<PAGE> 1
<PAGE> 1
ANNUAL REPORT
THE STRONG
MUNICIPAL INCOME FUNDS
[PHOTO Anonymous Man With Woman]
THE STRONG MUNICIPAL MONEY MARKET FUND
THE STRONG SHORT-TERM MUNICIPAL BOND FUND
THE STRONG INSURED MUNICIPAL BOND FUND
THE STRONG MUNICIPAL BOND FUND
THE STRONG HIGH-YIELD MUNICIPAL BOND FUND
[STRONG LOGO]
DECEMBER 31,1994
<PAGE> 2
SHAREHOLDER PRIVILEGES*
TELEPHONE PURCHASE
Make additional investments from $50 to $25,000 into any
Strong Fund by calling us toll-free at 1-800-368-3863.
TELEPHONE EXCHANGE
If your financial goals change, you can exchange between any of
the Strong Funds free of charge.
TELEPHONE REDEMPTION
You can call toll-free to redeem your mutual fund shares at
any time. Your shares will be redeemed no later than the close of
the next business day.
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your
bank checking or NOW account to your Strong Funds account. The
minimum amount per transfer is $50.
PAYROLL DIRECT DEPOSIT PLAN
You can automatically transfer all or a portion of your net pay
at each pay period. This eliminates the delay of depositing
paychecks to your bank and then sending a check through the mail
to Strong Funds.
AUTOMATIC EXCHANGE PLAN
This plan allows you to exchange money from one Strong Fund to
another. For example, you may want to set up automatic exchanges
from a money market fund to an equity fund. The minimum amount
per exchange is $50.
NO MINIMUM INVESTMENT PROGRAM
The Funds will waive the minimum initial investment for
investors using the Automatic Investment Plan.
For more information about these privileges, call us at
1-800-368-3863.
To reduce the volume of mail you receive, only one copy of
certain materials, such as prospectuses and shareholder reports,
is mailed to your household. Please call 1-800-368-3863 if you
wish to receive additional copies, free of charge.
*Each Fund reserves the right to terminate or modify any of
these privileges.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
MESSAGE FROM THE CHAIRMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT REVIEWS
The Strong Municipal Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Strong Short-Term Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Strong Insured Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Strong Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Strong High-Yield Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FINANCIAL INFORMATION
Equivalent Taxable Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Historical Investment Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Summary of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Historical Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Schedules of Investments in Securities
The Strong Municipal Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Strong Short-Term Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
The Strong Insured Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
The Strong Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
The Strong High-Yield Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Statements of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
<PAGE> 4
Message from the Chairman
Dear Strong Funds Investor:
We are pleased to report that 1994, our twentieth year, was extremely
successful. In a challenging investment environment, our results were, once
again, very satisfying, with many of our funds being among the top performers
in their categories.
Mutual fund assets under management grew past $8 billion, and active accounts
passed the 500,000 mark.
[PHOTO of Richard S. Strong]
Morningstar, Inc., a nationally recognized authority on mutual funds, assigns
"star" ratings to funds, with 1 star as the lowest rating and 5 stars the
highest. Of the twelve Strong Funds that Morningstar currently rates, all have
at least a 3-star rating, and many carry 4 or 5 stars. We believe this
objective, unbiased recognition of Strong Funds speaks extremely well for the
talent and strength of our firm's investment department.
We are very encouraged by the shift that has occurred in the Congress as a
result of the 1994 elections. Looking ahead, we believe this sweeping change
will have a number of important implications. Among them:
- - - Federal Reserve Board policies should be supported, not hampered, by
Congress.
- - - The U.S. dollar may once again become a bastion of stability and
confidence.
2
<PAGE> 5
- - - Inflation should trend downward over time.
- - - Entrepreneurial initiatives, investments and business should receive
positive, rather than negative, legislative treatment.
With another year of solid investment results behind us and a favorable
investment climate ahead, we are very confident in our future growth potential.
To fully realize this potential, we forged ahead this past year and implemented
strategic actions aimed at providing you with superior investment results, a
wide and expanding range of investment products, and exceptional service.
First and foremost, our strategy relies on having very talented and dedicated
people who are deeply committed to you and the stewardship of your investments.
Our team enjoys a dynamic balance of successful and experienced portfolio
managers, combined with our own rising young talent. Simply put, we believe
that we have developed an excellent investment management team to serve you.
To further enhance the effectiveness of our entire organization, we made
several significant additions to our management and administrative capabilities
in 1994. We were very pleased to have John Dragisic join us as Vice Chairman.
John brings with him many successful years of general management experience and
a unique perspective on the company as a former member of the Strong Funds
Board. Among several other new positions, we were particularly pleased with the
appointment of Rochelle Lamm Wallach as President of Strong Advisory Services,
a new unit that will lead our efforts in today's critically important
retirement and financial intermediary markets. These appointments, and the
others we have made during the past year, will contribute greatly to the
continued growth and success we expect in our third decade.
These are important changes for you, because they not only strengthen the
management of your Fund's advisor, but they also make it possible for us to
continue building on our strengths with better service and a wider array of
investment alternatives.
With these vital resources now in place, we look forward to the coming year
with great confidence. We thank you for your continued support.
Sincerely,
/s/ Richard S. Strong
Richard S. Strong
Chairman
3
<PAGE> 6
The Strong
Municipal
Money
Market
Fund
As of 12/30/94
7-DAY
CURRENT
YIELD(2)
4.54%
7-DAY
EFFECTIVE
YIELD(2)
4.64%
The Strong Municipal Money Market Fund is managed for a high level of federally
tax-exempt income, principal preservation, and daily liquidity.
Since its inception on October 23, 1986, the Strong Municipal Money Market Fund
has provided its shareholders with consistently superior returns. Based on
total return from its inception through December 31, 1994, the Fund ranked #1
of 60 tax-exempt money market funds tracked by Lipper Analytical Services, a
respected mutual-fund evaluation service. The Fund carries outstanding rankings
for more recent periods, as well, ranking #1 of 121 funds and #1 of 84 funds,
respectively, for the one- and five-year periods ended December 31, 1994.(1)
ATTRACTIVE YIELDS
As of December 30, 1994, the Strong Municipal Money Market Fund's 7-day current
yield was 4.54%, and its 7-day effective yield--which reflects
compounding--was 4.64%.(2) The following table shows the Fund's equivalent
taxable yields for each of 1994's federal income tax brackets.
EQUIVALENT TAXABLE YIELDS(2)
as of 12/30/94
<TABLE>
<CAPTION>
Your tax-exempt
effective yield of
Taxable Income 4.64%
Marginal is equivalent to a
Joint Return Single Return Tax Rate taxable yield of:
<S> <C> <C> <C>
$38,000 $22,750
& under & under 15% 5.46%
$38,001- $22,751-
91,850 55,100 28% 6.44%
$91,851- $55,101-
140,000 115,000 31% 6.72%
$140,001- $115,001-
250,000 250,000 36% 7.25%
over over
$250,000 $250,000 39.6% 7.68%
</TABLE>
A HIGH-QUALITY PORTFOLIO
The Strong Municipal Money Market Fund invests only in short-term securities
with minimal credit risk. All of the Fund's holdings are rated within the top
two short-term rating categories or are of comparable quality. Furthermore, we
have not invested in the types of derivatives identified by the Securities and
Exchange Commission as unsuitable for money market funds.
[PHOTO Four Children Playing]
4
<PAGE> 7
This year, as in the past, our extensive research process helped us identify
opportunities to gain incremental yield without compromising credit quality. We
believe all our holdings remain sound and that the Fund is--and will continue
to be--solidly valued at $1.00 per share. (3)
BELT AND SUSPENDERS
More than 96% of the assets in the portfolio carry some type of quality
enhancement, such as collateral, insurance, or an institutional support
agreement, making the securities eligible for investment by the Fund. Because
these arrangements act like suspenders on top of a belt, providing a
promise--above and beyond the promise of the original issuer--to pay principal
and interest, they boost the quality of these securities.
To further enhance the Fund's stability, over 55% of the Fund's net assets
carry a daily or weekly "put" feature. Because these securities can be sold in
seven days or fewer at their contractual par value, they provide the Fund with
a substantial cushion of liquidity.
HIGHER RATES IN 1995
As we expected, the Federal Reserve repeatedly raised short-term interest rates
throughout 1994. The resulting turbulence in both the stock and bond markets
underscored for many investors the wisdom of maintaining a portion of their
investments in a safe harbor, such as a money market fund. If you are among our
new investors, welcome aboard; and if you have been with us for some time,
thank you for your continued confidence.
Looking ahead to 1995, we expect interest rates will continue to climb,
although at a somewhat slower pace than in 1994. As always, whatever the
economic environment, we remain committed to preserving the integrity of your
investment and providing you with top-quality investment results. We believe
that the Strong Municipal Money Market Fund is well-positioned to continue its
performance in the future, and we pledge our continued best efforts in the
years to come.
Sincerely,
[PHOTO of Steven D. Harrop]
/s/ Steven D. Harrop
Steven D. Harrop
Portfolio Manager
(1) The Fund's Lipper rankings in the tax-exempt money market fund category
are based on total-return performance through 12/31/94. From time to
time, the Fund's advisor has waived its management fee, which has
resulted in higher returns. All performance rankings are historical and
do not represent future results.
(2) Yields are annualized for the 7 days ended 12/30/94, are historical, and
will vary. The Fund's income may be subject to state and local taxes and,
depending on your tax status, the Alternative Minimum Tax. The equivalent
taxable yields are based on the Fund's effective yield, which assumes
reinvested income. The chart reflects 1994 marginal federal income tax
rates before limitations and phase-outs. Individuals with adjusted gross
income exceeding $111,800 should consult their tax advisor to determine
their actual 1994 marginal tax rate.
(3) An investment in the Fund is neither insured nor guaranteed by the U.S.
government, and there can be no assurance that the Fund will be able to
maintain a stable share price of $1.00.
5
<PAGE> 8
The Strong
Short-Term
Municipal
Bond Fund
As of 12/30/94
- - --------------
30-DAY
ANNUALIZED
YIELD
5.08%
AVERAGE
MATURITY(2)
0.9 years
AVERAGE
QUALITY
AA
By investing in a diversified portfolio of short-term municipal securities, the
Strong Short-Term Municipal Bond Fund seeks to provide its shareholders with as
high a level of federally tax-exempt income as is consistent with preservation
of capital.
The Strong Short-Term Municipal Bond Fund's annualized 30-day yield finished
the year at 5.08%, more than 130 basis points higher than its 1993 year-end
level.(1) The table on page 14 shows the Fund's equivalent taxable yields for
each of 1994's federal income tax brackets.
HIGHER RATES AND
ACCELERATED REDEMPTIONS
A number of forces combined to exert downward pressure on municipal bond prices
throughout 1994. The Federal Reserve, with six rate increases since February,
sought to apply the brakes to economic growth in an effort to stave off the
threat of inflation. Although the financial markets seemed more comfortable
with the Fed's tactics by late fall, the bank's initial efforts caught many
investors off guard.
In February, as higher interest rates translated into lower bond prices, many
new bond and bond-fund investors--who were unaccustomed to the market's
volatility--began what has evolved into a ten-month sell-off. In the municipal
bond market, where mutual funds play an especially large role, the
higher-than-usual redemptions drove many funds simultaneously to liquidate
portions of their portfolios, pushing a weak market even lower, and with
surprising speed.
Finally, concern late in the year over several selected credit
situations--Orange County, California's bankruptcy, for example--dampened what
had appeared to be the start of a rally in the municipal markets. For the most
part, we believe these are isolated events precipitated by imprudent investment
strategies,
<TABLE>
<CAPTION>
GROWTH OF AN
ASSUMED $10,000 INVESTMENT
from 12/31/91 to 12/31/94
12/91 6/92 12/92 6/93 12/93 6/94 12/94
<S> <C> <C> <C> <C> <C> <C> <C>
The Strong Short-Term Municipal Bond Fund 10,000 10,345 10,716 11,118 11,441 11,322 11,256
Lehman Brothers 3-Year Municipal Bond Index 10,000 10,309 10,643 11,022 11,305 11,276 11,383
</TABLE>
Average Annual
Total Returns
through 12/31/94
Since inception
on 12/31/91
4.02%
1-year
-1.61%
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers 3-Year Municipal Bond Index, an unmanaged, total-return
performance benchmark for the 3-year, tax-exempt bond market. Results include
the reinvestment of all dividends and capital gains. Source for the index data
is Micropal. 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 Fund shares. Please see the Historical Investment Returns
section for more information on the Fund's performance record.
(1) The Fund's income may be subject to state and local taxes and, depending
on your tax status, the Alternative Minimum Tax. At the end of 1993, the
Fund's annualized 30-day yield was 3.76%.
(2) When-issued securities and futures contracts are reflected in the Fund's
average maturity.
6
<PAGE> 9
not by problems inherent in the municipal or derivatives markets. However,
regardless of the root cause, the resulting market turbulence affected most
funds, even those--like the Strong Short-Term Municipal Bond Fund--that held
no bonds issued by those municipalities.
OUR STRATEGY
Last spring, to boost the Short-Term Municipal Bond Fund's yield and take
advantage of what we expected to be a flattening yield curve, we began buying
longer-term bonds, capturing higher current income while hedging the
commensurate interest-rate risk with exchange-traded futures and options.
Although this strategy helped lead the Fund to one of the highest yields in its
category, we have been disappointed by the resulting total return. Going
forward, however, we believe the longer maturity/short futures strategy is a
sound one, primarily because we expect the yields on long-term securities to
decline, causing these securities to increase in value relative to shorter-term
issues.
Another benefit of this strategy is that it allows us to enhance the income
potential of the Fund without relaxing our credit standards. The two most
common avenues to a higher current income are longer maturities and lower
credit quality. Because we have elected to pursue the former, we have been able
to avoid sacrificing the latter. The Fund's average quality rating remains a
solid AA.
<TABLE>
<CAPTION>
BOND QUALITY
<S> <C>
AAA & comparable 42.0%
AA & comparable 14.2%
A & Comparable 26.9%
BBB & comparable 21.3%
</TABLE>
Weighted average ratings of fixed income securities as a percentage of net
assets on 12/31/94. 14.3% of the Fund's net assets are unrated securities for
which the advisor has made a comparable-quality determination.
IN 1995, SLOWER GROWTH,
FEWER BONDS
By mid-year, we expect economic growth to begin to slow and interest rates to
begin to decline. This, combined with 1994's elimination from the bond market
of many highly leveraged, institutional investors, should make 1995 a less
volatile year for municipal bonds. However, should economic growth
accelerate--or should some unforeseen event or scandal shock the market--we
could be in for further turbulence.
[PHOTO of Thomas J. Conlin and Greg D. Winston]
With higher interest rates, new-issue volume has slowed significantly over the
past year. In addition, we expect that many investors will be searching for
tax-free replacements as their older, high-coupon bonds are called for
redemption in the coming months. The resulting supply/demand imbalance should
push municipal bond prices higher.
We appreciate your confidence in us during this rather difficult year, and
we're looking forward to a more prosperous 1995.
Sincerely,
/s/ Thomas J. Conlin
Thomas J. Conlin
Portfolio Manager
/s/ Greg D. Winston
Greg D. Winston
Portfolio Manager
Effective January 9,
1995, Thomas J. Conlin
and Greg D. Winston
assumed portfolio
management duties
for the Fund, which
had been managed by
G. Nolan Smith
since 1992.
7
<PAGE> 10
The Strong
Insured
Municipal
Bond Fund
As of 12/30/94
30-DAY
ANNUALIZED
YIELD
5.33%
AVERAGE
MATURITY(2)
18.5 years
AVERAGE
QUALITY
AAA
By investing primarily in a portfolio of municipal securities that are insured
for the timely payment of interest and repayment of principal, the Strong
Insured Municipal Bond Fund seeks to provide as high a level of income exempt
from federal income tax as is consistent with capital preservation.
As of December 30, 1994, the Strong Insured Municipal Bond Fund's annualized
30-day yield was 5.33%, giving investors in the 36% tax bracket an equivalent
taxable yield of 8.33%.(1) The table on page 14 shows the Fund's equivalent
taxable yields for each of 1994's federal income tax brackets.
RISING RATES HURT INSURED PRICES IN 1994
Although 1994 was a tough year for bonds in general, most insured municipal
bond funds experienced especially sharp declines. Because insured bonds are
among the most liquid and easily traded municipal securities, they tend to be
the first instruments sold when mutual funds experience redemptions. When
investors began to trim back their long-term municipal bond holdings in 1994,
large quantities of insured bonds entered the marketplace simultaneously. This
cycle occurred twice in 1994--in February and November--and, in both instances,
insured bond prices suffered sharp declines.
It is equally important to recognize, however, that the markets can also
rebound quickly- and that insured bonds have often led the way. Indeed, during
December the tone of the market turned more constructive, and the Fund gained
back a great deal of ground, although not enough to erase the decline
experienced earlier in the year.
<TABLE>
<CAPTION>
GROWTH OF AN
ASSUMED $10,000 INVESTMENT
from 11/25/91 to 12/31/94
11/91 12/91 6/92 12/92 6/93 12/93 6/94 12/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Strong Insured Municipal Bond Fund 10,000 10,335 11,082 11,685 12,621 13,186 12,361 12,333
Lehman Brothers Insured Municipal Bond Index 10,000 10,230 10,658 11,184 12,038 12,641 11,995 11,885
</TABLE>
Average Annual
Total Returns
through 12/31/94
Since inception
on 11/25/91
7.00%
3-year
6.07%
1-year
-6.47%
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 Insured Municipal Bond Index, an unmanaged, total-return
performance benchmark for the insured, tax-exempt bond market. To equalize the
time periods, we have prorated the Index's performance for the month of
November 1991. Results include the reinvestment of all dividends and capital
gains. 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 Fund shares. Please see the Historical Investment Returns section
for more information on the Fund's performance record.
(1) The Fund's income may be subject to state and local taxes and, depending
on your tax status, the Alternative Minimum Tax.
(2) When-issued securities are reflected in the Fund's average maturity.
