<PAGE> 1
SEMIANNUAL REPORT
JUNE 30, 1995
THE STRONG
INTERNATIONAL INCOME FUNDS
[Photo of Children in a field]
THE STRONG SHORT-TERM GLOBAL BOND FUND
THE STRONG INTERNATIONAL BOND FUND
[STRONG FUNDS LOGO]
<PAGE> 2
EIGHT BASIC PRINCIPLES FOR
SUCCESSFUL MUTUAL FUND INVESTING
These common sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here
24 hours a day, seven days a week to take your call.
1. Have a plan. Even a simple plan can help you take control of your
financial future. Review your plan once a year, or if your circumstances
change.
2. Start investing as soon as possible. Make time a valuable ally.
Let it put the power of compounding to work for you, while helping to
reduce your potential investment risk.
3. Diversify your portfolio. By investing in different asset classes -
stocks, bonds, and cash - you help protect against poor performance in one
type of investment while including investments most likely to help you
achieve your important goals.
4. Invest regularly. Investing is a process, not a one-time event.
Make a habit of investing. And make it easy for yourself with an
"automatic investment plan." This popular strategy not only helps you
manage investment risk, it also ensures you "pay yourself first" on a
regular basis.
5. Maintain a long-term perspective. For most individuals, the best
discipline is staying invested as market conditions change. Reactive,
emotional investment decisions are all too often a source of regret - and
of principal loss.
6. Consider stocks to help achieve major long-term goals. Over time,
stocks have provided the more powerful returns needed to help the value of
your investments stay well ahead of inflation.
7. Keep a comfortable amount of cash in your portfolio. To meet
current needs, including emergencies, use a money market fund or a bank
account - not your long-term investment assets.
8. Know what you're buying. Make sure you understand the potential
risks and rewards associated with each of your investments. Ask questions
... request information ... make up your own mind. And choose a fund
company that helps you make informed investment decisions.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT REVIEWS
The Strong Short-Term Global Bond Fund............................................... 2
The Strong International Bond Fund................................................... 4
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Short-Term Global Bond Fund............................................. 6
The Strong International Bond Fund................................................. 7
Statements of Operations............................................................. 9
Statements of Assets and Liabilities................................................. 10
Statements of Changes in Net Assets.................................................. 10
Notes to Financial Statements........................................................ 11
FINANCIAL HIGHLIGHTS.......................................................................... 16
</TABLE>
<PAGE> 4
The Strong
Short-Term
Global Bond
Fund
As of 6/30/95
-------------
30-DAY
ANNUALIZED
YIELD
8.01%(1)
AVERAGE
QUALITY
AA
AVERAGE
EFFECTIVE
MATURITY
1.8 years(2)
The Strong Short-Term Global Bond Fund seeks total return by investing for a
high level of income with a low degree of share-price fluctuation. The Fund
invests primarily in investment-grade debt obligations of U.S. and foreign
issuers. It normally will pay dividends quarterly and have an average effective
portfolio maturity of three years or less.
THE FUND PERFORMED WELL
Despite often challenging market conditions, the Fund performed relatively
well during the first half of 1995. Its total return for the period was
5.03%.(1)
THE "TEQUILA EFFECT" CAUSES
TEMPORARY HEADACHE FOR EMERGING MARKETS
While the year got off to a volatile start due to Mexico's devaluation of the
peso, global bond markets performed well overall in the first half of 1995.
Although the problems that prompted the peso's devaluation were specific to
Mexico, the event made investors nervous about the prospects for other
emerging markets. This led to indiscriminate selling, even in reasonably
healthy markets-a result popularly called the "tequila effect."
After the initial downturn, however, the value inherent in many global bond
markets became too attractive to ignore, and prices rebounded. Adding fuel to
the rally was the strong performance of the U.S. bond market during the first
half of 1995. Following one of its most difficult years on record in 1994, U.S.
bond prices were buoyed by a stream of unexpectedly weak economic numbers that
allayed fears of higher rates and incipient inflation. The ensuing upturn in
U.S. bonds helped support the rallies in global markets.
The strong performance of several currencies versus the dollar also fortified
global markets. Although the Fund is hedged to minimize the effect of
currency movements, the gains that foreign markets posted in dollar terms
helped improve investor psychology. By June 30, 1995, most short-term global
bond markets had rebounded strongly, reflected in the overall 6.08% total
return as measured by the Salomon Brothers 1-3 Year World Government Bond Index.
A STRATEGY MARKED
BY TACTICAL SHIFTS
As stated in the Fund's annual report, our view going into the year was that the
U.S. economy would slow and thereby set the stage for lower rates and higher
prices in 1995. Thus, we began the year intending to maintain a neutral
portfolio position. While our forecast turned out to be quite accurate, the
volatility resulting from the peso's devaluation prompted us to be more cautious
than we otherwise would have liked.
This caution was reflected in our allocation of the Fund's assets. During the
first three months, we underweighted Mexico and other Latin American markets,
overweighted the U.S. and other dollar-bloc countries, and kept positions
light in higher-yielding European countries like Italy, Spain, and Sweden, which
tended to be more volatile. In addition, we reduced our exposure to below
investment-grade bonds. As the second quarter progressed, we began to unwind
some of the more cautious positions in favor of a neutral asset allocation.
Overall, these tactical moves helped the Fund maintain a position in the top
quarter of Short World Multi-Market Funds tracked by Lipper Analytical Services
for the 6-month period ended 6/30/95, and the top 18% for the 1-year period,
based on total return.(3)
As the volatility of the first six months of 1995 suggests, investments in
overseas markets can pose more risk than U.S. investments, and the Fund's share
price is expected to be more volatile than that of a U.S.-only fund. The
Fund's returns will fluctuate with changes in bond market conditions, currency
values, interest rates, foreign government regulations,
2
<PAGE> 5
and economic and political conditions in countries in which the Fund invests.
These risks are generally intensified in emerging markets.
For disciplined investors, however, we believe the risks are outweighed by the
potential rewards.
TOP FIVE COUNTRIES
(based on net assets as of 6/30/95)
<TABLE>
<CAPTION>
Country % of assets
<S> <C>
United States 44.3%
Brazil 12.1%
United Kingdom 7.2%
Germany 7.0%
Norway 4.6%
</TABLE>
Please see the Schedule of Investments in Securities for a complete listing
of the Fund's portfolio.
WE REMAIN NEUTRAL
For the near term, we expect to maintain the Fund's current neutral duration and
asset allocation. We believe that U.S. interest rates will remain in a tight
range, with a slight downward bias if economic indicators continue to suggest
a slowing economy. If the dollar strengthens more than we anticipate, we may
re-balance the portfolio to emphasize the traditional, more stable European
currencies of Germany, France, and the Netherlands.
Overall, we are likely to maintain the Fund's neutral stance, selling on
rallies and buying on weakness in an effort to add value over time.
