<PAGE>
ANNUAL REPORT | September 30, 2000
The Strong
Schafer Balanced
--------------------------------------------------------------------------------
Fund
[PHOTO APPEARS HERE]
[LOGO OF STRONG]
<PAGE>
The Strong
Schafer Balanced
Fund
_____________________
ANNUAL REPORT . SEPTEMBER 30, 2000
Table of Contents
<TABLE>
<S> <C>
Investment Review
The Strong Schafer Balanced Fund................................. 2
Financial Information
Schedule of Investments in Securities............................ 5
Statement of Assets and Liabilities.............................. 6
Statement of Operations.......................................... 7
Statements of Changes in Net Assets.............................. 8
Notes to Financial Statements.................................... 9
Financial Highlights.................................................. 11
Report of Independent Accountants..................................... 12
</TABLE>
<PAGE>
THE STRONG SCHAFER BALANCED FUND
--------------------------------
FUND
highlights
. For the year ended September 30, 2000, the Strong Schafer Balanced Fund
returned 8.57%, while the S&P 500 Index returned 13.28%./1/, *
. Among the strong performers in the Fund's stock portfolio were companies in
the health-care, financial, telecom, and technology sectors. Defense
contractors, retailers, and other stocks reporting earnings disappointments
took a hit.
. The Fund's bond portfolio, emphasizing short- and intermediate-term
Treasuries, contributed positively to the Fund's performance.
_____________________________________________________________________________
AVERAGE ANNUAL
TOTAL RETURN/1/
As of 9-30-00
1-year 8.57%
Since Inception 5.33%
(12-31-97)
Equity funds are volatile investments and should only be considered for long-
term goals. The Fund's inception return was significantly enhanced through
investments in initial public offerings. You should not expect that such
favorable returns can be consistently achieved. Please consider this before
investing.
_____________________________________________________________________________
FIVE LARGEST HOLDINGS
As of 9-30-00
Security % of Net Assets
United States Treasury Notes 34.8%
Federal Home Loan 3.2%
Mortgage Corporation
Franklin Resources, Inc. 3.1%
Chubb Corporation 2.9%
Cadence Design Systems, Inc. 2.7%
Please see the Schedule of Investments in Securities for a complete listing
of the Fund's portfolio.
Perspectives
from the Manager
/s/ David K. Schafer
David K. Schafer
Portfolio Manager
________________________________________________________________________________
Two sectors that contributed strongly to the Fund's performance on the stock
side were health-care and financial stocks. Ten of the Fund's top 15 gainers
were from these two sectors. We had built most of our health-care position last
October. Starting with just one health stock, American Home Products, we added
Omnicare, ICN Pharmaceutical, and Mylan Laboratories. We also added a position
in Schering Plough in March 2000.
Strong financial stocks for the Fund included Chubb Insurance, banking stocks
Wells Fargo and Mellon Financial, investment house Merrill Lynch, and mutual
fund company Franklin Resources. Other stocks that outpaced the benchmark were
global electronics distributors Arrow and Avnet, computer software designer
Cadence Design (which recovered from a disappointing 1999), global shipper
FedEx, and BCE (formerly Bell Canada).
Defense contractors Raytheon and Lockheed Martin, retailer May Department
Stores, and cathode maker UCAR International were the worst-performing stocks in
the portfolio for the 12 months. All had reported disappointing earnings during
the fiscal year.
Although the performance of the Fund and that of the S&P 500 Index were close
for the 12 months as a whole (8.57% to 13.28%),
_____________________________
It appears that a
certain level of
rationality has returned
to the marketplace,
and it is our hope and
expectation that this
trend will continue.
_____________________________
________________________________________________________________________________
/1/ Average annual total return reflects annualized change in the value of an
investment, while total return reflects aggregate change and is not
annualized.
2
<PAGE>
the two actually behaved quite differently over the course of the year. The Fund
trailed the benchmark during the first six months of the fiscal year (5.01% to
17.51%), then outpaced it in the second six months (3.39% to -3.60%)./1/
For the bond portion of the portfolio, we invested in short- and intermediate-
term Treasury securities. Over the past six months, yields on two- and five-year
Treasuries fell by approximately 50 and 70 basis points, respectively, as the
Federal Reserve finished tightening interest rates and market expectations
shifted toward a more neutral monetary policy. In the latter part of the period,
Treasury securities also benefited from weakness in the equity markets. These
holdings slightly increased the Fund's performance over the past six months.
