THE STRONG
----------
INTERNATIONAL
STOCK FUND II
=================================
ANNUAL REPORT o DECEMBER 31, 1998
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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 ...................................5
Statement of Operations ...............................................6
Statements of Changes in Net Assets ...................................7
Notes to Financial Statements .........................................8
Financial Highlights ......................................................10
Report of Independent Accountants .........................................11
[STRONG LOGO]
STRONG INVESTMENTS, INC.
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds are offered by prospectus only. 10101L98
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THE STRONG INTERNATIONAL STOCK FUND II
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FUND
HIGHLIGHTS
o The Fund returned -4.78% for the 12 months ended December 31, 1998.
o New management came to the Fund in May 1998. Major changes included
reducing the number of stocks, cutting emerging-market exposure, and
eliminating closed-end funds and illiquid stocks.
o The Fund was overweighted in Western Europe, as well as in banks,
insurance, and technology. These positions hurt performance in September
and October.
o The Fund stayed fully invested in stocks, in keeping with our long-term
perspective. We did not sell out of companies that we continue to believe
in, even if their market prices suffered in recent downturns.
- ---------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 12-31-98
1-year -4.78%
3-year -3.13%
Since Inception -2.15%
(on 10-20-95)
- ---------------------------------------
FIVE LARGEST HOLDINGS
BY COUNTRY
As of 12-31-98
COUNTRY % OF NET ASSETS
United Kingdom 28.0%
Hong Kong 22.7%
France 8.9%
Germany 7.5%
Netherlands 7.5%
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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Although fears of a global recession at times drove the markets, we don't
believe the world will fall into one. And even if a recession were to come
about, we believe that global central banks will do their utmost to maintain a
stable economic environment, primarily by making cuts in benchmark interest
rates. Therefore, we anticipate that a slow growth environment will prevail over
the gloom-and-doom scenario some observers have forecast recently.
Despite recent missteps, Western Europe appears likely to remain one of the most
attractive areas to invest in during 1999 for several reasons:
1. The launch of the European Monetary Union on January 1, 1999, which should
ease international trade.
2. Increasing stock buybacks among European companies, which can boost stock
prices and increase shareholder value.
3. Continued restructuring, consolidation, and deregulation. The drive for
efficiency that swept through the U.S. in the late 1980s and early 1990s is
just beginning in Europe.
4. Welfare reforms that will reduce the burden on national treasuries.
We also believe interest rates will continue to fall over the next few months,
which bodes well for the battered Asian economies. We believe the most
attractive Asian market for the near future is Hong Kong, because:
1. Its stock market is centered on real estate and banking. Both industries
can respond very favorably to declining interest rates.
----------------------------
WE ANTICIPATE THAT A
SLOW GROWTH ENVIRON-
MENT WILL PREVAIL OVER
THE GLOOM-AND-DOOM
SCENARIO SOME
OBSERVERS HAVE
FORECAST RECENTLY.
----------------------------
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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 project. Including such insurance fees and expenses in the Fund's
return quotations has the effect of decreasing the performance quoted.
2
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2. There are fewer shares available on the Hong Kong stock market in the wake
of the government's recent substantial purchases. This tightened supply
could move prices up.
3. The recent strength of the Japanese yen significantly reduced the threat of
a currency devaluation.
Over the next six to 12 months, we intend to modify our weighting in Western
Europe, pulling back from our previous heavy emphasis on this region. We remain
firm believers in the region's bright prospects, but we also believe that
declining interest rates may benefit Southeast Asian markets. As a result, we're
investing more in the Far East. And although our investments in real estate,
bank, and insurance stocks hurt the Fund in September and early October, we
believe the current interest-rate climate will work to their benefit. Thus we're
maintaining our holdings in these areas.
After dire predictions by various market gurus and strategists, the sun has
returned to global stock markets. While there may be a slowdown in the global
economy, we believe rumors of its demise are greatly exaggerated.
Thank you for your investment with the Strong International Stock Fund II. We
appreciate the confidence you've shown us.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 10-20-95 to 12-31-98
[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 10,320
6-96 11,641 10,965 11,215
12-96 11,326 11,125 11,809
6-97 12,307 12,372 13,456
12-97 9,795 11,323 12,665
6-98 10,463 13,127 14,668
12-98 9,327 13,588 14,269
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.
