<PAGE>
THE
STRONG SCHAFER
VALUE FUND
ANNUAL REPORT o SEPTEMBER 30, 1996
[PHOTO OF MAN & BOY WITH BASEBALL BAT]
[PICTURE OF GRAPH SLOPING UPWARD]
[PICTURE OF PIE CHART EMPHASIZING STOCKS]
DESIGNED FOR INVESTORS
SEEKING LONG-TERM
CAPITAL APPRECIATION
[STRONG LOGO]
STRONG FUNDS
<PAGE>
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.
[PICTURE OF FOLDER LABELED INVESTMENTS]
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.
[PICTURE OF CLOCK]
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.
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION]
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.
[PICTURE OF MEMO REMINDER TO INVEST]
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.
[PICTURE OF GRAPH SLOPING UPWARD]
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.
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION EMPASIZING STOCKS]
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.
[PICTURE OF DOLLAR SIGN]
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.
[PICTURE OF MAGNIFYING GLASS]
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>
THE
STRONG SCHAFER
VALUE FUND
ANNUAL REPORT o SEPTEMBER 30, 1996
TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong Schafer Value Fund...................................2
FINANCIAL INFORMATION
Schedule of Investments.........................................5
Statement of Operations.........................................7
Statement of Assets and Liabilities.............................7
Statement of Changes in Net Assets..............................8
Notes to Financial Statements...................................9
FINANCIAL HIGHLIGHTS..................................................11
REPORT OF INDEPENDENT ACCOUNTANTS.....................................12
<PAGE>
The Strong SCHAFER VALUE Fund
================================================================================
The Strong Schafer Value Fund seeks long-term capital appreciation through a
portfolio composed primarily of stocks. Current income is a secondary objective.
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.
While our alliance with Strong helps us widen our distribution capability and
increases the number of services we can offer shareholders, it in no way alters
the approach we use to manage the Fund. We will continue to run the portfolio
according to the same highly-defined, value-oriented investment approach we've
used since the Fund's inception over 10 years ago.
AVERAGE ANNUAL TOTAL RETURNS(1)
as of 9-30-96
TIME STRONG SCHAFER S&P 500
PERIOD VALUE FUND STOCK INDEX*
1-year 12.99% 20.33%
5-year 17.80% 15.23%
10-year 15.57% 14.99%
PERFORMANCE RECAP
As you may know, the 12-month period ended September 30, 1996, has been an
exciting time for stock investors. After hitting an all-time high in early June
of 1996, the market corrected sharply through June and July, then rallied to new
highs in mid-September.
As is our philosophy, we remained fully invested throughout the period, which
means we participated fully in the market's ups, and its downs. After the dust
settled, the Fund ended with a respectable 12.99% return. This lagged the S&P
500's return primarily due to the market's preoccupation with high-flying growth
stocks, which we tend to avoid. For longer-term periods, we remain ahead of the
S&P 500.*
OUR UNAMBIGUOUS APPROACH
Many stock fund managers use a "top-down" investment approach--they evaluate
economic conditions, interest rate scenarios, even sociological trends in an
attempt to identify themes or sectors that appear attractive. We prefer to use
an approach that's less ambiguous and more "bottom-up."
We look for two things in a stock: earnings that are growing faster than the
market (as measured by the S&P 500 Stock Index), and a price-to-earnings
multiple that's below that of the market. Or, to put it another way, we look for
stocks with above-average earnings growth selling at a discount. If we can find
relatively inexpensive stocks that offer growing earnings, we believe they will
provide solid long-term growth potential regardless of what's happening with
interest rates or the market as a whole.
One advantage of our approach is that it enables us to find attractive
opportunities in areas of the market that are out of favor. For example...
* Earlier this year, insurance stocks were hurt by rising interest rates, and
many investors decided to avoid that sector of the market. However, using our
criteria, we added to an insurance stock--THE PROGRESSIVE CORPORATION--that
we already owned and that we continue to believe is attractive. As writers of
substandard auto insurance, this company isn't very "sexy." But they know
their business and they know how to make a profit. They've established a
record of growing earnings, and the stock's price versus its earnings is
still lower than that of the market.
