As filed with the Securities and Exchange Commission on or about
December 15, 2000
Securities Act Registration No. 33-7603
Investment Company Act Registration No. 811-4770
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
------
Post-Effective Amendment No. 32 [X]
-------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 33 [X]
-------
(Check appropriate box or boxes)
STRONG MUNICIPAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (414) 359-3400
Elizabeth N. Cohernour
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on December 15, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[X] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
This Post-Effective Amendment to the Registration Statement of Strong
Municipal Funds, Inc., which is currently comprised of three Funds, relates to
the Strong Tax-Free Money Fund, which is being added through this Amendment and
updates the exhibit index of the Strong Municipal Advantage Fund, Strong
Municipal Money Market Fund, and Strong Short-Term High Yield Municipal Fund.
<PAGE>
PROSPECTUS December 15, 2000
The Strong
Tax-Free Money
Fund
[PICTURE OF MAN HOLDING TELEPHONE]
[STRONG LOGO] STRONG
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED OF
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
YOUR INVESTMENT
KEY INFORMATION
What are the fund's goals? ....................................................1
What are the fund's principal investment strategies? ..........................1
What are the main risks of investing in the fund? .............................2
What are the fund's fees and expenses? ........................................3
Who are the fund's investment advisor and portfolio manager? ..................4
OTHER IMPORTANT INFORMATION YOU SHOULD KNOW
A Word About Credit Quality ...................................................5
Taxable Investments ...........................................................6
YOUR ACCOUNT
Share Price ...................................................................7
Buying Shares .................................................................7
Selling Shares ................................................................9
Additional Policies ..........................................................12
Distributions ................................................................13
Taxes ........................................................................14
Services For Investors .......................................................15
Reserved Rights ..............................................................19
For More Information .................................................Back Cover
In this prospectus, "we" or "us" refers to Strong Capital Management, Inc., the
investment advisor, administrator, and transfer agent for the Strong Funds.
<PAGE>
YOUR INVESTMENT
KEY INFORMATION
WHAT ARE THE FUND'S GOALS?
--------------------------------------------------------------------------------
The STRONG TAX-FREE MONEY FUND seeks federally tax-exempt current income, a
stable share price, and daily liquidity.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The TAX-FREE MONEY FUND is managed to provide a stable share price of $1.00. The
fund invests, under normal market conditions, at least 80% of its net assets in
short-term, high-quality municipal obligations whose interest is exempt from
federal income tax, including the federal alternative minimum tax (AMT).
Although under normal market conditions, the fund expects to invest
substantially all of its assets in obligations that are exempt from federal
income tax, including the AMT, the fund may invest up to 20% of its assets in
taxable securities of comparable quality to its investments in municipal
obligations, including U.S. government securities, bank and corporate
obligations, and short-term fixed securities. The fund may also invest any
amount in cash or taxable cash equivalents to the extent the manager cannot
obtain suitable obligations that are exempt from federal income tax, including
the AMT. The fund invests in securities that mature in 397 days or less. The
average maturity of the fund will normally be 90 days or less.
The manager may sell a holding if its fundamental qualities (for example, credit
quality) deteriorate, or to take advantage of more attractive yield
opportunities.
((Side Box))
Under normal market conditions, the fund will invest at least 80% of its net
assets in municipal obligations. MUNICIPAL OBLIGATIONS are debt obligations
issued by or for U.S. states, territories, and possessions and the District of
Columbia and their political subdivisions, agencies, and instrumentalities.
Municipal obligations can be issued to obtain money for public purposes or for
privately operated facilities or projects. Some municipal obligations pay
interest that is exempt from federal income tax. Examples of municipal
obligations are general obligation bonds, revenue bonds, industrial development
bonds, notes, and municipal lease obligations.
The fund anticipates that substantially all of the income that it pays will be
exempt from federal income tax, including the federal alternative minimum tax
(AMT). To the extent the fund holds taxable securities or securities subject to
the federal alternative minimum tax, some income the fund pays may be taxable.
In addition, income from the fund may be subject to state and local taxes.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
NOT INSURED: Your investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government agency. The
fund's goal is to preserve the value of your investment at $1.00 per share.
However, it is possible to lose money by investing in this fund.
INTEREST-RATE RISK: As interest rates rise, the fund's fixed income securities
will decrease in value. The longer the maturity of a security, the greater its
interest-rate risk.
INVESTMENT RISK: Economic, business, or political developments may affect the
ability of municipal issuers to repay principal and to make interest payments.
This could result in fluctuations in the fund's returns.
MANAGEMENT RISK: The fund is subject to management risk because it is actively
managed. There is no guarantee that the investment techniques and risk analyses
used by the managers will produce the desired results.
The fund is appropriate for investors who are comfortable with the risks
described here and who need cash immediately. It can also be used as a permanent
conservative part of your portfolio.
The bar chart and performance table are not presented because the fund is new
and did not begin operations until December 15, 2000.
WHAT ARE THE FUND'S FEES AND EXPENSES?
This section describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
The fund is 100% no-load, so you pay no sales charges (loads) to buy or sell
shares.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
The costs of operating the fund are deducted from fund assets, which means you
pay them indirectly. These costs are deducted before computing the daily share
price or making distributions. As a result, they don't appear on your account
statement, but instead reduce the total return you receive from your fund
investment.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENT OF AVERAGE NET ASSETS)
Management Fees 0.50%
Other Expenses* 0.32%
Total Annual Fund Operating Expenses 0.82%**
* BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
** TOTAL ANNUAL FUND OPERATING EXPENSES OF THE FUND DO NOT REFLECT OUR
ABSORPTION OF EXPENSES. WITH ABSORPTIONS, THE TOTAL EXPENSES ARE EXPECTED
TO BE 0.60%. WE CAN TERMINATE ABSORPTIONS FOR THIS FUND AT ANY TIME.
EXAMPLE: This example is intended to help you compare the cost of investing in
the fund, before fee waivers and expense absorptions, with the cost of investing
in other mutual funds. The example assumes that you invest $10,000 in the fund
and reinvest all dividends and distributions for the time periods indicated, and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
1 YEAR 3 YEARS
------------------ ----------------
$84 $262
WHO ARE THE FUND'S INVESTMENT ADVISOR AND PORTFOLIO MANAGER?
Strong Capital Management, Inc. (Strong) is the investment advisor for the fund.
Strong provides investment management services for mutual funds and other
investment portfolios representing assets, as of October 31, 2000, of over $45
billion. Strong began conducting business in 1974. Since then, its principal
business has been providing investment advice for individuals and institutional
accounts, such as pension and profit-sharing plans, as well as mutual funds,
several of which are available through variable insurance products. Strong's
address is P.O. Box 2936, Milwaukee, WI 53201.
JOHN C. BONNELL manages the fund. He has over ten years of investment experience
and is a Chartered Financial Analyst. He joined Strong as a portfolio manager in
May 1999 and has managed the fund since its inception in December 2000. For ten
years prior to joining Strong, Mr. Bonnell worked at USAA Investment Management
Company, most recently serving as an executive director and portfolio manager.
From 1995 to 1996, he was a senior securities analyst and from 1991 to 1995 he
served as a securities analyst. Mr. Bonnell received his bachelors degree in
Finance from the University of Texas in 1987 and his Masters of Business
Administration from St. Mary's University in 1991.
OTHER IMPORTANT INFORMATION YOU SHOULD KNOW
A WORD ABOUT CREDIT QUALITY
CREDIT QUALITY measures the issuer's expected ability to pay interest and
principal payments on time. Credit quality can be "higher-quality,"
"medium-quality," "lower-quality," or "in default." The fund only invests in
securities with a "higher-quality" rating for short-term debt securities.
HIGHER-QUALITY means bonds that are in either of the two highest rating
categories (A-1 and A-2 or SP-1 and SP-2 by Standard & Poor's Ratings Group
(S&P))* for short-term debt securities.
* OR THOSE RATED IN THIS CATEGORY BY ANY NATIONALLY RECOGNIZED STATISTICAL
RATING ORGANIZATION. S&P IS ONLY ONE EXAMPLE OF A NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATION.
This chart shows S&P's definition and ratings group for credit quality. Other
rating organizations use similar definitions.
<TABLE>
<CAPTION>
Short-term debt securities
<S> <C> <C> <C>
Credit Quality S&P's S&P's Ratings Rating
Definition Group Category
---------------- ------------------------ ----------------------- -----------------------
Higher Strong capacity to pay A-1 or SP-1 First highest
principal and interest
Higher Satisfactory capacity A-2 or SP-2 Second highest
to pay principal and
interest
---------------- ------------------------ ----------------------- -----------------------
</TABLE>
We determine a bond's credit quality rating at the time of investment by
conducting credit research and analysis and by relying on credit ratings
of several nationally recognized statistical rating organizations. These
organizations are called NRSROs. When we determine if a bond is in a
specific category, we may use the highest rating assigned to it by any
NRSRO. If a bond is not rated, we rely on our credit research and analysis
to rate the bond. If a bond's credit quality rating is downgraded after
our investment, we monitor the situation to decide if we need to take any
action such as selling the bond.
Typically, municipal bonds are not rated. This means that investments in
municipal bonds may require more credit analysis by us than investments in
taxable bonds.
TAXABLE INVESTMENTS
The fund may invest up to 20% of its assets in U.S. government and
corporate bonds, and other debt securities that are of the same quality as
the fund's investments in municipal bonds. These bonds may produce taxable
income, including income subject to the federal alternative minimum tax
(AMT), and income subject to state and local taxes.
YOUR ACCOUNT
SHARE PRICE
Your transaction price for buying, selling, or exchanging shares of the
fund is the net asset value per share (NAV) for the fund. NAV is generally
calculated as of the close of trading on the New York Stock Exchange
(usually 3:00 p.m. Central Time) every day the NYSE is open. If the NYSE
closes at any other time, or if an emergency exists, NAV may be calculated
at a different time. Your share price will be the next NAV calculated
after we accept your order. We use amortized cost to value money market
securities held by the fund.
<PAGE>
((Side Box))
When we use AMORTIZED COST to value money market fund securities, we generally
mean that the security is initially valued at the price we paid for it. After
that, the value of the security is gradually increased (amortizing a discount)
or decreased (amortizing a premium) each day without regard to fluctuating
interest rates.
((Side Box))
We determine the share price or NAV of the fund by dividing net assets
attributable to the fund (the value of the investments, cash, and other assets
attributable to the fund minus the liabilities attributable to the fund) by the
number of fund shares outstanding.
BUYING SHARES
INVESTMENT MINIMUMS: When buying shares, you must meet the following investment
minimum requirements.
<TABLE>
<CAPTION>
<S> <C> <C>
Initial Investment Additional Investment
Minimum Minimum
-------------------------------- -------------------------------------------- ------------------------------------
Regular accounts $2,500 $50
-------------------------------- -------------------------------------------- ------------------------------------
</TABLE>
BUYING INSTRUCTIONS You can buy shares in several ways.
MAIL
You can open or add to an account by mail with a check made payable to
Strong. Send it to the address listed on the back of this prospectus, along
with your account application (for a new account) or an Additional
Investment Form (for an existing account).
EXCHANGE OPTION Sign up for the exchange option when you open your account.
To add this option to an existing account, visit the Account Services area
at WWW.ESTRONG.COM or call 800-368-3863 for a Shareholder Account Options
Form.
((Side Box))
QUESTIONS?
Call 800-368-3863
24 hours a day,
7 days a week
EXPRESS PURCHASESM You can make additional investments to your existing
account directly from your bank account. If you didn't establish this
option when you opened your account, visit the Account Services area at
WWW.ESTRONG.COM or call us at 800-368-3863 for a Shareholder Account
Options Form.
STRONG DIRECT(R) You can use Strong Direct(R) to add to your investment
from your bank account or to exchange shares between Strong Funds by
calling 800-368-7550. See "Services for Investors" for more information.
STRONG ONLINE ACCOUNT ACCESS You can use Strong online account access at
WWW.ESTRONG.COM to add to your investment from your bank account or to
exchange shares between Strong Funds. See "Services for Investors" for more
information.
<PAGE>
INVESTOR CENTERS You can visit our Investor Center in Menomonee Falls,
Wisconsin, near Milwaukee. Visit the Account Services area at
WWW.ESTRONG.COM or call 800-368-3863 for hours and directions, or for the
location of our other Investor Centers.
WIRE
Call 800-368-3863 for instructions before wiring funds either to open or
add to an account. This helps to ensure that your account will be credited
promptly and correctly.
AUTOMATIC INVESTMENT SERVICES See "Services for Investors" for detailed
information on all of our automatic investment services. You can sign up
for these services when you open your account or you can add them later by
visiting the Account Services area at WWW.ESTRONG.COM or by calling
800-368-3863 for the appropriate form.
BROKER-DEALER You may purchase shares through a broker-dealer or other
intermediary who may charge you a fee. Broker-dealers, including the fund's
distributor, and other intermediaries may also from time to time sponsor or
participate in promotional programs pursuant to which investors receive
incentives for establishing with the broker-dealer or intermediary an
account and/or for purchasing shares of the Strong Funds through the
account(s). Investors should contact the broker-dealer or intermediary and
consult the Statement of Additional Information for more information about
promotional programs.
PLEASE REMEMBER . . .
o We only accept checks payable to Strong.
o We do not accept cash, third-party checks, credit card convenience
checks, or checks drawn on banks outside the U.S.
o You will be charged $20 for every check, wire, or Electronic Funds
Transfer returned unpaid.
SELLING SHARES
You can access the money in your account by selling (also called redeeming)
some or all of your shares by one of the methods below. After your
redemption request is accepted, we normally send you the proceeds on the
next business day.
SELLING INSTRUCTIONS
You can sell shares in several ways.
MAIL
Write a letter of instruction. It should specify your account number, the
dollar amount or number of shares you wish to redeem, the names and
signatures of the owners (or other authorized persons), and your mailing
address. Then, mail it to the address listed on the back of this
prospectus.
REDEMPTION OPTION Sign up for the redemption option when you open your
account or add it later by visiting the Account Services area at
WWW.ESTRONG.COM or by calling 800-368-3863 to request a Shareholder Account
Options Form. With this option, you may sell shares by phone or via the
Internet and receive the proceeds in one of three ways:
(1) We can mail a check to your account's address. Checks will not be
forwarded by the Postal Service, so please notify us if your address
has changed.
(2) We can transmit the proceeds by Electronic Funds Transfer to a
properly pre-authorized bank account. The proceeds usually will arrive
at your bank two banking days after we process your redemption.
(3) For a $10 fee, we can transmit the proceeds by wire to a properly
pre-authorized bank account. The proceeds usually will arrive at your
bank the first banking day after we process your redemption.
STRONG DIRECT(R) You can redeem shares through Strong Direct(R) at
800-368-7550. See "Services for Investors" for more information.
STRONG ONLINE ACCOUNT ACCESS You can use Strong online account access at
WWW.ESTRONG.COM to redeem shares. See "Services for Investors" for more
information.
INVESTOR CENTERS You can visit our Investor Center in Menomonee Falls,
Wisconsin, near Milwaukee. Visit the Account Services area at
WWW.ESTRONG.COM or call 800-368-3863 for hours and directions, or for the
location of our other Investor Centers.
SYSTEMATIC WITHDRAWAL PLAN You can set up automatic withdrawals from your
account at regular intervals. You can sign up for this service when you
open your account, or you can add it later by visiting the Account Services
area at WWW.ESTRONG.COM or by calling 800-368-3863 for the appropriate
form. See "Services for Investors" for information on this service and
other automatic investment and withdrawal services.
BROKER-DEALER You may sell shares through a broker-dealer or other
intermediary who may charge you a fee.
Check Writing
Sign up for free check writing when you open your account or call
800-368-3863 to add it later to an existing account. Check redemptions must
be for a minimum of $500. You cannot write a check to close out an account.
Please Remember...
o If you recently purchased shares, the payment of your redemption
proceeds may be delayed by up to 10 days to allow the purchase check
or electronic transaction to clear.
o You will be charged a $10 service fee for a stop-payment on a check
written on your Strong Funds account.
o Some transactions and requests require a signature guarantee.
o If you are selling shares you hold in certificate form, you must
submit the certificates with your redemption request. Each registered
owner must sign the certificates and all signatures must be
guaranteed.
((Side Box))
SIGNATURE GUARANTEES help ensure that major transactions or changes to your
account are in fact authorized by you. For example, we require a signature
guarantee on written redemption requests for more than $100,000. You can
obtain a signature guarantee for a nominal fee from most banks, brokerage
firms, and other financial institutions. A notary public stamp or seal
cannot be substituted for a signature guarantee.
ADDITIONAL POLICIES
DEPOSIT OF UNSPECIFIED CHECKS
When your investment check does not clearly indicate the fund that you would
like to purchase, we will deposit the check into the Strong Money Market Fund
until you clarify your investment decision.
INVESTING THROUGH A THIRD PARTY
If you invest through a third party (rather than directly with Strong), the
policies and fees may be different than described in this prospectus. Banks,
brokers, 401(k) plans, financial advisors, and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution for details.
LOW BALANCE ACCOUNT FEE
Because of the high cost of maintaining small accounts, an annual low balance
account fee of $10 (or the value of the account if the account value is less
than $10) will be charged to all accounts that fail to meet the initial
investment minimum. The fee, which is payable to the transfer agent, will not
apply to (1) any retirement accounts, (2) accounts with an automatic investment
plan (unless regular investments have been discontinued), or (3) shareholders
whose combined Strong Funds assets total $100,000 or more. We may waive the fee,
in our discretion, in the event that a significant market correction lowers an
account balance below the account's initial investment minimum.
PURCHASES IN KIND
You may, if we approve, purchase shares of the fund with securities that are
eligible for purchase by the fund (consistent with the fund's investment
restrictions, policies, and goal) and that have a value that is readily
ascertainable in accordance with the fund's valuation policies.
TELEPHONE AND ELECTRONIC TRANSACTIONS
We use reasonable procedures to confirm that telephone and electronic
transaction requests are genuine. We may be responsible if we do not follow
these procedures. You are responsible for losses resulting from fraudulent or
unauthorized instructions received over the telephone or electronically,
provided we reasonably believe the instructions were genuine. To safeguard your
account, please keep your Strong Direct(R) and Strong online account access
passwords confidential. Contact us immediately if you believe there is a
discrepancy between a transaction you performed and the confirmation statement
you received, or if you believe someone has obtained unauthorized access to your
account or password.