- --------------------------------------------------------------------------------
* 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 benchmark,
returned 20.00% for the 12 months through December 31, 1998.*
o Western Europe fell hard in September and early October after accumulating
strong gains through July.
o In September and October, Japanese stocks benefited from the yen's 33%
surge in value. The Hong Kong government supported its country's markets by
using currency reserves to purchase stocks.
o Concerns following Russia's default on its debt, Latin American turmoil,
and hedge-fund crises drove investors out of financial-services companies.
Fear of a recession, which could cut corporate spending, led investors to
shun high-tech firms.
3
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SCHEDULE OF INVESTMENTS IN SECURITIES DECEMBER 31, 1998
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==================================
STRONG INTERNATIONAL STOCK FUND II
==================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS 99.3%
Canada 2.7%
Northern Telecom, Ltd. 25,700 $ 1,288,213
Egypt 0.0%
Suez Cement 105 1,585
Finland 5.9%
Nokia Oyj `A Shares' 20,000 2,433,042
Sonera Group Oyj (b) 19,200 342,824
-----------
2,775,866
France 8.9%
Banque Nationale de Paris 12,700 1,045,778
Groupe Danone 1,500 429,439
Pinault-Printemps-Redoute SA 2,525 482,527
Societe Generale 2,700 437,221
Societe Television Francaise 2,700 480,702
ST Microelectronics (b) 12,200 862,276
Suez Lyonnaise des Eaux 2,300 472,453
-----------
4,210,396
Germany 7.5%
Bayerische Motoren Werke AG 1,600 1,243,045
Bayerische Motoren Werke AG - New (b) 134 101,367
Deutsche Lufthansa AG - Registered Shares 48,000 1,061,347
Mannesmann AG 10,000 1,147,630
Muenchener Rueckversicherungs-Gesellschaft
Warrants, Expire 6/03/02 (b) 52 2,421
-----------
3,555,810
Greece 0.3%
Panafon Hellenic Telecom Company SA
(Acquired 11/20/98; Cost $99,116) (b) (c) 5,500 147,242
Hong Kong 22.7%
Cheung Kong Holdings, Ltd. 228,000 1,640,848
China Telecom (Hong Kong), Ltd. (b) 382,000 660,780
Citic Pacific, Ltd. 349,000 752,369
Hang Seng Bank, Ltd. 198,000 1,770,002
Henderson Land Development Company, Ltd. 250,000 1,294,116
Hutchison Whampoa, Ltd. 209,000 1,477,132
New World Development Company, Ltd. 565,000 1,422,238
Peregrine Investment Holdings, Ltd. (b) 236,000 0
Sun Hung Kai Properties, Ltd. 231,000 1,684,804
-----------
10,702,289
India 0.0%
UTI-Mastergrowth 93 Fund (b) 15,100 3,595
Ireland 1.2%
Bank of Ireland 26,000 577,030
Italy 6.7%
Banca Poplare di Brescia 30,000 732,506
La Rinascente Spa 58,500 602,216
Mediaset Spa 88,000 715,606
Mediolanum Spa 85,000 631,092
Telecom Italia Mobile Spa 67,000 495,096
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3,176,516
Kazakhstan 0.1%
Firebird Republics Fund (b) 1,280 68,784
Netherlands 7.5%
ASM Lithography Holding NV (b) 29,000 885,661
Getronics NV 7,600 376,057
Koninklijke Ahold NV 23,250 858,500
Koninklijke Ahrend NV 12,000 273,903
Vendex NV 21,100 511,924
VNU NV 17,000 640,383
-----------
3,546,428
Portugal 1.6%
Brisa-Auto Estradas de Portugal SA 12,800 753,956
Romania 0.3%
The Romanian Investment Fund, Ltd.
