-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UW3YZZqDGkV3573DTJwsSuTM0NtkqXbJu+1Jpy6gdQ1p6YGsqbjYfdnqBU88rEGf tX3UfCIv6NBM8dn9NN6zGg== 0000950124-95-000289.txt : 19950518 0000950124-95-000289.hdr.sgml : 19950518 ACCESSION NUMBER: 0000950124-95-000289 CONFORMED SUBMISSION TYPE: ARS PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950215 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRONG INSURED MUNICIPAL BOND FUND INC CENTRAL INDEX KEY: 0000879142 STANDARD INDUSTRIAL CLASSIFICATION: FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: ARS SEC ACT: 1934 Act SEC FILE NUMBER: 811-06410 FILM NUMBER: 95511513 BUSINESS ADDRESS: STREET 1: P O BOX 2936 STREET 2: BRUCE D BEHLING CITY: MILWAUKEE STATE: WI ZIP: 53051 BUSINESS PHONE: 4143593400 ARS 1 INSURED MUNI AR 1 1 ANNUAL REPORT THE STRONG MUNICIPAL INCOME FUNDS [PHOTO Anonymous Man With Woman] THE STRONG MUNICIPAL MONEY MARKET FUND THE STRONG SHORT-TERM MUNICIPAL BOND FUND THE STRONG INSURED MUNICIPAL BOND FUND THE STRONG MUNICIPAL BOND FUND THE STRONG HIGH-YIELD MUNICIPAL BOND FUND [STRONG LOGO] DECEMBER 31,1994 2 SHAREHOLDER PRIVILEGES* TELEPHONE PURCHASE Make additional investments from $50 to $25,000 into any Strong Fund by calling us toll-free at 1-800-368-3863. TELEPHONE EXCHANGE If your financial goals change, you can exchange between any of the Strong Funds free of charge. TELEPHONE REDEMPTION You can call toll-free to redeem your mutual fund shares at any time. Your shares will be redeemed no later than the close of the next business day. AUTOMATIC INVESTMENT PLAN This plan allows you to set up regular transfers from your bank checking or NOW account to your Strong Funds account. The minimum amount per transfer is $50. PAYROLL DIRECT DEPOSIT PLAN You can automatically transfer all or a portion of your net pay at each pay period. This eliminates the delay of depositing paychecks to your bank and then sending a check through the mail to Strong Funds. AUTOMATIC EXCHANGE PLAN This plan allows you to exchange money from one Strong Fund to another. For example, you may want to set up automatic exchanges from a money market fund to an equity fund. The minimum amount per exchange is $50. NO MINIMUM INVESTMENT PROGRAM The Funds will waive the minimum initial investment for investors using the Automatic Investment Plan. For more information about these privileges, call us at 1-800-368-3863. To reduce the volume of mail you receive, only one copy of certain materials, such as prospectuses and shareholder reports, is mailed to your household. Please call 1-800-368-3863 if you wish to receive additional copies, free of charge. *Each Fund reserves the right to terminate or modify any of these privileges. 3 TABLE OF CONTENTS MESSAGE FROM THE CHAIRMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 INVESTMENT REVIEWS The Strong Municipal Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Strong Short-Term Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Strong Insured Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 The Strong Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 The Strong High-Yield Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 FINANCIAL INFORMATION Equivalent Taxable Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Historical Investment Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Summary of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Historical Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Schedules of Investments in Securities The Strong Municipal Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 The Strong Short-Term Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 The Strong Insured Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 The Strong Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 The Strong High-Yield Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Statements of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4 Message from the Chairman Dear Strong Funds Investor: We are pleased to report that 1994, our twentieth year, was extremely successful. In a challenging investment environment, our results were, once again, very satisfying, with many of our funds being among the top performers in their categories. Mutual fund assets under management grew past $8 billion, and active accounts passed the 500,000 mark. [PHOTO of Richard S. Strong] Morningstar, Inc., a nationally recognized authority on mutual funds, assigns "star" ratings to funds, with 1 star as the lowest rating and 5 stars the highest. Of the twelve Strong Funds that Morningstar currently rates, all have at least a 3-star rating, and many carry 4 or 5 stars. We believe this objective, unbiased recognition of Strong Funds speaks extremely well for the talent and strength of our firm's investment department. We are very encouraged by the shift that has occurred in the Congress as a result of the 1994 elections. Looking ahead, we believe this sweeping change will have a number of important implications. Among them: - - - Federal Reserve Board policies should be supported, not hampered, by Congress. - - - The U.S. dollar may once again become a bastion of stability and confidence. 2 5 - - - Inflation should trend downward over time. - - - Entrepreneurial initiatives, investments and business should receive positive, rather than negative, legislative treatment. With another year of solid investment results behind us and a favorable investment climate ahead, we are very confident in our future growth potential. To fully realize this potential, we forged ahead this past year and implemented strategic actions aimed at providing you with superior investment results, a wide and expanding range of investment products, and exceptional service. First and foremost, our strategy relies on having very talented and dedicated people who are deeply committed to you and the stewardship of your investments. Our team enjoys a dynamic balance of successful and experienced portfolio managers, combined with our own rising young talent. Simply put, we believe that we have developed an excellent investment management team to serve you. To further enhance the effectiveness of our entire organization, we made several significant additions to our management and administrative capabilities in 1994. We were very pleased to have John Dragisic join us as Vice Chairman. John brings with him many successful years of general management experience and a unique perspective on the company as a former member of the Strong Funds Board. Among several other new positions, we were particularly pleased with the appointment of Rochelle Lamm Wallach as President of Strong Advisory Services, a new unit that will lead our efforts in today's critically important retirement and financial intermediary markets. These appointments, and the others we have made during the past year, will contribute greatly to the continued growth and success we expect in our third decade. These are important changes for you, because they not only strengthen the management of your Fund's advisor, but they also make it possible for us to continue building on our strengths with better service and a wider array of investment alternatives. With these vital resources now in place, we look forward to the coming year with great confidence. We thank you for your continued support. Sincerely, /s/ Richard S. Strong Richard S. Strong Chairman 3 6 The Strong Municipal Money Market Fund As of 12/30/94 7-DAY CURRENT YIELD(2) 4.54% 7-DAY EFFECTIVE YIELD(2) 4.64% The Strong Municipal Money Market Fund is managed for a high level of federally tax-exempt income, principal preservation, and daily liquidity. Since its inception on October 23, 1986, the Strong Municipal Money Market Fund has provided its shareholders with consistently superior returns. Based on total return from its inception through December 31, 1994, the Fund ranked #1 of 60 tax-exempt money market funds tracked by Lipper Analytical Services, a respected mutual-fund evaluation service. The Fund carries outstanding rankings for more recent periods, as well, ranking #1 of 121 funds and #1 of 84 funds, respectively, for the one- and five-year periods ended December 31, 1994.(1) ATTRACTIVE YIELDS As of December 30, 1994, the Strong Municipal Money Market Fund's 7-day current yield was 4.54%, and its 7-day effective yield--which reflects compounding--was 4.64%.(2) The following table shows the Fund's equivalent taxable yields for each of 1994's federal income tax brackets. EQUIVALENT TAXABLE YIELDS(2) as of 12/30/94
Your tax-exempt effective yield of Taxable Income 4.64% Marginal is equivalent to a Joint Return Single Return Tax Rate taxable yield of: $38,000 $22,750 & under & under 15% 5.46% $38,001- $22,751- 91,850 55,100 28% 6.44% $91,851- $55,101- 140,000 115,000 31% 6.72% $140,001- $115,001- 250,000 250,000 36% 7.25% over over $250,000 $250,000 39.6% 7.68%
A HIGH-QUALITY PORTFOLIO The Strong Municipal Money Market Fund invests only in short-term securities with minimal credit risk. All of the Fund's holdings are rated within the top two short-term rating categories or are of comparable quality. Furthermore, we have not invested in the types of derivatives identified by the Securities and Exchange Commission as unsuitable for money market funds. [PHOTO Four Children Playing] 4 7 This year, as in the past, our extensive research process helped us identify opportunities to gain incremental yield without compromising credit quality. We believe all our holdings remain sound and that the Fund is--and will continue to be--solidly valued at $1.00 per share. (3) BELT AND SUSPENDERS More than 96% of the assets in the portfolio carry some type of quality enhancement, such as collateral, insurance, or an institutional support agreement, making the securities eligible for investment by the Fund. Because these arrangements act like suspenders on top of a belt, providing a promise--above and beyond the promise of the original issuer--to pay principal and interest, they boost the quality of these securities. To further enhance the Fund's stability, over 55% of the Fund's net assets carry a daily or weekly "put" feature. Because these securities can be sold in seven days or fewer at their contractual par value, they provide the Fund with a substantial cushion of liquidity. HIGHER RATES IN 1995 As we expected, the Federal Reserve repeatedly raised short-term interest rates throughout 1994. The resulting turbulence in both the stock and bond markets underscored for many investors the wisdom of maintaining a portion of their investments in a safe harbor, such as a money market fund. If you are among our new investors, welcome aboard; and if you have been with us for some time, thank you for your continued confidence. Looking ahead to 1995, we expect interest rates will continue to climb, although at a somewhat slower pace than in 1994. As always, whatever the economic environment, we remain committed to preserving the integrity of your investment and providing you with top-quality investment results. We believe that the Strong Municipal Money Market Fund is well-positioned to continue its performance in the future, and we pledge our continued best efforts in the years to come. Sincerely, [PHOTO of Steven D. Harrop] /s/ Steven D. Harrop Steven D. Harrop Portfolio Manager (1) The Fund's Lipper rankings in the tax-exempt money market fund category are based on total-return performance through 12/31/94. From time to time, the Fund's advisor has waived its management fee, which has resulted in higher returns. All performance rankings are historical and do not represent future results. (2) Yields are annualized for the 7 days ended 12/30/94, are historical, and will vary. The Fund's income may be subject to state and local taxes and, depending on your tax status, the Alternative Minimum Tax. The equivalent taxable yields are based on the Fund's effective yield, which assumes reinvested income. The chart reflects 1994 marginal federal income tax rates before limitations and phase-outs. Individuals with adjusted gross income exceeding $111,800 should consult their tax advisor to determine their actual 1994 marginal tax rate. (3) An investment in the Fund is neither insured nor guaranteed by the U.S. government, and there can be no assurance that the Fund will be able to maintain a stable share price of $1.00. 5 8 The Strong Short-Term Municipal Bond Fund As of 12/30/94 - - -------------- 30-DAY ANNUALIZED YIELD 5.08% AVERAGE MATURITY(2) 0.9 years AVERAGE QUALITY AA By investing in a diversified portfolio of short-term municipal securities, the Strong Short-Term Municipal Bond Fund seeks to provide its shareholders with as high a level of federally tax-exempt income as is consistent with preservation of capital. The Strong Short-Term Municipal Bond Fund's annualized 30-day yield finished the year at 5.08%, more than 130 basis points higher than its 1993 year-end level.(1) The table on page 14 shows the Fund's equivalent taxable yields for each of 1994's federal income tax brackets. HIGHER RATES AND ACCELERATED REDEMPTIONS A number of forces combined to exert downward pressure on municipal bond prices throughout 1994. The Federal Reserve, with six rate increases since February, sought to apply the brakes to economic growth in an effort to stave off the threat of inflation. Although the financial markets seemed more comfortable with the Fed's tactics by late fall, the bank's initial efforts caught many investors off guard. In February, as higher interest rates translated into lower bond prices, many new bond and bond-fund investors--who were unaccustomed to the market's volatility--began what has evolved into a ten-month sell-off. In the municipal bond market, where mutual funds play an especially large role, the higher-than-usual redemptions drove many funds simultaneously to liquidate portions of their portfolios, pushing a weak market even lower, and with surprising speed. Finally, concern late in the year over several selected credit situations--Orange County, California's bankruptcy, for example--dampened what had appeared to be the start of a rally in the municipal markets. For the most part, we believe these are isolated events precipitated by imprudent investment strategies,
GROWTH OF AN ASSUMED $10,000 INVESTMENT from 12/31/91 to 12/31/94 12/91 6/92 12/92 6/93 12/93 6/94 12/94 The Strong Short-Term Municipal Bond Fund 10,000 10,345 10,716 11,118 11,441 11,322 11,256 Lehman Brothers 3-Year Municipal Bond Index 10,000 10,309 10,643 11,022 11,305 11,276 11,383
Average Annual Total Returns through 12/31/94 Since inception on 12/31/91 4.02% 1-year -1.61% This graph, prepared in accordance with SEC regulations, compares a $10,000 investment in the Fund, made at its inception, with a similar investment in the Lehman Brothers 3-Year Municipal Bond Index, an unmanaged, total-return performance benchmark for the 3-year, tax-exempt bond market. Results include the reinvestment of all dividends and capital gains. Source for the index data is Micropal. Performance is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell Fund shares. Please see the Historical Investment Returns section for more information on the Fund's performance record. (1) The Fund's income may be subject to state and local taxes and, depending on your tax status, the Alternative Minimum Tax. At the end of 1993, the Fund's annualized 30-day yield was 3.76%. (2) When-issued securities and futures contracts are reflected in the Fund's average maturity. 6 9 not by problems inherent in the municipal or derivatives markets. However, regardless of the root cause, the resulting market turbulence affected most funds, even those--like the Strong Short-Term Municipal Bond Fund--that held no bonds issued by those municipalities. OUR STRATEGY Last spring, to boost the Short-Term Municipal Bond Fund's yield and take advantage of what we expected to be a flattening yield curve, we began buying longer-term bonds, capturing higher current income while hedging the commensurate interest-rate risk with exchange-traded futures and options. Although this strategy helped lead the Fund to one of the highest yields in its category, we have been disappointed by the resulting total return. Going forward, however, we believe the longer maturity/short futures strategy is a sound one, primarily because we expect the yields on long-term securities to decline, causing these securities to increase in value relative to shorter-term issues. Another benefit of this strategy is that it allows us to enhance the income potential of the Fund without relaxing our credit standards. The two most common avenues to a higher current income are longer maturities and lower credit quality. Because we have elected to pursue the former, we have been able to avoid sacrificing the latter. The Fund's average quality rating remains a solid AA.
BOND QUALITY AAA & comparable 42.0% AA & comparable 14.2% A & Comparable 26.9% BBB & comparable 21.3%
Weighted average ratings of fixed income securities as a percentage of net assets on 12/31/94. 14.3% of the Fund's net assets are unrated securities for which the advisor has made a comparable-quality determination. IN 1995, SLOWER GROWTH, FEWER BONDS By mid-year, we expect economic growth to begin to slow and interest rates to begin to decline. This, combined with 1994's elimination from the bond market of many highly leveraged, institutional investors, should make 1995 a less volatile year for municipal bonds. However, should economic growth accelerate--or should some unforeseen event or scandal shock the market--we could be in for further turbulence. [PHOTO of Thomas J. Conlin and Greg D. Winston] With higher interest rates, new-issue volume has slowed significantly over the past year. In addition, we expect that many investors will be searching for tax-free replacements as their older, high-coupon bonds are called for redemption in the coming months. The resulting supply/demand imbalance should push municipal bond prices higher. We appreciate your confidence in us during this rather difficult year, and we're looking forward to a more prosperous 1995. Sincerely, /s/ Thomas J. Conlin Thomas J. Conlin Portfolio Manager /s/ Greg D. Winston Greg D. Winston Portfolio Manager Effective January 9, 1995, Thomas J. Conlin and Greg D. Winston assumed portfolio management duties for the Fund, which had been managed by G. Nolan Smith since 1992. 7 10 The Strong Insured Municipal Bond Fund As of 12/30/94 30-DAY ANNUALIZED YIELD 5.33% AVERAGE MATURITY(2) 18.5 years AVERAGE QUALITY AAA By investing primarily in a portfolio of municipal securities that are insured for the timely payment of interest and repayment of principal, the Strong Insured Municipal Bond Fund seeks to provide as high a level of income exempt from federal income tax as is consistent with capital preservation. As of December 30, 1994, the Strong Insured Municipal Bond Fund's annualized 30-day yield was 5.33%, giving investors in the 36% tax bracket an equivalent taxable yield of 8.33%.(1) The table on page 14 shows the Fund's equivalent taxable yields for each of 1994's federal income tax brackets. RISING RATES HURT INSURED PRICES IN 1994 Although 1994 was a tough year for bonds in general, most insured municipal bond funds experienced especially sharp declines. Because insured bonds are among the most liquid and easily traded municipal securities, they tend to be the first instruments sold when mutual funds experience redemptions. When investors began to trim back their long-term municipal bond holdings in 1994, large quantities of insured bonds entered the marketplace simultaneously. This cycle occurred twice in 1994--in February and November--and, in both instances, insured bond prices suffered sharp declines. It is equally important to recognize, however, that the markets can also rebound quickly- and that insured bonds have often led the way. Indeed, during December the tone of the market turned more constructive, and the Fund gained back a great deal of ground, although not enough to erase the decline experienced earlier in the year.
GROWTH OF AN ASSUMED $10,000 INVESTMENT from 11/25/91 to 12/31/94 11/91 12/91 6/92 12/92 6/93 12/93 6/94 12/94 The Strong Insured Municipal Bond Fund 10,000 10,335 11,082 11,685 12,621 13,186 12,361 12,333 Lehman Brothers Insured Municipal Bond Index 10,000 10,230 10,658 11,184 12,038 12,641 11,995 11,885
Average Annual Total Returns through 12/31/94 Since inception on 11/25/91 7.00% 3-year 6.07% 1-year -6.47% This graph, provided in accordance with SEC regulations, compares a $10,000 investment in the Fund, made at its inception, with a similar investment in the Lehman Brothers Insured Municipal Bond Index, an unmanaged, total-return performance benchmark for the insured, tax-exempt bond market. To equalize the time periods, we have prorated the Index's performance for the month of November 1991. Results include the reinvestment of all dividends and capital gains. Performance is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell Fund shares. Please see the Historical Investment Returns section for more information on the Fund's performance record. (1) The Fund's income may be subject to state and local taxes and, depending on your tax status, the Alternative Minimum Tax. (2) When-issued securities are reflected in the Fund's average maturity. (3) Issue Insurance and Mutual Fund Insurance insure the timely payment of interest and principal of the insured security but do not protect the market value of the underlying security or the net asset value of the Fund's shares. 8 11 THE BENEFITS OF INSURANCE AND DIVERSIFICATION The widely publicized problems in Orange County, California underscore the benefit of investing in insured credits. The vast majority of your Fund's holdings (95.4%, as of December 31, 1994) are insured by a nationally recognized group of insurers. Should a bond's original issuer default on a payment, its insurer is obligated to make prompt payments of both interest and principal, when due.(3) We believe Orange County's problems were not caused solely by the derivative investments in their fund, but rather by the mismanagement of those investments. Nonetheless, Orange County's situation also underscores the benefit of diversifying across a variety of issuers and areas of the country. As of December 31, 1994, the Fund held securities of 36 different issuers, with no more than 23.2% of its assets concentrated in any single state. A HIGH-QUALITY PORTFOLIO Even though all of the securities in the Fund's portfolio must be rated AAA, our philosophy has always been to conduct our own research, rather than rely solely on the ratings assigned by the large ratings agencies. We analyze each bond as if we were evaluating the viability of a business--not just the reputation of the issuing municipality. By researching both the securities themselves and the national insurance syndicates, we believe we can better offer our shareholders a portfolio composed of truly top-tier securities with minimal credit risk. As a side note, although the Fund's prospectus allows us to employ certain types of derivatives, we have never chosen to use them in the past, nor do they fit into our current investment strategy.
