<PAGE>
THE STRONG
INTERNATIONAL STOCK FUND II
SEMI-ANNUAL REPORT o JUNE 30, 1996
[PHOTO OF FAMILY]
[Picture of World Map]
[Bar graph]
DESIGNED TO SEEK CAPITAL GROWTH
BY INVESTING PRIMARILY IN STOCKS
OF FOREIGN-BASED COMPANIES
[STRONG FUNDS LOGO]
STRONG FUNDS
<PAGE>
THE STRONG
INTERNATIONAL STOCK FUND II
SEMI-ANNUAL REPORT o JUNE 30, 1996
Table of Contents
INVESTMENT REVIEWS
The Strong International Stock Fund II.........2
FINANCIAL INFORMATION
Schedule of Investments in Securities..........4
Statement of Operations........................8
Statement of Assets and Liabilities............8
Statement of Changes in Net Assets.............9
Notes to Financial Statements..................9
FINANCIAL HIGHLIGHTS.................................11
<PAGE>
The Strong INTERNATIONAL STOCK FUND II
================================================================================
By investing primarily in the stocks of companies based outside the United
States, the Strong International Stock Fund II pursues capital growth. The Fund
provides convenient access to growth opportunities worldwide and, when added to
a domestic portfolio, will increase diversification while providing the
potential for higher returns compared to a U.S.- only portfolio.
[PHOTO OF UMBRELLAS]
INTERNATIONAL MARKETS CONTINUED TO BOUNCE BACK
The slow, steady recovery in international markets we saw in 1995 continued
during the first half of this year. However, except on an individual country and
stock level, performance was somewhat muted during the second quarter. Global
markets as a whole-- as measured by the MSCI EAFE(TM) Index--gained 4.52% over
this six-month period. 1
Our accuracy in selecting the more attractive markets--and the more attractive
stocks in those markets--contributed to the Fund outperforming the Index by a
broad margin. The Fund posted a gain of 13.46% over the same period, as measured
by total return. 1
At mid-year, assets under management in the Strong International Stock Fund II
approached $50 million--up from $1.8 million at the beginning of the year--and
the Fund held 191 stocks.
FIVE LARGEST STOCK HOLDINGS
based on net assets as of 6-30-96
................................................................................
Simint Spa Italy Shoe & Apparel Mfg. 1.5%
................................................................................
Belle Corporation Philippines Real Estate 1.2%
................................................................................
Raision Finland Food 0.9%
Tehtaat Oy
................................................................................
Tambang Timah Indonesia Metals/Mining 0.9%
PT GDR
................................................................................
SGS Holdings SA Switzerland Finance-Miscellaneous 0.8%
................................................................................
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
MIXED MARKETS IN EUROPE AND ASIA
European economies generally tended to lag that of the U.S. during the first
half of the year, although the dollar's strength helped to improve their export
competitiveness. The Fund benefited, in particular, from holdings in Italy (3.9%
of net assets) and Spain (3.0% of net assets), which gained 13.2% and 14.4%,
respectively, for the six months through June. 2
Economic growth remained impressive in Asia, although the picture there also was
mixed. Concerns about inflation and overheating generally depressed investor
sentiment, while mainland China's aggressive posturing toward Taiwan--and to a
lesser extent Hong Kong--fueled some political worries. The area's best
performers included Taiwan, the Philippines, and Malaysia, which posted gains of
37.0%, 19.5% and 16.2%, respectively. The only Asian countries in negative
territory so far this year have been South Korea, whose market lost 14.6%, and
Thailand, which was down 0.4%. 2
Among emerging markets, Poland was the big winner--gaining 52.0% over this
six-month period. Despite the dramatic differences among worldwide markets, we
retained our "bottom up" approach by attending to country weightings only after
first identifying value in individual companies. 2
A FAVORABLE OUTLOOK
Attention has returned to the international markets this year as investors who
previously kept their funds invested solely in U.S. stocks have been more
inclined to plug into the faster growth rates in international and emerging
markets. We expect to see a more general pick-up in international markets in the
second half of the year which, together with the value added by rigorous
attention to stock selection, we believe will produce returns superior to the
U.S. markets.