(3) Issue Insurance and Mutual Fund Insurance insure the timely payment of
interest and principal of the insured security but do not protect the
market value of the underlying security or the net asset value of the
Fund's shares.
8
<PAGE> 11
THE BENEFITS
OF INSURANCE AND
DIVERSIFICATION
The widely publicized problems in Orange County, California underscore the
benefit of investing in insured credits. The vast majority of your Fund's
holdings (95.4%, as of December 31, 1994) are insured by a nationally
recognized group of insurers. Should a bond's original issuer default on a
payment, its insurer is obligated to make prompt payments of both interest and
principal, when due.(3)
We believe Orange County's problems were not caused solely by the derivative
investments in their fund, but rather by the mismanagement of those
investments. Nonetheless, Orange County's situation also underscores the
benefit of diversifying across a variety of issuers and areas of the country.
As of December 31, 1994, the Fund held securities of 36 different issuers, with
no more than 23.2% of its assets concentrated in any single state.
A HIGH-QUALITY
PORTFOLIO
Even though all of the securities in the Fund's portfolio must be rated AAA,
our philosophy has always been to conduct our own research, rather than rely
solely on the ratings assigned by the large ratings agencies. We analyze each
bond as if we were evaluating the viability of a business--not just the
reputation of the issuing municipality. By researching both the securities
themselves and the national insurance syndicates, we believe we can better
offer our shareholders a portfolio composed of truly top-tier securities with
minimal credit risk. As a side note, although the Fund's prospectus allows us
to employ certain types of derivatives, we have never chosen to use them in the
past, nor do they fit into our current investment strategy.
<TABLE>
<CAPTION>
SECTOR ALLOCATION
(Top ten sectors based on net assets as of 12/31/94)
<S> <C>
Hospitals 19.2%
Water & Sewer 17.9%
Electric Power 13.8%
Pollution Control 13.2%
General Obligation 11.8%
Lease 6.7%
Transporation 5.7%
Multi-Family Mortgage 3.1%
Toll Road 2.0%
Tax Allocation 0.8%
</TABLE>
Please see the Schedule of Investments in Securities for a complete listing of
the Funds's portfolio.
OUTLOOK
Within six to nine months, we expect interest rates to begin to decline. We
believe that long-term municipal bonds are currently undervalued, and we expect
long-term yields to come down significantly. The resulting rally should push
the prices of long-term insured municipal bonds higher.
We appreciate your investment in the Strong Insured Municipal Bond Fund. While
it has been a difficult year, we believe the long-term prospects for this
market are excellent, and we look forward to earning your continued confidence
in the years to come.
Sincerely,
/s/ Thomas J. Conlin [PHOTO of Thomas
Thomas J. Conlin J. Conlin and
Portfolio Manager Mary-Kay H.
Bourbulas]
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
9
<PAGE> 12
The Strong
Municipal
Bond Fund
As of 12/30/94
30-DAY
ANNUALIZED
YIELD
6.22%
AVERAGE
MATURITY
19.4 years
AVERAGE
QUALITY
AA
The Strong Municipal Bond Fund pursues a high level of current income exempt
from federal income tax by investing in a diversified portfolio composed
primarily of investment-grade municipal bonds.
As of December 30, 1994, the Strong Municipal Bond Fund's annualized 30-day
yield was 6.22%, giving investors in the 36% tax bracket an equivalent taxable
yield of 9.72%.* The table on page 14 shows the Fund's equivalent taxable
yields for each of 1994's federal income tax brackets.
HIGHER RATES PUSHED
BOND PRICES LOWER
The bond market's troubles began in early February, when the Federal Reserve
began raising short-term interest rates in an effort to keep inflation in
check. Although municipal prices fell across all maturities, the long end of
the market was generally affected more than the short end. As higher interest
rates translated into lower bond prices, many investors sold off portions of
their investments. The resulting surplus of available bonds in the marketplace
further depressed prices and prompted more investors to redeem.
Because the majority of its investor base consists of American individuals--and,
for the most part, excludes foreign investors--the municipal bond market does
not enjoy as broad a demand as do other types of fixed-income securities. Thus,
an expanding or contracting supply of available securities can have a more
dramatic effect on municipal bond prices. On a positive note, however, the
municipal market regained significant ground in December, with bond prices
moving up in response to strong buyer demand.
INVESTMENT STRATEGY
Anticipating higher rates, we began the year with an emphasis on
shorter-duration, high-quality securities in an effort to make the portfolio
less sensitive to interest-rate risk. We were therefore able to weather the
market's initial correction in February fairly well.
Although we anticipated an additional correction later in the year, November's
downturn was unexpectedly swift and severe, causing many bond investors to
redeem mutual funds, thus putting further pressure on bond prices. The
correction subsided in December, as investors' concerns about inflation faded
and their focus apparently turned to relative value. By positioning the Fund in
high-quality, discounted securities, we were able to participate in the
resulting rally.
Breaking news stunned the market late in the year, when Orange County,
California declared bankruptcy. Although we did not hold any bonds issued by
Orange County or any of its municipalities--nor do we employ any of the
leveraged derivative strategies that apparently got the County in trouble--their
credit problems highlight the importance of diversifying by issuer and
geographic region. At year-end, we held securities of 66 different issuers, and
no more than 10.9% of assets were concentrated in any single state.
<TABLE>
<CAPTION>
SECTOR ALLOCATION
(Top ten sectors based on net assets as of 12/31/94)
<S> <C>
Hospital Revenue 25.7%
Pollution Control Revenue 13.8%
Electric Power Revenue 10.9%
Lease Revenue 8.9%
Water & Sewer Revenue 8.6%
General Obligation 5.2%
Retirement Center Revenue 4.3%
Multi-Family Mortage Revenue 3.1%
Single-Family Mortgage Revenue 3.0%
Toll Road Revenue 2.6%
</TABLE>
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
10
<PAGE> 13
We continue to concentrate our efforts on those sectors we believe are poised
for growth over the next ten to twenty years. These include facilities--such as
nursing homes, hospitals, and retirement-housing communities--that serve
America's rapidly growing population of senior citizens, as well as
infrastructure projects intended to update our nation's schools, roadways, and
water and sewer systems.
OUTLOOK
By the third quarter of 1995, we expect U.S. economic growth to begin to slow
and interest rates, as a result, to decline. We believe that long-term
municipal bonds are currently undervalued, and we expect long-term yields to
eventually come down substantially, raising the value of these securities.
Favorable supply/demand dynamics is another factor in our moderately bullish
outlook for long-term municipal bonds. Because it is more expensive to
introduce bond issues when interest rates are rising, new-issue volume has
slowed significantly over the past year. Additionally, many investors are
likely to be searching for alternative tax-exempt investments as more bonds are
called in 1995. Barring an unexpectedly swift overhaul of the tax code by the
new Congress, we believe the resulting supply/demand pressure could help push
municipal bond prices higher.
Thank you for your continued confidence in our investment management. It has
been a difficult year, but we strongly believe better times are ahead.
Sincerely,
/s/ Thomas J. Conlin [PHOTO of Thomas J.
Thomas J. Conlin Conlin and Mary-Kay
Portfolio Manager H. Bourbulas]
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
<TABLE>
<CAPTION>
GROWTH OF AN
ASSUMED $10,000 INVESTMENT
from 10/23/86 to 12/31/94
10/86 12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Strong Municipal Bond Fund 10,000 10,129 9,949 10,705 11,463 11,995 13,598 15,256 17,052 16,275
Lehman Brothers Municipal Bond Index 10,000 10,216 10,370 11,423 12,656 13,578 15,227 16,568 18,602 17,640
</TABLE>
Average Annual
Total Returns
through 12/31/94
Since inception
on 10/23/86
6.13%
5-year
7.26%
3-year
6.17%
1-year
-4.55%
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 Bond Index, an unmanaged, total-return performance
benchmark for the investment-grade, tax-exempt bond market. To equalize the
time periods, we have prorated the Index's performance for the month of October
1986. Results include the reinvestment of all dividends and capital gains.
Source for the index data is Micropal. 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 Fund shares. Please see the Historical
Investment Returns section for more information on the Fund's performance
record.
* The Fund's income may be subject to state and local taxes and, depending
on your tax status, the Alternative Minimum Tax.
11
<PAGE> 14
The Strong
High-Yield
Municipal
Bond Fund
As of 12/30/94
30-DAY
ANNUALIZED
YIELD(1)
8.02%
AVERAGE
MATURITY(2)
17.1 years
AVERAGE
QUALITY
BBB
The Strong High-Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax by investing in a diversified
portfolio of longer-term, medium- and lower-quality municipal bonds.
Based on the Fund's December 30, 1994, annualized 30-day yield of 8.02%,
investors in the 36% tax bracket enjoyed an equivalent taxable yield of
12.53%.(1) The table on page 14 shows the Fund's equivalent taxable yields for
each of 1994's federal income tax brackets.
A TOUGH MARKET FOR BONDS
This past year produced what was perhaps the most difficult investment
environment for municipal bonds in six years. The Federal Reserve's persistent,
preemptive attacks on future inflation pushed interest rates significantly
higher in 1994. Although the yield curve for taxable Treasury securities
flattened noticeably during the year--meaning the spread between short-term and
long-term yields narrowed--the municipal bond curve remained comparatively steep
as prices fell across the entire maturity range.
The municipal market experienced two episodes of severely diminished liquidity
in 1994. Though short-lived, these events in February and November affected the
prices of most municipal bonds. They were marked by fund companies selling
securities to meet cash requirements, as many investors, prompted by falling
share prices, redeemed portions of their funds.
Although the Strong High-Yield Municipal Bond Fund did experience significant
redemptions this fall, we were relatively well-positioned to handle them. Over
the course of the year, we had increased our exposure to AAA-rated securities
in order to provide ample liquidity during times of extreme market volatility.
As a result, we were able to draw on those holdings to raise the needed cash
without having to liquidate the core holdings of the portfolio.
<TABLE>
<CAPTION>
BOND QUALITY(2)
(Based on market value as of 12/31/94)
[PIE CHART]
<S> <C>
BBB & comparable 46.2%
BB & comparable 38.6%
AAA 7.8%
B & comparable 6.6%
CCC-equivalents & below 0.8%
</TABLE>
73.6% of the Fund's net assets are unrated securities for which the advisor has
made a comparable-quality determination.
HIGH-YIELDS FARED
BETTER THAN MOST
In general, high-yield bonds tend to be less affected by inflation fears than
other sectors of the municipal market, because their higher coupon rates help
offset price declines. High-yield bonds are additionally buoyed by the fact
that, in times of economic expansion, investors tend to worry less about
issuers' ability to meet their credit obligations.
While we recognize that relative performance is little solace to many bond
investors this year, the Strong High-Yield Municipal Bond Fund was down just
0.99% for the year, while the Lehman Brothers Municipal Bond Index, which is
generally representative of the overall municipal bond market, lost 5.17% over
the same period. The Fund also outperformed most other mutual funds of its
type. Its calendar-year total return ranked it #5 of the 36 high-yield
municipal debt funds tracked by Lipper Analytical Services.(1)
INVESTMENT THEMES
We continue to focus our investments in areas that we believe are poised for
growth over the next ten to twenty years. Our largest commitment by far is
to those areas affected by the aging of America. Demographic shifts are driving
the need to build facilities--such as hospitals, nursing homes, and
retirement-housing communities--to care for our country's expanding elderly
population.
12
<PAGE> 15
We also continue to monitor the infrastructure sectors for attractive
investment opportunities in schools, airports, roads, bridges, and water and
sewer systems.
OUTLOOK
Within six to nine months, we expect interest rates will begin to decline.
Because we believe long-term municipal bonds are currently undervalued, we
expect long-term yields to come down significantly, producing a relatively
strong rally.
High interest rates over the past year have dissuaded issuers from bringing new
deals to market, shrinking the supply of long-term bonds considerably. Barring
any drastic, immediate changes to the tax code, we expect the demand for
municipals to remain relatively strong, since a large number of bonds are
likely to be called in 1995, leaving many investors searching for tax-free
replacements. As the municipal market stabilizes, the resulting demand/supply
imbalance could help lead municipal bond prices higher.
We thank you for your investment in the Strong High-Yield Municipal Bond Fund,
and we look forward to earning your continued confidence in the years to come.
Sincerely,
/s/ Thomas J. Conlin [PHOTO of Thomas J.Conlin
Thomas J. Conlin and Mary-Kay H. Bourbulas]
Portfolio Manager
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
<TABLE>
<CAPTION>
GROWTH OF AN
ASSUMED $10,000 INVESTMENT
from 10/1/93 to 12/31/94
10/93 12/93 3/94 6/94 9/94 12/94
<S> <C> <C> <C> <C> <C> <C>
The Strong High-Yield Municipal Bond Fund 10,000 10,266 10,007 10,169 10,288 10,165
Lehman Brothers Baa Municipal Bond Index 10,000 10,164 9,627 9,757 9,803 9,609
</TABLE>
Average Annual
Total Returns
through 12/31/94
Since inception
on 10/1/93
1.32%
1-year
-0.99%
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers Baa Municipal Bond Index, an unmanaged, total-return
performance benchmark for the high-yield, tax-exempt bond market. Results
include the reinvestment of all dividends and capital gains. 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 Fund
shares. Please see the Historical Investment Returns section for more
information on the Fund's performance record.
(1) As of December 30, 1994, the advisor was temporarily waiving fees of .60%
and absorbing expenses of .25%. Otherwise, the Fund's current yield would
have been 7.17%, the equivalent taxable yield would have been 11.20%, and
the total returns would have been lower. The Fund's income may be subject
to state and local taxes and, depending on your tax status, the
Alternative Minimum Tax. Rankings are historical and do not represent
future results.
(2) Futures contracts are reflected in the average maturity, but not in the
bond-quality breakdown. The underlying market value of these short
positions represents 7.9% of the net assets of the High-Yield Municipal
Bond Fund, which is intended to reduce the Fund's exposure to
interest-rate fluctuations.
13
<PAGE> 16
Equivalent
Taxable
Yields*
as of 12/30/94
<TABLE>
<CAPTION>
The Strong The Strong
Municipal Money Short-Term
Market Fund Municipal Bond Fund
Taxable Income Your tax-exempt Your tax-exempt
Marginal yield of 4.64% is yield of 5.08% is
Joint Single Tax equivalent to a equivalent to a
Return Return Rate taxable yield of: taxable yield of
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$38,000 $22,750
& under & under 15% 5.46% 5.98%
- - -----------------------------------------------------------------------------------------------------------
$38,001- $22,751-
91,850 55,100 28% 6.44% 7.06%
- - -----------------------------------------------------------------------------------------------------------
$91,851- $55,101-
140,000 115,000 31% 6.72% 7.36%
- - -----------------------------------------------------------------------------------------------------------
$140,001- $115,001-
250,000 250,000 36% 7.25% 7.94%
- - -----------------------------------------------------------------------------------------------------------
over over
$250,000 $250,000 39.6% 7.68% 8.41%
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
[PHOTO of little girl]
14
<PAGE> 17
<TABLE>
<CAPTION>
The Strong The Strong The Strong
Insured Municipal Municipal High-Yield
Bond Fund Bond Fund Municipal Bond Fund
Your tax-exempt Your tax-exempt Your tax-exempt
yield of 5.33% is yield of 6.22% is yield of 8.02% is
equivalent to a equivalent to a equivalent to a
taxable yield of: taxable yield of: taxable yield of:
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6.27% 7.32% 9.44%
- - ----------------------------------------------------------------------------------------------------------------------
7.40% 8.64% 11.14%
- - ----------------------------------------------------------------------------------------------------------------------
7.72% 9.01% 11.62%
- - ----------------------------------------------------------------------------------------------------------------------
8.33% 9.72% 12.53%
- - ----------------------------------------------------------------------------------------------------------------------
8.82% 10.30% 13.28%
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
[PHOTO of Two Anonymous Men]
* Yields are annualized for the 30 days ended 12/30/94, except for the
Municipal Money Market Fund, whose yields are annualized for the 7 days ended
12/30/94. The Funds' income may be subject to state and local taxes and,
depending on your tax status, the Alternative Minimum Tax. The chart reflects
1994 marginal federal income tax rates before limitations and phase-outs.
Individuals with adjusted gross income exceeding $111,800 should consult their
tax advisor to determine their actual 1994 marginal tax rate. The Municipal
Money Market Fund's equivalent taxable yields are based on the Fund's
effective yield, which assumes reinvested income. The advisor has agreed to
voluntarily waive its management fee and absorb the High-Yield Municipal Bond
Fund's expenses through June 30, 1995. Without this subsidization, the Fund's
current yield would have been 7.17%, its equivalent taxable yields would have
been similarly affected, and its total returns would have been lower.
Performance is historical and does not represent future results. Yields vary,
and with the exception of the Municipal Money Market Fund, you may have a gain
or loss when you sell shares. An investment in the Municipal Money Market Fund
is neither insured nor guaranteed by the U.S. government, and there can be no
assurance that the Fund will maintain a stable net asset value of $1.00.
Please see the Historical Investment Returns section for the Funds' total
returns.
