<PAGE>
[PHOTO OF WOMAN WITH 3 KIDS] [LOGO]
SEMI-ANNUAL REPORT
THE STRONG
SCHAFER BALANCED
FUND
SEMI-ANNUAL REPORT - MARCH 31, 2000
<PAGE>
THE STRONG
SCHAFER BALANCED
FUND
----
SEMI-ANNUAL REPORT - MARCH 31, 2000
Table of Contents
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
<PAGE>
THE STRONG SCHAFER BALANCED FUND
---------------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ David K. Schafer
David K. Schafer
Portfolio Manager
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Two major changes took place in the Strong Schafer Balanced Fund equity
portfolio during the past six months. One was an increase in the weighting of
the healthcare sector to just under 20% of equity assets. The other was the
trimming back of the broad financial segment (banks, brokers, insurance
companies) to about 25% of the equity portfolio. We added pharmaceuticals
Alza Corp. and Schering-Plough as their prices declined dramatically, making
them attractive purchase candidates. To make room for the additional
weighting in the pharmaceuticals area, we lightened up financials and
eliminated our aerospace exposure. Liquidated positions include Merrill
Lynch, BankAmerica, Summit Bancorp, Allstate Insurance, Lockheed Martin, and
Raytheon.
If you exclude from the equity portfolio the unusual performance of initial
public offerings, the Fund's equity performance in the first quarter of 2000
improved to a degree as the stock market broadened briefly. While these
investment results are encouraging, they are still far from the standard we set
for ourselves. We see signs suggesting that the massive liquidation of value
stocks by individuals and institutions and the extremely heavy redemptions among
value stock mutual funds may have just about run their course.
This observation comes from looking at the portfolios of other value-labeled
funds and noticing two important features. First, the definition of "value" has
been liberalized during
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WE SEE SIGNS SUGGESTING THAT THE MASSIVE LIQUIDATION OF VALUE STOCKS BY
INDIVIDUALS AND INSTITUTIONS AND THE EXTREMELY HEAVY REDEMPTIONS AMONG VALUE
STOCK MUTUAL FUNDS MAY HAVE JUST ABOUT RUN THEIR COURSE.
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[SIDEBAR]
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FUND
HIGHLIGHTS
- For the six months ended March 31, 2000, the Strong Schafer Balanced Fund
returned 5.01%, while the S&P 500 Stock Index returned 17.51%.*
- In the equity portfolio, we raised the healthcare position to nearly 20%.
Many high-quality names in the industry were beaten down to prices that
represented attractive valuations.
- The Fund invested the bond portion of the portfolio in intermediate-term U.S.
Treasury notes. Over the past six months, yields on two-year and five-year
Treasury securities rose approximately 85 basis points and 55 basis points,
respectively, as the Federal Reserve raised short-term rates three times.
These holdings slightly reduced the Fund's performance.
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURN(1)
AS OF 3-31-00
<TABLE>
<S> <C>
1-year 1.30%
Since Inception 4.98%
(12-31-97)
</TABLE>
--------------------------------------------------------------------------------
FIVE LARGEST HOLDINGS
AS OF 3-31-00
<TABLE>
<CAPTION>
SECURITY % OF NET ASSETS
<S> <C>
United States Treasury Notes 37.9%
ICN Pharmaceuticals, Inc. 2.9%
Canadian National Railway Co. 2.8%
American Home Products 2.8%
Corporation
Borg-Warner Automotive, Inc. 2.7%
</TABLE>
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
--------------------------------------------------------------------------------
(1)Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and capital
gains. Average annual total return reflects annualized change while total
return reflects aggregate change, and is not annualized.
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2
<PAGE>
the past few years, which has led to a liquidation of traditional value stocks
in favor of some that are more growth oriented. Second, the asset bases of value
funds have shrunk dramatically. Granted, poor investment results have played a
hand in this decline, but the overwhelming force driving the reduction has been
shareholder redemptions out of value funds. Because these redemptions have
increased the supply of value stocks in the market, they have put additional
downward pressure on share prices. The supply of value stocks has greatly
outweighed the demand for these stocks during the past three growth-driven
years.
Such steep and wide-ranging redemptions have been a difficult storm to weather,
but almost ironically, they now give us some cause for optimism. Our inclination
is to believe that the only investors remaining in value funds and other value
vehicles are those who are thoroughly committed to the investment style and the
individual opportunities it presents. We believe these fellow hard-core value
investors intend, as we do, to stay with these investments in anticipation of
their pulling out of the very difficult cycle they have endured. With this extra
selling pressure being relieved, it may be easier for value stocks to reassert
themselves--particularly in light of the very strong fundamentals many value
companies now offer--so that they may enjoy better results over the next several
years.
