<PAGE>
[LOGO]
THE STRONG
MUNICIPAL INCOME
FUNDS
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ANNUAL REPORT - AUGUST 31, 1999
The Strong High-Yield Municipal Bond Fund
The Strong Municipal Bond Fund
The Strong Short-Term High Yield Municipal Fund
The Strong Short-Term Municipal Bond Fund
[Photo of Strong Funds Headquarters in Background]
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Strong Investor,
A few months back, I sent a letter to some of our shareholders describing a
recent business trip to Indianapolis. I said that everywhere I went--every
highway traveled, every side street ventured down, bulldozers, cranes and
backhoes were hard at work.
Indianapolis, like most American cities we visit these days, is in the midst of
a spectacular building boom. A sea of yellow construction equipment is washing
over the nation's landscape.
It is the latest chapter in the unbelievable economic expansion that has blessed
this country--almost without pause--since 1982. The signs of prosperity are
everywhere:
- Highways jammed with people on their way to do business.
- "Help Wanted" signs in more store windows than most of us have ever seen at
one time.
- Consumer confidence is at an all-time high. Shopping carts are stuffed with
personal computers, printers, software and all sorts of related high-tech
equipment transforming the lives of Americans.
- Restaurants are packed almost every night of the week with people who have
money to spend.
As we make our way through the last quarter of the last year of the 20th
Century, we are fortunate to be living in one of the greatest booms in recorded
history. We should be grateful for the opportunity to live in these incredibly
prosperous times. We also ought to remember that nothing lasts forever.
The nation's economic engine is running near full capacity. After eight years of
continuous growth, the American economy is beginning to overheat. It's that
strain on the system that has Mr. Greenspan's Federal Reserve, which is
responsible for managing the economy and keeping inflation at reasonable levels,
obviously concerned.
Though the current batch of inflation indicators don't seem too threatening, the
Fed is wise to keep a sharp eye on the system. The economy can only grow so fast
and still remain healthy. If it gains too much speed--like a car heading down a
steep slope--it runs the risk of careening out of control. It's the Fed's job to
provide just the right mix of acceleration and braking.
The Federal Reserve has an awesome responsibility. While they want the economy
to move ahead, they can't let their hopes override common sense. The Fed has
become increasingly worried about excessive valuations in the stock market and
the possibility that, left unchecked, a financial bubble could occur.
Here at Strong, we are bullish on America's prospects for the 21st Century. Long
term, we believe interest rates are headed down. But, in the short term,
expectations of what the stock market and the U.S. economy can continue to
deliver seem inflated. For that reason, this could be a good time to complement
your portfolio's stock holdings with more conservative money market and
short-term bond funds.
/s/ Dick
<PAGE>
THE STRONG MUNICIPAL
INCOME FUNDS
---------------
ANNUAL REPORT - AUGUST 31, 1999
TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong High-Yield Municipal Bond Fund.............................2
The Strong Municipal Bond Fund........................................4
The Strong Short-Term High Yield Municipal Fund.......................6
The Strong Short-Term Municipal Bond Fund.............................8
BOND GLOSSARY.............................................................10
FINANCIAL INFORMATION
Schedules of Investments in Securities...............................11
Statements of Assets and Liabilities.................................27
Statements of Operations.............................................28
Statements of Changes in Net Assets..................................29
Notes to Financial Statements........................................31
FINANCIAL HIGHLIGHTS......................................................34
REPORT OF INDEPENDENT ACCOUNTANTS.........................................36
<PAGE>
THE STRONG HIGH-YIELD MUNICIPAL BOND FUND
-----------------------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
- --------------------------------------------------------------------------------
The high-yield municipal market's performance is more directly tied to supply
and demand than interest rates. Credit spreads in the municipal market have been
under pressure, most notably in the healthcare sector. Long-term non-rated
issues rose approximately 75 basis points during the period as compared to a 65
basis-point move in BBB-rated securities. As liquidity dried up, market
participants demanded a yield premium on non-rated paper. Although credit
quality continued to be good, reflecting continued economic strength, the market
was driven by demand. Thus, lower-rated issues were trading based on bids, not
indicative of credit quality. Although A-rated long-term municipal revenue bonds
have retreated from their high level of 106% for the year versus Treasury
securities, their current level of 96% is still cheap on a historical basis.
- --------------------------------------------------------------------------------
THE FUND APPEARS WELL POSITIONED TO TAKE ADVANTAGE OF INVESTING SOME OF ITS CASH
HOLDINGS AT HIGHER INTEREST RATES.
- --------------------------------------------------------------------------------
We continue to favor sectors that play into our "aging of America" theme.
Currently, we believe that attractive opportunities remain in the healthcare
sector. Although rating downgrades exceeded upgrades in this sector over the
past year, the market continues to "throw the baby out with the bath water" and
has penalized all hospitals. Although this sector may get a bit cheaper, it
represents value on an issue-by-issue basis, and sector holdings were taken up
to nearly 12% from 10% a year ago. No other major changes were made with regard
to sector holdings.
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- The Fund returned -1.05% for the 12-month period ended August 31, 1999. Its
30-day annualized yield was quoted at 5.97%. For investors in the 36% tax
bracket, this translates into a taxable equivalent yield of 9.33%.
- New-issue supply dropped over 20% on a year-over-year basis, but was not
enough to cause municipals to retreat from their attractive levels versus
treasury securities.
- Yields rose across the board as continued strength in the U.S. economy
forced the Federal Reserve to raise short-term interest rates twice.
- Yields in the healthcare sector continued to climb.
----------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 8-31-99
1-year -1.05%
3-year 7.48%
5-year 6.88%
Since Inception 6.42%
(on 10-1-93)
----------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO
STATISTICS
AS OF 8-31-99
30-day annualized yield(1) 5.97%
Average maturity(2) 14.1 years
Average quality rating(3) BB
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From time to time, the Fund's advisor has waived its management fee and/or
absorbed Fund expenses, which has resulted in higher returns.
(1) Yield is annualized for the 30 days ended 8-31-99, is historical, and will
vary.
(2) The Fund's average maturity includes the effect of futures and when-issued
securities.
(3) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned long-term ratings by the Advisor.
2
<PAGE>
We continue to remain well diversified geographically, with no state
accounting for more than 10% of holdings. The fund's duration rose slightly in
response to the rise in interest rates, ending the year at 9.04 years versus
8.86 years at 2/28/99. The fund increased its cash holdings by selling off
lower-coupon higher-rated bonds. These securities are most sensitive to interest
rate moves, and removing these securities from the portfolio boosted the overall
coupon rate in the fund.
Going forward, the fundamentals of the municipal market look promising. We
anticipate building cash levels up a bit more from current levels. We will
continue to keep an eye on economic activity, although the market appears to
have priced in further economic strength. Given the attractive levels of
municipals vs. Treasury bonds, the Fund appears well positioned to take
advantage of investing some of its cash holdings at higher interest rates. Cash
levels may be taken down if economic activity stabilizes, however, continued
caution appears to have little downside.
Thank you for your continued investment in the Strong High-Yield Municipal Bond
Fund.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 10-1-93 to 8-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG HIGH YIELD High Yield Municipal Lipper High Yield Municipal
MUNICIPAL BOND FUND Bond Index* Debt Funds Index*
-------------------- -------------------- ----------------------------
<S> <C> <C> <C>
9/93 $10,000 $10,000 $10,000
12/93 $10,266 $10,164 $10,141
12/94 $10,165 $ 9,608 $ 9,638
12/95 $11,650 $11,381 $11,245
<CAPTION>
THE STRONG HIGH YIELD High Yield Municipal Lipper High Yield Municipal
MUNICIPAL BOND FUND Bond Index* Debt Funds Index*
-------------------- -------------------- ----------------------------
<S> <C> <C> <C>
12/96 $12,247 $11,867 $11,674
12/97 $13,848 $13,164 $12,815
12/98 $14,684 $13,982 $13,528
12/99 $14,448 $14,102 $13,358
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
High-Yield Municipal Bond Index and the Lipper High Yield Municipal Debt Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG HIGH-YIELD MUNICIPAL BOND FUND SEEKS TO PROVIDE A HIGH LEVEL OF
TAX-FREE INCOME BY INVESTING IN LONGER-TERM, LOWER-RATED MUNICIPAL SECURITIES.
OUR INVESTMENT APPROACH BEGINS WITH A TOP-DOWN ASSESSMENT OF THE ECONOMY, WHICH
WE CONSTANTLY MONITOR AS THE FRAMEWORK FOR OUR PORTFOLIO. NEXT, WE CHOOSE
SECTORS WHICH APPEAR ATTRACTIVE BASED ON OUR ECONOMIC ASSESSMENT.
FINALLY, WE INDIVIDUALLY SELECT SECURITIES WITHIN ATTRACTIVE SECTORS.
SECURITY ANALYSIS DOES NOT STOP WHEN WE SELECT A HOLDING FOR THE PORTFOLIO. EACH
BOND WE OWN IS MONITORED CONTINUALLY. PORTFOLIO ADJUSTMENTS ARE MADE BASED ON
INDIVIDUAL BOND PERFORMANCE AND CHANGES IN THE ECONOMIC AND COMPETITIVE
LANDSCAPE.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - Municipal bonds continued to trade at the cheapest levels to Treasuries in
over a decade, but in the wake of widening corporate bond spreads, municipals
looked expensive. Municipal yields crept up to 12-month highs.
- - Net inflows into long-term Federal municipal bond funds were flat to negative.
As liquidity dried up, spreads continued to widen between AAA-rated securities
and lower- or non-rated issues. Dealers were reluctant to bid on lower-rated
issues, and were unwilling to stock bonds.
- - The rise in U.S. yields eventually should slow U.S. economic growth. Rate
hikes by the Federal Reserve may be successful in capping inflation.
- --------------------------------------------------------------------------------
* The High-Yield Municipal Bond Index is comprised of the Lehman Brothers Baa
Municipal Bond Index from inception through December 31, 1995, and the
Lehman Brothers High-Yield Municipal Bond Index from January 1, 1996 to
present. The Lehman Brothers Baa Municipal Bond Index is an unmanaged index
generally representative of municipal bonds rated Baa. The Lehman Brothers
High-Yield Municipal Bond Index, which was instituted on January 1, 1996,
is an unmanaged index generally representative of municipal bonds rated
below Baa. The Lipper High Yield Municipal Debt Funds Index is an
equally-weighted performance index of the largest qualifying funds in this
Lipper category. Source of the High-Yield Index data is Lehman Brothers.
Source of the Lipper index data is Lipper Inc.
3
<PAGE>
THE STRONG MUNICIPAL BOND FUND
------------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ Steven D. Harrop
Steven D. Harrop
Portfolio Manager
- --------------------------------------------------------------------------------
For Municipal Bonds, the past year has largely been defined by a bear market
over the last six months. Prices have declined, and yields have increased, for
all maturities of both taxable and tax-exempt securities. The yields on AAA
30-year municipal issues are now especially attractive relative to Treasuries,
having jumped to over 90% of the yield available on the 30-year Treasury Bond.
The Bond Buyer 40, an index of 40 AAA and AA long-term municipal issues, is
currently posting a yield well above that of the long Treasury Bond. At this
juncture, municipal bonds are offering their highest yields in three years.
- --------------------------------------------------------------------------------
AT THIS JUNCTURE, MUNICIPAL BONDS ARE OFFERING THEIR HIGHEST YIELDS IN THREE
YEARS.
- --------------------------------------------------------------------------------
That said, markets overall have been, and remain, quite volatile. At the heart
of the rise in interest rates have been two increases in the Discount Rate by
the Federal Reserve Board. The Federal Reserve boosted the Discount Rate from
4.75% to 5.00% on June 30, and again to 5.25% on August 24. With the August
increase, Federal Reserve Chairman Alan Greenspan voiced the hope that the 5.25%
level would be sufficient to slow the economy to a sustainable pace.
In this environment, we're continuing to use the investment strategies that have
helped this fund outperform in recent years. We've continued to emphasize credit
quality in the portfolio, though we also selectively use non-investment-grade
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - For the year ended August 31, 1999, the Fund posted a return of -0.97%. Its
30-day annualized yield was quoted at 5.46%. For investors in the 36% tax
bracket, this translates into a taxable equivalent yield of 8.53%.
- - The Fund's average maturity is 15.9 years; a bit longer than the 12.5 year
average maturity posted six months ago. The Fund's average quality rating
remains solidly at "A", with 23.5% of assets in AAA holdings and 14.4% of
assets in non-investment-grade issues.
- - Issue selection drove performance. A number of our holdings were pre-refunded
over the past six months as issuers looked to refinance at lower rates.
Currently, about 11% of the Fund's assets are escrowed to maturity or call
date, from the proceeds of refundings.
----------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 8-31-99
1-year -0.97%
3-year 6.83%
5-year 5.36%
10-year 6.81%
Since Inception 6.19%
(on 10-23-86)
----------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO STATISTICS
AS OF 8-31-99
30-day annualized yield(1) 5.46%
Average maturity(2) 15.9 years
Average quality rating(3) A
- --------------------------------------------------------------------------------
From time to time, the Fund's advisor has waived its management fee and/or
absorbed Fund expenses, which has resulted in higher returns.
(1) Yield is annualized for the 30 days ended 8-31-99, is historical, and will
vary.
(2) The Fund's average maturity includes the effect of futures and when-issued
securities.
(3) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned long-term ratings by the Advisor.
4
<PAGE>
securities to enhance yield potential. We strive to manage risk through our
rigorous securities research and careful issue selection. The Fund must limit
its non-investment-grade holdings to no more than 15% of assets.
Diversification helps to keep risk in check as well; we believe this is one
of the main attractions funds offer over investments in individual securities.
With 126 holdings in the Fund, if a single investment stumbles, it needn't bring
the whole portfolio down with it. At the same time, the Fund's positions are not
so diluted as to have little impact on performance.
In addition to the benefits of professional management/research and extensive
diversification, shareholders enjoy next-day liquidity and the ability to move
assets in or out of this Fund with a telephone call. We have made the
opportunity to invest in this Fund as profitable and convenient as we can.
Going forward, we will continue to emphasize quality in the portfolio as we
expect a volatile interest rate environment for the foreseeable future. Thank
you for your investment in the Strong Municipal Bond Fund. We're happy to help
you pursue your important financial goals.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 10-23-86 to 8-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG MUNICIPAL Lehman Brothers Lipper General Municipal
BOND FUND Municipal Bond Index* Debt Funds Index*
-------------------- -------------------- ----------------------------
<S> <C> <C> <C>
9/86 $10,000 $10,000 $10,000
12/86 $10,129 $10,216 $10,252
12/88 $10,705 $11,423 $11,370
12/90 $11,995 $13,578 $13,252
12/92 $15,256 $16,669 $16,170
<CAPTION>
THE STRONG MUNICIPAL Lehman Brothers Lipper General Municipal
BOND FUND Municipal Bond Index* Debt Funds Index*
-------------------- -------------------- ----------------------------
<S> <C> <C> <C>
12/94 $16,275 $17,642 $17,082
12/96 $18,569 $21,640 $20,757
12/98 $22,211 $25,160 $23,986
12/99 $21,836 $24,825 $23,396
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Lehman Brothers Municipal Bond Index and the Lipper General Municipal Debt Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you may have a gain
or loss when you sell shares. To equalize the time periods, the indexes'
performance was prorated for the month of October 1986.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG MUNICIPAL BOND FUND SEEKS TOTAL RETURN BY INVESTING FOR A HIGH LEVEL
OF FEDERALLY TAX-EXEMPT INCOME. BECAUSE WE BELIEVE THAT INVESTORS IN A MUNICIPAL
BOND FUND ARE SEEKING A STEADY STREAM OF TAX-EXEMPT INCOME, WE STRIVE TO
MAXIMIZE THIS INCOME. WE ALSO WORK TO KEEP SHARE-PRICE FLUCTUATIONS IN CHECK BY
KEEPING THE FUND'S SENSITIVITY TO INTEREST-RATE CHANGES, ITS CREDIT QUALITY, AND
ITS DIVERSIFICATION AT REASONABLE LEVELS.
OUR INVESTMENT APPROACH FOCUSES ON SELECTION OF INDIVIDUAL SECURITIES,
DRIVEN BY BOND-BY-BOND RESEARCH. MACROECONOMIC ANALYSIS ALSO PLAYS AN IMPORTANT
ROLE IN SHAPING THE PORTFOLIO.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - With the AAA 30-year municipal bond yielding 5.52%, compared with the AAA
30-year Treasury's taxable yield of 6.06%, long-term municipal investments are
attractive to investors in most tax brackets.
- - Interest rates generally increased over the period. The AAA 30-year municipal
bond posted an average yield of 5.01% over the 12-month period ended
August 31, 1999, versus 4.84% for the 6-month period ended February 28, 1999.
- - The Lehman Brothers Municipal Bond Index returned 0.50% for the year ended
August 31, 1999, while the Lipper General Municipal Debt Funds Index returned
-1.16% for the same period.
- --------------------------------------------------------------------------------
* The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of investment-grade, tax-exempt bonds. The Lipper General
Municipal Debt Funds Index is an equally-weighted performance index of the
largest qualifying funds in this Lipper category. Source of the Lehman index
data is Standard & Poor's Micropal. Source of the Lipper index data is
Lipper Inc.
5
<PAGE>
THE STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
-----------------------------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
- --------------------------------------------------------------------------------
Given the Fund's short-term focus, a small rise in interest rates normally would
not affect performance. However, we saw a sharp rise in rates over the year in
response to continued strength in the economy. As such, short-term interest
rates rose more than long-term rates as the market priced in successive rate
hikes by the Federal Reserve. Three-year BBB yields rose about 70 basis points
in the last half year, while 30-year BBB yields rose approximately the same
amount in that time period.
As liquidity dried up, market participants demanded a yield premium on non-rated
paper. Credit quality continued to be good, reflecting economic strength, but
demand drove the market. Although bids were better on the short end due to
retail demand, shorter issues were not trading on credit fundamentals, but
rather on investor demand. A-rated three-year municipal revenue bonds rebounded
off cheap levels vs. Treasury bonds thanks to strong retail demand, and
currently equal 76% vs. a high of 82% of Treasuries.
- --------------------------------------------------------------------------------
GOING FORWARD, THE FUNDAMENTALS OF THE MUNICIPAL MARKET LOOK PROMISING.
- --------------------------------------------------------------------------------
We continue to favor sectors that play into our "aging of America" theme.
Currently, we believe opportunities remain in the healthcare sector. We added to
our healthcare position, taking our healthcare sector to 22%, up from 15% at
year end. We find rural hospitals attractive since many have a monopoly in their
area and tend to offer "bread and butter" services. For more
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - The Fund returned 3.18% for the 12-month period ended August 31, 1999. Its
30-day annualized yield was quoted at 5.04%. For investors in the 36% tax
bracket, this translates into a taxable equivalent yield of 7.88%.