2
<PAGE>
FIVE LARGEST HOLDINGS BY COUNTRY
based on net assets as of 6-30-96
................................................................................
Japan 14.6%
................................................................................
Australia 6.2%
................................................................................
United Kingdom 4.4%
................................................................................
Malaysia 4.1%
................................................................................
New Zealand 3.9%
................................................................................
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
Shareholders should keep in mind, however, that the Fund is likely to be more
volatile than a U.S.-only fund, due to changes in stock-market conditions,
currency values, interest rates, local regulations and economic and political
conditions. But given the value currently available in international markets, we
believe foreign equities offer long-term investors an attractive opportunity.
We thank you for your support and look forward to earning your continued
confidence.
Sincerely,
/s/ Anthony L.T. Cragg
Anthony L.T. Cragg
Portfolio Manager
[PHOTO OF ANTHONY L.T. CRAGG]
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 10-20-95 to 6-30-96
The Strong International MSCI S&P 500
Stock Fund II EAFE(TM) Index Stock Index
9-95 10,000 10,000 10,000
12-95 10,261 10,491 10,535
3-96 10,964 10,794 11,101
6-96 11,642 10,965 11,600
TOTAL RETURNS 1
as of 6-30-96
6-MONTH
13.46%
SINCE INCEPTION
(on 10-20-95)
16.42%
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Standard & Poor's 500 Stock Index ("S&P 500") and the Morgan Stanley Capital
International Europe, Australasia, and Far East Index ("MSCI EAFE(TM)"). The S&P
500 is an unmanaged index generally representative of the U.S. stock market. The
MSCI EAFE(TM) is an unmanaged, market-capitalization weighted index generally
representative of major overseas stock markets. MSCI EAFE(TM) data are
dollar-adjusted. Results include reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares. Source of the S&P 500 and MSCI EAFE(TM) index data is
Micropal. To equalize time periods, the indexes' performance was prorated for
the month of October, 1995.
================================================================================
1 Total return measures aggregate change in the value of an investment in the
Fund, assuming reinvestment of dividends and capital gains. The Fund's
returns include the effect of deducting the Fund's expenses, but do not
include charges and expenses attributable to any particular insurance
product. Excluding such fees and expenses from the Fund's return quotations
has the effect of increasing the performance quoted. The Morgan Stanley
Capital International Europe, Australasia, and Far East Index ("MSCI
EAFE(TM)") is an unmanaged, market-capitalization weighted index generally
representative of major overseas stock markets. MSCI EAFE(TM) data are
dollar-adjusted. Source for the index data is Micropal.
2 All returns quoted are in U.S. dollar terms.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
COMMON STOCK 76.7%
AUSTRALIA 6.0%
Aberfoyle, Ltd. 108,000 $ 306
Aristocrat Leisure, Ltd. (b) 40,000 91
Bank of Melbourne, Ltd. 17,000 99
Coles Myer, Ltd. 98,000 356
Email, Ltd. 51,000 133
MIM Holdings, Ltd. 67,000 87
Newcrest Mining, Ltd. 22,000 88
Novus Petroleum, Ltd. 250,169 364
Oil Search, Ltd. 203,000 203
Polartechnics, Ltd. (b) 129,000 234
Resolute Samantha, Ltd. 24,000 56
Sea World Property Trust 240,000 225
Sydney Aquarium, Ltd. 137,900 331
Sydney Harbour Casino Holdings, Ltd. (b) 128,000 177
Western Mining Corporation, Ltd. 12,000 86
------
2,836
AUSTRIA 0.4%
Wolford AG 800 196
BRAZIL 0.8%
Cia Vale Do Rio Doce Sponsored ADR 15,000 302
Usinas Siderurgicas de Minas Gerais Sponsored ADR 6,200 67
------
369
CANADA 0.2%
Indochina Goldfields, Ltd. (Acquired 6/13/96;
Cost $110) (b) (c) 10,000 110
CHINA 1.7%
The China Fund, Inc. 23,000 282
Ek Chor China Motorcycle Company, Ltd. 10,800 146
Nanjing Panda Electronics Company, Ltd. 474,000 81
Shandong Huaneng Power Company, Ltd. ADR 17,000 140
Yizheng Chemical Fibre Company, Ltd. 578,000 128
------
777
EGYPT 0.3%
Egypt Investment Company, Ltd. (Acquired 6/03/96;
Cost $129) (b) (c) 12,500 128
FINLAND 0.9%
Raision Tehtaat Oy New 1,240 73
Raision Tehtaat Oy `V Shares' 6,200 370
------
443
FRANCE 1.7%
Assurances Generales de France 3,000 81
Compagnie Generale des Eaux 1,525 170
Dassault Systems SA ADR (b) 6,000 186
Remy Cointreau 5,000 147
Sabeton SA 1,350 204
------
788
GERMANY 0.2%
Keikert AG 3,000 83
HONG KONG 2.2%
Asia Satellite Telecommunications Holdings, Ltd.(b) 38,000 113
CDL Hotels International, Ltd. 570,611 313
Guangshen Railway Company, Ltd.