Although we are not ready to declare that value investing will now be the style
of choice for the majority of investors in the future, it is, of course,
comforting to note that this much-maligned group of stocks has significantly
outperformed the S&P 500 Index in recent months. It appears that a certain level
of rationality has returned to the marketplace, and it is our hope and
expectation that this trend will continue.
We thank you for your continued patience and investment in the Strong Schafer
Balanced Fund.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-31-97 to 9-30-00
<TABLE>
<CAPTION>
The Strong 60/40 Lipper
Schafer Balanced S&P Balanced
Balanced Fund Index* 500 Index* Fund's Index*
<S> <C> <C> <C> <C>
Dec 97 $10,000 $10,000 $10,000 $10,000
Jun 98 $10,430 $11,193 $11,771 $10,955
Dec 98 $10,321 $12,117 $12,857 $11,508
Jun 99 $11,828 $12,983 $14,449 $12,218
Dec 99 $10,845 $13,667 $15,563 $12,541
Jun 00 $10,824 $13,824 $15,497 $12,759
Sep 00 $11,534 $13,892 $15,347 $13,013
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Standard & Poor's 500 Index ("S&P 500"), the 60/40 Balanced Index, and the
Lipper Balanced Funds Index. Results include the reinvestment of all
dividends and capital gains distributions. Performance is historical and does
not represent future results. Investment returns and principal value vary,
and you may have a gain or loss when you sell shares.
________________________________________________________________________________
* The 60/40 Balanced Index is comprised of 60% S&P 500 Index and 40% Lehman
Brothers Intermediate Government Bond Index. The S&P 500 Index is an
unmanaged index generally representative of the U.S. stock market. The Lehman
Brothers Intermediate Government Bond Index is an unmanaged index generally
representative of government securities with maturities of 1-10 years. The
Lipper Balanced Funds Index is an equally weighted performance index of the
largest qualifying funds in this Lipper category. Source of the S&P Index
data is Standard & Poor's Micropal. Source of the Lipper Index data is
Lipper, Inc.
YOUR FUND'S
approach
The Strong Schafer Balanced Fund seeks total return by investing for both income
and capital growth. The Fund invests about 60% of its assets in equity
securities of medium- and large-capitalization companies. The portfolio manager
generally seeks stocks of companies that have above-average projected earnings
growth whose stock has a lower price/earnings ratio than that of the S&P 500
Index. The manager believes these value-oriented stocks have the potential to
increase in price. The Fund invests roughly similar amounts of its assets in
each stock in the portfolio. The remaining assets of the Fund are invested in
short- and intermediate-term, higher- and medium-quality bonds. Bonds are
purchased to generate income and to help offset the volatility that stock
investments usually experience.
________________________________________________________________________________
MARKET
highlights
. From October 1999 through March 2000, the market environment featured steady
economic growth; from that point on, however, concerns about a possible
economic slowdown increased, with more companies issuing earnings warnings.
. The U.S. stock market experienced a major shift starting in February 2000,
when it broadened out from its previously narrow focus on technology and
large-cap growth companies.
. Over the past six months, the broader market was able to outpace the S&P 500
Index, which is driven by large-cap growth companies. This was the first time
in several years that the broader market kept ahead of this index.
