<PAGE>
- --------------------------------------------------------------------------------
THE STRONG
SCHAFER VALUE FUND
ANNUAL REPORT o SEPTEMBER 30, 1997
[PHOTO OF FAMILY WALKING]
[STRONG LOGO]
STRONG FUNDS
<PAGE>
8
EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING
These common-sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here 24
hours a day, seven days a week to take your call.
- --------------------------------------------------------------------------------
[PICTURE OF FOLDER LABELED INVESTMENTS]
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.
- --------------------------------------------------------------------------------
[PICTURE OF CLOCK]
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.
- --------------------------------------------------------------------------------
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION]
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 including investments most likely to help you achieve your
important goals.
- --------------------------------------------------------------------------------
[PICTURE OF MEMO REMINDER TO INVEST]
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're tempted to spend
those assets on short-term needs.
- --------------------------------------------------------------------------------
[PICTURE OF GRAPH SLOPING UPWARD]
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 of principal loss.
- --------------------------------------------------------------------------------
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION EMPHASIZING STOCKS]
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.
- --------------------------------------------------------------------------------
[PICTURE OF DOLLAR SIGN]
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.
- --------------------------------------------------------------------------------
[PICTURE OF MAGNIFYING GLASS]
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.
<PAGE>
- --------------------------------------------------------------------------------
THE STRONG
SCHAFER VALUE FUND
ANNUAL REPORT o SEPTEMBER 30, 1997
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Schafer Value Fund ........................................2
FINANCIAL INFORMATION
Schedule of Investments ..............................................5
Statement of Assets and Liabilities ..................................8
Statement of Operations ..............................................8
Statement of Changes in Net Assets ...................................9
Notes to Financial Statements .......................................10
FINANCIAL HIGHLIGHTS .....................................................12
REPORT OF INDEPENDENT ACCOUNTANTS ........................................12
<PAGE>
THE STRONG SCHAFER VALUE FUND
WE REMAIN FULLY COMMITTED TO THE VALUE INVESTMENT PHILOSOPHY THAT HAS GUIDED THE
FUND SINCE ITS INCEPTION MORE THAN TEN YEARS AGO.
The Strong Schafer Value Fund invests in common stocks with the primary goal of
long-term capital appreciation with current income being an important, but
secondary, objective.
PERFORMANCE
For the fiscal year ended September 30, 1997, the Fund posted a gain of 47.5%
compared with the 40.4% return of the S&P 500* for the same period. The S&P 500
Index is the benchmark against which the Fund is frequently measured.
During the first two quarters of the Fund's fiscal year, the stock market was
turbulent, particularly in the weeks surrounding the Federal Reserve's March
hike in the Fed Funds Rate. In keeping with the Fund's investment philosophy, we
remained fully invested and, as a result, participated fully in the market
swings--both up and down.
The market's performance over the last six months has been particularly strong.
In the first part of the fiscal year investors favored larger, multinational
companies. Because of their high valuation levels, we did not own many of these
stocks. However, as the market finally broadened out in the second half of our
fiscal year, the more attractively valued mid-sized companies began to
participate. As we had added a number of more modestly valued mid-sized
companies to the portfolio during the year, this helped the performance of the
Fund.
The Fund has a fairly broadly diversified portfolio and, reflecting this
diversity, each of the top five performing stocks for fiscal 1997 came from a
different industry. The leading performers were Philips Electronics NV
(electronics), Paine Webber Group (brokerage), Federal Express (air
transportation), Cummins Engine (diesel engines) and Progressive Corporation
(insurance).
A PATIENT, DISCIPLINED PROCESS
As we near the end of the second year of our strategic alliance with Strong
Funds, we remain fully committed to the value investment philosophy that has
guided the Fund since its inception more than ten years ago. We continue our
search for stocks whose P/E multiples are less than that of the average S&P 500
stock, but whose earnings per share growth prospects over the next several years
are superior to those of the S&P Index. Simply stated, we are looking for
above-average growth at a discounted price. Another important feature of our
investment philosophy is the equal weighting of stocks in the portfolio.
Currently we own about 55 stocks and each new portfolio holding is given an
initial weighting of about 1.8% of the total assets of the Fund.
Our disciplined buy-and-sell process also has resulted in a lower turnover of
securities within the Fund--less than 23% for the 12-month period. In fact, more
than half of the securities were held in the portfolio for the entire year.