- - New issue supply dropped over 20% on a year-over-year basis. This alone,
however, was not enough to cause municipals to retreat from their attractive
levels vs. Treasury securities.
- - Yields rose as continued strength in the U.S. economy forced the Federal
Reserve to raise short-term interest rates twice.
- - Yields in the healthcare sector continued to climb.
----------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURN
AS OF 8-31-99
1-year 3.18%
Since Inception 4.96%
(on 11-30-97)
----------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO
STATISTICS
AS OF 8-31-99
30-day annualized yield(1) 5.04%
Average maturity(2) 2.6 years
Average quality rating(3) BB
- --------------------------------------------------------------------------------
(1) Yield is annualized for the 30 days ended 8-31-99, is historical, and will
vary. The Fund's Advisor has waived its management fee of 0.13%. Otherwise,
the current yield would have been 4.91% and returns would have been lower.
(2) The Fund's average maturity includes the effect of when-issued securities.
(3) For the purposes of this average rating, the Fund's short-term debt
obligations have been assigned long-term ratings by the Advisor.
6
<PAGE>
complex procedures, they have referral agreements with larger facilities in
major metropolitan areas. Although rating downgrades exceeded upgrades in this
sector over the past year, the market continued to penalize all hospitals. We
also made a sector change in the Industrial Development sector, which rose to
23% from 21% at year end. Purchases included utility providers and paper
manufacturers. We purchased several issues backed by corporations in the paper
industry, which appear to be cyclically rebounding as mergers realize economies
of scale. Given the rapid consolidation in the paper industry, prospects look
good.
Although we put money to work over the past quarter, the rise in short term
rates may not be over and opportunities to buy at cheaper levels may lie ahead.
We remain diversified geographically, with no state accounting for more than 10%
of holdings. Going forward, the fundamentals of the municipal market look
promising. Given the attractive levels of municipals vs. Treasury bonds, the
Fund appears well positioned to take advantage of investing some of its cash at
higher rates.
Thank you for your continued investment in the Strong Short-Term High Yield
Municipal Bond Fund.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG SHORT-TERM HIGH YIELD MUNICIPAL BOND FUND SEEKS TO PROVIDE A HIGH
LEVEL OF TAX-FREE INCOME BY INVESTING IN SHORT-TERM, LOWER RATED MUNICIPAL
SECURITIES. OUR INVESTMENT APPROACH BEGINS WITH A TOP-DOWN ASSESSMENT OF THE
ECONOMY, WHICH WE CONSTANTLY MONITOR AS THE FRAMEWORK FOR OUR PORTFOLIO. NEXT,
WE CHOOSE SECTORS WHICH APPEAR ATTRACTIVE BASED ON OUR ECONOMIC ASSESSMENT.
FINALLY, WE INDIVIDUALLY SELECT SECURITIES WITHIN ATTRACTIVE SECTORS. SECURITY
ANALYSIS DOES NOT STOP WHEN WE SELECT A HOLDING FOR THE PORTFOLIO. EACH BOND WE
OWN IS MONITORED CONTINUALLY.
PORTFOLIO ADJUSTMENTS ARE MADE BASED ON INDIVIDUAL BOND PERFORMANCE AND
CHANGES IN THE ECONOMIC AND COMPETITIVE LANDSCAPE.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - Municipal bonds look attractive vs. Treasuries, continuing to trade at the
cheapest levels to Treasuries in over a decade. But in the wake of widening
corporate bond spreads municipals look expensive. Municipal yields crept
up to 12-month highs.
- - Net inflows into municipal bonds were flat to negative. As liquidity dried
up, spreads continued to widen between AAA securities and lower- or non-rated
issues. Dealers were reluctant to bid on lower-rated issues, and unwilling to
stock bonds.
- - The rise in yields eventually should slow U.S. economic growth, and hikes in
short-term interest rates may be successful in capping inflation.
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 11-30-97 to 8-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG SHORT-TERM Lehman Brothers 1-3 Year Non-Investment Lipper High Yield Municipal
HIGH YIELD MUNICIPAL FUND Grade Municipal Bond Index* Debt Funds Index*
------------------------- -------------------------------------- ---------------------------
<S> <C> <C> <C>
11/97 $10,000 $10,000 $10,000
12/97 $10,082 $10,052 $10,159
3/98 $10,287 $10,190 $10,299
6/98 $10,458 $10,326 $10,463
<CAPTION>
THE STRONG SHORT-TERM Lehman Brothers 1-3 Year Non-Investment Lipper High Yield Municipal
HIGH YIELD MUNICIPAL FUND Grade Municipal Bond Index* Debt Funds Index*
------------------------- -------------------------------------- ---------------------------
<S> <C> <C> <C>
9/98 $10,602 $10,459 $10,700
12/98 $10,699 $10,599 $10,724
3/99 $10,814 $10,735 $10,811
6/99 $10,849 $10,818 $10,691
8/99 $10,883 $10,873 $10,588
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers 1-3 Year Non-Investment Grade Municipal Bond Index and the
Lipper High Yield Municipal Debt Funds Index. Results include the reinvestment
of all dividends and capital gains distributions. Performance is historical and
does not represent future results. Investment returns and principal value will
vary, and you may have a gain or loss when you sell shares.
- --------------------------------------------------------------------------------
* The Lehman Brothers 1-3 Year Non-Investment Grade Municipal Bond Index is an
unmanaged index generally representative of municipal bonds rated below Baa
with maturities of one to three years. The Lipper High Yield Municipal Debt
Funds Index is an equally-weighted performance index of the largest
qualifying funds in this Lipper category. Source of the Lehman index data is
Lehman Brothers. Source of the Lipper index data is Lipper Inc.
7
<PAGE>
THE STRONG SHORT-TERM MUNICIPAL BOND FUND
-----------------------------------------
PERSPECTIVES FROM THE MANAGER
/s/ Steven D. Harrop
Steven D. Harrop
Portfolio Manager
- --------------------------------------------------------------------------------
Unlike longer-term municipal markets, the markets for shorter-term municipal
issues have not experienced the unusual convergence of tax-exempt municipal
yields with taxable bond yields. (Usually, the yield on a municipal issue is
lower, reflecting the federally tax-exempt status of the income they pay.) A
more normal relationship between the two has prevailed in shorter-maturity
issues--though it's worth reminding investors of the significant impact munis'
federally tax-exempt status can have on the yield that actually stays in your
pocket. At this writing, the yield on 5-year municipal bonds across the sector
spectrum average roughly 75% of the yield on 5-year Treasury securities.
That said, markets overall have been, and remain, quite volatile. At the heart
of the rise in interest rates have been two increases in the Discount Rate by
the Federal Reserve Board. The Federal Reserve boosted the Discount Rate from
4.75% to 5.00% on June 30, and again to 5.25% on August 24. With the August
increase, Chairman Greenspan voiced the hope that the 5.25% level would be
sufficient to slow the economy to a sustainable pace.
- --------------------------------------------------------------------------------
IN THIS ENVIRONMENT, WE'RE CONTINUING TO USE THE INVESTMENT STRATEGIES THAT HAVE
HELPED THIS FUND TO OUTPERFORM IN RECENT YEARS.
- --------------------------------------------------------------------------------
In this environment, we're continuing to use the investment strategies that have
helped this fund to outperform in recent years. We've continued to emphasize
credit quality in the portfolio, though we also selectively use
non-investment-
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - The Fund returned 2.79% for the 12-month period ended August 31, 1999. Its
30-day annualized yield was quoted at 4.55%. For investors in the 36% tax
bracket, this translates into a taxable equivalent yield of 7.11%.
- - The Fund's average portfolio maturity, at 2.7 years, is very near the maximum
level permitted. The Fund's average quality rating remains solidly at "A".
- - Vigorous bond-by-bond research and painstaking issue selection continue to
drive our investment process.
----------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 8-31-99
1-year 2.79%
3-year 5.27%
5-year 4.36%
Since Inception 4.65%
(on 12-31-91)
----------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO
STATISTICS
AS OF 8-31-99
30-day annualized yield(1) 4.55%
Average maturity(2) 2.74 years
Average quality rating(3) A
- --------------------------------------------------------------------------------
From time to time, the Fund's advisor has waived its management fee and/or
absorbed Fund expenses, which has resulted in higher returns.
(1) Yield is annualized for the 30 days ended 8-31-99, is historical, and will
vary.
(2) The Fund's average maturity includes the effect of when-issued securities.
(3) For the purposes of this average rating, the Fund's short-term debt
obligations have been assigned long-term ratings by the Advisor.
8
<PAGE>
grade securities to enhance yield potential. We strive to manage risk through
our rigorous securities research and careful issue selection. The Fund must
limit its non-investment grade holdings to no more than 15% of assets.
Diversification helps to keep risk in check as well; we believe that this is one
of the main attractions funds offer over investments in individual securities.
With 140 holdings in the Fund, if a single investment stumbles, it needn't bring
the whole portfolio down with it. At the same time, the Fund's positions are not
so diluted as to have little impact on performance.
In addition to the benefits of professional management/research and extensive
diversification, the Fund shareholder enjoys next-day liquidity and the ability
to move assets in or out of the Fund with a telephone call. We have made the
opportunity to invest in this fund as profitable and convenient as we can.
Going forward, we will continue to emphasize quality in the portfolio as we
expect a volatile interest rate environment for the foreseeable future. Thank
you for your investment in the Strong Short-Term Municipal Bond Fund.
We're happy to help you pursue your important financial goals.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 12-31-91 to 8-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG SHORT-TERM Lehman Brothers Municipal Lipper Short Municipal
MUNICIPAL BOND FUND 3 Year Bond Index* Debt Average*
--------------------- ------------------------- ----------------------
<S> <C> <C> <C>
12/91 $10,000 $10,000 $10,000
12/92 $10,716 $10,643 $10,678
12/93 $11,440 $11,305 $11,130
12/94 $11,225 $11,382 $11,167
<CAPTION>
THE STRONG SHORT-TERM Lehman Brothers Municipal Lipper Short Municipal
MUNICIPAL BOND FUND 3 Year Bond Index* Debt Average*
--------------------- ------------------------- ----------------------
<S> <C> <C> <C>
12/95 $11,860 $12,391 $11,988
12/96 $12,438 $12,941 $12,421
12/97 $13,300 $13,650 $12,999
12/98 $14,039 $14,361 $13,589
12/99 $14,166 $14,546 $13,732
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers Municipal 3 Year Bond Index and the Lipper Short Municipal Debt
Average. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value will vary, and you may have a gain or
loss when you sell shares.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG SHORT-TERM MUNICIPAL BOND FUND SEEKS TOTAL RETURN BY INVESTING FOR A
HIGH LEVEL OF FEDERALLY TAX-EXEMPT CURRENT INCOME WITH A LOW DEGREE OF
SHARE-PRICE FLUCTUATION. BECAUSE WE BELIEVE THAT INVESTORS IN A MUNICIPAL BOND
FUND ARE SEEKING A STEADY STREAM OF TAX-EXEMPT INCOME, WE STRIVE TO MAXIMIZE
THIS INCOME WITHIN THE BOUNDS OF THE FUND'S MATURITY, QUALITY, AND
DIVERSIFICATION GOALS. THE FUND MAINTAINS AN AVERAGE PORTFOLIO MATURITY OF THREE
YEARS OR LESS.
OUR INVESTMENT APPROACH FOCUSES ON SELECTION OF INDIVIDUAL SECURITIES,
DRIVEN BY BOND-BY-BOND RESEARCH. MACROECONOMIC ANALYSIS ALSO PLAYS AN IMPORTANT
ROLE IN SHAPING THE PORTFOLIO.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - Interest rates generally increased over the period, producing a decline in
securities prices. While the decline in prices was greatest in the longer-term
issues, it affected all points along the yield curve.
- - The Lehman Brothers Municipal 3-Year Bond Index returned 2.92% for the year
ended August 31, 1999, while the Lipper Short Municipal Debt Average returned
2.50% over the same period.
- --------------------------------------------------------------------------------
* The Lehman Brothers Municipal 3 Year Bond Index is an unmanaged index
generally representative of three-year, tax-exempt bonds. The Lipper Short
Municipal Debt Average represents funds that invest in municipal debt issues
with dollar-weighted average maturities of less than three years. Source of
the Lehman index data is Standard & Poor's Micropal. Source of the Lipper
index data is Lipper Inc.
9
<PAGE>
- --------------------------------------------------------------------------------
BOND
GLOSSARY
BOND QUALITY RATINGS -- There are services that analyze the financial condition
of a bond's issuer and then assign it a rating. The best-known rating agencies
are Standard and Poors and Moody's. The highest-quality bonds are rated AAA
(S&P) or Aaa (Moody's.) The scale descends to AA, A, then BBB and so on, down to
D. Bonds with a rating of BBB or higher are considered investment-grade. Bonds
rated CC and below are considered "junk bonds." Typically, the lower a bond's
rating, the higher yield it must pay in order to compensate the bond-holder for
the added risk.
MATURITY -- Like a loan, a bond must be paid off on a certain date. A bond's
maturity is the time remaining until it is paid off. Bonds typically mature in a
range from overnight to 30 years from now. Typically, bonds with longer
maturities will have higher yields and larger price changes in reaction to
interest rate changes. In rare situations, shorter-term bonds will have higher
yields; this is known as an inverted yield curve (see definition that follows.)
DURATION -- Duration is similar to maturity, but also accounts for the
semi-annual interest payments made by most bonds. Duration is a useful tool for
determining a bond or a bond fund's sensitivity to interest rate changes. The
higher the duration, the more a bond's price will fluctuate when interest rates
change.
TREASURY SPREAD -- The Treasury spread is the difference in yield between a
Treasury bond (issued by the federal government) and a bond with an equal
maturity, but from another category, such as a corporate bond. This calculation
is used to measure the prices of corporate bonds, mortgage-backed securities and
other non-government issues relative to Treasuries. Higher spreads occur in
uncertain times when investors buy Treasuries for their safety and sell other
types of bonds.
YIELD -- Yield is the income your investment is generating. It is calculated by
taking the income paid by a bond in a given period of time, often 30 days,
annualizing it and stating it as a percentage of the money invested.
YIELD CURVE -- The yield curve is a graph that plots the yields of Treasury
bonds against their maturities. Under normal circumstances, this line will slope
upward, reflecting longer-maturity bonds having higher yields. In rare
circumstances, such as in a time of deflation, the yield curve may slope
downward, or "invert." The steepness of the yield curve shifts depending on
economic trends and outlooks. Properly positioned, a bond investor can profit
from these shifts.
10
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS 95.1%
Alabama 2.5%
West Jefferson, Alabama Amusement and Public
Park Authority First Mortgage Revenue -
Visionland Alabama Project:
6.00%, Due 2/01/08 $ 3,445,000 $ 3,354,569
8.00%, Due 12/01/26 (Pre-Refunding at $102 on
12/01/06) 10,305,000 12,481,931
-----------
15,836,500
Alaska 1.2%
Juneau, Alaska City and Borough Nonrecourse
Revenue - St. Ann's Care Center Project, 6.875%,
Due 12/01/25 4,000,000 3,950,000
Seward, Alaska Revenue - Alaska Sealife Center
Project, 7.65%, Due 10/01/16 3,500,000 3,631,250
-----------
7,581,250
Arizona 2.2%
Maricopa County, Arizona IDA Senior Living
Facilities Revenue - Christian Care Mesa, Inc.