SECTOR ALLOCATION (Top ten sectors based on net assets as of 12/31/94) Hospitals 19.2% Water & Sewer 17.9% Electric Power 13.8% Pollution Control 13.2% General Obligation 11.8% Lease 6.7% Transporation 5.7% Multi-Family Mortgage 3.1% Toll Road 2.0% Tax Allocation 0.8%
Please see the Schedule of Investments in Securities for a complete listing of the Funds's portfolio. OUTLOOK Within six to nine months, we expect interest rates to begin to decline. We believe that long-term municipal bonds are currently undervalued, and we expect long-term yields to come down significantly. The resulting rally should push the prices of long-term insured municipal bonds higher. We appreciate your investment in the Strong Insured Municipal Bond Fund. While it has been a difficult year, we believe the long-term prospects for this market are excellent, and we look forward to earning your continued confidence in the years to come. Sincerely, /s/ Thomas J. Conlin [PHOTO of Thomas Thomas J. Conlin J. Conlin and Portfolio Manager Mary-Kay H. Bourbulas] /s/ Mary-Kay H. Bourbulas Mary-Kay H. Bourbulas Portfolio Manager 9 12 The Strong Municipal Bond Fund As of 12/30/94 30-DAY ANNUALIZED YIELD 6.22% AVERAGE MATURITY 19.4 years AVERAGE QUALITY AA The Strong Municipal Bond Fund pursues a high level of current income exempt from federal income tax by investing in a diversified portfolio composed primarily of investment-grade municipal bonds. As of December 30, 1994, the Strong Municipal Bond Fund's annualized 30-day yield was 6.22%, giving investors in the 36% tax bracket an equivalent taxable yield of 9.72%.* The table on page 14 shows the Fund's equivalent taxable yields for each of 1994's federal income tax brackets. HIGHER RATES PUSHED BOND PRICES LOWER The bond market's troubles began in early February, when the Federal Reserve began raising short-term interest rates in an effort to keep inflation in check. Although municipal prices fell across all maturities, the long end of the market was generally affected more than the short end. As higher interest rates translated into lower bond prices, many investors sold off portions of their investments. The resulting surplus of available bonds in the marketplace further depressed prices and prompted more investors to redeem. Because the majority of its investor base consists of American individuals--and, for the most part, excludes foreign investors--the municipal bond market does not enjoy as broad a demand as do other types of fixed-income securities. Thus, an expanding or contracting supply of available securities can have a more dramatic effect on municipal bond prices. On a positive note, however, the municipal market regained significant ground in December, with bond prices moving up in response to strong buyer demand. INVESTMENT STRATEGY Anticipating higher rates, we began the year with an emphasis on shorter-duration, high-quality securities in an effort to make the portfolio less sensitive to interest-rate risk. We were therefore able to weather the market's initial correction in February fairly well. Although we anticipated an additional correction later in the year, November's downturn was unexpectedly swift and severe, causing many bond investors to redeem mutual funds, thus putting further pressure on bond prices. The correction subsided in December, as investors' concerns about inflation faded and their focus apparently turned to relative value. By positioning the Fund in high-quality, discounted securities, we were able to participate in the resulting rally. Breaking news stunned the market late in the year, when Orange County, California declared bankruptcy. Although we did not hold any bonds issued by Orange County or any of its municipalities--nor do we employ any of the leveraged derivative strategies that apparently got the County in trouble--their credit problems highlight the importance of diversifying by issuer and geographic region. At year-end, we held securities of 66 different issuers, and no more than 10.9% of assets were concentrated in any single state.
SECTOR ALLOCATION (Top ten sectors based on net assets as of 12/31/94) Hospital Revenue 25.7% Pollution Control Revenue 13.8% Electric Power Revenue 10.9% Lease Revenue 8.9% Water & Sewer Revenue 8.6% General Obligation 5.2% Retirement Center Revenue 4.3% Multi-Family Mortage Revenue 3.1% Single-Family Mortgage Revenue 3.0% Toll Road Revenue 2.6%
Please see the Schedule of Investments in Securities for a complete listing of the Fund's portfolio. 10 13 We continue to concentrate our efforts on those sectors we believe are poised for growth over the next ten to twenty years. These include facilities--such as nursing homes, hospitals, and retirement-housing communities--that serve America's rapidly growing population of senior citizens, as well as infrastructure projects intended to update our nation's schools, roadways, and water and sewer systems. OUTLOOK By the third quarter of 1995, we expect U.S. economic growth to begin to slow and interest rates, as a result, to decline. We believe that long-term municipal bonds are currently undervalued, and we expect long-term yields to eventually come down substantially, raising the value of these securities. Favorable supply/demand dynamics is another factor in our moderately bullish outlook for long-term municipal bonds. Because it is more expensive to introduce bond issues when interest rates are rising, new-issue volume has slowed significantly over the past year. Additionally, many investors are likely to be searching for alternative tax-exempt investments as more bonds are called in 1995. Barring an unexpectedly swift overhaul of the tax code by the new Congress, we believe the resulting supply/demand pressure could help push municipal bond prices higher. Thank you for your continued confidence in our investment management. It has been a difficult year, but we strongly believe better times are ahead. Sincerely, /s/ Thomas J. Conlin [PHOTO of Thomas J. Thomas J. Conlin Conlin and Mary-Kay Portfolio Manager H. Bourbulas] /s/ Mary-Kay H. Bourbulas Mary-Kay H. Bourbulas Portfolio Manager
GROWTH OF AN ASSUMED $10,000 INVESTMENT from 10/23/86 to 12/31/94 10/86 12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 The Strong Municipal Bond Fund 10,000 10,129 9,949 10,705 11,463 11,995 13,598 15,256 17,052 16,275 Lehman Brothers Municipal Bond Index 10,000 10,216 10,370 11,423 12,656 13,578 15,227 16,568 18,602 17,640
Average Annual Total Returns through 12/31/94 Since inception on 10/23/86 6.13% 5-year 7.26% 3-year 6.17% 1-year -4.55% This graph, provided in accordance with SEC regulations, compares a $10,000 investment in the Fund, made at its inception, with a similar investment in the Lehman Brothers Municipal Bond Index, an unmanaged, total-return performance benchmark for the investment-grade, tax-exempt bond market. To equalize the time periods, we have prorated the Index's performance for the month of October 1986. Results include the reinvestment of all dividends and capital gains. Source for the index data is Micropal. Performance is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell Fund shares. Please see the Historical Investment Returns section for more information on the Fund's performance record. * The Fund's income may be subject to state and local taxes and, depending on your tax status, the Alternative Minimum Tax. 11 14 The Strong High-Yield Municipal Bond Fund As of 12/30/94 30-DAY ANNUALIZED YIELD(1) 8.02% AVERAGE MATURITY(2) 17.1 years AVERAGE QUALITY BBB The Strong High-Yield Municipal Bond Fund seeks to provide a high level of current income exempt from federal income tax by investing in a diversified portfolio of longer-term, medium- and lower-quality municipal bonds. Based on the Fund's December 30, 1994, annualized 30-day yield of 8.02%, investors in the 36% tax bracket enjoyed an equivalent taxable yield of 12.53%.(1) The table on page 14 shows the Fund's equivalent taxable yields for each of 1994's federal income tax brackets. A TOUGH MARKET FOR BONDS This past year produced what was perhaps the most difficult investment environment for municipal bonds in six years. The Federal Reserve's persistent, preemptive attacks on future inflation pushed interest rates significantly higher in 1994. Although the yield curve for taxable Treasury securities flattened noticeably during the year--meaning the spread between short-term and long-term yields narrowed--the municipal bond curve remained comparatively steep as prices fell across the entire maturity range. The municipal market experienced two episodes of severely diminished liquidity in 1994. Though short-lived, these events in February and November affected the prices of most municipal bonds. They were marked by fund companies selling securities to meet cash requirements, as many investors, prompted by falling share prices, redeemed portions of their funds. Although the Strong High-Yield Municipal Bond Fund did experience significant redemptions this fall, we were relatively well-positioned to handle them. Over the course of the year, we had increased our exposure to AAA-rated securities in order to provide ample liquidity during times of extreme market volatility. As a result, we were able to draw on those holdings to raise the needed cash without having to liquidate the core holdings of the portfolio.
BOND QUALITY(2) (Based on market value as of 12/31/94) [PIE CHART] BBB & comparable 46.2% BB & comparable 38.6% AAA 7.8% B & comparable 6.6% CCC-equivalents & below 0.8%
73.6% of the Fund's net assets are unrated securities for which the advisor has made a comparable-quality determination. HIGH-YIELDS FARED BETTER THAN MOST In general, high-yield bonds tend to be less affected by inflation fears than other sectors of the municipal market, because their higher coupon rates help offset price declines. High-yield bonds are additionally buoyed by the fact that, in times of economic expansion, investors tend to worry less about issuers' ability to meet their credit obligations. While we recognize that relative performance is little solace to many bond investors this year, the Strong High-Yield Municipal Bond Fund was down just 0.99% for the year, while the Lehman Brothers Municipal Bond Index, which is generally representative of the overall municipal bond market, lost 5.17% over the same period. The Fund also outperformed most other mutual funds of its type. Its calendar-year total return ranked it #5 of the 36 high-yield municipal debt funds tracked by Lipper Analytical Services.(1) INVESTMENT THEMES We continue to focus our investments in areas that we believe are poised for growth over the next ten to twenty years. Our largest commitment by far is to those areas affected by the aging of America. Demographic shifts are driving the need to build facilities--such as hospitals, nursing homes, and retirement-housing communities--to care for our country's expanding elderly population. 12 15 We also continue to monitor the infrastructure sectors for attractive investment opportunities in schools, airports, roads, bridges, and water and sewer systems. OUTLOOK Within six to nine months, we expect interest rates will begin to decline. Because we believe long-term municipal bonds are currently undervalued, we expect long-term yields to come down significantly, producing a relatively strong rally. High interest rates over the past year have dissuaded issuers from bringing new deals to market, shrinking the supply of long-term bonds considerably. Barring any drastic, immediate changes to the tax code, we expect the demand for municipals to remain relatively strong, since a large number of bonds are likely to be called in 1995, leaving many investors searching for tax-free replacements. As the municipal market stabilizes, the resulting demand/supply imbalance could help lead municipal bond prices higher. We thank you for your investment in the Strong High-Yield Municipal Bond Fund, and we look forward to earning your continued confidence in the years to come. Sincerely, /s/ Thomas J. Conlin [PHOTO of Thomas J.Conlin Thomas J. Conlin and Mary-Kay H. Bourbulas] Portfolio Manager /s/ Mary-Kay H. Bourbulas Mary-Kay H. Bourbulas Portfolio Manager
GROWTH OF AN ASSUMED $10,000 INVESTMENT from 10/1/93 to 12/31/94 10/93 12/93 3/94 6/94 9/94 12/94 The Strong High-Yield Municipal Bond Fund 10,000 10,266 10,007 10,169 10,288 10,165 Lehman Brothers Baa Municipal Bond Index 10,000 10,164 9,627 9,757 9,803 9,609
Average Annual Total Returns through 12/31/94 Since inception on 10/1/93 1.32% 1-year -0.99% This graph, prepared in accordance with SEC regulations, compares a $10,000 investment in the Fund, made at its inception, with a similar investment in the Lehman Brothers Baa Municipal Bond Index, an unmanaged, total-return performance benchmark for the high-yield, tax-exempt bond market. Results include the reinvestment of all dividends and capital gains. Performance is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell Fund shares. Please see the Historical Investment Returns section for more information on the Fund's performance record. (1) As of December 30, 1994, the advisor was temporarily waiving fees of .60% and absorbing expenses of .25%. Otherwise, the Fund's current yield would have been 7.17%, the equivalent taxable yield would have been 11.20%, and the total returns would have been lower. The Fund's income may be subject to state and local taxes and, depending on your tax status, the Alternative Minimum Tax. Rankings are historical and do not represent future results. (2) Futures contracts are reflected in the average maturity, but not in the bond-quality breakdown. The underlying market value of these short positions represents 7.9% of the net assets of the High-Yield Municipal Bond Fund, which is intended to reduce the Fund's exposure to interest-rate fluctuations. 13 16 Equivalent Taxable Yields* as of 12/30/94
The Strong The Strong Municipal Money Short-Term Market Fund Municipal Bond Fund Taxable Income Your tax-exempt Your tax-exempt Marginal yield of 4.64% is yield of 5.08% is Joint Single Tax equivalent to a equivalent to a Return Return Rate taxable yield of: taxable yield of - - ----------------------------------------------------------------------------------------------------------- $38,000 $22,750 & under & under 15% 5.46% 5.98% - - ----------------------------------------------------------------------------------------------------------- $38,001- $22,751- 91,850 55,100 28% 6.44% 7.06% - - ----------------------------------------------------------------------------------------------------------- $91,851- $55,101- 140,000 115,000 31% 6.72% 7.36% - - ----------------------------------------------------------------------------------------------------------- $140,001- $115,001- 250,000 250,000 36% 7.25% 7.94% - - ----------------------------------------------------------------------------------------------------------- over over $250,000 $250,000 39.6% 7.68% 8.41% - - -----------------------------------------------------------------------------------------------------------
[PHOTO of little girl] 14 17
The Strong The Strong The Strong Insured Municipal Municipal High-Yield Bond Fund Bond Fund Municipal Bond Fund Your tax-exempt Your tax-exempt Your tax-exempt yield of 5.33% is yield of 6.22% is yield of 8.02% is equivalent to a equivalent to a equivalent to a taxable yield of: taxable yield of: taxable yield of: - - ---------------------------------------------------------------------------------------------------------------------- 6.27% 7.32% 9.44% - - ---------------------------------------------------------------------------------------------------------------------- 7.40% 8.64% 11.14% - - ---------------------------------------------------------------------------------------------------------------------- 7.72% 9.01% 11.62% - - ---------------------------------------------------------------------------------------------------------------------- 8.33% 9.72% 12.53% - - ---------------------------------------------------------------------------------------------------------------------- 8.82% 10.30% 13.28% - - ----------------------------------------------------------------------------------------------------------------------
[PHOTO of Two Anonymous Men] * Yields are annualized for the 30 days ended 12/30/94, except for the Municipal Money Market Fund, whose yields are annualized for the 7 days ended 12/30/94. The Funds' income may be subject to state and local taxes and, depending on your tax status, the Alternative Minimum Tax. The chart reflects 1994 marginal federal income tax rates before limitations and phase-outs. Individuals with adjusted gross income exceeding $111,800 should consult their tax advisor to determine their actual 1994 marginal tax rate. The Municipal Money Market Fund's equivalent taxable yields are based on the Fund's effective yield, which assumes reinvested income. The advisor has agreed to voluntarily waive its management fee and absorb the High-Yield Municipal Bond Fund's expenses through June 30, 1995. Without this subsidization, the Fund's current yield would have been 7.17%, its equivalent taxable yields would have been similarly affected, and its total returns would have been lower. Performance is historical and does not represent future results. Yields vary, and with the exception of the Municipal Money Market Fund, you may have a gain or loss when you sell shares. An investment in the Municipal Money Market Fund is neither insured nor guaranteed by the U.S. government, and there can be no assurance that the Fund will maintain a stable net asset value of $1.00. Please see the Historical Investment Returns section for the Funds' total returns. 15 18 HISTORICAL INVESTMENT RETURNS(1)
STRONG SHORT-TERM STRONG INSURED STRONG STRONG HIGH-YIELD MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND ------------------- ------------------- ------------------- ------------------- 1986 -- -- + 1.3%(2) -- 1987 -- -- - 1.8% -- 1988 -- -- + 7.6% -- 1989 -- -- + 7.1% -- 1990 -- -- + 4.6% -- 1991 -- + 3.4%(2) +13.4% -- 1992 + 7.2%(2) +13.1% +12.2% -- 1993 + 6.8% +12.8% +11.8% + 2.7%(2) 1994 - 1.6% - 6.5% - 4.6% - 1.0% Since Inception +12.6% +23.3% +62.8% + 1.7% Average Annual Total Return -- One-Year Period Ended December 31, 1994 - 1.6% - 6.5% - 4.6% - 1.0% -- Five-Year Period Ended December 31, 1994 -- -- + 7.3% -- -- Inception Date to December 31, 1994(2) + 4.0% + 7.0% + 6.1% + 1.3%
YIELD INFORMATION(1)
STRONG MUNICIPAL MONEY MARKET FUND(3) ------------------ Annualized for the 7-Day Period Ended December 30, 1994 Current Yield 4.54% Effective Yield 4.64%
STRONG SHORT-TERM STRONG INSURED STRONG STRONG HIGH-YIELD MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND(4) ------------------- ------------------- ------------------- -------------------- Annualized for the 30-Day Period Ended December 30, 1994 5.08% 5.33% 6.22% 8.02%
SUMMARY OF INVESTMENTS December 31, 1994
($ In Thousands) STRONG SHORT-TERM STRONG INSURED MUNICIPAL BOND FUND(5) MUNICIPAL BOND FUND -------------------- ------------------- Municipal Bonds $158,918 99% $ 39,356 77% Cash Equivalents and Other Assets and Liabilities, Net 2,325 1 11,668 23 -------- --- -------- --- Net Assets $161,243 100% $ 51,024 100% ======== === ======== ===
STRONG STRONG HIGH-YIELD MUNICIPAL BOND FUND MUNICIPAL BOND FUND(5) ------------------- -------------------- Municipal Bonds $229,078 82% $102,220 95% Cash Equivalents and Other Assets and Liabilities, Net 50,730 18 5,335 5 -------- --- -------- --- Net Assets $279,808 100% $107,555 100% ======== === ======== ===
(1) All performance is historical and does not represent future results. Investment returns and principal value of Strong Short-Term Municipal Bond Fund, Strong Insured Municipal Bond Fund, Strong Municipal Bond Fund and Strong High-Yield Municipal Bond Fund will vary, and you may have a gain or loss when you sell shares. Returns assume reinvestment of all dividends and capital gain distributions. Each Fund's income may be subject to state and local taxes and, depending on your tax status, the Alternative Minimum Tax. (2) Respective inception dates are December 31, 1991 for Strong Short-Term Municipal Bond Fund; November 25, 1991 for Strong Insured Municipal Bond Fund; October 23, 1986 for Strong Municipal Bond Fund; and October 1, 1993 for Strong High-Yield Municipal Bond Fund. (3) An investment in the Fund is neither insured nor guaranteed by the U.S. government and there can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. Effective yield assumes reinvestment of income. Yields vary. (4) At December 31, 1994, the Advisor was temporarily waiving fees of .60% and absorbing expenses of .25% for the Strong High-Yield Municipal Bond Fund. Otherwise, the Fund's current yield would have been 7.17%, and the total returns would have been lower. (5) Futures contracts are not reflected in the allocation. The underlying market value of these short positions represents 18.7% of the net assets of the Short-Term Municipal Bond Fund and 7.9% of the net assets of the High-Yield Municipal Bond Fund, which is intended to reduce the Fund's exposure to interest rate fluctuations. (See Note 2(D) in the Notes to Financial Statements.) 16 19 HISTORICAL RECORD The following table illustrates an assumed $10,000 investment in each Strong Municipal Income Fund on the date of the initial public offering, with income dividends and capital gains distributions reinvested in additional shares.