2
<PAGE>
GROWTH OF THE FUND
The Schafer Value Fund's assets have grown significantly over the last fiscal
year. We invest these new assets in keeping with our disciplined approach. To
maintain equally weighted holdings in the portfolio, we may use daily inflows of
cash to add to our current positions in stocks that are slightly
underweighted--as long as we think they're still a good value. If the
fundamentals are right, we will also invest in new stocks when the earnings
prospects are compelling and the valuations attractive.
OUTLOOK
The table on the following page demonstrates that we continue to find stocks
that meet our investment criteria. You'll see that the Fund's price/earnings
ratio was 13.6 times our estimate of 1997 earnings--significantly below the S&P
500's estimated P/E of 20.4. We believe the Fund's holdings will show
earnings-per-share growth of more than 14% in 1998, while the consensus estimate
of earnings growth for the S&P 500 during the same period is slightly more than
7%.
[PHOTO OF DAVID K. SCHAFER]
Thank you for your investment in the Strong Schafer Value Fund. We appreciate
your confidence in our investment approach.
Sincerely,
/s/David K. Schafer
David K. Schafer
Portfolio Manager
Strong Schafer Value Fund, Inc.
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 9-30-87 to 9-30-97
================================================================================
[GRAPH]
Lipper Growth
THE STRONG SCHAFER S & P 500 and Income
VALUE FUND Index* Funds Index*
9-87 10,000 10,000 10,000
12-87 7,348 7,747 8,014
12-88 8,670 9,034 9,485
12-89 11,275 11,897 11,736
12-90 10,140 11,527 11,033
12-91 14,289 15,039 14,095
12-92 16,957 16,185 15,453
12-93 21,023 17,816 17,712
12-94 20,124 18,052 17,638
12-95 26,996 24,835 23,131
12-96 33,250 30,537 27,917
9-97 43,854 39,585 35,073
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made on 9-30-87, with similar investments in the
Standard & Poor's 500 Stock Index ("S&P 500") and the Lipper Growth & Income
Funds Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares in the Fund.
================================================================================
=================================
AVERAGE ANNUAL
TOTAL RETURNS
=================================
As of 9-30-97
1-year 47.46%
5-year 23.00%
10-year 15.93%
Since Inception 17.38%
(on 10-22-85)
=================================
- --------------------------------------------------------------------------------
*The S&P 500 is an unmanaged index generally representative of the U.S. stock
market, without regard to company size. The Lipper Growth & Income Funds Index
is an equally-weighted performance index of the largest qualifying funds in
this Lipper category. Source of the S&P index data is Standard & Poor's
Micropal. Source of the Lipper index data is Lipper Analytical Services, Inc.
3
<PAGE>
<TABLE>
===================================================================================================================================
PORTFOLIO HOLDINGS, EARNINGS PER SHARE ESTIMATES, AND PRICE/EARNINGS RATIOS AS OF 11-7-97 (UNAUDITED)
===================================================================================================================================
<CAPTION>
CLOSING PRICE EARNINGS PER SHARE PRICE/EARNINGS RATIO
SECURITY (11-7-97) 1996A 1997E 1998E 1997E 1998E
<S> <C> <C> <C> <C> <C> <C>
Northeast Utilities 11 15/16 -0.40 -0.40 1.80 -29.8 6.6
..................................................................................................................................
LaSalle Re Holdings 32 7/8 4.50 5.30 4.75 6.2 6.9
..................................................................................................................................
General Motors 64 7/16 6.10 7.74 8.10 8.3 8.0
..................................................................................................................................
Cleveland-Cliffs 43 3/16 5.16 4.40 5.21 9.8 8.3
..................................................................................................................................
Singer Co NV 13 1/4 1.65 1.25 1.55 10.6 8.5
..................................................................................................................................
Ford Motor 45 1/16 3.50 5.18 5.06 8.7 8.9
..................................................................................................................................
Owens Corning 34 1/16 4.65 3.75 3.75 9.1 9.1
..................................................................................................................................
Partner Re Ltd 41 3/4 4.41 4.35 4.50 9.6 9.3
..................................................................................................................................
UCAR International 38 9/16 3.00 3.45 4.00 11.2 9.6
..................................................................................................................................
Cummins Engine 61 1/16 3.90 5.50 6.25 11.1 9.8
..................................................................................................................................