Project, 7.875%, Due 4/01/27 1,745,000 1,832,250
Navajo County, Arizona IDA IDR - Stone Container
Corporation Project:
7.20%, Due 6/01/27 5,675,000 6,065,156
7.40%, Due 4/01/26 5,500,000 5,912,500
-----------
13,809,906
Arkansas 1.5%
Little Rock, Arkansas Hotel and Restaurant Gross
Receipts Tax Revenue, 7.375%, Due 8/01/15 1,500,000 1,764,375
Northwest Arkansas Regional Airport Authority
Airport Revenue, 7.625%, Due 2/01/27 7,175,000 7,874,563
-----------
9,638,938
California 4.8%
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue:
Zero %, Due 1/01/17 5,000,000 1,906,250
Zero %, Due 1/01/26 7,000,000 1,540,000
Zero %, Due 1/15/26 2,000,000 1,080,000
Zero %, Due 1/01/28 24,000,000 4,710,000
Zero %, Due 1/01/29 8,335,000 1,541,975
Zero %, Due 1/15/31 4,000,000 555,000
Zero %, Due 1/15/34 4,500,000 517,500
Zero %, Due 1/15/36 4,000,000 405,000
Millbrae, California Residential Facilities Revenue -
Magnolia of Millbrae Project, 7.375%, Due 9/01/27 6,000,000 6,232,500
San Francisco, California Redevelopment Agency
Residential Facilities Revenue - Coventry Park
Project, 8.50%, Due 12/01/26 5,000,000 5,612,500
San Joaquin Hills, California Transportation
Corridor Agency Toll Road Revenue Refunding,
Zero %, Due 1/15/21 (Rate Reset Effective 1/15/07) 10,000,000 6,525,000
-----------
30,625,725
Colorado 3.2%
Arapahoe County, Colorado E-470 Public Highway
Authority Capital Appreciation:
Zero %, Due 9/01/18 (c) 5,000,000 1,675,000
Zero %, Due 9/01/19 3,000,000 952,500
Zero %, Due 9/01/22 2,000,000 532,500
Zero %, Due 9/01/24 3,000,000 705,000
Arapahoe County, Colorado E-470 Public Highway
Authority Senior Revenue, 4.75%, Due 9/01/23 (c) 2,000,000 1,710,000
Bachelor Gulch, Colorado Metropolitan District GO,
7.00%, Due 12/01/15 (c) 1,100,000 1,126,125
Black Hawk, Colorado Device Tax Revenue,
5.625%, Due 12/01/21 1,500,000 1,432,500
Colorado Health Facilities Authority Hospital
Revenue - Steamboat Springs Health Care
Association Project, 5.75%, Due 9/15/22 5,000,000 4,531,250
Colorado Health Facilities Authority Revenue -
Rocky Mountain Adventist Project, 6.625%,
Due 2/01/13 1,550,000 1,526,750
Denver, Colorado Urban Renewal Authority Tax
Increment Revenue - Pavilions Project, 7.75%,
Due 9/01/16 1,760,000 1,905,200
Eaglebend Affordable Housing Corporation
Multi-Family Housing Project Revenue
Refunding, 6.45%, Due 7/01/21 (c) 1,000,000 1,026,250
Englewood, Colorado MFHR Refunding - Marks
Apartments Project, 6.65%, Due 12/01/26 3,000,000 3,131,250
-----------
20,254,325
Connecticut 1.5%
Connecticut Health and EFA Revenue - New
Opportunities for Waterbury, Inc. Project, 6.75%,
Due 7/01/28 3,895,000 3,968,031
Mashantucket Western Pequot Tribe Subordinated
Special Revenue:
Zero %, Due 9/01/15 2,000,000 737,500
Zero %, Due 9/01/16 2,000,000 680,000
Zero %, Due 9/01/18 1,100,000 324,500
5.50%, Due 9/01/28 2,200,000 2,010,250
6.40%, Due 9/01/11 1,710,000 1,821,150
-----------
9,541,431
Florida 4.5%
Arbor Greene Community Development District
Special Assessment Revenue:
5.75%, Due 5/01/06 865,000 855,269
7.00%, Due 5/01/03 300,000 305,625
Cory Lakes, Florida Community Development
District Special Assessment Revenue, 8.375%,
Due 5/01/17 3,175,000 3,405,188
Florida Housing Finance Agency MFHR
Refunding - Lake Side Villas and Golf Villas at
Sabal Palm Project:
6.75%, Due 12/01/10 1,000,000 963,750
7.00%, Due 12/01/16 2,600,000 2,483,000
7.25%, Due 12/01/25 4,400,000 4,180,000
Grand Haven Community Development District
Special Assessment Revenue, 6.90%, Due 5/01/19 1,000,000 1,035,000
Largo, Florida Sun Coast Health System Revenue -
Sun Coast Hospital Issue, 6.30%, Due 3/01/20 8,045,000 7,773,481
Palm Beach County, Florida Solid Waste IDR -
Okeelanta Power LP Project:
6.375%, Due 2/15/07 (Purchased in Default on
1/28/98) 1,300,000 845,000
6.70%, Due 2/15/15 (Purchased in Default on
2/04/98) 500,000 325,000
Palm Beach County, Florida Solid Waste IDR -
Osceola Power LP Project, 6.85%, Due 1/01/14
(Purchased in Default 1/13/98 - 2/04/98) 450,000 292,500
Pinellas County, Florida EFA Revenue - College
Harbor Project, 8.50%, Due 12/01/28 5,185,000 5,385,919
Polk County, Florida HFA Subordinated Revenue -
Lake Wales Gardens Project, Zero %, Due 4/01/20 4,715,000 772,081
-----------
28,621,813
Georgia 4.9%
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Evergreen Village Estates
Project, 6.625%, Due 5/01/28 605,000 605,000
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Franciscan Club Apartments
Projects, 7.75%, Due 4/01/22 (Defaulted Effective
10/01/96) 4,840,000 2,758,800
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Park Place Apartments
Project, 6.75%, Due 3/01/31 6,000,000 5,910,000
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dekalb County, Georgia Residential Care Facilities
for the Elderly Authority First Lien Revenue -
King's Bridge Retirement Center, Inc. Project:
8.00%, Due 7/01/06 $ 650,000 $ 718,250
8.15%, Due 7/01/16 2,380,000 2,644,775
8.25%, Due 7/01/26 5,250,000 5,788,125
Fulton County, Georgia Housing Authority
MFHR - Washington Court Project:
6.40%, Due 2/01/19 775,000 743,031
6.50%, Due 2/01/28 1,750,000 1,664,688
Fulton County, Georgia Residential Care Facilities
Revenue - Residential Housing Authority
Assisted Living Project:
6.90%, Due 7/01/19 1,640,000 1,605,150
7.00%, Due 7/01/29 5,360,000 5,226,000
Savannah, Georgia EDA IDR - Stone Container
Corporation Project, 7.40%, Due 4/01/26 3,500,000 3,762,500
-----------
31,426,319
Illinois 6.1%
Chicago, Illinois O'Hare International Airport
Special Facility Revenue Refunding -
International Terminal Project, 5.50%,
Due 1/01/15 (b) 7,000,000 6,833,750
Godfrey, Illinois Revenue - United Methodist
Village Project, 5.875%, Due 11/15/29 5,000,000 4,468,750
Illinois DFA Hospital Revenue - Adventist Health
System/Sunbelt Obligation Project, 5.50%,
Due 11/15/20 2,000,000 1,825,000
Illinois HDA MFHR, 5.00%, Due 7/01/25 3,750,000 2,985,938
Metropolitan Pier and Exposition Authority
Hospitality Facilities Revenue - McCormick
Place Convention Project, 7.00%, Due 7/01/26 6,000,000 6,757,500
Riverdale, Illinois Environmental Improvement
Revenue - Acme Metals, Inc. Project:
7.90%, Due 4/01/24 (Defaulted Effective 9/29/98) 2,500,000 2,250,000
7.95%, Due 4/01/25 (Defaulted Effective 9/29/98) 5,000,000 4,500,000
Robbins, Illinois Resource Recovery Revenue:
8.375%, Due 10/15/10 4,000,000 2,400,000
8.375%, Due 10/15/16 11,250,000 6,750,000
-----------
38,770,938
Indiana 4.0%
Indiana Health Facility Financing Authority
Revenue - Hamilton Communities, Inc. Project,
6.50%, Due 1/01/30 18,200,000 17,267,250
Indianapolis, Indiana EDR MFHR - Post Pointe
Apartments Project:
8.30%, Due 3/01/06 480,000 488,400
8.40%, Due 3/01/11 710,000 725,975
8.75%, Due 3/01/27 6,540,000 6,703,500
-----------
25,185,125
Iowa 4.0%
Asbury, Iowa Elderly Care and Retirement
Facilities Revenue - Stonehill Project, 6.00%,
Due 9/01/28 2,905,000 2,679,862
Cedar Rapids, Iowa First Mortgage Revenue -
Cottage Grove Place Project:
5.875%, Due 7/01/28 7,635,000 7,100,550
9.00%, Due 7/01/25 (Pre-Refunding at $102 on
7/01/05) 6,000,000 7,365,000
Iowa Finance Authority Elder Care Facility First
Mortgage Revenue - Amity Fellowserve-Iowa,
Inc. Project, 6.00%, Due 10/01/28 8,820,000 8,367,975
-----------
25,513,387
Kentucky 2.0%
Kuttawa, Kentucky First Mortgage Revenue -
GF/Kentucky, Inc. Project, 6.75%, Due 3/01/29 2,900,000 2,736,875
Morgantown, Kentucky Solid Waste Disposal
Facilities Revenue - IMCO Recycling, Inc. Project:
6.00%, Due 5/01/23 4,100,000 3,854,000
7.65%, Due 5/01/16 5,740,000 6,199,200
-----------
12,790,075
Louisiana 2.5%
Iberia Parish, Louisiana Hospital Service District
Number 1 Revenue, 8.00%, Due 5/26/16 2,100,000 2,136,750
Louisiana Health and Education Authority
Revenue Refunding - Lambeth House, Inc. Project:
6.00%, Due 1/01/14 500,000 477,500
6.15%, Due 1/01/18 1,885,000 1,811,956
6.20%, Due 1/01/28 2,750,000 2,622,813
Louisiana Public Facilities Authority Revenue -
Progressive Healthcare Providers, Inc.
Developmental Centers Project, 6.375%,
Due 10/01/28 3,350,000 3,086,188
Louisiana Public Facilities Authority Senior Lien
Revenue - Progressive Healthcare Providers, Inc.
Developmental Centers Project, 8.00%,
Due 1/01/13 (Pre-Refunding at $103 on 1/01/02) 5,175,000 5,640,750
-----------
15,775,957
Massachusetts 1.9%
Massachusetts Health and EFA Revenue - Saints
Memorial Medical Center Project, 5.75%,
Due 10/01/06 1,885,000 1,814,312
Massachusetts Industrial Finance Agency
Assisted Living Facility Revenue - TNG Marina
Bay LLC Project, 7.50%, Due 12/01/27 4,220,000 4,409,900
Massachusetts Industrial Finance Agency Health
Care Facility Revenue - Metro Health Foundation
of Massachusetts, Inc. Project, 6.75%,
Due 12/01/27 3,000,000 3,007,500
Massachusetts Industrial Finance Agency
Revenue - Institute for Developmental Disabilities
Project, 9.25%, Due 6/01/09 2,810,000 2,859,175
-----------
12,090,887
Michigan 1.4%
Michigan Strategic Fund Resource Recovery
Limited Obligation Revenue - Central Wayne
Energy Recovery LP Project:
6.90%, Due 7/01/19 2,200,000 2,128,500
7.00%, Due 7/01/27 6,800,000 6,553,500
-----------
8,682,000
Minnesota 2.6%
Rochester, Minnesota MFHR - Wedum Shorewood
Campus Project, 6.60%, Due 6/01/36 5,350,000 5,457,000
St. Paul, Minnesota Housing and Redevelopment
Authority Hospital Facility Revenue - HealthEast
Project:
5.50%, Due 11/01/09 1,580,000 1,489,150
Series A, 6.625%, Due 11/01/17 3,895,000 3,914,475
Series B, 6.625%, Due 11/01/17 3,410,000 3,427,050
Washington County, Minnesota Housing and
Redevelopment Authority Hospital Revenue -
HealthEast Project, 5.375%, Due 11/15/18 2,500,000 2,168,750
-----------
16,456,425
Mississippi 0.4%
Mississippi Development Bank Special Obligation
Refunding - Diamond Lakes Utilities and
Improvements District Project, 6.25%,
Due 12/01/17 2,500,000 2,437,500
Missouri 1.3%
Saline County, Missouri IDA Health Facilities
Revenue - John Fitzgibbon Memorial Hospital,
Inc. Project, 6.50%, Due 12/01/28 5,465,000 5,061,956
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Springfield, Missouri Land Clearance Redevelopment
Authority Industrial Revenue Refunding -
University Plaza Redevelopment Corporation
Project, 6.90%, Due 10/01/16 $ 3,440,000 $ 3,440,000
-----------
8,501,956
Montana 0.1%
Crow Finance Authority Tribal Purpose Revenue,
5.70%, Due 10/01/27 1,000,000 971,250
New Hampshire 0.4%
New Hampshire Business Finance Authority
Revenue Air Cargo Facility - Pease LLC Project,
6.75%, Due 4/01/24 2,500,000 2,384,375
New Jersey 4.3%
Camden County, New Jersey Improvement
Authority Lease Revenue - Kaighn Port Marine
Terminal A Project, 8.00%, Due 6/01/27 4,890,000 5,342,325
New Jersey EDA Assisted Living Revenue -
Meridian Assisted Living Project, 6.75%,
Due 8/01/30 5,000,000 4,818,750
New Jersey EDA EDR - Kapkowski Road Landfill Reclamation Improvement District
Project:
Zero %, Due 4/01/04 160,000 121,000
Zero %, Due 4/01/05 310,000 219,325
Zero %, Due 4/01/06 1,020,000 675,750
Zero %, Due 4/01/07 1,025,000 635,500
Zero %, Due 4/01/09 1,020,000 553,350
6.375%, Due 4/01/31 15,000,000 15,018,750
-----------
27,384,750
New York 0.9%
Huntington, New York Housing Authority Senior
Housing Facility Revenue - Gurwin Jewish
Senior Residences Project:
6.00%, Due 5/01/29 1,000,000 953,750
6.00%, Due 5/01/39 2,000,000 1,885,000
Rockland County, New York Industrial Development
Agency Civic Facility Revenue - Dominican
College Project, 6.25%, Due 5/01/28 2,775,000 2,611,969
-----------
5,450,719
North Carolina 3.2%
Fletcher, North Carolina First Mortgage Housing
Revenue - Avery's View Retirement Facilities,
Inc. Project, 7.00%, Due 3/01/28 15,000,000 14,887,500
Macon County, North Carolina HFC Revenue -
Chestnut Hill Highlands Project, 8.50%,
Due 7/01/27 (Defaulted Effective 8/09/99) 8,145,000 5,294,250
-----------
20,181,750
North Dakota 0.6%
Ward County, North Dakota Health Care Facility
Revenue - St. Joseph's Hospital Corporation
Project, 8.875%, Due 11/15/24 (Pre-Refunding at
$101 on 11/15/04) 3,210,000 3,868,050
Ohio 3.8%
Akron, Ohio COP - Akron Municipal Baseball
Stadium Project, Zero %, Due 12/01/16 (Rate
Reset Effective 12/01/01) 1,500,000 1,430,625
Cleveland, Ohio Airport Special Revenue
Refunding - Continental Airlines, Inc. Project:
5.50%, Due 12/01/08 (b) 9,045,000 8,694,506
5.70%, Due 12/01/19 (b) 7,000,000 6,510,000
Cuyahoga County, Ohio MFHR - The Park Lane
Apartments Project:
7.80%, Due 7/01/07 470,000 474,112
7.90%, Due 7/01/12 680,000 686,800
8.25%, Due 7/01/28 1,930,000 1,949,300
Medina County, Ohio EDR MFHR - Camelot Place,
Ltd. Project, 8.375%, Due 10/01/23 400,000 400,500
Pike County, Ohio Hospital Facilities Revenue -
Pike Health Services, Inc. Project, 6.75%,
Due 7/01/17 3,660,000 3,760,650
-----------
23,906,493
Pennsylvania 9.1%
Bucks County, Pennsylvania IDA CDR - Attleboro
Associates, Ltd. Nursing Facility Project:
8.00%, Due 12/01/05 645,000 703,856
8.25%, Due 6/01/11 3,190,000 3,489,062
Delaware County, Pennsylvania Authority Health
Care Facility First Mortgage Revenue -
GF/Longwood Care, Inc. Project:
8.50%, Due 4/15/10 530,000 540,600
9.00%, Due 4/15/25 5,860,000 5,984,525
Horsham, Pennsylvania IDA CDA Health Care
Facilities Revenue - GF/Pennsylvania Properties,
Inc. Project:
7.375%, Due 9/01/08 440,000 435,050
8.375%, Due 9/01/24 6,000,000 6,217,500
Lehigh County, Pennsylvania General Purpose
Authority Revenue - Kidspeace Obligation
Group Project:
6.00%, Due 11/01/23 1,000,000 952,500
6.20%, Due 11/01/14 3,585,000 3,544,669
Montgomery County, Pennsylvania IDA Revenue -
Wordsworth Academy Project, 8.00%,
Due 9/01/24 6,840,000 7,002,450
Pennsylvania EDFA Exempt Facilities Revenue -
National Gypsum Company Project:
6.125%, Due 11/01/27 7,000,000 6,790,000
6.25%, Due 11/01/27 3,000,000 2,921,250
Pennsylvania EDFA Qualified Residential Rent
Project Revenue - RSI Properties/Butler LLC
Project, 8.00%, Due 9/01/27 (Defaulted
Effective 9/01/99) 3,000,000 2,610,000
Pennsylvania EDFA Qualified Residential Rent
Project Revenue - RSI Properties/Greensburg
LLC Project, 8.00%, Due 9/01/27 (Defaulted
Effective 9/01/99) 3,000,000 2,760,000
Philadelphia, Pennsylvania Hospitals and Higher
EFA Revenue - Temple University Children's
Medical Center Project, 5.75%, Due 6/15/29 7,105,000 6,385,619
Philadelphia, Pennsylvania IDA CDR Refunding -
Doubletree Guest Suites Project, 6.50%,
Due 10/01/27 3,500,000 3,556,875
Scranton-Lackawanna, Pennsylvania Health and
Welfare Authority Hospital Revenue - Marian
Community Hospital Project, 7.125%, Due 1/15/13 1,000,000 1,072,500
Wilkinsburg, Pennsylvania Municipal Authority
Health Facilities Revenue - Monroeville Christian
Project, 8.25%, Due 3/01/27 3,000,000 2,947,500
-----------
57,913,956
South Carolina 7.3%
Connector 2000 Association, Inc. Subordinate
Capital Appreciation Toll Road Revenue -
Greenville, South Carolina Southern Connector
Project:
Zero %, Due 1/01/15 4,400,000 1,567,500
Zero %, Due 1/01/16 4,600,000 1,529,500
Zero %, Due 1/01/17 5,600,000 1,743,000
Zero %, Due 1/01/18 5,800,000 1,682,000
Zero %, Due 1/01/19 5,900,000 1,600,375
Zero %, Due 1/01/23 7,400,000 1,498,500
Zero %, Due 1/01/24 7,500,000 1,415,625
Zero %, Due 1/01/25 8,700,000 1,533,375
13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Zero %, Due 1/01/26 $ 9,000,000 $ 1,485,000
Zero %, Due 1/01/27 9,100,000 1,399,125
Zero %, Due 1/01/28 9,300,000 1,336,875
Zero %, Due 1/01/29 10,500,000 1,417,500
Zero %, Due 1/01/30 10,800,000 1,350,000
Zero %, Due 1/01/31 11,000,000 1,292,500
Zero %, Due 1/01/32 11,200,000 1,232,000
Zero %, Due 1/01/33 11,500,000 1,178,750
Zero %, Due 1/01/34 11,700,000 1,111,500
Zero %, Due 1/01/35 12,000,000 1,065,000
Zero %, Due 1/01/36 12,200,000 1,021,750
Zero %, Due 1/01/37 12,400,000 961,000
Zero %, Due 1/01/38 17,200,000 1,247,000
Florence County, South Carolina IDR - Stone
Container Corporation Project, 7.375%,
Due 2/01/07 2,400,000 2,520,000
Loris, South Carolina Community Hospital District
Hospital Revenue, 5.625%, Due 1/01/29 5,000,000 4,506,250
South Carolina Jobs - EDA Solid Waste Recycling
Facilities Revenue, 9.00%, Due 12/01/11 1,000,000 1,011,250
South Carolina Jobs - EDA Solid Waste Recycling
Facilities Revenue - Santee River Rubber Project,
8.00%, Due 12/01/14 10,000,000 9,612,500
-----------
46,317,875
South Dakota 0.3%
Mobridge, South Dakota Health Care Facilities
Revenue - Mobridge Regional Hospital Project,
6.50%, Due 12/01/22 1,860,000 1,825,125
Tennessee 0.3%
