<PAGE> 1
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ANNUAL REPORT
THE STRONG
INTERNATIONAL INCOME FUNDS
[PHOTO OF FOUR ANONYMOUS CHILDREN]
THE STRONG SHORT-TERM GLOBAL BOND FUND
THE STRONG INTERNATIONAL BOND FUND
[LOGO]
DECEMBER 31, 1994
<PAGE> 2
SHAREHOLDER PRIVILEGES*
TELEPHONE PURCHASE
Make additional investments from $50 to $25,000 into any Strong Fund by calling
us toll-free at 1-800-368-3863.
TELEPHONE EXCHANGE
If your financial goals change, you can exchange between any of the Strong
Funds free of charge.
TELEPHONE REDEMPTION
You can call toll-free to redeem your mutual fund shares at any time. Your
shares will be redeemed no later than the close of the next business day.
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your bank checking or
NOW account to your Strong Funds account. The minimum amount per transfer is
$50.
PAYROLL DIRECT DEPOSIT PLAN
You can automatically transfer all or a portion of your net pay at each pay
period. This eliminates the delay of depositing paychecks to your bank and then
sending a check through the mail to Strong Funds.
AUTOMATIC EXCHANGE PLAN
This plan allows you to exchange money from one Strong Fund to another. For
example, you may want to set up automatic exchanges from a money market fund to
an equity fund. The minimum amount per exchange is $50.
NO MINIMUM INVESTMENT PROGRAM
The Funds will waive the minimum initial investment for investors using the
Automatic Investment Plan.
For more information about these privileges, call us at 1-800-368-3863.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household.
Please call 1-800-368-3863 if you wish to receive additional copies, free of
charge.
*Each Fund reserves the right to terminate or modify any of these privileges.
<PAGE> 3
TABLE OF CONTENTS
MESSAGE FROM THE CHAIRMAN.................................... 2
INVESTMENT REVIEWS
The Strong Short-Term Global Bond Fund.................... 4
The Strong International Bond Fund........................ 6
FINANCIAL INFORMATION
Historical Record......................................... 8
Summary of Investments.................................... 8
Schedules of Investments in Securities
The Strong Short-Term Global Bond Fund................ 9
The Strong International Bond Fund.................... 10
Statements of Operations.................................. 12
Statements of Assets and Liabilities...................... 13
Statements of Changes in Net Assets....................... 14
Notes to Financial Statements............................. 15
FINANCIAL HIGHLIGHTS......................................... 18
REPORT OF INDEPENDENT ACCOUNTANTS............................ 19
<PAGE> 4
Message from the Chairman
[PHOTO OF RICHARD S. STRONG]
Dear Strong Funds Investor:
We are pleased to report that 1994, our twentieth year, was extremely
successful. In a challenging investment environment, our results were, once
again, very satisfying, with many of our funds being among the top
performers in their categories.
Mutual fund assets under management grew past $8 billion, and active accounts
passed the 500,000 mark.
Morningstar, Inc., a nationally recognized authority on mutual funds,
assigns "star" ratings to funds, with 1 star as the lowest rating and 5 stars
the highest. Of the twelve Strong Funds that Morningstar currently rates, all
have at least a 3-star rating, and many carry 4 or 5 stars. We believe this
objective, unbiased recognition of Strong Funds speaks extremely well for the
talent and strength of our firm's investment department.
We are very encouraged by the shift that has occurred in the Congress as a
result of the 1994 elections. Looking ahead, we believe this sweeping change
will have a number of important implications. Among them:
- - Federal Reserve Board policies should be supported, not hampered, by Congress.
- - The U.S. dollar may once again become a bastion of stability and confidence.
2
<PAGE> 5
- - Inflation should trend downward over time.
- - Entrepreneurial initiatives, investments and business should receive
positive, rather than negative, legislative treatment.
With another year of solid investment results behind us and a favorable
investment climate ahead, we are very confident in our future growth potential.
To fully realize this potential, we forged ahead this past year and implemented
strategic actions aimed at providing you with superior investment results, a
wide and expanding range of investment products, and exceptional service.
First and foremost, our strategy relies on having very talented and dedicated
people who are deeply committed to you and the stewardship of your investments.
Our team enjoys a dynamic balance of successful and experienced portfolio
managers, combined with our own rising young talent. Simply put, we believe
that we have developed an excellent investment management team to serve you.
To further enhance the effectiveness of our entire organization, we made
several significant additions to our management and administrative
capabilities in 1994. We were very pleased to have John Dragisic join us as
Vice Chairman. John brings with him many successful years of general management
experience and a unique perspective on the company as a former member of the
Strong Funds Board. Among several other new positions, we were particularly
pleased with the appointment of Rochelle Lamm Wallach as President of Strong
Advisory Services, a new unit that will lead our efforts in today's critically
important retirement and financial intermediary markets. These appointments,
and the others we have made during the past year, will contribute greatly to
the continued growth and success we expect in our third decade.
These are important changes for you, because they not only strengthen the
management of your Fund's advisor, but they also make it possible for us to
continue building on our strengths with better service and a wider array of
investment alternatives.
With these vital resources now in place, we look forward to the coming year
with great confidence. We thank you for your continued support.
Sincerely,
Richard S. Strong
- -----------------
Richard S. Strong
Chairman
3
<PAGE> 6
THE STRONG
SHORT-TERM
GLOBAL BOND
FUND
As of 12/30/94
30-DAY ANNUALIZED YIELD
9.15%
AVERAGE
QUALITY
BBB
AVERAGE
MATURITY
1.1 Years
The Strong Short-Term Global Bond Fund seeks a high level of income consistent
with capital preservation. The Fund invests primarily in investment-grade bonds
of both U.S. and foreign issuers and will, under normal circumstances, have an
average effective maturity of less than three years.
GOOD TIMING AND A
SELECTIVE STRATEGY
For international bond managers, 1994 was a challenging, volatile period.
Within this uncertainty, however, the Strong Short-Term Global Bond Fund found
opportunity ...
In the first quarter of 1994, bond markets around the world were unsettled by
fast-rising interest rates in the United States. Generally, when the U.S.
bond market sneezes, international markets catch cold, and the turbulence in
America that began in February acted as a catalyst for similar disruptions in
other nations. Thus, when the Fund debuted on March 31, prices were declining,
yields were higher, and we were able to use incoming assets to buy bonds at
values that were substantially better than were available at the beginning of
1994.
From its inception through September, the Fund adopted a defensive posture in
response to the markets' volatility. We actively kept its average maturity and
duration short, and maintained only a modest exposure to emerging markets,
which were particularly vulnerable to potential corrections.