During times of unusual market activity, our phones may be busy and you may
experience a delay placing a telephone request. During these times, consider
trying Strong Direct(R), our 24-hour automated telephone system, by calling
800-368-7550, or use Strong online account access, our online transaction
center, by visiting WWW.ESTRONG.COM. Please remember that you must have
telephone redemption as an option on your account to redeem shares through
Strong Direct(R) or Strong online account access.
VERIFICATION OF ACCOUNT STATEMENTS
You should contact Strong in writing regarding any errors or discrepancies
within 60 days after the date of the statement confirming a transaction. The
statement will be deemed correct if we do not hear from you within those 60
days.
DISTRIBUTIONS
--------------------------------------------------------------------------------
DISTRIBUTION POLICY
The fund generally pays you dividends from net investment income monthly and
distributes any net capital gains that it realizes annually. Dividends are
declared on each day NAV is calculated, except for bank holidays. Dividends
earned on weekends, holidays, and days when the fund's NAV is not calculated are
declared on the first day preceding these days that the fund's NAV is
calculated. Your investment generally earns dividends from the first business
day after we accept your purchase order.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Your dividends and capital gains distributions will be automatically reinvested
in additional shares, unless you choose otherwise. Your other options are to
receive checks for these payments, have them automatically invested in another
Strong Fund, or have them deposited into your bank account. To change the
current option for payment of dividends and capital gains distributions, please
call 800-368-3863.
TAXES
--------------------------------------------------------------------------------
TAXABLE DISTRIBUTIONS
Any net investment income and net short-term capital gains distributions you
receive are generally taxable as ordinary dividend income at your income tax
rate. Distributions of net capital gains are generally taxable as long-term
capital gains. This is generally true no matter how long you have owned your
shares and whether you reinvest your distributions or take them in cash. You may
also have to pay taxes when you exchange or sell shares if your shares have
increased in value since you bought them.
TAX-EXEMPT DISTRIBUTIONS
Exempt-interest dividends from municipal funds are generally exempt from federal
income taxes, but may be subject to state and local tax. Also, if you are
subject to the Alternative Minimum Tax, you may have to pay federal tax on a
portion of your income from exempt-interest dividends. Under normal market
conditions, the fund invests at least 80% of its net assets in municipal
obligations whose interest is exempt from federal income taxes, including the
federal alternative minimum tax (AMT).
RETURN OF CAPITAL If your fund's distributions exceed its earnings and
profits, all or a portion of those distributions may be treated as a return
of capital to you. A return of capital may be treated as a sale of your
shares. It may also reduce the cost basis of your shares.
YEAR-END STATEMENT
To assist you in tax preparation, after the end of each calendar year, we send
you a statement of your fund's ordinary dividends and net capital gains
distributions (Form 1099).
BACKUP WITHHOLDING By law, we must withhold 31% of your distributions and
proceeds if (1) you are subject to backup withholding or (2) you have not
provided us with complete and correct taxpayer information such as your
Social Security number or tax identification number.
((Side Box))
-------------------------------------------------------
YOU MAY WANT TO AVOID:
o Investing a large amount in a fund close to the end of the calendar year.
If the fund makes a capital gains distribution, you may receive some of
your investment back as a taxable distribution.
o Selling shares of a mutual fund at a loss if you have purchased additional
shares of the same fund within 30 days prior to the sale or if you plan to
purchase additional shares of the same fund within 30 days following the
sale. This is called a wash sale and you will not be allowed to claim a tax
loss on this transaction.
-------------------------------------------------------
Because everyone's tax situation is unique, you should consult your tax
professional for assistance.
SERVICES FOR INVESTORS
We provide you with a variety of services to help you manage your investment.
For more details, call 800-368-3863, 24 hours a day, 7 days a week. These
services include:
STRONG DIRECT(R) AUTOMATED TELEPHONE SYSTEM Our 24-hour automated response
system enables you to use a touch-tone phone to access current share prices
(800-368-3550), to access fund and account information (800-368-5550), and to
make purchases, exchanges, or redemptions among your existing accounts if you
have elected these services (800-368-7550). Passwords help to protect your
account information.
ESTRONG.COM
Visit us online at WWW.ESTRONG.COM to access your fund's performance and
portfolio holding information. In addition to general information about
investing, our web site offers daily performance information, portfolio manager
commentaries, and information on available account options.
STRONG ONLINE ACCOUNT ACCESS
If you are a shareholder, you may use Strong online account access to access
your account information 24 hours a day from your personal computer at
WWW.ESTRONG.COM. Strong online account access allows you to view account
history, account balances, and recent dividend activity, as well as to make
purchases, exchanges, or redemptions among your existing accounts if you have
elected these services. Additional planning tools and market information is also
available. Encryption technology and passwords help to protect your account
information. You may register to use Strong online account access at
WWW.ESTRONG.COM.
STRONGMAIL
If you register for StrongMail at WWW.STRONGMAIL.COM, you will receive your
fund's closing price by e-mail each business day. In addition, StrongMail offers
market news and updates throughout the day.
STRONG EXCHANGE OPTION
You may exchange shares of a fund for shares of another Strong Fund, either in
writing, by telephone, or through your personal computer, if the accounts are
identically registered (with the same name, address, and taxpayer identification
number). Please ask us for the appropriate prospectus and read it before
investing in any of the Strong Funds. Remember, an exchange of shares of one
Strong Fund for those of another Strong Fund is considered a sale and a purchase
of shares for several purposes, including tax purposes, and may result in a
capital gain or loss. Some Strong Funds into which you may want to exchange into
may charge a redemption fee of 0.50% to 1.00% on the sale of shares held for
less than six to twelve months. Purchases by exchange are subject to the
investment requirements and other criteria of the fund purchased.
STRONG CHECK WRITING
Strong Funds offers check writing on most of its bond and money market funds.
Checks written on your account are subject to this prospectus and the terms and
conditions found in the front of the book of checks.
STRONG AUTOMATIC INVESTMENT SERVICES You may invest or redeem automatically in
the following ways, some of which may be subject to additional restrictions or
conditions.
AUTOMATIC INVESTMENT PLAN (AIP) This plan allows you to make regular,
automatic investments from your bank checking or savings account.
AUTOMATIC EXCHANGE PLAN
This plan allows you to make regular, automatic exchanges from one eligible
Strong Fund to another.
AUTOMATIC DIVIDEND REINVESTMENT Your dividends and capital gains will be
automatically reinvested in additional shares, unless you choose otherwise.
Your other options are to receive checks for these payments, have them
automatically invested in another Strong Fund, or have them deposited into
your bank account.
PAYROLL DIRECT DEPOSIT PLAN
This plan allows you to send all or a portion of your paycheck, Social
Security check, military allotment, or annuity payment to the Strong Funds
of your choice.
SYSTEMATIC WITHDRAWAL PLAN
This plan allows you to redeem a fixed sum from your account on a regular
basis. Payments may be sent electronically to a bank account or as a check
to you or anyone you properly designate.
SAME-DAY DIVIDEND AND WIRE
You will earn a same-day dividend if you purchase shares and have, or with your
purchase will have, at least $5 million invested in the fund and you have
completed a special application. The following rules also apply:
o Call 800-368-1683 before 9:00 a.m. Central Time and place an irrevocable
purchase order.
o You must send the purchase price via federal
funds wire which must be received by Firstar
Bank Milwaukee, N.A by 2:30 p.m. Central Time.
If you do not wire federal funds by this
deadline, we may cancel the purchase order. If
we do not cancel the order and the fund borrows
an amount of money equal to your purchase price,
you may be liable for any interest expense
caused by the borrowing.
<PAGE>
o Wires should be sent to:
.........Firstar Bank Milwaukee, N.A.
.........777 East Wisconsin Avenue
.........Milwaukee, WI 53202
.........ABA routing number: 075000022
.........Account number: 112737-090
.........For further credit to: (insert your
account number and registration)
You may also receive a same-day redemption wire by calling 800-368-1683. You
must place your redemption order by 9:00 a.m. Central Time. Redemption proceeds
will not earn dividends on the day in which they are wired. If you use a
same-day redemption wire to close an account, dividends credited to your account
for the month up to the day of redemption will be paid the next business day.
SOME OF THESE SERVICES MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS OR CONDITIONS.
CALL 800-368-3863 FOR MORE INFORMATION.
<PAGE>
Reserved Rights
--------------------------------------------------------------------------------
We reserve the right to:
o Refuse, change, discontinue, or temporarily suspend account services,
including purchase, exchange, or telephone and Strong online account access
redemption privileges, for any reason.
o Reject any purchase request for any reason including exchanges from other
Strong Funds. Generally, we do this if the purchase or exchange is
disruptive to the efficient management of a fund (due to the timing of the
investment or an investor's history of excessive trading).
o Change the minimum or maximum investment amounts.
o Delay sending out redemption proceeds for up to seven days (this generally
only applies to very large redemptions without notice, excessive trading,
or during unusual market conditions).
o Suspend redemptions or postpone payments when the NYSE is closed for any
reason other than its usual weekend or holiday closings, when trading is
restricted by the SEC, or under any emergency circumstances.
o Make a redemption in kind (a payment in portfolio securities rather than
cash) if the amount you are redeeming is in excess of the lesser of (1)
$250,000 or (2) 1% of the fund's assets. Generally, redemption in kind is
used when large redemption requests may cause harm to the fund and its
shareholders. This includes redemptions made by check writing.
o Close any account that does not meet minimum investment requirements. We
will give you notice and 60 days to increase your balance to the required
minimum.
o Waive the initial investment minimum at our discretion.
o Reject any purchase or redemption request that does not contain all
required documentation.
o Amend or terminate purchases in kind at any time.
<PAGE>
FOR MORE INFORMATION
More information is available upon request at no charge, including:
SHAREHOLDER REPORTS: Additional information will be available in the annual and
semi-annual report to shareholders. When available, these reports will contain a
letter from management, discuss recent market conditions, economic trends, and
investment strategies that significantly affected your investment's performance
during the last fiscal year, and list portfolio holdings.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI contains more details about
investment policies and techniques. A current SAI is on file with the SEC and is
incorporated into this prospectus by reference. This means that the SAI is
legally considered a part of this prospectus even though it is not physically
contained within this prospectus.
To request information or to ask questions:
BY TELEPHONE FOR HEARING-IMPAIRED (TDD)
414-359-1400 or 800-368-3863 800-999-2780
BY MAIL BY OVERNIGHT DELIVERY
Strong Funds Strong Funds
P.O. Box 2936 900 Heritage Reserve
Milwaukee, WI 53201-2936 Menomonee Falls, WI 53051
ON THE INTERNET BY E-MAIL
View online or download documents: [email protected]
Strong Funds: WWW.ESTRONG.COM
SEC*: www.sec.gov
To reduce the volume of mail you receive, only one copy of financial reports,
prospectuses, and other regulatory materials is mailed to your household. You
can call us at 800-368-3863, or write to us at the address listed above, to
request (1) additional copies free of charge, or (2) that we discontinue our
practice of householding regulatory materials.
This prospectus is not an offer to sell securities in places other than the
United States and its territories.
*INFORMATION ABOUT A FUND (INCLUDING THE SAI) CAN ALSO BE REVIEWED AND COPIED AT
THE SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON,
D.C. YOU MAY CALL THE COMMISSION AT 202-942-8090 FOR INFORMATION ABOUT THE
OPERATION OF THE PUBLIC REFERENCE ROOM. REPORTS AND OTHER INFORMATION ABOUT A
FUND ARE ALSO AVAILABLE FROM THE EDGAR DATABASE ON THE COMMISSION'S INTERNET
SITE AT WWW.SEC.GOV. YOU MAY OBTAIN A COPY OF THIS INFORMATION, AFTER PAYING A
DUPLICATING FEE, BY SENDING A WRITTEN REQUEST TO THE COMMISSION'S PUBLIC
REFERENCE SECTION, WASHINGTON, D.C. 20549-0102, OR BY SENDING AN ELECTRONIC
REQUEST TO THE FOLLOWING E-MAIL ADDRESS: [email protected].
Strong Tax-Free Money Fund, a series of Strong
Municipal Funds, Inc., SEC file number: 811-4770
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
STRONG TAX-FREE MONEY FUND, A SERIES FUND OF STRONG MUNICIPAL FUNDS, INC.
P.O. Box 2936
Milwaukee, WI 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863
e-mail: [email protected]
web site: www.eStrong.com
This SAI is not a Prospectus and should be read together with the Prospectus for
the Fund dated December 15, 2000. Requests for copies of the Prospectus should
be made by calling any number listed above.
December 15, 2000
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS PAGE
INVESTMENT RESTRICTIONS...........................................................................................3
INVESTMENT POLICIES AND TECHNIQUES................................................................................5
Strong Tax-Free Money Fund.....................................................................................5
Borrowing......................................................................................................5
Debt Obligations...............................................................................................5
Illiquid Securities............................................................................................6
Lending of Portfolio Securities................................................................................6
Municipal Obligations..........................................................................................7
Participation Interests........................................................................................7
Repurchase Agreements..........................................................................................8
Rule 2a-7: Maturity, Quality, and Diversification Restrictions................................................8
Sector Concentration...........................................................................................8
Standby Commitments............................................................................................8
Taxable Securities.............................................................................................9
U.S. Government Securities.....................................................................................9
Variable- or Floating-Rate Securities..........................................................................9
DIRECTORS AND OFFICERS...........................................................................................10
INVESTMENT ADVISOR...............................................................................................12
DISTRIBUTOR......................................................................................................15
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................15
CUSTODIAN........................................................................................................18
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.....................................................................19
TAXES............................................................................................................19
DETERMINATION OF NET ASSET VALUE.................................................................................21
ADDITIONAL SHAREHOLDER INFORMATION...............................................................................21
ORGANIZATION.....................................................................................................24
SHAREHOLDER MEETINGS.............................................................................................24
PERFORMANCE INFORMATION..........................................................................................25
GENERAL INFORMATION..............................................................................................31
INDEPENDENT ACCOUNTANTS..........................................................................................32
LEGAL COUNSEL....................................................................................................32
APPENDIX - DEFINITION OF BOND RATINGS............................................................................33
</TABLE>
No person has been authorized to give any information or to make any
representations other than those contained in this SAI and its corresponding
Prospectus and, if given or made, such information or representations may not be
relied upon as having been authorized. This SAI does not constitute an offer to
sell securities.
<PAGE>
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT LIMITATIONS
The following are the Fund's fundamental investment limitations which, along
with the Fund's investment objective (which is described in the Prospectus),
cannot be changed without shareholder approval. To obtain approval, a majority
of the Fund's outstanding voting shares must vote for the change. A majority of
the Fund's outstanding voting securities means the vote of the lesser of: (1)
67% or more of the voting securities present, if more than 50% of the
outstanding voting securities are present or represented, or (2) more than 50%
of the outstanding voting shares.
Unless indicated otherwise below, the Fund:
1. May not with respect to 75% of its total assets, purchase the
securities of any issuer (except securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities) if, as a result,
(1) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (2) the Fund would hold more than 10% of
the outstanding voting securities of that issuer.
2. May (1) borrow money from banks and (2) make other investments or engage in
other transactions permissible under the Investment Company Act of 1940
("1940 Act") which may involve a borrowing, provided that the combination
of (1) and (2) shall not exceed 33 1/3% of the value of the Fund's total
assets (including the amount borrowed), less the Fund's liabilities (other
than borrowings), except that the Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) from a bank for
temporary or emergency purposes (but not for leverage or the purchase of
investments). The Fund may also borrow money from the other Strong Funds or
other persons to the extent permitted by applicable law.
3. May not issue senior securities, except as permitted under the 1940 Act.
4. May not act as an underwriter of another issuer's securities, except to
the extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection with the purchase
and sale of portfolio securities.
5. May not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall
not prevent the Fund from purchasing or selling options, futures
contracts, or other derivative instruments, or from investing in
securities or other instruments backed by physical commodities).
6. May not make loans if, as a result, more than 33 1/3% of the Fund's
total assets would be lent to other persons, except through (1)
purchases of debt securities or other debt instruments, or (2) engaging
in repurchase agreements.
7. May not purchase the securities of any issuer if, as a result, more
than 25% of the Fund's total assets would be invested in the securities
of issuers, the principal business activities of which are in the same
industry.
8. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prohibit the Fund from purchasing or selling securities or other
instruments backed by real estate or of issuers engaged in real estate
activities).
9. May, notwithstanding any other fundamental investment policy or
restriction, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and restrictions as the
Fund.
10. May not, under normal market conditions, invest less than 80% of its net
assets in municipal securities.
<PAGE>
NON-FUNDAMENTAL OPERATING POLICIES
The following are the Fund's non-fundamental operating policies, which may be
changed by the Fund's Board of Directors without shareholder approval.
Unless indicated otherwise below, the Fund may not:
1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, or
unless it covers such short sale as required by the current rules and
positions of the Securities and Exchange Commission ("SEC") or its staff,
and provided that transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not deemed to
constitute selling securities short.
2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts, options
on futures contracts, or other derivative instruments shall not constitute
purchasing securities on margin.
3. Invest in illiquid securities if, as a result of such investment, more than
15% (10% with respect to a money fund) of its net assets would be invested
in illiquid securities, or such other amounts as may be permitted under the
1940 Act.
4. Purchase securities of other investment companies except in compliance with
the 1940 Act and applicable state law.
5. Invest all of its assets in the securities of a single open-end investment
management company with substantially the same fundamental investment
objective, restrictions and policies as the Fund.
6. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act and, in
accordance with Rule 4.5, will use futures or options on futures
transactions solely for bona fide hedging transactions (within the meaning
of the Commodity Exchange Act), provided, however, that the Fund may, in
addition to bona fide hedging transactions, use futures and options on
futures transactions if the aggregate initial margin and premiums required
to establish such positions, less the amount by which any such options
positions are in the money (within the meaning of the Commodity Exchange
Act), do not exceed 5% of the Fund's net assets.
7. Borrow money except (1) from banks or (2) through reverse repurchase
agreements or mortgage dollar rolls, and will not purchase securities when
bank borrowings exceed 5% of its total assets.
8. Make any loans other than loans of portfolio securities, except through (1)
purchases of debt securities or other debt instruments, or (2) engaging in
repurchase agreements.
9. Engage in any transaction or practice which is not permissible under Rule
2a-7 of the 1940 Act, notwithstanding any other fundamental investment
limitation or non-fundamental operating policy.