Shelby County, Tennessee Health, Educational and
Housing Facility Board Health Care Facilities
Revenue - Kirby Pines Retirement Community
Project, 6.375%, Due 11/15/25 2,100,000 2,110,500
Texas 1.8%
DeSoto, Texas IDA IDR - Wintergreen Commercial
Partnership Project, 7.00%, Due 1/01/17 3,718,638 3,737,231
Hidalgo County, Texas Health Services
Corporation Hospital Revenue - Mission
Hospital, Inc. Project, 6.75%, Due 8/15/16 3,000,000 3,116,250
Jefferson County, Texas Health Facilities
Development Corporation Hospital Revenue -
Baptist Health Care System Project, 8.30%,
Due 10/01/14 4,630,000 4,732,369
-----------
11,585,850
Virginia 5.3%
Alexandria, Virginia Redevelopment and Housing
Authority MFHR Refunding - Park Center
Apartments Project, 6.375%, Due 4/01/34 14,400,000 13,446,000
Hampton, Virginia Redevelopment and Housing
Authority First Mortgage Revenue Refunding -
Olde Hampton Project, 6.50%, Due 7/01/16 1,540,000 1,495,725
Loudoun County, Virginia IDA IDR Refunding -
Dulles Airport Marriott Hotel Project, 7.125%,
Due 9/01/15 5,000,000 5,300,000
Peninsula Ports Authority of Virginia Port Facility
Revenue Refunding - Ziegler Coal Project, 6.90%,
Due 5/02/22 12,000,000 11,730,000
Virginia Small Business Financing Authority IDR -
Albion Enterprises LLC Project, 6.40%,
Due 1/01/14 1,750,000 1,682,188
-----------
33,653,913
Wisconsin 4.9%
Brookfield, Wisconsin IDR Refunding - Midway
Motor Lodge Project, 8.40%, Due 4/01/12 4,950,000 5,426,438
Wisconsin Health and EFA Revenue - Aurora
Health Care, Inc. Project, 5.625%, Due 2/15/29 3,000,000 2,700,000
Wisconsin Health and EFA Revenue - Divine
Savior Hospital, Inc. Project, 5.70%, Due 6/01/28 3,000,000 2,681,250
Wisconsin Health and EFA Revenue - FH
Healthcare Development, Inc. Project, 6.25%,
Due 11/15/28 3,000,000 2,865,000
Wisconsin Health and EFA Revenue - Heartland-
Edgerton Group Project, 9.00%, Due 11/15/25 2,460,000 2,555,325
Wisconsin Health and EFA Revenue - National
Regency of New Berlin, Inc. Project:
7.75%, Due 8/15/15 4,850,000 5,310,750
8.00%, Due 8/15/25 6,470,000 7,092,737
Wisconsin Health and EFA Revenue - Richland
Hospital, Inc. Project, 5.375%, Due 6/01/28 2,500,000 2,306,250
-----------
30,937,750
Wyoming 0.3%
Teton County, Wyoming Hospital District Hospital
Revenue Refunding and Improvement, 5.80%,
Due 12/01/17 2,200,000 2,073,500
- -----------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $617,324,744) 604,106,313
- -----------------------------------------------------------------------------------------------------------------------
TAXABLE MUNICIPAL BONDS 0.1%
Iowa
Iowa Finance Authority Elder Care Facility First
Mortgage Revenue - Amity Fellowserve-Iowa,
Inc. Project, 7.00%, Due 10/01/06 860,000 841,725
- -----------------------------------------------------------------------------------------------------------------------
Total Taxable Municipal Bonds (Cost $860,000) 841,725
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 6.2%
Municipal Money Market Funds
Multiple States
Strong Municipal Money Market Fund (d) 39,100,000 39,100,000
- -----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $39,100,000) 39,100,000
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Investments in Securities (Cost $657,284,744) 101.4% 644,048,038
Other Assets and Liabilities, Net (1.4%) (8,670,067)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $635,377,971
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUTURES
- -----------------------------------------------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Depreciation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold:
305 Municipal Bond Futures 12/99 $34,770,000 $430,203
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS 101.3%
Alabama 2.2%
Courtland, Alabama IDB Solid Waste Disposal
Revenue - Champion International Corporation
Project:
5.70%, Due 10/01/28 $3,000,000 $2,752,500
6.375%, Due 3/01/29 3,425,000 3,480,656
Troy, Alabama IDB Solid Waste Revenue -
Alabama Protein Recycling LLC Project, 7.75%,
Due 5/01/19 2,000,000 1,925,000
-----------
8,158,156
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alaska 0.4%
Alaska HFC Capital Appreciation Mortgage
Revenue, Zero %, Due 12/01/27 $ 8,500,000 $ 1,445,000
Arizona 1.0%
Phoenix, Arizona IDA Mortgage Revenue
Refunding - Christian Care Retirement
Apartments, Inc. Project, 6.25%, Due 1/01/16 3,740,000 3,805,450
Arkansas 0.8%
Arkansas DFA MFHR - Spring Valley Apartments
Project, 5.50%, Due 4/01/29 2,000,000 1,875,000
Pulaski County, Arkansas Public Facilities Board
MFHR - Plantation House and Indian Hills
Apartments Project, 6.05%, Due 8/01/27 1,000,000 1,006,250
-----------
2,881,250
California 1.8%
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue:
Zero %, Due 1/01/28 12,060,000 2,366,775
Zero %, Due 1/01/30 4,110,000 719,250
Los Angeles, California MFHR - Earthquake
Rehabilitation Projects, 5.85%, Due 12/01/27 1,535,000 1,602,156
Tri-City Housing Finance Agency
SFMR - FNMA and GNMA Mortgage-Backed
Securities Program, 6.45%, Due 12/01/28 1,815,000 1,880,794
-----------
6,568,975
Colorado 6.6%
Castle Rock Ranch, Colorado Public Improvements
Authority Public Facilities Revenue:
6.25%, Due 12/01/17 9,820,000 10,421,475
6.30%, Due 12/01/07 3,115,000 3,391,456
6.375%, Due 12/01/11 2,000,000 2,170,000
6.40%, Due 12/01/08 3,310,000 3,628,587
6.50%, Due 12/01/09 3,525,000 3,890,719
Colorado Health Facilities Authority Retirement
Housing Revenue - Liberty Heights Project,
Zero %, Due 7/15/20 2,900,000 808,375
-----------
24,310,612
Connecticut 0.4%
Connecticut Health and EFA Revenue - Edgehill
Issue, 6.875%, Due 7/01/17 1,500,000 1,546,875
Delaware 0.6%
Delaware EDA Revenue, 6.30%, Due 5/01/22 2,250,000 2,323,125
Florida 0.8%
Leon County, Florida EFA Revenue Refunding -
Southgate Residence Hall Project, 6.75%,
Due 9/01/28 1,000,000 978,750
Manatee County, Florida HFA SFMR, 7.45%,
Due 5/01/27 950,000 1,040,250
Pinellas County, Florida EFA Revenue - College
Harbor Project, 6.50%, Due 12/01/20 1,020,000 1,063,350
-----------
3,082,350
Georgia 8.7%
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Evergreen Village Estates
Project:
5.875%, Due 5/01/07 780,000 804,375
6.375%, Due 5/01/17 1,675,000 1,725,250
6.50%, Due 5/01/27 2,965,000 3,068,775
Colquitt County, Georgia Development Authority
Revenue - Southern Care Corporation Facility
Project, Zero %, Due 12/01/21 7,270,000 1,753,888
George L. Smith II Georgia World Congress Center
Authority Revenue Refunding - Domed Stadium
Project, 5.75%, Due 7/01/15 (b) 4,000,000 3,935,000
Houston County, Georgia MFHR - Emerald Coast
Housing II, Inc. Corder Crossing Apartments
Project, 7.00%, Due 8/01/28 8,170,000 7,832,987
Richmond County, Georgia Development Authority
First Mortgage Revenue, Zero %, Due 12/01/21 20,000,000 4,825,000
Washington, Georgia Wilkes Payroll Development
Authority Subordinated Revenue - Southern
Care Corporation Facility Project, Zero %,
Due 12/01/21:
Series A 8,125,000 1,960,156
Series C 25,595,000 6,174,794
-----------
32,080,225
Idaho 0.5%
Idaho Housing Agency SFMR, 6.45%, Due 7/01/27 1,935,000 2,005,144
Illinois 10.7%
Illinois DFA Hospital Revenue - Adventist Health
System/Sunbelt Obligation Project, 5.50%,
Due 11/15/29 8,750,000 7,809,375
Illinois DFA Retirement Housing Revenue -
Regency Park at Lincolnwood Project:
Zero %, Due 7/15/23 30,000,000 6,412,500
Zero %, Due 7/15/25 15,400,000 2,887,500
Illinois Health Facilities Authority Refunding
Revenue - Lutheran Social Services of Illinois
Project, 6.125%, Due 8/15/20 9,160,000 9,160,000
Kane, Cook and DuPage Counties, Illinois School
District Number U-46 Capital Appreciation
School Building:
Zero %, Due 1/01/11 1,800,000 981,000
Zero %, Due 1/01/13 2,500,000 1,178,125
Metropolitan Pier and Exposition Authority
Capital Appreciation - McCormick Place
Expansion Project, Zero %, Due 6/15/16 1,250,000 479,688
Metropolitan Pier and Exposition Authority
Hospitality Facilities Revenue - McCormick
Place Convention Project, 7.00%, Due 7/01/26 1,500,000 1,689,375
Silvis, Rock Island County, Illinois Special Service
Area GO, 5.65%, Due 1/01/18 1,105,000 1,103,619
Will County, Illinois Exempt Facilities Revenue -
Mobil Oil Refining Corporation Project, 6.40%,
Due 4/01/26 5,000,000 5,293,750
Zion, Illinois Park District GO Revenue, 6.50%,
Due 12/30/17 2,485,000 2,491,212
-----------
39,486,144
Indiana 5.0%
Indiana Health Facility Financing Authority
Hospital Revenue - Jackson County Schneck
Memorial Hospital Project, 7.50%, Due 2/15/22
(Pre-Refunding at $102 on 2/15/02) 6,790,000 7,392,613
Petersburg, Indiana PCR Refunding - Indianapolis
Power & Light Company Project, 5.50%,
Due 10/01/23 4,425,000 4,303,312
St. Joseph County, Indiana Hospital Authority
Health System Revenue - Madison Center, Inc.
Project, 5.80%, Due 2/15/24 7,300,000 6,789,000
-----------
18,484,925
Iowa 1.4%
Iowa Finance Authority Hospital Facility
Refunding Revenue - Jennie Edmundson
Memorial Hospital Project, 7.65%, Due 11/01/16
(Pre-Refunding at $102 on 11/01/01) 4,850,000 5,286,500
15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Louisiana 6.6%
Claiborne Parish, Louisiana Law Enforcement
District Revenue - Claiborne Correctional
Facilities Project, 6.25%, Due 3/01/19 $ 7,500,000 $ 7,218,750
Iberia Parish, Louisiana IDB IDR - Acadia Board
Company, Ltd. Project, 7.50%, Due 8/01/22 2,500,000 2,371,875
New Orleans, Louisiana Regional Transit Authority
Tax-Exempt Lease-Purchase Agreements,
6.125%, Due 5/01/10:
Lease M98147 13,736,428 13,427,358
Lease M98159 1,292,101 1,263,029
-----------
24,281,012
Massachusetts 2.2%
Massachusetts IFA IDR - Welch Foods, Inc.
Project, 5.60%, Due 12/01/17 1,700,000 1,619,250
Massachusetts Municipal Wholesale Electric
Company Power Supply System Revenue,
4.75%, Due 7/01/11 2,000,000 1,917,500
Massachusetts State Housing Finance Agency
Housing Revenue, 5.50%, Due 7/01/13 (b) 4,770,000 4,632,863
-----------
8,169,613
Michigan 1.4%
Dearborn, Michigan EDC Hospital Revenue
Refunding - Oakwood Obligated Group Project,
5.25%, Due 8/15/21 2,765,000 2,640,575
Michigan Hospital Finance Authority Hospital
Revenue Refunding - Pontiac Osteopathic
Hospital Project, 6.00%, Due 2/01/14 2,500,000 2,403,125
-----------
5,043,700
Minnesota 1.8%
St. Paul, Minnesota Housing and Redevelopment
Authority Lease Revenue - Community of Peace
Academy Project, 6.10%, Due 11/01/29 3,570,000 3,400,425
Woodbury, Minnesota IDR Refunding - Harvey
Vogel Manufacturing Company Project, 5.80%,
Due 12/01/28 3,510,000 3,299,400
-----------
6,699,825
Mississippi 1.0%
Jackson, Mississippi Housing Authority MFHR -
Elton Park Apartments Project, 5.40%,
Due 4/01/39 4,000,000 3,785,000
Missouri 1.7%
St. Louis, Missouri Municipal Finance Corporation
Leasehold Revenue Refunding, 5.85%,
Due 7/15/09 3,600,000 3,739,500
Springfield, Missouri Land Clearance
Redevelopment Authority Industrial Revenue
Refunding - University Plaza Project, 6.60%,
Due 10/01/11 2,465,000 2,492,731
-----------
6,232,231
Montana 0.8%
Crow Finance Authority Tribal Purpose Revenue,
5.70%, Due 10/01/27 1,500,000 1,456,875
Miles City, Montana MFHR - Birchwood Properties
LP Project, 6.75%, Due 5/01/29 1,655,000 1,582,594
-----------
3,039,469
New Mexico 1.2%
Albuquerque, New Mexico Industrial Revenue -
MCT Industries, Inc. Project, 6.50%, Due 4/01/17 4,330,000 4,557,325
New York 0.9%
Dutchess County, New York Resource Recovery
Agency Solid Waste System Revenue, 5.40%,
Due 1/01/13 (b) 1,710,000 1,684,350
New York Urban Development Corporation
Revenue, 5.50%, Due 4/01/19 1,500,000 1,485,000
-----------
3,169,350
North Dakota 3.3%
North Dakota Housing Finance Agency - Home
Mortgage Finance Program, 6.40%,
Due 1/01/28 1,300,000 1,345,500
Oakes, North Dakota IDR - Omniquip
International, Inc. Project, 5.80%, Due 2/01/14 4,515,000 4,351,331
Richland County, North Dakota MFHR - Birchwood
Properties LP Project, 6.75%, Due 5/01/29 5,165,000 4,939,031
Three Affiliated Tribes of the Fort Berthold
Reservation GO, 6.30%, Due 11/15/10 1,515,000 1,507,425
-----------
12,143,287
Ohio 4.5%
Medina County, Ohio EDR MFHR - Camelot Place,
Ltd. Project, 8.375%, Due 10/01/23 3,800,000 3,804,750
Montgomery County, Ohio Health Care Facilities
Revenue Refunding - Friendship Village of
Dayton Project, 6.25%, Due 2/01/22 1,250,000 1,212,500
Ohio Housing Finance Agency Residential
Mortgage Revenue, 5.95%, Due 9/01/27 1,950,000 1,962,187
Toledo, Ohio Housing Improvement - Commodore
Perry Apartments Project, 5.45%, Due 12/01/28 2,680,000 2,559,400
Toledo, Ohio MFMR - Commodore Perry
Apartments Project, 7.00%, Due 12/01/28 7,500,000 7,218,750
-----------
16,757,587
Oklahoma 3.9%
Oklahoma County, Oklahoma Finance Authority
MFHR First Mortgage - Multiple Apartments
Project, 7.125%, Due 4/01/28 10,170,000 9,686,925
Oklahoma Ordinance Works Authority PCR
Refunding - Ralston Purina Company Project,
6.30%, Due 9/01/15 1,500,000 1,571,250
Shawnee, Oklahoma Hospital Authority Revenue -
MidAmerica HealthCare, Inc. Project, 8.00%,
Due 4/01/04 2,095,000 2,140,420
Washington County, Oklahoma Medical Authority
Revenue - Bartlesville Jane Phillips Episcopal
Hospital Project, 6.125%, Due 11/01/14 1,000,000 1,021,760
-----------
14,420,355
Oregon 0.3%
Washington County, Oregon MFHR - Bethany
Meadows Project, 6.25%, Due 8/01/10 1,000,000 1,016,790
Pennsylvania 8.3%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue - Saint Francis
Medical Center Project:
5.75%, Due 5/15/17 1,660,000 1,556,250
5.75%, Due 5/15/27 3,965,000 3,603,194
Montgomery County, Pennsylvania IDA First
Mortgage Revenue Refunding - The Meadowood
Corporation Project, 6.25%, Due 12/01/17 1,500,000 1,518,750
Montgomery County, Pennsylvania IDA Retirement
Community Revenue - ACTS Retirement-Life
Communities Project, 5.25%, Due 11/15/28 8,350,000 7,295,812
Pennsylvania EDA Qualified Residential Rent
Project Revenue - RSI Properties/Butler LLC
Project, 8.00%, Due 9/01/27 (Defaulted Effective
9/01/99) 2,360,000 2,053,200
Pennsylvania EDA Qualified Residential Rent Project Revenue - RSI
Properties/Greensburg LLC Project, 8.00%, Due 9/01/27
(Defaulted Effective 9/01/99) 2,655,000 2,442,600
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Hospital Revenue -
Temple University Hospital Project, 6.50%,
Due 11/15/08 $ 3,900,000 $ 4,002,375
Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Revenue -
Temple University Children's Medical Center
Project, 5.75%, Due 6/15/29 3,000,000 2,696,250
Scranton-Lackawanna, Pennsylvania Health and
Welfare Authority Hospital Revenue - Marian
Community Hospital Project, 6.50%,
Due 1/15/07 1,500,000 1,546,875
Scranton-Lackawanna, Pennsylvania Health and
Welfare Authority Hospital Revenue - Moses
Taylor Hospital Project, 6.25%, Due 7/01/20 4,200,000 4,032,000
-----------
30,747,306
Rhode Island 0.4%
Rhode Island Health and Education Building
Corporation Hospital Financing Revenue -
South County Hospital Project, 6.00%,
Due 11/15/17 1,630,000 1,640,188
South Carolina 5.4%
Connector 2000 Association, Inc. Senior Capital
Appreciation Toll Road Revenue - Greenville,
South Carolina Southern Connector Project:
Zero %, Due 1/01/12 3,900,000 1,842,750
Zero %, Due 1/01/14 4,560,000 1,898,100
Zero %, Due 1/01/15 1,000,000 388,750
Zero %, Due 1/01/26 10,000,000 1,850,000
Zero %, Due 1/01/32 12,100,000 1,527,625
Connector 2000 Association, Inc. Senior Current
Interest Toll Road Revenue - Greenville, South
Carolina Southern Connector Project, 5.25%,
Due 1/01/23 8,800,000 7,678,000
York County, South Carolina Exempt Facility
Industrial Revenue - Hoechst Celanese
Corporation Project, 5.70%, Due 1/01/24 4,890,000 4,663,837
-----------
19,849,062
South Dakota 1.8%
Education Loans, Inc. Student Loan Revenue
Subordinated Asset-Backed, 5.60%, Due 6/01/20 3,000,000 2,868,750
Sisseton-Wahpeton Sioux Tribe of the Lake
Traverse Reservation GO:
7.00%, Due 11/01/13 850,000 843,625
7.00%, Due 11/01/23 1,290,000 1,233,563
South Dakota EDFA EDR Pooled Loan Program -
Midstates Printing, Inc. Project, 5.50%,
Due 4/01/18 685,000 635,337
South Dakota HDA Homeownership Mortgage,
6.40%, Due 5/01/16 995,000 1,023,606
-----------
6,604,881
Tennessee 0.5%
Shelby County, Tennessee Health, Educational and
Housing Facilities Board Revenue - Ave Maria
Assisted Living Project, 5.50%, Due 12/01/31 2,000,000 1,850,000
Texas 9.4%
Dallas County, Texas Utility and Reclamation
District GO Refunding, 6.70%, Due 2/15/25 (b) 5,000,000 5,006,250
El Paso, Texas Property Finance Authority, Inc.