3
<PAGE>
PORTFOLIO HOLDINGS, EARNINGS PER SHARE ESTIMATES, AND PRICE/EARNINGS RATIOS AS
OF 9-30-00 (UNAUDITED)
<TABLE>
<CAPTION>
Earnings Per Share Price/Earnings Ratio
Security Unit Price 2000E 2001E 2000E 2001E
<S> <C> <C> <C> <C> <C>
ALLTEL Corporation $ 52.19 2.70 3.09 19.3 16.9
--------------------------------------------------------------------------------------------------------------------------
Arrow Electronics, Inc. 34.06 3.57 4.60 9.5 7.4
--------------------------------------------------------------------------------------------------------------------------
Avnet, Inc. 28.38 2.48 3.73 11.4 7.6
--------------------------------------------------------------------------------------------------------------------------
BorgWarner Inc. 33.13 5.24 5.39 6.3 6.1
--------------------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Company 57.13 2.34 2.59 24.4 22.1
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Cadence Design Systems, Inc. 25.69 0.84* 1.15 30.6 22.3
--------------------------------------------------------------------------------------------------------------------------
Canadian National Railway Company 29.31 2.98 3.35 9.9 8.8
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Chase Manhattan Corporation 46.19 3.64 4.15 12.7 11.1
--------------------------------------------------------------------------------------------------------------------------
Chubb Corporation 79.13 3.98 4.71 19.9 16.8
--------------------------------------------------------------------------------------------------------------------------
ECI Telecom Ltd. 30.63 1.80 2.16 17.0 14.2
--------------------------------------------------------------------------------------------------------------------------
Family Dollar Stores, Inc. 19.25 1.22 1.45 15.8 13.3
--------------------------------------------------------------------------------------------------------------------------
FedEx Corporation 44.34 2.90 3.06 15.3 14.5
--------------------------------------------------------------------------------------------------------------------------
Freddie Mac 54.06 3.38 3.88 16.0 13.9
--------------------------------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 44.43 2.47 2.75 18.0 16.2
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General Motors Corporation 65.00 9.29 9.34 7.0 7.0
--------------------------------------------------------------------------------------------------------------------------
Harrah's Entertainment, Inc. 27.50 1.65 2.04 16.7 13.5
--------------------------------------------------------------------------------------------------------------------------
ICN Pharmaceuticals, Inc. 33.25 1.72 2.06 19.3 16.1
--------------------------------------------------------------------------------------------------------------------------
Lafarge Corporation 21.75 3.81 4.08 5.7 5.3
--------------------------------------------------------------------------------------------------------------------------
May Department Stores Company 20.50 2.52 2.83 8.1 7.2
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Maytag Corporation 31.06 3.31 3.56 9.4 8.7
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Mellon Financial Corporation 46.38 2.03 2.28 22.8 20.4
--------------------------------------------------------------------------------------------------------------------------
Montana Power Company 33.38 1.28 1.29 26.1 25.9
--------------------------------------------------------------------------------------------------------------------------
Mylan Laboratories Inc. 26.94 1.26 1.48 21.3 18.2
--------------------------------------------------------------------------------------------------------------------------
Office Depot, Inc. 7.81 1.00 1.25 7.8 6.3
--------------------------------------------------------------------------------------------------------------------------
Omnicare, Inc. 16.13 0.75 1.05 21.5 15.4
--------------------------------------------------------------------------------------------------------------------------
Schering-Plough Corporation 46.50 1.64 1.90 28.3 24.5
--------------------------------------------------------------------------------------------------------------------------
Superior Industries International, Inc. 30.00 3.02 3.32 9.9 9.0
--------------------------------------------------------------------------------------------------------------------------
UCAR International Inc. 12.69 1.00 2.05 12.7 6.2
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Wells Fargo & Company 45.94 2.53 2.90 18.1 15.8
--------------------------------------------------------------------------------------------------------------------------
Strong Schafer Balanced Fund Portfolio Averages 15.8 13.4
S&P 500 Index 500 Stocks 1,436.50 57.89 62.69 24.8 22.9
</TABLE>
E = Estimate
*Represents 4th Quarter 2000 annualized Earnings Per Share.