We appreciate your investment in the Strong Short-Term Global Bond Fund,
and we look forward to earning your continued confidence.
Sincerely,
Shirish T. Malekar
Portfolio Manager
Growth of an assumed $10,000 investment
from 3/31/94 to 6/30/95
The Strong Short-Term Global Bond Fund
3/94 10000
6/94 10180
9/94 10404
12/94 10513
3/95 10641
6/95 11042
Salomon Brothers 1-3 Year World Government Bond Index (Currency Hedged)
3/94 10000
6/94 9995
9/94 10075
12/94 10153
3/95 10457
6/95 10771
Average Annual Total Returns
through 6/30/95
Since inception 8.25%
on 3/31/94
1-year 8.47%
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Salomon Brothers 1-3 Year World Government Bond Index (Currency Hedged), an
unmanaged, market capitalization-weighted index of short-term, global
fixed-income government securities. 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.
(1) As of June 30, 1995, the advisor temporarily waived fees of .625% and
absorbed expenses of 1.375%. Otherwise, the Fund's yield would have been
6.01% and returns would have been lower.
(2) The Fund's average effective maturity includes the effect of futures
contracts.
(3) Lipper Analytical Services calculations are based upon changes in net asset
value with dividends and capital gains reinvested. For the 6-month and
1-year periods ended 6/30/95, the Fund was ranked #10 of 44 and #7 of 39
funds, respectively. Rankings are historical and do not represent future
results.
3
<PAGE> 6
The Strong
International
Bond Fund
As of 6/30/95
30-DAY
ANNUALIZED
YIELD
8.47%(1)
AVERAGE
CREDIT
QUALITY
AA
AVERAGE
EFFECTIVE
MATURITY
4.3 years(2)
The Strong International Bond Fund seeks high total return by investing for
both income and capital appreciation. The Fund invests primarily in
investment-grade debt obligations of foreign issuers.
THE FUND PERFORMED WELL
Despite often challenging market conditions, the Fund performed exceptionally
well during the first half of 1995. Its total return for the period was
18.53%(1), earning it a ranking of #9 of 154 General World Income Funds tracked
by Lipper Analytical Services for the 6-month period ended 6/30/95. For the
1-year period, the Fund was ranked #3 of 132 funds.(3)
GLOBAL BOND MARKETS SHRUG
OFF THE "TEQUILA EFFECT"
Overall, the global bond markets performed well in the first half of
1995. The year started inauspiciously on the heels of the Mexican peso's
devaluation. Although the problems that prompted the devaluation were specific
to Mexico, investors also became nervous about other emerging markets. This led
to indiscriminate selling, even in reasonably healthy markets-a result
popularly called the "tequila effect."
However, global prices quickly rebounded during the first quarter for several
reasons.
* The value inherent in bonds following the initial downturn became too
attractive to ignore.
* The U.S. bond market, after experiencing one of its most difficult
years on record in 1994, rallied strongly in early 1995, buoyed by a stream
of unexpectedly weak economic numbers. This helped support the rally in
global markets.
* The dollar's weakness helped make assets denominated in many foreign
currencies more valuable.
By June 30, 1995, global bond markets, as measured by the Salomon
Brothers Non-U.S. World Government Bond Index, had gained 20.03%.
A SUCCESSFUL BALANCING ACT
As stated in the Fund's 1994 annual report, we began the year intending
to maintain a neutral portfolio position, given our view that U.S. economy
would slow and thereby set the stage for lower rates and higher prices in 1995.
As it turned out, this forecast was quite accurate. However, due to the
volatility resulting from the peso's devaluation, we believed it was prudent to
be more cautious than we otherwise would have liked.
Our caution was reflected in the balancing of the Fund's assets. During the
first three months, we underweighted Mexico and other Latin American markets,
overweighted the U.S. and other dollar-bloc countries, and kept positions
light in higher-yielding, more volatile European countries like Italy, Spain,
and Sweden. In addition, we reduced our exposure to below investment-grade
bonds.
As the second quarter progressed, we began to unwind some of the more
cautious positions in favor of a neutral asset allocation. By using futures to
make these moves on a timely basis, the Fund was able to produce an outstanding
total return for shareholders.
TOP FIVE COUNTRIES
(based on net assets as of 6/30/95)
<TABLE>
<CAPTION>
Country % of assets
<S> <C>
United States 33.0%
Germany 17.0%
Brazil 11.4%
New Zealand 9.8%
France 7.1%
</TABLE>
Please see the Schedule of Investments in Securities for a complete listing
of the Fund's portfolio.
4
<PAGE> 7
WE REMAIN NEUTRAL
For the near term, we expect to maintain the Fund's current neutral
duration and asset allocation. We believe that U.S. interest rates will remain
in a tight range, with a slight downward bias if economic indicators continue
to suggest a slowing economy. If the dollar strengthens more than we
anticipate, we may re-balance the portfolio to more strongly emphasize the
traditional, more stable European currencies of Germany, France, and the
Netherlands.
Overall, we will likely maintain the Fund's neutral stance, selling on
rallies and buying on weakness in an effort to add value over time.
A WORD ABOUT RISK
The volatility exhibited by global markets over the past six months,
and indeed at times over the past 18 months, illustrates how capricious these
markets can be in the short-term. Sometimes this volatility works for you, as
it did in the first half of 1995. But it would be unwise to expect such a
return on more than an occasional basis. Investors in this Fund must always be
aware that overseas markets will fluctuate with changes in bond market
conditions, currency values, interest rates, foreign government regulations and
economic and political conditions-and that these risks are generally
intensified in emerging markets.
However, for long-term investors, we believe the risks are outweighed by the
potential benefits.
We appreciate your investment in the Strong International Bond Fund, and we
look forward to earning your continued confidence.
Sincerely,
Shirish T. Malekar
Portfolio Manager
Growth of an assumed $10,000 investment
from 3/31/94 to 6/30/95
The Strong International Bond Fund
3/94 10000
6/94 10560
9/94 10810
12/94 10866
3/95 12295
6/95 12879
Salomon Brothers Non-U.S. World Government Bond Index (Currency Unhedged)
3/94 10000
6/94 10169
9/94 10337
12/94 10396
3/95 11897
6/95 12478
Average Annual Total Returns
through 6/30/95
Since inception 22.43%
on 3/31/94
1-year 21.96%
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in
the Salomon Brothers Non-U.S. World Government Bond Index (Currency Unhedged),
an unmanaged, market capitalization-weighted index of liquid, non-U.S.
fixed-income government securities. 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.
(1) As of June 30, 1995, the advisor temporarily waived fees of .70%
and absorbed expenses of 1.30%. Otherwise, the Fund's yield
would have been 6.47% and returns would have been lower.
(2) The Fund's average effective maturity includes the effect of futures
contracts.
