<PAGE>
THE STRONG SCHAFER
VALUE FUND
SEMI-ANNUAL REPORT o MARCH 31, 1997
[PHOTO OF MAN & A BOY]
[PIE CHART OF ASSET DIVERSIFICAITON, EMPHASIZING STOCKS]
[BAR GRAPH]
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 EMPHASIZING 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
SEMI-ANNUAL REPORT o MARCH 31, 1997
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Schafer Value Fund ..................................... 2
FINANCIAL INFORMATION
Schedule of Investments in Securities ............................. 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
<PAGE>
THE STRONG SCHAFER VALUE FUND
- --------------------------------------------------------------------------------
THE STRONG SCHAFER VALUE FUND, INC. SEEKS LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN COMMON STOCKS. CURRENT INCOME IS A SECONDARY OBJECTIVE.
PERFORMANCE SUMMARY
For the six months ended March 31, 1997 the Strong Schafer Value Fund posted a
gain of 12.64%, slightly higher than the 11.24% rise in the S&P 500 for the same
time period.(1) While this was a positive period for stocks, it also was a
rather volatile time for the stock market. The S&P 500 reached record highs
before selling off at the end of December 1996 and again at the end of March
when the Federal Reserve, in a much anticipated move, raised interest rates.*
As has been our practice, we generally remained fully invested in common stocks
during this period and did not try to time the stock market based on economic
and interest-rate forecasts. While most analysts would agree that much of the
stock market's activity during the period was driven by top-down factors such as
the worry about inflation and rising interest rates, we continued to base our
investment decisions on company-specific, bottom-up criteria.
MANY STOCKS CONTRIBUTED TO STRONG PERFORMANCE
As a result of this approach, no one industry dominated our investment portfolio
and our top five performing stocks for the six months came from five different
industries. Owens-Illinois (containers) was our best performer followed by Exxon
(oil), PaineWebber (brokerage), Federal Express (air transport) and Cummins
Engine (auto and truck parts). Bank stocks constituted our heaviest industry
weighting and accounted for approximately 12% of the portfolio.
Despite the diversity of the stocks in our portfolio, each was chosen for the
portfolio for similar reasons. First, each stock had earnings-per-share growth
prospects that were superior to the projected earnings growth for the S&P 500 at
the time we purchased it. Second, each stock had a price/earnings multiple--an
indication of how expensive a stock is relative to its reported and estimated
earnings--lower than the price/earnings multiple for the market as represented
by the S&P 500. Simply stated, our objective is to buy above-average earnings
growth at a discount. It is our belief that stocks with these two
characteristics can provide superior long-term price appreciation potential,
relative to the stock market as a whole.
2
<PAGE>
The table on the following page is one of the ways we track the stocks in our
portfolio. As the table indicates, the price/earnings ratio of the Strong
Schafer Value Fund's portfolio was approximately 12 times our estimate of 1997
earnings--well below the estimated P/E of 18 for the S&P 500. Furthermore, we
estimate that the earnings-per-share growth of our portfolio holdings will
exceed 10% in 1997 while the consensus estimate for 1997 earnings growth for the
S&P 500 is less than 10%.
Thank you for your continued interest in the Strong Schafer Value Fund.
Sincerely,
/s/ David K. Schafer
David K. Schafer
Portfolio Manager
April 18, 1997
[PHOTO OF DAVID K. SCHAFER]
==========================
AVERAGE ANNUAL
TOTAL RETURNS(1)
==========================
As of 3-31-97
1-YEAR 19.33%
5-YEAR 17.80%
10-YEAR 14.21%
SINCE INCEPTION 15.46%
(on 10-22-85)
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 3-31-87 to 3-31-97
THE STRONG Lipper
SCHAFER S & P 500 Growth and Income
VALUE FUND Index* Funds Index*
3-87 10,000 10,000 10,000
12-87 8,285 8,673 8,762
12-88 9,775 10,113 10,370
12-89 12,713 13,318 12,831
12-90 11,432 12,904 12,062
12-91 16,111 16,836 15,410
12-92 19,119 18,118 16,894
12-93 23,703 19,945 19,364
12-94 22,689 20,208 19,284
12-95 30,437 27,802 25,289
12-96 37,489 34,185 30,522
3-97 37,768 35,102 31,035
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made on 3-31-87, with similar investments in the
Standard & Poor's 500 Stock Index ("S&P 500") and the Lipper Growth and Income
Funds Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares in the Fund.
