<PAGE> 1
As filed with the Securities and Exchange Commission
on January 29, 1997
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1933 Act File No. 2-99752
1940 Act File No. 811-4384
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
-----
Pre-Effective Amendment No.
-----
Post-Effective Amendment No. 13 x
-----
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 x
Amendment No. 13
------------------------
STRONG SCHAFER VALUE FUND, INC.
(Exact Name of Registrant as Specified in Charter)
645 Fifth Avenue
New York, New York 10022
(Address of Principal Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 644-1800
David K. Schafer
Strong Schafer Value Fund, Inc.
645 Fifth Avenue
New York, New York 10022
(Name and Address of Agent for Service)
Copy to:
Andrew H. Shaw, Esq.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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x on February 1, 1997 pursuant to paragraph (b)
- -----
60 days after filing pursuant to paragraph (a)
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on (date) pursuant to paragraph (a) of rule 485
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-------------------------
Pursuant to the provision of Rule 24f-2 under the Investment Company Act of
1940, Registrant has registered an indefinite number of shares of capital stock
under the Securities Act of 1933. Registrant's Rule 24f-2 Notice for its most
recent fiscal year was filed on November 22, 1996.
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<PAGE> 2
CROSS REFERENCE SHEET
BETWEEN PROSPECTUS, TOGETHER WITH THE
STATEMENT OF ADDITIONAL INFORMATION, AND FORM N-1A
PART A
<TABLE>
<CAPTION>
Information Required in Prospectus Prospectus Caption
------------------------------------ ------------------
<S> <C> <C>
Item 1. Cover Page. Cover Page.
Item 2. Synopsis. Expenses.
Item 3. Condensed Financial Financial Highlights;
Information. About The Fund.
Item 4. General Description of Cover page; Investment Objective and
Registrant. Policies; About The Fund.
Item 5. Management of the Fund. About The Fund;
Shareholder Manual.
Item 5A. Management's Discussion of Included in Annual Report.
Fund Performance.
Item 6. Capital Stock and Other About the Fund;
Securities. Shareholder Manual.
Item 7. Purchase of Securities Cover Page; Shareholder
Being Offered. Manual -- How to Buy
Shares; Determining Your
Share Price.
Item 8. Redemption or Repurchase. Shareholder Manual --
How to Sell Shares.
Item 9. Pending Legal Proceedings. Not Applicable.
</TABLE>
2
<PAGE> 3
PART B
<TABLE>
<CAPTION>
Information Required in Statement of
Statement of Additional Additional Information
Information Caption
------------------------------- ----------------------
<S> <C> <C>
Item 10. Cover Page. Cover Page.
Item 11. Table of Contents. Table of Contents.
Item 12. General Information Not Applicable.
and History.
Item 13. Investment Objectives Investment Objective
and Policies. and Policies;
Investment
Restrictions.
Item 14. Management of the Directors and Officers
Fund. of the Fund;
Investment Advisor and
Investment Advisory
Agreement.
Item 15. Control Persons and Directors and Officers
Principal Holders of of the Fund; Principal
Securities. Shareholders.
Item 16. Investment Advisory Investment Advisor and
and Other Services. Investment Advisory
Agreement; Custodian;
Transfer Agent;
Experts.
Item 17. Brokerage Allocation Brokerage.
and Other Practices.
Item 18. Capital Stock and Not Applicable.
Other Securities.
Item 19. Purchase, Redemption Purchase, Redemption
and Pricing of and Pricing of Shares.
Securities Being
Offered.
Item 20. Tax Status. Tax Status.
Item 21. Underwriters. Distributor.
Item 22. Calculation of Performance
Performance Data. Information.
Item 23. Financial Statements. Financial Statements
Incorporated by
Reference.
</TABLE>
PART C
3
<PAGE> 4
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
4
<PAGE> 5
STRONG SCHAFER VALUE FUND, INC.
STRONG FUNDS
P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863
Device for the Hearing-Impaired:
(800) 999-2780
The Strong Family of Funds ("Strong Funds") is a family of more than
twenty-five diversified and non-diversified mutual funds. All of the Strong
Funds are no-load funds, meaning that you may purchase, redeem, or exchange
shares without paying a sales charge. Strong Funds include growth funds,
conservative equity funds, income funds, municipal income funds, international
funds and cash management funds.
The Strong Schafer Value Fund (the "Fund") is described in this Prospectus.
The Fund is a no-load, open-end, diversified mutual fund, the primary objective
of which is long-term capital appreciation principally through investment in
common stocks and other equity securities. Current income is a secondary
objective.
The investment advisor for the Fund is Schafer Capital Management, Inc. (the
"Advisor").
------------------------------------
This Prospectus should be read carefully and retained for future reference.
It sets forth concisely the information about the Fund that an investor should
know before investing. A Statement of Additional Information dated February 1,
1997 containing additional information about the Fund is incorporated by
reference into this Prospectus and has been filed electronically with the
Securities and Exchange Commission (the "Commission") and is available without
charge upon oral or written request of the Fund at the address and telephone
number set forth above. The Commission also maintains a web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding registrants
(including the Fund) that file electronically with the Commission.
------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------
February 1, 1997
---------------------
PROSPECTUS PAGE I-1
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSES................................ I-3
FINANCIAL HIGHLIGHTS.................... I-4
INVESTMENT OBJECTIVE AND POLICIES....... I-5
ABOUT THE FUND.......................... I-7
SHAREHOLDER MANUAL...................... II-1
</TABLE>
---------------------
PROSPECTUS PAGE I-2
<PAGE> 7
EXPENSES
The expense summary format below was developed for use by all mutual funds to
help you make your investment decisions. Of course, you should consider this
expense information along with other important information in this Prospectus,
the Fund's investment objective and the Fund's past performance.
<TABLE>
<S> <C> <C>
A. Shareholder Transaction Expenses
Sales Load Imposed on Purchases......................... none
Sales Load Imposed on Reinvested Dividends.............. none
Deferred Sales Load Imposed on Redemptions.............. none
B. Annual Fund Operating Expenses (as a percent of average
net assets)
Management Fees......................................... 1.00%
12b-1 Fees.............................................. none
Other Expenses.......................................... .27%
-----
Total Fund Operating Expenses.................. 1.27%
=====
C. Example
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each period:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------- ------- --------
<S> <C> <C> <C>
$13 $40 $69 $153
</TABLE>
EXPLANATION OF TABLES AND EXAMPLE
A. Shareholder Transaction Expenses are charges you pay when you buy or sell
shares of a fund. There are none for the Fund.
B. Annual Fund Operating Expenses are based on amounts incurred during the
Fund's most recent fiscal year ended September 30, 1996. Management Fees are
paid by the Fund to Schafer Capital Management, Inc. (the "Advisor") for
managing its investments and business affairs. Other Expenses are principally
for maintaining shareholder records, furnishing shareholder statements and
reports, and certain other services. Management Fees and Other Expenses are
reflected in the Fund's share price and are not charged directly to individual
shareholder accounts. See "About the Fund" herein for further information.
C. Example of Expenses. The hypothetical example illustrates the expenses
associated with a $1,000 investment over periods of 1, 3, 5 and 10 years, based
on the expenses in the table above and an assumed annual rate of return of 5%.
The return of 5% and expenses should not be considered indications of past or
future Fund performance or expenses, both of which may vary.
---------------------
PROSPECTUS PAGE I-3
<PAGE> 8
FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each period)
The following information regarding selected per share data and ratios of
the Fund for the year ended September 30, 1996 has been audited by Coopers &
Lybrand L.L.P., independent accountants, whose unqualified report thereon is
included in the Fund's Annual Report to Shareholders and is incorporated by
reference in the Statement of Additional Information. The information regarding
selected per share data and ratios of the Fund for each of the nine years in the
period ended September 30, 1995 were audited by other independent accountants.
All of the other independent accountants' reports were unqualified. This
information should be read in conjunction with the financial statements and
notes thereto appearing in the Fund's Annual Report to Shareholders which is
incorporated by reference in the Statement of Additional Information. The Fund's
Annual Report to Shareholders, which may be obtained upon request from the Fund
without charge, contains further information about the performance of the Fund.
<TABLE>
<CAPTION>
For the Year ended September 30,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21 $ 25.65 $ 32.23
-------- -------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............................ .47 .36 .26 .28 .42 .46 .45
Net gain (loss) on securities (both realized and
unrealized).................................... 5.00 8.53 1.34 8.00 4.96 8.41 (5.87)
-------- -------- ------- ------- ------- ------- -------
Total from Investment Operations............... 5.47 8.89 1.60 8.28 5.38 8.87 (5.42)
-------- -------- ------- ------- ------- ------- -------
Less :
Distributions from net realized gains............ (1.27) (1.64) (1.08) (3.27) (5.48) (1.73) (.60)
Dividends from net investment income............. (.38) (.33) (.19) (.39) (.52) (.58) (.56)
-------- -------- ------- ------- ------- ------- -------
Total dividends and distributions.............. (1.65) (1.97) (1.27) (3.66) (6.00) (2.31) (1.16)
-------- -------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.................... $ 47.28 $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21 $ 25.65
========== ========== ======== ======== ======== ======== ========
Total Return...................................... 12.99% 26.01% 4.42% 28.41% 18.80% 37.28% (17.34%)
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)......... $389,382 $163,269 $68,399 $21,403 $12,195 $ 9,811 $10,772
Ratio of expenses to average net assets.......... 1.27% 1.28% 1.48% 1.74% 2.08% 2.00% 2.00%
Ratio of net investment income to average net
assets......................................... 1.21% 1.18% .99% .79% 1.20% 1.26% 1.45%
Portfolio turnover rate.......................... 17.84% 33.19% 28.45% 33.29% 53.03% 54.74% 35.95%
Average Commission rate paid..................... $ .07+
<CAPTION>
1989 1988 1987
------- ------- -------
<S> <C><C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 24.26 $ 30.49 $ 21.64
------- ------- -------
Income from Investment Operations:
Net investment income............................ .49 .56 .32
Net gain (loss) on securities (both realized and
unrealized).................................... 8.18 (5.39) 8.84
------- ------- -------
Total from Investment Operations............... 8.67 (4.83) 9.16
------- ------- -------
Less :
Distributions from net realized gains............ -- (1.18) --
Dividends from net investment income............. (.70) (.22) (.31)
------- ------- -------
Total dividends and distributions.............. (.70) (1.40) (.31)
------- ------- -------
Net Asset Value, End of Period.................... $ 32.23 $ 24.26 $ 30.49
======== ======== ========
Total Return...................................... 36.56% (15.34%) 42.81%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)......... $13,794 $12,268 $19,854
Ratio of expenses to average net assets.......... 2.09% 1.82%* 1.96%*
Ratio of net investment income to average net
assets......................................... 1.81% 2.32% 1.20%
Portfolio turnover rate.......................... 42.20% 42.82% 46.52%
Average Commission rate paid.....................
</TABLE>
- ---------------
* After expense reimbursement.
+ Disclosure required, effective for reporting periods beginning after September
1, 1995.
---------------------
PROSPECTUS PAGE I-4
<PAGE> 9
INVESTMENT OBJECTIVE AND POLICIES
The Fund's primary investment objective is long-term capital appreciation,
and portfolio securities are selected primarily with a view to achievement of
this objective. The Fund's primary objective is also a fundamental policy of the
Fund and may not be changed without shareholder approval. Current income is a
secondary objective in the selection of investments. Such secondary objective is
not a fundamental policy of the Fund and may be changed by a vote of a majority
of the Board of Directors without a vote of the shareholders.
The policy of the Fund is to invest in securities which are believed by
the Advisor to offer the possibility of increase in value, for the most part
common stocks of established companies having a strong financial position and a
low stock market valuation at the time of purchase (as measured by
price/earnings ratios as compared with average price/earnings ratios of major
market indices, e.g., Standard & Poor's 500 Index) in relation to investment
value (as measured by prospective earnings and dividend growth rates as compared
with market averages of such rates). Investments are then monitored by the
Fund's Advisor for price movement and earnings developments. Once a security is
purchased, it will generally be held in the portfolio until it no longer meets
the Fund's financial or valuation criteria as determined by the Fund's Advisor.
The Fund expects to purchase and sell securities at such times as it deems to
be in the best interest of its shareholders. Although there may be some
short-term portfolio turnover, securities are generally purchased which the
Advisor believes will appreciate in value over the long term. The Fund
anticipates that its annual portfolio turnover rate should not significantly
exceed 50%. The Fund, however, has not placed any limit on its rate of portfolio
turnover and securities may be sold without regard to the time they have been
held when, in the opinion of the Advisor, investment considerations warrant such
action.
The Fund does not concentrate its investments in any particular industry or
group of industries, but diversifies its holdings among as many different
companies and industries as seems appropriate in the light of conditions
prevailing at any given time.
Other than as considered appropriate for cash reserves, the Fund will
generally maintain a fully invested position in common stocks of publicly-held
companies, primarily in stocks of companies listed on a national securities
exchange and other equity securities (common stocks or securities convertible
into common stocks). Investments may also be made in debt securities which are
convertible into equity securities and preferred stocks which are convertible
into common stock and in warrants or other rights to purchase common stock,
which in each case are considered equity securities by the Advisor. The Advisor
rarely engages in market timing by shifting the portfolio or a significant
portion thereof in or out of the market in anticipation of market
---------------------
PROSPECTUS PAGE I-5
<PAGE> 10
fluctuations. Although the Fund's portfolio will normally be fully invested in
equity securities as described above, a portion of its assets may be held from
time to time in cash or cash equivalents (e.g., short-term money market
securities such as U.S. Treasury bills, prime-rated commercial paper,
certificates of deposit, variable rate demand notes, or repurchase agreements)
when the Advisor is unable to identify attractive equity investments. Variable
rate demand notes are non-negotiable instruments. The instruments the Fund
invests in 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. With regard to repurchase agreements (which
are agreements under which the seller of a security agrees at the time of sale
to repurchase it at an agreed time and price), in the event of a bankruptcy or
other default of the seller, the Fund could experience both delays in
liquidating the underlying securities and losses, including: (a) possible
decline in the value of the underlying security during the period while the Fund
seeks to enforce its rights thereto; (b) possible subnormal levels of income or
proceeds and lack of access to income and proceeds during this period; and (c)
expenses of enforcing its rights.