15
<PAGE> 18
HISTORICAL INVESTMENT RETURNS(1)
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INSURED STRONG STRONG HIGH-YIELD
MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
1986 -- -- + 1.3%(2) --
1987 -- -- - 1.8% --
1988 -- -- + 7.6% --
1989 -- -- + 7.1% --
1990 -- -- + 4.6% --
1991 -- + 3.4%(2) +13.4% --
1992 + 7.2%(2) +13.1% +12.2% --
1993 + 6.8% +12.8% +11.8% + 2.7%(2)
1994 - 1.6% - 6.5% - 4.6% - 1.0%
Since Inception +12.6% +23.3% +62.8% + 1.7%
Average Annual Total Return
-- One-Year Period Ended December 31, 1994 - 1.6% - 6.5% - 4.6% - 1.0%
-- Five-Year Period Ended December 31, 1994 -- -- + 7.3% --
-- Inception Date to December 31, 1994(2) + 4.0% + 7.0% + 6.1% + 1.3%
</TABLE>
YIELD INFORMATION(1)
<TABLE>
<CAPTION>
STRONG MUNICIPAL
MONEY MARKET FUND(3)
------------------
<S> <C>
Annualized for the 7-Day Period Ended December 30, 1994
Current Yield 4.54%
Effective Yield 4.64%
</TABLE>
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INSURED STRONG STRONG HIGH-YIELD
MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND(4)
------------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Annualized for the 30-Day Period Ended
December 30, 1994 5.08% 5.33% 6.22% 8.02%
</TABLE>
SUMMARY OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
($ In Thousands)
STRONG SHORT-TERM STRONG INSURED
MUNICIPAL BOND FUND(5) MUNICIPAL BOND FUND
-------------------- -------------------
<S> <C> <C> <C> <C>
Municipal Bonds $158,918 99% $ 39,356 77%
Cash Equivalents and Other Assets and Liabilities, Net 2,325 1 11,668 23
-------- --- -------- ---
Net Assets $161,243 100% $ 51,024 100%
======== === ======== ===
</TABLE>
<TABLE>
<CAPTION>
STRONG STRONG HIGH-YIELD
MUNICIPAL BOND FUND MUNICIPAL BOND FUND(5)
------------------- --------------------
<S> <C> <C> <C> <C>
Municipal Bonds $229,078 82% $102,220 95%
Cash Equivalents and Other Assets and Liabilities, Net 50,730 18 5,335 5
-------- --- -------- ---
Net Assets $279,808 100% $107,555 100%
======== === ======== ===
</TABLE>
(1) All performance is historical and does not represent future results.
Investment returns and principal value of Strong Short-Term
Municipal Bond Fund, Strong Insured Municipal Bond Fund, Strong Municipal
Bond Fund and Strong High-Yield Municipal Bond Fund will vary, and you
may have a gain or loss when you sell shares. Returns assume reinvestment
of all dividends and capital gain distributions. Each Fund's income may
be subject to state and local taxes and, depending on your tax status,
the Alternative Minimum Tax.
(2) Respective inception dates are December 31, 1991 for Strong Short-Term
Municipal Bond Fund; November 25, 1991 for Strong Insured Municipal Bond
Fund; October 23, 1986 for Strong Municipal Bond Fund; and October 1,
1993 for Strong High-Yield Municipal Bond Fund.
(3) An investment in the Fund is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share. Effective yield
assumes reinvestment of income. Yields vary.
(4) At December 31, 1994, the Advisor was temporarily waiving fees of .60%
and absorbing expenses of .25% for the Strong High-Yield Municipal Bond
Fund. Otherwise, the Fund's current yield would have been 7.17%, and the
total returns would have been lower.
(5) Futures contracts are not reflected in the allocation. The underlying
market value of these short positions represents 18.7% of the net assets
of the Short-Term Municipal Bond Fund and 7.9% of the net assets of the
High-Yield Municipal Bond Fund, which is intended to reduce the Fund's
exposure to interest rate fluctuations. (See Note 2(D) in the Notes to
Financial Statements.)
16
<PAGE> 19
HISTORICAL RECORD
The following table illustrates an assumed $10,000 investment in each Strong
Municipal Income Fund on the date of the initial public offering, with income
dividends and capital gains distributions reinvested in additional shares.
<TABLE>
<CAPTION>
NET ASSET CAPITAL GAINS INCOME GROWTH OF
VALUE PER DISTRIBUTIONS DIVIDENDS AN INITIAL $10,000
SHARE PER SHARE PER SHARE INVESTMENT
--------- ------------- --------- ------------------
<S> <C> <C> <C> <C>
Strong Municipal Money Market Fund:
*October 23, 1986 $ 1.00 $ -- $10,000
December 31, 1986 1.00 .01 10,068
December 31, 1987 1.00 .05 10,545
December 31, 1988 1.00 .05 11,089
December 31, 1989 1.00 .06 11,765
December 31, 1990 1.00 .06 12,488
December 31, 1991 1.00 .05 13,134
December 31, 1992 1.00 .03 13,578
December 31, 1993 1.00 .02 13,922
December 31, 1994 1.00 .03 14,330
Strong Short-Term Municipal Bond Fund:
*December 31, 1991 $10.00 $ -- $ -- $10,000
December 31, 1992 10.20 .02 .48 10,716
December 31, 1993 10.36 .07 .44 11,441
December 31, 1994 9.73 .01 .45 11,256
Strong Insured Municipal Bond Fund:
*November 25, 1991 $10.00 $ -- $ -- $10,000
December 31, 1991 10.28 -- .06 10,335
December 31, 1992 10.82 .14 .62 11,685
December 31, 1993 11.46 .16 .56 13,186
December 31, 1994 10.19 -- .54 12,333
Strong Municipal Bond Fund:
*October 23, 1986 $10.00 $ -- $ -- $10,000
December 31, 1986 10.01 -- .12 10,130
December 31, 1987 9.16 -- .67 9,949
December 31, 1988 9.35 -- .49 10,705
December 31, 1989 9.47 -- .52 11,463
December 31, 1990 9.22 -- .66 11,995
December 31, 1991 9.76 -- .65 13,598
December 31, 1992 10.00 .26 .65 15,256
December 31, 1993 10.25 .32 .58 17,052
December 31, 1994 9.23 -- .56 16,275
Strong High-Yield Municipal Bond Fund:
*October 1, 1993 $10.00 $ -- $ -- $10,000
December 31, 1993 10.10 -- .16 10,266
December 31, 1994 9.29 .00 .71 10,165
</TABLE>
*Date of Initial Public Offering
17
<PAGE> 20
SCHEDULE OF INVESTMENTS IN SECURITIES December 31, 1994
<TABLE>
<CAPTION>
STRONG MUNICIPAL MONEY MARKET FUND
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST
AMOUNT MATURITY DATE+ (NOTE 2)
--------- -------- -------- ----------
<S> <C> <C> <C>
MUNICIPAL BONDS 42.5%*
CALIFORNIA 4.0%*
$20,000,000 California 6.50% Revenue Anticipation Warrants (Putable @ 101.157) 4.607% 06/30/95 $ 20,408,875
5,000,000 California 11.00% Various Purpose GO 3.834 05/01/95 5,118,868
3,805,000 Contra Costa County, California** COP -- Concord Healthcare Center,
Inc. Project 4.150 06/01/95 3,805,000
5,250,000 Los Angeles, California 5.00% Unified School District
COP -- Multiple Properties Project 4.608 12/01/95 5,268,324
4,000,000 Sacramento County, California 4.50% TRAN 4.529 09/29/95 3,999,160
7,000,000 San Bernadino County, California 4.50% TRAN 4.534 07/31/95 6,998,670
5,000,000 Stanislaus County, California 4.25% Office of Education TRAN 3.621 07/10/95 5,016,140
------------
50,615,037
CONNECTICUT 0.5%*
930,000 Connecticut** Development Authority IDR -- American Distilling &
Manufacturing Project 3.125 03/01/95 930,000
5,100,000 Connecticut** HFA Housing Mortgage Finance Program 4.500 11/15/95 5,100,000
-----------
6,030,000
DISTRICT OF COLUMBIA 0.2%*
2,070,000 District of Columbia** Housing Finance Agency MFHR -- Chastleton
Development Project 3.900 07/01/95 2,070,000
FLORIDA 1.2%*
Florida** Housing Finance Agency MFHR:
4,000,000 Monterey Lake Project 3.307 04/01/95 4,030,678
2,750,000 Wood Forest II Project 5.000 12/01/95 2,750,000
9,000,000 Orange County, Florida** HFA MFHR -- Oakwood Project 4.700 10/01/95 9,000,000
------------
15,780,678
ILLINOIS 9.7%*
Illinois** DFA IDR:
4,420,000 Deerfield Executive Center Project 4.500 09/01/95 4,420,000
1,880,000 Jefferson Partners Limited Partnership -- 216 South Jefferson
Project 5.250 12/01/95 1,880,000
3,320,000 Jefferson Partners Limited Partnership -- 217 North Jefferson
Project 5.329 12/01/95 3,317,700
Lakemoor, Illinois** MFHR Mortgage -- Lakemoor Apartments Project:
4,831,500 Series A 3.250 03/01/95 4,831,500
50,000,000 Series B 4.150 03/10/95 50,000,000
10,000,000 Series C 5.550 06/01/95 10,000,000
41,820,000 Oakbrook Terrace, Illinois** MFHR -- Renaissance Project 5.550 06/01/95 41,820,000
5,820,000 Palatine, Illinois** MFHR -- Clover Ridge Apartments Project (w) 5.850 12/15/95 5,820,000
------------
122,089,200
IOWA 0.3%*
4,000,000 Iowa 4.25% School Corporations Warrant Certificates --
Participating School Corporations
of the Iowa School Cash Anticipation Program 3.620 07/17/95 4,013,380
KANSAS 1.8%*
4,340,000 Lawrence, Kansas** CDR -- Kan/Del Hotel Investment Partners,
L.P. Project 4.500 07/01/95 4,340,000
Lenexa, Kansas** MFHR:
8,550,000 Charter House Apartments Project 4.500 04/01/95 8,550,000
5,985,000 Point West Apartment Associates Project 4.010 06/01/95 5,985,000
3,800,000 Manhattan, Kansas** CDR Refunding -- Kan/Del Hotel Investment
Partners, L.P. Project 5.000 08/01/95 3,800,000
-----------
22,675,000
MARYLAND 0.8%*
9,760,000 Maryland** Community Development Administration Department of
Housing and Community
Development -- Single Family Program 5.375 11/29/95 9,760,000
MASSACHUSETTS 1.8%*
22,375,000 Lynn, Massachusetts 5.50% Water and Sewer Commission BAN 5.500 10/13/95 22,514,133
MINNESOTA 1.4%*
15,802,000 Dakota & Washington Counties, Minnesota** Housing &
Redevelopment Authority in & for the City of Anoka SFMR 3.250 03/01/95 15,802,000
1,500,000 Oakdale, Minnesota** Rental Housing Revenue -- Oakdale Village
Apartments Project 5.185 01/01/95 1,500,000
-------------
17,302,000
</TABLE>
See notes to financial statements
18
<PAGE> 21
STRONG MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST
AMOUNT MATURITY DATE+ (NOTE 2)
--------- -------- --------- ---------
<S> <C> <C> <C>
MISSISSIPPI 0.2%*
$ 1,145,000 Certified Development Company of Mississippi, Inc.** IDR --
Chris-Craft Enterprises, Inc. Project 5.000% 11/01/95 $ 1,145,000
1,200,000 Rankin County, Mississippi** Industrial Revenue -- Trilogy
Communications, Inc. Project 3.250 03/01/95 1,200,000
----------
2,345,000
MISSOURI 0.8%*
Kansas City, Missouri** IDA MFHR:
3,890,000 President Gardens Project 4.500 04/01/95 3,890,000
3,000,000 Twin Oaks I Apartments Project 4.500 04/01/95 3,000,000
3,000,000 Twin Oaks II Apartments Project 4.500 04/01/95 3,000,000
----------
9,890,000
NEW JERSEY 1.2%*
4,960,000 Eastern States** Tax-Exempt Mortgage Bond Trust -- Private 5.190 03/01/95 4,960,000
10,000,000 New Jersey 3.50% Transportation Trust Fund Authority
Transportation System (Putable at 100.076) 3.230 02/15/95 10,011,016
----------
14,971,016
NEW MEXICO 0.2%*
2,720,000 New Mexico** Mortgage Finance Authority SFMR Senior 4.351 03/01/95 2,719,320
NEW YORK 3.0%*
28,660,000 New York, New York 4.00% GO (Putable @ 100.115) 3.752 05/01/95 28,733,422
9,060,000 Niagara County, New York** Industrial Development Agency
IDR Refunding -- American Ref-Fuel Company of Niagara,
L.P. Project 4.000 01/15/95 9,060,000
----------
37,793,422
NORTH CAROLINA 0.1%*
1,500,000 Vance County, North Carolina** Industrial Facilities and
Pollution Control Financing Authority --
Southern Quilters-Carolina Comforters, Inc. Project 5.250 09/01/95 1,500,000
OHIO 0.2%*
1,000,000 Sharonville, Ohio** IDR -- Ralston Purina Company Project 4.700 12/01/95 1,000,000
1,235,000 Summit County, Ohio** IDR -- Waltco Truck Equipment Company Project 3.600 01/15/95 1,235,000
----------
2,235,000
OKLAHOMA 1.2%*
15,000,000 Tulsa County, Oklahoma** Home Finance Authority GNMA Collateralized
Mortgage Revenue 4.050 02/01/95 15,000,000
OREGON 0.3%*
4,000,000 Klamath Falls, Oregon** Electric Revenue -- Salt Caves Hydroelectric
Project 3.750 05/02/95 4,000,000
PENNSYLVANIA 6.8%*
3,435,000 Allegheny County, Pennsylvania 4.00% Residential Finance Authority
SFMR -- GNMA Mortgage-Backed Securities Program 4.000 06/01/95 3,435,000
6,150,000 Clinton County, Pennsylvania** IDA Solid Waste Disposal Revenue --
International Paper Company Project 2.900 01/15/95 6,150,000
5,000,000 Northampton County, Pennsylvania 10.50% IDA PCR -- Metropolitan
Edison Company Project 5.104 09/01/95 5,175,166
41,000,000 Northampton County, Pennsylvania** IDA Resource Recovery Revenue
-- Glendon Energy Company Project 4.930 04/01/95 41,000,000
4,900,000 Pennsylvania** Housing Finance Agency SFMR 3.500 04/01/95 4,900,000
Philadelphia, Pennsylvania** IDA CDR:
5,450,000 Economy Inn Project 3.950 07/01/95 5,450,000
12,275,000 Suite Hotel Project 4.000 06/01/95 12,275,000
7,075,000 Philadelphia, Pennsylvania 4.00% Water and Wastewater Revenue 4.000 06/12/95 7,075,000
----------
85,460,166
RHODE ISLAND 1.6%*
1,200,000 Providence, Rhode Island** Housing Authority MFHR -- Renaissance
Associates, L. P. Project 4.000 06/01/95 1,200,000
4,740,000 Providence, Rhode Island 3.60% Public Building Authority Revenue
BAN -- Scituate Reservoir II Project 3.419 03/16/95 4,741,800
14,000,000 Rhode Island 4.75% Solid Waste Management Corporation Landfill
Lease Notes 4.750 08/01/95 14,000,000
----------
19,941,800
TENNESSEE 0.3%*
3,760,000 Knox County, Tennessee** IDB Industrial Revenue -- ETB Development,
Inc. Project 4.000 04/01/95 3,760,000
TEXAS 0.6%*
3,340,000 Bushy Creek, Texas 5.50% Municipal Utility District 5.187 11/13/95 3,348,715
4,375,000 Tarrant County, Texas** HFC MFHR -- Lincoln Meadows Project 5.000 12/01/95 4,375,000
----------
7,723,715
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 22
SCHEDULE OF INVESTMENTS IN SECURITIES December 31, 1994
STRONG MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST
AMOUNT MATURITY DATE+ (NOTE 2)
--------- -------- --------- ---------
<S> <C> <C> <C>
VIRGINIA 0.4%*
$ 5,200,000 Oyster Point, Virginia** Development Corporation MFHR --
Jefferson Point Development Project 5.950% 01/05/95 $5,200,000
WASHINGTON 1.4%*
Washington** State Housing Finance Commission SFMR Refunding:
3,900,000 Series S-1B 3.900 01/01/95 3,900,000
2,800,000 Series S-3B 3.900 01/01/95 2,800,000
1,000,000 Series S-4B 3.900 01/01/95 1,000,000
1,800,000 Series S-5B 3.900 01/01/95 1,800,000
1,200,000 Series S-6B 5.011 01/01/95 1,199,928
1,700,000 Series S-7B 3.900 01/01/95 1,700,000
1,200,000 Series S-8B 4.000 01/01/95 1,200,000
3,000,000 Series S-9B 5.000 01/01/95 3,000,000
2,100,000 Series S-10B 5.250 04/01/95 2,100,000
----------
18,699,928
WISCONSIN 2.5%*
18,500,000 Milwaukee, Wisconsin** Redevelopment Authority MFHR -- City Hall
Square Apartments Project -- Private 5.780 06/01/95 18,500,000
13,815,000 Wisconsin** Housing and Economic Development Authority Home
Ownership Revenue 4.100 03/01/95 13,815,000
----------
32,315,000
----------
Total Municipal Bonds 536,403,795
MONTHLY VARIABLE RATE PUT BONDS 2.6%*
COLORADO 0.2%*
2,420,000 Jefferson County, Colorado IDR -- Anthony A. Petrarca/Cedarwood
Construction Company, Inc. Project 4.700 02/01/95 2,420,000
ILLINOIS 0.3%*
4,000,000 Green Leaf Ventures, Inc. Tax Exempt Bond Grantor Trust -- Private 4.800 02/01/95 4,000,000
LOUISIANA 1.2%*
15,140,000 Louisiana Housing Finance Agency GNMA Collateralized SFMR 4.250 02/01/95 15,140,000
NORTH CAROLINA 0.3%*
4,006,793 Carolina Freight Tax Exempt Bond Grantor Trust -- Private 4.500 02/01/95 4,006,793
TENNESSEE 0.4%*
4,300,000 GAF Corporation Tax Exempt Bond Grantor Trust -- Private 4.250 02/01/95 4,300,000
WISCONSIN 0.2%*
2,685,000 Johnson Controls, Inc. Tax Exempt Bond Grantor Trust -- Private 4.300 02/01/95 2,685,000
----------
Total Monthly Variable Rate Put Bonds 32,551,793
WEEKLY VARIABLE RATE PUT BONDS 43.3%*
ALABAMA 4.0%*
Alabama State IDA IDR:
3,775,000 Decatur Aluminum Corporation Project 5.900 01/10/95 3,775,000
5,000,000 Southern Ionics, Inc. Project 5.900 01/10/95 5,000,000
3,000,000 Well Built Cabinet, Inc. Project 5.900 01/10/95 3,000,000
5,000,000 Whitesell Project 5.900 01/10/95 5,000,000
1,920,000 Arab, Alabama IDB IDR -- Syncro Corporation Project 6.100 01/10/95 1,920,000
12,440,000 Birmingham, Alabama Baptist Medical Center -- Special Care Facilities
Financing Authority Revenue -- Methodist Home for the Aging Project 5.900 01/10/95 12,440,000
10,000,000 Bridgeport, Alabama IDB IDR -- Beaulieu Nylon, Inc. Project 5.900 01/10/95 10,000,000
1,865,000 Fort Payne, Alabama IDR -- Ovalstrapping, Inc. Project 5.900 01/10/95 1,865,000
3,100,000 Haleyville, Alabama IDB IDR -- Cusseta Wood Products, Inc. Project 5.900 01/10/95 3,100,000
3,681,000 Irondale, Alabama IDB IDR -- Fixed Collateral Mortgage Project 5.900 01/10/95 3,681,000
----------
49,781,000
ARIZONA 0.9%*
6,911,000 Chandler, Arizona IDA MFHR -- Greentree Place Apartments Project 5.950 01/10/95 6,911,000
2,765,000 Phoenix, Arizona IDA MFHR -- Rincon Vista Apartments Project 4.200 01/10/95 2,765,000
1,765,000 Tucson, Arizona IDA Industrial Revenue Refunding -- Santa Rita Hotel
Renovation Project 5.850 01/10/95 1,765,000
----------
11,441,000
</TABLE>
See notes to financial statements.