- --------------------------------------------------------------------------------
* The S&P 500 is an unmanaged index generally representative of the U.S.
stock market, without regard to company size. The Lipper Growth and Income
Funds Index is an equally-weighted performance index of the largest
qualifying funds in this Lipper category. Source of the S&P index data is
Micropal. Source of the Lipper index data is Lipper Analytical Services,
Inc.
1 Average total return and total return measure change in the value of an
investment, assuming reinvestment of all dividends and capital gains.
Average annual total return reflects annualized change, while total return
reflects aggregate change.
3
<PAGE>
<TABLE>
===================================================================================================================================
PORTFOLIO HOLDINGS, EARNINGS PER SHARE ESTIMATES, AND PRICE/EARNINGS RATIOS AS OF 4-18-97 (UNAUDITED)
===================================================================================================================================
<CAPTION>
CLOSING PRICE EARNINGS PER SHARE PRICE/EARNINGS RATIO
SECURITY (4-18-97) 1996A 1997E 1998E 1997E 1998E
<S> <C> <C> <C> <C> <C> <C>
National Bank of Canada .................... 10.72 1.65 1.80 2.00 6.0 5.4
Chrysler Corporation ....................... 30.37 5.10 5.15 5.10 5.9 6.0
Lasalle Re Holdings, Ltd. .................. 28.50 4.50 4.95 4.50 5.8 6.3
Northeast Utilities ........................ 8.75 2.24 0.30 1.25 29.2 7.0
Owens Corning .............................. 38.87 4.70 4.70 5.35 8.3 7.3
General Motors Corporation ................. 56.25 6.10 7.55 7.50 7.5 7.5
IBP, Inc. .................................. 23.25 2.40 2.70 3.10 8.6 7.5
Ford Motor Company ......................... 34.25 3.50 4.15 4.50 8.3 7.6
Burlington Industries, Inc. ................ 11.50 1.10 1.15 1.35 10.0 8.5
New Holland N.V. ........................... 22.00 1.55 2.30 2.55 9.6 8.6
Lafarge Corporation ........................ 24.00 1.90 2.45 2.75 9.8 8.7
Borg-Warner Automotive, Inc. ............... 43.62 3.65 4.40 4.85 9.9 9.0
The Chase Manhattan Corporation ............ 87.50 6.95 8.50 9.75 10.3 9.0
Old Republic International Corporation ..... 26.75 2.31 2.60 2.95 10.3 9.1
Carpenter Technology Corporation ........... 39.62 3.55 3.40 4.30 11.7 9.2
Southdown, Inc. ............................ 35.12 3.05 3.40 3.75 10.3 9.4
Reading & Bates ............................ 23.00 1.13 2.05 2.45 11.2 9.4
Harmon International Industries ............ 37.37 3.16 3.00 3.90 12.5 9.6
Burlington Northern Sante Fe, Inc. ......... 72.50 6.00 6.35 7.45 11.4 9.7
The Goodyear Tire & Rubber Company ......... 52.25 4.45 4.85 5.30 10.8 9.9
W.R. Berkley Corporation ................... 49.37 3.80 4.25 4.95 11.6 10.0
Ultramar Diamond Shamrock Corporation ...... 30.87 2.40 2.35 3.05 13.1 10.1
Philips Electronics N.V. ADR ............... 46.87 4.15 3.00 4.50 15.6 10.4
Morgan Stanley Group, Inc. ................. 60.37 5.95 5.90 5.80 10.2 10.4
Ucar International, Inc. ................... 43.00 3.00 3.50 4.05 12.3 10.6
Keycorp .................................... 50.00 3.75 4.20 4.70 11.9 10.6
Paine Webber Group, Inc. ................... 32.25 3.40 3.10 3.00 10.4 10.8
Avnet, Inc. ................................ 56.62 4.40 4.35 5.20 13.0 10.9
Citicorp ...................................103.25 7.50 8.45 9.50 12.2 10.9
Singer Company N.V. ........................ 18.50 1.65 1.35 1.65 13.7 11.2