NET ASSET CAPITAL GAINS INCOME GROWTH OF VALUE PER DISTRIBUTIONS DIVIDENDS AN INITIAL $10,000 SHARE PER SHARE PER SHARE INVESTMENT --------- ------------- --------- ------------------ Strong Municipal Money Market Fund: *October 23, 1986 $ 1.00 $ -- $10,000 December 31, 1986 1.00 .01 10,068 December 31, 1987 1.00 .05 10,545 December 31, 1988 1.00 .05 11,089 December 31, 1989 1.00 .06 11,765 December 31, 1990 1.00 .06 12,488 December 31, 1991 1.00 .05 13,134 December 31, 1992 1.00 .03 13,578 December 31, 1993 1.00 .02 13,922 December 31, 1994 1.00 .03 14,330 Strong Short-Term Municipal Bond Fund: *December 31, 1991 $10.00 $ -- $ -- $10,000 December 31, 1992 10.20 .02 .48 10,716 December 31, 1993 10.36 .07 .44 11,441 December 31, 1994 9.73 .01 .45 11,256 Strong Insured Municipal Bond Fund: *November 25, 1991 $10.00 $ -- $ -- $10,000 December 31, 1991 10.28 -- .06 10,335 December 31, 1992 10.82 .14 .62 11,685 December 31, 1993 11.46 .16 .56 13,186 December 31, 1994 10.19 -- .54 12,333 Strong Municipal Bond Fund: *October 23, 1986 $10.00 $ -- $ -- $10,000 December 31, 1986 10.01 -- .12 10,130 December 31, 1987 9.16 -- .67 9,949 December 31, 1988 9.35 -- .49 10,705 December 31, 1989 9.47 -- .52 11,463 December 31, 1990 9.22 -- .66 11,995 December 31, 1991 9.76 -- .65 13,598 December 31, 1992 10.00 .26 .65 15,256 December 31, 1993 10.25 .32 .58 17,052 December 31, 1994 9.23 -- .56 16,275 Strong High-Yield Municipal Bond Fund: *October 1, 1993 $10.00 $ -- $ -- $10,000 December 31, 1993 10.10 -- .16 10,266 December 31, 1994 9.29 .00 .71 10,165
*Date of Initial Public Offering 17 20 SCHEDULE OF INVESTMENTS IN SECURITIES December 31, 1994
STRONG MUNICIPAL MONEY MARKET FUND AMORTIZED PRINCIPAL YIELD TO MATURITY COST AMOUNT MATURITY DATE+ (NOTE 2) --------- -------- -------- ---------- MUNICIPAL BONDS 42.5%* CALIFORNIA 4.0%* $20,000,000 California 6.50% Revenue Anticipation Warrants (Putable @ 101.157) 4.607% 06/30/95 $ 20,408,875 5,000,000 California 11.00% Various Purpose GO 3.834 05/01/95 5,118,868 3,805,000 Contra Costa County, California** COP -- Concord Healthcare Center, Inc. Project 4.150 06/01/95 3,805,000 5,250,000 Los Angeles, California 5.00% Unified School District COP -- Multiple Properties Project 4.608 12/01/95 5,268,324 4,000,000 Sacramento County, California 4.50% TRAN 4.529 09/29/95 3,999,160 7,000,000 San Bernadino County, California 4.50% TRAN 4.534 07/31/95 6,998,670 5,000,000 Stanislaus County, California 4.25% Office of Education TRAN 3.621 07/10/95 5,016,140 ------------ 50,615,037 CONNECTICUT 0.5%* 930,000 Connecticut** Development Authority IDR -- American Distilling & Manufacturing Project 3.125 03/01/95 930,000 5,100,000 Connecticut** HFA Housing Mortgage Finance Program 4.500 11/15/95 5,100,000 ----------- 6,030,000 DISTRICT OF COLUMBIA 0.2%* 2,070,000 District of Columbia** Housing Finance Agency MFHR -- Chastleton Development Project 3.900 07/01/95 2,070,000 FLORIDA 1.2%* Florida** Housing Finance Agency MFHR: 4,000,000 Monterey Lake Project 3.307 04/01/95 4,030,678 2,750,000 Wood Forest II Project 5.000 12/01/95 2,750,000 9,000,000 Orange County, Florida** HFA MFHR -- Oakwood Project 4.700 10/01/95 9,000,000 ------------ 15,780,678 ILLINOIS 9.7%* Illinois** DFA IDR: 4,420,000 Deerfield Executive Center Project 4.500 09/01/95 4,420,000 1,880,000 Jefferson Partners Limited Partnership -- 216 South Jefferson Project 5.250 12/01/95 1,880,000 3,320,000 Jefferson Partners Limited Partnership -- 217 North Jefferson Project 5.329 12/01/95 3,317,700 Lakemoor, Illinois** MFHR Mortgage -- Lakemoor Apartments Project: 4,831,500 Series A 3.250 03/01/95 4,831,500 50,000,000 Series B 4.150 03/10/95 50,000,000 10,000,000 Series C 5.550 06/01/95 10,000,000 41,820,000 Oakbrook Terrace, Illinois** MFHR -- Renaissance Project 5.550 06/01/95 41,820,000 5,820,000 Palatine, Illinois** MFHR -- Clover Ridge Apartments Project (w) 5.850 12/15/95 5,820,000 ------------ 122,089,200 IOWA 0.3%* 4,000,000 Iowa 4.25% School Corporations Warrant Certificates -- Participating School Corporations of the Iowa School Cash Anticipation Program 3.620 07/17/95 4,013,380 KANSAS 1.8%* 4,340,000 Lawrence, Kansas** CDR -- Kan/Del Hotel Investment Partners, L.P. Project 4.500 07/01/95 4,340,000 Lenexa, Kansas** MFHR: 8,550,000 Charter House Apartments Project 4.500 04/01/95 8,550,000 5,985,000 Point West Apartment Associates Project 4.010 06/01/95 5,985,000 3,800,000 Manhattan, Kansas** CDR Refunding -- Kan/Del Hotel Investment Partners, L.P. Project 5.000 08/01/95 3,800,000 ----------- 22,675,000 MARYLAND 0.8%* 9,760,000 Maryland** Community Development Administration Department of Housing and Community Development -- Single Family Program 5.375 11/29/95 9,760,000 MASSACHUSETTS 1.8%* 22,375,000 Lynn, Massachusetts 5.50% Water and Sewer Commission BAN 5.500 10/13/95 22,514,133 MINNESOTA 1.4%* 15,802,000 Dakota & Washington Counties, Minnesota** Housing & Redevelopment Authority in & for the City of Anoka SFMR 3.250 03/01/95 15,802,000 1,500,000 Oakdale, Minnesota** Rental Housing Revenue -- Oakdale Village Apartments Project 5.185 01/01/95 1,500,000 ------------- 17,302,000
See notes to financial statements 18 21 STRONG MUNICIPAL MONEY MARKET FUND (continued)
AMORTIZED PRINCIPAL YIELD TO MATURITY COST AMOUNT MATURITY DATE+ (NOTE 2) --------- -------- --------- --------- MISSISSIPPI 0.2%* $ 1,145,000 Certified Development Company of Mississippi, Inc.** IDR -- Chris-Craft Enterprises, Inc. Project 5.000% 11/01/95 $ 1,145,000 1,200,000 Rankin County, Mississippi** Industrial Revenue -- Trilogy Communications, Inc. Project 3.250 03/01/95 1,200,000 ---------- 2,345,000 MISSOURI 0.8%* Kansas City, Missouri** IDA MFHR: 3,890,000 President Gardens Project 4.500 04/01/95 3,890,000 3,000,000 Twin Oaks I Apartments Project 4.500 04/01/95 3,000,000 3,000,000 Twin Oaks II Apartments Project 4.500 04/01/95 3,000,000 ---------- 9,890,000 NEW JERSEY 1.2%* 4,960,000 Eastern States** Tax-Exempt Mortgage Bond Trust -- Private 5.190 03/01/95 4,960,000 10,000,000 New Jersey 3.50% Transportation Trust Fund Authority Transportation System (Putable at 100.076) 3.230 02/15/95 10,011,016 ---------- 14,971,016 NEW MEXICO 0.2%* 2,720,000 New Mexico** Mortgage Finance Authority SFMR Senior 4.351 03/01/95 2,719,320 NEW YORK 3.0%* 28,660,000 New York, New York 4.00% GO (Putable @ 100.115) 3.752 05/01/95 28,733,422 9,060,000 Niagara County, New York** Industrial Development Agency IDR Refunding -- American Ref-Fuel Company of Niagara, L.P. Project 4.000 01/15/95 9,060,000 ---------- 37,793,422 NORTH CAROLINA 0.1%* 1,500,000 Vance County, North Carolina** Industrial Facilities and Pollution Control Financing Authority -- Southern Quilters-Carolina Comforters, Inc. Project 5.250 09/01/95 1,500,000 OHIO 0.2%* 1,000,000 Sharonville, Ohio** IDR -- Ralston Purina Company Project 4.700 12/01/95 1,000,000 1,235,000 Summit County, Ohio** IDR -- Waltco Truck Equipment Company Project 3.600 01/15/95 1,235,000 ---------- 2,235,000 OKLAHOMA 1.2%* 15,000,000 Tulsa County, Oklahoma** Home Finance Authority GNMA Collateralized Mortgage Revenue 4.050 02/01/95 15,000,000 OREGON 0.3%* 4,000,000 Klamath Falls, Oregon** Electric Revenue -- Salt Caves Hydroelectric Project 3.750 05/02/95 4,000,000 PENNSYLVANIA 6.8%* 3,435,000 Allegheny County, Pennsylvania 4.00% Residential Finance Authority SFMR -- GNMA Mortgage-Backed Securities Program 4.000 06/01/95 3,435,000 6,150,000 Clinton County, Pennsylvania** IDA Solid Waste Disposal Revenue -- International Paper Company Project 2.900 01/15/95 6,150,000 5,000,000 Northampton County, Pennsylvania 10.50% IDA PCR -- Metropolitan Edison Company Project 5.104 09/01/95 5,175,166 41,000,000 Northampton County, Pennsylvania** IDA Resource Recovery Revenue -- Glendon Energy Company Project 4.930 04/01/95 41,000,000 4,900,000 Pennsylvania** Housing Finance Agency SFMR 3.500 04/01/95 4,900,000 Philadelphia, Pennsylvania** IDA CDR: 5,450,000 Economy Inn Project 3.950 07/01/95 5,450,000 12,275,000 Suite Hotel Project 4.000 06/01/95 12,275,000 7,075,000 Philadelphia, Pennsylvania 4.00% Water and Wastewater Revenue 4.000 06/12/95 7,075,000 ---------- 85,460,166 RHODE ISLAND 1.6%* 1,200,000 Providence, Rhode Island** Housing Authority MFHR -- Renaissance Associates, L. P. Project 4.000 06/01/95 1,200,000 4,740,000 Providence, Rhode Island 3.60% Public Building Authority Revenue BAN -- Scituate Reservoir II Project 3.419 03/16/95 4,741,800 14,000,000 Rhode Island 4.75% Solid Waste Management Corporation Landfill Lease Notes 4.750 08/01/95 14,000,000 ---------- 19,941,800 TENNESSEE 0.3%* 3,760,000 Knox County, Tennessee** IDB Industrial Revenue -- ETB Development, Inc. Project 4.000 04/01/95 3,760,000 TEXAS 0.6%* 3,340,000 Bushy Creek, Texas 5.50% Municipal Utility District 5.187 11/13/95 3,348,715 4,375,000 Tarrant County, Texas** HFC MFHR -- Lincoln Meadows Project 5.000 12/01/95 4,375,000 ---------- 7,723,715
See Notes to Financial Statements. 19 22 SCHEDULE OF INVESTMENTS IN SECURITIES December 31, 1994 STRONG MUNICIPAL MONEY MARKET FUND (continued)
AMORTIZED PRINCIPAL YIELD TO MATURITY COST AMOUNT MATURITY DATE+ (NOTE 2) --------- -------- --------- --------- VIRGINIA 0.4%* $ 5,200,000 Oyster Point, Virginia** Development Corporation MFHR -- Jefferson Point Development Project 5.950% 01/05/95 $5,200,000 WASHINGTON 1.4%* Washington** State Housing Finance Commission SFMR Refunding: 3,900,000 Series S-1B 3.900 01/01/95 3,900,000 2,800,000 Series S-3B 3.900 01/01/95 2,800,000 1,000,000 Series S-4B 3.900 01/01/95 1,000,000 1,800,000 Series S-5B 3.900 01/01/95 1,800,000 1,200,000 Series S-6B 5.011 01/01/95 1,199,928 1,700,000 Series S-7B 3.900 01/01/95 1,700,000 1,200,000 Series S-8B 4.000 01/01/95 1,200,000 3,000,000 Series S-9B 5.000 01/01/95 3,000,000 2,100,000 Series S-10B 5.250 04/01/95 2,100,000 ---------- 18,699,928 WISCONSIN 2.5%* 18,500,000 Milwaukee, Wisconsin** Redevelopment Authority MFHR -- City Hall Square Apartments Project -- Private 5.780 06/01/95 18,500,000 13,815,000 Wisconsin** Housing and Economic Development Authority Home Ownership Revenue 4.100 03/01/95 13,815,000 ---------- 32,315,000 ---------- Total Municipal Bonds 536,403,795 MONTHLY VARIABLE RATE PUT BONDS 2.6%* COLORADO 0.2%* 2,420,000 Jefferson County, Colorado IDR -- Anthony A. Petrarca/Cedarwood Construction Company, Inc. Project 4.700 02/01/95 2,420,000 ILLINOIS 0.3%* 4,000,000 Green Leaf Ventures, Inc. Tax Exempt Bond Grantor Trust -- Private 4.800 02/01/95 4,000,000 LOUISIANA 1.2%* 15,140,000 Louisiana Housing Finance Agency GNMA Collateralized SFMR 4.250 02/01/95 15,140,000 NORTH CAROLINA 0.3%* 4,006,793 Carolina Freight Tax Exempt Bond Grantor Trust -- Private 4.500 02/01/95 4,006,793 TENNESSEE 0.4%* 4,300,000 GAF Corporation Tax Exempt Bond Grantor Trust -- Private 4.250 02/01/95 4,300,000 WISCONSIN 0.2%* 2,685,000 Johnson Controls, Inc. Tax Exempt Bond Grantor Trust -- Private 4.300 02/01/95 2,685,000 ---------- Total Monthly Variable Rate Put Bonds 32,551,793 WEEKLY VARIABLE RATE PUT BONDS 43.3%* ALABAMA 4.0%* Alabama State IDA IDR: 3,775,000 Decatur Aluminum Corporation Project 5.900 01/10/95 3,775,000 5,000,000 Southern Ionics, Inc. Project 5.900 01/10/95 5,000,000 3,000,000 Well Built Cabinet, Inc. Project 5.900 01/10/95 3,000,000 5,000,000 Whitesell Project 5.900 01/10/95 5,000,000 1,920,000 Arab, Alabama IDB IDR -- Syncro Corporation Project 6.100 01/10/95 1,920,000 12,440,000 Birmingham, Alabama Baptist Medical Center -- Special Care Facilities Financing Authority Revenue -- Methodist Home for the Aging Project 5.900 01/10/95 12,440,000 10,000,000 Bridgeport, Alabama IDB IDR -- Beaulieu Nylon, Inc. Project 5.900 01/10/95 10,000,000 1,865,000 Fort Payne, Alabama IDR -- Ovalstrapping, Inc. Project 5.900 01/10/95 1,865,000 3,100,000 Haleyville, Alabama IDB IDR -- Cusseta Wood Products, Inc. Project 5.900 01/10/95 3,100,000 3,681,000 Irondale, Alabama IDB IDR -- Fixed Collateral Mortgage Project 5.900 01/10/95 3,681,000 ---------- 49,781,000 ARIZONA 0.9%* 6,911,000 Chandler, Arizona IDA MFHR -- Greentree Place Apartments Project 5.950 01/10/95 6,911,000 2,765,000 Phoenix, Arizona IDA MFHR -- Rincon Vista Apartments Project 4.200 01/10/95 2,765,000 1,765,000 Tucson, Arizona IDA Industrial Revenue Refunding -- Santa Rita Hotel Renovation Project 5.850 01/10/95 1,765,000 ---------- 11,441,000
See notes to financial statements. 20 23 STRONG MUNICIPAL MONEY MARKET FUND (continued) AMORITIZED PRINCIPAL YIELD TO MATURITY COST AM0UNT MATURITY DATE+ (NOTE 2) - - ---------- -------- ------- ------------ ARKANSAS 0.2%* $ 2,800,000 Searcy, Arkansas IDR -- Yarnell Ice Cream Company, Inc. Project 6.000% 01/10/95 $ 2,800,000 CALIFORNIA 6.3%* 19,500,000 Foothills/Eastern Transportation Corridor Agency, Orange County, California Toll Road Revenue 7.000 01/10/95 19,500,000 Irvine, California Public Facilities and Infrastructure Authority Lease Revenue -- Capital Improvements Projects: 3,300,000 Series 1985 7.250 01/10/95 3,300,000 1,985,000 Series 1987 7.250 01/10/95 1,985,000 8,230,000 Kern County, California Housing Authority Guaranteed Tax-Exempt Mortgage Obligations 6.200 01/10/95 8,230,000 3,500,000 Ontario, California IDA IDR -- P & S Development Project 6.400 01/10/95 3,500,000 1,800,000 San Bernardino County, California COP -- 1992 Justice Center/Airport Improvements Refunding Project 5.800 01/10/95 1,800,000 2,500,000 San Bernardino County, California Housing Authority MFHR -- Household Bank/Reche Canyon Apartments Project 6.125 01/10/95 2,500,000 10,800,000 San Bernardino County, California -- Mercury Savings and Loan Association/Sandalwood Park Apartments Project 4.200 01/10/95 10,800,000 13,140,000 San Francisco, California City and County Redevelopment Agency Multi-Family Collateralized Housing Revenue -- Cathedral Hill Plaza West Project 5.900 01/10/95 13,140,000 2,800,000 San Joaquin County, California IDA IDR -- Modtech, Inc. 5.750 01/10/95 2,800,000 8,000,000 San Marcos, California Redevelopment Agency MFHR -- San Marcos Retirement Village Project 4.245 01/10/95 8,000,000 4,000,000 Santa Fe Springs, California IDA -- Tri-West Project 4.300 01/10/95 4,000,000 --------- 79,555,000 COLORADO 0.8%* 3,430,000 Aurora, Colorado IDR -- Optima Batteries, Inc. Project 5.850 01/10/95 3,430,000 1,621,000 Lakewood, Colorado Jefferson County IDR -- Verden Associates -- Holiday Inn Project 5.850 01/10/95 1,621,000 5,000,000 Westminster, Colorado IDR -- Lifecare International Project 6.200 01/10/95 5,000,000 --------- 10,051,000 FLORIDA 0.6%* 3,540,000 Brevard County, Florida IDR -- U. S. Space Camp Foundation Project 5.900 01/10/95 3,540,000 1,150,000 Palm Beach County, Florida IDR -- Meridian Housing Project 4.245 01/10/95 1,150,000 3,000,000 Volusia County, Florida HFA MFHR -- Household Bank/Mallwood Village Project 6.125 01/10/95 3,000,000 --------- 7,690,000 GEORGIA 1.7%* 10,000,000 Augusta, Georgia Housing Authority MFHR -- Augusta-Oxford Project 6.400 01/10/95 10,000,000 3,030,000 Cobb County, Georgia Development Authority IDR -- Datagraphic, Inc. Project 6.000 01/10/95 3,030,000 4,000,000 Fulton County, Georgia Development Authority IDR -- STO Corporation Project 3.500 01/10/95 4,000,000 1,555,000 Fulton County, Georgia Development Authority Revenue -- Darby Printing Company Project (w) 5.900 01/10/95 1,555,000 2,650,000 Jackson County, Georgia IDA Revenue -- IMACC Corporation Project 5.900 01/10/95 2,650,000 --------- 21,235,000 ILLINOIS 2.8%* 7,850,000 Carol Stream, Illinois MFHR -- St. Charles Square Project 6.050 01/10/95 7,850,000 3,025,000 Evanston, Illinois IDR -- Fountain Square Project 4.150 01/10/95 3,025,000 Illinois DFA IDR: 4,750,000 Knead Dough Baking Company Project 6.250 01/10/95 4,750,000 6,585,000 LaSalle/Hubbard Project 6.000 01/10/95 6,585,000 2,880,000 SMF, Inc. Project 6.000 01/10/95 2,880,000 2,400,000 Selfix, Inc. Project 6.000 01/10/95 2,400,000 3,200,000 Shutters Inc. Project 6.000 01/10/95 3,200,000 4,300,000 Springfield, Illinois Airport Authority -- Allied-Signal, Inc. Project 6.150 01/10/95 4,300,000 --------- 34,990,000 INDIANA 1.0%* 8,420,000 Lawrence, Indiana EDR -- Vinings Court Apartments Project 6.050 01/10/95 8,420,000 3,500,000 Mishawaka, Indiana EDR -- Elco Industries, Inc. -- Thermaplastics Project 4.100 01/10/95 3,500,000 --------- 11,920,000