Sponsored ADR (b) 7,000 134
Guoco Group, Ltd. 26,000 124
Peregrine Investment Holdings, Ltd. 95,000 137
Peregrine Investment Holdings, Ltd. Warrants,
Expire 5/15/98 (b) 9,500 1
Tingyi (Cayman Island) Holding Company (b) 793,000 218
------
1,040
INDIA 0.9%
IS Himilayan Fund NV (b) 8,200 117
Steel Authority of India, Ltd. GDR
(Acquired 4/16/96-4/22/96; Cost $294) (b) (c) 21,000 302
------
419
INDONESIA 3.6%
Bank Tiara Asia PT (Fgn Reg) 156,000 181
Ciputra Development PT (Fgn Reg) 68,000 138
Dharmala Intiland PT (Fgn Reg) 210,000 163
Jaya Real Property PT (Fgn Reg) 65,000 207
Kawasan Industries Jababeka PT (Fgn Reg) 43,000 63
Komatsu Indonesia PT (Fgn Reg) 267,000 195
Modern Photo Film Company PT 21,000 90
Semen Cibinong PT (Fgn Reg) 54,000 122
Super Indah Makmur PT 65,000 110
Tambang Timah PT GDR 3,200 58
Tambang Timah PT GDR
(Acquired 1/26/96-3/06/96; Cost $293) (c) 20,000 363
------
1,690
ISRAEL 0.5%
Check Point Software Technologies, Ltd. (b) 3,000 72
Tecnomatix Technologies, Ltd. (b) 7,400 141
------
213
ITALY 3.7%
Arnoldo Mondadori Editore Spa 32,800 248
De Rigo Spa ADR (b) 6,000 137
Esaote Biomedica Spa (b) 30,000 108
Gemina Spa (b) 240,000 104
Gucci Group NV (b) 450 29
Olivetti Group (b) 152,000 82
Pininfarina Spa 16,300 177
STET - Societa Finanziaria Telefonica P.A. 46,000 156
Simint Spa (b) 190,000 710
------
1,751
JAPAN 14.2%
Benesse Corporation 2,100 170
C-Cube Corporation 33,000 343
Canon Sales Company, Inc. 9,000 250
Chubu Steel Plate Company, Ltd. 41,000 270
Descente, Ltd. 15,000 119
Diamond City Company 21,000 195
Eiden Sakakiya Company, Ltd. Warrants,
Expire 11/30/99 (b) 100 120
Heiwa Corporation 9,000 208
Higashi Nihon House 12,000 210
Hirata Technical Company, Ltd. 10,000 171
Ishikawajima Harima Heavy Industries
Company, Ltd. 45,000 220
Japan Industrial Land Development 1,100 34
Marubeni Corporation 43,000 235
Mitsubishi Corporation 22,000 289
Mitsui Fudosan 28,000 378
New OJI Paper Company, Ltd. Warrants,
Expire 7/30/98 (b) 120 194
Nichiha 11,000 223
Nippon Felt Company, Ltd. 25,000 190