* UCAR is a company that makes graphite electrodes for the electric arc
furnaces used in "mini-mill" steel factories. "Mini-mills" are one part of
the steel business that has grown at a healthy rate. UCAR--as the low cost
producer--has about 40% of the market for graphite cathodes, a vital part of
electric arc mills. Moreover, they appear to be the only company with the
capacity to keep pace with demand. So we foresee the company being able to
increase earnings over the next several years, even though they operate in an
industry that is currently experiencing little growth.
Another important part of our straightforward investment approach is
diversification. Our goal is to maintain approximately equal weightings in each
stock we own. By weighting each stock equally, we can't get enamored with any
one stock. In addition, we limit our exposure to any particular industry to 20%
of the portfolio (normally, our commitments are closer to 10% of assets in a
single industry).
2
<PAGE>
Just as important as our buying strategy is our selling strategy. We monitor the
portfolio constantly, and if a stock fails to measure up-- either because its
earnings growth doesn't meet expectations, its price rises to the point where it
no longer represents a good value, or its fundamentals change--we'll likely
replace it with a stock that we believe offers a better opportunity for growth.
At the end of September 1996, the Fund held 45 stocks. The table on page 4
indicates that we continue to find stocks which meet our investment criteria.
Of course, because we invest in stocks, the Fund's share price will fluctuate,
and conditions in the stock market will affect our holdings. But over time, we
believe our approach offers investors an opportunity to participate in the
growth potential of stocks with less volatility than the market as a whole.
OUTLOOK
We believe that stocks are the place to be if you're a long-term investor
pursuing growth. While the market will always be subject to volatility, equity
investors have historically been rewarded with attractive returns over the long
run. Accordingly, it is important to maintain a disciplined strategy...you have
to be selective about what you buy, disciplined about when you sell, and patient
when you own good, undervalued stocks.
For our part, we intend to continue applying our value-oriented, disciplined
approach, which has proven its ability to add value for our shareholders. Thank
you for your investment in the Strong Schafer Value Fund. We look forward to
serving your investment needs in the years to come.
[PHOTO OF DAVID K. SCHAFER]
Sincerely,
/s/David K. Schafer
David K. Schafer
Portfolio Manager
Strong Schafer Value Fund, Inc.
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT AVERAGE ANNUAL
from 9-30-86 to 9-30-96 TOTAL RETURNS(1)
as of 9-30-96
THE STRONG SCHAFER
VALUE FUND S & P 500 INDEX 1-year
---------- --------------- 12.99%
3-86 10,000 10,000
12-86 10,544 10,557 5-year
12-87 10,501 11,112 17.80%
12-88 12,390 12,957
12-89 16,113 17,063 10-year
12-90 14,491 16,533 15.57%
12-91 20,420 21,570
12-92 24,223 23,213 Since inception
12-93 30,043 25,553 (on 10-22-85)
12-94 28,759 25,890 14.96%
12-95 38,579 35,619
9-96 42,498 40,427
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made on 9-30-86, with a similar investment in the
Standard & Poor's 500 Stock Index ("S&P 500 Index").* 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 Fund shares.
- --------------------------------------------------------------------------------
* The Standard and Poor's 500 Stock Index ("S&P 500 Index")is an unmanaged
index generally representative of the U.S. stock market.
1 Average annual total return measures change in the value of an investment
as an annualized average, assuming reinvestment of all dividends and
capital gains. Performance is historical and does not represent future
results.