4
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES September 30, 2000
-------------------------------------------------------------------------------
STRONG SCHAFER BALANCED FUND
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
Common Stocks 58.6%
Auto Manufacturers - Domestic 1.5%
General Motors Corporation 900 $ 58,500
Auto/Truck - Original Equipment 2.2%
Borg-Warner Automotive, Inc. 1,800 59,625
Superior Industries International, Inc. 800 24,000
------
83,625
Banks - Money Center 1.8%
The Chase Manhattan Corporation 1,500 69,281
Banks - Super Regional 4.8%
Mellon Financial Corporation 2,000 92,750
Wells Fargo Company 2,000 91,875
-------
184,625
Building - Cement/Concrete/Aggregate 2.2%
Lafarge Corporation 3,900 84,825
Computer - Graphics 2.7%
Cadence Design Systems, Inc. (b) 4,100 105,318
Electronics - Parts Distributors 3.5%
Arrow Electronics, Inc. (b) 2,700 91,969
Avnet, Inc. 1,600 45,400
-------
137,369
Finance - Investment Management 3.1%
Franklin Resources, Inc. 2,700 119,961
Finance - Mortgage & Related Services 3.2%
Federal Home Loan Mortgage Corporation 2,300 124,344
Household - Appliances 2.0%
Maytag Corporation 2,500 77,656
Insurance - Property/Casualty/Title 2.8%
Chubb Corporation 1,400 110,775
Leisure - Gaming 0.8%
Harrahs Entertainment, Inc. (b) 1,100 30,250
Medical - Drug/Diversified 1.8%
Bristol-Myers Squibb Company 1,200 68,550
Medical - Ethical Drugs 4.7%
ICN Pharmaceuticals, Inc. 2,800 93,100
Schering-Plough Corporation 1,900 88,350
-------
181,450
Medical - Generic Drugs 2.3%
Mylan Laboratories, Inc. 3,300 88,894
Medical/Dental - Services 2.7%
Omnicare, Inc. 6,400 103,200
Retail - Department Stores 4.3%
Family Dollar Stores, Inc. 5,100 98,175
May Department Stores Company 3,450 70,725
-------
168,900
Retail/Wholesale - Office Supplies 1.4%
Office Depot, Inc. (b) 6,900 53,906
Steel - Specialty Alloys 1.6%
UCAR International, Inc. (b) 4,900 $ 62,169
Telecommunications - Equipment 1.8%
ECI Telecom, Ltd. 2,300 70,438
Telecommunications - Services 1.4%
Montana Power Company 1,700 56,737
Transportation - Air Freight 2.4%
FedEx Corporation (b) 2,100 93,114
Transportation - Rail 2.3%
Canadian National Railway Company 3,000 87,938
Utility - Telephone 1.3%
ALLTEL Corporation 1,000 52,187
--------------------------------------------------------------------------------
Total Common Stocks (Cost $2,025,904) 2,274,012
--------------------------------------------------------------------------------
United States Government Issues 29.6%
United States Treasury Notes:
5.25%, Due 8/15/03 $ 340,000 333,731
6.25%, Due 1/31/02 390,000 390,366
6.625%, Due 5/15/07 410,000 425,119
--------------------------------------------------------------------------------
Total United States Government Issues (Cost $1,163,070) 1,149,216
--------------------------------------------------------------------------------
Short-Term Investments (a) 11.5%
Commercial Paper 6.3%
Interest Bearing, Due Upon Demand
Firstar Bank, N.A., 6.29% 244,800 244,800
Wisconsin Electric Power Company, 6.24% 100 100
---------
244,900
United States Government Issues 5.2%
United States Treasury Notes, 6.50%, Due 8/31/01 200,000 200,438
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $446,376) 445,338
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $3,635,350) 99.7% 3,868,566
Other Assets and Liabilities, Net 0.3% 11,123
--------------------------------------------------------------------------------
Net Assets 100.0% $3,879,689
================================================================================
LEGEND
--------------------------------------------------------------------------------
(a) Short-term investments include any security which has a remaining maturity
of less than one year.
(b) Non-income producing security.