Unless noted otherwise, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in the Fund's assets (i.e. due to cash inflows or redemptions) or in market
value of the investment or the Fund's assets will not constitute a violation of
that restriction.
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Fund's investment
objective, policies, and techniques described in the Prospectus.
STRONG TAX-FREE MONEY FUND
o Under normal market conditions at least 80% of the Fund's net assets will
be invested in municipal securities whose interest is exempt from federal
income tax, including the federal alternative minimum tax (AMT).
o The Fund may invest up to 20% of its net assets in taxable securities of
comparable quality to its investments in municipal securities, including
U.S. government securities, bank and corporate obligations, and short-term
fixed-income securities.
o The Fund may invest any amount in cash or cash equivalents, which may be
taxable, to the extent the manager cannot obtain other suitable tax-exempt
securities.
BORROWING
The Fund may borrow money from banks and make other investments or engage in
other transactions permissible under the 1940 Act that may be considered a
borrowing (such as mortgage dollar rolls and reverse repurchase agreements).
However, the Fund may not purchase securities when bank borrowings exceed 5% of
the Fund's total assets. Presently, the Fund only intends to borrow from banks
for temporary or emergency purposes.
The Fund has established a line-of-credit ("LOC") with certain banks by which it
may borrow funds for temporary or emergency purposes. A borrowing is presumed to
be for temporary or emergency purposes if it is repaid by the Fund within 60
days and is not extended or renewed. The Fund intends to use the LOC to meet
large or unexpected redemptions that would otherwise force the Fund to liquidate
securities under circumstances that are unfavorable to the Fund's remaining
shareholders. The Fund pays a commitment fee to the banks for the LOC.
DEBT OBLIGATIONS
The Fund may invest a portion of its assets in debt obligations. Issuers of debt
obligations have a contractual obligation to pay interest at a specified rate on
specified dates and to repay principal on a specified maturity date. Certain
debt obligations (usually intermediate- and long-term bonds) have provisions
that allow the issuer to redeem or "call" a bond before its maturity. Issuers
are most likely to call such securities during periods of falling interest rates
and the Fund may have to replace such securities with lower yielding securities,
which could result in a lower return for the Fund.
PRICE VOLATILITY. The market value of debt obligations is affected primarily by
changes in prevailing interest rates. The market value of a debt obligation
generally reacts inversely to interest-rate changes, meaning, when prevailing
interest rates decline, an obligation's price usually rises, and when prevailing
interest rates rise, an obligation's price usually declines.
MATURITY. In general, the longer the maturity of a debt obligation, the higher
its yield and the greater its sensitivity to changes in interest rates.
Conversely, the shorter the maturity, the lower the yield but the greater the
price stability. Commercial paper is generally considered the shortest maturity
form of debt obligation.
CREDIT QUALITY. The values of debt obligations may also be affected by changes
in the credit rating or financial condition of their issuers. Generally, the
lower the quality rating of a security, the higher the degree of risk as to the
payment of interest and return of principal. To compensate investors for taking
on such increased risk, those issuers deemed to be less creditworthy generally
must offer their investors higher interest rates than do issuers with better
credit ratings.
In conducting its credit research and analysis, the Advisor considers both
qualitative and quantitative factors to evaluate the creditworthiness of
individual issuers. The Advisor also relies, in part, on credit ratings compiled
by a number of Nationally Recognized Statistical Rating Organizations
("NRSROs").
ILLIQUID SECURITIES
The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). However, the Fund will not acquire illiquid securities if,
as a result, the illiquid securities would comprise more than 10% of the value
of the Fund's net assets (or such other amounts as may be permitted under the
1940 Act).
The Board of Directors of the Fund, or its delegate, has the ultimate authority
to determine, to the extent permissible under the federal securities laws, which
securities are illiquid for purposes of this limitation. Certain securities
exempt from registration or issued in transactions exempt from registration
under the Securities Act of 1933, as amended ("Securities Act"), such as
securities that may be resold to institutional investors under Rule 144A under
the Securities Act and Section 4(2) commercial paper, may be considered liquid
under guidelines adopted by the Fund's Board of Directors. The Board of
Directors of the Fund has delegated to the Advisor the day-to-day determination
of the liquidity of a security, although it has retained oversight and ultimate
responsibility for such determinations. The Board of Directors has directed the
Advisor to look to such factors as (1) the frequency of trades or quotes for a
security, (2) the number of dealers willing to purchase or sell the security and
number of potential buyers, (3) the willingness of dealers to undertake to make
a market in the security, (4) the nature of the security and nature of the
marketplace trades, such as the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer, (5) the likelihood
that the security's marketability will be maintained throughout the anticipated
holding period, and (6) any other relevant factors. The Advisor may determine
4(2) commercial paper to be liquid if (1) the 4(2) commercial paper is not
traded flat or in default as to principal and interest, (2) the 4(2) commercial
paper is rated in one of the two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security, by that NRSRO, or is determined
by the Advisor to be of equivalent quality, and (3) the Advisor considers the
trading market for the specific security taking into account all relevant
factors. With respect to any foreign holdings, a foreign security may be
considered liquid by the Advisor (despite its restricted nature under the
Securities Act) if the security can be freely traded in a foreign securities
market and all the facts and circumstances support a finding of liquidity.
Restricted securities may be sold only in privately negotiated transactions or
in a public offering with respect to which a registration statement is in effect
under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than prevailed when it decided to sell.
Restricted securities will be priced in accordance with pricing procedures
adopted by the Board of Directors of the Fund. If through the appreciation of
restricted securities or the depreciation of unrestricted securities the Fund
should be in a position where more than 15% of the value of its net assets are
invested in illiquid securities, including restricted securities that are not
readily marketable (except for 144A Securities and 4(2) commercial paper deemed
to be liquid by the Advisor), the Fund will take such steps as is deemed
advisable, if any, to protect the liquidity of the Fund's portfolio.
LENDING OF PORTFOLIO SECURITIES
The Fund is authorized to lend up to 33 1/3% of the total value of its portfolio
securities to broker-dealers or institutional investors that the Advisor deems
qualified, but only when the borrower maintains with the Fund's custodian bank
collateral either in cash or money market instruments in an amount at least
equal to the market value of the securities loaned, plus accrued interest and
dividends, determined on a daily basis and adjusted accordingly. Although the
Fund is authorized to lend, the Fund does not presently intend to engage in
lending. In determining whether to lend securities to a particular broker-dealer
or institutional investor, the Advisor will consider, and during the period of
the loan will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. The Fund will retain authority to terminate
any loans at any time. The Fund may pay reasonable administrative and custodial
fees in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or money market instruments held as collateral to the
borrower or placing broker. The Fund will receive reasonable interest on the
loan or a flat fee from the borrower and amounts equivalent to any dividends,
interest or other distributions on the securities loaned. The Fund will retain
record ownership of loaned securities to exercise beneficial rights, such as
voting and subscription rights and rights to dividends, interest, or other
distributions, when retaining such rights is considered to be in the Fund's
interest.
<PAGE>
MUNICIPAL OBLIGATIONS
IN GENERAL. Municipal obligations are debt obligations issued by or on behalf of
states, territories, and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, and instrumentalities.
Municipal obligations generally include debt obligations issued to obtain funds
for various public purposes. Certain types of municipal obligations are issued
in whole or in part to obtain funding for privately operated facilities or
projects. Municipal obligations include general obligation bonds, revenue bonds,
industrial development bonds, notes, and municipal lease obligations. Municipal
obligations also include obligations, the interest on which is exempt from
federal income tax, that may become available in the future as long as the Board
of Directors of the Fund determines that an investment in any such type of
obligation is consistent with the Fund's investment objective.
BONDS AND NOTES. General obligation bonds are secured by the issuer's pledge of
its full faith, credit, and taxing power for the payment of interest and
principal. Revenue bonds are payable only from the revenues derived from a
project or facility or from the proceeds of a specified revenue source.
Industrial development bonds are generally revenue bonds secured by payments
from and the credit of private users. Municipal notes are issued to meet the
short-term funding requirements of state, regional, and local governments.
Municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, tax and revenue anticipation notes, construction loan notes,
short-term discount notes, tax-exempt commercial paper, demand notes, and
similar instruments.
LEASE OBLIGATIONS. Municipal lease obligations may take the form of a lease, an
installment purchase, or a conditional sales contract. They are issued by state
and local governments and authorities to acquire land, equipment, and
facilities, such as state and municipal vehicles, telecommunications and
computer equipment, and other capital assets. The Fund may purchase these
obligations directly, or it may purchase participation interests in such
obligations. (See "Participation Interests" below.) Municipal leases are
generally subject to greater risks than general obligation or revenue bonds.
State constitutions and statutes set forth requirements that states or
municipalities must meet in order to issue municipal obligations. Municipal
leases may contain a covenant by the state or municipality to budget for,
appropriate, and make payments due under the obligation. Certain municipal
leases may, however, contain "non-appropriation" clauses, which provide that the
issuer is not obligated to make payments on the obligation in future years
unless funds have been appropriated for this purpose each year. Accordingly,
such obligations are subject to "non-appropriation" risk. While municipal leases
are secured by the underlying capital asset, it may be difficult to dispose of
any such asset in the event of non-appropriation or other default.
MORTGAGE-BACKED BONDS. The Fund's investments in municipal obligations may
include mortgage-backed municipal obligations, which are a type of municipal
security issued by a state, authority, or municipality to provide financing for
residential housing mortgages to target groups, generally low-income individuals
who are first-time home buyers. The Fund's interest, evidenced by such
obligations, is an undivided interest in a pool of mortgages. Payments made on
the underlying mortgages and passed through to the Fund will represent both
regularly scheduled principal and interest payments. The Fund may also receive
additional principal payments representing prepayments of the underlying
mortgages. While a certain level of prepayments can be expected, regardless of
the interest rate environment, it is anticipated that prepayment of the
underlying mortgages will accelerate in periods of declining interest rates. In
the event that the Fund receives principal prepayments in a declining
interest-rate environment, its reinvestment of such funds may be in bonds with a
lower yield.
PARTICIPATION INTERESTS
A participation interest gives the Fund an undivided interest in a municipal
obligation in the proportion that the Fund's participation interest bears to the
principal amount of the obligation. These instruments may have fixed, floating,
or variable rates of interest. The Fund will only purchase participation
interests if accompanied by an opinion of counsel that the interest earned on
the underlying municipal obligations will be tax-exempt. If the Fund purchases
unrated participation interests, the Board of Directors or its delegate must
have determined that the credit risk is equivalent to the rated obligations in
which the Fund may invest. Participation interests may be backed by a letter of
credit or guaranty of the selling institution. When determining whether such a
participation interest meets the Fund's credit quality requirements, the Fund
may look to the credit quality of any financial guarantor providing a letter of
credit or guaranty.
<PAGE>
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with certain banks or non-bank
dealers. In a repurchase agreement, the Fund buys a security at one price, and
at the time of sale, the seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within seven days). The repurchase
agreement, thereby, determines the yield during the purchaser's holding period,
while the seller's obligation to repurchase is secured by the value of the
underlying security. The Advisor will monitor, on an ongoing basis, the value of
the underlying securities to ensure that the value always equals or exceeds the
repurchase price plus accrued interest. Repurchase agreements could involve
certain risks in the event of a default or insolvency of the other party to the
agreement, including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities. Although no definitive creditworthiness
criteria are used, the Advisor reviews the creditworthiness of the banks and
non-bank dealers with which the Fund enters into repurchase agreements to
evaluate those risks. The Fund may, under certain circumstances, deem repurchase
agreements collateralized by U.S. government securities to be investments in
U.S. government securities.
RULE 2A-7: MATURITY, QUALITY, AND DIVERSIFICATION RESTRICTIONS
All capitalized but undefined terms in this discussion shall have the meaning
such terms have in Rule 2a-7 under the 1940 Act. The Fund is subject to certain
maturity restrictions in accordance with Rule 2a-7 for money market funds that
use the amortized cost method of valuation to maintain a stable net asset value
of $1.00 per share. Accordingly, the Fund will (1) maintain a dollar weighted
average portfolio maturity of 90 days or less, and (2) will purchase securities
with a remaining maturity of no more than 13 months (397 calendar days).
Further, the Fund will limit its investments to U.S. dollar-denominated
securities which represent minimal credit risks and meet certain credit quality
and diversification requirements. For purposes of calculating the maturity of
portfolio instruments, the Fund will follow the requirements of Rule 2a-7. Under
Rule 2a-7, the maturity of portfolio instruments is calculated as indicated
below.
Generally, the maturity of a portfolio instrument shall be deemed to be the
period remaining (calculated from the trade date or such other date on which the
Fund's interest in the instrument is subject to market action) until the date
noted on the face of the instrument as the date on which, in accordance with the
terms of the security, the principal amount must unconditionally be paid, or in
the case of an instrument called for redemption, the date on which the
redemption payment must be made.
The Fund is subject to certain credit quality restrictions pursuant to Rule 2a-7
under the 1940 Act. From time to time, the Fund may obtain securities ratings
from NRSROs, which may require the Fund to be managed in a manner that is more
restrictive than Rule 2a-7.
SECTOR CONCENTRATION
From time to time, the Fund may invest 25% or more of its assets in municipal
bonds that are related in such a way that an economic, business, or political
development or change affecting one such security could also affect the other
securities (for example, securities whose issuers are located in the same
state). Such related sectors may include hospitals, retirement centers,
pollution control, single family housing, multiple family housing, industrial
development, utilities, education, and general obligation bonds. The Fund also
may invest 25% or more of its assets in municipal bonds whose issuers are
located in the same state.
STANDBY COMMITMENTS
In order to facilitate portfolio liquidity, the Fund may acquire standby
commitments from brokers, dealers, or banks with respect to securities in its
portfolio. Standby commitments entitle the holder to achieve same-day settlement
and receive an exercise price equal to the amortized cost of the underlying
security plus accrued interest. Standby commitments generally increase the cost
of the acquisition of the underlying security, thereby reducing the yield.
Standby commitments are subject to the issuer's ability to fulfill its
obligation upon demand. Although no definitive creditworthiness criteria are
used, the Advisor reviews the creditworthiness of the brokers, dealers, and
banks from which the Fund obtains standby commitments to evaluate those risks.
<PAGE>
TAXABLE SECURITIES
From time to time when the Advisor deems it appropriate, the Fund may invest up
to 20% of its net assets in taxable investments (of comparable quality to their
respective tax-free investments), which would produce interest not exempt from
federal income tax, including among others: (1) obligations issued or
guaranteed, as to principal and interest, by the United States government, its
agencies, or instrumentalities; (2) obligations of financial institutions,
including banks, savings and loan institutions, insurance companies and mortgage
banks, such as certificates of deposit, bankers' acceptances, and time deposits;
(3) corporate obligations, including preferred stock and commercial paper, with
equivalent credit quality to the municipal securities in which the Fund may
invest; and (4) repurchase agreements with respect to any of the foregoing
instruments. For example, the Fund may invest in such taxable investments
pending the investment or reinvestment of such assets in municipal securities,
in order to avoid the necessity of liquidating portfolio securities to satisfy
redemptions or pay expenses, or when such action is deemed to be in the interest
of the Fund's shareholders.
U.S. GOVERNMENT SECURITIES
U.S. government securities are issued or guaranteed by the U.S. government or
its agencies or instrumentalities. Securities issued by the government include
U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities
issued by government agencies or instrumentalities include obligations of the
following:
o the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration, and
the Government National Mortgage Association ("GNMA"), including GNMA
pass-through certificates, whose securities are supported by the full faith
and credit of the United States;
o the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of
the agency to borrow from the U.S. Treasury;
o the Federal National Mortgage Association, whose securities are supported
by the discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and
o the Student Loan Marketing Association, the Interamerican Development Bank,
and International Bank for Reconstruction and Development, whose securities
are supported only by the credit of such agencies.
Although the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities;
consequently, the value of such securities will fluctuate.
VARIABLE- OR FLOATING-RATE SECURITIES
The Fund may invest in securities which offer a variable- or floating-rate of
interest. Variable-rate securities provide for automatic establishment of a new
interest rate at fixed intervals (e.g., daily, monthly, semi-annually, etc.).
Floating-rate securities generally provide for automatic adjustment of the
interest rate whenever some specified interest rate index changes. The interest
rate on variable- or floating-rate securities is ordinarily determined by
reference to or is a percentage of a bank's prime rate, the 90-day U.S. Treasury
bill rate, the rate of return on commercial paper or bank certificates of
deposit, an index of short-term interest rates, or some other objective measure.
Variable- or floating-rate securities frequently include a demand feature
entitling the holder to sell the securities to the issuer at par. In many cases,
the demand feature can be exercised at any time on seven days notice; in other
cases, the demand feature is exercisable at any time on 30 days notice or on
similar notice at intervals of not more than one year. Some securities which do
not have variable or floating interest rates may be accompanied by puts
producing similar results and price characteristics. When considering the
maturity of any instrument which may be sold or put to the issuer or a third
party, the Fund may consider that instrument's maturity to be shorter than its
stated maturity.
Variable-rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, that may change daily
without penalty, pursuant to direct arrangements between the Fund, as lender,
and the borrower. The interest rates on these notes fluctuate from time to time.
The issuer of such obligations normally has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days notice to the
holders of such obligations. The interest rate on a floating-rate demand
obligation is based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments will generally be traded. There generally is
not an established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and, if not so rated, the Fund may invest in them only if the Advisor determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Advisor, on behalf of the
Fund, will consider on an ongoing basis the creditworthiness of the issuers of
the floating- and variable-rate demand obligations in the Fund's portfolio.
The Fund will not invest more than 10% of its net assets in variable- and
floating-rate demand obligations that are not readily marketable (a variable- or
floating-rate demand obligation that may be disposed of on not more than seven
days notice will be deemed readily marketable and will not be subject to this
limitation). In addition, each variable- or floating-rate obligation must meet
the credit quality requirements applicable to all the Fund's investments at the
time of purchase. When determining whether such an obligation meets the Fund's
credit quality requirements, the Fund may look to the credit quality of the
financial guarantor providing a letter of credit or other credit support
arrangement.
In determining the Fund's weighted average portfolio maturity, the Fund (except
money market funds) will consider a floating- or variable-rate security to have
a maturity equal to its stated maturity (or redemption date if it has been
called for redemption), except that it may consider (1) variable-rate securities
to have a maturity equal to the period remaining until the next readjustment in
the interest rate, unless subject to a demand feature, (2) variable-rate
securities subject to a demand feature to have a remaining maturity equal to the
longer of (a) the next readjustment in the interest rate or (b) the period
remaining until the principal can be recovered through demand, and (3)
floating-rate securities subject to a demand feature to have a maturity equal to
the period remaining until the principal can be recovered through demand.
