THE STRONG INTERNATIONAL
STOCK FUND II
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SEMI-ANNUAL REPORT o JUNE 30, 1999
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong International Stock Fund II ...........................2
FINANCIAL INFORMATION
Schedule of Investments in Securities ............................4
Statement of Assets and Liabilities ..............................6
Statement of Operations ..........................................6
Statements of Changes in Net Assets ..............................7
Notes to Financial Statements ....................................8
FINANCIAL HIGHLIGHTS .....................................................10
[STRONG LOGO]
STRONG INVESTMENTS, INC.
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds are offered by prospectus only. 12430H99
[PHOTO OF STRONG HEADQUARTERS IN BACKGROUND]
<PAGE>
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THE STRONG INTERNATIONAL STOCK FUND II
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FUND
HIGHLIGHTS
o The Fund returned 11.27% for the six months ended June 30, 1999.(1)
o In the last two weeks of April, a shift in market favor to cyclicals and
away from technology and telecommunication stocks hurt our performance. But
after the brief euphoria had subsided, the same stocks in Europe quickly
rebounded in May and especially June, helping the Fund to out-perform.
Meanwhile, superior stock selection in Japan also contributed to the fund's
outperformance.
o Despite short-term market trends, the Fund stayed fully invested in stocks.
-----------------------------------
AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 6-30-99
1-year -0.82%
3-year -3.76%
Since Inception 1.01%
(on 10-20-95)
-----------------------------------
FIVE LARGEST HOLDINGS
BY COUNTRY
As of 6-30-99
COUNTRY % OF NET ASSETS
United Kingdom 21.6%
Japan 14.6%
France 9.5%
Netherlands 7.9%
Italy 6.7%
Please see the Schedule of Investments
in Securities for a complete listing of
the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGER
/s/ David Lui
David Lui
Portfolio Manager
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Our previous overweighting in Europe helped the Fund's performance in January
1999, when emerging markets plunged in the aftermath of Brazil's currency
devaluation. Emerging markets bounced back in February and March--but even
though we were underweighted in these markets, the Fund continued to outperform
thanks to the strength of our individual European holdings. For a short period
in April, the market's shift toward cyclicals and away from high technology and
telecommunication stocks hurt us, but this soon subsided, and our selections
rebounded through June.
The biggest question facing an international fund manager is, which region will
provide the highest return from now to the end of 1999? We will give our views
by region as follows:
Despite the gloom and doom over economic growth in Europe, we believe that the
positive effects of a weak Euro on export-driven European economies will finally
come through in the second half of 1999. Nonetheless, we are concerned about
bureaucracy that could slow the merger and acquisition process in Europe. Also,
European governments may try to spur growth with quick fixes, such as increases
in government spending.
How sustainable is the rally in Asia? The prognosis in Japan is getting better,
but it remains to be seen whether the recent spate of corporate restructurings
represent solid promises or mere lip service.
---------------------------
...we believe that the
positive effects of a
weak Euro on export-
driven European
economies will finally
come through in the
second half of 1999.
---------------------------
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1 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. Including such insurance fees and expenses in the Fund's
return quotations has the effect of decreasing the performance quoted.
Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2
<PAGE>
We believe a weak yen will power Japan's export sector in the second half of
1999. Further, it's likely that Prime Minister Obuchi would like to serve longer
than his predecessors, so he has an incentive to apply himself in this area.
Hong Kong basked in the glory of declining interest rates in February and March.
Stable real estate prices after a 50% correction will be helpful to an economy
that depends to a great extent on real estate and banking. In June, the
government announced the creation of a giant mutual fund to ease the
government's 15% ownership of the nation's total market. This is very positive,
but valuations are getting a bit stretched after the recent rally. Both China
and Korea still appear to have a long way to go to improve their economies and
their markets.