The above-described investment policies of the Fund will be applied in a
manner considered prudent by the Advisor to achieve the Fund's investment
objective of long-term capital appreciation. The Fund does not consider such
policies to be fundamental and such policies may be changed by the Board of
Directors without shareholder approval.
The Fund expects to invest primarily in the securities of U.S. issuers,
although it may also invest up to 20% of its assets in securities of foreign
issuers, or depository receipts for such securities, which are traded in a U.S.
market or are available through a U.S. broker or dealer, regardless of whether
such securities or depository receipts are traded in U.S. dollars, and which
meet the criteria for investment selection set forth above. Since 20% of the
Fund's assets may consist of securities issued by foreign issuers, the Fund may
be subject to additional investment risks for these securities that are
different in some respects from those experienced by a fund which invests only
in securities of U.S. domestic issuers. Such risks include future political and
economic developments, the imposition of foreign withholding taxes on dividend
and interest income payable on the securities, the possible establishment of
exchange controls, the possible seizure or nationalization of foreign
investments, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such securities.
With respect to the securities of foreign issuers which are denominated in
foreign currencies, such risks also include the currency risk. Generally, the
Fund will not purchase securities which it believes, at the time of purchase,
will be subject to exchange controls; however, there can be no assurance that
such laws may not become applicable to certain of the Fund's investments. In
addition, there may be less publicly available information about a foreign
issuer than about a domestic issuer, and foreign issuers may not be subject to
---------------------
PROSPECTUS PAGE I-6
<PAGE> 11
the same accounting, auditing, financial record keeping and shareholder
reporting standards and requirements as domestic issuers.
There are market risks inherent in any investment, and there is no assurance
that the primary investment objective of the Fund will be realized or that any
income will be earned. Moreover, the application of investment policies is
basically dependent upon the judgment of the Advisor. A prospective purchaser of
shares of the Fund should realize that there are risks in any policy dependent
upon such judgment and that no representation is made that the objectives of the
Fund will be accomplished or that there may not be substantial losses in any
particular investment. At any time, the value of the Fund's shares may be more
or less than the cost of such shares to the investor.
ABOUT THE FUND
MANAGEMENT
THE FUND. The Fund's Board of Directors is responsible for managing its
business and affairs. The Fund is an open-end, diversified management investment
company as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"). An investment company combines the investments of its
shareholders and purchases various securities. Through ownership of shares in
the investment company, shareholders participate in the investment performance
of such securities. As an open-end investment company, the Fund has an
obligation to redeem the shares of any shareholder by paying such shareholder
the net asset value next computed after receipt of a request in proper form for
a redemption of such shares. As a diversified investment company, the Fund's
investments are subject to certain limitations as to investing in individual
stocks and industry groups.
THE ADVISOR. Schafer Capital Management, Inc. (the "Advisor"), 645 Fifth
Avenue, New York, New York 10022, a Delaware corporation formed in 1984 and
registered under the Investment Advisers Act of 1940, serves as investment
advisor to the Fund pursuant to an Investment Advisory Agreement dated August
13, 1985 (the "Advisory Agreement"). The Advisor also serves as investment
advisor to other equity accounts. An affiliate of the Advisor, Schafer Cullen
Capital Management, Inc. serves as investment advisor to equity accounts for
individuals, tax-exempt equity accounts, charitable foundation accounts and
other equity accounts.
Under the Advisory Agreement, the Advisor furnishes continuous investment
advisory services and management to the Fund, subject to the authority of the
Fund's Board of Directors. The Advisor selects the securities to be purchased
and sold for, and administers the affairs of, the Fund. The Advisor also
furnishes office space, office facilities, equipment, personnel (other than the
services of directors of the Fund who are not interested persons of the
Advisor), and clerical, bookkeeping and administrative services for the Fund to
the extent not provided by Strong Capital Management, Inc. ("Strong"), the
Fund's transfer agent and dividend-disbursing agent, and accounting services
agent. For its services, the Advisor receives a fee, payable monthly, at an
---------------------
PROSPECTUS PAGE I-7
<PAGE> 12
annual rate equal to 1% of the average daily net assets of the Fund. This fee is
higher than that paid by most other mutual funds. For the year ended September
30, 1996, the advisory fee paid by the Fund amounted to 1% of the Fund's average
daily net assets. The Fund's total expenses for the same period amounted to
1.27% of the Fund's average daily net assets.
PORTFOLIO MANAGER. David K. Schafer, the Advisor's controlling person
(within the meaning of the Investment Company Act) and sole shareholder, has
been in the investment management business for more than twenty-five years. Mr.
Schafer is the President of the Advisor and has been primarily responsible for
the day-to-day management of the Fund's portfolio since October 1985, when the
Fund commenced operations. Mr. Schafer is also a minority shareholder of Schafer
Cullen Capital Management, Inc. Mr. Schafer was a securities analyst, first for
Arnold Bernhard & Co., Inc., publisher of The Value Line Investment Survey, from
June 1966 to June 1968; for J & W Seligman & Co. from June 1968 to December
1970; and for Fariston Management Corp., from January 1971 to November 1972. In
1972, he joined the treasury department of INCO Ltd. to supervise the investment
managers of that company's pension assets, and in 1974 he began managing a
portion of those assets himself. In 1981, Mr. Schafer left INCO Ltd. to found
Schafer Capital Management.
TRANSFER AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc., P.O. Box 2936, Milwaukee, Wisconsin 53201,
acts as dividend-disbursing agent and transfer agent for the Fund. Strong is
compensated for its services based on an annual fee per account plus certain
out-of-pocket expenses.
DISTRIBUTOR
Strong Funds Distributors, Inc., P.O. Box 2936, Milwaukee, Wisconsin 53201,
an indirect subsidiary of Strong, acts as distributor of the shares of the Fund.
ORGANIZATION
SHAREHOLDER RIGHTS. The Fund was incorporated under the laws of the State of
Maryland on August 12, 1985 and commenced operations on October 22, 1985. On
January 10, 1996, the Board of Directors approved a change in the name of the
Fund from Schafer Value Fund, Inc. to Strong Schafer Value Fund, Inc. The Fund's
address is 645 Fifth Avenue, New York, New York 10022. The Fund has an
authorized capital of 250 million shares consisting of only one class of
stock -- Common Stock, $.10 par value. Shareholders are entitled to one vote per
share, to such distributions as may be declared by the Fund's Board of Directors
out of funds legally available therefore, and upon liquidation to participate
ratably in the assets available for distribution. There are no conversion or
sinking-fund provisions applicable to the shares, and shareholders have no
preemptive rights and may not cumulate their votes in the election of directors.
The shares are redeemable (as described under "How to Sell Shares" and
"Determining Your Share Price" in the Shareholder
---------------------
PROSPECTUS PAGE I-8
<PAGE> 13
Manual section of this Prospectus) and are transferable. All shares issued and
sold by the Fund will be fully paid and non-assessable.
The Fund is not required to hold annual meetings of shareholders. However,
special meetings may be called for such purposes as electing or removing
directors, terminating or reorganizing the Fund, changing fundamental policies
or voting on other matters when required by the Investment Company Act.
SHAREHOLDER PRIVILEGES. The shareholders of the Fund may benefit from the
privileges described in the "Shareholder Manual" (see Page II-1). However, the
Fund reserves the right, at any time and without prior notice, to suspend,
limit, modify or terminate any of these privileges or their use in any manner by
any person or class.
PRINCIPAL SHAREHOLDER. As of December 31, 1996, Charles Schwab & Co., Inc.
("Schwab") owned of record approximately 37% of the outstanding shares of the
Fund. Schwab's record ownership of greater than 25% of the Fund's shares may
result in it being deemed a controlling entity of the Fund.
DISTRIBUTIONS AND TAXES
PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund intends to distribute
its net investment income (i.e., net income and gains, exclusive of net capital
gains) and net capital gains (i.e., the excess of realized net long-term capital
gains over net short-term capital loss), if any, less any available capital loss
carryover, to shareholders annually. The Fund reserves the right, however, to
declare and pay distributions of net investment income quarterly. Unless you
choose otherwise, all distributions to you of net investment income and net
capital gains will be automatically reinvested in full and fractional shares of
the Fund, or you may elect to have your distributions automatically reinvested
in shares of another Strong Fund. Shares are purchased at the net asset value
next determined after the dividend payment and are credited to your account. As
in the case of normal purchases, stock certificates are not issued unless
requested. You will be advised of the number of shares purchased and the price
following each reinvestment.
You may withdraw from the dividend reinvestment program and elect to receive
income dividends or capital gain distributions or both in cash at any time. Any
shareholder who is not participating in the dividend reinvestment program may
elect to do so by giving written notice to the Fund. If you request in writing
that your dividends and other distributions be paid in cash, the Fund will
credit your bank account by Electronic Funds Transfer ("EFT") or issue a check
to you within five business days of the payment date. You may change your
election at any time by calling or writing Strong Funds. Strong Funds must
receive any such change 7 days (15 days for EFT) prior to a dividend or capital
gain distribution payment date in order for the change to be effective for that
payment.
---------------------
PROSPECTUS PAGE I-9
<PAGE> 14
TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. You will be subject to
federal income tax at ordinary income tax rates on any dividends that are
derived from net investment income, whether paid in cash or reinvested in
additional shares of the Fund or another Strong Fund. Such dividends will
qualify for the 70% dividends received deduction available to corporations only
to the extent the Fund's net investment income consists of qualifying dividend
income from U.S. corporations. Distributions of net capital gain, when
designated as such by the Fund, are taxable to you as long-term capital gains,
regardless of how long you have held your Fund shares. The Fund's distributions
are taxable in the year they are paid, whether they are taken in cash or
reinvested in additional shares, except that certain distributions declared in
the last three months of the year and paid in January are taxable as if paid on
the prior December 31.
If the Fund's distributions exceed its net investment income and net capital
gain in any year, as a result of currency-related losses or otherwise, all or a
portion of those distributions may be treated as a return of capital to
shareholders for tax purposes.
YEAR-END TAX REPORTING. After the end of each calendar year, you will
receive a statement (Form 1099) of the federal income tax status of all
dividends and other distributions paid (or deemed paid) during the year.
SHARES SOLD OR EXCHANGED. Your redemption of Fund shares may result in
taxable gain or loss to you, depending upon whether the redemption proceeds
payable to you are more or less than your adjusted cost basis for the redeemed
shares. Similar tax consequences generally will result from an exchange of Fund
shares for shares of another Strong Fund. Except as discussed below, any such
taxable gain or loss realized by a shareholder who is not a dealer in securities
will be treated as a long-term capital gain or loss if the shares have been held
for more than one year, and otherwise as a short-term capital gain or loss. If
you purchase shares of the Fund within thirty days before or after redeeming or
exchanging shares of the Fund at a loss, a portion or all of that loss will not
be deductible and will increase the cost basis of the newly purchased shares.
Any loss realized by you upon the redemption or exchange of Fund shares held for
six months or less will be treated as long-term capital loss to the extent of
any distributions of net capital gains received on such shares. If you redeem
shares out of a retirement account, you will be subject to withholding for
federal income tax purposes unless you transfer the distribution directly to an
"eligible retirement plan."
BUYING A DISTRIBUTION. A distribution paid shortly after you have purchased
shares in the Fund will reduce the net asset value of the shares by the amount
of the distribution, which nevertheless will be taxable to you as described
above even though it represents a return of a portion of your investment.
---------------------
PROSPECTUS PAGE I-10
<PAGE> 15
BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish the Fund with a correct taxpayer identification
number, the Fund is required to withhold federal income tax at a rate of 31%
(backup withholding) from all income dividends, capital gain distributions, and
redemption proceeds payable to you. Withholding at that rate from dividends and
capital gain distributions payable to you also is required if you otherwise are
subject to backup withholding. To avoid backup withholding, you must provide a
taxpayer identification number and state that you are not subject to backup
withholding due to the underreporting of your income. This certification is
included as part of your application. Please complete it when you open your
account.
TAX STATUS OF THE FUND. The Fund has qualified, and intends to remain
qualified, as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. As a regulated investment company,
the Fund is not subject to Federal income taxes on its income and gains
distributed to shareholders, provided the Fund distributes to its shareholders
at least 90% of its net investment income each year. The Fund intends to
distribute annually to its shareholders substantially all of its net investment
income and net capital gains, if any (computed after taking into account any
available capital loss carryover).
------------------------
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders. You are urged to consult your
own tax advisors for more detailed information.
PERFORMANCE INFORMATION
The Fund may advertise "average annual total return," "total return," and
"cumulative total return." Each of these figures is based upon historical
results and does not represent the future performance of the Fund. Average
annual total return and total return figures measure both the net investment
income generated by, and the effect of any realized and unrealized appreciation
or depreciation of, the underlying investments in the Fund assuming the
reinvestment of all dividends and distributions. Total return figures are not
annualized and simply represent the aggregate change of the Fund's investments
over a specified period of time.
Comparative performance information obtained from industry or financial
publications may also be used. The Fund may compare its performance to that of
other mutual funds with similar investment objectives and to stock or other
relevant indices. From time to time, articles about the Fund regarding its
performance or ranking may appear in national publications. Some of these
publications may publish their own rankings or performance reviews of mutual
funds, including the Fund. Reference to or reprints of such articles may be used
in the Fund's promotional literature.