Variable- and floating-rate securities generally are subject to less principal
fluctuation than securities without these attributes since the securities
usually trade at amortized cost following the readjustment in the interest rate.
Money market funds will determine the maturity of floating- and variable-rate
securities in accordance with Rule 2a-7 under the Investment Company Act of
1940.
DIRECTORS AND OFFICERS
The Board of Directors of the Fund is responsible for managing the Fund's
business and affairs. Directors and officers of the Fund, together with
information as to their principal business occupations during the last five
years, and other information are shown below. Each director who is deemed an
"interested person," as defined in the 1940 Act, is indicated by an asterisk
(*). Each officer and director holds the same position with the 27 registered
open-end management investment companies consisting of 59 mutual funds ("Strong
Funds"). For 2001, the Strong Funds, in the aggregate, pay each Director who is
not a director, officer, or employee of the Advisor, or any affiliated company
(a "disinterested director") an annual fee of $101,000 plus $6,000 per Board
meeting, except for the Chairman of the Independent Directors Committee. The
Chairman of the Independent Directors Committee receives an annual fee of
$111,100 plus $6,600 per Board meeting. The Independent Directors have formed an
Audit Committee. For their services on the Audit Committee, each Independent
Director receives an additional $2,500 per meeting attended. The Chairman of the
Audit Committee receives $2,750 per meeting. In addition, each disinterested
director is reimbursed by the Strong Funds for travel and other expenses
incurred in connection with attendance at such meetings. Other officers and
directors of the Strong Funds receive no compensation or expense reimbursement
from the Strong Funds.
*RICHARD S. STRONG (DOB 5/12/42), Director and Chairman of the Board of the
Strong Funds.
Prior to August 1985, Mr. Strong was Chief Executive Officer of the Advisor,
which he founded in 1974. Since August 1985, Mr. Strong has been a Security
Analyst and Portfolio Manager of the Advisor. In October 1991, Mr. Strong also
became the Chairman of the Advisor. Mr. Strong is a Director of the Advisor. Mr.
Strong has been in the investment management business since 1967.
<PAGE>
MARVIN E. NEVINS (DOB 7/9/18), Director of the Strong Funds.
Private Investor. From 1945 to 1980, Mr. Nevins was Chairman of Wisconsin
Centrifugal Inc., a foundry. From 1980 until 1981, Mr. Nevins was the Chairman
of the Wisconsin Association of Manufacturers & Commerce. He has been a Director
of A-Life Medical, Inc., San Diego, CA since 1996 and Surface Systems, Inc. (a
weather information company), St. Louis, MO since 1992. He was also a regent of
the Milwaukee School of Engineering and a member of the Board of Trustees of the
Medical College of Wisconsin and Carroll College.
WILLIE D. DAVIS (DOB 7/24/34), Director of the Strong Funds.
Mr. Davis has been Director of Alliance Bank since 1980, Sara Lee Corporation (a
food/consumer products company) since 1983, KMart Corporation (a discount
consumer products company) since 1985, Dow Chemical Company since 1988, MGM
Mirage (formerly MGM Grand, Inc.) (an entertainment/hotel company) since 1990,
Wisconsin Energy Corporation (formerly WICOR, Inc.) (a utility company) since
1990, Johnson Controls, Inc. (an industrial company) since 1992, Checker's Drive
In Restaurants, Inc. (formerly Rally's Hamburgers, Inc.) since 1994,
Metro-Goldwyn-Mayer, Inc. (an entertainment company) since 1998, and Bassett
Furniture Industries, Inc. since 1997. Mr. Davis has been a trustee of the
University of Chicago since 1980 and Marquette University since 1988. Since
1977, Mr. Davis has been President and Chief Executive Officer of All Pro
Broadcasting, Inc. Mr. Davis was a Director of the Fireman's Fund (an insurance
company) from 1975 until 1990.
STANLEY KRITZIK (DOB 1/9/30), Director and Chairman of the Audit Committee of
the Strong Funds.
Mr. Kritzik has been a Partner of Metropolitan Associates since 1962, a Director
of Aurora Health Care since 1987 and of Wisconsin Health Information Network
since November 1997, and a member of the Board of Governors of the Snowmass
Village Resort Association since October 1999. He was a Director of Health
Network Ventures, Inc. from 1992 until April 2000.
WILLIAM F. VOGT (DOB 7/19/47), Director and Chairman of the Independent
Directors Committee of the Strong Funds.
Mr. Vogt has been the President of Vogt Management Consulting, Inc. since 1990.
From 1982 until 1990, he served as Executive Director of University Physicians
of the University of Colorado. Mr. Vogt is the Past President of the Medical
Group Management Association and a Fellow of the American College of Medical
Practice Executives.
NEAL MALICKY (DOB 9/14/34), Director of the Strong Funds.
Mr. Malicky has been President Emeritus of Baldwin-Wallace College since July
2000. From July 1999 to June 2000, he served as Chancellor of Baldwin-Wallace
College. From 1981 to June 1999, he served as President of Baldwin-Wallace
College. He is a Trustee of Southwest Community Health Systems, Cleveland
Scholarship Program, and The National Conference for Community Justice and
President of the Reserve Homeowners Association. He is also the Past President
of the National Association of Schools and Colleges of the United Methodist
Church, the Past Chairperson of the Association of Independent Colleges and
Universities of Ohio, and the Past Secretary of the National Association of
Independent Colleges and Universities.
ELIZABETH N. COHERNOUR (DOB 4/26/50), Vice President and Secretary of the Strong
Funds.
Ms. Cohernour has been General Counsel and Senior Vice President of the Advisor
since January 2000. From February 1999 until January 2000, Ms. Cohernour acted
as Counsel to MFP Investors. From May 1988 to February 1999, Ms. Cohernour acted
as General Counsel and Vice President to Franklin Mutual Advisers, Inc.
CATHLEEN A. EBACHER (DOB 11/9/62), Vice President and Assistant Secretary of the
Strong Funds.
Ms. Ebacher has been Senior Counsel of the Advisor since December 1997. From
November 1996 until December 1997, Ms. Ebacher acted as Associate Counsel to the
Advisor. From May 1992 until November 1996, Ms. Ebacher acted as Corporate
Counsel to Carson Pirie Scott & Co., a department store retailer. From June 1989
until May 1992, Ms. Ebacher was an attorney for Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c., a Milwaukee law firm.
RHONDA K. HAIGHT (DOB 11/13/64), Assistant Treasurer of the Strong Funds.
Ms. Haight has been Manager of the Mutual Fund Accounting Department of the
Advisor since January 1994. From May 1990 to January 1994, Ms. Haight was a
supervisor in the Mutual Fund Accounting Department of the Advisor. From June
1987 to May 1990, Ms. Haight was a Mutual Fund Accountant of the Advisor.
SUSAN A. HOLLISTER (DOB 7/8/68), Vice President and Assistant Secretary of the
Strong Funds.
Ms. Hollister has been Associate Counsel of the Advisor since July 1999. From
August 1996 until May 1999, Ms. Hollister completed a Juris Doctor at the
University of Wisconsin Law School. From December 1993 until August 1996, Ms.
Hollister was Deposit Operations Supervisor for First Federal Savings Bank, La
Crosse - Madison.
DENNIS A. WALLESTAD (DOB 11/3/62), Vice President of the Strong Funds.
Mr. Wallestad has been Director of Finance and Operations of the Advisor since
February 1999. From April 1997 to February 1999, Mr. Wallestad was the Chief
Financial Officer of The Ziegler Companies, Inc. From November 1996 to April
1997, Mr. Wallestad was the Chief Administrative Officer of Calamos Asset
Management, Inc. From July 1994 to November 1996, Mr. Wallestad was Chief
Financial Officer for Firstar Trust and Investments Group. From September 1991
to June 1994 and from September 1985 to August 1989, Mr. Wallestad was an Audit
Manager for Arthur Andersen & Co., LLP in Milwaukee. Mr. Wallestad completed a
Masters of Accountancy from the University of Oklahoma from September 1989 to
August 1991.
JOHN W. WIDMER (DOB 1/19/65), Treasurer of the Strong Funds.
Mr. Widmer has been Treasurer of the Advisor since April 1999. From May 1997 to
January 2000, Mr. Widmer was the Manager of Financial Management and Sales
Reporting Systems. From May 1992 to May 1997, Mr. Widmer was an Accounting and
Business Advisory Manager in the Milwaukee office of Arthur Andersen LLP. From
June 1987 to May 1992, Mr. Widmer was an accountant at Arthur Andersen LLP.
THOMAS M. ZOELLER (DOB 2/21/64), Vice President of the Strong Funds.
Mr. Zoeller has been Senior Vice President and Chief Financial Officer of the
Advisor since February 1998 and a member of the Office of the Chief Executive
since November 1998. From October 1991 to February 1998, Mr. Zoeller was the
Treasurer and Controller of the Advisor, and from August 1991 to October 1991 he
was the Controller. From August 1989 to August 1991, Mr. Zoeller was the
Assistant Controller of the Advisor. From September 1986 to August 1989, Mr.
Zoeller was a Senior Accountant at Arthur Andersen & Co.
Except for Messrs. Nevins, Davis, Kritzik, Vogt, and Malicky, the address of all
of the above persons is P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Nevins'
address is 6075 Pelican Bay Boulevard #1006, Naples, Florida 34108. Mr. Davis'
address is 161 North La Brea, Inglewood, California 90301. Mr. Kritzik's address
is 1123 North Astor Street, P.O. Box 92547, Milwaukee, Wisconsin 53202-0547. Mr.
Vogt's address is 55 North Holden Road, P.O. Box 7657, Avon, CO 81620. Mr.
Malicky's address is 518 Bishop Place, Berea, OH 44017.
INVESTMENT ADVISOR
The Fund has entered into an Advisory Agreement with Strong Capital Management,
Inc. ("Advisor"). Mr. Strong controls the Advisor due to his stock ownership of
the Advisor. Mr. Strong is the Chairman and a Director of the Advisor, Ms.
Cohernour is Senior Vice President and General Counsel of the Advisor, Ms.
Ebacher is Senior Counsel of the Advisor, Ms. Haight is Manager of the Mutual
Fund Accounting Department of the Advisor, Ms. Hollister is Associate Counsel of
the Advisor, Mr. Wallestad is Senior Vice President of the Advisor, Mr. Widmer
is Treasurer of the Advisor, and Mr. Zoeller is Senior Vice President and Chief
Financial Officer of the Advisor. As of October 31, 2000, the Advisor had over
$45 billion under management.
The Advisory Agreement is required to be approved annually by either the Board
of Directors of the Fund or by vote of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act). In either case, each annual
renewal must be approved by the vote of a majority of the Fund's directors who
are not parties to the Advisory Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement is terminable, without penalty, on 60 days
written notice by the Board of Directors of the Fund, by vote of a majority of
the Fund's outstanding voting securities, or by the Advisor, and will terminate
automatically in the event of its assignment.
Under the terms of the Advisory Agreement, the Advisor manages the Fund's
investments subject to the supervision of the Fund's Board of Directors. The
Advisor is responsible for investment decisions and supplies investment research
and portfolio management. The Advisory Agreement authorizes the Advisor to
delegate its investment advisory duties to a subadvisor in accordance with a
written agreement under which the subadvisor would furnish such investment
advisory services to the Advisor. In that situation, the Advisor continues to
have responsibility for all investment advisory services furnished by the
subadvisor under the subadvisory agreement. At its expense, the Advisor provides
office space and all necessary office facilities, equipment, and personnel for
servicing the investments of the Fund. The Advisor places all orders for the
purchase and sale of the Fund's portfolio securities at the Fund's expense.
Except for expenses assumed by the Advisor, as set forth above, or by Strong
Investments, Inc. ("Distributor") with respect to the distribution of the Fund's
shares, the Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions, and similar
expenses; expenses of issue, sale, repurchase, or redemption of shares; expenses
of registering or qualifying shares for sale with the states and the SEC;
expenses for printing and distribution of prospectuses to existing shareholders;
charges of custodians (including fees as custodian for keeping books and similar
services for the Fund), transfer agents (including the printing and mailing of
reports and notices to shareholders), registrars, auditing and legal services,
and clerical services related to recordkeeping and shareholder relations;
printing of stock certificates; fees for directors who are not "interested
persons" of the Advisor; expenses of indemnification; extraordinary expenses;
and costs of shareholder and director meetings.
As compensation for its advisory services, the Fund pays to the Advisor a
monthly management fee at the annual rate specified below of the average daily
net asset value of the Fund. From time to time, the Advisor may voluntarily
waive all or a portion of its management fee for the Fund.
FUND ANNUAL RATE
------------------------------------------- ------------------------------------
Tax-Free Money Fund 0.50%
On July 12, 1994, the SEC filed an administrative action ("Order") against the
Advisor, Mr. Strong, and another employee of the Advisor in connection with
conduct that occurred between 1987 and early 1990. In re Strong/Corneliuson
Capital Management, Inc., et al. Admin. Proc. File No. 3-8411. The proceeding
was settled by consent without admitting or denying the allegations in the
Order. The Order found that the Advisor and Mr. Strong aided and abetted
violations of Section 17(a) of the 1940 Act by effecting trades between mutual
funds, and between mutual funds and Harbour Investments Ltd. ("Harbour"),
without complying with the exemptive provisions of SEC Rule 17a-7 or otherwise
obtaining an exemption. It further found that the Advisor violated, and Mr.
Strong aided and abetted violations of, the disclosure provisions of the 1940
Act and the Investment Advisers Act of 1940 by misrepresenting the Advisor's
policy on personal trading and by failing to disclose trading by Harbour, an
entity in which principals of the Advisor owned between 18 and 25 percent of the
voting stock. As part of the settlement, the respondents agreed to a censure and
a cease and desist order and the Advisor agreed to various undertakings,
including adoption of certain procedures and a limitation for six months on
accepting certain types of new advisory clients.
On June 6, 1996, the Department of Labor ("DOL") filed an action against the
Advisor for equitable relief alleging violations of the Employee Retirement
Income Security Act of 1974 ("ERISA") in connection with cross trades that
occurred between 1987 and late 1989 involving certain pension accounts managed
by the Advisor. Contemporaneous with this filing, the Advisor, without admitting
or denying the DOL's allegations, agreed to the entry of a consent judgment
resolving all matters relating to the allegations. Reich v. Strong Capital
Management, Inc., (U.S.D.C. E.D. WI) ("Consent Judgment"). Under the terms of
the Consent Judgment, the Advisor agreed to reimburse the affected accounts a
total of $5.9 million. The settlement did not have any material impact on the
Advisor's financial position or operations.
The Fund, the Advisor, and the Distributor have adopted a Code of Ethics
("Code") that governs the personal trading activities of all "Access Persons" of
the Advisor and the Distributor. Access Persons include every director and
officer of the Advisor, the Distributor, and the investment companies managed by
the Advisor, including the Fund, as well as certain employees of the Advisor and
the Distributor who have access to information relating to the purchase or sale
of securities by the Advisor on behalf of accounts managed by it. The Code is
based upon the principal that such Access Persons have a fiduciary duty to place
the interests of the Fund and the Advisor's and Distributor's other clients
ahead of their own.
The Code requires Access Persons (other than Access Persons who are independent
directors of the investment companies managed by the Advisor, including the
Fund) to, among other things, preclear their securities transactions (with
limited exceptions, such as transactions in shares of mutual funds, direct
obligations of the U.S. government, and certain options on broad-based
securities market indexes) and to execute such transactions through the
Advisor's trading department. The Code, which applies to all Access Persons
(other than Access Persons who are independent directors of the investment
companies managed by the Advisor, including the Fund), includes a ban on
acquiring any securities in an initial public offering, other than a new
offering of a registered open-end investment company, and a prohibition from
profiting on short-term trading in securities. In addition, no Access Person may
purchase or sell any security that is contemporaneously being purchased or sold,
or to the knowledge of the Access Person, is being considered for purchase or
sale, by the Advisor on behalf of any mutual fund or other account managed by
it. Finally, the Code provides for trading "black out" periods of seven calendar
days during which time Access Persons may not trade in securities that have been
purchased or sold by any client for which the Advisor serves as an investment
advisor or subadvisor, renders investment advice, makes investment decisions, or
places through its Trading Department.
The Advisor provides investment advisory services for multiple clients through
different types of investment accounts (e.g., mutual funds, hedge funds,
separately managed accounts, etc.) who may have similar or different investment
objectives and investment policies (e.g., some accounts may have an active
trading strategy while others follow a "buy and hold" strategy). In managing
these accounts, the Advisor seeks to maximize each account's return, consistent
with the account's investment objectives and investment strategies. While the
Advisor's policies are designed to ensure that over time similarly-situated
clients receive similar treatment, to the maximum extent possible, because of
the range of the Advisor's clients, the Advisor may give advice and take action
with respect to one account that may differ from the advice given, or the timing
or nature of action taken, with respect to another account (the Advisor and its
principals and associates also may take such actions in their personal
securities transactions, to the extent permitted by and consistent with the
Code). For example, the Advisor may use the same investment style in managing
two accounts, but one may have a shorter-term horizon and accept high-turnover
while the other may have a longer-term investment horizon and desire to minimize
turnover. If the Advisor reasonably believes that a particular security may
provide an attractive opportunity due to short-term volatility but may no longer
be attractive on a long-term basis, the Advisor may cause accounts with a
shorter-term investment horizon to buy the security at the same time it is
causing accounts with a longer-term investment horizon to sell the security. The
Advisor takes all reasonable steps to ensure that investment opportunities are,
over time, allocated to accounts on a fair and equitable basis relative to the
other similarly-situated accounts and that the investment activities of
different accounts do not unfairly disadvantage other accounts.
From time to time, the Advisor votes the shares owned by the Fund according to
its Statement of General Proxy Voting Policy ("Proxy Voting Policy"). The
general principal of the Proxy Voting Policy is to vote any beneficial interest
in an equity security prudently and solely in the best long-term economic
interest of the Fund and its beneficiaries considering all relevant factors and
without undue influence from individuals or groups who may have an economic
interest in the outcome of a proxy vote. Shareholders may obtain a copy of the
Proxy Voting Policy upon request from the Advisor.
