<PAGE> 1
[THE STRONG SCHAFER LOGO]
VALUE Fund
SEMI-ANNUAL REPORT - MARCH 31, 1996
[GRAPHIC]
DESIGNED FOR INVESTORS
SEEKING LONG-TERM
CAPITAL APPRECIATION
[STRONG LOGO]
STRONG FUNDS
<PAGE> 2
EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING
These common-sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here
24 hours a day, seven days a week to take your call.
- --------------------------------- 1 --------------------------------------------
Have a plan.
[GRAPHIC] Even a simple plan can help you take control of your
financial future. Review your plan once a year, or if
your circumstances change.
- --------------------------------- 2 --------------------------------------------
Start investing as soon as possible.
[GRAPHIC] Make time a valuable ally. Let it put the power of
compounding to work for you, while helping to reduce
your potential investment risk.
- --------------------------------- 3 --------------------------------------------
Diversify your portfolio.
[GRAPHIC] By investing in different asset classes-stocks,
bonds, and cash-you help protect against poor
performance in one type of investment while including
investments most likely to help you achieve your
important goals.
- --------------------------------- 4 --------------------------------------------
Invest regularly.
[GRAPHIC] Investing is a process, not a one-time event. By
investing regularly over the long term, you reduce
the impact of short-term market gyrations, and you
attend to your long-term plan before you're tempted
to spend those assets on short-term needs.
- --------------------------------- 5 --------------------------------------------
Maintain a long-term perspective.
[GRAPHIC] For most individuals, the best discipline is staying
invested as market conditions change. Reactive,
emotional investment decisions are all too often a
source of regret-and of principal loss.
- --------------------------------- 6 --------------------------------------------
Consider stocks to help achieve major long-term goals.
[GRAPHIC] Over time, stocks have provided the more powerful
returns needed to help the value of your investments
stay well ahead of inflation.
- --------------------------------- 7 --------------------------------------------
Keep a comfortable amount of cash in your portfolio.
[GRAPHIC] To meet current needs, including emergencies, use a
money market fund or a bank account-not your
long-term investment assets.
- --------------------------------- 8 --------------------------------------------
Know what you're buying.
[GRAPHIC] Make sure you understand the potential risks and
rewards associated with each of your investments. Ask
questions... request information...make up your own
mind. And choose a fund company that helps you make
informed investment decisions.
<PAGE> 3
[THE STRONG SCHAFER LOGO]
VALUE Fund
SEMI-ANNUAL REPORT O MARCH 31, 1996
Table of Contents
<TABLE>
<S> <C>
INVESTMENT REVIEWS
The Strong Schafer Value Fund . . . . . . . . . . . . . . . . . . . . 2
FINANCIAL INFORMATION
Schedules of Investments in Securities . . . . . . . . . . . . . . . 5
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . 7
Statements of Assets and Liabilities . . . . . . . . . . . . . . . . 8
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 10
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 4
The Strong SCHAFER VALUE Fund
The Strong Schafer Value Fund's primary investment objective is long-term
capital appreciation, and portfolio securities are selected primarily with a
view to achievement of this objective. Current income is a secondary objective
in the selection of investments.
A STRONG ALLIANCE
We would like to take this opportunity to thank our long-term shareholders for
their continued confidence in us, and to welcome new shareholders who have
joined the Fund since we formed an alliance with Strong Capital Management,
Inc. in January of this year.
FOCUS ON INDIVIDUAL MERIT
"...we choose stocks on their individual merits rather than try to time the
market, or to be invested in today's 'hot' stock or industry."
[GRAPHIC]
The alliance does not affect the way the Fund is managed. Schafer Capital
Management, Inc. will continue to exclusively manage the investment portfolio
of the Strong Schafer Value Fund, using the same value-oriented, bottom-up
investment approach it has used since the Fund's inception in 1985. Separately,
Strong will act as the Fund's transfer, shareholder services, and accounting
agent. Strong will also provide marketing services for the Fund and act as the
distributor of the Fund's shares.