IBP Corporation 23 1/16 2.06 2.20 2.35 10.5 9.8
..................................................................................................................................
Ultramar Diamond 30 1/2 2.40 2.25 3.05 13.6 10.0
..................................................................................................................................
Harnischfeger 38 1/4 2.40 2.90 3.80 13.2 10.1
..................................................................................................................................
Tektronix 40 13/16 3.00 3.48 4.00 11.7 10.2
..................................................................................................................................
National Bank of Canada 21 1.65 1.80 2.00 11.7 10.5
..................................................................................................................................
PACCAR, Inc. 47 3/16 5.17 3.90 4.50 12.1 10.5
..................................................................................................................................
Borg Warner Auto 53 5/16 3.27 4.88 5.00 10.9 10.7
..................................................................................................................................
Champion Enterprises 16 3/4 1.43 1.38 1.55 12.1 10.8
..................................................................................................................................
New Holland 28 9/16 1.50 2.25 2.60 12.7 11.0
..................................................................................................................................
Lafarge Corp 30 5/8 1.90 2.54 2.76 12.1 11.1
..................................................................................................................................
Armstrong World 65 7/16 5.05 5.28 5.80 12.4 11.3
..................................................................................................................................
Asia Pulp & Paper 12 3/4 0.15 0.65 1.10 19.6 11.6
..................................................................................................................................
Burlington Industries 15 1/8 1.10 1.15 1.30 13.2 11.6
..................................................................................................................................
Goodyear Tire & Rubber 61 1/4 4.45 4.80 5.30 12.8 11.6
..................................................................................................................................
Old Republic International 35 13/16 2.33 2.78 3.08 12.9 11.6
..................................................................................................................................
Carpenter Tech 47 15/16 3.55 3.12 4.00 15.4 12.0
..................................................................................................................................
Chase Manhattan 116 5/8 6.95 8.53 9.75 13.7 12.0
..................................................................................................................................
Phillips NV 77 7/8 4.15 4.50 6.35 17.3 12.3
..................................................................................................................................
W.R. Berkely 40 3/8 2.40 2.87 3.27 14.1 12.3
..................................................................................................................................
Arrow Electronics 29 3/4 1.97 2.05 2.40 14.5 12.4
..................................................................................................................................
Southdown 55 1/8 3.05 3.75 4.30 14.7 12.8
..................................................................................................................................
Burlington Northern 93 3/4 5.70 6.05 7.25 15.5 12.9
..................................................................................................................................
YPF Sociedad 31 1/2 2.31 2.31 2.45 13.6 12.9
..................................................................................................................................
Citicorp 127 1/4 7.50 8.47 9.75 15.0 13.1
..................................................................................................................................
Key Corporation 61 3/4 3.75 4.20 4.70 14.7 13.1
..................................................................................................................................
Phillips Petroleum 49 5/8 3.39 3.66 3.79 13.6 13.1
..................................................................................................................................
Avnet 63 3/4 4.31 4.23 4.75 15.1 13.4
..................................................................................................................................
Western Resources 36 2.60 2.56 2.68 14.1 13.4
..................................................................................................................................
Cyprus Ama 20 5/16 1.50 1.72 1.50 11.8 13.5
..................................................................................................................................
GTE Corporation 42 5/16 2.89 2.93 3.10 14.4 13.6
..................................................................................................................................
Philip Services 16 1/16 0.51 0.85 1.17 18.9 13.7
..................................................................................................................................
Morgan Dean Witter 54 1/8 5.95 3.70 3.92 14.6 13.8
..................................................................................................................................
Harman International 53 5/8 3.16 2.90 3.80 18.5 14.1
..................................................................................................................................
Paine Webber 46 9/16 3.40 3.44 3.19 13.5 14.6
..................................................................................................................................
Storage Technology 61 5/16 3.15 3.65 4.17 16.8 14.7
..................................................................................................................................
SBC Communications 63 1/2 3.45 3.70 4.15 17.2 15.3
..................................................................................................................................
May Department Stores 53 15/16 3.10 3.15 3.50 17.1 15.4
..................................................................................................................................
Atlantic Richfield 80 9/16 5.13 4.98 5.21 16.2 15.5
..................................................................................................................................
Federal Express 66 11/16 2.70 3.50 4.23 19.1 15.8
..................................................................................................................................
Mellon Bank 50 11/16 2.58 2.90 3.20 17.5 15.8
..................................................................................................................................
