<PAGE>
ANNUAL REPORT | October 31, 2000
The Strong
Municipal Income
--------------------------------------------------------------------------------
Funds
[PHOTO APPEARS HERE]
Strong High-Yield Municipal Bond Fund
Strong Short-Term High Yield Municipal Fund
Strong Municipal Bond Fund
Strong Short-Term Municipal Bond Fund
[LOGO HERE] STRONG
<PAGE>
A Few Words From Dick Strong
--------------------------------------------------------------------------------
[PHOTO HERE]
153 Rate Increases Later...
When Will the Pendulum Swing?
During the last 18 months, the central bankers of the world's most powerful
countries have had one overriding objective on their minds: to slow the economic
growth of their countries. To accomplish this objective, they have raised
interest rates around the globe a staggering total of 153 times.
Included in those 153 rate increases were six by the Federal Reserve Bank of the
United States. The Fed governors' objective was the same as their counterparts'
worldwide--to slow economic growth. And make no mistake...THEY WILL NOT FAIL!
Economic management is a nebulous process of leads and lags. It often takes
months or even years to get an accurate fix on the economy and gauge the
reaction to each action. It is an inexact cross between art and science.
In the last year and a half, the U.S. economy has contended with:
. Higher interest rates
. Oil selling upwards of $30 a barrel
. A strong U.S. dollar that rendered American goods and services more
expensive and less attractive to foreigners
. The erosion of wealth caused by a nearly 40% correction in the Nasdaq
The end result of it all is less money circulating through our economy and a
slowing of economic growth.
We have already begun to see signs of a weakening economy. Sales falling short
of expectations, layoffs, disappointing corporate profits, and business failures
all point to a slowdown. How much more weakening lies ahead is impossible to
know. The combination of higher interest rates, expensive oil, the strong U.S.
dollar, and further market corrections could deliver one heck of a wallop!
The lesson to be learned from all of this is that the world's financial markets
and economies are inherently cyclical. There will always be good times and bad
times, booms and busts. A solid investment program must be built to withstand
the stress of expanding and contracting economic cycles.
At Strong, our research indicates that sometime soon, the central bankers of the
world will begin to actively stimulate their respective economies by easing up
on interest rates. The internal fabric of the U.S. economy remains the best it
has been in several decades. We believe that the economy and the financial
markets will once again begin to grow and prosper in late 2001 and 2002.
The financial markets have recently had a significant correction reminiscent of
1973-74. The stock market is usually an early indicator of economic strength or
weakness and will begin to move long before earnings, job reports, and business
activity catch up.
The important thing for investors to remember is not to react to whatever the
most recent stimulus has been, but to have a well-thought-out plan to reach
their objectives--and to stay the course with that plan. At Strong, we continue
to believe, as we did back in 1975, that a balanced approach to investing can
serve you and your family well. Our recommendation continues to be that
investors should construct a balanced portfolio of money funds, bond mutual
funds, and stock mutual funds.
/s/ Dick
<PAGE>
ANNUAL REPORT | October 31, 2000
The Strong
Municipal Income
--------------------------------------------------------------------------------
Funds
Table of Contents
<TABLE>
<S> <C>
Investment Reviews
Strong High-Yield Municipal Bond Fund............................... 2
Strong Short-Term High Yield Municipal Fund......................... 4
Strong Municipal Bond Fund.......................................... 6
Strong Short-Term Municipal Bond Fund............................... 8
Bond Glossary.......................................................... 10
Financial Information
Schedules of Investments in Securities
Strong High-Yield Municipal Bond Fund........................... 11
Strong Short-Term High Yield Municipal Fund..................... 14
Strong Municipal Bond Fund...................................... 18
Strong Short-Term Municipal Bond Fund........................... 21
Statements of Assets and Liabilities................................ 27
Statements of Operations............................................ 29
Statements of Changes in Net Assets................................. 31
Notes to Financial Statements....................................... 32
Financial Highlights................................................... 38
Report of Independent Accountants...................................... 43
</TABLE>
<PAGE>
Strong High-Yield Municipal Bond Fund
--------------------------------------------------------------------------------
Your Fund's Approach
The Strong High-Yield Municipal Bond Fund seeks total return by investing for a
high level of federally tax-exempt current income. The Fund invests primarily in
long-term, medium- and lower-quality municipal bonds. The Fund's manager
emphasizes bonds whose credit quality may be improving and issuers that
complement current investment themes, such as the "aging of America." The
manager also considers the overall interest rate environment. The Fund typically
maintains an average maturity between 15 and 25 years.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 10-1-93 to 10-31-00
<TABLE>
<CAPTION>
Lipper
The Strong High-Yield High Yield
High-Yield Municipal Municipal Debt
Municipal Bond Bond Index* Funds Index*
<S> <C> <C> <C>
Sep 93 $10,000 $10,000 $10,000
Dec 93 $10,266 $10,164 $10,141
Dec 94 $10,165 $ 9,608 $ 9,636
Dec 95 $11,650 $11,361 $11,245
Dec 96 $12,247 $11,867 $11,674
Dec 97 $13,949 $13,164 $12,815
Dec 98 $14,684 $13,982 $13,528
Dec 99 $13,879 $13,730 $13,034
Oct 00 $13,925 $14,509 $13,559
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
High-Yield Municipal Bond Index and the Lipper High Yield Municipal Debt Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares. This graph is based on Investor Class shares only;
performance for other classes will vary due to differences in fee structures.
Q: How did your fund perform?
A: The Fund's performance for the year was weighed down primarily by the
Fund's exposure to lower- rated securities. Investor reaction to the
high-yield municipal market negatively impacted the portfolio, and a market
sector within the Fund suffered downgrades.
Q: What market conditions, market events, and other factors impacted your
fund's performance?
A: The Fund's returns have been hampered by its high exposure to BBB and
lower-rated securities. Earlier this year, the municipal market taught us
an important lesson in liquidity and diversification. As investors who were
concerned about the overall performance of high-yield municipals sought to
reallocate assets, we were able to meet redemptions but were forced to sell
securities at prices that were not indicative of their credit fundamentals.
The market continues to demand significantly higher yields from lower-rated
long-term municipal debt.
State and local governments have benefited from the strong economy.
Municipalities have been able to store funds away for a rainy day, and the
increased fiscal strength can be seen in the fact that credit upgrades well
outpaced downgrades. An exception to this was in the health-care sector,
where the Fund was overweighted.
2
<PAGE>
Q: What investment strategies and techniques impacted your fund's performance?
A: With outflows abating, we have repositioned the portfolio to place more
emphasis on higher-rated bonds and also to enhance the Fund's sector
diversification. We have increased the Fund's exposure to the utility and
transportation sectors, but have maintained our weighting in health care.
We have also decreased overall portfolio duration to 8.36 years, which
should position the Fund to benefit from the steady interest rate
environment we anticipate will continue in coming months.
Because the potential for higher incremental yield requires an incremental
increase in risk, a team of seasoned professionals carries out the Fund's
disciplined investment style. Although the process starts from the top
down, a team of research analysts and traders assist the portfolio manager
in implementing our approach.
Q: What is your future outlook?
A: After raising interest rates by 125 basis points, the Federal Reserve has
adopted a wait-and-see attitude on whether further rate hikes are needed to
keep inflation in check. If rates hold steady or fall, the steeply
discounted prices that currently affect lower-rated municipal bonds should
ease somewhat, as investors once again express interest in these issues to
boost their portfolios' income levels.
Health-care-related bonds may have a more difficult time, however, as
concerns remain about reduced reimbursements for their services from
Medicare and other insurers. Signs of improvement are, however, beginning
to emerge. We continue to overweight the sector in the portfolio, where our
research is crucial for identifying those participants that can thrive in
today's challenging health-care field.
Certainly in coming months, we will see how election results will play out
in the bond markets. We appreciate your investment in the Strong High-Yield
Municipal Bond Fund and look forward to working with you in the years to
come.
Mary-Kay H. Bourbulas
Portfolio Manager
---------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year -0.84%
3-year 0.96%
5-year 4.12%
Since Inception 4.79%
(10-1-93)
ADVISOR CLASS/1/
-------------
1-year -1.09%
3-year 0.63%
5-year 3.76%
Since Inception 4.42%
(10-1-93)
PORTFOLIO STATISTICS
--------------------
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/2/ 6.70%
ADVISOR CLASS
-------------
30-day annualized yield/2/ 6.23%
Average maturity/3/ 14.8 Years
Average quality rating/4/ BB
--------------------------------------------------------------------------------
The Fund invests in lower-quality securities that present a significant risk for
loss of principal and interest. Securities of the Fund are generally valued at
fair value through valuations obtained by a commercial pricing service. Please
consider this before investing.
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 2-29-00 is based on
the Fund's Investor Class shares' performance, restated for the higher
expense ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
/2/ Yields are historical and do not represent future yields. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.15%. Otherwise, the current yield would have been 6.08%, and
returns would have been lower.
/3/ The Fund's average maturity includes the effect of futures and when-issued
securities.
/4/ For purposes of this average rating, the Fund's short-term debt obligations
have been assigned long-term ratings by the Advisor.
* The High-Yield Municipal Bond Index is comprised of the Lehman Brothers Baa
Municipal Bond Index from inception through December 31, 1995, and the
Lehman Brothers High-Yield Municipal Bond Index from January 1, 1996, to
present. The Lehman Brothers Baa Municipal Bond Index is an unmanaged index
generally representative of municipal bonds rated Baa. The Lehman Brothers
High-Yield Municipal Bond Index, which was instituted on January 1, 1996,
is an unmanaged index generally representative of municipal bonds rated
below Baa. The Lipper High Yield Municipal Debt Funds Index is an equally
weighted performance index of the largest qualifying funds in this Lipper
category. Source of the High-Yield Index data is Lehman Brothers. Source of
the Lipper index data is Lipper Inc.
3
<PAGE>
Strong Short-Term High Yield Municipal Fund
Your Fund's Approach
The Strong Short-Term High Yield Municipal Fund seeks total return by investing
for a high level of federally tax-exempt current income with a moderate degree
of share-price fluctuation. The Fund invests primarily in short- and
intermediate-term, medium- and lower-quality municipal bonds. The Fund's manager
emphasizes bonds whose credit quality may be improving and issuers that
complement current investment themes, such as the "aging of America." The
manager also considers the overall interest rate environment. The Fund typically
maintains an average maturity between one and three years.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 11-30-97 to 10-31-00
<TABLE>
<CAPTION>
Lehman Brothers
The Strong 1-3 Year
Short-Term Non-Investment Lipper
High Yield Grade Municipal High Yield Municipal
Municipal Fund Bond Index* Debt Fund Index*
<S> <C> <C> <C>
Nov 97 $10,000 $10,000 $10,000
Dec 97 $10,082 $10,052 $10,159
Jun 98 $10,458 $10,326 $10,463
Dec 98 $10,699 $10,599 $10,724
Jun 99 $10,849 $10,818 $10,691
Dec 99 $10,783 $10,987 $10,333
Jun 00 $10,880 $11,298 $10,506
Oct 00 $11,091 $11,543 $10,749
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers 1-3 Year Non-Investment Grade Municipal Bond Index and the
Lipper High Yield Municipal Debt Funds Index. Results include the reinvestment
of all dividends and capital gains distributions. Performance is historical and
does not represent future results. Investment returns and principal value vary,
and you may have a gain or loss when you sell shares. This graph is based on
Investor Class shares only; performance for other classes will vary due to
differences in fee structures.
Q: How did your fund perform?
A: The Fund's performance for the period was hampered by several factors.
Health-care bonds within the portfolio, for instance, were downgraded due
to various industry concerns. Other high-yield debt issues did not fare
well, either. We have since sought to increase the credit quality and
sector diversification of the Fund.
Q: What market conditions, market events, and other factors impacted your
fund's performance?
A: After posting poor returns in 1999, municipal securities have done
considerably better in 2000, with high-quality municipals delivering some
of the best returns in the fixed income market. The rally has not, however,
had a similar impact on lower-rated municipal credits. Health-care bonds,
in which the Fund is overweighted, faced particular difficulty, as
virtually every bond in this sector was hurt by concerns over profitability
in a time of reduced reimbursement rates from government and private
insurers.
Although the greatest difficulties appear to be in the past, the market
continues to demand significantly higher yields from municipals rated BBB
or below. This means that prices of these issues remain depressed. If
interest rates hold steady or fall, however, there could be room for
significant improvement as investors turn to the bonds as a means to boost
their investment income. As it is, the Federal Reserve has taken no action
with regard to interest rates since May.
4
<PAGE>
Q: What investment strategies and techniques impacted your fund's performance?
A: Earlier this year, the Fund faced significant redemptions, forcing us to
sell securities at prices that were far lower than was justified by their
credit fundamentals. As cash came back into the Fund, however, we
concentrated on purchasing securities in sectors favored by the
marketplace, including general obligation and utility bonds. Increased tax
receipts and a favorable deregulatory environment, respectively, make these
sectors attractive.
Our goal was to selectively upgrade the Fund's credit quality and sector
diversification. We have made great strides in meeting these goals--and in
improving liquidity. We reduced the Fund's average duration to 2.31 years,
reflecting our generally neutral market outlook, and the Fund's average
credit quality remains at BB.
While many areas of the municipal market continue to benefit from credit
upgrades, health care continues to feel the pain of reduced reimbursements
from Medicare, Medicaid, and managed-care providers. Nonetheless, signs of
stabilization are beginning to emerge. We continue to overweight health
care, as demographic trends in the U.S. support the industry's long-term
prospects. Our intensive credit research is key in evaluating bonds in this
sector.
Q: What is your future outlook?
A: As flows return to the marketplace, the difference (or spread) in yield
between AAA and BBB or lower-rated debt should narrow. We believe the
portfolio is positioned to take advantage of the narrowing spread.
We will keep a careful eye on developments in Washington that could affect
the municipal markets. Proposals for tax cuts, savings incentives, and
Alternative Minimum Tax relief have all been discussed and may present us
with new opportunities in the months ahead.
We appreciate the confidence you've shown in the Strong Short-Term High
Yield Municipal Fund.
Mary-Kay H. Bourbulas
Portfolio Manager
-----------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 2.50%
Since Inception 3.62%
(11-30-97)
ADVISOR CLASS/1/
--------------
1-year 1.98%
Since Inception 3.17%
(11-30-97)
PORTFOLIO STATISTICS
--------------------
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/2/ 5.42%
ADVISOR CLASS
-------------
30-day annualized yield/2/ 4.96%
Average maturity/3/ 2.8 years
Average
quality rating/4/ BB
--------------------------------------------------------------------------------
The Fund invests in lower-quality securities that present a significant
risk for loss of principal and interest. Securities of the Fund are
generally valued at fair value through valuations obtained by a commercial
pricing service. Please consider this before investing.
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 2-29-00 is based on
the Fund's Investor Class shares' performance, restated for the higher
expense ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
/2/ Yields are historical and do not represent future yields. Yields fluctuate.
Yields are as of 10-31-00. The Investor Class has temporarily absorbed
expenses of 0.05%. Otherwise, the current yield would have been 5.37%, and
returns would have been lower. The Advisor Class has temporarily absorbed
expenses of 0.16%. Otherwise, the current yield would have been 4.80%, and
returns would have been lower.
/3/ The Fund's average maturity includes the effect of futures and when-issued
securities.
/4/ For the purposes of this average rating, the Fund's short-term debt
obligations have been assigned long-term ratings by the Advisor.
* The Lehman Brothers 1-3 Year Non-Investment Grade Municipal Bond Index is
an unmanaged index generally representative of municipal bonds rated below
Baa with maturities of one to three years. The Lipper High Yield Municipal
Debt Funds Index is an equally weighted performance index of the largest
qualifying funds in this Lipper category. Source of the Lehman index data
is Lehman Brothers. Source of the Lipper index data is Lipper Inc.
5
<PAGE>
Strong Municipal Bond Fund
--------------------------------------------------------------------------------
Your Fund's Approach
The Strong Municipal Bond Fund seeks total return by investing for a high level
of federally tax-exempt current income with a moderate degree of share-price
fluctuation. The Fund invests primarily in long-term, higher- and medium-quality
municipal bonds. The Fund's manager conducts intensive research on individual
issuers to uncover solid investment opportunities and especially looks for bonds
whose quality may be improving. The Fund typically maintains an average maturity
between 10 and 20 years.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 10-23-86 to 10-31-00
<TABLE>
<CAPTION>
The Strong Lehman Brothers Lipper General
Municipal Municipal Municipal
Bond Fund Bond Index* Debt Funds Index*
<S> <C> <C> <C>
Sep 86 $10,000 $10,000 $10,000
Dec 87 $ 9,949 $10,369 $10,182
Dec 89 $11,463 $12,655 $12,502
Dec 91 $13,598 $15,226 $14,848
Dec 93 $17,051 $18,604 $18,180
Dec 95 $18,128 $20,722 $20,040
Dec 97 $20,819 $23,629 $22,706
Dec 99 $20,772 $24,643 $23,009
Oct 00 $21,147 $26,657 $24,755
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Lehman Brothers Municipal Bond Index and the Lipper General Municipal Debt Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares. To equalize the time periods, the indexes' performances
were prorated for the month of October 1986. This graph is based on Investor
Class shares only; performance for other classes will vary due to differences in
fee structures.
Q: How did your fund perform?
A: Early in the period, the Fund was positioned with the view that interest
rates would be stable or trend lower and also with the view that
lower-quality bonds would perform well in the continued strong economic
environment. Early in the period, when short and intermediate interest
rates started to rise, the Fund was hurt by having a longer maturity. At
the same time, even though credit quality in the general market was
improving (as measured by credit upgrades versus downgrades), there was
little demand for lower-quality bonds in the marketplace. This caused these
bonds to perform poorly and to impact the Fund negatively.
Q: What market conditions, market events, and other factors impacted your
fund's performance?
A: Over the past year, the Federal Reserve increased short-term rates by 125
basis points. Therefore, short- and intermediate-term interest rates
trended higher; however, longer-term interest rates remained fairly stable.
The result was a relatively flat yield curve. Also, higher-quality bonds
performed better than lower-quality bonds.
The municipal market in general was one of the best-performing sectors of
the fixed income marketplace. On a historical basis, municipals continue to
look attractive versus Treasuries. Long-term, high-quality municipals are
yielding approximately 95% of Treasuries, and this is before taking into
consideration the tax
6
<PAGE>
benefits associated with this asset class.
Q: What investment strategies and techniques impacted your fund's performance?
A: On March 31, a new manager took over responsibilities for this portfolio.
Our aim is to manage the Fund by positioning the portfolio to look more
like the Lehman Brothers Municipal Bond Index* and hopefully outperform
this benchmark by making moderate deviations.
Therefore, during the period, we reduced the Fund's duration to bring it
more in line with its benchmark. Our current duration is 7.7 years. We
have also started to upgrade the overall credit quality of the portfolio.
This will be a slower process, as we believe that the current yields on
lower-quality bonds are very attractive on a longer-term basis and a quick
sale now is not in the best interest of long-term shareholders.
One sector that has performed very poorly is health care. We are
maintaining the Fund's overweighting in the sector, as it shows signs of
stabilizing. In this sector, and throughout the portfolio, we take a
proactive approach to credit research. We strive to structure a diversified
portfolio of securities with positive credit fundamentals, which should
lead to more consistent long-term results. With this in mind, the portfolio
currently has an average credit quality of A.
Q: What is your future outlook?
A: Recent data suggests that the U.S. economy is slowing its rate of growth.
The market has reacted by starting to price in an easing of interest rates.
With current mortgage rates below the levels seen when the Federal Reserve
started to raise short-term rates in 1999 and continued strong consumer
spending, it is hard for us to argue that the economy will slow to a level
that justifies a Federal Reserve easing. Therefore, we have positioned the
Fund with the view that interest rates will remain fairly steady over the
next few months.
While we will pay very close attention to the changes that may take place
after the resolution of the political elections, one must remember that
campaign promises may look very different from actua policy changes.
We thank you for your investment in the Strong Municipal Bond Fund.
Lyle J. Fitterer
Portfolio Manager
----------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 0.62%
5-year 3.73%
10-year 6.10%
Since Inception 5.49%
(10-23-86)
ADVISOR CLASS/1/
-------------
1-year 0.28%
5-year 3.38%
10-year 5.74%
Since Inception 5.13%
(10-23-86)
INSTITUTIONAL CLASS/2/
-------------------
1-year 0.70%
5-year 3.75%
10-year 6.11%
Since Inception 5.49%
(10-23-86)
PORTFOLIO STATISTICS
--------------------
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/3/ 5.52%
ADVISOR CLASS
-------------
30-day annualized yield/3/ 5.15%
INSTITUTIONAL CLASS
-------------------
30-day annualized yield/3/ 5.87%
Average maturity/4/ 11.5 years
Average
quality rating/5/ A
The Fund invests a portion of its assets in lower-quality securities that
present a significant risk for loss of principal and interest. Securities of the
Fund are generally valued at fair value through valuations obtained by a
commercial pricing service. Please consider this before investing.
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 2-29-00 is based on
the Fund's Investor Class shares' performance, restated for the higher
expense ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
/2/ The performance of the Institutional Class shares prior to 7-31-00 is based
on the Fund's Investor Class shares' performance. Please consult a
prospectus for information about all share classes.