We thank you for your continued patience and investment.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 12-31-97 TO 3-31-00
[GRAPH]
<TABLE>
<CAPTION>
Schafer Balanced Fund S&P 500* Lipper Balanced Fund*
<S> <C> <C> <C>
Dec 97 $10,000.00 $10,000.00 $10,000.00
Jun 98 $10,430.55 $11,771.15 $10,955.17
Dec 98 $10,321.28 $12,857.66 $11,508.65
Jun 99 $11,828.55 $14,449.88 $12,218.84
Dec 99 $10,845.27 $15,563.50 $12,541.73
Mar 00 $11,156.06 $15,920.48 $12,915.36
</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 Stock Index ("S&P 500") 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 S&P 500 Stock Index is an unmanaged index generally representative of the
U.S. stock market. 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.
[SIDEBAR]
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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
STOCK 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
- The U.S. economy continued to show steady growth with few signs of inflation.
Foreign economies, most notably those in Asia, began to recover from declines
tracing back to mid-1997. Similar global economic upturns have historically
been good environments for stock markets around the world.
- Offsetting this seemingly rosy outlook is the two-tiered market in the U.S.,
which has attracted the Federal Reserve's attention. Further attempts by the
Fed to cool the superheated Nasdaq marketplace could lead to higher interest
rates and/or higher margin requirements.
- Most of the six-month period was characterized by a narrow market led by tech
stocks, in which the Fund trailed its benchmark.
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3
<PAGE>
<TABLE>
<CAPTION>
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PORTFOLIO HOLDINGS, EARNINGS PER SHARE ESTIMATES, AND PRICE/EARNINGS RATIOS AS OF 3-31-00 (UNAUDITED)
-----------------------------------------------------------------------------------------------------
EARNINGS PER SHARE PRICE/EARNINGS RATIO
SECURITY UNIT PRICE 2000E 2001E 2000E 2001E
<S> <C> <C> <C> <C> <C>
Alltel Corporation $ 63.25 2.72 3.31 23.28 19.13
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American Home Products Corporation 53.75 1.91 2.19 28.21 24.53
-----------------------------------------------------------------------------------------------------------------------------------
Arrow Electronics, Inc. 35.25 2.80 3.38 12.60 10.42
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Avnet, Inc. 63.00 3.95 4.17 15.95 15.11
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Borg-Warner Automotive, Inc. 39.37 5.75 6.36 6.84 6.19
-----------------------------------------------------------------------------------------------------------------------------------
Cadence Design Systems, Inc. 20.62 0.84 1.15 24.55 17.93
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Canadian National Railway Company 26.69 2.94 3.33 9.08 8.02
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The Chase Manhattan Corporation 87.19 6.24 6.90 13.98 12.63
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Chubb Corporation 67.56 4.02 4.66 16.79 14.51
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ECI Telecom, Ltd. 31.37 1.80 2.16 17.43 14.52
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Family Dollar Stores, Inc. 20.81 1.02 1.23 20.44 16.97
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FedEx Corporation 38.81 2.27 2.59 17.12 14.97
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Federal Home Loan Mortgage Corporation 44.19 3.38 3.87 13.07 11.42
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Franklin Resources, Inc. 33.44 2.29 2.54 14.61 13.15
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General Motors Corporation 82.81 9.75 11.02 8.49 7.51
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ICN Pharmaceuticals, Inc. 27.25 1.81 2.20 15.06 12.39
-----------------------------------------------------------------------------------------------------------------------------------
Lafarge Corporation 23.75 4.14 4.39 5.74 5.41
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May Department Stores Company 28.50 2.31 2.86 12.35 9.95
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Maytag Corporation 33.12 3.81 4.28 8.70 7.75
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Mellon Financial Corporation 29.75 2.03 2.28 14.63 13.07
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Mylan Laboratories, Inc. 27.50 1.48 1.77 18.52 15.55
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Office Depot, Inc. 11.56 1.00 1.25 11.56 9.25
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Omnicare, Inc. 12.06 1.00 1.25 12.06 9.65
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Schering-Plough Corporation 37.12 1.64 1.91 22.58 19.45
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UCAR International, Inc. 13.19 1.65 2.60 7.99 5.07
-----------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Company 40.75 2.56 2.93 15.94 13.90
-----------------------------------------------------------------------------------------------------------------------------------
STRONG SCHAFER BALANCED FUND PORTFOLIO AVERAGES 14.91 12.63
S&P 500 STOCK INDEX 500 STOCKS 1,498.58 49.40 55.98 30.34 26.77