During the last quarter of 1994, we concluded that we had witnessed the
majority of the markets' decline. Although the Federal Reserve's repeated
tightening was disruptive, it appeared to assure international investors that
the Fed was independent from political pressure. The results of America's
November elections were also generally perceived as positive for bond prices
going forward. We therefore began to relax the Fund's defensive stance in favor
of a slightly more neutral position. We extended the Fund's duration, primarily
by increasing the duration of its U.S. component, and selectively increased our
commitment to securities rated below investment grade.
Overall, our actions resulted in excellent performance for the Fund. As of
December 31, 1994, the Fund's total return was 5.13%, ranking it #3 of 40 short
world multi-market funds tracked by Lipper since the Fund's inception.*
ASSETS BY CREDIT-QUALITY RATING
(based on net assets as of 12/31/94)
<TABLE>
<S> <C>
AAA 17.2%
AA 2.7%
A 11.8%
BBB 34.8%
BB 19.5%
B 9.1%
</TABLE>
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
TOP FIVE HOLDINGS BY COUNTRY
(based on net assets as of 12/31/94)
<TABLE>
<CAPTION>
% of Net
Country Assets
<S> <C>
United States 35.7%
Mexico 14.1%
Brazil 13.3%
Argentina 8.1%
India 5.4%
</TABLE>
The Fund's asset allocation does not reflect a long position of foreign
government futures representing 3% of net assets, which is intended to increase
the Fund's participation in the bond market. As of December 31, 1994, the Fund
was invested in 18 countries. Please see the Schedule of Investments in
Securities for a complete listing of the Fund's portfolio.
4
<PAGE> 7
Please be aware that investments in overseas markets can pose more risk than
U.S. investments, and the Fund's share price is expected to be more volatile
than that of a U.S.-only fund. The Fund's returns will fluctuate with
changes in bond market conditions, currency values, interest rates,
foreign government regulations, and economic and political conditions in
countries in which the Fund invests. These risks are generally intensified
for investments in emerging markets.
WE INTEND TO REMAIN NEUTRAL
Going into 1995, we expect to maintain the Fund's neutral positioning.
Following the increase in yields experienced in 1994, bonds appear to offer
reasonable value across all major asset classes. While we anticipate further
rate hikes by the Federal Reserve, we feel the current cycle of Fed tightening
is nearing the end, with further modest increases already priced into the
market. Therefore, we will likely keep the portfolio's duration near its
current level, and reap the current attractive levels of income available in
many global bond markets. We do not expect to lengthen the Fund's duration from
present levels until we see clear signs of a slowing U.S. economy and a
stronger inclination toward monetary easing by the Federal Reserve.
We appreciate your investment in the Strong Short-Term Global Bond Fund, and we
look forward to earning your continued confidence.
[PHOTO OF SHIRISH T.MALEKAR]
Sincerely,
Shirish T. Malekar
- ------------------
Shirish T. Malekar
Portfolio Manager
Growth of an assumed $10,000 investment
from 3/31/94 to 12/31/94
<TABLE>
<CAPTION>
The Strong Short-Term Global Bond Fund
<S> <C>
3/94 10000
4/94 10100
5/94 10170
6/94 10180
7/94 10290
8/94 10350
9/94 10404
10/94 10485
11/94 10535
12/94 10513
<CAPTION>
Salomon Brothers 1-3 Year World Government Bond Index (Currency Hedged)
<S> <C>
3/94 10000
4/94 9988
5/94 10000
6/94 9995
7/94 10060
8/94 10060
9/94 10075
10/94 10114
11/94 10134
12/94 10153
</TABLE>
Cumulative Total Return
from 3/31/94 to 12/31/94
5.13%
* As of December 30, 1994, the advisor was temporarily waiving fees of .63% and
absorbing expenses of 1.10%. Otherwise, the Fund's yield would have been
7.42%, and the total return would have been lower. Lipper Analytical Services
calculations are based upon changes in net asset value with dividends
reinvested. Rankings are historical and do not represent future results.
5
<PAGE> 8
THE STRONG
INTERNATIONAL
BOND FUND
As of 12/30/94
30-DAY
ANNUALIZED
YIELD*
9.60%
AVERAGE
QUALITY
A
AVERAGE
MATURITY
4.3 YEARS
The Strong International Bond Fund seeks high total return by investing for a
high level of income and capital appreciation. The Fund invests primarily in
investment-grade bonds of foreign issuers and normally will have an average
effective maturity of four to nine years.
STRONG PERFORMANCE
IN DIFFICULT TIMES
Bond and currency markets experienced a turbulent period in 1994. The Federal
Reserve repeatedly increased U.S. short-term rates, resulting in higher yields
on corporate, government and mortgage-backed global bonds, beginning in
February and lasting through the first three quarters of 1994. The dollar also
fell during this period, weakening against the deutsche mark and hitting a
post-World War II low against the yen. By the final quarter, however,
international investors appeared to gain confidence that the Federal Reserve
was aggressive enough in raising rates, and bond prices began to stabilize.
Because the Fund debuted on March 31, we avoided the earlier bond market
sell-off and were able to begin buying bonds when prices were lower.
Nevertheless, the markets' volatility, and our outlook on interest rates,
prompted us to position the Fund defensively from its inception. We kept
duration low to lessen the portfolio's interest-rate sensitivity. We also kept
our European weighting modest, and most of our investments in emerging markets
were limited to money market-type instruments. To help mitigate the dollar's
weakness, we maintained short positions in the dollar versus the deutsche mark
and the yen. This defensive stance remained in place until September.
During the last quarter of 1994, we adopted a more neutral position, reflecting
our belief that the bulk of the disruption was over. We increased duration to
the intermediate range, neutralized our dollar position versus our benchmark,
and boosted the Fund's income-earning potential by increasing our weighting in
bonds rated below investment grade. We accomplished most of these changes by
using futures contracts combined with short-term cash deposits. Futures
represented a better value than cash bonds...they were more easily traded, less
expensive to purchase, and allowed us greater investment flexibility.