(3) Lipper Analytical Services calculations are based upon changes in net
asset value with dividends and capital gains reinvested. Rankings are
historical and do not represent future results.
5
<PAGE> 8
SCHEDULE OF INVESTMENTS IN SECURITIES June 30, 1995 (Unaudited)
STRONG SHORT-TERM GLOBAL BOND FUND
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
---------------- -------
<S> <C> <C>
FOREIGN BONDS 34.1%*
BRAZIL 5.8%*
Banco Bamerindus Do Brasil Sociedad
Anonima Notes:
400,000 USD 10.50%, Due 6/23/97 $ 399,000
700,000 USD 10.50%, Due 6/23/97 (Acquired 6/12/95;
Cost $699,568) (r) 698,250
-------------
1,097,250
FINLAND 4.1%*
3,000,000 FIM Government of Finland Debentures, 11.00%,
Due 1/15/99 765,856
GERMANY 6.3%*
1,500,000 DEM Republic of Germany Debentures, Series 90,
8.875%, Due 12/20/00 1,197,310
MEXICO 2.6%*
500,000 USD Banco Nacional de Comercio Exterior Floating
Rate Notes, 10.875%, Due 6/23/97 (Putable
at 100 on 6/23/96)(Acquired 6/15/95;
Cost $500,000) (r) 485,000
NEW ZEALAND 3.5%*
1,000,000 NZD Government of New Zealand Notes, 8.00%,
Due 7/15/98 668,169
NORWAY 4.6%*
5,000,000 NOK Kingdom of Norway Debentures, 9.00%,
Due 1/31/99 863,668
UNITED KINGDOM 7.2%*
Government of the United Kingdom Bonds:
200,000 GBP 10.50%, Due 2/21/97 332,330
50,000 GBP 8.75%, Due 9/01/97 81,191
600,000 GBP 8.00%, Due 12/07/00 945,370
-------------
1,358,891
-------------
TOTAL FOREIGN BONDS (COST $6,305,432) 6,436,144
DOMESTIC BONDS 43.2%*
CORPORATE BONDS 3.0%*
$100,000 Bank of Boston Corporation Subordinated
Floating Rate Notes, 6.1875%, Due 2/28/01 98,176
450,000 Viacom International, Inc. Reset Notes,
8.75%, Due 5/15/01 (Rate Reset
Effective 5/15/98) 468,563
-----------
TOTAL CORPORATE BONDS (COST $553,608) 566,739
NON-AGENCY MORTGAGE-BACKED SECURITIES 35.1%*
158,005 Bear Stearns Mortgage Securities, Inc.
Mortgage Pass-Thru Certificates, Series
1993-12, Class 1-A, 6.50%, Due 1/25/34 156,079
500,000 Chase Mortgage Finance Corporation
Mortgage Pass-Thru Certificates, Series
1994-D, Class A-2, 6.00%, Due 2/25/25 494,855
Citicorp Mortgage Securities, Inc.
Real Estate Mortgage Investment Conduit
Pass-Thru Certificates:
402,789 Series 1988-3, Class A-2, 9.00%,
Due 4/01/18 418,324
480,586 Series 1990-17, Class M, 9.50%,
Due 11/25/20 498,158
$500,000 First Boston Mortgage Securities
Corporation Variable Rate Mortgage
Pass-Thru Certificates, Series
1994-MHC1, Class C, 7.1625%,
Due 4/25/11 $ 497,500
66,108 GS Trust 3 Floating Rate Collateralized
Mortgage Obligation, Series C, Class C-2,
6.9625%, Due 7/07/15 66,025
Green Tree Securitized Net Interest
Margin Trust Certificates:
450,748 Series 1994-A, 6.90%, Due 2/15/04 452,172
720,676 Series 1994-B, 7.85%, Due 7/15/04 722,910
260,000 Merrill Lynch Credit Corporation Senior
Subordinated Variable Rate Mortgage
Pass-Thru Certificates, Series 1995-A,
Class A-4, 6.8625%, Due 7/15/20 248,625
74,961 Merrill Lynch Home Equity Acceptance, Inc.
Subordinated Variable Rate
Mortgage-Backed Certificates, Series
1994-A, Class A-1, 7.0625%, Due 8/17/23 71,400
218,610 Merrill Lynch Mortgage Investors, Inc.
Manufactured Housing Contract
Pass-Thru Certificates, Series 1992-E,
Class B, 5.85%, Due 8/15/12 217,036
120,000 Merrill Lynch Mortgage Investors, Inc.
Senior Subordinated Variable Rate
Pass-Thru Certificates, Series 1994-H,
Class M, 7.0625%, Due 6/15/19 109,020
1,140,708 Mortgage Obligation Structured Trust
Pass-Thru Certificates, Series 1993-1,
Class A-1, 6.35%, Due 10/25/18 1,144,986
991,388 RTC Variable Rate Mortgage Pass-Thru
Securities, Inc. Manufactured Housing
Certificates, Series 1992-MH1, Class B-2,
6.525%, Due 8/15/19 (Acquired 4/21/95;
Cost $976,059) (r) 979,590
RTC Variable Rate Mortgage Pass-Thru
Securities, Inc.:
54,047 Series 1992-16, Class A-4, 7.448%,
Due 8/25/22 54,402
506,894 Series 1995-1, Class B-5, 7.4131%,
Due 10/25/28 494,222
-------------
TOTAL NON-AGENCY MORTGAGE-BACKED
SECURITIES (COST $6,556,782) 6,625,304
UNITED STATES GOVERNMENT AGENCY ISSUES 5.1%*
56,338 FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru
Certificates, Series 1989-73, Class A,
Principal Only, Due 8/25/14 50,475
759,827 FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru
Certificates, 10.50%, Due 8/01/20 824,531
84,548 GMAC #12 FHA Project Loan, 7.31%,
Due 5/01/21 87,521
-------------
TOTAL UNITED STATES GOVERNMENT AGENCY
ISSUES (COST $958,993) 962,527
-------------
TOTAL DOMESTIC BONDS
(COST $8,069,383) 8,154,570
</TABLE>
6
<PAGE> 9
STRONG SHORT-TERM GLOBAL BOND FUND (continued)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
- ---------------- -------
<S> <C>
FOREIGN CASH EQUIVALENTS 20.4%*
FOREIGN OBLIGATIONS 10.0%*
BRAZIL 3.7%*
500,000 USD Lehman Brothers Holdings, Inc. Notes (with
Brazilian Real indexation and interest
based on Brazilian Government Securities),
8.125%, Due 9/01/95 (Acquired 6/22/95;
Cost $500,000) (r) $ 500,000
200,000 USD Uniao De Bancos Brasileiros S.A.