E=ESTIMATE
</TABLE>
4
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES March 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
----------------------------
STRONG SCHAFER BALANCED FUND
----------------------------
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 60.3%
AIRLINE 2.6%
Fedex Corporation (b) 2,700 $ 105,300
AUTO & TRUCK PARTS 2.7%
Borg-Warner Automotive, Inc. 2,800 110,250
AUTOMOBILE 2.5%
General Motors Corporation 1,200 99,375
BANK - MONEY CENTER 2.2%
The Chase Manhattan Corporation 1,000 87,187
BANK - SUPER REGIONAL 4.5%
Mellon Financial Corporation 3,400 100,300
Wells Fargo Company 2,000 81,875
----------
182,175
BROKERAGE & INVESTMENT MANAGEMENT 2.2%
Franklin Resources, Inc. 2,700 90,281
COMPUTER SOFTWARE 2.6%
Cadence Design Systems, Inc. (b) 5,100 105,825
ELECTRONIC PARTS DISTRIBUTION 3.6%
Arrow Electronics, Inc. (b) 2,700 95,175
Avnet, Inc. 800 50,400
----------
145,575
HEALTHCARE - DRUG/DIVERSIFIED 9.8%
American Home Products Corporation 2,100 112,613
ICN Pharmaceuticals, Inc. 4,300 117,175
Mylan Laboratories, Inc. 3,500 96,250
Schering-Plough Corporation 1,900 69,825
----------
395,863
HEALTHCARE - PATIENT CARE 2.7%
Omnicare, Inc. 9,000 108,562
HOUSEHOLD APPLIANCES & FURNISHINGS 2.1%
Maytag Corporation 2,500 82,812
INSURANCE - PROPERTY & CASUALTY 2.3%
Chubb Corporation 1,400 94,588
METALS & MINING 2.7%
Lafarge Corporation 4,600 109,250
MORTGAGE & RELATED SERVICE 2.5%
Federal Home Loan Mortgage Corporation 2,300 101,631
RAILROAD 2.8%
Canadian National Railway Company 4,300 114,756
RETAIL - DEPARTMENT STORE 5.1%
Family Dollar Stores, Inc. 5,100 106,144
May Department Stores Company 3,450 98,325
----------
204,469
RETAIL - SPECIALTY 2.4%
Office Depot, Inc. (b) 8,500 98,281
STEEL 1.6%
UCAR International, Inc. (b) 4,900 64,619
TELECOMMUNICATION EQUIPMENT 1.8%
ECI Telecom, Ltd. 2,300 72,163
TELEPHONE 1.6%
Alltel Corporation 1,000 63,063
--------------------------------------------------------------------------------
Total Common Stocks (Cost $2,223,837) 2,436,025
--------------------------------------------------------------------------------
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
UNITED STATES GOVERNMENT ISSUES 37.9%
United States Treasury Notes:
<S> <C> <C>
5.25%, Due 8/15/03 $340,000 $ 328,419
6.25%, Due 1/31/02 390,000 388,050
6.50%, Due 8/31/01 400,000 399,750
6.625%, Due 5/15/07 410,000 418,072
--------------------------------------------------------------------------------
Total United States Government Issues (Cost $1,569,719) 1,534,291
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 0.4%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
Warner Lambert Company, 5.77% 16,500 16,500
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $16,500) 16,500
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $3,810,056) 98.6% 3,986,816
Other Assets and Liabilities, Net 1.4% 57,092
--------------------------------------------------------------------------------
NET ASSETS 100.0% $4,043,908
================================================================================
</TABLE>
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>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------------------------------------------------------------------------
March 31, 2000 (Unaudited)
Strong Schafer
Balanced Fund
--------------
<S> <C>
ASSETS:
Investments in Securities, at Market Value (Cost of $3,810,056) $3,986,816
Receivable for Securities Sold 24,676
Dividends & Interest Receivable 21,641
Other Assets 21,836
----------
Total Assets 4,054,969
ACCRUED OPERATING EXPENSES AND OTHER LIABILITIES 11,061
----------
NET ASSETS $4,043,908
==========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $4,163,581
Undistributed Net Investment Income 14,499
Accumulated Net Realized Loss (310,932)
Net Unrealized Appreciation 176,760
----------
Net Assets $4,043,908
==========
Capital Shares Outstanding (Unlimited Number Authorized) 388,462
NET ASSET VALUE PER SHARE $10.41
======
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended March 31, 2000 (Unaudited)
Strong Schafer
Balanced Fund
--------------
<S> <C>
INCOME:
Dividends (net of foreign withholding taxes of $472) $ 20,945
Interest 62,039
---------
Total Income 82,984
EXPENSES:
Investment Advisory Fees 26,668
Custodian Fees 1,513
Shareholder Servicing Costs 11,605
Professional Fees 3,717
Reports to Shareholders 6,535
Federal and State Registration Fees 11,398
Other 2,323
---------
Total Expenses before Absorptions 63,759
Involuntary Expense Absorptions by Advisor (10,664)
---------
Expenses, Net 53,095
---------
NET INVESTMENT INCOME 29,889
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Loss on Investments (284,415)
Net Change in Unrealized Appreciation/Depreciation on Investments 463,585
---------
NET GAIN ON INVESTMENTS 179,170
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $209,059
=========
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------------------------------------------
Strong Schafer Balanced Fund
---------------------------------
Six Months Ended Year Ended
March 31, 2000 Sept. 30, 1999
---------------- --------------
(Unaudited)
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 29,889 $ 95,394
