<PAGE> 1
SCHAFER VALUE FUND, INC.
645 FIFTH AVENUE
NEW YORK, NEW YORK 10022
(212) 644-1800
November 1, 1995
Dear Shareholders:
On the occasion of our tenth anniversary, we would like to express our
sincerest appreciation for the continued confidence and loyalty of our original
and longer term shareholders. We would also like to take this opportunity to
welcome those of you who have become new shareholders this year.
September 30, 1995 brought to a close the tenth fiscal year of the Schafer
Value Fund, a year in which the net assets of the Fund more than doubled,
reflecting a sharp increase in the number of new shareholders and the rising
stock market. The shareholder base at the fiscal year end more than doubled to
approximately 9,600 compared to 4,100 at the beginning of the period while net
assets increased from $68.4 million at the start of the fiscal year to $163.3 on
September 30, 1995. The net asset value per share gained a healthy 26.0% for the
year but trailed the 29.7% advance registered by the S&P 500 for the same time
frame. Due in large measure to the inflow of new money into the Fund, the
expense ratio has declined to an all time low of 1.28% of net assets. For the
third year in a row the expense ratio has declined and the current level of our
expense ratio is below the average of 1.39% for the 1,863 Growth and Growth &
Income domestic equity funds tracked by Morningstar, Inc.
While the growth in the economy has slowed somewhat this year, the benefits
of corporate restructuring, low interest rates and inflation being held in check
have led to improved corporate profits, a fact which has not gone unnoticed in
the stock market. However, as you will note on Table I, we have continued to
find stocks whose price/earnings multiples are lower than that of the S&P 500
and whose earnings per share growth prospects are better than those of the
Index. The average stock in our portfolio sells at 10.5 times our estimate of
1996 earnings per share compared to 15.2 times for the S&P 500. The average
estimated year over year earnings gain for our portfolio stocks is nearly 20%
compared to the consensus expectation of a gain of less than 7% for the S&P 500
earnings next year.
<PAGE> 2
TABLE I
PORTFOLIO HOLDINGS
EARNINGS PER SHARE ESTIMATES
AND PRICE/EARNINGS RATIOS
(UNAUDITED)
<TABLE>
<CAPTION>
PRICE/EARNINGS
EARNINGS PER SHARE RATIO
CLOSING PRICE ------------------------------- -----------------
SECURITY (OCTOBER 31, 1995) 1994A 1995E 1996E 1995E 1996E
- ----------------------------- ------------------ ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
American Home Products....... $ 88.50 $ 5.15 $4.85 $ 5.85 18.2 15.1
Archer Daniels Midland....... 16.25 0.90 1.45 1.65 11.2 9.8
Asian Pulp & Paper........... 10.13 0.30 1.45 2.35 7.0 4.3
Avnet Inc. .................. 49.63 2.10 3.30 4.15 15.0 12.0
Berkley, W.R. ............... 43.00 4.30 2.80 3.90 15.4 11.0
Borg Warner Automotive....... 28.50 2.84 3.15 3.60 9.0 7.9
Burlington Industries........ 11.50 1.37 1.15 1.25 10.0 9.2
Burlington Northern Santa
Fe......................... 82.50 4.35 5.20 6.25 15.9 13.2
Canadian Pacific............. 15.63 1.20 1.15 1.45 13.6 10.8
Chrysler Corp. .............. 53.00 10.14 6.20 8.00 8.5 6.6
Circuit City Stores.......... 34.50 1.72 2.05 2.45 16.8 14.1