The Advisor also provides two programs of custom portfolio management called
Strong Advisor and Strong Private Client. These programs are designed to
determine an investment approach that fits an investor's financial needs and
then provide the investor with a custom built portfolio of Strong Funds and
certain other unaffiliated mutual funds, in the case of Strong Advisor, and
Strong Funds, and individual stocks and bonds, in the case of Strong Private
Client, based on that allocation. The Advisor, on behalf of participants in the
Strong Advisor and Strong Private Client programs, may determine to invest a
portion of the program's assets in any one Strong Fund, which investment,
particularly in the case of a smaller Strong Fund, could represent a material
portion of the Fund's assets. In such cases, a decision to redeem the Strong
Advisor or Strong Private Client program's investment in a Fund on short notice
could raise a potential conflict of interest for the Advisor, between the
interests of participants in the Strong Advisor or Strong Private Client program
and of the Fund's other shareholders. In general, the Advisor does not expect to
direct the Strong Advisor or Strong Private Client program to make redemption
requests on short notice. However, should the Advisor determine this to be
necessary, the Advisor will use its best efforts and act in good faith to
balance the potentially competing interests of participants in the Strong
Advisor and Strong Private Client program and the Fund's other shareholders in a
manner the Advisor deems most appropriate for both parties in light of the
circumstances..
From time to time, the Advisor may make available to third parties current and
historical information about the portfolio holdings of the Advisor's mutual
funds or other clients. Release may be made to entities such as fund ratings
entities, industry trade groups, and financial publications. Generally, the
Advisor will release this type of information only where it is otherwise
publicly available. This information may also be released where the Advisor
reasonably believes that the release will not be to the detriment of the best
interests of its clients.
For more complete information about the Advisor, including its services,
investment strategies, policies, and procedures, please call 800-368-3863 and
ask for a copy of Part II of the Advisor's Form ADV.
DISTRIBUTOR
Under a Distribution Agreement with the Fund ("Distribution Agreement"), Strong
Investments, Inc. ("Distributor"), P.O. Box 2936, Milwaukee, WI 53201, acts as
underwriter of the Fund's shares. Mr. Strong is the Chairman and Director of the
Distributor. The Distribution Agreement provides that the Distributor will use
its best efforts to distribute the Fund's shares. The Distribution Agreement
further provides that the Distributor will bear the additional costs of printing
prospectuses and shareholder reports that are used for selling purposes, as well
as advertising and any other costs attributable to the distribution of the
Fund's shares. The Distributor is a direct subsidiary of the Advisor and
controlled by the Advisor and Richard S. Strong. The Distribution Agreement is
subject to the same termination and renewal provisions as are described above
with respect to the Advisory Agreement.
The shares of the Fund are offered on a "no-load" basis, which means that no
sales commissions are charged on the purchase of those shares.
From time to time, the Distributor may hold in-house sales incentive programs
for its associated persons under which these persons may receive compensation
awards in connection with the sale and distribution of the Fund's shares. These
awards may include items such as, but not limited to, cash, gifts, merchandise,
gift certificates, and payment of travel expenses, meals, and lodging. Any
in-house sales incentive program will be conducted in accordance with the rules
of the National Association of Securities Dealers, Inc. ("NASD").
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisor is responsible for decisions to buy and sell securities for the Fund
and for the placement of the Fund's investment business and the negotiation of
the commissions to be paid on such transactions. It is the policy of the
Advisor, to seek the best execution at the best security price available with
respect to each transaction, in light of the overall quality of brokerage and
research services provided to the Advisor, or the Fund. In OTC transactions,
orders are placed directly with a principal market maker unless it is believed
that a better price and execution can be obtained using a broker. The best price
to the Fund means the best net price without regard to the mix between purchase
or sale price and commissions, if any. In selecting broker-dealers and in
negotiating commissions, the Advisor considers a variety of factors, including
best price and execution, the full range of brokerage services provided by the
broker, as well as its capital strength and stability, and the quality of the
research and research services provided by the broker. Brokerage will not be
allocated based on the sale of any shares of the Strong Funds.
The Advisor has adopted procedures that provide generally for the Advisor to
seek to bunch orders for the purchase or sale of the same security for the Fund,
other mutual funds managed by the Advisor, and other advisory clients
(collectively, "client accounts"). The Advisor will bunch orders when it deems
it to be appropriate and in the best interest of the client accounts. When a
bunched order is filled in its entirety, each participating client account will
participate at the average share price for the bunched order on the same
business day, and transaction costs shall be shared pro rata based on each
client's participation in the bunched order. When a bunched order is only
partially filled, the securities purchased will be allocated on a pro rata basis
to each client account participating in the bunched order based upon the initial
amount requested for the account, subject to certain exceptions, and each
participating account will participate at the average share price for the
bunched order on the same business day.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)") permits
an investment advisor, under certain circumstances, to cause an account to pay a
broker or dealer a commission for effecting a transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
the transaction in recognition of the value of the brokerage and research
services provided by the broker or dealer. Brokerage and research services
include (1) furnishing advice as to the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or purchasers or sellers of securities; (2) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and (3) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement, and custody).
In carrying out the provisions of the Advisory Agreement, the Advisor may cause
the Fund to pay a broker, which provides brokerage and research services to the
Advisor, a commission for effecting a securities transaction in excess of the
amount another broker would have charged for effecting the transaction. The
Advisor believes it is important to its investment decision-making process to
have access to independent research. The Advisory Agreement provides that such
higher commissions will not be paid by the Fund unless (1) the Advisor
determines in good faith that the amount is reasonable in relation to the
services in terms of the particular transaction or in terms of the Advisor's
overall responsibilities with respect to the accounts as to which it exercises
investment discretion; (2) such payment is made in compliance with the
provisions of Section 28(e), other applicable state and federal laws, and the
Advisory Agreement; and (3) in the opinion of the Advisor, the total commissions
paid by the Fund will be reasonable in relation to the benefits to the Fund over
the long term. The investment management fee paid by the Fund under the Advisory
Agreement is not reduced as a result of the Advisor's receipt of research
services. To request a copy of the Advisor's Soft Dollar Practices, please call
800-368-3863.
The Advisor may engage in "step-out" and "give-up" brokerage transactions
subject to best price and execution. In a step-out or give-up trade, an
investment advisor directs trades to a broker-dealer who executes the
transactions while a second broker-dealer clears and settles part or all of the
transaction. The first broker-dealer then shares part of its commission with the
second broker-dealer. The Advisor engages in step-out and give-up transactions
primarily (1) to satisfy directed brokerage arrangements of certain of its
client accounts and/or (2) to pay commissions to broker-dealers who supply
research or analytical services.
Generally, research services provided by brokers may include information on the
economy, industries, groups of securities, individual companies, statistical
information, accounting and tax law interpretations, political developments,
legal developments affecting portfolio securities, technical market action,
pricing and appraisal services, credit analysis, risk measurement analysis,
performance analysis, and analysis of corporate responsibility issues. Such
research services are received primarily in the form of written reports,
telephone contacts, and personal meetings with security analysts. In addition,
such research services may be provided in the form of access to various
computer-generated data, computer hardware and software, and meetings arranged
with corporate and industry spokespersons, economists, academicians, and
government representatives. In some cases, research services are generated by
third parties but are provided to the Advisor by or through brokers. Such
brokers may pay for all or a portion of computer hardware and software costs
relating to the pricing of securities.
Where the Advisor itself receives both administrative benefits and research and
brokerage services from the services provided by brokers, it makes a good faith
allocation between the administrative benefits and the research and brokerage
services, and will pay for any administrative benefits with cash. In making good
faith allocations between administrative benefits and research and brokerage
services, a conflict of interest may exist by reason of the Advisor's allocation
of the costs of such benefits and services between those that primarily benefit
the Advisor and those that primarily benefit the Fund and other advisory
clients.
From time to time, the Advisor may purchase new issues of securities for the
Fund in a fixed income price offering. In these situations, the seller may be a
member of the selling group that will, in addition to selling the securities to
the Fund and other advisory clients, provide the Advisor with research. The NASD
has adopted rules expressly permitting these types of arrangements under certain
circumstances. Generally, the seller will provide research "credits" in these
situations at a rate that is higher than that which is available for typical
secondary market transactions. These arrangements may not fall within the safe
harbor of Section 28(e).
At least annually, the Advisor considers the amount and nature of research and
research services provided by brokers, as well as the extent to which such
services are relied upon, and attempts to allocate a portion of the brokerage
business of the Fund and other advisory clients on the basis of that
consideration. In addition, brokers may suggest a level of business they would
like to receive in order to continue to provide such services. The actual
brokerage business received by a broker may be more or less than the suggested
allocations, depending upon the Advisor's evaluation of all applicable
considerations.
The Advisor has informal arrangements with various brokers whereby, in
consideration for providing research services and subject to Section 28(e), the
Advisor allocates brokerage to those firms, provided that the value of any
research and brokerage services was reasonable in relationship to the amount of
commission paid and was subject to best execution. In no case will the Advisor
make binding commitments as to the level of brokerage commissions it will
allocate to a broker, nor will it commit to pay cash if any informal targets are
not met. The Advisor anticipates it will continue to enter into such brokerage
arrangements.
The Advisor may direct the purchase of securities on behalf of the Fund and
other advisory clients in secondary market transactions, in public offerings
directly from an underwriter, or in privately negotiated transactions with an
issuer. When the Advisor believes the circumstances so warrant, securities
purchased in public offerings may be resold shortly after acquisition in the
immediate aftermarket for the security in order to take advantage of price
appreciation from the public offering price or for other reasons. Short-term
trading of securities acquired in public offerings, or otherwise, may result in
higher portfolio turnover and associated brokerage expenses.
The Advisor places portfolio transactions for other advisory accounts, including
other mutual funds managed by the Advisor. Research services furnished by firms
through which the Fund effects its securities transactions may be used by the
Advisor in servicing all of its accounts; not all of such services may be used
by the Advisor in connection with the Fund. In the opinion of the Advisor, it is
not possible to measure separately the benefits from research services to each
of the accounts managed by the Advisor. Because the volume and nature of the
trading activities of the accounts are not uniform, the amount of commissions in
excess of those charged by another broker paid by each account for brokerage and
research services will vary. However, in the opinion of the Advisor, such costs
to the Fund will not be disproportionate to the benefits received by the Fund on
a continuing basis.
The Advisor seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In making
such allocations between the Fund and other advisory accounts, the main factors
considered by the Advisor are the respective investment objectives, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and the opinions of the persons responsible for recommending the
investment.
From time to time, the Advisor may invest for a client in securities being
offered in an initial public offering ("IPO"), if the portfolio manager team
responsible for the account believes the investment appropriate and desirable
for that client. In making this judgment, the team generally considers, among
other things, the client's investment objectives and restrictions, tolerance for
risk and high portfolio turnover and tax situation; the investment merits of the
IPO; the account's current holdings and the availability of funds to make the
investment; whether a meaningful position in the IPO securities could be
obtained for the account; and expected transaction and other costs to the client
making the investment. The team also may consider the account's past
participation in IPOs and secondary offerings; brokerage commissions and
mark-ups or mark-downs generated by trading for the account; and any other
indicators of the client's contribution to the availability of the IPO
investment opportunity. After weighing these and other relevant factors, the
portfolio manager team may decide to invest in a particular IPO for some but not
all clients, or for no clients. IPO investments made by a team for two or more
clients may be in amounts that are not equal or proportionate to the
participating account's asset size. Other portfolio manager teams may make
different investment decisions for their clients about the same IPO.
When a Fund is small, IPOs may greatly increase the Fund's total returns. But,
as the Fund grows larger, the Fund is unlikely to achieve the same level of
returns from IPOs. Investing in IPOs is risky, and the prices of stocks
purchased in IPOs tend to fluctuate more widely than stocks of more established
companies.
"Hot issues" are IPOs that trade at a premium when secondary market trading
begins. Typically, the demand for "hot issues" exceeds the supply, and the
amount of any "hot issue" IPO made available to an investment manager like the
Advisor usually is limited. In addition, IPO underwriters tend to offer "hot
issues" on a priority basis to investors that have invested or are likely to
invest in other offerings underwritten by the same firm or that have executed a
significant volume of trades through the firm. A portfolio manager team may buy
larger amounts of "hot issue" IPOs for those clients whose past trading,
investing and other activities have contributed to the availability of specific
"hot issue" IPOs or "hot issue" IPOs generally to the Advisor.
Each portfolio manager team places its clients' orders for a particular IPO with
the Advisor's trading desk, and the trading desk seeks to fill those orders
together. If the trading desk is not able to obtain the total amount of
securities needed to fill all orders, the shares actually obtained are allocated
by the trading desk among the participating portfolio manager teams in
accordance with pre-established percentages for each team. The trading desk then
reallocates each team's percentage among those team clients participating in the
order pro rata according to the number of shares ordered for each client,
subject to rounding up or down to eliminate odd lots or de minimis amounts. The
percentages of each limited availability IPO, typically a "hot issue," allocated
to each team are fixed in advance, based on the amount of assets under
management by each team and other indicators of a team's overall contribution to
IPO deal flow, including brokerage generated and the team's overall trading and
investing pattern. Team allocation percentages are periodically reevaluated and
adjusted if appropriate, generally at intervals of six months or more. In
addition, a separate, fixed portion of the percentage allocation of the
portfolio manager team that manages the Advisor's private investment companies,
or "hedge funds," is specifically designated to go to the hedge funds. Like the
team level allocations, the amount designated for the hedge funds is determined
in advance and is subject to periodic reevaluation and adjustment. It is
designed to recognize the significant contribution made by the trading and
investing of the hedge funds to IPO deal flow to the Advisor.
The Advisor's policy and procedures for allocating IPO investment opportunities,
including "hot issues," are designed to ensure that all clients are treated
fairly and equitably over time. The Advisor does not, however, allocate IPO
investment opportunities among its clients in equal amounts or pro rata based on
the size of an account's assets. Under the Advisor's IPO allocation procedures,
certain clients, including the hedge funds, may receive a greater share than
other clients (in proportion to the size of their account assets) of the IPO
investment opportunities available to the Advisor, including "hot issue" IPOs.
These differences in IPO allocations result from, among other things, (1)
different judgments made by each portfolio manager team at the time an IPO
investment opportunity arises as to whether it would be a desirable and
appropriate investment for each particular client and (2) the fact that the
Advisor's IPO allocation procedures permit those clients who contribute more to
"hot issue" deal flow to receive greater allocations of limited availability
"hot issue" IPOs in proportion to the size of their accounts than may be
allocated to other clients. .
The Advisor also has a policy of blocking further purchases of IPOs for certain
client accounts when the portion of the account's total return for the trailing
four-calendar-quarter period-to-date that is attributable to IPO investments
exceeds certain percentage limits. The restriction remains in place until
IPO-driven performance falls below the percentage limits. This policy is
designed to help ensure that the Advisor does not attract separate account
clients or fund investors on the basis of IPO-driven performance that the
Advisor may not be able to sustain or replicate. The blocking policy is applied
only to those registered investment companies and separate account clients whose
performance is advertised or included in composites of account performance used
to market the Advisor's services. The hedge funds managed by the Advisor are not
subject to these limits.
The Advisor's policies and procedures generally result in greater IPO
allocations (as a percentage of client assets under management) to the hedge
funds and to other clients whose accounts are actively traded, have high
portfolio turnover rates or invest heavily in all types of IPOs and secondary
offerings. As do the hedge funds, these clients may pay the Advisor higher
account management fees, including performance fees.
Transactions in futures contracts are executed through futures commission
merchants ("FCMs"). The Fund's procedures in selecting FCMs to execute the
Fund's transactions in futures contracts are similar to those in effect with
respect to brokerage transactions in securities.
CUSTODIAN
As custodian of the Fund's assets, State Street Bank and Trust Company, 801
Pennsylvania Avenue, Kansas City, Missouri, 64105, has custody of all securities
and cash of the Fund, delivers and receives payment for securities sold,
receives and pays for securities purchased, collects income from investments,
and performs other duties, all as directed by officers of the Fund. The
custodian is in no way responsible for any of the investment policies or
decisions of the Fund.
<PAGE>
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The Advisor, P.O. Box 2936, Milwaukee, WI 53201, acts as transfer agent and
dividend-disbursing agent for the Fund. The Advisor is compensated as follows:
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------- -------------------------------------------------------------------------------
FUND TYPE/SHARE CLASS FEE*
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Money Funds and Investor Class $32.50 annual open account fee, $4.20 annual closed account fee.
shares of Money Funds
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Advisor Class shares of Money 0.20% of the average daily net asset value of all Advisor Class shares.
Funds(1)
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Institutional class shares of Money 0.015% of the average daily net asset value of all Institutional Class shares.
Funds
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Income Funds and Investor Class $31.50 annual open account fee, $4.20 annual closed account fee.
shares of Income Funds
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Advisor Class shares of Income Funds 0.20% of the average daily net asset value of all Advisor Class shares.
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Institutional Class shares of Income 0.015% of the average daily net asset value of all Institutional Class shares.
Funds
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Equity Funds and Investor Class $21.75 annual open account fee, $4.20 annual closed account fee.
shares of Equity Funds
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Advisor Class shares of Equity Funds 0.20% of the average daily net asset value of all Advisor Class shares.
-------------------------------------- -------------------------------------------------------------------------------
-------------------------------------- -------------------------------------------------------------------------------
Institutional Class shares of Equity 0.015% of the average daily net asset value of all Institutional Class shares.
Funds
-------------------------------------- -------------------------------------------------------------------------------
</TABLE>
* Plus out-of-pocket expenses, such as postage and printing expenses in
connection with shareholder communications.
(1) Excluding the Strong Heritage Money Fund. The fee for the Heritage Money
Fund is 0.015% of the average daily net asset value of all Advisor Class shares.
From time to time, the Fund, directly or indirectly through arrangements with
the Advisor, and/or the Advisor may pay fees to third parties that provide
transfer agent type services and other administrative services to persons who
beneficially own interests in the Fund, such as participants in 401(k) plans and
shareholders who invest through other financial intermediaries. These services
may include, among other things, sub-accounting services, transfer agent type
activities, answering inquiries relating to the Fund, transmitting proxy
statements, annual reports, updated prospectuses, other communications regarding
the Fund, and related services as the Fund or beneficial owners may reasonably
request. In such cases, the Fund will not pay fees based on the number of
beneficial owners at a rate that is greater than the rate the Fund is currently
paying the Advisor for providing these services to Fund shareholders; however,
the Advisor may pay to the third party amounts in excess of such limitation out
of its own profits.