AT&T Corporation ........................... 33.62 3.50 2.90 2.95 11.6 11.4
Repsol S.A. Sponsored ADR .................. 43.25 3.05 3.35 3.80 12.9 11.4
Asia Pulp & Paper Company, Ltd. ADR ........ 11.62 0.15 0.65 1.00 17.9 11.6
Cummins Engine Company, Inc. ............... 54.00 3.90 4.15 4.60 13.0 11.7
Mellon Bank Corporation .................... 77.25 5.15 5.80 6.45 13.3 12.0
Owens-Illinois, Inc. ....................... 26.37 1.55 1.90 2.20 13.9 12.0
YPF Sociedad Anonima ADR ................... 26.62 1.80 2.10 2.20 12.7 12.1
SBC Communications, Inc. ................... 51.00 3.45 3.70 4.10 13.8 12.4
The May Department Stores Company .......... 45.87 3.10 3.20 3.50 14.3 13.1
Tektronix, Inc. ............................ 53.00 3.00 3.45 3.95 15.4 13.4
Atlantic Richfield Company .................131.62 8.30 9.50 9.60 13.9 13.7
The Progressive Corporation ................ 72.87 4.10 4.50 5.10 16.2 14.3
Northern Trust Corporation ................. 40.87 2.20 2.50 2.80 16.4 14.6
Federal Express Corporation ................ 53.75 2.70 3.00 3.40 17.9 15.8
Cyprus Amax Minerals Company ............... 23.37 1.50 1.60 1.30 14.6 18.0
----------------
AVERAGE PRICE/EARNINGS RATIO 12.2 10.4
S&P 500 INDEX 766.34 38.65 41.10 43.80 18.6 17.5
</TABLE>
A=ACTUAL E=ESTIMATE
5
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES March 31, 1997 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES OR UNIT
PRINCIPAL AVERAGE MARKET MARKET
SECURITY AMOUNT UNIT COST VALUE % CHANGE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 98.7%
AGRICULTURAL EQUIPMENT 2.2%
<S> <C> <C> <C> <C> <C>
New Holland N.V. (b) 661,900 $21.22 $ 22.250 4.85% $14,727,275
AIR TRANSPORT 2.2%
Federal Express Corporation (b) 285,800 35.46 52.125 47.00 14,897,325
AUTO & TRUCK PARTS 6.5%
Borg-Warner Automotive, Inc. 368,000 31.50 42.625 35.32 15,686,000
Cummins Engine Company, Inc. 276,200 41.78 51.250 22.67 14,155,250
The Goodyear Tire & Rubber Company 273,500 47.33 52.250 10.40 14,290,375
-----------
44,131,625
AUTOMOBILE 6.3%
Chrysler Corporation 481,000 28.05 30.000 6.95 14,430,000
Ford Motor Company 457,000 32.77 31.375 (4.26) 14,338,375
General Motors Corporation 250,000 56.39 55.375 (1.80) 13,843,750
-----------
42,612,125
BANKS 11.9%
The Chase Manhattan Corporation 146,400 75.05 93.625 24.75 13,706,700
Citicorp 126,700 93.37 108.250 15.94 13,715,275
KeyCorp 272,500 36.82 48.750 32.40 13,284,375
Mellon Bank Corporation 181,300 46.98 72.750 54.85 13,189,575
National Bank of Canada 1,260,000 10.79 10.692 (0.91) 13,472,041
Northern Trust Corporation 352,000 39.36 37.500 (4.73) 13,200,000
-----------
80,567,966
BROKERAGE & INVESTMENT MANAGEMENT 4.0%
Morgan Stanley Group, Inc. 232,000 64.89 58.750 (9.46) 13,630,000
PaineWebber Group, Inc. 475,400 19.62 28.250 43.99 13,430,050
-----------
27,060,050
BUILDING MATERIALS 6.3%
Lafarge Corporation 630,200 19.97 22.750 13.92 14,337,050
Owens Corning 346,500 39.64 40.250 1.54 13,946,625
Southdown, Inc. 413,000 35.58 34.250 (3.74) 14,145,250
-----------
42,428,925
CONTAINER 2.5%
Owens-Illinois, Inc. (b) 699,100 16.19 24.625 52.10 17,215,338
ELECTRIC UTILITIES 1.9%
Northeast Utilities 1,640,000 11.30 7.875 (30.31) 12,915,000
ELECTRONICS 6.2%
Avnet, Inc. 240,000 44.74 56.375 26.01 13,530,000
Hughes Electronics Corporation 255,000 46.07 54.250 17.76 13,833,750
Tektronix, Inc. 294,000 38.56 50.500 30.96 14,847,000
-----------
42,210,750
FOOD 2.3%
IBP, Inc. 630,500 25.42 24.625 (3.13) 15,526,062
HOUSEHOLD APPLIANCES 6.2%