See notes to financial statements. 21 24 SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994 STRONG MUNICIPAL MONEY MARKET FUND (continued)
AMORTIZED PRINCIPAL YIELD TO MATURITY COST AMOUNT MATURITY DATE+ (NOTE 2) - - ------------- --------- ---------- --------- IOWA 0.3%* $ 3,800,000 Iowa Falls, Iowa IDR Refunding -- GENPAK Corporation Project 4.245% 01/10/95 $ 3,800,000 KENTUCKY 2.2%* 7,200,000 Jeffersontown, Kentucky IDR -- Columbia Sussex Corporation Facility 5.000 01/10/95 7,200,000 11,000,000 Ohio County, Kentucky PCR -- Big Rivers Electric Corporation Project 5.850 01/10/95 11,000,000 10,000,000 Somerset, Kentucky IBR -- Tibbals Flooring Company Project 5.900 01/10/95 10,000,000 --------- 28,200,000 LOUISIANA 1.3%* 6,500,000 DeSoto Parish, Louisiana PCR Trust -- DDSB Municipal Securities Trust 5.750 01/10/95 6,500,000 4,325,000 Orleans, Louisiana Levee District -- Levee Improvement 5.700 01/10/95 4,325,000 5,635,000 Orleans, Louisiana Levee District -- Public Improvement 5.700 01/10/95 5,635,000 --------- 16,460,000 MARYLAND 0.4%* 5,100,000 Washington County, Maryland EDR -- Tandy Project 6.450 01/10/95 5,100,000 MASSACHUSETTS 1.4%* Massachusetts Industrial Finance Agency IDR: 4,400,000 Lightolier, Inc. Project 5.650 01/10/95 4,400,000 2,600,000 Portland Causeway Realty Trust 4.245 01/10/95 2,600,000 4,000,000 Sunstrand Corporation Project 6.100 01/10/95 4,000,000 6,500,000 Salem, Massachusetts Industrial Development Finance Authority IDR -- Applied Extrusion Technologies, Inc. Project 4.245 01/10/95 6,500,000 --------- 17,500,000 MICHIGAN 0.2%* 1,400,000 Lansing, Michigan Limited Obligation EDC IDR -- Ashland Oil, Inc. Project 5.440 01/10/95 1,400,000 1,300,000 Livonia, Michigan EDC -- Limited Obligation Revenue -- Livonia Luxury Suites, Ltd. Project 6.050 01/10/95 1,300,000 --------- 2,700,000 MINNESOTA 1.7%* 7,500,000 Brooklyn Center, Minnesota Rental Housing Revenue -- Four Courts Apartments Project 5.270 01/10/95 7,500,000 11,500,000 New Brighton, Minnesota Rental Housing Revenue -- Polynesian Village Apartments Project 5.270 01/10/95 11,500,000 2,000,000 Princeton, Minnesota IDR -- Plastic Products Company, Inc. Project 6.200 01/10/95 2,000,000 --------- 21,000,000 MISSISSIPPI 1.3%* 3,000,000 Lee County, Mississippi IDR -- Hunter Douglas, Inc. Project 6.800 01/10/95 3,000,000 4,800,000 Mississippi Business Finance Corporation IDR -- Intex Plastics Corporation Project 5.900 01/10/95 4,800,000 Prentiss County, Mississippi IDR -- Heidelberg Eastern Project: 2,500,000 Series A 4.100 01/10/95 2,500,000 6,650,000 Series B 4.200 01/10/95 6,650,000 --------- 16,950,000 MISSOURI 2.5%* 4,900,000 Kansas City, Missouri IDA IDR -- Century Avenue Association Project 4.150 01/10/95 4,900,000 25,000,000 St. Charles County, Missouri IDA IDR Refunding -- Country Club Apartments Project 6.050 01/10/95 25,000,000 1,300,000 St. Louis County, Missouri IDA -- Hampton Inn Westport Associates Project 4.200 01/10/95 1,300,000 --------- 31,200,000 NEBRASKA 0.3%* 4,000,000 York, Nebraska IDR -- Sundstrand Corporation Project 6.100 01/10/95 4,000,000 NEVADA 0.3%* 4,100,000 Henderson, Nevada Public Improvement Trust -- Berry Plastics Corporation Project 5.700 01/10/95 4,100,000 NEW HAMPSHIRE 0.4%* 5,000,000 New Hampshire IDA Industrial Facility Revenue -- Ferrofluidics Corporation -- Nashua Series Project 6.000 01/10/95 5,000,000 NEW JERSEY 0.6%* 2,150,000 New Jersey EDA EDR -- Hickory Industries, Inc. Project 5.900 01/10/95 2,150,000 5,900,000 New Jersey EDA IDR -- Union Avenue Associates Project 4.300 01/10/95 5,900,000 --------- 8,050,000
See notes to financial statements. 22 25 STRONG MUNICIPAL MONEY MARKET FUND (continued) AMORTIZED PRINCIPAL YIELD TO MATURITY COST AMOUNT MATURITY DATE+ (NOTE 2) --------- -------- --------- --------- NORTH CAROLINA 0.4%* $ 4,500,000 Gaston County, North Carolina Industrial Facilities and Pollution Control Financing Authority IDR -- Spring-Ford Knitting Company, Inc. Project 5.900% 01/10/95 $ 4,500,000 OHIO 0.6%* 4,000,000 Cuyahoga County, Ohio Industrial Revenue -- Motch Corporation Project 5.900 01/10/95 4,000,000 3,500,000 Gallia County, Ohio IDR -- Harsco Corporation Project 5.800 01/10/95 3,500,000 ----------- 7,500,000 PENNSYLVANIA 1.8%* 18,000,000 Elk County, Pennsylvania IDA Solid Waste Disposal Revenue -- Willamette Industries, Inc. Project 6.100 01/10/95 18,000,000 5,000,000 Montgomery County, Pennsylvania IDA IDR Refunding -- Spring City Limited Partnership Project 5.950 01/10/95 5,000,000 ----------- 23,000,000 SOUTH CAROLINA 0.6%* 1,000,000 Charleston County, South Carolina Industrial Revenue -- Tandy Corporation Project 5.100 01/10/95 1,000,000 1,400,000 Richland County, South Carolina IDR -- Ashland Oil Project 5.440 01/10/95 1,400,000 5,000,000 South Carolina Jobs EDA IDR -- Roller Bearing Company of America, Inc. Project 6.000 01/10/95 5,000,000 ----------- 7,400,000 SOUTH DAKOTA 0.1%* 430,000 Aberdeen, South Dakota IDR -- Lomar Development Company Project 6.550 01/10/95 430,000 775,000 Brookings, South Dakota IDR Refunding -- Lomar Development Company Project 6.450 01/10/95 775,000 ----------- 1,205,000 TENNESSEE 0.7%* 3,000,000 McMinn County, Tennessee IDB IDR -- Southern Ionics, Inc. Project 5.900 01/10/95 3,000,000 5,600,000 Rutherford County, Tennessee IDB IDR Refunding -- Square D Company Project 5.850 01/10/95 5,600,000 ----------- 8,600,000 TEXAS 4.4%* 3,050,000 Austin County, Texas IDC IDR -- Gulf States Toyota, Inc. Project 5.700 01/10/95 3,050,000 3,000,000 Azle, Texas IDA IDR -- Tandy Corporation Project 6.460 01/10/95 3,000,000 15,000,000 Calhoun County, Texas Navigation IDA Port Revenue -- Formosa Plastics Corporation, Texas Project 7.000 01/10/95 15,000,000 4,700,000 Deer Park, Texas Port Development Corporation IDR 5.440 01/10/95 4,700,000 9,160,351 Fairfax County, Virginia LaSalle National Bank LeaseTOPS Trust 6.050 01/10/95 9,160,351 8,000,000 Grapevine, Texas IDC IDR -- Trencor Jetco, Inc. Project 6.100 01/10/95 8,000,000 3,000,000 Longview, Texas Industrial Corporation IDR -- Longview Guest Inn Project 6.050 01/10/95 3,000,000 5,375,000 NCNB Pooled Tax-Exempt Trust COP -- Texas 4.250 01/10/95 5,375,000 4,090,000 Texas Small Business IDC IDR -- Moulding Products, Inc. Project 6.200 01/10/95 4,090,000 ----------- 55,375,351 UTAH 0.5%* 6,350,000 Salt Lake City, Utah IDR -- Parkview Plaza Associates Project 5.950 01/10/95 6,350,000 WASHINGTON 0.5%* 2,710,000 Pierce County, Washington EDC -- Brown & Haley Project 6.400 01/10/95 2,710,000 4,200,000 Port Moses Lake, Washington Public Corporation Industrial Revenue -- Basic American Foods Project 4.000 01/10/95 4,200,000 ----------- 6,910,000 WISCONSIN 2.3%* 2,550,000 Ashwaubenon, Wisconsin IDR -- Pioneer Metal Finishing, Inc. Project 6.350 01/10/95 2,550,000 2,000,000 Columbus, Wisconsin IDR -- Maysteel Corporation Project 5.900 01/10/95 2,000,000 8,320,000 Madison, Wisconsin IDR -- Manchester Place Project 6.200 01/10/95 8,320,000 3,000,000 Menomonee Falls, Wisconsin IDR -- Maysteel Corporation Project 5.900 01/10/95 3,000,000 8,495,000 Milwaukee, Wisconsin Redevelopment Authority Development Revenue -- Washington Square Phase III Project 6.100 01/10/95 8,495,000 4,000,000 Oak Creek, Wisconsin IDR -- Outlook Packaging, Inc. Project 5.750 01/10/95 4,000,000 ----------- 28,365,000 WYOMING 0.2%* 3,000,000 Gillette, Campbell County, Wyoming Environmental Improvement Revenue -- Black Hills Power and Light Company Project 5.950 01/10/95 3,000,000 ----------- Total Weekly Variable Rate Put Bonds 545,728,351
See notes to financial statements. 23 26 SCHEDULE OF INVESTMENTS IN SECURITIES (continued) STRONG MUNICIPAL MONEY MARKET FUND (continued) December 31, 1994
AMORTIZED PRINCIPAL YIELD TO MATURITY COST AMOUNT MATURITY DATE+ (NOTE 2) --------- -------- --------- --------- DAILY VARIABLE RATE PUT BONDS 12.1%* CALIFORNIA 6.0%* $16,000,000 Irvine, California Ranch Water District of Consolidated General Obligations of Improvement Districts 6.875% 01/03/95 $ 16,000,000 10,700,000 Irvine Coast, Orange County, California Assessment District Limited Obligation Improvement 6.750 01/03/95 10,700,000 16,000,000 Orange County, California Apartment Development Revenue -- Park Place Irvine-Phase I Project 7.000 01/03/95 16,000,000 25,500,000 Orange County, California County Sanitation Districts COP -- Capital Improvement Program 6.625 01/03/95 25,500,000 7,500,000 San Bernardino, California MFHR -- Sandlewood Project 6.400 01/03/95 7,500,000 ------------- 75,700,000 ILLINOIS 2.2%* 2,315,000 Des Plaines, Illinois IDR -- Oakton Partners Project 4.100 01/03/95 2,315,000 705,000 East Hazel Crest, Illinois EDR Refunding -- Columbia Sussex Corporation Project 5.000 01/03/95 705,000 4,610,000 Illinois DFA Industrial Project Revenue -- Webster-Wayne Shopping Center Project 4.100 01/03/95 4,610,000 8,180,000 Illinois Health Facilities Authority -- Rest Haven Illiana Christian Convalescent Home Project 6.050 01/03/95 8,180,000 Merrionette Park, Illinois Industrial Project Revenue: 6,615,000 Southwick & Weglarz Project 6.400 01/03/95 6,615,000 1,924,000 Weglarz Project 6.400 01/03/95 1,924,000 2,684,000 Weglarz & Taxman Project 6.400 01/03/95 2,684,000 ------------- 27,033,000 IOWA 0.1%* 1,665,000 Cedar Rapids, Iowa IDR Refunding MMars First Program -- Columbus McKinnon Corporation Project 6.100 01/03/95 1,665,000 KENTUCKY 0.3%* 4,150,000 Boone County, Kentucky IBR Refunding Bonds -- Columbia Airport Project 5.600 01/03/95 4,150,000 MAINE 1.4%* 17,350,000 Regional Waste Systems, Inc. of Maine -- Solid Waste Resource Recovery System Revenue 6.750 01/03/95 17,350,000 MICHIGAN 0.1%* 1,740,000 Michigan Job Development Authority IDR -- Anthony A. Petrarca/Cedarwood Construction Company, Inc. Project 4.700 01/03/95 1,740,000 MONTANA 1.6%* 20,450,000 Montana State Board Investment Resource Recovery Revenue -- Colstrip Project 6.750 01/03/95 20,450,000 OREGON 0.3%* 3,650,000 Metropolitan Service District, Oregon Waste Disposal Project Revenue -- Riedel Oregon Compost Company, Inc. Project 6.750 01/03/95 3,650,000 VERMONT 0.1%* 1,110,000 Vermont IDA IDR -- Woodbury Lumber Corporation Project 6.250 01/03/95 1,110,000 -------------- Total Daily Variable Rate Put Bonds 152,848,000 -------------- TOTAL INVESTMENTS IN SECURITIES 100.5%* 1,267,531,939 Other Assets and Liabilities, Net (0.5%*) (6,914,439) -------------- NET ASSETS 100.0%* $1,260,617,500 ==============
See notes to financial statements. 24 27 STRONG SHORT-TERM MUNICIPAL BOND FUND
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- MUNICIPAL BONDS 98.6%* ALABAMA 2.0%* $1,000,000 Alabama Industrial Access Road and Bridge Corporation Capital Improvement, 5.15%, Due 6/01/02 $ 951,250 1,000,000 Eufaula, Alabama IDB IDR -- Aladan Corporation Project, 5.25%, Due 9/01/98+ 952,500 1,360,000 Loxley, Alabama IDB IDR -- Alabama Gin Company Project, 5.00%, Due 11/14/97+ 1,285,200 ---------- 3,188,950 ARIZONA 2.2%* Mohave County, Arizona IDA Hospital System Revenue Refunding -- Medical Environments, Inc. and Phoenix Baptist Hospital Medical Center, Inc.: 1,470,000 5.20%, Due 7/01/97 1,438,763 1,595,000 5.50%, Due 7/01/98 1,543,162 675,000 Phoenix, Arizona IDA Hospital Revenue -- John C. Lincoln Hospital and Health Center Project, 4.65%, Due 12/01/98+ 631,969 ---------- 3,613,894 CALIFORNIA 10.6%* 8,000,000 Bakersfield, California Hospital Revenue -- Greater Bakersfield Memorial Hospital Project, 7.375%, Due 1/01/99+ (Pre-refunding at 102.00) 8,640,000 1,000,000 California State Public Works Board Lease Revenue -- Regents of the University of California -- Various University of California Projects, 5.90%, Due 11/01/05 935,000 2,000,000 Los Angeles, California GO, 5.25%, Due 9/01/06 1,770,000 2,890,000 Los Angeles, California Wastewater System Revenue, 6.80%, Due 8/01/98+ (Pre-refunding at 102.00) 3,070,625 2,520,000 West Bason, California Municipal Water District COP -- West Basin Water Reclamation Program, 6.85%, Due 8/01/00+ (Pre-refunding at 102.00) 2,705,850 ---------- 17,121,475 DISTRICT OF COLUMBIA 3.5%* District of Columbia GO: 5,000,000 5.10%, Due 12/01/99(w) 4,643,750 1,060,000 5.60%, Due 6/01/03 1,010,975 ---------- 5,654,725 GEORGIA 5.3%* 8,000,000 Municipal Electric Authority of Georgia Special Obligation -- Second Crossover Series, 8.125%, Due 1/01/17 8,600,000 ILLINOIS 4.3%* 945,000 Collinsville, Illinois Madison County IDR Refunding, Drury Inn -- Collinsville Project, 5.25%, Due 11/01/98 907,200 Illinois Educational Facilities Authority Revenue -- Lewis University Project: 1,100,000 4.50%, Due 11/10/97+ 1,038,125 1,390,000 5.30%, Due 9/25/02+ 1,264,900 1,565,000 Peoria, Illinois Peoria County IDR Refunding -- Pere Marquette Hotel Associates Project, 5.375%, Due 8/25/96+ 1,547,394 330,000 Quincy, Illinois, Adams County SFMR Refunding, 4.25%, Due 9/01/99 323,812 2,000,000 Upper Illinois River Valley Development Authority Solid Waste Disposal Revenue -- Waste Recovery -- Illinois Project, 6.50%, Due 2/01/04 1,925,000 ---------- 7,006,431 INDIANA 1.3%* $5,500,000 Indiana University Trustees Refunding Student Fee, Zero %, Due 8/01/09 $2,091,375 IOWA 1.7%* 2,865,000 Iowa Finance Authority Mortgage Revenue Refunding -- Friendship Village Project, 4.95%, Due 4/27/98+ 2,732,494 LOUISIANA 6.8%* 2,600,000 Jefferson Parish, Louisiana School Board Sales Tax Refunding, 4.20%, Due 2/01/99 2,470,000 Louisiana Public Facilities Authority Hospital Revenue and Refunding -- Touro Infirmary Project: 1,215,000 4.75%, Due 8/15/98+ 1,157,287 2,400,000 6.125%, Due 8/15/23 1,866,000 1,765,000 Louisiana Public Facilities Authority Revenue -- Louisiana Association of Independent Colleges and Universities Facilities Loan Program, 5.20%, Due 1/06/96+ 1,745,144 2,500,000 New Orleans, Louisiana Public Improvement Bonds, 8.125%, Due 10/01/03 2,709,375 1,000,000 Regional Transit Authority of New Orleans, Louisiana Sales Tax Revenue, 6.50%, Due 12/01/08 1,008,750 10,956,556 MICHIGAN 5.6%* 3,000,000 Detroit, Michigan Distributable State Aid GO -- 1992 Fiscal Stabilization Series, 5.375%, Due 5/01/96 2,977,500 Greater Detroit, Michigan Resource Recovery Authority Revenue: 1,300,000 Series C, 9.25%, Due 12/13/08 1,356,875 4,500,000 Series D, 9.25%, Due 12/13/08 4,696,875 ---------- 9,031,250 MISSISSIPPI 0.6%* 995,000 Prentiss County, Mississippi Hospital Revenue -- Private, 5.40%, Due 6/23/96+ 978,831 MISSOURI 6.0%* New Madrid, Missouri Power Plant Revenue Refunding: 4,590,000 5.55%, Due 6/01/02 4,532,625 2,630,000 5.55%, Due 12/01/02 2,597,125 2,750,000 Springfield, Missouri and Carlyle Capital Markets, Inc. Board of Public Utilities COP, 5.20%, Due 12/15/03 2,609,063 ---------- 9,738,813 NEBRASKA 3.3%* 3,855,000 Nebraska IFA Multifamily Loan Revenue -- Park Drive Apartments Project, 4.75%, Due 6/01/97+ 3,811,631 Nebraska Public Gas Agency Gas Supply System Revenue and Refunding: 500,000 5.75%, Due 4/01/00 492,500 300,000 5.85%, Due 4/01/01 294,750 700,000 6.25%, Due 4/01/05 679,000 ---------- 5,277,881 NEW JERSEY 3.1%* 2,875,000 Essex County, New Jersey Utilities Authority Solid Waste System Project, 5.375%, Due 4/13/96 2,860,625