---------------------
PROSPECTUS PAGE I-11
<PAGE> 16
This page has been left blank intentionally.
---------------------
PROSPECTUS PAGE I-12
<PAGE> 17
SHAREHOLDER MANUAL
<TABLE>
<S> <C>
HOW TO BUY SHARES...................... II-1
DETERMINING YOUR SHARE PRICE........... II-4
HOW TO SELL SHARES..................... II-5
SHAREHOLDER SERVICES................... II-9
REGULAR INVESTMENT PLANS............... II-10
SPECIAL SITUATIONS..................... II-12
</TABLE>
HOW TO BUY SHARES
All the Strong Funds are 100% no-load, meaning you may purchase, redeem, or
exchange shares directly at net asset value without paying a sales charge.
Because the Fund's net asset value changes daily, your purchase price will be
the next net asset value determined after Strong receives and accepts your
purchase order.
Whether you are opening a new account or adding to an existing one, Strong
provides you with several methods to buy the Fund's shares.
----------------------
PROSPECTUS PAGE II-1
<PAGE> 18
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TO OPEN A NEW ACCOUNT
- -------------------------------------------------------------------------------
<S> <C>
MAIL BY CHECK
- Complete and sign the application. Make your check
or money order payable to "Strong Funds."
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to Strong Funds, 900 Heritage
Reserve, Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- Call 1-800-368-3863 for instructions on
establishing an account with an exchange by mail.
- ------------------------------------------------------------------------------
TELEPHONE BY EXCHANGE
- Call 1-800-368-3863 to establish a new account by
1-800-368-3863 exchanging funds from an existing Strong Funds
24 HOURS A DAY, account.
7 DAYS A WEEK - Sign up for telephone exchange services when you
open your account. To add the telephone exchange
option to your account, call 1-800-368-3863 for a
Telephone Exchange Form.
- Please note that your accounts must be identically
registered and that you must exchange enough into the
new account to meet the minimum initial investment.
- ------------------------------------------------------------------------------
IN PERSON - Stop by Strong's Investor Center in Menomonee
Falls, Wisconsin. Call 1-800-368-3863 for hours and
directions.
- The Investor Center can only accept checks or money
orders.
- ------------------------------------------------------------------------------
WIRE Call 1-800-368-3863 for instructions on opening an
account by
wire.
- ------------------------------------------------------------------------------
AUTOMATICALLY USE STRONG'S "NO-MINIMUM INVESTMENT PROGRAM."
- If you sign up for Strong's Automatic Investment
Plan when you open your account, the Fund will waive
its minimum initial investment (see chart on page
II-4).
- Complete the Automatic Investment Plan section on
the account application.
- Mail to the address indicated on the application.
- ------------------------------------------------------------------------------
BROKER-DEALER - You may purchase shares in the Fund through a
broker-dealer or other institution that may charge a
transaction fee.
- The Fund may only accept requests to purchase
shares into a broker-dealer street name account from
the broker-dealer.
</TABLE>
----------------------
PROSPECTUS PAGE II-2
<PAGE> 19
- --------------------------------------------------------------------------------
TO ADD TO AN EXISTING ACCOUNT
- --------------------------------------------------------------------------------
BY CHECK
- - Complete an Additional Investment Form provided at the bottom of your account
statement, or write a note indicating your fund account number and
registration. Make your check or money order payable to "Strong Funds."
- - Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If you're
using an express delivery service, send to Strong Funds, 900 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- - Call 1-800-368-3863 for instructions on exchanging by mail.
- --------------------------------------------------------------------------------
BY EXCHANGE
- - Add to an account by exchanging funds from another Strong Funds account.
- - Sign up for telephone exchange services when you open your account. To add the
telephone exchange option to your account, call 1-800-368-3863 for a Telephone
Exchange Form.
- - Please note that the accounts must be identically registered and that the
minimum exchange is $50 or the balance of your account, whichever is less.
BY TELEPHONE PURCHASE
- - Sign up for telephone purchase when you open your account to make additional
investments from $50 to $25,000 into your Strong Funds account by telephone.
To add this option to your account, call 1-800-368-3863 for a Telephone
Purchase Form.
Or use Strong Direct(SM), Strong Funds' automated telephone response system.
Call 1-800-368-7550.
- --------------------------------------------------------------------------------
- - Stop by Strong's Investor Center in Menomonee Falls, Wisconsin. Call
1-800-368-3863 for hours and directions.
- - The Investor Center can only accept checks or money orders.
- --------------------------------------------------------------------------------
Call 1-800-368-3863 for instructions on adding to an account by wire.
- --------------------------------------------------------------------------------
USE ONE OF STRONG'S AUTOMATIC INVESTMENT PROGRAMS. Sign up for these services
when you open your account, or call 1-800-368-3863 for instructions on how to
add them to your existing account.
- - AUTOMATIC INVESTMENT PLAN. Make regular, systematic investments (minimum $50)
into your Strong Funds account from your bank checking or NOW account.
Complete the Automatic Investment Plan section on the account application.
- - AUTOMATIC EXCHANGE PLAN. Make regular, systematic exchanges (minimum $50) from
one Strong Funds account to another. Call 1-800-368-3863 for an application.
- - PAYROLL DIRECT DEPOSIT. Have a specified amount (minimum $50) regularly
deducted from your paycheck, social security check, military allotment, or
annuity payment invested directly into your Strong Funds account. Call
1-800-368-3863 for an application.
- - AUTOMATIC DIVIDEND REINVESTMENT. Unless you choose otherwise, all your
dividends and capital gain distributions will be automatically reinvested in
additional Fund shares. Or, you may elect to have your dividends and capital
gain distributions automatically reinvested in shares of another Strong Fund.
- --------------------------------------------------------------------------------
- - You may purchase additional shares in the Fund through a broker-dealer or
other institution that may charge a transaction fee.
- - Strong Funds may only accept requests to purchase additional shares into a
broker-dealer street name account from the broker-dealer.
----------------------
PROSPECTUS PAGE II-3
<PAGE> 20
WHAT YOU SHOULD KNOW ABOUT BUYING SHARES
- - Please make all checks or money orders payable to "Strong Funds."
- - Strong cannot accept third-party checks or checks drawn on banks outside the
U.S.
- - You will be charged a $20 service fee for each check, wire, or Electronic
Funds Transfer ("EFT") purchase that is returned unpaid, and you will be
responsible for any resulting losses suffered by the Fund.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
- - The Fund reserves the right to decline to accept your purchase order upon
receipt for any reason.
- - Minimum Investment Requirements:
----------------------------------------------------------------------------
To open a regular account...........................................$2,500
To open an IRA or Defined Contribution account........................$250
To open an UGMA/UTMA account..........................................$250
To open a 401(k) or 403(b) retirement account...................No Minimum
To add to an existing account..........................................$50
The Fund offers a No-Minimum Investment Program that waives the minimum
initial investment requirements for investors who participate in the Strong
Automatic Investment Plan (described on page II-11). Unless you participate in
the Strong No-Minimum Investment Program, please ensure your purchases meet the
minimum investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach the Fund's minimum initial investment), the
Fund reserves the right to close your account. Before taking such action, the
Fund will provide you with written notice and at least 60 days in which to
reinstate an investment program or otherwise reach the minimum initial
investment required.
DETERMINING YOUR SHARE PRICE
Generally, when you make any purchases, sales or exchanges, the price of your
shares will be the net asset value ("NAV") next determined after Strong Funds
receives your request in proper form. If Strong Funds receives such request
prior to the close of regular trading on the New York Stock Exchange (the
"Exchange") on a day on which the Exchange is open, your share price will be the
NAV determined that day. The NAV for the Fund is normally determined as of 3:00
p.m. Central Time ("CT") each day the Exchange is open. The Fund reserves the
right to change the time at which purchases, redemptions and exchanges are
priced if the Exchange closes at a time other
----------------------
PROSPECTUS PAGE II-4
<PAGE> 21
than 3:00 p.m. CT or if an emergency exists. The Fund's NAV is calculated by
taking the fair value of the Fund's total assets, subtracting all its
liabilities, and dividing by the total number of shares outstanding. Expenses
are accrued daily and applied when determining the NAV.
The Fund's portfolio securities are valued based on market quotations or at
fair value as determined by the method selected by the Fund's Board of
Directors. Equity securities traded on a national securities exchange or NASDAQ
are valued at the last sales price on the national securities exchange on which
such securities are primarily traded or NASDAQ, as the case may be. Securities
for which there were no transactions on a given day or securities not listed on
an exchange or NASDAQ are valued at the average of the most recent bid and asked
prices. Other exchange-traded securities (generally foreign securities) will be
valued based on market quotations. Debt securities are valued by a pricing
service that utilizes electronic data processing techniques to determine values
for normal institutional-sized trading units of debt securities without regard
to sale or bid prices when such techniques are believed to more accurately
reflect the fair market value for such securities. Otherwise, sale or bid prices
are used. Any securities or other assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors. Debt securities having remaining
maturities of 60 days or less when purchased are valued by the amortized cost
method. Under this method of valuation, a security is initially valued at its
acquisition cost, and thereafter, amortization of any discount or premium is
assumed each day, regardless of the impact of the fluctuating rates on the
market value of the instrument.
Securities quoted in foreign currency, if any, are valued daily in U.S.
dollars at the foreign currency exchange rates that are prevailing at the time
the daily NAV per share is determined. Although the Fund values its foreign
assets in U.S. dollars on a daily basis, when necessary, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Foreign currency exchange rates are generally determined prior to the close of
regular trading on the Exchange. Occasionally, events affecting the value of
foreign investments and such exchange rates occur between the time at which they
are determined and the close of trading on the Exchange. Such events would not
normally be reflected in a calculation of the Fund's NAV on that day. If events
that materially affect the value of the Fund's foreign investments or the
foreign currency exchange rates occur during such period, the investments will
be valued at their fair value as determined in good faith by or under the
direction of the Board of Directors.
HOW TO SELL SHARES
You can access the money in your account at any time by selling (redeeming)
some or all of your shares back to the Fund. Once your redemption
----------------------
PROSPECTUS PAGE II-5
<PAGE> 22
request is received in proper form, Strong will normally mail you the proceeds
the next business day and, in any event, no later than seven days thereafter.
To redeem shares, you may use any of the methods described in the following
chart. However, if you are selling shares in a retirement account, please call
1-800-368-3863 for instructions. Please note that there is a $10.00 fee for
closing an IRA or other retirement account or for transferring assets to another
custodian. For your protection, certain requests may require a signature
guarantee. (See "Special Situations -- Signature Guarantees").
----------------------
PROSPECTUS PAGE II-6
<PAGE> 23
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
TO SELL SHARES
- -----------------------------------------------------------------------------
<S> <C>
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
For your protection, following information: your account number, the
certain redemption dollar amount or number of shares you wish to
requests may require a redeem, each owner's name, your street address, and
signature guarantee. See the signature of each owner as it appears on the
"Special Situations -- account.
Signature Guarantees." - Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to 900 Heritage Reserve, Menomonee
Falls, Wisconsin 53051.
FOR TRUST ACCOUNTS
- Same as above. Please ensure that all trustees sign
the letter of instruction.
FOR OTHER REGISTRATIONS
- Call 1-800-368-3863 for instructions.
- -----------------------------------------------------------------------------
TELEPHONE
Sign up for telephone redemption services when you
1-800-368-3863 open your account by checking the "Yes" box in the
24 HOURS A DAY, appropriate section of the account application. To
7 DAYS A WEEK add the telephone redemption option to your account,
call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares by phone and arrange to receive the
proceeds in one of three ways:
TO RECEIVE A CHECK BY MAIL
- At no charge, we will mail a check to the address
to which your account is registered.
TO DEPOSIT BY EFT
- At no charge, we will transmit the proceeds by
Electronic Funds Transfer (EFT) to a pre-authorized
bank account. Usually, the funds will arrive at
your bank two banking days after we process your
redemption.
TO DEPOSIT BY WIRE
- For a $10 fee, we will transmit the proceeds by
wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next banking day
after we process your redemption.
You may also use Strong Direct(SM), Strong Funds'
automated telephone response system. Call
1-800-368-7550.
- -----------------------------------------------------------------------------
AUTOMATICALLY
You can set up automatic withdrawals from your
account at regular intervals. To establish the
Systematic Withdrawal Plan, request a form by calling
1-800-368-3863.
- -----------------------------------------------------------------------------
BROKER-DEALER
You may also redeem shares through broker-dealers or
others who may charge a commission or other
transaction fee.
</TABLE>
----------------------
PROSPECTUS PAGE II-7
<PAGE> 24
WHAT YOU SHOULD KNOW ABOUT SELLING SHARES
- - If you have recently purchased shares, please be aware that your redemption
request may not be honored until the purchase check has cleared your bank,
which generally occurs within ten calendar days.
- - You will be charged a $10 service fee for a stop-payment and replacement of a
redemption or dividend check.
- - The right of redemption may be suspended during any period in which (i)
trading on the Exchange is restricted, as determined by the SEC, or the
Exchange is closed for other than weekends and holidays; (ii) the SEC has
permitted such suspension by order; or (iii) an emergency as determined by the
SEC exists, making disposal of portfolio securities or valuation of net assets
of the Fund not reasonably practicable.
