STRONG SHORT TERM GLOBAL BOND FUND INC, 497, 1995-10-13

STRONG SHORT TERM GLOBAL BOND FUND INC
497, 1995-10-13

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<PAGE> 1

STRONG INTERNATIONAL FUNDS

<TABLE>
<S> <C>
STRONG SHORT-TERM GLOBAL BOND FUND, INC. STRONG FUNDS
STRONG INTERNATIONAL BOND FUND, INC. P.O. Box 2936
STRONG INTERNATIONAL STOCK FUND, INC. Milwaukee, Wisconsin 53201
STRONG ASIA PACIFIC FUND, INC. Telephone: (414) 359-1400
Toll-Free: (800) 368-3863
Device for the
Hearing-Impaired:
(800) 999-2780
</TABLE>

The Strong Family of Funds ("Strong Funds") is a family of twenty-three
diversified and non-diversified, open-end management investment companies,
commonly called mutual funds. All of the Strong Funds are no-load funds, meaning
that you may purchase, redeem, or exchange shares without paying a sales charge.
Strong Funds include growth funds, growth and income funds, income funds,
municipal income funds, international funds, and money market funds. The "Strong
International Funds" are described in this Prospectus.

This Prospectus contains information you should consider before you invest.
Please read it carefully and keep it for future reference. A Statement of
Additional Information for the Funds, dated October 13, 1995, contains further
information, is incorporated by reference into this Prospectus, and has been
filed with the Securities and Exchange Commission ("SEC"). That Statement, which
may be revised from time to time, is available without charge upon request to
the above-noted address or telephone number.

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------

Dated October 13, 1995

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PROSPECTUS PAGE I-1
<PAGE> 2

STRONG INTERNATIONAL FUNDS

Strong Short-Term Global Bond Fund, Inc. and Strong International Bond Fund,
Inc. (collectively, the "Bond Funds") are separately incorporated, non-
diversified, open-end management investment companies. The Strong International
Stock Fund, Inc. and Strong Asia Pacific Fund, Inc. (collectively, the "Stock
Funds") are separately incorporated, diversified, open-end management investment
companies.

STRONG SHORT-TERM GLOBAL BOND FUND (the "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 will normally pay dividends
quarterly and have an average effective portfolio maturity of three years or
less.

STRONG INTERNATIONAL BOND FUND (the "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.

STRONG INTERNATIONAL STOCK FUND (the "International Stock Fund") seeks
capital growth. The Fund invests primarily in the equity securities of issuers
located outside the United States.

STRONG ASIA PACIFIC FUND (the "Asia Pacific Fund") seeks capital growth. The
Fund invests primarily in the equity securities of issuers located in Asia or
the Pacific Basin.

TABLE OF CONTENTS

<TABLE>
<S> <C>
EXPENSES................................. I-3
FINANCIAL HIGHLIGHTS..................... I-4
HIGHLIGHTS............................... I-7
INVESTMENT OBJECTIVES AND POLICIES....... I-8
Comparing the Funds............ I-10
Strong Short-Term Global Bond
Fund......................... I-10
Strong International Bond
Fund......................... I-11
Strong International Stock
Fund......................... I-11
Strong Asia Pacific Fund....... I-12
FUNDAMENTALS OF FIXED INCOME INVESTING... I-14
IMPLEMENTATION OF POLICIES AND RISKS..... I-17
ABOUT THE FUNDS.......................... I-26
SHAREHOLDER MANUAL....................... II-1
APPENDIX A............................... A-1
APPENDIX B............................... B-1
</TABLE>

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the Statement
of Additional Information, and if given or made, such information or
representations may not be relied upon as having been authorized by the Strong
International Funds. This Prospectus does not constitute an offer to sell
securities in any state or jurisdiction in which such offering may not lawfully
be made.

---------------------

PROSPECTUS PAGE I-2
<PAGE> 3

EXPENSES

The following information is provided in order to help you understand the
various costs and expenses that you, as an investor in the Funds, will bear
directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales Load Imposed on Purchases............. NONE
Sales Load Imposed on Reinvested
Dividends................................. NONE
Deferred Sales Load......................... NONE
Redemption Fees............................. NONE
Exchange Fees............................... NONE
</TABLE>

There are certain charges associated with retirement accounts and with
certain other special shareholder services offered by the Funds. Additionally,
purchases and redemptions may also be made through broker-dealers or others who
may charge a commission or other transaction fee for their services. (See
"Shareholder Manual - How to Buy Shares" and "- How to Sell Shares.")

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Total
Management Other 12b-1 Operating
Fund Fees Expenses Fees Expenses
<S> <C> <C> <C> <C>
Short-Term Global Bond 0.625% 1.105%* NONE 1.73%
International Bond 0.70 1.30* NONE 2.00
International Stock 1.00 .70 NONE 1.70
Asia Pacific 1.00 1.00 NONE 2.00
</TABLE>

- ----------------------------------------------------------------------------

* The expenses specified in the table have been estimated since the Funds did
not commence operations until March 31, 1994.

The Funds' investment advisor, Strong Capital Management, Inc. (the
"Advisor"), may from time to time, voluntarily waive its management fee and/or
absorb certain expenses for a Fund. For additional information concerning fees
and expenses, see "About the Funds - Management."

-------------------
PROSPECTUS PAGE I-3
<PAGE> 4

EXAMPLE. You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Period (in
Fund 1years) 3
<S> <C> <C>
Short-Term Global Bond $18 $54
International Bond 20 63
International Stock 17 54
Asia Pacific 20 63
</TABLE>

- ----------------------------------------------------------------------------

The Example is based on each Fund's "Total Fund Operating Expenses" described
above. PLEASE REMEMBER THAT THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND THAT ACTUAL EXPENSES MAY BE HIGHER
OR LOWER THAN THOSE SHOWN. The assumption in the Example of a 5% annual return
is required by regulations of the SEC applicable to all mutual funds. The
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of a Fund's shares.

FINANCIAL HIGHLIGHTS

The following Financial Highlights for each of the Funds has been audited by
Coopers & Lybrand L.L.P., independent certified public accountants. Their report
for the Short-Term Global Bond and International Bond Funds for the fiscal
period March 31, 1994 through December 31, 1994 is included in the Annual Report
of the International Income Funds. Their report for the International Stock and
Asia Pacific Funds is included in the Annual Report of the Growth Funds. The
Annual Reports are contained in the Funds' Statement of Additional Information.

The Financial Highlights for the Funds should be read in conjunction with the
Financial Statements and related notes included in the Funds' Annual Report.
Additional information about each Fund's performance is contained in the Funds'
Annual Report, which may be obtained without charge by calling or writing Strong
Funds. The following presents information relating to a share of capital stock
of each of the Funds, outstanding for the entire period.

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PROSPECTUS PAGE I-4
<PAGE> 5

Strong Strong
Short-Term International
Global Bond Fund Bond Fund
------------------ ---------------
1994** 1994**
------------------ ---------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.35 0.46
Net Realized and Unrealized Gains
(Losses) on Investments 0.16 0.40
-------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.51 0.86
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.35) (0.46)
Dividends in Excess of Net Investment Income -- (0.02)
Distributions In Excess of Net Realized Gains (0.01) (0.02)
-------- ---------
TOTAL DISTRIBUTIONS (0.36) (0.50)
-------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.15 $ 10.36
======== =========
Total Return +5.1% +8.7%
Net Assets, End of Period (In Thousands) $ 19,682 $ 9,946
Ratio of Expenses to Average Net Assets 0.0%* 0.0%*
Ratio of Expenses to Average Net Assets Without Waivers and
Absorptions 1.7%* 2.0%*
Ratio of Net Investment Income to Average
Net Assets 7.7%* 7.9%*
Portfolio Turnover Rate 383.7%* 905.7%*
</TABLE>

* Calculated on an annualized basis.

** For the period from March 31, 1994 (inception) to December 31, 1994. Total
return is not annualized.

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PROSPECTUS PAGE I-5
<PAGE> 6

<TABLE>
<CAPTION>
Strong Asia
Strong International Stock Fund Pacific Fund
------------------------------------- -------------
1994 1993 1992** 1994
-------- -------- ------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.18 $ 9.77 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06 -- 0.05 0.05
Net Realized and Unrealized Gains
(Losses) on Investments (0.27) 4.66 (0.23) (0.57)
-------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS (0.21) 4.66 (0.18) (0.52)
LESS DISTRIBUTIONS
From Net Investment Income (0.01) -- (0.05) (0.01)
In Excess of Net Investment Income -- (0.02) -- --
From Net Realized Gains (1.25) (0.23) -- --
In Excess of Net Realized Gains (0.06) -- -- (0.12)
-------- -------- ------- -------
TOTAL DISTRIBUTIONS (1.32) (0.25) (0.05) (0.13)
-------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.65 $ 14.18 $ 9.77 $ 9.35
======== ======== ======= =======
Total Return -1.6% +47.8% -1.8% -5.3%
Net Assets, End of Period (In Thousands) $257,830 $128,445 $12,723 $57,724
Ratio of Expenses to Average Net Assets 1.7% 1.9% 2.0%* 2.0%
Ratio of Net Investment Income to Average
Net Assets 0.3% (0.3%) 0.8%* 0.6%
Portfolio Turnover Rate 136.5% 139.9% 25.2%* 103.3%
</TABLE>

* Calculated on an annualized basis.

** Inception date is March 4, 1992. Total return is not annualized.

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PROSPECTUS PAGE I-6
<PAGE> 7

HIGHLIGHTS

INVESTMENT OBJECTIVES AND POLICIES

Each Fund has distinct investment objectives and policies. The Short-Term
Global Bond and International Bond Funds seek total return consistent with their
investment objectives and policies. The International Stock and Asia Pacific
Funds seek capital growth consistent with their investment objectives and
policies. The investment objective of each Fund is set forth under "Investment
Objectives and Policies."

IMPLEMENTATION OF POLICIES AND RISKS

BOND FUNDS

The Funds will invest in foreign debt obligations and foreign currencies and
may invest in securities of issuers in developing countries. The Funds may
invest in non-investment-grade securities (commonly called "junk bonds") within
specified limits. The Funds also may engage in derivative transactions,
including options, futures, options on futures, forward currency contracts, and
swap agreements. The Funds may also invest in repurchase agreements, when-issued
securities, and illiquid securities and may engage in reverse repurchase
agreements and mortgage dollar roll transactions. The Funds are
"non-diversified" investment companies, which means that they may invest a
larger proportion of their respective assets in the securities of a single
issuer than diversified funds. Each Fund's investment policies may result in
high portfolio turnover rates.
Because of their ability to invest in foreign securities and currencies, each
Fund may offer the potential for greater returns - and may experience greater
share-price volatility - than funds investing only in comparable U.S.
securities. Consistent with the Short-Term Global Bond Fund's goal of capital
preservation, the Advisor will engage in hedging strategies in an effort to
limit the share-price volatility of the Fund. In seeking to achieve the
objective of high total return, the International Bond Fund will remain
primarily unhedged against its exposure to foreign currency risk. (See
"Fundamentals of Fixed Income Investing - High-Yield (High-Risk) Securities" and
"Implementation of Policies and Risks.")

STOCK FUNDS

Subject to certain limitations, each Fund may invest in foreign securities
and engage in foreign currency and derivative transactions, including options,
futures, and options on futures transactions. Each Fund may invest in illiquid
securities, engage in substantial short-term trading, and may invest a
significant portion of its assets in small companies, some of which may be
unseasoned. Each Fund may also invest in repurchase agreements and when-issued

---------------------

PROSPECTUS PAGE I-7
<PAGE> 8

securities. These investment practices and techniques involve risks that are
different in some respects from those associated with similar funds that do not
use them. Because of their ability to invest in foreign securities and
currencies, each Fund may offer the potential for greater returns - and may
experience greater share-price volatility - than funds investing only in
comparable U.S. securities. (See "Implementation of Policies and Risks.")

MANAGEMENT

The Advisor, Strong Capital Management, Inc., serves as investment advisor to
the Funds. The Advisor provides investment management services for mutual funds
and other investment portfolios representing assets of over $15 billion. (See
"About the Funds - Management.")

PURCHASE AND REDEMPTION OF SHARES

You may purchase or redeem shares of a Fund at net asset value. There are no
redemption or 12b-1 charges. The net asset values change daily with the value of
each Fund's portfolio. You can locate the net asset value for a Fund in
newspaper listings of mutual fund prices under the "Strong Funds" heading. (See
"Shareholder Manual - How to Buy Shares" and "- How to Sell Shares.")

SHAREHOLDER SERVICES

Strong shareholder benefits include: telephone purchase, exchange, and
redemption privileges; professional representatives available 24 hours a day;
automatic investment, automatic dividend reinvestment, payroll direct deposit,
automatic exchange and systematic withdrawal plans; a no-minimum investment
program; and free check-writing for the Short-Term Global Bond and International
Bond Funds. (See "Shareholder Manual - Shareholder Services.")

DIVIDENDS AND OTHER DISTRIBUTIONS

The policy of each Fund is to pay dividends from net investment income
quarterly and to distribute substantially all net realized capital gains
annually. The Short-Term Global Bond and International Bond Funds may also
distribute all or a portion of any net realized gains from foreign currency
transactions quarterly. (See "About the Funds - Distributions and Taxes.")

INVESTMENT OBJECTIVES AND POLICIES

The descriptions that follow are designed to help you choose the Fund that
best fits your investment objective. You may want to pursue more than one
objective by investing in more than one of the Funds or by investing in one of
the other Strong Funds, which are described in separate prospectuses. Each

---------------------

PROSPECTUS PAGE I-8
<PAGE> 9

International Fund's investment objective is discussed below in connection with
the Fund's investment policies. Because of the risks inherent in all
investments, there can be no assurance that the Funds will meet their
objectives.

The Short-Term Global Bond and International Bond Funds' return and risk
potential depends in part on the maturity and credit-quality characteristics of
the underlying investments in their portfolios. In general, longer-maturity debt
obligations carry higher yields and greater price volatility than shorter-term
debt obligations. Similarly, securities issued by less creditworthy entities
tend to carry higher yields than those with higher credit ratings. (See
"Fundamentals of Fixed Income Investing" for a more detailed discussion of the
principles and risks associated with debt obligations.) When the Advisor
determines that market conditions warrant a temporary defensive position, the
Short-Term Global Bond and International Bond Funds may invest without
limitation in cash (U.S. dollars, foreign currencies, or multicurrency units)
and short-term fixed income securities.

The International Stock and Asia Pacific Funds each invest a substantial
portion of its assets in equity securities. Accordingly, each Fund's net asset
value will fluctuate based upon changes in the value of the securities in its
portfolio, and each Fund's net asset value is likely to fluctuate more than that
of a fund invested principally in fixed income securities. The International
Stock and Asia Pacific Funds, therefore, are not appropriate for investors'
short-term financial needs.

Each Fund has adopted certain fundamental investment restrictions that are
set forth in the Funds' Statement of Additional Information ("SAI"). Those
restrictions, each Fund's investment objective, and any other investment
policies identified as "fundamental" cannot be changed without shareholder
approval. To further guide investment activities, each Fund has also instituted
a number of non-fundamental operating policies, which are described throughout
this Prospectus and in the SAI. Although operating policies may be changed by a
Fund's Board of Directors without shareholder approval, a Fund will promptly
notify shareholders of any material change in operating policies.

Except as limited below, the International Stock and Asia Pacific Funds may
invest in a diversified portfolio of securities without regard to objective
investment criteria, such as company size, exchange listing, earnings history,
or other factors. When selecting securities, the Advisor will, except as
otherwise limited below, be limited only by its best judgment as to what will
help achieve the International Stock and Asia Pacific Funds' investment
objectives.

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PROSPECTUS PAGE I-9
<PAGE> 10

COMPARING THE FUNDS

The following charts are intended to help distinguish the Funds and help you
determine their suitability for your investments.

BOND FUNDS

<TABLE>
<CAPTION>
SHORT-TERM INTERNATIONAL
GLOBAL BOND BOND
<S> <C> <C>
- ---------------------------------------------------------------------
INVESTMENT OBJECTIVE Total return from a High total return
high level of income from both income and
with a low degree of capital appreciation
share-price
fluctuation
- ---------------------------------------------------------------------
COUNTRY U.S. plus at least 2 At least 3 foreign
DIVERSIFICATION foreign countries countries
- ---------------------------------------------------------------------
QUALITY 65% or more 65% or more
investment-grade investment- grade
- ---------------------------------------------------------------------
U.S. COMPONENT At least 35% No more than 35%
- ---------------------------------------------------------------------
EXPOSURE TO FOREIGN- Primarily hedged Primarily unhedged
CURRENCY RISK
- ---------------------------------------------------------------------
AVERAGE EFFECTIVE 3 years or less Unconstrained, but
MATURITY currently expect 4 to
9 years
- ---------------------------------------------------------------------
</TABLE>

STOCK FUNDS

<TABLE>
<CAPTION>
INTERNATIONAL ASIA
STOCK PACIFIC
<S> <C> <C>
- ---------------------------------------------------------------------
INVESTMENT OBJECTIVE Capital growth Capital growth
- ---------------------------------------------------------------------
COUNTRY At least 3 foreign At least 3 foreign
DIVERSIFICATION countries countries
- ---------------------------------------------------------------------
ANTICIPATED EQUITY 90-100% 65-100%
EXPOSURE
- ---------------------------------------------------------------------
MAXIMUM DEBT EXPOSURE 35% 35%
- ---------------------------------------------------------------------
MAXIMUM CASH POSITION 100%* 100%*
- ---------------------------------------------------------------------
INVESTMENT FOCUS Non U.S. Far East
- ---------------------------------------------------------------------
</TABLE>

* Temporary emergency purposes only.

STRONG SHORT-TERM GLOBAL BOND FUND

The Short-Term Global Bond Fund seeks total return by investing for a high
level of income with a low degree of share-price fluctuation.

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PROSPECTUS PAGE I-10
<PAGE> 11

The Fund is designed for investors who are willing to accept some risk of
principal fluctuation in order to pursue a higher level of income than money-
market securities generally offer, and who are willing to accept the risks of
foreign investing in order to diversify their portfolios to pursue potentially
higher yields than comparable U.S.-only funds. Because its share price will
vary, the Fund is not an appropriate investment for those whose primary
objective is absolute principal stability; and because it normally pays its
dividends quarterly, the Fund may not be an appropriate investment for those
whose primary objective is a steady stream of monthly income.
The Fund invests primarily in investment-grade debt obligations of U.S. and
foreign issuers. Although there are no maturity restrictions on the individual
securities in the portfolio, the Fund will normally maintain an average
effective portfolio maturity of three years or less. Under normal market
conditions, the Fund will invest in at least three different countries,
including at least 35% of its total assets in securities of U.S. issuers. To
attempt to limit the Fund's exposure to foreign-currency risk, the Advisor
intends to employ hedging strategies. (See "Implementation of Policies and Risks
- - Derivative Instruments.")

STRONG INTERNATIONAL BOND FUND

The International Bond Fund seeks high total return by investing for both
income and capital appreciation.

The Fund is designed for long-term investors who are willing to accept the
risk of fluctuation in principal associated with longer-term securities in order
to pursue higher income than shorter-term securities generally provide, and who
are willing to accept the risks of foreign investing in order to diversify their
portfolios to pursue potentially higher yields than comparable U.S.-only funds.

The Fund invests primarily in investment-grade debt obligations of foreign
issuers. Under normal market conditions, the Fund will invest at least 65% of
its total assets in securities of issuers in at least three foreign countries.
Although there are no maturity limitations on the Fund's portfolio, it is
currently anticipated that the Fund will maintain an average effective portfolio
maturity of between four and nine years.

STRONG INTERNATIONAL STOCK FUND

The International Stock Fund seeks capital growth. The Fund invests primarily
in the equity securities of issuers located outside the United States.

The Fund will invest at least 65% of its total assets in foreign equity
securities, including common stocks, preferred stocks, and securities that are
convertible into common or preferred stocks, such as warrants and convertible
bonds, that are issued by companies whose principal headquarters are located
outside the United States.

Under normal market conditions, the Fund expects to invest at least 90% of
its total assets in foreign equity securities. The Fund may, however, invest up
to 35% of its total assets in equity securities of U.S. issuers or debt
obligations,

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PROSPECTUS PAGE I-11
<PAGE> 12

including intermediate- to long-term debt obligations of U.S. issuers or
foreign-government entities. When the Advisor determines that market conditions
warrant a temporary defensive position, the Fund may invest without limitation
in cash (U.S. dollars, foreign currencies, or multicurrency units) and
short-term fixed income securities. Although the debt obligations in which it
invests will be primarily investment-grade, the Fund may invest up to 5% of its
total assets in non-investment-grade debt obligations. (See "Implementation of
Policies and Risks - Debt Obligations.")

The Fund will normally invest in securities of issuers located in at least
three foreign countries. The Advisor expects that the majority of the Fund's
investments will be in issuers in the following markets: Argentina, Australia,
Brazil, Chile, Cambodia, the Czech Republic, France, Germany, Hong Kong,
Hungary, India, Indonesia, Italy, Japan, Malaysia, Mexico, the Netherlands, New
Zealand, Norway, Peru, the Philippines, Poland, Russia, Singapore, South Africa,
South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, and
Vietnam. The Fund will also invest in other European, Pacific Rim, and Latin
American markets.

As market and global conditions change, the Fund will change its allocations
among the countries of the world, and nothing herein will limit the Fund's
ability to invest in or avoid any particular countries or regions. In allocating
the Fund's assets among various countries, the Advisor will seek economic and
market environments favorable for capital appreciation and, with respect to
developing countries, economic, political, and stock-market environments that
show signs of stabilizing or improving. See "Implementation of Policies and
Risks - Foreign Securities and Currencies" for a discussion of the special risks
involved in investing in foreign securities.

In analyzing foreign companies for investment, the Advisor will ordinarily
look for one or more of the following characteristics in relation to the
company's prevailing stock price:

- - prospects for above-average sales and earnings growth and high return on
invested capital;

- - overall financial strength, including sound financial and accounting policies
and a strong balance sheet;

- - significant competitive advantages, including innovative products and
efficient service;

- - effective research, product development, and marketing;

- - pricing flexibility;

- - stable, capable management; and

- - other general operating characteristics that will enable the company to
compete successfully in its marketplace.

STRONG ASIA PACIFIC FUND

The Asia Pacific Fund seeks capital growth. The Fund invests primarily in the
equity securities of issuers located in Asia or the Pacific Basin.

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PROSPECTUS PAGE I-12
<PAGE> 13

The Fund will invest at least 65% of its total assets in equity securities,
including common stocks, preferred stocks, and securities that are convertible
into common or preferred stocks, such as warrants and convertible bonds, that
are issued by companies in Asia or the Pacific Basin. This region includes, but
is not limited to, the following countries: Australia, Bangladesh, Cambodia,
Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, the
People's Republic of China, the Philippines, Singapore, South Korea, Sri Lanka,
Taiwan, Thailand, and Vietnam. Under normal market conditions, the Fund will
invest in issuers located in at least three foreign countries. The Advisor will
consider an issuer to be located in Asia or the Pacific Basin if it meets one of
the following criteria:

(i) it is organized under the laws of a country in Asia or the Pacific
Basin and has a principal office in a country in Asia or the Pacific
Basin;

(ii) it derives 50% or more of its total revenues from business in Asia or
the Pacific Basin; or

(iii) its equity securities are traded principally on a securities exchange
in Asia or the Pacific Basin.

The Fund intends to be as fully invested in Asia and the Pacific Basin as is
practicable in light of economic and market conditions and the Fund's cash flow.
The Fund may invest up to 35% of its total assets in equity or debt securities
of issuers located outside the Asia Pacific region, including the United States.
When the Advisor determines that market conditions warrant a temporary defensive
position, the Fund may invest without limitation in cash (U.S. dollars, foreign
currencies, or multicurrency units) and short-term fixed income securities.
Although the debt obligations in which it invests will be primarily
investment-grade, the Fund may invest up to 5% of its total assets in
non-investment-grade debt obligations. (See "Implementation of Policies and
Risks - Debt Obligations.")

The Fund may invest where the Advisor believes the potential for capital
growth exists. The Fund may invest in the securities of all types of issuers,
large or small, whose earnings are believed to be in a relatively strong growth
trend, and, to a lesser extent, in companies in which significant further growth
is not anticipated but whose market value is thought to be undervalued.

In analyzing foreign companies for investment, the Advisor will ordinarily
look for one or more of the following characteristics in relation to the
company's prevailing stock price:

- - prospects for above-average sales and earnings growth;

- - high return on invested capital;

- - overall financial strength, including sound financial and accounting policies
and a strong balance sheet;

- - competitive advantages, including innovative products and service;

- - effective research, product development, and marketing;

- - pricing flexibility;

- - stable, capable management; and

- - other general operating characteristics that will enable the company to
compete successfully in its marketplace.

----------------------

PROSPECTUS PAGE I-13

<PAGE> 14

FUNDAMENTALS OF FIXED
INCOME INVESTING

The securities in which each Bond Fund may invest include fixed- and
variable-rate obligations, debentures, notes, certificates of deposit,
commercial paper, repurchase agreements, banker's acceptances, other short-term
fixed income securities, structured investments such as mortgage- and
asset-backed securities, loan participations and assignments, and convertible
debt issued by governmental or non-governmental issuers located in the U.S. or
in foreign countries or by supranational issuers, such as the World Bank, the
Asian Development Bank, the European Investment Bank and the European Economic
Community. The Bond Funds may also invest in warrants and preferred stock. Such
securities may be denominated in U.S. dollars, in foreign currencies or in
multinational currencies, such as the European Currency Unit.

Issuers of debt obligations have a contractual obligation to pay interest at
a specified rate ("coupon rate") on specified dates and to repay principal
("face value" or "par value") on a specified maturity date. Certain debt
obligations (usually intermediate- and long-term obligations) have provisions
that allow the issuer to redeem or "call" the obligation before its maturity.
Issuers are most likely to call debt obligations during periods of falling
interest rates. As a result, a Fund may be required to invest the unanticipated
proceeds of the called obligation at lower interest rates, which may cause the
Fund's income to decline.

Although the net asset value of each Bond Fund is expected to fluctuate, the
Advisor actively manages each Fund's portfolio and adjusts its average effective
portfolio maturity according to the Advisor's interest rate outlook while
seeking to avoid or reduce, to the extent possible, any negative change in a
Fund's net asset value.

PRICE VOLATILITY

The market value of debt obligations is affected by changes in prevailing
interest rates. The market value of a debt obligation generally reacts inversely
to interest-rate changes, meaning, when prevailing interest rates decline, an
obligation's price usually rises, and when prevailing interest rates rise, an
obligation's price usually declines. A fund portfolio consisting primarily of
debt obligations will react similarly to changes in interest rates.

MATURITY

In general, the longer the maturity of a debt obligation, the higher its
yield and the greater its sensitivity to changes in interest rates. Conversely,
the shorter the maturity, the lower the yield but the greater the price
stability. Commercial paper is generally considered the shortest form of debt
obligation. Notes, whose original maturities are two years or less, are
considered short-term

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<PAGE> 15

obligations. The term "bond" generally refers to securities with maturities
longer than two years. Bonds with maturities of three years or less are
considered short-term, bonds with maturities between three and seven years are
considered intermediate-term, and bonds with maturities greater than seven years
are considered long-term. The Bond Funds may invest in debt obligations which
are subject to demand or other features which may be used by the Funds to
shorten the maturity of the obligation.

CREDIT QUALITY

The values of debt obligations may also be affected by changes in the credit
rating or financial condition of their issuers. Generally, the lower the quality
rating of an obligation, the higher the degree of risk as to the payment of
interest and return of principal. To compensate investors for taking on such
increased risk, those issuers deemed to be less creditworthy generally must
offer their investors higher interest rates than do issuers with better credit
ratings.

In conducting its credit research and analysis, the Advisor considers both
qualitative and quantitative factors to evaluate the creditworthiness of
individual issuers. The Advisor also relies, in part, on credit ratings compiled
by a number of nationally recognized statistical rating organizations
("NRSROs"). "Appendix A - Ratings of Debt Obligations" presents the ratings of
three well-known such organizations: Moody's Investors Service, Inc., Standard &
Poor's Ratings Group ("S&P"), and Fitch Investors Service, Inc.

INVESTMENT-GRADE DEBT OBLIGATIONS. Debt obligations in which the Funds may
invest will be primarily investment-grade debt obligations, although each Fund
may invest up to 35% of its assets in non-investment-grade debt obligations.
Investment-grade debt obligations include the following:

- - U.S. government securities (See "Implementation of Policies and Risks -
Government Securities" below);
- - bonds or bank obligations rated in one of the four highest rating categories
(e.g., BBB or higher by S&P);
- - short-term notes rated in one of the two highest rating categories (e.g., SP-2
or higher by S&P);
- - short-term bank obligations in one of the three highest categories (e.g., A-3
or higher by S&P), with respect to obligations maturing in one year or less;
- - commercial paper rated in one of the three highest rating categories (e.g.,
A-3 or higher by S&P);
- - unrated debt obligations determined by the Advisor to be of comparable
quality; and
- - repurchase agreements involving investment-grade debt obligations.

Investment-grade debt obligations are generally believed to have relatively
low degrees of credit risk. However, securities rated in the fourth highest

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<PAGE> 16

category (e.g., BBB by S&P), although considered investment-grade, may have some
speculative characteristics, since their issuers' capacity for repayment may be
more vulnerable to adverse economic conditions or changing circumstances than
that of higher-rated issuers.

HIGH-YIELD (HIGH-RISK) SECURITIES. Each Bond Fund may invest up to, but not
including, 35% of its total assets in high-yield (high-risk) securities. These
securities, also referred to as "junk bonds," are those securities rated lower
than investment-grade and unrated securities of comparable quality. Although
these securities generally offer higher yields than investment-grade securities
with similar maturities, lower-quality securities involve greater risks,
including the possibility of default or bankruptcy. In general, they are
regarded to be predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal. Other potential risks associated with
investing in high-yield securities include:

- - substantial market-price volatility resulting from changes in interest rates,
changes in or uncertainty about economic conditions, and changes in the actual
or perceived ability of the issuer to meet its obligations;
- - greater sensitivity of highly leveraged issuers to adverse economic changes
and individual-issuer developments;
- - subordination to the prior claims of other creditors;
- - additional Congressional attempts to restrict the use or limit the tax and
other advantages of these securities; and
- - adverse publicity and changing investor perceptions about these securities.