Eurobond, 9.75%, Due 10/13/95 199,500
-------------
699,500
CANADA 1.6%*
400,000 CAD Government of Canada Debentures,
Series H76, 10.25%, Due 3/01/96 297,200
FRANCE 0.3%*
300,000 FRF Government of France Notes, 9.00%,
Due 2/12/96 62,592
GERMANY 0.7%*
170,000 DEM Republic of Germany Debentures, Series 94,
8.875%, Due 1/22/96 126,340
SOUTH AFRICA 3.7%*
700,000 USD South African Transnet LINCs Series 1994-1
(A Trust established by CS First Boston
Structured Products Corporation), 8.207%,
Due 10/02/95 (Aquired 10/18/94;
Cost $700,000) (r) 705,250
-------------
1,890,882
DISCOUNTED CERTIFICATE OF DEPOSIT 1.3%*
POLAND
250,000 USD Morgan Guaranty (with Polish Zloty
indexation based on the Polish
denominated deposit), Due 7/21/95 248,360
DISCOUNTED COMMERCIAL PAPER 6.4%*
BRAZIL 2.6%*
500,000 USD Petroleo Brasileiro S.A. Eurodollar,
Due 9/08/95 490,978
INDONESIA 2.3%*
1,000,000,000 IDR Bakrie and Brothers PT, Due 8/28/95 437,194
THAILAND 1.5%*
7,000,000 THB GS Capital Corporation, Ltd., Due 8/11/95 280,533
-------------
1,208,705
TIME DEPOSITS 2.7%*
PHILIPPINES
500,000 USD Citibank Time Deposit (with Philippine
Peso indexation and interest based on
the Philippine denominated deposit),
12.85%, Due 9/05/95 510,516
-------------
Total Foreign Cash Equivalents 3,858,463
DOMESTIC CASH EQUIVALENTS 1.1%*
INTEREST BEARING COMMERCIAL PAPER, DUE UPON DEMAND 1.0%*
$188,000 United States Cayman Eurodollar Call
Deposit, 5.00% 188,000
UNITED STATES GOVERNMENT ISSUE 0.1%*
20,000 United States Treasury Bills, Due 8/24/95 19,853
-------------
Total Domestic Cash Equivalents 207,853
-------------
Total Cash Equivalents (Cost $4,010,465) 4,066,316
-------------
TOTAL INVESTMENTS IN SECURITIES
(COST $18,385,280) 98.8%* 18,657,030
Other Assets and Liabilities, Net 1.2%* 216,183
-------------
NET ASSETS 100.0%* $18,873,213
=============
</TABLE>
<TABLE>
<CAPTION>
STRONG INTERNATIONAL BOND FUND
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
- ---------------- -------
<S> <C> <C>
FOREIGN BONDS 49.7%*
AUSTRALIA 3.0%*
600,000 AUD Government of Australia Notes, Series 1101,
12.00%, Due 11/15/01 $ 491,152
BRAZIL 5.4%*
Banco Bamerindus Do Brasil Sociedad
Anonima Notes:
600,000 USD 10.50%, Due 6/23/97 598,500
300,000 USD 10.50%, Due 6/23/97 (Acquired
6/12/95; Cost $299,815) (r) 299,250
-------------
897,750
CANADA 1.1%*
250,000 CAD Mobil Oil of Canada Corporation Senior
Unsubordinated Notes, 9.00%,
Due 5/02/97 186,497
DENMARK 4.8%*
4,500,000 DKK Kingdom of Denmark Notes, 8.00%,
Due 3/15/06 794,406
FINLAND 3.1%*
2,000,000 FIM Government of Finland Debentures,
11.00%, Due 1/15/99 510,570
FRANCE 7.1%*
5,400,000 FRF Government of France Debentures, 8.50%,
Due 11/25/02 1,177,787
GERMANY 12.6%*
2,800,000 DEM Republic of Germany Debentures, Series 94,
7.50%, Due 11/11/04 2,082,511
NEW ZEALAND 9.8%*
Government of New Zealand Notes:
800,000 NZD 8.00%, Due 7/15/98 534,535
1,700,000 NZD 6.50%, Due 2/15/00 1,077,974
-------------
1,612,509
UNITED KINGDOM 2.8%*
300,000 GBP Government of the United Kingdom Notes,
7.25%, Due 3/30/98 469,869
-------------
TOTAL FOREIGN BONDS
(COST $8,012,545) 8,223,051
DOMESTIC BONDS 26.6%*
CORPORATE BONDS 0.3%*
$50,000 Bank of Boston Corporation
Subordinated Floating Rate Notes,
6.1875%, Due 2/28/01 (Cost $49,011) 49,088
</TABLE>
7
<PAGE> 10
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED) JUNE 30, 1995 (Unaudited)
STRONG INTERNATIONAL BOND FUND (continued)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL AMOUNT (NOTE 2)
- ---------------- -------
<S> <C>
NON-AGENCY MORTGAGE-BACKED SECURITIES 26.1%*
$480,586 Citicorp Mortgage Securities, Inc.
Real Estate Mortgage Investment
Conduit Pass-Thru Certificates, Series
1990-17, Class-M, 9.50%, Due 11/25/20 $ 498,158
41,336,451 First Boston Mortgage Securities
Corporation Mortgage Pass-Thru
Certificates, Series 1992-4, Class A-5,
Interest Only, 0.625%, Due 10/25/22 310,023
Green Tree Securitized Net Interest
Margin Trust Certificates:
166,259 Series 1994-A, 6.90%, Due 2/15/04 166,785
145,629 Series 1994-B, 7.85%, Due 7/15/04 146,080
360,000 Merrill Lynch Credit Corporation Senior
Subordinated Variable Rate Mortgage
Pass-Thru Certificates, Series 1995-A,
Class A-4, 6.8625%, Due 7/15/20 344,250
112,441 Merrill Lynch Home Equity Acceptance,
Inc. Subordinated Variable Rate
Mortgage-Backed Certificates, Series
1994-A, Class A-1, 7.0625%, Due 8/17/23 107,100
75,000 Merrill Lynch Mortgage Investors, Inc.