/3/ Yields are historical and do not represent future yields. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.16%. Otherwise, the current yield would have been 4.99%, and
returns would have been lower.
/4/ The Fund's average maturity includes the effect of futures and when-issued
securities.
/5/ For purposes of this average rating, the Fund's short-term debt obligations
have been assigned long-term ratings by the Advisor.
* The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of investment-grade, tax-exempt bonds. The Lipper General
Municipal Debt Funds Index is an equally weighted performance index of the
largest qualifying funds in this Lipper category. Source of the Lehman
index data is Standard & Poor's Micropal. Source of the Lipper index data
is Lipper Inc.
7
<PAGE>
Strong Short-Term Municipal Bond Fund
--------------------------------------------------------------------------------
Your Fund's Approach
The Strong Short-Term Municipal Bond Fund seeks total return by investing for a
high level of federally tax-exempt current income with a low degree of
share-price fluctuation. The Fund invests primarily in short- and
intermediate-term, higher- and medium-quality municipal bonds. The Fund's
manager conducts intensive research on individual issuers to uncover solid
investment opportunities and especially looks for bonds whose quality may be
improving. The Fund typically maintains an average maturity of three years or
less.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-31-91 to 10-31-00
<TABLE>
<CAPTION>
The Strong
Short-Term Lehman Brothers Lipper Short
Municipal Municipal Municipal
Bond Fund 3 Year Bond Index* Debt Funds Average*
<S> <C> <C> <C>
Dec 91 $10,000 $10,000 $10,000
Dec 92 $10,716 $10,643 $10,578
Dec 93 $11,440 $11,305 $11,130
Dec 94 $11,256 $11,382 $11,167
Dec 95 $11,860 $12,391 $11,968
Dec 96 $12,436 $12,941 $12,423
Dec 97 $13,300 $13,650 $13,001
Dec 98 $14,039 $14,361 $13,591
Dec 99 $14,202 $14,643 $13,822
Oct 00 $14,768 $15,322 $14,353
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers Municipal 3 Year Bond Index and the Lipper Short Municipal Debt
Funds Average. Results include the reinvestment of all dividends and capital
gains distributions. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you may have a gain or
loss when you sell shares. This graph is based on Investor Class shares only;
performance for other classes will vary due to differences in fee structures.
Q: How did your fund perform?
A: Just as the highest-quality securities (Treasuries) have outperformed other
taxable bonds, AAA-rated municipal bonds have outperformed most other
sectors of the tax-free market. Even though the Fund's exposure to bonds
rated below AAA exceeds the benchmark index's level, the additional yield
these securities generate has still allowed the Fund to perform well.
Q: What market conditions, market events, and other factors impacted your
fund's performance?
A: Although municipal issues were among the worst performers in 1999, they
have turned out to be among the best-performing sectors of the fixed income
markets in 2000. After raising rates by 125 basis points over the past
year, the Federal Reserve entered a holding pattern as signs of slowing
economic growth -- the much-desired soft landing -- started to appear.
Municipal issuers continued to enjoy the benefits of a solid economy, with
credit upgrades exceeding downgrades in most sectors. Health care, where
the Fund maintains an overweighting, was a notable exception, although we
are starting to see signs of stability.
8
<PAGE>
Q: What investment strategies and techniques impacted your fund's performance?
A: The Fund's average portfolio maturity was reduced to 2.4 years, reflecting
our view that interest rates should remain fairly stable over the next
several months. The Fund's average credit quality remains a solid A. In
anticipation that the yields on Alternative Minimum Tax (AMT) bonds--that
is, bonds that are subject to special taxes levied on high-income
investors--would widen versus non-AMT bonds, we have reduced the percentage
of the Fund's securities that are subject to the AMT.
We have increased the Fund's exposure to the utility sector, focusing on
companies that have benefited from the changes deregulation has brought to
the industry. The Fund is positioned in line with our view that interest
rates will remain fairly steady over the next few months, although we will
keep an eye on developments that could change this scenario.
Q: What is your future outlook?
A: Many investors believe that the Federal Reserve has once again engineered a
soft landing for the U.S. economy and that we have, therefore, reached a
peak in short-term interest rates. That represents a positive environment
for fixed income investments in general, including short-term municipals.
Municipals have outperformed Treasuries recently, and on a historical
basis, their yields are still very attractive relative to taxable
alternatives.
We appreciate your investment in the Strong Short-Term Municipal Bond Fund
and look forward to working with you in the years to come.
Lyle J. Fitterer
Portfolio Manager
------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 4.29%
3-year 4.04%
5-year 4.70%
Since Inception 4.51%
(12-31-91)
ADVISOR CLASS/1/
--------------
1-year 4.01%
3-year 3.69%
5-year 4.34%
Since Inception 4.14%
(12-31-91)
INSTITUTIONAL CLASS/2/
--------------------
1-year 4.46%
3-year 4.09%
5-year 4.74%
Since Inception 4.53%
(12-31-91)
PORTFOLIO STATISTICS
--------------------
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/3/ 4.84%
ADVISOR CLASS
-------------
30-day annualized yield/3/ 4.50%
INSTITUTIONAL CLASS
-------------------
30-day annualized yield/3/ 5.11%
Average maturity 2.4 years
Average quality rating/4/ A
--------------------------------------------------------------------------------
The Fund invests a portion of its assets in lower-quality securities that
present a significant risk for loss of principal and interest. Securities of the
Fund are generally valued at fair value through valuations obtained by a
commercial pricing service. Please consider this before investing.
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 2-29-00 is based on the
Fund's Investor Class shares' performance, restated for the higher expense
ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
/2/ The performance of the Institutional Class shares prior to 7-31-00 is based
on the Fund's Investor Class shares' performance. Please consult a
prospectus for information about all share classes.
/3/ Yields are historical and do not represent future yields. Yields fluctuate.
Yields are as of 10-31-00.
/4/ For the purposes of this average rating, the Fund's short-term debt
obligations have been assigned long-term ratings by the Advisor.
* The Lehman Brothers Municipal 3 Year Bond Index is an unmanaged index
generally representative of three-year, tax-exempt bonds. The Lipper Short
Municipal Debt Funds Average represents funds that invest in municipal debt
issues with dollar-weighted average maturities of less than three years.
Source of the Lehman index data is Standard & Poor's Micropal. Source of the
Lipper index data is Lipper Inc.
9
<PAGE>
Bond Glossary
--------------------------------------------------------------------------------
Bond Quality Ratings--There are services that analyze the financial condition of
a bond's issuer and then assign it a rating. The best-known rating agencies are
Standard and Poors (S&P) and Moody's. The highest-quality bonds are rated AAA
(S&P) or Aaa (Moody's). The scale descends to AA, A, then BBB, and so on, down
to D. Bonds with a rating of BBB or higher are considered "investment grade."
Bonds rated BB and below are considered "junk bonds." Typically, the lower a
bond's rating, the higher the yield it must pay in order to compensate the
bondholder for the added risk.
Maturity--Like a loan, a bond must be paid off on a certain date. A bond's
maturity is the time remaining until it is paid off. Bonds typically mature in a
range from overnight to 30 years from now. Typically, bonds with longer
maturities will have higher yields and larger price changes in reaction to
interest rate changes. In rare situations, shorter-term bonds will have higher
yields; this is known as an inverted yield curve (see definition on this page).
Duration--Duration is similar to maturity, but also accounts for the semiannual
interest payments made by most bonds. Duration is a useful tool for determining
a bond's or a bond fund's sensitivity to interest rate changes. The higher the
duration, the more a bond's price will fluctuate when interest rates change.
Treasury Spread--The Treasury spread is the difference in yield between a
Treasury bond (issued by the federal government) and a bond with an equal
maturity but from another category, such as a corporate bond. This calculation
is used to measure the prices of corporate bonds, mortgage-backed securities,
and other non- government issues relative to Treasuries. Higher spreads occur in
uncertain times, when investors buy Treasuries for their safety and sell other
types of bonds.
Yield--Yield is the income your investment is generating. It is calculated by
taking the income paid by a bond in a given period of time (often 30 days),
annualizing it, and stating it as a percentage of the money invested.
Yield Curve--The yield curve is a graph that plots the yields of Treasury bonds
against their maturities. Under normal circumstances, this line will slope
upward, reflecting longer-maturity bonds having higher yields. In rare
circumstances, such as in a time of deflation, the yield curve may slope
downward, or "invert." The steepness of the yield curve shifts depending on
economic trends and outlooks. Properly positioned, a bond investor can profit
from these shifts.
10
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES October 31, 2000
--------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Municipal Bonds 96.8%
Alabama 0.6%
West Jefferson, Alabama Amusement and Public
Park Authority First Mortgage Revenue -
Visionland Alabama Project,
6.00%, Due 2/01/08 $3,445,000 $ 2,618,200
Alaska 1.8%
Juneau, Alaska City and Borough Nonrecourse
Revenue - St. Ann's Care Center Project,
6.875%, Due 12/01/25 4,000,000 3,735,000
Seward, Alaska Revenue - Alaska Sealife Center
Project, 7.65%, Due 10/01/16 3,500,000 3,539,375
-----------
7,274,375
Arizona 0.4%
Maricopa County, Arizona IDA Senior Living
Facilities Revenue - Christian Care Mesa, Inc.
Project, 7.875%, Due 4/01/27 1,745,000 1,758,088
Arkansas 0.4%
Little Rock, Arkansas Hotel and Restaurant Gross
Receipts Tax Revenue, 7.375%, Due 8/01/15 1,500,000 1,786,875
California 4.2%
Millbrae, California Residential Facilities Revenue -
Magnolia of Millbrae Project, 7.375%,
Due 9/01/27 6,000,000 6,052,500
San Francisco, California Redevelopment Agency
Residential Facilities Revenue - Coventry Park
Project, 8.50%, Due 12/01/26 5,000,000 5,100,000
San Joaquin Hills, California Transportation
Corridor Agency Toll Road Revenue Refunding,
Zero %, Due 1/15/21 (Rate Reset
Effective 1/15/07) 9,750,000 6,422,812
-----------
17,575,312
Colorado 1.6%
Colorado Health Facilities Authority Hospital
Revenue - Steamboat Springs Health Care
Association Project, 5.75%, Due 9/15/22 5,000,000 4,200,000
Colorado Health Facilities Authority Revenue -
Rocky Mountain Adventist Project, 6.625%,
Due 2/01/13 2,550,000 2,514,938
-----------
6,714,938
Connecticut 1.4%
Connecticut Health and EFA Revenue - New
Opportunities for Waterbury, Inc. Project,
6.75%, Due 7/01/28 3,895,000 3,870,656
Mashantucket Western Pequot Tribe
Subordinated Special Revenue Bonds:
Zero %, Due 9/01/15 2,000,000 800,000
Zero %, Due 9/01/16 2,000,000 740,000
Zero %, Due 9/01/18 1,100,000 354,750
-----------
5,765,406
Florida 5.9%
Arbor Greene Community Development District
Special Assessment Revenue, 7.00%,
Due 5/01/03 100,000 100,875
Cory Lakes, Florida Community Development
District Special Assessment Revenue, 8.375%,
Due 5/01/17 2,750,000 2,897,812
Florida HFA MFHR Refunding - Lake Side Villas
and Golf Villas at Sabal Palm Project:
6.75%, Due 12/01/10 1,000,000 953,750
7.00%, Due 12/01/16 2,600,000 2,427,750
7.25%, Due 12/01/25 (c) 4,400,000 4,042,500
Grand Haven Community Development District
Special Assessment Revenue, 6.90%,
Due 5/01/19 $ 970,000 $ 984,550
Largo, Florida Sun Coast Health System Revenue -
Sun Coast Hospital Issue, 6.30%, Due 3/01/20 7,295,000 6,291,938
Palm Beach County, Florida Solid Waste IDR -
Okeelanta Power LP Project:
6.375%, Due 2/15/07 (Purchased in Default
on 1/28/98) 1,300,000 780,000
6.70%, Due 2/15/15 (Purchased in Default
on 2/04/98) 500,000 300,000
Palm Beach County, Florida Solid Waste IDR -
Osceola Power LP Project, 6.85%, Due 1/01/14
(Purchased in Default on 1/13/98 - 2/04/98) 450,000 270,000
Pinellas County, Florida EFA Revenue - College
Harbor Project, 8.50%, Due 12/01/28 4,685,000 4,743,562
Polk County, Florida HFA Subordinated Revenue -
Lake Wales Gardens Project,
Zero %, Due 4/01/20 4,385,000 794,781
-----------
24,587,518
Georgia 4.5%
Atlanta, Georgia Urban Residential Finance
Authority MFHR:
Evergreen Village Estates Project, 6.625%,
Due 5/01/28 605,000 608,025
Park Place Apartments Project,
6.75%, Due 3/01/31 6,000,000 5,655,000
Dekalb County, Georgia Residential Care Facilities
for the Elderly Authority First Lien Revenue -
King's Bridge Retirement Center, Inc. Project:
8.00%, Due 7/01/06 650,000 686,563
8.15%, Due 7/01/16 2,380,000 2,531,725
8.25%, Due 7/01/26 5,250,000 5,532,187
Fulton County, Georgia Housing Authority
MFHR - Washington Court Project:
6.40%, Due 2/01/19 765,000 713,363
6.50%, Due 2/01/28 1,750,000 1,601,250
Fulton County, Georgia Residential Care Facilities
Revenue - Residential Housing Authority
Assisted Living Project, 6.90%, Due 7/01/19 1,640,000 1,410,400
-----------
18,738,513
Illinois 6.0%
Godfrey, Illinois Revenue - United Methodist
Village Project, 5.875%, Due 11/15/29 5,000,000 3,900,000
Illinois DFA Hospital Revenue - Adventist Health
System/Sunbelt Obligation Project, 5.50%,
Due 11/15/20 950,000 806,312
Illinois HDA MFHR, 5.00%, Due 7/01/25 (c) 3,750,000 3,075,000
Metropolitan Pier and Exposition Authority
Hospitality Facilities Revenue - McCormick
Place Convention Project, 7.00%, Due 7/01/26 3,000,000 3,558,750
Riverdale, Illinois Environmental Improvement
Revenue - Acme Metals, Inc. Project:
7.90%, Due 4/01/24 (Defaulted Effective 9/29/98) 2,500,000 2,250,000
7.95%, Due 4/01/25 (Defaulted Effective 9/29/98) 5,000,000 4,500,000
Robbins, Illinois Resource Recovery Revenue -
Restructuring Project:
Series A, 8.375%, Due 10/15/16 5,480,468 1,370,117
(Defaulted Effective 3/17/00)
Series B, 8.375%, Due 10/15/16 2,144,531 536,133
(Defaulted Effective 3/17/00)
Series C, 7.25%, Due 10/15/09 850,426 838,733
Series C, 7.25%, Due 10/15/24 3,676,918 3,493,072
Series D, Zero %, Due 10/15/09 1,706,885 789,434
-----------
25,117,551
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Indiana 6.0%
Indiana Health Facility Financing Authority
Revenue - Hamilton Communities, Inc.
Project, 6.50%, Due 1/01/30 $18,200,000 $15,629,250
Indianapolis, Indiana EDR MFHR - Post Pointe
Apartments Project:
8.30%, Due 3/01/06 (Currently Accruing at 7.00%) 480,000 384,000
8.40%, Due 3/01/11 (Currently Accruing at 7.00%) 710,000 568,000
8.75%, Due 3/01/27 (Currently Accruing at 7.00%) 6,540,000 5,232,000
St. Joseph County, Indiana EDR - Hamilton
Communities Obligation Group Project,
7.15%, Due 7/01/29 3,155,000 3,131,338
-----------
24,944,588
Iowa 4.9%
Cedar Rapids, Iowa First Mortgage Revenue -
Cottage Grove Place Project:
5.875%, Due 7/01/28 (c) 7,635,000 5,668,988
9.00%, Due 7/01/25 (Pre-Refunding at
$102 on 7/01/05) (c) 6,000,000 7,147,500
Iowa Finance Authority Elder Care Facility First
Mortgage Revenue - Amity Fellowserve-Iowa,
Inc. Project, 6.00%, Due 10/01/28 8,820,000 7,463,925
-----------
20,280,413
Kentucky 2.9%
Kuttawa, Kentucky First Mortgage Revenue -
GF/Kentucky, Inc. Project, 6.75%, Due 3/01/29 2,900,000 2,497,625
Morgantown, Kentucky Solid Waste Disposal
Facilities Revenue - IMCO Recycling, Inc.
Project:
6.00%, Due 5/01/23 4,100,000 3,638,750
7.65%, Due 5/01/16 5,740,000 5,991,125
-----------
12,127,500
Louisiana 1.7%
Iberia Parish, Louisiana Hospital Service District
Number 1 Revenue, 8.00%, Due 5/26/16 2,100,000 1,968,750
Louisiana Local Government Environment
Facilities Community Development Authority
Revenue - Capital Projects and Equipment
Acquisition Program, 6.55%, Due 9/01/25 2,000,000 2,077,500
Louisiana Public Facilities Authority Revenue -
Progressive Healthcare Providers, Inc.
Developmental Centers Project, 6.375%,
Due 10/01/28 3,350,000 2,826,563
-----------
6,872,813
Massachusetts 4.9%
Massachusetts Development Finance Agency
Revenue - Developmental Disabilities, Inc.
Project, 8.00%, Due 6/01/20 9,675,000 9,832,219
Massachusetts Development Finance Agency
Revenue Health Care Facility Alliance, 7.10%,
Due 7/01/32 2,000,000 1,815,000
Massachusetts Health and EFA Revenue - Saints
Memorial Medical Center Project, 5.75%,
Due 10/01/06 1,885,000 1,710,637
Massachusetts Industrial Finance Agency Assisted
Living Facility Revenue - TNG Marina Bay LLC
Project, 7.50%, Due 12/01/27 4,220,000 4,204,175
Massachusetts Industrial Finance Agency Health
Care Facility Revenue - Metro Health
Foundation of Massachusetts, Inc. Project,
6.75%, Due 12/01/27 3,000,000 2,726,250
-----------
20,288,281
Michigan 1.9%
Michigan Strategic Fund Resource Recovery
Limited Obligation Revenue - Central Wayne
Energy Recovery LP Project:
6.90%, Due 7/01/19 $ 2,200,000 $ 1,988,250
7.00%, Due 7/01/27 6,800,000 6,060,500
-----------
8,048,750
Minnesota 2.8%
Rochester, Minnesota MFHR - Wedum Shorewood
Campus Project, 6.60%, Due 6/01/36 5,350,000 4,982,188
St. Paul, Minnesota Housing and Redevelopment
Authority Hospital Revenue - HealthEast Project:
5.50%, Due 11/01/09 1,580,000 1,386,450
Series A, 6.625%, Due 11/01/17 2,750,000 2,409,687
Series B, 6.625%, Due 11/01/17 3,320,000 2,909,150
-----------
11,687,475
Missouri 1.9%
Saline County, Missouri IDA Health Facilities
Revenue - John Fitzgibbon Memorial Hospital,
Inc. Project, 6.50%, Due 12/01/28 5,465,000 4,467,638
Springfield, Missouri Land Clearance
Redevelopment Authority Industrial Revenue
Refunding - University Plaza Project, 6.90%,
Due 10/01/16 3,440,000 3,341,100
-----------
7,808,738
Montana 0.2%
Crow Finance Authority Tribal Purpose Revenue,
5.70%, Due 10/01/27 1,000,000 946,250
New Hampshire 0.6%
New Hampshire Business Finance Authority
Revenue Air Cargo Facility - Pease LLC
Project, 6.75%, Due 4/01/24 2,450,000 2,269,312
New Jersey 3.9%
Camden County, New Jersey Improvement
Authority Lease Revenue - Kaighn Port Marine
Terminal A Project, 8.00%, Due 6/01/27 4,890,000 4,890,000
New Jersey EDA Assisted Living Revenue -
Meridian Assisted Living Project, 6.75%,
Due 8/01/30 5,000,000 4,368,750
New Jersey EDA EDR - Kapkowski Road
Landfill Reclamation Improvement District
Project:
Zero %, Due 4/01/04 160,000 129,800
Zero %, Due 4/01/05 310,000 235,600
Zero %, Due 4/01/06 1,020,000 724,200
Zero %, Due 4/01/07 1,025,000 679,063
Zero %, Due 4/01/09 1,020,000 590,325
6.375%, Due 4/01/31 5,000,000 4,743,750
-----------
16,361,488
New York 0.5%
Rockland County, New York IDA Civic Facility
Revenue - Dominican College Project, 6.25%,
Due 5/01/28 2,275,000 2,084,469
North Carolina 3.8%
Fletcher, North Carolina First Mortgage
Housing Revenue - Avery's View Retirement
Facilities, Inc. Project, 7.00%, Due 3/01/28
(Rate Reset Effective 3/01/05)
(Defaulted Effective 8/24/00) 15,000,000 12,750,000
Macon County, North Carolina HFC Revenue -
Chestnut Hill Highlands Project, 8.50%,
Due 7/01/27 (Defaulted Effective 8/09/99) 8,145,000 3,176,550
-----------
15,926,550
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Ohio 3.1%
Akron, Ohio COP - Akron Municipal Baseball
Stadium Project, Zero %, Due 12/01/16
(Rate Reset Effective 12/01/01) $ 1,500,000 $ 1,507,500
Cleveland, Ohio Airport Special Revenue
Refunding - Continental Airlines, Inc.