20
<PAGE> 23
STRONG MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
AMORITIZED
PRINCIPAL YIELD TO MATURITY COST
AM0UNT MATURITY DATE+ (NOTE 2)
- - ---------- -------- ------- ------------
<S> <C> <C> <C> <C>
ARKANSAS 0.2%*
$ 2,800,000 Searcy, Arkansas IDR -- Yarnell Ice Cream Company, Inc. Project 6.000% 01/10/95 $ 2,800,000
CALIFORNIA 6.3%*
19,500,000 Foothills/Eastern Transportation Corridor Agency, Orange County,
California Toll Road Revenue 7.000 01/10/95 19,500,000
Irvine, California Public Facilities and Infrastructure Authority
Lease Revenue -- Capital Improvements Projects:
3,300,000 Series 1985 7.250 01/10/95 3,300,000
1,985,000 Series 1987 7.250 01/10/95 1,985,000
8,230,000 Kern County, California Housing Authority Guaranteed Tax-Exempt
Mortgage Obligations 6.200 01/10/95 8,230,000
3,500,000 Ontario, California IDA IDR -- P & S Development Project 6.400 01/10/95 3,500,000
1,800,000 San Bernardino County, California COP -- 1992 Justice Center/Airport
Improvements Refunding Project 5.800 01/10/95 1,800,000
2,500,000 San Bernardino County, California Housing Authority MFHR -- Household
Bank/Reche Canyon Apartments Project 6.125 01/10/95 2,500,000
10,800,000 San Bernardino County, California -- Mercury Savings and Loan
Association/Sandalwood Park Apartments Project 4.200 01/10/95 10,800,000
13,140,000 San Francisco, California City and County Redevelopment Agency
Multi-Family Collateralized Housing Revenue -- Cathedral Hill
Plaza West Project 5.900 01/10/95 13,140,000
2,800,000 San Joaquin County, California IDA IDR -- Modtech, Inc. 5.750 01/10/95 2,800,000
8,000,000 San Marcos, California Redevelopment Agency MFHR -- San Marcos
Retirement Village Project 4.245 01/10/95 8,000,000
4,000,000 Santa Fe Springs, California IDA -- Tri-West Project 4.300 01/10/95 4,000,000
---------
79,555,000
COLORADO 0.8%*
3,430,000 Aurora, Colorado IDR -- Optima Batteries, Inc. Project 5.850 01/10/95 3,430,000
1,621,000 Lakewood, Colorado Jefferson County IDR -- Verden Associates -- Holiday
Inn Project 5.850 01/10/95 1,621,000
5,000,000 Westminster, Colorado IDR -- Lifecare International Project 6.200 01/10/95 5,000,000
---------
10,051,000
FLORIDA 0.6%*
3,540,000 Brevard County, Florida IDR -- U. S. Space Camp Foundation Project 5.900 01/10/95 3,540,000
1,150,000 Palm Beach County, Florida IDR -- Meridian Housing Project 4.245 01/10/95 1,150,000
3,000,000 Volusia County, Florida HFA MFHR -- Household Bank/Mallwood Village Project 6.125 01/10/95 3,000,000
---------
7,690,000
GEORGIA 1.7%*
10,000,000 Augusta, Georgia Housing Authority MFHR -- Augusta-Oxford Project 6.400 01/10/95 10,000,000
3,030,000 Cobb County, Georgia Development Authority IDR -- Datagraphic, Inc. Project 6.000 01/10/95 3,030,000
4,000,000 Fulton County, Georgia Development Authority IDR -- STO Corporation Project 3.500 01/10/95 4,000,000
1,555,000 Fulton County, Georgia Development Authority Revenue -- Darby Printing
Company Project (w) 5.900 01/10/95 1,555,000
2,650,000 Jackson County, Georgia IDA Revenue -- IMACC Corporation Project 5.900 01/10/95 2,650,000
---------
21,235,000
ILLINOIS 2.8%*
7,850,000 Carol Stream, Illinois MFHR -- St. Charles Square Project 6.050 01/10/95 7,850,000
3,025,000 Evanston, Illinois IDR -- Fountain Square Project 4.150 01/10/95 3,025,000
Illinois DFA IDR:
4,750,000 Knead Dough Baking Company Project 6.250 01/10/95 4,750,000
6,585,000 LaSalle/Hubbard Project 6.000 01/10/95 6,585,000
2,880,000 SMF, Inc. Project 6.000 01/10/95 2,880,000
2,400,000 Selfix, Inc. Project 6.000 01/10/95 2,400,000
3,200,000 Shutters Inc. Project 6.000 01/10/95 3,200,000
4,300,000 Springfield, Illinois Airport Authority -- Allied-Signal, Inc. Project 6.150 01/10/95 4,300,000
---------
34,990,000
INDIANA 1.0%*
8,420,000 Lawrence, Indiana EDR -- Vinings Court Apartments Project 6.050 01/10/95 8,420,000
3,500,000 Mishawaka, Indiana EDR -- Elco Industries, Inc. -- Thermaplastics Project 4.100 01/10/95 3,500,000
---------
11,920,000
</TABLE>
See notes to financial statements.
21
<PAGE> 24
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994
STRONG MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
<CAPTION> AMORTIZED
PRINCIPAL YIELD TO MATURITY COST
AMOUNT MATURITY DATE+ (NOTE 2)
- - ------------- --------- ---------- ---------
<S> <C> <C> <C>
IOWA 0.3%*
$ 3,800,000 Iowa Falls, Iowa IDR Refunding -- GENPAK Corporation Project 4.245% 01/10/95 $ 3,800,000
KENTUCKY 2.2%*
7,200,000 Jeffersontown, Kentucky IDR -- Columbia Sussex Corporation Facility 5.000 01/10/95 7,200,000
11,000,000 Ohio County, Kentucky PCR -- Big Rivers Electric Corporation Project 5.850 01/10/95 11,000,000
10,000,000 Somerset, Kentucky IBR -- Tibbals Flooring Company Project 5.900 01/10/95 10,000,000
---------
28,200,000
LOUISIANA 1.3%*
6,500,000 DeSoto Parish, Louisiana PCR Trust -- DDSB Municipal Securities Trust 5.750 01/10/95 6,500,000
4,325,000 Orleans, Louisiana Levee District -- Levee Improvement 5.700 01/10/95 4,325,000
5,635,000 Orleans, Louisiana Levee District -- Public Improvement 5.700 01/10/95 5,635,000
---------
16,460,000
MARYLAND 0.4%*
5,100,000 Washington County, Maryland EDR -- Tandy Project 6.450 01/10/95 5,100,000
MASSACHUSETTS 1.4%*
Massachusetts Industrial Finance Agency IDR:
4,400,000 Lightolier, Inc. Project 5.650 01/10/95 4,400,000
2,600,000 Portland Causeway Realty Trust 4.245 01/10/95 2,600,000
4,000,000 Sunstrand Corporation Project 6.100 01/10/95 4,000,000
6,500,000 Salem, Massachusetts Industrial Development Finance Authority
IDR -- Applied Extrusion Technologies, Inc. Project 4.245 01/10/95 6,500,000
---------
17,500,000
MICHIGAN 0.2%*
1,400,000 Lansing, Michigan Limited Obligation EDC IDR -- Ashland Oil, Inc. Project 5.440 01/10/95 1,400,000
1,300,000 Livonia, Michigan EDC -- Limited Obligation Revenue -- Livonia
Luxury Suites, Ltd. Project 6.050 01/10/95 1,300,000
---------
2,700,000
MINNESOTA 1.7%*
7,500,000 Brooklyn Center, Minnesota Rental Housing Revenue -- Four Courts
Apartments Project 5.270 01/10/95 7,500,000
11,500,000 New Brighton, Minnesota Rental Housing Revenue -- Polynesian Village
Apartments Project 5.270 01/10/95 11,500,000
2,000,000 Princeton, Minnesota IDR -- Plastic Products Company, Inc. Project 6.200 01/10/95 2,000,000
---------
21,000,000
MISSISSIPPI 1.3%*
3,000,000 Lee County, Mississippi IDR -- Hunter Douglas, Inc. Project 6.800 01/10/95 3,000,000
4,800,000 Mississippi Business Finance Corporation IDR -- Intex Plastics
Corporation Project 5.900 01/10/95 4,800,000
Prentiss County, Mississippi IDR -- Heidelberg Eastern Project:
2,500,000 Series A 4.100 01/10/95 2,500,000
6,650,000 Series B 4.200 01/10/95 6,650,000
---------
16,950,000
MISSOURI 2.5%*
4,900,000 Kansas City, Missouri IDA IDR -- Century Avenue Association Project 4.150 01/10/95 4,900,000
25,000,000 St. Charles County, Missouri IDA IDR Refunding -- Country
Club Apartments Project 6.050 01/10/95 25,000,000
1,300,000 St. Louis County, Missouri IDA -- Hampton Inn Westport Associates Project 4.200 01/10/95 1,300,000
---------
31,200,000
NEBRASKA 0.3%*
4,000,000 York, Nebraska IDR -- Sundstrand Corporation Project 6.100 01/10/95 4,000,000
NEVADA 0.3%*
4,100,000 Henderson, Nevada Public Improvement Trust -- Berry Plastics
Corporation Project 5.700 01/10/95 4,100,000
NEW HAMPSHIRE 0.4%*
5,000,000 New Hampshire IDA Industrial Facility Revenue -- Ferrofluidics
Corporation -- Nashua Series Project 6.000 01/10/95 5,000,000
NEW JERSEY 0.6%*
2,150,000 New Jersey EDA EDR -- Hickory Industries, Inc. Project 5.900 01/10/95 2,150,000
5,900,000 New Jersey EDA IDR -- Union Avenue Associates Project 4.300 01/10/95 5,900,000
---------
8,050,000
</TABLE>
See notes to financial statements.
22
<PAGE> 25
STRONG MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
<Ccaption>
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST
AMOUNT MATURITY DATE+ (NOTE 2)
--------- -------- --------- ---------
<S> <C> <C> <C>
NORTH CAROLINA 0.4%*
$ 4,500,000 Gaston County, North Carolina Industrial Facilities and Pollution
Control Financing Authority IDR -- Spring-Ford Knitting
Company, Inc. Project 5.900% 01/10/95 $ 4,500,000
OHIO 0.6%*
4,000,000 Cuyahoga County, Ohio Industrial Revenue -- Motch Corporation Project 5.900 01/10/95 4,000,000
3,500,000 Gallia County, Ohio IDR -- Harsco Corporation Project 5.800 01/10/95 3,500,000
-----------
7,500,000
PENNSYLVANIA 1.8%*
18,000,000 Elk County, Pennsylvania IDA Solid Waste Disposal Revenue -- Willamette
Industries, Inc. Project 6.100 01/10/95 18,000,000
5,000,000 Montgomery County, Pennsylvania IDA IDR Refunding -- Spring City
Limited Partnership Project 5.950 01/10/95 5,000,000
-----------
23,000,000
SOUTH CAROLINA 0.6%*
1,000,000 Charleston County, South Carolina Industrial Revenue -- Tandy
Corporation Project 5.100 01/10/95 1,000,000
1,400,000 Richland County, South Carolina IDR -- Ashland Oil Project 5.440 01/10/95 1,400,000
5,000,000 South Carolina Jobs EDA IDR -- Roller Bearing Company of
America, Inc. Project 6.000 01/10/95 5,000,000
-----------
7,400,000
SOUTH DAKOTA 0.1%*
430,000 Aberdeen, South Dakota IDR -- Lomar Development Company Project 6.550 01/10/95 430,000
775,000 Brookings, South Dakota IDR Refunding -- Lomar Development Company Project 6.450 01/10/95 775,000
-----------
1,205,000
TENNESSEE 0.7%*
3,000,000 McMinn County, Tennessee IDB IDR -- Southern Ionics, Inc. Project 5.900 01/10/95 3,000,000
5,600,000 Rutherford County, Tennessee IDB IDR Refunding -- Square D Company Project 5.850 01/10/95 5,600,000
-----------
8,600,000
TEXAS 4.4%*
3,050,000 Austin County, Texas IDC IDR -- Gulf States Toyota, Inc. Project 5.700 01/10/95 3,050,000
3,000,000 Azle, Texas IDA IDR -- Tandy Corporation Project 6.460 01/10/95 3,000,000
15,000,000 Calhoun County, Texas Navigation IDA Port Revenue -- Formosa
Plastics Corporation, Texas Project 7.000 01/10/95 15,000,000
4,700,000 Deer Park, Texas Port Development Corporation IDR 5.440 01/10/95 4,700,000
9,160,351 Fairfax County, Virginia LaSalle National Bank LeaseTOPS Trust 6.050 01/10/95 9,160,351
8,000,000 Grapevine, Texas IDC IDR -- Trencor Jetco, Inc. Project 6.100 01/10/95 8,000,000
3,000,000 Longview, Texas Industrial Corporation IDR -- Longview Guest Inn Project 6.050 01/10/95 3,000,000
5,375,000 NCNB Pooled Tax-Exempt Trust COP -- Texas 4.250 01/10/95 5,375,000
4,090,000 Texas Small Business IDC IDR -- Moulding Products, Inc. Project 6.200 01/10/95 4,090,000
-----------
55,375,351
UTAH 0.5%*
6,350,000 Salt Lake City, Utah IDR -- Parkview Plaza Associates Project 5.950 01/10/95 6,350,000
WASHINGTON 0.5%*
2,710,000 Pierce County, Washington EDC -- Brown & Haley Project 6.400 01/10/95 2,710,000
4,200,000 Port Moses Lake, Washington Public Corporation Industrial Revenue --
Basic American Foods Project 4.000 01/10/95 4,200,000
-----------
6,910,000
WISCONSIN 2.3%*
2,550,000 Ashwaubenon, Wisconsin IDR -- Pioneer Metal Finishing, Inc. Project 6.350 01/10/95 2,550,000
2,000,000 Columbus, Wisconsin IDR -- Maysteel Corporation Project 5.900 01/10/95 2,000,000
8,320,000 Madison, Wisconsin IDR -- Manchester Place Project 6.200 01/10/95 8,320,000
3,000,000 Menomonee Falls, Wisconsin IDR -- Maysteel Corporation Project 5.900 01/10/95 3,000,000
8,495,000 Milwaukee, Wisconsin Redevelopment Authority Development
Revenue -- Washington Square
Phase III Project 6.100 01/10/95 8,495,000
4,000,000 Oak Creek, Wisconsin IDR -- Outlook Packaging, Inc. Project 5.750 01/10/95 4,000,000
-----------
28,365,000
WYOMING 0.2%*
3,000,000 Gillette, Campbell County, Wyoming Environmental Improvement
Revenue -- Black Hills Power and Light Company Project 5.950 01/10/95 3,000,000
-----------
Total Weekly Variable Rate Put Bonds 545,728,351
</TABLE>
See notes to financial statements.
23
<PAGE> 26
SCHEDULE OF INVESTMENTS IN SECURITIES (continued)
STRONG MUNICIPAL MONEY MARKET FUND (continued) December 31, 1994
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST
AMOUNT MATURITY DATE+ (NOTE 2)
--------- -------- --------- ---------
<S> <C> <C> <C>
DAILY VARIABLE RATE PUT BONDS 12.1%*
CALIFORNIA 6.0%*
$16,000,000 Irvine, California Ranch Water District of Consolidated General
Obligations of Improvement Districts 6.875% 01/03/95 $ 16,000,000
10,700,000 Irvine Coast, Orange County, California Assessment District Limited
Obligation Improvement 6.750 01/03/95 10,700,000
16,000,000 Orange County, California Apartment Development Revenue -- Park
Place Irvine-Phase I Project 7.000 01/03/95 16,000,000
25,500,000 Orange County, California County Sanitation Districts COP --
Capital Improvement Program 6.625 01/03/95 25,500,000
7,500,000 San Bernardino, California MFHR -- Sandlewood Project 6.400 01/03/95 7,500,000
-------------
75,700,000
ILLINOIS 2.2%*
2,315,000 Des Plaines, Illinois IDR -- Oakton Partners Project 4.100 01/03/95 2,315,000
705,000 East Hazel Crest, Illinois EDR Refunding -- Columbia Sussex Corporation
Project 5.000 01/03/95 705,000
4,610,000 Illinois DFA Industrial Project Revenue -- Webster-Wayne Shopping Center
Project 4.100 01/03/95 4,610,000
8,180,000 Illinois Health Facilities Authority -- Rest Haven Illiana Christian
Convalescent Home Project 6.050 01/03/95 8,180,000
Merrionette Park, Illinois Industrial Project Revenue:
6,615,000 Southwick & Weglarz Project 6.400 01/03/95 6,615,000
1,924,000 Weglarz Project 6.400 01/03/95 1,924,000
2,684,000 Weglarz & Taxman Project 6.400 01/03/95 2,684,000
-------------
27,033,000
IOWA 0.1%*
1,665,000 Cedar Rapids, Iowa IDR Refunding MMars First Program -- Columbus McKinnon
Corporation Project 6.100 01/03/95 1,665,000
KENTUCKY 0.3%*
4,150,000 Boone County, Kentucky IBR Refunding Bonds -- Columbia Airport Project 5.600 01/03/95 4,150,000
MAINE 1.4%*
17,350,000 Regional Waste Systems, Inc. of Maine -- Solid Waste Resource Recovery
System Revenue 6.750 01/03/95 17,350,000
MICHIGAN 0.1%*
1,740,000 Michigan Job Development Authority IDR -- Anthony A. Petrarca/Cedarwood
Construction Company, Inc. Project 4.700 01/03/95 1,740,000
MONTANA 1.6%*
20,450,000 Montana State Board Investment Resource Recovery Revenue -- Colstrip
Project 6.750 01/03/95 20,450,000
OREGON 0.3%*
3,650,000 Metropolitan Service District, Oregon Waste Disposal Project Revenue --
Riedel Oregon Compost Company, Inc. Project 6.750 01/03/95 3,650,000
VERMONT 0.1%*
1,110,000 Vermont IDA IDR -- Woodbury Lumber Corporation Project 6.250 01/03/95 1,110,000
--------------
Total Daily Variable Rate Put Bonds 152,848,000
--------------
TOTAL INVESTMENTS IN SECURITIES 100.5%* 1,267,531,939
Other Assets and Liabilities, Net (0.5%*) (6,914,439)
--------------
NET ASSETS 100.0%* $1,260,617,500
==============
</TABLE>
See notes to financial statements.