Repsol 42 5/16 -0.51 2.28 2.67 18.6 15.8
..................................................................................................................................
Electronic Data Systems 37 3/8 0.84 1.87 2.23 20.0 16.8
..................................................................................................................................
Reading & Bates 43 3/4 1.13 1.52 2.50 28.8 17.5
..................................................................................................................................
Progressive Corporation 103 7/16 4.10 4.60 5.70 22.5 18.1
..................................................................................................................................
Northern Trust 60 1/8 2.20 2.60 3.20 23.1 18.8
----------------
S&P 500 INDEX 920.03 45.17 48.45 20.4 19.0
STRONG SCHAFER VALUE FUND
PORTFOLIO AVERAGES 13.6 12.4
A=ACTUAL E=ESTIMATE
</TABLE>
4
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS September 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES OR UNIT
PRINCIPAL AVERAGE MARKET MARKET
SECURITY AMOUNT UNIT COST VALUE % CHANGE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 99.0%
AGRICULTURAL EQUIPMENT 1.7%
<S> <C> <C> <C> <C> <C>
New Holland N.V. 771,000 $21.46 $ 29.50 37.47% $ 22,744,500
AIR TRANSPORT 2.1%
Federal Express Corporation (b) 344,000 38.50 80.00 107.79% 27,520,000
APPAREL MANUFACTURING 1.6%
Burlington Industries, Inc. (b) 1,515,400 12.22 14.00 14.57% 21,215,600
AUTO & TRUCK PARTS 5.3%
Borg-Warner Automotive, Inc. 406,200 32.74 56.88 73.73% 23,102,625
Cummins Engine Company, Inc. 318,200 42.79 78.06 82.43% 24,839,488
The Goodyear Tire & Rubber Company 310,000 47.65 68.75 44.28% 21,312,500
-------------
69,254,613
AUTOMOBILE & TRUCKS 7.1%
Chrysler Corporation 598,500 28.93 36.81 27.24% 22,032,281
Ford Motor Company 503,200 33.36 45.25 35.64% 22,769,800
General Motors Corporation 353,600 56.07 66.94 19.39% 23,669,100
PACCAR, Inc. 452,600 41.84 56.00 33.84% 25,345,600
-------------
93,816,781
BANKS 10.4%
The Chase Manhattan Corporation 204,000 80.87 118.00 45.91% 24,072,000
Citicorp 157,100 96.34 133.94 39.03% 21,041,581
KeyCorp 365,000 41.59 63.63 52.99% 23,223,125
Mellon Bank Corporation 420,300 26.46 54.75 106.92% 23,011,425
National Bank of Canada 1,501,000 10.75 14.02 30.42% 21,039,008
Northern Trust Company 410,000 39.40 59.13 50.08% 24,241,250
-------------
136,628,389
BROKERAGE 3.6%
Morgan Stanley, Dean Witter, Discover & Company 443,190 38.80 54.06 39.33% 23,959,959
Paine Webber Group, Inc. 504,200 20.57 46.56 126.35% 23,476,812
-------------
47,436,771
BUILDING MATERIALS 5.7%
Lafarge Corporation 802,000 21.02 32.25 53.43% 25,864,500
Owens Corning 630,000 39.19 36.50 -6.86% 22,995,000
Southdown, Inc. 489,000 35.97 54.63 51.88% 26,711,625
-------------
75,571,125
COMPUTER EQUIPMENT & SERVICE 3.3%
Electronic Data Systems Corporation 635,000 36.51 35.50 -2.77% 22,542,500
Storage Technology Corporation (b) 450,300 39.05 47.81 22.43% 21,529,969
-------------
44,072,469
ELECTRIC UTILITIES 3.4%
Northeast Utilities 2,400,000 10.59 9.63 -9.11% 23,100,000
Western Resources, Inc. 635,800 34.32 34.31 -0.03% 21,815,888
-------------
44,915,888
ELECTRONIC EQUIPMENT & DISTRIBUTION 7.4%
Arrow Electronics, Inc. (b) 390,000 57.96 58.00 0.07% 22,620,000
Avnet, Inc. 366,000 50.43 63.56 26.04% 23,263,875
Philips Electronics NV ADR 352,500 37.16 84.00 126.05% 29,610,000
Tektronix, Inc. 330,300 40.52 67.44 66.44% 22,274,606
-------------
97,768,481
FOOD 1.8%
IBP, Inc. 993,800 24.77 23.63 -4.60% 23,478,525
HOUSING RELATED 7.4%
Armstrong World Industries, Inc. 336,000 68.81 67.06 -2.54% 22,533,000
Champion Enterprises, Inc. (b) 1,353,800 16.83 19.13 13.67% 25,891,425
Harman International Industries, Inc. 577,000 38.05 50.06 31.56% 28,886,063
Singer Company NV 1,163,200 18.37 17.19 -6.42% 19,992,500
-------------
97,302,988
INSURANCE 8.2%
W.R. Berkley Corporation 507,600 29.33 43.06 46.81% 21,858,525
LaSalle Re Holdings, Ltd. 653,700 24.36 35.13 44.21% 22,961,212
Old Republic International Corporation 640,300 21.28 39.00 83.27% 24,971,700
Partners RE, Ltd. ADR 259,100 32.96 43.06 30.64% 11,157,494
The Progressive Corporation 245,800 46.27 107.13 131.53% 26,331,325
-------------
107,280,256
See notes to financial statements.