Net Realized Gain (Loss) (284,415) 170,075
Net Change in Unrealized Appreciation/Depreciation 463,585 770,005
----------- ------------
Net Increase in Net Assets Resulting from Operations 209,059 1,035,474
DISTRIBUTIONS:
From Net Investment Income (15,390) (97,846)
From Net Realized Gains (176,149) (70,461)
----------- ------------
Total Distributions (191,539) (168,307)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 640,694 3,727,879
Proceeds from Reinvestment of Distributions 178,213 159,008
Payment for Shares Redeemed (3,026,896) (6,438,818)
----------- ------------
Net Decrease in Net Assets from Capital Share Transactions (2,207,989) (2,551,931)
----------- ------------
TOTAL DECREASE IN NET ASSETS (2,190,469) (1,684,764)
NET ASSETS:
Beginning of Period 6,234,377 7,919,141
----------- ------------
End of Period $4,043,908 $6,234,377
=========== ============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 62,631 340,018
Issued in reinvestment of distributions 17,786 15,504
Redeemed (299,046) (615,097)
------- -------
Net Decrease in Shares of the Fund (218,629) (259,575)
======= =======
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
March 31, 2000 (Unaudited)
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 March 31, 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
to U.S. dollars based upon current exchange rates. Purchases and sales
of foreign investment securities and income are converted daily 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. 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)
--------------------------------------------------------------------------------
March 31, 2000 (Unaudited)
(G) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts 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 premium 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. 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 March 31, 2000, other shareholding
servicing expenses paid to the Advisor, transfer agency banking charges and
unaffiliated directors' fees for the six months then ended, excluding the
effect of waivers and absorptions, were $8,038, $11,657, $678 and $977,
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 of each
borrowing on 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 .08% per annum 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 during the six
months ended March 31, 2000.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of U.S. Government and Agency securities
for the six months ended March 31, 2000 were $0 and $1,004,706, respectively.
The aggregate purchases and sales of other long term securities for the six
months ended March 31, 2000 were $1,266,409 and $2,461,304, respectively.
6. INCOME TAX INFORMATION
At March 31, 2000, the cost of investments in securities for federal income
tax purposes was $3,868,050. Net unrealized appreciation of securities was
$118,766, consisting of gross unrealized appreciation and depreciation of
$296,264 and $177,498, respectively.
10
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
STRONG SCHAFER BALANCED FUND
-----------------------------------------------------------------------------------------------------
Period Ended
---------------------------
March 31, Sept. 30, Sept. 30,
Selected Per-Share Data(a) 2000(b) 1999 1998(c)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.27 $ 9.14 $10.00
Income From Investment Operations:
Net Investment Income 0.07 0.15 0.10
Net Realized and Unrealized Gains (Losses) on Investments 0.43 1.22 (0.86)
-----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.50 1.37 (0.76)
Less Distributions:
From Net Investment Income (0.03) (0.15) (0.10)
From Net Realized Gains (0.33) (0.09) --
-----------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.24) (0.10)
-----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.41 $10.27 $ 9.14
=====================================================================================================
Ratios and Supplemental Data
-----------------------------------------------------------------------------------------------------
Total Return +5.0% +15.1% -7.7%
Net Assets, End of Period (In Thousands) $4,044 $6,234 $7,919
Ratio of Expenses to Average Net Assets Without
Waivers and Absorptions 2.0%* 2.0% 2.0%*
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 24.9% 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 six months ended March 31, 2000 (unaudited).
(c)For the period December 31, 1997 (inception) to September 30, 1998.
See Notes to Financial Statements.
11
<PAGE>
NOTES
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12
<PAGE>
Directors
Richard S. Strong
Marvin E. Nevins
William F. Vogt
Willie D. Davis
Stanley Kritzik
Neal Malicky
Officers
Richard S. Strong, CHAIRMAN OF THE BOARD
Thomas M. Zoeller, VICE PRESIDENT
Dennis A. Wallestad, VICE PRESIDENT
Stephen J. Shenkenberg, VICE PRESIDENT AND SECRETARY
John S. Weitzer, 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 1-800-368-1030. 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. RT3478-0400
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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STRONG INVESTMENTS
P.O. Box 2936
Milwaukee, Wisconsin 53201