- - If you are selling shares you hold in certificate form, you must submit the
certificates with your redemption request. Each registered owner must endorse
the certificates and all signatures must be guaranteed.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
REDEMPTIONS IN KIND
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the assets of
the Fund. If the Advisor determines that existing conditions make cash payments
in excess of such minimum undesirable, redemption payments may be made in whole
or in part in securities or other financial assets, valued for this purpose as
they are valued in computing the NAV for the Fund's shares (a
"redemption-in-kind"). Shareholders receiving securities or other financial
assets in a redemption-in-kind may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences. If you
expect to make a redemption in excess of the lesser of $250,000 or 1% of the
Fund's assets during any 90-day period and would like to avoid any possibility
of being paid with securities in-kind, you may do so by providing the Fund with
an unconditional instruction to redeem at least 15 calendar days prior to the
date on which the redemption transaction is to occur, specifying the dollar
amount or number of shares to be redeemed and the date of the transaction
(please call 1-800-368-3863). This will provide the Fund with sufficient time to
raise the cash in an orderly manner to pay the redemption and thereby minimize
the effect of the redemption on the interests of the Fund's remaining
shareholders.
----------------------
PROSPECTUS PAGE II-8
<PAGE> 25
WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS
- - The Fund reserves the right to refuse a telephone redemption if the Fund
believes it advisable to do so.
- - Once you place your telephone redemption request, it cannot be canceled or
modified.
- - Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund's transfer
agent reasonably believes that such instructions are genuine. The Fund's
transfer agent employs reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Fund's transfer agent may incur
liability if it does not follow these procedures.
- - Because of increased telephone volume, you may experience difficulty in
implementing a telephone redemption during periods of dramatic economic or
market changes.
SHAREHOLDER SERVICES
INFORMATION SERVICES
24-HOUR ASSISTANCE. Strong Funds has registered representatives available to
help you 24 hours a day, 7 days a week. Call 1-414-359-1400 or toll-free
1-800-368-3863. You may also write to Strong Funds at the address on the back
cover of this Prospectus or e-mail us at [email protected].
STRONG DIRECT(SM) AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day,
the Strong Direct(SM) automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity
(1-800-368-5550), and perform purchases, exchanges or redemptions among your
existing Strong accounts (1-800-368-7550). Your account information is protected
by a personal code that you establish.
STATEMENTS AND REPORTS. At a minimum, the Fund will confirm all transactions
for your account on a quarterly basis. We recommend that you file each quarterly
statement - and, especially, each calendar year-end statement - with your other
important financial papers, since you may need to refer to them at a later date
for tax purposes. Should you need additional copies of previous statements, you
may order confirmation statements for the current and preceding year at no
charge. Statements for earlier years are available for $10 each. Call
1-800-368-3863 to order past statements.
Each year, you will also receive a statement confirming the tax status of any
distributions paid to you, as well as a semi-annual report and an annual report
containing audited financial statements.
----------------------
PROSPECTUS PAGE II-9
<PAGE> 26
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. Call
1-800-368-3863 if you wish to receive additional copies, free of charge.
More complete information regarding the Fund's investment policies and
services is contained in its SAI, which you may request by calling or writing
Strong Funds at the phone number and address on the back cover of this
Prospectus.
CHANGING YOUR ACCOUNT INFORMATION. So that you continue receiving your
correspondence, including any dividend checks and statements, please notify us
in writing as soon as possible if your address changes. You may use the
Additional Investment Form at the bottom of your confirmation statement, or
simply write us a letter of instruction that contains the following information:
1. a written request to change the address,
2. the account number(s) for which the address is to be changed,
3. the new address, and
4. the signatures of all owners of the accounts.
Please send your request to the address on the back cover of this Prospectus.
Changes to your account's registration - such as adding or removing a joint
owner, changing an owner's name, or changing the type of your account - must
also be submitted in writing. Please call 1-800-368-3863 for instructions. For
your protection, some requests may require a signature guarantee.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may exchange shares between identically registered
Strong Funds accounts, either in writing or by telephone. By establishing the
telephone exchange services, you authorize the Fund and its agents to act upon
your instruction by telephone to exchange shares from any account you specify.
For tax purposes, an exchange is considered a sale and a purchase. Please obtain
and read the appropriate prospectus before investing in any of the Strong Funds.
Since an excessive number of exchanges may be detrimental to the Fund, the Fund
reserves the right to discontinue the exchange privilege of any shareholder who
makes more than five exchanges in a year or three exchanges in a calendar
quarter.
REGULAR INVESTMENT PLANS
Strong Funds' Automatic Investment Plan, Payroll Direct Deposit Plan, and
Automatic Exchange Plan, all discussed below, are methods of implementing DOLLAR
COST AVERAGING. Dollar cost averaging is an investment strategy that involves
investing a fixed amount of money at regular time intervals. By always
----------------------
PROSPECTUS PAGE II-10
<PAGE> 27
investing the same set amount, you will be purchasing more shares when the price
is low and fewer shares when the price is high. Ultimately, by using this
principle in conjunction with fluctuations in share price, your average cost per
share may be less than your average transaction price. A program of regular
investment cannot ensure a profit or protect against a loss during declining
markets. Since such a program involves continuous investment regardless of
fluctuating share values, you should consider your ability to continue the
program through periods of both low and high share-price levels.
AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan allows you to make
regular, systematic investments in the Fund from your bank checking or NOW
account. You may choose to make investments on any day of the month in amounts
of $50 or more. You can set up the Automatic Investment Plan with any financial
institution that is a member of the Automated Clearing House. Because the Fund
has the right to close an investor's account for failure to reach the minimum
initial investment, please consider your ability to continue this Plan until you
reach the minimum initial investment. To establish the Plan, complete the
Automatic Investment Plan section on the account application, or call
1-800-368-3863 for an application.
PAYROLL DIRECT DEPOSIT PLAN. Once you meet the Fund's minimum initial
investment requirement, you may purchase additional Fund shares through the
Payroll Direct Deposit Plan. Through this Plan, periodic investments (minimum
$50) are made automatically from your payroll check into your existing Fund
account. By enrolling in the Plan, you authorize your employer or its agents to
deposit a specified amount from your payroll check into the Fund's bank account.
In most cases, your Fund account will be credited the day after the amount is
received by the Fund's bank. In order to participate in the Plan, your employer
must have direct deposit capabilities through Automated Clearing House available
to its employees. The Plan may be used for other direct deposits, such as social
security checks, military allotments, and annuity payments.
To establish Direct Deposit for your account, call 1-800-368-3863 to obtain
an Authorization for Payroll Direct Deposit to a Strong Funds Account form. Once
the Plan is established, you may alter the amount of the deposit, alter the
frequency of the deposit, or terminate your participation in the program by
notifying your employer.
AUTOMATIC EXCHANGE PLAN. The Automatic Exchange Plan allows you to make
regular, systematic exchanges (minimum $50) from one Strong Funds account into
another Strong Funds account. By setting up the Plan, you authorize the Fund and
its agents to redeem a set dollar amount or number of shares from the first
account and purchase shares of a second Strong Fund. In addition, you authorize
the Fund and its agents to accept telephone instructions to change the dollar
amount and frequency of the exchange. An exchange transaction is a sale and
purchase of shares for federal income tax
----------------------
PROSPECTUS PAGE II-11
<PAGE> 28
purposes and may result in a capital gain or loss. To establish the Plan,
request a form by calling 1-800-368-3863.
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial
investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be terminated. You may also terminate the Plan at any time by calling
or writing to the Fund. Once participation in the Plan has been terminated for
any reason, to reinstate the Plan you must do so in writing; simply investing
additional funds will not reinstate the Plan.
SYSTEMATIC WITHDRAWAL PLAN. You can set up automatic withdrawals from your
account at regular intervals. To begin distributions, you must have an initial
balance of $5,000 in your account and withdraw at least $50 per payment. To
establish the Systematic Withdrawal Plan, request a form by calling
1-800-368-3863. Depending upon the size of the account and the withdrawals
requested (and fluctuations in net asset value of the shares redeemed),
redemptions for the purpose of satisfying such withdrawals may reduce or even
exhaust the account. If the amount remaining in the account is not sufficient to
meet a Plan payment, the remaining amount will be redeemed and the Plan will be
terminated.
SPECIAL SITUATIONS
POWER OF ATTORNEY. If you are investing as attorney-in-fact for another
person, please complete the account application in the name of such person and
sign the back of the application in the following form: "[applicant's name] by
[your name], attorney-in-fact." To avoid having to file an affidavit prior to
each transaction, please complete the Power of Attorney form available from
Strong Funds at 1-800-368-3863. However, if you would like to use your own power
of attorney form, please call the same number for instructions.
CORPORATIONS AND TRUSTS. If you are investing for a corporation, please
include with your account application a certified copy of your corporate
resolution indicating which officers are authorized to act on behalf of the
corporation. As an alternative, you may complete a Certification of Authorized
Individuals, which can be obtained from the Fund. Until a valid corporate
resolution or Certification of Authorized Individuals form is received by the
Fund, services such as telephone and wire redemption will not be established.
If you are investing as a trustee, please include the date of the trust. All
trustees must sign the application. If they do not, services such as telephone
and wire redemption will not be established. All trustees must sign redemption
requests unless proper documentation to the contrary is provided to the Fund.
----------------------
PROSPECTUS PAGE II-12
<PAGE> 29
Failure to provide these documents or signatures as required when you invest may
result in delays in processing redemption requests.
FINANCIAL INTERMEDIARIES. Broker-dealers, financial institutions, and other
financial intermediaries that have entered into agreements with the Distributor
may enter purchase or redemption orders on behalf of their customers. If you
purchase or redeem shares of the Fund through a financial intermediary, certain
features of the Fund relating to such transactions may not be available or may
be modified in accordance with the terms of the intermediaries' agreement with
the Distributor. In addition, certain operational policies of the Fund,
including those related to settlement and dividend accrual, may vary from those
applicable to direct shareholders' of the Fund and may vary among
intermediaries. We urge you to consult your financial intermediary for more
information regarding these matters. In addition, the Fund may pay, directly or
indirectly through arrangements with Strong, amounts to financial intermediaries
that provide transfer agent-type and/or other administrative services relating
to the Fund to their customers, provided, however, that the Fund will not pay
more for these services through intermediary relationships than it would if the
intermediaries' customers were direct shareholders in the Fund. Certain
financial intermediaries may charge a commission or other transaction fee for
their services. You will not be charged for such fees if you purchase or redeem
your Fund shares directly from the Fund without the intervention of a financial
intermediary.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and
the Funds against fraudulent transactions by unauthorized persons. In the
following instances, the Fund will require a signature guarantee for all
authorized owners of an account:
- - when you add the telephone redemption option to your existing account;
- - if you transfer the ownership of your account to another individual or
organization;
- - when you submit a written redemption request for more than $25,000;
- - when you request to redeem or redeposit shares that have been issued in
certificate form;
- - if you open an account and later decide that you want certificates;
- - when you request that redemption proceeds be sent to a different name or
address than is registered on your account;
- - if you add/change your name or add/remove an owner on your account; and
- - if you add/change the beneficiary on your transfer on death account.
A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks, savings
associations, credit unions, brokerage firms, and others. PLEASE NOTE THAT A
NOTARY PUBLIC STAMP OR SEAL IS NOT ACCEPTABLE.
----------------------
PROSPECTUS PAGE II-13
<PAGE> 30
NOTES
<PAGE> 31
NOTES
<PAGE> 32
STRONG SCHAFER VALUE FUND, INC.
-----------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------
STRONG FUNDS
P. O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863
Device for the Hearing-Impaired:
(800) 999-2780
February 1, 1997
This Statement of Additional Information is not a prospectus. A copy of
the Prospectus dated February 1, 1997 (the "Prospectus") of Strong Schafer
Value Fund, Inc. (the "Fund") may be obtained without charge by writing or
telephoning the Fund at the address and telephone number set forth above. The
Prospectus provides the basic information about the Fund. This Statement of
Additional information contains information in addition to and more detailed
than that set forth in the Prospectus, and should be read in conjunction with
the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objective and Policies ..................................2
Investment Restrictions ............................................2
Directors and Officers of the Fund .................................5
Principal Shareholders .............................................7
Investment Advisor and Investment
Advisory Agreement ...............................................7
Distributor ........................................................9
Brokerage .........................................................10
Purchase, Redemption and Pricing of Shares ........................11
Tax Status ........................................................13
Performance Information ...........................................16
</TABLE>
-1-
<PAGE> 33
<TABLE>
<S> <C>
General Information ...............................................16
Portfolio Management...............................................20
Shareholder Reports ...............................................21
Custodian .........................................................21
Transfer Agent ....................................................21
Experts ...........................................................21
Additional Information ............................................22
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
(SEE ALSO "INVESTMENT OBJECTIVE AND POLICIES"
IN THE FUND'S PROSPECTUS)
The primary investment objective of the Fund is to seek long-term capital
appreciation. Current income is a secondary objective in the selection of
investments. The securities in which the Fund may invest are described under
"INVESTMENT OBJECTIVE AND POLICIES" in the Fund's Prospectus.
It is anticipated that the Fund will diversify its investments among
various issuers in different industries. The Fund may, however, from time to
time, invest up to 25% of the value of its total assets in securities of
issuers all of which conduct their principal business activities in the same
industry.
INVESTMENT RESTRICTIONS
The policies set forth below are fundamental policies of the Fund and may
not be changed without approval of the holders of the lesser of: (i) 67% of the
Fund's shares present or represented at a shareholders meeting at which the
holders of more than 50% of such shares are present or represented, or (ii)
more than 50% of the outstanding shares of the Fund. The Fund may not:
1. Purchase securities on margin, participate in a joint-trading
account (the bunching of securities transaction orders with orders of
other accounts managed by the advisor not being considered participation
in a joint-trading account for this purpose), sell securities short, act
as an underwriter or distributor of securities other than shares of the
Fund, lend money (except by purchasing publicly distributed debt
securities or entering into repurchase agreements) or purchase or sell
commodities, commodities futures or real estate (marketable securities of
companies whose business involves the purchase or sale of real estate not
being considered real estate for this purpose).
2. Borrow money or issue senior securities except for temporary bank
borrowings (not in excess of 5% of the value of its total assets) for
emergency or
-2-
<PAGE> 34
extraordinary purposes, or pledge, mortgage or hypothecate any of its
assets to secure such borrowings to an extent greater than 10% of the
value of the Fund's net assets.