Nippon Shinpan Company 29,000 206
Nomura Securities Company, Ltd. 16,000 312
Ohmoto Gumi Company, Ltd. 10,700 217
Powdertech 8,000 107
Roland 6,000 112
SXL Corporation Warrants, Expire 2/26/99 (b) 700 97
Salomon & Taylor Made Company, Ltd. 17,000 246
Shinseido Company, Ltd. 21,000 220
Shiseido Company, Ltd. 21,000 268
Sony Music Entertainment, Inc. 2,000 93
4
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
TOC Company, Ltd. 19,000 $ 225
Takeda Printing Company, Ltd. 15,000 224
Takihyo Company, Ltd. 6,000 100
Trinity Industrial 33,000 221
Xebio Company, Ltd. 5,900 221
------
6,688
LEBANON 0.1%
Banque Audi S.A.L. GDR (b) 4,600 59
LUXEMBOURG 0.3%
Audiofina 3,000 144
MALAYSIA 4.1%
ACP Industries BHD 63,000 346
Batu Kawan BHD 118,000 274
Highlands & Lowlands BHD 60,000 106
IJM Corporation BHD `A' 169,000 293
Kumpulan Guthrie BHD 133,000 212
Road Builder Holdings BHD 68,000 303
Sriwani Holdings BHD 110,000 191
TA Enterprise BHD 122,000 191
------
1,916
MEXICO 0.7%
Mexico Fund 23,000 351
NAMIBIA 0.2%
Namibia Breweries (b) 175,300 105
NETHERLANDS 1.2%
Ceteco Holding NV 5,960 324
Philips Electronics NV ADR 3,300 108
Qiagen NV (b) 8,000 121
------
553
NEW ZEALAND 3.2%
AFFCO Holdings, Ltd. 128,895 49
Air New Zealand, Ltd. Class B 20,600 64
Corporate Investments, Ltd. (b) 300,000 99
Direct Capital Partners, Ltd. (b) 622,000 302
Evergreen Forests, Ltd. (b) 355,000 143
Fletcher Challenge Energy (b) 32,000 71
Guinness Peat Group PLC 607,741 312
Shortland Properties, Ltd. 580,000 327
Trans Rail Holdings, Ltd. (b) 12,000 167
------
1,534
NORWAY 1.9%
Alvern Norway AS (b) 23,000 233
I.M. Skaugen ASA (b) 408,000 213
Netcom ASA (b) 13,000 137
Schibsted Group AS 14,200 183
Tomra Systems AS 13,000 132
------
898
PAKISTAN 0.8%
Pakistan Investment Fund, Inc. 31,000 209
Pakistan Telecommunications Corporation GDR (b) 1,600 189
------
398
PERU 0.8%
Minsur SA (b) 40,000 358
PHILIPPINES 2.8%
Belle Corporation (b) 2,400,000 578
Benpres Holdings Corporation Sponsored GDR (b) 38,000 309
Empire East Land Holdings, Inc.