SFMR - GNMA Mortgage-Backed Securities
Program, 8.70%, Due 12/01/18 440,000 464,750
Grape Creek-Pulliam, Texas Independent School
District Public Facility Corporation School
Facility Lease Revenue:
7.00%, Due 5/15/10 1,000,000 1,072,500
7.25%, Due 5/15/21 1,300,000 1,399,125
Guadalupe-Blanco River Authority Sewage and
Solid Waste Disposal Facility - E.I. du Pont de
Nemours and Company Project, 6.40%,
Due 4/01/26 4,000,000 4,200,000
Lufkin, Texas Health Facilities Development
Corporation Health System Revenue Refunding -
Memorial Health System of East Texas Project,
6.875%, Due 2/15/26 8,095,000 8,550,344
Port Arthur, Texas HFC Mortgage Revenue
Refunding - FHA Insured Mortgage Loans -
Port Arthur UDAG Projects, 6.40%, Due 1/01/28 3,565,000 3,671,950
Ranger, Texas Housing Corporation MFMR
Refunding - FHA Insured Mortgage Loans -
Ranger Apartments Project, 8.80%, Due 3/01/24 1,160,000 1,305,000
Texas Department of Housing and Community
Affairs Residential Mortgage Revenue, 5.50%,
Due 1/01/21 5,115,000 4,923,188
Texas Department of Housing and Community
Affairs SFMR, 6.00%, Due 9/01/17 1,285,000 1,312,306
Woodville, Texas HFC MFHR - Dogwood Terrace
Apartments Project, 7.50%, Due 10/01/29 3,000,000 2,865,000
-----------
34,770,413
Utah 0.7%
Eagle Mountain, Utah Special Assessment, 5.90%,
Due 12/15/07 1,263,000 1,264,516
Salt Lake County, Utah Housing Authority MFHR -
Millcreek Pines Apartments Project, 6.80%,
Due 9/01/17 1,390,000 1,440,387
-----------
2,704,903
Virginia 0.4%
Pocahontas Parkway Association Route 895
Connector Toll Road Revenue, Zero %,
Due 8/15/17 5,000,000 1,687,500
Washington 1.8%
Grant County, Washington Public Utility District
Number 2 - Wanapum Hydroelectric Development
Second Series Revenue Refunding, 5.375%,
Due 1/01/16 (b) 1,365,000 1,289,925
Spokane, Washington Downtown Foundation
Parking Revenue - River Park Square Project,
5.60%, Due 8/01/19 3,350,000 3,216,000
Washington EDFA Nonrecourse Revenue - Lindal
Cedar Homes, Inc. Project, 5.80%, Due 11/01/17 2,175,000 2,131,500
-----------
6,637,425
Wisconsin 2.1%
Wisconsin Health and EFA Revenue - Howard
Young Medical Center, Inc. Project, 5.75%,
Due 8/15/13 1,250,000 1,229,688
Wisconsin Health and EFA Revenue - St. John's
Home of Milwaukee and Sunrise Care Center, Inc.
Obligated Group Project, 5.625%, Due 12/15/22 5,450,000 4,973,125
Wisconsin Housing and EDA Home Ownership
Revenue, 6.20%, Due 3/01/27 1,480,000 1,507,750
-----------
7,710,563
- -----------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $381,559,733) 374,982,516
- -----------------------------------------------------------------------------------------------------------------------
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (a) 2.1%
Municipal Funds
Multiple States
Nuveen Premium Income Municipal Fund 4 90,800 $ 1,220,125
Strong Municipal Money Market Fund (d) 6,500,000 6,500,000
- -----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $7,819,991) 7,720,125
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Investments In Securities (Cost $389,379,724) 103.4% 382,702,641
Other Assets and Liabilities, Net (3.4%) (12,490,754)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $370,211,887
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS 85.9%
Alabama 3.5%
West Jefferson, Alabama Amusement and Public
Park Authority First Mortgage Revenue -
Visionland Alabama Project, 5.875%,
Due 2/01/06 (c) $6,510,000 $6,379,800
Alaska 0.8%
Juneau, Alaska City and Borough Nonrecourse
Revenue - St. Ann's Care Center Project, 5.875%,
Due 12/01/04 1,350,000 1,339,875
Arizona 0.4%
Winslow, Arizona IDA Hospital Revenue - Winslow
Memorial Hospital Project, 4.95%, Due 6/01/03 745,000 734,756
California 0.1%
Los Angeles, California Regional Airports
Improvement Corporation Lease Revenue
Facilities - Continental Airlines, Inc. Project,
9.25%, Due 8/01/24 85,000 98,281
Colorado 3.0%
Black Hawk, Colorado Business Improvement
District Special Assessment Special Improvement
District:
6.00%, Due 12/01/09 1,470,000 1,444,275
6.25%, Due 12/01/11 2,000,000 1,927,500
Colorado Health Facilities Authority Hospital
Revenue - Steamboat Springs Health Care
Association Project:
4.30%, Due 9/15/01 115,000 113,275
4.40%, Due 9/15/02 380,000 371,925
4.70%, Due 9/15/05 85,000 81,706
4.80%, Due 9/15/01 245,000 244,694
4.80%, Due 9/15/06 455,000 435,094
4.90%, Due 9/15/02 230,000 229,138
4.90%, Due 9/15/07 20,000 19,025
Denver, Colorado City and County Airport
Revenue, 8.25%, Due 11/15/12 625,000 663,281
-----------
5,529,913
Connecticut 0.7%
Connecticut Health and EFA Revenue - New
Opportunities for Waterbury, Inc. Project, 6.75%,
Due 7/01/13 1,205,000 1,211,676
District of Columbia 0.9%
District of Columbia Revenue - American
Geophysical Union Project, 5.50%, Due 9/01/03 700,000 703,500
District of Columbia Revenue - Methodist Home
Issue, 4.80%, Due 1/01/05 985,000 965,300
-----------
1,668,800
Florida 4.7%
Arbor Greene Community Development District
Special Assessment Revenue, 7.00%, Due 5/01/03 235,000 239,406
Broward County, Florida IDR - Beverly Enterprises-
Florida, Inc. Project, 9.80%, Due 11/01/10 1,000,000 1,066,250
Grand Haven Community Development District
Special Assessment Revenue, 6.30%, Due 5/01/02 2,800,000 2,838,500
Leon County, Florida IDR - Beverly Enterprises-
Florida, Inc. Project, 9.80%, Due 6/01/11 825,000 871,340
Orlando and Orange County, Florida Expressway
Authority Expressway Revenue Refunding,
5.95%, Due 7/01/23 10,000 10,025
Tarpon Springs, Florida Health Facilities Authority
Hospital Revenue Refunding - Tarpon Springs
Hospital Foundation Project, 8.75%, Due 5/01/12 3,420,000 3,494,966
-----------
8,520,487
Georgia 1.4%
Atlanta, Georgia Special Purpose Facilities Revenue -
Delta Air Lines, Inc. Project, 7.90%, Due 12/01/18 1,550,000 1,590,315
Atlanta, Georgia Urban Residential Finance
Authority MFHR - Park Place Apartments
Project, 6.00%, Due 9/01/06 1,060,000 1,034,825
-----------
2,625,140
Hawaii 0.0%
Hawaii Department of Transportation Special
Facility Revenue - Continental Airlines, Inc.
Project, 9.60%, Due 6/01/08 50,000 52,488
Idaho 0.0%
Idaho Student Loan Fund Marketing Association,
Inc. Student Loan Revenue, 5.10%, Due 10/01/02 10,000 9,825
Illinois 8.7%
Carol Stream, Illinois First Mortgage Revenue -
Windsor Park Manor Project, 6.25%, Due 12/01/01 250,000 254,062
Chicago, Illinois O'Hare International Airport
Special Facilities Revenue - American Airlines,
Inc. Project, 7.875%, Due 11/01/25 165,000 173,662
Chicago, Illinois O'Hare International Airport
Special Facilities Revenue - United Airlines, Inc.
Project, 8.95%, Due 5/01/18 1,760,000 1,885,400
Granite City, Illinois Hospital Revenue Refunding -
St. Elizabeth Medical Center Project, 8.125%,
Due 6/01/08 860,000 864,300
Hoopeston, Illinois Hospital Capital Improvement
Revenue Refunding - Hoopeston Community
Memorial Hospital Project, 5.25%, Due 11/15/03 490,000 488,162
Illinois DFA IDR Refunding - Great Plains Hotel
Corporation of Illinois Project, 7.50%,
Due 4/01/16 495,000 496,376
Illinois DFA MFHR - Town and Garden Apartments
Project, 7.20%, Due 9/01/08 2,250,000 2,354,063
Illinois DFA Revenue - Community Rehabilitation
Providers Project, 5.00%, Due 7/01/04 1,235,000 1,207,213
Illinois Health Facilities Authority Revenue - Delnor
Community Residential Project, 6.15%,
Due 11/15/27 1,000,000 971,250
Illinois Health Facilities Authority Revenue
Refunding - Bohemian-Tabor Hills Project, 5.90%,
Due 11/15/21 1,700,000 1,617,125
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Illinois Health Facilities Authority Revenue
Refunding - Lifelink Corporation Obligated Group
Project, 5.95%, Due 2/15/21 $2,000,000 $ 1,925,000
Sauk Village, Illinois GO, 6.25%, Due 12/01/10 2,300,000 2,251,125
Southwestern Illinois Development Authority
Revenue - Anderson Hospital Project:
5.25%, Due 8/15/01 390,000 391,463
5.25%, Due 8/15/03 435,000 433,369
5.25%, Due 8/15/04 460,000 455,400
-----------
15,767,970
Indiana 3.4%
Anderson, Indiana EDR Refunding and
Improvement - Anderson University Project,
5.05%, Due 10/01/03 3,265,000 3,256,837
Indiana Health Facility Financing Authority
Revenue - Hamilton Communities, Inc. Project,
6.00%, Due 1/01/10 2,800,000 2,716,000
Indianapolis, Indiana EDR MFHR - Post Pointe
Apartments Project, 8.20%, Due 3/01/01 145,000 145,725
-----------
6,118,562
Iowa 3.6%
Asbury, Iowa Elderly Care and Retirement Facilities
Revenue - Stonehill Project, 5.00%, Due 9/01/03 4,000,000 3,980,000
Harlan, Iowa Revenue - American Baptist Homes of
the Midwest - Baptist Memorial Home Project,
5.875%, Due 5/15/23 920,000 874,000
Ottumwa, Iowa Hospital Facility Revenue
Refunding and Improvement - Ottumwa Regional
Health Center, Inc. Project, 6.00%, Due 10/01/18 25,000 24,812
Ottumwa, Iowa Revenue Refunding - Regional
Retirement Living Project, 5.90%, Due 2/15/24 1,740,000 1,663,875
-----------
6,542,687
Kansas 1.2%
Topeka, Kansas Industrial Revenue Refunding -
Reser's Fine Foods, Inc. Project:
5.00%, Due 4/01/01 300,000 297,750
5.20%, Due 4/01/03 300,000 296,250
5.30%, Due 4/01/04 300,000 295,125
Wathena, Kansas Industrial Revenue - Skyjack
Equipment, Inc. Project:
5.00%, Due 5/01/01 85,000 84,575
5.15%, Due 5/01/02 390,000 386,588
5.25%, Due 5/01/03 130,000 128,538
5.40%, Due 5/01/04 345,000 341,119
5.50%, Due 5/01/05 335,000 330,394
-----------
2,160,339
Kentucky 0.9%
Jefferson County, Kentucky Health Facilities
Revenue Refunding - Beverly Enterprises, Inc.
Project, 5.40%, Due 5/01/03 430,000 424,087
Kenton County, Kentucky Airport Board Special
Facilities Revenue - Mesaba Aviation, Inc. Project,
6.00%, Due 7/01/05 (b) 985,000 985,000
Kentucky EDFA Hospital System Refunding and
Improvement Revenue - Appalachian Regional
Healthcare, Inc. Project, 5.10%, Due 10/01/03 250,000 250,000
-----------
1,659,087
Louisiana 3.7%
Hodge, Louisiana Utility Revenue - Stone Container
Corporation Project, 9.00%, Due 3/01/10 100,000 103,466
Louisiana Public Facilities Authority Revenue -
Progressive Healthcare Providers/Louisiana, Inc.
Project, 5.75%, Due 10/01/03 1,390,000 1,365,675
West Feliciana Parish, Louisiana PCR - Gulf States
Utilities Company Project, 9.00%, Due 5/01/15 2,000,000 2,105,980
West Feliciana Parish, Louisiana PCR - Gulf States
Utilities Company III Project, 7.70%,
Due 12/01/14 3,000,000 3,225,000
-----------
6,800,121
Maine 5.5%
Maine Finance Authority Solid Waste Disposal
Revenue - Boise Cascade Corporation Project,
7.90%, Due 6/01/15 5,000,000 5,193,350
Maine Finance Authority Solid Waste Recycling
Facilities Revenue - Great Northern Paper Project,
7.75%, Due 10/01/22 (c) 4,500,000 4,865,625
-----------
10,058,975
Maryland 0.6%
Baltimore County, Maryland IDR - Barre-National,
Inc. Equipment Project, 6.875%, Due 7/01/09 1,200,000 1,053,000
Massachusetts 3.3%
Massachusetts Health and EFA Revenue - Saints
Memorial Medical Center Project, 5.50%,
Due 10/01/02 3,500,000 3,491,250
Massachusetts Industrial Finance Agency Health
Care Facility Revenue - Metro Health Foundation
of Massachusetts, Inc. Project, 6.25%,
Due 12/01/03 1,720,000 1,707,100
Massachusetts Industrial Finance Agency Revenue -
Institute for Developmental Disabilities Project,
9.25%, Due 6/01/09 725,000 737,687
-----------
5,936,037
Minnesota 2.8%
Burnsville, Minnesota CDR Refunding - Holiday Inn
Project, 5.875%, Due 4/01/08 1,430,000 1,438,938
Maplewood, Minnesota Health Care Facility
Revenue - HealthEast Project:
5.70%, Due 11/15/02 1,000,000 997,500
5.80%, Due 11/15/03 1,400,000 1,396,500
St. Paul, Minnesota Housing and Redevelopment
Authority Hospital Revenue - HealthEast Project:
4.60%, Due 11/01/00 500,000 492,500
4.75%, Due 11/01/01 750,000 729,375
-----------
5,054,813
Mississippi 0.9%
Mississippi Hospital Equipment and Facilities
Authority Revenue Refunding - Rush Medical
Foundation Project, 5.40%, Due 1/01/07 1,760,000 1,718,200
Missouri 1.4%
Columbia, Missouri IDR - American Air Filter
Company, Inc. Project, 7.45%, Due 7/01/04 1,105,000 1,107,895
Ellisville, Missouri IDA IDR Refunding - Gambrill
Gardens Project:
4.80%, Due 6/01/02 110,000 108,762
5.10%, Due 6/01/05 125,000 122,188
5.20%, Due 6/01/06 135,000 131,625
Saline County, Missouri IDA Health Facilities
Revenue - John Fitzgibbon Memorial Hospital,
Inc. Project, 5.75%, Due 12/01/03 1,010,000 993,587
-----------
2,464,057
Montana 0.2%
Crow Finance Authority Tribal Purpose Revenue,
4.75%, Due 10/01/00 290,000 292,874
Nebraska 0.2%
Scottsbluff, Nebraska CDR - WSL-RBJ, A Minnesota
LP Project, 8.75%, Due 11/01/06 300,000 299,910
19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Hampshire 0.5%
New Hampshire Higher Educational and Health
Facilities Authority Revenue - New England
College Project, 5.375%, Due 3/01/05 $1,000,000 $ 978,750
New Mexico 2.0%
Chaves County, New Mexico Hospital Revenue -
Eastern New Mexico Medical Center Project,
7.25%, Due 12/01/10 (Pre-Refunding at $102 on
12/01/02) 1,810,000 1,961,587
Santa Fe County, New Mexico Project Revenue -
El Castillo Retirement Residences Project, 5.80%,
Due 5/15/18 1,835,000 1,734,075
-----------
3,695,662
New York 2.2%
Monroe County, New York IDR Agency - Empire
Sports Project, 6.50%, Due 3/01/08 1,105,000 1,099,475
New York Energy Research and Development
Authority Electric Facilities Revenue, 7.15%,
Due 9/01/19 1,750,000 1,872,500
Rockland County, New York IDR Agency Civic
Facility - Dominican College Project, 5.50%,
Due 5/01/02 570,000 563,588
Tompkins County, New York IDR Agency Life Care
Community - Kendal at Ithaca, Inc. Project:
7.25%, Due 6/01/03 90,000 91,564
7.625%, Due 6/01/09 445,000 450,563
-----------
4,077,690
North Carolina 0.7%
Fletcher, North Carolina First Mortgage Housing
Revenue - Avery's View Retirement Facilities, Inc.
Project, 8.00%, Due 3/01/10 1,000,000 1,036,780
North Carolina Medical Care Commission Health
Care Facilities First Mortgage Revenue - DePaul
Community Facilities Project, 5.75%, Due 1/01/03 270,000 267,637
-----------
1,304,417
Ohio 5.4%
Cleveland, Ohio Airport Special Revenue
Refunding - Continental Airlines, Inc. Project,
5.25%, Due 12/01/02 (b) (c) 6,475,000 6,377,875
Cuyahoga County, Ohio MFHR - The Park Lane
Apartments Project, 7.70%, Due 7/01/02 210,000 210,788
Dayton, Ohio Special Facilities Revenue - AFCO
Cargo Day LLC Project, 5.875%, Due 4/01/04 500,000 490,625
Ohio Water Development Authority Solid Waste
Disposal Revenue - Bay Shore Power Project,
5.375%, Due 9/01/02 2,800,000 2,772,000
-----------
9,851,288
Oklahoma 0.4%
Leflore County, Oklahoma Hospital Authority
Hospital Revenue:
5.05%, Due 6/01/01 205,000 203,975
5.25%, Due 6/01/02 235,000 233,237
5.45%, Due 6/01/03 260,000 257,400
-----------
694,612
Pennsylvania 4.7%
Bucks County, Pennsylvania IDA CDR - Attleboro
Associates, Ltd. Nursing Facility Project, 8.00%,
Due 12/01/05 1,200,000 1,309,500
Clarion County, Pennsylvania IDA Health Facilities
Revenue Refunding - Beverly Enterprises, Inc.