NO CHANGE IN OUR INVESTMENT APPROACH
The investment philosophy we have used over the years, and continue to employ
today, is to generally remain fully invested in common stocks at all times. We
look for medium- to large-capitalization stocks whose earnings are growing
faster than the average of the earnings of the stocks comprising the S&P 500
Index, and are selling at below-average price-to-earnings ratios. In other
words, we look for above-average growth at a discount.
We utilize a bottom-up approach in choosing stocks; that is, we choose stocks
on their individual merits rather than trying to time the market or be invested
in today's "hot" stock or industry. And to keep our natural enthusiasm for any
one stock in check, we equally weight our holdings. We currently invest
approximately 2.5% of the Fund's assets in each stock we purchase for the Fund.
To assure adequate diversification, we will not invest more than 20% of the
Fund's net assets in any one industry. We also may invest up to 20% of the Fund
in common stocks of foreign companies, again adhering to our process of equal
weighting. While we consider ourselves long-term investors, we remain acutely
aware of the influences and events affecting our individual holdings. The end
result is a low annual turnover rate.
At the end of March 1996, the Fund held 41 stocks. The table on page 4
indicates that we continue to find stocks which meet our investment criteria.
2
<PAGE> 5
FUND STRATEGY: STAY THE COURSE
The Strong Schafer Value Fund posted a 6.7% gain for the six-month period ended
March 31, 1996. While the gain is healthy by most standards, investors may be
less enthusiastic given 1995's extraordinary returns. The bull market that
dominated the U.S. investment scene last year has cooled somewhat, in light of
mixed economic signals. The Federal Reserve Board, which lowered short-term
interest rates in 1995 and again early this year, has foregone opportunities to
ease rates further so far this year, causing some concern in the financial
markets.
[PHOTO]
Going forward, we will continue our disciplined approach to value investing, in
which we look for companies that we believe offer our shareholders
above-average growth at a discount.
Very truly yours,
/s/ DAVID K. SCHAFER
David K. Schafer
Portfolio Manager
Strong Schafer Value Fund, Inc.
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 Investment
from 3-31-86 to 3-31-96
<TABLE>
<CAPTION>
THE STRONG SCHAFER VALUE FUND S&P 500 INDEX
<S> <C> <C>
3-86 10,000 10,000
12-86 9680.19 10,399.59
12-87 9641.48 10,945.65
12-88 11,375.45 12,763.54
12-89 14,793.98 16,807.78
12-90 13,304.39 16,286.07
12-91 18,748.20 21,247.65
12-92 22,248.95 22,866.17
12-93 27,583.24 24,170.95
12-94 26,403.68 25,503.46
12-95 35,420.30 35,087.12
3-96 36,831.49 36,970.45
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (1)
AS OF 3-31-96
<S> <C>
1-YEAR 28.40%
5-YEAR 17.71%
10-YEAR 13.93%
SINCE INCEPTION 15.10%
(on 10-22-85)
</TABLE>
This graph, prepared in accordance with SEC regulations, compares a
$10,000 investment in the Fund, made at 3-31-86, with a similar investment
in the Standard and Poor's 500 Stock Index ("S&P 500"), an unmanaged index
generally representative of the U.S. stock market. Results include the
reinvestment of all dividends and capital gains distributions. Source for
the index data is Micropal. 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.
(1) Average annual total return measures change in the value of an investment
in the Fund as an annualized average, assuming reinvestment of all
dividends and capital gains.