As with any other asset in a Bond Fund's portfolio, any reduction in the
value of such securities as a result of the factors listed above would be
reflected in the Fund's net asset value. In addition, a Fund that invests in
lower-quality securities may incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal and
interest on its holdings. As a result of the associated risks, successful
investments in high-yield (high-risk) securities will be more dependent on the
Advisor's credit analysis than generally would be the case with investments in
investment-grade securities.

It is uncertain how the high-yield market will perform during a prolonged
period of rising interest rates. A prolonged economic downturn or a prolonged
period of rising interest rates could adversely affect the market for these
securities, increase their volatility, and reduce their value and liquidity. In
addition, lower-quality securities tend to be less liquid than higher-quality
securities because the market for them is not as broad or active. If market
quotations are not available, these securities will be valued in accordance with
procedures established by the Bond Funds' Board of Directors. Judgment

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<PAGE> 17

may, therefore, play a greater role in valuing these securities. The lack of a
liquid secondary market may have an adverse effect on market price and a Fund's
ability to sell particular securities.

See Appendix B for information concerning the credit quality of each Bond
Fund's investments in 1994.

IMPLEMENTATION OF POLICIES AND RISKS

In addition to the investment policies described above (and subject to
certain restrictions described below), the Funds may invest in some or all of
the following securities and may employ some or all of the following investment
techniques, some of which may present special risks as described below.
Presently, the Funds do not intend to engage in cross-trading. A more complete
discussion of certain of these securities and investment techniques and their
associated risks is contained in the Funds' SAI.

FOREIGN SECURITIES AND CURRENCIES

The Funds may invest in foreign securities either directly or indirectly
through the use of depositary receipts. (See "Investment Objectives and
Policies.") Depositary receipts are generally issued by banks or trust companies
and evidence ownership of underlying foreign securities.

Foreign investments involve special risks, including:

- - expropriation, confiscatory taxation, and withholding taxes on dividends and
interest;
- - less extensive regulation of foreign brokers, securities markets, and issuers;
- - less publicly available information and different accounting standards;
- - costs incurred in conversions between currencies, possible delays in
settlement in foreign securities markets, limitations on the use or transfer
of assets (including suspension of the ability to transfer currency from a
given country), and difficulty of enforcing obligations in other countries;
and
- - diplomatic developments and political or social instability.

Foreign economies may differ favorably or unfavorably from the U.S. economy
in various respects, including growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments positions. Many foreign securities are
less liquid and their prices more volatile than comparable U.S. securities.
Although the Funds generally invest only in securities that are regularly traded
on recognized exchanges or in over-the-counter markets, from time to time
foreign securities may be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign investing, such as custody
charges and brokerage costs, are higher than those attributable to domestic
investing.

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<PAGE> 18

The risks of investing in foreign markets generally are greater for
investments in developing or emerging markets and economies in which the Funds
may invest. Risks of investing in such markets include:

- - less social, political, and economic stability;
- - smaller securities markets and lower trading volumes, which may result in a
lack of liquidity and in greater price volatility;
- - certain national policies that may restrict a Fund's investment opportunities,
including restrictions on investments in issuers or industries deemed
sensitive to national interests, or expropriation or confiscation of assets or
property, which could result in a Fund's loss of its entire investment in that
market; and
- - less developed legal structures governing private or foreign investment or
allowing for judicial redress for injury to private property.

In addition, brokerage commissions, custodial services, withholding taxes,
and other costs relating to investment in emerging markets generally are more
expensive than in the U.S. and certain more established foreign markets.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values, and other protectionist measures negotiated or imposed by the countries
with which they trade.

The Advisor will actively manage the allocation of each Bond Fund's
investments among countries, geographic regions, and currencies to attempt to
achieve the Fund's investment objective. In doing so, the Advisor will consider
such factors as the historical and prospective relationships among currencies,
current and anticipated interest rates, inflation levels within various
countries, prospects for economic growth, government policies influencing
currency exchange rates and business conditions, as well as other macroeconomic,
social and political factors. In assessing investments in developing countries,
the Advisor will consider, among other things, whether the economic, political
and interest rate environments in such countries show signs of stabilizing or
improving.

Because most foreign securities are denominated in non-U.S. currencies, the
investment performance of the Funds could be significantly affected by changes
in foreign currency exchange rates. The value of a Fund's assets denominated in
foreign currencies will increase or decrease in response to fluctuations in the
value of those foreign currencies relative to the U.S. dollar. Currency exchange
rates can be volatile at times in response to supply and demand in the currency
exchange markets, international balances of payments, governmental intervention,
speculation, and other political and economic conditions.
The Funds may purchase and sell foreign currency on a spot basis and may
engage in forward currency contracts, currency options, and futures

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<PAGE> 19

transactions for hedging or any other lawful purpose consistent with its
investment objective, including transaction hedging, anticipatory hedging, and
cross hedging. Successful use of currency instruments will depend on the
Advisor's skill in analyzing and predicting currency values, and there is no
assurance that the use of these instruments will be advantageous to the Funds.
The International Bond Fund generally does not engage in foreign currency
hedging. (See "Derivative Instruments.")

DERIVATIVE INSTRUMENTS

Derivative instruments may be used by the Funds for any lawful purpose,
including hedging, risk management, or enhancing returns, but not for
speculation. Derivative instruments are securities or agreements whose value is
derived from the value of some underlying asset, for example, securities,
currencies, reference indexes, or commodities. Options, futures, and options on
futures transactions are considered derivative transactions. Derivatives
generally have investment characteristics that are based upon either forward
contracts (under which one party is obligated to buy and the other party is
obligated to sell an underlying asset at a specific price on a specified date)
or option contracts (under which the holder of the option has the right but not
the obligation to buy or sell an underlying asset at a specified price on or
before a specified date). Consequently, the change in value of a forward-based
derivative generally is roughly proportional to the change in value of the
underlying asset. In contrast, the buyer of an option-based derivative generally
will benefit from favorable movements in the price of the underlying asset but
is not exposed to corresponding losses due to adverse movements in the value of
the underlying asset. The seller of an option-based derivative generally will
receive fees or premiums but generally is exposed to losses due to changes in
the value of the underlying asset. Derivative transactions may include elements
of leverage and, accordingly, the fluctuation of the value of the derivative
transaction in relation to the underlying asset may be magnified. In addition to
options, futures, and options on futures transactions, derivative transactions
may include short sales against the box, in which a Fund sells a security it
owns for delivery at a future date; swaps, in which the two parties agree to
exchange a series of cash flows in the future, such as interest-rate payments;
interest-rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates exceed a specified
rate, or "cap"; and interest-rate floors, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates
fall below a specified level, or "floor." Derivative transactions may also
include forward currency contracts and foreign currency exchange-related
securities.

Derivative instruments may be exchange-traded or traded in over-the-counter
transactions between private parties. Over-the-counter transactions are subject
to the credit risk of the counterparty to the instrument and are less liquid
than exchange-traded derivatives since they often can only be closed out

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<PAGE> 20

with the other party to the transaction. When required by SEC guidelines, a
Fund will set aside permissible liquid assets or securities positions that
substantially correlate to the market movements of the derivatives transaction
in a segregated account to secure its obligations under derivative transactions.
In order to maintain its required cover for a derivative transaction, a Fund may
need to sell portfolio securities at disadvantageous prices or times since it
may not be possible to liquidate a derivative position.

The successful use of derivative transactions by a Fund is dependent upon the
Advisor's ability to correctly anticipate trends in the underlying asset. To the
extent that a Fund is engaging in derivative transactions other than for hedging
purposes, the Fund's 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 by gains in the Fund's 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 a Fund. Hedging transactions are also subject to risks. If
the Advisor incorrectly anticipates trends in the underlying asset, a Fund may
be in a worse position than if no hedging had occurred. In addition, there may
be an imperfect correlation between a Fund's derivative transactions and the
instruments being hedged.

ILLIQUID SECURITIES

Each Fund may invest up to 15% of its net assets in illiquid securities.
Illiquid securities are those securities that are not readily marketable,
including restricted securities and repurchase obligations that mature in more
than seven days. Certain restricted securities that may be resold to
institutional investors pursuant to Rule 144A under the Securities Act of 1933
and Section 4(2) commercial paper may be determined to be liquid under
guidelines adopted by each Fund's Board of Directors.

WHEN-ISSUED SECURITIES

Each Fund may invest without limitation in securities purchased 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
commitment, these securities may be delivered and paid for at a future date,
generally within 45 days. Purchasing when-issued securities allows a Fund to
lock in a fixed price or yield on a security it intends to purchase. However,
when a Fund purchases a when-issued security, it immediately assumes the risk of
ownership, including the risk of price fluctuation.

The greater a Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of a Fund.
Purchasing when-issued securities may involve the additional risk that the yield
available in the market when the delivery occurs may be higher or the market
price lower than that obtained at the time of commitment. Although a

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<PAGE> 21

Fund may be able to sell these securities prior to the delivery date, it will
purchase when-issued securities for the purpose of actually acquiring the
securities, unless, after entering into the commitment, a sale appears desirable
for investment reasons. When required by SEC guidelines, a Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.

MORTGAGE DOLLAR ROLLS AND
REVERSE REPURCHASE AGREEMENTS

Each Fund may engage in reverse repurchase agreements to facilitate portfolio
liquidity, a practice common in the mutual fund industry, or for arbitrage
transactions discussed below. In a reverse repurchase agreement, a Fund would
sell a security and enter into an agreement to repurchase the security at a
specified future date and price. The Fund generally retains the right to
interest and principal payments on the security. Since the Fund receives cash
upon entering into a reverse repurchase agreement, it may be considered a
borrowing. When required by SEC guidelines, a Fund will set aside permissible
liquid assets in a segregated account to secure its obligation to repurchase the
security.

Each Fund may also enter into mortgage dollar rolls, in which the Fund would
sell mortgage-backed securities for delivery in the current month and
simultaneously contract to purchase substantially similar securities on a
specified future date. While a Fund would forego principal and interest paid on
the mortgage-backed securities during the roll period, the Fund would be
compensated by the difference between the current sale price and the lower price
for the future purchase as well as by any interest earned on the proceeds of the
initial sale. The Fund also could be compensated through the receipt of fee
income equivalent to a lower forward price. At the time that the Fund would
enter into a mortgage dollar roll, it would set aside permissible liquid assets
in a segregated account to secure its obligation for the forward commitment to
buy mortgage-backed securities. Mortgage dollar roll transactions may be
considered a borrowing by the Funds.

The mortgage dollar rolls and reverse repurchase agreements entered into by
the Funds may be used as arbitrage transactions in which a Fund will maintain an
offsetting position in investment-grade debt obligations or repurchase
agreements that mature on or before the settlement date of the related mortgage
dollar roll or reverse repurchase agreement. Since a Fund will receive interest
on the securities or repurchase agreements in which it invests the transaction
proceeds, such transactions may involve leverage. However, since such securities
or repurchase agreements will be high quality and will mature on or before the
settlement date of the mortgage dollar roll or reverse repurchase agreement, the
Advisor believes that such arbitrage transactions do not present the risks to
the Funds that are associated with other types of leverage.

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<PAGE> 22

SOVEREIGN DEBT (BOND FUNDS)

Each Fund may invest in debt obligations issued or guaranteed by foreign
governments or their agencies, instrumentalities or political subdivisions, or
by supranational issuers (collectively, "sovereign debt"). Investment in
sovereign debt involves special risks. Certain foreign countries, particularly
developing countries, have experienced, and may continue to experience, high
rates of inflation and high interest rates; exchange-rate fluctuations; large
amounts of external debt, balance-of-payments, and trade difficulties; and
extreme poverty and unemployment. The issuer of the debt or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal or interest when due in accordance with the terms of such debt,
and the Funds may have limited legal recourse in the event of default. Neither
Fund will invest more than 25% of its total assets in securities issued by any
single foreign government, but each Fund may invest more than 25% of its total
assets in securities of issuers in a single foreign country.

GOVERNMENT SECURITIES (BOND FUNDS)

U.S. government securities are issued or guaranteed by the U.S. government or
its agencies or instrumentalities. Securities issued by the government include
U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities
issued or guaranteed by government agencies or instrumentalities include
obligations of the following:

- - the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration, and the Government
National Mortgage Association, including GNMA pass-through certificates, whose
securities are supported by the full faith and credit of the United States;
- - the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of the
agency to borrow from the U.S. Treasury;
- - the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and
- - the Student Loan Marketing Association, the Interamerican Development Bank,
and International Bank for Reconstruction and Development, whose securities
are supported only by the credit of such agencies.

Although the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities;
consequently, the value of such securities will fluctuate.

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DIVERSIFICATION (BOND FUNDS)

Each of the Funds is non-diversified. Because each Fund may invest a larger
portion of its assets in the securities of a single issuer than diversified
funds, an investment in the Funds may be subject to greater fluctuations in
value than an investment in a diversified fund.

MORTGAGE- AND ASSET-BACKED SECURITIES (BOND FUNDS)

Mortgage-backed securities represent direct or indirect participation in, or
are secured by and payable from, mortgage loans secured by real property, and
include single- and multi-class pass-through securities and collateralized
mortgage obligations. Such securities may be issued or guaranteed by U.S.
government agencies or instrumentalities or by private issuers, generally
originators in mortgage loans, including savings associations, mortgage bankers,
commercial banks, investment bankers, and special purpose entities
(collectively, "private lenders"). Mortgage-backed securities issued by private
lenders may be supported by pools of mortgage loans or other mortgage-backed
securities that are guaranteed, directly or indirectly, by the U.S. government
or one of its agencies or instrumentalities, or they may be issued without any
governmental guarantee of the underlying mortgage assets but with some form of
non-governmental credit enhancement.

Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein; rather, they include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal and
interest on asset-backed securities may be supported by non-governmental credit
enhancements similar to those utilized in connection with mortgage-backed
securities.

The yield characteristics of mortgage- and asset-backed securities differ
from those of traditional debt obligations. Among the principal differences are
that interest and principal payments are made more frequently on mortgage-and
asset-backed securities, usually monthly, and that principal may be prepaid at
any time because the underlying mortgage loans or other assets generally may be
prepaid at any time. As a result, if a Fund purchases these securities at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing the yield to maturity. Conversely, if a Fund
purchases these securities at a discount, a prepayment rate that is faster than
expected will increase yield to maturity, while a prepayment rate that is slower
than expected will reduce yield to maturity. Accelerated prepayments on
securities purchased by a Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is prepaid in full. The market for privately issued mortgage- and
asset-

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PROSPECTUS PAGE I-23
<PAGE> 24

backed securities is smaller and less liquid than the market for government
sponsored mortgage-backed securities.

The Funds may invest in stripped mortgage- or asset-backed securities, which
receive differing proportions of the interest and principal payments from the
underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases the market
value may be extremely volatile. With respect to certain stripped securities,
such as interest-only ("IO") and principal-only ("PO") classes, a rate of
prepayment that is faster or slower than anticipated may result in a Fund
failing to recover all or a portion of its investment, even though the
securities are rated investment-grade.

ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES
(BOND FUNDS)

The Funds may invest in zero-coupon, step-coupon, and pay-in-kind securities.
These securities are debt securities that do not make regular cash interest
payments. Zero-coupon and step-coupon securities are sold at a deep discount to
their face value. Pay-in-kind securities pay interest through the issuance of
additional securities. Because such securities do not pay current cash income,
the price of these securities can be volatile when interest rates fluctuate.
While these securities do not pay current cash income, federal income tax law
requires the holders of zero-coupon, step-coupon, and pay-in-kind securities to
include in income each year the portion of the original issue discount (or
deemed discount) and other non-cash income on such securities accrued during
that year. In order to continue to qualify as a "regulated investment company"
under the Internal Revenue Code and avoid a certain excise tax, each Fund may be
required to distribute a portion of such discount and income and may be required
to dispose of other portfolio securities, which may occur in periods of adverse
market prices, in order to generate cash to meet these distribution
requirements.

FOREIGN INVESTMENT COMPANIES (STOCK FUNDS)

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<PAGE> 25

SMALL COMPANIES (STOCK FUNDS)

The Funds may, from time to time, invest a substantial portion of their
assets in small companies. While smaller companies generally have potential for
rapid growth, investments in smaller companies often involve greater risks than
investments in larger, more established companies because smaller companies may
lack the management experience, financial resources, product diversification,
and competitive strengths of larger companies. In addition, in many instances
the securities of smaller companies are traded only over-the-counter or on a
regional securities exchange, and the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the
securities of smaller companies may be subject to greater and more abrupt price
fluctuations. When making large sales, a Fund may have to sell portfolio
holdings at discounts from quoted prices or may have to make a series of small
sales over an extended period of time due to the trading volume of smaller
company securities. Investors should be aware that, based on the foregoing
factors, an investment in the Funds may be subject to greater price fluctuations
than an investment in a fund that invests primarily in larger, more established
companies. The Advisor's research efforts may also play a greater role in
selecting securities for the Funds than in a fund that invests in larger, more
established companies.

DEBT OBLIGATIONS (STOCK FUNDS)

IN GENERAL. Debt obligations in which the Funds may invest will be primarily
investment-grade debt obligations, although each Fund may invest up to 5% of its
assets in non-investment-grade debt obligations. The market value of all debt
obligations is affected by changes in the prevailing interest rates. The market
value of such instruments generally reacts inversely to interest rate changes.
If the prevailing interest rates decline, the market value of debt obligations
generally increases. If the prevailing interest rates increase, the market value
of debt obligations generally decreases. In general, the longer the maturity of
a debt obligation, the greater its sensitivity to changes in interest rates.

Investment-grade debt obligations include:

- - U.S. government securities (as defined above);
- - bonds or bank obligations rated in one of the four highest rating categories
(e.g., BBB or higher by S&P);
- - short-term notes rated in one of the two highest categories (e.g., SP-2 or
higher by S&P);
- - short-term bank obligations rated in one of the three highest categories
(e.g., A-3 or higher by S&P), with respect to obligations maturing in one year
or less;
- - commercial paper rated in one of the three highest rating categories (e.g.,
A-3 or higher by S&P);

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<PAGE> 26

- - unrated debt obligations determined by the Advisor to be of comparable
quality; and
- - repurchase agreements involving investment-grade debt obligations.

Non-investment-grade debt obligations include:

- - securities rated as low as C by S&P or their equivalents;
- - commercial paper rated as low as C by S&P or its equivalents; and
- - unrated debt securities judged to be of comparable quality by the Advisor.

All ratings are determined at the time of investment. Any subsequent rating
downgrade of a debt obligation will be monitored by the Advisor to consider what
action, if any, a Fund should take consistent with its investment objective.
Investment-grade debt obligations are generally considered to have relatively
low degrees of credit risk. However, securities rated in the fourth highest
category (e.g., BBB by S&P), although considered investment-grade, have some
speculative characteristics, since their issuers' capacity for repayment may be
more vulnerable to adverse economic conditions or changing circumstances than
that of higher-rated issuers.

PORTFOLIO TURNOVER

Each Fund's historical portfolio turnover rates are listed under "Financial
Highlights." The annual portfolio turnover rate indicates changes in a Fund's
portfolio. The turnover rate may vary from year to year, as well as within a
year. It may also be affected by sales of portfolio securities necessary to meet
cash requirements for redemptions of shares. High portfolio turnover in any year
will result in the payment by a Fund of above-average amounts of transaction
costs and could result in the payment by shareholders of above-average amounts
of taxes on realized investment gains. The Asia Pacific Fund will not generally
trade in securities for short-term profits, but when the Advisor determines that
circumstances warrant, securities may be purchased and sold without regard to
the length of time held. Under normal market conditions, it is anticipated that
the rate of portfolio turnover of each Fund generally will not exceed 300%. The
International Stock Fund's portfolio turnover rate is expected to exceed 100%,
but generally not to exceed 200%. These rates should not be considered limiting
factors.

ABOUT THE FUNDS

MANAGEMENT

The Board of Directors of each Fund is responsible for managing its business
and affairs. Each of the Funds has entered into an investment advisory agreement
(collectively the "Advisory Agreements") with Strong Capital Management, Inc.
(the "Advisor"). Except for the advisory fee arrangements, the

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<PAGE> 27

Advisory Agreements are identical. Under the terms of these agreements, the
Advisor manages each Fund's investments and business affairs subject to the
supervision of each Fund's Board of Directors.

ADVISOR. The Advisor began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans. The Advisor also acts as investment advisor for each of the mutual funds
within the Strong Family of Funds. As of August 31, 1995, the Advisor had over
$15 billion under management. The Advisor's principal mailing address is P.O.
Box 2936, Milwaukee, Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the
Board of each Fund, is the controlling shareholder of the Advisor.

As compensation for its services, each Fund pays the Advisor a monthly
management fee based on a percentage of each Fund's average daily net asset
value. The annual rates are as follows: Short-Term Global Bond Fund, .625%;
International Bond Fund, .70%; and International Stock and Asia Pacific Funds,
1.0%. From time to time, the Advisor may voluntarily waive all or a portion of
its management fee and/or absorb certain Fund expenses without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver or absorption will temporarily lower a Fund's overall expense
ratio and increase a Fund's overall return to investors.

Except for expenses voluntarily absorbed by the Advisor or the distributor,
each Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions and similar expenses;
expenses of issue, sale, repurchase or redemption of shares; expenses of
registering or qualifying shares for sale with the states and the SEC; expenses
for printing and distribution costs of prospectuses to existing shareholders;
charges of custodians (including fees as custodian for keeping books and similar
services for the Fund), transfer agents (including the printing and mailing of
reports and notices to shareholders), registrars, auditing, and legal services
and clerical services related to recordkeeping and shareholder relations;
printing of stock certificates; fees for directors who are not "interested
persons" of the Advisor; expenses of indemnification; extraordinary expenses;
and costs of shareholder and director meetings.

PORTFOLIO MANAGERS. The following individuals serve as portfolio managers for
the Strong International Funds.

STRONG SHORT-TERM GLOBAL BOND FUND
STRONG INTERNATIONAL BOND FUND

MR. SHIRISH MALEKAR. Mr. Malekar joined the Advisor in January 1994. He was
an international bond portfolio manager at Pacific Investment Management Company
in California for the previous three years. Prior to that, he was a bond trader
at Harris Bank in Chicago for one year and a bond trader at PaineWebber
Incorporated in New York and Tokyo for more than two years.

----------------------

PROSPECTUS PAGE I-27
<PAGE> 28

He has an M.S. in Management from the Massachusetts Institute of Technology, an
M.S. in Petroleum Engineering from the University of Pittsburgh, and a B.S. in
Chemical Engineering from the University of Bombay, India.

STRONG INTERNATIONAL STOCK FUND
STRONG ASIA PACIFIC FUND

ANTHONY L.T. CRAGG. Mr. Cragg joined the Advisor in April 1993 to develop the
Advisor's international investment activities. During the prior seven years, he
helped establish Dillon, Read International Asset Management, where he was in
charge of Japanese, Asian, and Australian investments. A graduate of Christ
Church, Oxford University, Mr. Cragg began his investment career in 1980 at
Gartmore, Ltd., as an international investment manager, where his tenure
included assignments in London, Hong Kong, and Tokyo. He has managed the Strong
International Stock Fund since he joined the Advisor and has managed the Strong
Asia Pacific Fund since its inception in December 1993.

TRANSFER AND DIVIDEND-DISBURSING AGENT

The Advisor, P.O. Box 2936, Milwaukee, Wisconsin 53201, also acts as
dividend-disbursing agent and transfer agent for the Funds. The Advisor is
compensated for its services based on an annual fee per account plus certain
out-of-pocket expenses. The fees received and the services provided as transfer
agent and dividend-disbursing agent are in addition to those received and
provided for under the Advisory Agreements between the Advisor and the Funds.

DISTRIBUTOR

Strong Funds Distributors, Inc., P.O. Box 2936, Milwaukee, Wisconsin 53201,
an indirect subsidiary of the Advisor, acts as distributor of the shares of the
Funds.

ORGANIZATION

SHAREHOLDER RIGHTS. Each Fund is a Wisconsin corporation that is authorized
to issue shares of Common Stock and series and classes of series of shares of
Common Stock. Each share of the Funds has one vote, and all shares participate
equally in dividends and other capital gains distributions by the respective
Fund and in the residual assets of the respective Fund in the event of
liquidation. Certificates will be issued for shares held in your account only
upon your written request. You will, however, have full shareholder rights
whether or not you request certificates. Generally, the Funds will not hold an
annual meeting of shareholders unless required by the 1940 Act. Shareholders
have certain rights, including the right to call a meeting upon a vote of 10% of
a Fund's outstanding shares for the purpose of voting to remove one or more
directors or to transact any other business.

----------------------

PROSPECTUS PAGE I-28
<PAGE> 29

SHAREHOLDER PRIVILEGES. The shareholders of each Fund may benefit from the
privileges described in the "Shareholder Manual" (see page II-1). However, each
Fund reserves the right, at any time and without prior notice, to suspend,
limit, modify, or terminate any of these privileges or their use in any manner
by any person or class.

DISTRIBUTIONS AND TAXES

PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. You may elect to have all your
dividends and capital gain distributions from a Fund automatically reinvested in
additional shares of that Fund or in shares of another Strong Fund at the net
asset value determined on the payment date. If you request in writing that your
dividends and other distributions be paid in cash, a Fund will credit your bank
account by Electronic Funds Transfer ("EFT") or issue a check to you within five
business days of the payment date. You may change your election at any time by
calling or writing Strong Funds. Strong Funds must receive any such change 7
days (15 days for EFT) prior to a dividend or capital gain distribution payment
date in order for the change to be effective for that payment.

The policy of each Fund is to pay dividends from net investment income
quarterly. The Bond Funds each may (but is not required to) distribute with its
quarterly dividends all or a portion of any net realized gains from foreign
currency transactions. Each Fund also distributes substantially all its net
realized capital gains and gains from foreign currency transactions annually.
Each Fund may make additional distributions if necessary to avoid imposition of
a 4% excise tax on undistributed income and gains.

Each Fund anticipates that a quarterly dividend may, from time to time,
represent more or less than the amount of net investment income earned by the
Fund in the period to which the dividend relates. Any undistributed net
investment income and net realized gains from foreign currency transactions
("undistributed income") would be available to supplement future dividends,
which might otherwise have been reduced by reason of a decrease in a Fund's
quarterly net income. Undistributed income will be reflected in a Fund's net
asset value, and correspondingly, distributions from undistributed income will
reduce the Fund's net asset value. The dividend rate on a Fund's shares will be
adjusted from time to time by its Board of Directors and will vary as a result
of its performance.

TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. You are subject to federal
income tax at ordinary income tax rates on any dividends you receive that are
derived from investment company taxable income (consisting generally of net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions, if any). Distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss), when
designated as such by a Fund, are taxable to you as long-term capital gains,
regardless of how long you have held your Fund shares. The Funds' distributions
are taxable in the year they are paid, whether they are taken in cash or

----------------------

PROSPECTUS PAGE I-29
<PAGE> 30

reinvested in additional shares, except that certain distributions declared in
the last three months of the year and paid in January are taxable as if paid on
December 31.

BOND FUNDS

Most state laws provide a pass-through to mutual fund shareholders of the
state and local income tax exemption afforded owners of direct U.S. government
obligations. You will be notified annually of the percentage of a Fund's income
that is derived from U.S. government securities.
While neither Fund intends to declare, in any year, aggregate quarterly
dividends and other distributions in excess of its investment company taxable
income and net capital gain for that year, it is possible that net losses from
foreign currency transactions late in the year could convert a portion of those
distributions to a non-taxable return of capital.

STOCK FUNDS

If a Fund's distributions exceed its investment company taxable income and
net capital gain in any year, as a result of currency-related losses or
otherwise, all or a portion of those distributions may be treated as a return of
capital to shareholders for tax purposes.

YEAR-END TAX REPORTING. After the end of each calendar year, you will receive
a statement (Form 1099) of the federal income tax status of all dividends and
other distributions paid (or deemed paid) during the year.

SHARES SOLD OR EXCHANGED. Your redemption of Fund shares may result in
taxable gain or loss to you, depending upon whether the redemption proceeds
payable to you are more or less than your adjusted cost basis for the redeemed
shares. Similar tax consequences generally will result from an exchange of Fund
shares for shares of another Strong Fund. If you purchase shares of a Fund
within thirty days before or after redeeming shares of that Fund at a loss, a
portion or all of that loss will not be deductible and will increase the cost
basis of the newly purchased shares. If you redeem shares out of a retirement
account, you will be subject to withholding for federal income tax purposes
unless you transfer the distribution directly to an "eligible retirement plan."

BUYING A DISTRIBUTION. A distribution paid shortly after you have purchased
shares in a Fund will reduce the net asset value of the shares by the amount of
the distribution, which nevertheless will be taxable to you even though it
represents a return of a portion of your investment.

BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish a Fund with a correct taxpayer identification
number, the Fund is required to withhold federal income tax at a rate of 31%
(backup withholding) from all dividends, capital gain distributions,

----------------------

PROSPECTUS PAGE I-30
<PAGE> 31

and redemption proceeds payable to you. Withholding at that rate from
dividends and capital gain distributions payable to you also is required if you
otherwise are subject to backup withholding. To avoid backup withholding, you
must provide a taxpayer identification number and state that you are not subject
to backup withholding due to the underreporting of your income. This
certification is included as part of your application. Please complete it when
you open your account.

TAX STATUS OF THE FUNDS. Each Fund intends to continue to qualify for
treatment as a regulated investment company under Subchapter M of the Internal
Revenue Code and, if so qualified, will not be liable for federal income tax on
earnings and gains distributed to its shareholders in a timely manner.

This section is not intended to be a full discussion of present or proposed
federal income tax law and its effects on the Funds and investors therein. See
the SAI for a further discussion. There may be other federal, state, or local
tax considerations applicable to a particular investor. You are therefore urged
to consult your own tax adviser.

PERFORMANCE INFORMATION

Each Fund may advertise "average annual total return," "total return," and
"cumulative total return." The Bond Funds may also advertise "yield." Each of
these figures is based upon historical results and does not represent the future
performance of a Fund.

Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund assuming
the reinvestment of all dividends and distributions. Total return figures are
not annualized and simply represent the aggregate change of a Fund's investments
over a specified period of time.

Yield is an annualized figure, which means that it is assumed that a Fund
generates the same level of net investment income over a one-year period. A
Fund's yield is a measure of the net investment income per share earned by a
Fund over a specific 30-day period and is shown as a percentage of the net asset
value of the Fund's shares at the end of the period.

----------------------

PROSPECTUS PAGE I-31
<PAGE> 32

This page has been left blank intentionally.

----------------------

PROSPECTUS PAGE I-32
<PAGE> 33

SHAREHOLDER MANUAL

<TABLE>
<S> <C>
HOW TO BUY SHARES...................... II-1
DETERMINING YOUR SHARE PRICE........... II-5
HOW TO SELL SHARES..................... II-6
SHAREHOLDER SERVICES................... II-8
REGULAR INVESTMENT PLANS............... II-10
SPECIAL SITUATIONS..................... II-12
</TABLE>

HOW TO BUY SHARES

All the Strong Funds are 100% no-load, meaning you may purchase, redeem, or
exchange shares directly at net asset value without paying a sales charge.
Because the Funds' net asset values change daily, your purchase price will be
the next net asset value determined after Strong receives and accepts your
purchase order.
Whether you are opening a new account or adding to an existing one, Strong
Funds provides you with several methods to buy Fund shares.

----------------------

PROSPECTUS PAGE II-1
<PAGE> 34

-----------------------------------------------------------------------------

<TABLE>
<S> <C>
TO OPEN A NEW ACCOUNT
- ------------------------------------------------------------------------------
MAIL BY CHECK
- Complete and sign the application. Make your check
or money order payable to "Strong Funds."
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to Strong Funds, 100 Heritage
Reserve, Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- Call 1-800-368-3863 for instructions on
establishing an account with an exchange by mail.
- ------------------------------------------------------------------------------
TELEPHONE BY EXCHANGE
- Call 1-800-368-3863 to establish a new account by
1-800-368-3863 exchanging funds from an existing Strong Funds
24 HOURS A DAY, account.
7 DAYS A WEEK - Sign up for telephone exchange services when you
open your account. To add the telephone exchange
option to your account, call 1-800-368-3863 for a
Telephone Exchange Form.
- Please note that your accounts must be identically
registered and that you must exchange enough into the
new account to meet the minimum initial investment.
- ------------------------------------------------------------------------------
IN PERSON - Stop by our Investor Center in Menomonee Falls,
Wisconsin.
Call 1-800-368-3863 for hours and directions.
- The Investor Center can only accept checks or money
orders.
- ------------------------------------------------------------------------------
WIRE Call 1-800-368-3863 for instructions on opening an
account by
wire.
- ------------------------------------------------------------------------------
AUTOMATICALLY USE STRONG'S "NO-MINIMUM INVESTMENT PROGRAM."
- If you sign up for Strong's Automatic Investment
Plan when you open your account, Strong Funds will
waive the Fund's minimum initial investment (see
chart on page II-4).
- Complete both the Automatic Investment Plan section
on the account application.
- Mail to address indicated on the application.
- ------------------------------------------------------------------------------
BROKER-DEALER - You may purchase shares in a Fund through a
broker-dealer
or other institution that may charge a transaction
fee.
- Strong Funds may only accept requests to purchase
shares into a broker-dealer street name account
from the broker-dealer.
</TABLE>

----------------------

PROSPECTUS PAGE II-2
<PAGE> 35

- ------------------------------------------------------------------------------

TO ADD TO AN EXISTING ACCOUNT
- --------------------------------------------------------------------------------
BY CHECK
- - Complete an Additional Investment Form provided at the bottom of your account
statement, or write a note indicating your fund account number and
registration. Make your check or money order payable to "Strong Funds."
- - Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If you're
using an express delivery service, send to Strong Funds, 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- - Call 1-800-368-3863 for instructions on exchanging by mail.
- --------------------------------------------------------------------------------

BY EXCHANGE
- - Add to an account by exchanging funds from another Strong Funds account.
- - Sign up for telephone exchange services when you open your account. To add the
telephone exchange option to your account, call 1-800-368-3863 for a Telephone
Exchange Form.
- - Please note that the accounts must be identically registered and that the
minimum exchange is $50 or the balance of your account, whichever is less.
BY TELEPHONE PURCHASE

- - Sign up for telephone purchase when you open your account to make additional
investments from $50 to $25,000 into your Strong Funds account by telephone.
To add this option to your account, call 1-800-368-3863 for a Telephone
Purchase Form.

Or use Strong DirectSM, Strong Funds' automated telephone response system. Call
1-800-368-3863 for details.
- --------------------------------------------------------------------------------

- - Stop by our Investor Center in Menomonee Falls, Wisconsin. Call 1-800-368-3863
for hours and directions.
- - The Investor Center can only accept checks or money orders.
- --------------------------------------------------------------------------------

Call 1-800-368-3863 for instructions on adding to an account by wire.
- --------------------------------------------------------------------------------

USE ONE OF STRONG'S AUTOMATIC INVESTMENT PROGRAMS. Sign up for these services
when you open your account, or call 1-800-368-3863 for instructions on how to
add them to your existing account.

- - AUTOMATIC INVESTMENT PLAN. Make regular, systematic investments (minimum $50)
into your Strong Funds account from your bank checking or NOW account.
Complete the Automatic Investment Plan section on the account application.

- - AUTOMATIC EXCHANGE PLAN. Make regular, systematic exchanges (minimum $50) from
one Strong Funds account to another. Call 1-800-368-3863 for an application.
- - PAYROLL DIRECT DEPOSIT. Have a specified amount (minimum $50) regularly
deducted from your paycheck, social security check, military allotment, or
annuity payment invested directly into your Strong Funds account. Call
1-800-368-3863 for an application.
- - AUTOMATIC DIVIDEND REINVESTMENT. Unless you choose otherwise, all your
dividends and capital gain distributions will be automatically reinvested in
additional Fund shares. Or, you may elect to have your dividends and capital
gain distributions automatically invested in shares of another Strong Fund.
- --------------------------------------------------------------------------------

- - You may purchase additional shares in a Fund through a broker-dealer or other
institution that may charge a transaction fee.
- - Strong Funds may only accept requests to purchase additional shares into a
broker-dealer street name account from the broker-dealer.

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PROSPECTUS PAGE II-3
<PAGE> 36

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES

- - Please make all checks or money orders payable to "Strong Funds."
- - We cannot accept third-party checks or checks drawn on banks outside the U.S.
- - You will be charged a $20 service fee for each check, wire, or Electronic
Funds Transfer ("EFT") purchase that is returned unpaid, and you will be
responsible for any resulting losses suffered by a Fund.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
- - A Fund may decline to accept your purchase order upon receipt when, in the
judgment of the Advisor, it would not be in the best interests of the existing
shareholders.
- - The exchange privileges are available in all 50 states because Strong Funds
intend to continue to qualify their shares for sale in all 50 states.
- - Minimum Investment Requirements:

- ----------------------------------------------------------------------------
To open a regular account...........................................$1,000

To open an IRA, Defined Contribution, or UGMA/UTMA account............$250

To open a 401(k) or 403(b) retirement account...................No Minimum

To add to an existing account..........................................$50

The Funds offer a No-Minimum Investment Program that waives the minimum
initial investment requirements for investors who participate in the Strong
Automatic Investment Plan (described on page II-10). Unless you participate in
the Strong No-Minimum Investment Program, please ensure that your purchases meet
the minimum investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach a Fund's minimum initial investment), each
Fund reserves the right to close your account. Before taking such action, a Fund
will provide you with written notice and at least 60 days in which to reinstate
an investment program or otherwise reach the minimum initial investment
required.

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES
THROUGH A BROKER-DEALER

- - If you purchase shares through a program of services offered or administered
by a broker-dealer, financial institution, or other service provider, you
should read the program's materials, including information relating to fees,
in connection with a Fund's Prospectus. Certain features of a Fund may not be
available or may be modified in connection with the program of services
provided.

----------------------

PROSPECTUS PAGE II-4
<PAGE> 37

- - Certain broker-dealers, financial institutions, or other service providers
that have entered into an agreement with the Distributor may enter purchase
orders on behalf of their customers by phone, with payment to follow within
several days as specified in the agreement. The Funds may effect such purchase
orders at the net asset value next determined after receipt of the telephone
purchase order. It is the responsibility of the broker-dealer, financial
institution, or other service provider to place the order with the Funds on a
timely basis. If payment is not received within the time specified in the
agreement, the broker-dealer, financial institution, or other service provider
could be held liable for any resulting fees or losses.

DETERMINING YOUR SHARE PRICE

Generally, when you make any purchases, sales, or exchanges, the price of
your shares will be the net asset value ("NAV") next determined after Strong
Funds receives your request in proper form. If Strong Funds receives such
request prior to the close of the New York Stock Exchange (the "Exchange") on a
day on which the Exchange is open, your share price will be the NAV determined
that day. The NAV for each Fund is normally determined as of 3:00 p.m. Central
Time ("CT") each day the Exchange is open. The Funds reserve the right to change
the time at which purchases, redemptions, and exchanges are priced if the
Exchange closes at a time other than 3:00 p.m. CT or if an emergency exists.
Each Fund's NAV is calculated by taking the fair value of a Fund's total assets,
subtracting all its liabilities, and dividing by the total number of shares
outstanding. Expenses are accrued and applied daily when determining the net
asset value. A Fund's portfolio securities are valued based on market quotations
or at fair value as determined by the method selected by each Fund's Board of
Directors.

Debt securities are valued by a pricing service that utilizes electronic data
processing techniques to determine values for normal institutional size trading
units of debt securities without regard to the existence of sale or bid prices
when such values are believed to more accurately reflect the fair market value
of such securities. Otherwise, sale or bid prices are used. Any securities or
other assets for which market quotations are not readily available are valued at
fair value as determined in good faith by the Board of Directors. Debt
securities having remaining maturities of 60 days or less when purchased are
valued by the amortized cost method when the Board of Directors determines that
the fair value of such securities is their amortized cost. Under this method of
valuation, a security is initially valued at its acquisition cost, and
thereafter, amortization of any discount or premium is assumed each day,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.

Equity securities traded on a national securities exchange or NASDAQ are
valued at the last sale price on the national securities exchange or NASDAQ on
which such securities are primarily traded. Securities traded on NASDAQ for
which there were no transactions on a given day or securities not listed on an

----------------------

PROSPECTUS PAGE II-5
<PAGE> 38

exchange or NASDAQ are valued at the average of the most recent bid and
asked prices. Other exchange traded securities (generally foreign securities)
will be valued based on market quotations.

Securities quoted in foreign currency are valued daily in U.S. dollars at the
foreign currency exchange rates that are prevailing at the time the daily net
asset value per share is determined. Although the Funds value their foreign
assets in U.S. dollars on a daily basis, they do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis. Foreign
currency exchange rates are generally determined prior to the close of trading
on the Exchange. Occasionally, events affecting the value of foreign investments
and such exchange rates occur between the time at which they are determined and
the close of trading on the Exchange. Such events would not normally be
reflected in a calculation of a Fund's net asset value on that day. If events
that materially affect the value of a Fund's foreign investments or the foreign
currency exchange rates occur during such period, the investments will be valued
at their fair value as determined in good faith by or under the direction of the
Board of Directors. The International Stock and Asia Pacific Funds' portfolio
securities, from time to time, may be listed primarily on foreign exchanges that
trade on other days than those on which the Exchange is open for business,
(e.g., Saturday). As a result, the net asset value of those Funds may be
significantly affected by such trading on days when shareholders cannot effect
transactions on their accounts.

HOW TO SELL SHARES

You can access the money in your account at any time by selling (redeeming)
some or all of your shares back to the Fund. Once your redemption request is
received in proper form, Strong will normally mail you the proceeds the next
business day and, in any event, no later than seven days thereafter.

To redeem shares, you may use any of the methods described in the following
chart. However, if you are selling shares in a retirement account, please call
1-800-368-3863 for instructions. Please note that there is a $10.00 fee for
closing an IRA or other retirement account or for transferring assets to another
custodian. For your protection, certain requests may require a signature
guarantee.

----------------------

PROSPECTUS PAGE II-6
<PAGE> 39

-----------------------------------------------------------------------------

<TABLE>
<S> <C>
TO SELL SHARES
- -----------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
following information: your account number, the
dollar amount or number of shares you wish to
redeem, each owner's name, your street address, and
the signature of each owner as it appears on the
account.
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express
delivery service, send to 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
FOR TRUST ACCOUNTS
- Same as above. Please ensure that all trustees sign
the letter of instruction.
FOR OTHER REGISTRATIONS
- Call 1-800-368-3863 for instructions.
- -----------------------------------------------------------------------------
TELEPHONE Sign up for telephone redemption services when you
open
1-800-368-3863 your account by checking the "Yes" box in the
24 HOURS A DAY, appropriate section of the account application. To
7 DAYS A WEEK add the telephone redemption option to your account,
call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares ($500 minimum) by phone and arrange
to receive the proceeds in one of three ways:
TO RECEIVE A CHECK BY MAIL
- At no charge, we will mail a check to the address
to which your account is registered.
TO DEPOSIT BY EFT
- At no charge, we will transmit the proceeds by
Electronic Funds Transfer (EFT) to a pre-authorized
bank account. Usually, the funds will arrive at
your bank two banking days after we process your
redemption.
TO DEPOSIT BY WIRE
- For a $10 fee, we will transmit the proceeds by
wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next banking day
after we process your redemption.
You may also use Strong Direct SM, Strong Funds'
automated telephone response system. Call
1-800-368-3863 for details.
- -----------------------------------------------------------------------------
CHECK WRITING Sign up for the free check-writing privilege when you
open
(SHORT-TERM GLOBAL your account. To add check writing to an existing
BOND AND INTERNATIONAL account or to order additional checks, call
BOND FUNDS ONLY) 1-800-368-3863.
Please keep in mind that all check redemptions must
be for a minimum of $500 and that you cannot write a
check to close an account.
- -----------------------------------------------------------------------------
AUTOMATICALLY You can set up automatic withdrawals from your
account at
regular intervals. To establish the Systematic
Withdrawal Plan, request a form by calling
1-800-368-3863.
- -----------------------------------------------------------------------------
BROKER-DEALER You may also redeem shares through broker-dealers or
others
who may charge a commission or other transaction fee.
</TABLE>

----------------------

PROSPECTUS PAGE II-7
<PAGE> 40

WHAT YOU SHOULD KNOW ABOUT SELLING SHARES

- - If you have recently purchased shares, please be aware that your redemption
request may not be honored until the purchase check has cleared your bank,
which generally occurs within ten calendar days.
- - The right of redemption may be suspended during any period in which (i)
trading on the Exchange is restricted, as determined by the SEC, or the
Exchange is closed for other than weekends and holidays; (ii) the SEC has
permitted such suspension by order; or (iii) an emergency as determined by the
SEC exists, making disposal of portfolio securities or valuation of net assets
of a Fund not reasonably practicable.
- - If you are selling shares you hold in certificate form, you must submit the
certificates with your redemption request. Each registered owner must endorse
the certificates and all signatures must be guaranteed.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

- - The Funds reserve the right to refuse a telephone redemption if they believe
it advisable to do so.
- - Once you place your telephone redemption request, it cannot be canceled or
modified.
- - Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund reasonably
believes that such instructions are genuine. The Funds and their transfer
agent employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. The Funds may incur liability if they do not follow
these procedures.
- - Because of increased telephone volume, you may experience difficulty in
implementing a telephone redemption during periods of dramatic economic or
market changes.

SHAREHOLDER SERVICES

INFORMATION SERVICES

24-HOUR ASSISTANCE. Strong Funds has registered representatives available to
help you 24 hours a day, 7 days a week. Call 1-414-359-1400 or toll-free
1-800-368-3863. You may also write to Strong Funds at the address on the cover
of this Prospectus.

STRONG DIRECT(SM) AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day,
the Strong Direct(SM) automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You

----------------------

PROSPECTUS PAGE II-8
<PAGE> 41

may also confirm account balances, hear records of recent transactions and
dividend activity, and perform purchases, exchanges or redemptions among your
existing Strong accounts. Your account information is protected by a personal
code that you establish. For more information on this service, call
1-800-368-3863.

STATEMENTS AND REPORTS. At a minimum, each Fund will confirm all transactions
for your account on a quarterly basis. We recommend that you file each quarterly
statement - and, especially, each calendar year-end statement - with your other
important financial papers, since you may need to refer to them at a later date
for tax purposes. Should you need additional copies of previous statements, you
may order confirmation statements for the current and preceding year at no
charge. Statements for earlier years are available for $10 each. Call
1-800-368-3863 to order past statements.

Each year, you will also receive a statement confirming the tax status of any
distributions paid to you, as well as a semiannual report and an annual report
containing audited financial statements.

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. Call
1-800-368-3863 if you wish to receive additional copies, free of charge.
More complete information regarding each Fund's investment policies and
services is contained in its SAI, which you may request by calling or writing
Strong Funds at the phone number and address on the cover of this Prospectus.

CHANGING YOUR ACCOUNT INFORMATION. So that you continue receiving your Strong
correspondence, including any dividend checks and statements, please notify us
in writing as soon as possible if your address changes. You may use the
Additional Investment Form at the bottom of your confirmation statement, or
simply write us a letter of instruction that contains the following information:
1. a written request to change the address,
2. the account number(s) for which the address is to be changed,
3. the new address, and
4. the signatures of all owners of the accounts.
Please send your request to the address on the cover of this Prospectus.

Changes to an account's registration - such as adding or removing a joint
owner, changing an owner's name, or changing the type of your account - must
also be submitted in writing. Please call 1-800-368-3863 for instructions. For
your protection, some requests may require a signature guarantee.

----------------------

PROSPECTUS PAGE II-9
<PAGE> 42

TRANSACTION SERVICES

FREE EXCHANGE PRIVILEGE. You may exchange shares between identically
registered Strong Funds accounts, either in writing or by telephone. By
establishing the telephone exchange services, you authorize the Fund and its
agents to act upon your instruction by telephone to exchange shares from any
account you specify. For tax purposes, an exchange is considered a sale and a
purchase. Please obtain and read the appropriate prospectus before investing in
any of the Strong Funds. Since an excessive number of exchanges may be
detrimental to the Funds, each Fund reserves the right to discontinue the
exchange privilege of any shareholder who makes more than five exchanges in a
year or three exchanges in a calendar quarter.

FREE CHECK-WRITING PRIVILEGES. You may also redeem shares of the Bond Funds
by check in amounts of $500 or more. There is no charge for this privilege.
Redemption by check cannot be honored if share certificates are outstanding and
would need to be liquidated to honor the check. Checks are supplied free of
charge, and additional checks will be sent to you upon request. The Funds do not
return the checks you write, although copies are available upon request.

You may place stop-payment requests on checks by calling Strong Funds at
1-800-368-3863. A $10 fee will be charged for each stop-payment request. A stop
payment will remain in effect for two weeks following receipt of oral
instructions (six months following written instructions) by Strong Funds.
If there are insufficient cleared shares in your account to cover the amount
of your redemption by check, the check will be returned, marked "insufficient
funds," and a fee of $10 will be charged to the account.

REGULAR INVESTMENT PLANS

Strong Funds' Automatic Investment Plan, Payroll Direct Deposit Plan, and
Automatic Exchange Plan, all discussed below, are methods of implementing DOLLAR
COST AVERAGING. Dollar cost averaging is an investment strategy that involves
investing a fixed amount of money at regular time intervals. By always investing
the same set amount, you will be purchasing more shares when the price is low
and fewer shares when the price is high. Ultimately, by using this principle in
conjunction with fluctuations in share price, your average cost per share may be
less than your average transaction price. A program of regular investment cannot
ensure a profit or protect against a loss during declining markets. Since such a
program involves continuous investment regardless of fluctuating share values,
you should consider your ability to continue the program through periods of both
low and high share-price levels.

AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan allows you to make
regular, systematic investments in a Fund from your bank checking or

-----------------------

PROSPECTUS PAGE II-10
<PAGE> 43

NOW account. You may choose to make investments on any day of the month
in amounts of $50 or more. You can set up the Automatic Investment Plan with any
financial institution that is a member of the Automated Clearing House. Because
each Fund has the right to close an investor's account for failure to reach the
minimum initial investment, please consider your ability to continue this Plan
until you reach the minimum initial investment. Such closing may occur in
periods of declining share prices. To establish the Plan, complete the Automatic
Investment Plan section on the account application, or call 1-800-368-3863 for
an application.

PAYROLL DIRECT DEPOSIT PLAN. Once you meet a Fund's minimum initial
investment requirement, you may purchase additional Fund shares through the
Payroll Direct Deposit Plan. Through this Plan, periodic investments (minimum
$50) are made automatically from your payroll check into your existing Fund
account. By enrolling in the Plan, you authorize your employer or its agents to
deposit a specified amount from your payroll check into the Fund's bank account.
In most cases, your Fund account will be credited the day after the amount is
received by the Fund's bank. In order to participate in the Plan, your employer
must have direct deposit capabilities through Automated Clearing House available
to its employees. The Plan may be used for other direct deposits, such as social
security checks, military allotments, and annuity payments.
To establish a Direct Deposit for your account, call 1-800-368-3863 to obtain
an Authorization for Payroll Direct Deposit to a Strong Funds Account form. Once
the Plan is established, you may alter the amount of the deposit, alter the
frequency of the deposit, or terminate your participation in the program by
notifying your employer.

AUTOMATIC EXCHANGE PLAN. The Automatic Exchange Plan allows you to make
regular, systematic exchanges (minimum $50) from one Strong Funds account into
another Strong Funds account. By setting up the Plan, you authorize the Fund and
its agents to redeem a set dollar amount or number of shares from the first
account and purchase shares of a second Strong Fund. In addition, you authorize
a Fund and its agents to accept telephone instructions to change the dollar
amount and frequency of the exchange. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result in a capital
gain or loss. To establish the Plan, request a form by calling 1-800-368-3863.
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial
investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be terminated. You may also terminate the Plan at any time

-----------------------

PROSPECTUS PAGE II-11
<PAGE> 44

by calling or writing to the Fund. Once participation in the Plan has been
terminated for any reason, to reinstate the Plan you must do so in writing;
simply investing additional funds will not reinstate the Plan.

SYSTEMATIC WITHDRAWAL PLAN. You can set up automatic withdrawals from your
account at regular intervals. To begin distributions, you must have an initial
balance of $5,000 in your account and withdraw at least $50 per payment. To
establish the Systematic Withdrawal Plan, request a form by calling 1-800-
368-3863. Depending upon the size of the account and the withdrawals requested
(and fluctuations in net asset value of the shares redeemed), redemptions for
the purpose of satisfying such withdrawals may reduce or even exhaust the
account. If the amount remaining in the account is not sufficient to meet a Plan
payment, the remaining amount will be redeemed and the Plan will be terminated.

SPECIAL SITUATIONS

POWER OF ATTORNEY. If you are investing as attorney-in-fact for another
person, please complete the account application in the name of such person and
sign the back of the application in the following form: "[applicant's name] by
[your name], attorney-in-fact." To avoid having to file an affidavit prior to
each transaction, please complete the Power of Attorney form available from
Strong Funds at 1-800-368-3863. However, if you would like to use your own power
of attorney form, please call the same number for instructions.

CORPORATIONS AND TRUSTS. If you are investing for a corporation, please
include with your account application a certified copy of your corporate
resolution indicating which officers are authorized to act on behalf of the
corporation. As an alternative, you may complete a Certification of Authorized
Individuals form, which can be obtained from the Funds. Until a valid corporate
resolution or Certification of Authorized Individuals is received by the Fund,
services such as telephone redemption, wire redemption, and, for the Bond Funds,
check writing, will not be established.

If you are investing as a trustee, please include the date of the trust. All
trustees must sign the application. If they do not, services such as telephone
redemption, wire redemption, and, for the Bond Funds, check writing will not be
established. All trustees must sign redemption requests unless proper
documentation to the contrary is provided to the Fund. Failure to provide these
documents or signatures as required when you invest may result in delays in
processing redemption requests.

-----------------------

PROSPECTUS PAGE II-12
<PAGE> 45

SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and
the Funds against fraudulent transactions by unauthorized persons. In the
following instances, the Funds will require a signature guarantee for all
authorized owners of an account:

- - when you add the telephone redemption or check-writing options to your
existing account;
- - if you transfer the ownership of your account to another individual or
organization;
- - when you submit a written redemption request for more than $25,000;
- - when you request to redeem or redeposit shares that have been issued in
certificate form;
- - if you open an account and later decide that you want certificates;
- - when you request that redemption proceeds be sent to a different name or
address than is registered on your account;
- - if you add/change your name or add/remove an owner on your account; and
- - if you add/change the beneficiary on your transfer-on-death account.

A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks, savings
associations, credit unions, brokerage firms, and others. PLEASE NOTE THAT A
NOTARY PUBLIC STAMP OR SEAL IS NOT ACCEPTABLE.

-----------------------

PROSPECTUS PAGE II-13
<PAGE> 46

APPENDIX A

RATINGS OF DEBT OBLIGATIONS:

<TABLE>
<CAPTION>
Moody's Standard & Fitch
Investors Poor's Ratings Investors
Service, Inc. Group Service, Inc. Definition
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM Aaa AAA AAA Highest quality
Aa AA AA High quality
A A A Upper medium grade
Baa BBB BBB Medium grade
Ba BB BB Low grade
B B B Speculative
Caa, Ca, C CCC, CC, C CCC, CC, C Submarginal
D D DDD, DD, D Probably in default
- ----------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Moody's S&P Fitch
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM MIG1/VMIG1 Best quality SP-1+ Very strong quality F-1+ Exceptionally strong
quality
---------------------------------------------------------------
MIG2/VMIG2 High quality SP-1 Strong quality F-1 Very strong quality
---------------------------------------------------------------
MIG3/VMIG3 Favorable SP-2 Satisfactory grade F-2 Good credit quality
quality
---------------------------------------------------------------
MIG4/VMIG4 Adequate F-3 Fair credit quality
quality
---------------------------------------------------------------
SG Speculative SP-3 Speculative grade F-S Weak credit quality
grade
- ----------------------------------------------------------------------------
COMMERCIAL P-1 Superior A-1+ Extremely strong F-1+ Exceptionally strong
PAPER quality quality quality
---------------------------------------------------------------
A-1 Strong quality F-1 Very strong quality
---------------------------------------------------------------
P-2 Strong A-2 Satisfactory quality F-2 Good credit quality
quality
---------------------------------------------------------------
P-3 Acceptable A-3 Adequate quality F-3 Fair credit quality
quality
---------------------------------------------------------------
B Speculative quality F-S Weak credit quality
Not Prime C Doubtful quality D Default
- --------------
</TABLE>

----------------------

PROSPECTUS PAGE A-1
<PAGE> 47

APPENDIX B

WEIGHTED AVERAGE RATINGS OF DEBT OBLIGATIONS1

----------------------------------
---------------------------------------------------------------------------

<TABLE>
<CAPTION>
Average Percentage of Assets Held During Percentage of Assets Held on December 31,
19942 1994
- ------------------------------------------- -------------------------------------------
Short-Term Short-Term
Global Bond Global Bond
---------------- ----------------
Equivalent Equivalent
S&P Moody's Rated Unrated3 S&P Moody's Rated Unrated3
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AAA Aaa4 16.5 % - AAA Aaa4 17.2 % -
AA Aa 7.1 - AA Aa 2.7 -
A A 7.0 - A A 11.8 -
BBB Baa 38.7 - BBB Baa 34.8 -
BB Ba 20.0 - BB Ba 19.5 -
B B 4.0 - B B 9.1 -
CCC Caa - - CCC Caa - -
CC Ca - - CC Ca - -
C C - - C C - -
Totals 93.3 % 0 % Totals 95.1 % 0 %
</TABLE>

----------------------------------
---------------------------------------------------------------------------

<TABLE>
<CAPTION>
Average Percentage of Assets Held During Percentage of Assets Held on December 31,
19942 1994
- ------------------------------------------- -------------------------------------------
International Bond International Bond
---------------- ----------------
Equivalent Equivalent
S&P Moody's Rated Unrated3 S&P Moody's Rated Unrated3
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AAA Aaa4 15.9 % - AAA Aaa4 38.0 % -
AA Aa 9.6 - AA Aa 4.7 -
A A 6.3 - A A 0.7 -
BBB Baa 45.9 - BBB Baa 31.3 -
BB Ba 14.0 - BB Ba 11.2 -
B B 1.9 - B B 5.8 -
CCC Caa - - CCC Caa - -
CC Ca - - CC Ca - -
C C - - C C - -
Totals 93.6 % 0 % Totals 91.7 % 0 %
</TABLE>

(1)
A security rated differently by two or more rating services is included in the
category representing the higher of the ratings assigned to the security.

(2)
Based on a weighted average of the securities held at the end of each month.
Investment-grade debt obligations are those rated in one of the four highest
categories by an NRSRO. See "Fundamentals of Fixed Income Investing - High-Yield
(High-Risk) Securities" in this Prospectus for a discussion of the risks
associated with non-investment-grade debt obligations and Appendix A and the SAI
for a description of credit ratings.

(3)
This category represents the comparable quality of unrated securities, as
determined by the Advisor.

(4)
Includes all U.S. government obligations.

----------------------

PROSPECTUS PAGE B-1
<PAGE> 48

NOTES
<PAGE> 49

STATEMENT OF ADDITIONAL INFORMATION

STRONG SHORT-TERM GLOBAL BOND FUND, INC.
STRONG INTERNATIONAL BOND FUND, INC.

STRONG INTERNATIONAL STOCK FUND, INC.

STRONG ASIA PACIFIC FUND, INC.

P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: 1-414-359-1400
Toll-Free: 1-800-368-3863

This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the Prospectus of Strong Short-Term Global Bond
Fund, Inc. (the "Short-Term Global Bond Fund"), Strong International Bond Fund,
Inc. (the "International Bond Fund"), Strong International Stock Fund, Inc.
(the "International Stock Fund"), and Strong Asia Pacific Fund, Inc. (the "Asia
Pacific Fund") (collectively, the "International Funds") dated October 13,
1995. Requests for copies of the Prospectus should be made by calling one of
the numbers listed above. The financial statements appearing in the Funds'
Annual Report, which accompanies this Statement of Additional Information, are
incorporated herein by reference.