<PAGE>
<TABLE>
PORTFOLIO HOLDINGS,
EARNINGS PER SHARE ESTIMATES, AND
PRICE/EARNINGS RATIOS (UNAUDITED)
====================================================================================
<CAPTION>
CLOSING PRICE EARNINGS PER SHARE PRICE/EARNINGS RATIO
SECURITY (9-30-96) 1995A 1996E 1997E 1996E 1997E
<S> <C> <C> <C> <C> <C> <C>
Lasalle Re Holdings, Ltd. ................. 23.50 4.50 4.50 4.65 5.2 5.1
Ford Motor Company ........................ 31.25 3.65 3.10 5.00 10.1 6.3
Chrysler Corporation ...................... 28.63 3.10 4.00 4.38 7.2 6.5
IBP, inc. ................................. 23.25 2.90 3.10 3.50 7.5 6.6
Owens Corning Corporation ................. 36.88 4.60 4.70 5.50 7.8 6.7
Philips Electronics NV ADR ................ 35.88 4.60 4.15 5.10 8.6 7.0
Lafarge Corporation ....................... 18.63 1.85 2.15 2.50 8.7 7.5
Hanson PLC ADR ............................ 12.38 1.45 1.50 1.60 8.3 7.7
Paine Webber Group, Inc. .................. 21.00 1.50 2.40 2.60 8.8 8.1
Inco, Ltd. ................................ 30.75 1.90 2.25 3.80 13.7 8.1
Borg-Warner Automotive, Inc. .............. 35.50 3.15 3.65 4.35 9.7 8.2
Burlington Industries, Inc. ............... 9.88 1.05 1.10 1.15 9.0 8.6
Carpenter Technology Corporation .......... 35.00 2.81 3.55 4.00 9.9 8.8
Cummins Engine Co., Inc. .................. 39.38 5.20 3.90 4.30 10.1 9.2
The Goodyear Tire & Rubber Company ........ 46.13 4.02 4.45 4.95 10.4 9.3
Old Republic International Corporation .... 24.75 2.43 2.31 2.65 10.7 9.4
First Chicago Corporation ................. 45.25 3.70 4.30 4.80 10.5 9.4
Asia Pulp & Paper Company, Ltd. ADR ....... 11.88 1.00 0.65 1.25 18.3 9.5
Avnet, Inc. ............................... 48.50 3.30 4.35 5.00 11.1 9.7
Singer Company NV ......................... 20.63 1.89 1.65 2.10 12.5 9.8
The Chase Manhattan Corporation ........... 80.13 5.75 6.95 8.00 11.5 10.0
Philip Morris Companies, Inc. ............. 89.75 6.50 7.65 8.75 11.7 10.3
Owens Illinois, Inc. ...................... 17.50 1.40 1.55 1.70 11.3 10.3
Mellon Bank Corporation ................... 59.25 4.50 5.15 5.70 11.5 10.4
Ultramar Corporation ...................... 30.25 1.15 2.40 2.85 12.6 10.6
Citicorp .................................. 90.63 7.15 7.50 8.50 12.1 10.7
KeyCorp ................................... 44.00 3.70 3.75 4.05 11.7 10.9
UCAR International, Inc. .................. 40.50 1.87 3.00 3.50 12.7 10.9
The W. R. Berkley Corporation ............. 45.75 2.80 3.80 4.15 12.0 11.0
Cyprus Amax Minerals Company .............. 21.50 4.45 1.50 1.85 14.3 11.6
Canadian National Railway Company ......... 20.50 1.24 1.56 1.75 13.1 11.7
Burlington Northern Santa Fe, Inc. ........ 84.38 3.85 6.00 7.10 14.1 11.9
Merrill Lynch & Company, Inc. ............. 65.63 5.35 5.80 5.50 11.3 11.9
Tektronix, Inc. ........................... 40.88 2.50 3.00 3.40 13.6 12.0
Reebok International, Ltd. ................ 34.75 2.63 2.60 2.80 13.4 12.4
Federal Express Corporation ............... 79.25 5.30 5.40 6.25 14.7 12.7
Archer Daniels Midland Company ............ 19.25 1.45 1.35 1.50 14.3 12.8
YPF Sociedad Anonima ADR .................. 22.88 1.35 1.80 1.75 12.7 13.1
The May Department Stores Company ......... 48.63 2.95 3.10 3.35 15.7 14.5
Atlantic Richfield Company ................127.50 8.15 8.30 8.70 15.4 14.7
The Progressive Corporation ............... 57.25 3.02 3.25 3.80 17.6 15.1
Exxon Corporation ......................... 83.25 4.75 5.15 5.50 16.2 15.1
Circuit City Stores, Inc. ................. 36.13 1.82 1.95 2.30 18.5 15.7
Whirlpool Corporation ..................... 50.63 2.75 2.30 3.20 22.0 15.8