- --------------------------------------------------------------------------------
3
<PAGE> 6
<TABLE>
<CAPTION>
Portfolio Holdings,
Earnings per Share Estimates, and
Price/Earnings Ratios (unaudited)
-----------------------------------------------------------------------------
Closing Price Earnings Per Share Price/Earnings Ratio
SECURITY (3-31-96) 1995A 1996E 1997E 1996E 1997E
<S> <C> <C> <C> <C> <C> <C>
Lasalle Re Holdings . . . . . . . . . . . . . . . . . . $21.50 $4.40 $4.50 $4.65 4.8 4.6
Philips Electronics N.V. ADR . . . . . . . . . . . . . 36.38 4.60 4.85 5.80 7.5 6.3
Chrysler Corporation . . . . . . . . . . . . . . . . . 62.25 6.20 8.00 8.75 7.8 7.1
Inco, Ltd . . . . . . . . . . . . . . . . . . . . . . . 31.63 1.90 3.05 4.40 10.4 7.2
Owens Corning Fiberglass Corporation . . . . . . . . . 40.13 4.60 5.25 5.55 7.6 7.2
Compaq Computer Corporation . . . . . . . . . . . . . . 38.63 3.90 4.30 5.10 9.0 7.6
Cyprus Amax Minerals Company . . . . . . . . . . . . . 28.25 4.45 3.75 3.55 7.5 8.0
Old Republic International Corporation . . . . . . . . 32.50 3.63 3.45 3.95 9.4 8.2
Borg-Warner Automotive, Inc. . . . . . . . . . . . . . 33.25 3.15 3.60 4.00 9.2 8.3
Ford Motor Company . . . . . . . . . . . . . . . . . . 34.38 3.65 3.10 4.10 11.1 8.4
Paine Webber Group, Inc. . . . . . . . . . . . . . . . 22.00 1.50 2.40 2.60 9.2 8.5
First Chicago Corporation . . . . . . . . . . . . . . . 41.50 3.70 4.30 4.80 9.7 8.6
Burlington Industries, Inc. . . . . . . . . . . . . . . 12.63 1.05 1.20 1.40 10.5 9.0
Chase Manhattan Corporation . . . . . . . . . . . . . . 73.50 5.75 6.95 8.00 10.6 9.2
Hanson PLC Sponsored ADR . . . . . . . . . . . . . . . 15.00 1.45 1.50 1.60 10.0 9.4
Cummins Engine, Inc. . . . . . . . . . . . . . . . . . 40.38 5.20 4.10 4.30 9.8 9.4
Avnet, Inc. . . . . . . . . . . . . . . . . . . . . . . 48.25 3.30 4.35 5.10 11.1 9.5
KeyCorp . . . . . . . . . . . . . . . . . . . . . . . . 38.63 3.70 3.75 4.05 10.3 9.5
Mellon Bank Corporation . . . . . . . . . . . . . . . . 55.13 4.50 5.15 5.65 10.7 9.8
Canadian National Railway . . . . . . . . . . . . . . . 17.25 1.24 1.56 1.75 11.1 9.9
Reebok Internatinal . . . . . . . . . . . . . . . . . . 27.63 2.63 2.60 2.80 10.6 9.9
Philip Morris Companies, Inc. . . . . . . . . . . . . . 87.75 6.50 7.60 8.75 11.5 10.0
Ultramar Corporation . . . . . . . . . . . . . . . . . 28.88 1.15 2.40 2.85 12.0 10.1
Canadian Pacific, Ltd. . . . . . . . . . . . . . . . . 20.00 1.15 1.50 1.95 13.3 10.3
Merrill Lynch & Company, Inc. . . . . . . . . . . . . . 60.75 5.35 5.80 5.50 10.5 11.0
W.R. Berkley Corporation . . . . . . . . . . . . . . . 46.25 2.80 3.80 4.15 12.2 11.1
Circuit City Stores, Inc. . . . . . . . . . . . . . . . 29.88 1.82 2.15 2.65 13.9 11.3
Offshore Logistics, Inc. . . . . . . . . . . . . . . . 13.13 1.05 0.95 1.15 13.8 11.4
YPF Sociedad Anonima ADR . . . . . . . . . . . . . . . 20.13 1.35 1.80 1.75 11.2 11.5
Federal Express Corporation . . . . . . . . . . . . . . 69.88 5.30 5.35 6.05 13.1 11.5
The Progressive Corporation . . . . . . . . . . . . . . 44.63 3.02 3.25 3.80 13.7 11.7
E.I. du Pont de Nemours & Company . . . . . . . . . . . 83.00 5.75 6.50 7.05 12.8 11.8
