64 1.25 (0.61) -- (0.61) 10.09
Aug. 31, 1996(d) 9.91 0.44 (0.46) (0.02) (0.44) -- (0.44) 9.45
Dec. 31, 1995 9.29 0.69 0.62 1.31 (0.69) -- (0.69) 9.91
Dec. 31, 1994 10.10 0.71 (0.81) (0.10) (0.71) -- (0.71) 9.29
Dec. 31, 1993(e) 10.00 0.16 0.10 0.26 (0.16) -- (0.16) 10.10
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Period Ended Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) +7.3% $534 0.7%* 0.7%* 5.8%* 42.2%
Aug. 31, 1997 +13.6% 361 0.7% 0.7% 6.2% 92.1%
Aug. 31, 1996(d) -0.1% 238 0.7%* 0.7%* 6.9%* 106.8%
Dec. 31, 1995 +14.6% 267 0.4% 0.8% 7.1% 113.8%
Dec. 31, 1994 -1.0% 108 0.0% 0.8% 7.5% 198.1%
Dec. 31, 1993(e) +2.7% 21 0.0%* 1.1%* 6.8%* 28.0%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) For the six months ended February 28, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
(d) For the period ended August 31, 1996. Total return and portfolio turnover rate are not annualized.
(e) Inception date is October 1, 1993. Total return and portfolio turnover rate are not annualized.
27
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
-------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -----------------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total In Excess Net Asset
Value, Net Gains from From Net of Net From Net Value,
Beginning Investment (Losses) on Investment Investment Investment Realized Total End of
Period Ended of Period Income Investments Operations Income(b) Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) $ 9.52 $0.25 $0.35 $0.60 ($0.25) -- -- ($0.25) $ 9.87
Aug. 31, 1997 8.99 0.50 0.53 1.03 (0.50) -- -- (0.50) 9.52
Aug. 31, 1996(d) 9.52 0.33 (0.53) (0.20) (0.33) -- -- (0.33) 8.99
Dec. 31, 1995 9.23 0.52 0.51 1.03 (0.54) ($0.20) -- (0.74) 9.52
Dec. 31, 1994 10.25 0.56 (1.02) (0.46) (0.56) -- -- (0.56) 9.23
Dec. 31, 1993 10.00 0.58 0.57 1.15 (0.58) -- ($0.32) (0.90) 10.25
Dec. 31, 1992 9.76 0.65 0.50 1.15 (0.65) -- (0.26) (0.91) 10.00
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Period Ended Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) +6.4% $267 0.8%* 0.8%* 5.2%* 30.9%
Aug. 31, 1997 +11.8% 232 0.8% 0.8% 5.4% 85.0%
Aug. 31, 1996(d) -2.1% 247 0.8%* 0.8%* 5.4%* 172.9%
Dec. 31, 1995 +11.4% 247 0.8% 0.8% 5.4% 513.8%
Dec. 31, 1994 -4.6% 280 0.8% 0.8% 5.8% 311.0%
Dec. 31, 1993 +11.8% 399 0.7% 0.8% 5.6% 156.7%
Dec. 31, 1992 +12.2% 290 0.1% 0.9% 6.4% 324.0%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) For the six months ended February 28, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
(d) For the period ended August 31, 1996. Total return and portfolio turnover rate are not annualized.
</TABLE>
<TABLE>
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
- --------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
--------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- --------------------------
<CAPTION>
Net Asset Net Realized Total Net Asset
Value, Net and Unrealized from From Net Value,
Beginning Investment Gains on Investment Investment Total End of
Period Ended of Period Income Investments Operations Income (b) Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) $10.00 $0.11 $0.11 $0.22 ($0.11) ($0.11) $10.11
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Period Ended Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) +2.3% $24 0.6%* 1.1%* 5.0%* 5.2%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) For the period from November 30, 1997 (inception) to February 28, 1998 (Unaudited). Total return and portfolio turnover
rate are not annualized.
</TABLE>
<TABLE>
STRONG SHORT-TERM MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
--------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- -------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total Net Asset
Value, Net Gains from From Net From Net Value,
Beginning Investment (Losses) on Investment Investment Realized Total End of
Period Ended of Period Income Investments Operations Income(b) Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) $ 9.82 $0.23 $0.11 $0.34 ($0.23) -- ($0.23) $ 9.93
Aug. 31, 1997 9.67 0.49 0.15 0.64 (0.49) -- (0.49) 9.82
Aug. 31, 1996(d) 9.77 0.33 (0.10) 0.23 (0.33) -- (0.33) 9.67
Dec. 31, 1995 9.73 0.47 0.04 0.51 (0.47) -- (0.47) 9.77
Dec. 31, 1994 10.36 0.45 (0.62) (0.17) (0.45) ($0.01) (0.46) 9.73
Dec. 31, 1993 10.20 0.44 0.23 0.67 (0.44) (0.07) (0.51) 10.36
Dec. 31, 1992 10.00 0.48 0.22 0.70 (0.48) (0.02) (0.50) 10.20
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Period Ended Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998(c) +3.5% $195 0.6%* 0.6%* 4.8%* 7.2%
Aug. 31, 1997 +6.7% 165 0.7% 0.7% 5.0% 26.2%
Aug. 31, 1996(d) +2.4% 136 0.7%* 0.7%* 5.1%* 38.0%
Dec. 31, 1995 +5.4% 133 0.8% 0.8% 4.8% 226.8%
Dec. 31, 1994 -1.6% 161 0.7% 0.7% 4.5% 273.2%
Dec. 31, 1993 +6.8% 216 0.6% 0.7% 4.2% 141.5%
Dec. 31, 1992 +7.2% 111 0.2% 0.8% 4.9% 139.9%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) For the six months ended February 28, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
(d) For the period ended August 31, 1996. Total return and portfolio turnover rate are not annualized.
</TABLE>
28
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Mary F. Hoppa, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
John A. Flanagan, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201
AUDITOR
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863
-------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE ON COMPUTER]
Strong On-line
www.strong-funds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds Distributors, Inc. 7554D98 98SMUN