Hughes Electronics Corporation ............ 57.75 2.77 2.95 3.25 19.6 17.8
-------------
AVERAGE PRICE/EARNINGS RATIO 13.2 11.4
S&P 500 INDEX 701.20 37.40 41.00 43.75 17.1 16.0
A=ACTUAL E=ESTIMATE
</TABLE>
4
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS September 30, 1996
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
UNIT % OF
AVERAGE MARKET MARKET NET
SHARES SECURITY UNIT COST VALUE % CHANGE VALUE ASSETS
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK
AUTO PARTS
<S> <C> <C> <C> <C> <C>
230,100 Borg-Warner Automotive, Inc. $28.02 $ 35.500 26.70% $ 8,168,550 2.10%
165,000 The Goodyear Tire & Rubber Company 47.19 46.125 (2.26) 7,610,625 1.95
---------- ----
15,779,175 4.05
---------- ----
AUTOMOTIVE
309,000 Chrysler Corporation 25.98 28.625 10.18 8,845,125 2.27
268,800 Ford Motor Company 33.21 31.250 (5.90) 8,400,000 2.16
---------- ----
17,245,125 4.43
---------- ----
BANKS
121,000 The Chase Manhattan Corporation 70.65 80.125 13.41 9,695,125 2.49
86,000 Citicorp 90.45 90.625 0.19 7,793,750 2.00
206,500 First Chicago Corporation 33.28 45.250 35.97 9,344,125 2.40
202,300 KeyCorp 31.65 44.000 39.02 8,901,200 2.29
162,500 Mellon Bank Corporation 43.92 59.250 34.90 9,628,125 2.47
---------- ----
45,362,325 11.65
---------- ----
BROKERAGE
131,700 Merrill Lynch & Company, Inc. 44.78 65.625 46.55 8,642,813 2.22
365,000 Paine Webber Group, Inc. 17.90 21.000 17.32 7,665,000 1.97
---------- ----
16,307,813 4.19
---------- ----
CONTAINER
598,100 Owens Illinois, Inc. + 16.27 17.500 7.56 10,466,750 2.69
---------- ----
DIVERSIFIED
117,700 Hughes Electronics Corporation 35.78 57.750 61.40 6,797,175 1.74
534,600 Hanson PLC ADR 16.05 12.375 (22.90) 6,615,675 1.70
---------- ----
13,412,850 3.44
---------- ----
ELECTRONICS
192,500 Avnet, Inc. 41.66 48.500 16.42 9,336,250 2.40
232,500 Tektronix, Inc. 37.37 40.875 9.38 9,503,438 2.44
---------- ----
18,839,688 4.84
---------- ----
ENERGY
66,000 Atlantic Richfield Company 111.55 127.500 14.30 8,415,000 2.16
83,300 Exxon Corporation 69.67 83.250 19.49 6,934,725 1.78
204,500 Ultramar Corporation 24.27 30.250 24.64 6,186,125 1.59
402,200 YPF Sociedad Anonima ADR 19.61 22.875 16.65 9,200,325 2.36
---------- ----
30,736,175 7.89
---------- ----
FOOD
371,910 Archer Daniels Midland Company 15.14 19.250 27.15 7,159,267 1.84
385,000 IBP, inc. 26.24 23.250 (11.39) 8,951,250 2.30
---------- ----
16,110,517 4.14
---------- ----
HOUSEHOLD APPLIANCES
264,200 Philips Electronics NV ADR 36.69 35.875 (2.22) 9,478,175 2.43
481,900 Singer Company NV 18.72 20.625 10.18 9,939,187 2.55
128,400 Whirlpool Corporation 54.04 50.625 (6.32) 6,500,250 1.67
---------- ----
25,917,612 6.65
---------- ----
HOUSING
469,000 Lafarge Corporation 20.30 18.625 (8.25) 8,735,125 2.24
247,600 Owens-Corning Corporation 38.93 36.875 (5.28) 9,130,250 2.35
---------- ----
17,865,375 4.59
---------- ----
INSURANCE
382,100 LaSalle Re Holdings, Ltd. 22.69 23.500 3.57 8,979,350 2.31
392,500 Old Republic International Corporation 17.52 24.750 41.27 9,714,375 2.49
169,200 The Progressive Corporation 37.37 57.250 53.20 9,686,700 2.49
203,900 The W.R. Berkley Corporation 40.56 45.750 12.80 9,328,425 2.39
---------- ----
37,708,850 9.68
---------- ----
MACHINERY
239,200 Cummins Engine Co., Inc. 40.65 39.375 (3.14) 9,418,500 2.42
---------- ----
METALS & MINING
419,300 Cyprus Amax Minerals Company 25.91 21.500 (17.02) 9,014,950 2.32
281,200 INCO, Ltd. 30.67 30.750 0.26 8,646,900 2.22
---------- ----
17,661,850 4.54
---------- ----
5
See notes to financial statements.