Overall, our strategies resulted in excellent performance for the Fund. As of
December 31, 1994, the Fund's total return was 8.66%, ranking it #1 of 123
general world income funds tracked by Lipper since the Fund's inception.*
ASSETS BY CREDIT-QUALITY RATING
(based on net assets as of 12/31/94)
<TABLE>
<S> <C>
AAA 37.9%
AA 4.7%
A 0.7%
BBB 31.3%
BB 11.2%
B 5.8%
</TABLE>
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
TOP FIVE HOLDINGS BY COUNTRY
(based on net assets as of 12/31/94)
<TABLE>
<CAPTION>
% of Net
Country Assets
<S> <C>
United States 24.5%
Brazil 8.7%
Mexico 8.0%
Chile 6.9%
Finland 6.7%
</TABLE>
The Fund's asset allocation does not reflect a long position of foreign 10-year
bond futures representing 70% of net assets, which is intended to increase the
Fund's participation in the bond market. As of December 31, 1994 the Fund was
invested in 17 countries. Please see the Schedule of Investments in Securities
for a complete listing of the Fund's portfolio.
6
<PAGE> 9
Please be aware that investments in overseas markets can pose more risk than
U.S. investments, and the Fund's share price is expected to be more volatile
than that of a U.S.-only fund. The Fund's returns will fluctuate with changes
in bond market conditions, currency values, interest rates, foreign government
regulations, and economic and political conditions in countries in which the
Fund invests. These risks are generally intensified for investments in
emerging markets.
A NEUTRAL NEAR-TERM OUTLOOK
For the near term, we expect to maintain the Fund's current neutral duration
and asset allocation. Global bonds appear to be reasonably valued following
the 1994 correction. While further rate hikes by the Federal Reserve are
likely, we believe global bond markets would view such increases as proof of
the Fed's commitment to fight inflation. In addition, higher short-term rates
should help slow the U.S. economy at some point, giving long-term bond prices
in the U.S. and abroad the opportunity to move higher. Obviously, the timing
of such an event is difficult to foresee. Thus, we expect to maintain the
Fund's neutral stance, reap the attractive levels of income that many bonds
currently offer, and selectively add holdings that we believe offer the
potential for both high income and capital appreciation.
[PHOTO OF SHIRISH T. MALEKAR]
We appreciate your investment in the Strong International Bond Fund, and we
look forward to earning your continued confidence.
Sincerely,
Shirish T. Malekar
- ------------------
Shirish T. Malekar
Portfolio Manager
Growth of an assumed $10,000 investment
from 3/31/94 to 12/31/94
<TABLE>
<CAPTION>
The Strong International Bond Fund
<S> <C>
3/94 10000
4/94 10220
5/94 10220
6/94 10560
7/94 10630
8/94 10600
9/94 10810
10/94 11095
11/94 11003
12/94 10866
<CAPTION>
Salomon Brothers Non-U.S. World Government Bond Index (Currency Unhedged)
<S> <C>
3/94 10000
4/94 10065
5/94 9929
6/94 10169
7/94 10196
8/94 10137
9/94 10337
10/94 10604
11/94 10391
12/94 10396
</TABLE>
Cumulative Total Return
from 3/31/94 to 12/31/94
8.66%
7
<PAGE> 10
TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
Strong Short-Term Strong International
Global Bond Fund(2) Bond Fund(3)
------------------- --------------------
<S> <C> <C>
From inception on March 31, 1994 through December 31, 1994 + 5.1% + 8.7%
</TABLE>
CURRENT YIELD INFORMATION
<TABLE>
<CAPTION>
Strong Short-Term Strong International
Global Bond Fund(2) Bond Fund(3)
------------------- --------------------
<S> <C> <C>
Annualized for the 30-Day Period Ended December 30, 1994 9.15% 9.60%
</TABLE>
HISTORICAL RECORD
The following table illustrates an assumed $10,000 investment in the Strong
International Income Funds on March 31, 1994, the date of the initial public
offering, with income dividends and capital gains distributions reinvested in
additional shares.
<TABLE>
<CAPTION>
Net Asset Capital Gains Income Growth of
Value Per Distributions Dividends An Initial $10,000
Share Per Share Per Share Investment
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strong Short-Term Global Bond Fund
March 31, 1994 $10.00 $ -- $ -- $10,000
December 31, 1994 10.15 .01 .35 10,513
Strong International Bond Fund
March 31, 1994 $10.00 $ -- $ -- $10,000
December 31, 1994 10.36 .02 .48 10,866
</TABLE>
SUMMARY OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
($ In Thousands)
Strong Short-Term Strong International
Global Bond Fund(4) Bond Fund(4)
------------------- ---------------------
<S> <C> <C> <C> <C>
Foreign Denominated Issues $ 1,750 9% $1,947 20%
Corporate Bonds 8,563 43 1,776 18
United States Government and Agency Issues 141 1 1,539 15
Cash Equivalents and Other Assets and Liabilities, Net 9,228 47 4,684 47
------- ---- ------ ----
Net Assets $19,682 100% $9,946 100%
======= ==== ====== ====
</TABLE>
(1) All performance is historical and does not represent future results.
Investment returns and principal value will vary, and you may have a gain or
loss when you sell shares. Returns assume reinvestment of all dividends and
capital gains distributions. Total return is not annualized.
(2) The Advisor is temporarily waiving fees of 0.625% and absorbing expenses of
1.105% for Strong Short-Term Global Bond Fund. Otherwise, the yield would
have been 7.42%, and the total return would have been lower.
(3) The Advisor is temporarily waiving fees of 0.70% and absorbing expenses of
1.30% for Strong International Bond Fund. Otherwise, the yield would have
been 7.60%, and the total return would have been lower.
(4) The Strong Short-Term Global Bond Fund and Strong International Bond Fund
asset allocations do not reflect a long position of U.S. and foreign
government futures representing 3% and 70%, respectively, of net assets,
which is intended to increase each Fund's participation in the bond market.
(See Note 2 (D) in the Notes to Financial Statements.)
8
<PAGE> 11
SCHEDULE OF INVESTMENTS IN SECURITIES December 31, 1994
STRONG SHORT-TERM GLOBAL BOND FUND
<TABLE>
<CAPTION>
Principal Value Principal Value
Amount (Note 2) Amount (Note 2)
- ---------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOREIGN DENOMINATED ISSUES 8.9%*
CANADA 0.3%* $ 345,000 Hook-SupeRx, Inc.
90,000 CAD Government of Canada, Senior Notes, 10.125%,
Series H76, 10.25%, Due 6/01/02 $ 351,038
Due 3/01/96 $ 65,252 50,000 Magma Copper Company
Senior Subordinated
DENMARK 0.4%* Notes, 11.50%,
500,000 DKK Kingdom of Denmark, Due 1/15/02 52,875
9.00%, Due 11/15/98 82,882 77,383 Merrill Lynch Home
Equity Acceptance, Inc.