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
September 30, 2000
<TABLE>
<CAPTION>
Strong Schafer
Balanced Fund
-------------
<S> <C>
Assets:
Investments in Securities, at Market Value (Cost of $3,635,350) $3,868,566
Dividends and Interest Receivable 21,090
Other Assets 10,383
----------
Total Assets 3,900,039
Liabilities:
Payable for Securities Purchased 11,968
Accrued Operating Expenses and Other Liabilities 8,382
----------
Total Liabilities 20,350
----------
Net Assets $3,879,689
==========
Net Assets Consist of:
Capital Stock (par value and paid-in capital) $3,899,726
Undistributed Net Investment Income 10,608
Accumulated Net Realized Loss (263,861)
Net Unrealized Appreciation 233,216
----------
Net Assets $3,879,689
==========
Capital Shares Outstanding (Unlimited Number Authorized) 363,055
Net Asset Value Per Share $ 10.69
==========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Year Ended September 30, 2000
<TABLE>
<CAPTION>
Strong Schafer
Balanced Fund
-------------
<S> <C>
Income:
Dividends (net of foreign withholding taxes of $664) $ 36,194
Interest 106,518
---------
Total Income 142,712
Expenses:
Investment Advisory Fees 45,529
Custodian Fees 968
Shareholder Servicing Costs 20,490
Professional Fees 12,812
Reports to Shareholders 29,809
Federal and State Registration Fees 22,532
Other 5,510
---------
Total Expenses before Waivers and Absorptions 137,650
Involuntary Expense Waivers and Absorptions (46,536)
---------
Expenses, Net 91,114
---------
Net Investment Income 51,598
Realized and Unrealized Gain (Loss):
Net Realized Loss on Investments (237,344)
Net Change in Unrealized Appreciation/Depreciation on Investments 520,040
---------
Net Gain on Investments 282,696
---------
Net Increase in Net Assets Resulting from Operations $ 334,294
=========
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strong Schafer Balanced Fund
----------------------------
Year Ended Year Ended
Sept. 30,2000 Sept. 30, 1999
------------- --------------
<S> <C> <C>
Operations:
Net Investment Income $ 51,598 $ 95,394
Net Realized Gain (Loss) on Investments (237,344) 170,075
Net Change in Unrealized Appreciation/Depreciation on Investments 520,040 770,005
----------- -----------
Net Increase in Net Assets Resulting from Operations 334,294 1,035,474
Distributions:
From Net Investment Income (40,990) (97,846)
From Net Realized Gains (176,149) (70,461)
----------- -----------
Total Distributions (217,139) (168,307)
Capital Share Transactions:
Proceeds from Shares Sold 1,651,999 3,727,879
Proceeds from Reinvestment of Distributions 201,920 159,008
Payment for Shares Redeemed (4,325,762) (6,438,818)
----------- -----------
Net Decrease in Net Assets from Capital Share Transactions (2,471,843) (2,551,931)
----------- -----------
Total Decrease in Net Assets (2,354,688) (1,684,764)
Net Assets:
Beginning of Year 6,234,377 7,919,141
----------- -----------
End of Year $ 3,879,689 $ 6,234,377
=========== -----------
Transactions in Shares of the Fund:
Sold 158,946 340,018
Issued in Reinvestment of Distributions 20,084 15,504
Redeemed (423,066) (615,097)
----------- -----------
Net Decrease in Shares of the Fund (244,036) (259,575)
=========== ===========
</TABLE>
8
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
September 30, 2000
1. Organization
Strong Schafer Balanced Fund (the "Fund") is a diversified series of Strong
Schafer Funds, Inc., an open-end management investment company registered
under the Investment Company Act of 1940, as amended.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation -- Securities of the Fund are valued at fair value
through valuations obtained by a commercial pricing service or the
mean of the bid and asked prices when no last sales price is
available. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith under
consistently applied procedures established by and under the general
supervision of the Board of Directors. Securities which are purchased
within 60 days of their stated maturity are valued at amortized cost,
which approximates fair value.
The Fund may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration
to pertinent factors, including recent private sales, market
conditions and the issuer's financial performance. The Fund generally
bears the costs, if any, associated with the disposition of restricted
securities. The Fund held no restricted securities at September 30,
2000.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders
in a manner which results in no tax cost to the Fund. Therefore, no
federal income or excise tax provision is required.
Net investment income or net realized gains for financial statement
purposes may differ from the characterization for federal income tax
purposes due to differences in the recognition of income and expense
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
The Fund generally pays dividends from net investment income quarterly
and distributes any net capital gains that it realizes annually.