Archer Daniels Midland Company . . . . . . . . . . . . 18.38 1.45 1.40 1.55 13.1 11.9
Whirlpool Corporation . . . . . . . . . . . . . . . . . 55.25 2.80 3.80 4.50 14.5 12.3
Asia Pulp & Paper Company, Ltd. ADR . . . . . . . . . . 9.63 1.00 0.15 0.75 64.2 12.8
Atlantic Richfield Company . . . . . . . . . . . . . . 119.00 8.15 8.25 8.60 14.4 13.8
May Department Stores Company . . . . . . . . . . . . . 48.25 2.95 3.10 3.35 15.6 14.4
Sotheby's Holdings Inc. Class A . . . . . . . . . . . . 14.63 0.56 0.70 1.00 20.9 14.6
Exxon Corporation . . . . . . . . . . . . . . . . . . . 81.63 4.75 5.15 5.50 15.8 14.8
American Home Products Corporation . . . . . . . . . . 108.38 4.85 5.75 6.55 18.8 16.5
General Motors Class H . . . . . . . . . . . . . . . . 63.25 2.85 2.95 3.25 21.4 19.5
-------------------
Average Price/Earnings Ratio 13.0 10.4
S&P 500 Index 645.50 37.40 39.60 44.00 16.3 14.7
A= Actual E=Estimate
</TABLE>
4
<PAGE> 7
March 31, 1996 (Unaudited)
SCHEDULE OF INVESTMENTS IN SECURITIES
<TABLE>
<CAPTION>
Unit % of
Average Market Market Net
Shares Security Unit Cost Value % Change Value Assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE
117,700 General Motors Corp. Class H $35.78 $63.250 76.77% $ 7,444,525 2.78%
------------ ------
AUTOMOTIVE
230,100 Borg-Warner Automotive, Inc. 28.02 33.250 18.67 7,650,825 2.86
101,500 Chrysler Corporation 48.13 62.250 29.34 6,318,375 2.36
197,500 Ford Motor Company 32.86 34.375 4.61 6,789,062 2.54
------------ -----
20,758,262 7.76
------------ -----
BANKS
90,000 The Chase Manhattan Corp. 74.32 73.500 -1.10 6,615,000 2.47
159,000 First Chicago Corporation 31.28 41.500 32.67 6,598,500 2.47
184,400 KeyCorp 31.09 38.625 24.24 7,122,450 2.66
128,500 Mellon Bank Corporation 41.02 55.125 34.39 7,083,562 2.65
------------ -----
27,419,512 10.25
------------ -----
BROKERAGE
121,000 Merrill Lynch & Company, Inc. 43.61 60.750 39.30 7,350,750 2.75
332,300 Paine Webber Group, Inc. 17.61 22.000 24.93 7,310,600 2.73
------------ -----
14,661,350 5.48
------------ -----
BUILDING & INDUSTRY
150,200 Owens-Corning Fiberglas Corp.+ 39.46 40.125 1.69 6,026,775 2.25
------------ -----
CHEMICALS
80,000 E.I. duPont de Nemours & Company 67.82 83.000 22.38 6,640,000 2.48
------------ -----
COMPUTERS & ELECTRONICS
156,500 Avnet, Inc. 40.80 48.250 18.26 7,551,125 2.82
165,700 Compaq Computer Corporation+ 39.48 38.625 -2.17 6,400,163 2.39
166,100 Philips Electronics N.V. ADR 37.90 36.375 -4.02 6,041,888 2.26
------------ -----
19,993,176 7.47
------------ -----
ENERGY
57,500 Atlantic Richfield Company 111.13 119.000 7.08 6,842,500 2.56
65,300 Exxon Corporation 66.47 81.625 22.80 5,330,113 1.99
73,500 Offshore Logistics, Inc.+ 13.89 13.125 -5.51 964,688 0.36
204,500 Ultramar Corp. 24.27 28.875 18.97 5,904,937 2.21
289,100 YPF Sociedad Anonima ADR 18.73 20.125 7.45 5,818,138 2.17
------------ -----
24,860,376 9.29
------------ -----
FOOD
354,200 Archer Daniels Midland Company 15.90 18.375 15.57 6,508,425 2.43
------------ -----
FOOTWARE
252,000 Reebok International, Ltd. 28.07 27.625 -1.59 6,961,500 2.60
------------ -----
HEALTHCARE
34,700 American Home Products Corporation 58.57 108.375 85.04 3,760,612 1.41