24
<PAGE> 27
STRONG SHORT-TERM MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
MUNICIPAL BONDS 98.6%*
ALABAMA 2.0%*
$1,000,000 Alabama Industrial Access Road and Bridge
Corporation Capital Improvement, 5.15%,
Due 6/01/02 $ 951,250
1,000,000 Eufaula, Alabama IDB IDR -- Aladan
Corporation Project, 5.25%, Due 9/01/98+ 952,500
1,360,000 Loxley, Alabama IDB IDR -- Alabama Gin
Company Project, 5.00%, Due 11/14/97+ 1,285,200
----------
3,188,950
ARIZONA 2.2%*
Mohave County, Arizona IDA Hospital System
Revenue Refunding -- Medical Environments,
Inc. and Phoenix Baptist Hospital Medical
Center, Inc.:
1,470,000 5.20%, Due 7/01/97 1,438,763
1,595,000 5.50%, Due 7/01/98 1,543,162
675,000 Phoenix, Arizona IDA Hospital Revenue --
John C. Lincoln Hospital and Health Center
Project, 4.65%, Due 12/01/98+ 631,969
----------
3,613,894
CALIFORNIA 10.6%*
8,000,000 Bakersfield, California Hospital Revenue --
Greater Bakersfield Memorial Hospital
Project, 7.375%, Due 1/01/99+ (Pre-refunding
at 102.00) 8,640,000
1,000,000 California State Public Works Board Lease
Revenue -- Regents of the University of
California -- Various University of California
Projects, 5.90%, Due 11/01/05 935,000
2,000,000 Los Angeles, California GO, 5.25%, Due 9/01/06 1,770,000
2,890,000 Los Angeles, California Wastewater System
Revenue, 6.80%, Due 8/01/98+ (Pre-refunding
at 102.00) 3,070,625
2,520,000 West Bason, California Municipal Water
District COP -- West Basin Water
Reclamation Program, 6.85%, Due 8/01/00+
(Pre-refunding at 102.00) 2,705,850
----------
17,121,475
DISTRICT OF COLUMBIA 3.5%*
District of Columbia GO:
5,000,000 5.10%, Due 12/01/99(w) 4,643,750
1,060,000 5.60%, Due 6/01/03 1,010,975
----------
5,654,725
GEORGIA 5.3%*
8,000,000 Municipal Electric Authority of Georgia Special
Obligation -- Second Crossover Series,
8.125%, Due 1/01/17 8,600,000
ILLINOIS 4.3%*
945,000 Collinsville, Illinois Madison County IDR
Refunding, Drury Inn -- Collinsville Project,
5.25%, Due 11/01/98 907,200
Illinois Educational Facilities Authority
Revenue -- Lewis University Project:
1,100,000 4.50%, Due 11/10/97+ 1,038,125
1,390,000 5.30%, Due 9/25/02+ 1,264,900
1,565,000 Peoria, Illinois Peoria County IDR Refunding --
Pere Marquette Hotel Associates Project,
5.375%, Due 8/25/96+ 1,547,394
330,000 Quincy, Illinois, Adams County SFMR Refunding,
4.25%, Due 9/01/99 323,812
2,000,000 Upper Illinois River Valley Development Authority
Solid Waste Disposal Revenue -- Waste
Recovery -- Illinois Project, 6.50%,
Due 2/01/04 1,925,000
----------
7,006,431
INDIANA 1.3%*
$5,500,000 Indiana University Trustees Refunding Student
Fee, Zero %, Due 8/01/09 $2,091,375
IOWA 1.7%*
2,865,000 Iowa Finance Authority Mortgage Revenue
Refunding -- Friendship Village Project,
4.95%, Due 4/27/98+ 2,732,494
LOUISIANA 6.8%*
2,600,000 Jefferson Parish, Louisiana School Board Sales
Tax Refunding, 4.20%, Due 2/01/99 2,470,000
Louisiana Public Facilities Authority Hospital
Revenue and Refunding -- Touro Infirmary
Project:
1,215,000 4.75%, Due 8/15/98+ 1,157,287
2,400,000 6.125%, Due 8/15/23 1,866,000
1,765,000 Louisiana Public Facilities Authority Revenue --
Louisiana Association of Independent Colleges
and Universities Facilities Loan Program,
5.20%, Due 1/06/96+ 1,745,144
2,500,000 New Orleans, Louisiana Public
Improvement Bonds, 8.125%, Due 10/01/03 2,709,375
1,000,000 Regional Transit Authority of New Orleans,
Louisiana Sales Tax Revenue, 6.50%,
Due 12/01/08 1,008,750
10,956,556
MICHIGAN 5.6%*
3,000,000 Detroit, Michigan Distributable State
Aid GO -- 1992 Fiscal Stabilization Series,
5.375%, Due 5/01/96 2,977,500
Greater Detroit, Michigan Resource Recovery
Authority Revenue:
1,300,000 Series C, 9.25%, Due 12/13/08 1,356,875
4,500,000 Series D, 9.25%, Due 12/13/08 4,696,875
----------
9,031,250
MISSISSIPPI 0.6%*
995,000 Prentiss County, Mississippi Hospital
Revenue -- Private, 5.40%, Due 6/23/96+ 978,831
MISSOURI 6.0%*
New Madrid, Missouri Power Plant Revenue
Refunding:
4,590,000 5.55%, Due 6/01/02 4,532,625
2,630,000 5.55%, Due 12/01/02 2,597,125
2,750,000 Springfield, Missouri and Carlyle Capital
Markets, Inc. Board of Public Utilities COP,
5.20%, Due 12/15/03 2,609,063
----------
9,738,813
NEBRASKA 3.3%*
3,855,000 Nebraska IFA Multifamily Loan Revenue --
Park Drive Apartments Project,
4.75%, Due 6/01/97+ 3,811,631
Nebraska Public Gas Agency Gas Supply
System Revenue and Refunding:
500,000 5.75%, Due 4/01/00 492,500
300,000 5.85%, Due 4/01/01 294,750
700,000 6.25%, Due 4/01/05 679,000
----------
5,277,881
NEW JERSEY 3.1%*
2,875,000 Essex County, New Jersey Utilities Authority
Solid Waste System Project, 5.375%,
Due 4/13/96 2,860,625
</TABLE>
See notes to financial statements.
25
<PAGE> 28
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
New Jersey Health Care Facilities Financing
Authority Health System Revenue --
St. Mary Hospital Issue:
$ 1,030,000 4.125%, Due 7/01/96 $ 1,009,400
1,120,000 4.625%, Due 7/01/98 1,066,800
-----------
4,936,825
NEW MEXICO 1.5%*
2,500,000 Los Alamos, New Mexico Incorporated County
Utility System Revenue, 5.80%, Due 7/01/06 2,387,625
NEW YORK 6.1%*
3,910,000 New York, New York GO, 5.50%, Due 8/01/04 3,709,612
2,000,000 New York, New York Municipal Water Finance
Authority Water and Sewer System Revenue,
5.375%, Due 6/15/07 1,847,500
4,335,000 Westchester, New York Industrial Development
Agency Transportation Revenue Refunding --
AGR Realty Company Project,
5.75%, Due 1/01/02 4,237,463
-----------
9,794,575
OHIO 1.5%*
2,410,000 Cincinnati, Ohio City School District RAN,
5.60%, Due 6/15/97 2,403,975
OREGON 6.3%*
10,780,000 Hillsboro, Oregon Hospital Facility Authority
Revenue and Advance Refunding --
Tuality Heathcare Project, 4.80%,
Due 5/20/98+ 10,106,250
PUERTO RICO 3.7%*
6,140,000 Puerto Rico Electric Power Authority Power
Revenue, 5.90%, Due 7/01/03 6,009,525
SOUTH DAKOTA 0.8%*
1,475,000 Sioux Falls, South Dakota Sales Tax Revenue,
4.90%, Due 11/15/05 1,296,156
TENNESSEE 3.0%*
1,850,000 Hamilton County, Tennessee IDB Lease Rental
Revenue -- City of Chattanooga and County
of Hamilton, Tennessee, Lessees, 5.50%,
Due 9/01/03 1,766,750
1,300,000 Knoxville, Tennessee Community Development
Corporation MFHR Refunding and
Improvement -- College Hills Project, 4.65%,
Due 12/01/99+ 1,181,375
1,945,000 Shelby County, Tennessee Health, Educational
and Housing Facility Board First Mortgage
Revenue Refunding -- Northlake Apartments
Project, 5.30%, Due 12/23/99+ 1,849,676
---------
4,797,801
TEXAS 6.0%*
Grand Prairie, Texas Health Facilities
Development Corporation Hospital Revenue
Refunding -- Dallas/Fort Worth Medical
Center -- Grand Prairie Project:
2,700,000 6.00%, Due 11/01/99(w) 2,686,500
3,700,000 6.50%, Due 11/01/04(w) 3,663,000
Harris County, Texas Toll Road Senior
Lien Revenue:
1,275,000 5.60%, Due 8/15/04 1,233,562
1,540,000 5.70%, Due 8/15/05 1,485,730
560,000 Orange County, Texas Navigation and Port
District IDC IDR Refunding -- Wal-Mart
Stores, Inc. Project, 5.95%, Due 10/01/09 525,700
-----------
9,594,492
UTAH 6.2%*
10,000,000 Carbon County, Utah Solid Waste Disposal
Refunding Revenue -- East Carbon Landfill
Project -- Private, 6.04%, Due 5/01/97 9,912,500
WASHINGTON 7.2%*
$7,400,000 Washington Health Care Facilities Authority
Revenue -- Sisters of Providence, 5.375%,
Due 12/23/97+ $ 7,307,500
Washington Public Power Supply System --
Nuclear Project No. 2 Refunding Revenue:
1,700,000 4.60%, Due 7/01/02 1,487,500
2,000,000 5.25%, Due 7/01/03 1,845,000
1,225,000 Washington Public Power Supply System --
Nuclear Project No. 3 Refunding Revenue,
4.90%, Due 7/01/04 1,045,844
-----------
11,685,844
-----------
Total Municipal Bonds (Cost $162,213,655) 158,918,243
CASH EQUIVALENTS 5.8%*
SHORT-TERM MUNICIPAL BOND 0.5%*
ARIZONA 0.5%*
826,043 Metrocentre Little Rock, Arkansas
Improvement District No. 1 First Mortgage
Revenue -- Capital Hotel Project, 9.50%,
Due 12/31/94 826,043
DAILY VARIABLE RATE PUT BONDS 5.3%*
ILLINOIS 3.8%*
6,050,000 Joliet, Illinois Regional Port District IBR --
Terminal Facilities Project 6,050,000
NEW YORK 1.5%*
2,500,000 New York, New York GO 2,500,000
-----------
Total Daily Variable Rate Put Bonds 8,550,000
-----------
Total Cash Equivalents (Cost $9,376,043) 9,376,043
TOTAL INVESTMENTS IN SECURITIES
(COST $171,589,698) 104.4%* 168,294,286
Other Assets and Liabilities, Net (4.4%*) (7,051,340)
-----------
NET ASSETS 100.0%* $161,242,946
<CAPTION> ===========
STRONG INSURED MUNICIPAL BOND FUND
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C>
MUNICIPAL BONDS 77.1%*
ARIZONA 9.5%*
$1,870,000 Maricopa County, Arizona Alhambra
Elementary School District No. 68 School
Improvement and Refunding, 4.90%,
Due 7/01/08 $1,559,113
2,450,000 Maricopa County, Arizona Paradise Valley
Unified School District No. 69 School
Improvement, 4.80%, Due 7/01/13 1,920,187
1,750,000 University of Arizona Medical Center
Corporation Hospital Revenue, 5.00%,
Due 7/01/21 1,358,438
-----------
4,837,738
CALIFORNIA 23.2%*
2,000,000 Anaheim, California Community Center Authority
COP -- Convention Center Financing Project,
5.50%, Due 8/01/14 1,700,000
2,500,000 California Statewide Communities Development
Authority COP -- St. Joseph Health System
Obligated Group Project, 5.50%, Due 7/01/23 2,059,375
1,000,000 California Variable Purpose GO, 4.75%,
Due 9/01/18 748,750
</TABLE>
See notes to financial statements.
26
<PAGE> 29
STRONG INSURED MUNICIPAL BOND FUND (continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- - ---------- --------
<S> <C>
$ 1,500,000 Contra Costa County, California MFHR,
GNMA Collateralized -- Crescent Park
Apartments Project, 7.80%, Due 6/20/34 $ 1,582,500
1,845,000 Contra Costa County, California Water
District Revenue Refunding, 5.00%,
Due 10/01/20 1,422,956
500,000 Los Angeles, California Community
Redevelopment Agency -- Bunker Hill
Project, 5.60%, Due 12/01/28 409,375
2,000,000 Los Angeles, California Wastewater System
Revenue Refunding, 4.70%, Due 11/01/17 1,495,000
1,700,000 Moulton Niguel, Orange County, California
Water District COP, 4.80%, Due 9/01/17 1,277,125
1,500,000 Southern California Public Power Authority
Revenue -- Mead-Adelanto Project, 4.875%,
Due 7/01/20 1,132,500
------------
11,827,581
FLORIDA 3.3%*
2,000,000 Dade County, Florida Water and Sewer System
Revenue Refunding, 5.00%, Due 10/01/08 1,712,500
GEORGIA 3.0%*
2,000,000 Georgia Municipal Electric Authority Power
Revenue, 4.75%, Due 1/01/19 1,510,000
ILLINOIS 6.6%*
2,000,000 Chicago, Illinois Public Building Commission
Revenue -- Board of Education of the City of
Chicago, 5.75%, Due 12/01/18 1,725,000
1,920,000 Illinois DFA PCR Refunding -- Illinois Power
Company Project, 5.70%, Due 2/01/24 1,629,600
------------
3,354,600
INDIANA 1.6%*
1,000,000 Indianapolis, Indiana Gas Utility System
Revenue Refunding, 5.375%, Due 6/01/21 811,250
MASSACHUSETTS 9.7%*
3,690,000 Boston, Massachusetts Revenue -- Boston
Hospital, 5.75%, Due 2/15/23 3,168,787
1,200,000 Massachusetts Bay Transportation Authority
General Transportation System, 5.50%,
Due 3/01/22 1,002,000
1,000,000 Massachusetts Municipal Wholesale Electric
Company Power Supply System Revenue,
4.75%, Due 7/01/11 788,750
------------
4,959,537
NEW JERSEY 1.5%*
1,000,000 New Jersey Wastewater Treatment Trust,
4.80%, Due 3/01/13 793,750
NEW YORK 3.2%*
1,750,000 New York, New York Municipal Water Finance
Authority Water and Sewer System Revenue,
5.375%, Due 6/15/07 1,616,563
SOUTH CAROLINA 3.7%*
2,250,000 South Carolina Public Service Authority
Revenue Refunding, 5.50%, Due 7/01/21 1,906,875
TEXAS 6.8%*
$ 225,000 El Paso, Texas Property Finance Authority,
Inc., SFMR -- GNMA Mortgage-Backed,
8.70%, Due 12/01/18 $ 235,687
3,300,000 Grand Prairie, Texas Health Facilities
Development Corporation Hospital Revenue
Refunding -- Dallas/Fort Worth Medical
Center -- Grand Prairie Project, 6.875%,
Due 11/01/10(w) 3,234,000
100,000 Southeast Texas HFC SFMR, Zero %,
Due 9/01/11 18,250
------------
3,487,937
UTAH 1.6%*
1,000,000 Salt Lake County, Utah Water Conservancy
District Revenue, 5.35%, Due 10/01/18 822,500
WASHINGTON 3.4%*
2,000,000 Washington Public Power Supply System
Nuclear Project No. 3 Refunding Revenue,
5.60%, Due 7/01/15 1,715,000
------------
Total Municipal Bonds (Cost $39,219,459) 39,355,831
CASH EQUIVALENTS 19.4%*
SHORT-TERM MUNICIPAL BOND 0.2%*
TEXAS 0.2%*
90,000 Austin, Texas HFC SFMR, Zero %, Due 12/01/95 84,375
WEEKLY VARIABLE RATE PUT BOND 3.7%*
NEW YORK 3.7%*
1,900,000 New York State Thruway Authority
General Revenue 1,900,000
DAILY VARIABLE RATE PUT BONDS 15.5%*
ARIZONA 2.1%*
1,100,000 Maricopa County, Arizona Pollution Control
Corporation PCR Refunding -- Arizona Public
Service Company Palo Verde Project 1,100,000
IOWA 3.9%*
2,000,000 Iowa Finance Authority Solid Waste Disposal
Revenue -- Cedar River Paper Company Project 2,000,000
LOUISIANA 3.5%*
1,800,000 Louisiana Recovery District Sales Tax Revenue 1,800,000
NEW YORK 2.0%*
1,000,000 New York, New York Industrial Development
Agency IDR -- Japan Airlines Company, Ltd.