(Acquired 5/08/97; Cost $300,000) (b) (c) 300 146,250
Spain 1.1%
Banco Santander SA 25,363 504,007
Sweden 1.1%
Skandia Forsakrings AB 33,000 504,905
Switzerland 3.4%
Adecco SA 1,921 876,932
Zurich Allied AG 950 703,422
-----------
1,580,354
Ukraine 0.3%
Ukrainian Opportunity Fund (b) 29,700 148,500
United Kingdom 28.0%
Boots Company PLC 27,000 457,048
Cable & Wireless Communications PLC (b) 86,400 784,504
Diageo PLC 3,813 43,135
Dixons Group PLC 35,000 489,430
EMAP PLC 28,800 547,772
GKN PLC 39,500 520,999
Hays PLC 73,200 638,620
Legal & General Group PLC 135,000 1,742,673
Lloyds TSB Group PLC 108,000 1,527,211
Misys PLC 128,500 930,333
National Express Group PLC 48,000 885,961
Stagecoach Holdings PLC 145,000 573,760
Standard Chartered PLC 177,000 2,038,936
Vodafone Group PLC 79,000 1,275,223
WPP Group PLC 129,000 780,340
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13,235,945
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TOTAL COMMON STOCKS (Cost $41,914,096) 46,927,671
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SHORT-TERM INVESTMENTS (A) 1.8%
COMMERCIAL PAPER 0.1%
Interest Bearing, Due Upon Demand
United States
United States Cayman Eurodollar Call Deposit,
3.75% $ 71,000 71,000
TIME DEPOSITS 1.7%
United States
Westdeutsche Landesbank Gironzentrale
Grand Cayman, 5.4375%, Due 1/04/99 800,000 800,000
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TOTAL SHORT-TERM INVESTMENTS (Cost $871,000) 871,000
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TOTAL INVESTMENTS IN SECURITIES (Cost $42,785,096) 101.1% 47,798,671
Other Assets and Liabilities, Net (1.1%) (517,914)
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NET ASSETS 100.0% $47,280,757
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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) Restricted security.
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
4
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STATEMENT OF ASSETS AND LIABILITIES
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December 31, 1998
Strong International
Stock Fund II
--------------------
ASSETS:
Investments in Securities, at Value (Cost of $42,785,096) $47,798,671
Dividends and Interest Receivable 75,350
Other Assets 5,822
-----------
Total Assets 47,879,843
LIABILITIES:
Payable for Securities Purchased 504,053
Accrued Operating Expenses and Other Liabilities 95,033
-----------
Total Liabilities 599,086
-----------
NET ASSETS $47,280,757
===========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $61,176,924
Accumulated Net Investment Income 177,022
Accumulated Net Realized Loss (19,089,366)
Net Unrealized Appreciation 5,016,177
-----------
Net Assets $47,280,757
===========
Capital Shares Outstanding (Unlimited Number Authorized) 5,387,173
NET ASSET VALUE PER SHARE $8.78
=====
See Notes to Financial Statements.
5
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STATEMENT OF OPERATIONS
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For the Year Ended December 31, 1998
Strong International
Stock Fund II
--------------------
INCOME:
Dividends (net of withholding taxes of $99,828) $ 912,104
Interest 138,178
----------
Total Income 1,050,282
EXPENSES:
Investment Advisory Fees 548,043
Custodian Fees 253,030
Shareholder Servicing Costs 50,034
Other 29,829
----------
Total Expenses 880,936
----------
NET INVESTMENT INCOME 169,346
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (12,693,411)
Futures Contracts and Forward Foreign Currency Contracts (1,138,499)
Foreign Currencies (1,796)
----------
Net Realized Loss (13,833,706)
Change in Unrealized Appreciation/Depreciation on:
Investments 11,797,320
Futures Contracts (98,437)
Foreign Currencies 3,375
----------
Net Change in Unrealized Appreciation/Depreciation 11,702,258
----------
NET LOSS ON INVESTMENTS (2,131,448)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($1,962,102)
==========
See Notes to Financial Statements.