Philips Electronics N.V. ADR 332,500 36.68 44.500 21.32 14,796,250
Singer Company N.V. 820,000 18.40 18.250 (0.82) 14,965,000
Whirlpool Corporation 253,400 51.22 47.625 (7.02) 12,068,175
-----------
41,829,425
INSURANCE 8.5%
W.R. Berkley Corporation 287,000 43.39 51.000 17.54 14,637,000
LaSalle Re Holdings, Ltd. 526,500 23.50 28.750 22.34 15,136,875
Old Republic International Corporation 550,000 20.16 25.625 27.11 14,093,750
The Progressive Corporation 219,800 44.18 63.875 44.58 14,039,725
-----------
57,907,350
METALS & MINING 2.2%
Cyprus Amax Minerals Company 614,500 24.75 23.750 (4.04) 14,594,375
5
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) March 31, 1997 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES OR UNIT
PRINCIPAL AVERAGE MARKET MARKET
SECURITY AMOUNT UNIT COST VALUE % CHANGE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
OIL 10.1%
<S> <C> <C> <C> <C> <C>
Atlantic Richfield Company 115,700 $118.75 $135.000 13.68% $ 15,619,500
Exxon Corporation 58,300 72.60 107.750 48.42 6,281,825
Repsol S.A. Sponsored ADR 373,000 41.12 40.750 (0.90) 15,199,750
Ultramar Diamond Shamrock Corporation 505,000 27.11 31.750 17.12 16,033,750
YPF Sociedad Anonima ADR 575,000 21.65 26.500 22.40 15,237,500
------------
68,372,325
PAPER & FOREST PRODUCTS 2.0%
Asia Pulp & Paper Company, Ltd. ADR (b) 1,318,000 10.87 10.375 (4.55) 13,674,250
RAILROAD 1.9%
Burlington Northern Santa Fe Corporation 178,600 84.32 74.000 (12.24) 13,216,400
RETAIL - DEPARTMENT STORE 2.0%
The May Department Stores Company 304,000 41.29 45.500 10.20 13,832,000
SHOE & APPAREL MANUFACTURING 3.6%
Burlington Industries, Inc. (b) 888,100 11.65 11.500 (1.29) 10,213,150
Reebok International, Ltd. 311,000 29.26 44.875 53.37 13,956,125
------------
24,169,275
STEEL 4.2%
Carpenter Technology Corporation 390,100 33.19 38.250 15.25 14,921,325
UCAR International, Inc. (b) 350,500 39.52 39.625 0.27 13,888,563
------------
28,809,888
TELECOMMUNICATIONS 4.2%
AT&T Corporation 402,000 34.90 34.750 (0.43) 13,969,500
SBC Communications, Inc. 264,600 50.59 52.625 4.02 13,924,575
------------
27,894,075
TOBACCO 1.5%
Philip Morris Companies, Inc. 91,600 70.83 114.125 61.13 10,453,850
------------
TOTAL COMMON STOCKS (COST $599,379,778) 669,045,654
SHORT-TERM INVESTMENTS (a) 1.4%
COMMERCIAL PAPER 1.4%
DISCOUNTED 1.3%
American Express Company, Due 4/01/96 $8,600,000 8,600,000
INTEREST BEARING, DUE UPON DEMAND 0.1%
General Mills, Inc., 5.27% 142,374 142,374
Johnson Controls, Inc., 5.31% 258,025 258,025
Sara Lee Corporation, 5.27% 802,478 802,478
------------
1,202,877
------------
TOTAL SHORT-TERM INVESTMENTS (COST $9,802,877) 9,802,877
------------
TOTAL INVESTMENTS IN SECURITIES (COST $609,182,655) 100.1% 678,848,531
Other Assets & Liabilities, Net (0.1%) (672,706)
------------
NET ASSETS 100.0% $678,175,825
============
</TABLE>
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- ------------------------------------------------------------
United States ................................... 85.0%
Netherlands ..................................... 4.4
Argentina ....................................... 2.3
Hong Kong ....................................... 2.2
Spain ........................................... 2.2
Canada .......................................... 2.0
Singapore ....................................... 2.0
Other Assets and Liabilities, Net .............. (0.1)
------
Total 100.0%
======
LEGEND
- ------
(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.