Project 1,000,000
UTAH 2.0%*
1,000,000 Emery County, Utah PCR Refunding --
PacifiCorp Projects 1,000,000
WYOMING 2.0%*
1,000,000 Sweetwater County, Wyoming PCR --
PacifiCorp Project 1,000,000
------------
Total Daily Variable Rate Put Bonds 7,900,000
------------
Total Cash Equivalents (Cost $9,884,218) 9,884,375
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $49,103,677) 96.5%* 49,240,206
Other Assets and Liabilities, Net 3.5%* 1,784,195
------------
NET ASSETS 100.0%* $51,024,401
============
</TABLE>
See notes to financial statements.
27
<PAGE> 30
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994
STRONG MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
MUNICIPAL BONDS 81.9%*
ALASKA 0.9%*
$ 3,400,000 Alaska HFC General Housing Purpose
Refunding, 5.40%, Due 12/01/23 $ 2,669,000
ARIZONA 2.4%*
5,000,000 Arizona Transportation Board Subordinated
Highway Revenue Refunding, 4.75%,
Due 7/01/11 3,968,750
4,000,000 Phoenix, Arizona Civic Improvement
Corporation Wastewater System Lease
Revenue, 4.75%, Due 7/01/23 2,885,000
------------
6,853,750
CALIFORNIA 10.6%*
5,000,000 California Housing Finance Agency Home
Mortgage Revenue, Zero %, Due 8/01/20 681,250
California Various Purpose GO:
10,000,000 4.75%, Due 9/10/00+ 7,775,000
4,200,000 5.125%, Due 10/01/17 3,360,000
3,500,000 Contra Costa County, California MFHR, GNMA
Collateralized -- Crescent Park Apartments
Project, 7.80%, Due 12/20/34 3,692,500
Los Angeles, California Department of Water
and Power Water Works Refunding Revenue:
6,710,000 4.50%, Due 5/15/11 5,183,475
3,000,000 4.50%, Due 5/15/18 2,133,750
3,650,000 Southern California Public Power Authority
Revenue -- Palo Verde Project, 5.00%,
Due 7/01/15 2,888,063
5,155,000 Southern California Public Power Authority
Revenue -- San Juan Power Project, 5.00%,
Due 1/01/20 3,988,681
------------
29,702,719
COLORADO 0.4%*
1,000,000 Colorado Health Facilities Authority Hospital
Revenue -- PSL Healthcare System Project,
8.25%, Due 2/15/06 1,038,750
DELAWARE 2.3%*
Delaware EDA Hospital Revenue --
Osteopathic Hospital Association of
Delaware/Riverside Hospital:
1,915,000 6.00%, Due 2/04/01+ 1,735,469
2,695,000 6.50%, Due 2/16/06+ 2,351,387
2,760,000 6.75%, Due 2/11/11+ 2,377,050
------------
6,463,906
FLORIDA 0.7%*
2,290,000 Homestead, Florida Industrial Revenue --
Community Rehabilitation Providers Program,
7.95%, Due 11/01/18 2,063,863
ILLINOIS 5.8%*
1,660,000 Cook County, Illinois GO, 5.00%, Due 11/15/23 1,253,300
6,000,000 Granite City, Illinois Hospital Revenue
Refunding -- Saint Elizabeth Medical Center,
8.125%, Due 6/01/08 5,865,000
2,205,000 Illinois Health Facilities Authority Hospital
Revenue -- Ravenswood Hospital Medical
Center, 6.85%, Due 6/01/12 2,025,844
Illinois Health Facilities Authority Revenue --
Community Hospital of Ottawa Project:
1,700,000 6.75%, Due 8/15/14 1,498,125
2,925,000 6.85%, Due 8/15/24 2,526,469
3,000,000 Illinois Health Facilities Authority Revenue --
Fairview Obligated Group Project, 8.25%,
Due 10/01/99 $ 3,007,500
------------
16,176,238
INDIANA 4.2%*
Indiana Health Facility Financing Authority
Hospital Revenue -- Jackson County Schneck
Memorial Hospital Project,
1,000,000 7.50%, Due 2/15/12 965,000
7,790,000 7.50%, Due 2/15/22 7,381,025
4,000,000 Indiana State Office Building Commission
Capitol Complex Revenue -- Indiana
Government Center North Project, 5.25%,
Due 7/01/15 3,330,000
------------
11,676,025
IOWA 1.7%*
3,710,000 Iowa Finance Authority Hospital Revenue --
Trinity Regional Hospital Project, 7.00%,
Due 7/01/22 3,311,175
1,880,000 Ottumwa, Iowa Hospital Facility Revenue
Refunding and Improvement -- Ottumwa
Regional Health Center, Incorporated
6.00%, Due 10/01/18 1,506,350
------------
4,817,525
KENTUCKY 0.5%*
Jefferson County, Kentucky First Mortgage
Revenue -- The Christian Church Homes of
Kentucky Project:
715,000 6.125%, Due 11/15/13 590,769
1,165,000 6.125%, Due 11/15/18 932,000
------------
1,522,769
LOUISIANA 1.6%*
3,285,000 East Baton Rouge Parish, Louisiana Public
Improvement Sales Tax, 4.80%, Due 2/01/13 2,549,981
1,985,647 Louisiana Public Facilities Authority SFMR,
8.45%, Due 12/01/12 2,047,698
------------
4,597,679
MASSACHUSETTS 10.6%*
3,000,000 Massachusetts Bay Transportation Authority
General Transportation System, 5.50%,
Due 3/01/22 2,505,000
Massachusetts Health and Educational
Facilities Authority Revenue -- Saints
Memorial Medical Center:
4,000,000 5.50%, Due 10/01/02 3,225,000
6,650,000 6.00%, Due 10/01/23 4,222,750
3,915,000 Massachusetts Industrial Finance Agency First
Mortgage Revenue -- Reeds Landing Project,
7.75%, Due 10/01/00 3,802,444
6,000,000 Massachusetts Municipal Wholesale Electric
Company Power Supply System Revenue,
4.75%, Due 7/01/11 4,732,500
10,000,000 Massachusetts Water Resources Authority
General Revenue, 4.75%, Due 12/01/23 7,287,500
5,000,000 Massachusetts Water Resources Authority
General Revenue Refunding, 5.00%,
Due 3/01/22 3,843,750
------------
29,618,944
</TABLE>
See notes to financial statements.
28
<PAGE> 31
STRONG MUNICIPAL BOND FUND (continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
MICHIGAN 3.1%*
$ 3,930,000 Detroit, Michigan Water Supply System
Revenue Refunding, 4.75%, Due 7/01/19 $ 2,937,675
500,000 Mason County, Michigan Hospital Finance
Authority Hospital Revenue Refunding --
Memorial Medical Center of West Michigan,
7.25%, Due 6/01/08 477,500
1,000,000 Michigan Hospital Finance Authority Hospital
Revenue Refunding -- Community Memorial
Hospital, Cheboygan, Michigan, 6.25%,
Due 4/01/10 861,250
5,000,000 Pontiac Hospital Finance Authority, Michigan
Hospital Revenue -- NOMC Obligated Group,
6.00%, Due 8/01/07 4,431,250
-----------
8,707,675
MONTANA 3.1%*
10,000,000 Forsyth, Montana, Rosebud County, PCR
Refunding -- The Montana Power Company
Colstrip Project, 5.90%, Due 12/01/23 8,775,000
NEW MEXICO 0.2%*
528,137 Santa Fe, New Mexico SFMR, 8.45%,
Due 12/01/11 556,524
NEW YORK 10.1%*
26,160,000 Battery Park City Authority, New York Senior
Revenue Refunding, 4.75%, Due 11/01/19 19,227,600
6,000,000 New York, New York Municipal Water Finance
Authority Water and Sewer System Revenue,
5.375%, Due 6/15/07 5,542,500
4,250,000 New York State Medical Care Facilities Finance
Agency Mental Health Services Facilities
Improvement Revenue Refunding, 5.25%,
Due 2/15/21 3,421,250
-----------
28,191,350
OHIO 2.9%*
3,800,000 Medina County, Ohio Economic Development
MFHR -- Camelot Place, Ltd. Project,
8.375%, Due 10/01/23 3,524,500
660,000 Ohio HFA SFMR, Zero %, Due 8/01/15 56,928
3,300,000 Ohio Municipal Electric Generation Agency
Joint Venture 5 "OMEGA JV5" Beneficial
Interest Certificates -- Belleville
Hydroelectric Project, 5.375%, Due 2/15/24 2,730,750
Springdale, Ohio Hospital Facilities First
Mortgage Revenue -- Southwestern Ohio
Seniors' Services, Inc.:
1,700,000 6.00%, Due 11/01/18 1,340,875
450,000 6.00%, Due 11/01/23 345,375
-----------
7,998,428
OKLAHOMA 1.3%*
3,415,000 Shawnee, Oklahoma Hospital Authority
Revenue -- MidAmerica HealthCare, Inc.,
8.00%, Due 10/01/99+ 3,555,869
PENNSYLVANIA 4.6%*
6,000,000 Blair County, Pennsylvania Hospital Authority
First Mortgage Revenue, Mercy Hospital
Sublessee, 8.125%, Due 7/01/08+ 6,112,500
3,000,000 Lehigh County, Pennsylvania IDA PCR
Refunding -- Pennsylvania Power & Light
Company Project, 6.40%, Due 9/01/29 2,861,250
$5,000,000 Pennsylvania Intergovernmental Cooperation
Authority Special Tax Revenue Refunding --
City of Philadelphia Funding Program, 5.00%,
Due 6/15/22 $ 3,900,000
-----------
12,873,750
SOUTH CAROLINA 3.3%*
1,435,000 Kershaw County, South Carolina Hospital
Facilities Revenue Refunding -- Kershaw
County Memorial Hospital Project, 8.00%,
Due 9/15/17 1,458,319
5,000,000 Piedmont, South Carolina Municipal Power
Agency Electric Revenue, 5.00%,
Due 1/01/22 3,893,750
5,000,000 South Carolina Public Service Authority
Revenue Refunding, 5.00%, Due 1/01/25 3,787,500
-----------
9,139,569
TEXAS 6.2%*
575,000 El Paso, Texas Property Finance Authority, Inc.,
SFMR -- GNMA Mortgage-Backed, 8.70%,
Due 12/01/18 602,312
6,000,000 Harris County, Texas Toll Road Senior Lien
Revenue, 5.00%, Due 8/15/16 4,777,500
10,000,000 North Central Texas Health Facilities
Development Corporation -- Tri-City Health
Centre, Inc. Project, 9.50%, Due 5/01/21 10,600,000
1,160,000 Ranger, Texas Housing Corporation MFMR
Refunding -- FHA Insured Mortgage
Loan -- Ranger Apartments Project,
8.80%, Due 3/01/24 1,261,500
-----------
17,241,312
VIRGINIA 0.6%*
995,000 Loudoun County, Virginia Sanitation Authority
Water and Sewer System Revenue, 5.25%,
Due 1/01/20 813,412
900,000 Norfolk, Virginia Water Revenue, 5.25%,
Due 11/01/13 756,000
-----------
1,569,412
WASHINGTON 4.4%*
Bellevue, Washington Convention Center
Authority, King County, Washington Special
Obligation Revenue and Refunding,
Compound Interest:
1,510,000 Zero %, Due 2/01/19 283,125
1,140,000 Zero %, Due 2/01/20 199,500
5,000,000 Zero %, Due 2/01/21 818,750
7,000,000 Zero %, Due 2/01/23 997,500
3,725,000 Skagit County, Washington Housing Authority
Low-Income Housing Assistance Revenue --
GNMA Collateralized Mortgage Loans --
Sea Mar Project, 7.00%, Due 6/20/35 3,706,375
5,000,000 Washington Health Care Facilities Authority
Revenue -- Sisters of Providence, 6.25%,
Due 10/01/13 4,456,250
15,105,000 Washington Housing Finance Commission
SFMR -- GNMA and FNMA Mortgage
Backed Securities Program, Zero %,
Due 1/01/25 1,755,956
------------
12,217,456
</TABLE>
See notes to financial statements.
29
<PAGE> 32
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) Decembr 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
WISCONSIN 0.4%*
$1,000,000 Kaukauna, Wisconsin Outagamie County
Electric System Revenue Refunding,
7.25%, Due 3/29/06+ $ 1,050,000
------------
Total Municipal Bonds (Cost $230,845,100) 229,077,513
CASH EQUIVALENTS 12.0%*
DAILY VARIABLE RATE PUT BONDS
LOUISIANA 1.6%*
4,500,000 Louisiana Public Facilities Authority IDR --
Kenner Hotel Limited Partnership Project 4,500,000
MISSISSIPPI 1.2%*
3,300,000 Jackson County, Mississippi Port Facility
Refunding Revenue -- Chevron U.S.A. Inc.
Project 3,300,000
NEW MEXICO 0.7%*
2,000,000 Hurley, New Mexico PCR -- Kennecott
Santa Fe Corporation Project 2,000,000
NEW YORK 0.8%*
2,300,000 New York, New York GO 2,300,000
SOUTH CAROLINA 0.7%*
2,000,000 Berkeley County, South Carolina PCR
Refunding -- Amoco Chemical Company
Project 2,000,000
TEXAS 1.9%*
3,500,000 Gulf Coast Waste Disposal Authority PCR --
Amoco Oil Company Project 3,500,000
1,800,000 Gulf Coast Waste Disposal Authority PCR
Refunding -- Amoco Oil Company Project 1,800,000
------------
5,300,000
UTAH 5.1%*
9,240,000 Emery County, Utah PCR Refunding --
PacifiCorp Projects 9,240,000
5,000,000 Salt Lake County, Utah PCR Refunding --
Service Station Holdings, Inc. Project 5,000,000
------------
14,240,000
Total Daily Variable Rate Put Bonds ----------
(Cost $33,640,000) 33,640,000
TOTAL INVESTMENTS IN SECURITIES ----------
(COST $264,485,100) 93.9%* 262,717,513
Other Assets and Liabilities, Net 6.1%* 17,090,608
------------
NET ASSETS 100.0%* $279,808,121
============
</TABLE>
STRONG HIGH-YIELD MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
MUNICIPAL BONDS 95.0%*
DELAWARE 0.4%*
$ 435,000 Delaware EDA Hospital Revenue -- Osteopathic
Hospital Association of Delaware/Riverside
Hospital, 6.75%, Due 2/01/11+ $ 374,644
FLORIDA 10.5%*
Brevard County, Florida Health Facilities
Authority Revenue Refunding -- Courtenay
Springs Village Project:
970,000 7.375%, Due 9/10/00+ 934,838
2,000,000 7.75%, Due 1/08/16+ 1,875,000
1,500,000 Cape Coral, Florida Health Facilities Authority
Hospital Revenue -- Cape Coral Medical
Center, Inc. Project, 7.50%, Due 11/15/21 1,434,375
Hialeah Gardens, Florida IDR Refunding --
Waterford Convalescent Center Project:
$1,000,000 7.875%, Due 12/01/07 $ 947,500
1,000,000 8.25%, Due 12/01/14 961,250
1,200,000 Highlands County, Florida IDA First Mortgage
Health Care Revenue -- Church of All
Faiths, Inc. Project, 9.375%, Due 10/01/21 (d) 840,000
1,275,000 Homestead, Florida Industrial Revenue --
Community Rehabilitation Providers Program,
7.95%, Due 11/01/18 1,149,094
2,735,000 Largo, Florida Sun Coast Health System
Revenue -- Sun Coast Hospital Issue, 6.20%,
Due 3/01/13 2,297,400
7,840,000 Polk County, Florida HFA Subordinated
Revenue -- Lake Wales Gardens Project,
Zero %, Due 4/01/20 891,800
------------
11,331,257
GEORGIA 6.5%*
4,840,000 Atlanta, Georgia Urban Residential Finance
Authority MFHR -- Franciscan Club
Apartments Projects, 7.75%, Due 4/01/22 4,628,250
2,500,000 Atlanta, Georgia Urban Residential Finance
Authority Revenue -- Landrum Arms
Project, 8.00%, Due 7/01/24 2,337,500
---------
6,965,750
ILLINOIS 6.5%*
1,030,000 Granite City, Illinois Hospital Revenue
Refunding -- Saint Elizabeth Medical Center,
8.125%, Due 6/01/08 1,006,825
Illinois DFA Community Rehabilitation
Providers Facilities Acquisition Program
Revenue:
1,110,000 7.25%, Due 3/01/04 1,047,563
3,070,000 7.50%, Due 3/01/14 2,786,025
270,000 Illinois DFA Industrial Revenue Refunding --
Great Plains Hotel Corporation of Illinois
Project, 7.50%, Due 4/01/16 235,575
2,000,000 Illinois DFA Solid Waste Disposal Facility
Revenue -- Ford Heights Waste Tire To
Energy Project, 7.875%, Due 4/01/11 1,922,500
------------
6,998,488
INDIANA 1.4%*
1,500,000 Wells County, Indiana Hospital Authority
Hospital Facility Revenue Refunding --
Caylor-Nickel Medical Center, Inc. Project,
8.75%, Due 4/15/12 1,507,500
LOUISIANA 8.0%*
6,030,000 Louisiana Public Facilities Authority Senior
Lien Revenue -- Progressive
Healthcare Providers, Inc. Developmental
Centers, 8.00%, Due 3/23/06+ 5,396,850
3,000,000 New Orleans, Louisiana Public Improvement,
8.125%, Due 10/01/03 3,251,250
------------
8,648,100
MASSACHUSETTS 7.5%*
Massachusetts Health and Educational Facilities
Authority Revenue -- Saints Memorial
Medical Center:
2,885,000 5.75%, Due 10/01/06 2,091,625
6,500,000 6.00%, Due 10/01/23 4,127,500
</TABLE>
See notes to financial statements.