Compaq Computer.............. 54.88 3.25 3.90 4.55 14.1 12.1
Cummins Engine............... 36.78 6.11 5.20 5.35 7.1 6.9
Cyprus Amax Minerals......... 26.23 1.38 4.40 3.75 6.0 7.0
Exxon Corp. ................. 76.00 4.10 4.75 5.00 16.0 15.2
First Chicago Corp. ......... 69.13 5.65 6.70 7.45 10.3 9.3
Federal Express.............. 82.63 5.00 5.90 7.00 14.0 11.8
General Motors, Class H...... 42.13 2.70 2.85 3.05 14.8 13.8
Hanson PLC................... 15.63 1.16 1.45 1.65 10.8 9.5
Inco Ltd..................... 34.00 NA 2.10 3.20 16.2 10.6
KMart Corp. ................. 9.00 1.00 0.25 0.50 36.0 18.0
KeyCorp...................... 34.00 3.60 3.70 4.05 9.2 8.4
May Department Stores........ 38.88 2.95 3.10 3.55 12.5 11.0
Mellon Bank.................. 50.13 3.05 4.45 5.00 11.3 10.0
Merrill Lynch................ 54.50 5.10 5.35 6.10 10.2 8.9
Offshore Logistics........... 12.38 1.05 0.96 1.20 12.9 10.3
Old Republic International... 27.63 2.70 3.00 3.25 9.2 8.5
Owens-Corning Fiberglass..... 42.75 3.35 4.35 5.05 9.8 8.5
Paine Webber Group........... 21.75 1.45 1.50 1.95 14.5 11.2
Philip Morris................ 83.25 5.65 6.50 7.85 12.8 10.6
Progressive Corp. ........... 42.00 2.75 3.02 3.60 13.9 11.7
Redman Industries............ 26.25 1.67 2.75 3.20 9.5 8.2
Sotheby's Holdings........... 14.38 0.36 0.65 1.05 22.1 13.7
Ultramar Corp. .............. 23.88 2.70 2.35 2.65 10.2 9.0
Whirlpool Corp .............. 52.88 4.30 3.90 4.85 13.6 10.9
YPF S.A. .................... 17.00 1.36 1.35 2.00 12.6 8.5
----- -----
Averages Price/Earnings
Ratio:..................... 13.1 10.5
S&P 500 Index................ 583.10 32.50 36.6 38.45 15.9 15.2
</TABLE>
- ---------------
A = actual
E = estimate
2
<PAGE> 3
Tables II and III display the investment results of Schafer Value Fund as
compared to the S&P 500 over the last 10 years.
TABLE II
<TABLE>
<CAPTION>
Schafer
Fiscal year ended Value Fund S&P 500
----------------- ------------- -----------
<S> <C> <C>
September 30, 1995.................. 26.0% 29.7%
September 30, 1994.................. 4.5 3.7
September 30, 1993.................. 28.4 13.0
September 30, 1992.................. 18.8 11.0
September 30, 1991.................. 37.4 31.1
September 30, 1990.................. -17.4 -9.0
September 30, 1989.................. 36.9 33.0
September 30, 1988.................. -15.5 -12.4
September 30, 1987.................. 42.9 43.5
Oct. 22, 1985 -- Sept. 30, 1986..... 8.2 26.6
</TABLE>
TABLE III
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE SCHAFER VALUE FUND AND THE S&P 500 INDEX
PERIODS ENDING SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Measurement Period Schafer Value
(Fiscal Year Covered) Fund S&P 500
<S> <C> <C>
Oct. 22 10.000 10.000
Sept. 30 10.820 12.556
Sept. 30 15.464 18.017
Sept. 30 13.069 15.786
Sept. 30 17.887 20.988
Sept. 30 14.773 19.097
Sept. 30 20.293 25.036
Sept. 30 24.107 27.797
Sept. 30 30.955 31.411
Sept. 30 32.342 32.567
Sept. 30 40.757 42.242
</TABLE>
Performance data for both the Fund and the S&P 500 Index are total rates of
return which include the reinvestment of dividends and distributions. Past
performance does not guarantee future results. Investment returns will fluctuate
and shares when redeemed may be worth more or less than original cost.
We thank you for your continued interest in the Schafer Value Fund.