6
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 1997 (Unaudited)
INCOME:
Dividends $ 6,183,780
Interest 412,974
-----------
Total Income 6,596,754
EXPENSES:
Investment Advisory Fees 2,675,191
Custodian Fees 18,488
Shareholder Servicing Costs 323,936
Other 244,157
-----------
Total Expenses 3,261,772
-----------
NET INVESTMENT INCOME 3,334,982
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain on Investments 14,215,211
Change in Unrealized Appreciation/Depreciation on:
Investments 31,602,357
Foreign Currencies (547)
-----------
NET GAIN 45,817,021
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $49,152,003
===========
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
March 31, 1997 (Unaudited)
<CAPTION>
ASSETS:
<S> <C>
Investments in Securities, at Market Value (Cost of $609,182,655) $678,848,531
Dividends and Interest Receivable 1,341,074
Receivable from Fund Shares Sold 637,654
Other Assets 2,973
------------
Total Assets 680,830,232
LIABILITIES:
Payable to Brokers for Securities Purchased 1,827,990
Payable for Fund Shares Redeemed 95,118
Accrued Operating Expenses and Other Liabilities 731,299
------------
Total Liabilities 2,654,407
------------
NET ASSETS $678,175,825
============
NET ASSETS CONSIST OF:
Capital Stock (250,000,000 shares authorized, 13,194,387 shares outstanding, $.10 par value) $ 1,319,439
Paid-in Capital 595,107,040
Accumulated Undistributed Net Investment Income 1,380,911
Accumulated Undistributed Net Realized Gains 10,703,106
Net Unrealized Appreciation on Investments 69,665,329
------------
Net Assets $678,175,825
============
NET ASSET VALUE PER SHARE $51.40
======
7
See notes to financial statements.
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996
-------------- --------------
(UNAUDITED)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 3,334,982 $ 3,250,896
Net Realized Gain 14,215,211 10,300,245
Change in Unrealized Appreciation/Depreciation 31,601,810 18,447,604
------------ ------------
Increase in Net Assets Resulting from Operations 49,152,003 31,998,745
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 320,510,720 270,574,644
Proceeds from Reinvestment of Dividends 17,495,106 6,479,401
Payment for Shares Redeemed (80,402,112) (76,034,374)
------------ ------------
Increase in Net Assets from Capital Share Transactions 257,603,714 201,019,671
DISTRIBUTIONS:
From Net Investment Income (4,149,409) (1,590,270)
From Net Realized Gain on Investments (13,812,351) (5,314,873)
------------ ------------
Total Distributions (17,961,760) (6,905,143)
------------ ------------
TOTAL INCREASE IN NET ASSETS 288,793,957 226,113,273
NET ASSETS:
Beginning of Period 389,381,868 163,268,595
------------ ------------
End of Period $678,175,825 $389,381,868
============ ============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 6,165,887 6,009,482
Issued in Reinvestment of Distributions 340,173 151,671
Redeemed (1,547,468) (1,681,871)
------------ ------------
Increase 4,958,592 4,479,282
============ ============
8
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
March 31, 1997 (Unaudited)
1. ORGANIZATION
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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation -- Portfolio securities traded primarily on a
principal securities exchange are valued at the last reported sales
price or the mean between the latest bid and asked prices where no
last sales price is available. Securities traded over-the-counter are
valued at the mean of the latest bid and asked prices or the last
reported sales price. Securities for which market quotations are not
readily available, when held by the Funds, are valued at fair value as
determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of
Directors. Securities which are purchased within 60 days of their
stated maturity are valued at amortized cost, which approximates
current value.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
It is the Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no Federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for Federal income tax purposes due to differences in
the recognition of income and expense items for financial statement
and tax purposes. Where appropriate, reclassifications between net
asset accounts are made for such differences that are permanent in
nature.