TAXES
GENERAL
The Fund intends to qualify annually for treatment as a RIC under Subchapter M
of the IRC. If so qualified, the Fund will not be liable for federal income tax
on earnings and gains distributed to its shareholders in a timely manner. This
qualification does not involve government supervision of the Fund's management
practices or policies. The following federal tax discussion is intended to
provide you with an overview of the impact of federal income tax provisions on
the Fund or its shareholders. These tax provisions are subject to change by
legislative or administrative action at the federal, state, or local level, and
any changes may be applied retroactively. Any such action that limits or
restricts the Fund's current ability to pass-through earnings without taxation
at the Fund level, or otherwise materially changes the Fund's tax treatment,
could adversely affect the value of a shareholder's investment in the Fund.
Because the Fund's taxes are a complex matter, you should consult your tax
adviser for more detailed information concerning the taxation of the Fund and
the federal, state, and local tax consequences to shareholders of an investment
in the Fund.
In order to qualify for treatment as a RIC under the IRC, the Fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of taxable net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions, if applicable) ("Distribution Requirement") and
must meet several additional requirements. These requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities (or foreign
currencies if applicable) or other income (including gains from options,
futures, or forward contracts) derived with respect to its business of investing
in securities ("Income Requirement"); (2) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (3) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer. There is a 30-day period after the
end of each calendar year quarter in which to cure any non-compliance with these
requirements.
If Fund shares are sold at a loss after being held for 12 months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares.
The Fund's distributions are taxable in the year they are paid, whether they are
taken in cash or reinvested in additional shares, except that certain
distributions declared in the last three months of the year and paid in January
are taxable as if paid on December 31.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
The Fund may make additional distributions if necessary to avoid imposition of
the Excise Tax on undistributed income and gains.
PASS-THROUGH INCOME TAX EXEMPTION
Most state laws provide a pass-through to mutual fund shareholders of the state
and local income tax exemption afforded owners of direct U.S. government
obligations. You will be notified annually of the percentage of a Fund's income
that is derived from U.S. government securities.
MUNICIPAL SECURITIES
A substantial portion of the dividends paid by the Fund will qualify as
exempt-interest dividends and thus will be excludable from gross income by its
shareholders, if the Fund satisfies the requirement that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets
consists of securities the interest on which is excludable from gross income
under section 103(a); the Fund intends to continue to satisfy this requirement.
The aggregate dividends excludable from the Fund's shareholders' gross income
may not exceed the Fund's net tax-exempt income. The shareholders' treatment of
dividends from the Fund under local and state income tax laws may differ from
the treatment thereof under the IRC.
Tax-exempt interest attributable to certain private activity bonds ("PABs")
(including, in the case of a RIC receiving interest on such bonds, a
proportionate part of the exempt-interest dividends paid by that RIC) is subject
to the alternative minimum tax. Exempt-interest dividends received by a
corporate shareholder also may be indirectly subject to that tax without regard
to whether the Fund's tax-exempt interest was attributable to such bonds.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PABs or industrial development
bonds ("IDBs") should consult their tax advisors before purchasing shares of the
Fund because, for users of certain of these facilities, the interest on such
bonds is not exempt from federal income tax. For these purposes, the term
"substantial user" is defined generally to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of PABs or IDBs.
The Fund may invest in municipal bonds that are purchased, generally not on
their original issue, with market discount (that is, at a price less than the
principal amount of the bond or, in the case of a bond that was issued with
original issue discount, a price less than the amount of the issue price plus
accrued original issue discount) ("municipal market discount bonds"). Market
discount generally arises when the value of the bond declines after issuance
(typically, because of an increase in prevailing interest rates or a decline in
the issuer's creditworthiness). Gain on the disposition of a municipal market
discount bond purchased by the Fund after April 30, 1993 (other than a bond with
a fixed maturity date within one year from its issuance), generally is treated
as ordinary (taxable) income, rather than capital gain, to the extent of the
bond's accrued market discount at the time of disposition. Market discount on
such a bond generally is accrued ratably, on a daily basis, over the period from
the acquisition date to the date of maturity. In lieu of treating the
disposition gain as above, the Fund may elect to include market discount in its
gross income currently, for each taxable year to which it is attributable.
Use of Tax-Lot Accounting
When sell decisions are made by the Fund's portfolio manager, the Advisor
generally sells the tax lots of the Fund's securities that results in the lowest
amount of taxes to be paid by the shareholders on the Fund's capital gain
distributions. The Advisor uses tax-lot accounting to identify and sell the tax
lots of a security that have the highest cost basis and/or longest holding
period to minimize adverse tax consequences to the Fund's shareholders. However,
if the Fund has a capital loss carry forward position, the Advisor would reverse
its strategy and sell the tax lots of a security that have the lowest cost basis
and/or shortest holding period to maximize the use of the Fund's capital loss
carry forward position.
DETERMINATION OF NET ASSET VALUE
Generally, when an investor makes any purchases, sales, or exchanges, the price
of the investor's shares will be the net asset value ("NAV") next determined
after Strong Funds receives a request in proper form (which includes receipt of
all necessary and appropriate documentation and subject to available funds). The
"offering price" is the initial sales charge, if any, plus the NAV. If Strong
Funds receives such a request prior to the close of the New York Stock Exchange
("NYSE") on a day on which the NYSE is open, the share price will be the NAV
determined that day. The NAV for each Fund or each class of shares is normally
determined as of 3:00 p.m. Central Time ("CT") each day the NYSE is open. The
NYSE is open for trading Monday through Friday except New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the NYSE will not be open for
trading on the preceding Friday, and when any such holiday falls on a Sunday,
the NYSE will not be open for trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a monthly or yearly accounting
period. The Fund reserves the right to change the time at which purchases,
redemptions, and exchanges are priced if the NYSE closes at a time other than
3:00 p.m. CT or if an emergency exists. The NAV of each Fund or of each class of
shares of a Fund is calculated by taking the fair value of the Fund's total
assets attributable to that Fund or class, subtracting all its liabilities
attributable to that Fund or class, and dividing by the total number of shares
outstanding of that Fund or class. Expenses are accrued daily and applied when
determining the NAV. The Fund's portfolio securities are valued based on market
quotations or at fair value as determined by the method selected by the Fund's
Board of Directors.
The Fund values its securities on the amortized cost basis and seek to maintain
their net asset value at a constant $1.00 per share. In the event a difference
of 1/2 of 1% or more were to occur between the net asset value calculated by
reference to market values and the Fund's $1.00 per share net asset value, or if
there were any other deviation which the Fund's Board of Directors believed
would result in a material dilution to shareholders or purchasers, the Board of
Directors would consider taking any one or more of the following actions or any
other action considered appropriate: selling portfolio securities to shorten
average portfolio maturity or to realize capital gains or losses, reducing or
suspending shareholder income accruals, redeeming shares in kind, or utilizing a
value per unit based upon available indications of market value. Available
indications of market value may include, among other things, quotations or
market value estimates of securities and/or values based on yield data relating
to money market securities that are published by reputable sources.
ADDITIONAL SHAREHOLDER INFORMATION
BROKERS RECEIPT OF PURCHASE AND REDEMPTION ORDERS
The Fund has authorized certain brokers to accept purchase and redemption orders
on the Fund's behalf. These brokers are, in turn, authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Purchase and redemption orders received in this manner will be priced at
the Fund's net asset value next computed after they are accepted by an
authorized broker or the broker's authorized designee.
FEE WAIVERS
The Fund reserves the right to waive some or all fees in certain conditions
where the application of the fee would not serve its purpose.
FINANCIAL INTERMEDIARIES
If an investor purchases or redeems shares of the Fund through a financial
intermediary, certain features of the Fund relating to such transactions may not
be available or may be modified. In addition, certain operational policies of
the Fund, including those related to settlement and dividend accrual, may vary
from those applicable to direct shareholders of the Fund and may vary among
intermediaries. Please consult your financial intermediary for more information
regarding these matters. In addition, the Fund may pay, directly or indirectly
through arrangements with the Advisor, amounts to financial intermediaries that
provide transfer agent type and/or other administrative services to their
customers. The Fund will not pay more for these services through intermediary
relationships than it would if the intermediaries' customers were direct
shareholders in the Fund; however, the Advisor may pay to the financial
intermediary amounts in excess of such limitation out of its own profits.
Certain financial intermediaries may charge an advisory, transaction, or other
fee for their services. Investors will not be charged for such fees if investors
purchase or redeem Fund shares directly from the Fund without the intervention
of a financial intermediary.
FUND REDEMPTIONS
Shareholders (except Advisor and Institutional Class shareholders) can gain
access to the money in their accounts by selling (also called redeeming) some or
all of their shares by mail, telephone, computer, automatic withdrawals, through
a broker-dealer, or by writing a check (assuming all the appropriate documents
and requirements have been met for these account options). Advisor and
Institutional Class shareholders may redeem some or all of their shares by
telephone or by faxing a written request. After a redemption request is
processed, the proceeds from the sale will normally be sent on the next business
day but, in any event, no more than seven days later.
MOVING ACCOUNT OPTIONS AND INFORMATION
When establishing a new account (other than an Institutional Class account) by
exchanging funds from an existing Strong Funds account, some account options
(such as check writing, the Exchange Option, Express PurchaseSM, and the
Redemption Option), if existing on the account from which money is exchanged,
will automatically be made available on the new account unless the shareholder
indicates otherwise, or the option is not available on the new account. Subject
to applicable Strong Funds policies, other account options, including automatic
investment, automatic exchange, and systematic withdrawal, may be moved to the
new account at the request of the shareholder. These options are not available
for Institutional Class accounts. If allowed by Strong Funds policies (i) once
the account options are established on the new account, the shareholder may
modify or amend the options, and (ii) account options may be moved or added from
one existing account to another new or existing account. Account information,
such as the shareholder's address of record and social security number, will be
copied from the existing account to the new account.
PROMOTIONAL ITEMS
From time to time, the Advisor and/or Distributor may give de minimis gifts or
other immaterial consideration to investors who open new accounts or add to
existing accounts with the Strong Funds. In addition, from time to time, the
Advisor and/or Distributor, alone or with other entities or persons, may
sponsor, participate in conducting, or be involved with sweepstakes, give-aways,
contests, incentive promotions, or other similar programs ("Give-Aways"). This
is done in order to, among other reasons, increase the number of users of and
visits to the Fund's Internet web site. As part of the Give-Aways, persons may
receive cash or other awards including without limitation, gifts, merchandise,
gift certificates, travel, meals, and lodging. Under the Advisor's and
Distributor's standard rules for Give-Aways, their employees, subsidiaries,
advertising and promotion agencies, and members of their immediate families are
not eligible to enter the Give-Aways.
<PAGE>
REDEMPTION IN KIND
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the assets of
the Fund. If the Advisor determines that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in securities
or other financial assets, valued for this purpose as they are valued in
computing the NAV for the Fund's shares (a "redemption in kind"). Shareholders
receiving securities or other financial assets in a redemption in kind may
realize a gain or loss for tax purposes, and will incur any costs of sale, as
well as the associated inconveniences. If you expect to make a redemption in
excess of the lesser of $250,000 or 1% of the Fund's assets during any 90-day
period and would like to avoid any possibility of being paid with securities
in-kind, you may do so by providing Strong Funds with an unconditional
instruction to redeem at least 15 calendar days prior to the date on which the
redemption transaction is to occur, specifying the dollar amount or number of
shares to be redeemed and the date of the transaction (please call
800-368-3863). This will provide the Fund with sufficient time to raise the cash
in an orderly manner to pay the redemption and thereby minimize the effect of
the redemption on the interests of the Fund's remaining shareholders.
Redemption checks in excess of the lesser of $250,000 or 1% of the Fund's assets
during any 90-day period may not be honored by the Fund if the Advisor
determines that existing conditions make cash payments undesirable.
RIGHT OF SET-OFF
To the extent not prohibited by law, the Fund, any other Strong Fund, and the
Advisor, each has the right to set-off against a shareholder's account balance
with a Strong Fund, and redeem from such account, any debt the shareholder may
owe any of these entities. This right applies even if the account is not
identically registered.
SHARES IN CERTIFICATE FORM
Certificates will be issued for shares (other than Advisor Class or
Institutional Class shares) held in a Fund account only upon written request.
Certificates will not be issued for Institutional Class or Advisor Class shares
of any Fund. A shareholder will, however, have full shareholder rights whether
or not a certificate is requested.
SIGNATURE GUARANTEES
A signature guarantee is designed to protect shareholders and the Fund against
fraudulent transactions by unauthorized persons. In the following instances, the
Fund will require a signature guarantee for all authorized owners of an account:
o when adding the Redemption Option to an existing account;
o when transferring the ownership of an account to another individual or
organization;
o when submitting a written redemption request for more than $100,000;
o when requesting to redeem or redeposit shares that have been issued in
certificate form;
o if requesting a certificate after opening an account;
o when requesting that redemption proceeds be sent to a different name or
address than is registered on an account;
o if adding/changing a name or adding/removing an owner on an account; and
o if adding/changing the beneficiary on a transfer-on-death account.
A signature guarantee may be obtained from any eligible guarantor institution,
as defined by the SEC. These institutions include banks, savings associations,
credit unions, brokerage firms, and others. Please note that a notary public
stamp or seal is not acceptable.
TELEPHONE AND ELECTRONIC EXCHANGE/REDEMPTION PRIVILEGES
The Fund employs reasonable procedures to confirm that instructions communicated
by telephone or electronically are genuine. The Fund may not be liable for
losses due to unauthorized or fraudulent instructions. Such procedures include
but are not limited to requiring a form of personal identification prior to
acting on instructions received by telephone or electronically, providing
written confirmations of such transactions to the address of record, tape
recording telephone instructions, and backing up electronic transactions.
ORGANIZATION
The Fund is either a "Corporation" or a "Series" of common stock of a
Corporation, as described in the chart below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Incorporation Date Series Date Class Authorized Par
Corporation Date Created Created Shares Value ($)
--------------------------------------------- -------------- ------------ ------------ ------------ -----------
Strong Municipal Funds, Inc. (1) 07/28/96 Indefinite .00001
- Strong Municipal Money Market Fund 07/28/86 Indefinite .00001
- Strong Municipal Advantage Fund 10/27/95 Indefinite .00001
* Investor Class(3) 10/27/95 Indefinite .00001
* Advisor Class 09/21/00 Indefinite .00001
* Institutional Class 07/24/00 Indefinite .00001
- Strong Tax-Free Money Fund 12/01/00 Indefinite .00001
</TABLE>
(1) Prior to October 27, 1995, the Fund's name was Strong Municipal Money Market
Fund, Inc.
The Strong Municipal Money Market Fund, the Strong Municipal Advantage, and the
Strong Tax-Free Money Funds are diversified series of Strong Municipal Funds,
Inc., which is an open-end management investment company.
The Corporation is a Wisconsin corporation that is authorized to offer separate
series of shares representing interests in separate portfolios of securities,
each with differing investment objectives. The shares in any one portfolio may,
in turn, be offered in separate classes, each with differing preferences,
limitations, or relative rights. However, the Articles of Incorporation for the
Corporation provide that if additional series of shares are issued by the
Corporation, such new series of shares may not affect the preferences,
limitations, or relative rights of the Corporation's outstanding shares. In
addition, the Board of Directors of the Corporation is authorized to allocate
assets, liabilities, income, and expenses to each series and class. Classes
within a series may have different expense arrangements than other classes of
the same series and, accordingly, the net asset value of shares within a series
may differ. Finally, all holders of shares of the Corporation may vote on each
matter presented to shareholders for action except with respect to any matter
that affects only one or more series or class, in which case only the shares of
the affected series or class are entitled to vote. Each share of the Fund has
one vote, and all shares participate equally in dividends and other capital
gains distributions by the Fund and in the residual assets of the Fund in the
event of liquidation. Fractional shares have the same rights proportionately as
do full shares. Shares of the Corporation have no preemptive, conversion, or
subscription rights. If the Corporation issues additional series, the assets
belonging to each series of shares will be held separately by the custodian,
and, in effect, each series will be a separate fund.
SHAREHOLDER MEETINGS
The Wisconsin Business Corporation Law permits registered investment companies,
such as the Fund, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the 1940 Act.
The Fund has adopted the appropriate provisions in its Bylaws and may, at its
discretion, not hold an annual meeting in any year in which the election of
directors is not required to be acted on by shareholders under the 1940 Act.
The Fund's Bylaws allow for a director to be removed by its shareholders with or
without cause, only at a meeting called for the purpose of removing the
director. Upon the written request of the holders of shares entitled to not less
than ten percent (10%) of all the votes entitled to be cast at such meeting, the
Secretary of the Fund shall promptly call a special meeting of shareholders for
the purpose of voting upon the question of removal of any director. The
Secretary shall inform such shareholders of the reasonable estimated costs of
preparing and mailing the notice of the meeting, and upon payment to the Fund of
such costs, the Fund shall give not less than ten nor more than sixty days
notice of the special meeting.
<PAGE>
PERFORMANCE INFORMATION
The Strong Funds may advertise a variety of types of performance information as
more fully described below. The Fund's performance is historical and past
performance does not guarantee the future performance of the Fund. From time to
time, the Advisor may agree to waive or reduce its management fee and/or to
absorb certain operating expenses for the Fund. Waivers of management fees and
absorption of expenses will have the effect of increasing the Fund's
performance.
7-DAY CURRENT AND EFFECTIVE YIELD
The Fund's 7-day current yield quotation is based on a seven-day period and is
computed as follows. The first calculation is net investment income per share,
which is accrued interest on portfolio securities, plus amortized discount,
minus amortized premium, less accrued expenses. This number is then divided by
the price per share (expected to remain constant at $1.00) at the beginning of
the period ("base period return"). The result is then divided by 7 and
multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the calculation.
The Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
Effective yield is equal [(base period return + 1)(365/7)]- 1.
TAXABLE EQUIVALENT YIELD
The Fund's tax-equivalent yield is computed by dividing that portion of the
Fund's yield (computed as described above) that is tax-exempt by one minus the
stated federal income tax rate and adding the result to that portion, if any, of
the yield of the Fund that is not tax-exempt. Tax-equivalent yield does not
reflect possible variations due to the federal alternative minimum tax.
An investor may want to determine which investment, tax-exempt or taxable, will
provide you with a higher after-tax return. To determine the tax-equivalent
yield, simply divide the yield from the tax-exempt investment by the sum of (1
minus the investor's marginal tax rate). The tables below are provided for
making this calculation for selected tax-exempt yield and taxable income levels.