5
<PAGE>
SCHEDULE OF INVESTMENTS (continued) September 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES OR UNIT
PRINCIPAL AVERAGE MARKET MARKET
SECURITY AMOUNT UNIT COST VALUE % CHANGE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
MACHINERY 1.9%
Harnischfeger Industries, Inc. 575,000 $41.43 $42.75 3.19% $ 24,581,250
METALS & MINING 6.7%
Carpenter Technology Corporation 416,000 33.68 49.50 46.97% 20,592,000
Cleveland-Cliffs, Inc. 500,300 42.69 43.63 2.20% 21,825,587
Cyprus Amax Minerals Company 940,000 24.74 24.00 -2.99% 22,560,000
UCAR International, Inc. (b) 489,000 40.44 47.75 18.08% 23,349,750
-------------
88,327,337
OIL 8.9%
Atlantic Richfield Company 303,000 61.98 85.44 37.85% 25,887,563
Phillips Petroleum Company 451,000 48.48 51.63 6.50% 23,282,875
Repsol S.A. Sponsored ADR 527,000 41.76 43.38 3.88% 22,858,625
Ultramar Diamond Shamrock Corporation 626,500 28.23 32.31 14.45% 20,243,781
YPF Sociedad Anonima ADR 683,300 23.08 36.88 59.79% 25,196,687
-------------
117,469,531
OIL WELL EQUIPMENT & SERVICE 2.6%
Reading & Bates Corporation (b) 816,000 23.64 41.56 75.80% 33,915,000
PAPER & FOREST PRODUCTS 1.6%
Asia Pulp & Paper Company, Ltd. ADR 1,369,500 10.90 15.69 43.94% 21,484,031
POLLUTION CONTROL 1.6%
Philip Services Corporation (b) 1,170,000 18.69 18.25 -2.35% 21,352,500
RAILROAD 1.6%
Burlington Northern Santa Fe Corporation 217,800 82.20 96.63 17.55% 21,044,925
RETAIL - DEPARTMENT STORE 1.7%
The May Department Stores Company 411,100 42.69 54.50 27.66% 22,404,950
TELECOMMUNICATIONS 3.4%
AT&T Corporation 559,100 35.39 44.31 25.20% 24,775,119
SBC Communications, Inc. 326,600 52.34 61.38 17.27% 20,045,075
-------------
44,820,194
-------------
TOTAL COMMON STOCKS (COST $1,000,252,697) 1,304,406,104
SHORT-TERM INVESTMENTS (a) 1.8%
COMMERCIAL PAPER
INTEREST BEARING 1.7%
Ford Motor Credit, 5.85%, Due 10/02/97 $7,200,000 7,200,000
General Electric Capital Corporation:
5.56%, Due 10/02/97 5,000,000 5,000,000
5.56%, Due 10/07/97 2,500,000 2,500,000
Prudential Funding Corporation:
5.54%, Due 10/06/97 3,900,000 3,900,000
5.58%, Due 10/03/97 4,000,000 4,000,000
-------------
22,600,000
INTEREST BEARING, DUE UPON DEMAND 0.1%
American Family Financial Services, Inc., 5.16% 80,936 80,936
General Mills, Inc., 5.13% 156,680 156,680
Johnson Controls, Inc., 5.17% 829,432 829,432
Pitney Bowes Credit Corporation, 5.14% 92,842 92,842
Wisconsin Electric Power Company, 5.19% 92,879 92,879
-------------
1,252,769
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $23,852,769) 23,852,769
-------------
TOTAL INVESTMENTS IN SECURITIES 100.8% (COST $1,024,105,466) 1,328,258,873
Other Assets & Liabilities, Net (0.8%) (10,740,245)
-------------
NET ASSETS 100.0% $1,317,518,628
==============
</TABLE>
See notes to financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
-------------------------------------------------------------------------------
United States .................................................. 86.0%
Netherlands .................................................... 4.0%
Canada ......................................................... 3.2%
Argentina ...................................................... 1.9%
Spain .......................................................... 1.7%
Singapore ...................................................... 1.6%
Hong Kong ...................................................... 1.5%
Bermuda ........................................................ 0.9%
Other Assets & Liabilities, Net ................................ (0.8%)
------
Total .......................................................... 100.0%
======
LEGEND
- ------
(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.