Very truly yours,
/s/ DAVID K. SCHAFER
----------------------
David K. Schafer
President and Chairman
of the Board of Directors
3
<PAGE> 4
SCHEDULE OF INVESTMENTS
Schafer Value Fund, Inc. / September 30, 1995
<TABLE>
<CAPTION>
UNIT % OF
AVERAGE MARKET MARKET NET
SHARES SECURITY UNIT COST VALUE % CHANGE VALUE ASSETS
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE
117,700 General Motors Corp., Class H........ $ 35.78 $41.00 14.6% $ 4,825,700 3.0%
------------ -----
AUTOMOTIVE
156,900 Borg Warner Automotive, Inc.......... 26.76 32.00 19.6 5,020,800 3.1
82,500 Chrysler Corporation................. 46.48 53.00 14.0 4,372,500 2.7
105,700 Cummins Engine Co., Inc.............. 43.54 38.50 -11.6 4,069,450 2.5
------------ -----
13,462,750 8.3
------------ -----
BANKS
71,500 First Chicago Corporation............ 53.69 68.63 27.8 4,906,687 3.0
136,827 KeyCorp.............................. 29.44 34.25 16.3 4,686,325 2.9
101,800 Mellon Bank Corporation.............. 37.94 44.63 17.6 4,542,825 2.8
------------ -----
14,135,837 8.7
------------ -----
BROKERAGE
245,700 Paine Webber Group, Inc. ............ 16.70 19.75 18.3 4,852,575 3.0
56,000 Merrill Lynch & Company, Inc. ....... 35.82 62.50 74.5 3,500,000 2.1
------------ -----
8,352,575 5.1
------------ -----
BUILDING INDUSTRY
99,100 Owens-Corning Fiberglass Corp.+...... 36.49 44.63 22.3 4,422,337 2.7
164,900 Redman Industries, Inc.+ ............ 19.45 26.00 33.7 4,287,400 2.6
------------ -----
8,709,737 5.3
------------ -----
COMPUTERS & ELECTRONICS
61,600 Avnet, Inc........................... 36.07 51.63 43.1 3,180,100 1.9
80,600 Compaq Computer Corporation+......... 33.12 48.38 46.1 3,899,025 2.4
------------ -----
7,079,125 4.3
------------ -----
ENERGY
65,300 Exxon Corporation.................... 66.47 72.25 8.7 4,717,925 2.9
123,500 Offshore Logistics, Inc.+............ 11.67 13.88 18.9 1,713,562 1.0
197,800 Ultramar Corporation................. 24.30 23.75 -2.3 4,697,750 2.9
260,800 YPF S.A.-ADR......................... 18.87 18.00 -4.6 4,694,400 2.9
------------ -----
15,823,637 9.7
------------ -----
</TABLE>
See notes to financial statements.
4
<PAGE> 5
SCHEDULE OF INVESTMENTS
Schafer Value Fund, Inc. / September 30, 1995 (Continued)
<TABLE>
<CAPTION>
UNIT % OF
AVERAGE MARKET MARKET NET
SHARES SECURITY UNIT COST VALUE % CHANGE VALUE ASSETS
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
FERTILIZER
294,400 Archer Daniels Midland Company....... $ 15.66 $15.38 -1.8% $ 4,526,400 2.8%
------------ -----
HOME APPLIANCES
76,000 Whirlpool Corporation................ 52.43 57.75 10.1 4,389,000 2.7
------------ -----
INSURANCE
165,600 Old Republic International Corp...... 22.59 28.88 27.8 4,781,700 2.9
102,700 The Progressive Corporation.......... 33.68 44.75 32.9 4,595,825 2.8
89,300 The W.R. Berkley Corporation......... 36.59 45.38 24.0 4,051,988 2.5
------------ -----
13,429,513 8.2
------------ -----
PHARMACEUTICAL
34,700 American Home Products Corporation... 58.57 84.88 44.9 2,945,163 1.8
------------ -----
MISCELLANEOUS
288,500 Hanson PLC-ADR....................... 16.86 16.25 -3.6 4,688.125 2.9
------------ -----
METALS & MINING
162,600 Cyprus Amax Minerals Company......... 28.29 28.13 -0.6 4,573,125 2.8
138,900 INCO Ltd............................. 28.93 34.25 18.4 4,757,325 2.9
------------ -----
9,330,450 5.7
------------ -----
PAPER
403,800 Asian Pulp & Paper Co., Ltd.-ADR+.... 12.41 12.13 -2.3 4,896,075 3.0
------------ -----
RETAIL
280,000 KMart Corp........................... 16.16 14.50 -10.3 4,060,000 2.5
108,000 May Department Stores Company........ 38.02 43.75 15.1 4,725,000 2.9
156,100 Circuit City Stores, Inc. ........... 27.99 31.63 13.0 4,936,663 3.0
197,200 Sotheby's Holdings, Inc., Class A.... 12.30 14.00 13.8 2,760,800 1.7
------------ -----
16,482,463 10.1
------------ -----
TEXTILES
385,000 Burlington Industries, Inc.+......... 12.17 12.63 3.7 4,860,625 3.0
------------ -----
TOBACCO
51,900 Philip Morris Companies, Inc. ....... 58.66 83.50 42.3 4,333,650 2.6
------------ -----
</TABLE>
See notes to financial statements.