(C) Realized Gains and Losses on Investment Transactions -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) Certain Investment Risks -- The Fund may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with
the Fund's investment objectives and limitations. The Fund intends to
use such derivative instruments primarily to hedge or protect against
adverse movements in securities prices or interest rates. The use of
these instruments may involve risks such as the possibility of
illiquid markets or imperfect correlation between the value of the
instruments and the underlying securities, or that the counterparty
will fail to perform its obligations.
Investments in foreign denominated assets or forward currency
contracts may involve greater risks than domestic investments, due to
currency, political, economic, regulatory and market risks.
(E) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted daily 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.
(F) Repurchase Agreements -- The Fund may enter into repurchase agreements
with institutions that the Fund's investment advisor, Strong Capital
Management, Inc. ("the Advisor"), has determined are creditworthy
pursuant to criteria adopted by the Board of Directors. Each
repurchase agreement is recorded at cost, which approximates fair
value. The Fund requires that the collateral, represented by
securities (primarily U.S. Government securities), in a repurchase
transaction be maintained in a segregated account with a custodian
bank in a manner sufficient to enable the Fund to obtain those
securities in the event of a default of the repurchase agreement. On a
daily basis, the Advisor monitors each repurchase agreement to ensure
the value of the collateral, including accrued interest, is at least
equal to the amounts owed to the Fund under each repurchase agreement.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
September 30, 2000
(G) Use of Estimates -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts in these financial
statements. Actual results could differ from those estimates.
(H) Other -- Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premiums and discounts.
3. Related Party Transactions
The Advisor, with whom certain officers and directors of the Fund are
affiliated, provides investment advisory and shareholder recordkeeping and
related services to the Fund. Investment advisory fees, which are
established by terms of the advisory agreement, are based on an annualized
rate of 1.00% of the average daily net assets of the Fund. Based on the
terms of the advisory agreement, advisory fees and other expenses will be
waived or absorbed by the Advisor if the Fund's operating expenses exceed
2% of the average daily net assets of the fund. In addition, the Fund's
Advisor may voluntarily waive or absorb certain expenses at their
discretion. Shareholder recordkeeping and related service fees are based on
contractually established rates for each open and closed shareholder
account. The Advisor also allocates to the Fund certain charges or credits
resulting from transfer agency banking activities based on the Fund's level
of subscription and redemption activity. Charges allocated to the Fund by
the Advisor are included in Other Expenses in the Fund's Statement of
Operations. Credits allocated by the Advisor serve to reduce the
shareholder servicing expenses incurred by the Fund and are reported as
Fees Paid Indirectly by Advisor in the Fund's Statement of Operations. In
addition, the Advisor is compensated for certain other services related to
costs incurred for reports to shareholders.
Schafer Capital Management, Inc. ("Schafer") manages the investments of the
Fund under a subadvisory agreement with the Advisor. Schafer is compensated
by the Advisor (not the Fund) and bears all of its own expenses in
providing subadvisory services.
The Fund may invest cash in money market funds sponsored and managed by the
Advisor, subject to certain limitations. The terms of such transactions are
identical to those of non-related entities except that, to avoid duplicate
investment advisory fees, advisory fees of the Fund are reduced by an
amount equal to advisory fees paid to the Advisor under its investment
advisory agreement with the money market funds.
The amount payable to the Advisor at September 30, 2000, shareholder
servicing and other expenses paid to the Advisor, transfer agency banking
charges and unaffiliated directors' fees for the year then ended, excluding
the effect of waivers and absorptions, were $6,302, $20,573, $2,202 and
$1,229, respectively.
4. Line of Credit
The Strong Funds have established a line of credit agreement ("LOC") with
certain financial institutions to be used for temporary or emergency
purposes, primarily for financing redemption payments. Combined borrowings
among all participating Strong Funds are subject to a $350 million cap on
the total LOC. For an individual Fund, borrowings under the LOC are limited
to either the lesser of 15% of the market value of total assets or any
explicit borrowing limits in the Fund's prospectus. Principal and interest
on each borrowing under the LOC are due not more than 60 days after the
date of the borrowing. Borrowings under the LOC bear interest based on
prevailing market rates as defined in the LOC. A commitment fee of 0.08%
per annum (0.09% effective October 13, 2000) is incurred on the unused
portion of the LOC and is allocated to all participating Strong Funds.