This Statement of Additional Information is dated October 13, 1995.

<PAGE> 50

STRONG INTERNATIONAL FUNDS

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>

INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
BORROWING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DEPOSITARY RECEIPTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DERIVATIVE INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FOREIGN CURRENCY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
FOREIGN INVESTMENT COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FOREIGN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
HIGH-YIELD (HIGH-RISK) SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ILLIQUID SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
LENDING OF PORTFOLIO SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MORTGAGE- AND ASSET-BACKED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 18
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SHORT SALES AGAINST THE BOX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
TEMPORARY DEFENSIVE POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
WHEN-ISSUED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ZERO-COUPON, STEP-COUPON AND PAY-IN-KIND SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SHORT-TERM GLOBAL BOND AND INTERNATIONAL BOND FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AVERAGE EFFECTIVE PORTFOLIO MATURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
CONVERTIBLE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
LOAN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SOVEREIGN DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
VARIABLE- OR FLOATING-RATE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DIRECTORS AND OFFICERS OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
INVESTMENT ADVISOR AND DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ADDITIONAL SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
FUND ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
PORTFOLIO MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
- ------------------------------------------
</TABLE>

No Person Has Been Authorized To Give Any Information Or To Make Any
Representations Other Than Those Contained In This Statement Of Additional
Information And The Prospectus Dated October 13, 1995, and if given or made,
such information or representations may not be relied upon as having been
authorized by the funds.

This Statement of Additional Information does not constitute an offer to sell
securities.
<PAGE> 51
INVESTMENT RESTRICTIONS

The investment objective of the Short-Term Global Bond Fund is to seek
total return by investing for a high level of income with a low degree of share
price fluctuation. The investment objective of the International Bond Fund is
to seek high total return by investing for both income and capital
appreciation. The investment objective of the International Stock and Asia
Pacific Funds is to seek capital growth. The Funds' investment objectives and
policies are described in detail in the Prospectus under the caption
"Investment Objectives and Policies." The following are the Funds' fundamental
investment limitations, which cannot be changed without shareholder approval.

With respect to the International Stock and Asia Pacific Funds, each Fund:

1. May not with respect to 75% of its total assets, purchase the
securities of any issuer (except securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities) if, as a
result, (i) more than 5% of the Fund's total assets would be invested
in the securities of that issuer, or (ii) the Fund would hold more
than 10% of the outstanding voting securities of that issuer.

With respect to the International Funds, each Fund:

2. May (i) borrow money from banks and (ii) make other investments or
engage in other transactions permissible under the Investment Company
Act of 1940 (the "1940 Act") which may involve a borrowing, provided
that the combination of (i) and (ii) shall not exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed),
less the Fund's liabilities (other than borrowings), except that the
Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) from a bank for temporary or emergency
purposes (but not for leverage or the purchase of investments). The
Fund may also borrow money from the other Strong Funds or other
persons to the extent permitted by applicable law.

3. May not issue senior securities, except as permitted under the 1940
Act.

4. May not act as an underwriter of another issuer's securities, except
to the extent that the Fund may be deemed to be an underwriter within
the meaning of the Securities Act of 1933 in connection with the
purchase and sale of portfolio securities.

5. May not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall
not prevent the Fund from purchasing or selling options, futures
contracts, or other derivative instruments, or from investing in
securities or other instruments backed by physical commodities).

6. May not make loans if, as a result, more than 33 1/3% of the Fund's
total assets would be lent to other persons, except through (i)
purchases of debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.

7. May not purchase the securities of any issuer if, as a result, more
than 25% of the Fund's total assets would be invested in the
securities of issuers, the principal business activities of which are
in the same industry.

8. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prohibit the Fund from purchasing or selling securities or other
instruments backed by real estate or of issuers engaged in real estate
activities).

9. May, notwithstanding any other fundamental investment policy or
restriction, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and restrictions as the
Fund.

3
<PAGE> 52

The following are the Funds' non-fundamental operating policies which
may be changed by each Fund's Board of Directors without shareholder approval.

Each Fund may not:

1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short,
or unless it covers such short sale as required by the current rules
and positions of the Securities and Exchange Commission or its staff,
and provided that transactions in options, futures contracts, options
on futures contracts, or other derivative instruments are not deemed
to constitute selling securities short.

2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions;
and provided that margin deposits in connection with futures
contracts, options on futures contracts, or other derivative
instruments shall not constitute purchasing securities on margin.

3. Invest in illiquid securities if, as a result of such investment, more
than 15% of its net assets would be invested in illiquid securities,
or such other amounts as may be permitted under the 1940 Act.

4. Purchase securities of other investment companies except in compliance
with the 1940 Act and applicable state law.

5. Invest all of its assets in the securities of a single open-end
investment management company with substantially the same fundamental
investment objective, restrictions and policies as the Fund.

6. Purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political
subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of issuers that, including
predecessor or unconditional guarantors, have a record of less than
three years of continuous operation. This policy does not apply to
securities of pooled investment vehicles or mortgage or asset-backed
securities.

7. Invest in direct interests in oil, gas, or other mineral exploration
programs or leases; however, the Fund may invest in the securities of
issuers that engage in these activities.

8. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act
and, in accordance with Rule 4.5, will use futures or options on
futures transactions solely for bona fide hedging transactions (within
the meaning of the Commodity Exchange Act), provided, however, that
the Fund may, in addition to bona fide hedging transactions, use
futures and options on futures transactions if the aggregate initial
margin and premiums required to establish such positions, less the
amount by which any such options positions are in the money (within
the meaning of the Commodity Exchange Act), do not exceed 5% of the
Fund's net assets.

In addition, (i) the aggregate value of securities underlying call
options on securities written by the Fund or obligations underlying
put options on securities written by the Fund determined as of the
date of the options are written will not exceed 50% of the Fund's net
assets; (ii) the aggregate premiums paid on all options purchased by
the Fund and which are being held will not exceed 20% of the Fund's
net assets; (iii) the Fund will not purchase put or call options,
other than hedging positions, if, as a result thereof, more than 5% of
its total assets would be so invested; and (iv) the aggregate margin
deposits required on all futures and options on futures transactions
being held will not exceed 5% of the Fund's total assets.

9. Pledge, mortgage or hypothecate any assets owned by the Fund except as
may be necessary in connection with permissible borrowings or
investments and then such pledging, mortgaging, or hypothecating may
not exceed 33 1/3% of the Fund's total assets at the time of the
borrowing or investment.

10. Purchase or retain the securities of any issuer if any officer or
director of the Fund or its investment advisor beneficially owns more
than 1/2 of 1% of the securities of such issuer and such officers and
directors together own beneficially more than 5% of the securities of
such issuer.

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11. Purchase warrants, valued at the lower of cost or market value, in
excess of 5% of the Fund's net assets. Included in that amount, but
not to exceed 2% of the Fund's net assets, may be warrants that are
not listed on any stock exchange. Warrants acquired by the Fund in
units or attached to securities are not subject to these restrictions.

12. Borrow money except (i) from banks or (ii) through reverse repurchase
agreements or mortgage dollar rolls, and will not purchase securities
when bank borrowings exceed 5% of its total assets.

13. Make any loans other than loans of portfolio securities, except
through (i) purchases of debt securities or other debt instruments, or
(ii) engaging in repurchase agreements.

Except for the fundamental investment limitations listed above and
each Fund's investment objective, the other investment policies described in
the Prospectus and this Statement of Additional Information are not fundamental
and may be changed with approval of a Fund's Board of Directors.

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Funds'
investment objectives, policies, and techniques that are described in detail in
the Prospectus under the captions "Investment Objectives and Policies" and
"Implementation of Policies and Risks."

BORROWING

Each Fund may borrow money from banks, limited by each Fund's
fundamental investment restriction to 33 1/3% of its total assets, and may
engage in mortgage dollar roll transactions and reverse repurchase agreements
which may be considered a form of borrowing. (See "Implementation of Policies
and Risks - Mortgage Dollar Rolls and Reverse Repurchase Agreements" in the
Funds' Prospectus.) In addition, each Fund may borrow up to an additional 5%
of its total assets from banks for temporary or emergency purposes. A Fund will
not purchase securities when bank borrowings exceed 5% of the Fund's total
assets.

DEPOSITARY RECEIPTS

As indicated in the Prospectus, each Fund may invest in foreign
securities by purchasing depositary receipts, including American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securities
convertible into securities or issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement. For purposes of the Funds' investment policies, ADRs and EDRs are
deemed to have the same classification as the underlying securities they
represent. Thus, an ADR or EDR representing ownership of common stock will be
treated as common stock.

ADR facilities may be established as either "unsponsored" or
"sponsored." While ADRs issued under these two types of facilities are in some
respects similar, there are distinctions between them relating to the rights
and obligations of ADR holders and the practices of market participants. A
depositary may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depositary requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depositary usually
charges fees upon the deposit and withdrawal of the deposited securities, the
conversion of dividends into U.S. dollars, the disposition of non-cash
distributions, and the performance of other services. The depositary of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited securities
or to pass through voting rights to ADR holders in respect of the deposited
securities. Sponsored ADR facilities are created in generally the same manner
as unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depositary. The deposit agreement
sets out the rights and responsibilities of the issuer, the depositary and the
ADR holders. With sponsored facilities, the issuer of the deposited securities
generally will bear some of the costs relating to the facility (such as
dividend payment fees of the depositary), although ADR holders continue to bear
certain other

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<PAGE> 54

costs (such as deposit and withdrawal fees). Under the terms of most sponsored
arrangements, depositories agree to distribute notices of shareholder meetings
and voting instructions, and to provide shareholder communications and other
information to the ADR holders at the request of the issuer of the deposited
securities.

DERIVATIVE INSTRUMENTS

GENERAL DESCRIPTION. As discussed in the Prospectus, the Funds may
use a variety of derivative instruments, including options, futures contracts
(sometimes referred to as "futures"), options on futures contracts, forward
currency contracts and swap agreements with respect to the International Bond
and Short-Term Global Bond Funds for any lawful purpose consistent with each
Fund's investment objective, such as to hedge a Fund's portfolio, risk
management or to attempt to enhance returns, but not for speculation. The
Funds also may use derivative instruments to synthetically create, for example,
exposure to a foreign country where a direct investment in the country may not
be practical or economical. Until the Funds reach a significant asset size,
the Advisor expects to make considerable use of this technique.

The use of these instruments is subject to applicable regulations of
the SEC, the several options and futures exchanges upon which they may be
traded, the Commodity Futures Trading Commission ("CFTC") and various state
regulatory authorities. In addition, a Fund's ability to use these instruments
will be limited by tax considerations.

In addition to the products, strategies and risks described below and
in the Prospectus, the Advisor may discover additional derivative instruments
and other hedging techniques. These new opportunities may become available as
the Advisor develops new techniques or as regulatory authorities broaden the
range of permitted transactions. The Advisor may utilize these opportunities
to the extent that they are consistent with a Fund's investment objective and
permitted by a Fund's investment limitations and applicable regulatory
authorities.

SPECIAL RISKS OF THESE INSTRUMENTS. The use of derivative instruments
involves special considerations and risks as described below. Risks pertaining
to particular instruments are described in the sections that follow.

(1) Successful use of most of these instruments depends upon the
Advisor's ability to predict movements of the overall securities and currency
markets, which requires different skills than predicting changes in the prices
of individual securities. While the Advisor is experienced in the use of these
instruments, there can be no assurance that any particular strategy adopted
will succeed.

(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of investments
being hedged. For example, if the value of an instrument used in a short hedge
(such as writing a call option, buying a put option, or selling a futures
contract) increased by less than the decline in value of the hedged investment,
the hedge would not be fully successful. Such a lack of correlation might
occur due to factors unrelated to the value of the investments being hedged,
such as speculative or other pressures on the markets in which these
instruments are traded. The effectiveness of hedges using instruments on
indices will depend on the degree of correlation between price movements in the
index and price movements in the investments being hedged.

(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can
also reduce opportunity for gain by offsetting the positive effect of favorable
price movements in the hedged investments. For example, if a Fund entered into
a short hedge because the Advisor projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the instrument. Moreover, if the price of the
instrument declined by more than the increase in the price of the security, the
Fund could suffer a loss.

(4) As described below, a Fund might be required to maintain
assets as "cover," maintain segregated accounts, or make margin payments when
it takes positions in these instruments involving obligations to third parties
(i.e., instruments other than purchased options). If a Fund were unable to
close out its positions in such instruments, it might be required to continue
to maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair a Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that a Fund sell a portfolio security at a
disadvantageous time. A Fund's ability to close out a position in an
instrument prior to

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expiration or maturity depends on the existence of a liquid secondary market
or, in the absence of such a market, the ability and willingness of the other
party to the transaction ("counter party") to enter into a transaction closing
out the position. Therefore, there is no assurance that any hedging position
can be closed out at a time and price that is favorable to a Fund.

For a discussion of the federal income tax treatment of the Funds'
derivative instruments, see "Taxes -- Derivative Instruments" below.

GENERAL LIMITATIONS ON CERTAIN DERIVATIVE TRANSACTIONS. The Funds
have each filed a notice of eligibility for exclusion from the definition of
the term "commodity pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures markets. Pursuant to Rule
4.5 of the regulations under the Commodity Exchange Act (the "CEA"), the notice
of eligibility for each Fund includes representations that each Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations, provided that a Fund may hold other
positions in futures contracts and related options that do not qualify as a
bona fide hedging position if the aggregate initial margin deposits and
premiums required to establish these positions, less the amount by which any
such options positions are "in the money," do not exceed 5% of a Fund's net
assets. Adoption of these guidelines does not limit the percentage of a Fund's
assets at risk to 5%.

In addition, (i) the aggregate value of securities underlying call
options on securities written by a Fund or obligations underlying put options
on securities written by a Fund determined as of the date the options are
written will not exceed 50% of the Fund's net assets; (ii) the aggregate
premiums paid on all options purchased by a Fund and which are being held will
not exceed 20% of the Fund's net assets; (iii) a Fund will not purchase
put or call options, other than hedging positions, if, as a result thereof,
more than 5% of its total assets would be so invested; and (iv) the aggregate
margin deposits required on all futures and options on futures transactions
being held will not exceed 5% of a Fund's total assets.

The foregoing limitations are not fundamental policies of the Funds
and may be changed by each Fund's Board of Directors without shareholder
approval as regulatory agencies permit.

Transactions using options (other than purchased options), expose the
Funds to counter-party risk. To the extent required by SEC guidelines, a Fund
will not enter into any such transaction unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
futures, or forward currency contracts or (2) cash and liquid high grade debt
securities with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. Each Fund will
also set aside cash and/or appropriate liquid assets in a segregated custodial
account if required to do so by the SEC and CFTC regulations. Assets used as
cover or held in a segregated account cannot be sold while the position in the
corresponding option, futures contract, or forward currency contract is open,
unless they are replaced with similar assets. As a result, the commitment of a
large portion of a Fund's assets to segregated accounts as a cover could impede
portfolio management or a Fund's ability to meet redemption requests or other
current obligations.

OPTIONS. Each Fund may purchase and write put and call options on
securities, on indices of debt and equity securities and on foreign currency,
and enter into closing transactions with respect to such options to terminate
an existing position. The purchase of call options serves as a long hedge, and
the purchase of put options serves as a short hedge. Writing put or call
options can enable a Fund to enhance income by reason of the premiums paid by
the purchaser of such options. Writing call options serves as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security appreciates to a price higher than the exercise price of the call
option, it can be expected that the option will be exercised and the Fund will
be obligated to sell the security at less than its market value or will be
obligated to purchase the security at a price greater than that at which the
security must be sold under the option. All or a portion of any assets used as
cover for OTC options written by a Fund would be considered illiquid to the
extent described under "Investment Policies and Techniques -- Illiquid
Securities." Writing put options serves as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the security
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be
obligated to purchase the security at more than its market value.

The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions. Generally, the OTC debt and

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<PAGE> 56

foreign currency options used by the Funds are European-style options. This
means that the option is only exercisable immediately at its expiration. This
is in contrast to American-style options, which are exercisable at any time
prior to the expiration date of the option. Options that expire unexercised
have no value.

A Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing purchase
transaction. Conversely, a Fund may terminate a position in a put or call
option it had purchased by writing an identical put or call option; this is
known as a closing sale transaction. Closing transactions permit a Fund to
realize the profit or limit the loss on an option position prior to its
exercise or expiration.

The Funds may or write both exchange-traded and OTC options.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed that, in effect, guarantees
completion of every exchange-traded option transaction. In contrast, OTC
options are contracts between a Fund and the other party to the transaction
("counter party") (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when a Fund purchases or writes an OTC option,
it relies on the counter party to make or take delivery of the underlying
investment upon exercise of the option. Failure by the counter party to do so
would result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction.

A Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
intends to purchase or write only those exchange-traded options for which there
appears to be a liquid secondary market. However, there can be no assurance
that such a market will exist at any particular time. Closing transactions can
be made for OTC options only by negotiating directly with the counter party, or
by a transaction in the secondary market if any such market exists. Although
each Fund will enter into OTC options only with counter parties that are
expected to be capable of entering into closing transactions with the Funds,
there is no assurance that the Funds will in fact be able to close out an OTC
option at a favorable price prior to expiration. In the event of insolvency of
the counter party, a Fund might be unable to close out an OTC option position
at any time prior to its expiration.

If a Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call
option written by a Fund could cause material losses because the Fund would be
unable to sell the investment used as cover for the written option until the
option expires or is exercised.

The Funds may engage in options transactions on indices in much the
same manner as the options on securities discussed above, except the index
options may serve as a hedge against overall fluctuations in the securities
market in general.

The writing and purchasing of options is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Imperfect correlation between
the options and securities markets may detract from the effectiveness of
attempted hedging.

SPREAD TRANSACTIONS. Each Fund may purchase covered spread options
from securities dealers. Such covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives a
Fund the right to put, or sell, a security that it owns at a fixed dollar
spread or fixed yield spread in relationship to another security that a Fund
does not own, but which is used as a benchmark. The risk to a Fund in
purchasing covered spread options is the cost of the premium paid for the
spread option and any transaction costs. In addition, there is no assurance
that closing transactions will be available. The purchase of spread options
will be used to protect a Fund against adverse changes in prevailing credit
quality spreads, i.e., the yield spread between high quality and lower quality
securities. Such protection is only provided during the life of the spread
option.

FUTURES CONTRACTS. Each Fund may enter into interest rate, securities
index, and foreign currency futures contracts. Each Fund may also purchase put
and call options, and write covered put and call options, on futures in which
it is allowed to invest. The purchase of futures or call options thereon can
serve as a long hedge, and the sale of futures or the purchase of put options
thereon can serve as a short hedge. Writing covered call options on futures
contracts can serve as a limited short hedge, and writing covered put options
on futures contracts can serve as a limited long hedge, using a strategy
similar to that used for writing covered options in securities. The Funds'
hedging may include purchases of futures as an offset against the effect of

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expected increases in currency exchange rates and securities prices and sales
of futures as an offset against the effect of expected declines in currency
exchange rates and securities prices. The Funds' futures transactions may be
entered into for any lawful purpose consistent with the Funds' investment
objectives, such as hedging purposes, risk management or to enhance returns,
but not for speculation. The Funds may also write put options on futures
contracts while at the same time purchasing call options on the same futures
contracts in order to create synthetically a long futures contract position.
Such options would have the same strike prices and expiration dates. The Funds
will engage in this strategy only when the Advisor believes it is more
advantageous to the Funds than is purchasing the futures contract.

To the extent required by regulatory authorities, the Funds only enter
into futures contracts that are traded on national futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading are regulated under the CEA by the CFTC. Although
techniques other than sales and purchases of futures contracts could be used to
reduce the Fund's exposure to market, currency, and interest rate fluctuations,
a Fund may be able to hedge its exposure more effectively and perhaps at a
lower cost through using futures contracts.

A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g. debt security) or currency for a specified price at a
designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index futures
contract was originally written. A foreign currency contract is a bilateral
agreement pursuant to which one party agrees to make and the other party agrees
to accept delivery of a specified type of currency at a specified future time
and at a specified price. Transaction costs are incurred when a futures
contract is bought or sold and margin deposits must be maintained. A futures
contract may be satisfied by delivery or purchase, as the case may be, of the
instrument, the currency or by payment of the change in the cash value of the
index. More commonly, futures contracts are closed out prior to delivery by
entering into an offsetting transaction in a matching futures contract.
Although the value of an index might be a function of the value of certain
specified securities, no physical delivery of those securities is made. If the
offsetting purchase price is less than the original sale price, a Fund realizes
a gain; if it is more, a Fund realizes a loss. Conversely, if the offsetting
sale price is more than the original purchase price, a Fund realizes a gain; if
it is less, a Fund realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular futures contract at a particular time. If a Fund is not able to
enter into an offsetting transaction, the Fund will continue to be required to
maintain the margin deposits on the futures contract.

No price is paid by a Fund upon entering into a futures contract.
Instead, at the inception of a futures contract, a Fund is required to deposit
in a segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of cash,
U.S. government securities or other liquid, high grade debt securities, in an
amount generally equal to 10% or less of the contract value. High grade
securities include securities rated "A" or better by an NRSRO. Margin must
also be deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction if
all contractual obligations have been satisfied. Under certain circumstances,
such as periods of high volatility, a Fund may be required by an exchange to
increase the level of its initial margin payment, and initial margin
requirements might be increased generally in the future by regulatory action.

Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as "marking to market." Variation margin does not involve borrowing, but
rather represents a daily settlement of a Fund's obligations to or from a
futures broker. When a Fund purchases an option on a future, the premium paid
plus transaction costs is all that is at risk. In contrast, when a Fund
purchases or sells a futures contract or writes a call or put option thereon,
it is subject to daily variation margin calls that could be substantial in the
event of adverse price movements. If the Fund has insufficient cash to meet
daily variation margin requirements, it might need to sell securities at a time
when such sales are disadvantageous. Purchasers and sellers of futures
positions and options on futures can enter into offsetting closing transactions
by selling or purchasing, respectively, an instrument identical to the
instrument held or written. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
Each Fund intends to enter into futures transactions only on exchanges or
boards of trade where there appears to be a liquid secondary market. However,
there can be no assurance that such a market will exist for a particular
contract at a particular time.

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Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a future or option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

If a Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue to
be required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain cash
or securities in a segregated account.

Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or options on futures
contracts might not correlate perfectly with movements in the prices of the
investments being hedged. For example, all participants in the futures and
options on futures contracts markets are subject to daily variation margin
calls and might be compelled to liquidate futures or options on futures
contracts positions whose prices are moving unfavorably to avoid being subject
to further calls. These liquidations could increase price volatility of the
instruments and distort the normal price relationship between the futures or
options and the investments being hedged. Also, because initial margin deposit
requirements in the futures market are less onerous than margin requirements in
the securities markets, there might be increased participation by speculators
in the futures markets. This participation also might cause temporary price
distortions. In addition, activities of large traders in both the futures and
securities markets involving arbitrage, "program trading" and other investment
strategies might result in temporary price distortions.

FOREIGN CURRENCY-RELATED DERIVATIVE STRATEGIES--SPECIAL
CONSIDERATIONS. The Funds may purchase and sell foreign currency on a spot
basis, and may use currency-related derivatives instruments such as options on
foreign currencies, futures on foreign currencies, options on futures on
foreign currencies and forward currency contracts (i.e., an obligation to
purchase or sell a specific currency at a specified future date, which may be
any fixed number of days from the contract date agreed upon by the parties, at
a price set at the time the contract is entered into). The Funds may use these
instruments for hedging or any other lawful purpose consistent with its
investment objective, including transaction hedging, anticipatory hedging,
cross hedging, proxy hedging, and position hedging. The Funds' use of
currency-related derivative instruments will be directly related to the Funds'
current or anticipated portfolio securities, and the Funds may engage in
transactions in currency-related derivative instruments as a means to protect
against some or all of the effects of adverse changes in foreign currency
exchange rates on its portfolio investments. In general, if the currency in
which a portfolio investment is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase. Conversely, a decline
in the exchange rate of the currency would adversely affect the value of the
portfolio investment expressed in U.S. dollars.

For example, the Funds might use currency-related derivative
instruments to "lock in" a U.S. dollar price for a portfolio investment,
thereby enabling the Funds to protect itself against a possible loss resulting
from an adverse change in the relationship between the U.S. dollar and the
subject foreign currency during the period between the date the security is
purchased or sold and the date on which payment is made or received. The Funds
also might use currency-related derivative instruments when the Advisor
believes that one currency may experience a substantial movement against
another currency, including the U.S. dollar, and it may use currency-related
derivative instruments to sell or buy the amount of the former foreign
currency, approximating the value of some or all of the Funds' portfolio
securities denominated in such foreign currency. Alternatively, where
appropriate, the Funds may use currency-related derivative instruments to hedge
all or part of its foreign currency exposure through the use of a basket of
currencies or a proxy currency where such currency or currencies act as an
effective proxy for other currencies. The use of this basket hedging technique
may be more efficient and economical than using separate currency-related
derivative instruments for each currency exposure held by the Funds.
Furthermore, currency-related derivative instruments may be used for short
hedges - for example, a Fund may sell a forward currency contract to lock in
the U.S. dollar equivalent of the proceeds from the anticipated sale of a
security denominated in a foreign currency.

In addition, the Funds may use a currency-related derivative
instrument to shift exposure to foreign currency fluctuations from one foreign
country to another foreign country where the Advisor believes that the foreign
currency exposure purchased will appreciate relative to the U.S. dollar and
thus better protect the Funds against the expected decline in the foreign
currency

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exposure sold. For example, if a Fund owns securities denominated in a foreign
currency and the Advisor believes that currency will decline, it might enter
into a forward contract to sell an appropriate amount of the first foreign
currency, with payment to be made in a second foreign currency that the Advisor
believes would better protect a Fund against the decline in the first security
than would a U.S. dollar exposure. Hedging transactions that use two foreign
currencies are sometimes referred to as "cross hedges." The effective use of
currency-related derivative instruments by the Funds in a cross hedge is
dependent upon a correlation between price movements of the two currency
instruments and the underlying security involved, and the use of two currencies
magnifies the risk that movements in the price of one instrument may not
correlate or may correlate unfavorably with the foreign currency being hedged.
Such a lack of correlation might occur due to factors unrelated to the value of
the currency instruments used or investments being hedged, such as speculative
or other pressures on the markets in which these instruments are traded.

The Funds also might seek to hedge against changes in the value of a
particular currency when no hedging instruments on that currency are available
or such hedging instruments are more expensive than certain other hedging
instruments. In such cases, the Funds may hedge against price movements in
that currency by entering into transactions using currency-related derivative
instruments on another foreign currency or a basket of currencies, the values
of which the Advisor believes will have a high degree of positive correlation
to the value of the currency being hedged. The risk that movements in the
price of the hedging instrument will not correlate perfectly with movements in
the price of the currency being hedged is magnified when this strategy is used.

The use of currency-related derivative instruments by the Funds
involves a number of risks. The value of currency-related derivative
instruments depends on the value of the underlying currency relative to the
U.S. dollar. Because foreign currency transactions occurring in the interbank
market might involve substantially larger amounts than those involved in the
use of such derivative instruments, the Funds could be disadvantaged by having
to deal in the odd lot market (generally consisting of transactions of less
than $1 million) for the underlying foreign currencies at prices that are less
favorable than for round lots (generally consisting of transactions of greater
than $1 million).

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions in
the interbank market and thus might not reflect odd-lot transactions where
rates might be less favorable. The interbank market in foreign currencies is a
global, round-the-clock market. To the extent the U.S. options or futures
markets are closed while the markets for the underlying currencies remain open,
significant price and rate movements might take place in the underlying markets
that cannot be reflected in the markets for the derivative instruments until
they re-open.

Settlement of transactions in currency-related derivative instruments
might be required to take place within the country issuing the underlying
currency. Thus, the Funds might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and
might be required to pay any fees, taxes and charges associated with such
delivery assessed in the issuing country.

When the Funds engage in a transaction in a currency-related
derivative instrument, it relies on the counterparty to make or take delivery
of the underlying currency at the maturity of the contract or otherwise
complete the contract. In other words, the Funds will be subject to the risk
that a loss may be sustained by the Funds as a result of the failure of the
counterparty to comply with the terms of the transaction. The counterparty
risk for exchange-traded instruments is generally less than for
privately-negotiated or OTC currency instruments, since generally a clearing
agency, which is the issuer or counterparty to each instrument, provides a
guarantee of performance. For privately-negotiated instruments, there is no
similar clearing agency guarantee. In all transactions, the Funds will bear
the risk that the counterparty will default, and this could result in a loss of
the expected benefit of the transaction and possibly other losses to the Funds.
The Funds will enter into transactions in currency-related derivative
instruments only with counterparties that the Advisor reasonably believes are
capable of performing under the contract.

Purchasers and sellers of currency-related derivative instruments may
enter into offsetting closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can
be no assurance that the Funds will in fact be able to close out a

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forward currency contract (or any other currency-related derivative instrument)
at a time and price favorable to the Funds. In addition, in the event of
insolvency of the counterparty, the Funds might be unable to close out a
forward currency contract at any time prior to maturity. In the case of an
exchange-traded instrument, the Funds will be able to close the position out
only on an exchange which provides a market for the instruments. The ability
to establish and close out positions on an exchange is subject to the
maintenance of a liquid market, and there can be no assurance that a liquid
market will exist for any instrument at any specific time. In the case of a
privately-negotiated instrument, the Funds will be able to realize the value of
the instrument only by entering into a closing transaction with the issuer or
finding a third party buyer for the instrument. While the Funds will enter
into privately-negotiated transactions only with entities who are expected to
be capable of entering into a closing transaction, there can be no assurance
that the Funds will in fact be able to enter into such closing transactions.