These yields are presented for purposes of illustration only and are not
representative of any yield that a Fund may generate.
The following table is based upon the 2000 federal tax rates in effect as of
January 1, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------- -------------------------------------------------------------------
A TAX-FREE YIELD OF:
------------------------------------------------- -------------------------------------------------------------------
------------------------------------------------- -------------- ------------ ------------- ------------ ------------
2000 Taxable Income Levels* 4% 5% 6% 7% 8%
------------------------------------------------- -------------- ------------ ------------- ------------ ------------
------------------ ------------------ ----------- -------------------------------------------------------------------
Single Married Filing Marginal IS EQUIVALENT TO A TAXABLE YIELD OF:
Jointly Tax Rate
------------------ ------------------ ----------- -------------------------------------------------------------------
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
under $26,250 under $43,850 15% 4.71% 5.88% 7.06% 8.24% 9.41%
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
$26,250-$63,550 $43,850 -$105,950 28% 5.56% 6.94% 8.33% 9.72% 11.11%
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
$63,550-$132,600 $105,950-$161,450 31% 5.80% 7.25% 8.70% 10.14% 11.59%
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
$132,600-$288,350 $161,450-$288,350 36% 6.25% 7.81% 9.38% 10.94% 12.50%
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
over $288,350 over $288,350 39.6% 6.62% 8.28% 9.93% 11.59% 13.25%
------------------ ------------------ ----------- -------------- ------------ ------------- ------------ ------------
</TABLE>
* A taxpayer with an adjusted gross income in excess of $128,950 may, to the
extent such taxpayer itemizes deductions, be subject to a higher effective
marginal rate.
DISTRIBUTION RATE
The distribution rate for the Fund is computed, according to a non-standardized
formula, by dividing the total amount of actual distributions per share paid by
the Fund over a twelve month period by the Fund's net asset value on the last
day of the period. The distribution rate differs from the Fund's yield because
the distribution rate includes distributions to shareholders from sources other
than dividends and interest, such as short-term capital gains. Therefore, the
Fund's distribution rate may be substantially different than its yield. Both the
Fund's yield and distribution rate will fluctuate.
AVERAGE ANNUAL TOTAL RETURN
The Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the SEC. The average annual total
return for the Fund for a specific period is calculated by first taking a
hypothetical $10,000 investment ("initial investment") in the Fund's shares on
the first day of the period and computing the "redeemable value" of that
investment at the end of the period. The redeemable value is then divided by the
initial investment, and this quotient is taken to the Nth root (N representing
the number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total returns
reflect the impact of sales charges, if any.
TOTAL RETURN
Calculation of the Fund's total return is not subject to a standardized formula.
Total return performance for a specific period is calculated by first taking an
investment (assumed below to be $10,000) ("initial investment") in the Fund's
shares on the first day of the period and computing the "ending value" of that
investment at the end of the period. The total return percentage is then
determined by subtracting the initial investment from the ending value and
dividing the remainder by the initial investment and expressing the result as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value of the Fund on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
returns reflect the impact of sales charges, if any.
CUMULATIVE TOTAL RETURN
Cumulative total return represents the simple change in value of an investment
over a stated period and may be quoted as a percentage or as a dollar amount.
Total returns and cumulative total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship between these factors and their
contributions to total return. Cumulative total returns reflect the impact of
sales charges, if any
COMPARISONS
U.S. TREASURY BILLS, NOTES, OR BONDS. Investors may want to compare the
performance of the Fund to that of U.S. Treasury bills, notes, or bonds, which
are issued by the U.S. Government. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities.
CERTIFICATES OF DEPOSIT. Investors may want to compare the Fund's performance to
that of certificates of deposit offered by banks and other depositary
institutions. Certificates of deposit may offer fixed or variable interest rates
and principal is guaranteed and may be insured. Withdrawal of the deposits prior
to maturity normally will be subject to a penalty. Rates offered by banks and
other depositary institutions are subject to change at any time specified by the
issuing institution.
MONEY MARKET FUNDS. Investors may also want to compare performance of the Fund
to that of money market funds. Money market fund yields will fluctuate and
shares are not insured, but share values usually remain stable.
LIPPER INC. ("LIPPER") AND OTHER INDEPENDENT RANKING ORGANIZATIONS. From time to
time, in marketing and other fund literature, the Fund's performance may be
compared to the performance of other mutual funds in general or to the
performance of particular types of mutual funds with similar investment goals,
as tracked by independent organizations. Among these organizations, Lipper, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets, may be cited. Lipper performance
figures are based on changes in net asset value, with all income and capital
gains dividends reinvested. Such calculations do not include the effect of any
sales charges imposed by other funds. The Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and portfolio holdings.
The Fund's performance may also be compared to the average performance of its
Lipper category.
OTHER SOURCES. The Fund's advertisements and supplemental sales literature may
contain full or partial reprints of editorials or articles evaluating the Fund's
management and performance from such sources as Money, Forbes, Kiplinger's,
Smart Money, Financial World, Business Week, U.S. News and World Report, The
Wall Street Journal, Mutual Fund Magazine, Barron's, and various investment
newsletters. The Fund may also include testimonials from shareholders, clients,
and others that describe their experiences with the Fund, the Advisor, or the
Distributor, including descriptions of the Fund's performance, features, and
attributes and the services, tools, and assistance provided by the Fund, the
Advisor, or the Distributor.
VARIOUS BANK PRODUCTS. The Fund's performance also may be compared on a before
or after-tax basis to various bank products, including the average rate of bank
and thrift institution money market deposit accounts, Super N.O.W. accounts and
certificates of deposit of various maturities as reported in the Bank Rate
Monitor, National Index of 100 leading banks, and thrift institutions as
published by the Bank Rate Monitor, Miami Beach, Florida. The rates published by
the Bank Rate Monitor National Index are averages of the personal account rates
offered on the Wednesday prior to the date of publication by 100 large banks and
thrifts in the top ten Consolidated Standard Metropolitan Statistical Areas. The
rates provided for the bank accounts assume no compounding and are for the
lowest minimum deposit required to open an account. Higher rates may be
available for larger deposits.
With respect to money market deposit accounts and Super N.O.W. accounts, account
minimums range upward from $2,000 in each institution and compounding methods
vary. Super N.O.W. accounts generally offer unlimited check writing while money
market deposit accounts generally restrict the number of checks that may be
written. If more than one rate is offered, the lowest rate is used. Rates are
determined by the financial institution and are subject to change at any time
specified by the institution. Generally, the rates offered for these products
take market conditions and competitive product yields into consideration when
set. Bank products represent a taxable alternative income producing product.
Bank and thrift institution deposit accounts may be insured. Shareholder
accounts in the Fund are not insured. Bank passbook savings accounts compete
with money market mutual fund products with respect to certain liquidity
features but may not offer all of the features available from a money market
mutual fund, such as check writing. Bank passbook savings accounts normally
offer a fixed rate of interest while the yield of the Fund fluctuates. Bank
checking accounts normally do not pay interest but compete with money market
mutual fund products with respect to certain liquidity features (e.g., the
ability to write checks against the account). Bank certificates of deposit may
offer fixed or variable rates for a set term. (Normally, a variety of terms are
available.) Withdrawal of these deposits prior to maturity will normally be
subject to a penalty. In contrast, shares of the Fund are redeemable at the net
asset value (normally, $1.00 per share) next determined after a request is
received, without charge.
INDICES. The Fund may compare its performance to a wide variety of indices.
There are differences and similarities between the investments that a Fund may
purchase and the investments measured by the indices.
HISTORICAL ASSET CLASS RETURNS. From time to time, marketing materials may
portray the historical returns of various asset classes. Such presentations will
typically compare the average annual rates of return of inflation, U.S. Treasury
bills, bonds, common stocks, and small stocks. There are important differences
between each of these investments that should be considered in viewing any such
comparison. The market value of stocks will fluctuate with market conditions,
and small-stock prices generally will fluctuate more than large-stock prices.
Stocks are generally more volatile than bonds. In return for this volatility,
stocks have generally performed better than bonds or cash over time. Bond prices
generally will fluctuate inversely with interest rates and other market
conditions, and the prices of bonds with longer maturities generally will
fluctuate more than those of shorter-maturity bonds. Interest rates for bonds
may be fixed at the time of issuance, and payment of principal and interest may
be guaranteed by the issuer and, in the case of U.S. Treasury obligations,
backed by the full faith and credit of the U.S. Treasury.
STRONG FUNDS. The Strong Funds offer a comprehensive range of conservative to
aggressive investment options. The Strong Funds and their investment objectives
are listed below.
<TABLE>
<CAPTION>
<S> <C>
FUND NAME INVESTMENT OBJECTIVE
----------------------------------------- --------------------------------------------------------------------------
CASH MANAGEMENT
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Advantage Fund Current income with a very low degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
Strong Heritage Money Fund Current income, a stable share price, and daily liquidity.
----------------------------------------- --------------------------------------------------------------------------
Strong Investors Money Fund Current income, a stable share price, and daily liquidity.
----------------------------------------- --------------------------------------------------------------------------
Strong Money Market Fund Current income, a stable share price, and daily liquidity.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Municipal Advantage Fund Federally tax-exempt current income with a very
low degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Municipal Money Market Fund Federally tax-exempt current income, a stable
share-price, and daily liquidity.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Tax-Free Money Fund Federally tax-exempt current income, a stable
share-price, and daily liquidity.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
GROWTH AND INCOME
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong American Utilities Fund Total return by investing for both income and capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Balanced Fund High total return consistent with reasonable risk over the
long term.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Blue Chip 100 Fund Total return by investing for both income and capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Growth and Income Fund High total return by investing for capital growth and income.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Limited Resources Fund Total return by investing for both capital growth
and income.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Schafer Balanced Fund Total return by investing for both income and
capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Schafer Value Fund Long-term capital appreciation principally through investment
in common stocks and other equity securities. Current income is a
secondary objective.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
EQUITY
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Discovery Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Dow 30 Value Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Enterprise Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Growth Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
<PAGE>
----------------------------------------- --------------------------------------------------------------------------
Strong Growth 20 Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Index 500 Fund To approximate as closely as practicable (before fees and expenses) the
capitalization-weighted total rate of return of that portion of the U.S.
market for publicly traded common stocks composed of the larger
capitalized companies.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Internet Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Large Cap Growth Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Mid Cap Disciplined Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Opportunity Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Strategic Growth Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Technology 100 Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong U.S. Emerging Growth Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Value Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
<PAGE>
----------------------------------------- --------------------------------------------------------------------------
INCOME
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Corporate Bond Fund Total return by investing for a high level of current income
with a moderate degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Government Securities Fund Total return by investing for a high level of current
income with a moderate degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong High-Yield Bond Fund Total return by investing for a high level of current income and capital
growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Short-Term Bond Fund Total return by investing for a high level of current
income with a low degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Short-Term High Yield Bond Fund Total return by investing for a high level of current
income with a moderate degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
INTERNATIONAL
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Asia Pacific Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Foreign MajorMarketsSM Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong International Bond Fund High total return by investing for both income and capital appreciation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong International Stock Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Overseas Fund Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
LIFE STAGE SERIES
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Aggressive Portfolio Capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Conservative Portfolio Total return by investing primarily for income and
secondarily for capital growth.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Moderate Portfolio Total return by investing primarily for capital growth
and secondarily for income.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
MUNICIPAL INCOME
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong High-Yield Municipal Bond Fund Total return by investing for a high level
of federally tax-exempt current income.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Municipal Bond Fund Total return by investing for a high level of
federally tax-exempt current income with a moderate degree of share-price
fluctuation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Short-Term High Yield Municipal Total return by investing for a high level of federally tax-exempt
Fund current income with a moderate degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
----------------------------------------- --------------------------------------------------------------------------
Strong Short-Term Municipal Bond Fund Total return by investing for a high level of federally tax-exempt
current income with a low degree of share-price fluctuation.
----------------------------------------- --------------------------------------------------------------------------
</TABLE>
The Advisor also serves as Advisor to several management investment companies,
some of which fund variable annuity separate accounts of certain insurance
companies.
The Fund may from time to time be compared to other Strong Funds based on a
risk/reward spectrum. In general, the amount of risk associated with any
investment product is commensurate with that product's potential level of
reward. The Strong Funds risk/reward continuum or any Fund's position on the
continuum may be described or diagrammed in marketing materials. The Strong
Funds risk/reward continuum positions the risk and reward potential of each
Strong Fund relative to the other Strong Funds, but is not intended to position
any Strong Fund relative to other mutual funds or investment products. Marketing
materials may also discuss the relationship between risk and reward as it
relates to an individual investor's portfolio.
Tying Time Frames to Your Goals. There are many issues to consider as you make
your investment decisions, including analyzing your risk tolerance, investing
experience, and asset allocations. You should start to organize your investments
by learning to link your many financial goals to specific time frames. Then you
can begin to identify the appropriate types of investments to help meet your
goals. As a general rule of thumb, the longer your time horizon, the more price
fluctuation you will be able to tolerate in pursuit of higher returns. For that
reason, many people with longer-term goals select stocks or long-term bonds, and
many people with nearer-term goals match those up with for instance, short-term
bonds. The Advisor developed the following suggested holding periods to help our
investors set realistic expectations for both the risk and reward potential of
our funds. (See table below.) Of course, time is just one element to consider
when making your investment decision.
STRONG FUNDS SUGGESTED MINIMUM HOLDING PERIODS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
UNDER 1 YEAR 1 TO 2 YEARS 4 TO 7 YEARS 5 OR MORE YEARS
------------ ------------ ------------ ---------------
Heritage Money Fund Advantage Fund Conservative Portfolio Aggressive Portfolio
Investors Money Fund Municipal Advantage Fund Corporate Bond Fund American Utilities Fund
Money Market Fund Government Securities Fund Asia Pacific Fund
Municipal Money Market Fund 2 TO 4 YEARS High-Yield Bond Fund Balanced Fund
------------
Tax-Free Money Fund Short-Term Bond Fund High-Yield Municipal Bond Blue Chip 100 Fund
Short-Term High Yield Bond Fund Discovery Fund
Fund International Bond Fund Dow 30 Value Fund
Short-Term High Yield Municipal Bond Fund Enterprise Fund
Municipal Fund Foreign MajorMarketsSM Fund
Short-Term Municipal Bond Growth Fund
Fund Growth 20 Fund
Growth and Income Fund
Index 500 Fund
International Stock Fund
Internet Fund
Large Cap Growth Fund
Limited Resources Fund
Mid Cap Disciplined Fund
Moderate Portfolio
Opportunity Fund
Overseas Fund
Schafer Balanced Fund
Schafer Value Fund
Strategic Growth Fund
Technology 100 Fund
U.S. Emerging Growth Fund
Value Fund
</TABLE>
ADDITIONAL FUND INFORMATION
PORTFOLIO CHARACTERISTICS. In order to present a more complete picture of the
Fund's portfolio, marketing materials may include various actual or estimated
portfolio characteristics, including but not limited to median market
capitalizations, earnings per share, alphas, betas, price/earnings ratios,
returns on equity, dividend yields, capitalization ranges, growth rates,
price/book ratios, top holdings, sector breakdowns, asset allocations, quality
breakdowns, and breakdowns by geographic region.
MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE. Occasionally statistics may be
used to specify fund volatility or risk. The general premise is that greater
volatility connotes greater risk undertaken in achieving performance. Measures
of volatility or risk are generally used to compare the Fund's net asset value
or performance relative to a market index. One measure of volatility is beta.
Beta is the volatility of a fund relative to the total market as represented by
the Standard & Poor's 500 Stock Index. A beta of more than 1.00 indicates
volatility greater than the market, and a beta of less than 1.00 indicates
volatility less than the market. Another measure of volatility or risk is
standard deviation. Standard deviation is a statistical tool that measures the
degree to which a fund's performance has varied from its average performance
during a particular time period.
Standard deviation is calculated using the following formula:
Standard deviation = the square root of (SIGMA)(xi - xm)2
n-1
Where: (SIGMA) = "the sum of",
xi = each individual return during the time period, xm = the average
return over the time period, and n = the number of individual returns
during the time period.
Statistics may also be used to discuss the Fund's relative performance. One such
measure is alpha. Alpha measures the actual return of a fund compared to the
expected return of a fund given its risk (as measured by beta). The expected
return is based on how the market as a whole performed, and how the particular
fund has historically performed against the market. Specifically, alpha is the
actual return less the expected return. The expected return is computed by
multiplying the advance or decline in a market representation by the Fund's
beta. A positive alpha quantifies the value that the fund manager has added, and
a negative alpha quantifies the value that the fund manager has lost.
Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.
Duration. Duration is a calculation that seeks to measure the price sensitivity
of a bond or a bond fund to changes in interest rates. It measures bond price
sensitivity to interest rate changes by taking into account the time value of
cash flows generated over the bond's life. Future interest and principal
payments are discounted to reflect their present value and then are multiplied
by the number of years they will be received to produce a value that is
expressed in years. Since duration can also be computed for the Fund, you can
estimate the effect of interest rates on the Fund's share price. Simply multiply
the Fund's duration by an expected change in interest rates. For example, the
price of the Fund with a duration of two years would be expected to fall
approximately two percent if market interest rates rose by one percentage point.
GENERAL INFORMATION
BUSINESS PHILOSOPHY
The Advisor is an independent, Midwestern-based investment advisor, owned by
professionals active in its management. Recognizing that investors are the focus
of its business, the Advisor strives for excellence both in investment
management and in the service provided to investors. This commitment affects
many aspects of the business, including professional staffing, product
development, investment management, and service delivery.
The increasing complexity of the capital markets requires specialized skills and
processes for each asset class and style. Therefore, the Advisor believes that
active management should produce greater returns than a passively managed index.
The Advisor has brought together a group of top-flight investment professionals
with diverse product expertise, and each concentrates on their investment
specialty. The Advisor believes that people are the firm's most important asset.
For this reason, continuity of professionals is critical to the firm's long-term
success.
INVESTMENT ENVIRONMENT
Discussions of economic, social, and political conditions and their impact on
the Fund may be used in advertisements and sales materials. Such factors that
may impact the Fund include, but are not limited to, changes in interest rates,
political developments, the competitive environment, consumer behavior, industry
trends, technological advances, macroeconomic trends, and the supply and demand
of various financial instruments. In addition, marketing materials may cite the
portfolio management's views or interpretations of such factors.