Senior Subordinated Variable Rate
Pass-Thru Certificates, Series 1994-H,
Class M, 7.0625%, Due 6/15/19 68,138
1,239,423 Mortgage Obligation Structured Trust
Pass-Thru Certificates, Series 1993-1,
Class A-1, 6.35%, Due 10/25/18 1,244,071
18,525,937 Premier Auto Trust Asset-Backed
Certificates, Series 1992-5, Class I,
Interest Only, 2.85%, Due 3/15/98 183,407
506,894 RTC Variable Rate Mortgage Pass-Thru
Securities, Inc., Series 1995-1, Class B-5,
7.4131%, Due 10/25/28 494,222
760,659 Ryland Mortgage Securities Corporation
Collaterized Mortgage Bonds, Series
1992-2, Class B, 8.00%, Due 1/25/19 761,847
---------------
TOTAL NON-AGENCY MORTGAGE-BACKED
SECURITIES (COST $4,290,270) 4,324,081
UNITED STATES GOVERNMENT AGENCY ISSUE 0.2%*
37,788 FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru
Certificates, Series 1989-73, Class A,
Principal Only, Due 8/25/14
(Cost $33,348) 33,855
---------------
TOTAL DOMESTIC BONDS
(COST $4,372,629) 4,407,024
FOREIGN CASH EQUIVALENTS 18.7%*
FOREIGN OBLIGATIONS 9.9%*
BRAZIL 3.0%*
500,000 USD Lehman Brothers Holdings, Inc. Notes (with
Brazilian Real indexation and interest
based on Brazilian Government
Securities), 8.125%, Due 9/01/95
(Acquired 6/22/95; Cost $500,000) (r) 500,000
GERMANY 4.4%*
1,000,000 DEM Republic of Germany Debentures, Series 93,
9.00%, Due 10/20/95 $ 731,967
SOUTH AFRICA 2.5%*
400,000 USD South African Transnet LINCs Series
1994-1 (A trust established by CS
First Boston Structured Products
Corporation), 8.207%, Due 10/02/95
(Acquired 10/18/94; Cost $400,000)(r) 403,000
---------------
1,634,967
DISCOUNTED CERTIFICATE OF DEPOSIT 1.5%*
Poland
250,000 USD Morgan Guaranty (with Polish Zloty
indexation based on the Polish
denominated deposit), Due 7/21/95 248,360
DISCOUNTED COMMERCIAL PAPER 7.3%*
BRAZIL 3.0%*
500,000 USD Petroleo Brasileiro S.A. Eurodollar,
Due 9/08/95 490,979
INDONESIA 2.6%*
1,000,000,000 Bakrie and Brothers PT, Due 8/28/95 437,194
IDR
Thailand 1.7%*
7,000,000 THB GS Capital Corporation, Ltd., Due 8/11/95 280,533
---------------
1,208,706
---------------
Total Foreign Cash Equivalents 3,092,033
DOMESTIC CASH EQUIVALENTS 6.4%*
INTEREST BEARING COMMERCIAL PAPER, DUE UPON DEMAND 5.2%*
$855,000 United States Cayman Eurodollar Call
Deposit, 5.00% 855,000
United States Government Issue 1.2% *
205,000 United States Treasury Bills, Due 8/24/95 203,497
---------------
Total Domestic Cash Equivalents 1,058,497
---------------
Total Cash Equivalents (Cost $4,117,305) 4,150,530
---------------
TOTAL INVESTMENTS IN SECURITIES
(COST $16,502,479) 101.4%* 16,780,605
Other Assets and Liabilities, Net (1.4%*) (240,486)
---------------
NET ASSETS 100.0%* $ 16,540,119
===============
</TABLE>
* Percentages are calculated as a percentage of net assets.
(r) Restricted Security.
See notes to financial statements.
8
<PAGE> 11
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
STRONG SHORT-TERM STRONG INTERNATIONAL
GLOBAL BOND FUND BOND FUND
---------------- --------------------
<S> <C> <C>
INTEREST INCOME $617 $ 496
EXPENSES:
Investment Advisory Fees 44 42
Custodian Fees 36 40
Shareholder Servicing Costs 20 12
Reports to Shareholders 13 11
Federal and State Registration Fees 42 38
Other 13 13
---- ------
Total Expenses before Waivers and Absorptions 168 156
Voluntary and Involuntary Expense Waivers and Absorptions
by Advisor (168) (156)
---- ------
-- --
Expenses, Net ---- ------
NET INVESTMENT INCOME 617 496
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (189) 240
Futures Contracts, Options, and Forward Foreign Currency Contracts (17) 1,035
Foreign Currencies 13 (110)
Change in Unrealized Appreciation/Depreciation on:
Investments 299 173
Futures Contracts, Options, and Forward Foreign Currency Contracts (42) 2
Assets and Liabilities Denominated in Foreign Currencies 1 15
---- ------
NET GAIN 65 1,355
---- ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $682 $1,851
==== ======
</TABLE>
See notes to financial statements.
9
<PAGE> 12
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
STRONG SHORT-TERM STRONG INTERNATIONAL
GLOBAL BOND FUND BOND FUND
------------------ --------------------
<S> <C> <C>
ASSETS:
Investments in Securities, at Value
(Cost of $18,385 and $16,502, respectively) $ 18,657 $ 16,781
Receivable from Brokers for Securities and Forward
Foreign Currency Contracts Sold 379 493
Receivable for Fund Shares Sold 794 30
Interest Receivable 284 355
Other 40 58
----------- -----------
Total Assets 20,154 17,717
LIABILITIES:
Payable to Brokers for Securities and Forward Foreign
Currency Contracts Purchased 1,175 1,098
Payable for Fund Shares Redeemed 27 2
Payable to Advisor for Organizational Costs 79 77
----------- -----------
Total Liabilities 1,281 1,177
----------- -----------
NET ASSETS $ 18,873 $ 16,540
=========== ===========
Capital Shares
Authorized 10,000,000 10,000,000
Outstanding 1,828 1,401
NET ASSET VALUE PER SHARE $ 10.32 $ 11.81
=========== ===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1995 (Unaudited) and the Period Ended
December 31, 1994
<TABLE>
<CAPTION>
(In Thousands)
STRONG SHORT-TERM STRONG INTERNATIONAL
GLOBAL BOND FUND BOND FUND
------------------------------ ------------------------------
June 30, 1995 Dec. 31, 1994 June 30, 1995 Dec. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 617 $ 576 $ 496 $ 414
Net Realized Gain (Loss) (193) (153) 1,165 (97)
Change in Unrealized Appreciation/Depreciation 258 (53) 190 110
------- ------- ------- -------
Increase in Net Assets Resulting from Operations 682 370 1,851 427
CAPITAL SHARE TRANSACTIONS (976) 19,819 5,268 9,873
DISTRIBUTIONS:
From Net Investment Income (515) (576) (525) (414)
In Excess of Net Investment Income -- (4) -- (20)
In Excess of Net Realized Gains -- (27) -- (20)
------- ------- ------- -------
TOTAL INCREASE (DECREASE) IN NET ASSETS (809) 19,582 6,594 9,846
NET ASSETS:
Beginning of Period 19,682 100 9,946 100
------- ------- ------- -------
End of Period $18,873 $19,682 $16,540 $ 9,946
======= ======= ======= =======
</TABLE>
See notes to financial statements.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
1. ORGANIZATION
The Strong International Income Funds consist of Strong Short-Term Global
Bond Fund, Inc. and Strong International Bond Fund, Inc. The Funds are
separately incorporated, non-diversified, open-end management investment
companies registered with the Securities and Exchange Commission under the
Investment Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) Security Valuation -- Debt securities are valued on the basis of
valuations furnished by a pricing service that utilizes electronic
data processing techniques to determine valuations for normal
institutional-size trading units of debt securities without regard
to sale or bid prices when such valuations are believed to more
accurately reflect the fair value of such securities. Otherwise,
sale or bid prices are used. Securities for which quotations are not
readily available are valued at fair value as determined in good
faith under consistently applied procedures established by and under
the general supervision of the Directors of the Funds. Debt
securities which are purchased within 60 days of their stated
maturity are valued at amortized cost, which approximates current
value.