FINLAND 1.1%* Subordinated Variable
1,000,000 FIM Government of Finland, Rate Mortgage-Backed
11.00%, Due 6/15/97 221,431 Certificates, Series
1994-A, Class A-1,
FRANCE 0.3%* 6.4375%, Due 8/17/23 73,127
300,000 FRF Government of France, 289,055 Merrill Lynch Mortgage
9.00%, Due 2/12/96 57,281 Investors, Inc.
Manufactured Housing
GERMANY 0.6%* Contract Pass-Thru
170,000 DEM Republic of Germany, Certificates, Series
8.875%, Due 1/22/96 112,818 1992-E, Class B, 5.85%,
Due 8/15/12 282,580
NEW ZEALAND 3.2%* 120,000 Merrill Lynch Mortgage
1,000,000 NZD Government of New Zealand, Investors, Inc. Senior
8.00%, Due 7/15/98 619,646 Subordinated Variable
Rate Pass-Thru
NORWAY 2.6%* Certificates, Series
3,300,000 NOK Union Bank of Norway, 1994-H, Class M, 6.375%,
12.45%, Due 4/19/01 511,428 Due 6/15/19 108,804
1,000,000 News America Holdings, Inc.
UNITED KINGDOM 0.4%* Floating Rate Debt Unit
50,000 GBP Government of the United with Premium Call (Medium-
Kingdom, 8.75%, Term Structured Enhanced
Due 9/01/97 78,946 Return Trusts 1994,
---------- Series R-14), 7.325%,
Due 3/11/98
TOTAL FOREIGN DENOMINATED (Acquired 11/08/94;
ISSUES (COST $1,678,308) 1,749,684 Cost $1,003,020)(r) 1,002,300
61,527 RTC Variable Rate Mortgage
CORPORATE BONDS 43.5%* Pass-Thru Securities,
$ 500,000 Alpargatas S.A.I.C. Inc., Series 1992-16,
Obligations, 9.00%, Class A-4, 6.6308%,
Due 11/26/96 Due 8/25/22 59,604
(Acquired 9/08/94; 170,000 Republic of Argentina Bonos
Cost $493,125)(r) 481,721 del Tesoro Floating Rate
100,000 Bank of Boston Corporation Eurobonds, 5.9375%, Due
Subordinated Floating 5/31/96 161,500
Rate Notes, 6.125%, 650,000 USG Corporation Senior
Due 2/28/01 98,000 Notes, 10.25%, Due
1,000,000 Bridas Corporation 12/15/02 664,625
Guaranteed Senior 450,000 Viacom International, Inc.
Notes, 12.50%, Reset Notes, 8.75%, Due
Due 11/15/99 945,000 5/15/01 (Rate Reset
454,552 Citicorp Mortgage Effective 5/15/95) 452,250
Securities, Inc. Real ----------
Estate Mortgage
Investment Conduit TOTAL CORPORATE BONDS
Pass-Thru Certificates, (COST $8,688,184) 8,562,903
Series 1988-3, Class A-2,
9.00%, Due 4/01/18 449,511 UNITED STATES GOVERNMENT AGENCY ISSUES 0.7%*
500,000 Essar Gujarat Limited 68,078 FNMA Guaranteed Real
Floating Rate Notes, Estate Mortgage
8.025%, Due 7/15/99 503,604 Investment Conduit
550,000 Essar Gujarat Limited Pass-Thru Certificates,
Floating Rate Notes, Series 1989-73, Class A,
8.025%, Due 7/15/99 Principal Only, Due
(Acquired 7/06/94 8/25/14 58,058
and 9/01/94; 713 FNMA Guaranteed Real
Cost $550,000)(r) 553,964 Estate Mortgage
780,000 First Boston Mortgage Investment Conduit
Security Corporation Pass-Thru Certificates,
Mortgage Pass-Thru Series 1990-83, Class
Certificates, Series 83-C, Principal Only,
1993-2, Class A-2, Due 7/25/20 713
7.50%, Due 3/25/33 742,950 85,990 GMAC #12 FHA Project Loan,
500,000 First Boston Mortgage 7.31%, Due 5/01/21 81,852
Security Corporation ----------
Variable Rate Mortgage
Pass-Thru Certificates, TOTAL UNITED STATES
Series 1994-MHC1, Class GOVERNMENT AGENCY ISSUES
C, 6.725% DUE 4/25/11 497,500 (COST $145,221) 140,623
82,797 GS Trust 3 Floating Rate
Collateralized Mortgage CASH EQUIVALENTS 42.0%*
Obligation, Series C, FOREIGN DENOMINATED ISSUE 0.7%*
Class C-2, 7.025%, SWEDEN 0.7%*
Due 7/07/15 82,681 1,000,000 SEK Kingdom of Sweden, 11.50%,
85,054 Green Tree Financial Due 9/01/95 136,335
Corporation Certificates,
Series 1994-BII, Class FOREIGN GOVERNMENT ISSUE 1.0%*
A-1, 7.85%, Due 7/15/09 82,263 $ 200,000 Turkish Public
267,669 Green Tree Securitized Participation
Net Interest Margin Administration
Trust Certificates, Series Certificates, 7.063%,
1994-A, 6.90%, Due 4/19/95 196,000
Due 2/15/04 255,039
679,812 Green Tree Securitized
Net Interest Margin
Trust Certificates,
Series 1994-B,
7.85%, Due 7/15/04 661,967
</TABLE>
See notes to financial statements.