See notes to financial statements. 25 28 SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994 STRONG SHORT-TERM MUNICIPAL BOND FUND (continued)
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- New Jersey Health Care Facilities Financing Authority Health System Revenue -- St. Mary Hospital Issue: $ 1,030,000 4.125%, Due 7/01/96 $ 1,009,400 1,120,000 4.625%, Due 7/01/98 1,066,800 ----------- 4,936,825 NEW MEXICO 1.5%* 2,500,000 Los Alamos, New Mexico Incorporated County Utility System Revenue, 5.80%, Due 7/01/06 2,387,625 NEW YORK 6.1%* 3,910,000 New York, New York GO, 5.50%, Due 8/01/04 3,709,612 2,000,000 New York, New York Municipal Water Finance Authority Water and Sewer System Revenue, 5.375%, Due 6/15/07 1,847,500 4,335,000 Westchester, New York Industrial Development Agency Transportation Revenue Refunding -- AGR Realty Company Project, 5.75%, Due 1/01/02 4,237,463 ----------- 9,794,575 OHIO 1.5%* 2,410,000 Cincinnati, Ohio City School District RAN, 5.60%, Due 6/15/97 2,403,975 OREGON 6.3%* 10,780,000 Hillsboro, Oregon Hospital Facility Authority Revenue and Advance Refunding -- Tuality Heathcare Project, 4.80%, Due 5/20/98+ 10,106,250 PUERTO RICO 3.7%* 6,140,000 Puerto Rico Electric Power Authority Power Revenue, 5.90%, Due 7/01/03 6,009,525 SOUTH DAKOTA 0.8%* 1,475,000 Sioux Falls, South Dakota Sales Tax Revenue, 4.90%, Due 11/15/05 1,296,156 TENNESSEE 3.0%* 1,850,000 Hamilton County, Tennessee IDB Lease Rental Revenue -- City of Chattanooga and County of Hamilton, Tennessee, Lessees, 5.50%, Due 9/01/03 1,766,750 1,300,000 Knoxville, Tennessee Community Development Corporation MFHR Refunding and Improvement -- College Hills Project, 4.65%, Due 12/01/99+ 1,181,375 1,945,000 Shelby County, Tennessee Health, Educational and Housing Facility Board First Mortgage Revenue Refunding -- Northlake Apartments Project, 5.30%, Due 12/23/99+ 1,849,676 --------- 4,797,801 TEXAS 6.0%* Grand Prairie, Texas Health Facilities Development Corporation Hospital Revenue Refunding -- Dallas/Fort Worth Medical Center -- Grand Prairie Project: 2,700,000 6.00%, Due 11/01/99(w) 2,686,500 3,700,000 6.50%, Due 11/01/04(w) 3,663,000 Harris County, Texas Toll Road Senior Lien Revenue: 1,275,000 5.60%, Due 8/15/04 1,233,562 1,540,000 5.70%, Due 8/15/05 1,485,730 560,000 Orange County, Texas Navigation and Port District IDC IDR Refunding -- Wal-Mart Stores, Inc. Project, 5.95%, Due 10/01/09 525,700 ----------- 9,594,492 UTAH 6.2%* 10,000,000 Carbon County, Utah Solid Waste Disposal Refunding Revenue -- East Carbon Landfill Project -- Private, 6.04%, Due 5/01/97 9,912,500 WASHINGTON 7.2%* $7,400,000 Washington Health Care Facilities Authority Revenue -- Sisters of Providence, 5.375%, Due 12/23/97+ $ 7,307,500 Washington Public Power Supply System -- Nuclear Project No. 2 Refunding Revenue: 1,700,000 4.60%, Due 7/01/02 1,487,500 2,000,000 5.25%, Due 7/01/03 1,845,000 1,225,000 Washington Public Power Supply System -- Nuclear Project No. 3 Refunding Revenue, 4.90%, Due 7/01/04 1,045,844 ----------- 11,685,844 ----------- Total Municipal Bonds (Cost $162,213,655) 158,918,243 CASH EQUIVALENTS 5.8%* SHORT-TERM MUNICIPAL BOND 0.5%* ARIZONA 0.5%* 826,043 Metrocentre Little Rock, Arkansas Improvement District No. 1 First Mortgage Revenue -- Capital Hotel Project, 9.50%, Due 12/31/94 826,043 DAILY VARIABLE RATE PUT BONDS 5.3%* ILLINOIS 3.8%* 6,050,000 Joliet, Illinois Regional Port District IBR -- Terminal Facilities Project 6,050,000 NEW YORK 1.5%* 2,500,000 New York, New York GO 2,500,000 ----------- Total Daily Variable Rate Put Bonds 8,550,000 ----------- Total Cash Equivalents (Cost $9,376,043) 9,376,043 TOTAL INVESTMENTS IN SECURITIES (COST $171,589,698) 104.4%* 168,294,286 Other Assets and Liabilities, Net (4.4%*) (7,051,340) ----------- NET ASSETS 100.0%* $161,242,946 =========== STRONG INSURED MUNICIPAL BOND FUND PRINCIPAL VALUE AMOUNT (NOTE 2) --------- -------- MUNICIPAL BONDS 77.1%* ARIZONA 9.5%* $1,870,000 Maricopa County, Arizona Alhambra Elementary School District No. 68 School Improvement and Refunding, 4.90%, Due 7/01/08 $1,559,113 2,450,000 Maricopa County, Arizona Paradise Valley Unified School District No. 69 School Improvement, 4.80%, Due 7/01/13 1,920,187 1,750,000 University of Arizona Medical Center Corporation Hospital Revenue, 5.00%, Due 7/01/21 1,358,438 ----------- 4,837,738 CALIFORNIA 23.2%* 2,000,000 Anaheim, California Community Center Authority COP -- Convention Center Financing Project, 5.50%, Due 8/01/14 1,700,000 2,500,000 California Statewide Communities Development Authority COP -- St. Joseph Health System Obligated Group Project, 5.50%, Due 7/01/23 2,059,375 1,000,000 California Variable Purpose GO, 4.75%, Due 9/01/18 748,750
See notes to financial statements. 26 29 STRONG INSURED MUNICIPAL BOND FUND (continued)
PRINCIPAL VALUE AMOUNT (NOTE 2) - - ---------- -------- $ 1,500,000 Contra Costa County, California MFHR, GNMA Collateralized -- Crescent Park Apartments Project, 7.80%, Due 6/20/34 $ 1,582,500 1,845,000 Contra Costa County, California Water District Revenue Refunding, 5.00%, Due 10/01/20 1,422,956 500,000 Los Angeles, California Community Redevelopment Agency -- Bunker Hill Project, 5.60%, Due 12/01/28 409,375 2,000,000 Los Angeles, California Wastewater System Revenue Refunding, 4.70%, Due 11/01/17 1,495,000 1,700,000 Moulton Niguel, Orange County, California Water District COP, 4.80%, Due 9/01/17 1,277,125 1,500,000 Southern California Public Power Authority Revenue -- Mead-Adelanto Project, 4.875%, Due 7/01/20 1,132,500 ------------ 11,827,581 FLORIDA 3.3%* 2,000,000 Dade County, Florida Water and Sewer System Revenue Refunding, 5.00%, Due 10/01/08 1,712,500 GEORGIA 3.0%* 2,000,000 Georgia Municipal Electric Authority Power Revenue, 4.75%, Due 1/01/19 1,510,000 ILLINOIS 6.6%* 2,000,000 Chicago, Illinois Public Building Commission Revenue -- Board of Education of the City of Chicago, 5.75%, Due 12/01/18 1,725,000 1,920,000 Illinois DFA PCR Refunding -- Illinois Power Company Project, 5.70%, Due 2/01/24 1,629,600 ------------ 3,354,600 INDIANA 1.6%* 1,000,000 Indianapolis, Indiana Gas Utility System Revenue Refunding, 5.375%, Due 6/01/21 811,250 MASSACHUSETTS 9.7%* 3,690,000 Boston, Massachusetts Revenue -- Boston Hospital, 5.75%, Due 2/15/23 3,168,787 1,200,000 Massachusetts Bay Transportation Authority General Transportation System, 5.50%, Due 3/01/22 1,002,000 1,000,000 Massachusetts Municipal Wholesale Electric Company Power Supply System Revenue, 4.75%, Due 7/01/11 788,750 ------------ 4,959,537 NEW JERSEY 1.5%* 1,000,000 New Jersey Wastewater Treatment Trust, 4.80%, Due 3/01/13 793,750 NEW YORK 3.2%* 1,750,000 New York, New York Municipal Water Finance Authority Water and Sewer System Revenue, 5.375%, Due 6/15/07 1,616,563 SOUTH CAROLINA 3.7%* 2,250,000 South Carolina Public Service Authority Revenue Refunding, 5.50%, Due 7/01/21 1,906,875 TEXAS 6.8%* $ 225,000 El Paso, Texas Property Finance Authority, Inc., SFMR -- GNMA Mortgage-Backed, 8.70%, Due 12/01/18 $ 235,687 3,300,000 Grand Prairie, Texas Health Facilities Development Corporation Hospital Revenue Refunding -- Dallas/Fort Worth Medical Center -- Grand Prairie Project, 6.875%, Due 11/01/10(w) 3,234,000 100,000 Southeast Texas HFC SFMR, Zero %, Due 9/01/11 18,250 ------------ 3,487,937 UTAH 1.6%* 1,000,000 Salt Lake County, Utah Water Conservancy District Revenue, 5.35%, Due 10/01/18 822,500 WASHINGTON 3.4%* 2,000,000 Washington Public Power Supply System Nuclear Project No. 3 Refunding Revenue, 5.60%, Due 7/01/15 1,715,000 ------------ Total Municipal Bonds (Cost $39,219,459) 39,355,831 CASH EQUIVALENTS 19.4%* SHORT-TERM MUNICIPAL BOND 0.2%* TEXAS 0.2%* 90,000 Austin, Texas HFC SFMR, Zero %, Due 12/01/95 84,375 WEEKLY VARIABLE RATE PUT BOND 3.7%* NEW YORK 3.7%* 1,900,000 New York State Thruway Authority General Revenue 1,900,000 DAILY VARIABLE RATE PUT BONDS 15.5%* ARIZONA 2.1%* 1,100,000 Maricopa County, Arizona Pollution Control Corporation PCR Refunding -- Arizona Public Service Company Palo Verde Project 1,100,000 IOWA 3.9%* 2,000,000 Iowa Finance Authority Solid Waste Disposal Revenue -- Cedar River Paper Company Project 2,000,000 LOUISIANA 3.5%* 1,800,000 Louisiana Recovery District Sales Tax Revenue 1,800,000 NEW YORK 2.0%* 1,000,000 New York, New York Industrial Development Agency IDR -- Japan Airlines Company, Ltd. Project 1,000,000 UTAH 2.0%* 1,000,000 Emery County, Utah PCR Refunding -- PacifiCorp Projects 1,000,000 WYOMING 2.0%* 1,000,000 Sweetwater County, Wyoming PCR -- PacifiCorp Project 1,000,000 ------------ Total Daily Variable Rate Put Bonds 7,900,000 ------------ Total Cash Equivalents (Cost $9,884,218) 9,884,375 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $49,103,677) 96.5%* 49,240,206 Other Assets and Liabilities, Net 3.5%* 1,784,195 ------------ NET ASSETS 100.0%* $51,024,401 ============
See notes to financial statements. 27 30 SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994 STRONG MUNICIPAL BOND FUND
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- MUNICIPAL BONDS 81.9%* ALASKA 0.9%* $ 3,400,000 Alaska HFC General Housing Purpose Refunding, 5.40%, Due 12/01/23 $ 2,669,000 ARIZONA 2.4%* 5,000,000 Arizona Transportation Board Subordinated Highway Revenue Refunding, 4.75%, Due 7/01/11 3,968,750 4,000,000 Phoenix, Arizona Civic Improvement Corporation Wastewater System Lease Revenue, 4.75%, Due 7/01/23 2,885,000 ------------ 6,853,750 CALIFORNIA 10.6%* 5,000,000 California Housing Finance Agency Home Mortgage Revenue, Zero %, Due 8/01/20 681,250 California Various Purpose GO: 10,000,000 4.75%, Due 9/10/00+ 7,775,000 4,200,000 5.125%, Due 10/01/17 3,360,000 3,500,000 Contra Costa County, California MFHR, GNMA Collateralized -- Crescent Park Apartments Project, 7.80%, Due 12/20/34 3,692,500 Los Angeles, California Department of Water and Power Water Works Refunding Revenue: 6,710,000 4.50%, Due 5/15/11 5,183,475 3,000,000 4.50%, Due 5/15/18 2,133,750 3,650,000 Southern California Public Power Authority Revenue -- Palo Verde Project, 5.00%, Due 7/01/15 2,888,063 5,155,000 Southern California Public Power Authority Revenue -- San Juan Power Project, 5.00%, Due 1/01/20 3,988,681 ------------ 29,702,719 COLORADO 0.4%* 1,000,000 Colorado Health Facilities Authority Hospital Revenue -- PSL Healthcare System Project, 8.25%, Due 2/15/06 1,038,750 DELAWARE 2.3%* Delaware EDA Hospital Revenue -- Osteopathic Hospital Association of Delaware/Riverside Hospital: 1,915,000 6.00%, Due 2/04/01+ 1,735,469 2,695,000 6.50%, Due 2/16/06+ 2,351,387 2,760,000 6.75%, Due 2/11/11+ 2,377,050 ------------ 6,463,906 FLORIDA 0.7%* 2,290,000 Homestead, Florida Industrial Revenue -- Community Rehabilitation Providers Program, 7.95%, Due 11/01/18 2,063,863 ILLINOIS 5.8%* 1,660,000 Cook County, Illinois GO, 5.00%, Due 11/15/23 1,253,300 6,000,000 Granite City, Illinois Hospital Revenue Refunding -- Saint Elizabeth Medical Center, 8.125%, Due 6/01/08 5,865,000 2,205,000 Illinois Health Facilities Authority Hospital Revenue -- Ravenswood Hospital Medical Center, 6.85%, Due 6/01/12 2,025,844 Illinois Health Facilities Authority Revenue -- Community Hospital of Ottawa Project: 1,700,000 6.75%, Due 8/15/14 1,498,125 2,925,000 6.85%, Due 8/15/24 2,526,469 3,000,000 Illinois Health Facilities Authority Revenue -- Fairview Obligated Group Project, 8.25%, Due 10/01/99 $ 3,007,500 ------------ 16,176,238 INDIANA 4.2%* Indiana Health Facility Financing Authority Hospital Revenue -- Jackson County Schneck Memorial Hospital Project, 1,000,000 7.50%, Due 2/15/12 965,000 7,790,000 7.50%, Due 2/15/22 7,381,025 4,000,000 Indiana State Office Building Commission Capitol Complex Revenue -- Indiana Government Center North Project, 5.25%, Due 7/01/15 3,330,000 ------------ 11,676,025 IOWA 1.7%* 3,710,000 Iowa Finance Authority Hospital Revenue -- Trinity Regional Hospital Project, 7.00%, Due 7/01/22 3,311,175 1,880,000 Ottumwa, Iowa Hospital Facility Revenue Refunding and Improvement -- Ottumwa Regional Health Center, Incorporated 6.00%, Due 10/01/18 1,506,350 ------------ 4,817,525 KENTUCKY 0.5%* Jefferson County, Kentucky First Mortgage Revenue -- The Christian Church Homes of Kentucky Project: 715,000 6.125%, Due 11/15/13 590,769 1,165,000 6.125%, Due 11/15/18 932,000 ------------ 1,522,769 LOUISIANA 1.6%* 3,285,000 East Baton Rouge Parish, Louisiana Public Improvement Sales Tax, 4.80%, Due 2/01/13 2,549,981 1,985,647 Louisiana Public Facilities Authority SFMR, 8.45%, Due 12/01/12 2,047,698 ------------ 4,597,679 MASSACHUSETTS 10.6%* 3,000,000 Massachusetts Bay Transportation Authority General Transportation System, 5.50%, Due 3/01/22 2,505,000 Massachusetts Health and Educational Facilities Authority Revenue -- Saints Memorial Medical Center: 4,000,000 5.50%, Due 10/01/02 3,225,000 6,650,000 6.00%, Due 10/01/23 4,222,750 3,915,000 Massachusetts Industrial Finance Agency First Mortgage Revenue -- Reeds Landing Project, 7.75%, Due 10/01/00 3,802,444 6,000,000 Massachusetts Municipal Wholesale Electric Company Power Supply System Revenue, 4.75%, Due 7/01/11 4,732,500 10,000,000 Massachusetts Water Resources Authority General Revenue, 4.75%, Due 12/01/23 7,287,500 5,000,000 Massachusetts Water Resources Authority General Revenue Refunding, 5.00%, Due 3/01/22 3,843,750 ------------ 29,618,944
See notes to financial statements. 28 31 STRONG MUNICIPAL BOND FUND (continued)