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 800-368-3863.
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.
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.
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.
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.
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 principal
loss.
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.
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.
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.
STRONG FINANCIAL ADVISORS GROUP
The Strong Financial Advisors Group is dedicated to helping financial advisors
better serve their clients. Financial advisors receive regular updates on the
mutual funds managed by the Advisor, access to portfolio managers through
special conference calls, consolidated mailings of duplicate confirmation
statements, access to the Advisor's network of regional representatives, and
other specialized services. For more information on the Strong Financial
Advisors Group, call 800-368-1683.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee, WI 53202, are
the independent accountants for the Fund, providing audit services and
assistance and consultation with respect to the preparation of filings with the
SEC.
LEGAL COUNSEL
Godfrey & Kahn, S.C., 780 North Water Street, Milwaukee, WI 53202, acts as legal
counsel for the Fund.
<PAGE>
APPENDIX - DEFINITION OF BOND RATINGS
STANDARD & Poor's Issue Credit Ratings
A Standard & Poor's issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation,
a specific class of financial obligations, or a specific financial program
(including ratings on medium term note programs and commercial paper programs).
It takes into consideration the creditworthiness of guarantors, insurers, or
other forms of credit enhancement on the obligation and takes into account the
currency in which the obligation is denominated. The issue credit rating is not
a recommendation to purchase, sell, or hold a financial obligation, inasmuch as
it does not comment as to market price or suitability for a particular investor.
Issue credit ratings are based on current information furnished by the obligors
or obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any credit rating
and may, on occasion, rely on unaudited financial information. Credit ratings
may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances.
Issue credit ratings can be either long-term or short-term. Short-term ratings
are generally assigned to those obligations considered short-term in the
relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days - including commercial paper.
Short-term ratings are also used to indicate the creditworthiness of an obligor
with respect to put features on long-term obligations. The result is a dual
rating, in which the short-term rating addresses the put feature, in addition to
the usual long-term rating. Medium-term notes are assigned long-term ratings.
Issue credit ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of payment - capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As such,
they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above. (Such differentiation applies when an entity has
both senior and subordinated obligations, secured and unsecured obligations, or
operating company and holding company obligations.) Accordingly, in the case of
junior debt, the rating may not conform exactly with the category definition.
'AAA'
An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
'AA'
An obligation rated 'AA' differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
'A'
An obligation rated 'A' is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
'BBB'
An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated 'BB', 'B', 'CCC', 'CC' and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least degree of
speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
'BB'
An obligation rated 'BB' is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
'B'
An obligation rated 'B' is more vulnerable to nonpayment than obligations rated
'BB', but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
'CCC'
An obligation rated 'CCC' is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
'CC'
An obligation rated 'CC' is currently highly vulnerable to nonpayment.
'C'
A subordinated debt or preferred stock obligation rated 'C' is CURRENTLY HIGHLY
VULNERABLE to nonpayment. The 'C' rating may be used to cover a situation where
a bankruptcy petition has been filed or similar action taken, but payments on
this obligation are being continued. A 'C' also will be assigned to a preferred
stock issue in arrears on dividends or sinking fund payments, but that is
currently paying.
'D'
An obligation rated 'D' is in payment default. The 'D' rating category is used
when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
Plus (+) or minus (-) : The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
r
This symbol is attached to the ratings of instruments with significant noncredit
risks. It highlights risks to principal or volatility of expected returns which
are not addressed in the credit rating. Examples include: obligations linked or
indexed to equities, currencies, or commodities; obligations exposed to severe
prepayment risk - such as interest-only or principal-only mortgage securities;
and obligations with unusually risky interest terms, such as inverse floaters.
N.R.
This indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that Standard & Poor's does not rate a
particular obligation as a matter of policy.
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
<PAGE>
FITCH IBCA, INC. ("FITCH") LONG-TERM NATIONAL CREDIT RATINGS
AAA (xxx)
'AAA' national ratings denote the highest rating assigned by Fitch in its
national rating scale for that country. This rating is assigned to the "best"
credit risk relative to all other issuers or issues in the same country and will
normally be assigned to all financial commitments issued or guaranteed by the
sovereign state.
AA (xxx)
'AA' national ratings denote a very strong credit risk relative to other issuers
or issues in the same country. The credit risk inherent in these financial
commitments differs only slightly from the country's highest rated issuers or
issues.
A (xxx)
'A' national ratings denote a strong credit risk relative to other issuers or
issues in the same country. However, changes in circumstances or economic
conditions may affect the capacity for timely repayment of these financial
commitments to a greater degree than for financial commitments denoted by a
higher rated category.
BBB (xxx)
'BBB' national ratings denote an adequate credit risk relative to other issuers
or issues in the same country. However, changes in circumstances or economic
conditions are more likely to affect the capacity for timely repayment of these
financial commitments than for financial commitments denoted by a higher rated
category.
BB (xxx)
'BB' national ratings denote a fairly weak credit risk relative to other issuers
or issues in the same country. Within the context of the country, payment of
these financial commitments is uncertain to some degree and capacity for timely
repayment remains more vulnerable to adverse economic change over time.
B (xxx)
'B' national ratings denote a significantly weak credit risk relative to other
issuers or issues in the same country. Financial commitments are currently being
met but a limited margin of safety remains and capacity for continued timely
payments is contingent upon a sustained, favourable business and economic
environment.
CCC (xxx), CC (xxx), C (xxx)
These categories of national ratings denote an extremely weak credit risk
relative to other issuers or issues in the same country. Capacity for meeting
financial commitments is solely reliant upon sustained, favourable business or
economic developments.
DDD (xxx), DD (xxx), D (xxx)
These categories of national ratings are assigned to entities or financial
commitments which are currently in default.
A special identifier for the country concerned will be added to all national
ratings. For illustrative purposes, (xxx) has been used, as above.
"+" or "-" may be appended to a national rating to denote relative status within
a major rating category. Such suffixes are not added to the 'AAA (xxx)' national
rating category or to categories below 'CCC (xxx)'.
<PAGE>
SHORT-TERM RATINGS
STANDARD & Poor's Short-Term Issue Credit Ratings
'A-1'
A short-term obligation rated 'A-1' is rated in the highest category by Standard
& Poor's. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
'A-2'
A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
'A-3'
A short-term obligation rated 'A-3' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
'B'
A short-term obligation rated 'B' is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
'C'
A short-term obligation rated 'C' is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
'D'
A short-term obligation rated 'D' is in payment default. The 'D' rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
STANDARD & Poor's Short-Term Municipal Issue Credit Ratings
SP-1
Strong capacity to pay principal and interest. An issue determined to possess a
very strong capacity to pay debt service is given a plus (+) designation.
SP-2
Satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.
SP-3
Speculative capacity to pay principal and interest.
MOODY'S SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME - 1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured sources
of alternate liquidity.
PRIME - 2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME - 3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
NOT PRIME Issuers rated Not Prime do not fall within any of the Prime rating
categories.
FITCH IBCA, INC. ("FITCH") SHORT-TERM NATIONAL CREDIT RATINGS
F1 (xxx)
Indicates the strongest capacity for timely payment of financial commitments
relative to other issuers or issues in the same country. Under Fitch's national
rating scale, this rating is assigned to the "best" credit risk relative to all
others in the same country and is normally assigned to all financial commitments
issued or guaranteed by the sovereign state. Where the credit risk is
particularly strong, a "+" is added to the assigned rating.
F2 (xxx)
Indicates a satisfactory capacity for timely payment of financial commitments
relative to other issuers or issues in the same country. However, the margin of
safety is not as great as in the case of the higher ratings.
F3 (xxx)
Indicates an adequate capacity for timely payment of financial commitments
relative to other issuers or issues in the same country. However, such capacity
is more susceptible to near-term adverse changes than for financial commitments
in higher rated categories.
B (xxx)
Indicates an uncertain capacity for timely payment of financial commitments
relative to other issuers or issues in the same country. Such capacity is highly
susceptible to near-term adverse changes in financial and economic conditions.
C (xxx)
Indicates a highly uncertain capacity for timely payment of financial
commitments relative to other issuers or issues in the same country. Capacity or
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D (xxx)
Indicates actual or imminent payment default.
A special identifier for the country concerned will be added to all national
ratings. For illustrative purposes, (xxx) has been used, as above.
"+" or "-" may be appended to a national rating to denote relative status within
a major rating category. Such suffixes are not added to ratings other than 'F1
(xxx)'.
In certain countries, regulators have established credit rating scales, to be
used within their domestic markets, using specific nomenclature. In these
countries, our rating definitions for F1+ (xxx), F1 (xxx), F2 (xxx) and F3 (xxx)
may be substituted by the regulatory scales, e.g. A1+, A1, A2 and A3.
STRONG MUNICIPAL FUNDS, INC.
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. EXHIBITS
<S> <C> <C>
(a) Articles of Incorporation dated July 31, 1996(2)
(a.1) Amendment to Articles of Incorporation dated October 13, 1997(3)
(a.2) Amendment to Articles of Incorporation dated February 22, 2000(5)
(a.3) Amendment to Articles of Incorporation dated July 24, 2000(6)
(a.4) Amendment to Articles of Incorporation dated September 21, 2000(8)
(a.5) Amendment to Articles of Incorporation dated December 1, 2000
(b) Bylaws dated October 20, 1995(1)
(b.1) Amendment to Bylaws dated May 1, 1998(4)
(c) Specimen Stock Certificate(5)
(d) Amended and Restated Investment Advisory Agreement(5)
(d.1) Investment Advisory Agreement (Tax-Free Money Fund)
(e) Distribution Agreement(5)
(e.1) Distribution Agreement - Advisor Class(5)
(e.2) Dealer Agreement(5) (Advisor shares only)
(e.3) Mutual Fund Distribution and Shareholder Services Agreement (Advisor shares only)
(e.4) Services Agreement(5)
(f) Inapplicable
(g) Custody Agreement (Municipal Advantage, Municipal Money Market, and Short-Term High Yield Municipal Funds)(1)
(g.1) Custody Agreement (Tax-Free Money Fund)
(h) Amended and Restated Transfer and Dividend Disbursing Agent Agreement(5)
(h.1) Administration Agreement-Investor Class(5)
(h.2) Administration Agreement-Advisor Class(5)
(h.3) Administration Agreement-Institutional Class(6)
(i) Opinion and Consent of Counsel
(j) Inapplicable
(k) Inapplicable
(l) Stock Subscription Agreement
(m) Amended and Restated Rule 12b-1 Plan
(n) Amended and Restated Rule 18f-3 Plan
(o) Inapplicable
(p) Code of Ethics for Access Persons dated November 9, 2000
(p.1) Code of Ethics for Non-Access Persons dated November 9, 2000
(q) Power of Attorney dated August 1, 2000(7)
(r) Letter of Representation
(1) Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement on Form N-1A of
Registrant filed on or about November 17, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A of
Registrant filed on or about June 27, 1997.
(3) Incorporated herein by reference to Post-Effective Amendment No. 16 to the Registration Statement on Form N-1A of
Registrant filed on or about November 25, 1997.
(4) Incorporated herein by reference to Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A of
Registrant filed on or about June 26, 1998.
(5) Incorporated herein by reference to Post-Effective Amendment No. 26 to the Registration Statement on Form N-1A of
Registrant filed on or about February 25, 2000.
(6) Incorporated herein by reference to Post-Effective Amendment No. 28 to the Registration Statement on Form N-1A of
Registrant filed on or about July 27, 2000.
(7) Incorporated herein by reference to Post-Effective Amendment No. 29 to the Registration Statement on Form N-1A of
Registrant filed on or about August 1, 2000.
(8) Incorporated herein by reference to Post-Effective Amendment No. 30 to the Registration Statement on Form N-1A of
Registrant filed on or about September 28, 2000.
</TABLE>
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
Registrant neither controls any person nor is under common control with
any other person.
Item 25. INDEMNIFICATION
----------------
Officers and directors of the Funds, its advisor and underwriter are
insured under a joint directors and officers/errors and omissions insurance
policy underwritten by a group of insurance companies in the aggregate amount of
$115,000,000, subject to certain deductions. Pursuant to the authority of the
Wisconsin Business Corporation Law ("WBCL"), Article VII of Registrant's Bylaws
provides as follows:
ARTICLE VII. INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 7.01. MANDATORY INDEMNIFICATION. The Corporation shall
indemnify, to the full extent permitted by the WBCL, as in effect from
time to time, the persons described in Sections 180.0850 through
180.0859 (or any successor provisions) of the WBCL or other provisions
of the law of the State of Wisconsin relating to indemnification of
directors and officers, as in effect from time to time. The
indemnification afforded such persons by this section shall not be
exclusive of other rights to which they may be entitled as a matter of
law.
SECTION 7.02. PERMISSIVE SUPPLEMENTARY BENEFITS. The
Corporation may, but shall not be required to, supplement the right of
indemnification under Section 7.01 by (a) the purchase of insurance on
behalf of any one or more of such persons, whether or not the
Corporation would be obligated to indemnify such person under Section
7.01; (b) individual or group indemnification agreements with any one
or more of such persons; and (c) advances for related expenses of such
a person.
SECTION 7.03. AMENDMENT. This Article VII may be amended or
repealed only by a vote of the shareholders and not by a vote of the
Board of Directors.
SECTION 7.04. INVESTMENT COMPANY ACT. In no event shall
the Corporation indemnify any person hereunder in contravention
of any provision of the Investment Company Act.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
The information contained under "Who are the funds' investment advisor
and portfolio managers?" in the Prospectus and under "Directors and Officers,"
"Investment Advisor," and "Distributor" in the Statement of Additional
Information is hereby incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
<PAGE>
Item 27. PRINCIPAL UNDERWRITERS
(a) Strong Investments, Inc., principal underwriter for Registrant, also serves
as principal underwriter for Strong Advantage Fund, Inc.; Strong Asia Pacific
Fund, Inc.; Strong Balanced Fund, Inc.; Strong Common Stock Fund, Inc.; Strong
Conservative Equity Funds, Inc.; Strong Corporate Bond Fund, Inc.; Strong
Discovery Fund, Inc.; Strong Equity Funds, Inc.; Strong Government Securities
Fund, Inc.; Strong Heritage Reserve Series, Inc.; Strong High-Yield Municipal
Bond Fund, Inc.; Strong Income Funds, Inc.; Strong Income Funds II, Inc.; Strong
International Equity Funds, Inc.; Strong International Income Funds, Inc.;
Strong Large Cap Growth Fund, Inc.; Strong Life Stage Series, Inc.; Strong Money
Market Fund, Inc.; Strong Municipal Bond Fund, Inc.; Strong Opportunity Fund,
Inc.; Strong Opportunity Fund II, Inc.; Strong Schafer Funds, Inc.; Strong
Schafer Value Fund, Inc.; Strong Short-Term Bond Fund, Inc.; Strong Short-Term
Global Bond Fund, Inc.; Strong Short-Term Municipal Bond Fund, Inc.; and Strong
Variable Insurance Funds, Inc.
<TABLE>
<CAPTION>
(b)
<S> <C> <C>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Fund
----------------------------------------------------------------------------------------------------------
Peter D. Schwab President and Director none
100 Heritage Reserve
Menomonee Falls, WI 53051
Richard W. Smirl Vice President and Chief
100 Heritage Reserve Compliance Officer none
Menomonee Falls, WI 53051
Dana J. Russart Vice President none
100 Heritage Reserve
Menomonee Falls, WI 53051
Michael W. Stefano Vice President none
100 Heritage Reserve
Menomonee Falls, WI 53051
Lawrence B. Zuntz Vice President none
100 Heritage Reserve
Menomonee Falls, WI 53051
Dennis A. Wallestad Vice President Vice President
100 Heritage Reserve
Menomonee Falls, WI 53051
Elizabeth N. Cohernour Secretary Vice President and
100 Heritage Reserve Secretary
Menomonee Falls, WI 53051
Thomas M. Zoeller Treasurer and Chief Vice President
100 Heritage Reserve Financial Officer
Menomonee Falls, WI 53051
Kevin J. Scott Assistant Treasurer none
100 Heritage Reserve
Menomonee Falls, WI 53051
Constance R. Wick Assistant Secretary none
100 Heritage Reserve
Menomonee Falls, WI 53051
</TABLE>
(c) None
Item 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are in the physical possession of Registrant's Vice President,
Elizabeth N. Cohernour, at Registrant's corporate offices, 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
Item 29. MANAGEMENT SERVICES
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
Item 30. UNDERTAKINGS
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
Village of Menomonee Falls, and State of Wisconsin on the 14th day of December,
2000.
STRONG MUNICIPAL FUNDS, INC.
(Registrant)
BY: /s/ Elizabeth N. Cohernour
---------------------------------------
Elizabeth N. Cohernour, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Title Date
Chairman of the Board (Principal Executive
/s/ Richard S. Strong Officer) and a Director December 14, 2000
-----------------------------------------------
Richard S. Strong
Treasurer (Principal Financial and
/s/ John W. Widmer Accounting Officer) December 14, 2000
-----------------------------------------------
John W. Widmer
Director December 14, 2000
-----------------------------------------------
Marvin E. Nevins*
Director December 14, 2000
-----------------------------------------------
Willie D. Davis*
Director December 14, 2000
-----------------------------------------------
William F. Vogt*
Director December 14, 2000
-----------------------------------------------
Stanley Kritzik*
Director December 14, 2000
-----------------------------------------------
Neal Malicky*
</TABLE>
* Susan A. Hollister signs this document pursuant to powers of attorney filed
with Post-Effective Amendment No. 29 to the Registration Statement on Form
N-1A.
By: /s/ Susan A. Hollister
---------------------------------------
Susan A. Hollister
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
EDGAR
Exhibit No. Exhibit Exhibit No.
----------- ------- -----------
(a.5) Amendment to Articles of Incorporation EX-99.a5
(d.1) Investment Advisory Agreement EX-99.d1
(e.3) Mutual Fund Distribution and Shareholder Services Agreement EX-99.e3
(g.1) Custody Agreement EX-99.g1
(i) Opinion and Consent of Counsel EX-99.i
(l) Stock Subscription Agreement EX-99.l
(m) Amended and Restated Rule 12b-1 Plan EX-99.m
(n) Amended and Restated Rule 18f-3 Plan EX-99.n
(p) Code of Ethics for Access Persons EX-99.p
(p.1) Code of Ethics for Non-Access Persons EX-99.p1
(r) Letter of Representation EX-99.r
</TABLE>