The precise matching of currency-related derivative instrument amounts
and the value of the portfolio securities involved generally will not be
possible because the value of such securities, measured in the foreign
currency, will change after the currency-related derivative instrument position
has been established. Thus, the Funds might need to purchase or sell foreign
currencies in the spot (cash) market. The projection of short-term currency
market movements is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain.

Permissible foreign currency options will include options traded
primarily in the OTC market. Although options on foreign currencies are traded
primarily in the OTC market, the Funds will normally purchase or sell OTC
options on foreign currency only when the Advisor reasonably believes a liquid
secondary market will exist for a particular option at any specific time.

There will be a cost to the Funds of engaging in transactions in
currency-related derivative instruments that will vary with factors such as the
contract or currency involved, the length of the contract period, and the
market conditions then prevailing. The Funds may have to pay a fee or
commission or, in cases where the instruments are entered into on a principal
basis, foreign exchange dealers or other counterparties will realize a profit
based on the difference ("spread") between the prices at which they are buying
and selling various currencies. Thus, for example, a dealer may offer to sell
a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should a Fund desire to resell that currency to the dealer.

When required by the SEC guidelines, the Funds will set aside
permissible liquid assets in segregated accounts or otherwise cover its
potential obligations under currency-related derivatives instruments. To the
extent the Funds' assets are so set aside, they cannot be sold while the
corresponding currency position is open, unless they are replaced with similar
assets. As a result, if a large portion of the Funds' assets are so set aside,
this could impede portfolio management or the Funds' ability to meet redemption
requests or other current obligations.

The Advisor's decision to engage in a transaction in a particular
currency-related derivative instrument will reflect the Advisor's judgment that
the transaction will provide value to the Funds and its shareholders and is
consistent with the Funds' objectives and policies. In making such a judgment,
the Advisor will analyze the benefits and risks of the transaction and weigh
them in the context of the Funds' entire portfolio and objectives. The
effectiveness of any transaction in a currency-related derivative instrument is
dependent on a variety of factors, including the Advisor's skill in analyzing
and predicting currency values and upon a correlation between price movements
of the currency instrument and the underlying security. There might be
imperfect correlation, or even no correlation, between price movements of an
instrument and price movements of investments being hedged. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the markets
in which these instruments are traded. In addition, the Funds' use of
currency-related derivative instruments is always subject to the risk that the
currency in question could be devalued by the foreign government. In such a
case, any long currency positions would decline in value and could adversely
affect any hedging position maintained by a Fund.

The Funds' dealing in currency-related derivative instruments will
generally be limited to the transactions described above. However, the Funds
reserve the right to use currency-related derivatives instruments for different
purposes and under different circumstances. Of course, the Funds are not
required to use currency-related derivatives instruments and will not do so
unless deemed appropriate by the Advisor. It also should be realized that use
of these instruments does not eliminate, or protect against, price movements in
the Funds' securities that are attributable to other (i.e., non-currency
related) causes. Moreover, while the use of currency-related derivatives
instruments may reduce the risk of loss due to a decline in the value of a
hedged currency, at

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the same time the use of these instruments tends to limit any potential gain
which may result from an increase in the value of that currency.

SWAP AGREEMENTS. With respect to the Short-Term Global Bond and
International Bond Funds, either Fund may enter into interest rate, securities
index and currency exchange rate swap agreements for purposes of attempting to
obtain or preserve a particular desired return or spread at a lower cost to the
Fund than if the Fund had invested directly in an instrument that yielded that
desired return or spread. A Fund also may enter into swaps in order to protect
against an increase in the price of, or the currency exchange rate applicable
to, securities that the Fund anticipates purchasing at a later date. Swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to several years. In a standard
"swap" transaction, two parties agree to exchange the returns (or differentials
in rates of return) earned or realized on particular predetermined investments
or instruments. The gross returns to be exchanged or "swapped" between the
parties are calculated with respect to a "notional amount," i.e., the return on
or increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Swap agreements may include interest rate
caps, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates exceed a specified rate, or
"cap"; interest rate floors, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates fall
below a specified level, or "floor"; and interest rate collars, under which a
party sells a cap and purchases a floor, or vice versa, in an attempt to
protect itself against interest rate movements exceeding given minimum or
maximum levels.

The "notional amount" of the swap agreement is only the agreed upon
basis for calculating the obligations that the parties to a swap agreement have
agreed to exchange. Under most swap agreements entered into by a Fund, the
obligations of the parties would be exchanged on a "net basis." Consequently, a
Fund's obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the "net
amount"). A Fund's obligations under a swap agreement will be accrued daily
(offset against amounts owed to the Fund) and any accrued but unpaid net
amounts owed to a swap counter party will be covered by the maintenance of a
segregated account consisting of cash, or liquid high grade debt obligations.

Whether a Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Advisor's ability to
predict correctly whether certain types of investments are likely to produce
greater returns than other investments. Swap agreements may be considered to be
illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a
swap agreement counter party. Certain restrictions imposed on the Funds by the
Internal Revenue Code may limit the Funds' ability to use swap agreements. The
swaps market is largely unregulated.

The Funds will enter into swap agreements only with banks and
recognized securities dealers believed by the Advisor to present minimal credit
risks in accordance with guidelines established by each Fund's Board of
Directors. If there is a default by the other party to such a transaction, a
Fund will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreements related to
the transaction.

FOREIGN CURRENCY TRANSACTIONS

Although the International Stock and Asia Pacific Funds value their
respective assets daily in U.S. dollars, neither is required to convert its
holdings of foreign currencies to U.S. dollars on a daily basis. The Funds'
foreign currencies generally will be held as "foreign currency call accounts"
at foreign branches of foreign or domestic banks. These accounts bear interest
at negotiated rates and are payable upon relatively short demand periods. If a
bank became insolvent, the Funds could suffer a loss of some or all of the
amounts deposited. The Funds may convert foreign currency to U.S. dollars from
time to time. Although foreign exchange dealers generally do not charge a
stated commission or fee for conversion, the prices posted generally include a
"spread," which is the difference between the prices at which the dealers are
buying and selling foreign currencies.

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FOREIGN INVESTMENT COMPANIES

Some of the countries in which the Funds invest may not permit direct
investment by outside investors. Investments in such countries may only be
permitted through foreign government-approved or -authorized investment
vehicles, which may include other investment companies. Investing through such
vehicles may involve frequent or layered fees or expenses and may also be
subject to limitation under the 1940 Act. Under the 1940 Act, a Fund may
invest up to 10% of its assets in shares of investment companies and up to 5%
of its assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.

FOREIGN SECURITIES

Many of the foreign securities held by the Short-Term Global Bond and
International Bond Funds will not be registered with the Securities and
Exchange Commission (the "SEC"), nor will the issuers thereof be subject to SEC
reporting requirements. Accordingly, there may be less publicly available
information concerning foreign issuers of securities held by the Funds than is
available concerning U.S. companies. Disclosure and regulatory standards in
many respects are less stringent in emerging market countries than in the U.S.
and other major markets. There also may be a lower level of monitoring and
regulation of emerging markets and the activities of investors in such markets,
and enforcement of existing regulations may be extremely limited. Foreign
companies, and in particular, companies in smaller and emerging capital markets
are not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory requirements comparable to those
applicable to U.S. companies. Each Fund's net investment income and capital
gains from its foreign investment activities may be subject to non-U.S.
withholding taxes.

The costs attributable to foreign investing that the Funds must bear
frequently are higher than those attributable to domestic investing; this is
particularly true with respect to emerging capital markets. For example, the
cost of maintaining custody of foreign securities exceeds custodian costs for
domestic securities, and transaction and settlement costs of foreign investing
also frequently are higher than those attributable to domestic investing.
Costs associated with the exchange of currencies also make foreign investing
more expensive than domestic investing. Investment income on certain foreign
securities in which the Funds may invest may be subject to foreign withholding
or other government taxes that could reduce the return of these securities.
Tax treaties between the United States and foreign countries, however, may
reduce or eliminate the amount of foreign tax to which the Funds would be
subject.

Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
failed to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to settlement
problems could result either in losses to a Fund due to subsequent declines in
the value of such portfolio security or, if the Fund has entered into a
contract to sell the security, could result in possible liability to the
purchaser.

HIGH-YIELD (HIGH-RISK) SECURITIES

IN GENERAL. The International Bond and Short-Term Global Bond Funds
have the authority to invest up to but not including 35% of its total assets in
non-investment grade debt securities. The International Stock and Asia Pacific
Funds have the authority to invest up to 5% of its net assets in non-investment
grade debt securities. Non-investment grade debt securities (hereinafter
referred to as "lower-quality securities") include (i) bonds rated as low as C
by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("S&P"), or Fitch Investors Service, Inc. ("Fitch"), or CCC by Duff & Phelps,
Inc. ("D&P"); (ii) commercial paper rated as low as C by S&P, Not Prime by
Moody's or Fitch 4 by Fitch; and (iii) unrated debt securities of comparable
quality. Lower-quality securities, while generally offering higher yields than
investment grade securities with similar maturities, involve greater risks,
including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below. Refer to the Appendix of
this Statement of Additional Information for a discussion of securities
ratings.

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EFFECT OF INTEREST RATES AND ECONOMIC CHANGES. The lower-quality and
comparable unrated security market is relatively new and its growth has
paralleled a long economic expansion. As a result, it is not clear how this
market may withstand a prolonged recession or economic downturn. Such an
economic downturn could severely disrupt the market for and adversely affect
the value of such securities.

All interest-bearing securities typically experience appreciation when
interest rates decline and depreciation when interest rates rise. The market
values of lower-quality and comparable unrated securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Lower-quality and comparable unrated securities also tend to be
more sensitive to economic conditions than are higher-rated securities. As a
result, they generally involve more credit risks than securities in the
higher-rated categories. During an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower-quality and comparable
unrated securities may experience financial stress and may not have sufficient
revenues to meet their payment obligations. The issuer's ability to service
its debt obligations may also be adversely affected by specific corporate
developments, the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due
to default by an issuer of these securities is significantly greater than
issuers of higher-rated securities because such securities are generally
unsecured and are often subordinated to other creditors. Further, if the
issuer of a lower-quality or comparable unrated security defaulted, a Fund
might incur additional expenses to seek recovery. Periods of economic
uncertainty and changes would also generally result in increased volatility in
the market prices of these securities and thus in the Fund's net asset value.

As previously stated, the value of a lower-quality or comparable
unrated security will decrease in a rising interest rate market, and
accordingly so will a Fund's net asset value. If a Fund experiences unexpected
net redemptions in such a market, it may be forced to liquidate a portion of
its portfolio securities without regard to their investment merits. Due to the
limited liquidity of lower-quality and comparable unrated securities (discussed
below), a Fund may be forced to liquidate these securities at a substantial
discount. Any such liquidation would reduce the Fund's asset base over which
expenses could be allocated and could result in a reduced rate of return for
the Fund.

PAYMENT EXPECTATIONS. Lower-quality and comparable unrated securities
typically contain redemption, call or prepayment provisions which permit the
issuer of such securities containing such provisions to, at its discretion,
redeem the securities. During periods of falling interest rates, issuers of
these securities are likely to redeem or prepay the securities and refinance
them with debt securities with a lower interest rate. To the extent an issuer
is able to refinance the securities, or otherwise redeem them, a Fund may have
to replace the securities with a lower yielding security, which would result in
a lower return for the Fund.

CREDIT RATINGS. Credit ratings issued by credit-rating agencies
evaluate the safety of principal and interest payments of rated securities.
They do not, however, evaluate the market value risk of lower-quality
securities and, therefore, may not fully reflect the true risks of an
investment. In addition, credit rating agencies may or may not make timely
changes in a rating to reflect changes in the economy or in the condition of
the issuer that affect the market value of the security. Consequently, credit
ratings are used only as a preliminary indicator of investment quality.
Investments in lower-quality and comparable unrated securities will be more
dependent on the Advisor's credit analysis than would be the case with
investments in investment-grade debt securities. The Advisor employs its own
credit research and analysis, which includes a study of existing debt, capital
structure, ability to service debt and to pay dividends, the issuer's
sensitivity to economic conditions, its operating history and the current trend
of earnings. The Advisor continually monitors the investments in each Fund's
portfolio and carefully evaluates whether to dispose of or to retain
lower-quality and comparable unrated securities whose credit ratings or credit
quality may have changed.

LIQUIDITY AND VALUATION. A Fund may have difficulty disposing of
certain lower-quality and comparable unrated securities because there may be a
thin trading market for such securities. Because not all dealers maintain
markets in all lower-quality and comparable unrated securities, there is no
established retail secondary market for many of these securities. The Funds
anticipate that such securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market
does exist, it is generally not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market may have an
adverse impact on the market price of the security. As a result, a Fund's
asset value and ability to dispose of particular securities, when necessary to
meet the Fund's liquidity needs or in response to a specific economic event,
may

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<PAGE> 64

be impacted. The lack of a liquid secondary market for certain securities may
also make it more difficult for the Fund to obtain accurate market quotations
for purposes of valuing the Fund's portfolio. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. During periods of thin trading, the spread
between bid and asked prices is likely to increase significantly. In addition,
adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower-quality and comparable
unrated securities, especially in a thinly traded market.

RECENT AND PROPOSED LEGISLATION. Recent legislation has been adopted,
and from time to time proposals have been discussed, regarding new legislation
designed to limit the use of certain lower-quality and comparable unrated
securities by certain issuers. An example of legislation is a recent law which
requires federally insured savings and loan associations to divest their
investments in these securities over time. It is not currently possible to
determine the impact of the recent legislation or the proposed legislation on
the lower-quality and comparable unrated securities market. However, it is
anticipated that if additional legislation is enacted or proposed, it could
have a material affect on the value of these securities and the existence of a
secondary trading market for the securities.

ILLIQUID SECURITIES

The Funds may invest in illiquid securities (i.e., securities that are
not readily marketable). However, a Fund will not acquire illiquid securities
if, as a result, they would comprise more than 15% of the value of the Fund's
net assets (or such other amounts as may be permitted under the 1940 Act). The
Board of Directors of each Fund, or its delegate, has the ultimate authority to
determine, to the extent permissible under the federal securities laws, which
securities are illiquid for purposes of this limitation. Certain securities
exempt from registration or issued in transactions exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), including
securities that may be resold pursuant to Rule 144A under the Securities Act,
may be considered liquid. The Board of Directors of each Fund has delegated to
Strong Capital Management, Inc. (the "Advisor") the day-to-day determination of
the liquidity of a security, although it has retained oversight and ultimate
responsibility for such determinations. Although no definitive liquidity
criteria are used, each Fund's Board of Directors has directed the Advisor to
look to such factors as (i) the nature of the market for a security (including
the institutional private resale market), (ii) the terms of certain securities
or other instruments allowing for the disposition to a third party or the
issuer thereof (e.g., certain repurchase obligations and demand instruments),
(iii) the availability of market quotations (e.g., for securities quoted in the
PORTAL system), and (iv) other permissible relevant factors.

Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act. Where registration is
required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund might obtain a less favorable price than
prevailed when it decided to sell. Restricted securities will be priced at
fair value as determined in good faith by the Board of Directors of each Fund.
If through the appreciation of restricted securities or the depreciation of
unrestricted securities, a Fund should be in a position where more than 15% of
the value of its net assets are invested in illiquid securities, including
restricted securities which are not readily marketable, the Fund will take such
steps as are deemed advisable, if any, to protect liquidity.

Each Fund may sell over-the-counter ("OTC") options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC
options written by the Fund. The assets used as cover for OTC options written
by a Fund will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.

Notwithstanding the above, the Advisor intends, as a matter of
internal policy, to limit each Fund's investments in illiquid securities to 10%
of its net assets.

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<PAGE> 65

LENDING OF PORTFOLIO SECURITIES

Each Fund is authorized to lend up to 33 1/3% of the total value of
its portfolio securities to broker-dealers or institutional investors that the
Advisor deems qualified, but only when the borrower maintains with the Fund's
custodian bank collateral either in cash or money market instruments, in an
amount at least equal to the market value of the securities loaned, plus
accrued interest and dividends, determined on a daily basis and adjusted
accordingly. However, the Funds do not presently intend to engage in such
lending. In determining whether to lend securities to a particular
broker-dealer or institutional investor, the Advisor will consider, and during
the period of the loan will monitor, all relevant facts and circumstances,
including the creditworthiness of the borrower. Each Fund will retain
authority to terminate any loans at any time. The Funds may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. The Funds
will receive reasonable interest on the loan or a flat fee from the borrower
and amounts equivalent to any dividends, interest or other distributions on the
securities loaned. Each Fund will retain record ownership of loaned securities
to exercise beneficial rights, such as voting and subscription rights and
rights to dividends, interest or other distributions, when retaining such
rights is considered to be in a Fund's interest.

MORTGAGE- AND ASSET-BACKED SECURITIES

Mortgage-backed securities represent direct or indirect participations
in, or are secured by and payable from, mortgage loans secured by real
property, and include single- and multi-class pass-through securities and
collateralized mortgage obligations. Such securities may be issued or
guaranteed by U.S. government agencies or instrumentalities, such as the
Government National Mortgage Association and the Federal National Mortgage
Association, or by private issuers, generally originators and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities (collectively, "private
lenders"). Mortgage-backed securities issued by private lenders may be
supported by pools of mortgage loans or other mortgage-backed securities that
are guaranteed, directly or indirectly, by the U.S. government or one of its
agencies or instrumentalities, or they may be issued without any governmental
guarantee of the underlying mortgage assets but with some form of
non-governmental credit enhancement.

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein, but include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property, and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal
and interest on asset-backed securities may be supported by non-governmental
credit enhancements similar to those utilized in connection with
mortgage-backed securities.

The yield characteristics of mortgage- and asset-backed securities
differ from those of traditional debt securities. Among the principal
differences are that interest and principal payments are made more frequently
on mortgage-and asset-backed securities, usually monthly, and that principal
may be prepaid at any time because the underlying mortgage loans or other
assets generally may be prepaid at any time. As a result, if a Fund purchases
these securities at a premium, a prepayment rate that is faster than expected
will reduce yield to maturity, while a prepayment rate that is slower than
expected will have the opposite effect of increasing the yield to maturity.
Conversely, if a Fund purchases these securities at a discount, a prepayment
rate that is faster than expected will increase yield to maturity, while a
prepayment rate that is slower than expected will reduce yield to maturity.
Amounts available for reinvestment by a Fund are likely to be greater during a
period of declining interest rates and, as a result, are likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Accelerated prepayments on securities purchased by a Fund at a premium
also impose a risk of loss of principal because the premium may not have been
fully amortized at the time the principal is prepaid in full. The market for
privately issued mortgage- and asset-backed securities is smaller and less
liquid than the market for government-sponsored mortgage-backed securities.

The Funds may invest in stripped mortgage- or asset-backed securities,
which receive differing proportions of the interest and principal payments from
the underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases such
market value may be extremely volatile. With respect to certain stripped
securities, such as interest only and principal only classes, a rate of
prepayment that is faster or slower than anticipated may result in a Fund
failing to recover all or a portion of its investment, even though the
securities are rated investment grade.

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MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

The Funds may engage in reverse repurchase agreements to facilitate
portfolio liquidity, a practice common in the mutual fund industry, or for
arbitrage transactions discussed below. In a reverse repurchase agreement, a
Fund would sell a security and enter into an agreement to repurchase the
security at a specified future date and price. The Fund generally retains the
right to interest and principal payments on the security. Since the Fund
receives cash upon entering into a reverse repurchase agreement, it may be
considered a borrowing. (See "Borrowing" above.) When required by guidelines
of the SEC, a Fund will set aside permissible liquid assets in a segregated
account to secure its obligations to repurchase the security.

Each Fund may also enter into mortgage dollar rolls, in which the Fund
would sell mortgage-backed securities for delivery in the current month and
simultaneously contract to purchase substantially similar securities on a
specified future date. While a Fund would forego principal and interest paid
on the mortgage-backed securities during the roll period, the Fund would be
compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the proceeds
of the initial sale. The Fund also could be compensated through the receipt of
fee income equivalent to a lower forward price. At the time the Fund would
enter into a mortgage dollar roll, it would set aside permissible liquid assets
in a segregated account to secure its obligation for the forward commitment to
buy mortgage-backed securities. Mortgage dollar roll transactions may be
considered a borrowing by the Funds. (See "Borrowing" above.)

The mortgage dollar rolls and reverse repurchase agreements entered
into by the Funds may be used as arbitrage transactions in which a Fund will
maintain an offsetting position in investment grade debt obligations or
repurchase agreements that mature on or before the settlement date on the
related mortgage dollar roll or reverse repurchase agreements. Since a Fund
will receive interest on the securities or repurchase agreements in which it
invests the transaction proceeds, such transactions may involve leverage.
However, since such securities or repurchase agreements will be high quality
and will mature on or before the settlement date of the mortgage dollar roll or
reverse repurchase agreement, the Advisor believes that such arbitrage
transactions do not present the risks to the Funds that are associated with
other types of leverage.

REPURCHASE AGREEMENTS

The Funds may invest in repurchase agreements with certain banks or
non-bank dealers. In a repurchase agreement, a Fund buys a security at one
price, and at the time of sale, the seller agrees to repurchase the obligation
at a mutually agreed upon time and price (usually within seven days). The
repurchase agreement, thereby, determines the yield during the purchaser's
holding period, while the seller's obligation to repurchase is secured by the
value of the underlying security. If the value of such securities is less than
the repurchase price, plus any agreed-upon additional amount, the other party
to the agreement will be required to provide additional collateral so that at
all times the collateral is at least equal to the repurchase price, plus any
agreed-upon additional amount. The Advisor will monitor, on an ongoing basis,
the value of the underlying securities to ensure that the value always equals
or exceeds the repurchase price plus accrued interest. Repurchase agreements
could involve certain risks in the event of a default or insolvency of the
other party to the agreement, including possible delays or restrictions upon a
Fund's ability to dispose of the underlying securities. Although no definitive
creditworthiness criteria are used, the Advisor reviews the creditworthiness of
the banks and non-bank dealers with which the Funds enter into repurchase
agreements to evaluate those risks. A Fund may, under certain circumstances,
deem repurchase agreements collateralized by U.S. government securities to be
investments in U.S. government securities.

SHORT SALES AGAINST THE BOX

Each Fund may sell securities short against the box to hedge
unrealized gains on portfolio securities. Selling securities short against the
box involves selling a security that the Fund owns or has the right to acquire,
for delivery at a specified date in the future. If the Fund sells securities
short against the box, it may protect unrealized gains, but will lose the
opportunity to profit on such securities if the price rises.

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TEMPORARY DEFENSIVE POSITION

When the Advisor determines that market conditions warrant a temporary
defensive position, the Funds may invest without limitation in cash and
short-term fixed income securities, including U.S. government securities,
commercial paper, broker's acceptances, certificates of deposit, and time
deposits.

WARRANTS

Each Fund may acquire warrants. Warrants are securities giving the
holder the right, but not the obligation, to buy the stock of an issuer at a
given price (generally higher than the value of the stock at the time of
issuance) during a specified period or perpetually. Warrants may be acquired
separately or in connection with the acquisition of securities. A Fund will
purchase warrants, valued at the lower of cost or market value, in excess of 5%
of the Fund's net assets. Included in that amount, but not to exceed 2% of the
Fund's net assets, may be warrants that are not listed on any stock exchange.
Warrants acquired by the Fund in units or attached to securities are not
subject to these restrictions. Warrants do not carry with them the right to
dividends or voting rights with respect to the securities that they entitle
their holder to purchase, and they do not represent any rights in the assets of
the issuer. As a result, warrants may be considered more speculative than
certain other types of investments. In addition, the value of a warrant does
not necessarily change with the value of the underlying securities, and a
warrant ceases to have value if it is not exercised prior to its expiration
date.

WHEN-ISSUED SECURITIES

The Funds may from time to time purchase securities on a "when-issued"
basis. The price of debt obligations purchased on a when-issued basis, which
may be expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase. During the period between the purchase and settlement, no payment is
made by a Fund to the issuer and no interest on debt obligations accrues to a
Fund. Forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of a Fund's other assets. While
when-issued securities may be sold prior to the settlement date, the Funds
intend to purchase such securities with the purpose of actually acquiring them
unless a sale appears desirable for investment reasons. At the time a Fund
makes the commitment to purchase a security on a when-issued basis, it will
record the transaction and reflect the value of the security in determining its
net asset value. The Funds do not believe that their respective net asset
values will be adversely affected by the purchase of securities on a
when-issued basis.

The Funds will maintain cash and marketable securities equal in value
to commitments for when-issued securities. Such segregated securities either
will mature or, if necessary, be sold on or before the settlement date. When
the time comes to pay for when-issued securities, a Fund will meet it's
obligations from then-available cash flow, sale of the securities held in the
separate account, described above, sale of other securities or, although it
would not normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or lesser than a Funds'
payment obligation).

ZERO-COUPON, STEP-COUPON AND PAY-IN-KIND SECURITIES

The Funds may invest in zero-coupon, step-coupon, and pay-in-kind
securities. These securities are debt securities that do not make regular cash
interest payments. Zero-coupon and step-coupon securities are sold at a deep
discount to their face value. Pay-in-kind securities pay interest through the
issuance of additional securities. Because such securities do not pay current
cash income, the price of these securities can be volatile when interest rates
fluctuate. While these securities do not pay current cash income, federal
income tax law requires the holders of zero-coupon, step-coupon, and
pay-in-kind securities to include in income each year the portion of the
original issue discount (or deemed discount) and other non-cash income on such
securities accruing that year. In order to continue to qualify as a "regulated
investment company" under the Internal Revenue Code and avoid a certain excise
tax, each Fund may be required to distribute a portion of such discount and
income and may be required to

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dispose of other portfolio securities, which may occur in periods of adverse
market prices, in order to generate cash to meet these distribution
requirements.

INVESTMENT POLICIES AND TECHNIQUES --
SHORT-TERM GLOBAL BOND AND INTERNATIONAL BOND FUNDS

AVERAGE EFFECTIVE PORTFOLIO MATURITY

The Short-Term Global Bond and International Bond Funds' average
effective portfolio maturity represents an average based on the actual stated
maturity dates of the debt securities in the Fund's portfolio, except that (i)
variable-rate securities are deemed to mature at the next interest rate
adjustment date, (ii) debt securities with put features are deemed to mature at
the next put exercise date, (iii) the maturity of mortgage-backed securities is
determined on an "expected life" basis, and (iv) securities being hedged with
futures contracts may be deemed to have a longer maturity, in the case of
purchases of futures contracts, and a shorter maturity, in the case of sales of
futures contracts, than they would otherwise be deemed to have. In addition, a
security that is subject to redemption at the option of the issuer on a
particular date (the "call date"), which is prior to the security's stated
maturity, may be deemed to mature on the call rather than on its stated
maturity date. The call date of a security will be used to calculate average
effective portfolio maturity when the Advisor reasonably anticipates, based
upon information available to it, that the issuer will exercise its right to
redeem the security. The Advisor may base its conclusion on such factors as
the interest rate paid on the security compared to prevailing market rates, the
amount of cash available to the issuer of the security, events affecting the
issuer of the security, and other factors that may compel or make it
advantageous for the issuer to redeem a security prior to its stated maturity.

CONVERTIBLE SECURITIES

The Short-Term Global Bond and International Bond Funds may invest up
to 5% of their total assets in convertible securities, which are bonds,
debentures, notes, preferred stocks, or other securities that may be converted
into or exchanged for a specified amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest
normally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted, or exchanged.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stock since they have fixed income characteristics,
and (3) provide the potential for capital appreciation if the market price of
the underlying common stock increases. Most convertible securities currently
are issued by U.S. companies, although a substantial Eurodollar convertible
securities market has developed, and the markets for convertible securities
denominated in local currencies are increasing.

The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value,
if converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with
investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price of
the underlying common stock. If the conversion value is low relative to the
investment value, the price of the convertible security is governed principally
by its investment value. Generally, the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of
the underlying common stock approaches or exceeds the conversion price, the
price of the convertible security will be increasingly influenced by its
conversion value. A convertible security generally will sell at a premium over
its conversion value by the extent to which investors place value on the right
to acquire the underlying common stock while holding a fixed income security.

A convertible security might be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Fund is called for redemption,
the Fund will be required to permit the issuer to redeem the security, convert
it into the underlying common stock or sell it to a third party.

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LOAN INTEREST

Each Fund may invest a portion of its assets in loan interests ("Loan
Interest"), which are interests in amounts owned by a corporate, governmental
or other borrower to lenders or lending syndicates. Loan Interests purchased
by a Fund may have a maturity of any number or days or years, and may be
secured or unsecured. Loan Interests involve the risk of loss in case of
default or bankruptcy of the borrower and, in the case of participation
interests, involve a risk of insolvency of the agent lending bank or other
financial intermediary. Loan Interests are not rated by any nationally
recognized statistical rating organizations ("NRSROs") and are, at present, not
readily marketable and may be subject to contractual restrictions on resale.

A Loan Interest is typically originated, negotiated, and structured by
a U.S. or foreign commercial bank, insurance company finance company, or other
financial institution (the "Agent") for a lending syndicate of financial
institutions. The Agent typically administers and enforces the loan on behalf
of the other lenders in the syndicate. In addition, an institution, typically
but not always the Agent (the "Collateral Bank"), holds collateral (if any) on
behalf of the lenders. These Loan Interests may take the form of participation
interests in, assignments of or novations of a loan during its secondary
distribution, or direct interests during a primary distribution. Such Loan
Interests may be acquired from U.S. or foreign banks, insurance companies,
finance companies, or other financial institutions who have made loans or are
members of a lending syndicate or from other holders of Loan Interests. A Fund
may also acquire Loan Interests under which the Fund derives its rights
directly from the borrower. Such Loan Interests are separately enforceable by
a Fund against the borrower and all payments of interest and principal are
typically made directly to a Fund from the borrower. In the event that a Fund
and other lenders become entitled to take possession of shared collateral, it
is anticipated that such collateral would be held in the custody of a
Collateral Bank for their mutual benefit. The Funds may not act as an Agent, a
Collateral Bank, a guarantor or sole negotiator or structurer with respect to a
loan.

The Advisor will analyze and evaluate the financial condition of the
borrower in connection with the acquisition of any Loan Interest. The Advisor
also analyzes and evaluates the financial condition of the Agent and, in the
case of Loan Interests in which the Fund does not have privity with the
borrower, those institutions from or through whom the Fund derives its rights
in a loan (the "Intermediate Participants").