Project, 5.50%, Due 12/01/08 4,045,000 3,822,525
Cuyahoga County, Ohio MFHR - The Park
Lane Apartments Project:
7.80%, Due 7/01/07 470,000 376,000
7.90%, Due 7/01/12 680,000 544,000
8.25%, Due 7/01/28 1,930,000 1,544,000
Medina County, Ohio EDR MFHR - Camelot
Place, Ltd. Project, 8.375%, Due 10/01/23 400,000 386,500
Ohio Air Quality Development Authority PCR -
Ohio Edison Project, 5.80%, Due 6/01/16
(Mandatory Put at $100 on 12/01/04) 1,525,000 1,557,406
Pike County, Ohio Hospital Facilities Revenue -
Pike Health Services, Inc. Project,
6.75%, Due 7/01/17 3,160,000 2,950,650
-----------
12,688,581
Pennsylvania 8.9%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue -
Health System Project:
9.25%, Due 11/15/22 1,000,000 952,500
9.25%, Due 11/15/30 4,000,000 3,760,000
Bucks County, Pennsylvania IDA CDR -
Attleboro Associates, Ltd. Nursing Facility Project
8.00%, Due 12/01/05 570,000 593,512
8.25%, Due 6/01/11 3,025,000 3,172,469
Delaware County, Pennsylvania Authority Health
Care Facility First Mortgage Revenue -
GF/Longwood Care, Inc. Project:
8.50%, Due 4/15/10 530,000 521,388
9.00%, Due 4/15/25 5,860,000 5,720,825
Horsham, Pennsylvania IDA CDA Health Care
Facilities Revenue - GF/Pennsylvania
Properties, Inc. Project:
7.375%, Due 9/01/08 440,000 429,550
8.375%, Due 9/01/24 6,000,000 6,000,000
Montgomery County, Pennsylvania IDA
Revenue - Wordsworth Academy Project,
8.00%, Due 9/01/24 6,840,000 6,908,400
Pennsylvania EDFA Qualified Residential Rent
Project Revenue (Defaulted Effective 9/01/99):
RSI Properties/Butler LLC Project,
8.00%, Due 9/01/27 3,000,000 1,905,000
RSI Properties/Greensburg LLC Project,
8.00%, Due 9/01/27 3,000,000 1,905,000
Philadelphia, Pennsylvania Hospitals and Higher
EFA Revenue - Temple University Children's
Medical Center Project, 5.75%, Due 6/15/29 1,605,000 1,286,006
Scranton-Lackawanna, Pennsylvania Health and
Welfare Authority Hospital Revenue -
Marian Community Hospital Project,
7.125%, Due 1/15/13 1,000,000 995,000
Wilkinsburg, Pennsylvania Municipal Authority
Health Facilities Revenue - Monroeville
Christian Project, 8.25%, Due 3/01/27 3,000,000 3,022,500
-----------
37,172,150
Puerto Rico 0.2%
Children's Trust Fund Puerto Rico Tobacco
Settlement Revenue Asset-Backed Bonds,
6.00%, Due 7/01/26 (b) 1,000,000 990,000
South Carolina 6.9%
Connector 2000 Association, Inc. Subordinate
Capital Appreciation Toll Road Revenue -
Greenville, South Carolina Southern
Connector Project:
Zero %, Due 1/01/15 $ 4,400,000 $ 1,446,500
Zero %, Due 1/01/16 4,600,000 1,397,250
Zero %, Due 1/01/17 5,600,000 1,575,000
Zero %, Due 1/01/18 5,800,000 1,508,000
Zero %, Due 1/01/19 5,900,000 1,416,000
Zero %, Due 1/01/23 7,400,000 1,267,250
Zero %, Due 1/01/24 7,500,000 1,190,625
Zero %, Due 1/01/25 8,700,000 1,272,375
Zero %, Due 1/01/26 9,000,000 1,215,000
Zero %, Due 1/01/27 9,100,000 1,137,500
Zero %, Due 1/01/28 9,300,000 1,069,500
Zero %, Due 1/01/29 10,500,000 1,115,625
Zero %, Due 1/01/30 10,800,000 1,066,500
Zero %, Due 1/01/31 11,000,000 1,003,750
Zero %, Due 1/01/32 11,200,000 938,000
Zero %, Due 1/01/33 11,500,000 891,250
Zero %, Due 1/01/34 11,700,000 833,625
Zero %, Due 1/01/35 12,000,000 795,000
Zero %, Due 1/01/36 12,200,000 747,250
Zero %, Due 1/01/37 12,400,000 697,500
Zero %, Due 1/01/38 17,200,000 903,000
Loris, South Carolina Community Hospital
District Hospital Revenue,
5.625%, Due 1/01/29 2,350,000 1,877,062
South Carolina Jobs - EDA Solid Waste
Recycling Facilities Revenue - Santee River
Rubber Project, 8.00%, Due 12/01/14 4,000,000 3,215,000
-----------
28,578,562
South Dakota 0.4%
Mobridge, South Dakota Health Care Facilities
Revenue - Mobridge Regional Hospital
Project, 6.50%, Due 12/01/22 1,860,000 1,611,225
Tennessee 0.3%
Memphis, Tennessee Health, Educational and
Housing Facility Board MFHR - Hickory Pointe
Apartments Project, 8.50%, Due 7/01/10 1,250,000 1,260,938
Texas 2.6%
DeSoto, Texas IDA IDR - Wintergreen
Commercial Partnership Project,
7.00%, Due 1/01/17 3,594,050 3,592,972
Hidalgo County, Texas Health Services
Corporation Hospital Revenue - Mission
Hospital, Inc. Project, 6.75%, Due 8/15/16 3,000,000 2,947,500
Jefferson County, Texas Health Facilities
Development Corporation Hospital Revenue -
Baptist Health Care System Project,
8.30%, Due 10/01/14 4,465,000 4,437,094
-----------
10,977,566
Virginia 5.5%
Alexandria, Virginia Redevelopment and
Housing Authority MFHR Refunding:
Park at Landmark Project, 8.75%, Due
12/01/29 (Mandatory Put at $100 on 7/01/05) 4,000,000 4,000,000
Park Center Apartments Project, 6.375%,
Due 4/01/34 (c) 14,400,000 12,852,000
Peninsula Ports Authority of Virginia Port
Facility Revenue Refunding - Ziegler Coal
Project, 6.90%, Due 5/02/22
(Defaulted Effective 11/02/00) 12,000,000 4,200,000
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Virginia Small Business Financing Authority
IDR - Albion Enterprises LLC Project,
6.40%, Due 1/01/14 $1,750,000 $ 1,647,187
------------
22,699,187
Wisconsin 5.6%
Brookfield, Wisconsin IDR Refunding - Midway
Motor Lodge Project, 8.40%, Due 4/01/12 4,755,000 5,099,737
Wisconsin Health and EFA Revenue - Divine
Savior Hospital, Inc. Project,
5.70%, Due 6/01/28 2,500,000 1,975,000
Wisconsin Health and EFA Revenue - FH
Healthcare Development, Inc. Project,
6.25%, Due 11/15/28 3,000,000 2,512,500
Wisconsin Health and EFA Revenue -
Heartland-Edgerton Group Project,
9.00%, Due 11/15/25 2,435,000 2,383,256
Wisconsin Health and EFA Revenue - National
Regency of New Berlin, Inc. Project:
7.75%, Due 8/15/15 4,690,000 4,860,012
8.00%, Due 8/15/25 6,415,000 6,663,581
------------
23,494,086
Wyoming 0.5%
Teton County, Wyoming Hospital District
Hospital Revenue Refunding and
Improvement, 5.80%, Due 12/01/17 2,200,000 2,172,500
--------------------------------------------------------------------------------
Total Municipal Bonds (Cost $459,151,582) 403,228,198
--------------------------------------------------------------------------------
Taxable Municipal Bonds 0.2%
Iowa
Iowa Finance Authority Elder Care Facility First
Mortgage Revenue - Amity Fellowserve-
Iowa, Inc. Project, 7.00%, Due 10/01/06 860,000 808,400
--------------------------------------------------------------------------------
Total Taxable Municipal Bonds (Cost $860,000) 808,400
--------------------------------------------------------------------------------
Short-Term Investments (a) 1.8%
Municipal Money Market Funds
Multiple States
Strong Municipal Money Market Fund (d) 7,650,000 7,650,000
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $7,650,000) 7,650,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $467,661,582) 98.8% 411,686,598
Other Assets and Liabilities, Net 1.2% 4,859,542
--------------------------------------------------------------------------------
Net Assets 100.0% $416,546,140
================================================================================
FUTURES
--------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Depreciation
--------------------------------------------------------------------------------
Sold:
205 Municipal Bond Futures 12/00 $ 20,410,313 $ 142,969
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
Municipal Bonds 74.3%
Alabama 3.7%
West Jefferson, Alabama Amusement and Public
Park Authority First Mortgage Revenue -
VisionLand Alabama Project,
5.875%, Due 2/01/06 $6,510,000 $ 4,947,600
Alaska 1.0%
Juneau, Alaska City and Borough Nonrecourse
Revenue - St. Ann's Care Center Project,
5.875%, Due 12/01/04 $1,350,000 $ 1,307,812
American Samoa 0.9%
Territory of American Samoa GO Refunding,
5.75%, Due 9/01/03 1,115,000 1,133,119
Arizona 0.4%
Winslow, Arizona IDA Hospital Revenue -
Winslow Memorial Hospital Project,
4.95%, Due 6/01/03 570,000 553,612
California 0.5%
Los Angeles, California Regional Airports
Improvement Corporation Lease Revenue
Facilities - Continental Airlines Project,
9.25%, Due 8/01/24 84,027 94,005
Tustin, California Unified School District BAN -
Community Facilities Project,
6.10%, Due 9/01/02 500,000 500,625
------------
594,630
Colorado 3.7%
Black Hawk, Colorado Business Improvement
District Special Assessment:
Gilpin County Project, 6.00%, Due 12/01/09 1,075,000 1,053,500
The Lodge At Black Hawk Project,
6.25%, Due 12/01/11 1,825,000 1,731,469
Colorado Health Facilities Authority Hospital
Revenue - Steamboat Springs Health Care
Association Project:
4.40%, Due 9/15/02 380,000 372,400
4.70%, Due 9/15/05 85,000 81,600
4.80%, Due 9/15/06 455,000 434,525
4.90%, Due 9/15/02 230,000 225,113
4.90%, Due 9/15/07 20,000 19,000
Meridian, Colorado Metropolitan District GO,
7.00%, Due 12/01/01 1,000,000 1,023,740
------------
4,941,347
Connecticut 0.9%
Connecticut Health and EFA Revenue - New
Opportunities for Waterbury, Inc. Project,
6.75%, Due 7/01/13 1,205,000 1,205,590
District of Columbia 1.0%
District of Columbia Revenue - American
Geophysical Union Project, 5.50%, Due 9/01/03 450,000 448,312
District of Columbia Revenue - Methodist Home
Issue, 4.80%, Due 1/01/05 985,000 939,444
1,387,756
Florida 2.4%
Arbor Greene Community Development
District Special Assessment Revenue,
7.00%, Due 5/01/03 80,000 80,700
Grand Haven Community Development
District Special Assessment Revenue,
6.30%, Due 5/01/02 2,300,000 2,311,500
Leon County, Florida IDR - Beverly
Enterprises - Florida, Inc. Project,
9.80%, Due 6/01/11 785,000 810,206
Orlando and Orange County, Florida
Expressway Authority Revenue Refunding,
5.95%, Due 7/01/23 10,000 10,038
------------
3,212,444
</TABLE>
14
<PAGE>
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
Georgia 0.7%
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Park Place Apartments
Project, 6.00%, Due 9/01/06 $ 990,000 $ 964,013
Idaho 0.0%
Idaho Student Loan Fund Marketing
Association, Inc. Student Loan Revenue,
5.10%, Due 10/01/02 10,000 9,988
Illinois 9.1%
Chicago, Illinois O'Hare International Airport
Special Facilities Revenue:
American Airlines, Inc. Project,
7.875%, Due 11/01/25 165,000 170,318
United Airlines, Inc. Project,
8.95%, Due 5/01/18 1,170,000 1,222,580
Chicago, Illinois Tax Increment - Sub-Central
Loop Redevelopment Project:
6.25%, Due 12/01/02 (b) 1,600,000 1,600,000
6.35%, Due 12/01/03 (b) 1,000,000 1,000,000
Granite City, Illinois Hospital Revenue
Refunding - St. Elizabeth Medical Center
Project, 8.125%, Due 6/01/08 795,000 764,194
Hoopeston, Illinois Hospital Capital
Improvement Revenue Refunding -
Hoopeston Community Memorial
Hospital Project, 5.25%, Due 11/15/03 490,000 474,075
Illinois DFA IDR Refunding - Great Plains
Hotel Corporation of Illinois Project,
7.50%, Due 4/01/16 485,000 491,693
Illinois DFA MFHR - Town and Garden
Apartments Project, 7.20%, Due 9/01/08 (c) 2,250,000 2,309,062
Illinois DFA Revenue - Community
Rehabilitation Providers Project,
5.00%, Due 7/01/04 1,010,000 980,963
Illinois Health Facilities Authority Revenue -
Riverside Health System Project,
5.90%, Due 11/15/02 (c) 445,000 448,894
Illinois Health Facilities Authority Revenue
Refunding:
Bohemian-Tabor Hills Project,
5.90%, Due 11/15/21 1,450,000 1,187,187
Lifelink Corporation Obligated Group
Project, 5.95%, Due 2/15/21 1,800,000 1,536,750
----------
12,185,716
Indiana 3.7%
Anderson, Indiana EDR Refunding and
Improvement - Anderson University
Project, 5.05%, Due 10/01/03 2,445,000 2,423,606
Indiana Health Facility Financing Authority
Revenue - Hamilton Communities, Inc.
Project, 6.00%, Due 1/01/10 2,800,000 2,569,000
---------
4,992,606
Iowa 1.7%
Harlan, Iowa Revenue - American Baptist Homes
of the Midwest - Baptist Memorial Home
Project, 5.875%, Due 5/15/23 920,000 750,950
Ottumwa, Iowa Hospital Facility Revenue
Refunding and Improvement - Ottumwa
Regional Health Center, Inc. Project,
6.00%, Due 10/01/18 25,000 23,031
Ottumwa, Iowa Revenue Refunding - Regional
Retirement Living Project,
5.90%, Due 2/15/24 1,740,000 1,492,050
---------
2,266,031
Kansas 1.3%
Topeka, Kansas Industrial Revenue Refunding -
Reser's Fine Foods, Inc. Project:
5.20%, Due 4/01/03 $ 300,000 $ 294,375
5.30%, Due 4/01/04 300,000 293,250
Wathena, Kansas IDR - Skyjack Equipment,
Inc. Project:
5.15%, Due 5/01/02 390,000 384,638
5.25%, Due 5/01/03 130,000 127,237
5.40%, Due 5/01/04 345,000 336,375
5.50%, Due 5/01/05 335,000 324,950
---------
1,760,825
Kentucky 2.7%
Jefferson County, Kentucky Health Facilities
Revenue Refunding - Beverly Enterprises,
Inc. Project, 5.40%, Due 5/01/03 430,000 419,250
Kenton County, Kentucky Airport Board Special
Facilities Revenue - Mesaba Aviation, Inc.