See notes to financial statements.
7
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------------
September 30, 1997
<CAPTION>
ASSETS:
<S> <C>
Investments in Securities, at Market Value (Cost of $1,024,105,466) $1,328,258,873
Receivable from Brokers for Securities Sold 590,286
Dividends and Interest Receivable 1,079,141
Receivable from Fund Shares Sold 991,410
Other Assets 2,584
--------------
Total Assets 1,330,922,294
LIABILITIES:
Payable to Brokers for Securities Purchased 11,912,077
Due to Investment Advisor 984,356
Payable for Fund Shares Redeemed 80,502
Accrued Operating Expenses and Other Liabilities 426,731
--------------
Total Liabilities 13,403,666
--------------
NET ASSETS $1,317,518,628
==============
NET ASSETS CONSIST OF:
Capital Stock (250,000,000 shares authorized, $.10 par value) $ 1,957,974
Paid-in Capital 977,212,891
Undistributed Net Investment Income 4,514,155
Undistributed Net Realized Gains 29,679,234
Net Unrealized Appreciation 304,154,374
--------------
Net Assets $1,317,518,628
==============
Capital Shares Outstanding 19,579,738
NET ASSET VALUE PER SHARE $67.29
======
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------
For the Year Ended September 30, 1997
INCOME:
<S> <C>
Dividends $ 14,671,551
Interest 1,120,392
------------
Total Income 15,791,943
EXPENSES:
Investment Advisory Fees 7,583,633
Custodian Fees 36,980
Shareholder Servicing Costs 1,126,895
Federal and State Registration Fees 236,900
Other 339,757
------------
Total Expenses 9,324,165
------------
NET INVESTMENT INCOME 6,467,778
REALIZED AND UNREALIZED GAIN:
Net Realized Gain on Investments 33,191,786
Change in Unrealized Appreciation/Depreciation on Investments 266,090,855
------------
NET GAIN 299,282,641
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $305,750,419
============
</TABLE>
See notes to financial statements.
8
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED YEAR ENDED
SEPT. 30, 1997 SEPT. 30, 1996
-------------- --------------
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 6,467,778 $ 3,250,896
Net Realized Gain 33,191,786 10,300,245
Change in Unrealized Appreciation/Depreciation 266,090,855 18,447,604
-------------- ------------
Increase in Net Assets Resulting from Operations 305,750,419 31,998,745
DISTRIBUTIONS:
From Net Investment Income (4,149,409) (1,590,270)
From Net Realized Gain on Investments (13,812,350) (5,314,873)
-------------- ------------
Total Distributions (17,961,759) (6,905,143)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 856,205,901 270,574,644
Proceeds from Reinvestment of Dividends 17,495,106 6,479,401
Payment for Shares Redeemed (233,352,907) (76,034,374)
-------------- ------------
Increase in Net Assets from Capital Share Transactions 640,348,100 201,019,671
-------------- ------------
TOTAL INCREASE IN NET ASSETS 928,136,760 226,113,273
NET ASSETS:
Beginning of Year 389,381,868 163,268,595
-------------- ------------
End of Year $1,317,518,628 $389,381,868
============== ============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 15,163,183 6,009,482
Issued in Reinvestment of Dividends 340,173 151,671
Redeemed (4,159,413) (1,681,871)
---------- ----------
Net Increase 11,343,943 4,479,282
========== ==========
See notes to financial statements.