9
<PAGE> 12
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) December 31, 1994
<TABLE>
<CAPTION>
STRONG SHORT-TERM GLOBAL BOND FUND (continued) STRONG INTERNATIONAL BOND FUND
Principal Value Principal Value
Amount (Note 2) Amount (Note 2)
- -------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <S> <C>
DISCOUNTED CERTIFICATES OF DEPOSIT 4.7%* FOREIGN DENOMINATED ISSUES 19.3%*
$ 600,000 Banco Bamerindus, Due 4/05/95 $ 588,215 CANADA 1.8%*
328,544 J.P. Morgan (With Philippine Peso 250,000 CAD Mobil Oil of Canada Corporation
Indexation based on the Senior Unsubordinated Notes,
Philippine denominated 9.00%, Due 5/02/97 $ 176,216
deposit), Due 1/06/95 336,022
----------- DENMARK 0.6%*
924,237 360,000 DKK Kingdom of Denmark, 9.00%,
Due 11/15/98 59,675
EURODOLLAR COMMERCIAL PAPER 28.0%*
DISCOUNTED 23.4%* FINLAND 6.7%*
700,000 Banco Economico, Due 4/11/95 683,854 1,000,000 FIM Government of Finland, 11.00%,
700,000 Empresas ICA, Due 1/12/95 698,569 Due 6/15/97 221,431
500,000 Grupo Gigante, Due 1/25/95 497,712 2,000,000 FIM Government of Finland, 11.00%,
Multibanco Commermex: Due 1/15/99 443,495
400,000 Due 1/18/95 398,634 ----------
200,000 Due 3/29/95 196,798 664,926
Petroleo Brasileiro, S.A.:
700,000 Due 6/07/95 676,024 NEW ZEALAND 5.0%*
500,000 Due 9/08/95 474,036 800,000 NZD Government of New Zealand,
1,000,000 Tesobonos, Due 5/04/95 973,189 8.00%, Due 7/15/98 495,717
-----------
4,598,816 NORWAY 3.4%*
2,200,000 NOK Union Bank of Norway, 12.45%,
INTEREST BEARING, DUE UPON DEMAND 4.6%* 4/19/01 340,952
907,000 U.S. Cayman Eurodollar Call
Deposit, 3.75% 907,000 SPAIN 1.8%*
----------- 25,000,000 ESP Government of Spain, 9.00%,
Total Eurodollar Commercial Paper 5,505,816 Due 2/28/97 182,597
----------
CORPORATE OBLIGATIONS 4.8%* TOTAL FOREIGN DENOMINATED ISSUES
50,000 Masco Industry, Inc. Senior (COST $1,886,205) 1,920,083
Subordinated Notes, 10.00%,
Due 3/15/95 50,250 FOREIGN DENOMINATED CURRENCY OPTIONS 0.3%*
700,000 South African Transnet LINCs (3,311,258) DEM January German Deutschemark
Series 1994-1 (A Trust Put Options (Strike price is
established by CS First Boston $1.51. Expiration date is
Structured Products Corporation), 1/30/95) (92,219)
8.207%, Due 10/02/95 (Acquired 3,344,482 DEM January German Deutschemark
10/18/94; Cost $700,000)(r) 690,375 Put Options (Strike price is
200,000 Uniao De Bancos Brasileiros S.A. $1.495. Expiration date is
Eurobond, 9.75%, Due 10/13/95 201,500 1/30/95) 119,064
----------- ----------
942,125 TOTAL FOREIGN DENOMINATED
CURRENCY OPTIONS (COST $6,564) 26,845
TIME DEPOSITS 2.7%*
Citibank Time Deposit (with Chilean CORPORATE BONDS 17.9%*
Peso indexation and interest based $500,000 Alpargatas S.A.I.C. Obligations,
on the Chilean denominated deposit): 9.00%, Due 11/26/96
200,000 14.50%, Due 1/27/95 212,804 (Acquired 9/08/94;
101,478 15.00%, Due 1/09/95 106,842 Cost $493,125)(r) 481,721
200,000 16.00%, Due 5/31/95 209,479 50,000 Bank of Boston Corporation
----------- Subordinated Floating Rate Notes,
529,125 6.125%, Due 2/28/01 49,000
450,000 Essar Gujarat Limited Floating
UNITED STATES GOVERNMENT ISSUES 0.1%* Rate Notes, 8.025%, Due 7/15/99
United States Treasury Bills: (Acquired 7/06/94 and 9/01/94;
10,000 Due 1/12/95 9,994 Cost $450,000)(r) 453,243
10,000 Due 2/02/95 9,965 50,000 First Boston Mortgage Security
----------- Corporation Mortgage Pass-Thru
19,959 Certificates, Series 1993-2,
----------- Class A-2, 7.50%, Due 3/25/33 47,625
Total Cash Equivalents 315,000 Hook-SupeRx, Inc. Senior Notes,
(Cost $8,222,010) 8,253,597 10.125%, Due 6/01/02 320,512
----------- 250,000 Indah Kiat International Finance
TOTAL INVESTMENTS IN SECURITIES Company B.V. Guaranteed
(COST $18,733,723) 95.1%* 18,706,807 Secured Notes, 11.375%,
Other Assets and Liabilities, Due 6/15/99 246,250
Net 4.9%* 975,176 116,075 Merrill Lynch Home Equity
----------- Acceptance, Inc. Subordinated
NET ASSETS 100.0%* $19,681,983 Variable Rate Mortgage-Backed
=========== Certificates, Series 1994-A,
Class A-1, 6.4375%,
Due 8/17/23 109,691
75,000 Merrill Lynch Mortgage
Investors, Inc. Senior
Subordinated Variable Rate
Pass-Thru Certificates,
Series 1994-H, Class M, 6.125%,
Due 6/15/19 68,003
----------
TOTAL CORPORATE BONDS
(COST $1,789,806) 1,776,045
</TABLE>
See notes to financial statements.
10
<PAGE> 13
STRONG INTERNATIONAL BOND FUND (continued)
<TABLE>
<CAPTION>
Principal Value Principal Value
Amount (Note 2) Amount (Note 2)
- ------------------------------------------------------------------------ --------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY ISSUES 15.5%* UNITED STATES GOVERNMENT ISSUES 1.8%*
$ 45,662 FNMA Guaranteed Real Estate Mortgage United States Treasury Bills:
Investment Conduit Pass-Thru Certificates, $ 40,000 Due 1/12/95 $ 39,975
Series 1989-73, Class A, Principal Only, 140,000 Due 2/02/95 139,505
Due 8/25/14 $ 38,941 ----------
1,000,000 United States Treasury Notes, 7.375%, 179,480
Due 11/15/97 989,687 ----------
700,000 United States Treasury Securities Stripped Total Cash Equivalents 3,872,726
Interest Payment, Zero %, Due 2/15/99 509,937 (Cost $3,798,233) ----------
----------
TOTAL UNITED STATES GOVERNMENT AND TOTAL INVESTMENTS IN SECURITIES
AGENCY ISSUES (COST $1,547,921) 1,538,565 (COST $9,028,729) 91.9%* 9,134,264
Other Assets and Liabilities,
Net 8.1%* 812,059
----------
CASH EQUIVALENTS 38.9%* NET ASSETS 100.0%* $9,946,323
FOREIGN DENOMINATED ISSUES 3.2%* ==========
NEW ZEALAND 0.6%*
100,000 NZD Government of New Zealand, 10.00%,
Due 2/15/95 64,076
SWEDEN 2.6%*
1,900,000 SEK Kingdom of Sweden, 11.50%, 9/01/95 259,037
----------
Total Foreign Denominated Issues 323,113 * Percentages are calculated as a percentage of
net assets.
FOREIGN GOVERNMENT ISSUE 1.0%* (r) Restricted Security.