Project, 5.50%, Due 5/01/03 595,000 586,819
Dauphin County, Pennsylvania Subordinated Office
and Parking Revenue - River Front Office Center
Project, 5.35%, Due 1/01/02 820,000 811,800
Harrisburg, Pennsylvania Authority Office and
Parking Revenue, 5.25%, Due 5/01/02 820,000 812,825
Pennsylvania EDFA Qualified Residential Rent
Project Revenue - RSI Properties/Butler LLC
Project, 7.00%, Due 9/01/02 (Defaulted Effective
9/01/99) 300,000 261,000
Pennsylvania EDFA Qualified Residential Rent
Project Revenue - RSI Properties/Greensburg LLC
Project, 7.00%, Due 9/01/02 (Defaulted Effective
9/01/99) 300,000 276,000
Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Hospital Revenue -
Chestnut Hill Hospital Project, 6.50%,
Due 11/15/22 1,500,000 1,520,625
Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Revenue - Temple
University Children's Medical Center Project:
4.40%, Due 6/15/01 200,000 197,250
4.55%, Due 6/15/02 470,000 460,013
4.65%, Due 6/15/03 490,000 476,525
Westmoreland County, Pennsylvania IDA Health
Care Facilities Revenue Refunding - Redstone
Presbyterian Senior Care Obligated Group Project,
5.90%, Due 11/15/21 1,915,000 1,826,431
-----------
8,538,788
South Dakota 0.5%
Lincoln County, South Dakota Revenue Refunding -
American Baptist Homes of the Midwest-Trail
Ridge Project, 5.875%, Due 11/15/21 945,000 906,019
Texas 7.9%
Alliance Airport Authority, Inc. Special Facilities
Revenue - American Airlines, Inc. Project, 7.50%,
Due 12/01/29 (c) 3,000,000 3,150,000
DeSoto, Texas IDA IDR - Wintergreen Commercial
Partnership Project, 7.00%, Due 1/01/17 1,398,960 1,405,955
Gulf Coast Waste Disposal Authority Revenue -
Champion International Corporation
Project, 7.45%, Due 5/01/26 (c) 1,840,000 1,957,300
Jefferson County, Texas Health Facilities
Development Corporation Hospital Revenue -
Baptist Health Care System Project, 8.875%,
Due 6/01/21 5,745,000 5,845,537
Lubbock, Texas Health Facilities Development
Corporation First Mortgage Revenue - Carillon,
Inc. Project, 5.75%, Due 7/01/29 2,000,000 2,005,000
-----------
14,363,792
Vermont 1.6%
Vermont Educational and Health Buildings
Financing Agency Revenue - Vermont Council of
Developmental and Mental Health Project, 6.20%,
Due 12/15/05 2,125,000 2,135,625
Vermont Educational and Health Buildings
Financing Agency Revenue Health Care Facility -
Copley Manor Project, 5.40%, Due 4/01/06 710,000 692,250
-----------
2,827,875
Virginia 0.8%
Hampton, Virginia Redevelopment and Housing
Authority First Mortgage Revenue Refunding -
Olde Hampton Project, 6.00%, Due 7/01/03 1,210,000 1,197,900
Virginia Small Business Financing Authority IDR -
Albion Enterprises LLC Project, 6.00%,
Due 1/01/02 250,000 247,813
-----------
1,445,713
West Virginia 0.0%
Harrison County, West Virginia CDR Refunding -
Kmart Corporation Project, 7.625%, Due 12/01/04 80,000 84,400
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wisconsin 6.0%
Madison, Wisconsin IDR - McCaughey Development
Association Project, 5.875%, Due 4/01/10 $1,045,000 $ 1,007,119
Wisconsin Health and EFA Revenue - Attic Angel
Obligation Group Project, 6.00%, Due 11/15/28 1,490,000 1,421,087
Wisconsin Health and EFA Revenue - Beaver Dam
Community Hospital, Inc. Project, 5.70%,
Due 8/15/18 2,000,000 1,902,500
Wisconsin Health and EFA Revenue - Divine Savior
Hospital, Inc. Project:
4.15%, Due 6/01/01 210,000 208,425
4.30%, Due 6/01/02 220,000 217,525
4.45%, Due 6/01/03 225,000 221,625
4.60%, Due 6/01/04 240,000 235,800
Wisconsin Health and EFA Revenue - FH Healthcare
Development, Inc. Project, 5.00%, Due 11/15/02 1,360,000 1,344,700
Wisconsin Health and EFA Revenue - Kenosha
Hospital and Medical Center Project, 4.50%,
Due 5/15/02 560,000 553,000
Wisconsin Health and EFA Revenue - Linden
Grove, Inc. Project, 6.15%, Due 11/01/19 405,000 405,024
Wisconsin Health and EFA Revenue - Lutheran
Home Project, 7.00%, Due 9/01/25 30,000 30,788
Wisconsin Health and EFA Revenue - Oakwood
Project, 5.90%, Due 8/15/28 3,565,000 3,386,750
-----------
10,934,343
Wyoming 1.3%
Sweetwater County, Wyoming Solid Waste Disposal
Revenue - FMC Corporation Project, 7.00%,
Due 6/01/24 1,000,000 1,057,500
Teton County, Wyoming Hospital District Hospital
Revenue Refunding and Improvement, 4.85%,
Due 12/01/02 1,265,000 1,250,769
-----------
2,308,269
- -----------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $158,430,864) 156,109,291
- -----------------------------------------------------------------------------------------------------------------------
VARIABLE RATE PUT BONDS 10.0%
Arizona 1.6%
Maricopa County, Arizona IDA IDR - Borden, Inc.
Project, 4.39%, Due 10/01/12 (Putable at $100 and
Rate Reset Effective 10/01/00) 3,000,000 2,959,980
Florida 1.1%
St. John's County, Florida IDA IDR Refunding -
Vicar's Landing Project, 5.125%, Due 2/15/17
(Putable at $100 and Rate Reset Effective 2/15/04) 2,000,000 1,970,000
Louisiana 0.6%
St. Charles Parish, Louisiana PCR Refunding -
Entergy Louisiana, Inc. Project, 4.85%, Due
6/01/30 (Mandatory Put at $100 on 6/01/02) 1,000,000 1,000,000
New Jersey 1.6%
New Jersey EDA Senior Mortgage Revenue
Refunding EXTRAS - Arbor Glen of Bridgewater
Project, 5.375%, Due 5/15/32 (Putable at $100 and
Rate Reset Effective 5/15/04) 3,000,000 2,981,250
Ohio 1.8%
Ohio Air Quality Development Authority Revenue
Refunding - Ohio Edison Company Project,
4.25%, Due 6/01/33 (Mandatory Put at $100 on
6/01/01) 2,000,000 1,982,500
Ohio Water Development Authority Facilities PCR
Refunding - Toledo Edison Company Project,
5.25%, Due 9/01/33 (Mandatory Put at $100 on
9/01/02) (b) 1,350,000 1,350,000
-----------
3,332,500
Pennsylvania 0.8%
Beaver County, Pennsylvania IDA PCR Revenue
Refunding - Toledo Edison Project, 4.85%, Due
6/01/30 (Mandatory Put at $100 on 6/01/04) 1,500,000 1,500,000
Tennessee 1.4%
Shelby County, Tennessee Health, Educational and
Housing Facility Board Health Care Facilities
Revenue EXTRAS - Kirby Pines Retirement
Community Project, 5.50%, Due 11/15/27 (Putable
at $100 and Rate Reset Effective 11/15/02) 2,450,000 2,446,938
Texas 1.1%
Abilene, Texas Health Facilities Development
Corporation Retirement Facilities Revenue
EXTRAS - Sears Methodist Retirement System
Obligated Group Project, 5.25%, Due 11/15/28
(Putable at $100 and Rate Reset Effective 11/15/03) 2,025,000 1,997,156
- -----------------------------------------------------------------------------------------------------------------------
Total Variable Rate Put Bonds (Cost $18,270,231) 18,187,824
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 7.5%
Municipal Bonds 1.0%
Kansas 0.3%
Lawrence, Kansas CDR Refunding - Holiday Inn
Project, 7.00%, Due 7/01/00 190,000 191,720
Manhattan, Kansas CDR Refunding - Holiday Inn
Project, 7.00%, Due 7/01/00 190,000 191,720
Topeka, Kansas Industrial Revenue Refunding -
Reser's Fine Foods, Inc. Project, 4.75%,
Due 4/01/00 100,000 99,788
-----------
483,228
Maryland 0.0%
Howard County, Maryland IDR Refunding - Keebler
Company Project, 5.95%, Due 3/01/00 65,000 65,134
Minnesota 0.4%
St. Paul, Minnesota Housing and Redevelopment
Authority Hospital Revenue - HealthEast Project,
4.50%, Due 11/01/99 725,000 723,383
Missouri 0.1%
Ellisville, Missouri IDA IDR Refunding - Gambrill
Gardens Project, 4.50%, Due 6/01/00 100,000 99,668
Oklahoma 0.1%
Leflore County, Oklahoma Hospital Authority
Hospital Revenue, 4.90%, 6/01/00 185,000 184,624
Wisconsin 0.1%
Wisconsin Health and EFA Revenue - Divine Savior
Hospital, Inc. Project, 3.90%, Due 6/01/00 200,000 199,366
-----------
Total Municipal Bonds 1,755,403
Weekly Variable Rate Put Bonds 1.3%
Washington
Pierce County, Washington EDC Pooled Bond
Program Industrial Revenue - Northwest Banking
Project, 3.80%, Due 9/07/99 2,325,000 2,325,000
21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Municipal Money Market Funds 5.2%
Multiple States
Strong Municipal Money Market Fund (d) 9,500,000 $ 9,500,000
- -----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $13,584,394) 13,580,403
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Investments in Securities (Cost $190,285,489) 103.4% 187,877,518
Other Assets and Liabilities, Net (3.4%) (6,180,711)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $181,696,807
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUTURES
- -----------------------------------------------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Depreciation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold:
120 Municipal Bond Futures 12/99 $13,680,000 $169,260
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS 82.2%
Alabama 1.0%
Birmingham, Alabama Airport Authority Airport
Revenue Refunding, 5.25%, Due 7/01/03 (b) $3,070,000 $3,123,725
Arizona 0.2%
Maricopa County, Arizona IDA MFHR - Mercy Bond
Properties Arizona I-A, 5.20%, Due 1/01/04 780,000 786,825
California 0.9%
Intermodal Container Transfer Facility Joint Powers
Authority Refunding Revenue, 7.70%, Due
11/01/14 1,500,000 1,508,325
Los Angeles, California Community College COP,
6.00%, Due 8/15/20 1,455,000 1,498,650
-----------
3,006,975
Colorado 2.2%
Arapahoe County, Colorado E-470 Public Highway
Authority Capital Improvement Trust Fund
Highway Revenue, Zero %, Due 8/31/03 500,000 415,625
Castle Rock Ranch, Colorado Public Improvements
Authority Public Facilities Revenue:
5.70%, Due 12/01/06 1,000,000 1,050,000
5.90%, Due 12/01/03 1,475,000 1,543,219
6.10%, Due 12/01/05 2,780,000 2,974,600
Eaglebend Affordable Housing Corporation
Multi-Family Housing Project Revenue
Refunding, 5.45%, Due 7/01/02 790,000 791,975
Miners Mesa, Colorado Commercial Metropolitan
District GO, 6.75%, Due 12/01/02 340,000 340,037
-----------
7,115,456
Connecticut 0.4%
Connecticut IDA - The Olympic Hotel Corporation
Project, 6.775%, Due 8/01/03 1,376,281 1,371,121
District of Columbia 0.9%
District of Columbia Hospital Revenue Refunding -
Medlantic Healthcare Group, Inc. Project, 6.50%,
Due 8/15/02 2,925,000 3,096,844
Florida 3.2%
Capital Projects Finance Authority Solid Waste
Disposal Revenue Capital Projects Loan
Program - Peerless Dade, Inc. Project, 7.50%,
Due 11/01/18 3,000,000 3,011,250
Duval County, Florida School District GO
Refunding, 6.00%, Due 8/01/03 1,000,000 1,056,250
Florida Housing Finance Agency MFMR -
Hammocks Place Project, 6.25%, Due 12/01/06 2,000,000 2,062,000
Miami Beach, Florida Redevelopment Agency
Incremental Tax Revenue, 9.125%, Due 12/01/04 3,910,000 4,344,987
-----------
10,474,487
Georgia 2.4%
Athens-Clarke County, Georgia Residential Care
Facilities for the Elderly Authority Revenue -
Wesley Woods of Athens, Inc. Project, 5.30%,
Due 10/01/01 1,000,000 1,000,000
Columbus, Georgia Development Authority Revenue
Refunding - Jordan Company Project, 5.50%,
Due 9/01/09 (Mandatory Put at $100 on 9/01/01) 1,205,000 1,205,000
George L. Smith II Georgia World Congress Center
Authority Revenue Refunding - Domed Stadium
Project, 7.875%, Due 7/01/20 5,225,000 5,499,103
-----------
7,704,103
Guam 4.2%
Guam Airport Authority General Revenue:
6.00%, Due 10/01/00 2,300,000 2,334,592
6.40%, Due 10/01/05 7,045,000 7,467,700
Guam Government GO, 5.70%, Due 9/01/03 3,630,000 3,693,707
-----------
13,495,999
Hawaii 2.8%
Honolulu, Hawaii City and County GO:
4.00%, Due 2/01/01 (b) 3,765,000 3,760,294
4.10%, Due 2/01/02 (b) 1,415,000 1,407,925
4.25%, Due 2/01/03 (b) 4,075,000 4,044,437
-----------
9,212,656
Illinois 1.6%
Illinois DFA Solid Waste Disposal Revenue - Waste
Management, Inc. Project, 7.125%, Due 1/01/01 640,000 656,000
Illinois EFA Revenue - Lewis University Project,
5.30%, Due 10/01/04 1,390,000 1,388,263
Illinois Health Facilities Authority Revenue -
Covenant Retirement Communities Project, 7.60%,
Due 12/01/12 750,000 810,000
Naperville, DuPage County and Will County, Illinois
EDR Refunding - Illinois Hospital and Health
Systems Association Project, 5.70%, Due 5/01/04 2,275,000 2,314,812
-----------
5,169,075
Iowa 0.4%
Iowa Finance Authority Mortgage Revenue
Refunding - Friendship Village Project, 4.95%,
Due 11/01/00 1,270,000 1,276,350
Kentucky 4.9%
Mount Sterling, Kentucky League of Cities Funding
Trust Lease Program Revenue, 5.625%,
Due 3/01/03 3,250,000 3,355,625
Pendleton County, Kentucky Multi-County Lease
Revenue - Kentucky Association of Counties
Leasing Trust Program, 6.50%, Due 3/01/19 5,000,000 5,237,500
Trimble County, Kentucky PCR, 7.625%,
Due 11/01/20 7,000,000 7,393,750
-----------
15,986,875
</TABLE>
22
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Louisiana 1.8%
Louisiana Public Facilities Authority Student Loan
Revenue, 6.75%, Due 9/01/06 $ 410,000 $ 425,887
St. Charles Parish, Louisiana PCR - Union Carbide,
Inc. Project, 7.35%, Due 11/01/22 5,000,000 5,331,250
-----------
5,757,137
Maine 1.8%
Maine Educational Loan Marketing Corporation
Student Loan Revenue Refunding, 6.90%,
Due 11/01/03 2,490,000 2,564,700
Maine Finance Authority Electric Rate Stabilization
Revenue Refunding - Penobscot Energy Recovery
Company LP Project, 5.20%, Due 7/01/18 3,335,000 3,314,156
-----------
5,878,856
Maryland 1.6%
Baltimore, Maryland COP Refunding - Board of
Education Administrative Headquarters/Municipal
Capital Projects:
4.55%, Due 4/01/01 (b) 1,000,000 1,002,500
4.65%, Due 4/01/02 (b) 1,975,000 1,979,937
4.75%, Due 4/01/03 (b) 2,065,000 2,072,744
-----------
5,055,181
Massachusetts 5.1%
Massachusetts Education Loan Authority Education
Loan Revenue, 7.45%, Due 1/01/02 1,075,000 1,092,920
Massachusetts Health and EFA Competitive Lease
Program - Whitehead Institute for Biomedical
Research Project, 4.595%, Due 10/15/03 7,583,003 7,526,131
Massachusetts Industrial Finance Agency
Refunding Revenue - Emerson College Issue,
8.50%, Due 1/01/03 3,200,000 3,448,000
Massachusetts Industrial Finance Agency Water
Treatment Revenue - Massachusetts-American
Hingham Project, 6.25%, Due 12/01/10 4,450,000 4,639,125
-----------
16,706,176
Michigan 2.1%
Flint, Michigan Hospital Building Authority
Revenue Refunding - Hurley Medical Center
Project:
5.75%, Due 7/01/03 2,355,000 2,387,381
6.00%, Due 7/01/04 1,005,000 1,027,613
6.00%, Due 7/01/05 510,000 520,837
Flint, Michigan Hospital Building Authority Revenue
Rental - Hurley Medical Center Project, 5.00%,
Due 7/01/03 1,050,000 1,036,875
Michigan Hospital Finance Authority Revenue
Refunding - Detroit Medical Center Obligation
Group Project, 6.50%, Due 8/15/18 1,875,000 1,877,344
-----------
6,850,050
Minnesota 4.2%
Maplewood, Minnesota Health Care Facility
Revenue - HealthEast Project, 5.70%,
Due 11/15/02 1,740,000 1,735,650
St. Paul, Minnesota Housing and Redevelopment
Authority Hospital Revenue Refunding -
HealthEast Project, 6.625%, Due 11/01/17 8,285,000 8,326,425
Woodbury, Minnesota Lease Revenue - Minnesota
Math and Science Academy Project, 5.50%,
Due 11/01/28 3,555,000 3,523,894
-----------
13,585,969
Mississippi 1.4%
Mississippi Higher Education Assistance
Corporation Student Loan Revenue:
5.60%, Due 9/01/04 2,505,000 2,545,706
5.80%, Due 9/01/06 2,050,000 2,080,750
-----------
4,626,456
Missouri 0.6%
Springfield, Missouri Land Clearance
Redevelopment Authority Industrial Revenue
Refunding - University Plaza Project, 6.30%,
Due 10/01/06 1,790,000 1,823,563
Nevada 0.5%
Nevada Housing Division SFMR, 5.20%, Due 4/01/30 1,500,000 1,494,375
New Hampshire 0.1%
New Hampshire IDA Industrial Facilities Revenue -
Permattach Tool Project, 7.70%, Due 12/01/01 225,000 233,719
New Jersey 0.2%
New Jersey Health Care Facilities Finance Authority
Revenue - Southern Ocean County Hospital
Project, 5.75%, Due 7/01/01 700,000 707,000
New York 2.3%
Albany, New York Housing Authority Tax Credit -
Lark Drive Associates, LP Project, 5.25%,
Due 6/01/01 3,300,000 3,337,125
New Rochelle, New York Municipal Housing
Authority Mortgage Revenue, 4.70%,
Due 12/01/03 1,465,000 1,452,181
New York Environmental Facilities Corporation
State Water Revolving Fund PCR - Pilgrim State
Sewage Treatment Project, 5.625%, Due 3/15/04 1,000,000 1,042,500
New York, New York GO, 5.875%, Due 8/01/03 1,500,000 1,573,125
-----------
7,404,931
North Carolina 1.1%
North Carolina Housing Finance Agency Home
Ownership Revenue, 4.55%, Due 1/01/24 3,605,000 3,537,406
Ohio 3.9%
Akron, Ohio COP - Akron Municipal Baseball
Stadium Project:
Zero %, Due 12/01/01 1,000,000 902,500
Zero %, Due 12/01/02 1,240,000 1,120,650
Cleveland, Ohio City School District Energy
Conservation Improvement GO:
6.53%, Due 9/15/00 670,000 685,410
6.53%, Due 3/15/01 690,000 709,838
6.53%, Due 9/15/01 715,000 744,494
6.53%, Due 3/15/02 740,000 777,437
6.53%, Due 9/15/02 760,000 798,448
6.53%, Due 3/15/03 785,000 824,713
6.53%, Due 9/15/03 815,000 856,231
6.53%, Due 3/15/04 840,000 882,487
6.53%, Due 9/15/04 865,000 908,752
Montgomery County, Ohio Health Care Facilities
Revenue Refunding - Friendship Village of
Dayton Project, 5.15%, Due 2/01/03 2,025,000 2,009,812
Montgomery County, Ohio Health Care Facilities
Revenue Refunding EXTRAS - Friendship
Village of Dayton Project, 5.375%, Due 2/01/22
(Putable at $100 on 2/01/03) 1,050,000 1,047,375
Wood County, Ohio IDR - Abbey Etna Machine
Company Project, 7.625%, Due 7/01/01 285,000 289,631
-----------
12,557,778
Oregon 1.2%
Hillsboro, Oregon Hospital Facility Authority
Revenue and Advance Refunding - Tuality
Healthcare Project, 4.80%, Due 10/01/00 3,940,000 3,962,458
23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA 13.8%
Delaware County, Pennsylvania Authority Health
Facilities Revenue - Mercy Health Corporation of
Southeastern Pennsylvania Obligated Group
Project, 6.00%, Due 11/15/07 (Pre-Refunding at
$100 on 11/15/05) $5,575,000 $ 5,860,719
Horizon Hospital System Authority Hospital
Revenue, 5.40%, Due 5/15/01 1,150,000 1,158,625
Montgomery County, Pennsylvania IDA First
Mortgage Revenue - Pennsylvania Nursing and
Rehabilitation Center Project, 7.625%, Due 7/01/18
(Pre-Refunding at $102.775 on 3/31/04) 4,700,000 5,393,250
Pennsylvania Housing Finance Agency SFMR:
4.50%, Due 4/01/28 7,000,000 6,833,750
4.80%, Due 10/01/22 5,300,000 5,213,875
6.875%, Due 10/01/24 6,000,000 6,255,000
Philadelphia, Pennsylvania Hospitals and Higher
Education Facilities Authority Hospital Revenue -
Chestnut Hill Hospital Project, 6.50%,
Due 11/15/22 2,250,000 2,280,938
Southern Chester County, Pennsylvania Health and
Higher Education Authority Mortgage Revenue -
Jenner's Pond Retirement Community Project,
5.15%, Due 11/01/03:
Series 1998 7,500,000 7,350,000
Series 1999 4,500,000 4,410,000
-----------
44,756,157
Puerto Rico 0.8%
Commonwealth of Puerto Rico Tax-Exempt Lease
Certificates, 5.10%, Due 4/01/04 2,572,380 2,588,457
South Carolina 1.7%
Charleston County, South Carolina First Mortgage
Health Facilities Revenue - The Episcopal Church
Home Project, 5.40%, Due 4/01/04 3,020,000 3,020,000
South Carolina Jobs - EDA EDR Refunding
EXTRAS - Westminster Presbyterian Center, Inc.