------------ -----
HOUSEHOLD APPLIANCE & FURNISHINGS
95,300 Whirlpool Corporation 52.58 55.250 5.08 5,265,325 1.97
------------ -----
INSURANCE
326,300 Lasalle Re Holdings, Ltd. 23.09 21.500 -6.89 7,015,450 2.62
198,000 Old Republic International Corp 24.13 32.500 34.69 6,435,000 2.41
150,000 The Progressive Corporation 36.93 44.625 20.84 6,693,750 2.50
141,200 The W.R. Berkley Corporation 39.89 46.250 15.94 6,530,500 2.44
------------ -----
26,674,700 9.97
------------ -----
MACHINERY
162,600 Cummins Engine Co., Inc. 41.90 40.375 -3.64 6,564,975 2.45
------------ -----
METALS & MINING
233,600 Cyprus Amax Minerals Company 28.10 28.250 0.53 6,599,200 2.47
195,100 INCO, Ltd. 30.11 31.625 5.03 6,170,037 2.30
------------ -----
12,769,237 4.77
------------ -----
MISCELLANEOUS
450,200 Hanson PLC ADR 16.28 15.000 -7.86 6,753,000 2.52
------------ -----
PAPER
686,000 Asia Pulp & Paper Company, Ltd. ADR+ 11.11 09.625 -13.37 6,602,750 2.47
RETAIL
250,000 Circuit City Stores, Inc. 27.88 29.875 7.16 7,468,750 2.79
154,300 May Department Stores Company 39.03 48.250 23.62 7,444,975 2.78
139,700 Sotheby's Holdings, Inc., Class A 12.07 14.625 21.17 2,043,112 0.77
------------ -----
16,956,837 6.34
------------ -----
</TABLE>
5
See notes to financial statements.
<PAGE> 8
March 31, 1996 (Unaudited)
SCHEDULE OF INVESTMENTS IN SECURITIES (continued)
<TABLE>
<CAPTION>
Unit % of
Average Market Market Net
Shares Security Unit Cost Value % Change Value Assets
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TEXTILES
535,000 Burlington Industries, Inc.+ $12.25 $12.625 3.06% $ 6,754,375 2.52%
------------ ------
TOBACCO
60,500 Philip Morris Companies, Inc. 62.28 87.750 40.90 5,308,875 1.98
------------ -----
TRANSPORTATION
380,200 Canadian National Railway Co. 17.03 17.250 1.29 6,558,450 2.45
314,100 Canadian Pacific, Ltd 16.29 20.000 22.77 6,282,000 2.35
89,700 Federal Express Corporation+ 65.76 69.875 6.26 6,267,788 2.34
------------ -----
19,108,238 7.14
------------ -----
TOTAL SECURITIES (Cost $228,449,194) 257,792,825 96.33
------------ -----
PRINCIPAL
AMOUNT CASH EQUIVALENTS
- -----------------------------------------------------------------------------------------------------
Commercial Paper
----------------
7,000,000 Associates Corp.
due 4/01/96, 5.353% 7,000,000 2.61
2,000,000 Prudential Funding Corp.
due 4/02/96, 5.323% 2,000,000 0.75
------------ ------
9,000,000 3.36
------------ ------
Interest Bearing, Due Upon Demand
---------------------------------
304,169 Pitney Bowes Credit Corporation 304,169 0.11
215,000 Sara Lee Corporation 215,000 0.08
145,000 Southwestern Bell Telephone Company 145,000 0.05
445,026 Warner Lambert Company 445,026 0.17
------------ ------
1,109,195 0.41
------------ ------
TOTAL CASH EQUIVALENTS (Cost $10,109,195) 10,109,195 3.77
------------ ------
Total Investments (Cost $238,558,389) 267,902,020 100.10
Excess of Other Liabilities Over Other Assets (278,231) (0.10)
----------- ------
Net Assets Applicable to Outstanding Capital Shares $267,623,789 100.00%
============ ======
</TABLE>
+ Non-Income producing security.
ADR-American Depository Receipt.
6
See notes to financial statements.