This is a critical time in global growth. We could be on the cusp of a global
slowdown, or entering a new phase in global expansion. Whatever the outcome, I
can assure you of an exciting ride into the new millennium. I thank you for your
investment in the Fund, and hope you'll be on that ride with us.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 10-20-95 to 6-30-99
[GRAPH]
THE STRONG Lipper
INTERNATIONAL MSCI EAFE International
STOCK FUND II Index* Funds Index*
9-95 10,000 10,000 10,000
12-95 10,261 10,491 10,321
6-96 11,642 10,965 11,215
12-96 11,327 11,126 11,810
6-97 12,307 12,373 13,457
12-97 9,795 11,324 12,666
6-98 10,464 13,127 14,668
12-98 9,327 13,588 14,269
6-99 10,378 14,127 15,254
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Morgan Stanley Capital International Europe, Australasia, and Far East Index
("MSCI EAFE") and the Lipper International Funds Index. Results include the
reinvestment of all dividends and capital gains distributions. Performance is
historical and does not represent future results. Investment returns and
principal value vary, and you may have a gain or loss when you sell shares. To
equalize time periods, the indices' performance was prorated for the month of
October 1995.
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* The MSCI EAFE is an unmanaged index generally representative of major
overseas stock markets. MSCI EAFE data is U.S. dollar adjusted. The Lipper
International Funds Index is an equally-weighted performance index of the
largest qualifying funds in this Lipper category. Source of the MSCI index
data is Standard & Poor's Micropal. Source of the Lipper index data is
Lipper Inc.
YOUR FUND'S
APPROACH
THE STRONG INTERNATIONAL STOCK FUND II SEARCHES OUTSIDE THE U.S. FOR STOCKS THAT
APPEAR TO HAVE STRONG GROWTH POTENTIAL RELATIVE TO THEIR RISK. OUR THREE-STEP
INVESTMENT PROCESS INVOLVES COUNTRY ALLOCATION, INTENSIVE RESEARCH, AND CURRENCY
MANAGEMENT. WE EXAMINE THE ECONOMIC OUTLOOK OF INDIVIDUAL COUNTRIES TO DECIDE
HOW MUCH OF THE FUND'S ASSETS--IF ANY--TO INVEST IN EACH ONE. THEN WE CHOOSE
INDIVIDUAL STOCKS BASED ON RIGOROUS ANALYSIS INCORPORATING INTERVIEWS WITH A
COMPANY'S LEADERSHIP. WE MAKE TAX EFFICIENCY A PRIORITY AND SOMETIMES INVEST TO
MANAGE RISK FROM FLUCTUATIONS IN FOREIGN CURRENCY VALUES.
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MARKET
HIGHLIGHTS
o The MSCI Europe, Australasia, and Far East Index*, the Fund's bench-mark,
returned 3.97% for the six months ended June 30, 1999.
o Western Europe led the international markets until the end of January, when
they were weighted down by the recently ended war in Kosovo. Macroeconomic
data out of Continental Europe in June pointed to a new phase of sustained
growth.
o Restructuring plans from blue-chip companies revived the Japanese market in
March. The rest of Asia rallied strongly in sympathy.