30
<PAGE> 33
STRONG HIGH-YIELD MUNCIPAL BOND FUND (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
$ 750,000 Massachusetts Industrial Finance Agency First
Mortgage Revenue -- Berkshire
Retirement Community, Lenox Project,
6.50%, Due 7/01/09 $ 681,563
1,195,000 Massachusetts Industrial Finance Agency First
Mortgage Revenue -- Evanswood Bethzatha
Corporation Project, 7.875%, Due 1/15/20 1,139,731
------------
8,040,419
MICHIGAN 2.2%*
2,000,000 Michigan Hospital Finance Authority Hospital
Revenue and Refunding -- Brighton Hospital,
8.625%, Due 10/01/18 2,010,000
350,000 Michigan Hospital Finance Authority Hospital
Revenue and Refunding -- Detroit Osteopathic
Hospital Corporation, 7.50%, Due 11/01/10 324,187
------------
2,334,187
NEW HAMPSHIRE 5.0%*
New Hampshire Higher Educational and Health
Facilities Authority First Mortgage
Revenue -- Rivermead at Peterborough
Project:
4,000,000 7.375%, Due 7/01/00 3,910,000
1,610,000 8.50%, Due 7/01/24 1,515,412
------------
5,425,412
NEW YORK 4.0%*
3,000,000 Orange County, New York Industrial
Development Agency Life Care Community
Revenue -- The Glen Arden, Inc. Project,
8.25%, Due 1/01/02 3,003,750
Tompkins County, New York Industrial
Development Agency Life Care Community
Revenue -- Kendal at Ithaca, Inc. Project:
500,000 7.875%, Due 6/01/15 487,500
800,000 7.875%, Due 6/01/24 759,000
------------
4,250,250
OHIO 1.2%*
400,000 Medina County, Ohio Economic Development
MFHR -- Camelot Place, Ltd. Project, 8.375%,
Due 10/01/23 371,000
Springdale, Ohio Hospital Facilities First
Mortgage Revenue -- Southwestern Ohio
Seniors' Services, Inc. Project:
600,000 6.00%, Due 11/01/18 473,250
550,000 6.00%, Due 11/01/23 422,125
------------
1,266,375
PENNSYLVANIA 30.9%*
1,000,000 Beaver County, Pennsylvania IDA PCR -- The Toledo
Edison Company Beaver Valley Project, 10.75%,
Due 11/15/15 1,038,750
Bucks County, Pennsylvania IDA CDR --
Attleboro Associates, Ltd. Nursing Facility
Project:
1,530,000 8.00%, Due 5/08/01+ 1,472,625
3,785,000 8.25%, Due 3/13/05+ 3,628,869
Delaware County, Pennsylvania IDA Revenue --
Martins Run Project:
1,000,000 5.40%, Due 12/15/01 935,000
1,500,000 6.00%, Due 3/17/06+ 1,336,875
$5,000,000 Horsham, Pennsylvania IDA CDA Health
Care Facilities Revenue -- GF/Pennsylvania
Properties, Inc. Project, 8.375%,
Due 9/01/24 $ 4,712,500
Montgomery County, Pennsylvania Higher
Education and Health Authority Hospital
Revenue -- United Hospitals, Inc. --
St. Christopher's Hospital for Children
Project:
350,000 7.50%, Due 11/01/13 322,437
230,000 8.50%, Due 11/01/17 233,162
1,600,000 Montgomery County, Pennsylvania IDA Health
Care Facility First Mortgage Revenue --
AHF/Ambler, Inc. Project, 8.50%,
Due 12/01/23 1,454,000
Montgomery County, Pennsylvania IDA
Retirement Community Revenue
Refunding -- G. D. L. Farms Corporation
Project:
2,000,000 6.30%, Due 1/01/13 1,632,500
4,660,000 6.50%, Due 1/01/20 3,751,300
6,840,000 Montgomery County, Pennsylvania IDA
Revenue -- Wordsworth Academy Project,
8.00%, Due 9/01/24 6,164,550
2,200,000 Pennsylvania Economic DFA Resource
Recovery Revenue -- Northampton
Generating Project, 6.875%, Due 1/01/11 1,850,750
1,260,000 Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Hospital
Revenue -- Methodist Hospital Project, 9.00%,
Due 7/01/10 1,291,500
Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Hospital
Revenue -- Nazareth Hospital Project:
1,125,000 9.375%, Due 7/01/05 1,153,125
2,220,000 9.375%, Due 7/01/15 2,261,625
------------
33,239,568
TEXAS 3.8%*
4,765,962 DeSoto, Texas IDA IDR -- Wintergreen
Commercial Partnership Project, 7.00%,
Due 1/01/17 4,116,600
VIRGINIA 1.8%*
Norfolk, Virginia IDA IDR Mortgage
Refunding -- Comfort Inn -- Norfolk Naval
Station Project:
625,000 6.75%, Due 1/15/07+ 549,219
1,675,000 7.00%, Due 9/05/13+ 1,434,219
------------
1,983,438
WISCONSIN 5.3%*
5,660,000 Brookfield, Wisconsin IDR Refunding --
Midway Motor Lodge Project, 8.40%,
Due 2/15/06+ 5,737,825
------------
Total Municipal Bonds (Cost $107,098,295) 102,219,813
</TABLE>
See notes to financial statements.
31
<PAGE> 34
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994
STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ---------
<S> <C>
CASH EQUIVALENTS 4.8%*
DAILY VARIABLE RATE PUT BONDS
NEW MEXICO 0.5%*
$ 500,000 Farmington, New Mexico PCR -- Arizona
Public Service Company Four Corners
Project $ 500,000
NORTH CAROLINA 1.4%*
1,500,000 Halifax County, North Carolina Industrial
Facilities and Pollution Control Financing
Authority Revenue -- Westmoreland --
LG&E Partners Roanoke Valley Project 1,500,000
OHIO 1.0%*
1,100,000 Twinsburg, Ohio IDR -- United Stationers
Supply Co. Project 1,100,000
UTAH 1.9%*
2,000,000 Salt Lake County, Utah PCR Refunding --
Service Station Holdings, Inc. Project 2,000,000
-------------
Total Daily Variable Rate Put Bonds
(Cost $5,100,000) 5,100,000
-------------
TOTAL INVESTMENTS IN SECURITIES
(COST $112,198,295) 99.8%* 107,319,813
Other Assets and Liabilities, Net 0.2%* 235,584
-------------
NET ASSETS 100.0%* $107,555,397
-------------
-------------
</TABLE>
* Percentages are calculated as a percentage of net assets.
** Variable rate bonds.
+ Maturity date represents actual maturity, earliest put date
or pre-refunding date.
(d) Security was purchased while in default, and accordingly, no interest
has been accrued or received since acquisition.
(w) When-Issued Security.
See notes to financial statements.
32
<PAGE> 35
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
(In Thousands)
STRONG MUNICIPAL STRONG SHORT-TERM
MONEY MARKET FUND MUNICIPAL BOND FUND
----------------- -------------------
<S> <C> <C>
INTEREST INCOME $46,910 $10,475
EXPENSES:
Investment Advisory Fees 6,673 1,010
Custodian Fees 123 35
Shareholder Servicing Costs 868 211
Reports to Shareholders 692 72
Federal and State Registration Fees 80 104
Other 126 58
------ -------
Total Expenses before Waivers and Absorptions by Advisor 8,562 1,490
Voluntary Expense Waivers and Absorptions by Advisor (187) --
------ -------
Expenses, Net 8,375 1,490
------ -------
NET INVESTMENT INCOME 38,535 8,985
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments -- (8,946)
Futures Contracts -- 2,433
Change in Unrealized Appreciation/Depreciation on Investments -- (6,339)
------ -------
NET LOSS -- (12,852)
------ -------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $38,535 ($ 3,867)
====== ========
</TABLE>
<TABLE>
<CAPTION>
STRONG INSURED STRONG STRONG HIGH-YIELD
MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------- ------------------- -------------------
<S> <C> <C> <C>
INTEREST INCOME $3,008 $22,806 $5,945
EXPENSES:
Investment Advisory Fees 253 2,078 477
Custodian Fees 8 39 15
Shareholder Servicing Costs 92 455 80
Reports to Shareholders 26 140 26
Federal and State Registration Fees 53 90 53
Other 47 51 24
------- -------- -------
Total Expenses before Waivers and Absorptions by Advisor 479 2,853 675
Voluntary Expense Waivers and Absorptions by Advisor -- -- (675)
------- -------- -------
Expenses, Net 479 2,853 --
------- -------- -------
NET INVESTMENT INCOME 2,529 19,953 5,945
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (3,993) (23,725) (2,072)
Futures Contracts -- -- 111
Change in Unrealized Appreciation/Depreciation
on Investments (2,405) (14,892) (4,978)
------- -------- -------
NET LOSS (6,398) (38,617) (6,939)
------- -------- -------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ($3,869) ($18,664) ($ 994)
======= ======== =======
</TABLE>
See notes to financial statements.
33
<PAGE> 36
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
STRONG MUNICIPAL STRONG SHORT-TERM
MONEY MARKET FUND MUNICIPAL BOND FUND
----------------- -------------------
<S> <C> <C>
ASSETS:
Investments in Securities, at Value
(Cost of $1,267,532 and $171,590, respectively) $ 1,267,532 $ 168,294
Receivable from Brokers for Securities Sold 62,520 5,052
Interest Receivable 10,489 2,845
Other 291 736
----------- -----------
Total Assets 1,340,832 176,927
LIABILITIES:
Payable to Brokers for Securities Purchased 74,887 14,821
Dividends Payable 4,598 716
Accrued Operating Expenses and Other Liabilities 730 147
----------- -----------
Total Liabilities 80,215 15,684
----------- -----------
NET ASSETS $ 1,260,617 $ 161,243
=========== ===========
Capital Shares
Authorized 10,000,000 10,000,000
Outstanding 1,260,617 16,577
NET ASSET VALUE PER SHARE $ 1.00 $ 9.73
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
STRONG INSURED STRONG STRONG HIGH-YIELD
MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------- ------------------- -------------------
<S> <C> <C> <C>
ASSETS:
Investments in Securities, at Value
(Cost of $49,104, $264,485 and $112,198,
respectively) $ 49,240 $262,718 $ 107,320
Receivable from Brokers for Securities Sold 4,076 14,033 3,255
Interest Receivable 1,054 4,554 2,307
Other 213 215 280
----------- -------- ----------
Total Assets 54,583 281,520 113,162
LIABILITIES:
Payable to Brokers for Securities Purchased 3,251 -- 4,861
Dividends Payable 216 1,511 716
Accrued Operating Expenses and Other Liabilities 92 201 30
----------- -------- ----------
Total Liabilities 3,559 1,712 5,607
----------- -------- ----------
NET ASSETS $ 51,024 $279,808 $ 107,555
=========== ======== ==========
Capital Shares
Authorized 10,000,000 100,000 1,000,000
Outstanding 5,009 30,329 11,572
NET ASSET VALUE PER SHARE $ 10.19 $ 9.23 $ 9.29
=========== ======== ==========
</TABLE>
See notes to financial statements.
34
<PAGE> 37
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
(In Thousands)
STRONG MUNICIPAL STRONG SHORT-TERM
MONEY MARKET FUND MUNICIPAL BOND FUND
-------------------------- -------------------
1994 1993 1994 1993
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 38,535 $ 29,240 $ 8,985 $ 7,390
Net Realized Gain (Loss) -- -- (6,513) 1,573
Change in Unrealized Appreciation/Depreciation -- -- (6,339) 1,963
---------- ---------- -------- --------
Increase (Decrease) in Net Assets Resulting
from Operations 38,535 29,240 (3,867) 10,926
CAPITAL SHARE TRANSACTIONS 88,057 67,069 (41,777) 103,296
DIVIDENDS PAID FROM:
Net Investment Income (38,535) (29,240) (8,985) (7,390)
Net Realized Gain on Investments -- -- (308) (1,468)
---------- ---------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 88,057 67,069 (54,937) 105,364
NET ASSETS:
Beginning of Year 1,172,560 1,105,491 216,180 110,816
---------- ---------- -------- --------
End of Year $1,260,617 $1,172,560 $161,243 $216,180
========== ========== ======== ========
</TABLE>
See notes to financial statements.
35
<PAGE> 38
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
(In Thousands)
STRONG INSURED STRONG
MUNICIPAL BOND FUND MUNICIPAL BOND FUND
1994 1993 1994 1993
------- ------- -------- --------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 2,529 $ 2,409 $ 19,953 $ 22,187
Net Realized Gain (Loss) (3,993) 635 (23,725) 11,696
Change in Unrealized Appreciation/Depreciation (2,405) 2,271 (14,892) 9,409
------- ------- -------- --------
Increase (Decrease) in Net Assets Resulting
from Operations (3,869) 5,315 (18,664) 43,292
CAPITAL SHARE TRANSACTIONS (3,791) 37,733 (80,486) 100,046
DIVIDENDS PAID FROM:
Net Investment Income (2,529) (2,409) (19,953) (22,187)
Net Realized Gain on Investments -- (793) -- (11,991)
------- ------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS (10,189) 39,846 (119,103) 109,160
NET ASSETS:
Beginning of Year 61,213 21,367 398,911 289,751
------- ------- -------- --------
End of Year $51,024 $61,213 $279,808 $398,911
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
STRONG HIGH-YIELD
MUNICIPAL BOND FUND
1994 1993*
-------- -------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 5,945 $ 127
Net Realized Gain (Loss) (1,961) 6
Change in Unrealized Appreciation/Depreciation (4,978) 114
-------- -------
Increase (Decrease) in Net Assets Resulting
from Operations (994) 247
CAPITAL SHARE TRANSACTIONS 93,661 20,620
DIVIDENDS PAID FROM:
Net Investment Income (5,945) (127)
Net Realized Gain on Investments (7) --
-------- -------
TOTAL INCREASE IN NET ASSETS 86,715 20,740
NET ASSETS:
Beginning of Period 20,840 100
-------- -------
End of Period $107,555 $20,840
======== =======
</TABLE>
*For the Period October 1, 1993 (Inception) through December 31, 1993.
See notes to financial statements.
36
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1. ORGANIZATION
The Strong Municipal Income Funds consist of Strong Municipal Money Market
Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc., Strong Insured
Municipal Bond Fund, Inc., Strong Municipal Bond Fund, Inc. and Strong
High-Yield Municipal Bond Fund, Inc. The Funds are separately incorporated,
diversified, open-end management investment companies registered with the
Securities and Exchange Commission under the Investment Company Act of
1940.
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 -- Investments in securities for which market
quotations are readily available are valued at fair value as
determined by a pricing service on the basis of the average of the
most recent bid and asked prices in the principal market (closing
sales prices if the principal market is an exchange) in which such
securities are normally traded as well as such factors as market
transactions among institutional investors and dealer quotations for
similar securities. Securities for which 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 Directors of the Funds. Debt securities which are
purchased within 60 days of their stated maturity are valued at
amortized cost, which approximates current value.
Investments in Strong Municipal Money Market Fund are valued using the
amortized cost method (which approximates current value) whereby
investments purchased at a discount or premium are valued by
amortizing the difference between the original purchase price and
maturity value of the issue over the period to maturity.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
It is the Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no Federal income or excise tax provision is required.
(C) Realized Gains and Losses On Investment Transactions -- The Funds
determine the gain or loss realized on investment transactions by
comparing the identified cost of the security lot sold with the net
sales proceeds.
(D) Futures -- The Funds, except for Strong Municipal Money Market Fund,
may enter into futures contracts to provide protection against adverse
movements in the prices of securities in the portfolio. Upon entering
into a futures contract, the Funds pledge to the broker cash or other
high-quality liquid debt securities equal to the minimum "initial
margin" requirements of the exchange. Additionally, the Funds receive
from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as "variation margin," and are recorded by the Funds as
unrealized gains or losses. When the futures contract is closed, the
Funds record a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at
the time it was closed.
The use of futures contracts involves, to varying degrees, elements of
market risk in excess of the amount recognized in the statement of
assets and liabilities. The predominant risk is that the movement in
the price of the futures contract may not correlate perfectly with the
movement in the prices of the assets being hedged. A lack of
correlation could render the portfolio's hedging strategy unsuccessful
and could result in a loss to the portfolio.
Futures contracts open at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
CONTRACT VALUE (DEPRECIATION)
FUND COLLATERAL (PAR VALUE) CONTRACTS (IN THOUSANDS) EXPIRATION (IN THOUSANDS)
---- ---------------------- --------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Strong Springfield, Missouri and Carlyle Capital 355 Municipal ($30,142) March 1995 ($321)
Short-Term Markets, Inc. Board of Public Utilities Bond Index
Municipal COP, 5.20% Futures
Bond Fund $2,750,000 Due 12/15/03 (Short)
Strong Halifax County, North Carolina Industrial 100 Municipal (8,491) March 1995 14
High-Yield Facilities and Pollution Control Bond Index
Municipal Financing Authority Revenue -- Futures
Bond Fund Westmoreland -- LG&E Partners Roanoke (Short)
Valley Project $1,500,000 Due 1/03/95
</TABLE>
(E) Options -- The Funds, except for Strong Municipal Money Market Fund,
may engage in options transactions to hedge against expected declines
of their portfolio securities. Premiums received by the Funds upon
writing covered call options are recorded in each Fund's statement of
assets and liabilities as an asset with a corresponding liability
which is subsequently adjusted to the current market value of the
option. When an option expires, is exercised, or is closed, each Fund
realizes a gain or loss, and the liability is eliminated. Each Fund
continues to bear the risk of a decline in the price of the underlying
security during the period, although any potential loss during the
period would be reduced by the amount of the option premium received.
The Funds, except for Strong Municipal Money Market Fund, may also
purchase put options on futures contracts, write call options on
futures contracts, and enter into related closing transactions for
hedging purposes. These options generally are similar to an option
covering a specific security, except that delivery of cash rather than
the underlying security is made.