Project, 6.00%, Due 7/01/05 985,000 978,844
Kentucky EDFA Hospital System Refunding and
Improvement Revenue - Appalachian Regional
Healthcare, Inc. Project, 5.10%, Due 10/01/03 250,000 230,313
Logan and Todd Counties, Kentucky Regional
Water Commission BAN Revenue,
5.50%, Due 8/01/03 2,000,000 2,005,000
---------
3,633,407
Louisiana 0.1%
Hodge, Louisiana Utility Revenue - Stone
Container Corporation Project,
9.00%, Due 3/01/10 100,000 101,865
Maryland 0.8%
Baltimore County, Maryland IDR -
Barre-National, Inc. Equipment Project,
6.875%, Due 7/01/09 1,200,000 1,044,000
Massachusetts 3.4%
Massachusetts Development Finance
Agency Revenue:
Developmental Disabilities, Inc. Project,
7.25%, Due 6/01/04 1,070,000 1,078,025
Health Care Facility Alliance Project,
6.50%, Due 7/01/03 820,000 802,575
Massachusetts Health and EFA Revenue - Saints
Memorial Medical Center Project,
5.50%, Due 10/01/02 1,285,000 1,252,875
Massachusetts Industrial Finance Agency Health
Care Facility Revenue - Metro Health
Foundation of Massachusetts, Inc. Project,
6.25%, Due 12/01/03 1,420,000 1,380,950
---------
4,514,425
Minnesota 3.4%
Burnsville, Minnesota CDR Refunding -
Holiday Inn Project, 5.875%, Due 4/01/08 1,430,000 1,430,029
Maplewood, Minnesota Health Care Facility
Revenue - HealthEast Project:
5.70%, Due 11/15/02 1,000,000 978,750
5.80%, Due 11/15/03 1,400,000 1,356,250
St. Paul, Minnesota Housing and Redevelopment
Authority Hospital Revenue - HealthEast
Project, 4.75%, Due 11/01/01 750,000 732,870
---------
4,497,899
Missouri 1.6%
Columbia, Missouri IDR - American Air Filter
Company, Inc. Project, 7.45%, Due 7/01/04 915,000 915,604
15
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
Shares of
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Ellisville, Missouri IDA IDR Refunding -
Gambrill Gardens Project:
4.80%, Due 6/01/02 $ 110,000 $ 107,937
5.10%, Due 6/01/05 125,000 118,594
5.20%, Due 6/01/06 135,000 126,731
Saline County, Missouri IDA Health Facilities
Revenue - John Fitzgibbon Memorial
Hospital, Inc. Project, 5.75%, Due 12/01/03 840,000 805,350
-----------
2,074,216
Nebraska 0.5%
American Public Energy Agency Gas Supply
Revenue - Nebraska Public Gas Agency
Project, 4.00%, Due 9/01/04 760,000 714,400
New Hampshire 0.6%
New Hampshire Higher Educational and Health
Facilities Authority Revenue - New England
College Project, 5.375%, Due 3/01/05 845,000 822,819
New Mexico 1.2%
Santa Fe County, New Mexico Project Revenue -
El Castillo Retirement Residences Project,
5.80%, Due 5/15/18 (c) 1,835,000 1,580,394
New York 1.1%
Monroe County, New York IDR Agency -
Empire Sports Project, 6.50%, Due 3/01/08 1,105,000 1,081,519
Rockland County, New York IDR Civic Facility
Agency - Dominican College Project,
5.50%, Due 5/01/02 390,000 386,100
-----------
1,467,619
North Carolina 0.8%
Fletcher, North Carolina First Mortgage
Housing Revenue - Avery's View Retirement
Facilities, Inc. Project, 8.00%, Due 3/01/10
(Defaulted Effective 8/24/00) 1,000,000 850,000
North Carolina Medical Care Commission
Health Care Facilities First Mortgage
Revenue - DePaul Community Facilities
Project, 5.75%, Due 1/01/03 210,000 204,225
-----------
1,054,225
Ohio 4.9%
Cleveland, Ohio Airport Special Revenue
Refunding - Continental Airlines, Inc. Project:
5.25%, Due 12/01/02 (c) 5,475,000 5,440,781
5.50%, Due 12/01/08 650,000 614,250
Cuyahoga County, Ohio MFHR - The Park Lane
Apartments Project, 7.70%, Due 7/01/02 145,000 116,000
Dayton, Ohio Special Facilities Revenue -
AFCO Cargo Day LLC Project,
5.875%, Due 4/01/04 400,000 391,000
-----------
6,562,031
Oklahoma 0.4%
Leflore County, Oklahoma Hospital Authority
Hospital Revenue:
5.25%, Due 6/01/02 235,000 230,300
5.45%, Due 6/01/03 260,000 251,550
-----------
481,850
Pennsylvania 4.4%
Bucks County, Pennsylvania IDA CDR -
Attleboro Associates, Ltd. Nursing
Facility Project, 8.00%, Due 12/01/05 1,065,000 1,108,931
Clarion County, Pennsylvania IDA Health
Facilities Revenue Refunding - Beverly
Enterprises, Inc. Project, 5.50%, Due 5/01/03 450,000 439,313
Dauphin County, Pennsylvania Subordinated
Office and Parking Revenue - River Front
Office Center Project, 5.35%, Due 1/01/02 $ 395,000 $ 391,544
Harrisburg, Pennsylvania Authority Office and
Parking Revenue, 5.25%, Due 5/01/02 545,000 540,231
Pennsylvania EDFA Qualified Residential Rent
Project Revenue (Defaulted Effective 9/01/99):
RSI Properties/Butler LLC Project,
7.00%, Due 9/01/02 300,000 190,500
RSI Properties/Greensburg LLC Project,
7.00%, Due 9/01/02 300,000 190,500
Philadelphia, Pennsylvania Hospitals and Higher
EFA Revenue:
Chestnut Hill Hospital Project,
6.50%, Due 11/15/22 1,000,000 903,750
Temple University Children's Medical
Center Project, 4.55%, Due 6/15/02 470,000 456,487
Westmoreland County, Pennsylvania IDA Health
Care Facilities Revenue Refunding - Redstone
Presbyterian Senior Care Obligated Group
Project, 5.90%, Due 11/15/21 1,915,000 1,646,900
-----------
5,868,156
South Carolina 0.7%
Richland County, South Carolina PCR
Refunding - Union Camp Corporation
Project, 6.10%, Due 11/01/04 900,000 929,250
South Dakota 0.3%
Lincoln County, South Dakota Revenue -
American Baptist Homes of the Midwest-
Trail Ridge Project, 5.875%, Due 11/15/21 445,000 361,563
Texas 6.0%
DeSoto, Texas IDA IDR - Wintergreen Commercial
Partnership Project, 7.00%, Due 1/01/17 1,352,089 1,351,684
Jefferson County, Texas Health Facilities
Development Corporation Hospital Revenue -
Baptist Health Care System Project,
8.875%, Due 6/01/21 (c) 5,650,000 5,600,562
Matagorda County, Texas Navigation District
Number 1 Revenue Refunding - Reliant
Energy, Inc. Project, 5.20%, Due 5/01/29 1,000,000 1,001,250
-----------
7,953,496
Vermont 1.8%
Vermont Educational and Health Buildings
Financing Agency Revenue - Vermont
Council of Developmental and Mental
Health Project, 6.20%, Due 12/15/05 1,790,000 1,734,063
Vermont Educational and Health Buildings
Financing Agency Revenue Health Care
Facility - Copley Manor Project,
5.40%, Due 4/01/06 710,000 667,400
-----------
2,401,463
Virginia 2.4%
Alexandria, Virginia Redevelopment and
Housing Authority MFHR Refunding - Park
at Landmark Project, 8.50%, Due 12/01/29
(Mandatory Put at $100 on 7/01/02) 2,000,000 2,000,000
Hampton, Virginia Redevelopment and
Housing Authority First Mortgage Revenue
Refunding - Olde Hampton Project,
6.00%, Due 7/01/03 1,020,000 1,009,800
Virginia Small Business Financing
Authority IDR - Albion Enterprises LLC
Project, 6.00%, Due 1/01/02 250,000 248,125
-----------
3,257,925
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Washington 0.7%
Spokane, Washington Downtown
Foundation Parking Revenue - River
Park Square Project, 5.00%, Due 8/01/08 $ 1,000,000 $ 990,000
West Virginia 0.1%
Harrison County, West Virginia CDR
Refunding - Kmart Corporation Project,
7.625%, Due 12/01/04 80,000 83,100
Wisconsin 4.5%
Madison, Wisconsin IDR - McCaughey
Development Association Project,
5.875%, Due 4/01/10 940,000 885,950
Menomonee Falls, Wisconsin BAN,
4.875%, Due 7/01/02 1,000,000 1,001,900
Wisconsin Health and EFA Revenue -
Attic Angel Obligation Group Project,
6.00%, Due 11/15/28 1,000,000 822,500
Wisconsin Health and EFA Revenue - Divine
Savior Hospital, Inc. Project:
4.30%, Due 6/01/02 220,000 215,050
4.45%, Due 6/01/03 225,000 217,125
4.60%, Due 6/01/04 240,000 228,600
Wisconsin Health and EFA Revenue - FH
Healthcare Development, Inc. Project,
5.00%, Due 11/15/02 1,360,000 1,322,600
Wisconsin Health and EFA Revenue - Kenosha
Hospital and Medical Center Project,
4.50%, Due 5/15/02 560,000 553,000
Wisconsin Health and EFA Revenue -
Lutheran Home Project, 7.00%, Due 9/01/25 30,000 30,075
Wisconsin Health and EFA Revenue - Marquette
University Project, 6.45%, Due 12/01/19
(Pre-Refunding at $101 on 12/01/04) 675,000 729,000
------------
6,005,800
Wyoming 0.9%
Teton County, Wyoming Hospital District
Hospital Revenue Refunding and
Improvement, 4.85%, Due 12/01/02 1,265,000 1,228,631
--------------------------------------------------------------------------------
Total Municipal Bonds (Cost $104,346,402) 99,091,623
--------------------------------------------------------------------------------
Variable Rate Put Bonds 13.3%
Arizona 1.9%
Maricopa County, Arizona Pollution Control
Corporation PCR Refunding - El Paso
Electric Company Project, 6.15%, Due 12/01/14
(Mandatory Put at $100 on 8/01/02) 2,500,000 2,503,125
Florida 1.4%
St. John's County, Florida IDA IDR Refunding -
Vicar's Landing Project, 5.125%, Due 2/15/17
(Putable at $100 and Rate Reset
Effective 2/15/04) 2,000,000 1,922,500
Montana 0.7%
Forsyth, Montana PCR Refunding - Portland
General Electric Company Project, 4.60%,
Due 5/01/33 (Putable at $100 and Rate
Reset Effective 5/01/03) 1,000,000 988,750
New Jersey 2.2%
New Jersey EDA Senior Mortgage Revenue
Refunding EXTRAS - Arbor Glen of Bridgewater
Project, 5.375%, Due 5/15/32 (Putable at
$100 and Rate Reset Effective 5/15/04) 3,000,000 2,898,750
Ohio 0.8%
Ohio Water Development Authority Facilities
PCR Refunding - Cleveland Electric
Illuminating Company Project, 5.35%,
Due 10/01/30 (Mandatory Put at
$100 on 10/01/02) $ 1,000,000 $ 1,000,000
Pennsylvania 0.5%
Beaver County, Pennsylvania IDA PCR
Refunding - Ohio Edison Company
Project, 4.65%, Due 6/01/33 (Mandatory
Put at $100 on 6/01/04) 750,000 732,187
Tennessee 1.8%
Shelby County, Tennessee Health, Educational
and Housing Facilities Board Health Care
Facilities Revenue EXTRAS - Kirby Pines
Retirement Community Project, 5.50%,
Due 11/15/27 (Putable at $100 and Rate
Reset Effective 11/15/02) 2,450,000 2,394,875
Texas 4.0%
Abilene, Texas Health Facilities Development
Corporation Retirement Facilities Revenue
EXTRAS - Sears Methodist Retirement
System Obligated Group Project, 5.25%,
Due 11/15/28 (Mandatory Put at
$100 on 11/15/03) 2,025,000 1,954,125
Brazos River Authority Revenue Refunding -
Reliant Energy, Inc. Project, 5.20%,
Due 12/01/18 (Mandatory Put at
$100 on 12/01/02) 1,000,000 1,001,250
Dallas-Fort Worth, Texas International
Airport Facility Improvement Corporation
Revenue Refunding - American Airlines, Inc.
Project, 5.95%, Due 5/01/29 (Mandatory
Put at $100 on 11/01/03) 400,000 405,000
Lubbock, Texas Health Facilities Development
Corporation First Mortgage Revenue -
Carillon, Inc. Project, 5.75%, Due 7/01/29
(Mandatory Put at $100 on 7/01/04) 2,000,000 1,962,500
------------
5,322,875
--------------------------------------------------------------------------------
Total Variable Rate Put Bonds (Cost $18,068,225) 17,763,062
--------------------------------------------------------------------------------
Short-Term Investments (a) 12.3%
Municipal Bonds 8.3%
Colorado 1.5%
Colorado Health Facilities Authority Hospital
Revenue - Steamboat Springs Health Care
Association Project:
4.30%, Due 9/15/01 115,000 113,290
4.80%, Due 9/15/01 245,000 243,753
Denver, Colorado City and County Airport
Revenue, 8.50%, Due 11/15/23
(Pre-Refunding at $102 on 11/15/00) 1,570,000 1,603,347
------------
1,960,390
Florida 0.8%
Broward County, Florida IDR - Beverly
Enterprises-Florida, Inc. Project, 9.80%,
Due 11/01/10 (Pre-Refunding at $103
on 11/01/00) 1,000,000 1,030,000
Indiana 0.0%
Indianapolis, Indiana EDR MFHR -
Post Pointe Apartments Project,
7.00%, Due 3/01/01 75,000 60,000
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Kansas 0.5%
Kansas State Independent College Finance
Authority RAN - Sterling College Project,
5.75%, Due 6/01/01 $ 300,000 $ 302,067
Topeka, Kansas Industrial Revenue
Refunding - Reser's Fine Foods, Inc.
Project, 5.00%, Due 4/01/01 300,000 298,680
Wathena, Kansas IDR - Skyjack Equipment,
Inc. Project, 5.00%, Due 5/01/01 85,000 84,563
-----------
685,310
Michigan 1.1%
Lakeville, Michigan Community School
District State Aid Notes, 5.50%, Due 6/29/01 1,500,000 1,510,710
Minnesota 0.4%
St. Paul, Minnesota Housing and Redevelopment
Authority Hospital Revenue - Healtheast
Project, 4.60%, Due 11/01/00 500,000 500,000
New York 1.9%
Niagara Falls, New York School District
RAN, 5.375%, Due 10/16/01 1,000,000 1,002,290
Schenectady, New York City School District
BAN, 5.50%, Due 6/29/01 1,500,000 1,504,050
-----------
2,506,340
Oklahoma 0.2%
Leflore County, Oklahoma Hospital Authority
Hospital Revenue, 5.05%, Due 6/01/01 205,000 203,409
Pennsylvania 0.1%
Philadelphia, Pennsylvania Hospitals and
Higher EFA Revenue - Temple University
Children's Medical Center Project,
4.40%, Due 6/15/01 200,000 197,886
Tennessee 0.1%
Tennergy Corporation Gas Revenue,
4.25%, Due 6/01/01 140,000 138,841
Wisconsin 1.7%
Dodgeland, Wisconsin School District
BAN, 5.20%, Due 4/01/01 1,000,000 1,000,130
Lac Du Flambeau, Wisconsin School District
Number 1 RAN TAN, 5.40%, Due 7/26/01 1,100,000 1,103,091
Wisconsin Health and EFA Revenue -
Divine Savior Hospital, Inc. Project,
4.15%, Due 6/01/01 210,000 208,225
----------
2,311,446
----------
Total Municipal Bonds 11,104,332
Variable Rate Put Bonds 1.5%
Alabama 0.8%
Selma, Alabama IDB PCR - International
Paper Company Project, 5.50%,
Due 7/15/06 (Putable at $100 on 7/15/01) 1,000,000 1,000,530
Ohio 0.7%
Ohio Water Development Authority
Facilities PCR Refunding - Ohio Edison
Company Project, 4.25%, Due 6/01/33
(Mandatory Put at $100 on 6/01/01) 1,000,000 994,350
----------
Total Variable Rate Put Bonds 1,994,880
Annual Variable Rate Put Bonds 2.3%
Florida 0.8%
Miami Beach, Florida Health Facilities Authority
Hospital Revenue - Mount Sinai Medical
Center Project, 7.08%, Due 8/15/01 $1,000,000 $ 1,000,000
South Carolina 1.5%
South Carolina Education Assistance Authority
Revenue Refunding - Guaranteed Student
Loan, 4.90%, Due 5/30/01 2,000,000 2,001,860
-----------
Total Annual Variable Rate Put Bonds 3,001,860
Municipal Money Market Funds 0.2%
Multiple States
Strong Municipal Money Market Fund (d) 300,000 300,000
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $16,405,376) 16,401,072
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $138,820,003) 99.9% 133,255,757
Other Assets and Liabilities, Net 0.1% 136,234
--------------------------------------------------------------------------------
Net Assets 100.0% $133,391,991
================================================================================
FUTURES
--------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Depreciation
--------------------------------------------------------------------------------
Sold:
40 Municipal Bond Futures 12/00 $3,982,500 $30,000
--------------------------------------------------------------------------------
Strong Municipal Bond Fund
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
Municipal Bonds 89.3%
Alabama 0.3%
Troy, Alabama IDB Solid Waste Revenue -
Alabama Protein Recycling LLC Project,
7.75%, Due 5/01/19
(Defaulted Effective 11/02/00) $2,000,000 $ 800,000
Arizona 0.4%
Phoenix, Arizona IDA Mortgage Revenue
Refunding - Christian Care Retirement
Apartments, Inc. Project, 6.25%, Due 1/01/16 1,000,000 907,500
Colorado 8.8%
Castle Rock Ranch, Colorado Public Improvements
Authority Public Facilities Revenue:
6.25%, Due 12/01/17 (c) 9,820,000 10,323,275
6.30%, Due 12/01/07 (c) 3,115,000 3,212,344
6.375%, Due 12/01/11 (c) 2,000,000 2,085,000
6.40%, Due 12/01/08 (c) 3,310,000 3,442,400
6.50%, Due 12/01/09 (c) 3,525,000 3,696,844
------------
22,759,863
Connecticut 1.3%
Stamford, Connecticut Housing Authority
MFHR - Fairfield Apartments Project,
4.75%, Due 12/01/28 (Mandatory Put
at $100 on 12/01/08) 3,500,000 3,255,000
Florida 0.7%
Leon County, Florida EFA Revenue
Refunding - Southgate Residence Hall
Project, 6.75%, Due 9/01/28 1,000,000 948,750
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pinellas County, Florida EFA Revenue - College
Harbor Project, 6.50%, Due 12/01/20 $ 1,020,000 $ 954,975
-------------
1,903,725
Georgia 10.4%
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Evergreen Village
Estates Project:
5.875%, Due 5/01/07 (c) 700,000 715,750
6.375%, Due 5/01/17 1,675,000 1,739,906
6.50%, Due 5/01/27 (c) 2,965,000 3,072,481
Colquitt County, Georgia Development Authority
Revenue - Southern Care Corporation
Facility Project, Zero %, Due 12/01/21 7,270,000 1,872,025
Georgia Municipal Electric Authority Revenue
Refunding, 5.25%, Due 1/01/25 2,490,000 2,402,850
Houston County, Georgia MFHR - Emerald
Coast Housing Project, 7.00%, Due 8/01/28 7,000,000 3,430,000
Richmond County, Georgia Development
Authority First Mortgage Revenue,
Zero %, Due 12/01/21 20,000,000 4,850,000
Washington, Georgia Wilkes Payroll
Development Authority Subordinated
Revenue - Southern Care Corporation
Facility Project, Zero %, Due 12/01/21:
Series A 8,125,000 2,122,656
Series C (c) 25,595,000 6,686,694
-------------
26,892,362
Illinois 6.2%
Chicago, Illinois O'Hare International Airport
Special Facility Revenue - United Airlines,
Inc. Project, 8.85%, Due 5/01/18 2,500,000 2,611,150
Illinois Health Facilities Authority Revenue,
6.724%, Due 6/19/15 (Pre-Refunding
at $102 on 6/07/02) 3,000,000 3,150,000
Illinois Health Facilities Authority Revenue
Refunding - Lutheran Social Services of
Illinois Project, 6.125%, Due 8/15/20 6,660,000 5,627,700
Metropolitan Pier and Exposition Authority
Dedicated State Tax Revenue - McCormick
Place Expansion Project, Zero %, Due 6/15/16 1,250,000 526,563
Metropolitan Pier and Exposition Authority
Hospitality Facilities Revenue - McCormick
Place Convention Project, 7.00%, Due 7/01/26 1,500,000 1,779,375
Zion, Illinois Park District GO Revenue,
6.50%, Due 12/30/17 2,485,000 2,425,981
-------------
16,120,769
Indiana 1.9%
St. Joseph County, Indiana Hospital Authority
Health System Revenue - Madison Center,
Inc. Project, 5.80%, Due 2/15/24 6,000,000 4,815,000
Kentucky 1.9%
Kentucky EDFA Health System Revenue -
Norton Healthcare, Inc. Project,
6.50%, Due 10/01/20 1,000,000 977,500
Logan and Todd Counties, Kentucky
Regional Water Commission BAN
Revenue, 5.50%, Due 8/01/03 4,000,000 4,010,000
-------------
4,987,500
Louisiana 10.7%
Claiborne Parish, Louisiana Law Enforcement
District Revenue - Claiborne Correctional
Facilities Project, 6.25%, Due 3/01/19 7,500,000 6,918,750
Iberia Parish, Louisiana IDB IDR - Acadia Board
Company, Ltd. Project, 7.50%, Due 8/01/22 2,180,000 2,005,600
Louisiana Local Government Environment
Facilities Community Development Authority
Revenue - Capital Projects and Equipment
Acquisition Program, 6.55%, Due 9/01/25 $ 3,000,000 $ 3,116,250
New Orleans, Louisiana Regional Transit
Authority Lease-Purchase Agreements,
6.125%, Due 5/01/10:
Lease M98147 (c) 13,736,428 14,423,249
Lease M98159 1,292,101 1,356,706
-------------
27,820,555
Massachusetts 0.6%
Massachusetts IFA IDR - Welch Foods, Inc.
Project, 5.60%, Due 12/01/17 1,700,000 1,608,625
Michigan 0.9%
Michigan Hospital Finance Authority Hospital
Revenue Refunding - Pontiac Osteopathic
Hospital Project, 6.00%, Due 2/01/14 2,500,000 2,218,750
Minnesota 2.5%
St. Paul, Minnesota Housing and Redevelopment
Authority Lease Revenue - Community of
Peace Academy Project, 6.10%, Due 11/02/29 3,570,000 3,288,863
Woodbury, Minnesota IDR Refunding -
Harvey Vogel Manufacturing Company
Project, 5.80%, Due 12/01/28 3,465,000 3,300,413
-------------
6,589,276
Missouri 1.5%
Springfield, Missouri Land Clearance
Redevelopment Authority Industrial
Revenue Refunding - University Plaza
Project, 6.60%, Due 10/01/11 2,465,000 2,542,031
St. Louis, Missouri Airport Revenue:
6.00%, Due 1/01/05 700,000 711,375
6.00%, Due 1/01/06 750,000 763,125
-------------
4,016,531
Montana 1.1%
Crow Finance Authority Tribal Purpose
Revenue, 5.70%, Due 10/01/27 1,500,000 1,419,375
Miles City, Montana MFHR - Birchwood
Properties LP Project, 6.75%, Due 5/01/29 1,645,000 1,511,344
-------------
2,930,719
North Carolina 0.4%
North Carolina Municipal Power Agency
Number 1 Catawba Electric Revenue
Refunding, 6.00%, Due 1/01/04 1,000,000 1,025,000
North Dakota 2.4%
Richland County, North Dakota MFHR -
Birchwood Properties LP Project,
6.75%, Due 5/01/29 5,130,000 4,713,188
Three Affiliated Tribes of the Fort Berthold
Reservation GO, 6.30%, Due 11/15/10 1,515,000 1,479,019
-------------
6,192,207
Ohio 4.6%
Medina County, Ohio EDR MFHR - Camelot
Place, Ltd. Project, 8.375%, Due 10/01/23 3,800,000 3,671,750
Montgomery County, Ohio Health Care
Facilities Revenue Refunding - Friendship
Village of Dayton Project, 6.25%, Due 2/01/22 1,250,000 1,001,563
Toledo, Ohio MFMR - Commodore Perry
Apartments Project, 7.00%, Due 12/01/28 7,495,000 7,354,469
-------------
12,027,782
Oklahoma 2.4%
Oklahoma County, Oklahoma Finance Authority
MFHR First Mortgage - Multiple Apartments
Project, 7.125%, Due 4/01/28 (Defaulted
Effective 7/31/00) 10,170,000 3,559,500
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND (continued)
Shares of
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Shawnee, Oklahoma Hospital Authority
Revenue - MidAmerica HealthCare, Inc.
Project, 8.00%, Due 4/01/04 $ 1,555,000 $ 1,573,800
Washington County, Oklahoma Medical
Authority Revenue - Bartlesville Jane
Phillips Episcopal Hospital Project,
6.125%, Due 11/01/14 1,060,000 1,095,775
-----------
6,229,075
Pennsylvania 7.7%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue - St. Francis
Medical Center Project:
5.75%, Due 5/15/17 1,660,000 1,357,050
5.75%, Due 5/15/27 3,965,000 2,998,531
Montgomery County, Pennsylvania IDA First
Mortgage Revenue Refunding - The
Meadowood Corporation Project,
6.25%, Due 12/01/17 1,500,000 1,329,375
Pennsylvania EDFA Qualified Residential Rent
Project Revenue (Defaulted Effective 9/01/99):
RSI Properties/Butler LLC Project,
8.00%, Due 9/01/27 2,360,000 1,498,600
RSI Properties/Greensburg LLC Project,
8.00%, Due 9/01/27 2,655,000 1,685,925
Philadelphia, Pennsylvania Hospitals and
Higher EFA Revenue:
Temple University Children's Medical
Center Project, 5.75%, Due 6/15/29 3,000,000 2,403,750
Temple University Hospital Project,
6.50%, Due 11/15/08 3,700,000 3,681,500
Scranton-Lackawanna, Pennsylvania Health
and Welfare Authority Hospital Revenue:
Marian Community Hospital Project,
6.50%, Due 1/15/07 1,500,000 1,458,750
Moses Taylor Hospital Project,
6.25%, Due 7/01/20 4,200,000 3,648,750
-----------
20,062,231
Puerto Rico 0.4%
Children's Trust Fund Puerto Rico Tobacco
Settlement Revenue Asset-Backed Bonds,
6.00%, Due 7/01/26 (b) 1,000,000 990,000
Rhode Island 0.6%
Rhode Island Health and Education Building
Corporation Hospital Financing Revenue -
South County Hospital Project,
6.00%, Due 11/15/17 1,630,000 1,589,250
South Carolina 4.5%
Connector 2000 Association, Inc. Senior Capital
Appreciation Toll Road Revenue - Greenville,
South Carolina Southern Connector Project:
Zero %, Due 1/01/12 3,900,000 1,774,500
Zero %, Due 1/01/14 4,560,000 1,784,100
Zero %, Due 1/01/15 1,000,000 360,000
Zero %, Due 1/01/26 10,000,000 1,575,000
Zero %, Due 1/01/32 12,100,000 1,225,125
Connector 2000 Association, Inc. Senior
Current Interest Toll Road Revenue -
Greenville, South Carolina Southern
Connector Project, 5.25%, Due 1/01/23 6,300,000 4,945,500
-----------
11,664,225
South Dakota 2.2%
Education Loans, Inc. Student Loan Revenue
Subordinated Asset-Backed Bonds,
5.60%, Due 6/01/20 3,000,000 2,872,500
Sisseton-Wahpeton Sioux Tribe of the Lake
Traverse Reservation GO:
7.00%, Due 11/01/13 $ 815,000 $ 830,281
7.00%, Due 11/01/23 1,290,000 1,259,362
South Dakota EDFA EDR Pooled Loan
Program - Midstates Printing, Inc.