Project, 5.20%, Due 11/15/28 2,455,000 2,424,312
-----------
5,444,312
South Dakota 0.4%
South Dakota EDFA EDR Refunding - Pooled Loan
Program - Technical Ordinance Project, 5.75%,
Due 4/01/07 1,370,000 1,433,363
Tennessee 1.7%
Memphis, Tennessee Health, Educational and
Housing Facility Board MFMR Refunding -
Edgewater Terrace Apartments Project, 7.375%,
Due 1/20/27 3,980,000 4,288,450
Tennessee Housing Development Agency
Homeownership Program Revenue, Zero %,
Due 7/01/05 1,585,000 1,186,769
-----------
5,475,219
Texas 7.5%
Brazos, Texas Higher Education Authority, Inc.
Student Loan Revenue Refunding, 5.95%, Due
6/01/02 3,005,000 3,087,637
Falcons Lair, Texas Utility and Reclamation District
COP, 7.10%, Due 10/15/03 5,855,000 5,884,275
Farmers Branch, Texas IDC IDR - Thermalloy, Inc.
Project, 6.105%, Due 4/24/01:
Series A 235,000 235,587
Series B 235,000 235,587
Harris County, Texas HFC MFHR - Bryant
Development Project, 6.1875%, Due 9/01/05 564,629 570,981
Hidalgo County, Texas Health Services Corporation
Hospital Revenue - Mission Hospital, Inc. Project,
5.75%, Due 8/15/01 930,000 939,300
Lancaster, Texas HFC MFHR - Intervest-Lancaster
Project:
5.94%, Due 6/15/04 2,925,000 2,935,969
6.5588%, Due 6/15/04 377,812 379,229
Mesquite, Texas HFC MFHR - GTR Associates -
Prescott Place Apartments Project, 5.775%,
Due 12/15/03:
Series A 4,205,070 4,220,840
Series B 1,401,690 1,406,947
Odessa, Texas Housing Authority MFMR -
Section 8 Assisted Project:
5.875%, Due 10/01/03 1,185,000 1,177,594
6.375%, Due 10/01/11 2,735,000 2,700,813
Robstown, Texas Combination Tax and Limited
Pledge Revenue COP, 7.75%, Due 10/01/12
(Pre-Refunding at $100 on 10/01/02) 510,000 559,725
-----------
24,334,484
Utah 1.5%
Eagle Mountain, Utah Water and Sewer Revenue
BAN, 5.375%, Due 9/01/01 4,910,000 4,897,725
Washington 1.2%
Walla Walla, Washington Housing Authority
Revenue - Wilbur Manor Project, 6.25%,
Due 12/01/11 1,440,000 1,440,000
Washington Health Care Facilities Authority
Revenue - Sisters of Providence Project, 5.375%,
Due 10/01/00 2,400,000 2,441,256
-----------
3,881,256
Wisconsin 0.6%
Wisconsin Housing and EDA Home Ownership
Revenue, 5.30%, Due 9/01/20 2,000,000 2,000,000
- -----------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $264,895,385) 266,812,519
- -----------------------------------------------------------------------------------------------------------------------
VARIABLE RATE PUT BONDS 12.0%
Arizona 1.0%
Scottsdale, Arizona IDA First Mortgage Revenue
Refunding - Westminster Village, Inc. Project,
5.25%, Due 6/01/16 (Mandatory Put at $100 on
6/01/04) 3,300,000 3,297,393
California 0.6%
Sacramento County, California MFHR Refunding -
Fairways II Apartments Project, 5.35%,
Due 8/01/25 (Mandatory Put at $100 on 8/01/05) 1,910,000 1,945,813
Georgia 1.7%
Atlanta, Georgia Urban Residential Finance
Authority MFHR Refunding - Ford Factory
Square Apartments Project, 6.00%, Due 12/01/30
(Mandatory Put at $100 on 12/01/02) 5,655,000 5,683,275
Massachusetts 1.1%
Massachusetts DFA First Mortgage Revenue -
LaSell Village Project, 5.625%, Due 12/01/28
(Putable at $100 and Rate Reset Effective
12/01/03) 3,500,000 3,460,625
Missouri 0.4%
St. Louis County, Missouri IDA MFHR Refunding -
Heatherbrook Gardens Project, 5.10%, Due
3/01/05 (Mandatory Put at $100 on 3/01/02) 1,280,000 1,283,200
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Hampshire 0.9%
New Hampshire Business Finance Authority PCR
Refunding - United Illuminating Company Project,
4.55%, Due 7/01/27 (Mandatory Put at $100 on
2/01/04) $3,000,000 $3,000,000
Texas 5.3%
Bexar County, Texas HFC MFHR - Park Ridge
Apartments Project, 5.50%, Due 5/01/35
(Mandatory Put at $100 on 5/01/03) 4,775,000 4,721,281
Northwest Trails Apartment Trust Pass-Thru
Certificates, 5.25%, Due 4/01/13 (Mandatory Put
at $100 on 10/01/01) 7,425,000 7,360,031
Trinity River Authority Refunding - Texas
Industries, Inc. Project, 6.1875%, Due 9/01/07
(Putable at $100 and Rate Reset Effective 11/01/01) 1,310,000 1,321,462
Trinity River Authority Refunding - Texas
Industries, Inc. Project, Series A, 6.1875%, Due
9/01/07 (Putable at $100 and Rate Reset Effective
11/01/01) 3,740,000 3,772,725
-----------
17,175,499
Virginia 1.0%
James City County, Virginia IDA Residential Care
Facility First Mortgage Revenue - Williamsburg
Landing, Inc. Project, 5.75%, Due 3/01/26 (Putable
at $100 and Rate Reset Effective 9/01/01) 3,000,000 3,009,450
Prince William County, Virginia IDA Residential
Care Facility First Mortgage Revenue -
Westminster Presbyterian Retirement Project,
6.00%, Due 1/01/25 (Putable at $100 and Rate
Reset Effective 1/01/03) 210,000 211,090
-----------
3,220,540
- -----------------------------------------------------------------------------------------------------------------------
Total Variable Rate Put Bonds (Cost $38,902,153) 39,066,345
- -----------------------------------------------------------------------------------------------------------------------
Taxable Municipal Bonds 0.1%
Minnesota 0.1%
Woodbury, Minnesota Lease Revenue - Minnesota
Math and Science Academy Project, 8.50%,
Due 11/01/03 175,000 172,375
Texas 0.0%
Bexar County, Texas HFC MFHR - Park Ridge
Apartments Project, 9.00%, Due 5/01/03 110,000 107,388
- -----------------------------------------------------------------------------------------------------------------------
Total Taxable Municipal Bonds (Cost $285,000) 279,763
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 10.1%
Municipal Bonds 1.9%
Arizona 0.1%
Phoenix, Arizona IDA Hospital Revenue - John C.
Lincoln Hospital and Health Center Project,
4.65%, Due 12/01/99 225,000 225,279
California 0.7%
California Health Facilities Financing Authority
Hospital Revenue - Downey Community Hospital
Project, 4.90%, Due 5/15/00 2,325,000 2,343,809
Guam 0.4%
Guam Airport Authority General Revenue, 5.80%,
10/01/99 1,450,000 1,451,812
Illinois 0.2%
Illinois DFA IDR - Engis Corporation Project,
7.65%, Due 10/01/99 275,000 275,671
Illinois EFA Revenue - Lewis University Project,
4.50%, Due 10/01/99 240,000 240,048
-----------
515,719
Ohio 0.3%
Cleveland, Ohio City School District Energy
Conservation Improvement GO, 6.53%,
Due 3/15/00 650,000 657,482
Sidney, Ohio IDR - Richard Klinger Project, 7.70%,
Due 12/01/99 335,000 337,640
-----------
995,122
Texas 0.1%
Farmers Branch, Texas IDC IDR - Thermalloy, Inc.
Project, 6.105%, Due 4/24/00:
Series A 215,000 215,538
Series B 215,000 215,537
-----------
431,075
Wisconsin 0.1%
Wisconsin Rapids, Wisconsin GO, 6.10%,
Due 9/01/99 225,000 225,000
-----------
Total Municipal Bonds 6,187,816
Variable Rate Put Bonds 1.2%
Arizona 0.8%
Scottsdale, Arizona IDA First Mortgage Revenue
Refunding - Westminster Village, Inc. Project,
5.50%, Due 6/01/17 (Putable at $100 and Rate
Reset Effective 12/01/99) 2,700,000 2,700,000
Michigan 0.4%
Michigan State HDA Limited Obligation Revenue -
River Place Plaza Apartments Project, 5.50%,
Due 6/01/18 (Mandatory Put at $100 on 6/01/00) 1,335,000 1,335,934
-----------
Total Variable Rate Put Bonds 4,035,934
Annual Variable Rate Put Bonds 2.4%
Illinois 1.2%
Peoria County, Illinois Congregate Care Revenue -
St. Francis Woods Project, 5.625%, Due 4/01/00 3,770,000 3,768,417
Missouri 1.2%
Jackson County, Missouri IDA MFHR - Pine Valley
Apartments Project, 5.625%, Due 3/01/00 3,800,000 3,803,990
-----------
Total Annual Variable Rate Put Bonds 7,572,407
Daily Variable Rate Put Bonds 1.5%
District of Columbia
District of Columbia Revenue - Medlantic Project,
5.20%, Due 9/01/99 5,000,000 5,000,000
Municipal Money Market Funds 3.1%
Multiple States
Strong Municipal Money Market Fund (d) 10,000,000 10,000,000
- -----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $32,785,565) 32,796,157
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Investments in Securities (Cost $336,868,103) 104.4% 338,954,784
Other Assets and Liabilities, Net (4.4%) (14,216,256)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $324,738,528
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
25
</TABLE>
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEGEND
- --------------------------------------------------------------------------------
(a) Short-term investments include any security which has a remaining maturity
of less than one year.
(b) All or a portion of security is when-issued.
(c) All or a portion of security is pledged to cover margin requirements for
futures contracts.
(d) Affiliated issuer (see Note 7 of Notes to Financial Statements).
Maturity date represents actual maturity or the longer of the next put date or
interest adjustment date.
Percentages are stated as a percent of net assets.
- --------------------------------------------------------------------------------
ABBREVIATIONS
- --------------------------------------------------------------------------------
The following is a list of abbreviations that may be used in the Schedules of
Investments in Securities:
BAN -- Bond Anticipation Notes
CDA -- Commercial Development Authority
CDR -- Commercial Development Revenue
COP -- Certificates of Participation
DFA -- Development Finance Authority
EDA -- Economic Development Authority
EDC -- Economic Development Corporation
EDFA -- Economic Development Finance Authority
EDR -- Economic Development Revenue
EFA -- Educational Facilities Authority
EXTRAS -- Extendable Rate Adjustable Securities
GO -- General Obligation
HDA -- Housing Development Authority
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
HFC -- Housing Finance Corporation
IBA -- Industrial Building Authority
IBR -- Industrial Building Revenue
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDC -- Industrial Development Corporation
IDFA -- Industrial Development Finance Authority
IDR -- Industrial Development Revenue
IFA -- Investment Finance Authority
MFHR -- Multi-Family Housing Revenue
MFMR -- Multi-Family Mortgage Revenue
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
SFHR -- Single Family Housing Revenue
SFMR -- Single Family Mortgage Revenue
TAN -- Tax Anticipation Notes
TRAN -- Tax and Revenue Anticipation Notes
See Notes to Financial Statements.
26
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
August 31, 1999
(In Thousands, Except Per Share Amounts)
Strong Strong Strong Short-Term Strong Short-Term
High-Yield Municipal Municipal High Yield Municipal
Bond Fund Bond Fund Municipal Fund Bond Fund
-------------------- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Securities, at Value
Unaffiliated Issuers (Cost of $618,185, $382,880,
$180,785 and $326,868, respectively) $604,948 $376,203 $178,378 $328,955
Affiliated Issuers (Cost of $39,100, $6,500, $9,500
and $10,000, respectively) 39,100 6,500 9,500 10,000
Receivable for Securities Sold 11,145 -- -- 2,475
Receivable for Fund Shares Sold 186 290 -- 101
Interest and Dividends Receivable 11,438 5,535 3,063 5,416
Other Assets 506 138 409 110
-------- -------- -------- --------
Total Assets 667,323 388,666 191,350 347,057
LIABILITIES:
Payable for Securities Purchased 28,539 16,803 8,807 21,058
Payable for Fund Shares Redeemed 298 5 100 6
Dividends Payable 3,068 1,627 720 1,217
Accrued Operating Expenses and Other Liabilities 40 19 26 37
-------- -------- -------- --------
Total Liabilities 31,945 18,454 9,653 22,318
-------- -------- -------- --------
NET ASSETS $635,378 $370,212 $181,697 $324,739
-------- -------- -------- --------
-------- -------- -------- --------
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $654,569 $404,488 $184,429 $337,834
Undistributed Net Investment Income -- -- -- 2
Accumulated Net Realized Loss (5,524) (27,599) (156) (15,184)
Net Unrealized Appreciation (Depreciation) (13,667) (6,677) (2,576) 2,087
-------- -------- -------- --------
Net Assets $635,378 $370,212 $181,697 $324,739
-------- -------- -------- --------
-------- -------- -------- --------
Capital Shares Outstanding (Unlimited Number Authorized) 64,888 39,530 18,192 33,277
NET ASSET VALUE PER SHARE $9.79 $9.37 $9.99 $9.76
-------- -------- -------- --------
-------- -------- -------- --------
See Notes to Financial Statements.