(Acquired 6/21/96; Cost $83) (b) (c) 169,000 103
Philippine National Bank (b) 11,000 184
Primetown Property Group, Inc. (b) 490,000 152
------
1,326
PORTUGAL 0.3%
Portugal Telecom SA Sponsored ADR 6,000 158
RUSSIA 1.4%
The Central European Growth Fund PLC 292,000 295
Oil Company Lukoil Sponsored ADR 8,000 350
------
645
SINGAPORE 3.8%
Hong Leong Finance, Ltd. (Fgn Reg) 76,000 266
Kay Hian James Capel Holdings, Ltd. 220,000 232
Keppel Corporation, Ltd. 29,000 243
Robinson & Company, Ltd. 85,000 361
Singapore Airlines, Ltd. (Fgn Reg) 30,000 317
Singapore Land, Ltd. 21,000 142
Van Der Horst, Ltd. 52,000 243
------
1,804
SOUTH AFRICA 1.5%
Energy Africa, Ltd. GDR (Acquired 5/13/96-5/14/96;
Cost $112) (b) (c) 8,500 135
Energy Africa, Ltd. GDS (b) 17,000 270
Morgan Stanley Africa Investment Fund, Inc. 22,300 282
------
687
SOUTH KOREA 0.7%
Hotel Shilla Company 7,000 83
Korea Electric Power Corporation Sponsored ADR 9,650 234
------
317
SPAIN 3.0%
Construcciones y Auxiliar de Ferrocarriles SA 7,200 274
Cortefiel SA 14,800 338
Cubiertas y Mzov SA 3,700 241
Sotogrande SA (b) 115,000 230
Telefonica de Espana SA 18,000 332
------
1,415
SWEDEN 0.8%
Argonaut AB `B Shares' (b) 128,000 264
Rotternos AB 116,000 134
------
398
SWITZERLAND 3.2%
Adia SA 800 200
Crossair AG 350 141
Magazine Zum Globus Registered Shares 350 212
Nestle AG 182 207
Oerlikon - Buehrle Holding AG `B' (b) 3,000 311
Oerlikon - Buehrle Holding AG `R' (b) 500 52
SGS (Societe Generale de Surveillance) Holdings SA 166 397
------
1,520
THAILAND 2.7%
Italian-Thai Development PCL (Fgn Reg) 33,000 307
Krung Thai Bank Republic Company, Ltd. 60,000 281
Land and Houses PCL (Fgn Reg) 14,000 176
Loxley PCL (Fgn Reg) 1,000 15
Property Perfect PCL(Fgn Reg) 45,000 193
The Ruam Pattana Two Fund (Fgn Reg) 302,000 199
The Siam Cement PCL(Fgn Reg) 2,000 98
------
1,269
TURKEY 1.1%
Ardem TI 1,126,000 127
Enka Holding Yatirim 427,000 130
Tukas 485,350 28
Turkish Investment Fund, Inc. 35,300 212
------
497
UNITED KINGDOM 4.4%
Allied Domecq PLC 19,800 139
Amstrad PLC 45,000 135
Bluebird Toys PLC 29,000 105
Body Shop International PLC 94,000 260
5
See notes to financial statements.
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES(continued) June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
British Aerospace PLC 23,000 $ 349
British Biotech PLC (b) 4,500 173
Inchcape PLC 73,500 334
Jarvis Hotels PLC (Acquired 6/21/96;
Cost $54) (b) (c) 20,000 53
Millenium & Copthorne PLC (b) 22,000 113
Railtrack Group PLC (Acquired 5/20/96;
Cost $100) (c) 33,000 112
Royal Doulton PLC 72,300 306
------
2,079
UNITED STATES 0.2%
Sunshine Mining and Refining Company (b) 67,000 84
United International Holdings, Inc. (b) 1,500 21
------
105
VIETNAM 0.2%
Vietnam Frontier Fund (b) 9,000 101
------
TOTAL COMMON STOCKS (COST $34,637) 36,168
PREFERRED STOCKS 3.7%
BRAZIL 1.0%
Companhia Antartica Paulista - Industria
Brasileira de Bebidas e Conexos (b) 2,460 319
Petroleo Brasileiro SA-Petrobras 1,200,000 150
------
469
GERMANY 2.1%
BBS Kraftfahrzeugtechnik AG (b) 530 122
Hornbach Holding AG 3,300 284
KSB Group Non-Voting 2,140 275
Porsche AG Non-Voting (b) 560 336
------
1,017
THAILAND 0.6%
Thai Prime Fund, Ltd. 16,000 282
------
TOTAL PREFERRED STOCKS (COST $1,605) 1,768
CORPORATE BONDS 0.6%
AUSTRALIA 0.2%
UIH Australia/Pacific, Inc. Senior Discount Notes,
Zero %, Due 5/15/06 (Rate Reset Effective
5/15/01) (Acquired 5/08/96; Cost $101) (c) 200 USD 105
JAPAN 0.4%
Sumitomo Bank International Finance NV
American Depositary Notes, 0.75%,
Due 5/31/01 (Acquired 6/06/96; Cost $184)(c) 20,000 JPY 197
------
TOTAL CORPORATE BONDS (COST $287) 302
GOVERNMENT AND AGENCY ISSUES 0.9%
ITALY 0.2%
Republic of Italy Convertible Notes, 5.00%,
Due 6/28/01 100 USD 102
NEW ZEALAND 0.7%
Government of New Zealand Notes, 8.00%,
Due 11/15/06 500 NZD 325
------
TOTAL GOVERNMENT AND AGENCY ISSUES
(COST $433) 427
SHORT-TERM INVESTMENTS (a) 17.5%
COMMERCIAL PAPER 1.0%
DISCOUNTED 0.8%
INDONESIA
Polysindo Eka Perkasa PT, Due 11/20/96 1,000,000 IDR 399
INTEREST BEARING, DUE UPON DEMAND 0.2%
United States Cayman Eurodollar Call
Deposit, 4.25% $ 69 $ 69
------
Total Commercial Paper 468
TIME DEPOSITS 16.5%
UNITED STATES
Bank of New York Time Deposit, 5.00%, Due 7/01/96 600 600