Project, 5.50%, Due 4/01/18 685,000 657,600
-----------
5,619,743
Tennessee 0.5%
Tennergy Corporation Gas Revenue,
4.125%, Due 6/01/09 1,560,000 1,390,350
Texas 6.1%
Dallas County, Texas Utility and
Reclamation District GO Refunding,
6.70%, Due 2/15/25 (b) 5,000,000 5,068,750
El Paso, Texas Property Finance Authority,
Inc. SFMR - GNMA Mortgage-Backed
Securities Program, 8.70%, Due 12/01/18 330,000 345,675
Grape Creek-Pulliam, Texas Independent
School District Public Facility Corporation
School Facility Lease Revenue:
7.00%, Due 5/15/10 1,000,000 1,113,750
7.25%, Due 5/15/21 1,300,000 1,478,750
Lufkin, Texas Health Facilities Development
Corporation Health System Revenue
Refunding - Memorial Health System of
East Texas Project, 6.875%, Due 2/15/26 4,515,000 4,232,812
Ranger, Texas Housing Corporation MFMR
Refunding - FHA Insured Mortgage
Loans - Ranger Apartments Project,
8.80%, Due 3/01/24 1,160,000 1,294,850
Woodville, Texas HFC MFHR - Dogwood
Terrace Apartments Project,
7.50%, Due 10/01/29 2,450,000 2,272,375
-----------
15,806,962
Utah 1.0%
Eagle Mountain, Utah Special Assessment
Bonds, 5.90%, Due 12/15/07 1,121,000 1,139,216
Salt Lake County, Utah Housing Authority
MFHR - Millcreek Pines Apartments
Project, 6.80%, Due 9/01/17 1,390,000 1,383,050
-----------
2,522,266
Washington 4.0%
Ocean Shores, Washington Water and
Sewer Revenue Notes, 5.00%, Due 12/01/01 2,360,000 2,356,672
Port Seattle, Washington Revenue Bonds,
5.625%, Due 2/01/30 2,500,000 2,478,125
Spokane, Washington Downtown Foundation
Parking Revenue - River Park Square
Project, 5.60%, Due 8/01/19 3,350,000 3,308,125
Washington EDFA Nonrecourse Revenue -
Lindal Cedar Homes, Inc. Project,
5.80%, Due 11/01/17 2,175,000 2,139,656
-----------
10,282,578
West Virginia 1.6%
Kanawha County, West Virginia Residential
Mortgage Revenue, 7.375%, Due 9/01/10 (c) 3,670,000 4,110,400
Wisconsin 1.7%
Wisconsin Health and EFA Revenue -
St. John's Home of Milwaukee and
Sunrise Care Center, Inc. Obligated
Group Project, 5.625%, Due 12/15/22 (c) 5,450,000 4,414,500
--------------------------------------------------------------------------------
Total Municipal Bonds (Cost $256,331,616) 231,552,744
--------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND (continued)
Shares of
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Variable Rate Put Bonds 5.0%
Kentucky 0.9%
Kentucky EDFA Health System Revenue -
Norton Healthcare, Inc. Project,
Zero %, Due 10/01/11 (Rate Reset
Effective 10/01/05) $ 3,000,000 $ 2,332,500
Mississippi 1.5%
Jackson, Mississippi Housing Authority
MFHR - Elton Park Apartments Project,
5.40%, Due 4/01/39 (Mandatory Put
at $100 on 4/01/19) 4,000,000 3,840,000
New Hampshire 0.4%
New Hampshire Business Finance Authority
PCR Refunding - United Illuminating
Company Project, 4.55%, Due 7/01/27
(Mandatory Put at $100 on 2/01/04) 1,000,000 981,250
Pennsylvania 1.1%
Beaver County, Pennsylvania IDA PCR
Refunding - Ohio Edison Company Project,
4.65%, Due 6/01/33 (Mandatory Put at
$100 on 6/01/04) 3,000,000 2,928,750
Texas 1.1%
Dallas-Fort Worth, Texas International
Airport Facility Improvement Corporation
Revenue Refunding - American Airlines, Inc.
Project, 5.95%, Due 5/01/29 (Mandatory
Put at $100 on 11/01/03) 3,000,000 3,037,500
--------------------------------------------------------------------------------
Total Variable Rate Put Bonds (Cost $13,026,839) 13,120,000
--------------------------------------------------------------------------------
Short-Term Investments (a) 5.9%
Monthly Variable Rate Put Bonds 0.6%
New Mexico
New Mexico Hospital Equipment Loan Council
Hospital Revenue - Presbyterian Health Care
Services Project, 5.83%, Due 11/07/00 1,500,000 1,500,000
Municipal Funds 5.3%
Multiple States
Blackrock Insured Municipal 2008 Term Trust 147,000 2,131,500
Nuveen Insured Premium Income
Municipal Fund 165,000 1,856,250
Strong Municipal Money Market Fund (d) 9,700,000 9,700,000
----------
Total Municipal Funds 13,687,750
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $15,202,052) 15,187,750
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $284,560,507) 100.2% 259,860,494
Other Assets and Liabilities, Net (0.2%) (455,010)
--------------------------------------------------------------------------------
Net Assets 100.0% $259,405,484
================================================================================
FUTURES
--------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Depreciation
--------------------------------------------------------------------------------
Sold:
123 Municipal Bond Futures 12/00 $12,246,188 $ 41,188
--------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND
Shares of
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
Municipal Bonds 56.5%
Alabama 0.6%
Alabama 21st Century Authority Tobacco
Settlement Revenue:
5.25%, Due 12/01/03 $ 1,000,000 $ 1,008,750
5.25%, Due 12/01/04 1,000,000 1,007,500
-----------
2,016,250
American Samoa 0.3%
Territory of American Samoa GO
Refunding, 5.50%, Due 9/01/02 1,010,000 1,018,838
Arizona 0.2%
Maricopa County, Arizona IDA MFHR -
Mercy Bond Properties Arizona I-A,
5.20%, Due 1/01/04 620,000 626,975
Colorado 3.4%
Castle Rock Ranch, Colorado Public
Improvements Authority Public
Facilities Revenue:
5.70%, Due 12/01/06 1,000,000 998,750
5.90%, Due 12/01/03 1,475,000 1,486,062
6.10%, Due 12/01/05 2,780,000 2,828,650
Eaglebend, Colorado Affordable Housing
Corporation MFHR Refunding,
5.45%, Due 7/01/02 595,000 593,513
Meridian, Colorado Metropolitan District GO,
7.00%, Due 12/01/01 1,250,000 1,279,675
Metropolitan Football Stadium District of
Colorado Sales Tax Revenue,
Zero %, Due 1/01/06 3,485,000 2,713,944
Montrose County, Colorado COP,
6.10%, Due 6/15/02 1,000,000 1,015,000
-----------
10,915,594
District of Columbia 1.3%
District of Columbia GO Refunding,
4.65%, Due 6/01/02 4,205,000 4,215,512
Florida 1.8%
Capital Projects Finance Authority Solid
Waste Disposal Revenue Capital Projects
Loan Program - Peerless Dade, Inc.
Project, 7.50%, Due 11/01/18 3,000,000 2,190,000
Miami Beach, Florida Redevelopment
Agency Incremental Tax Revenue,
9.125%, Due 12/01/04 3,390,000 3,474,750
-----------
5,664,750
Georgia 0.9%
Burke County, Georgia Development
Authority PCR - Georgia Power Company
Plant Project, 4.53%, Due 9/01/30
(Mandatory Put at $100 on 3/01/02) 3,000,000 3,003,750
Illinois 5.0%
Chicago, Illinois O'Hare International Airport
Special Facility Revenue - United Airlines,
Inc. Project, 8.85%, Due 5/01/18 2,000,000 2,088,920
Chicago, Illinois Public Building Commerce
Building Revenue, 5.75%, Due 12/01/18 3,000,000 3,157,500
Illinois EFA Revenue - Lewis University Project,
5.30%, Due 10/01/04 1,140,000 1,147,125
Illinois Health Facilities Authority Revenue,
6.724%, Due 6/19/15 (Pre-Refunding at
$102 on 6/07/02) 4,000,000 4,200,000
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Illinois Health Facilities Authority Revenue -
Covenant Retirement Communities Project,
7.60%, Due 12/01/12 $ 750,000 $ 790,313
Kane, Cook and Du Page Counties, Illinois
School District Number 46 Lease Purchase
Revenue, 6.07%, Due 6/21/05 2,500,000 2,553,125
Naperville, Illinois Dupage County and Will
County, EDR Refunding - Illinois Hospital
and Health Systems Association Project,
5.70%, Due 5/01/04 1,880,000 1,898,800
----------
15,835,783
Kentucky 3.5%
Kenton County, Kentucky Airport Board
Special Facilities Revenue - Delta Airlines,
Inc. Project, 6.75%, Due 2/01/02 2,000,000 2,030,000
Logan and Todd Counties, Kentucky
Regional Water Commission BAN
Revenue, 5.50%, Due 8/01/03 6,000,000 6,015,000
Pendleton County, Kentucky Multi-County
Lease Revenue - Kentucky Association of
Counties Leasing Trust Program,
6.50%, Due 3/01/19 3,000,000 3,123,750
----------
11,168,750
Louisiana 0.6%
Louisiana Local Government Environment
Facilities Community Development
Authority Revenue - Public Projects
Construction Notes, 5.25%, Due 2/15/02 2,000,000 2,015,000
Maine 0.9%
Maine Finance Authority Electric Rate
Stabilization Revenue Refunding -
Penobscot Energy Recovery
Company LP Project, 5.20%, Due 7/01/18 2,900,000 2,889,125
Massachusetts 4.8%
Massachusetts Education Loan Authority
Education Loan Revenue,
7.45%, Due 1/01/02 695,000 697,224
Massachusetts Health and EFA Competitive
Lease Program - Whitehead Institute for
Biomedical Research Project,
4.595%, Due 10/15/03 5,503,421 5,524,059
Massachusetts Industrial Finance Agency
PCR Refunding - Eastern Edison Company
Project, 5.875%, Due 8/01/08 2,000,000 2,040,000
Massachusetts Industrial Finance Agency
Revenue Refunding - Emerson College
Issue, 8.50%, Due 1/01/03 2,500,000 2,606,250
Massachusetts Industrial Finance Agency
Water Treatment Revenue -
Massachusetts-American Hingham
Project, 6.25%, Due 12/01/10 4,190,000 4,420,450
----------
15,287,983
Michigan 1.5%
Flint, Michigan Hospital Building Authority
Revenue Refunding - Hurley Medical
Center Project:
5.75%, Due 7/01/03 2,355,000 2,331,450
6.00%, Due 7/01/04 1,005,000 1,001,231
6.00%, Due 7/01/05 510,000 506,175
Flint, Michigan Hospital Building Authority
Revenue Rental - Hurley Medical Center
Project, 5.00%, Due 7/01/03 1,050,000 1,009,312
----------
4,848,168
Minnesota 3.0%
Maplewood, Minnesota Health Care Facility
Revenue - HealthEast Project,
5.70%, Due 11/15/02 $ 1,740,000 $ 1,703,025
St. Paul, Minnesota Housing and
Redevelopment Authority Hospital Revenue -
HealthEast Project, 6.625%, Due 11/01/17 5,000,000 4,381,250
Woodbury, Minnesota Lease Revenue -
Minnesota Math and Science Academy
Project, 5.50%, Due 11/01/28
(Mandatory Put at $100 on 5/01/02) 3,555,000 3,523,894
----------
9,608,169
Mississippi 0.7%
Mississippi Hospital Equipment and Facilities
Authority Hospital Revenue - Magnolia
Hospital Project, 7.375%, Due 10/01/21 2,000,000 2,090,900
Missouri 2.6%
Springfield, Missouri Land Clearance
Redevelopment Authority Industrial
Revenue Refunding - University Plaza
Project, 6.30%, Due 10/01/06 1,790,000 1,848,175
St. Louis, Missouri Airport Revenue:
6.00%, Due 1/01/04 1,000,000 1,015,000
6.00%, Due 1/01/06 2,250,000 2,289,375
6.25%, Due 1/01/02 1,440,000 1,456,200
6.25%, Due 1/01/03 1,500,000 1,526,250
----------
8,135,000
Nebraska 1.2%
American Public Energy Agency Gas Supply
Revenue - Nebraska Public Gas Agency
Project, 4.375%, Due 6/01/10 4,205,000 3,779,244
Nevada 0.9%
Nevada Housing Division SFMR,
5.20%, Due 4/01/30 1,440,000 1,441,800
Reno-Sparks, Nevada Convention and
Visitors Authority Limited Obligation
Refunding, 6.40%, Due 11/01/03 1,530,000 1,556,775
----------
2,998,575
New Hampshire 0.1%
New Hampshire IDA Industrial Facilities
Revenue - Permattach Tool Project,
7.70%, Due 12/01/01 225,000 225,520
New Jersey 0.3%
West Milford Township, New Jersey
Municipal Utilities Authority Revenue,
5.125%, Due 12/01/01 1,000,000 1,003,230
New York 0.6%
New Rochelle, New York Municipal Housing
Authority Mortgage Revenue,
4.70%, Due 12/01/03 1,165,000 1,162,088
New York Environmental Facilities
Corporation State Water Revolving Fund
PCR - Pilgrim State Sewage Treatment
Project, 5.625%, Due 3/15/04 800,000 827,000
----------
1,989,088
North Carolina 1.1%
North Carolina Housing Finance Agency
Home Ownership Revenue,
4.55%, Due 1/01/24 3,575,000 3,494,562
</TABLE>
22
<PAGE>
--------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
Ohio 3.0%
Akron, Ohio COP - Akron Municipal
Baseball Stadium Project:
Zero %, Due 12/01/01 $ 1,000,000 $ 950,160
Zero %, Due 12/01/02 1,240,000 1,184,200
Cleveland, Ohio City School District Energy
Conservation Improvement GO:
6.53%, Due 3/15/02 740,000 756,650
6.53%, Due 9/15/02 760,000 783,750
6.53%, Due 3/15/03 785,000 814,438
6.53%, Due 9/15/03 815,000 851,675
6.53%, Due 3/15/04 840,000 882,000
6.53%, Due 9/15/04 865,000 914,737
Montgomery County, Ohio Health Care
Facilities Revenue Refunding - Friendship
Village of Dayton Project, 5.15%, Due 2/01/03 1,370,000 1,332,325
Montgomery County, Ohio Health Care
Facilities Revenue Refunding EXTRAS -
Friendship Village of Dayton Project, 5.375%,
Due 2/01/22 (Putable at $100 on 2/01/03) 1,050,000 1,026,375
------------
9,496,310
Pennsylvania 7.2%
Pennsylvania Higher EFA Health Services
Revenue - University of Pennsylvania
Project, 5.125%, Due 1/01/02 2,060,000 2,062,575
Pennsylvania Housing Finance Agency
SFMR, 4.50%, Due 4/01/28 6,520,000 6,373,300
Philadelphia, Pennsylvania Municipal Authority
Revenue Refunding, 6.00%, Due 7/15/03 1,140,000 1,159,950
Southern Chester County, Pennsylvania Health
and Higher Education Authority Mortgage
Revenue - Jenner's Pond Retirement
Community Project, 5.15%, Due 11/01/03:
Series 1998 7,500,000 7,209,375
Series 1999 4,500,000 4,325,625
Washington County, Pennsylvania Hospital
Authority Revenue - Canonsburg General
Hospital Project, 7.35%, Due 6/01/13
(Pre-Refunding at $102 on 6/01/03) 1,705,000 1,822,219
------------
22,953,044
Puerto Rico 0.7%
Commonwealth of Puerto Rico Tax-Exempt
Lease Certificates, 5.10%, Due 4/01/04 2,108,380 2,142,641
Rhode Island 0.7%
Rhode Island EDC Revenue - Providence
Place Mall Project:
5.25%, Due 7/01/02 1,140,000 1,148,550
5.35%, Due 7/01/03 1,200,000 1,213,500
------------
2,362,050
South Dakota 0.4%
South Dakota EDFA EDR Refunding Pooled
Loan Program - Technical Ordinance
Project, 5.75%, Due 4/01/07 1,230,000 1,273,050
Tennessee 0.7%
Municipal Energy Acquisition Corporation
Gas Revenue, 5.00%, Due 3/01/03 1,000,000 998,750
Tennessee Housing Development Agency -
Homeownership Program Project,
Zero %, Due 7/01/05 1,585,000 1,268,000
------------
2,266,750
Texas 6.1%
Brazos, Texas Higher Education Authority,
Inc. Student Loan Revenue Refunding,
5.95%, Due 6/01/02 3,005,000 3,061,344
Falcons Lair, Texas Utility and Reclamation
District COP, 7.10%, Due 10/15/06 $ 5,855,000 $ 5,569,569
Harris County, Texas HFC MFHR - Bryant
Development Project, 7.125%, Due 9/01/05 464,629 469,856
Laguna Madre, Texas Water District Capital
Appreciation Refunding:
Zero %, Due 6/01/02 1,240,000 1,153,200
Zero %, Due 6/01/03 1,130,000 1,001,462
Zero %, Due 6/01/04 1,175,000 992,875
Lancaster, Texas HFC MFHR - Intervest-
Lancaster Project:
6.30%, Due 6/15/04 2,925,000 2,935,969
6.956%, Due 6/15/04 377,812 379,229
Odessa, Texas Housing Authority MFMR -
Section 8 Assisted Project:
5.875%, Due 10/01/03 750,000 750,937
6.375%, Due 10/01/11 2,735,000 2,731,581
Robstown, Texas Certificates of Obligation:
7.75%, Due 10/01/12 55,000 56,925
7.75%, Due 10/01/12 (Pre-Refunding at
$100 on 10/01/02) 410,000 429,987
------------
19,532,934
Washington 1.2%
Walla Walla, Washington Housing Authority
Revenue - Wilbur Manor Project,
6.25%, Due 12/01/11 1,365,000 1,337,700
Washington Public Power Supply System
Revenue Refunding - Nuclear Project
Number 3, 7.375%, Due 7/01/04 2,300,000 2,348,875
------------
3,686,575
Wisconsin 1.2%
Menomonee Falls, Wisconsin BAN,
4.875%, Due 7/01/02 2,750,000 2,755,225
Wisconsin Housing and EDA Home
Ownership Revenue, 4.55%, Due 3/01/23 1,000,000 960,000
------------
3,715,225
-----------------------------------------------------------------------------
Total Municipal Bonds (Cost $181,652,569) 180,259,345
-----------------------------------------------------------------------------
Variable Rate Put Bonds 16.0%
Arizona 1.8%
Scottsdale, Arizona IDA First Mortgage Revenue
Refunding - Westminster Village, Inc. Project:
5.25%, Due 6/01/16 (Putable at $100
and Rate Reset Effective 6/01/04) 3,300,000 3,184,500
6.00%, Due 6/01/17 (Putable at $100
and Rate Reset Effective 12/01/03) 2,700,000 2,676,375
------------
5,860,875
Connecticut 1.3%
Connecticut IDA - The Olympic Hotel
Corporation Project, 7.65%, Due 8/01/03 1,287,633 1,276,366
Stamford, Connecticut Housing Authority
MFHR - Fairfield Apartments Project,
4.75%, Due 12/01/28 (Mandatory
Put at $100 on 12/01/08) 3,000,000 2,790,000
------------
4,066,366
Georgia 1.8%
Atlanta, Georgia Urban Residential Finance
Authority MFHR Refunding - Ford
Factory Square Apartments Project,
6.00%, Due 12/01/30 (Mandatory
Put at $100 on 12/01/02) 5,655,000 5,655,000
Massachusetts 1.1%
Massachusetts Development Finance Agency
First Mortgage Revenue - LaSell Village
Project, 5.625%, Due 12/01/28 (Putable at
$100 and Rate Reset Effective 12/01/03) 3,500,000 3,381,875
23
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Mississippi 0.7%
Moss Point, Mississippi Redevelopment
Authority Urban Development Revenue -
Jackson County Motel Project,
5.50%, Due 8/01/05 $ 2,190,000 $ 2,189,869
Missouri 0.4%
St. Louis County, Missouri IDA MFHR
Refunding - Heatherbrook Gardens Project,
5.10%, Due 3/01/05 (Mandatory Put
at $100 on 3/01/02) 1,235,000 1,236,544
Montana 1.9%
Forsyth, Montana PCR Refunding -
Portland General Electric Company Project:
4.60%, Due 5/01/33 (Mandatory Put at
$100 on 5/01/03) 5,000,000 4,943,750
4.75%, Due 5/01/33 (Mandatory Put at
$100 on 5/01/03) 1,000,000 988,750
-----------
5,932,500
New Hampshire 0.6%
New Hampshire Business Finance Authority
PCR Refunding - United Illuminating
Company Project, 4.55%, Due 7/01/27
(Mandatory Put at $100 on 2/01/04) 2,000,000 1,962,500
Ohio 0.8%
Perry County, Ohio Nursing Facilities
Revenue Refunding - New Lexington
Health Care Project, 6.50%, Due 9/01/10
(Mandatory Put at $100 on 9/01/03) 2,420,000 2,445,724
Pennsylvania 0.6%
Beaver County, Pennsylvania IDA PCR
Refunding - Ohio Edison Company
Project, 4.65%, Due 6/01/33 (Mandatory
Put at $100 on 6/01/04) 2,100,000 2,050,125
South Carolina 0.7%
South Carolina Jobs EDA EDR Refunding
EXTRAS - Westminster Presbyterian Center,
Inc. Project, 5.20%, Due 11/15/28 (Putable
at $100 and Rate Reset Effective 11/15/03) 2,455,000 2,372,144
Texas 4.3%
Bexar County, Texas HFC MFHR - Park Ridge
Apartments Project, 5.50%, Due 5/01/35
(Mandatory Put at $100 on 5/01/03) 4,775,000 4,727,250
Brazos River Authority Revenue Refunding -
Reliant Energy, Inc. Project, 5.20%, Due
12/01/18 (Mandatory Put at $100 on 12/01/02) 4,000,000 4,005,000
Dallas-Fort Worth, Texas International Airport
Facility Improvement Corporation Revenue
Refunding - American Airlines, Inc. Project,
5.95%, Due 5/01/29 (Mandatory Put at
$100 on 11/01/03) 5,000,000 5,062,500
-----------
13,794,750
-----------------------------------------------------------------------------
Total Variable Rate Put Bonds (Cost $51,063,888) 50,948,272
-----------------------------------------------------------------------------
Short-Term Investments (a) 26.2%
Municipal Bonds 10.9%
Colorado 1.0%
Denver, Colorado City and County Airport
Revenue, 8.50%, Due 11/15/23 (Pre-Refunding
at $102 on 11/15/00) 3,000,000 3,063,720
Georgia 0.3%
Athens-Clarke County, Georgia Residential
Care Facilities for the Elderly Authority
Revenue - Wesley Woods of Athens, Inc.