5
<PAGE> 6
SCHEDULE OF INVESTMENTS
Schafer Value Fund, Inc. / September 30, 1995 (Continued)
<TABLE>
<CAPTION>
UNIT % OF
AVERAGE MARKET MARKET NET
SHARES SECURITY UNIT COST VALUE % CHANGE VALUE ASSETS
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
TRANSPORTATION
41,000 Burlington Northern Santa Fe Corp.... $ 50.30 $72.50 44.1% $ 2,972,500 1.8%
296,000 Canadian Pacific, Ltd................ 16.21 16.00 -1.3 4,736,000 2.9
55,000 Federal Express Corporation+......... 62.05 83.00 33.8 4,565,000 2.8
------------ -----
12,273,500 7.5
------------ -----
TOTAL SECURITIES (Cost $134,928,410)................................. 154,544,325 94.7
------------ -----
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CASH EQUIVALENTS
- ---------------------------------------------------------------------------------
<C> <S> <C> <C>
Warner Lambert Variable Rate Demand Note
$2,347,349 5.69%, due 10-02-1995.............................................. 2,347,349 1.4
Southwestern Bell Variable Rate Demand Note
2,136,648 5.70%, due 10-02-1995.............................................. 2,136,648 1.3
Sara Lee Variable Rate Demand Note
1,794,451 5.70%, due 10-02-1995.............................................. 1,794,451 1.1
Eli Lilly Variable Rate Demand Note
1,747,663 5.55%, due 10-02-1995.............................................. 1,747,663 1.1
General Mills Variable Rate Demand Note
393,066 5.71%, due 10-02-1995.............................................. 393,066 .2
Wisconsin Electric Variable Rate Demand Note
323,164 5.76%, due 10-02-1995.............................................. 323,164 .2
Pitney Bowes Variable Rate Demand Note
50,000 5.72%, due 10-02-1995.............................................. 50,000 .1
------------ -----
TOTAL CASH EQUIVALENTS (Cost $8,792,341)........................... 8,792,341 5.4
------------ -----
TOTAL INVESTMENTS (Cost $143,720,751).............................. 163,336,666 100.1
Excess of Other Liabilities Over Other Assets...................... (68,071) (.1)
------------ -----
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL SHARES................ $163,268,595 100.0%
=========== =====
</TABLE>
- ---------------
+ Non-income producing security.
ADR-American Depository Receipt.
See notes to financial statements.
6
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES
Schafer Value Fund, Inc. / September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at market value (cost $143,720,751)........... $163,336,666
Receivable for Fund shares sold............................ 495,650
Dividends receivable....................................... 214,387
Interest receivable........................................ 31,318
------------
Total assets....................................... 164,078,021
LIABILITIES:
Payable for securities purchased........................... 579,183
Due to Investment Adviser.................................. 128,251
Accrued expenses........................................... 65,227
Payable for Fund shares redeemed........................... 36,765
------------
Total liabilities.................................. 809,426
------------
NET ASSETS................................................... $163,268,595
============
NET ASSETS COMPRISED:
Capital Stock (authorized 25,000,000 shares; issued and
outstanding 3,756,513 shares, $.10 par value)........... $ 375,651
Paid-in surplus............................................ 137,395,546
Accumulated undistributed net investment income............ 797,663
Accumulated net realized gains............................. 5,083,820
Net unrealized appreciation of investments................. 19,615,915
------------
Net assets......................................... $163,268,595
============
Net asset, offering and redemption price per share
(3,756,513 shares issued and outstanding)............... $43.46
=======
</TABLE>
See notes to financial statements.
7
<PAGE> 8
STATEMENT OF OPERATIONS
Schafer Value Fund, Inc. / September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividend income (net of withholding tax of $6,741)............ $ 2,035,439
Interest income............................................... 358,972
-----------
Total investment income............................... 2,394,411
EXPENSES:
Investment Adviser's fee...................................... 964,453
Registration, filing and other fees........................... 86,022
Transfer agent fees........................................... 66,424
Custodial and accounting fees................................. 64,649
Professional fees............................................. 44,461
Printing...................................................... 19,906
Director's fee................................................ 3,000
----------
Total expenses........................................ 1,248,915
-----------
Net investment income................................. 1,145,496
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
NET REALIZED GAIN FROM SECURITY TRANSACTIONS:
Proceeds from sales........................................ 30,472,861
Less: cost of securities sold.............................. 25,387,308
----------
Net realized gain on transactions.......................... 5,085,553
NET UNREALIZED APPRECIATION:
Beginning of period........................................ 1,761,125
End of period.............................................. 19,615,915
----------
Change in unrealized appreciation.......................... 17,854,790
-----------
NET GAIN ON INVESTMENTS....................................... 22,940,343
-----------
INCREASE IN NET ASSETS FROM OPERATIONS.......................... $24,085,839
===========
</TABLE>
See notes to financial statements.