Bank of Scotland Time Deposit, 5.50%, Due 7/01/96 1,800 1,800
Bank Paribus Nationale Time Deposit, 5.50%,
Due 7/01/96 1,800 1,800
Royal Bank of Canada Time Deposit, 5.50%,
Due 7/01/96 1,800 1,800
Westdeutsche Landesbank Time Deposit, 5.50%,
Due 7/01/96 1,800 1,800
------
7,800
------
TOTAL SHORT-TERM INVESTMENTS (COST $8,268) 8,268
------
TOTAL INVESTMENTS IN SECURITIES
(COST $45,230) 99.4% 46,933
Other Assets and Liabilities, Net 0.6% 273
------
NET ASSETS 100.0% $47,206
======
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------------
UNREALIZED
VALUE APPRECIATION
SETTLEMENT IN USD (DEPRECIATION)
DATE (In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
Sold:
1,204,960 DEM 10/25/96 (796) 4
1,000,000,000 IDR 11/21/96 (416) (7)
416,960,000 JPY 10/25/96 (3,867) 133
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- --------------------------------------------------------------------------------
Conglomerate ......................................... 7.0%
Engineering & Construction ........................... 6.9
Real Estate .......................................... 6.4
Closed-End Fund ...................................... 5.2
Metals & Mining ...................................... 3.4
Leisure Service ...................................... 3.2
Oil - International Integrated ....................... 2.8
Shoe & Apparel Manufacturing ......................... 2.8
Bank - Money Center .................................. 2.7
Retail - Major Chain ................................. 2.7
Retail - Specialty ................................... 2.3
Telecommunication Service ............................ 2.3
Food ................................................. 2.2
Steel ................................................ 2.0
Finance - Miscellaneous .............................. 1.9
Leisure Product ...................................... 1.7
Auto & Truck Parts ................................... 1.5
Brokerage & Investment Management .................... 1.5
Consumer - Miscellaneous ............................. 1.5
Media - Publishing ................................... 1.4
Machinery - Miscellaneous ............................ 1.3
Beverage - Alcoholic ................................. 1.2
Airline .............................................. 1.1
Electronic Products - Miscellaneous .................. 1.1
Cosmetic & Personal Care ............................. 1.0
Paper & Forest Products .............................. 1.0
Shipping ............................................. 1.0
6
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERCENTAGE OF
INDUSTRY DIVERSIFICATION (continued) NET ASSETS
- --------------------------------------------------------------------------------
Foreign Government ................................... 0.9%
Railroad ............................................. 0.9
Agricultural Operations .............................. 0.8
Computer Software .................................... 0.8
Electric Power ....................................... 0.8
Retail - Department Store ............................ 0.8
Aerospace & Defense .................................. 0.7
Metal Products & Fabrication ......................... 0.7
Healthcare - Drug/Diversified ........................ 0.6
Machinery - Transportation Equipment & Parts ......... 0.6
Chemical ............................................. 0.5
Healthcare - Instrumentation ......................... 0.5
Housing .............................................. 0.5
Housing Related ...................................... 0.5
Insurance - Diversified .............................. 0.5
Natural Gas Distribution ............................. 0.5
Automobile ........................................... 0.4
Commercial Service ................................... 0.4
Machinery - Construction & Mining .................... 0.4
Electrical Equipment ................................. 0.3
Media - Radio/TV ..................................... 0.3
Healthcare - Biomedical/Genetic ...................... 0.2
Household Appliance & Furnishings .................... 0.2
Short-Term Investments ............................... 17.5
Other Assets and Liabilities, Net .................... 0.6
----
Total 100.0%
=====
LEGEND
- ------
(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.