o The technology and telecommunication sectors were market darlings up until
the second week of April, when the market made a sharp shift into
cyclicals. However, this proved short-lived.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES JUNE 30, 1999 (UNAUDITED)
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================================================================================
STRONG INTERNATIONAL STOCK FUND II
================================================================================
Shares or
Principal Value
Amount (Note 2)
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COMMON STOCKS 91.5%
Australia 1.3%
Cable & Wireless Optus, Ltd. (b) 104,000 $ 238,626
TABCORP Holdings, Ltd. 54,000 366,663
---------
605,289
Canada 4.4%
BCE Emergis, Inc. (b) 10,000 263,626
Nortel Networks Corporation 21,600 1,875,150
---------
2,138,776
Egypt 0.0%
Suez Cement 105 1,502
Finland 6.3%
Nokia Oyj 34,500 3,033,378
France 9.5%
Banque Nationale de Paris 11,500 961,164
Lagardere S.C.A. 9,300 347,279
Societe Generale 2,000 353,558
Societe Television Francaise 2,700 631,191
STMicroelectronics (b) 34,000 2,271,956
---------
4,565,148
Germany 4.0%
Bayerische Motoren Werke AG 634 437,425
Mannesmann AG 10,000 1,496,777
Muenchener Rueckversicherungs-Gesellschaft
Warrants, Expire 6/03/02 (b) 52 1,560
---------
1,935,762
Greece 1.1%
National Bank of Greece SA 1,180 77,451
Panafon Hellenic Telecom Company SA
(Acquired 1/04/99 - 1/15/99; Cost $567,384)(b)(d) 19,400 469,469
---------
546,920
Hong Kong 3.3%
Hutchison Whampoa, Ltd. 62,000 561,406
Johnson Electric Holdings, Ltd. 154,000 635,199
Li & Fung, Ltd. 156,000 374,004
Peregrine Investment Holdings, Ltd. 236,000 0
---------
1,570,609
India 0.0%
UTI-Mastergrowth 93 Fund (b) 15,100 4,724
Ireland 1.2%
Bank of Ireland 17,500 295,063
Elan Corporation PLC Sponsored ADR (b) 9,600 266,400
---------
561,463
Italy 6.7%
Banca Poplare di Brescia 30,000 1,291,242
Mediaset Spa 52,100 465,144
Mediolanum Spa 107,200 825,337
Telecom Italia Mobile Spa 106,300 637,089
---------
3,218,812
Japan 14.6%
Advantest Corporation 4,900 537,706
The Bank of Tokyo - Mitsubishi 17,000 241,675
Daiwa Securities Group, Inc. 141,000 930,693
Hoya Corporation 9,000 507,178
Keyence Corporation 3,300 576,683
NTT Mobile Communication Network, Inc. 35 473,597
Nintendo Company, Ltd. 3,900 542,203
Rohm Company, Ltd. 4,000 625,413
Taisho Pharmaceutical Company, Ltd. 18,600 613,861
Takeda Chemical Industries 10,000 462,871
Tokyo Electron, Ltd. 13,000 880,611
Tokyo Seimitsu Company, Ltd. 9,600 610,694
---------
7,003,185
Kazakhstan 0.2%
Firebird Republics Fund, Ltd. (b) 1,280 75,081
Mexico 0.8%
Fomento Economico Mexicano, SA de
CV Sponsored ADR 9,100 362,863
Netherlands 7.9%
ASM Lithography Holding NV 39,000 2,263,164
Koninklijke Ahold NV 16,650 575,240
Vendex NV 17,500 468,842
Verenigde Nederlandse Uitgeversbedrijven NV 12,800 513,062
---------
3,820,308
Portugal 0.6%
Brisa-Auto Estradas de Portugal SA 7,400 306,182
Romania 0.2%
The Romanian Investment Fund, Ltd. (b) 300 115,500
Singapore 2.8%
City Developments, Ltd. 63,000 403,941
The Development Bank of Singapore, Ltd. (Fgn Reg) 45,000 550,588
Singapore Press Holdings, Ltd. 24,000 409,412
---------
1,363,941
Spain 1.4%
Banco Santander Central Hispano SA 38,126 398,319
Tabacalera SA 13,000 263,565
---------
661,884
Sweden 1.2%
Skandia Forsakrings AB 30,500 574,619
Switzerland 2.0%
Adecco SA - Registered Shares 861 462,808
Zurich Allied AG 850 484,868
---------
947,676
United Kingdom 21.6%
Cable & Wireless Communications PLC (b) 79,000 759,860
Dixons Group PLC 120,300 2,247,815
Energis PLC (b) 65,200 1,555,475
GKN PLC 19,300 329,581
Hays PLC 47,700 502,801
Kingfisher PLC 34,500 397,118
Legal & General Group PLC 235,200 598,944
Lloyds TSB Group PLC 53,500 725,486
Misys PLC 42,300 362,174
National Express Group PLC 42,300 675,324
Vodafone Airtouch PLC 79,000 1,557,090
WPP Group PLC 80,700 682,684
----------
10,394,352
United States 0.4%
Global Crossing, Ltd. (b) 4,585 195,436
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TOTAL COMMON STOCKS (COST $35,117,728) 44,003,410
-------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 8.6%
COMMERCIAL PAPER 0.0%
INTEREST BEARING, DUE UPON DEMAND
United States
United States Cayman Eurodollar Call Deposit,
3.75% $ 11,000 11,000
Government & Agency Issues 1.1%
United States
United States Treasury Bills, Due 7/22/99 (c) 343,000 342,168
United States Treasury Bills, Due 9/16/99 (c) 200,000 198,049