<PAGE>
SCHEDULE OF INVESTMENTS (continued) September 30, 1996
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
UNIT % OF
AVERAGE MARKET MARKET NET
SHARES SECURITY UNIT COST VALUE % CHANGE VALUE ASSETS
- ----------------------------------------------------------------------------------------------------------
PAPER
766,000 Asia Pulp & Paper Company, Ltd. ADR + $11.19 $ 11.875 6.12% $ 9,096,250 2.34%
----------- -----
RETAIL
282,300 Circuit City Stores, Inc. 28.24 36.125 27.92 10,198,088 2.62
163,500 The May Department Stores Company 36.15 48.625 34.51 7,950,187 2.04
----------- -----
18,148,275 4.66
----------- -----
SHOE & APPAREL
547,900 Burlington Industries, Inc. + 11.83 9.875 (16.53) 5,410,513 1.39
272,000 Reebok International, Ltd. 28.06 34.750 23.84 9,452,000 2.43
----------- -----
14,862,513 3.82
----------- -----
STEEL
266,300 Carpenter Technology Corporation 32.14 35.000 8.90 9,320,500 2.39
230,000 UCAR International, Inc. + 40.52 40.500 (0.05) 9,315,000 2.39
----------- -----
18,635,500 4.78
----------- -----
TOBACCO
86,400 Philip Morris Companies, Inc. 69.52 89.750 29.10 7,754,400 1.99
----------- -----
TRANSPORTATION
35,000 Burlington Northern Santa Fe, Inc. 84.18 84.375 0.23 2,953,125 0.76
410,200 Canadian National Railway Company 17.14 20.500 19.60 8,409,100 2.16
116,300 Federal Express Corporation + 67.94 79.250 16.65 9,216,775 2.37
----------- -----
20,579,000 5.29
----------- -----
TOTAL COMMON STOCK (Cost $343,845,024) 381,908,543 98.08
----------- -----
PRINCIPAL
AMOUNT CASH EQUIVALENTS
- --------------------------------------------------------------------------------
Commercial Paper
----------------
$2,500,000 Associates Corporation, due 10/2/96, 5.25% 2,500,000 0.64
3,500,000 CIT Group Holdings, due 10/4/96, 5.35% 3,500,000 0.90
2,500,000 General Electric Capital Corporation, due 10/1/96, 5.41% 2,500,000 0.64
2,500,000 General Electric Capital Corporation, due 10/3/96, 5.28% 2,500,000 0.64
5,000,000 Prudential Fund Corporation, due 10/2/96, 5.33% 5,000,000 1.29
3,500,000 Prudential Fund Corporation, due 10/4/96, 5.26% 3,500,000 0.90
------------ ------
19,500,000 5.01
------------ ------
Variable Rate Demand Notes
--------------------------
703,948 American Family Financial Services, Inc., 5.20% 703,948 0.18
968,839 General Mills, Inc., 5.19% 968,839 0.25
230,890 Johnson Controls, Inc., 5.22% 230,890 0.06
590,162 Eli Lilly & Company, 5.02% 590,162 0.15
879,333 Sara Lee Corporation, 5.17% 879,333 0.22
2,689,210 Warner Lambert Company, 5.17% 2,689,210 0.70
------------ ------
6,062,382 1.56
------------ ------
TOTAL CASH EQUIVALENTS (Cost $25,562,382) 25,562,382 6.57
------------ ------
TOTAL INVESTMENTS (Cost $369,407,406) 407,470,925 104.65
Excess of Other Liabilities Over Other Assets (18,089,057) (4.65)
------------ ------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL SHARES $389,381,868 100.00%
============ ======
+ Non-Income producing security.