(c) Restricted security.
All principal amounts and costs are stated in thousands.
Percentages are stated as a percent of net assets.
CURRENCY ABBREVIATIONS
- ----------------------
IDR Indonesian Rupiah
JPY Japanese Yen
NZD New Zealand Dollar
USD United States Dollar
7
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
INCOME:
Dividends $ 263
Interest 121
---
Total Income 384
EXPENSES:
Investment Advisory Fees 120
Custodian Fees 84
Accounting Fees 12
Other 17
---
Total Expenses 233
---
NET INVESTMENT INCOME 151
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain on:
Investments 728
Futures Contracts, Options and Forward Foreign Currency Contracts 31
Change in Unrealized Appreciation/Depreciation on:
Investments 1,670
Futures Contracts, Options and Forward Foreign Currency Contracts 130
Foreign Currencies (1)
-----
NET GAIN 2,558
-----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,709
======
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
ASSETS:
<S> <C>
Investments in Securities, at Value (Cost of $45,230) $46,933
Receivable from Brokers for Securities and
Forward Foreign Currency Contracts Sold 747
Dividends and Interest Receivable 103
Other Assets 158
------
Total Assets 47,941
LIABILITIES:
Payable to Brokers for Securities and
Forward Foreign Currency Contracts Purchased 693
Accrued Operating Expenses and Other Liabilities 42
----
Total Liabilities 735
----
NET ASSETS $47,206
=======
Capital Shares
Authorized 300,000
Outstanding 4,080
NET ASSET VALUE PER SHARE $11.57
======
</TABLE>
8
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (Unaudited) and the Period Ended December 31, 1995 (Note 1)
(In Thousands)
JUNE 30, 1996 DEC. 31, 1995
------------- -------------
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 151 $ 2
Net Realized Gain 759 2
Change in Unrealized Appreciation/Depreciation 1,799 33
----- --
Increase in Net Assets Resulting from Operations 2,709 37
CAPITAL SHARE TRANSACTIONS 42,792 1,775
DISTRIBUTIONS:
From Net Investment Income (100) (2)
In Excess of Net Investment Income -- (5)
----- -----
TOTAL INCREASE IN NET ASSETS 45,401 1,805
NET ASSETS:
Beginning of Period 1,805 --
----- ------
End of Period $47,206 $1,805
======= ======
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
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June 30, 1996 (Unaudited)
1. ORGANIZATION
The Strong International Stock Fund II commenced operations on October 20,
1995, and is a diversified series of the Strong Variable Insurance Funds,
Inc., an open-end management investment company registered under the
Investment Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation-- Portfolio securities traded primarily on a
principal securities exchange are valued at the last reported sales
price or the mean between the latest bid and asked prices where no
last sales price is available. Securities traded over-the-counter are
valued at the mean of the latest bid and asked prices or the last
reported sales price. Debt securities not traded on a principal
securities exchange are valued through valuations obtained from a
commercial pricing service, otherwise sale or bid prices are used.
Securities for which market quotations are not readily available are
valued at fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of
the Board of Directors. Securities which are purchased within 60 days
of their stated maturity are valued at amortized cost, which
approximates current value.
The Fund may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration
to pertinent factors, including recent private sales, market
conditions and the issuer's financial performance. The Fund generally
bears the costs, if any, associated with the disposition of restricted
securities. Aggregate cost and fair value of these restricted
securities held at June 30, 1996 were as follows (in thousands):
Aggregate Cost $1,460
Aggregate Fair Value 1,608
Percent of Net Assets 3.4%
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its
shareholders in a manner which results in no tax cost to the Fund.