<PAGE> 9
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 1996 (Unaudited) (Note 1)
<TABLE>
<S> <C>
INCOME:
Dividends (Net of withholding tax of $20,287) $ 2,456,082
Interest 302,280
-----------
Total Income 2,758,362
EXPENSES:
Investment Advisory Fees 1,001,319
Custodian Fees 15,362
Shareholder Servicing Costs 107,373
Professional Fees 50,674
Reports to Shareholders 7,589
Federal and State Registration Fees 84,728
Other 3,000
-----------
Total Expenses 1,270,045
-----------
NET INVESTMENT INCOME 1,488,317
REALIZED AND UNREALIZED GAIN:
Net Realized Gain on Investments 2,090,711
Change in Unrealized Appreciation/Depreciation on Investments 9,727,715
-----------
NET GAIN 11,818,426
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,306,743
===========
</TABLE>
7
See notes to financial statements.
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
March 31, 1996 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in Securities, at market value (Cost of $238,558,389) $267,902,020
Receivable from Brokers for Securities Sold 670,625
Dividends Receivable 746,479
Interest Receivable 10,374
Cash 53,113
------------
Total Assets 269,382,611
LIABILITIES:
Payable to Brokers for Securities Purchased 1,443,554
Due to Investment Advisor 219,049
Accrued Operating Expenses and Other Liabilities 96,219
------------
Total Liabilities 1,758,822
------------
NET ASSETS $267,623,789
============
NET ASSETS COMPRISED:
Capital Stock (authorized 25,000,000 shares; issued and outstanding
5,997,023 shares, $.10 par value) $ 599,702
Paid-in Surplus 235,125,088
Accumulated Undistributed Net Investment Income 695,710
Accumulated Net Realized Gains 1,859,658
Net Unrealized Appreciation of Investments 29,343,631
------------
Net Assets $267,623,789
============
Net Asset, Offering and Redemption Price Per Share (5,997,023 shares issued and outstanding) $ 44.63
============
</TABLE>
8
See notes to financial statements.
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Periods Ended March 31, 1996 (Unaudited) and September 30, 1995
<TABLE>
<CAPTION>
March 31, 1996 Sept. 30, 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 1,488,317 $ 1,145,496
Net Realized Gain 2,090,711 5,085,553
Change in Unrealized Appreciation/Depreciation 9,727,715 17,854,790
------------ ------------
Increase in Net Assets Resulting from Operations 13,306,743 24,085,839
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net Proceeds from Sales of Shares 116,615,202 86,479,502
Dividend and Distribution Reinvested 6,479,401 3,972,087
Cost of Shares Redeemed (25,141,009) (15,553,119)
------------ ------------
Increase in Net Assets from Capital Share Transactions 97,953,594 74,898,470
------------ ------------
DISTRIBUTIONS:
From Net Investment Income (1,590,270) (689,275)
From Net Realized Gain on Investments (5,314,873) (3,425,487)
------------ ------------
Decrease in net Assets from Distributions (6,905,143) (4,114,762)
------------ ------------
TOTAL INCREASE IN NET ASSETS 104,355,194 94,869,547
NET ASSETS:
Beginning of Period 163,268,595 68,399,048
------------ ------------
End of Period (Including undistributed net investment income of
$695,710 and $797,663, respectively) $267,623,789 $163,268,595
============ ============
</TABLE>
9
See notes to financial statements.
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
March 31, 1996 (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Strong 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 a 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.
(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 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>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1996 SEPTEMBER 31, 1995
-------------- ------------------
<S> <C> <C>
Share sold 2,661,140 2,185,443
Share issued for reinvestment dividends and distributions 151,671 119,966
Shares redeemed (572,301) (421,007)
--------- ---------
Net Increase 2,240,510 1,884,402
========= =========
</TABLE>
3. INVESTMENT TRANSACTIONS
Purchases and proceeds form sales of investment securities (excluding cash
equivalents) during the period ended March 31, 1996 were $105,138,978 and
$13,708,905 respectively. The cost basis of portfolio securities for
federal income tax purposes was substantially the same as for book
purposes at March 31, 1996. This consisted of aggregate gross unrealized
appreciation for all investments in which there was an excess of market
value over cost of $32,337,254 and aggregate gross unrealized depreciation
for all investments in which there was an excess of cost over market value
of $2,993,617.