27
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Year Ended August 31, 1999
(IN THOUSANDS)
STRONG STRONG STRONG SHORT-TERM STRONG SHORT-TERM
HIGH-YIELD MUNICIPAL MUNICIPAL HIGH YIELD MUNICIPAL
BOND FUND BOND FUND MUNICIPAL FUND BOND FUND
-------------------- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
INCOME:
Interest $41,541 $21,251 $7,830 $14,746
Dividends - Unaffiliated Issuers -- 39 -- --
Dividends - Affiliated Issuers 928 332 220 335
------- ------- ------ -------
Total Income 42,469 21,622 8,050 15,081
EXPENSES:
Investment Advisory Fees 3,859 2,169 880 1,379
Custodian Fees 32 21 9 16
Shareholder Servicing Costs 312 284 49 176
Federal and State Registration Fees 55 38 71 61
Other 206 100 17 58
------- ------- ------ -------
Total Expenses before Waivers and Absorptions 4,464 2,612 1,026 1,690
Voluntary Expense Waivers and Absorptions by Advisor -- -- (459) --
------- ------- ------ -------
Expenses, Net 4,464 2,612 567 1,690
------- ------- ------ -------
NET INVESTMENT INCOME 38,005 19,010 7,483 13,391
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (5,805) 1,065 (617) (2,632)
Futures Contracts 2,706 (49) 544 --
------- ------- ------ -------
Net Realized Gain (Loss) (3,099) 1,016 (73) (2,632)
Net Change in Unrealized Appreciation/Depreciation on:
Investments (42,240) (25,676) (2,951) (4,117)
Futures Contracts 17 -- (169) --
------- ------- ------ -------
Net Change in Unrealized Appreciation/Depreciation (42,223) (25,676) (3,120) (4,117)
------- ------- ------ -------
NET LOSS ON INVESTMENTS (45,322) (24,660) (3,193) (6,749)
------- ------- ------ -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ($ 7,317) ($ 5,650) $4,290 $ 6,642
------- ------- ------ -------
------- ------- ------ -------
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Strong High-Yield Strong Municipal
Municipal Bond Fund Bond Fund
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
Aug. 31, 1999 Aug. 31, 1998 Aug. 31, 1999 Aug. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 38,005 $ 28,877 $ 19,010 $ 13,272
Net Realized Gain (Loss) (3,099) 2,108 1,016 3,091
Net Change in Unrealized Appreciation/Depreciation (42,223) 16,708 (25,676) 7,968
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets Resulting from
Operations (7,317) 47,693 (5,650) 24,331
DISTRIBUTIONS:
From Net Investment Income (38,005) (28,877) (19,010) (13,272)
From Net Realized Gains (3,100) (743) -- --
-------- -------- -------- --------
Total Distributions (41,105) (29,620) (19,010) (13,272)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 502,307 513,592 275,238 134,471
Proceeds from Reinvestment of Distributions 31,469 21,163 14,881 10,102
Payment for Shares Redeemed (517,242) (247,044) (182,161) (100,839)
-------- -------- -------- --------
Net Increase in Net Assets from Capital Share Transactions 16,534 287,711 107,958 43,734
-------- -------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS (31,888) 305,784 83,298 54,793
NET ASSETS:
Beginning of Year 667,266 361,482 286,914 232,121
-------- -------- -------- --------
End of Year $635,378 $667,266 $370,212 $286,914
-------- -------- -------- --------
-------- -------- -------- --------
TRANSACTIONS IN SHARES OF THE FUND:
Sold 48,707 49,323 27,799 13,683
Issued in Reinvestment of Distributions 3,057 2,036 1,507 1,033
Redeemed (50,294) (23,751) (18,591) (10,296)
-------- -------- -------- --------
Net Increase in Shares of the Fund 1,470 27,608 10,715 4,420
-------- -------- -------- --------
-------- -------- -------- --------
See Notes to Financial Statements.
29
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Strong Short-Term Strong Short-Term
High Yield Municipal Fund Municipal Bond Fund
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
Aug. 31, 1999 Aug. 31, 1998 Aug. 31, 1999 Aug. 31, 1998
------------- ------------- ------------- -------------
(Note 1)
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 7,483 $ 1,643 $ 13,391 $ 9,310
Net Realized Loss (73) (83) (2,632) (268)
Net Change in Unrealized Appreciation/Depreciation (3,120) 543 (4,117) 2,618
-------- -------- -------- --------
Net Increase in Net Assets Resulting from Operations 4,290 2,103 6,642 11,660
DISTRIBUTIONS FROM NET INVESTMENT INCOME (7,483) (1,643) (13,391) (9,310)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 210,900 124,691 277,898 167,477
Proceeds from Reinvestment of Distributions 5,751 971 11,311 7,757
Payment for Shares Redeemed (132,398) (25,485) (168,516) (131,741)
-------- -------- -------- --------
Net Increase in Net Assets from Capital Share Transactions 84,253 100,177 120,693 43,493
-------- -------- -------- --------
TOTAL INCREASE IN NET ASSETS 81,060 100,637 113,944 45,843
NET ASSETS:
Beginning of Year 100,637 -- 210,795 164,952
-------- -------- -------- --------
End of Year $181,697 $100,637 $324,739 $210,795
-------- -------- -------- --------
-------- -------- -------- --------
TRANSACTIONS IN SHARES OF THE FUND:
Sold 20,836 12,315 27,952 16,920
Issued in Reinvestment of Distributions 568 96 1,137 784
Redeemed (13,107) (2,516) (17,005) (13,308)
-------- -------- -------- --------
Net Increase in Shares of the Fund 8,297 9,895 12,084 4,396
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
August 31, 1999
1. ORGANIZATION
The accompanying financial statements represent the Strong Municipal Income
Funds (the "Funds"), which include the following funds, each with its own
investment objectives and policies:
- Strong High-Yield Municipal Bond Fund, Inc. (1)
- Strong Municipal Bond Fund, Inc. (1)
- Strong Short-Term High Yield Municipal Fund (a series of Strong
Municipal Funds, Inc.(1))
- Strong Short-Term Municipal Bond Fund, Inc. (1)
(1) A diversified, open-end management investment company registered under
the Investment Company Act of 1940.
The inception date for Strong Short-Term High Yield Municipal Fund is
November 30, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) SECURITY VALUATION -- Securities of the Funds are valued at fair value
through valuations obtained by a commercial pricing service or the
mean of the bid and asked prices when no last sales price is
available. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith under
consistently applied procedures established by and under the general
supervision of the Board of Directors. Securities which are purchased
within 60 days of their stated maturity are valued at amortized cost,
which approximates fair value.
The Funds may own certain investment securities which are restricted
as to resale. These securities are valued after giving due
consideration to pertinent factors, including recent private sales,
market conditions and the issuer's financial performance. The Funds
generally bear the costs, if any, associated with the disposition of
restricted securities. The Funds held no restricted securities at
August 31, 1999.
(B) FEDERAL INCOME AND EXCISE TAXES AND DISTRIBUTIONS TO SHAREHOLDERS --
The Funds intend to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains for financial statement
purposes may differ from the characterization for federal income tax
purposes due to differences in the recognition of income and expense
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
Each Fund generally pays dividends from net investment income monthly
and distributes any net capital gains that it realizes annually.
Dividends are declared on each day the net asset value is calculated
except bank holidays.
(C) REALIZED GAINS AND LOSSES ON INVESTMENT TRANSACTIONS -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) CERTAIN INVESTMENT RISKS -- The Funds may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with
the Funds' investment objectives and limitations. The Funds intend to
use such derivative instruments primarily to hedge or protect from
adverse movements in securities prices or interest rates. The use of
these instruments may involve risks such as the possibility of
illiquid markets or imperfect correlation between the value of the
instruments and the underlying securities, or that the counterparty
will fail to perform its obligations.
(E) FUTURES -- Upon entering into a futures contract, the Funds pledge to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Funds may be designated as collateral on open futures contracts.
The Funds also receive from or pay to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin," and are recorded
as unrealized gains or losses. When the futures contract is closed, a
realized gain or loss is recorded equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
(F) USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts in these financial statements. Actual results could differ
from those estimates.
(G) OTHER -- Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premiums and discounts.
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
August 31, 1999
(H) EXPENSE OFFSET ARRANGEMENTS -- Certain Funds pay a portion of their
custodian fees indirectly through expense offset arrangements.
Custodian fees are reduced for Funds that maintain compensating
balances in non-interest bearing accounts. The Funds could have
invested the assets used to pay for the custodian fees, had the assets
not been used in the expense offset arrangements. During the year
ended August 31, 1999, there were no amounts paid through expense
offset arrangements for the Funds.
3. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain
officers and directors of the Funds are affiliated, provides investment
advisory services and shareholder recordkeeping and related services to the
Funds. Investment advisory fees, which are established by terms of the
Advisory Agreements, are based on the following annualized rates of average
daily net assets: Strong Short-Term Municipal Bond Fund 0.50%, Strong
Municipal Bond Fund, Strong High-Yield Municipal Bond Fund and Strong
Short-Term High Yield Municipal Fund 0.60%. Based on the terms of the
Advisory Agreements, advisory fees and other expenses will be waived by the
Advisor if the Fund's operating expenses exceed 2% of the average daily net
assets of the Fund. In addition, the Fund's Advisor may voluntarily waive
or absorb certain expenses at their discretion. Shareholder recordkeeping
and related service fees are based on contractually established rates for
each open and closed shareholder account. In addition, the Advisor is
compensated for certain other services related to costs incurred for
reports to shareholders.
The Funds may invest in money market funds sponsored and managed by the
Advisor, subject to certain limitations. The terms of such transactions are
identical to those of non-related entities except that, to avoid duplicate
investment advisory fees, advisory fees of each Fund are reduced by an
amount equal to advisory fees paid to the Advisor under its investment
advisory agreement with the money market funds.
Certain information regarding related party transactions, excluding the
effect of waivers and absorptions, for the year ended August 31, 1999, is
as follows:
<TABLE>
<CAPTION>
Shareholder Servicing Unaffiliated
Payable to Advisor at and Other Expenses Directors'
August 31, 1999 Paid to Advisor Fees
--------------------- --------------------- ------------
<S> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $8,445 $438,541 $6,625
Strong Municipal Bond Fund 4,649 349,422 4,256
Strong Short-Term High Yield Municipal Fund 4,482 49,122 2,599
Strong Short-Term Municipal Bond Fund 4,565 176,249 3,587
</TABLE>
4. LINE OF CREDIT
The Strong Funds have established a line of credit agreement ("LOC") with
certain financial institutions to be used for temporary or emergency
purposes, primarily for financing redemption payments. Combined borrowings
among all participating Strong Funds are subject to a $350 million cap on
the total line of credit. For individual Funds, borrowings under the LOC
are limited to either the lesser of 15% of the market value of total assets
or any explicit borrowing limits in the Fund's prospectus. Borrowings under
the LOC bear interest based on prevailing market rates as defined in the
LOC. A commitment fee of .07% per annum is incurred on the unused portion
of the line of credit and is allocated to all participating Strong Funds.
At August 31, 1999, there were no borrowings by the Funds outstanding under
the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the year
ended August 31, 1999, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Strong High-Yield Municipal Bond Fund $347,334,488 $354,713,845
Strong Municipal Bond Fund 192,761,993 81,282,891
Strong Short-Term High Yield Municipal Fund 118,991,615 32,652,266
Strong Short-Term Municipal Bond Fund 184,355,479 62,065,193
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
6. INCOME TAX INFORMATION
At August 31, 1999, the investment cost, gross unrealized appreciation and
depreciation on investments and capital loss carryovers (expiring in
varying amounts through 2007) for federal income tax purposes were as
follows:
<TABLE>
<CAPTION>
Net
Federal Tax Unrealized Unrealized Appreciation/ Capital Loss
Cost Appreciation Depreciation Depreciation Carryovers
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Strong High-Yield Municipal Bond Fund $657,309,110 $18,369,562 $31,630,634 ($13,261,072) $ --
Strong Municipal Bond Fund 389,382,826 6,976,401 13,656,586 (6,680,185) 27,596,278
Strong Short-Term High Yield Municipal Fund 190,285,489 156,727 2,564,698 (2,407,971) 324,695
Strong Short-Term Municipal Bond Fund 336,868,703 3,432,363 1,346,282 2,086,081 15,184,074
</TABLE>
During the year ended August 31, 1999, the Strong High-Yield Municipal Bond
Fund paid capital gains distributions (taxable as long term gains at 20%)
of $499,746 to shareholders.
The Strong Municipal Bond Fund utilized $916,624 of its capital loss
carryovers during the year ended August 31, 1999.
The Strong High-Yield Municipal Bond Fund realized, on a tax basis,
post-October losses through August 31, 1999 of $5,915,891, which are not
recognized for tax purposes until the first day of the following fiscal
year.
7. INVESTMENTS IN AFFILIATES
Affiliated issuers, as defined under the Investment Company Act of 1940,
include those in which the Fund's holdings of an issuer represent 5% or
more of the outstanding voting securities of the issuer and any other
Strong Fund. A summary of transactions in the securities of these issuers
during the year ended August 31, 1999 is as follows:
<TABLE>
<CAPTION>
Balance of Balance of Dividend
Shares Gross Gross Sales Shares Value Income
Held Purchases and Held Aug. 31, Sept. 1, 1998 -
Sept. 1, 1998 and Additions Reductions Aug. 31, 1999 1999 Aug. 31, 1999
------------- ------------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
STRONG HIGH-YIELD MUNICIPAL BOND FUND
-------------------------------------
Strong Municipal Money Market Fund 52,800,000 308,300,000 322,000,000 39,100,000 $39,100,000 $928,178
STRONG MUNICIPAL BOND FUND
--------------------------
Strong Municipal Money Market Fund 3,000,000 167,750,000 164,250,000 6,500,000 6,500,000 331,751
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
-------------------------------------------
Strong Municipal Money Market Fund 4,700,000 32,450,000 27,650,000 9,500,000 9,500,000 219,802
STRONG SHORT-TERM MUNICIPAL BOND FUND
-------------------------------------
Strong Municipal Money Market Fund 4,900,000 211,300,000 206,200,000 10,000,000 10,000,000 335,435
33
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD MUNICIPAL BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Period Ended
----------------------------------------------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998 1997 1996(c) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.52 $10.09 $9.45 $9.91 $9.29 $10.10
Income From Investment Operations
Net Investment Income 0.58 0.59 0.61 0.44 0.69 0.71
Net Realized and Unrealized Gains (Losses) on Investments (0.68) 0.45 0.64 (0.46) 0.62 (0.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.10) 1.04 1.25 (0.02) 1.31 (0.10)
Less Distributions
From Net Investment Income (b) (0.58) (0.59) (0.61) (0.44) (0.69) (0.71)
From Net Realized Gains (0.05) (0.02) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.61) (0.61) (0.44) (0.69) (0.71)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.79 $10.52 $10.09 $9.45 $9.91 $ 9.29
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return -1.1% +10.5% +13.6% -0.1% +14.6% -1.0%
Net Assets, End of Period (In Millions) $635 $667 $361 $238 $267 $108
Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 0.7% 0.7% 0.7% 0.7%* 0.8% 0.8%
Ratio of Expenses to Average Net Assets 0.7% 0.7% 0.7% 0.7%* 0.4% 0.0%
Ratio of Net Investment Income to Average Net Assets 5.7% 5.7% 6.2% 6.9%* 7.1% 7.5%
Portfolio Turnover Rate 52.5% 66.5% 92.1% 106.8% 113.8% 198.1%
</TABLE>
STRONG MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Period Ended
----------------------------------------------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998 1997 1996(c) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.96 $9.52 $8.99 $9.52 $9.23 $10.25
Income From Investment Operations
Net Investment Income 0.51 0.51 0.50 0.33 0.52 0.56
Net Realized and Unrealized Gains (Losses) on Investments (0.59) 0.44 0.53 (0.53) 0.51 (1.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.08) 0.95 1.03 (0.20) 1.03 (0.46)
Less Distributions
From Net Investment Income (b) (0.51) (0.51) (0.50) (0.33) (0.54) (0.56)
In Excess of Net Investment Income -- -- -- -- (0.20) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.51) (0.50) (0.33) (0.74) (0.56)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.37 $9.96 $9.52 $8.99 $9.52 $ 9.23
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return -1.0% +10.1% +11.8% -2.1% +11.4% -4.6%
Net Assets, End of Period (In Millions) $370 $287 $232 $247 $247 $280
Ratio of Expenses to Average Net Assets 0.7% 0.7% 0.8% 0.8%* 0.8% 0.8%
Ratio of Net Investment Income to Average Net Assets 5.1% 5.2% 5.4% 5.4%* 5.4% 5.8%
Portfolio Turnover Rate 22.4% 58.5% 85.0% 172.9% 513.8% 311.0%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) In 1996, the Fund changed its fiscal year-end from December to August.
See Notes to Financial Statements.
34
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD MUNICIPAL FUND
- ---------------------------------------------------------------------------------------------
Period Ended
------------------
Aug. 31, Aug. 31,
Selected Per-Share Data(a) 1999 1998(c)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.17 $10.00
Income From Investment Operations
Net Investment Income 0.50 0.37
Net Realized and Unrealized Gains (Losses) on Investments (0.18) 0.17
- ---------------------------------------------------------------------------------------------
Total from Investment Operations 0.32 0.54
Less Distributions
From Net Investment Income (b) (0.50) (0.37)
- ---------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.37)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.99 $10.17
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------------------
Total Return +3.2% +5.5%
Net Assets, End of Period (In Millions) $182 $101
Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 0.7% 1.0%*
Ratio of Expenses to Average Net Assets 0.4% 0.4%*
Ratio of Net Investment Income to Average Net Assets 4.9% 5.0%*
Portfolio Turnover Rate 22.7% 8.1%
</TABLE>
STRONG SHORT-TERM MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Period Ended
----------------------------------------------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998 1997 1996(d) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.95 $9.82 $9.67 $9.77 $9.73 $10.36
Income From Investment Operations
Net Investment Income 0.47 0.48 0.49 0.33 0.47 0.45
Net Realized and Unrealized Gains (Losses) on Investments (0.19) 0.13 0.15 (0.10) 0.04 (0.62)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.28 0.61 0.64 0.23 0.51 (0.17)
Less Distributions
From Net Investment Income (b) (0.47) (0.48) (0.49) (0.33) (0.47) (0.45)
From Net Realized Gains -- -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.48) (0.49) (0.33) (0.47) (0.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.76 $9.95 $9.82 $9.67 $9.77 $ 9.73
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return +2.8% +6.3% +6.7% +2.4% +5.4% -1.6%
Net Assets, End of Period (In Millions) $325 $211 $165 $136 $133 $161
Ratio of Expenses to Average Net Assets 0.6% 0.6% 0.7% 0.7%* 0.8% 0.7%
Ratio of Net Investment Income to Average Net Assets 4.7% 4.8% 5.0% 5.1%* 4.8% 4.5%
Portfolio Turnover Rate 22.7% 15.7% 26.2% 38.0% 226.8% 273.2%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Tax-exempt for regular federal income tax purposes.
(c) For the period from November 30, 1997 (inception) to August 31, 1998.
(d) In 1996, the Fund changed its fiscal year-end from December to August.
See Notes to Financial Statements.
35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Municipal Income Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Strong High-Yield Municipal Bond
Fund, Inc., Strong Municipal Bond Fund, Inc., Strong Short-Term High Yield
Municipal Fund (one of the portfolios constituting the Strong Municipal Funds,
Inc.) and Strong Short-Term Municipal Bond Fund, Inc. (all four of the
portfolios collectively referred to herein as the "Strong Municipal Income
Funds") at August 31, 1999, the results of each of their operations, the changes
in each of their net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Strong Municipal Income
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Milwaukee,Wisconsin
October 6, 1999
36
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, CHAIRMAN OF THE BOARD
Mary F. Hoppa, VICE PRESIDENT
John S. Weitzer, VICE PRESIDENT
Stephen J. Shenkenberg, VICE PRESIDENT AND SECRETARY
John W. Widmer, TREASURER
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
DISTRIBUTOR
Strong Investments, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Bank Milwaukee, N.A.
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
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For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
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[GRAPHIC]
To order a free prospectus kit,
call 1-800-368-1030
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
call 1-800-368-3863
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If you are a
Financial Professional,
call 1-800-368-1683
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[GRAPHIC]
Strong On-line
www.strongfunds.com
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[LOGO]
STRONG FUNDS
P.O. Box 2936 - Milwaukee, Wisconsin 53201
STRONG INVESTMENTS, INC. 12899I99 AMUNI