Project, 5.30%, Due 10/01/01 $ 1,000,000 $ 991,910
Illinois 0.2%
Illinois DFA Solid Waste Disposal Revenue -
Waste Management, Inc. Project,
7.125%, Due 1/01/01 640,000 641,338
Iowa 0.2%
Iowa Finance Authority Mortgage Revenue
Refunding - Friendship Village Project,
4.95%, Due 11/01/00 650,000 650,000
Kansas 1.1%
Kansas State Independent College Finance
Authority RAN:
Benedictine College Project,
5.75%, Due 6/01/01 1,200,000 1,208,268
Mid America Nazarene University Project,
5.75%, Due 6/01/01 1,400,000 1,409,646
Southwestern College Project,
6.00%, Due 6/01/01 800,000 806,624
-----------
3,424,538
Michigan 0.4%
Lakeville, Michigan Community School District
State Aid Notes, 5.50%, Due 6/29/01 1,391,000 1,400,932
Nebraska 0.2%
American Public Energy Agency Gas Supply
Revenue - Nebraska Public Gas Agency
Project, 3.60%, Due 6/01/01 500,000 494,300
New Jersey 1.0%
Jersey City, New Jersey Municipal Utilities
Authority Project Notes, 5.65%, Due 7/27/01 3,000,000 3,008,970
New Jersey Health Care Facilities Finance
Authority Revenue - Southern Ocean County
Hospital Project, 5.75%, Due 7/01/01 300,000 300,069
-----------
3,309,039
New York 2.3%
Albany, New York Housing Authority - Tax
Credit - Lark Drive Association,
5.25%, Due 6/01/01 3,300,000 3,312,375
Buffalo, New York RAN, 5.25%, Due 5/31/01 1,000,000 1,001,730
Schenectady, New York City School District
BAN, 5.50%, Due 6/29/01 3,000,000 3,008,100
-----------
7,322,205
Ohio 1.4%
American Municipal Power-Ohio, Inc. BAN:
Grafton Village Project, 5.40%, Due 6/21/01 1,500,000 1,507,020
Montpelier Village Project, 5.15%, Due 7/13/01 1,300,000 1,304,173
Cleveland, Ohio City School District Energy
Conservation Improvement GO:
6.53%, Due 3/15/01 690,000 694,754
6.53%, Due 9/15/01 715,000 726,390
Wood County, Ohio IDR - Abbey Etna Machine
Company Project, 7.625%, Due 7/01/01 140,000 140,735
-----------
4,373,072
Pennsylvania 0.2%
Horizon Hospital System Authority Hospital
Revenue, 5.40%, Due 5/15/01 585,000 584,585
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Texas 0.5%
Hidalgo County, Texas Health Services
Corporation Hospital Revenue - Mission
Hospital, Inc. Project, 5.75%, Due 8/15/01 $ 480,000 $ 480,134
Laguna Madre, Texas Water District Capital
Appreciation Refunding, Zero %, Due 6/01/01 1,265,000 1,232,616
------------
1,712,750
Utah 1.5%
Eagle Mountain, Utah Water and Sewer
Revenue BAN, 5.375%, Due 9/01/01 4,910,000 4,894,484
Wisconsin 0.6%
Wittenberg-Birnamwood, Wisconsin School
District TRAN, 4.90%, Due 8/24/01 2,000,000 1,998,300
------------
Total Municipal Bonds 34,861,173
Variable Rate Put Bonds 7.2%
Alabama 1.9%
Selma, Alabama IDB PCR - International
Paper Company Project:
5.50%, Due 7/15/06 (Putable at $100
and Rate Reset Effective on 7/15/01) 800,000 800,424
5.50%, Due 7/15/08 (Putable at $100
and Rate Reset Effective on 7/15/01) 5,150,000 5,152,729
------------
5,953,153
Florida 1.4%
Miami Beach, Florida Health Facilities
Authority Hospital Revenue - Mount Sinai
Medical Center Project, 7.08%, Due 8/15/01 4,500,000 4,500,000
Ohio 0.6%
Ohio Air Quality Development Authority
Revenue Refunding - Ohio Edison Company
Project, 4.25%, Due 6/01/33 (Mandatory
Put at $100 on 6/01/01) 2,000,000 1,990,940
Texas 2.4%
Farmers Branch, Texas IDC IDR - Thermalloy,
Inc. Project, 7.03%, Due 4/24/01 235,000 235,000
Northwest Trails Apartment Trust Pass-Thru
Certificates, 5.25%, Due 4/01/13
(Putable at $100 on 10/01/01) 7,355,000 7,323,300
------------
7,558,300
Virginia 0.9%
James City County, Virginia IDA Residential
Care Facility First Mortgage Revenue -
Williamsburg Landing, Inc. Project, 5.75%,
Due 3/01/26 (Putable at $100 and Rate
Reset Effective 9/01/01) 3,000,000 2,999,910
------------
Total Variable Rate Put Bonds 23,002,303
Annual Variable Rate Put Bonds 2.4%
Illinois 1.2%
Peoria County, Illinois Congregate Care
Revenue - St. Francis Woods Project,
6.55%, Due 4/01/01 3,760,000 3,759,173
Missouri 1.2%
Jackson County, Missouri IDA MFHR -
Pine Valley Apartments Project,
6.55%, Due 3/01/01 3,765,000 3,765,000
------------
Total Annual Variable Rate Put Bonds 7,524,173
Monthly Variable Rate Put Bonds 1.4%
New Mexico
New Mexico State Hospital Equipment Loan
Council Hospital Revenue - Presbyterian
Health Care Services Project,
5.83%, Due 11/02/00 $ 4,500,000 $ 4,500,000
Daily Variable Rate Put Bonds 3.1%
District of Columbia 1.6%
District of Columbia Revenue - Medlantic
Project, 5.60%, Due 11/01/00 5,000,000 5,000,000
Illinois 1.5%
Illinois DFA Revenue - Provena Health
Project, 5.85%, Due 11/01/00 5,000,000 5,000,000
------------
Total Daily Variable Rate Put Bonds 10,000,000
Municipal Money Market Funds 1.2%
Multiple States
Strong Municipal Money Market Fund (d) 3,700,000 3,700,000
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $83,505,786) 83,587,649
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $316,222,243)
98.7% 314,795,266
Other Assets and Liabilities, Net 1.3% 4,037,923
--------------------------------------------------------------------------------
Net Assets 100.0% $318,833,189
================================================================================
</TABLE>
LEGEND
--------------------------------------------------------------------------------
(a) Short-term investments include any security which has a remaining maturity
of less than one year.
(b) All or a portion of security is when-issued.
(c) All or a portion of security is pledged or segregated as collateral on
open futures contracts or when-issued securities.
(d) Affiliated issuer (see Note 8 of Notes to Financial Statements).
Maturity date represents actual maturity or the longer of the next put date or
interest adjustment date.
Percentages are stated as a percent of net assets.
25
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
ABBREVIATIONS
-------------------------------------------------------------------------------
The following is a list of abbreviations that may be used in the Schedules of
Investments in Securities:
BAN -- Bond Anticipation Notes
CDA -- Commercial Development Authority
CDR -- Commercial Development Revenue
COP -- Certificates of Participation
DFA -- Development Finance Authority
EDA -- Economic Development Authority
EDC -- Economic Development Corporation
EDFA -- Economic Development Finance Authority
EDR -- Economic Development Revenue
EFA -- Educational Facilities Authority
EXTRAS -- Extendable Rate Adjustable Securities
GO -- General Obligation
HDA -- Housing Development Authority
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
HFC -- Housing Finance Corporation
IBA -- Industrial Building Authority
IBR -- Industrial Building Revenue
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDC -- Industrial Development Corporation
IDFA -- Industrial Development Finance Authority
IDR -- Industrial Development Revenue
IFA -- Investment Finance Authority
MERLOT -- Municipal Exempt Receipt - Liquidity Optional Tender
MFHR -- Multi-Family Housing Revenue
MFMR -- Multi-Family Mortgage Revenue
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
SFHR -- Single Family Housing Revenue
SFMR -- Single Family Mortgage Revenue
TAN -- Tax Anticipation Notes
TRAN -- Tax and Revenue Anticipation Notes
26
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------------------------
October 31, 2000
(In Thousands, Except As Noted)
Strong Short-Term
Strong High-Yield High Yield
Municipal Bond Fund Municipal Fund
------------------- ---------------
<S> <C> <C>
Assets:
Investments in Securities, at Value
Unaffiliated Issuers (Cost of $460,012 and $138,520, respectively) $ 404,037 $ 132,956
Affiliated Issuers (Cost of $7,650 and $300, respectively) 7,650 300
Receivable for Securities Sold 1,219 204
Receivable for Fund Shares Sold 23 73
Interest Receivable 7,886 2,786
Variation Margin Receivable 70 14
Other Assets 56 255
------------ ------------
Total Assets 420,941 136,588
Liabilities:
Payable for Securities Purchased 1,984 2,617
Payable for Fund Shares Redeemed 100 4
Dividends Payable 2,257 552
Accrued Operating Expenses and Other Liabilities 54 23
------------ ------------
Total Liabilities 4,395 3,196
------------ ------------
Net Assets $ 416,546 $ 133,392
============ ============
Net Assets Consist of:
Capital Stock (par value and paid-in capital) $ 495,127 $ 142,320
Accumulated Net Realized Loss (22,463) (3,334)
Net Unrealized Depreciation (56,118) (5,594)
------------ ------------
Net Assets $ 416,546 $ 133,392
============ ============
Investor Class ($ and shares in full)
Net Assets $416,531,416 $133,377,080
Capital Shares Outstanding (Unlimited Number Authorized) 7,584,596 13,927,845
Net Asset Value Per Share $ 8.75 $ 9.58
============ ============
Advisor Class ($ and shares in full)
Net Assets $ 14,723 $ 14,911
Capital Shares Outstanding (Unlimited Number Authorized) 1,682 1,558
Net Asset Value Per Share $ 8.76 $ 9.57
============ ============
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (continued)
-------------------------------------------------------------------------------
October 31, 2000
<TABLE>
<CAPTION>
(In Thousands, Except As Noted)
Strong Municipal Strong Short-Term
Bond Fund Municipal Bond Fund
---------------- -------------------
<S> <C> <C>
Assets:
Investments in Securities, at Value
Unaffiliated Issuers (Cost of $274,861 and $312,522, respectively) $ 250,160 $ 311,095
Affiliated Issuers (Cost of $9,700 and $3,700, respectively) 9,700 3,700
Receivable for Securities Sold 2,525 --
Receivable for Fund Shares Sold -- 225
Interest and Dividends Receivable 5,153 5,067
Variation Margin Receivable 46 --
Other Assets 164 117
-------- --------
Total Assets 267,748 320,204
Liabilities:
Payable for Securities Purchased 7,137 --
Payable for Fund Shares Redeemed 20 66
Dividends Payable 1,136 1,271
Accrued Operating Expenses and Other Liabilities 50 34
-------- --------
Total Liabilities 8,343 1,371
-------- --------
Net Assets $ 259,405 $ 318,833
======== ========
Net Assets Consist of:
Capital Stock (par value and paid-in capital) $ 322,419 $ 336,209
Accumulated Net Realized Loss (38,273) (15,949)
Net Unrealized Depreciation (24,741) (1,427)
-------- --------
Net Assets $ 259,405 $ 318,833
======== ========
Investor Class ($ and shares in full)
Net Assets $259,375,833 $316,963,043
Capital Shares Outstanding (Unlimited Number Authorized) 30,216,256 32,931,964
Net Asset Value Per Share $ 8.58 $ 9.62
===== =====
Institutional Class ($ and shares in full)
Net Assets $ 14,750 $ 687,858
Capital Shares Outstanding (Unlimited Number Authorized) 1,718 71,439
Net Asset Value Per Share $ 8.58 $ 9.63
===== =====
Advisor Class ($ and shares in full)
Net Assets $14,901 $1,182,288
Capital Shares Outstanding (Unlimited Number Authorized) 1,736 122,829
Net Asset Value Per Share $8.58 $9.63
===== =====
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
Strong High-Yield Municipal Strong Short-Term High Yield
Bond Fund Municipal Fund
----------------------------------- ----------------------------------
Period Ended Year Ended Period Ended Year Ended
October 31, 2000 August 31, 2000 October 31, 2000 August 31, 2000
---------------- --------------- ---------------- ---------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
Income:
Interest $ 5,113 $ 35,233 $ 1,310 $ 7,982
Dividends - Affiliated Issuers 46 458 21 134
------- ------- -------- --------
Total Income 5,159 35,691 1,331 8,116
Expenses:
Investment Advisory Fees 248 2,371 78 659
Administrative Fees - Investor Class 181 562 58 156
Custodian Fees 2 20 1 8
Shareholder Servicing Costs - Investor Class 63 412 10 69
Reports to Shareholders - Investor Class 2 107 2 18
Transfer Agency Banking Charges - Investor Class -- -- -- 4
Federal and State Registration Fees 5 59 10 57
Other 16 124 8 26
------- ------- -------- --------
Total Expenses before Waivers, Absorptions and
Fees Paid Indirectly by Advisor 517 3,655 167 997
Voluntary Expense Waivers and Absorptions by Advisor -- -- (11) (115)
Fees Paid Indirectly by Advisor - Investor Class (2) (13) (1) --
------- ------- -------- --------
Expenses, Net 515 3,642 155 882
------- ------- -------- --------
Net Investment Income 4,644 32,049 1,176 7,234
Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments (3,281) (13,012) (438) (2,369)
Futures Contracts -- (652) 9 (381)
------- ------- -------- --------
Net Realized Loss (3,281) (13,664) (429) (2,750)
Net Change in Unrealized Appreciation/Depreciation on:
Investments (4,332) (38,406) 121 (3,277)
Futures Contracts (77) 364 (13) 152
------- ------- -------- --------
Net Change in Unrealized Appreciation/Depreciation (4,409) (38,042) 108 (3,125)
------- ------- -------- --------
Net Loss on Investments (7,690) (51,706) (321) (5,875)
------- ------- -------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations ($ 3,046) ($19,657) $ 855 $ 1,359
======= ======= ======== ========
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (continued)
-------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Strong Municipal Strong Short-Term Municipal
Bond Fund Bond Fund
--------------------------------- ---------------------------------
Period Ended Year Ended Period Ended Year Ended
October 31, 2000 August 31, 2000 October 31, 2000 August 31, 2000
---------------- --------------- ---------------- ---------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
Income:
Interest $ 2,570 $19,039 $ 2,847 $15,330
Dividends - Unaffiliated Issuers 37 18 -- --
Dividends - Affiliated Issuers 75 382 41 487
------- ------- ------- -------
Total Income 2,682 19,439 2,888 15,817
Expenses:
Investment Advisory Fees 148 1,428 127 1,050
Administrative Fees - Investor Class 112 350 130 353
Administrative Fees - Advisor Class -- -- 1 1
Custodian Fees 2 12 3 13
Shareholder Servicing Costs - Investor Class 48 326 30 189
Shareholder Servicing Costs - Advisor Class -- -- 1 1
Reports to Shareholders - Investor Class 14 99 6 55
Transfer Agency Banking Charges - Investor Class -- -- 1 8
12b-1 Fees - Advisor Class -- -- 1 1
Other 16 107 17 80
------- ------- ------- -------
Total Expenses before Fees Paid Indirectly by Advisor 340 2,322 317 1,751
Fees Paid Indirectly by Advisor - Investor Class -- (5) -- --
------- ------- ------- -------
Expenses, Net 340 2,317 317 1,751
------- ------- ------- -------
Net Investment Income 2,342 17,122 2,571 14,066
Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments (478) (8,807) 270 (744)
Futures Contracts (1,152) (236) (154) (134)
------- ------- ------- -------
Net Realized Gain (Loss) (1,630) (9,043) 116 (878)
Net Change in Unrealized Appreciation/Depreciation on:
Investments (5,692) (12,331) (670) (2,844)
Futures Contracts 1,194 (1,235) 155 (155)
------- ------- ------- -------
Net Change in Unrealized Appreciation/Depreciation (4,498) (13,566) (515) (2,999)
------- ------- ------- -------
Net Loss on Investments (6,128) (22,609) (399) (3,877)
------- ------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations ($ 3,786) ($ 5,487) $ 2,172 $10,189
======= ======= ======= =======
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
Strong High-Yield Municipal Strong Short-Term High Yield
Bond Fund Municipal Fund
-------------------------------------------- -------------------------------------------
Period Ended Year Ended Year Ended Period Ended Year Ended Year Ended
Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999 Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999
------------- ------------- ------------- ------------- ------------- -------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income $ 4,644 $ 32,049 $ 38,005 $ 1,176 $ 7,234 $ 7,483
Net Realized Loss (3,281) (13,664) (3,099) (429) (2,750) (73)
Net Change in Unrealized
Appreciation/Depreciation (4,409) (38,042) (42,223) 108 (3,125) (3,120)
--------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations (3,046) (19,657) (7,317) 855 1,359 4,290
Distributions:
From Net Investment Income - Investor
Class (4,651) (32,049) (38,005) (1,176) (7,234) (7,483)
From Net Realized Gains - Investor
Class -- -- (3,100) -- -- --
--------- --------- --------- --------- --------- ---------
Total Distributions (4,651) (32,049) (41,105) (1,176) (7,234) (7,483)
Capital Share Transactions (Note 6):
Net Increase (Decrease) in Net Assets
from Capital Share Transactions (14,476) (144,953) 16,534 (6,701) (35,408) 84,253
--------- --------- --------- --------- --------- ---------
Total Increase (Decrease) in Net Assets (22,173) (196,659) (31,888) (7,022) (41,283) 81,060
Net Assets:
Beginning of Period 438,719 635,378 667,266 140,414 181,697 100,637
--------- --------- --------- --------- --------- ---------
End of Period $ 416,546 $ 438,719 $ 635,378 $ 133,392 $ 140,414 $ 181,697
========= ========= ========= ========= ========= =========
<CAPTION>
Strong Municipal Bond Fund Strong Short-Term Municipal Bond Fund
-------------------------------------------- -------------------------------------------
Period Ended Year Ended Year Ended Period Ended Year Ended Year Ended
Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999 Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999
------------- ------------- ------------- ------------- ------------- -------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income $ 2,342 $ 17,122 $ 19,010 $ 2,571 $ 14,066 $ 13,391
Net Realized Gain (Loss) (1,630) (9,043) 1,016 116 (878) (2,632)
Net Change in Unrealized
Appreciation/Depreciation (4,498) (13,566) (25,676) (515) (2,999) (4,117)
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net
Assets Resulting from Operations (3,786) (5,487) (5,650) 2,172 10,189 6,642
Distributions:
From Net Investment Income:
Investor Class (2,342) (17,122) (19,010) (2,550) (14,046) (13,391)
Institutional Class -- -- -- (2) -- --
Advisor Class -- -- -- (21) (22) --
-------- -------- -------- -------- -------- --------
Total Distributions (2,342) (17,122) (19,010) (2,573) (14,068) (13,391)
Capital Share Transactions (Note 6):
Net Increase (Decrease) in Net Assets
from Capital Share Transactions (8,148) (73,922) 107,958 8,921 (10,547) 120,693
-------- -------- -------- -------- -------- --------
Total Increase (Decrease) in Net Assets (14,276) (96,531) 83,298 8,520 (14,426) 113,944
Net Assets:
Beginning of Period 273,681 370,212 286,914 310,313 324,739 210,795
-------- -------- -------- -------- -------- --------
End of Period $259,405 $273,681 $370,212 $318,833 $310,313 $324,739
======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
October 31, 2000
1. Organization
The accompanying financial statements represent the Strong Municipal Income
Funds (the "Funds"), which include the following funds, each with its own
investment objectives and policies:
- Strong High-Yield Municipal Bond Fund, Inc./(1)/
- Strong Short-Term High Yield Municipal Fund (a series of Strong Municipal
Funds, Inc./(1)/)
- Strong Municipal Bond Fund, Inc./(1)/
- Strong Short-Term Municipal Bond Fund, Inc./(1)/
/(1)/ A diversified, open-end management investment company registered
under the Investment Company Act of 1940, as amended.