8
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
Schafer Value Fund, Inc. / September 30, 1995
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................. $ 1,145,496 $ 401,227
Net realized gain on investments....................... 5,085,553 3,452,976
Change in unrealized appreciation...................... 17,854,790 (3,184,793)
------------ ------------
Increase in net assets from operations................. 24,085,839 669,410
------------ ------------
Dividend to shareholders from net investment income.... (689,275 (123,444)
Distribution to shareholders from realized gains....... (3,425,487 (701,683)
------------ ------------
(4,114,762) (825,127)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares...................... 86,479,502 48,815,133
Dividend and distribution reinvested................... 3,972,087 806,971
Cost of shares redeemed................................ (15,553,119) (2,470,506)
------------ ------------
Increase in net assets from capital share
transactions........................................ 74,898,470 47,151,598
------------ ------------
Total increase in net assets........................... 94,869,547 46,995,881
NET ASSETS:
Beginning of period.................................... 68,399,048 21,403,167
------------ ------------
End of period (including undistributed net investment
income of $797,663 and $341,442, respectively)...... $163,268,595 $ 68,399,048
============ ============
</TABLE>
See notes to financial statements.
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
Schafer Value Fund, Inc. / September 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Schafer Value Fund, Inc. (the "Fund") was incorporated under the laws of
the State of Maryland on August 12, 1985 and is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company.
The following is a summary of significant accounting policies in conformity
with generally accepted accounting principles followed by the Fund in the
preparation of its financial statements.
A. Security Valuation
Securities traded on any stock exchange or in the NASDAQ national market
system will ordinarily be valued on the basis of the latest sale price as of the
close of the Exchange on which they are traded on the date of valuation or, in
the absence of any sale on that date and in the case of the over-the-counter
market, the mean of the latest reported bid and ask price, if market quotations
are readily available. Cash equivalents with remaining maturities of 60 days or
less are valued at amortized cost. Any securities for which there are no readily
available market quotations will be valued at their fair value as determined in
good faith by the Board of Directors.
B. Cash Equivalents
The Fund has investments in short-term variable rate demand notes, which
are unsecured nonnegotiable instruments. These instruments are rated at least A1
by Standard & Poor's. However, the Fund may be susceptible to credit risk with
respect to these notes to the extent the issuer defaults on its payment
obligation. The Fund's policy is to monitor the creditworthiness of the issuer
and does not anticipate nonperformance by these counterparties.
The Fund's Schedule of Investments indicates a maturity date which is the
next interest reset date. The rate shown is the rate in effect at September 30,
1995.
C. Security Transactions and Investment Income
Security transactions are recorded on the trade date. Realized gains and
losses on investments are calculated on a first-in, first-out basis. Dividends
are recorded on the ex-dividend date. Non-cash dividend income is recorded based
on the market or fair value of the property received. Interest income is
recorded on the accrual basis.
D. Distributions to Shareholders
Dividends from net investment income to shareholders and distributions from
realized gains on sales of securities are recorded on the ex-date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. The "book/tax" differences
are either considered temporary or permanent in nature. To the extent these
amounts are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
Schafer Value Fund, Inc. / September 30, 1995 (Continued)
investment income or distributions in excess of net realized gains. To the
extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of paid-in-capital.
E. Federal Income Taxes
The Fund has complied and intends to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
2. CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
---------------- ----------------
<S> <C> <C>
Shares sold............................................... 2,185,443 1,326,214
Shares issued for reinvested dividends and
distributions........................................... 119,966 22,115
Shares redeemed........................................... (421,007) (67,279)
--------- ---------
Net increase.............................................. 1,884,402 1,281,050
========= =========
</TABLE>
3. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investment securities (excluding cash
equivalents) during the year ended September 30, 1995 were $95,205,457 and
$30,472,861, respectively. The cost basis of portfolio securities for federal
income tax purposes was substantially the same as for book purposes at September
30, 1995. This consisted of aggregate gross unrealized appreciation for all
investments in which there was an excess of market value over cost of
$21,416,136 and aggregate gross unrealized depreciation for all investments in
which there was an excess of cost over market value of $1,800,221.
4. INVESTMENT ADVISORY FEES
Schafer Capital Management, Inc. (the "Investment Adviser") provides the
Fund with management and investment advisory services. The Investment Advisory
Agreement provides that subject to the direction of the Board of Directors of
the Fund, the Investment Adviser is responsible for the actual management of the
Fund's portfolio. The Investment Adviser is obligated to perform certain
administrative and management services for the Fund, except to the extent these
services are provided by any custodian, transfer agent, registrar or
administrator hired by the Fund, and is obligated to provide all of the office
space, facilities, equipment and personnel necessary to perform its duties under
the Investment Advisory Agreement. The current agreement provides for a monthly
fee computed at an annual rate of 1.0% of the Fund's average daily net assets.