ADR-American Depository Receipt.
6
See notes to financial statements.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended September 30, 1996
INCOME:
Dividends (Net of withholding tax of $114,979) $ 5,975,544
Interest 690,821
---------
Total Income 6,666,365
EXPENSES:
Investment Advisory Fees 2,649,217
Shareholder Servicing Costs 425,408
Federal and State Registration Fees 136,216
Professional Fees 89,684
Other 48,679
Reports to Shareholders 34,651
Custodian Fees 25,614
Unaffiliated Director's Fees 6,000
---------
Total Expenses 3,415,469
---------
NET INVESTMENT INCOME 3,250,896
REALIZED AND UNREALIZED GAIN:
Net Realized Gain on Investments 10,300,245
Change in Unrealized Appreciation on Investments 18,447,604
----------
NET GAIN 28,747,849
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $31,998,745
===========
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
September 30, 1996
ASSETS:
Investments in Securities, at Market Value
(Cost of $369,407,406) $407,470,925
Dividends and Interest Receivable 738,242
Receivable from Fund Shares Sold 252,974
-----------
Total Assets 408,462,141
LIABILITIES:
Payable for Securities Purchased 18,511,017
Due to Investment Advisor 325,922
Accrued Operating Expenses and Other Liabilities 211,549
Payable for Fund Shares Redeemed 31,785
----------
Total Liabilities 19,080,273
----------
NET ASSETS $389,381,868
============
NET ASSETS COMPRISED:
Capital Stock (authorized 250,000,000 shares;
issued and outstanding 8,235,795 shares, $.10 par value) $ 823,580
Paid-in Capital 337,967,288
Accumulated Undistributed Net Investment Income 2,458,289
Accumulated Net Realized Gains 10,069,192
Net Unrealized Appreciation of Investments 38,063,519
----------
Net Assets $389,381,868
============
Net Asset, Offering and Redemption Price Per Share $ 47.28
==========
See notes to financial statements.
7
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------
For the Years Ended September 30, 1996 and 1995
<CAPTION>
YEAR ENDED YEAR ENDED
SEPT. 30, 1996 SEPT. 30, 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 3,250,896 $ 1,145,496
Net Realized Gain on Investments 10,300,245 5,085,553
Change in Unrealized Appreciation on Investments 18,447,604 17,854,790
---------- ----------
Increase in Net Assets from Operations 31,998,745 24,085,839
CAPITAL SHARE TRANSACTIONS:
Net Proceeds from Sales of Shares 270,574,644 86,479,502
Dividends Reinvested 6,479,401 3,972,087
Cost of Shares Redeemed (76,034,374) (15,553,119)
----------- -----------
Increase in Net Assets from Capital Share Transactions 201,019,671 74,898,470
DISTRIBUTIONS PAID:
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 Paid (6,905,143) (4,114,762)
---------- ----------
TOTAL INCREASE IN NET ASSETS 226,113,273 94,869,547
NET ASSETS:
Beginning of Year 163,268,595 68,399,048
----------- ----------
End of Year (Including undistributed net investment
income of $2,458,289 and $797,663, respectively) $389,381,868 $163,268,595
============ ============
</TABLE>
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Strong Schafer Value Fund, Inc. (the "Fund"), formerly known as Schafer
Value Fund, Inc. (see note 5), 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 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, which
approximates current value. 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.