3. Make investments for the purposes of exercising control or
management of any company.
4. Purchase securities of any issuer (other than the United States or
an instrumentality of the United States), if as a result of such purchase,
the Fund would hold more than 10% of the voting securities of any class of
such issuer or more than 5% of the Fund's total assets would be invested
in securities of such issuer.
5. Concentrate more than 25% of the value of its total assets,
exclusive of U.S. government securities, in securities issued by companies
primarily engaged in the same industry.
6. Enter into repurchase agreements with maturities of more than
seven days or invest in securities for which there is no readily available
market if, as a result thereof, such repurchase agreements and securities
would constitute more than 10% of the value of the net assets of the Fund.
7. Invest in put or call options.
Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors without a vote of the shareholders, provide
that the Fund may not:
1. Invest in the securities of a foreign issuer or depository
receipts for such securities, if at the time of acquisition more than 20%
of the value of the Fund's assets would be invested in such securities.
(The Fund is permitted to invest up to 20% of its assets in securities of
foreign issuers or depository receipts therefor which are traded in a U.S.
market or available through a U.S. broker or dealer, regardless of whether
such securities or depository receipts are traded in U.S. dollars.)
2. Invest more than 5% of the value of its total assets in companies
having a record, together with predecessors, of less than three years of
continuous operation.
3. Purchase securities of other investment companies, except on the
open market where no commission or profit results other than the broker's
commission, or as part of a plan of merger, consolidation or
reorganization approved by the shareholders of the Fund.
-3-
<PAGE> 35
4. Acquire or retain any security issued by a company, an officer or
director of which is an officer or director of the Fund or an officer,
director or other affiliated person of its investment advisor.
5. Acquire or retain any security issued by a company if any of the
directors or officers of the Fund or directors, officers or other
affiliated persons of its investment advisor beneficially own more than
1/2% of such company's securities and all of the above persons owning more
than 1/2% own together more than 5% of its securities.
6. Purchase any interest in any oil, gas or any other mineral
exploration or development program, including mineral leases.
7. Purchase any securities which are restricted from sale to the
public without registration under the Securities Act of 1933.
8. Invest more than 5% of its net assets in warrants (valued at the
lower of cost or market value) or more than 2% of its net assets in
warrants not listed on the New York Stock Exchange or the American Stock
Exchange (warrants acquired by the Fund in units or attached to securities
to be considered without value for these purposes).
9. Loan portfolio securities except where collateral values are
continuously maintained at no less than 100% by "marking to market" daily
and the practice is fair, just and equitable.
-4-
<PAGE> 36
DIRECTORS AND OFFICERS OF THE FUND
Set forth below is information about the directors and
officers of the Fund. Directors deemed to be "interested persons" of the Fund
for purposes of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), are indicated by an asterisk (*).
<TABLE>
<CAPTION>
Name and Business Position(s) Held Principal Occupation(s)
Address with Fund and Other Affiliations
- ------------- ------------- ----------------------
<S> <C> <C>
David K. Schafer* Director and Sole Director and
101 Carnegie Center President President, Schafer
Princeton, NJ 08540 Capital Management, Inc.,
a registered investment advisor, since
June 1985; Chairman of the Board of
Schafer Cullen Capital Management, Inc.,
a registered investment advisor,
since January 1983; President, Chubb
Equity Managers Inc., a wholly-
owned subsidiary of The Chubb
Corporation, an insurance and
financial services company, from
October 1992 to October 1996;
President, INCO Capital
Management Inc., a registered
investment advisor, from June 1978
to December 1981.
James P. Cullen* Director and Vice President, Schafer
645 Fifth Avenue Vice President Capital Management, Inc.
New York, NY 10022 since June 1985;
President, Schafer Cullen Capital
Management,Inc., since January
1983; Vice President, Donaldson,
Lufkin & Jenrette, registered
broker/dealers, from January 1979 to
December 1982.
</TABLE>
-5-
<PAGE> 37
<TABLE>
<CAPTION>
Name and Business Position(s) Held Principal Occupation(s)
Address with Fund and Other Affiliations
- ------------- ------------- ----------------------
<S> <C> <C>
Eugene W. Potter, Jr. Director Currently retired;
43 Elm Lane President of Investment
Bronxville, Management Services, a
NY 10708 division of INCO Ltd, from July
1981 to November 1986; Chairman,
Management Investment Committee,
INCO Ltd. prior thereto; Trustee,
Capstone International Series Trust
(formerly Investors International
Series Trust), since May 1986.
Brendan J. Spillane Secretary and Secretary and Treasurer,
645 Fifth Avenue Treasurer Schafer Capital Management,
New York, NY 10022 Inc. since May, 1989;
Treasurer and Equity
Research Analyst, Schafer
Cullen Capital Management,
Inc. since May 1989; Senior
Accountant,Price Waterhouse,
independent accountants, from
August 1985 to April 1989; Certified
Public Accountant since November
1988.
</TABLE>
As of December 31, 1996, officers and directors of the Fund
as a group owned an aggregate of 86,599 shares of the Fund. Each director of
the Fund, other than Messrs. Schafer and Cullen, is paid a director's fee of
$1,000 during each calendar quarter plus $500 for each meeting attended and is
reimbursed for the expenses of attendance at such meetings.
The Fund does not pay any fees to its directors who are
considered "interested persons" of the Fund or its investment advisor, as
defined in the Investment Company Act. The aggregate compensation paid by the
Fund to its sole director who is not such an interested person during its
fiscal year ended September 30, 1996 is set forth below. The Fund's investment
advisor does not provide investment advisory services to any other registered
investment company, and therefore the Fund's directors receive compensation
only from the Fund. The Fund does not maintain any deferred compensation,
pension or retirement plans, and no pension or retirement benefits are accrued
as part of Fund expenses.
-6-
<PAGE> 38
<TABLE>
<CAPTION>
Aggregate
Name of Non-Interested Compensation
Director of the Fund from the Fund
---------------------- -------------
<S> <C>
Eugene W. Potter $6,000
</TABLE>
PRINCIPAL SHAREHOLDERS
At December 31, 1996, the following persons were known to the
Fund to be the owners of record of 5% or more of the outstanding shares of the
Fund:
<TABLE>
<CAPTION>
Amount of % of
Name Record Ownership Outstanding Shares
- ---- ---------------- ------------------
<S> <C> <C>
Charles Schwab & Co., Inc. 3,707,124 36.8
101 Montgomery Street
San Francisco, CA 94104
National Financial Services 553,966 5.5
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
</TABLE>
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
On July 15, 1996, the Board of Directors of the Fund,
including the sole director who is not an interested person of the Fund (as
defined in the Investment Company Act), last approved the continuation of the
appointment of Schafer Capital Management, Inc. (the "Advisor"), 645 Fifth
Avenue, New York, New York 10022, to furnish continuous investment advisory
services and management to the Fund pursuant to an Investment Advisory
Agreement dated August 13, 1985 (the "Advisory Agreement"). The Advisory
Agreement was approved by the Fund's shareholders on January 21, 1987.
Mr. Schafer, President and a Director of the Fund, is also
President and sole Director of the Advisor. Mr. Cullen, Vice President and a
Director of the Fund, is also Vice President of the Advisor. Mr. Spillane,
Secretary and Treasurer of the Fund, is also Secretary and Treasurer of the
Advisor. All of the outstanding stock of the Advisor is owned by Mr. Schafer.
-7-
<PAGE> 39
A discussion of the advisory fee payable to the Advisor is
included under the caption "ABOUT THE FUND -- THE ADVISOR" in the Prospectus.
For the years ended September 30, 1996, 1995 and 1994, the Fund paid the
Advisor $2,649,217, $964,453 and $417,749, respectively.
Under the Advisory Agreement and subject to the general
supervision of the Fund's Board of Directors, the Advisor is responsible for
making and implementing investment decisions for the Fund. In addition, the
Advisor furnishes office space, office facilities, equipment, personnel (other
than the services of directors of the Fund who are not interested persons of
the Advisor), and clerical and bookkeeping services for the Fund to the extent
not provided by the Fund's custodian, transfer agent and dividend paying agent,
and accounting services agent. The Fund pays all other expenses of its
operation, including, without limitation, interest, taxes and any governmental
filing fees; brokerage commissions and other costs incurred in connection with
the purchase or sale of securities; compensation and expenses of its directors,
other than those who are interested persons of the Advisor; legal and audit
expenses; the fees and expenses of the Fund's custodian, transfer agent and
dividend paying agent, and accounting services agent; expenses relating to the
redemption of shares; expenses of servicing shareholder accounts; fees and
expenses related to the registration and qualification of the Fund and its
shares under Federal and state securities laws; expenses of printing and
mailing reports, notices and proxy material to shareholders; insurance premiums
for fidelity and other insurance coverage; expenses of preparing prospectuses
and statements of additional information and of printing and distributing them
to existing shareholders; and any nonrecurring expenses, including actions,
suits or proceedings to which the Fund is a party and any obligation which the
Fund may incur to indemnify others. The Advisor has agreed to reimburse the
Fund on a monthly basis for all expenses incurred in any fiscal year (exclusive
of taxes, interest, brokerage fees and extraordinary expenses) which in the
aggregate exceed the lowest applicable percentage limitation prescribed by any
state in which the Fund's securities are qualified for sale. The Fund believes
that it is not subject to any such percentage limitation at December 31, 1996.
The Advisory Agreement provides that the Advisor shall have
no liability to the Fund or its shareholders in the absence of wilful
misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations under the Agreement.
The Advisory Agreement is not assignable and may be
terminated by either party, without penalty, on 60 days' notice. The Advisory
Agreement will continue in effect until August 13, 1997 (unless sooner
terminated) and thereafter for successive one-year periods so long as it is
approved annually (a) by a majority of the directors who are not interested
persons of the Fund or of the Advisor, as defined in the Investment Company
Act, cast in person at a meeting called for the purpose of voting on such
approval, and (b) either by the Board of Directors of the Fund or by the vote
of shareholders described under "Investment Restrictions."
Certain of the Advisor's clients may have investment
objectives similar to the Fund and certain investments may be appropriate for
the Fund and for other clients advised by the Advisor. From time to time, a
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all such
clients. In
-8-
<PAGE> 40
addition, a particular security may be bought for one or more clients when one
or more clients are selling such security, or purchases or sales of the same
security may be made for two or more clients on the same day. In any such
event, such transactions will be averaged as to price and allocated as to
amount in accordance with the daily purchase or sale orders actually placed for
each client. In some cases, this procedure could have a detrimental effect on
the price or amount of the securities purchased by or sold by the Fund. In
other cases, however, it is believed that the ability of the Fund to
participate, to the extent permitted by law, in volume transactions will
produce better results for the Fund. The sale of the Fund's shares is not a
determining factor in these transactions.
The Fund has no proprietary or exclusive rights in the names
"Strong" or "Schafer" or any logo or service mark furnished by Strong (as
hereinafter defined) or the Advisor, and may use such names and any such logos
or service marks only so long as the arrangements with Strong referred to in
the following paragraph and the Advisory Agreement with the Advisor,
respectively, remain in effect.
On January 10, 1996, the Advisor entered into a non-binding
letter of intent with Strong Capital Management, Inc. ("Strong") which provides
for, among other things, the Advisor and Strong to negotiate agreements (i)
designating Strong to assume certain responsibilities relating to the marketing
of the Fund's shares and calling for the Advisor to compensate Strong for such
activities and (ii) providing Strong the right to acquire, in the future, an
interest in the Advisor in a form yet to be negotiated, subject to the
satisfaction of certain substantive conditions (and subject to satisfaction of
applicable regulatory requirements). Strong is located in Milwaukee, Wisconsin
and currently manages approximately $23 billion in equity and fixed income
assets, including the Strong Family of Funds, a family of more than 25
diversified and non-diversified no-load mutual funds. Pending negotiation of
definitive agreements as referred to above, Strong is currently marketing the
Fund as part of the Strong Family of Funds pursuant to the terms of the letter
of intent. These arrangements are believed not to have resulted in, and are not
expected to result in, any material changes in the investment management of the
Fund's portfolio.
DISTRIBUTOR
Pursuant to a distribution agreement dated as of January 10,
1996, Strong Funds Distributors, Inc., an affiliate of Strong, has agreed to
act at the request of the Fund and the Advisor as the Fund's agent to effect
the distribution of the Fund's shares in certain jurisdictions in which the
Fund is not authorized to distribute its shares directly. Strong Funds
Distributors, Inc. is not entitled to receive any compensation from the Fund
for its services under the agreement. The agreement may be terminated at any
time (a) by the Board of Directors of the Fund or by a vote of a majority of
the outstanding voting securities of the Fund on 60 days' written notice to
Strong Funds Distributors, Inc. and the Advisor or (b) by Strong Funds
Distributors, Inc. on 60 days' written notice to the Fund and the Advisor. The
agreement shall terminate in the event of its assignment by Strong Funds
Distributors, Inc. If not so terminated, the agreement shall continue in effect
from year to year only so long as such continuance is approved annually by the
Board of Directors or stockholders of the Fund, and, in either event, by a
majority of those directors who are not interested persons of any party to the
agreement.
-9-
<PAGE> 41
From time to time, the Distributor may hold in-house sales
incentive programs for its associated persons under which these persons may
receive non-cash compensation awards in connection with the sale and
distribution of a fund's shares. These awards may include items such as, but
not limited to, gifts, merchandise, gift certificates, and payment of travel
expenses, meals and lodging. As required by the National Association of
Securities Dealers, Inc. or NASD's proposed rule amendments in this area, any
in-house sales incentive program will be multi-product oriented, i.e., any
incentive will be based on an associated person's gross production of all
securities within a product type and will not be based on the sales of shares
of any specifically designated mutual fund.