Therefore, no Federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for Federal income tax purposes due to differences in
the recognition of income and expense items for financial statement
and tax purposes. Where appropriate, reclassifications between net
asset accounts are made for such differences that are permanent in
nature.
(C) Realized Gains and Losses on Investment Transactions -- Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
9
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NOTES TO FINANCIAL STATEMENTS (continued)
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June 30, 1996 (Unaudited)
(D) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted to U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income are converted to
U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses.
(E) Additional Investment Risk -- The use of futures contracts, options,
foreign denominated assets and forward foreign currency exchange
contracts for purposes of hedging the Fund's investment portfolio
involves, to varying degrees, elements of market risk in excess of the
amount recognized in the statement of assets and liabilities. The
predominant risk with futures contracts is an imperfect correlation
between the value of the contracts and the underlying securities.
Foreign denominated assets and forward foreign currency exchange
contracts may involve greater risks than domestic transactions,
including currency, political and economic, regulatory and market
risks.
(F) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discounts.
3. NET ASSETS
Net assets as of June 30, 1996 were as follows (in thousands):
Capital Stock $44,567
Undistributed Net Investment Income 50
Undistributed Net Realized Gain 757
Net Unrealized Appreciation 1,832
-----
$47,206
=======
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund for the six months ended June 30, 1996
and the period ended December 31, 1995 were as follows (in thousands):
1996 1995
---- ----
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
Shares Sold 4,982 $54,488 242 $2,437
Dividends Reinvested 9 100 1 7
Shares Redeemed (1,087) (11,796) (66) (669)
------ ------- --- ----
3,904 $42,792 177 $1,775
===== ======= === ======
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Fund are affiliated, provides investment advisory
services to the Fund. Investment advisory fees, which are established by
terms of the Advisory Agreement, are based on an annualized rate of 1.00%
of the average daily net assets of the Fund. Advisory fees are subject to
reimbursement by the Advisor if the Fund's operating expenses exceed
certain levels.
The amount payable to the Advisor at June 30, 1996 and unaffiliated
directors' fees for the six months ended June 30, 1996 were (in thousands)
$33 and $1, respectively.
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the period
ended June 30, 1996 were as follows (in thousands):
Purchases $44,565
Sales 9,815
7. INCOME TAX INFORMATION
At June 30, 1996 the investment cost, gross unrealized appreciation and
depreciation on investments for Federal income tax purposes were as follows
(in thousands):
Aggregate Investment Cost $45,236
=======
Aggregate Unrealized:
Appreciation $ 3,249
Depreciation (1,552)
------
$ 1,697
=======
10
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following presents information relating to a share of capital stock of the
Fund outstanding for the entire period.
1996(a) 1995(b)
------- -------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.22 $10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.04 0.01
Net Realized and Unrealized Gains on Investments 1.33 0.25
---- ----
TOTAL FROM INVESTMENT OPERATIONS 1.37 0.26
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.02) (0.01)
In Excess of Net Investment Income -- (0.03)
---- ----
TOTAL DISTRIBUTIONS (0.02) (0.04)
----- -----
NET ASSET VALUE, END OF PERIOD $ 11.57 $10.22
======== ======
Total Return +13.5% +2.6%
Net Assets, End of Period (In Thousands) $47,206 $1,805
Ratio of Expenses to Average Net Assets 1.9%* 2.0%*
Ratio of Net Investment Income to Average Net Assets 1.2%* 1.0%*
Portfolio Turnover Rate 45.3% 26.9%
Average Commission Rate Paid(c) $0.0108
* Calculated on an annualized basis.
(a) For the six months ended June 30, 1996 (Unaudited). Total return and
portfolio turnover rate are not annualized.
(b) Inception date is October 20, 1995. Total return and portfolio turnover
rate are not annualized.
(c) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
11
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NOTES
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12
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[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
http://www.strong-funds.com
Strong funds offered by prospectus only
3237F96O