In a typical loan the Agent administers the terms of the loan
agreement. In such cases, the Agent is normally responsible for the collection
of principal and interest payments from the borrower and the apportionment of
these payments to the credit of all institutions which are parties to the loan
agreement. A Fund will generally rely upon the Agent or an Intermediate
Participant to receive and forward to the Fund its portion of the principal and
interest payments on the loan. Furthermore, unless under the terms of a
participation agreement a Fund has direct recourse against the borrower, the
Fund will rely on the Agent and the other members of the lending syndicate to
use appropriate credit remedies against the borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the loan
agreement based upon reports prepared by the borrower. The seller of the Loan
Interest usually does, but is often not obligated to, notify holders of Loan
Interests of any failures of compliance. The Agent may monitor the value of
the collateral and, if the value of the collateral declines, may accelerate the
loan, may give the borrower an opportunity to provide additional collateral or
may seek other protection for the benefit of the participants in the loan. The
Agent is compensated by the borrower for providing these services under a loan
agreement, and such compensation may include special fees paid upon structuring
and funding the loan and other fees paid on a continuing basis. With respect
to Loan Interests for which the Agent does not perform such administrative and
enforcement functions, a Fund will perform such tasks on its own behalf,
although a Collateral Bank will typically hold any collateral on behalf of the
Fund and the other lenders pursuant to the applicable loan agreement.

A financial institution's appointment as Agent may usually be
terminated in the event that it fails to observe the requisite standard of care
or becomes insolvent, enters Federal Deposit Insurance Corporation ("FDIC")
receivership, or, if not FDIC insured, enters into bankruptcy proceedings. A
successor Agent would generally be appointed to replace the terminated Agent,
and assets held by the Agent under the loan agreement should remain available
to holders of Loan Interests. However, if assets held by the Agent for the
benefit of the Fund were determined to be subject to the claims of the Agent's
general creditors, the Fund might incur certain costs and delays in realizing
payment on a loan interest, or suffer a loss of principal and/or interest. In
situations involving Intermediate Participants similar risks may arise.

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<PAGE> 70

Purchasers of Loan Interests depend primarily upon the
creditworthiness of the borrower for payment of principal and interest. If a
Fund does not receive scheduled interest or principal payments on such
indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protections than an unsecured
loan in the event of non-payment of scheduled interest or principal. However,
there is no assurance that the liquidation of collateral from a secured loan
would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks, and may be highly speculative. Borrowers that are
in bankruptcy or restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of developing
countries will also involve a risk that the governmental entities responsible
for the repayment of the debt may be unable, or unwilling, to pay interest and
repay principal when due.

SOVEREIGN DEBT

Sovereign debt differs from debt obligations issued by private
entities in that, generally, remedies for defaults must be pursued in the
courts of the defaulting party. Legal recourse is therefore limited.
Political conditions, especially a sovereign entity's willingness to meet the
terms of its debt obligations, are of considerable significance. Also, there
can be no assurance that the holders of commercial bank loans to the same
sovereign entity may not contest payments to the holders of sovereign debt in
the event of default under commercial bank loan agreements.

A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's
policy toward principal international lenders and the political constraints to
which a sovereign debtor may be subject. A country whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international price of such commodities. Increased protectionism on the part
of a country's trading partners, or political changes in those countries, could
also adversely affect its exports. Such events could diminish a country's
trade account surplus, if any, or the credit standing of a particular local
government or agency. Another factor bearing on the ability of a country to
repay sovereign debt is the level of the country's international reserves.
Fluctuations in the level of these reserves can affect the amount of foreign
exchange readily available for external debt payments and, thus, could have a
bearing on the capacity of the country to make payments on its sovereign debt.

To the extent that a country has a current account deficit (generally
when exports of merchandise and services are less than the country's imports of
merchandise and services plus net transfers (e.g., gifts of currency and goods)
to foreigners), it will need to depend on loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and inflows of foreign investment. The access of a country
to these forms of external funding may not be certain, and a withdrawal of
external funding could adversely affect the capacity of a government to make
payments on its obligations. In addition, the cost of servicing debt
obligations can be affected by a change in international interest rates since
the majority of these obligations carry interest rates that are adjusted
periodically based upon international rates.

With respect to sovereign debt of emerging market issuers, investors
should be aware that certain emerging market countries are among the largest
debtors to commercial banks and foreign governments. At times certain emerging
market countries have declared moratoria on the payment of principal and
interest on external debt.

Certain emerging market countries have experienced difficulty in
servicing their sovereign debt on a timely basis which led to defaults on
certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds (discussed below), and obtaining new credit to finance interest
payments. Holders of sovereign debt, including the Funds, may be requested to
participate in the rescheduling of such debt and to extend further loans to
sovereign debtors. The interests of holders of sovereign debt could be
adversely affected in the course of restructuring arrangements or by certain
other factors referred to below. Furthermore, some of the participants in the
secondary market for sovereign debt may also be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants. Obligations arising
from past restructuring agreements may affect the economic performance and
political and social stability of certain issuers of sovereign debt. There is
no bankruptcy proceeding by which sovereign debt on which a sovereign has
defaulted may be collected in whole or in part.

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<PAGE> 71

Foreign investment in certain sovereign debt is restricted or
controlled to varying degrees. These restrictions or controls may at times
limit or preclude foreign investment in such sovereign debt and increase the
costs and expenses of the Funds. Certain countries in which the Funds will
invest require governmental approval prior to investments by foreign persons,
limit the amount of investment by foreign persons in a particular issuer, limit
the investment by foreign persons only to a specific class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of the countries, or impose additional taxes on
foreign investors. Certain issuers may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances. The Funds could be adversely affected by
delays in, or a refusal to grant, any required governmental approval for
repatriation of capital, as well as by the application to the Funds of any
restrictions on investments. Investing in local markets may require the Funds
to adopt special procedures, seek local government approvals or take other
actions, each of which may involve additional costs to the Funds.

The sovereign debt in which a Fund may invest includes Brady Bonds,
which are securities issued under the framework of the Brady Plan, an
initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in
1989 as a mechanism for debtor nations to restructure their outstanding
external commercial bank indebtedness. In restructuring its external debt
under the Brady Plan framework, a debtor nation negotiates with its existing
bank lenders as well as multilateral institutions such as the International
Monetary Fund ("IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly issued Brady Bonds.
Brady Bonds may also be issued in respect of new money being advanced by
existing lenders in connection with the debt restructuring. The World Bank and
the IMF support the restructuring by providing funds pursuant to loan
agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount.

There can be no assurance that the circumstances regarding the
issuance of Brady Bonds by these countries will not change. Investors should
recognize that Brady Bonds have been issued only recently, and accordingly do
not have a long payment history. Agreements implemented under the Brady Plan
to date are designed to achieve debt and debt-service reduction through
specific options negotiated by a debtor nation with its creditors. As a
result, the financial packages offered by each country differ. The types of
options have included the exchange of outstanding commercial bank debt for
bonds issued at 100% of face value of such debt, which carry a below-market
stated rate of interest (generally known as par bonds), bonds issued at a
discount from the face value of such debt (generally known as discount bonds),
bonds bearing an interest rate which increases over time, and bonds issued in
exchange for the advancement of new money by existing lenders. Regardless of
the stated face amount and stated interest rate of the various types of Brady
Bonds, the Funds will purchase Brady Bonds in secondary markets, as described
below, in which the price and yield to the investor reflect market conditions
at the time of purchase.

Certain Brady Bonds have been collateralized as to principal due at
maturity by U.S. Treasury zero coupon bonds with maturities equal to the final
maturity of such Brady Bonds. Collateral purchases are financed by the IMF,
the World Bank, and the debtor nations' reserves. In the event of a default
with respect to collateralized Brady Bonds as a result of which the payment
obligations of the issuer are accelerated, the U.S. Treasury zero coupon
obligations held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. In addition, interest payments on certain types of Brady Bonds
may be collateralized by cash or high grade securities in amounts that
typically represent between 12 and 18 months of interest accruals on these
instruments with the balance of the interest accruals being uncollateralized.
Brady Bonds are often viewed as having several valuation components: (1) the
collateralized repayment of principal, if any, at final maturity, (2) the
collateralized interest payments, if any, (3) the uncollateralized interest
payments, and (4) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In light of
the residual risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and private entities
of countries issuing Brady Bonds, investments in Brady Bonds are to be viewed
as speculative. The Funds may purchase Brady Bonds with no or limited
collateralization, and will be relying for payment of interest and (except in
the case of principal collateralized Brady Bonds) principal primarily on the
willingness and ability of the foreign government to make payment in accordance
with the terms of the Brady Bonds. Brady Bonds issued to date are purchased
and sold in secondary markets through U.S. securities dealers and other
financial institutions and are generally maintained through European
transnational securities depositories.

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VARIABLE- OR FLOATING-RATE SECURITIES

The Short-Term Global Bond Fund and International Bond Funds may
invest in securities which offer a variable- or floating-rate of interest.
Variable-rate securities provide for automatic establishment of a new interest
rate at fixed intervals (e.g., daily, monthly, semi-annually, etc.).
Floating-rate securities provide for automatic adjustment of the interest rate
whenever some specified interest rate index changes. The interest rate on
variable- or floating-rate securities is ordinarily determined by reference to
or as a percentage of a bank's prime rate, the 90-day U.S. Treasury bill rate,
the rate of return on commercial paper or bank certificates of deposit, an
index of short-term interest rates, or some other objective measure.

Variable- or floating-rate securities frequently include a demand
feature entitling the holder to sell the securities to the issuer at par. In
many cases, the demand feature can be exercised at any time on 7 days notice;
in other cases, the demand feature is exercisable at any time on 30 days notice
or on similar notice at intervals of not more than one year. Some securities
which do not have variable or floating interest rates may be accompanied by
puts producing similar results and price characteristics. When considering the
maturity of any instrument which may be sold or put to the issuer or a third
party, each Fund may consider that instrument's maturity to be shorter than its
stated maturity.

Variable-rate demand notes include master demand notes which are
obligations that permit a Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between a Fund, as
lender, and the borrower. The interest rates on these notes fluctuate from
time to time. The issuer of such obligations normally has a corresponding
right, after a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a specified
number of days notice to the holders of such obligations. The interest rate on
a floating-rate demand obligation is based on a known lending rate, such as a
bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable-rate demand obligation is adjusted
automatically at specified intervals. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments will generally be
traded. There generally is not an established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, a Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies, and if not so rated, the Funds may
invest in them only if the Funds' Advisor determines that at the time of
investment the obligations are of comparable quality to the other obligations
in which the Funds may invest. The Advisor, on behalf of the Funds, will
consider on an ongoing basis the creditworthiness of the issuers of the
floating- and variable-rate demand obligations in the Funds' portfolio.

Each Fund will not invest more than 15% of its net assets in variable-
and floating-rate demand obligations that are not readily marketable (a
variable- or floating-rate demand obligation that may be disposed of on not
more than seven days notice will be deemed readily marketable and will not be
subject to this limitation). (See "Illiquid Securities" and "Investment
Restrictions.") In addition, each variable- or floating-rate obligation must
meet the credit quality requirements applicable to all the Funds' investments
at the time of purchase. When determining whether such an obligation meets a
Fund's credit quality requirements, the Fund may look to the credit quality of
the financial guarantor providing a letter of credit or other credit support
arrangement.

DIRECTORS AND OFFICERS OF THE FUNDS

Directors and officers of the Funds, together with information as to
their principal business occupations during the last five years, and other
information are shown below. Each director who is deemed an "interested
person," as defined in the 1940 Act, is indicated by an asterisk. Each officer
and director holds the same position with the following registered investment
companies: Strong Advantage Fund, Inc.; Strong American Utilities Fund, Inc.;
Strong Asset Allocation Fund, Inc.; Strong Common Stock Fund, Inc.; Strong
Corporate Bond Fund, Inc.; Strong Discovery Fund, Inc.; Strong Government
Securities Fund, Inc.; Strong Growth Fund, Inc.; Strong Heritage Reserve
Series, Inc.; Strong High-Yield Municipal Bond Fund, Inc.; Strong Insured
Municipal Bond Fund, Inc.; Strong Money Market Fund, Inc.; Strong Municipal
Bond Fund, Inc.; Strong Municipal Money Market Fund, Inc.; Strong Opportunity
Fund, Inc.; Strong Short-Term Bond Fund, Inc.; Strong Short-Term Municipal Bond
Fund, Inc.; Strong Total Return Fund, Inc.; and Strong U.S. Treasury Money
Fund, Inc. (collectively, the "Strong Funds") and Strong Institutional Funds,
Inc.; Strong Special Fund II, Inc.; and Strong Variable Insurance Funds, Inc.

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*Richard S. Strong (DOB 5/12/42), Chairman of the Board and Director
of the Funds.

Prior to August 1985, Mr. Strong was Chief Executive Officer of the
Advisor, which he founded in 1974. Since August 1985, Mr. Strong has been a
Security Analyst and Portfolio Manager of the Advisor. In October 1991, Mr.
Strong also became the Chairman of the Advisor. Mr. Strong is a director of
the Advisor. Since October 1993, Mr. Strong has been Chairman and a director
of Strong Holdings, Inc., a Wisconsin corporation and subsidiary of the Advisor
("Holdings"), and the Fund's underwriter, Strong Funds Distributors, Inc., a
Wisconsin corporation and subsidiary of Holdings ("Distributor"). Since
January 1994, Mr. Strong has been Chairman and a director of Heritage Reserve
Development Corporation, a Wisconsin Corporation and subsidiary of Holdings;
and since February 1994, Mr. Strong has been a member of the Managing Boards of
Fussville Real Estate Holdings L.L.C., a Wisconsin Limited Liability Company
and subsidiary of the Advisor, and Fussville Development L.L.C., a Wisconsin
Limited Liability Company and subsidiary of the Advisor, and certain of its
subsidiaries. Mr. Strong has served as a director of the Asia Pacific Fund
since incorporation in December 1990 and as chairman of the Board since October
1993; as a director of the International Stock Fund since its incorporation in
December 1990 and as chairman of the Board since January 1992; and as a
director and Chairman of the Board of the International Bond and Short-Term
Global Bond Funds since January 1994. Mr. Strong has been in the investment
management business since 1967.

Marvin E. Nevins (DOB 7/19/18), Director of the Funds.

Private Investor. From 1945 to 1980, Mr. Nevins was Chairman of
Wisconsin Centrifugal Inc., a foundry. From July 1983 to December 1986, he was
Chairman, General Casting Corp., Waukesha, Wisconsin, a foundry. Mr. Nevins is
a former Chairman of the Wisconsin Association of Manufacturers & Commerce. He
was also a regent of the Milwaukee School of Engineering and a member of the
Board of Trustees of the Medical College of Wisconsin. Mr. Nevins has served
as a director of the International Stock and Asia Pacific Funds since their
inception in December 1990 and as director of the International Bond and
Short-Term Global Bond Funds since January 1994.

Willie D. Davis (DOB 7/24/34), Director of the Funds.

Mr. Davis has been director of Alliance Bank since 1980, Sara Lee
Corporation (a food/consumer products company) since 1983, KMart Corporation (a
discount consumer products company) since 1985, YMCA Metropolitan - Los Angeles
since 1985, Dow Chemical Company since 1988, MGM Grand, Inc. (an
entertainment/hotel company) since 1990, WICOR, Inc. (a utility company) since
1990, Johnson Controls, Inc. (an industrial company) since 1992, L.A. Gear (a
footwear/sportswear company) since 1992, and Rally's Hamburger, Inc. since
1994. Mr. Davis has been a trustee of the University of Chicago since 1980,
Marquette University since 1988, and Occidental College since 1990. Since
1977, Mr. Davis has been President and Chief Executive Officer of All Pro
Broadcasting, Inc. Mr. Davis was a director of the Fireman's Fund (an
insurance company) from 1975 until 1990. Mr. Davis has served as a director of
the Funds since July 1994.

*John Dragisic (DOB 11/26/40), Vice Chairman and Director of the Funds.

Mr. Dragisic has been Vice Chairman of the Advisor and director of
Holdings and Distributor since July 1994. Mr. Dragisic previously served as a
director of the International Stock and Asia Pacific Funds from January 1992
until July 1994 and as director of the International Bond and Short-Term Global
Bond Funds from January 1994 until July 1994. Mr. Dragisic was the President
and Chief Executive Officer of Grunau Company, Inc. (a mechanical contracting
and engineering firm), Milwaukee, Wisconsin from 1987 until July 1994. From
1981 to 1987, he was an Executive Vice President with Grunau Company, Inc.
From 1969 until 1973, Mr. Dragisic worked for the Inter American Development
Bank. Mr. Dragisic received his Ph.D. in Economics in 1971 from the
University of Wisconsin-Madison, and his B.A. degree in Economics in 1962 from
Lake Forest College. Mr. Dragisic has been Vice Chairman of the Funds since
July 1994 and as a director of the Funds since April 1995.

Stanley Kritzik (DOB 1/9/30), Director of the Funds.

Mr. Kritzik has been a Partner of Metropolitan Associates since 1962,
a Director of Aurora Health Care since 1987, and Health Network Ventures, Inc.
since 1992. He has served as a director of the Funds since April 1995.

25
<PAGE> 74

William F. Vogt (DOB 7/19/47), Director of the Funds.

Mr. Vogt has been the President of Vogt Management Consulting, Inc.
since 1990. From 1982 until 1990, he served as Executive Director of
University Physicians of the University of Colorado. Mr. Vogt is the Past
President of the Medical Group Management Association and a Fellow of the
American College of Medical Practice Executives. He has served as a director
of the Funds since April 1995.

Lawrence A. Totsky (DOB 5/6/59), C.P.A., Vice President of the Funds.

Mr. Totsky has been Senior Vice President of the Advisor since
September 1994. Mr. Totsky served as Vice President of the Advisor from
December 1992 to September 1994. Mr. Totsky acted as the Advisor's Manager of
Shareholder Accounting and Compliance from June 1987 to June 1991 when he was
named Director of Mutual Fund Administration. Mr. Totsky has been a Vice
President of the International Stock Fund since May 1993, the Asia Pacific Fund
since October 1993, and the International Bond and Short-Term Global Bond Funds
since January 1994.

Thomas P. Lemke (DOB 7/30/54), Vice President of the Funds.

Mr. Lemke has been Senior Vice President, Secretary, and General
Counsel of the Advisor since September 1994. For two years prior to joining
the Advisor, Mr. Lemke acted as Resident Counsel for Funds Management at J.P.
Morgan & Co., Inc. From February 1989 until April 1992, Mr. Lemke acted as
Associate General Counsel to Sanford C. Bernstein Co., Inc. For two years
prior to that, Mr. Lemke was Of Counsel at the Washington D.C. law firm of Tew
Jorden & Schulte, a successor of Finley, Kumble Wagner. From August 1979 until
December 1986, Mr. Lemke worked at the Securities and Exchange Commission, most
notably as the Chief Counsel to the Division of Investment Management (November
1984 - December 1986), and as Special Counsel to the Office of Insurance
Products, Division of Investment Management (April 1982 - October 1984). Mr.
Lemke has been a Vice President of the Funds since October 1994.

Ann E. Oglanian (DOB 12/7/61), Secretary of the Funds.

Ms. Oglanian has been an Associate Counsel of the Advisor since
January 1992. Ms. Oglanian acted as Associate Counsel for the Chicago-based
investment management firm, Kemper Financial Services, Inc. from June 1988
until December 1991. Ms. Oglanian has been the Secretary of the Funds since
May 1994.

Ronald A. Neville (DOB 5/21/47), C.P.A., Treasurer of the Funds.

Mr. Neville has been the Senior Vice President and Chief Financial
Officer of the Advisor since January 1995. For fourteen years prior to that,
Mr. Neville worked at Twentieth Century Companies, Inc., most notably as Senior
Vice President and Chief Financial Officer (1988 until December 1994). Mr.
Neville received his M.B.A. in 1972 from the University of Missouri - Kansas
City and his B.A. degree in Business Administration and Economics in 1969 from
Drury College. Mr. Neville has been the Treasurer of the Funds since April
1995.

Except for Messrs. Nevins, Davis, Kritzik and Vogt, the address of all
of the above persons is P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Nevins'
address is 6075 Pelican Bay Boulevard, Naples, Florida 33963. Mr. Davis'
address is 161 North La Brea, Inglewood, California 90301. Mr. Kritzik's
address is 1123 North Astor Street, P.O. Box 92547, Milwaukee, Wisconsin
53202-0547. Mr. Vogt's address is 2830 Third Street Avenue, Denver, Colorado
80206.

The mutual fund complex that is managed by the Advisor, which is
composed of 26 open-end management investment companies consisting of 31 mutual
funds, of which the Funds are a part, in the aggregate, pays each Director who
is not a director, officer, or employee of the Advisor, or any affiliated
company (a "disinterested director") an annual fee of $50,000, plus $100 per
Board meeting for each mutual fund. In addition, each disinterested director
is reimbursed by the mutual funds for travel and other expenses incurred in
connection with attendance at such meetings. Other officers and directors of
the mutual funds receive no compensation or expense reimbursement from the
mutual funds.

As of March 31, 1995, the officers and directors of the International
Stock Fund in the aggregate beneficially owned less than 1% of the Fund's then
outstanding shares. As of March 31, 1995, the officers and directors of the
Short-Term Global Bond

26
<PAGE> 75

Fund in the aggregate beneficially owned 22,059 shares of common stock, which
was approximately 1.76% of the Fund's then outstanding shares. As of March 31,
1995, the officers and directors of the International Bond Fund in the
aggregate beneficially owned 27,894 shares of common stock, which was
approximately 2.99% of the Fund's then outstanding shares. As of March 31,
1995, the officers and directors of the Asia Pacific Fund in the aggregate
beneficially owned 61,697 shares of the Fund's common stock, which was
approximately 1.05% of the Fund's then outstanding shares. These figures
include 4,850 shares of the Short-Term Global Bond Fund; 11,574 shares of the
International Bond Fund; and 37,869 shares of the Asia Pacific Fund held by the
Advisor's Restated Pension Trust and Profit Sharing Trust for the benefit of
the employees of the Advisor. Mr. Dragisic and Mr. Richard T. Weiss are
trustees of these trusts.

PRINCIPAL SHAREHOLDERS

As of March 31, 1995, the following persons owned of record or are
known by the Funds to own of record or beneficially, more than 5% of the listed
Fund's outstanding shares:

<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PERCENT OF CLASS
---------------- ------ ----------------
<S> <C> <C>
Short-Term Global Bond
- ----------------------
Charles Schwab & Co., Inc. 125,229 9.99%
101 Montgomery Street
San Francisco, California 94104

International Bond
- ------------------
Oshkosh B'Gosh, Inc. 209,839 22.45%
P.O. Box 300
Oshkosh, Wisconsin 54902

Managed Health Services, Inc. 122,896 13.15
890 Elm Grove Road, #213
Elm Grove, Wisconsin 53122

Schneider National, Inc. 104,919 11.23
P.O. Box 2545
Green Bay, Wisconsin 54306

Marshall & Ilsley Trust Co. 76,235 8.16
1000 North Water Street
Milwaukee, Wisconsin 53202

Charles Schwab & Co., Inc. 64,347 6.89

Roundy's, Inc. 49,594 5.31
P.O. Box 473
Milwaukee, Wisconsin 53201
</TABLE>

27
<PAGE> 76

<TABLE>
<S> <C> <C>
International Stock
- -------------------
Charles Schwab & Co., Inc. 2,926,034 15.97

Asia Pacific
- ------------
Charles Schwab & Co., Inc. 386,079 6.56
</TABLE>

INVESTMENT ADVISOR AND DISTRIBUTOR

The Advisor to the Funds is Strong Capital Management, Inc. Mr.
Richard S. Strong controls the Advisor. Mr. Strong is the Chairman and a
Director of the Advisor, Mr. Dragisic is the Vice Chairman and a Director of
the Advisor, Mr. Totsky is a Senior Vice President of the Advisor, Mr. Lemke is
a Senior Vice President, Secretary, and General Counsel of the Advisor, Mr.
Neville is a Senior Vice President and Chief Financial Officer of the Advisor,
and Ms. Oglanian is the Associate Counsel of the Advisor. A brief description
of each Fund's investment advisory agreement ("Advisory Agreement") is set
forth in the Prospectus under "About the Funds - Management."

Each Fund's Advisory Agreement, dated May 1, 1995, was last approved
by shareholders at the annual meeting of shareholders held on April 13, 1995.
Each Advisory Agreement is required to be approved annually by its Board of
Directors or by vote of a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act). In either case, such annual renewal must be
approved by the vote of a majority of the Fund's directors who are not parties
to the Advisory Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval. Each
Advisory Agreement is terminable, without penalty, on 60 days written notice by
the Board of Directors of the Fund, by vote of a majority of the Fund's
outstanding voting securities, or by the Advisor. In addition, an Advisory
Agreement will terminate automatically in the event of its assignment.

Under the terms of each Advisory Agreement, the Advisor manages a
Fund's investments subject to the supervision of the Fund's Board of Directors.
The Advisor is responsible for investment decisions and supplies investment
research and portfolio management. At its expense, the Advisor provides office
space and all necessary office facilities, equipment, and personnel for
servicing the investments of the Fund. The Advisor places all orders for the
purchase and sale of the Fund's portfolio securities at its expense.

Except for expenses assumed by the Advisor as set forth above or by
the Distributor as described below with respect to the distribution of a Fund's
shares, each Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions, and similar
expenses; expenses of issue, sale, repurchase, or redemption of shares;
expenses of registering or qualifying shares for sale; expenses for printing
and distribution costs of Prospectuses and quarterly financial statements
mailed to existing shareholders; and charges of custodians, transfer agent fees
(including the printing and mailing of reports and notices to shareholders),
fees of registrars, fees for auditing and legal services, fees for clerical
services related to recordkeeping and shareholder relations, the cost of stock
certificates, and fees for directors who are not "interested persons" of the
Advisor.

As compensation for its services, the Short-Term Global Bond Fund pays
to the Advisor a monthly management fee at the annual rate of .625% of the
Fund's average daily net assets, the International Bond Fund pays to the
Advisor a monthly management fee at the annual rate of .70% of the Fund's
average daily net assets, and the International Stock and Asia Pacific Funds
pay to the Advisor a monthly management fee at the annual rate of 1.00% of the
average daily net asset value of each Fund. (See "Shareholder Manual --
Determining Your Share Price" in the Prospectus.) From time to time, the
Advisor may voluntarily waive all or a portion of its management fee for a
Fund. The organizational expenses of the Short-Term Global Bond,
International Bond, International Stock, and Asia Pacific Funds, which were
$81,832; $79,833; $101,429; and $41,963.57, respectively, were advanced by the
Advisor and will be reimbursed by each Fund over a period of not more than 60
months from each Fund's date of inception.

28
<PAGE> 77

The following table sets forth certain information concerning management fees
for each Fund:

<TABLE>
<CAPTION>
Management Fee
Incurred Management Fee Management Fee
by Fund Waiver Paid by Fund
--------- ------- ------------
<S> <C> <C> <C>
Short-Term Global Bond Fund(1)
1994 $ 46,721 $46,721 $ 0

International Bond Fund(1)
1994 $ 36,200 $36,200 $ 0

International Stock Fund
1992 $ 76,667 $ 0 $ 76,667
1993 $ 442,908 $ 0 $ 442,908
1994 $2,517,498 $ 0 $2,517,498

Asia Pacific Fund(2)
1994 $ 513,781 $ 0 $ 513,781
</TABLE>

- -----------------------

(1) Commenced operations on March 31, 1994.
(2) Commenced operations on December 31, 1993.

Each Advisory Agreement requires the Advisor to reimburse a Fund in
the event that the expenses and charges payable by the Fund in any fiscal year,
including the management fee but excluding taxes, interest, brokerage
commissions, and similar fees and to the extent permitted extraordinary
expenses, exceed that percentage of the average net asset value of the Fund for
such year. Such excess is determined by valuations made as of the close of
each business day of the year, which is the most restrictive percentage
provided by the state laws of the various states in which the Funds' common
stock is qualified for sale; or if the states in which the Funds' common stock
is qualified for sale impose no restrictions, the Advisor shall reimburse the
Funds in the event the expenses and charges payable by a Fund in any fiscal
year (as described above) exceed 2%. The most restrictive percentage
limitation currently applicable to the Funds is 2 1/2% of its average daily net
assets up to $30,000,000, 2% on the next $70,000,000 of its average daily net
assets, and 1 1/2% of its average daily net assets in excess of $100,000,000.
Reimbursement of expenses in excess of the applicable limitation will be made
on a monthly basis and will be paid to a Fund by reduction of the Advisor's
fee, subject to later adjustment, month by month, for the remainder of the
Fund's fiscal year. The Advisor may from time to time voluntarily absorb
expenses for a Fund in addition to the reimbursement of expenses in excess of
applicable limitations.

On July 12, 1994, the Securities and Exchange Commission (the SEC)
filed an administrative action (Order) against the Advisor, Mr. Strong, and
another employee of the Advisor in connection with conduct that occurred
between 1987 and early 1990. In re Strong/Corneliuson Capital Management, Inc.,
et al. Admin. Proc. File No. 3-8411. The proceeding was settled by consent
without admitting or denying the allegations in the Order. The Order alleged
that the Advisor and Mr. Strong aided and abetted violations of Section 17(a)
of the 1940 Act by effecting trades between mutual funds, and between mutual
funds and Harbour Investments Ltd. ("Harbour"), without complying with the
exemptive provisions of SEC Rule 17a-7 or otherwise obtaining an exemption. It
further alleged that the Advisor violated, and Mr. Strong aided and abetted
violations of, the disclosure provisions of the 1940 Act and the Investment
Advisers Act of 1940 by misrepresenting the Advisor's policy on personal
trading and by failing to disclose trading by Harbour, an entity in which
principals of the Advisor owned between 18 and 25 percent of the voting stock.
As part of the settlement, the respondents agreed to a censure and a cease and
desist order and the Advisor agreed to various undertakings, including adoption
of certain procedures and a limitation for six months on accepting certain
types of new advisory clients.