The Fund's distributor for the years ended September 30, 1995
and 1994 was Lazard Freres & Co. For the years ended September 30, 1995 and
1994, the Fund paid brokerage commissions of $26,838 and $11,151, respectively,
to Lazard Freres & Co.
BROKERAGE
The Advisor is responsible for selecting brokers and dealers
to effect purchases or sales of securities for the account of the Fund. In
selecting such brokers, it is the policy of the Advisor to seek the best
execution of orders at the most favorable price in light of the overall quality
of brokerage and research services provided, as described in this and the
following paragraph. In selecting brokers to effect portfolio transactions, the
determination of what is expected to result in best execution at the most
favorable price involves a number of largely judgmental considerations. Among
these are the Advisor's evaluation of the broker's efficiency in executing and
clearing transactions, block trading capability (including the broker's
willingness to position securities), the broker's familiarity with the security
and the broker's financial strength and stability. The most favorable price to
the Fund means the best net price without regard to the mix between purchase or
sale price and commission, if any. For the years ended September 30, 1996, 1995
and 1994, the Fund paid total brokerage commissions of $625,019, $331,297 and
$141,926, respectively. The Fund's annual portfolio turnover rate is set forth
in the Prospectus under "FINANCIAL HIGHLIGHTS."
In allocating the Fund's brokerage, the Advisor will also
take into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups and technical information and the availability of the brokerage
firm's analysts for consultation. While the Advisor believes these services
have substantial value, they are considered supplemental to the Advisor's own
efforts in the performance of its duties under the Advisory Agreement. As
permitted by the Advisory Agreement and in accordance with Section 28(e) of the
Securities Exchange Act of 1934, as amended, the Advisor may pay brokers higher
brokerage commissions than might be available from other brokers if the Advisor
determines in good faith that such amount paid is reasonable in relation to the
value of the overall quality of the brokerage, research and other services
provided. Other clients of the Advisor may indirectly benefit from the
availability of these services to the Advisor, and the Fund may indirectly
benefit from services available to the Advisor as a result of transactions for
other clients.
-10-
<PAGE> 42
The Advisor has entered into an arrangement with Strong
whereby Strong has assumed certain administrative responsibilities with respect
to the execution of portfolio trades on behalf of the Advisor, including trades
which the Advisor may effect on behalf of the Fund.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For a general discussion of how shares of the Fund are
purchased and redeemed and how the Fund values such shares for such purposes,
see "HOW TO BUY SHARES", "HOW TO SELL SHARES" AND "DETERMINING YOUR SHARE
PRICE" in the Shareholder Manual section of the Prospectus. Such discussions
are incorporated herein by reference.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore, deposit in the mail
or with such services, or receipt at Strong's post office box, of purchase
applications or redemption requests does not constitute receipt by Strong or
the Fund.
Broker-dealers which effect purchases or sales of shares of
the Fund on behalf of their customers may impose a transaction charge on such
customers for performing such services. No such transaction charge is imposed
if shares are purchased directly from the Fund, without the employment of the
services of a broker-dealer.
From time to time, the Fund may pay, directly or indirectly
through arrangements with Strong, amounts to financial intermediaries that
provide transfer-agent type and/or other administrative services relating to
the Fund to their customers. These services may include, among other things,
sub-accounting services, answering inquiries relating to the Fund,
transmitting, on behalf of the Fund, proxy statements, annual reports, updated
Prospectuses, other communications regarding the Fund, and related services as
the Fund or the intermediaries' customers may reasonably request. In such
cases, to the extent paid by the Fund, the Fund will not pay more for these
services through intermediary relationships than it would if the
intermediaries' customers were direct shareholders in the Fund. See also
"Investment Advisor and Investment Advisory Agreement" and "Brokerage" for a
description of certain arrangements entered into, or expected to be entered
into, between the Advisor and Strong.
The Fund, in its discretion, may permit an investor to
purchase shares of the Fund at net asset value in exchange for securities held
by the investor, provided that the Fund may acquire such securities consistent
with its investment policies. For purposes of determining the number of Fund
shares to be received in exchange for any accepted securities, the Fund will
value such securities in the same manner as is used by the Fund to value its
own assets.
-11-
<PAGE> 43
Retirement Programs
The Fund makes available a Defined Contribution Plan with
options including a profit-sharing plan (which may include a 401(k)
arrangement), a money purchase pension plan and a paired plan (a combination of
a profit-sharing plan and a money purchase pension plan), a so-called 403(b)(7)
Plan, IRAs and Simplified Employee Pension Plans ("SEPs") (including Salary
Reduction SEPs). Contributions to each are invested, and dividends and
distributions are automatically reinvested, in shares of the Fund. The Fund may
also be an investment option under 401(k) Plans. A Defined Contribution Plan
may be adopted by self-employed individuals, partners or an employer to provide
retirement benefits for themselves and their employees. The Defined
Contribution Plan may include a 401(k) arrangement which permits employees to
make pre-tax contributions and earn tax-deferred income. Such a plan may also
provide for employer contributions. The 403(b)(7) Plan is a tax-sheltered
custodial account available for use by eligible employers, such as certain
educational, non-profit, hospital and charitable organizations. An IRA is
available to anyone under age 70 1/2 who has earned income. A SEP, which may be
adopted by certain employers, permits an employee to make deductible
contributions to separate IRA accounts for each eligible employee. If a Salary
Reduction SEP has been adopted on or before December 31, 1996, eligible
employees may make pre-tax contributions to an IRA account. A Salary Reduction
SEP may not be adopted by any employer after December 31, 1996.
Generally, the maximum contribution allowable each year to an
IRA is the lesser of $2,000 and 100% of compensation includible in gross income
for the year. For a married couple, in general, the maximum contribution
allowable for each spouse each year to an IRA is $2,000, provided that the
combined compensation of both spouses that is includible in gross income is at
least $4,000. Under certain circumstances, a contribution to an IRA will be
tax-deductible. The maximum annual contribution allowable to a Defined
Contribution Plan is the lesser of (i) $30,000 and (ii) 25% of an employee's
compensation or a self-employed individual's earned income (net earnings
reduced by Defined Contribution Plan contributions) for the year. Additionally,
the maximum deduction allowable each year for contribution to the profit
sharing plan option of a Defined Contribution Plan is, generally, 15% of an
employee's compensation or a self-employed individual's earned income (net
earnings reduced by Defined Contribution Plan contributions) for the year.
Generally, the maximum annual contribution allowable for a 403(b)(7) Plan is
the lesser of (i) the same limit described above applicable to a Defined
Contribution Plan and (ii) an amount equal to the excess of the individual's
years of service times 20% of his or her compensation for the most recent year
over the amounts previously contributed to any plan for all prior years, and
(iii) if the contributions made to the 403(b)(7) Plan are made through salary
reduction, an amount equal to $9,500. Under a SEP, an employer, or
self-employed individual, is permitted to contribute a discretionary amount
each year up to the lesser of $30,000 and 15% of an employee's compensation for
the year or a self-employed individual's earned income (i.e., net earnings
reduced by SEP contributions) for the year, into an individual IRA for each
employee or self-employed individual. The annual compensation of each employee
and the earned income of each self-employed individual which can be taken into
account under the Defined Contribution Plan and a SEP for any year cannot
exceed $150,000 as increased by the cost-of-living adjustments for the calendar
years after 1994 as determined by the Internal Revenue Service (the $150,000
amount has been increased to $160,000 for the year 1997). A self-employed
individual may
-12-
<PAGE> 44
contribute to either a Defined Contribution Plan or a SEP and, in either case,
may also contribute to an IRA.
The custodial agreements for the Defined Contribution Plan
403(b)(7) Plan, IRAs and SEPs provide that Firstar Trust Company, Milwaukee,
Wisconsin, will provide the custodial service unless a different custodian is
specified. The annual maintenance fee payable to Firstar Trust Company with
respect to each participant in the Defined Contribution Plan, 403(b)(7) Plan,
an IRA or a SEP is at present $10.00 and, in the case of an IRA, will
automatically be deducted from each IRA account in September, unless paid prior
thereto. These fees may be changed at any time. If a custodian other than
Firstar Trust Company is specified, fees will be determined by such custodian.
The Defined Contribution Plan has been approved by the
Internal Revenue Service for use by employers or self-employed persons as a
plan qualified under Section 401 of the Internal Revenue Code. The Internal
Revenue Service has also approved the money purchase pension plan and profit
sharing plan options of the Defined Contribution Plan as a paired plan with the
result that employers or self-employed persons may adopt either or both of such
plans. The 403(b)(7) Plan is intended to comply with applicable requirements of
the Internal Revenue Code for use by eligible employers, such as certain
educational, non-profit, hospital and charitable organizations. Copies of the
Defined Contribution Plan and 403(b)(7) Plan may be obtained from the Fund. The
IRA Custodial Agreement has not been submitted to the IRS for approval because
it incorporates IRS Form 5305-A which makes such submission unnecessary.
The Fund makes available IRS Forms 5305-SEP and 5305A-SEP for
employers or self-employed persons who want to establish a SEP. As stated
above, however, a Salary Reduction SEP may not be adopted by an employer after
December 31, 1996.
The employer or individual, as the case may be, should
consult his or her tax advisor or attorney as to the applicability of the
Defined Contribution Plan, 403(b)(7) Plan, SEP or IRA to his or her particular
circumstances. Additionally, since these retirement programs involve
commitments covering future years, the investment objectives of the Fund, as
described in the Prospectus and in this Statement of Additional Information,
should be carefully considered.
For a discussion of income tax withholding on certain
distributions from qualified retirement plans or tax-sheltered annuity plans,
see "Tax Status" below.
TAX STATUS
The Fund has qualified, and intends to remain qualified, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. To so qualify, the Fund must, among other things, (i)
derive in each taxable year at least 90% of its gross income from dividends,
interest, gains from the sale or other disposition of stock or securities or
foreign currencies or other income derived with respect to its business of
investing in
-13-
<PAGE> 45
such stock, securities or currencies, (ii) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of stock,
securities or other specified instruments held for less than three months and
(iii) diversify its holdings so that, at the end of each quarter of its taxable
year, (a) at least 50% of the value of its assets is represented by cash, cash
items, U.S. Government securities, and other securities limited, in respect of
any one issuer, to a value not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer and (b) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than the U.S. Government).
As a regulated investment company, the Fund is generally not
subject to U.S. Federal income tax on its income and gains distributed to
shareholders, provided the Fund distributes to its shareholders at least 90% of
its net investment income (i.e., net income exclusive of net long-term capital
gains) each year.
If the Fund purchases shares in a foreign corporation treated
as a "passive foreign investment company" ("PFIC") for U.S. Federal income tax
purposes, however, the Fund may be subject to U.S. Federal income tax, and an
additional charge in the nature of interest, on a portion of distributions from
such foreign corporation and on gain from the disposition of such shares
(collectively referred to as "excess distributions"), even if such excess
distributions are paid by the Fund as a dividend to its shareholders. In
certain limited circumstances, the Fund may be eligible to make a qualified
electing fund election with respect to certain PFICs in which it owns shares.
Such an election would enable the Fund to avoid the taxes on excess
distributions by including in income each year the Fund's pro rata share of the
PFIC's income and gains for that year (whether or not the Fund's share of such
income and gains are distributed to the Fund). Alternatively, pursuant to
Proposed Treasury regulations (which are not yet effective), the Fund may be
eligible to elect under certain circumstances to treat its stock in certain
PFICs as having been sold on the last business day of each taxable year of the
Fund for the stock's fair market value, in which case the Fund would (subject
to certain exceptions) generally avoid the taxes on excess distributions. These
elections, therefore, may cause the Fund to recognize income in a particular
year in excess of the distributions it receives in that year from the PFIC.
A non-deductible 4% excise tax will be imposed on the Fund to
the extent the Fund does not distribute during each calendar year (i) 98% of
its ordinary income for such calendar year, (ii) 98% of its capital gain net
income for the one-year period ending on October 31 of such calendar year and
(iii) certain other amounts not distributed in previous years. The Fund intends
to distribute its income and gains in a manner so as to avoid the imposition of
such 4% excise tax.
For purposes of applying the distribution requirements
described above, and for purposes of determining the taxable income of
shareholders each year, dividends declared by the Fund in October, November or
December of a year, payable to shareholders as of a record date in such a
month, and paid during the following January, will be treated for Federal
income tax purposes as paid by the Fund and received by shareholders as of
December 31 of the calendar year declared.
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<PAGE> 46
If the net asset value of shares is reduced below a
shareholder's cost by a distribution, such distribution would be taxable as
described in the Prospectus, even though the distribution might be viewed in
economic terms as a return of capital. For Federal income tax purposes the
shareholder's original cost continues as his tax basis and on redemption his
gain or loss is the difference between such basis and the redemption price.
Income tax withholding at a rate of 20% is applicable to any
distribution from a qualified retirement plan, such as the Defined Contribution
Plan or 403(b)(7) Plan, where the distribution is eligible for tax-free
rollover treatment but is not transferred directly to a specified retirement
vehicle such as another qualified plan or an IRA. Also, all qualified plans and
403(b) plans must provide participants and certain other distributees with an
election to have an eligible rollover distribution transferred directly to
certain specified retirement vehicles. If a shareholder receives a distribution
which is subject to the 20% withholding requirement and wishes to roll the
distribution into another vehicle such as an IRA within 60 days, the
shareholder will have to contribute to the IRA the amount of the distribution
(after withholding) plus an amount equal to the amount withheld. The amount
withheld can be applied to reduce the shareholder's Federal income tax
liability and may be refunded to the shareholder upon filing a Federal income
tax return if it exceeds such tax liability. If the amount withheld is not
rolled over into the IRA, it will be subject to income tax plus, if the
shareholder has not attained age 59-1/2, an additional 10% penalty tax may
apply.