9
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1997
1. ORGANIZATION
Strong Schafer Value Fund, Inc. (the "Fund"), formerly known as Schafer
Value Fund, Inc. (see Note 4), was incorporated under the laws of the State
of Maryland on August 12, 1985, and is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation -- Portfolio securities traded primarily on a
principal securities exchange are valued at the last reported sales
price or the mean between the latest bid and asked prices where no
last sales price is available. Securities traded over-the-counter are
valued at the mean of the latest bid and asked prices or the last
reported sales price. Securities for which market quotations are not
readily available, when held by the Funds, are valued at fair value as
determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of
Directors. Securities which are purchased within 60 days of their
stated maturity are valued at amortized cost, which approximates
current value.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its
shareholders in a manner which results in no tax cost to the Fund.
Therefore, no federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for federal income tax purposes due to differences in
the recognition of income and expense items for financial statement
and tax purposes. Where appropriate, reclassifications between net
asset accounts are made for such differences that are permanent in
nature.
(C) Realized Gains and Losses on Investment Transactions -- Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds and are calculated on a first-in, first-out basis.
(D) Additional Investment Risk -- The Fund has short-term investments
which are unsecured nonnegotiable instruments. These instruments are
rated at least A1 by Standard & Poor's. However, the Fund may be
susceptible to credit risk with respect to these securities to the
extent the issuer defaults on its payment obligation. The Fund's
policy is to monitor the creditworthiness of the issuer and does not
anticipate nonperformance by these counterparties.
(E) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted to U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income are converted to
U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions.
(F) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(G) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discounts.
10
<PAGE>
- --------------------------------------------------------------------------------
3. RELATED PARTY TRANSACTIONS
Schafer Capital Management, Inc. (the "Advisor") provides the Fund with
management and investment advisory services. The Investment Advisory
Agreement provides that, subject to the direction of the Board of Directors
of the Fund, the Advisor is responsible for the management of the Fund's
portfolio. The Advisor is obligated to perform certain administrative and
management services for the Fund, except to the extent these services are
provided by any custodian, transfer agent, registrar or administrator hired
by the Fund, and is obligated to provide all of the office space,
facilities, equipment and personnel necessary to perform its duties under
the Investment Advisory Agreement. The current agreement provides for a
monthly fee computed at an annual rate of 1.0% of the Fund's average daily
net assets.
Unaffiliated Directors' Fees paid during the year were $4,500.
4. ALLIANCE WITH STRONG
In January 1996, the Advisor formed an alliance with Strong Capital
Management, Inc. ("Strong") and the Fund changed its name to the Strong
Schafer Value Fund, Inc. Strong provides fund accounting services and
shareholder recordkeeping and related services to the Fund. Fund accounting
service fees are contractually established based upon the net assets of the
Fund. Shareholder recordkeeping and related service fees are based upon
contractually established rates for each open and closed shareholder
account. In addition, Strong is compensated for certain other services
related to costs incurred for reports to shareholders. Other shareholder
servicing expenses paid to Strong for the year ended September 30, 1997
were $9,677.
Pursuant to a distribution agreement, an indirect subsidiary of Strong,
Strong Funds Distributors, Inc., has agreed to act at the request of the
Fund and the Advisor as the Fund's agent to effect the distribution of the
Fund's shares. No expenses are incurred by the Fund with respect to this
agreement.
On September 7, 1997, the Advisor and Strong entered into a Limited
Liability Company Agreement (the "LLC Agreement") forming Strong Schafer
Capital Management, L.L.C.(the "LLC"). The LLC Agreement contemplates that
the Advisor, subject to obtaining necessary regulatory approvals, including
without limitation approval of the Fund's shareholders, will cause the LLC
to become the investment advisor to the Fund. The LLC Agreement further
provides that each of the Advisor and Strong shall be members of the LLC,
with the Advisor as the managing member, and grants to Strong an option
pursuant to which Strong may purchase the Advisor's interest in the LLC
which is first exercisable on January 10, 2001, or earlier in the event of
certain other circumstances.
These changes will not affect the current investment approach or philosophy
outlined in the Fund's Prospectus. The Advisor, through its sole portfolio
manager and controlling person, David K. Schafer, will continue in its role
as the Fund's investment manager in which it has served since the Fund's
inception. As managing member of the LLC, the Advisor will perform all
obligations of the LLC under the proposed new investment advisory
arrangement between the Fund and the LLC. Moreover, the investment advisory
fee rate payable by the Fund to the LLC under the new investment advisory
arrangement are expected to remain the same.
5. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investment securities (excluding cash
equivalents) during the year ended September 30, 1997 were $791,582,873 and
$168,359,740, respectively.
6. INCOME TAX INFORMATION
At September 30, 1997, the investment cost and gross unrealized
appreciation and depreciation on investments for federal income tax
purposes were as follows:
Aggregate Investment Cost $1,024,361,773
Aggregate Unrealized:
Appreciation $ 315,293,099
Depreciation (11,395,999)
--------------
$ 303,897,100
==============
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the year ended September 30, 1997 which is designated as
qualifying for the dividends-received deduction is 100%.
11
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------- -----------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total Net Asset
Value, Net Gains from From Net From Net Value,
Beginning Investment on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sept. 30, 1997 $47.28 $0.39 $21.48 $21.87 ($0.43) ($1.43) ($1.86) $67.29
Sept. 30, 1996 43.46 0.47 5.00 5.47 (0.38) (1.27) (1.65) 47.28
Sept. 30, 1995 36.54 0.36 8.53 8.89 (0.33) (1.64) (1.97) 43.46
Sept. 30, 1994 36.21 0.26 1.34 1.60 (0.19) (1.08) (1.27) 36.54
Sept. 30, 1993 31.59 0.28 8.00 8.28 (0.39) (3.27) (3.66) 36.21
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
- --------------------------------
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------
<CAPTION>
Net Ratio of Net
Assets, Ratio of Investment Average
End of Expenses Income Portfolio Commission
Total Period (In to Average to Average Turnover Rate
Return Thousands) Net Assets Net Assets Rate Paid(b)
<S> <C> <C> <C> <C> <C> <C>
Sept. 30, 1997 +47.5% $1,317,519 1.2% 0.8% 22.5% $0.0639
Sept. 30, 1996 +13.0% 389,382 1.3% 1.2% 17.8% 0.0697
Sept. 30, 1995 +26.0% 163,269 1.3% 1.2% 33.2%
Sept. 30, 1994 +4.4% 68,399 1.5% 1.0% 28.5%
Sept. 30, 1993 +28.4% 21,403 1.7% 0.8% 33.3%
</TABLE>
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Schafer Value Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Strong
Schafer Value Fund, Inc., including the schedule of investments, as of September
30, 1997, the related statements of operations for the year then ended, and the
statements of changes in net assets and the financial highlights for each of the
two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the three years in the
period ended September 30, 1995 were audited by other auditors, whose report
dated October 27, 1995 expressed an unqualified opinion on such financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Strong
Schafer Value Fund, Inc. as of September 30, 1997, the results of its operations
for the year then ended, and the changes in its net assets, and the financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
November 4, 1997
12
<PAGE>
SHAREHOLDER PRIVILEGES*
STRONG FUNDS
- -----------------------------[PICTURE OF TELEPHONE]-----------------------------
24-HOUR SERVICES
TELEPHONE PURCHASE
Make additional investments into any Strong Fund by calling us toll-free at
1-800-368-3863.
TELEPHONE EXCHANGE
If your financial goals change, you can exchange your investments between any of
the Strong Funds.
TELEPHONE REDEMPTION
You can call toll-free to redeem your mutual fund shares at any time. Your
shares will be redeemed no later than the close of the next business day.
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your bank checking or NOW
account to your Strong Funds account.
PAYROLL DIRECT DEPOSIT PLAN
You can automatically transfer all or a portion of your net pay at each pay
period. This eliminates the delay of depositing paychecks to your bank and then
sending a check through the mail to Strong Funds.
AUTOMATIC EXCHANGE PLAN
This plan allows you to exchange money from one Strong Fund to another. For
example, you may want to set up automatic exchanges from a money market fund to
an equity fund.
FOR MORE INFORMATION ABOUT THESE PRIVILEGES, CALL US AT 1-800-368-3863.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household.
Please call 1-800-368-3863 if you wish to receive additional copies, free of
charge.
*Each Fund reserves the right to terminate or modify any of these privileges.
<PAGE>
For a prospectus containing more complete information, including management fees
and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030.
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863.
--------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE ON COMPUTER]
Strong On-line
www.strong-funds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds Distributors, Inc. 6422K97 97ASVAL