The staff of the U.S. Department of Labor (the "Staff") has contacted
the Advisor regarding alleged cross-trading of securities between 1987 and
early 1990 involving various customer accounts subject to the Employee
Retirement Security Act of 1974 ("ERISA") and managed by the Advisor. The
Advisor has informed the Staff of the basis for its position that the trades
complied with ERISA and that, in any event, any alleged noncompliance was not
the cause of any losses to the accounts. The Staff has stated that it
disagrees with the Advisor's positions, although to date it has not filed any
action against the Advisor. At

29
<PAGE> 78
this time, the Advisor is negotiating with the Staff regarding a possible
resolution of the matter, but it cannot presently determine whether the matter
will be settled or litigated or, if it is settled or litigated, how it
ultimately will be resolved. However, management presently believes, based on
current knowledge and the Advisor's insurance coverage, that the ultimate
resolution of this matter should not have a material adverse effect on the
Advisor's financial position.

The Advisor has adopted a Code of Ethics (the "Code") which governs
the personal trading activities of all "Access Persons" of the Advisor. Access
Persons include every director and officer of the Advisor and the investment
companies managed by the Advisor, including the Funds, as well as certain
employees of the Advisor who have access to information relating to the
purchase or sale of securities by the Advisor on behalf of accounts managed by
it. The Code is based upon the principal that such Access Persons have a
fiduciary duty to place the interests of the Advisor's clients ahead of their
own.

The Code requires Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor,
including the Funds) to, among other things, preclear their securities
transactions (with limited exceptions, such as transactions in shares of mutual
funds, direct obligations of the U.S. government, and certain options on
broad-based securities market indexes) and to execute such transactions through
the Advisor's trading department. The Code, which applies to all Access Persons
(other than Access Persons who are independent directors of the investment
companies managed by the Advisor, including the Funds), includes a ban on
acquiring any securities in an initial public offering, other than a new
offering of a registered open-end investment company, and a prohibition from
profiting on short-term trading in securities. In addition, no Access Person
may purchase or sell any security which, at the time, is being purchased or
sold, or to the knowledge of the Access Person, is being considered for
purchase or sale, by the Advisor on behalf of any mutual fund or other account
managed by it. Finally, the Code provides for trading "black out" periods
which prohibit trading by Access Persons who are portfolio managers within
seven calendar days of trading in the same securities by any mutual fund or
other account managed by the portfolio manager.

Under Distribution Agreements dated March 3, 1994, with the
International Bond and Short-Term Global Bond Funds; December 1, 1993, with the
International Stock Fund; and December 20, 1993, with the Asia Pacific Fund
(collectively, the "Distribution Agreements"), Strong Funds Distributors, Inc.
("Distributor"), a subsidiary of the Advisor, acts as underwriter of each
Funds' shares. Each Distribution Agreement provides that the Distributor will
use its best efforts to distribute the Funds' shares. Since the Funds are
"no-load" funds, no sales commissions are charged on the purchase of a Fund's
shares. Each Distribution Agreement further provides that the Distributor will
bear the additional costs of printing Prospectuses and shareholder reports
which are used for selling purposes, as well as advertising and other costs
attributable to the distribution of the Funds' shares. The Distributor is an
indirect subsidiary of the Advisor and controlled by the Advisor and Richard S.
Strong. Each Distribution Agreement is subject to the same termination and
renewal provisions as are described above with respect to the Advisory
Agreements.

From time to time, the Distributor may hold in-house sales incentive
programs for its associated persons under which these persons may receive
non-cash compensation awards in connection with the sale and distribution of a
Fund's shares. These awards may include items such as, but not limited to,
gifts, merchandise, gift certificates, and payment of travel expenses, meals
and lodging. As required by the National Association of Securities Dealers,
Inc. or NASD's proposed rule amendments in this area, any in-house sales
incentive program will be multi-product oriented, i.e., any incentive will be
based on an associated person's gross production of all securities within a
product type and will not be based on the sales of shares of any specifically
designated mutual fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Advisor is responsible for decisions to buy and sell securities
for the Funds and for the placement of the Funds' portfolio business and the
negotiation of the commissions to be paid on such transactions. It is the
policy of the Advisor to seek the best execution at the best security price
available with respect to each transaction, in light of the overall quality of
brokerage and research services provided to the Advisor or the Funds. In
over-the-counter transactions, orders are placed directly with a principal
market maker unless it is believed that a better price and execution can be
obtained using a broker. The best price to the Funds means the best net price
without regard to the mix between purchase or sale price and commission, if
any. In selecting broker-dealers and in negotiating commissions, the Advisor
considers a variety of factors, including best price and execution, the full
range of brokerage services provided by the broker, as well as its capital
strength and stability, and the quality of the research and research services
provided by the broker. Brokerage will not be allocated based on the sale of
any shares of the Strong Funds.

30
<PAGE> 79

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment advisor, under certain circumstances, to cause an account
to pay a broker-dealer a commission for effecting a transaction in excess of
the amount of commission another broker-dealer would have charged for effecting
the transaction in recognition of the value of the brokerage and research
services provided by the broker or dealer. Brokerage and research services
include (a) furnishing advice as to the value of securities, the advisability
of investing, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; (b) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy, and the performance of accounts; and (c) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement, and custody).

In carrying out the provisions of the Advisory Agreements, the Advisor
may cause the Funds to pay a broker, which provides brokerage and research
services to the Advisor, a commission for effecting a securities transaction in
excess of the amount another broker would have charged for effecting the
transaction. The Advisor believes it is important to its investment
decision-making process to have access to independent research. The Advisory
Agreements provide that such higher commissions will not be paid by the Funds
unless (a) the Advisor determines in good faith that the amount is reasonable
in relation to the services in terms of the particular transaction or in terms
of the Advisor's overall responsibilities with respect to the accounts as to
which it exercises investment discretion; (b) such payment is made in
compliance with the provisions of Section 28(e), other applicable state and
federal laws, and the Advisory Agreements; and (c) in the opinion of the
Advisor, the total commissions paid by a Fund will be reasonable in relation to
the benefits to a Fund over the long term. The investment management fees paid
by the Funds under the Advisory Agreements are not reduced as a result of the
Advisor's receipt of research services.

Generally, research services provided by brokers may include
information on the economy, industries, groups of securities, individual
companies, statistical information, accounting and tax law interpretations,
political developments, legal developments affecting portfolio securities,
technical market action, pricing and appraisal services, credit analysis, risk
measurement analysis, performance analysis, and analysis of corporate
responsibility issues. Such research services are received primarily in the
form of written reports, telephone contacts, and personal meetings with
security analysts. In addition, such research services may be provided in the
form of access to various computer-generated data, computer hardware and
software, and meetings arranged with corporate and industry spokespersons,
economists, academicians, and government representatives. In some cases,
research services are generated by third parties but are provided to the
Advisor by or through brokers. Such brokers may pay for all or a portion of
computer hardware and software costs relating to the pricing of securities.

Where the Advisor itself receives both administrative benefits and
research and brokerage services from the services provided by brokers, it makes
a good faith allocation between the administrative benefits and the research
and brokerage services, and will pay for any administrative benefits with cash.
In making good faith allocations of costs between administrative benefits and
research and brokerage services, a conflict of interest may exist by reason of
the Advisor's allocation of the costs of such benefits and services between
those that primarily benefit the Advisor and those that primarily benefit the
Funds and other advisory clients.

From time to time, the Advisor may purchase securities for a Fund in a
fixed price offering. In these situations, the seller may be a member of the
selling group that will, in addition to selling the securities to the Funds and
other advisory clients, provide the Advisor with research. The National
Association of Securities Dealers has adopted rules expressly permitting these
types of arrangements under certain circumstances. Generally, the seller will
provide research "credits" in these situations at a rate that is higher than
that which is available for typical secondary market transactions. These
arrangements may not fall within the safe harbor of Section 28(e).

Each year, the Advisor considers the amount and nature of research and
research services provided by brokers, as well as the extent to which such
services are relied upon, and attempts to allocate a portion of the brokerage
business of the Funds and other advisory clients on the basis of that
consideration. In addition, brokers may suggest a level of business they would
like to receive in order to continue to provide such services. The actual
brokerage business received by a broker may be more or less than the suggested
allocations, depending upon the Advisor's evaluation of all applicable
considerations.

31
<PAGE> 80

During its last fiscal year, the Advisor had an arrangement with
various brokers whereby, in consideration of the providing of research
services, the Advisor allocated brokerage to those firms, provided that their
brokerage and research services were satisfactory to the Advisor and their
execution capabilities were compatible with the Advisor's policy of seeking
best execution at the best security price available, as discussed above.

The Advisor may direct the purchase of securities on behalf of the
Funds and other advisory clients in secondary market transactions, in public
offerings directly from an underwriter, or in privately negotiated transactions
with an issuer. When the Advisor believes the circumstances so warrant,
securities purchased in public offerings may be resold shortly after
acquisition in the immediate aftermarket for the security in order to take
advantage of price appreciation from the public offering price or for other
reasons. Short-term trading of securities acquired in public offerings, or
otherwise, may result in higher portfolio turnover and associated brokerage
expenses.

With respect to the International Stock and Asia Pacific Funds, the
Advisor is responsible for selecting brokers in connection with foreign
securities transactions. The fixed commissions paid in connection with most
foreign stock transactions are usually higher than negotiated commissions on
U.S. stock transactions. Foreign stock exchanges and brokers are subject to
less government supervision and regulation as compared with the U.S. exchanges
and brokers. In addition, foreign security settlements may in some instances
be subject to delays and related administrative uncertainties.

The Advisor places portfolio transactions for other advisory accounts,
including other mutual funds managed by the Advisor. Research services
furnished by firms through which the Funds effect their securities transactions
may be used by the Advisor in servicing all of its accounts; not all of such
services may be used by the Advisor in connection with the Funds. In the
opinion of the Advisor, it is not possible to separately measure the benefits
from research services to each of the accounts (including a Fund) managed by
the Advisor. Because the volume and nature of the trading activities of the
accounts are not uniform, the amount of commissions in excess of those charged
by another broker paid by each account for brokerage and research services will
vary. However, in the opinion of the Advisor, such costs to the Funds will not
be disproportionate to the benefits received by the Funds on a continuing
basis.

The Advisor seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by each
Fund and another advisory account. In some cases, this procedure could have an
adverse effect on the price or the amount of securities available to a Fund.
In making such allocations between a Fund and other advisory accounts, the main
factors considered by the Advisor are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and the opinions of the persons responsible for recommending
the investment.

Transactions in futures contracts are executed through futures
commission merchants ("FCMs"). The Funds' procedures in selecting FCMs to
execute the Funds' transactions in futures contracts are similar to those in
effect with respect to brokerage transactions in securities.

The Short-Term Global Bond Fund paid brokerage commissions during 1994
of approximately $1,000. The International Bond Fund paid brokerage
commissions during 1994 of approximately $1,000. The International Stock Fund
paid brokerage commissions during 1992, 1993, and 1994 of approximately
$62,000, $592,000, and $2,405,000, respectively. The Asia Pacific Fund paid
brokerage commissions during 1994 of approximately $657,000.

As of December 31, 1994, each Fund had acquired securities of its
regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or
their parents in the following amounts:

<TABLE>
<CAPTION>
Regular Broker or Dealer or Parent Issuer Value of Securities Owned as of December 31, 1994*
----------------------------------------- -------------------------------------------------
<S> <C>
Short-Term Global:
Citibank $ 529,000

International Bond:
Citibank $1,096,000
</TABLE>

32
<PAGE> 81

<TABLE>
<S> <C>
International Stock:
Jardine Matheson Holdings, Ltd. $2,085,000

Asia Pacific:
Jardine Matheson Holdings, Ltd. $ 614,000
</TABLE>

* To the nearest thousand.

CUSTODIAN

As custodian of the Funds' assets, Brown Brothers Harriman & Co., 40
Water Street, Boston, Massachusetts 02109, has custody of all securities and
cash of the Funds, delivers and receives payment for securities sold, receives
and pays for securities purchased, collects income from investments, and
performs other duties, all as directed by officers of the Funds. The custodian
is in no way responsible for any of the investment policies or decisions of the
Funds. In addition, the Funds, with the approval of the Board of Directors and
subject to the rules of the SEC, will have sub-custodians in those foreign
countries in which their respective assets may be invested. The custodian and,
if applicable, the sub-custodian are in no way responsible for any of the
investment policies or decisions of the Funds.

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

The Advisor acts as dividend-disbursing agent and transfer agent for
the Funds. The Advisor is compensated based on an annual fee per open account
of $31.50 for the International Bond and Short-Term Global Bond Funds and
$21.75 for the International Stock and Asia Pacific Funds, plus certain
out-of-pocket expenses, such as postage and printing expenses in connection
with shareholder communications. The Advisor also receives an annual fee per
closed account of $4.20 from each Fund, payable monthly. The fees received and
the services provided as transfer agent and dividend-disbursing agent are in
addition to the fees received and services provided by the Advisor under the
Advisory Agreements. In addition, the Advisor provides certain printing and
mailing services for the Funds, such as printing and mailing of shareholder
account statements, checks and tax forms.

The following table sets forth certain information concerning amounts
paid by the Funds for transfer agency and dividend disbursing and printing and
mailing services:

<TABLE>
<CAPTION>
Transfer Agency and Dividend Disbursement
Services Charges Incurred
-----------------------------------------------------------------------------
Per Printing and Amounts Net Amount
Account Expense Mailing Waived By Paid By
Fund Charges Reimbursements Services Advisor Fund
-------- ------- -------------- -------- ------- -----
<S> <C> <C> <C> <C>
Short-Term Global Bond Fund
1994 $ 12,752 $ 6,945 $ 401 $20,098 $ 0
International Bond Fund
1994 $ 5,991 $ 6,255 $ 252 $12,498 $ 0
International Stock Fund
1992 $ 35,865 $ 23,461 $ 941 $ 0 $ 60,267
1993 134,884 44,319 5,731 0 $184,934
1994 749,157 154,218 18,947 0 922,322
Asia Pacific Fund
1994 $217,293 $ 45,741 $ 5,778 $ 0 $268,812
</TABLE>

- ------------------------------------

33
<PAGE> 82

From time to time, the Funds, directly or indirectly through
arrangements with the Advisor, may pay amounts to third parties that provide
transfer agent and other administrative services relating to the Funds to
persons who beneficially own interests in the Funds, such as participants in
401(k) plans. These services may include, among other things, sub-accounting
services, answering inquiries relating to the Funds, transmitting, on behalf of
the Funds, proxy statements, annual reports, updated Prospectuses, other
communications regarding the Funds, and related services as the Funds or
beneficial owners may reasonably request. In such cases, the Funds will not
pay fees at a rate that is greater than the rate the Funds are currently paying
the Advisor for providing these services to Fund shareholders.

TAXES

GENERAL

As indicated under "About the Funds - Distributions and Taxes" in the
Prospectus, each Fund intends to continue to qualify annually for treatment as
a regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended ("Code"). This qualification does not involve government
supervision of the Funds' management practices or policies.

In order to qualify for treatment as a RIC under the Code, each Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign
currency transactions) ("Distribution Requirement") and must meet several
additional requirements. For each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, futures, or forward
contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three months
- - options or futures (other than those on foreign currencies), or foreign
currencies (or options, futures, or forward contracts thereon) that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) ("30% Limitation"); (3) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs, and other securities, with these other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Fund's total assets and that does not represent
more than 10% of the issuer's outstanding voting securities; and (4) at the
close of each quarter of the Fund's taxable year, not more than 25% of the
value of its total assets may be invested in securities (other than U.S.
government securities or the securities of other RICs) of any one issuer.

If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital
loss to the extent of any capital gain distributions received on those shares.

Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

FOREIGN TRANSACTIONS

Interest and dividends received by a Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
a Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, it will be eligible to, and may, file an election with
the Internal Revenue Service that would enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. Pursuant to the election, a Fund
would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by him, his proportionate share of those taxes, (2) treat his share of those
taxes and of any dividend paid by the Fund that represents income from foreign
or U.S. possessions sources as his own income from those sources, and (3)
either deduct the taxes deemed paid by him in computing his taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income

34
<PAGE> 83

tax. Each Fund will report to its shareholders shortly after each taxable year
their respective shares of its income from sources within, and taxes paid to,
foreign countries and U.S. possessions if it makes this election.

Each Fund maintains its accounts and calculates its income in U.S.
dollars. In general, gain or loss (1) from the disposition of foreign
currencies and forward currency contracts, (2) from the disposition of
foreign-currency-denominated debt securities that are attributable to
fluctuations in exchange rates between the date the securities are acquired and
their disposition date, and (3) attributable to fluctuations in exchange rates
between the time a Fund accrues interest or other receivables or expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects those receivables or pays those liabilities, will be treated
as ordinary income or loss. A foreign-currency-denominated debt security
acquired by a Fund may bear interest at a high nominal rate that takes into
account expected decreases in the value of the principal amount of the security
due to anticipated currency devaluations; in that case, a Fund would be
required to include the interest in income as it accrues but generally would
realize a currency loss with respect to the principal only when the principal
was received (through disposition or upon maturity).

Each Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a portion of any "excess distribution"
received on the stock or of any gain on disposition of the stock (collectively,
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC
income will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If a Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) -- which probably would have to be distributed to its
shareholders to satisfy the Distribution Requirement and avoid imposition of
the Excise Tax -- even if those earnings and gain were not received by the
Fund. In most instances it will be very difficult, if not impossible, to make
this election because of certain requirements thereof.

The "Tax Simplification and Technical Corrections Bill of 1993,"
passed in May 1994 by the House of Representatives would substantially modify
the taxation of U.S. shareholders of foreign corporations, including
eliminating the provisions described above dealing with PFICs and replacing
them (and other provisions) with a regulatory scheme involving entities called
"passive foreign corporations." Three similar bills were passed by Congress in
1991 and 1992 and were vetoed. It is unclear at this time whether, and in what
form, the proposed modifications may be enacted into law.

Pursuant to proposed regulations, open-end RICs such as the Funds
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market value
of each such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).

DERIVATIVE INSTRUMENTS

The use of derivatives strategies, such as purchasing and selling
(writing) options and futures and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the
character and timing of recognition of the gains and losses the Funds realize
in connection therewith. Gains from the disposition of foreign currencies
(except certain gains therefrom that may be excluded by future regulations),
and income from transactions in options, futures, and forward currency
contracts derived by a Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement. However, income from the disposition of options and
futures (other than those on foreign currencies) will be subject to the 30%
Limitation if they are held for less than three months. Income from the
disposition of foreign currencies, and options, futures, and forward contracts
on foreign currencies, that are not directly related to a Fund's principal
business of investing in securities (or options and futures with respect to
securities) also will be subject to the 30% Limitation if they are held for
less than three months.

If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for

35
<PAGE> 84

purposes of determining whether the Fund satisfies the 30% Limitation. Thus,
only the net gain (if any) from the designated hedge will be included in gross
income for purposes of that limitation. Each Fund intends that, when it
engages in hedging strategies, the hedging transactions will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all of the Funds' hedging transactions. To the extent this
treatment is not available or is not elected by a Fund, it may be forced to
defer the closing out of certain options, futures, or forward currency
contracts beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.

For federal income tax purposes, each Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on options,
futures, and forward currency contracts that are subject to section 1256 of the
Code ("Section 1256 Contracts") and are held by the Fund as of the end of the
year, as well as gains and losses on Section 1256 Contracts actually realized
during the year. Except for Section 1256 Contracts that are part of a "mixed
straddle" and with respect to which a Fund makes a certain election, any gain
or loss recognized with respect to Section 1256 Contracts is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the Section 1256 Contract. Unrealized
gains on Section 1256 Contracts that have been held by a Fund for less than
three months as of the end of its taxable year, and that are recognized for
federal income tax purposes as described above, will not be considered gains on
investments held for less than three months for purposes of the 30% Limitation.

ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES

Each Fund may acquire zero-coupon, step-coupon, or other securities
issued with original issue discount. As a holder of those securities, a Fund
must include in its income the original issue discount that accrues on the
securities during the taxable year, even if the Fund receives no corresponding
payment on the securities during the year. Similarly, a Fund must include in
its income securities it receives as "interest" on pay-in-kind securities.
Because a Fund annually must distribute substantially all of its investment
company taxable income, including any original issue discount and other
non-cash income, to satisfy the Distribution Requirement and avoid imposition
of the Excise Tax, it may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions may be made from the proceeds on sales of
portfolio securities, if necessary. A Fund may realize capital gains or losses
from those sales, which would increase or decrease its investment company
taxable income or net capital gain, or both. In addition, any such gains may
be realized on the disposition of securities held for less than three months.
Because of the 30% Limitation, any such gains would reduce the Fund's ability
to sell other securities, or certain options, futures, or forward currency
contracts, held for less than three months that it might wish to sell in the
ordinary course of its portfolio management.

The foregoing federal tax discussion as well as the tax discussion
contained within the Prospectus under "About the Funds -- Distributions and
Taxes" is intended to provide you with an overview of the impact of federal
income tax provisions on each Fund or its shareholders. These tax provisions
are subject to change by legislative or administrative action at the federal,
state or local level, and any changes may be applied retroactively. Any such
action that limits or restricts each Fund's current ability to pass-through
earnings without taxation at the Fund level, or otherwise materially changes a
Fund's tax treatment, could adversely affect the value of a shareholder's
investment in a Fund. Because each Fund's taxes are a complex matter, you
should consult your tax adviser for more detailed information concerning the
taxation of a Fund and the federal, state, and local tax consequences to
shareholders of an investment in a Fund.

DETERMINATION OF NET ASSET VALUE

As set forth in the Prospectus under the caption "Shareholder Manual
- -- Determining Your Share Price," the net asset value of a Fund will be
determined as of the close of trading on each day the New York Stock Exchange
(the "NYSE") is open for trading. The NYSE is open for trading Monday through
Friday except New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Additionally, if any of the aforementioned holidays fall on a Saturday, the
NYSE will not be open for trading on the preceding Friday, and when any such
holiday falls on a Sunday, the NYSE will not be open for trading on the
succeeding Monday, unless unusual business conditions exist, such as the ending
of a monthly or the yearly accounting period.

36
<PAGE> 85

ADDITIONAL SHAREHOLDER INFORMATION

TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES AND AUTOMATIC EXCHANGE

Shares of the Funds and any other funds sponsored by the Advisor may
be exchanged for each other at relative net asset values. Exchanges will be
effected by redemption of shares of a Fund held and purchase of shares of the
fund for which Fund shares are being exchanged (the "New Fund"). For federal
income tax purposes, any such exchange constitutes a sale upon which a capital
gain or loss will be realized, depending upon whether the value of the shares
being exchanged is more or less than the shareholder's adjusted cost basis. If
you are interested in exercising any of these exchange privileges, you should
obtain Prospectuses of other funds sponsored by the Advisor from the Advisor.
Upon a telephone exchange, the transfer agent establishes a new account in the
New Fund with the same registration and dividend and capital gains options as
the redeemed account, unless otherwise specified, and confirms the purchase to
you.

The Funds employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Funds may not be liable for losses
due to unauthorized or fraudulent instructions. Such procedures include but
are not limited to requiring a form of personal identification prior to acting
on instructions received by telephone, providing written confirmations of such
transactions to the address of record, and tape recording telephone
instructions.

The Telephone Exchange and Redemption Privileges and Automatic
Exchange Plan are available only in states where shares of the New Fund may be
sold, and may be modified or discontinued at any time. Additional information
regarding the Telephone Exchange and Redemption Privileges and Automatic
Exchange Plan is contained in the Funds' Prospectus.

RETIREMENT PLANS

Individual Retirement Account (IRA): Everyone under age 70 1/2 with earned
income may contribute to a tax-deferred IRA. The Strong Funds offer a prototype
plan for you to establish your own IRA. You are allowed to contribute up to the
lesser of $2,000 or 100% of your earned income each year to your IRA. Under
certain circumstances, your contribution will be deductible.

Direct Rollover IRA: To avoid the mandatory 20% federal withholding tax on
distributions, you must transfer the qualified retirement or Code Section
403(b) plan distribution directly into an IRA. This tax cannot be avoided if
you receive a distribution and then roll it over into an IRA. The amount of
your Direct Rollover IRA contribution will not be included in your taxable
income for the year.

Simplified Employee Pension Plan (SEP-IRA): A SEP-IRA allows an employer to
make deductible contributions to separate IRA accounts established for each
eligible employee.

Salary Reduction Simplified Employee Pension Plan (SAR SEP-IRA): A SAR SEP-IRA
is a type of SEP-IRA in which an employer may allow employees to defer part of
their salaries and contribute into an IRA account. These deferrals help lower
the employees' taxable income.

Defined Contribution Plan: A defined contribution plan allows self-employed
individuals, partners, or a corporation to provide retirement benefits for
themselves and their employees. There are three plan types: a profit-sharing
plan, a money purchase pension plan, and a paired plan (a combination of a
profit-sharing plan and a money purchase plan).

401(k) Plan: A 401(k) plan is a type of profit-sharing plan that allows
employees to have part of their salary contributed to a retirement plan which
will earn tax-deferred income. A 401(k) plan is funded by employee
contributions, employer contributions, or a combination of both.

403(b)(7) Plan: A tax-sheltered custodial account designed to qualify under
section 403(b)(7) of the Code is available for use by employees of certain
educational, non-profit, hospital, and charitable organizations.

37
<PAGE> 86

FUND ORGANIZATION

Each Fund is a Wisconsin corporation that is authorized to offer
separate series of shares representing interests in separate portfolios of
securities, each with differing investment objectives. The shares in any one
portfolio may, in turn, be offered in separate classes, each with differing
preferences, limitations or relative rights. However, the Articles of
Incorporation for each of the Funds provides that if additional classes of
shares are issued by a Fund, such new classes of shares may not affect the
preferences, limitations or relative rights of the Fund's outstanding shares.
In addition, the Board of Directors of each Fund is authorized to allocate
assets, liabilities, income and expenses to each series and class. Classes
within a series may have different expense arrangements than other classes of
the same series and, accordingly, the net asset value of shares with a series
may differ. Finally, all holders of shares of a Fund may vote on each matter
presented to shareholders for action except with respect to any matter which
affects only one or more series or class, in which case only the shares of the
affected series or class is entitled to vote. Fractional shares have the same
rights proportionately as do full shares. Shares of the Funds have no
preemptive, conversion, or subscription rights. Each Fund currently has only
one series of common stock outstanding. If a Fund issues additional series, the
assets belonging to each series of shares will be held separately by the
custodian, and in effect each series will be a separate fund.

SHAREHOLDER MEETINGS

Each Fund is a Wisconsin corporation organized on the following dates
and currently has the following authorized shares of capital stock:

<TABLE>
<CAPTION>
Incorporation Authorized
Fund Date Shares Par Value ($)
---- ------------- ----------- -------------
<S> <C> <C> <C>
Short-Term Global Bond Fund January 5, 1994 10,000,000,000 .01
International Bond Fund January 5, 1994 10,000,000,000 .01
International Stock Fund December 28, 1990 10,000,000,000 .00001
Asia Pacific Fund December 28, 1990 10,000,000,000 .00001
</TABLE>

The Wisconsin Business Corporation Law permits registered investment
companies, such as the Funds, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the 1940 Act. Each Fund has adopted the appropriate provisions in their
Bylaws and may, at their discretion, not hold an annual meeting in any year in
which the election of directors is not required to be acted on by shareholders
under the 1940 Act.

Each Fund's Bylaws allow for a director to be removed by its
shareholders with or without cause, only at a meeting called for the purpose
of removing the director. Upon the written request of the holders of shares
entitled to not less than ten percent (10%) of all the votes entitled to be
cast at such meeting, the Secretary of the Fund shall promptly call a special
meeting of shareholders for the purpose of voting upon the question of removal
of any director. The Secretary of the Fund shall inform such shareholders of
the reasonable estimated costs of preparing and mailing the notice of the
meeting, and upon payment to the Fund of such costs, the Fund shall give not
less than ten nor more than sixty days notice of the special meeting.

PERFORMANCE INFORMATION

As described under "About the Funds -- Performance Information" in the
Prospectus, each Fund's historical performance or return may be shown in the
form of "average annual total return," "total return," and "cumulative total
return." The International Bond and Short-Term Global Bond Funds may also show
historical performance or return in the form of "yield" and "distribution
rate". From time to time, the Advisor may voluntarily waive all or a portion
of its management fee and/or absorb certain expenses for each Fund. Without
these waivers and absorption of expenses, the performance results for the
International Bond and Short-Term Global Bond Funds noted herein would have
been lower. All performance and returns noted herein are historical and do not
represent the future performance of a Fund.

38
<PAGE> 87

YIELD

Each Fund's yield is computed in accordance with a standardized method
prescribed by rules of the SEC. Under that method, the current yield quotation
for a Fund is based on a one month or 30-day period. Each Fund's yield is
computed by dividing the net investment income per share earned during the
30-day or one month period by the maximum offering price per share on the last
day of the period, according to the following formula:

a-b 6
YIELD = 2[( --- + 1) - 1]
cd

Where a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.

For the 30-day period ended December 30, 1994, the Short-Term Global
Bond Fund's yield was 9.15% and the International Bond Fund's yield was 9.60%.
For this period, the Advisor absorbed expenses of 1.105% and waived management
fees of 0.625% for the Short-Term Global Bond Fund and absorbed expenses of
1.30% and waived management fees of 0.7% for the International Bond Fund.
Without these waivers and absorptions, the Funds' yields would have been 7.42%
and 7.60%, respectively. In computing their yield, the Funds follow certain
standardized accounting practices specified by Commission rules. These
practices are not necessarily consistent with those that the Funds use to
prepare annual and interim financial statements in conformity with generally
accepted accounting principles.

DISTRIBUTION RATE

The distribution rate is computed, according to a non-standardized
formula, by dividing the total amount of actual distributions per share paid by
the Fund over a twelve month period by the Fund's net asset value on the last
day of the period. The distribution rate differs from the Fund's yield because
the distribution rate includes distributions to shareholders from sources other
than dividends and interest, such as premium income from option writing and
short-term capital gains. Therefore, the Fund's distribution rate may be
substantially different than the Fund's yield. Both the Fund's yield and
distribution rate will fluctuate.