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- MICHIGAN 3.1%* $ 3,930,000 Detroit, Michigan Water Supply System Revenue Refunding, 4.75%, Due 7/01/19 $ 2,937,675 500,000 Mason County, Michigan Hospital Finance Authority Hospital Revenue Refunding -- Memorial Medical Center of West Michigan, 7.25%, Due 6/01/08 477,500 1,000,000 Michigan Hospital Finance Authority Hospital Revenue Refunding -- Community Memorial Hospital, Cheboygan, Michigan, 6.25%, Due 4/01/10 861,250 5,000,000 Pontiac Hospital Finance Authority, Michigan Hospital Revenue -- NOMC Obligated Group, 6.00%, Due 8/01/07 4,431,250 ----------- 8,707,675 MONTANA 3.1%* 10,000,000 Forsyth, Montana, Rosebud County, PCR Refunding -- The Montana Power Company Colstrip Project, 5.90%, Due 12/01/23 8,775,000 NEW MEXICO 0.2%* 528,137 Santa Fe, New Mexico SFMR, 8.45%, Due 12/01/11 556,524 NEW YORK 10.1%* 26,160,000 Battery Park City Authority, New York Senior Revenue Refunding, 4.75%, Due 11/01/19 19,227,600 6,000,000 New York, New York Municipal Water Finance Authority Water and Sewer System Revenue, 5.375%, Due 6/15/07 5,542,500 4,250,000 New York State Medical Care Facilities Finance Agency Mental Health Services Facilities Improvement Revenue Refunding, 5.25%, Due 2/15/21 3,421,250 ----------- 28,191,350 OHIO 2.9%* 3,800,000 Medina County, Ohio Economic Development MFHR -- Camelot Place, Ltd. Project, 8.375%, Due 10/01/23 3,524,500 660,000 Ohio HFA SFMR, Zero %, Due 8/01/15 56,928 3,300,000 Ohio Municipal Electric Generation Agency Joint Venture 5 "OMEGA JV5" Beneficial Interest Certificates -- Belleville Hydroelectric Project, 5.375%, Due 2/15/24 2,730,750 Springdale, Ohio Hospital Facilities First Mortgage Revenue -- Southwestern Ohio Seniors' Services, Inc.: 1,700,000 6.00%, Due 11/01/18 1,340,875 450,000 6.00%, Due 11/01/23 345,375 ----------- 7,998,428 OKLAHOMA 1.3%* 3,415,000 Shawnee, Oklahoma Hospital Authority Revenue -- MidAmerica HealthCare, Inc., 8.00%, Due 10/01/99+ 3,555,869 PENNSYLVANIA 4.6%* 6,000,000 Blair County, Pennsylvania Hospital Authority First Mortgage Revenue, Mercy Hospital Sublessee, 8.125%, Due 7/01/08+ 6,112,500 3,000,000 Lehigh County, Pennsylvania IDA PCR Refunding -- Pennsylvania Power & Light Company Project, 6.40%, Due 9/01/29 2,861,250 $5,000,000 Pennsylvania Intergovernmental Cooperation Authority Special Tax Revenue Refunding -- City of Philadelphia Funding Program, 5.00%, Due 6/15/22 $ 3,900,000 ----------- 12,873,750 SOUTH CAROLINA 3.3%* 1,435,000 Kershaw County, South Carolina Hospital Facilities Revenue Refunding -- Kershaw County Memorial Hospital Project, 8.00%, Due 9/15/17 1,458,319 5,000,000 Piedmont, South Carolina Municipal Power Agency Electric Revenue, 5.00%, Due 1/01/22 3,893,750 5,000,000 South Carolina Public Service Authority Revenue Refunding, 5.00%, Due 1/01/25 3,787,500 ----------- 9,139,569 TEXAS 6.2%* 575,000 El Paso, Texas Property Finance Authority, Inc., SFMR -- GNMA Mortgage-Backed, 8.70%, Due 12/01/18 602,312 6,000,000 Harris County, Texas Toll Road Senior Lien Revenue, 5.00%, Due 8/15/16 4,777,500 10,000,000 North Central Texas Health Facilities Development Corporation -- Tri-City Health Centre, Inc. Project, 9.50%, Due 5/01/21 10,600,000 1,160,000 Ranger, Texas Housing Corporation MFMR Refunding -- FHA Insured Mortgage Loan -- Ranger Apartments Project, 8.80%, Due 3/01/24 1,261,500 ----------- 17,241,312 VIRGINIA 0.6%* 995,000 Loudoun County, Virginia Sanitation Authority Water and Sewer System Revenue, 5.25%, Due 1/01/20 813,412 900,000 Norfolk, Virginia Water Revenue, 5.25%, Due 11/01/13 756,000 ----------- 1,569,412 WASHINGTON 4.4%* Bellevue, Washington Convention Center Authority, King County, Washington Special Obligation Revenue and Refunding, Compound Interest: 1,510,000 Zero %, Due 2/01/19 283,125 1,140,000 Zero %, Due 2/01/20 199,500 5,000,000 Zero %, Due 2/01/21 818,750 7,000,000 Zero %, Due 2/01/23 997,500 3,725,000 Skagit County, Washington Housing Authority Low-Income Housing Assistance Revenue -- GNMA Collateralized Mortgage Loans -- Sea Mar Project, 7.00%, Due 6/20/35 3,706,375 5,000,000 Washington Health Care Facilities Authority Revenue -- Sisters of Providence, 6.25%, Due 10/01/13 4,456,250 15,105,000 Washington Housing Finance Commission SFMR -- GNMA and FNMA Mortgage Backed Securities Program, Zero %, Due 1/01/25 1,755,956 ------------ 12,217,456
See notes to financial statements. 29 32 SCHEDULE OF INVESTMENTS IN SECURITIES (continued) Decembr 31, 1994
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- WISCONSIN 0.4%* $1,000,000 Kaukauna, Wisconsin Outagamie County Electric System Revenue Refunding, 7.25%, Due 3/29/06+ $ 1,050,000 ------------ Total Municipal Bonds (Cost $230,845,100) 229,077,513 CASH EQUIVALENTS 12.0%* DAILY VARIABLE RATE PUT BONDS LOUISIANA 1.6%* 4,500,000 Louisiana Public Facilities Authority IDR -- Kenner Hotel Limited Partnership Project 4,500,000 MISSISSIPPI 1.2%* 3,300,000 Jackson County, Mississippi Port Facility Refunding Revenue -- Chevron U.S.A. Inc. Project 3,300,000 NEW MEXICO 0.7%* 2,000,000 Hurley, New Mexico PCR -- Kennecott Santa Fe Corporation Project 2,000,000 NEW YORK 0.8%* 2,300,000 New York, New York GO 2,300,000 SOUTH CAROLINA 0.7%* 2,000,000 Berkeley County, South Carolina PCR Refunding -- Amoco Chemical Company Project 2,000,000 TEXAS 1.9%* 3,500,000 Gulf Coast Waste Disposal Authority PCR -- Amoco Oil Company Project 3,500,000 1,800,000 Gulf Coast Waste Disposal Authority PCR Refunding -- Amoco Oil Company Project 1,800,000 ------------ 5,300,000 UTAH 5.1%* 9,240,000 Emery County, Utah PCR Refunding -- PacifiCorp Projects 9,240,000 5,000,000 Salt Lake County, Utah PCR Refunding -- Service Station Holdings, Inc. Project 5,000,000 ------------ 14,240,000 Total Daily Variable Rate Put Bonds ---------- (Cost $33,640,000) 33,640,000 TOTAL INVESTMENTS IN SECURITIES ---------- (COST $264,485,100) 93.9%* 262,717,513 Other Assets and Liabilities, Net 6.1%* 17,090,608 ------------ NET ASSETS 100.0%* $279,808,121 ============
STRONG HIGH-YIELD MUNICIPAL BOND FUND
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- MUNICIPAL BONDS 95.0%* DELAWARE 0.4%* $ 435,000 Delaware EDA Hospital Revenue -- Osteopathic Hospital Association of Delaware/Riverside Hospital, 6.75%, Due 2/01/11+ $ 374,644 FLORIDA 10.5%* Brevard County, Florida Health Facilities Authority Revenue Refunding -- Courtenay Springs Village Project: 970,000 7.375%, Due 9/10/00+ 934,838 2,000,000 7.75%, Due 1/08/16+ 1,875,000 1,500,000 Cape Coral, Florida Health Facilities Authority Hospital Revenue -- Cape Coral Medical Center, Inc. Project, 7.50%, Due 11/15/21 1,434,375 Hialeah Gardens, Florida IDR Refunding -- Waterford Convalescent Center Project: $1,000,000 7.875%, Due 12/01/07 $ 947,500 1,000,000 8.25%, Due 12/01/14 961,250 1,200,000 Highlands County, Florida IDA First Mortgage Health Care Revenue -- Church of All Faiths, Inc. Project, 9.375%, Due 10/01/21 (d) 840,000 1,275,000 Homestead, Florida Industrial Revenue -- Community Rehabilitation Providers Program, 7.95%, Due 11/01/18 1,149,094 2,735,000 Largo, Florida Sun Coast Health System Revenue -- Sun Coast Hospital Issue, 6.20%, Due 3/01/13 2,297,400 7,840,000 Polk County, Florida HFA Subordinated Revenue -- Lake Wales Gardens Project, Zero %, Due 4/01/20 891,800 ------------ 11,331,257 GEORGIA 6.5%* 4,840,000 Atlanta, Georgia Urban Residential Finance Authority MFHR -- Franciscan Club Apartments Projects, 7.75%, Due 4/01/22 4,628,250 2,500,000 Atlanta, Georgia Urban Residential Finance Authority Revenue -- Landrum Arms Project, 8.00%, Due 7/01/24 2,337,500 --------- 6,965,750 ILLINOIS 6.5%* 1,030,000 Granite City, Illinois Hospital Revenue Refunding -- Saint Elizabeth Medical Center, 8.125%, Due 6/01/08 1,006,825 Illinois DFA Community Rehabilitation Providers Facilities Acquisition Program Revenue: 1,110,000 7.25%, Due 3/01/04 1,047,563 3,070,000 7.50%, Due 3/01/14 2,786,025 270,000 Illinois DFA Industrial Revenue Refunding -- Great Plains Hotel Corporation of Illinois Project, 7.50%, Due 4/01/16 235,575 2,000,000 Illinois DFA Solid Waste Disposal Facility Revenue -- Ford Heights Waste Tire To Energy Project, 7.875%, Due 4/01/11 1,922,500 ------------ 6,998,488 INDIANA 1.4%* 1,500,000 Wells County, Indiana Hospital Authority Hospital Facility Revenue Refunding -- Caylor-Nickel Medical Center, Inc. Project, 8.75%, Due 4/15/12 1,507,500 LOUISIANA 8.0%* 6,030,000 Louisiana Public Facilities Authority Senior Lien Revenue -- Progressive Healthcare Providers, Inc. Developmental Centers, 8.00%, Due 3/23/06+ 5,396,850 3,000,000 New Orleans, Louisiana Public Improvement, 8.125%, Due 10/01/03 3,251,250 ------------ 8,648,100 MASSACHUSETTS 7.5%* Massachusetts Health and Educational Facilities Authority Revenue -- Saints Memorial Medical Center: 2,885,000 5.75%, Due 10/01/06 2,091,625 6,500,000 6.00%, Due 10/01/23 4,127,500
See notes to financial statements. 30 33 STRONG HIGH-YIELD MUNCIPAL BOND FUND (CONTINUED)
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- $ 750,000 Massachusetts Industrial Finance Agency First Mortgage Revenue -- Berkshire Retirement Community, Lenox Project, 6.50%, Due 7/01/09 $ 681,563 1,195,000 Massachusetts Industrial Finance Agency First Mortgage Revenue -- Evanswood Bethzatha Corporation Project, 7.875%, Due 1/15/20 1,139,731 ------------ 8,040,419 MICHIGAN 2.2%* 2,000,000 Michigan Hospital Finance Authority Hospital Revenue and Refunding -- Brighton Hospital, 8.625%, Due 10/01/18 2,010,000 350,000 Michigan Hospital Finance Authority Hospital Revenue and Refunding -- Detroit Osteopathic Hospital Corporation, 7.50%, Due 11/01/10 324,187 ------------ 2,334,187 NEW HAMPSHIRE 5.0%* New Hampshire Higher Educational and Health Facilities Authority First Mortgage Revenue -- Rivermead at Peterborough Project: 4,000,000 7.375%, Due 7/01/00 3,910,000 1,610,000 8.50%, Due 7/01/24 1,515,412 ------------ 5,425,412 NEW YORK 4.0%* 3,000,000 Orange County, New York Industrial Development Agency Life Care Community Revenue -- The Glen Arden, Inc. Project, 8.25%, Due 1/01/02 3,003,750 Tompkins County, New York Industrial Development Agency Life Care Community Revenue -- Kendal at Ithaca, Inc. Project: 500,000 7.875%, Due 6/01/15 487,500 800,000 7.875%, Due 6/01/24 759,000 ------------ 4,250,250 OHIO 1.2%* 400,000 Medina County, Ohio Economic Development MFHR -- Camelot Place, Ltd. Project, 8.375%, Due 10/01/23 371,000 Springdale, Ohio Hospital Facilities First Mortgage Revenue -- Southwestern Ohio Seniors' Services, Inc. Project: 600,000 6.00%, Due 11/01/18 473,250 550,000 6.00%, Due 11/01/23 422,125 ------------ 1,266,375 PENNSYLVANIA 30.9%* 1,000,000 Beaver County, Pennsylvania IDA PCR -- The Toledo Edison Company Beaver Valley Project, 10.75%, Due 11/15/15 1,038,750 Bucks County, Pennsylvania IDA CDR -- Attleboro Associates, Ltd. Nursing Facility Project: 1,530,000 8.00%, Due 5/08/01+ 1,472,625 3,785,000 8.25%, Due 3/13/05+ 3,628,869 Delaware County, Pennsylvania IDA Revenue -- Martins Run Project: 1,000,000 5.40%, Due 12/15/01 935,000 1,500,000 6.00%, Due 3/17/06+ 1,336,875 $5,000,000 Horsham, Pennsylvania IDA CDA Health Care Facilities Revenue -- GF/Pennsylvania Properties, Inc. Project, 8.375%, Due 9/01/24 $ 4,712,500 Montgomery County, Pennsylvania Higher Education and Health Authority Hospital Revenue -- United Hospitals, Inc. -- St. Christopher's Hospital for Children Project: 350,000 7.50%, Due 11/01/13 322,437 230,000 8.50%, Due 11/01/17 233,162 1,600,000 Montgomery County, Pennsylvania IDA Health Care Facility First Mortgage Revenue -- AHF/Ambler, Inc. Project, 8.50%, Due 12/01/23 1,454,000 Montgomery County, Pennsylvania IDA Retirement Community Revenue Refunding -- G. D. L. Farms Corporation Project: 2,000,000 6.30%, Due 1/01/13 1,632,500 4,660,000 6.50%, Due 1/01/20 3,751,300 6,840,000 Montgomery County, Pennsylvania IDA Revenue -- Wordsworth Academy Project, 8.00%, Due 9/01/24 6,164,550 2,200,000 Pennsylvania Economic DFA Resource Recovery Revenue -- Northampton Generating Project, 6.875%, Due 1/01/11 1,850,750 1,260,000 Philadelphia, Pennsylvania Hospitals and Higher Education Facilities Authority Hospital Revenue -- Methodist Hospital Project, 9.00%, Due 7/01/10 1,291,500 Philadelphia, Pennsylvania Hospitals and Higher Education Facilities Authority Hospital Revenue -- Nazareth Hospital Project: 1,125,000 9.375%, Due 7/01/05 1,153,125 2,220,000 9.375%, Due 7/01/15 2,261,625 ------------ 33,239,568 TEXAS 3.8%* 4,765,962 DeSoto, Texas IDA IDR -- Wintergreen Commercial Partnership Project, 7.00%, Due 1/01/17 4,116,600 VIRGINIA 1.8%* Norfolk, Virginia IDA IDR Mortgage Refunding -- Comfort Inn -- Norfolk Naval Station Project: 625,000 6.75%, Due 1/15/07+ 549,219 1,675,000 7.00%, Due 9/05/13+ 1,434,219 ------------ 1,983,438 WISCONSIN 5.3%* 5,660,000 Brookfield, Wisconsin IDR Refunding -- Midway Motor Lodge Project, 8.40%, Due 2/15/06+ 5,737,825 ------------ Total Municipal Bonds (Cost $107,098,295) 102,219,813
See notes to financial statements. 31 34 SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994 STRONG HIGH-YIELD MUNICIPAL BOND FUND (continued)
PRINCIPAL VALUE AMOUNT (NOTE 2) --------- --------- CASH EQUIVALENTS 4.8%* DAILY VARIABLE RATE PUT BONDS NEW MEXICO 0.5%* $ 500,000 Farmington, New Mexico PCR -- Arizona Public Service Company Four Corners Project $ 500,000 NORTH CAROLINA 1.4%* 1,500,000 Halifax County, North Carolina Industrial Facilities and Pollution Control Financing Authority Revenue -- Westmoreland -- LG&E Partners Roanoke Valley Project 1,500,000 OHIO 1.0%* 1,100,000 Twinsburg, Ohio IDR -- United Stationers Supply Co. Project 1,100,000 UTAH 1.9%* 2,000,000 Salt Lake County, Utah PCR Refunding -- Service Station Holdings, Inc. Project 2,000,000 ------------- Total Daily Variable Rate Put Bonds (Cost $5,100,000) 5,100,000 ------------- TOTAL INVESTMENTS IN SECURITIES (COST $112,198,295) 99.8%* 107,319,813 Other Assets and Liabilities, Net 0.2%* 235,584 ------------- NET ASSETS 100.0%* $107,555,397 ------------- -------------
* Percentages are calculated as a percentage of net assets. ** Variable rate bonds. + Maturity date represents actual maturity, earliest put date or pre-refunding date. (d) Security was purchased while in default, and accordingly, no interest has been accrued or received since acquisition. (w) When-Issued Security. See notes to financial statements. 32 35 STATEMENTS OF OPERATIONS For the Year Ended December 31, 1994
(In Thousands) STRONG MUNICIPAL STRONG SHORT-TERM MONEY MARKET FUND MUNICIPAL BOND FUND ----------------- ------------------- INTEREST INCOME $46,910 $10,475 EXPENSES: Investment Advisory Fees 6,673 1,010 Custodian Fees 123 35 Shareholder Servicing Costs 868 211 Reports to Shareholders 692 72 Federal and State Registration Fees 80 104 Other 126 58 ------ ------- Total Expenses before Waivers and Absorptions by Advisor 8,562 1,490 Voluntary Expense Waivers and Absorptions by Advisor (187) -- ------ ------- Expenses, Net 8,375 1,490 ------ ------- NET INVESTMENT INCOME 38,535 8,985 REALIZED AND UNREALIZED GAIN (LOSS): Net Realized Gain (Loss) on: Investments -- (8,946) Futures Contracts -- 2,433 Change in Unrealized Appreciation/Depreciation on Investments -- (6,339) ------ ------- NET LOSS -- (12,852) ------ ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $38,535 ($ 3,867) ====== ========