During 2000, the Board of Directors of the Funds approved changing the
Funds' fiscal year-end from August 31st to October 31st. Accordingly, the
activity of the Funds are presented for the period from September 1, 2000
to October 31, 2000.
Effective March 1, 2000, the Strong High-Yield Municipal Bond Fund, Strong
Short-Term High Yield Municipal Fund, Strong Municipal Bond Fund and Strong
Short-Term Municipal Bond Fund have issued two classes of shares: Investor
Class and Advisor Class. Shares held prior to March 1, 2000 were designated
as Investor Class shares. Effective August 1, 2000, the Strong Municipal
Bond Fund and Strong Short-Term Municipal Bond Fund have issued an
additional class of shares: Institutional Class. Each class of shares is
subject to an administrative fee and the Advisor Class shares are subject
to an annual distribution fee as described in Note 3. Each class of shares
has identical rights and privileges except with respect to voting rights on
matters pertaining to that class.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) Security Valuation -- Securities of the Funds are valued at fair value
through valuations obtained by a commercial pricing service or the
mean of the bid and asked prices when no last sales price is
available. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith under
consistently applied procedures established by and under the general
supervision of the Board of Directors. Securities which are purchased
within 60 days of their stated maturity are valued at amortized cost,
which approximates fair value.
Strong High-Yield Municipal Bond Fund and Strong Short-Term High Yield
Municipal Fund principally invest in medium- and lower-quality bonds,
including high-yield bonds. Because not all dealers maintain markets
in all lower-quality and comparable unrated securities, there is no
established retail secondary market for many of these securities. The
lack of a liquid secondary market for certain securities may make it
more difficult for the Fund to obtain accurate market quotations for
purposes of valuing the Fund's portfolio. Market quotations are
generally available on many lower-quality and comparable unrated
issues only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. During
periods of thin trading, the spread between bid and asked prices is
likely to increase significantly. In addition, adverse publicity and
investor perceptions, whether or not based on fundamental analysis,
may decrease the values and liquidity of lower-quality and comparable
unrated securities, especially in a thinly traded market.
The Funds may have difficulty disposing of certain lower-quality and
comparable unrated securities because there may be a thin trading
market for such securities. The Fund anticipates that such securities
could be sold only to a limited number of dealers or institutional
investors. To the extent a secondary trading market does exist, it is
generally not as liquid as the secondary market for higher-rated
securities. The lack of a liquid secondary market may have an adverse
impact on the market price of the security. As a result, the Fund's
asset value and ability to dispose of particular securities, when
necessary to meet the Fund's liquidity needs or in response to a
specific economic event, may be impacted.
The Funds may own certain investment securities which are restricted
as to resale. These securities are valued after giving due
consideration to pertinent factors including recent private sales,
market conditions and the issuer's financial performance. The Funds
generally bear the costs, if any, associated with the disposition of
restricted securities. The Funds held no restricted securities at
October 31, 2000.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
The Funds intend to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no federal income or excise tax provision is required.
Net investment income or net realized gains for financial statement
purposes may differ from the characterization for federal income tax
purposes due to differences in the recognition of income and expense
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
32
<PAGE>
--------------------------------------------------------------------------------
Each Fund generally pays dividends from net investment income monthly
and distributes any net capital gains that it realizes annually.
Dividends are declared on each day that the net asset value is
calculated, except for bank holidays.
(C) Realized Gains and Losses on Investment Transactions -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) Certain Investment Risks -- The Funds may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with
the Funds' investment objectives and limitations. The Funds intend to
use such derivative instruments primarily to hedge or protect from
adverse movements in securities prices or interest rates. The use of
these instruments may involve risks such as the possibility of
illiquid markets or imperfect correlation between the value of the
instruments and the underlying securities, or that the counterparty
will fail to perform its obligations.
(E) Futures -- Upon entering into a futures contract, the Funds pledge to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Funds may be designated as collateral on open futures contracts.
The Funds also receive from or pay to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin," and are recorded
as unrealized gains or losses. When the futures contract is closed, a
realized gain or loss is recorded equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
(F) Use of Estimates -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts in these financial
statements. Actual results could differ from those estimates.
(G) Expense Offset Arrangements -- Certain Funds may pay a portion of
their custodian fees indirectly through expense offset arrangements.
Custodian fees are reduced for Funds that maintain compensating
balances in non-interest bearing accounts. The Funds could have
invested the assets used to pay for the custodian fees, had the assets
not been used in the expense offset arrangements. For the period ended
October 31, 2000 and for the year ended August 31, 2000, there were no
amounts paid through expense offset arrangements of the Funds.
(H) Other -- Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premiums and discounts.
Income, expenses (other than expenses attributable to a specific
class), and realized and unrealized gains or losses on investments are
allocated to each class of shares based on its relative net assets.
3. Related Party Transactions
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Funds are affiliated, provides investment advisory,
administrative, shareholder recordkeeping and related services to the
Funds. Investment advisory and administrative fees, which are established
by terms of the advisory and administrative agreements, are based on the
following annualized rates of the average daily net assets of the
respective Fund:
<TABLE>
<CAPTION>
Administrative Administrative Administrative
Fees - Fees - Fees -
Advisory Fees Advisory Fees Investor Class Institutional Class Advisor Class
Sept. 1, 1999- Mar. 1, 2000- Mar. 1, 2000- Aug. 1, 2000- Mar. 1, 2000-
Feb. 29, 2000 Oct. 31, 2000 Oct. 31, 2000 Oct. 31, 2000 Oct. 31, 2000
------------- ------------- ------------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
Strong High-Yield Municipal Bond Fund 0.60% 0.35% 0.25% * 0.25%
Strong Short-Term High Yield Municipal Fund 0.60% 0.35% 0.25% * 0.25%
Strong Municipal Bond Fund 0.60% 0.35% 0.25% 0.02% 0.25%
Strong Short-Term Municipal Bond Fund 0.50% 0.25% 0.25% 0.02% 0.25%
</TABLE>
* The Strong High-Yield Municipal Bond Fund and Strong Short-Term High
Yield Municipal Fund do not offer Institutional Class shares.
Based on the terms of the advisory and administrative agreements, advisory
fees, administrative fees and other expenses will be waived or absorbed by
the Advisor if the Fund's operating expenses exceed 2% of the average daily
net assets of the Fund. In addition, the Fund's Advisor may voluntarily
waive or absorb certain expenses at its discretion. Shareholder
recordkeeping and related service fees for the Investor Class are based on
contractually established rates for each open and closed shareholder
account. Shareholder recordkeeping and related service fees for the
Institutional and Advisor Classes are paid at an annual rate of 0.015% and
0.20%, respectively, of the average daily net asset value of each
respective class. The Advisor also allocates to each Fund certain charges
or credits resulting from transfer agency banking activities based on each
Fund's level of subscription and redemption activity. Charges allocated to
the Funds by the Advisor are included in Other Expenses in the Funds'
Statements of Operations. Credits allocated by the Advisor serve to reduce
the shareholder servicing expenses incurred by the Funds and are
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
October 31, 2000
reported as Fees Paid Indirectly by Advisor in the Funds' Statements of
Operations. The Advisor is also compensated for certain other services
related to costs incurred for reports to shareholders.
The Funds have entered into a distribution agreement with Strong
Investments, Inc. (the "Distributor"), pursuant to Rule 12b-1 under the
1940 Act, on behalf of each of the Fund's Advisor Class shares. Under the
agreement, the Distributor is paid an annual rate of 0.25% of the average
daily net assets of the Advisor Class shares as compensation for services
provided and expenses incurred, including amounts paid to brokers or
dealers, in connection with the sale of each Fund's shares. For the period
ended October 31, 2000, 12b-1 fees incurred by Strong High-Yield Municipal
Bond Fund, Strong Short-Term High Yield Municipal Fund, Strong Municipal
Bond Fund and Strong Short-Term Municipal Bond Fund were $6, $6, $6 and
$1,077, respectively. For the year ended August 31, 2000, 12b-1 fees
incurred by Strong High-Yield Municipal Bond Fund, Strong Short-Term High
Yield Municipal Fund, Strong Municipal Bond Fund and Strong Short-Term
Municipal Bond Fund were $19, $18, $19 and $1,190, respectively.
The Funds may invest cash in money market funds sponsored and managed by
the Advisor, subject to certain limitations. The terms of such transactions
are identical to those of non-related entities except that, to avoid
duplicate investment advisory fees, advisory fees of each Fund are reduced
by an amount equal to advisory fees paid to the Advisor under its
investment advisory agreement with the money market funds.
Certain information regarding related party transactions, excluding the
effects of waivers and absorptions, is as follows:
<TABLE>
<CAPTION>
Period Ended October 31, 2000
--------------------------------------------------------
Shareholder Servicing Transfer Agency Unaffiliated
Payable to Advisor at and Other Expenses Banking Directors'
October 31, 2000 Paid to Advisor Charges/(Credits) Fees
--------------------- --------------------- ----------------- ------------
<S> <C> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $29,651 $62,744 ($1,847) --
Strong Short-Term High Yield Municipal Fund 9,394 10,486 (510) --
Strong Municipal Bond Fund 24,365 47,893 (232) --
Strong Short-Term Municipal Bond Fund 14,852 30,604 959 --
</TABLE>
<TABLE>
<CAPTION>
Period Ended August 31, 2000
---------------------------------------------------------
Shareholder Servicing Transfer Agency Unaffiliated
and Other Expenses Banking Directors'
Paid to Advisor Charges/(Credits) Fees
---------------------- ----------------- ------------
<S> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $412,492 ($13,561) $10,665
Strong Short-Term High Yield Municipal Fund 69,518 4,191 3,022
Strong Municipal Bond Fund 326,614 (5,133) 6,840
Strong Short-Term Municipal Bond Fund 190,686 7,550 6,142
</TABLE>
The Advisor owns 100% of the outstanding Advisor Class shares of the Strong
High-Yield Municipal Bond Fund, Strong Short-Term High Yield Municipal Fund
and Strong Municipal Bond Fund. The Advisor owns 100% of the outstanding
Institutional Class shares of the Strong Municipal Bond Fund.
4. Line of Credit
The Strong Funds have established a line of credit agreement ("LOC") with
certain financial institutions to be used for temporary or emergency
purposes, primarily for financing redemption payments. Combined borrowings
among all participating Strong Funds are subject to a $350 million cap on
the total LOC. For an individual Fund, borrowings under the LOC are limited
to either the lesser of 15% of the market value of the Fund's total assets
or any explicit borrowing limits in the Funds' prospectus. Principal and
interest on each borrowing on the LOC are due not more than 60 days after
the date of the borrowing. Borrowings under the LOC bear interest based on
prevailing market rates as defined in the LOC. A commitment fee of 0.09%
per annum is incurred on the unused portion of the LOC and is allocated to
all participating Strong Funds. At October 31, 2000, there were no
borrowings by the Funds outstanding under the LOC.
34
<PAGE>
--------------------------------------------------------------------------------
5. Investment Transactions
The aggregate purchases and sales of long-term securities, other than
government securities, were as follows:
<TABLE>
<CAPTION>
Period Ended Oct. 31, 2000 Year Ended Aug. 31, 2000
-------------------------- ---------------------------
Purchases Sales Purchases Sales
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $ 5,773,382 $23,036,408 $ 84,461,849 $212,706,814
Strong Short-Term High Yield Municipal Fund 8,098,209 12,956,349 38,142,449 69,846,836
Strong Municipal Bond Fund 18,260,863 27,620,510 58,273,481 152,880,944
Strong Short-Term Municipal Bond Fund 34,567,139 25,068,729 132,380,994 161,899,994
</TABLE>
There were no purchases or sales of long-term government securities for the
period ended October 31, 2000 and year ended August 31, 2000.
6. Capital Share Transactions
<TABLE>
<CAPTION>
Strong High-Yield Municipal Bond Fund
-----------------------------------------------
Period Ended Year Ended Year Ended
Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999
------------- ------------- -------------
(Note 1)
<S> <C> <C> <C>
Capital Share Transactions of Each Class of
Shares of the Funds Were as Follows:
INVESTOR CLASS
Proceeds from Shares Sold $ 18,425,923 $ 201,847,580 $ 502,307,378
Proceeds from Reinvestment of Distributions 3,504,675 24,790,708 31,468,598
Payment for Shares Redeemed (36,406,250) (371,606,766) (517,242,032)
------------- -------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (14,475,652) (144,968,478) 16,533,944
ADVISOR CLASS
Proceeds from Shares Sold -- 15,050 --
Proceeds from Reinvestment Of Distributions 1 1 --
Payment for Shares Redeemed (51) -- --
------------- -------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (50) 15,051 --
------------- -------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions ($14,475,702) ($144,953,427) $ 16,533,944
============= ============== =============
Transactions in Shares of each Class of
the Funds were as Follows:
INVESTOR CLASS
Sold 2,078,239 22,005,077 48,707,320
Issued in Reinvestment of Distributions 394,434 2,698,065 3,057,459
Redeemed (4,119,283) (40,359,824) (50,294,494)
------------- -------------- -------------
Net Increase (Decrease) in Shares (1,646,610) (15,656,682) 1,470,285
ADVISOR CLASS
Sold -- 1,687 --
Issued in Reinvestment of Distributions -- -- --
Redeemed (6) -- --
------------- -------------- -------------
Net Increase (Decrease) in Shares (6) 1,687 --
------------- -------------- -------------
Net Increase (Decrease) in Shares of
the Fund (1,646,616) (15,654,995) 1,470,285
============= ============== =============
<CAPTION>
Strong Short-Term High Yield Municipal Fund
-------------------------------------------
Period Ended Year Ended Year Ended
Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999
------------- ------------- -------------
(Note 1)
<S> <C> <C> <C>
Capital Share Transactions of Each Class of
Shares of the Funds Were as Follows:
INVESTOR CLASS
Proceeds from Shares Sold $ 7,164,139 $ 110,528,131 $ 210,900,967
Proceeds from Reinvestment of Distributions 1,002,664 5,984,624 5,750,550
Payment for Shares Redeemed (14,868,080) (151,935,441) (132,398,739)
------------ ------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (6,701,277) (35,422,686) 84,252,778
ADVISOR CLASS
Proceeds from Shares Sold -- 15,019 --
Proceeds from Reinvestment Of Distributions -- -- --
Payment for Shares Redeemed -- (19) --
------------ ------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions -- 15,000 --
------------ ------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions ($6,701,277) ($35,407,686) $ 84,252,778
============ ============= =============
Transactions in Shares of each Class of
the Funds were as Follows:
INVESTOR CLASS
Sold 746,998 11,390,809 20,835,883
Issued in Reinvestment of Distributions 104,551 614,318 568,449
Redeemed (1,550,294) (15,570,456) (13,107,327)
------------ ------------- -------------
Net Increase (Decrease) in Shares (698,745) (3,565,329) 8,297,005
ADVISOR CLASS
Sold -- 1,560 --
Issued in Reinvestment of Distributions -- -- --
Redeemed -- (2) --
------------ ------------- -------------
Net Increase (Decrease) in Shares -- 1,558 --
------------ ------------- -------------
Net Increase (Decrease) in Shares of
the Fund (698,745) (3,563,771) 8,297,005
============ ============= =============
</TABLE>
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cotinued)
--------------------------------------------------------------------------------
October 31, 2000
<TABLE>
<CAPTION>
Strong Municipal Bond Fund
--------------------------------------------
Period Ended Year Ended Year Ended
Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999
------------- ------------- -------------
(Note 1)
<S> <C> <C> <C>
Capital Share Transactions of Each Class of
Shares of the Funds Were as Follows:
INVESTOR CLASS
Proceeds from Shares Sold $ 8,944,451 $ 97,511,732 $ 275,238,572
Proceeds from Reinvestment of Distributions 1,870,411 13,892,617 14,880,671
Payment for Shares Redeemed (18,962,465) (185,355,967) (182,161,223)
------------ ------------ ------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (8,147,603) (73,951,618) 107,958,020
INSTITUTIONAL CLASS
Proceeds from Shares Sold -- 15,000 --
Proceeds from Reinvestment of Distributions -- -- --
Payment for Shares Redeemed -- -- --
------------ ------------ ------------
Net Increase in Net Assets from
Capital Share Transactions -- 15,000 --
ADVISOR CLASS
Proceeds from Shares Sold -- 15,025 --
Proceeds from Reinvestment of Distributions -- -- --
Payment for Shares Redeemed -- (25) --
------------ ------------ ------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions -- 15,000 --
------------ ------------ ------------
Net Increase (Decrease) in Net Assets
from Capital Share Transactions ($ 8,147,603) ($ 73,921,618) $ 107,958,020
============ ============ ============
Transactions in Shares of Each Class
of the Funds Were as Follows:
INVESTOR CLASS
Sold 1,027,963 10,969,952 27,799,032
Issued in Reinvestment of Distributions 213,873 1,564,196 1,507,576
Redeemed (2,176,926) (20,913,021) (18,591,274)
------------ ------------ ------------
Net Increase (Decrease) in Shares (935,090) (8,378,873) 10,715,334
INSTITUTIONAL CLASS
Sold -- 1,718 --
Issued in Reinvestment of Distributions -- -- --
Redeemed -- -- --
------------ ------------ ------------
Net Increase in Shares -- 1,718 --
ADVISOR CLASS
Sold -- 1,739 --
Issued in Reinvestment of Distributions -- -- --
Redeemed -- (3) --
------------ ------------ ------------
Net Increase (Decrease) in Shares -- 1,736 --
------------ ------------ ------------
Net Increase (Decrease) in Shares of
the Fund (935,090) (8,375,419) 10,715,334
============ ============ ============
<CAPTION>
Strong Short-Term Municipal Bond Fund
--------------------------------------------
Period Ended Year Ended Year Ended
Oct. 31, 2000 Aug. 31, 2000 Aug. 31, 1999
------------- ------------- -------------
(Note 1)
<S> <C> <C> <C>
Capital Share Transactions of Each Class of
Shares of the Funds Were as Follows:
INVESTOR CLASS
Proceeds from Shares Sold $ 30,132,082 $ 159,090,226 $ 277,898,076
Proceeds from Reinvestment of Distributions 2,289,991 12,103,035 11,310,921
Payment for Shares Redeemed (22,343,477) (184,754,970) (168,515,800)
------------ ------------ ------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 10,078,596 (13,561,709) 120,693,197
INSTITUTIONAL CLASS
Proceeds from Shares Sold 672,931 15,000 --
Proceeds from Reinvestment of Distributions -- -- --
Payment for Shares Redeemed -- -- --
------------ ------------ ------------
Net Increase in Net Assets from
Capital Share Transactions 672,931 15,000 --
ADVISOR CLASS
Proceeds from Shares Sold -- 3,015,025 --
Proceeds from Reinvestment of Distributions -- -- --
Payment for Shares Redeemed (1,830,400) (15,094) --
------------ ------------ ------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (1,830,400) 2,999,931 --
------------ ------------ ------------
Net Increase (Decrease) in Net Assets
from Capital Share Transactions $ 8,921,127 ($ 10,546,778) $ 120,693,197
============ ============ ============
Transactions in Shares of Each Class
of the Funds Were as Follows:
INVESTOR CLASS
Sold 3,128,892 16,532,816 27,951,790
Issued in Reinvestment of Distributions 237,672 1,255,840 1,137,711
Redeemed (2,319,712) (19,180,956) (17,004,715)
------------ ------------ ------------
Net Increase (Decrease) in Shares 1,046,852 (1,392,300) 12,084,786
INSTITUTIONAL CLASS
Sold 69,879 1,561 --
Issued in Reinvestment of Distributions -- -- --
Redeemed -- -- --
------------ ------------ ------------
Net Increase in Shares 69,879 1,561 --
ADVISOR CLASS
Sold -- 314,395 --
Issued in Reinvestment of Distributions -- -- --
Redeemed (190,000) (1,566) --
------------ ------------ ------------
Net Increase (Decrease) in Shares (190,000) 312,829 --
------------ ------------ ------------
Net Increase (Decrease) in Shares of
the Fund 926,731 (1,077,910) 12,084,786
============ ============ ============
</TABLE>
36
<PAGE>
7. Income Tax Information
At October 31, 2000, the investment cost and gross unrealized appreciation
and depreciation on investments for federal income tax purposes were as
follows:
<TABLE>
<CAPTION>
Federal Tax Unrealized Unrealized Net
Cost Appreciation Depreciation Depreciation
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $467,684,338 $5,972,011 $61,969,751 $55,997,740
Strong Short-Term High Yield Municipal Fund 138,820,003 205,032 5,769,278 5,564,246
Strong Municipal Bond Fund 284,560,507 2,711,790 27,411,803 24,700,013
Strong Short-Term Municipal Bond Fund 316,244,047 1,546,312 2,995,093 1,448,781
</TABLE>
At August 31, 2000 (the tax year-end of the Funds), the capital loss
carryovers (expiring in varying amounts through 2008) for federal income
tax purposes for Strong High-Yield Municipal Bond Fund, Strong Short-Term
High Yield Municipal Fund, Strong Municipal Bond Fund and Strong Short-Term
Municipal Bond Fund were $6,053,826, $340,267, $27,308,192 and $15,128,391,
respectively.