Pursuant to various state regulations, the Investment Adviser has agreed to
reimburse the Fund on a monthly basis for all expenses incurred in any fiscal
year (exclusive of taxes, interest,
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
Schafer Value Fund, Inc. / September 30, 1995 (Continued)
brokerage fees and extraordinary expenses) which in the aggregate exceed the
most restrictive limitation prescribed by any state in which the Fund's
securities are qualified for sale. The most restrictive limitation to which the
Fund may be subject is 2.5% of the first $30 million of the Fund's average
annual net assets for such year, 2% of the next $70 million of average annual
net assets and 1.5% of the remaining average annual net assets. For the year
ended September 30, 1995, no reimbursement was required.
5. DISTRIBUTION AGREEMENT
Pursuant to a distribution agreement, Lazard Freres & Co. has agreed to act
at the request of the Fund and the Investment Adviser as the Fund's agent to
effect the distribution of the Fund's shares in certain jurisdictions in which
the Fund is not authorized to distribute its shares directly. Lazard Freres &
Co. is not entitled to receive any compensation from the Fund for its services
under the agreement.
Lazard Freres & Co. may provide brokerage services to the Fund. For the
year ended September 30, 1995, the Fund incurred $26,838 in brokerage
commissions to Lazard Freres & Co. which the Board of Directors of the Fund
determined were at reasonable and fair commission levels.
6. RELATED PARTIES AND SIGNIFICANT INVESTORS
At September 30, 1995, the Fund has been advised that affiliates of the
Investment Adviser, and David K. Schafer (individually), the sole shareholder of
the Investment Adviser, directly or indirectly controlled 43,991 shares, or
1.17% of the outstanding shares, of the Fund.
12
<PAGE> 13
FINANCIAL HIGHLIGHTS
Schafer Value Fund, Inc.
(FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period............... $ 36.54 $ 36.21 $ 31.59 $ 32.21 $ 25.65
Income from Investment Operations:
Net investment income............. .36 .26 .28 .42 .46
Net gain on securities (both
realized and unrealized)........ 8.53 1.34 8.00 4.96 8.41
--------- ------- ------- ------- -------
Total from Investment
Operations................ 8.89 1.60 8.28 5.38 8.87
--------- ------- ------- ------- -------
Less:
Distribution from net realized
gains........................... (1.64) (1.08) (3.27) (5.48) (1.73)
Dividends from net investment
income.......................... (.33) (.19) (.39) (.52) (.58)
--------- ------- ------- ------- -------
Total dividends and
distributions............. (1.97) (1.27) (3.66) (6.00) (2.31)
--------- ------- ------- ------- -------
Net Asset Value, End of Period...... $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21
========= ======= ======= ======= =======
Total Return........................ 26.01% 4.42% 28.41% 18.80% 37.28%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands)...................... $ 163,269 $68,399 $21,403 $12,195 $ 9,811
Ratio of expenses to average net
assets.......................... 1.28% 1.48% 1.74% 2.08% 2.00%
Ratio of net investment income to
average net assets.............. 1.18% .99% .79% 1.20% 1.26%
Portfolio turnover rate........... 33.19% 28.45% 33.29% 53.03% 54.74%
</TABLE>
See notes to financial statements.
13
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
Schafer Value Fund, Inc.
To the Board of Directors
and Shareholders of
Schafer Value Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, 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 Schafer Value Fund, Inc. (the
"Fund") at September 30, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. 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 audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards 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 audits, which included confirmation of securities at
September 30, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 27, 1995
14
<PAGE> 15
SCHAFER
VALUE FUND INC.
---------------------------
ANNUAL REPORT
SCHAFER SEPTEMBER 30, 1995
VALUE FUND INC.
------------------------------------------------
645 Fifth Avenue
New York, New York 10022
(800) 343-0481
INVESTMENT ADVISER:
Schafer Capital Management, Inc.
645 Fifth Avenue
New York, New York 10022
CUSTODIAN & TRANSFER AGENT:
Firstar Trust Company
Mutual Fund Services
615 East Michigan Street
Milwaukee, Wisconsin 53202
COUNSEL:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
------------------------------------------------
To request information, open an
account, or inquire about an existing
account, including current net asset
value, please call (800) 343-0481.