STRONG INSURED STRONG STRONG HIGH-YIELD MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND ------------------- ------------------- ------------------- INTEREST INCOME $3,008 $22,806 $5,945 EXPENSES: Investment Advisory Fees 253 2,078 477 Custodian Fees 8 39 15 Shareholder Servicing Costs 92 455 80 Reports to Shareholders 26 140 26 Federal and State Registration Fees 53 90 53 Other 47 51 24 ------- -------- ------- Total Expenses before Waivers and Absorptions by Advisor 479 2,853 675 Voluntary Expense Waivers and Absorptions by Advisor -- -- (675) ------- -------- ------- Expenses, Net 479 2,853 -- ------- -------- ------- NET INVESTMENT INCOME 2,529 19,953 5,945 REALIZED AND UNREALIZED GAIN (LOSS): Net Realized Gain (Loss) on: Investments (3,993) (23,725) (2,072) Futures Contracts -- -- 111 Change in Unrealized Appreciation/Depreciation on Investments (2,405) (14,892) (4,978) ------- -------- ------- NET LOSS (6,398) (38,617) (6,939) ------- -------- ------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($3,869) ($18,664) ($ 994) ======= ======== =======
See notes to financial statements. 33 36 STATEMENTS OF ASSETS AND LIABILITIES December 31, 1994
(In Thousands, Except Per Share Amounts) STRONG MUNICIPAL STRONG SHORT-TERM MONEY MARKET FUND MUNICIPAL BOND FUND ----------------- ------------------- ASSETS: Investments in Securities, at Value (Cost of $1,267,532 and $171,590, respectively) $ 1,267,532 $ 168,294 Receivable from Brokers for Securities Sold 62,520 5,052 Interest Receivable 10,489 2,845 Other 291 736 ----------- ----------- Total Assets 1,340,832 176,927 LIABILITIES: Payable to Brokers for Securities Purchased 74,887 14,821 Dividends Payable 4,598 716 Accrued Operating Expenses and Other Liabilities 730 147 ----------- ----------- Total Liabilities 80,215 15,684 ----------- ----------- NET ASSETS $ 1,260,617 $ 161,243 =========== =========== Capital Shares Authorized 10,000,000 10,000,000 Outstanding 1,260,617 16,577 NET ASSET VALUE PER SHARE $ 1.00 $ 9.73 =========== ===========
STRONG INSURED STRONG STRONG HIGH-YIELD MUNICIPAL BOND FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND ------------------- ------------------- ------------------- ASSETS: Investments in Securities, at Value (Cost of $49,104, $264,485 and $112,198, respectively) $ 49,240 $262,718 $ 107,320 Receivable from Brokers for Securities Sold 4,076 14,033 3,255 Interest Receivable 1,054 4,554 2,307 Other 213 215 280 ----------- -------- ---------- Total Assets 54,583 281,520 113,162 LIABILITIES: Payable to Brokers for Securities Purchased 3,251 -- 4,861 Dividends Payable 216 1,511 716 Accrued Operating Expenses and Other Liabilities 92 201 30 ----------- -------- ---------- Total Liabilities 3,559 1,712 5,607 ----------- -------- ---------- NET ASSETS $ 51,024 $279,808 $ 107,555 =========== ======== ========== Capital Shares Authorized 10,000,000 100,000 1,000,000 Outstanding 5,009 30,329 11,572 NET ASSET VALUE PER SHARE $ 10.19 $ 9.23 $ 9.29 =========== ======== ==========
See notes to financial statements. 34 37 STATEMENTS OF CHANGES IN NET ASSETS For the Years Ended December 31, 1994 and 1993
(In Thousands) STRONG MUNICIPAL STRONG SHORT-TERM MONEY MARKET FUND MUNICIPAL BOND FUND -------------------------- ------------------- 1994 1993 1994 1993 ---------- ---------- -------- -------- OPERATIONS: Net Investment Income $ 38,535 $ 29,240 $ 8,985 $ 7,390 Net Realized Gain (Loss) -- -- (6,513) 1,573 Change in Unrealized Appreciation/Depreciation -- -- (6,339) 1,963 ---------- ---------- -------- -------- Increase (Decrease) in Net Assets Resulting from Operations 38,535 29,240 (3,867) 10,926 CAPITAL SHARE TRANSACTIONS 88,057 67,069 (41,777) 103,296 DIVIDENDS PAID FROM: Net Investment Income (38,535) (29,240) (8,985) (7,390) Net Realized Gain on Investments -- -- (308) (1,468) ---------- ---------- -------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 88,057 67,069 (54,937) 105,364 NET ASSETS: Beginning of Year 1,172,560 1,105,491 216,180 110,816 ---------- ---------- -------- -------- End of Year $1,260,617 $1,172,560 $161,243 $216,180 ========== ========== ======== ========
See notes to financial statements. 35 38 STATEMENTS OF CHANGES IN NET ASSETS For the Years Ended December 31, 1994 and 1993
(In Thousands) STRONG INSURED STRONG MUNICIPAL BOND FUND MUNICIPAL BOND FUND 1994 1993 1994 1993 ------- ------- -------- -------- OPERATIONS: Net Investment Income $ 2,529 $ 2,409 $ 19,953 $ 22,187 Net Realized Gain (Loss) (3,993) 635 (23,725) 11,696 Change in Unrealized Appreciation/Depreciation (2,405) 2,271 (14,892) 9,409 ------- ------- -------- -------- Increase (Decrease) in Net Assets Resulting from Operations (3,869) 5,315 (18,664) 43,292 CAPITAL SHARE TRANSACTIONS (3,791) 37,733 (80,486) 100,046 DIVIDENDS PAID FROM: Net Investment Income (2,529) (2,409) (19,953) (22,187) Net Realized Gain on Investments -- (793) -- (11,991) ------- ------- -------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS (10,189) 39,846 (119,103) 109,160 NET ASSETS: Beginning of Year 61,213 21,367 398,911 289,751 ------- ------- -------- -------- End of Year $51,024 $61,213 $279,808 $398,911 ======= ======= ======== ========
STRONG HIGH-YIELD MUNICIPAL BOND FUND 1994 1993* -------- ------- OPERATIONS: Net Investment Income $ 5,945 $ 127 Net Realized Gain (Loss) (1,961) 6 Change in Unrealized Appreciation/Depreciation (4,978) 114 -------- ------- Increase (Decrease) in Net Assets Resulting from Operations (994) 247 CAPITAL SHARE TRANSACTIONS 93,661 20,620 DIVIDENDS PAID FROM: Net Investment Income (5,945) (127) Net Realized Gain on Investments (7) -- -------- ------- TOTAL INCREASE IN NET ASSETS 86,715 20,740 NET ASSETS: Beginning of Period 20,840 100 -------- ------- End of Period $107,555 $20,840 ======== =======
*For the Period October 1, 1993 (Inception) through December 31, 1993. See notes to financial statements. 36 39 NOTES TO FINANCIAL STATEMENTS December 31, 1994 1. ORGANIZATION The Strong Municipal Income Funds consist of Strong Municipal Money Market Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc., Strong Insured Municipal Bond Fund, Inc., Strong Municipal Bond Fund, Inc. and Strong High-Yield Municipal Bond Fund, Inc. The Funds are separately incorporated, diversified, open-end management investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. (A) Security Valuation -- Investments in securities for which market quotations are readily available are valued at fair value as determined by a pricing service on the basis of the average of the most recent bid and asked prices in the principal market (closing sales prices if the principal market is an exchange) in which such securities are normally traded as well as such factors as market transactions among institutional investors and dealer quotations for similar securities. Securities for which quotations are not readily available are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Directors of the Funds. Debt securities which are purchased within 60 days of their stated maturity are valued at amortized cost, which approximates current value. Investments in Strong Municipal Money Market Fund are valued using the amortized cost method (which approximates current value) whereby investments purchased at a discount or premium are valued by amortizing the difference between the original purchase price and maturity value of the issue over the period to maturity. (B) Federal Income and Excise Taxes and Distributions to Shareholders -- It is the Funds' policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders in a manner which results in no tax cost to the Funds. Therefore, no Federal income or excise tax provision is required. (C) Realized Gains and Losses On Investment Transactions -- The Funds determine the gain or loss realized on investment transactions by comparing the identified cost of the security lot sold with the net sales proceeds. (D) Futures -- The Funds, except for Strong Municipal Money Market Fund, may enter into futures contracts to provide protection against adverse movements in the prices of securities in the portfolio. Upon entering into a futures contract, the Funds pledge to the broker cash or other high-quality liquid debt securities equal to the minimum "initial margin" requirements of the exchange. Additionally, the Funds receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as "variation margin," and are recorded by the Funds as unrealized gains or losses. When the futures contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the statement of assets and liabilities. The predominant risk is that the movement in the price of the futures contract may not correlate perfectly with the movement in the prices of the assets being hedged. A lack of correlation could render the portfolio's hedging strategy unsuccessful and could result in a loss to the portfolio. Futures contracts open at December 31, 1994 were as follows:
UNREALIZED APPRECIATION CONTRACT VALUE (DEPRECIATION) FUND COLLATERAL (PAR VALUE) CONTRACTS (IN THOUSANDS) EXPIRATION (IN THOUSANDS) ---- ---------------------- --------- -------------- ---------- -------------- Strong Springfield, Missouri and Carlyle Capital 355 Municipal ($30,142) March 1995 ($321) Short-Term Markets, Inc. Board of Public Utilities Bond Index Municipal COP, 5.20% Futures Bond Fund $2,750,000 Due 12/15/03 (Short) Strong Halifax County, North Carolina Industrial 100 Municipal (8,491) March 1995 14 High-Yield Facilities and Pollution Control Bond Index Municipal Financing Authority Revenue -- Futures Bond Fund Westmoreland -- LG&E Partners Roanoke (Short) Valley Project $1,500,000 Due 1/03/95
(E) Options -- The Funds, except for Strong Municipal Money Market Fund, may engage in options transactions to hedge against expected declines of their portfolio securities. Premiums received by the Funds upon writing covered call options are recorded in each Fund's statement of assets and liabilities as an asset with a corresponding liability which is subsequently adjusted to the current market value of the option. When an option expires, is exercised, or is closed, each Fund realizes a gain or loss, and the liability is eliminated. Each Fund continues to bear the risk of a decline in the price of the underlying security during the period, although any potential loss during the period would be reduced by the amount of the option premium received. The Funds, except for Strong Municipal Money Market Fund, may also purchase put options on futures contracts, write call options on futures contracts, and enter into related closing transactions for hedging purposes. These options generally are similar to an option covering a specific security, except that delivery of cash rather than the underlying security is made. The use of written option contracts involves elements of market risk in excess of the amount recognized in the statement of assets and liabilities. The contract value represents a Fund's involvement in these financial instruments. When required, a Fund will set aside permissible liquid assets in a segregated account to secure its potential obligations under its options positions. 37 40 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1994 (F) When-Issued Securities -- The Funds may purchase securities on a when-issued or delayed delivery basis. Although the payment and interest terms of these securities are established at the time the purchaser enters into the agreement, these securities may be delivered and paid for at a future date, generally within 45 days. The Funds record purchases of when-issued securities and reflect the values of such securities in determining net asset value in the same manner as other portfolio securities. The Funds segregate and maintain at all times cash, cash equivalents, or other high-quality liquid debt securities in an amount at least equal to the amount of outstanding commitments for when-issued securities. (G) Average Years to Maturity -- A Fund's average maturity is generally based on the actual stated maturity of a security. However, the maturity date of a variable rate security is the next interest rate adjustment date and for a debt security with a put or demand feature, the next put or demand exercise date is considered its maturity. The maturity of a mortgage-backed security is determined on an "expected life" basis. Notwithstanding the foregoing, the use of futures contracts for hedging purposes may impact the effective maturity of a portfolio security and accordingly, the calculated average years to maturity of the Fund. (H) Deferred Organizational Costs -- Costs incurred by Strong Short-Term Municipal Bond Fund, Strong Insured Municipal Bond Fund and Strong High-Yield Municipal Bond Fund in connection with their organization and initial registration and public offering of shares have been deferred and are being amortized to expense over a sixty-month period. These costs were advanced by the Advisor and will be reimbursed by the Funds over a period of not more than sixty months. (I) Other -- Portfolio transactions are recorded on the trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. 3. NET ASSETS Net assets as of December 31, 1994 were as follows (in thousands):
STRONG MUNICIPAL STRONG SHORT-TERM STRONG INSURED MONEY MARKET FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND ----------------- ------------------- ------------------- Capital Stock $1,260,617 $171,372 $54,957 Undistributed Net Realized Loss -- (6,513) (4,069) Net Unrealized Appreciation (Depreciation) -- (3,616) 136 ---------- -------- ------- Net Assets $1,260,617 $161,243 $51,024 ========== ======== =======
STRONG STRONG HIGH-YIELD MUNICIPAL BOND FUND MUNICIPAL BOND FUND ------------------- ------------------- Capital Stock $ 305,572 $114,381 Undistributed Net Realized Loss (23,996) (1,961) Net Unrealized Depreciation (1,768) (4,865) --------- -------- Net Assets $ 279,808 $107,555 ========= ========
4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the Funds during 1994 and 1993 were as follows (in thousands):
1994 1993 ------------------------ ------------------------ SHARES DOLLARS SHARES DOLLARS ---------- ---------- ---------- ---------- STRONG MUNICIPAL MONEY MARKET FUND Shares Sold 2,652,872 $2,652,872 2,067,312 $2,067,312 Shares Issued in Reinvestment of Dividends 34,513 34,513 24,859 24,859 Shares Redeemed (2,599,328) (2,599,328 ) (2,025,102) (2,025,102) ---------- ---------- ---------- ---------- Net Increase 88,057 $ 88,057 67,069 $ 67,069 ========== ========== ========== ========== STRONG SHORT-TERM MUNICIPAL BOND FUND Shares Sold 14,809 $ 150,226 20,830 $ 215,066 Shares Issued in Reinvestment of Dividends 799 8,049 707 7,298 Shares Redeemed (19,907) (200,052) (11,524) (119,068) ---------- ---------- ---------- ---------- Net Increase (Decrease) (4,299) ($ 41,777) 10,013 $ 103,296 ========== ========== ========== ========== STRONG INSURED MUNICIPAL BOND FUND Shares Sold 3,835 $ 40,236 5,420 $ 60,923 Shares Issued in Reinvestment of Dividends 179 1,922 214 2,427 Shares Redeemed (4,347) (45,949) (2,267) (25,617) ---------- ---------- ---------- ---------- Net Increase (Decrease) (333) ($ 3,791 ) 3,367 $ 37,733 ========== ========== ========== ==========
38 41
1994 1993 SHARES DOLLARS SHARES DOLLARS ------- -------- ------- -------- STRONG MUNICIPAL BOND FUND Shares Sold 17,346 $168,663 31,256 $321,485 Shares Issued in Reinvestment of Dividends 1,675 16,211 2,689 27,719 Shares Redeemed (27,598) (265,360) (24,027) (249,158) ------- -------- ------- -------- Net Increase (Decrease) (8,577) ($ 80,486) 9,918 $100,046 ======= ======== ======= ======== STRONG HIGH-YIELD MUNICIPAL BOND FUND Shares Sold 21,216 $205,563 2,234 $ 22,439 Shares Issued in Reinvestment of Dividends 400 3,848 4 42 Shares Redeemed (12,107) (115,750) (186) (1,861) ------- -------- ------- -------- Net Increase 9,509 $ 93,661 2,052 $ 20,620 ======= ======== ======= ========