$ 100,000 Turkish Public Participation Administration
Certificates, 7.063%, Due 4/19/95 98,000
DISCOUNTED CERTIFICATE Of DEPOSIT 3.9%*
400,000 Banco Bamerindus, Due 4/05/95 392,144
EURODOLLAR COMMERCIAL PAPER 14.0%*
DISCOUNTED 12.7%*
300,000 Empresas ICA, Due 1/12/95 299,387
500,000 Multibanco Commermex, Due 3/29/95 491,996
500,000 Petroleo Brasileiro, S.A., Due 9/08/95 474,036
----------
1,265,419
INTEREST BEARING, DUE UPON DEMAND 1.3%*
124,000 U.S. Cayman Eurodollar Call Deposit, 3.75% 124,000
----------
Total Eurodollar Commercial Paper 1,389,419
CORPORATE OBLIGATION 4.0%*
400,000 South African Transnet LINCs Series 1994-1
(A trust established by CS First Boston
Structured Products Corporation), 8.207%,
Due 10/02/95 (Acquired 10/18/94;
Cost $400,000)(r) 394,500
TIME DEPOSITS 11.0%*
Citibank Time Deposit (with Chilean Peso
indexation and interest based on the
Chilean denominated deposit):
101,478 15.00%, Due 1/09/95 106,842
100,915 15.00%, Due 1/23/95 107,524
450,000 16.00%, Due 5/31/95 471,328
382,585 Citibank Time Deposit (with Philippine Peso
indexation and interest based on the
Philippine denominated deposit),
11.90%, Due 1/18/95 410,376
----------
1,096,070
</TABLE>
See notes to financial statements.
11
<PAGE> 14
STATEMENTS OF OPERATIONS
For the Period from March 31, 1994 (inception) to December 31, 1994
(In Thousands)
Strong Short-Term Strong International
Global Bond Fund Bond Fund
----------------- --------------------
INTEREST INCOME: $ 576 $ 414
EXPENSES:
Investment Advisory Fees 47 36
Custodian Fees 44 48
Shareholder Servicing Costs 13 6
Professional Fees 8 12
Reports to Shareholders 8 7
Federal and State
Registration Fees 5 3
Other 4 3
----- -----
Total Expenses before
Waivers and Absorptions 129 115
Voluntary Expense Waivers
and Absorptions by Advisor (129) (115)
----- -----
Expenses, Net _ _
----- -----
NET INVESTMENT INCOME 576 414
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (81) (35)
Futures Contracts and Hedges 27 40
Foreign Currencies (99) (102)
Change in Unrealized
Appreciation/Depreciation on:
Investments (27) 105
Futures Contracts and Hedges (27) 14
Assets and Liabilities
Denominated in Foreign
Currencies 1 (9)
----- -----
NET GAIN (LOSS) (206) 13
----- -----
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 370 $ 427
===== =====
See notes to financial statements.
12
<PAGE> 15
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
Strong Short-Term Strong International
Global Bond Fund Bond Fund
----------------- --------------------
<S> <C> <C>
ASSETS:
Investments in Securities, at Value
(Cost of $18,734 and $9,029, respectively) $ 18,707 $ 9,134
Receivable from Brokers for Securities and Forward
Foreign Currency Exchange Contracts Sold 4,457 9,616
Receivable for Fund Shares Sold 37 21
Interest Receivable 267 264
Other 209 80
----------- -----------
Total Assets 23,677 19,115
LIABILITIES:
Payable to Brokers for Securities and Forward Foreign
Currency Exchange Contracts Purchased 3,791 8,725
Payable for Fund Shares Redeemed 122 28
Payable to Advisor for Organizational Costs 82 80
Other Liabilities _ 336
----------- -----------
Total Liabilities 3,995 9,169
----------- -----------
NET ASSETS $ 19,682 $ 9,946
=========== ===========
Capital Shares
Authorized 10,000,000 10,000,000
Outstanding 1,939 960
NET ASSET VALUE PER SHARE $ 10.15 $ 10.36
=========== ===========
</TABLE>
See notes to financial statements.
13
<PAGE> 16
STATEMENTS OF CHANGES IN NET ASSETS
For the Period from March 31, 1994 (inception) to December 31, 1994
(In Thousands)
Strong Short-Term Strong International
Global Bond Fund Bond Fund
----------------- --------------------
OPERATIONS:
Net Investment Income $ 576 $ 414
Net Realized Loss (153) (97)
Change in Unrealized
Appreciation/Depreciation (53) 110
------- ------
Increase in Net Assets Resulting
from Operations 370 427
CAPITAL SHARE TRANSACTIONS 19,819 9,873
DISTRIBUTIONS:
From Net Investment Income (576) (414)
In Excess of Net Investment Income (4) (20)
In Excess of Net Realized Gains (27) (20)
------- ------
TOTAL INCREASE IN NET ASSETS 19,582 9,846
NET ASSETS:
Beginning of Period 100 100
------- ------
End of Period $19,682 $9,946
======= ======
See notes to financial statements.
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1. ORGANIZATION
The Strong International Income Funds consist of Strong Short-Term
Global Bond Fund, Inc. and Strong International Bond Fund, Inc. The Funds
are separately incorporated, non-diversified, open-end management investment
companies registered with the Securities and Exchange Commission under the
Investment Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) Security Valuation - Debt securities are valued on the basis of
valuations furnished by a pricing service that utilizes electronic data
processing techniques to determine valuations for normal
institutional-size trading units of debt securities without regard
to sale or bid prices when such valuations are believed to more
accurately reflect the fair value of such securities. Otherwise, sale or
bid prices are used. Securities for which quotations are not readily
available are valued at fair value as determined in good faith under
consistently applied procedures established by and under the general
supervision of the Directors of the Funds. Debt securities which are
purchased within 60 days of their stated maturity are valued at
amortized cost, which approximates current value.
The Funds own certain investment securities which are restricted as to
resale. These securities are valued by the Funds after giving due
consideration to pertinent factors including recent private sales,
market conditions, and the issuer's financial performance. Where future
disposition of these securities require registration under the
Securities Act of 1933, the Funds have the right to include their
securities in such registration, generally without cost to the Funds.
Aggregate fair value and cost of these restricted securities at
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
Strong Short-Term Strong International
Global Bond Fund Bond Fund
----------------- --------------------
<S> <C> <C>
Aggregate Cost $2,746,145 $1,343,125
Aggregate Fair Value 2,728,360 1,329,464
Percent of Net Assets 13.9%* 13.4%*
</TABLE>
* Of these securities, which are restricted from resale, 100% are
eligible for resale pursuant to Rule 144A under the Securities Act
of 1933 and also have been determined to be liquid by the Advisor
based upon guidelines established by the Fund's Board of Directors.