The Funds own certain investment securities which are restricted as
to resale. These securities are valued by the Funds after giving
due consideration to pertinent factors including recent private
sales, market conditions, and the issuer's financial performance.
The Funds bear the costs, if any, associated with the disposition
of restricted securities. Where such disposition depends on a
security's registration under the Securities Act of 1933, the Funds
will bear such registration costs unless the Funds have
registration rights, in which case the issuer will bear such costs.
Aggregate cost and fair value of these restricted securities at June
30, 1995 were as follows:
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INTERNATIONAL
GLOBAL BOND FUND BOND FUND
----------------- --------------------
<S> <C> <C>
Aggregate Cost $3,375,627 $1,199,815
Aggregate Fair Value 3,368,090 1,202,250
Percent of Net Assets 17.9%* 7.3%
</TABLE>
*Of these securities, which are restricted from resale, 14.2% have
been determined to be liquid by the Advisor based upon guidelines
established by the Fund's Board of Directors.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
It is the Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no Federal income or excise tax provision is required.
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.
(C) Realized Gains and Losses On Investment Transactions -- The Funds
determine the gain or loss realized on investment transactions by
comparing the identified cost of the security lot sold with the net
sales proceeds.
(D) Futures -- The Funds may enter into futures contracts for any lawful
purpose, including hedging, risk management, or enhancing returns,
but not for speculation. Upon entering into a futures contract, the
Funds deposit cash or U.S. government securities or other liquid,
high-grade debt obligations in a segregated account with its
custodian, in the name of the futures broker through whom the
transaction was effected, equal to the minimum "initial margin"
requirements of the applicable futures exchange. Additionally, the
Funds receive from or pay to the broker an amount of cash equal to
the daily fluctuation in value of the contract. Such receipts or
payments are known as "variation margin," and are recorded by the
Funds as unrealized gains or losses. When the contract is closed,
the Funds record a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the
value at the time it was closed.
The use of futures contracts involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement
of assets and liabilities. The successful use of futures contracts
by the Funds is dependent upon the ability of Strong Capital
Management, Inc. (the "Advisor") to correctly anticipate trends in
the underlying assets of the futures contracts. To the extent that
the Funds are engaging in futures contracts other than for hedging
purposes, the Funds' successful use of such transactions is more
dependent upon the Advisor's ability to correctly anticipate such
trends, since losses in these transactions may not be offset in
gains in the Funds' portfolio or in lower purchase prices for assets
it intends to acquire. The Advisor's prediction of trends in
underlying assets may prove to be inaccurate, which could result in
substantial losses to the Funds. Hedging transactions are also
subject to risks. If the Advisor incorrectly anticipates trends in
the underlying asset, the Funds may be in a worse position than if
no hedging had occurred. In addition, there may be imperfect
correlation between the Funds' use of futures contracts and the
assets being hedged.
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1995 (Unaudited)
(D) Futures (continued)
Futures contracts open at June 30, 1995 were as follows:
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
VALUE APPRECIATION
(IN EXPIR- (DEPRECIATION)
FUND COLLATERAL (PAR VALUE) CONTRACTS THOUSANDS) ATION (IN THOUSANDS)
- ---- ---------------------- --------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
Strong Short-Term $ 20,000 U.S. Treasury Bills, 11 Five-Year U.S. Treasury Bonds (Long) $1,181 Sept. 1995 $ 3
Global Bond Due 8/24/95
Strong International 205,00 U.S. Treasury Bills, 2 Ten-Year German Government Bonds
Bond Due 8/24/95 (Long) 335 Sept. 1995 (8)
4 Ten-Year Italian Government Bonds
(Long) 479 Sept. 1995 (17)
3 Ten-Year Japanese Government Bonds
(Long) 4,268 Sept. 1995 35
10 Ten-Year United Kingdom Government
Bonds (Long) 821 Sept. 1995 (18)
</TABLE>
(E) Options -- The Funds may engage in options transactions for any
lawful purpose, including hedging, risk management, or enhancing
returns, but not for speculation. The Funds may purchase or write
put and call options on securities, futures contracts, indices, and
foreign currency, and enter into closing transactions with respect
to such options to terminate an existing position.
Premiums received by the Funds upon writing put or call options are
recorded in the Funds' statements of assets and liabilities as an
asset with a corresponding liability which is subsequently adjusted
to the current market value of the option. When an option that is
written by the Funds expires, is exercised, or is closed, the Funds
realize a gain or loss, and the liability is eliminated. The Funds
continue 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. The use of written option contracts
involve elements of market risk in excess of the amount recognized
in the statements of assets and liabilities. The contract value
represents the Funds' involvement in these financial instruments.
When required by SEC guidelines, the Funds will set aside
permissable liquid assets in a segregated account to secure its
potential obligations under its written options positions.
The successful use of option contracts by the Funds is dependent
upon the ability of the Advisor to correctly anticipate trends in
the underlying assets of the option contracts. To the extent that
the Funds are engaging in option contracts other than for hedging
purposes, the Funds' successful use of such transactions is more
dependent upon the Advisor's ability to correctly anticipate such
trends, since losses in these transactions may not be offset in
gains in the Funds' portfolio or in lower purchase prices for assets
it intends to acquire. The Advisor's prediction of trends in
underlying assets may prove to be inaccurate, which could result in
substantial losses to the Funds. Hedging transactions are also
subject to risks. If the Advisor incorrectly anticipates trends in
the underlying asset, the Funds may be in a worse position than if
no hedging had occurred. In addition, there may be imperfect
correlation between the Funds' use of option contracts and the
assets being hedged.
(F) Foreign Currency Translation -- Investment securities and other
assets and liabilities denominated 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.
(G) When-Issued Securities -- The Funds may purchase securities on a
when-issued or delayed delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the agreement, these securities may be
delivered and paid for at a future date, generally within 45 days.
The Funds record purchases of when-issued securities and reflect the
values of such securities in determining net asset value in the same
manner as other portfolio securities. The Funds segregate and
maintain at all times permissible liquid assets in an amount at
least equal to the amount of outstanding commitments for when-issued
securities.
(H) Average Years to Maturity -- A Fund's average effective maturity is
generally based on the actual stated maturity date of a security,
unless it is subject to redemption and the Advisor reasonably
expects the issue to be called, in which case the call date may be
used in determining the effective maturity of the portfolio. In
addition, the effective maturity date of a variable rate security is
the next interest rate adjustment date and for a debt security with
a put feature, the next put exercise date is considered its
maturity. The effective maturity of a mortgage-backed security is
determined on an "expected life" basis. Notwithstanding the
foregoing, the use of futures contracts and options may impact the
effective maturity of a portfolio security and accordingly, the
calculated average years to maturity of a Fund's portfolio.