AVERAGE ANNUAL TOTAL RETURN

The average annual total return of a Fund is computed by finding the
average annual compounded rates of return over these periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:

P (1 + T)n = ERV
P = a hypothetical initial payment of $10,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $10,000 payment made at the
beginning of the stated periods at the end of the stated periods.

TOTAL RETURN

Calculation of the Funds' total return is not subject to a
standardized formula. Total return performance for a specific period is
calculated by first taking an investment (assumed below to be $10,000)
("initial investment") in a Fund's shares on the first day of the period and
computing the "ending value" of that investment at the end of the period. The
total return percentage is then determined by subtracting the initial
investment from the ending value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains dividends paid by a Fund

39
<PAGE> 88
have been reinvested at net asset value on the reinvestment dates during the
period. Total return may also be shown as the increased dollar value of the
hypothetical investment over the period.

CUMULATIVE TOTAL RETURN

Cumulative total return represents the simple change in value of an
investment over a stated period and may be quoted as a percentage or as a
dollar amount. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in
order to illustrate the relationship between these factors and their
contributions to total return.

Each Fund's performance figures are based upon historical results and
do not represent future performance. A Fund's shares are sold at net asset
value per share. The Funds' returns and net asset value will fluctuate and
shares are redeemable at the then current net asset value of each Fund, which
may be more or less than original cost. Factors affecting a Fund's performance
include general market conditions, operating expenses and investment
management. Any additional fees charged by a dealer or other financial
services firm would reduce the returns described in this section.

The figures below show performance information for various periods
ended December 31, 1994. No adjustment has been made for taxes, if any,
payable on dividends. The periods indicated were ones of fluctuating
securities prices.

SHORT-TERM GLOBAL BOND FUND
<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1994 Increase Increase
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $10,513 5.13% N/A
</TABLE>

(1) From March 31, 1994
-----------------------

INTERNATIONAL BOND FUND
<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1994 Increase Increase
---------- ---- -------- --------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $10,866 8.66% N/A
-----------------------
(1) From March 31, 1994

INTERNATIONAL STOCK FUND

Total Average Annual
Return Total Return
------ ------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1994 Increase Increase
---------- ---- -------- --------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $14,282 42.82% 13.45%
One Year 10,000 9,844 -1.56 -1.56
</TABLE>

------------------------
(1) March 4, 1992

40
<PAGE> 89

ASIA PACIFIC FUND

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1994 Increase Increase
---------- ---- -------- --------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $9,473 -5.27% -5.27%
</TABLE>
------------------------
(1) December 31, 1993

The Short-Term Global Bond, International Bond, International Stock,
and Asia Pacific Funds' total returns for the three months ending March 31,
1995 were 1.22%, 13.15%, -4.14%, and -4.06%, respectively.

COMPARISONS

(1) U.S. TREASURY BILLS, NOTES, OR BONDS

Investors may want to compare the performance of a Fund to that of
U.S. Treasury bills, notes or bonds, which are issued by the U.S. government.
Treasury obligations are issued in selected denominations. Rates of Treasury
obligations are fixed at the time of issuance and payment of principal and
interest is backed by the full faith and credit of the United States Treasury.
The market value of such instruments will generally fluctuate inversely with
interest rates prior to maturity and will equal par value at maturity.
Generally, the values of obligations with shorter maturities will fluctuate
less than those with longer maturities.

(2) CERTIFICATES OF DEPOSIT

Investors may want to compare a Fund's performance to that of
certificates of deposit offered by banks and other depositary institutions.
Certificates of deposit represent an alternative (taxable) income-producing
product. Certificates of deposit may offer fixed or variable interest rates
and principal is guaranteed and may be insured. Withdrawal of the deposits
prior to maturity normally will be subject to a penalty. Rates offered by
banks and other depositary institutions are subject to change at any time
specified by the issuing institution. The bonds held by the International Bond
and Short-Term Global Bond Funds are generally longer term than most
certificates of deposit and may reflect longer term market interest rate
fluctuations.

(3) MONEY MARKET FUNDS

Investors may also want to compare performance of a Fund to that of
money market funds. Money market fund yields will fluctuate and shares are not
insured, but share values usually remain stable.

(4) LIPPER ANALYTICAL SERVICES, INC. ("LIPPER") AND OTHER INDEPENDENT
RANKING ORGANIZATIONS

From time to time, in marketing and other fund literature, a Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual fund with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, may be
cited. Lipper performance figures are based on changes in net asset value,
with all income and capital gain dividends reinvested. Such calculations do
not include the effect of any sales charges imposed by other funds. The Funds
will be compared to Lipper's appropriate fund category, that is, by fund
objective and portfolio holdings. Lipper also issues a monthly yield analysis
for fixed income funds.

(5) MORNINGSTAR, INC.

A Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. which rates funds on the basis of historical
risk and total return. Morningstar's ratings range from five stars (highest)
to one star (lowest) and represent Morningstar's assessment of the historical
risk level and total return of a fund as a weighted average for 3-, 5-, and
10-year periods. Ratings are not absolute and do not represent future results.

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<PAGE> 90

(6) INDEPENDENT SOURCES

Evaluations of Fund performance made by independent sources may also
be used in advertisements concerning a Fund, including reprints of, or
selections from, editorials or articles about a Fund, especially those with
similar objectives. Sources for Fund performance information and articles
about a Fund may include publications such as Money, Forbes, Kiplinger's, Smart
Money, Morningstar, Inc., Financial World, Business Week, U.S. News and World
Report, The Wall Street Journal, Barron's and a variety of investment
newsletters.

(7) INDICES
Each Fund may compare its performance to a wide variety of indices
including the following:

<TABLE>
<S> <C>
(a) The Consumer Price Index.
(b) The CDA U.S. Treasury Bill Index.
(c) The JP Morgan Global Short-Term Government Bond Index.
(d) The JP Morgan Non-Dollar Government Bond Index.
(e) The Salomon Brothers Non-U.S. Dollar World Government Bond Index (Currency Unhedged).
(f) The Salomon Brothers Broad Investment Grade Bond Index.
(g) The Salomon Brothers 1-3 Year World Government Bond Index (Currency Hedged).
(h) The Lehman Brothers Intermediate Government Corporate Index.
(i) The Merrill Lynch 1-3 Year Government Corporate Index.
(j) Dow Jones Average of 30 Industrials.
(k) Standard & Poor's 500 Stock Index
(l) Morgan Stanley Capital International EAFE(R) Index (Net Dividend, Gross Dividend, and Price-Only). In addition, a Fund
may compare its performance to certain other indices that measure stock market performance in geographic areas in which
the Fund may invest. The market prices and yields of the stocks in these indexes will fluctuate. A Fund may also compare
its portfolio weighting to the EAFE Index weighting, which represents the relative capitalization of the major overseas
markets on a dollar-adjusted basis.
(m) Morgan Stanley Capital International World Index.
(n) Morgan Stanley Capital International Combined Far East Ex-Japan Free Index.
</TABLE>

There are differences and similarities between the investments which a
Fund may purchase for its portfolio and the investments measured by the indices
which are noted herein. The market prices and yields of taxable and tax-exempt
bonds will fluctuate. There are important differences among the various
investments included in the indices that should be considered in reviewing this
information.

(8) HISTORICAL INFORMATION

Because the Funds' investments primarily are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against these
currencies may account for part of a Fund's investment performance. Historical
information regarding the value of the dollar versus foreign currencies may be
used from time to time in advertisements concerning the Funds. Such historical
information is not indicative of future fluctuations in the value of the U.S.
dollar against these currencies. Marketing materials may cite country and
economic statistics and historical stock or bond market performance for any of
the countries in which the Funds may invest, including, but not limited to, the
following: population growth, gross domestic product, inflation rate, average
stock market price earnings ratios, selected returns on stocks or bonds, and
the total value of stock or bond markets. Sources of such statistics may
include official publications of various foreign governments, exchanges, or
investment research firms. In addition, marketing materials may cite the
portfolio management's views or interpretations of such statistical data or
historical performance.

(9) HISTORICAL ASSET CLASS RETURNS

From time to time, marketing materials may portray the historical
returns of various asset classes. Such presentations will typically compare
the average annual rates of return of inflation, U.S. Treasury bills, bonds,
common stocks, and small stocks. There are important differences between each
of these investments that should be considered in viewing any such comparison.
The market value of stocks will fluctuate with market conditions, and
small-stock prices generally will fluctuate more than large-stock prices.
Stocks are generally more volatile than bonds. In return for this volatility,
stocks have generally performed better than bonds or cash over time.
Similarly, international stocks and bonds are generally more volatile than
domestic stocks and bonds, and may also offer greater return potential over
time. Bond prices generally will fluctuate inversely with interest rates and

42
<PAGE> 91

other market conditions, and the prices of bonds with longer maturities
generally will fluctuate more than those of shorter-maturity bonds. Interest
rates for bonds may be fixed at the time of issuance, and payment of principal
and interest may be guaranteed by the issuer and, in the case of U.S. Treasury
obligations, backed by the full faith and credit of the U.S. Treasury.

(10) STRONG FAMILY OF FUNDS
The Strong Family of Funds offers a comprehensive range of
conservative to aggressive investment options. All of the members of the Strong
Family and their investment objectives are listed below. The Funds are listed
in ascending order of risk and return, as determined by the Funds' Advisor.

<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
<S> <C>
Strong U.S. Treasury Money Fund Current income, a stable share price, and daily liquidity.
Strong Money Market Fund Current income, a stable share price, and daily liquidity.
Strong Heritage Money Fund Current income, a stable share price, and daily liquidity.
Strong Municipal Money Market Federally tax-exempt current income, a stable share-price, and daily
Fund liquidity.
Strong Advantage Fund Current income with a very low degree of share-price fluctuation.
Strong Short-Term Bond Fund Total return by investing for a high level of current income with a low
degree of share-price fluctuation.
Strong Short-Term Municipal Bond Total return by investing for a high level of federally tax-exempt
Fund current income with a low degree of share-price fluctuation.
Strong Short-Term Global Bond Total return by investing for a high level of income with a low degree
Fund of share-price fluctuation.
Strong Government Securities Total return by investing for a high level of current income with a
Fund moderate degree of share-price fluctuation.
Strong Insured Municipal Bond Total return by investing for a high level of federally tax-exempt
Fund current income with a moderate degree of share-price fluctuation.
Strong Municipal Bond Fund Total return by investing for a high level of federally tax-exempt
current income with a moderate degree of share-price fluctuation.
Strong Corporate Bond Fund Total return by investing for a high level of current income with a
moderate degree of share-price fluctuation.
Strong International Bond Fund High total return by investing for both income and capital appreciation.
Strong High-Yield Municipal Bond Total return by investing for a high level of federally tax-exempt
Fund current income.
Strong Asset Allocation Fund High total return consistent with reasonable risk over the long term.
Strong American Utilities Fund Total return by investing for both income and capital growth.
Strong Total Return Fund High total return by investing for capital growth and income.
Strong Opportunity Fund Capital growth.
Strong Growth Fund Capital growth.
Strong Common Stock Fund* Capital growth.
Strong Discovery Fund Capital growth.
Strong International Stock Fund Capital growth.
Strong Asia Pacific Fund Capital growth.
</TABLE>

* The Strong Common Stock Fund is currently closed to new investors.

The Advisor also serves as an Advisor or Subadvisor to several
management investment companies, some of which fund variable annuity separate
accounts of certain insurance companies.

Each Fund may from time to time be compared to the other funds in the
Strong Family of Funds based on a risk/reward spectrum. In general, the amount
of risk associated with any investment product is commensurate with that
product's potential level of reward. The Strong Funds risk/reward continuum or
any Fund's position on the continuum may be described or diagrammed in
marketing materials. The Strong Funds risk/reward continuum positions the risk
and reward potential of each

43
<PAGE> 92

Strong Fund relative to the other Strong Funds, but is not intended to position
any Strong Fund relative to other mutual funds or investment products.
Marketing materials may also discuss the relationship between risk and reward
as it relates to an individual investor's portfolio.

Financial goals vary from person to person. You may choose one or
more of the Strong Funds to help you reach your financial goals. To help you
better understand the Strong International Funds and determine which Fund or
combination of Funds best meets your personal investment objectives, they are
described in the same Prospectus. Though they appear in the same Prospectus,
each of the International Funds is a separately incorporated investment
company. Because the Funds share a Prospectus, there may be the possibility of
cross liability between the Funds.

ADDITIONAL FUND INFORMATION

(1) DURATION (INTERNATIONAL BOND AND SHORT-TERM GLOBAL BOND FUNDS ONLY)

Duration is a calculation that measures the price sensitivity of a
Fund to changes in interest rates. Theoretically, if a Fund had a duration of
2.0, a 1% increase in interest rates would cause the prices of the bonds in the
Fund to decrease by approximately 2%. Conversely, a 1% decrease in interest
rates would cause the prices of the bonds in the Fund to increase by
approximately 2%. Depending on the direction of market interest rates, a Fund's
duration may be shorter or longer than its average maturity.

(2) PORTFOLIO CHARACTERISTICS

In order to present a more complete picture of a Fund's portfolio,
marketing materials may include various actual or estimated portfolio
characteristics, including but not limited to median market capitalizations,
earnings per share, alphas, betas, price/earnings ratios, returns on equity,
dividend yields, capitalization ranges, growth rates, price/book ratios, top
holdings, sector breakdowns, asset allocations, quality breakdowns, and
breakdowns by geographic region.

(3) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

Occasionally statistics may be used to specify Fund volatility or
risk. The general premise is that greater volatility connotes greater risk
undertaken in achieving performance. Measures of volatility or risk are
generally used to compare the Fund's net asset value or performance relative to
a market index. One measure of volatility is beta. Beta is the volatility of
a fund relative to the total market as represented by the Standard & Poor's 500
Stock Index. A beta of more than 1.00 indicates volatility greater than the
market, and a beta of less than 1.00 indicates volatility less than the market.
Another measure of volatility or risk is standard deviation. Standard deviation
is a statistical tool that measures the degree to which a fund's performance
has varied from its average performance during a particular time period.

Standard deviation is calculated using the following formula:

2
Standard deviation = the square root of E(x - x )
i m
-----------
n-1

where E = "the sum of",
x = each individual return during the time period,
i
x = the average return over the time period, and
m
n = the number of individual returns during the time period.

44
<PAGE> 93

Statistics may also be used to discuss a Fund's relative performance.
One such measure is alpha. Alpha measures the actual return of a fund compared
to the expected return of a fund given its risk (as measured by beta). The
expected return is based on how the market as a whole performed, and how the
particular fund has historically performed against the market. Specifically,
alpha is the actual return less the expected return. The expected return is
computed by multiplying the advance or decline in a market representation by
the fund's beta. A positive alpha quantifies the value that the fund manager
has added, and a negative alpha quantifies the value that the fund manager has
lost.

Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.

GENERAL INFORMATION

BUSINESS PHILOSOPHY

The Advisor is an independent, Midwestern-based investment advisor,
owned by professionals active in its management. Recognizing that investors are
the focus of its business, the Advisor strives for excellence both in
investment management and in the service provided to investors. This commitment
affects many aspects of the business, including professional staffing, product
development, investment management, and service delivery. Through its
commitment to excellence, the Advisor intends to benefit investors and to
encourage them to think of Strong Funds as their mutual fund family.

The increasing complexity of the capital markets requires specialized
skills and processes for each asset class and style. Therefore, the Advisor
believes that active management should produce greater returns than a passively
managed index. The Advisor has brought together a group of top-flight
investment professionals with diverse product expertise, and each concentrates
on their investment specialty. The Advisor believes that people are the firm's
most important asset. For this reason, continuity of professionals is critical
to the firm's long-term success.

INVESTMENT ENVIRONMENT

Discussions of economic, social, and political conditions and their
impact on the Funds may be used in advertisements and sales materials. Such
factors that may impact the Funds include, but are not limited to, changes in
interest rates, political developments, the competitive environment, consumer
behavior, industry trends, technological advances, product development, pending
or enacted legislation, demographic variables, macroeconomic trends, and the
supply and demand of various financial instruments. In addition, marketing
materials may cite the portfolio management's views or interpretations of such
factors.

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.

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. By investing
regularly over the long term, you reduce the impact of short-term market
gyrations, and you attend to your long-term plan before you're tempted to
spend those assets on short-term needs.

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<PAGE> 94

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 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.

STRONG RETIREMENT PLAN SERVICES

Strong Retirement Plan Services offers a full menu of high quality,
affordable retirement plan options, including traditional money purchase
pension and profit sharing plans, 401(k) plans, simplified employee pension
plans, salary reduction plans, Keoghs, and 403(b) plans. Retirement plan
specialists are available to help companies determine which type of retirement
plan may be appropriate for their particular situation.

Markets:

The retirement plan services provided by the Advisor focus on four
distinct markets, based on the belief that a retirement plan should fit the
customer's needs, not the other way around.

1. Small company plans. Small company plans are designed for companies with
1-50 plan participants. The objective is to incorporate the features
and benefits typically reserved for large companies, such as sophisticated
recordkeeping systems, outstanding service, and investment expertise, into a
small company plan without administrative hassles or undue expense. Small
company plan sponsors receive a comprehensive plan administration manual as
well as toll-free telephone support.

2. Large company plans. Large company plans are designed for companies with
between 51 and 1,000 plan participants. Each large company plan is
assigned a team of professionals consisting of an account manager, who is
typically an attorney, CPA, or holds a graduate degree in business, a
conversion specialist (if applicable), an accounting manager, a
legal/technical manager, and an education/communications educator.

3. Women-owned businesses.

4. Non-profit and educational organizations (the 403(b) market).

Turnkey approach:

The retirement plans offered by the Advisor are designed to be
streamlined and simple to administer. To this end, the Advisor has invested
heavily in the equipment, systems, and people necessary to adopt or convert a
plan, and to keep it running smoothly. The Advisor provides all aspects of the
plan, including plan design, administration, recordkeeping, and investment
management. To streamline plan design, the Advisor provides customizable
IRS-approved prototype documents. The Advisor's services also include annual
government reporting and testing as well as daily valuation of each
participant's account. This structure is intended to eliminate the confusion
and complication often associated with dealing with multiple vendors. It is
also designed to save plan sponsors time and expense.

The Advisor strives to provide one-stop retirement savings programs
that combine the advantages of proven investment management, flexible plan
design, and a wide range of investment options. The open architecture design
of the plans allow for the use of the family of mutual funds managed by the
Advisor as well as a stable asset value option. Large company plans may
supplement these options with their company stock (if publicly traded) or funds
from other well-known mutual fund families.

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<PAGE> 95

Education:

Participant education and communication is key to the success of any
retirement program, and therefore is one of the most important services that
the Advisor provides. The Advisor's goal is twofold: to make sure that plan
participants fully understand their options and to educate them about the
lifelong investment process. To this end, the Advisor provides attractive,
readable print materials that are supplemented with audio and video tapes, and
retirement education programs.

Service:

The Advisor's goal is to provide a world class level of service. One
aspect of that service is an experienced, knowledgeable team that provides
ongoing support for plan sponsors, both at adoption or conversion and
throughout the life of a plan. The Advisor is committed to delivering accurate
and timely information, evidenced by straightforward, complete, and
understandable reports, participant account statements, and plan summaries.

The Advisor has designed both "high-tech" and "high-touch" systems,
providing an automated telephone system as well as personal contact.
Participants can access daily account information, conduct transactions, or
have questions answered in the way that is most comfortable for them.

STRONG FINANCIAL ADVISORS GROUP

The Strong Financial Advisors Group is dedicated to helping financial
advisors better serve their clients. Financial advisors receive regular
updates on the mutual funds managed by the Advisor, access to portfolio
managers through special conference calls, consolidated mailings of duplicate
confirmation statements, access to the Advisor's network of regional
representatives, and other specialized services. For more information on the
Strong Financial Advisors Group, call 1-800-368-1683.

PORTFOLIO MANAGEMENT

Each portfolio manager works with a team of analysts, traders, and
administrative personnel. From time to time, marketing materials may discuss
various members of the team, including their education, investment experience,
and other credentials.

INTERNATIONAL BOND AND SHORT-TERM GLOBAL BOND FUNDS

The Advisor's investment philosophy includes (i) active management to
deliver a superior total return with low to moderate risk versus benchmarks;
(ii) a long-term outlook; (iii) controlled country and currency exposure; (iv)
duration managed within a narrow band; and (v) value added by use of all
available sectors and instruments. The Advisor also believes that (i) over
time, international diversification may help reduce total portfolio risk and
increase return potential; and (ii) foreign and emerging markets are often
inefficient, providing significant growth opportunities for investors who do
their homework.

The Advisor's investment process generally follows a five-step
approach. The first step is the global "satellite" view. This top-down
approach, driven by a secular outlook, determines duration and blocs. Second,
the Advisor takes a continental "airplane" view. Major continental allocations
are based on global economic cycles and relative values. The third step is the
country/currency "helicopter" view. Country allocations are determined based
on country-specific policies and prospects along with risk management
considerations. Fourth, the Advisor considers the country structure "car" view.
Consideration of each country's economic outlook, combined with an analysis of
the yield curve, determines the portfolio structure and sector composition.
Finally, issue selection is done "by foot". Individual securities are chosen
from alternatives such as sovereigns, corporates, mortgages, futures, and
options. The Advisor's currency risk management approach involves short-,
intermediate-, and long-term analysis. Within each time frame, the Advisor may
utilize various econometric models and trading systems in its analysis of
currency risk.

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<PAGE> 96

INTERNATIONAL STOCK AND ASIA PACIFIC FUNDS

The Advisor's investment philosophy is that (i) active management with
focused security and country selection can generate superior returns over
passive benchmarks; (ii) local knowledge and local contacts are essential for
effective international investing; (iii) application of U.S. and non-U.S.
financial analysis techniques can be used to value certain international
securities; (iv) attractive investment opportunities exist in all
areas-established and developing markets, large and small companies; (v)
seeking out under-researched and undervalued companies is as valid in
international investing as in domestic investing; and (vi) risk can be reduced
by underweighting the least attractive markets, not overweighting volatile
markets, and making bold allocations to attractive markets and securities.

The Advisor's investment process includes (i) global market analysis
to determine which countries/currencies to emphasize and avoid; (ii) combining
U.S. and non-U.S. fundamental research techniques where possible; (iii)
utilizing local knowledge and local contacts to closely monitor companies and
unearth new candidates for investment opportunities; (iv) focusing on stock
selection in moderately attractive markets; (v) focusing on sector/industry
weightings in the most attractive markets; (vi) emphasizing growth companies in
smaller and emerging markets; (vii) emphasizing value plays and turnaround
situations in more mature equity markets; and (viii) utilizing hedging of
foreign currency risk on an opportunistic basis.

The Advisor considers selling a stock when there is a high price/cash
flow or price/earnings multiple relative to the country and/or industry,
deterioration in country policies towards investors, or deterioration in
company fundamentals and management.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, are the independent accountants for the Funds, providing audit
services and assistance and consultation with respect to the preparation of
filings with the SEC.

LEGAL COUNSEL

Kirkpatrick & Lockhart, 1800 M Street, N.W., Washington D.C. 20036
acts as outside legal counsel for the Funds.

FINANCIAL STATEMENTS

The Annual Report that is attached hereto contains the following
financial information for each Fund:

<TABLE>
<S> <C>
(a) Schedule of Investments in Securities.
(b) Statement of Operations.
(c) Statement of Assets and Liabilities.
(d) Statement of Changes in Net Assets.
(e) Notes to Financial Statements.
(f) Financial Highlights.
(g) Report of Independent Accountants.
</TABLE>

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<PAGE> 97

APPENDIX

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information, or
for other circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of default -- capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation.

2. Nature of and provisions of the obligation.

3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.

INVESTMENT GRADE
AAA Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

AA Debt rated 'AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree.

A Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

SPECULATIVE GRADE

Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation
and 'C' the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.

BB Debt rated 'BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The 'BB' rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-' rating.

B Debt rated 'B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest

A-1
<PAGE> 98

and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.

CCC Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The 'CCC'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'B' or 'B-' rating.

CC Debt rated 'CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.

C Debt rated 'C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.

CI The rating 'CI' is reserved for income bonds on which no interest
is being paid.

D Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grade period. The 'D' rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

MOODY'S LONG-TERM DEBT RATINGS

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such Bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes Bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.

A-2
<PAGE> 99

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

FITCH INVESTORS SERVICE, INC. BOND RATINGS

Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.

Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.

Fitch ratings are not recommendations to buy, sell, or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.

Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'.
Because bonds rated in the 'AAA' and 'AA' categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of the issuers is generally rated 'F-1+'.

A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.

BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds, and therefore impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
('BB' to 'C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ('DDD' to 'D') is an
assessment of the ultimate recovery value through reorganization or
liquidation.

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<PAGE> 100

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk. Moreover, the character of the risk
factor varies from industry to industry and between corporate, health care and
municipal obligations.

BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.

B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.

CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

DDD, DD,
and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. 'DDD' represents the highest potential for recovery of these
bonds, and 'D' represents the lowest potential for recovery.

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and
expertise. The projected viability of the obligor at the trough of the cycle
is a critical determination.

Each rating also takes into account the legal form of the security,
(e.g., first mortgage bonds, subordinated debt, preferred stock, etc.). The
extent of rating dispersion among the various classes of securities is
determined by several factors including relative weightings of the different
security classes in the capital structure, the overall credit strength of the
issuer, and the nature of covenant protection. Review of indenture
restrictions is important to the analysis of a company's operating and
financial constraints.

The Credit Rating Committee formally reviews all ratings once per
quarter (more frequently, if necessary). Ratings of 'BBB-' and higher fall
within the definition of investment grade securities, as defined by bank and
insurance supervisory authorities.

A-4
<PAGE> 101

<TABLE>
<CAPTION>
RATING SCALE DEFINITION
<S> <C>
AAA Highest credit quality. The risk factors are negligible, being only slightly more
than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is modest, but may
AA vary slightly from time to time because of economic conditions.
AA-

A+ Protection factors are average but adequate. However, risk factors are more
A variable and greater in periods of economic stress.
A-

BBB+ Below average protection factors but still considered sufficient for prudent
BBB investment. Considerable variability in risk during economic cycles.
BBB-

BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate according to
BB- industry conditions or company fortunes. Overall quality may move up or
down frequently within this category.

B+ Below investment grade and possessing risk that obligations will not be met
B when due. Financial protection factors will fluctuate widely according to
B- economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a higher
or lower rating grade.

CCC Well below investment grade securities. Considerable uncertainty exists as to
timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arrearages.
</TABLE>

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market.

Ratings graded into several categories, ranging from 'A-1' for the
highest quality obligations to 'D' for the lowest. These categories are as
follows:

A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.

A-5
<PAGE> 102

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1'.

A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.

B Issues rated 'B' are regarded as having only speculative capacity
for timely payment.

C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.

D Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.

MOODY'S COMMERCIAL PAPER RATINGS

The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act of 1933, as amended.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act of 1933, nor
does it represent that any specific note is a valid obligation of a rated
issuer or issued in conformity with any applicable law. Moody's employs the
following three designations, all judged to be investment grade, to indicate
the relative repayment capacity of rated issuers:

Issuers rated PRIME-1 (for related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
(i) leading market positions in well established industries, (ii) high rates of
return on funds employed, (iii) conservative capitalization structures with
moderate reliance on debt and ample asset protection, (iv) broad margins in
earnings coverage of fixed financial charges and high internal cash generation,
and (v) well established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.

Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.

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<PAGE> 103

FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

F-1+ (Exceptionally Strong Credit Quality) Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.

F-1 (Very Strong Credit Quality) Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated 'F-1+'.

F-2 (Good Credit Quality) Issues assigned this rating have a
satisfactory degree of assurance for timely payment but the
margin of safety is not as great as for issues assigned 'F-1+'
and 'F-1' ratings.

F-3 (Fair Credit Quality) Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment grade.

F-S (Weak Credit Quality) Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.

D (Default) Issues assigned this rating are in actual or imminent
payment default.

LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.

DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year, including commercial paper, the
uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper is also rated
according to this scale.

Emphasis is placed on liquidity which we define as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.

<TABLE>
<CAPTION>
Rating Scale: Definition
- ------------ ----------
<S> <C>
Duff 1+ Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.

Duff 1 Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.

Duff 1- High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
</TABLE>

A-7
<PAGE> 104

<TABLE>
<S> <C>
Good Grade
----------

Duff 2 Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small.

Satisfactory Grade
------------------

Duff 3 Satisfactory liquidity and other protection factors qualify issue as to investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely payment is expected.

Non-investment Grade
--------------------

Duff 4 Speculative investment characteristics. Liquidity is not sufficient to insure against disruption in debt
service. Operating factors and market access may be subject to a high degree of variation.

Default
-------

Duff 5 Issuer failed to meet scheduled principal and/or interest payments.
</TABLE>

THOMSON BANKWATCH (TBW) SHORT-TERM RATINGS

The TBW Short-Term Ratings apply, unless otherwise noted, to
unsubordinated instruments of the rated entities with a maturity of one year or
less, including deposits, bank notes, bankers' acceptances, federal funds,
letters of credit, commercial paper and other obligations comparable in
priority and security to those specifically listed herein. These ratings do
not consider any collateral or security as the basis for the rating, although
some of the securities may in fact have collateral. Further, these ratings do
not incorporate consideration of the possible sovereign risk associated with a
foreign deposit (defined as a deposit taken in a branch outside the country in
which the rated entity is headquartered) of the rated entity. TBW Short-Term
Ratings are intended to assess the likelihood of an untimely or incomplete
payments of principal or interest.

TBW-1 The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.

TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1".

TBW-3 The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.

TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

IBCA SHORT-TERM RATINGS

IBCA Short-Term Ratings assess the borrowing characteristics of banks
and corporations, and the capacity for timely repayment of debt obligations.
The Short-Term Ratings relate to debt which has a maturity of less than one
year.

A1+ Obligations supported by the highest capacity for timely
repayment and possess a particularly strong credit feature.

A1 Obligations supported by the highest capacity for timely
repayment.

A2 Obligations supported by a good capacity for timely
repayment.

A3 Obligations supported by a satisfactory capacity for timely
repayment.

A-8
<PAGE> 105

B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.

C Obligations for which there is a high risk of default or
which are currently in default.

D Obligations which are currently in default.

A-9