The rules broadly define distributions which qualify for
rollover treatment. Shareholders who expect to receive distributions which may
qualify for rollover treatment and therefore may be subject to 20% withholding
should consult their own tax advisers for a complete discussion of the impact
of these rules on such distributions.
The foregoing is only a general summary of certain provisions
of the Internal Revenue Code and current Treasury regulations applicable to the
Fund and its shareholders. The Internal Revenue Code and such regulations are
subject to change by legislative or administrative action.
The tax consequences to a foreign shareholder of the Fund may
be different from those described herein. Foreign shareholders are advised to
consult their own tax advisors with respect to the particular tax consequences
to them of an investment in the Fund.
Distributions to shareholders may also be subject to state
and local taxes. Investors are urged to consult their own tax advisors
regarding the application of Federal, state and local tax laws.
-15-
<PAGE> 47
PERFORMANCE INFORMATION
The annual rate of return of the Fund varies and during the
five year period ended December 31, 1996 ranged from -4.28% in 1994 to 34.15%
in 1995. The compounded annual rates of return of the Fund for the one, five
and ten year periods ended December 31, 1996 were 23.17%, 18.40% and 16.25%,
respectively, computed in accordance with the rules for standardized
computation of performance as established by the Securities and Exchange
Commission. Such rules for standardized computation of performance provide for
determining percentage changes, carried out to two decimal places, based on
changes in net asset value as described under "ABOUT THE FUND -- PERFORMANCE
INFORMATION" in the Prospectus.
The Fund's performance will vary from time to time and an
investor's shares, when redeemed, may be worth more or less than their original
cost. Past results should not be considered representative of future
performance. Factors affecting the Fund's performance include, among other
things, general market conditions, the composition of its portfolio, and
operating expenses. No adjustment is made in reporting performance for taxes
payable by shareholders on reinvested income dividends and capital gains
distributions.
GENERAL INFORMATION
Portfolio Characteristics
In order to present a more complete picture of a Fund's
portfolio, marketing materials may include various actual or estimated
portfolio characteristics, including but not limited to median market
capitalizations, earnings per share, alphas, betas price/earnings ratios,
returns on equity, dividend yields, capitalization ranges, growth rates,
price/book ratios, top holdings, sector breakdowns, asset allocations, quality
breakdowns and breakdowns by geographic region.
Measures of Volatility and Relative Performance
Occasionally, statistics may be used to specify Fund
volatility or risk. The general premise is that greater volatility connotes
greater risk undertaken in achieving performance. Measures of volatility or
risk are generally used to compare the Fund's net asset value or performance
relative to a market Index. One measure of volatility is beta. Beta is the
volatility of a fund relative to the total market as represented by the
Standard & Poor's 500 Index. A beta of more than 1.00 indicates volatility
greater than the market and a beta of less than 1.00 indicates volatility less
than the market. Another measure of volatility or risk is standard deviation.
Standard deviation is a statistical tool that measures the degree to which a
fund's performance has varied from its average performance during a particular
time period.
-16-
<PAGE> 48
Standard deviation is calculated using the following formula:
2
Standard deviation = the square root of [SIGMA] (xi - xa)
-----------------
n-1
where: [SIGMA] = "the sum of",
x = each individual return during the time period.
i
x = the average return over the time period, and
a
n = the number of individual returns during the time period.
Statistics may also be used to discuss the Fund's relative
performance. One such measure is alpha. Alpha measures the actual return of the
fund compared to the expected return of a fund given its risk (as measured by
beta). The expected return is based on how the market as a whole performed, and
how the particular fund has historically performed against the market.
Specifically, alpha is the actual return less the expected return. The expected
return is computed by multiplying the advance or decline in a market
representation by the fund's beta. A positive alpha quantifies the value that
the fund manager has added and a negative alpha quantifies the value that the
fund manager has lost.
Other measures of volatility and relative performance may be
used as appropriate. However, all such measures will fluctuate and do not
represent future results.
Investment Environment
Discussions of economic, social and political conditions and
their impact on the Fund may be used in advertisements and sales materials.
Such factors that may impact the Fund include but are not limited to changes in
interest rates, political developments, the competitive environment, customer
behavior, industry trends, technological advances, macroeconomic trends and the
supply and demand of various financial instruments. In addition, marketing
materials may cite the portfolio management's various interpretations of such
factors.
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, please contact Strong at
1-800-368-3863.
1. Have a plan - 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. Make time a valuable ally. Let it
put the power of compounding to work for you, while helping to
reduce your potential investment risk.
-17-
<PAGE> 49
3. Diversify your portfolio. By investing in different asset classes -
stocks, bonds, and cash you help protect against poor performance in
one type of investment while building investments most likely to help
you achieve your important goals.
4. Invest regularly. 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 are tempted to spend those assets on short-term needs.
5. Maintain a long-term perspective. 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 principal loss.
6. Consider stocks to help achieve major long term goals. 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. 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. 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.
Strong Retirement Plan Services
Strong Retirement Plan Services offers a full menu of high
quality, affordable retirement plan options, including traditional money
purchase pension and profit sharing plans, 401(k) plans, simplified employee
pension plans, salary reduction plans, Keoghs, and 403(b) plans. Strong's
retirement plan specialists are available to help companies determine which
type of retirement plan may be appropriate for their particular situation.
Markets:
The retirement plan services offered by Strong focus on four
distinct markets, based on the belief that a retirement plan should fit the
customer's needs, not the other way around.
1. Small company plans. Small company plans are designed for companies
with 1-50 plan participants. The objective is to incorporate the
features and benefits typically reserved for large companies, such as
sophisticated recordkeeping systems, outstanding service and
investment expertise, into a small company plan without administrative
hassles or undue
-18-
<PAGE> 50
expense. Small company plan sponsors receive a comprehensive plan
administration manual as well as toll-free telephone support.
2. Large company plans. Large company plans are designed for companies
with between 51 and 1,000 plan participants. Each large company plan
is assigned a team of professionals consisting of an account manager,
who is typically an attorney, CPA, or holds a graduate degree in
business, acquisition specialist (if applicable), an accounting
manager, a legal/technical manager and an education/communications
educator.
3. Women-owned businesses.
4. Non-profit and educational organizations (the 403(b) market).
Turnkey approach:
The retirement plans offered by Strong are designed to be
streamlined and simple to administer. To this end, Strong has invested heavily
in the equipment, systems and people necessary to adopt or convert a plan and
to keep it running smoothly. Strong provides all aspects of the plan, including
plan design, administration, recordkeeping and investment management. To
streamline plan design, Strong provides customizable IRS-approved prototype
documents. Strong services also include annual government reporting and testing
as well as daily valuation of each participant's account. This structure is
intended to eliminate the confusion and complication often associated with
dealing with multiple vendors. It is also designed to save plan sponsors time
and expense.
The Fund strives to provide one-stop retirement savings
programs that combine the advantages of proven investment management, flexible
plan design and a wide range of investment options. The open architecture
design of the plans allow for the use of the Strong family of mutual funds as
well as a stable asset value option. Large company plans may supplement these
options with their company stock (if publicly traded) or funds from other
well-known mutual fund families.
Education:
Participant education and communication is key to the success
of any retirement program, and therefore is one of the most important services
that Strong provides. Strong's goal is twofold: to make sure that plan
participants fully understand their options and to educate them about the
lifelong investment process. To this end, Strong provides attractive, readable
print materials that are supplemented with audio and video tapes, and
retirement education programs.
Service:
Strong's goal is to provide a world class level of service.
One aspect of that service is an experienced, knowledgeable team that provides
ongoing support for plan sponsors, both at adoption or conversion and
throughout the life of a plan. Strong is committed to
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<PAGE> 51
delivering accurate and timely information, evidenced by straightforward,
complete and understandable reports, participant account statements and plan
summaries.
Strong has designed both "high-tech" and "high-touch"
systems, providing an automated telephone system as well as personal contact.
Participants can access daily account information, conduct transactions or
leave questions answered in the way that is most comfortable for them.
Strong Financial Advisors Group
The Strong Financial Advisors Group is dedicated to helping
financial advisors better serve their clients. Financial advisors receive
regular updates on the Fund, access to its portfolio manager through special
conference calls, consolidated mailings of duplicate confirmation statements,
access to Strong's network of regional representatives and other specialized
services. For more information on the Strong Financial Advisors Group, call
1-800-368-1683.
PORTFOLIO MANAGEMENT
The Fund's portfolio manager works with analysts, traders and
administrative personnel. From time to time, marketing materials may discuss
various members of the team, including their education, investment experience
and other credentials.
The Advisor's investment philosophy includes the following basic beliefs:
- Stocks with lower P/E ratios and higher growth rates than the
Standard & Poor's 500 Index are attractive investment
candidates for value-oriented investors.
- Market timing is rarely successful. Instead, the Advisor
maintains a long-term perspective, normally remaining fully
invested regardless of market conditions.
- Allocating relatively equal weighting to portfolio holdings
ensures a disciplined, rational approach to the investment
process.
- Since the Advisor invests in a limited number of stocks, its
selection of holdings typically requires a judicious buy and
sell discipline.
The Advisor employs a value-oriented management style that focuses on mid-to
large- capitalization stocks. The investment process generally includes roughly
equally weighting each issue and holding a relatively limited number of stocks
in the portfolio. The Advisor generally utilizes a "buy and hold" strategy, but
remains aware of the status of each individual holding. As a
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<PAGE> 52
result of this long-term approach, the Fund typically has a low annual turnover
rate (50% or less). As the Advisor identifies attractive new investments,
current Fund holdings are evaluated to determine sell candidates.
SHAREHOLDER REPORTS
An annual report will be issued to shareholders after the
close of each fiscal year, which ends September 30. This report will include
financial statements for the Fund audited by the Fund's independent
accountants, Coopers & Lybrand L.L.P. A semi-annual report will also be issued
to the Fund's shareholders. The Fund's financial statements appearing in its
Annual Report to Shareholders dated September 30, 1996, together with the
report of Coopers & Lybrand L.L.P. thereon, are incorporated by reference in
this Statement of Additional Information.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin, acts as custodian of the cash and securities of the Fund. The
custodian holds all cash and, directly or through a book entry system or an
agent, securities of the Fund, delivers and receives payment for securities
sold by the Fund, collects income from investments of the Fund and performs
other duties, all as directed by officers of the Fund. The custodian does not
exercise any supervisory function over the management of, or the purchase and
sale of securities by, the Fund.
TRANSFER AGENT
Strong acts as the Fund's transfer agent, shareholder
servicing agent and fund accounting services agent.
EXPERTS
Coopers & Lybrand L.L.P. has been selected as the independent
accountants of the Fund. As such, they are responsible for auditing the
financial statements of the Fund. The financial statements of the Fund for its
fiscal year ended September 30, 1996 included in the 1996 Annual Report,
incorporated herein by reference, have been audited by Coopers & Lybrand L.L.P.
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 included in the 1996 Annual Report were audited by other
independent accountants, whose report dated October 27, 1995, expressed an
unqualified opinion on such financial statement and financial highlights.
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<PAGE> 53
ADDITIONAL INFORMATION
The Fund's Prospectus and this Statement of Additional
Information omit certain information contained in the Registration Statement
which the Fund has filed electronically with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, and reference
is hereby made to the Registration Statement for further information with
respect to the Fund and the securities offered hereby. This Registration
Statement is available for inspection by the public at the public reference
facilities maintained by the Commission in Washington, D.C.
<PAGE> 54
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Included in Part A of this Registration Statement:
Financial Highlights
Included in Part B of this Registration Statement:
Report of Independent Accountants*
Statement of Assets and Liabilities as of September 30, 1996*
Schedule of Investments as of September 30, 1996*
Statement of Operations for the Year Ended September 30, 1996*
Statement of Changes in Net Assets for the Year Ended September 30, 1996
and the Year Ended September 30, 1995*
Statements, schedules and historical information other than those listed above
have been omitted since they are either not applicable or are not required.
(b) Exhibits.
1.1 Articles of Incorporation*****
1.2 Certificate of Correction of Articles of Incorporation*****
1.3 Change of Resident Agent and Address and Principal office*****
1.4 Articles of Amendment*****
1.5 Articles Supplementary regarding increase in the number of
authorized shares
2. By-Laws of the Registrant, as amended *****
3. Not Applicable
4. Specimen stock certificate**
5. Investment Advisory Agreement between the Registrant and
Schafer Capital Management, Inc.*****
6. Distribution Agreement between the Registrant and Strong Funds
Distributors, Inc.*****
7. Not Applicable
8. Custodian Agreement between the Registrant and First Wisconsin
Trust Company (now Firstar Trust Company)***;
and the Schedule of Remuneration****
9.1 Shareholder Servicing and Transfer Agent Agreement between the
Registrant and Strong and Shareholder Servicing Fee
Schedule*****
C-1
<PAGE> 55
9.2 Fund Accounting Servicing Agreement between the Registrant and
Strong and Fund Valuation and Accounting Annual Fee
Schedule*****
9.3 Trading Agreement between the Advisor and Strong and Addendum
to Trading Agreement
10. Opinion and Consent of Whitman and Ransom**
11. Consent of Independent Accountants
12. Not Applicable
13. Not Applicable
14.1 Amended Prototype Defined Contribution Retirement Plan with
Standardized Adoption Agreements*****
14.2 Amended Individual Retirement Custodial Account*****
14.3 Amended Section 403(b)(7) Retirement Plan*****
15. Not Applicable
16. Schedule for Computation of Performance Quotations
17. Financial Data Schedule
- ---------------
* Incorporated by reference from the Annual Report to Shareholders
for the year ended September 30, 1995.
** Previously filed in Pre-Effective Amendment No. 1 on October 17,
1985 and hereby incorporated by reference.