The Strong Municipal Bond Fund and Strong Short-Term Municipal Bond Fund
utilized $291,188 and $55,683, respectively, of their capital loss
carryovers during the year ended August 31, 2000.
The Strong High-Yield Municipal Bond Fund, Strong Short-Term High Yield
Municipal Fund, Strong Municipal Bond Fund and Strong Short-Term Municipal
Bond Fund each realized, on a tax basis post-October losses through August
31, 2000 of $13,171,308, $2,581,521, $10,619,999 and $1,069,370,
respectively, which are not recognized for tax purposes until the first day
of the following fiscal year.
8. Investments in Affiliates
Affiliated issuers, as defined under the Investment Company Act of 1940,
include those in which the Fund's holdings of an issuer represent 5% or
more of the outstanding voting securities of the issuer and any other
Strong Fund. A summary of transactions in the securities of these issuers
were as follows:
<TABLE>
<CAPTION>
Balance of Gross Gross Sales Balance of Value
Shares Held Purchases and Shares Held Oct. 31,
Sept. 1, 2000 and Additions Reductions Oct. 31, 2000 2000
------------- ------------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
Strong High-Yield Municipal Bond Fund
-------------------------------------
Strong Municipal Money Market Fund 11,050,000 16,700,000 20,100,000 7,650,000 $7,650,000
Strong Short-Term High Yield Municipal Fund
-------------------------------------------
Strong Municipal Money Market Fund 1,500,000 15,400,000 16,600,000 300,000 300,000
Strong Municipal Bond Fund
--------------------------
Strong Municipal Money Market Fund 18,200,000 12,200,000 20,700,000 9,700,000 9,700,000
Strong Short-Term Municipal Bond Fund
-------------------------------------
Strong Municipal Money Market Fund 12,400,000 25,000,000 33,700,000 3,700,000 3,700,000
<CAPTION>
Dividend Income Dividend Income
Sept. 1, 2000 - Sept. 1, 1999 -
Oct. 31, 2000 Aug. 31, 2000
--------------- ---------------
<S> <C> <C>
Strong High-Yield Municipal Bond Fund
-------------------------------------
Strong Municipal Money Market Fund $46,000 $458,014
Strong Short-Term High Yield Municipal Fund
-------------------------------------------
Strong Municipal Money Market Fund 21,493 133,972
Strong Municipal Bond Fund
--------------------------
Strong Municipal Money Market Fund 75,046 381,937
Strong Short-Term Municipal Bond Fund
-------------------------------------
Strong Municipal Money Market Fund 40,963 486,875
</TABLE>
37
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND -- INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
----------------------------------------------------------------------
Oct. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Dec. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000 1999 1998 1997 1996/(d)/ 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.91 $ 9.79 $ 10.52 $ 10.09 $ 9.45 $ 9.91 $ 9.29
Income From Investment Operations:
Net Investment Income 0.09 0.59 0.58 0.59 0.61 0.44 0.69
Net Realized and Unrealized Gains (Losses) on Investments (0.15) (0.88) (0.68) 0.45 0.64 (0.46) 0.62
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.06) (0.29) (0.10) 1.04 1.25 (0.02) 1.31
Less Distributions:
From Net Investment Income/(b)/ (0.10) (0.59) (0.58) (0.59) (0.61) (0.44) (0.69)
From Net Realized Gains -- -- (0.05) (0.02) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.10) (0.59) (0.63) (0.61) (0.61) (0.44) (0.69)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.75 $ 8.91 $ 9.79 $ 10.52 $ 10.09 $ 9.45 $ 9.91
====================================================================================================================================
Ratios and Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Total Return -0.7% -2.9% -1.1% +10.5% +13.6% -0.1% +14.6%
Net Assets, End of Period (In Millions) $ 417 $ 439 $ 635 $ 667 $ 361 $ 238 $ 267
Ratio of Expenses to Average Net Assets Without Waivers,
Absorptions and Fees Paid Indirectly by Advisor 0.7%* 0.7% 0.7% 0.7% 0.7% 0.7%* 0.8%
Ratio of Expenses to Average Net Assets 0.7%* 0.7% 0.7% 0.7% 0.7% 0.7%* 0.4%
Ratio of Net Investment Income to Average Net Assets 6.4%* 6.4% 5.7% 5.7% 6.2% 6.9%* 7.1%
Portfolio Turnover Rate/(e)/ 1.4% 17.5% 52.5% 66.5% 92.1% 106.8% 113.8%
</TABLE>
STRONG HIGH-YIELD MUNICIPAL BOND FUND -- ADVISOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
---------------------------
Oct. 31, Aug. 31,
Selected Per-Share Data(a) 2000/(c)/ 2000/(f)/
----------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 8.91 $ 8.92
Income From Investment Operations:
Net Investment Income 0.09 0.28
Net Realized and Unrealized Losses on Investments (0.15) (0.01)
----------------------------------------------------------------------------------------
Total from Investment Operations (0.06) 0.27
Less Distributions:
From Net Investment Income/(b)/ (0.09) (0.28)
----------------------------------------------------------------------------------------
Total Distributions (0.09) (0.28)
----------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.76 $ 8.91
========================================================================================
Ratios and Supplemental Data
----------------------------------------------------------------------------------------
Total Return -0.7% +3.1%
Net Assets, End of Period (In Millions) $ 0/(g)/ $ 0/(g)/
Ratio of Expenses to Average Net Assets Without Waivers,
Absorptions and Fees Paid Indirectly by Advisor 1.2%* 1.1%*
Ratio of Expenses to Average Net Assets 1.1%* 1.1%*
Ratio of Net Investment Income to Average Net Assets 6.0%* 6.3%*
Portfolio Turnover Rate/(e)/ 1.4% 17.5%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) In 2000, the Fund changed its fiscal year-end from August to October
(Note 1).
(d) In 1996, the Fund changed its fiscal year-end from December to August.
(e) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(f) For the period from March 1, 2000 (Commencement of Class) to August 31,
2000.
(g) Amount is less than $500,000.
See Notes to Financial Statements.
38
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
---------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND -- INVESTOR CLASS
---------------------------------------------------------------------------------------------------------
Period Ended
-------------------------------------
Oct. 31, Aug. 31, Aug. 31, Aug. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000 1999 1998/(d)/
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.60 $ 9.99 $10.17 $10.00
Income From Investment Operations:
Net Investment Income 0.08 0.51 0.50 0.37
Net Realized and Unrealized Gains (Losses) on Investments (0.02) (0.39) (0.18) 0.17
---------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.06 0.12 0.32 0.54
Less Distributions:
From Net Investment Income/(b)/ (0.08) (0.51) (0.50) (0.37)
---------------------------------------------------------------------------------------------------------
Total Distributions (0.08) (0.51) (0.50) (0.37)
---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.58 $ 9.60 $ 9.99 $10.17
=========================================================================================================
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------
Total Return +0.7% +1.3% +3.2% +5.5%
Net Assets, End of Period (In Millions) $ 133 $ 140 $ 182 $ 101
Ratio of Expenses to Average Net Assets Without Waivers,
Absorptions and Fees Paid Indirectly by Advisor 0.7%* 0.7% 0.7% 1.0%*
Ratio of Expenses to Average Net Assets 0.7%* 0.6% 0.4% 0.4%*
Ratio of Net Investment Income to Average Net Assets 5.1%* 5.2% 4.9% 5.0%*
Portfolio Turnover Rate/(e)/ 6.0% 27.9% 22.7% 8.1%
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND -- ADVISOR CLASS
-------------------------------------------------------------------------------------
<CAPTION>
Period Ended
-----------------------
Oct. 31, Aug. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000/(f)/
-------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.60 $9.63
Income From Investment Operations:
Net Investment Income 0.07 0.24
Net Realized and Unrealized Losses on Investments (0.03) (0.03)
-------------------------------------------------------------------------------------
Total from Investment Operations 0.04 0.21
Less Distributions:
From Net Investment Income/(b)/ (0.07) (0.24)
-------------------------------------------------------------------------------------
Total Distributions (0.07) (0.24)
-------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.57 $9.60
=====================================================================================
Ratios and Supplemental Data
-------------------------------------------------------------------------------------
Total Return +0.5% +2.2%
Net Assets, End of Period (In Millions) $0/(g)/ $0/(g)/
Ratio of Expenses to Average Net Assets Without Waivers
and Absorptions 1.2%* 1.2%*
Ratio of Expenses to Average Net Assets 1.1%* 1.1%*
Ratio of Net Investment Income to Average Net Assets 4.6%* 4.9%*
Portfolio Turnover Rate/(e)/ 6.0% 27.9%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) In 2000, the Fund changed its fiscal year-end from August to October
(Note 1).
(d) For the period from November 30, 1997 (inception) to August 31, 1998.
(e) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(f) For the period from March 1, 2000 (Commencement of Class) to August 31,
2000.
(g) Amount is less than $500,000.
See Notes to Financial Statements.
39
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
------------------------------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND -- INVESTOR CLASS
------------------------------------------------------------------------------------------------------------------------------------
Period Ended
-----------------------------------------------------------------------
Oct. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Dec. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000 1999 1998 1997 1996/(d)/ 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.78 $ 9.37 $ 9.96 $ 9.52 $ 8.99 $ 9.52 $ 9.23
Income From Investment Operations:
Net Investment Income 0.08 0.50 0.51 0.51 0.50 0.33 0.52
Net Realized and Unrealized Gains (Losses) on Investments (0.20) (0.59) (0.59) 0.44 0.53 (0.53) 0.51
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.12) (0.09) (0.08) 0.95 1.03 (0.20) 1.03
Less Distributions:
From Net Investment Income/(b)/ (0.08) (0.50) (0.51) (0.51) (0.50) (0.33) (0.54)
In Excess of Net Investment Income -- -- -- -- -- -- (0.20)
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.08) (0.50) (0.51) (0.51) (0.50) (0.33) (0.74)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.58 $ 8.78 $ 9.37 $ 9.96 $ 9.52 $ 8.99 $ 9.52
====================================================================================================================================
Ratios and Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Total Return -1.4% -0.9% -1.0% +10.1% +11.8% -2.1% +11.4%
Net Assets, End of Period (In Millions) $ 259 $ 274 $ 370 $ 287 $ 232 $ 247 $ 247
Ratio of Expenses to Average Net Assets Without
Fees Paid Indirectly by Advisor 0.8%* 0.8% 0.7% 0.7% 0.8% 0.8%* 0.8%
Ratio of Expenses to Average Net Assets 0.8%* 0.8% 0.7% 0.7% 0.8% 0.8%* 0.8%
Ratio of Net Investment Income to Average Net Assets 5.2%* 5.6% 5.1% 5.2% 5.4% 5.4%* 5.4%
Portfolio Turnover Rate/(e)/ 7.2% 19.2% 22.4% 58.5% 85.0% 172.9% 513.8%
<CAPTION>
STRONG MUNICIPAL BOND FUND -- INSTITUTIONAL CLASS
------------------------------------------------------------------------------------------------------------
Period Ended
----------------------
Oct. 31, Aug. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 1999/(f)/
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 8.79 $ 8.73
Income From Investment Operations:
Net Investment Income 0.08 0.04
Net Realized and Unrealized Gains (Losses) on Investments (0.21) 0.06
------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.13) 0.10
Less Distributions:
From Net Investment Income/(b)/ (0.08) (0.04)
------------------------------------------------------------------------------------------------------------
Total Distributions (0.08) (0.04)
------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.58 $ 8.79
============================================================================================================
Ratios and Supplemental Data
------------------------------------------------------------------------------------------------------------
Total Return -1.5% +1.2%
Net Assets, End of Period (In Millions) $ 0/(g)/$ 0/(g)/
Ratio of Expenses to Average Net Assets 0.4%* 0.4%*
Ratio of Net Investment Income to Average Net Assets 5.6%* 5.5%*
Portfolio Turnover Rate/(e)/ 7.2% 19.2%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) In 2000, the Fund changed its fiscal year-end from August to October
(Note 1).
(d) In 1996, the Fund changed its fiscal year-end from December to August.
(e) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(f) For the period from August 1, 2000 (Commencement of Class) to August 31,
2000.
(g) Amount is less than $500,000.
See Notes to Financial Statements.
40
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND-- ADVISOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
------------------------
Oct. 31, Aug. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000/(d)/
-----------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 8.78 $ 8.64
Income From Investment Operations:
Net Investment Income 0.07 0.24
Net Realized and Unrealized Gains (Losses) on Investment (0.20) 0.14
-----------------------------------------------------------------------------------------
Total from Investment Operations (0.13) 0.38
Less Distributions:
From Net Investment Income/(b)/ (0.07) (0.24)
-----------------------------------------------------------------------------------------
Total Distributions (0.07) (0.24)
-----------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 8.58 $ 8.78
=========================================================================================
Ratios and Supplemental Data
-----------------------------------------------------------------------------------------
Total Return -1.5% +4.4%
Net Assets, End of Period (In Millions) $ 0/(e)/ $ 0/(e)/
Ratio of Expenses to Average Net Assets Without
Waivers and Absorptions 1.2%* 1.1%*
Ratio of Expenses to Average Net Assets 1.1%* 1.1%*
Ratio of Net Investment Income to Average Net Assets 4.9%* 5.4%*
Portfolio Turnover Rate/(f)/ 7.2% 19.2%
</TABLE>
STRONG SHORT-TERM MUNICIPAL BOND FUND -- INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
------------------------------------------------------------------------
Oct. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Dec. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000 1999 1998 1997 1996/(g)/ 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.64 $ 9.76 $ 9.95 $ 9.82 $ 9.67 $ 9.77 $ 9.73
Income From Investment Operations:
Net Investment Income 0.08 0.46 0.47 0.48 0.49 0.33 0.47
Net Realized and Unrealized Gains (Losses) on Investments (0.02) (0.12) (0.19) 0.13 0.15 (0.10) 0.04
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.06 0.34 0.28 0.61 0.64 0.23 0.51
Less Distributions:
From Net Investment Income/(b)/ (0.08) (0.46) (0.47) (0.48) (0.49) (0.33) (0.47)
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.08) (0.46) (0.47) (0.48) (0.49) (0.33) (0.47)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.62 $ 9.64 $ 9.76 $ 9.95 $ 9.82 $ 9.67 $ 9.77
====================================================================================================================================
Ratios and Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Total Return +0.6% +3.6% +2.8% +6.3% +6.7% +2.4% +5.4%
Net Assets, End of Period (In Millions) $ 317 $ 307 $ 325 $ 211 $ 165 $ 136 $ 133
Ratio of Expenses to Average Net Assets 0.6%* 0.6% 0.6% 0.6% 0.7% 0.7%* 0.8%
Ratio of Net Investment Income to Average Net Assets 4.9%* 4.8% 4.7% 4.8% 5.0% 5.1%* 4.8%
Portfolio Turnover Rate/(f)/ 8.9% 48.6% 22.7% 15.7% 26.2% 38.0% 226.8%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) In 2000, the Fund changed its fiscal year-end from August to October (Note
1).
(d) For the period from March 1, 2000 (Commencement of Class) to August 31,
2000.
(e) Amount is less than $500,000.
(f) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(g) In 1996, the Fund changed its fiscal year-end from December to August.
See Notes to Financial Statements.
41
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND -- INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
------------------------------------
Oct. 31, Aug. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000/(d)/
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.64 $ 9.61
Income From Investment Operations:
Net Investment Income 0.08 0.04
Net Realized and Unrealized Gains (Losses) on Investments (0.01) 0.03
--------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.07 0.07
Less Distributions:
From Net Investment Income/(b)/ (0.08) (0.04)
--------------------------------------------------------------------------------------------------------
Total Distributions (0.08) (0.04)
--------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.63 $ 9.64
========================================================================================================
Ratios and Supplemental Data
--------------------------------------------------------------------------------------------------------
Total Return +0.8% +0.8%
Net Assets, End of Period (In Millions) $ 1 $ 0(e)
Ratio of Expenses to Average Net Assets Without
Fees Paid Indirectly by Advisor 0.3%* 0.3%*
Ratio of Expenses to Average Net Assets 0.3%* 0.3%*
Ratio of Net Investment Income to Average Net Assets 4.9%* 5.3%*
Portfolio Turnover Rate/(f)/ 8.9% 48.6%
</TABLE>
STRONG SHORT-TERM MUNICIPAL BOND FUND -- ADVISOR CLASS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
---------------------------------
Oct. 31, Aug. 31,
Selected Per-Share Data/(a)/ 2000/(c)/ 2000/(g)/
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $9.64 $9.58
Income From Investment Operations:
Net Investment Income 0.07 0.22
Net Realized and Unrealized Gains (Losses) on Investments (0.01) 0.06
-------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.06 0.28
Less Distributions:
From Net Investment Income/(b)/ (0.07) (0.22)
-------------------------------------------------------------------------------------------------------
Total Distributions (0.07) (0.22)
-------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.63 $9.64
=======================================================================================================
Ratios and Supplemental Data
-------------------------------------------------------------------------------------------------------
Total Return +0.7% +2.9%
Net Assets, End of Period (In Millions) $ 1 $ 3
Ratio of Expenses to Average Net Assets Without
Fees Paid Indirectly by Advisor 1.0%* 0.9%*
Ratio of Expenses to Average Net Assets 1.0%* 0.9%*
Ratio of Net Investment Income to Average Net Assets 4.6%* 4.5%*
Portfolio Turnover Rate/(f)/ 8.9% 48.6%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the
Fund outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) In 2000, the Fund changed its fiscal year-end from August to
October (Note 1).
(d) For the period from August 1, 2000 (Commencement of Class) to
August 31, 2000.
(e) Amount is less than $500,000.
(f) Calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(g) For the period from March 1, 2000 (Commencement of Class) to
August 31, 2000.
See Notes to Financial Statements.
42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Municipal Income Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments in securities, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Strong High-Yield
Municipal Bond Fund, Inc., Strong Short-Term High Yield Municipal Fund (one of
the portfolios constituting the Strong Municipal Funds, Inc.), Strong Municipal
Bond Fund, Inc. and Strong Short-Term Municipal Bond Fund, Inc. (all four
collectively referred to herein as the "Strong Municipal Income Funds") at
October 31, 2000, the results of each of their operations, the changes in each
of their net assets and their financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Strong Municipal
Income Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 5, 2000
43
<PAGE>
Directors
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Neal Malicky
Marvin E. Nevins
William F. Vogt
Officers
Richard S. Strong, Chairman of the Board
Elizabeth N. Cohernour, Vice President and Secretary
Cathleen A. Ebacher, Vice President and Assistant Secretary
Susan A. Hollister, Vice President and Assistant Secretary
Dennis A. Wallestad, Vice President
Thomas M. Zoeller, Vice President
John W. Widmer, Treasurer
Rhonda K. Haight, Assistant Treasurer
Investment Advisor
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Distributor
Strong Investments, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Custodian
Firstar Bank, N.A.
P.O. Box 701, Milwaukee, Wisconsin 53201
Transfer Agent and Dividend-Disbursing Agent
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Independent Accountants
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Legal Counsel
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030. Please read it carefully
before investing or sending money. This report does not constitute an offer
for the sale of securities. Strong Funds are offered for sale by prospectus
only. Strong Investments, Inc. RT8699-1200
Strong Investments
P.O. Box 2936 | Milwaukee, WI 53201
www.eStrong.com
--------------------------------------------------------------------------------
To order a free prospectus kit, call
1-800-368-1030
To learn more about our funds, discuss an existing
account, or conduct a transaction, call
1-800-368-3863
If you are a Financial Professional, call
1-800-368-1683
Visit our web site at
www.eStrong.com B
[LOGO HERE] STRONG