(C) Realized Gains and Losses on Investment Transactions -- Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds and are calculated on a first-in, first-out basis.
(D) Additional Investment Risk-- 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.
(E) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(F) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discounts.
3. RELATED PARTY TRANSACTIONS
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 prescribed by any state in which the
Fund's securities are qualified for sale. For the six months ended March
31, 1997, no reimbursement was required.
At March 31, 1997, 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
96,268 shares, or 0.73% of the outstanding shares, of the Fund.
The amount payable to the Advisor at March 31, 1997 is $578,072 and
Unaffiliated Directors' Fees paid during the period were $1,500.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
March 31, 1997 (Unaudited)
4. 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
assets 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. Other
shareholder servicing expenses paid to Strong for the six months ended
March 31, 1997 were $4,616.
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.
5. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investment securities (excluding cash
equivalents) during the six months ended March 31, 1997 were $330,230,889
and $88,911,345, respectively.
6. INCOME TAX INFORMATION
At March 31, 1997, the investment cost and gross unrealized appreciation
and depreciation on investments for Federal income tax purposes were as
follows:
Aggregate Investment Cost $609,438,962
Aggregate Unrealized:
Appreciation $ 88,456,437
Depreciation (19,046,868)
------------
$ 69,409,569
============
10
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED MARCH 31 YEAR ENDED SEPTEMBER 30
-------------- ----------------------------------------------------------------
<CAPTION>
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
SELECTED PER-SHARE DATA (a)
- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 47.28 $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.27 0.47 0.36 0.26 0.28 0.42
Net Realized and Unrealized Gains on Investments 5.71 5.00 8.53 1.34 8.00 4.96
-------- -------- -------- ------- ------- -------
Total from Investment Operations 5.98 5.47 8.89 1.60 8.28 5.38
LESS DISTRIBUTIONS:
From Net Investment Income (0.43) (0.38) (0.33) (0.19) (0.39) (0.52)
From Net Realized Gains (1.43) (1.27) (1.64) (1.08) (3.27) (5.48)
-------- -------- -------- ------- ------- -------
Total Distributions (1.86) (1.65) (1.97) (1.27) (3.66) (6.00)
-------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 51.40 $ 47.28 $ 43.46 $ 36.54 $ 36.21 $ 31.59
======== ======== ======== ======= ======= =======
TOTAL RETURN +12.6% +13.0% +26.0% +4.4% +28.4% +18.8%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $678,176 $389,382 $163,269 $68,399 $21,403 $12,195
Ratio of Expenses to Average Net Assets 1.2% 1.3% 1.3% 1.5% 1.7% 2.1%
Ratio of Net Investment Income to Average Net Assets 1.2% 1.2% 1.2% 1.0% 0.8% 1.2%
Portfolio Turnover Rate 18.9% 17.8% 33.2% 28.5% 33.3% 53.0%
Average Commission Rate Paid (b) $ 0.06 $ 0.07
</TABLE>
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
11
<PAGE>
NOTES
- --------------------------------------------------------------------------------
12
<PAGE>
SHAREHOLDER PRIVILEGES*
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. 2652
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030.
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863.
--------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE]
Strong Funds On-Line
http://www.strong-funds.com
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
5143D97