6
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<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
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<CAPTION>
Strong International Stock Fund II
----------------------------------
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 169,346 $ 468,442
Net Realized Loss (13,833,706) (3,983,154)
Net Change in Unrealized Appreciation/Depreciation 11,702,258 (5,890,715)
---------- ----------
Net Decrease in Net Assets Resulting from Operations (1,962,102) (9,405,427)
DISTRIBUTIONS:
From Net Investment Income (642,787) (468,442)
In Excess of Net Investment Income -- (835,402)
From Net Realized Gains -- (1,952,335)
---------- ----------
Total Distributions (642,787) (3,256,179)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 62,818,720 49,323,565
Proceeds from Reinvestment of Distributions 642,787 3,256,179
Payment for Shares Redeemed (73,396,714) (55,248,543)
---------- ----------
Net Decrease in Net Assets from Capital Share Transactions (9,935,207) (2,668,799)
---------- ----------
TOTAL DECREASE IN NET ASSETS (12,540,096) (15,330,405)
NET ASSETS:
Beginning of Year 59,820,853 75,151,258
---------- ----------
End of Year $47,280,757 $59,820,853
=========== ===========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 6,670,162 4,419,239
Issued in Reinvestment of Distributions 63,075 288,891
Redeemed (7,763,041) (4,980,333)
---------- ----------
Net Decrease in Shares of the Fund (1,029,804) (272,203)
========== ==========
See Notes to Financial Statements.
7
</TABLE>
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NOTES TO FINANCIAL STATEMENTS
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December 31, 1998
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 December 31, 1998, approximately 86% 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, depending on local convention or regulation.
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 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 December 31, 1998 were $399,116 and $293,492
respectively, representing 0.6% 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 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 calculated 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
Foreign denominated assets and forward currency contracts may involve
greater risks than domestic transactions, including 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. 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 (none were written
during the period). 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>
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(G) 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.
(H) Forward Foreign Currency Exchange Contracts -- Forward foreign
currency exchange contracts are valued at the forward rate and are
market-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 of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(J) 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. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Fund are affiliated, provides investment advisory 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 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 Fund may invest cash reserves 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 December 31, 1998, shareholder
servicing and other expenses paid to the Advisor and unaffiliated
directors' fees for the year then ended were $7,586, $99,386 and $1,500,
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 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 December 31, 1998, there were no borrowings by the Funds outstanding
under the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the year
ended December 31, 1998 were $133,185,286 and $135,755,181, respectively..
6. INCOME TAX INFORMATION
At December 31, 1998, the cost of investments in securities for federal
income tax purposes was $45,013,421. Net unrealized appreciation of
securities was $2,785,250, consisting of gross unrealized appreciation and
depreciation of $4,527,849 and $1,742,599, respectively. The Fund had a
capital loss carryover of $16,861,042 which expires in 2006.
9
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
STRONG INTERNATIONAL STOCK FUND II
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year Ended
--------------------------------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA(a) 1998 1997 1996 1995(b)
- -----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.32 $11.23 $10.22 $10.00
Income From Investment Operations
Net Investment Income 0.03 0.06 0.03 0.01
Net Realized and Unrealized Gains (Losses) on Investments (0.46) (1.50) 1.03 0.25
- -----------------------------------------------------------------------------------------------
Total from Investment Operations (0.43) (1.44) 1.06 0.26
Less Distributions
From Net Investment Income (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) -- --
- -----------------------------------------------------------------------------------------------
Total Distributions (0.11) (0.47) (0.05) (0.04)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.78 $9.32 $11.23 $10.22
===============================================================================================
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Total Return -4.8% -13.5% +10.4% +2.6%
Net Assets, End of Period (In Millions) $47 $60 $75 $2
Ratio of Expenses to Average Net Assets 1.6% 1.5% 1.9% 2.0%*
Ratio of Net Investment Income to Average Net Assets 0.3% 0.6% 0.4% 1.0%*
Portfolio Turnover Rate 255.2% 169.2% 126.0% 26.9%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from October 20, 1995 (inception) to December 31, 1995.
See Notes to Financial Statements.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of Strong Variable Insurance Funds, Inc.
and the Shareholders of the Strong International Stock Fund II
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Strong International Stock Fund II
(the "Fund") (one of the portfolios constituting the Strong Variable Insurance
Funds, Inc.) at December 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities owned at
December 31, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 3, 1999
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