There were no borrowings by the Fund under the LOC for the year ended
September 30, 2000.
5. Investment Transactions
The aggregate purchases and sales of U.S. Government and Agency securities
for the year ended September 30, 2000 were $0 and $1,209,315, respectively.
The aggregate purchases and sales of other long term securities for the
year ended September 30, 2000 were $1,573,351 and $3,014,957, respectively.
6. Income Tax Information
At September 30, 2000, the cost of investments in securities for federal
income tax purposes was $3,693,344. Net unrealized appreciation of
securities was $175,222, consisting of gross unrealized appreciation and
depreciation of $371,829 and $196,607, respectively.
The Fund had a capital loss carryover of $186,882 which expires in 2008.
The Fund realized, on a tax basis, post-October losses through September
30, 2000 of $18,985, which are not recognized for tax purposes until the
first day of the following fiscal year.
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the year ended September 30, 2000 which is designated as
qualifying for the dividends-received deduction is 82% (unaudited).
10
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
STRONG SCHAFER BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
----------------------------------------
Sept. 30, Sept. 30, Sept. 30,
Selected Per-Share Data/(a)/ 2000 1999 1998/(b)/
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.27 $ 9.14 $10.00
Income From Investment Operations:
Net Investment Income 0.13 0.15 0.10
Net Realized and Unrealized Gains (Losses) on Investments 0.72 1.22 (0.86)
-------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.85 1.37 (0.76)
Less Distributions:
From Net Investment Income (0.10) (0.15) (0.10)
From Net Realized Gains (0.33) (0.09) --
-------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.24) (0.10)
-------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.69 $10.27 $ 9.14
===============================================================================================================================
Ratios and Supplemental Data
-------------------------------------------------------------------------------------------------------------------------------
Total Return +8.6% +15.1% -7.7%
Net Assets, End of Period (In Thousands) $3,880 $6,234 $7,919
Ratio of Expenses to Average Net Assets 2.0% 2.0% 2.0%*
Ratio of Net Investment Income to Average Net Assets 1.1% 1.3% 1.5%*
Portfolio Turnover Rate 35.7% 87.9% 45.5%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period December 31, 1997 (inception) to September 30, 1998.
See Notes to Financial Statements.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Schafer Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments in securities, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Strong Schafer
Balanced Fund (one of the portfolios constituting the Strong Schafer Funds,
Inc.) (the "Fund") at September 30, 2000, the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at September 30, 2000 by
correspondence with the custodian and brokers, provides a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
October 25, 2000
12
<PAGE>
Directors
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Neal Malicky
Marvin E. Nevins
William F. Vogt
Officers
Richard S. Strong, Chairman of the Board
Elizabeth N. Cohernour, Vice President and Secretary
Cathleen A. Ebacher, Vice President and Assistant Secretary
Susan A. Hollister, Vice President and Assistant Secretary
Dennis A. Wallestad, Vice President
Thomas M. Zoeller, Vice President
John W. Widmer, Treasurer
Rhonda K. Haight, Assistant Treasurer
Investment Advisor
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Distributor
Strong Investments, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Custodian
Firstar Bank, N.A.
P.O. Box 701, Milwaukee, Wisconsin 53201
Transfer Agent and Dividend-Disbursing Agent
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
Independent Accountants
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Legal Counsel
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030Financial Printing
GroupFinancial Printing GroupFor a prospectus containing more complete
information, including management fees and expenses, please call 1-800-368-
1030. Please read it carefully before investing or sending money. This
report does not constitute an offer for the sale of securities. Strong
Funds are offered for sale by prospectus only. Strong Investments, Inc.
RT8436-1100
Strong Investments
P.O. Box 2936 | Milwaukee, WI 53201
www.eStrong.com
________________________________________________________________________________
To order a free prospectus kit, call
1-800-368-1030
To learn more about our funds, discuss an existing
account, or conduct a transaction, call
1-800-368-3863
If you are a Financial Professional, call
1-800-368-1683
Visit our web site at
www.eStrong.com
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