---------
540,217
4
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STRONG INTERNATIONAL STOCK FUND II (CONTINUED)
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Shares or
Principal Value
Amount (Note 2)
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Time Deposits 7.5%
United States
Dresdner Bank, 5.75%, Due 7/01/99 $2,000,000 $2,000,000
Wachovia Grand Cayman, 5.25%, Due 7/01/99 1,600,000 1,600,000
----------
3,600,000
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TOTAL SHORT-TERM INVESTMENTS (COST $4,151,182) 4,151,217
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TOTAL INVESTMENTS IN SECURITIES (COST $39,268,910) 100.1% 48,154,627
Other Assets and Liabilities, Net (0.1%) (47,114)
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NET ASSETS 100.0% $48,107,513
================================================================================
FUTURES
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Underlying
Expiration Face Amount Unrealized
Date at Value Appreciation
- --------------------------------------------------------------------------------
Purchased:
53 Nikkei 225 (OSE) Index 9/99 $7,689,028 $340,962
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
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Unrealized
Settlement Value Appreciation
Date in USD (Depreciation)
- --------------------------------------------------------------------------------
Sold:
240,000,000 JPY 7/23/99 $1,987,754 $41,930
512,000,000 JPY 8/12/99 4,251,224 26,924
183,000,000 JPY 9/24/99 1,529,465 (12,681)
LEGEND
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(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.
(c) All or a portion of security pledged to cover margin requirements for
futures contracts.
(d) Restricted security.
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
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June 30, 1999 (Unaudited)
Strong International
Stock Fund II
--------------------
ASSETS:
Investments in Securities, at Value (Cost of $39,268,910) $48,154,627
Receivable for Securities Sold 56,172
Dividends and Interest Receivable 63,063
------------
Total Assets 48,273,862
LIABILITIES:
Accrued Operating Expenses and Other Liabilities 166,349
------------
NET ASSETS $48,107,513
============
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) 56,856,196
Undistrubuted Net Investment Income 34,174
Accumulated Net Realized Loss (18,064,607)
Net Unrealized Appreciation 9,281,750
------------
Net Assets $48,107,513
============
Capital Shares Outstanding (Unlimited Number Authorized) 4,942,244
NET ASSET VALUE PER SHARE $9.73
=====
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 (Unaudited)
Strong International
Stock Fund II
--------------------
INCOME:
Dividends (net of withholding taxes of $25,222) $ 260,343
Interest 35,889
----------
Total Income 296,232
EXPENSES:
Investment Advisory Fees 227,460
Custodian Fees 16,300
Other 18,298
----------
Total Expenses 262,058
----------
NET INVESTMENT INCOME 34,174
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 1,005,433
Futures Contracts and Forward Foreign Currency Contracts 24,015
Foreign Currencies (4,688)
----------
Net Realized Gain 1,024,760
Net Change in Unrealized Appreciation/Depreciation on:
Investments 3,872,142
Futures Contracts and Forward Foreign Currency Contracts 397,135
Foreign Currencies (3,704)
----------
Net Change in Unrealized Appreciation/Depreciation 4,265,573
----------
NET GAIN ON INVESTMENTS 5,290,333
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,324,507
==========
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
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<CAPTION>
Strong International Stock Fund II
----------------------------------
Six Months Ended Year Ended
June 30, 1999 Dec. 31, 1998
------------------- --------------
(Unaudited)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 34,174 $ 169,346
Net Realized Gain (Loss) 1,024,760 (13,833,706)
Net Change in Unrealized Appreciation/Depreciation 4,265,573 11,702,258
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations 5,324,507 (1,962,102)
DISTRIBUTIONS:
From Net Investment Income (177,022) (642,787)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 61,823,329 62,818,720
Proceeds from Reinvestment of Distributions 179,420 642,787
Payment for Shares Redeemed (66,323,478) (73,396,714)
----------- -----------