(B) Federal Income and Excise Taxes and Distributions to Shareholders -
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no Federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for Federal income tax purposes due to differences in
the recognition of income and expense items for financial statement and
tax purposes.
(C) Realized Gains and Losses On Investment Transactions - The Funds
determine the gain or loss realized on investment transactions by
comparing the identified cost of the security lot sold with the net
sales proceeds.
(D) Futures - The Funds may enter into futures contracts for any lawful
purpose, including traditional hedging purposes. Upon entering into a
futures contract, the Funds pledge to the broker cash or U.S. government
securities equal to the minimum "initial margin" requirements of the
exchange. Additionally, the Funds receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as "variation margin," and are
recorded by the Funds as unrealized gains or losses. When the contracts
are closed, the Funds record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened
and the value at the time it was closed.
The use of futures contracts involves, to varying degrees, elements of
market risk in excess of the amount recognized in the statements of
assets and liabilities. The predominant risk is that the movement in
the price of the futures contract may not correlate perfectly with the
movement in the prices of the assets being hedged. A lack of
correlation could render the portfolio's hedging strategy unsuccessful
and could result in a loss to the portfolio.
Futures contracts open at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
Fund Collateral (par value) Contracts
---- ---------------------- ---------
<S> <C> <C>
Strong Short-Term $ 10,000 U.S. Treasury Bills, 5 Five-Year U.S. Treasury Bonds (Long)
Global Bond Due 2/02/95
Strong International U.S. Treasury Bills, 10 Ten-Year French Government Bonds (Long)
Bond 40,000 Due 1/12/95 8 Ten-Year German Government Bonds (Long)
140,000 Due 2/02/95 6 Ten-Year Italian Government Bonds (Long)
3 Ten-Year Japanese Government Bonds (Long)
10 Ten-Year United Kingdom Government Bonds (Long)
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Appreciation
Contract Value (Depreciation)
Fund (In Thousands) Expiration (In Thousands)
---- -------------- ---------- ---------------
<S> <C> <C> <C>
Strong Short-Term $ 500 Mar. 1995 ($2)
Global Bond
Strong International 1,029 Mar. 1995 (16)
Bond 1,150 Mar. 1995 (19)
731 Mar. 1995 (13)
3,269 Mar. 1995 14
788 Mar. 1995 (12)
</TABLE>
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994
(E) Options - Each of the Funds may engage in options transactions to
hedge against expected declines of their portfolio securities. Premiums
received by the Funds upon writing covered call options are recorded in
each Fund's statement of assets and liabilities as an asset with a
corresponding liability which is subsequently adjusted to the current
market value of the option. When an option expires, is exercised, or is
closed, each Fund realizes a gain or loss, and the liability is
eliminated. Each Fund continues to bear the risk of a decline in the
price of the underlying security during the period, although any
potential loss during the period would be reduced by the amount of the
option premium received.
Each of the Funds may also purchase put options on futures contracts,
write call options on futures contracts and enter into related closing
transactions for hedging purposes. These options are generally similar
to an option covering a specific security, except that delivery of cash
rather than the underlying security is made.
The use of written option contracts involves elements of market risk in
excess of the amount recognized in the statement of assets and
liabilities. The contract value represents a Fund's involvement in
these financial instruments. When required, a Fund will set aside
permissible liquid assets in a segregated account to secure its
potential obligations under its options positions.
(F) Foreign Currency Translation - Investment securities and other
assets and liabilities denominated in foreign currencies are converted
to U.S. dollars based upon current exchange rates. Purchases and sales of
foreign investment securities and income are converted to U.S. dollars
based upon currency exchange rates prevailing on the respective dates of
such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a
component of such gains or losses.
(G) When-Issued Securities - The Funds may purchase securities on a
when-issued or delayed delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the agreement, these securities may be delivered
and paid for at a future date, generally within 45 days. The Funds record
purchases of when-issued securities and reflect the values of such
securities in determining net asset value in the same manner as other
portfolio securities. The Funds segregate and maintain at all times cash,
cash equivalents, or other high-quality liquid debt securities in an
amount at least equal to the amount of outstanding commitments for
when-issued securities.
(H) Average Years to Maturity - A Fund's dollar-weighted effective
maturity is generally based on the actual stated maturity of a
security, unless it is subject to redemption and the Advisor reasonably
expects the issue to be called, in which case the call date may be used
in determining the effective maturity of the portfolio. In addition, the
effective maturity date of a variable rate security is the next interest
rate adjustment date and for a debt security with a put feature, the next
put exercise date is considered its maturity. The effective maturity of a
mortgage-backed security is determined on an "expected life" basis.
Notwithstanding the foregoing, the use of futures contracts for hedging
purposes may impact the effective maturity of a portfolio security and
accordingly, the calculated average years to maturity of the Fund.
(I) Deferred Organizational Costs - Costs incurred by the Funds in
connection with their organization and initial registration and public
offering of shares have been deferred and are being amortized to expense
over a sixty-month period. These costs were advanced by the Advisor and
will be reimbursed by the Funds over a period of not more than sixty
months.
(J) Other - Portfolio transactions are recorded on the trade date. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
3. NET ASSETS
Net assets as of December 31, 1994 were as follows (in thousands):
Strong Short-Term Strong International
Global Bond Fund Bond Fund
----------------- --------------------
Capital Stock $19,919 $9,973
Undistributed Net Investment Loss (72) (86)
Undistributed Net Realized Loss (112) (51)
Net Unrealized Appreciation
(Depreciation) (53) 110
------- ------
Net Assets $19,682 $9,946
======= ======
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the period from March 31, 1994
(inception) to December 31, 1994 were as follows (in thousands):
Strong Short-Term Strong International
Global Bond Fund Bond Fund
----------------- --------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
Shares Sold 2,866 $29,549 1,439 $15,103
Shares Issued in
Reinvestment of Dividends 52 537 41 433
Shares Redeemed (989) (10,267) (530) (5,663)
----- ------- ----- -------
Net Increase 1,929 $19,819 950 $ 9,873
===== ======= ===== =======
16
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain
officers and a director of the Funds are affiliated, provides investment
advisory services and shareholder recordkeeping and related services to the
Funds. Investment advisory fees, which are established by terms of the
Advisory Agreements, are based on annualized rates of .625% of the average
daily net assets of the Strong Short-Term Global Bond Fund, and .70% of the
average net assets of the Strong International Bond Fund. Advisory fees are
subject to reimbursement by the Advisor if the Funds' operating expenses
exceed certain levels. Shareholder recordkeeping and related service fees
are based on contractually established rates for each open and closed
shareholder account. In addition, the Advisor is compensated for certain
other services related to costs incurred for reports to shareholders.