4. INVESTMENT ADVISORY FEES
Schafer Capital Management, Inc. (the "Investment Advisor") 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, and brokerage fees and
extraordinary expenses) which in the aggregate exceed
10
<PAGE> 13
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 a year, 2% of the next $70 million of
average annual net assets and 1.5% of the remaining average annual net
assets. For the six months ended March 31, 1996, no reimbursement was
required.
5. DISTRIBUTION AGREEMENT
Pursuant to a distribution agreement, Strong Funds Distributors, Inc. 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 distributed its
shares directly. No expenses are incurred by the Fund with respect to
this agreement.
6. RELATED PARTIES AND SIGNIFICANT INVESTORS
At March 31, 1996, 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
50,914 shares, or 0.85% of the outstanding shares, of the Fund.
11
<PAGE> 14
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following presents information relating to a share of capital stock of the
Fund, outstanding for the entire period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31 YEAR ENDED SEPTEMBER 30
-------------- ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21 $ 25.65
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.58 0.36 0.26 0.28 0.42 0.46
Net Realized and Unrealized Gains on Investments 2.24 8.53 1.34 8.00 4.96 8.41
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 2.82 8.89 1.60 8.28 5.38 8.87
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.38) (0.33) (0.19) (0.39) (0.52) (0.58)
From Net Realized Gains (1.27) (1.64) (1.08) (3.27) (5.48) (1.73)
--------- -------- --------- --------- -------- ---------
TOTAL DISTRIBUTIONS (1.65) (1.97) (1.27) (3.66) (6.00) (2.31)
--------- -------- --------- --------- -------- ---------
NET ASSET VALUE, END OF PERIOD $ 44.63 $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21
========= ========= ========== ========= ========== =========
Total Return +6.75% +26.01% +4.42% +28.41% +18.80% +37.28%
Net Assets, End of Period (In Thousands) $ 267,624 $ 163,269 $ 68,399 $ 21,403 $ 12,195 $ 9,811
Ratio of Expenses to Average Net Assets 1.27%* 1.28% 1.48% 1.74% 2.08% 2.00%
Ratio of Net Investment Income to Average Net Assets 1.49%* 1.18% 0.99% 0.79% 1.20% 1.26%
Portfolio Turnover Rate 13.69%* 33.19% 28.45% 33.29% 53.03% 54.74%
</TABLE>
* Calculated on an annualized basis.
12
<PAGE> 15
SHAREHOLDER PRIVILEGES*
[STRONG FUNDS 24-HOUR SERVICE LOGO]
TELEPHONE PURCHASE
Make additional investments into any Strong Fund by calling us toll-free at
1-800-368-3863.
TELEPHONE EXCHANGE
If your financial goals change, you can exchange your investments between any
of the Strong Funds.
TELEPHONE REDEMPTION
You can call toll-free to redeem your mutual fund shares at any time. Your
shares will be redeemed no later than the close of the next business day.
[STRONG FUNDS AUTOMATIC EXCHANGE LOGO]
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your bank checking or
NOWaccount to your Strong Funds account.
PAYROLL DIRECT DEPOSIT PLAN
You can automatically transfer all or a portion of your net pay at each pay
period. This eliminates the delay of depositing paychecks to your bank and then
sending a check through the mail to Strong Funds.
AUTOMATIC EXCHANGE PLAN
This plan allows you to exchange money from one Strong Fund to another. For
example, you may want to set up automatic exchanges from a money market fund to
an equity fund.
FOR MORE INFORMATION ABOUT THESE PRIVILEGES, CALL US AT 1-800-368-3863.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household.
Please call 1-800-368-3863 if you wish to receive additional copies, free of
charge.
*Each Fund reserves the right to terminate or modify any of these privileges.
<PAGE> 16
Bulk Rate
U.S. Postage
PAID
Milw, WI
Permit #4134
FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030.
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-368-3863.
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 annual report does not constitute an offer for
the sale of securities. Strong Funds are offered for sale by prospectus only.
[STRONG LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
http://www.strong-funds.com
2862D96