The use of written option contracts involves elements of market risk
in excess of the amount recognized in the statement of assets and
liabilities. The contract value represents a Fund's involvement in
these financial instruments. When required, a Fund will set aside
permissible liquid assets in a segregated account to secure its
potential obligations under its options positions.
37
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994
(F) When-Issued Securities -- The Funds may purchase securities on a
when-issued or delayed delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the agreement, these securities may be delivered
and paid for at a future date, generally within 45 days. The Funds
record purchases of when-issued securities and reflect the values of
such securities in determining net asset value in the same manner as
other portfolio securities. The Funds segregate and maintain at all
times cash, cash equivalents, or other high-quality liquid debt
securities in an amount at least equal to the amount of outstanding
commitments for when-issued securities.
(G) Average Years to Maturity -- A Fund's average maturity is generally
based on the actual stated maturity of a security. However, the
maturity date of a variable rate security is the next interest rate
adjustment date and for a debt security with a put or demand feature,
the next put or demand exercise date is considered its maturity. The
maturity of a mortgage-backed security is determined on an "expected
life" basis. Notwithstanding the foregoing, the use of futures
contracts for hedging purposes may impact the effective maturity of a
portfolio security and accordingly, the calculated average years to
maturity of the Fund.
(H) Deferred Organizational Costs -- Costs incurred by Strong Short-Term
Municipal Bond Fund, Strong Insured Municipal Bond Fund and Strong
High-Yield Municipal Bond Fund in connection with their organization
and initial registration and public offering of shares have been
deferred and are being amortized to expense over a sixty-month period.
These costs were advanced by the Advisor and will be reimbursed by the
Funds over a period of not more than sixty months.
(I) Other -- Portfolio transactions are recorded on the trade date.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
3. NET ASSETS
Net assets as of December 31, 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
STRONG MUNICIPAL STRONG SHORT-TERM STRONG INSURED
MONEY MARKET FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND
----------------- ------------------- -------------------
<S> <C> <C> <C>
Capital Stock $1,260,617 $171,372 $54,957
Undistributed Net Realized Loss -- (6,513) (4,069)
Net Unrealized Appreciation (Depreciation) -- (3,616) 136
---------- -------- -------
Net Assets $1,260,617 $161,243 $51,024
========== ======== =======
</TABLE>
<TABLE>
<CAPTION>
STRONG STRONG HIGH-YIELD
MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------- -------------------
<S> <C> <C>
Capital Stock $ 305,572 $114,381
Undistributed Net Realized Loss (23,996) (1,961)
Net Unrealized Depreciation (1,768) (4,865)
--------- --------
Net Assets $ 279,808 $107,555
========= ========
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds during 1994 and 1993 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
STRONG MUNICIPAL MONEY MARKET FUND
Shares Sold 2,652,872 $2,652,872 2,067,312 $2,067,312
Shares Issued in Reinvestment of Dividends 34,513 34,513 24,859 24,859
Shares Redeemed (2,599,328) (2,599,328 ) (2,025,102) (2,025,102)
---------- ---------- ---------- ----------
Net Increase 88,057 $ 88,057 67,069 $ 67,069
========== ========== ========== ==========
STRONG SHORT-TERM MUNICIPAL BOND FUND
Shares Sold 14,809 $ 150,226 20,830 $ 215,066
Shares Issued in Reinvestment of Dividends 799 8,049 707 7,298
Shares Redeemed (19,907) (200,052) (11,524) (119,068)
---------- ---------- ---------- ----------
Net Increase (Decrease) (4,299) ($ 41,777) 10,013 $ 103,296
========== ========== ========== ==========
STRONG INSURED MUNICIPAL BOND FUND
Shares Sold 3,835 $ 40,236 5,420 $ 60,923
Shares Issued in Reinvestment of Dividends 179 1,922 214 2,427
Shares Redeemed (4,347) (45,949) (2,267) (25,617)
---------- ---------- ---------- ----------
Net Increase (Decrease) (333) ($ 3,791 ) 3,367 $ 37,733
========== ========== ========== ==========
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
1994 1993
SHARES DOLLARS SHARES DOLLARS
------- -------- ------- --------
<S> <C> <C> <C> <C>
STRONG MUNICIPAL BOND FUND
Shares Sold 17,346 $168,663 31,256 $321,485
Shares Issued in Reinvestment of Dividends 1,675 16,211 2,689 27,719
Shares Redeemed (27,598) (265,360) (24,027) (249,158)
------- -------- ------- --------
Net Increase (Decrease) (8,577) ($ 80,486) 9,918 $100,046
======= ======== ======= ========
STRONG HIGH-YIELD MUNICIPAL BOND FUND
Shares Sold 21,216 $205,563 2,234 $ 22,439
Shares Issued in Reinvestment of Dividends 400 3,848 4 42
Shares Redeemed (12,107) (115,750) (186) (1,861)
------- -------- ------- --------
Net Increase 9,509 $ 93,661 2,052 $ 20,620
======= ======== ======= ========
</TABLE>
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and a director of the Funds are affiliated, provides investment advisory
services and shareholder recordkeeping and related services to the Funds.
Investment advisory fees, which are established by terms of the Advisory
Agreements, are based on annualized rates of .50% of the average daily net
assets of the Strong Municipal Money Market Fund, Strong Short-Term
Municipal Bond Fund and Strong Insured Municipal Bond Fund, and .60% of the
average daily net assets of the Strong Municipal Bond Fund and Strong
High-Yield Municipal Bond Fund. Advisory fees are subject to reimbursement
by the Advisor if the Funds' operating expenses exceed certain levels.
Shareholder recordkeeping and related service fees are based on
contractually established rates for each open and closed shareholder
account. In addition, the Advisor is compensated for certain other services
related to costs incurred for reports to shareholders.
Certain information regarding these transactions, excluding the effects of
waivers and reimbursements for the year ended December 31, 1994 is as
follows (in thousands):
<TABLE>
<CAPTION>
STRONG MUNICIPAL STRONG SHORT-TERM STRONG INSURED
MONEY MARKET FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND
----------------- ------------------- -------------------
<S> <C> <C> <C>
Payable to Advisor at December 31, 1994 $623 $122 $79
Other Shareholder Servicing Expenses Paid
to Advisor 34 6 2
Unaffiliated Directors' Fees 15 4 2
</TABLE>
<TABLE>
<CAPTION>
STRONG STRONG HIGH-YIELD
MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------- -------------------
<S> <C> <C>
Payable to Advisor at December 31, 1994 $160 $ 29
Other Shareholder Servicing Expenses Paid
to Advisor 12 2
Unaffiliated Directors' Fees 6 2
</TABLE>
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities during 1994 were
as follows (in thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INSURED
MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------- -------------------
<S> <C> <C>
Purchases $ 546,510 $192,217
Sales 584,417 206,095
</TABLE>
<TABLE>
<CAPTION>
STRONG MUNICIPAL STRONG HIGH-YIELD
BOND FUND MUNICIPAL BOND FUND
---------------- -------------------
<S> <C> <C>
Purchases $1,033,090 $237,891
Sales 1,174,137 149,446
</TABLE>
39
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994
7. INCOME TAX INFORMATION
At December 31, 1994, the investment cost, gross unrealized appreciation
and depreciation on investments and capital loss carryovers (expiring in
2002) for Federal income tax purposes were as follows (in thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INSURED
MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------- --------------------
<S> <C> <C>
Aggregate Investment Cost $171,601 $ 49,126
Aggregate Unrealized:
Appreciation $ 377 $ 620
Depreciation (3,684) (506)
-------- --------
($ 3,307) $ 114
======== ========
Capital Loss Carryovers $ 6,916 $ 4,047
======== ========
</TABLE>
<TABLE>
<CAPTION>
STRONG MUNICIPAL STRONG HIGH-YIELD
BOND FUND MUNICIPAL BOND FUND
---------------- --------------------
<S> <C> <C>
Aggregate Investment Cost $264,782 $112,221
Aggregate Unrealized:
Appreciation $ 7,056 $ 88
Depreciation (9,120) (4,989)
-------- --------
($ 2,064) ($ 4,901)
======== ========
Capital Loss Carryovers $ 23,699 $ 1,924
======== ========
</TABLE>
8. ABBREVIATIONS
The following is a list of abbreviations 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
EDR -- Economic Development Revenue
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
IDR -- Industrial Development Revenue
IFA -- Investment Finance Authority
MFHR -- Multi-Family Housing Revenue
MFMR -- Multi-Family Mortgage Revenue
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
SFHR -- Single Family Housing Revenue
SFMR -- Single Family Mortgage Revenue
TRAN -- Tax and Revenue Anticipation Notes
40
<PAGE> 43
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of each
of the Funds, outstanding for the entire period.
STRONG MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.03 0.02 0.03 0.05 0.06
Dividends from Net Investment Income*** (0.03) (0.02) (0.03) (0.05) (0.06)
---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ======== ========
Total Return +2.9% +2.5% +3.4% +5.2% +6.1%
Net Assets, End of Period (In Thousands) $1,260,617 $1,172,560 $1,105,491 $782,482 $218,205
Ratio of Expenses to Average Net Assets 0.6% 0.7% 0.7% 0.7% 0.8%
Ratio of Expenses to Average Net Assets
Without Waivers 0.6% 0.7% 0.7% 0.7% 0.8%
Ratio of Net Investment Income to Average
Net Assets 2.9% 2.5% 3.3% 5.0% 6.0%
<CAPTION>
1989 1988 1987 1986
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.06 0.05 0.05 0.01
Dividends from Net Investment Income*** (0.06) (0.05) (0.05) (0.01)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return +6.1% +5.2% +4.7% +0.7%
Net Assets, End of Period (In Thousands) $ 73,802 $ 77,465 $ 59,085 $ 2,401
Ratio of Expenses to Average Net Assets 0.9% 0.8% 0.6% 0.5%*
Ratio of Expenses to Average Net Assets
Without Waivers 0.9% 0.8% 1.0% 0.5%*
Ratio of Net Investment Income to Average
Net Assets 5.9% 5.0% 4.7% 3.7%*
</TABLE>
STRONG SHORT-TERM MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.36 $ 10.20 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.45 0.44 0.48
Net Realized and Unrealized Gains (Losses)
on Investments (0.62) 0.23 0.22
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.17) 0.67 0.70
LESS DISTRIBUTIONS
Dividends From Net Investment Income*** (0.45) (0.44) (0.48)
Distributions From Net Realized Gains (0.01) (0.07) (0.02)
---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.46) (0.51) (0.50)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.73 $ 10.36 $ 10.20
========== ========== ==========
Total Return -1.6% +6.8% +7.2%
Net Assets, End of Period (In Thousands) $ 161,243 $ 216,180 $ 110,816
Ratio of Expenses to Average Net Assets 0.7% 0.6% 0.2%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.7% 0.7% 0.8%
Ratio of Net Investment Income to Average
Net Assets 4.5% 4.2% 4.9%
Portfolio Turnover Rate 273.2% 141.5% 139.9%
</TABLE>
* Calculated on an annualized basis.
** Inception date is October 23, 1986 for Strong Municipal Money Market
Fund. Total return is not annualized.
*** Tax-exempt for regular Federal income tax purposes.
41
<PAGE> 44
FINANCIAL HIGHLIGHTS (continued)
STRONG INSURED MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
1994 1993 1992 1991
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.46 $ 10.82 $ 10.28 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.54 0.56 0.62 0.06
Net Realized and Unrealized Gains (Losses)
on Investments (1.27) 0.80 0.68 0.28
-------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS (0.73) 1.36 1.30 0.34
LESS DISTRIBUTIONS
Dividends From Net Investment Income*** (0.54) (0.56) (0.62) (0.06)
Distributions From Net Realized Gains -- (0.16) (0.14) --
-------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.54) (0.72) (0.76) (0.06)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.19 $ 11.46 $ 10.82 $ 10.28
======== ======== ======== ========
Total Return -6.5% +12.8% +13.1% +3.4%
Net Assets, End of Period (In Thousands) $ 51,024 $ 61,213 $ 21,367 $ 1,308
Ratio of Expenses to Average Net Assets 1.0% 0.6% 0.2% 0.5%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.0% 0.9% 1.1% 1.0%*
Ratio of Net Investment Income to Average
Net Assets 5.0% 4.9% 5.8% 5.6%*
Portfolio Turnover Rate 411.1% 110.7% 289.6% 238.9%*
</TABLE>
STRONG MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 10.00 $ 9.76 $ 9.22 $ 9.47
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.56 0.58 0.65 0.65 0.66
Net Realized and Unrealized Gains (Losses)
on Investments (1.02) 0.57 0.50 0.54 (0.25)
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS (0.46) 1.15 1.15 1.19 0.41
LESS DISTRIBUTIONS
Dividends From Net Investment Income*** (0.56) (0.58) (0.65) (0.65) (0.66)
Distributions From Net Realized Gains -- (0.32) (0.26) -- --
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.56) (0.90) (0.91) (0.65) (0.66)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.23 $ 10.25 $ 10.00 $ 9.76 $ 9.22
========= ========= ========= ========= =========
Total Return -4.6% +11.8% +12.2% +13.4% +4.6%
Net Assets, End of Period (In Thousands) $279,808 $398,911 $289,751 $115,230 $ 31,560
Ratio of Expenses to Average Net Assets 0.8% 0.7% 0.1% 0.1% 0.3%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.8% 0.8% 0.9% 1.1% 1.5%
Ratio of Net Investment Income to Average
Net Assets 5.8% 5.6% 6.4% 6.9% 7.2%
Portfolio Turnover Rate 311.0% 156.7% 324.0% 465.2% 586.0%
<CAPTION>
1989 1988 1987 1986
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.35 $ 9.16 $ 10.01 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.52 0.49 0.67 0.12
Net Realized and Unrealized Gains (Losses)
on Investments 0.12 0.19 (0.85) 0.01
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.64 0.68 (0.18) 0.13
LESS DISTRIBUTIONS
Dividends From Net Investment Income*** (0.52) (0.49) (0.67) (0.12)
Distributions From Net Realized Gains -- -- -- --
--------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.52) (0.49) (0.67) (0.12)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.47 $ 9.35 $ 9.16 $ 10.01
========= ========= ========= =========
Total Return +7.1% +7.6% -1.8% +1.3%
Net Assets, End of Period (In Thousands) $ 18,735 $ 18,275 $ 19,070 $ 2,212
Ratio of Expenses to Average Net Assets 1.7% 1.3% 1.0% 0.4%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.8% 1.4% 1.3% 1.0%*
Ratio of Net Investment Income to Average
Net Assets 5.6% 5.3% 7.0% 6.4%*
Portfolio Turnover Rate 243.3% 343.6% 284.0% 116.1%*
</TABLE>
* Calculated on an annualized basis.
** Respective inception dates are November 25, 1991 for Strong Insured
Municipal Bond Fund and October 23, 1986 for Strong Municipal Bond
Fund. Total return is not annualized.
*** Tax-exempt for regular Federal income tax purposes.
42
<PAGE> 45
FINANCIAL HIGHLIGHTS (continued)
STRONG HIGH-YIELD MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
1994 1993**
-------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.71 0.16
Net Realized and Unrealized Gains (Losses)
on Investments (0.81) 0.10
-------- --------
TOTAL FROM INVESTMENT OPERATIONS (0.10) 0.26
LESS DISTRIBUTIONS
Dividends From Net Investment Income*** (0.71) (0.16)
-------- --------
TOTAL DISTRIBUTIONS (0.71) (0.16)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 9.29 $ 10.10
======== ========
Total Return -1.0% +2.7%
Net Assets, End of Period (In Thousands) $107,555 $ 20,840
Ratio of Expenses to Average Net Assets 0.0% 0.0%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.8% 1.1%*
Ratio of Net Investment Income to Average Net Assets 7.5% 6.8%*
Portfolio Turnover Rate 198.1% 111.1%*
</TABLE>
* Calculated on an annualized basis.
** Inception date is October 1, 1993. Total return is not annualized.
*** Tax-exempt for regular Federal income tax purposes.
43
<PAGE> 46
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of the
Strong Municipal Income Funds
We have audited the accompanying statements of assets and liabilities of Strong
Municipal Money Market Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc.,
Strong Insured Municipal Bond Fund, Inc., Strong Municipal Bond Fund, Inc. and
Strong High-Yield Municipal Bond Fund, Inc. (collectively referred to herein
as the "Strong Municipal Income Funds"), including the schedules of investments
in securities, as of December 31, 1994, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended for Strong Municipal Money
Market Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc., Strong Insured
Municipal Bond Fund, Inc., and Strong Municipal Bond Fund, Inc., and for the
period from October 1, 1993 (inception) to December 31, 1993 and the year ended
December 31, 1994 for Strong High-Yield Municipal Bond Fund, Inc., and the
financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Strong Municipal Income Funds as of December 31, 1994, the results of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended for Strong Municipal Money
Market Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc., Strong Insured
Municipal Bond Fund, Inc., and Strong Municipal Bond Fund, Inc., and for the
period from October 1, 1993 (inception) to December 31, 1993 and the year ended
December 31, 1994 for Strong High-Yield Municipal Bond Fund, Inc., and the
financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
January 28, 1995
44
<PAGE> 47
DIRECTORS OF THE FUND
Richard S. Strong
Marvin E. Nevins
Willie D. Davis
OFFICERS OF THE FUND
Richard S. Strong
Chairman of the Board
John Dragisic
Vice Chairman
Lawrence A. Totsky
Vice President
Thomas P. Lemke
Vice President
Ann E. Oglanian
Secretary
Thomas M. Zoeller
Treasurer
Investment Advisor
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Distributor
Strong Funds Distributors, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Custodian
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201
Transfer Agent and Dividend-Disbursing Agent
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Auditors
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Legal Counsel
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
Ticker Symbols
SXFXX - The Strong Municipal Money Market Fund
STSMX - The Strong Short-Term Municipal Bond Fund
STIMX - The Strong Insured Municipal Bond Fund
SXFIX - The Strong Municipal Bond Fund
SHYLX - The Strong High Yield Municipal Bond Fund
<PAGE> 48
FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030.
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-368-3863.
This report must be preceded or accompanied by the prospectus for
the Strong Municipal Income Funds.
[STRONG LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