(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
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------
Shares Sold 6,009,482 2,185,443
Dividends Reinvested 151,671 119,966
Shares Redeemed (1,681,871) (421,007)
---------- --------
Net Increase 4,479,282 1,884,402
========= =========
3. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investment securities (excluding cash
equivalents) during the year ended September 30, 1996 were $244,367,020 and
$45,750,651, respectively. The cost basis of portfolio securities for
federal income tax purposes was the same as for book purposes at September
30, 1996. This consisted of aggregate gross unrealized appreciation for all
investments in which there was an excess of market value over cost of
$48,328,576 and aggregate gross unrealized depreciation for all investments
in which there was an excess of cost over market value of $10,265,057.
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 Advisor is responsible for the actual
management of the Fund's portfolio. The Investment Advisor 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.
The Investment Advisor 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 the most restrictive limitation
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
September 30, 1996
prescribed by any state in which the Fund's securities are qualified for
sale. For the year ended September 30, 1996, no reimbursement was required.
5. ALLIANCE WITH STRONG
In January 1996, the Investment Advisor formed an alliance with Strong
Capital Management, Inc. ("Strong") and the Fund changed its name to the
Strong Schafer Value Fund, Inc. Strong provides fund accounting services
and shareholder recordkeeping and related services to the Fund. Fund
accounting service fees are contractually established based upon the net
asset value of the Fund. Shareholder recordkeeping and related service fees
are based upon contractually established rates for each open and closed
shareholder account. In addition, Strong is compensated for certain other
services related to costs incurred for reports to shareholders.
Pursuant to a distribution agreement, an indirect subsidiary of Strong,
Strong Funds Distributors, Inc., has agreed to act at the request of the
Fund and the Investment Advisor as the Fund's agent to effect the
distribution of the Fund's shares. No expenses are incurred by the Fund
with respect to this agreement.
6. RELATED PARTIES AND SIGNIFICANT INVESTORS
At September 30, 1996, the Fund has been advised that affiliates of the
Investment Adviser, and David K. Schafer (individually), the sole
shareholder of the Investment Advisor, directly or indirectly controlled
50,726 shares, or 0.62% of the outstanding shares, of the Fund.
10
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
The following presents information relating to a share of capital stock of the
Fund, outstanding for the entire period.
<CAPTION>
Year Ended September 30
--------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.47 0.36 0.26 0.28 0.42
Net Realized and Unrealized Gains on Investments 5.00 8.53 1.34 8.00 4.96
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 5.47 8.89 1.60 8.28 5.38
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.38) (0.33) (0.19) (0.39) (0.52)
From Net Realized Gains (1.27) (1.64) (1.08) (3.27) (5.48)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.65) (1.97) (1.27) (3.66) (6.00)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 47.28 $ 43.46 $ 36.54 $ 36.21 $ 31.59
========= ========= ========== ========= =========
Total Return +12.99% +26.01% +4.42% +28.41% +18.80%
Net Assets, End of Period (In Thousands) $ 389,382 $ 163,269 $ 68,399 $ 21,403 $ 12,195
Ratio of Expenses to Average Net Assets 1.27% 1.28% 1.48% 1.74% 2.08%
Ratio of Net Investment Income to Average
Net Assets 1.21% 1.18% 0.99% 0.79% 1.20%
Portfolio Turnover Rate 17.84% 33.19% 28.45% 33.29% 53.03%
Average Commission rate paid (a) $ 0.07
</TABLE>
(a) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Schafer Value Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Strong
Schafer Value Fund, Inc., including the schedule of investments, as of September
30, 1996, and the related statements of operations and changes in net assets,
and the financial highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended September 30, 1995 and the financial highlights for each of
the four years in the period ended September 30, 1995 were audited by other
auditors, whose report dated October 27, 1995, expressed an unqualified opinion
on such financial statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 1996 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Strong Schafer Value Fund, Inc. as of September 30, 1996, the results of its
operations, the changes in its net assets, and the financial highlights for the
year then ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
October 29, 1996
12
<PAGE>
SHAREHOLDER PRIVILIGES*
STRONG FUNDS
[PICTURE OF TELEPHONE]
24-HOUR SERVICE
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
[PICTURE OF DOLLAR SIGN]
AUTOMATIC EXCHANGE
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your bank checking or NOW
account 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>
Bulk Rate
U.S. Postage
PAID
Milwaukee, WI
Permit No. 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
4006J96P