*** Previously filed in Post-Effective Amendment No. 5 on
January 31, 1990 and hereby incorporated by reference.
**** Previously filed in Post-Effective Amendment No. 10 on
February 1, 1995 and hereby incorporated by reference.
***** Previously filed in Post-Effective Amendment No. 11 on
February 1, 1996 and hereby incorporated by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of December 31, 1996, the number of record holders of each
class of securities of the Registrant was as follows:
C-2
<PAGE> 56
Number of
Title of Class Record Holders
-------------- --------------
Common Stock, $.10 par value...... 15,358
Item 27. Indemnification.
Article XII of the Registrant's By-Laws provides for
indemnification of the Registrant's directors and officers under certain
circumstances. Such By-Laws are incorporated by reference herein.
Item 28. Business and Other Connections of Investment Adviser.
Schafer Capital Management, Inc., registrant's investment
adviser, also acts as investment adviser to certain other clients.
David K. Schafer, a director and officer of Schafer
Capital Management, Inc., is also Chairman of the Board of Schafer Cullen
Capital Management, Inc., 645 Fifth Avenue, New York, New York 10022.
James P. Cullen, an officer of Schafer Capital Management,
Inc., is also President of Schafer Cullen Capital Management, Inc.
Schafer Cullen Capital Management, Inc. is a registered
investment adviser under the Investment Advisers Act of 1940, as amended.
Item 29. Principal Underwriters.
Not Applicable.
Item 30. Location of Accounts and Records
Such records are located at:
1. Strong Schafer Value Fund, Inc.
645 Fifth Avenue
New York, New York 10022
2. Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
C-3
<PAGE> 57
3. Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
4. Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of Registrant's latest annual report
to shareholders, upon request and without charge.
Insofar as indemnification by the Registrant for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant has also been advised that in the opinion of the
Securities and Exchange Commission it may, under the Investment Company of 1940,
advance attorney's fees or other expenses incurred by its directors, officers or
investment adviser in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it is ultimately determined
that he is entitled to indemnification, so long as least one of the following
conditions is met prior to the advance: (1) the indemnitee shall provide a
security for his undertaking, (2) the Registrant shall be insured against losses
arising by reason of any lawful advances, or (3) a majority of a quorum of the
disinterested, non-party directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the indemnitee ultimately will be bound entitled to
indemnification.
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<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
29th day of January, 1997.
SCHAFER VALUE FUND, INC.
By: /s/ David K. Schafer
---------------------------
David K. Schafer,
President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below on January 29, 1997 by the
following persons in the capacities indicated.
Name Title
---- -----
/s/ David K. Schafer Director and President
- -------------------------
David K. Schafer
/s/ Brendan Spillane Secretary and Treasurer and
- ------------------------- Principal Financial and
Brendan Spillane Accounting Officer
* Director and Executive
- ------------------------- Vice President
James P. Cullen
* Director
- ------------------------
Eugene W. Potter, Jr.
*By: /s/ David K. Schafer
---------------------
David K. Schafer
(Attorney-in-fact)
S-1
<PAGE> 59
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED WITH
FORM N-1A
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
AND
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940
STRONG SCHAFER VALUE FUND, INC.
(Exact name of Registrant as specified in Charter)
<TABLE>
<CAPTION>
EDGAR
Exhibit
Exhibit Number Description of Exhibit Number
- -------------- ------------------------ ------
<S> <C>
1.5 Articles Supplementary
regarding increase in the
number of authorized shares
9.3 Trading Agreement between the
Advisor and Strong and Addendum
to Trading Agreement
11 Consent of Coopers & Lybrand L.L.P.
16 Schedule for Computation of
Performance Quotations
17 Financial Data Schedule
</TABLE>
<PAGE> 1
STRONG SCHAFER VALUE FUND, INC.
ARTICLES SUPPLEMENTARY
INCREASING AUTHORIZED STOCK
AS AUTHORIZED BY SECTION 2-105(c) OF
THE MARYLAND GENERAL CORPORATION LAW
Strong Schafer Value Fund, Inc., a Maryland corporation,
having its principal office in the State of Maryland at c/o James J. Hanks, Jr.,
Weinberg and Green, 100 South Charles Street, Baltimore, Maryland 21201
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has increased the
authorized capital stock of the Corporation to 250,000,000 shares of
Common Stock (par value $.10 per share).
SECOND: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
THIRD: (a) As of immediately before the increase the
total number of shares of stock of all classes which the Corporation
has authority to issue is 25,000,000 shares of Common Stock (par
value $.10 per share).
(b) As increased the total of shares of stock of
all classes which the Corporation has authority to issue is
250,000,000 shares of Common Stock (par value $.10 per share).
(c) The aggregate par value of all shares having a
par value is $2,500,000 before the increase and $25,000,000 as
increased.
IN WITNESS WHEREOF, Strong Schafer Value Fund, Inc. has
caused these presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on May 21, 1996.
WITNESS: STRONG SCHAFER VALUE FUND, INC.
/s/ Brendan J. Spillane /s/ David K. Schafer
- ------------------------ ------------------------------
Brendan J. Spillane, David K. Schafer,
Secretary President
<PAGE> 2
THE UNDERSIGNED, President of Strong Schafer Value Fund,
Inc., who executed on behalf of the Corporation, Articles Supplementary of which
this Certificate is made a part, hereby acknowledges in the name and on behalf
of said Corporation the foregoing Articles Supplementary to be the corporate act
of said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ David K. Schafer
--------------------------------
David K. Schafer, President
<PAGE> 1
[LETTERHEAD OF STRONG CAPITAL MANAGEMENT, INC.]
September 4, 1996
Mr. David K. Schafer
Schafer Capital Management, Inc.
645 Fifth Avenue
New York, New York 10022
Re: Portfolio Trading
Dear David:
We appreciate this opportunity to confirm our agreement
under which Strong Capital Management, Inc. ("Strong") will assume
administrative responsibility for executing portfolio trades on behalf of
Schafer Capital Management, Inc. ("Schafer"), for the benefit of
certain clients of Schafer.
1. NATURE OF SERVICES/SCOPE OF DUTIES - Strong agrees to use its best
efforts to act as the "Trading Desk" for Schafer with respect to such
transactions as Schafer may from time to time request Strong to perform and to
execute portfolio trades on behalf of the following discretionary clients to
Schafer: (i) the Strong Schafer Value Fund; and (ii) any and all subadvisory or
similar relationships that Strong and Schafer jointly enter into (the "Schafer
clients").
The parties agree that Schafer shall be responsible for issuing
instructions to Strong as to (i) which securities shall be purchased or sold and
(ii) the amount of securities to be purchased or sold. Subject to the
instructions and/or oversight of Schafer, and unless Schafer issues specific
instructions otherwise, Strong agrees to use its best efforts to, where
appropriate: (i) choose the broker-dealer through which the securities will be
purchased or sold; (ii) choose the price at which the transaction will be
effected; (iii) "work" the order in the manner deemed most appropriate by
Strong; (iv) choose the time of execution; (v) ensure that the executing
broker-dealer reports the transaction to Strong; and (vi) provide Schafer with
such reasonable reports about trading activity as the parties may mutually agree
to (collectively, the "Services").
Schafer acknowledges that, in providing the Services, Strong will use
the same brokerage placement customs and practices that Strong applies when
executing portfolio trades for its
<PAGE> 2
discretionary clients and will treat Schafer transactions in the same manner as
it treats transactions for its discretionary clients.
3. COMMISSION RATE SCHEDULE - In providing the Services, Strong will use
its best efforts to execute portfolio trades in accordance with the commission
rates set forth in the attached commission schedule, as it may be modified in
the future.
4. EXPENSES - Schafer agrees to reimburse Strong on a quarterly basis
for the annual compensation expenses of Strong associates involved in
providing the Services to Schafer, which includes salary, discretionary bonus,
and benefits as calculated in good faith by Strong. Where only a portion of an
associate's time is devoted to the services, Schafer will reimburse Strong only
for the pro rata portion of that associate's time devoted to the Services. In
addition, Schafer agrees to reimburse Strong for the non-compensation benefits
provided to Associates involved in providing the services (e.g., health
benefits, 401k, etc.), which amount shall not exceed 20% of each associate's
base salary and discretionary bonus that are allocable to providing the
Services to Schafer. Schafer agrees to make such payment to Strong within
thirty (30) days of the end of each quarter.
At the end of each fiscal year for Strong, Strong will notify Schafer
of the amount of the discretionary bonus to be awarded to any associate involved
in providing the Services to Schafer so that Schafer may determine whether it
wishes to make any additional grant of discretionary bonus to the associate[s]
(and Schafer shall reimburse Strong for any such additional grant of
discretionary bonus).
5. LIABILITY - Schafer acknowledges that, except in the case of gross
negligence or willful misfeasance, (i) Strong shall not be liable hereunder for
any action performed or omitted to be performed or for any errors of judgment in
providing the Services and (ii) Schafer agrees to defend and indemnify Strong in
the event of any claim or assertion made against Strong relating to the Services
by any client or other party.
6. CONTACT PERSON - Any questions about the Services shall be directed
to Dave Braaten (or such other Strong associates as the parties may in the
future agree to).
7. TERMINATION - Either party may terminate this agreement on thirty (30)
days written notice to the other party.
<PAGE> 3
Please confirm the foregoing by signing below and returning the
enclosed copy of this letter to me.
Sincerely,
/s/ Thomas P. Lemke
----------------------
Thomas P. Lemke
General Counsel
CONFIRMED:
/s/ David K. Schafer
- ----------------------
David K. Schafer
President
<PAGE> 4
SCHAFER CAPITAL MANAGEMENT, INC.
645 Fifth Avenue
New York, New York 10022
October 22, 1996
Mr. Thomas P. Lemke
Strong Capital Management, Inc.
One Hundred Heritage Reserve
PO Box 2936
Milwaukee, WI 53201
Dear Tom:
As I believe you are aware, we propose that the trading agreement
dated September 4, 1996 between Schafer Capital Management, Inc. and Strong
Capital Management, Inc. be supplemented by including in such agreement the
provisions contained in the Addendum attached hereto. If you are in agreement
with such amendment and supplementation of the trading agreement, please sign
below and return the enclosed copy of this letter to me.
Very truly yours,
/s/ David K. Schafer
---------------------
David K. Schafer
President
Confirmed:
STRONG CAPITAL MANAGEMENT, INC.
By: /s/ Thomas P. Lemke
---------------------------
<PAGE> 5
ADDENDUM TO TRADING AGREEMENT BETWEEN
SCHAFER CAPITAL MANAGEMENT, INC., AND
STRONG CAPITAL MANAGEMENT, INC.
Compliance and Maintenance of Records -- Strong agrees that, in
the provision of the Services to Strong Schafer Value Fund, Inc. (the "Fund") on
behalf of Schafer, it will (i) act consistently with the obligations of Schafer
to the Fund as set forth in the Investment Advisory Agreement dated as of August
13, 1985 between such parties; (2) act consistently with the disclosures
relating to brokerage and trading contained in the Registration Statement on
Form N- 1A of the Fund, as such Registration Statement may be amended from time
to time; and (3) comply with all applicable provisions of the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder. Without limiting the generality of the foregoing, Strong agrees to
maintain and preserve, in accordance with the 1940 Act and the rules and
regulations thereunder, and for the periods prescribed by Rule 31a-2 under the
1940 Act, books and records with respect to securities transactions required to
be maintained by Rule 31a-1 under the 1940 Act.
Strong further agrees that all records which it maintains
on behalf of Schafer on behalf of the Fund are the Fund's property and that
Strong will surrender them to Schafer and/or the Fund, the Fund's independent
auditors, or as may be required by any government agency having jurisdiction
over Schafer and/or the Fund, promptly upon written request. The provisions of
this Section shall survive any termination of this Agreement.
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Strong Schafer Value Fund, Inc.
We consent to the incorporation by reference in Post-Effective Amendment No. 13
to the Registration Statement of Strong Schafer Value Fund, Inc. on Form N-1A of
our report dated October 29, 1996 on our audit of the financial statements and
financial highlights of Strong Schafer Value Fund, Inc., which report is
included in the Annual Report to Shareholders for the year ended September 30,
1996, which is also incorporated by reference in the Registration Statement. We
also consent to the reference to our Firm under the caption "Independent
Accountants" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
January 29, 1997
<PAGE> 1
Exhibit 16
One year period ended December 31, 1996:
1
1,000 (1 - .2317) = $1,232
Five year period ended December 31, 1996:
5
1,000 (1 + .1840) = $2,327
10 year period ended December 31, 1996:
10
1,000 (1 + .1625) = $4,507
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 369,407,406
<INVESTMENTS-AT-VALUE> 407,470,925
<RECEIVABLES> 991,216
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 408,462,141
<PAYABLE-FOR-SECURITIES> 18,511,017
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 569,256
<TOTAL-LIABILITIES> 19,080,273
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<DIVIDEND-INCOME> 5,975,544
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<OTHER-INCOME> 0
<EXPENSES-NET> (3,415,469)
<NET-INVESTMENT-INCOME> 3,250,896
<REALIZED-GAINS-CURRENT> 10,300,245
<APPREC-INCREASE-CURRENT> 18,447,604
<NET-CHANGE-FROM-OPS> 31,998,745
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,590,270)
<DISTRIBUTIONS-OF-GAINS> (5,314,873)
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<NUMBER-OF-SHARES-SOLD> 6,009,482
<NUMBER-OF-SHARES-REDEEMED> (1,681,871)
<SHARES-REINVESTED> 151,671
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,415,469
<AVERAGE-NET-ASSETS> 267,888,375
<PER-SHARE-NAV-BEGIN> 43
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 5
<PER-SHARE-DIVIDEND> (0)
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<PER-SHARE-NAV-END> 47
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<AVG-DEBT-PER-SHARE> 0
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