(I) Deferred Organizational Costs -- Costs incurred by the Funds in
connection with their organization and initial registration and
public offering of shares have been deferred and are being amortized
to expense over a sixty-month period. These costs were advanced by
the Advisor and will be reimbursed by the Funds over a period of not
more than sixty months.
(J) Other -- Portfolio transactions are recorded on the trade date.
Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recorded on the accrual
basis.
12
<PAGE> 15
3. NET ASSETS
Net assets as of June 30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INTERNATIONAL
GLOBAL BOND FUND BOND FUND
---------------- -------------------
<S> <C> <C>
Capital Stock $ 18,942 $ 15,241
Undistributed Net Investment Income (Loss) 30 (115)
Undistributed Net Realized Gain (Loss) (304) 1,115
Net Unrealized Appreciation (Depreciation) 205 299
-------- --------
Net Assets $ 18,873 $ 16,540
======== ========
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the six months ended June 30, 1995
and the period from March 31, 1994 (inception) to December 31, 1994 were as
follows (in thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM GLOBAL BOND FUND JUNE 30, 1995 DECEMBER 31, 1994
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares Sold 1,245 $ 12,862 2,866 $ 29,549
Shares Issued in Reinvestment of Dividends 46 470 52 537
Shares Redeemed (1,401) (14,308) (989) (10,267)
----- --------- ----- --------
Net Increase (Decrease) (110) ($ 976) 1,929 $ 19,819
==== ======== ==== ========
</TABLE>
<TABLE>
<CAPTION>
STRONG INTERNATIONAL BOND FUND JUNE 30, 1995 DECEMBER 31, 1994
-------------------------- -------------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares Sold 804 $ 9,367 1,439 $ 15,103
Shares Issued in Reinvestment of Dividends 43 504 41 433
Shares Redeemed (406) (4,603) (530) (5,663)
---- ------- ----- --------
Net Increase 441 $ 5,268 950 $ 9,873
=== ======= ===== ========
</TABLE>
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers and
directors of the Funds are affiliated, provides investment advisory services
and shareholder recordkeeping and related services to the Funds. Investment
advisory fees, which are established by terms of the Advisory Agreements, are
based on annualized rates of .625% of the average daily net assets of the
Strong Short-Term Global Bond Fund, and .70% of the average net assets of the
Strong International Bond Fund. Advisory fees are subject to reimbursement by
the Advisor if the Funds' operating expenses exceed certain levels. Shareholder
recordkeeping and related service fees are based on contractually established
rates for each open and closed shareholder account. In addition, the Advisor is
compensated for certain other services related to costs incurred for reports to
shareholders.
Certain information regarding these transactions, excluding the effects of
waivers and reimbursements, for the six months ended June 30, 1995 is as
follows (in thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INTERNATIONAL
GLOBAL BOND FUND BOND FUND
---------------- ---------
<S> <C> <C>
Payable to Advisor at June 30, 1995 $79 $77
Other Shareholder Servicing Expenses Paid to Advisor 1 2
Unaffiliated Directors' Fees 1 1
</TABLE>
13
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1995 (Unaudited)
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities during the six months
ended June 30, 1995 and the investment cost and unrealized appreciation and
depreciation at June 30, 1995 for Federal income tax purposes, were as follows
(in thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG INTERNATIONAL
GLOBAL BOND FUND BOND FUND
---------------- --------------------
<S> <C> <C>
PURCHASES:
U.S. Government and Agency $ 3,332 $ --
Other 42,259 30,408
SALES:
U.S. Government and Agency 2,538 1,532
Other 38,456 21,859
Aggregate Investment Cost 18,389 16,503
Aggregate Unrealized:
Appreciation $ 322 $ 311
Depreciation (53) (34)
-------- --------
$ 269 $ 277
======== ========
</TABLE>
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into forward foreign currency exchange contracts for any
lawful purpose, including hedging, risk management, or enhancing returns, but
not for speculation.
Forward foreign currency exchange contracts are valued at the forward rate, and
are marked-to-market daily. The change in market value is recorded by the
Funds as an unrealized gain or loss. When the contract is closed, the Funds
record 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.
Forward foreign currency exchange contracts are typically used by the Funds to
hedge currency exposure related to receivables from securities sold and
payables for securities purchased.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the underlying prices of the Funds' portfolio securities, but
it does establish a rate of exchange that can be achieved in the future.
Although forward foreign currency exchange contracts limit the risk of loss due
to a decline in the value of the hedged currency, they also limit any potential
gain that might result should the value of the currency increase. In addition,
the Funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts.
At June 30, 1995, the Funds had entered into forward foreign currency exchange
contracts as follows:
<TABLE>
<CAPTION>
UNREALIZED
CURRENCY VALUE APPRECIATION
CURRENCY SETTLEMENT IN USD (DEPRECIATION)
FUND SOLD DATE (IN THOUSANDS) (IN THOUSANDS)
- ---- --------------------------------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Strong Short-Term Global Bond 405,275 Canadian Dollars 7/13/95 $ 295 $ (3)
3,289,720 Finnish Markkas 7/13/95 771 (12)
2,485,745 German Marks 7/13/95 1,799 (35)
983,502 New Zealand Dollars 7/13/95 657 1
5,522,808 Norwegian Kroner 7/13/95 897 (17)
819,860 United Kingdom Pounds 7/13/95 1,305 3
1,000,000,000 Indonesian Rupiahs 8/28/95 443 (9)
Strong International Bond 650,000 Australian Dollars 7/13/95 468 0
46,605,843 Belgian Francs 7/13/95 1,640 (7)
212,725 Canadian Dollars 7/13/95 155 0
1,478,300 Danish Kroner 7/13/95 274 (1)
7,945,758 French Francs 7/13/95 1,633 (40)
4,670,862 French Francs 7/13/95 963 (26)
441,934 German Marks 7/13/95 320 (5)
2,458,300 New Zealand Dollars 7/13/95 1,643 2
149,716 United Kingdom Pounds 7/13/95 238 (1)
1,091,725 German Marks 7/20/95 790 (10)
1,000,000,000 Indonesian Rupiahs 8/28/95 443 (9)
</TABLE>
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1995 (Unaudited)
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
UNREALIZED
CURRENCY VALUE APPRECIATION
CURRENCY SETTLEMENT IN USD (DEPRECIATION)
FUND PURCHASED DATE (IN THOUSANDS) (IN THOUSANDS)
- ---- --------------------------------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Strong International Bond 7,011,839 German Marks 7/13/95 $4,963 $108
1,592,562,500 Italian Lira 7/13/95 962 11
510,146,500 Japanese Yen 7/13/95 6,030 (7)
151,986 Swiss Francs 7/13/95 130 2
513,934 United Kingdom Pounds 7/13/95 825 (8)
4,670,862 French Francs 7/20/95 948 14
</TABLE>
8. FOREIGN INVESTMENTS
Investments in foreign markets can pose more risks than U.S. investments, and
the Funds' share price is expected to be more volatile than that of a U.S.
securities-only fund. The Funds' returns will fluctuate with changes in stock
market conditions, currency values, interest rates, foreign government
regulations, and economic and political conditions in countries in which each
Fund invests. These risks are generally intensified for investments in emerging
markets.