5. RELATED PARTY TRANSACTIONS Strong Capital Management, Inc. (the "Advisor"), with whom certain officers and a director of the Funds are affiliated, provides investment advisory services and shareholder recordkeeping and related services to the Funds. Investment advisory fees, which are established by terms of the Advisory Agreements, are based on annualized rates of .50% of the average daily net assets of the Strong Municipal Money Market Fund, Strong Short-Term Municipal Bond Fund and Strong Insured Municipal Bond Fund, and .60% of the average daily net assets of the Strong Municipal Bond Fund and Strong High-Yield Municipal Bond Fund. Advisory fees are subject to reimbursement by the Advisor if the Funds' operating expenses exceed certain levels. Shareholder recordkeeping and related service fees are based on contractually established rates for each open and closed shareholder account. In addition, the Advisor is compensated for certain other services related to costs incurred for reports to shareholders. Certain information regarding these transactions, excluding the effects of waivers and reimbursements for the year ended December 31, 1994 is as follows (in thousands):
STRONG MUNICIPAL STRONG SHORT-TERM STRONG INSURED MONEY MARKET FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND ----------------- ------------------- ------------------- Payable to Advisor at December 31, 1994 $623 $122 $79 Other Shareholder Servicing Expenses Paid to Advisor 34 6 2 Unaffiliated Directors' Fees 15 4 2
STRONG STRONG HIGH-YIELD MUNICIPAL BOND FUND MUNICIPAL BOND FUND ------------------- ------------------- Payable to Advisor at December 31, 1994 $160 $ 29 Other Shareholder Servicing Expenses Paid to Advisor 12 2 Unaffiliated Directors' Fees 6 2
6. INVESTMENT TRANSACTIONS The aggregate purchases and sales of long-term securities during 1994 were as follows (in thousands):
STRONG SHORT-TERM STRONG INSURED MUNICIPAL BOND FUND MUNICIPAL BOND FUND ------------------- ------------------- Purchases $ 546,510 $192,217 Sales 584,417 206,095
STRONG MUNICIPAL STRONG HIGH-YIELD BOND FUND MUNICIPAL BOND FUND ---------------- ------------------- Purchases $1,033,090 $237,891 Sales 1,174,137 149,446
39 42 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1994 7. INCOME TAX INFORMATION At December 31, 1994, the investment cost, gross unrealized appreciation and depreciation on investments and capital loss carryovers (expiring in 2002) for Federal income tax purposes were as follows (in thousands):
STRONG SHORT-TERM STRONG INSURED MUNICIPAL BOND FUND MUNICIPAL BOND FUND ------------------- -------------------- Aggregate Investment Cost $171,601 $ 49,126 Aggregate Unrealized: Appreciation $ 377 $ 620 Depreciation (3,684) (506) -------- -------- ($ 3,307) $ 114 ======== ======== Capital Loss Carryovers $ 6,916 $ 4,047 ======== ========
STRONG MUNICIPAL STRONG HIGH-YIELD BOND FUND MUNICIPAL BOND FUND ---------------- -------------------- Aggregate Investment Cost $264,782 $112,221 Aggregate Unrealized: Appreciation $ 7,056 $ 88 Depreciation (9,120) (4,989) -------- -------- ($ 2,064) ($ 4,901) ======== ======== Capital Loss Carryovers $ 23,699 $ 1,924 ======== ========
8. ABBREVIATIONS The following is a list of abbreviations used in the Schedules of Investments in Securities: BAN -- Bond Anticipation Notes CDA -- Commercial Development Authority CDR -- Commercial Development Revenue COP -- Certificates of Participation DFA -- Development Finance Authority EDA -- Economic Development Authority EDC -- Economic Development Corporation EDR -- Economic Development Revenue GO -- General Obligation HDA -- Housing Development Authority HDC -- Housing Development Corporation HFA -- Housing Finance Authority HFC -- Housing Finance Corporation IBA -- Industrial Building Authority IBR -- Industrial Building Revenue IDA -- Industrial Development Authority IDB -- Industrial Development Board IDC -- Industrial Development Corporation IDR -- Industrial Development Revenue IFA -- Investment Finance Authority MFHR -- Multi-Family Housing Revenue MFMR -- Multi-Family Mortgage Revenue PCR -- Pollution Control Revenue RAN -- Revenue Anticipation Notes SFHR -- Single Family Housing Revenue SFMR -- Single Family Mortgage Revenue TRAN -- Tax and Revenue Anticipation Notes 40 43 FINANCIAL HIGHLIGHTS The following presents information relating to a share of capital stock of each of the Funds, outstanding for the entire period. STRONG MUNICIPAL MONEY MARKET FUND
1994 1993 1992 1991 1990 ---------- ---------- ---------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net Investment Income 0.03 0.02 0.03 0.05 0.06 Dividends from Net Investment Income*** (0.03) (0.02) (0.03) (0.05) (0.06) ---------- ---------- ---------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ======== ======== Total Return +2.9% +2.5% +3.4% +5.2% +6.1% Net Assets, End of Period (In Thousands) $1,260,617 $1,172,560 $1,105,491 $782,482 $218,205 Ratio of Expenses to Average Net Assets 0.6% 0.7% 0.7% 0.7% 0.8% Ratio of Expenses to Average Net Assets Without Waivers 0.6% 0.7% 0.7% 0.7% 0.8% Ratio of Net Investment Income to Average Net Assets 2.9% 2.5% 3.3% 5.0% 6.0% 1989 1988 1987 1986 -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net Investment Income 0.06 0.05 0.05 0.01 Dividends from Net Investment Income*** (0.06) (0.05) (0.05) (0.01) -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== Total Return +6.1% +5.2% +4.7% +0.7% Net Assets, End of Period (In Thousands) $ 73,802 $ 77,465 $ 59,085 $ 2,401 Ratio of Expenses to Average Net Assets 0.9% 0.8% 0.6% 0.5%* Ratio of Expenses to Average Net Assets Without Waivers 0.9% 0.8% 1.0% 0.5%* Ratio of Net Investment Income to Average Net Assets 5.9% 5.0% 4.7% 3.7%*
STRONG SHORT-TERM MUNICIPAL BOND FUND
1994 1993 1992 ---------- ---------- ---------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.36 $ 10.20 $ 10.00 INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.45 0.44 0.48 Net Realized and Unrealized Gains (Losses) on Investments (0.62) 0.23 0.22 ---------- ---------- ---------- TOTAL FROM INVESTMENT OPERATIONS (0.17) 0.67 0.70 LESS DISTRIBUTIONS Dividends From Net Investment Income*** (0.45) (0.44) (0.48) Distributions From Net Realized Gains (0.01) (0.07) (0.02) ---------- ---------- ---------- TOTAL DISTRIBUTIONS (0.46) (0.51) (0.50) ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 9.73 $ 10.36 $ 10.20 ========== ========== ========== Total Return -1.6% +6.8% +7.2% Net Assets, End of Period (In Thousands) $ 161,243 $ 216,180 $ 110,816 Ratio of Expenses to Average Net Assets 0.7% 0.6% 0.2% Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 0.7% 0.7% 0.8% Ratio of Net Investment Income to Average Net Assets 4.5% 4.2% 4.9% Portfolio Turnover Rate 273.2% 141.5% 139.9%
* Calculated on an annualized basis. ** Inception date is October 23, 1986 for Strong Municipal Money Market Fund. Total return is not annualized. *** Tax-exempt for regular Federal income tax purposes. 41 44 FINANCIAL HIGHLIGHTS (continued) STRONG INSURED MUNICIPAL BOND FUND
1994 1993 1992 1991 -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.46 $ 10.82 $ 10.28 $ 10.00 INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.54 0.56 0.62 0.06 Net Realized and Unrealized Gains (Losses) on Investments (1.27) 0.80 0.68 0.28 -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS (0.73) 1.36 1.30 0.34 LESS DISTRIBUTIONS Dividends From Net Investment Income*** (0.54) (0.56) (0.62) (0.06) Distributions From Net Realized Gains -- (0.16) (0.14) -- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (0.54) (0.72) (0.76) (0.06) -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 10.19 $ 11.46 $ 10.82 $ 10.28 ======== ======== ======== ======== Total Return -6.5% +12.8% +13.1% +3.4% Net Assets, End of Period (In Thousands) $ 51,024 $ 61,213 $ 21,367 $ 1,308 Ratio of Expenses to Average Net Assets 1.0% 0.6% 0.2% 0.5%* Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 1.0% 0.9% 1.1% 1.0%* Ratio of Net Investment Income to Average Net Assets 5.0% 4.9% 5.8% 5.6%* Portfolio Turnover Rate 411.1% 110.7% 289.6% 238.9%*
STRONG MUNICIPAL BOND FUND
1994 1993 1992 1991 1990 --------- --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 10.00 $ 9.76 $ 9.22 $ 9.47 INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.56 0.58 0.65 0.65 0.66 Net Realized and Unrealized Gains (Losses) on Investments (1.02) 0.57 0.50 0.54 (0.25) --------- --------- --------- --------- --------- TOTAL FROM INVESTMENT OPERATIONS (0.46) 1.15 1.15 1.19 0.41 LESS DISTRIBUTIONS Dividends From Net Investment Income*** (0.56) (0.58) (0.65) (0.65) (0.66) Distributions From Net Realized Gains -- (0.32) (0.26) -- -- --------- --------- --------- --------- --------- TOTAL DISTRIBUTIONS (0.56) (0.90) (0.91) (0.65) (0.66) --------- --------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD $ 9.23 $ 10.25 $ 10.00 $ 9.76 $ 9.22 ========= ========= ========= ========= ========= Total Return -4.6% +11.8% +12.2% +13.4% +4.6% Net Assets, End of Period (In Thousands) $279,808 $398,911 $289,751 $115,230 $ 31,560 Ratio of Expenses to Average Net Assets 0.8% 0.7% 0.1% 0.1% 0.3% Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 0.8% 0.8% 0.9% 1.1% 1.5% Ratio of Net Investment Income to Average Net Assets 5.8% 5.6% 6.4% 6.9% 7.2% Portfolio Turnover Rate 311.0% 156.7% 324.0% 465.2% 586.0% 1989 1988 1987 1986 --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $ 9.35 $ 9.16 $ 10.01 $ 10.00 INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.52 0.49 0.67 0.12 Net Realized and Unrealized Gains (Losses) on Investments 0.12 0.19 (0.85) 0.01 --------- --------- --------- --------- TOTAL FROM INVESTMENT OPERATIONS 0.64 0.68 (0.18) 0.13 LESS DISTRIBUTIONS Dividends From Net Investment Income*** (0.52) (0.49) (0.67) (0.12) Distributions From Net Realized Gains -- -- -- -- --------- --------- --------- --------- TOTAL DISTRIBUTIONS (0.52) (0.49) (0.67) (0.12) --------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD $ 9.47 $ 9.35 $ 9.16 $ 10.01 ========= ========= ========= ========= Total Return +7.1% +7.6% -1.8% +1.3% Net Assets, End of Period (In Thousands) $ 18,735 $ 18,275 $ 19,070 $ 2,212 Ratio of Expenses to Average Net Assets 1.7% 1.3% 1.0% 0.4%* Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 1.8% 1.4% 1.3% 1.0%* Ratio of Net Investment Income to Average Net Assets 5.6% 5.3% 7.0% 6.4%* Portfolio Turnover Rate 243.3% 343.6% 284.0% 116.1%*
* Calculated on an annualized basis. ** Respective inception dates are November 25, 1991 for Strong Insured Municipal Bond Fund and October 23, 1986 for Strong Municipal Bond Fund. Total return is not annualized. *** Tax-exempt for regular Federal income tax purposes. 42 45 FINANCIAL HIGHLIGHTS (continued) STRONG HIGH-YIELD MUNICIPAL BOND FUND
1994 1993** -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 10.00 INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.71 0.16 Net Realized and Unrealized Gains (Losses) on Investments (0.81) 0.10 -------- -------- TOTAL FROM INVESTMENT OPERATIONS (0.10) 0.26 LESS DISTRIBUTIONS Dividends From Net Investment Income*** (0.71) (0.16) -------- -------- TOTAL DISTRIBUTIONS (0.71) (0.16) -------- -------- NET ASSET VALUE, END OF PERIOD $ 9.29 $ 10.10 ======== ======== Total Return -1.0% +2.7% Net Assets, End of Period (In Thousands) $107,555 $ 20,840 Ratio of Expenses to Average Net Assets 0.0% 0.0% Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 0.8% 1.1%* Ratio of Net Investment Income to Average Net Assets 7.5% 6.8%* Portfolio Turnover Rate 198.1% 111.1%*
* Calculated on an annualized basis. ** Inception date is October 1, 1993. Total return is not annualized. *** Tax-exempt for regular Federal income tax purposes. 43 46 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of the Strong Municipal Income Funds We have audited the accompanying statements of assets and liabilities of Strong Municipal Money Market Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc., Strong Insured Municipal Bond Fund, Inc., Strong Municipal Bond Fund, Inc. and Strong High-Yield Municipal Bond Fund, Inc. (collectively referred to herein as the "Strong Municipal Income Funds"), including the schedules of investments in securities, as of December 31, 1994, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended for Strong Municipal Money Market Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc., Strong Insured Municipal Bond Fund, Inc., and Strong Municipal Bond Fund, Inc., and for the period from October 1, 1993 (inception) to December 31, 1993 and the year ended December 31, 1994 for Strong High-Yield Municipal Bond Fund, Inc., and the financial highlights for each of the periods indicated. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1994 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Strong Municipal Income Funds as of December 31, 1994, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended for Strong Municipal Money Market Fund, Inc., Strong Short-Term Municipal Bond Fund, Inc., Strong Insured Municipal Bond Fund, Inc., and Strong Municipal Bond Fund, Inc., and for the period from October 1, 1993 (inception) to December 31, 1993 and the year ended December 31, 1994 for Strong High-Yield Municipal Bond Fund, Inc., and the financial highlights for each of the periods indicated, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Milwaukee, Wisconsin January 28, 1995 44 47 DIRECTORS OF THE FUND Richard S. Strong Marvin E. Nevins Willie D. Davis OFFICERS OF THE FUND Richard S. Strong Chairman of the Board John Dragisic Vice Chairman Lawrence A. Totsky Vice President Thomas P. Lemke Vice President Ann E. Oglanian Secretary Thomas M. Zoeller Treasurer Investment Advisor Strong Capital Management, Inc. P.O. Box 2936, Milwaukee, Wisconsin 53201 Distributor Strong Funds Distributors, Inc. P.O. Box 2936, Milwaukee, Wisconsin 53201 Custodian Firstar Trust Company P.O. Box 701, Milwaukee, Wisconsin 53201 Transfer Agent and Dividend-Disbursing Agent Strong Capital Management, Inc. P.O. Box 2936, Milwaukee, Wisconsin 53201 Auditors Coopers & Lybrand L.L.P. 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 Legal Counsel Godfrey & Kahn, S.C. 780 North Water Street, Milwaukee, Wisconsin 53202 Ticker Symbols SXFXX - The Strong Municipal Money Market Fund STSMX - The Strong Short-Term Municipal Bond Fund STIMX - The Strong Insured Municipal Bond Fund SXFIX - The Strong Municipal Bond Fund SHYLX - The Strong High Yield Municipal Bond Fund 48 FOR LITERATURE AND INFORMATION REQUESTS, CALL 1-800-368-1030. TO DISCUSS AN EXISTING ACCOUNT OR CONDUCT A TRANSACTION, CALL 1-800-368-3863. This report must be preceded or accompanied by the prospectus for the Strong Municipal Income Funds. [STRONG LOGO] STRONG FUNDS DISTRIBUTORS, INC. P.O. Box 2936 Milwaukee, Wisconsin 53201 -----END PRIVACY-ENHANCED MESSAGE-----