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities during
the period from March 31, 1994 (inception) to December 31, 1994 and the
investment cost and unrealized appreciation and depreciation at December 31,
1994 for Federal income tax purposes, were as follows (in thousands):
<TABLE>
<CAPTION>
Strong Short-Term Strong International
Global Bond Fund Bond Fund
----------------- --------------------
<S> <C> <C>
Purchases:
U.S. Government and Agency $ 2,350 $ 1,559
Other 25,365 25,457
Sales:
U.S. Government and Agency 2,219 21
Other 14,858 21,707
Aggregate Investment Cost 18,734 9,029
Aggregate Unrealized:
Appreciation $ 230 $ 267
Depreciation (257) (162)
------- -------
($ 27) $ 105
======= =======
</TABLE>
Capital loss carryovers (expiring in 2002) for Federal income tax purposes
were $114 for Strong Short-Term Global Bond Fund and $47 for Strong
International Bond Fund.
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are valued at the forward rate,
and are marked-to-market daily. The change in market value is recorded by
the Fund as an unrealized gain or loss. When the contract is closed, the
Fund records an exchange gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time
it was closed. Forward foreign currency exchange contracts are typically
used by the Funds to hedge currency exposure related to receivables from
securities sold and payables for securities purchased.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the underlying prices of the Funds' portfolio securities,
but it does establish a rate of exchange that can be achieved in the future.
Although forward foreign currency exchange contracts limit the risk of loss
due to a decline in the value of the hedged currency, they also limit any
potential gain that might result should the value of the currency increase.
In addition, the Fund could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of their contracts.
At December 31, 1994, the Funds had entered into forward foreign currency
contracts as follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation
Currency to be Contract to (Depreciation)
Fund Delivered Deliver In Exchange for Maturity Date (In Thousands)
---- -------------- ----------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Strong Short-Term Global Bond German 2,076,808 USD 1,321,272 3/13/95 ($22)
Deutschemarks
U.S. Dollars 1,000,000 IDR 2,219,250,000 3/06/95 (5)
U.S. Dollars 146,090 DEM 226,549 3/13/95 1
Strong International Bond Japanese Yen 49,435,000 USD 500,000 3/13/95 (1)
U.S. Dollars 592,407 CAD 818,706 3/13/95 (9)
U.S. Dollars 114,555 SFR 151,986 3/13/95 2
U.S. Dollars 3,492,680 DEM 5,489,883 3/13/95 57
U.S. Dollars 3,105,401 JPY 308,527,900 3/13/95 12
U.S. Dollars 892,436 GBP 570,210 3/13/95 (1)
</TABLE>
8. FOREIGN INVESTMENTS
Investments in foreign markets can pose more risks than U.S. investments,
and the Funds' share price is expected to be more volatile than that of a
U.S. securities-only fund. The Funds' returns will fluctuate with changes
in stock market conditions, currency values, interest rates, foreign
government regulations, and economic and political conditions in countries
in which each Fund invests. These risks are generally intensified for
investments in emerging markets.
17
<PAGE> 20
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of each
of the Funds, outstanding for the entire period.
STRONG SHORT-TERM GLOBAL BOND FUND
1994**
--------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.35
Net Realized and Unrealized Gains
(Losses) on Investments 0.16
-------
TOTAL FROM INVESTMENT OPERATIONS 0.51
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.35)
Distributions In Excess of Net Realized Gains (0.01)
-------
TOTAL DISTRIBUTIONS (0.36)
-------
NET ASSET VALUE, END OF PERIOD $ 10.15
=======
Total Return +5.1%
Net Assets, End of Period (In Thousands) $19,682
Ratio of Expenses to Average Net Assets 0.0%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.7%*
Ratio of Net Investment Income to Average Net Assets 7.7%*
Portfolio Turnover Rate 383.7%*
STRONG INTERNATIONAL BOND FUND
1994**
--------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.46
Net Realized and Unrealized Gains
(Losses) on Investments 0.40
-------
TOTAL FROM INVESTMENT OPERATIONS 0.86
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.46)
Distributions In Excess of Net Investment Income (0.02)
Distributions In Excess of Net Realized Gains (0.02)
-------
TOTAL DISTRIBUTIONS (0.50)
-------
NET ASSET VALUE, END OF PERIOD $ 10.36
=======
Total Return +8.7%
Net Assets, End of Period (In Thousands) $ 9,946
Ratio of Expenses to Average Net Assets 0.0%*
Ratio of Expenses to Average Net Assets Without
Waivers and Absorptions 2.0%*
Ratio of Net Investment Income to Average Net Assets 7.9%*
Portfolio Turnover Rate 905.7%*
* Calculated on an annualized basis.
** For the period from March 31, 1994 (inception) to December 31, 1994. Total
return is not annualized.
18
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of the
Strong International Income Funds
We have audited the accompanying statements of assets and liabilities of Strong
Short-Term Global Bond Fund, Inc. and Strong International Bond Fund, Inc.
(collectively referred to herein as the "Strong International Income Funds"),
including the schedules of investments in securities, as of December 31, 1994,
and the related statements of operations and changes in net assets and the
financial highlights for the period from March 31, 1994 (inception) to December
31, 1994. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
each of the Strong International Income Funds as of December 31, 1994, the
results of their operations, the changes in their net assets and the financial
highlights for the period from March 31, 1994 to December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
February 7, 1995
19
<PAGE> 22
NOTES
20
<PAGE> 23
DIRECTORS OF THE FUND
Richard S. Strong
Marvin E. Nevins
Willie D. Davis
OFFICERS OF THE FUND
Richard S. Strong
Chairman of the Board
John Dragisic
Vice Chairman
Lawrence A. Totsky
Vice President
Thomas P. Lemke
Vice President
Ann E. Oglanian
Secretary
Thomas M. Zoeller
Treasurer
Investment Advisor
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Distributor
Strong Funds Distributors, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Custodian
Brown Brothers Harriman & Co.
40 Water Street, Boston, Massachusetts 02109
Transfer Agent and Dividend-Disbursing Agent
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Auditors
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Legal Counsel
Kirkpatrick & Lockhart
1800 M Street, N.W.,Washington, D.C. 20036
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FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030.
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-368-3863.
This report must be preceded or accompanied by the prospectus for
the Strong International Income Funds.
[LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