9. ANNUAL MEETING
A shareholder meeting was held on April 13, 1995 in Milwaukee, Wisconsin.
Results of the shareholder vote, calculated as a percentage of total shares
voted, are as follows:
<TABLE>
<CAPTION>
STRONG INTERNATIONAL BOND FUND STRONG SHORT-TERM GLOBAL BOND FUND
SHARES VOTED 631,294.740 SHARES VOTED 756,403.090
------------------------------ ------------------------------
PROPOSALS AFFIRMATIVE WITHHOLD AFFIRMATIVE WITHHOLD
- --------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
1 Election of Directors
Richard S. Strong 99.81% 0.19% 99.10% 0.90%
John Dragisic 99.81 0.19 99.04 0.96
Marvin E. Nevins 99.76 0.24 98.79 1.21
Willie D. Davis 99.78 0.22 98.35 1.65
William F. Vogt 99.81 0.19 98.25 1.75
Stanley Kritzik 99.79 0.21 98.07 1.93
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Ratify Selection of Auditors 99.40% 0.21% 0.39% 97.40% 0.86% 1.74%
3 Adopt Advisory Agreement 98.57 0.65 0.78 92.31 5.17 2.52
4 Adopt Revised Articles 98.38 0.67 0.95 91.95 5.92 2.13
5 Amend Investment Objective 98.63 0.43 0.94 92.61 4.37 3.02
6 Amend or Adopt a Fundamental
Investment Limitation Concerning:
6A Concentration 95.48 3.43 1.09 91.23 4.98 3.79
6B Lending 95.01 3.93 1.06 90.54 5.68 3.78
6C Purchasing or Selling Real Estate 95.30 3.64 1.06 90.19 6.03 3.78
6D Borrowing 98.32 0.61 1.07 90.30 5.70 4.00
6E Underwriting Securities 98.23 0.70 1.07 89.83 6.16 4.01
6F Purchasing or Selling Financial
Commodities 98.08 0.85 1.07 89.23 6.96 3.81
6G Issuing Senior Securities 98.57 0.36 1.07 90.59 5.40 4.01
6H Pooled Fund Structures 98.70 0.23 1.07 90.25 5.41 4.34
7 Eliminate a Fundamental Investment
Limitation Concerning:
7A Short Sales of Securities 94.82 3.88 1.30 89.13 5.48 5.39
7B Use of Margin 94.57 4.12 1.31 88.04 6.52 5.44
</TABLE>
15
<PAGE> 18
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of each
of the Funds, outstanding for the entire period.
STRONG SHORT-TERM GLOBAL BOND FUND
<TABLE>
<CAPTION>
1995*** 1994**
------- ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.15 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.39 0.35
Net Realized and Unrealized Gains
on Investments 0.12 0.16
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.51 0.51
LESS DISTRIBUTIONS
Distributions from Net Investment Income (0.34) (0.35)
Distributions In Excess of
Net Realized Gains -- (0.01)
------ ------
TOTAL DISTRIBUTIONS (0.34) (0.36)
------ ------
NET ASSET VALUE, END OF PERIOD $10.32 $10.15
====== ======
Total Return +5.0% +5.1%
Net Assets, End of Period (In Thousands) $18,873 $19,682
Ratio of Expenses to Average Net Assets 0.0%* 0.0%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 2.0%* 1.7%*
Ratio of Net Investment Income to
Average Net Assets 8.4%* 7.7%*
Portfolio Turnover Rate 408.6% 383.7%*
</TABLE>
STRONG INTERNATIONAL BOND FUND
<TABLE>
<CAPTION>
1995*** 1994**
------- ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.36 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.46 0.46
Net Realized and Unrealized Gains
on Investments 1.44 0.40
------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.90 0.86
LESS DISTRIBUTIONS
Distributions from Net Investment Income (0.45) (0.46)
Distributions In Excess of
Net Investment Income -- (0.02)
Distributions In Excess of
Net Realized Gains -- (0.02)
------ ------
TOTAL DISTRIBUTIONS (0.45) (0.50)
------ ------
NET ASSET VALUE, END OF PERIOD $11.81 $10.36
====== ======
Total Return +18.5% +8.7%
Net Assets, End of Period (In Thousands) $16,540 $9,946
Ratio of Expenses to Average Net Assets 0.0%* 0.0%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 2.0%* 2.0%*
Ratio of Net Investment Income to
Average Net Assets 8.2%* 7.9%*
Portfolio Turnover Rate 283.5% 905.7%*
</TABLE>
* Calculated on an annualized basis.
** Inception date is March 31, 1994 for both Strong Short-Term Global
Bond Fund and Strong International Bond Fund. Total return is not
annualized.
*** For the six months ended June 30, 1995. (Unaudited) Total
return and portfolio turnover are not annualized.
16
<PAGE> 19
SHAREHOLDER PRIVILEGES*
TELEPHONE PURCHASE
Make additional investments into any Strong Fund by calling us
toll-free at 1-800-368-3863.
TELEPHONE EXCHANGE
If your financial goals change, you can exchange your investments
between any of the Strong Funds.
TELEPHONE REDEMPTION
You can call toll-free to redeem your mutual fund shares at any time.
Your shares will be redeemed no later than the close of the next
business day.
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your bank
checking or NOW account to your Strong Funds account.
PAYROLL DIRECT DEPOSIT PLAN
You can automatically transfer all or a portion of your net pay at each
pay period. This eliminates the delay of depositing paychecks to your
bank and then sending a check through the mail to Strong Funds.
AUTOMATIC EXCHANGE PLAN
This plan allows you to exchange money from one Strong Fund to
another. For example, you may want to set up automatic exchanges
from a money market fund to an equity fund.
For more information about these privileges, call us at 1-800-368-3863.
To reduce the volume of mail you receive, only one copy of certain
materials, such as prospectuses and shareholder reports, is mailed to
your household. Please call 1-800-368-3863 if you wish to receive
additional copies, free of charge.
*Each Fund reserves the right to terminate or modify any of these
privileges.
<PAGE> 20
FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030.
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-368-3863.
This report must be preceded or accompanied by the prospectus for
the Strong International Income Funds.
[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