Net Decrease in Net Assets from Capital Share Transactions (4,320,729) (9,935,207)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 826,756 (12,540,096)
NET ASSETS:
Beginning of Period 47,280,757 59,820,853
----------- -----------
End of Period $48,107,513 $47,280,757
=========== ===========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 6,670,360 6,670,162
Issued in Reinvestment of Distributions 19,869 63,075
Redeemed (7,135,159) (7,763,041)
----------- -----------
Net Decrease in Shares of the Fund (444,930) (1,029,804)
=========== ===========
See Notes to Financial Statements.
7
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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June 30, 1999 (Unaudited)
1. ORGANIZATION
Strong International Stock Fund II is a diversified series of Strong
Variable Insurance Funds, Inc., an open-end management investment company
registered under the Investment Company Act of 1940. The Fund offers and
sells its shares only to separate accounts of insurance companies for the
purpose of funding variable annuity and variable life insurance contracts.
At June 30, 1999, approximately 84% of the Fund's shares are owned by the
separate accounts of one insurance company.
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 of 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 last 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 fair 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, 1999 were $567,384 and $469,469,
respectively, representing 1.0% of the net assets of the Fund.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
The Fund intends 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 for financial statement
purposes may differ from the characterization for federal income tax
purposes due to differences in the recognition of income and expense
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
The Fund generally pays dividends from net investment income and
distributes any net capital gains that it realizes annually.
(C) Realized Gains and Losses on Investment Transactions -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined on a
first-in, first-out basis.
(D) Certain Investment Risks -- The Fund may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with
the Fund's investment objectives and limitations. The Fund intends to
use such derivative instruments primarily to hedge or protect from
adverse movements in securities prices or interest rates. The use of
these instruments may involve risks such as the possibility of
illiquid markets or imperfect correlation between the value of the
instruments and the underlying securities, or that the counterparty
will fail to perform its obligations.
Investments in foreign denominated assets or forward foreign currency
contracts may involve greater risks than domestic investments, due to
currency, political and economic, regulatory and market risks.
(E) Futures -- Upon entering into a futures contract, the Fund pledges to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Fund may be designated as collateral on open futures contracts.
The Fund also receives from or pays to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin" and are recorded
as unrealized gains or losses. When the futures contract is closed, a
realized gain or loss is recorded equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
(F) Options -- The Fund may write put or call options. Premiums received
by the Fund upon writing put or call options are recorded 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, the Fund realizes a gain or loss, and the
liability is eliminated. The Fund continues to bear the risk of
adverse movements in the price of the underlying asset during the
period of the option, although any potential loss during the period
would be reduced by the amount of the option premium received.
8
<PAGE>
(G) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted to U.S. dollars based upon currency 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.
(H) Forward Foreign Currency Exchange Contracts -- Forward foreign
currency exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the Fund records
an exchange 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.
(I) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts in these financial statements. Actual results could differ
from those estimates.
(J) Other -- Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premium and discounts.
3. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Fund are affiliated, provides investment advisory
services and shareholder recordkeeping and related 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. Based on the terms of the Advisory Agreement,
advisory fees and other expenses will be waived by the Advisor if the
Fund's operating expenses exceed 2% of the average daily net assets of the
Fund. In addition, the Fund's Advisor may voluntarily waive or absorb
certain expenses at their discretion. Shareholder recordkeeping and related
service fees are based on the lesser of various agreed-upon contractual
percentages of the average daily net assets of the Fund or a contractually
established rate for each participant account. The Advisor is compensated
for certain other services related to costs incurred for reports to
shareholders.
The Fund may invest cash in money market funds sponsored and managed by the
Advisor, subject to certain limitations. The terms of such transactions are
identical to those of non-related entities except that, to avoid duplicate
investment advisory fees, advisory fees of the Fund are reduced by an
amount equal to advisory fees paid to the Advisor under its investment
advisory agreement with the money market funds.
The amount payable to the Advisor at June 30, 1999, shareholder servicing
and other expenses paid to the Advisor, and unaffiliated directors' fees
for the six months then ended, were $5,039, $30,402 and $750, respectively.
4. LINE OF CREDIT
The Strong Funds have established a line of credit agreement ("LOC") with
certain financial institutions to be used for temporary or emergency
purposes, primarily for financing redemption payments. Combined borrowings
among all participating Strong Funds are subject to a $350 million cap on
the total line of credit. For individual Funds, borrowings under the LOC
are limited to either the lesser of 15% of the market value of total net
assets or any explicit borrowing limits in the Fund's prospectus.
Borrowings under the LOC bear interest based on prevailing market rates as
defined in the LOC. A commitment fee of .07% per annum is incurred on the
unused portion of the line of credit and is allocated to all participating
Strong Funds. At June 30, 1999, there were no borrowings by the Fund
outstanding under the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the six
months ended June 30, 1999 were $28,702,515 and $36,482,531, respectively.
6. INCOME TAX INFORMATION
At June 30, 1999, the cost of investments in securities for federal income
tax purposes was $40,730,811. Net unrealized appreciation of securities was
$7,423,816, consisting of gross unrealized appreciation and depreciation of
$9,336,381 and $1,912,565, respectively. At December 31, 1998, the Fund had
a capital loss carryover of $16,861,042, which expires in 2006.
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the year ended December 31, 1998 which is designated as
qualifying for the dividends-received deduction was 0.2% (unaudited).
9
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
STRONG INTERNATIONAL STOCK FUND II
- ----------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED
- ----------------------------------------------------------------------------------------------------------------------------
June 30, Dec.31, Dec. 31, Dec. 31 Dec. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996 1995(c)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $8.78 $9.32 $11.23 $10.22 $10.00
Income From Investment Operations
Net Investment Income 0.01 0.03 0.06 0.03 0.01
Net Realized and Unrealized Gains (Losses) on Investments 0.98 (0.46) (1.50) 1.03 0.25
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Total from Investment Operations 0.99 (0.43) (1.44) 1.06 0.26
Less Distributions
From Net Investment Income (0.04) (0.11) (0.06) (0.03) (0.01)
In Excess of Net Investment Income -- -- (0.12) (0.02) (0.03)
From Net Realized Gains -- -- (0.29) -- --
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Total Distributions (0.04) (0.11) (0.47) (0.05) (0.04)
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Net Asset Value, End of Period $9.73 $8.78 $ 9.32 $11.23 $10.22
=============================================================================================================================
Ratios and Supplemental Data
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Total Return +11.3% -4.8% -13.5% +10.4% +2.6%
Net Assets, End of Period (In Millions) $48 $47 $60 $75 $2
Ratio of Expenses to Average Net Assets 1.1%* 1.6% 1.5% 1.9% 2.0%*
Ratio of Net Investment Income to Average Net Assets 0.1%* 0.3% 0.6% 0.4% 1.0%*
Portfolio Turnover Rate 63.7% 255.2% 169.2% 126.0% 26.9%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended June 30, 1999 (unaudited).
(c) For the period from October 20, 1995 (inception) to December 31, 1995.
See Notes to Financial Statements.
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NOTES
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11
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