<PAGE>
===============================================================================
THE STRONG
SCHAFER VALUE FUND
SEMI-ANNUAL REPORT o MARCH 31, 1998
[PHOTO OF FAMILY WALKING DOWN ROAD]
[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
SEMI-ANNUAL REPORT o MARCH 31, 1998
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
Statements of Changes in Net Assets......................................9
Notes to Financial Statements...........................................10
FINANCIAL HIGHLIGHTS.........................................................12
<PAGE>
THE STRONG SCHAFER VALUE FUND
WE BELIEVE THAT THE HISTORICALLY HIGH VALUATION OF THE MARKET MAKES THIS AN
IDEAL TIME FOR THE APPLICATION OF OUR DISCIPLINED INVESTMENT PROCESS.
The Strong Schafer Value Fund seeks long-term capital appreciation principally
through investments in common stocks and other equity securities. Current
income is a secondary objective.
PERFORMANCE SUMMARY
For the six months ended March 31, 1998, the Fund posted a gain of 7.71%, while
its benchmark index, the S&P 500*, returned 17.22%. Though this was a strong
period for the stock market, the largest capitalization companies, most already
carrying high multiples, led the charge to ever-loftier valuations. In fact,
the 10% of S&P 500 companies with the highest market capitalizations accounted
for 54% of that index's performance in the last half-year. While the Fund's
performance lagged during this interim period, we continue to utilize our
time-tested, low-P/E style of investing which has historically generated above
average long-term returns for our investors.
We stay essentially fully invested in common stocks at all times in the Strong
Schafer Value Fund and do not try to "time" or predict the short-term
fluctuations of the market. Instead, we focus on picking stocks, one at a time,
based on our "bottom-up" investment approach.
A STRONG MARKET FOR SOME STOCKS
Strong, but opposing, influences impacted the financial markets over the past
half-year. The economy of the U.S. continued to experience very low
unemployment and little to no inflation, exerting upward pressure on many
stocks. At the same time, many Asian economies saw their track record of rapid
growth come to a sudden halt, hurting the segment of the U.S. market which had
exposure to that region.
In the confusion created by the mixed conditions, many investors gravitated
toward the largest-capitalization, blue chip companies. Most of these companies
already carried high price-to-earnings ratios that went even higher as new
money poured in from investors. Given the high weighting of stocks with these
characteristics in the S&P 500, that index had a nice rally. However, companies
with an exposure to Asia, whether real or perceived, tended to underperform the
S&P 500, sometimes even declining in price. Many quality small and mid-cap
stocks, which simply did not enjoy the investor familiarity of blue chips,
failed to match the return of the index.
THE FUND'S POSITIONING
As Asian economies weakened, many U.S. manufacturers of heavy equipment saw
their orders from that region dry up. This negatively affected the prices of
the Fund's holdings, such as Harnischfeger and Cummins Engine, in the heavy
equipment industry. The decline in oil prices, to a 10-year low in March, hurt
the performance of all of the energy-related companies in the portfolio. On the
positive side, the low interest rates and mild winter weather experienced in
the U.S. gave homebuilders and cement companies unseasonably strong results.
The Fund holds Champion Enterprises, Southdown and Lafarge Corporation in these
industries. A strong U.S. economy also powered solid performances by the Fund's
holdings involved in the manufacture of autos, including Ford, Goodyear Tire &
Rubber and Borg-Warner Automotive.
2
<PAGE>
OUTLOOK
We believe that the historically high valuation of the market makes this an
ideal time for the application of our disciplined investment process. Our
investment style, coupled with this hot market, has created a portfolio that is
more inexpensive than usual, on a P/E basis, relative to the S&P 500. We
continue to seek out stocks with P/E multiples less than that of the S&P 500
with projected two- to three-year earnings growth greater than the S&P 500. We
also give the stocks in our portfolio equal initial weightings. Over the years,
our disciplined process of buying and selling has allowed us to keep our
turnover of securities within the Fund relatively low.
The table on the following page shows the positive valuation comparison that
our portfolio enjoys versus the S&P 500. The average stock held in Strong
Schafer Value Fund has a price/earnings ratio of 13.2 times 1999 estimated
earnings, well below that of the S&P 500, at 21.8 times consensus earnings
projections.
Furthermore, we estimate that the average stock in our portfolio will grow
earnings per share at a rate of 10.2% in 1998 and 14.6% in 1999 versus
consensus estimates of less than 7%, in both years, for the S&P 500.
Thank you for your investment in the Strong Schafer Value Fund.
[PHOTO OF DAVID K. SCHAFER]
Sincerely,
/s/ David K. Schafer
David K. Schafer
Portfolio Manager
=============================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
=============================================================
From 3-31-88 to 3-31-98
[GRAPH]
THE STRONG Lipper Growth
SCHAFER VALUE S & P 500 and Income
FUND Index* Funds Index*
3-88 10,000 10,000 10,000
12-88 10,489 11,033 10,983
12-90 12,268 14,077 12,775
12-92 20,516 19,765 17,893
12-94 24,347 22,045 20,424
12-96 40,228 37,292 32,325
3-98 57,146 56,672 45,718
This graph, prepared in accordance with SEC regulations,
compares a $10,000 investment in the Fund, made on 3-31-88,
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(1)
===============================
As of 3-31-98
1-YEAR 41.00%
5-YEAR 21.01%
10-YEAR 19.04%
SINCE INCEPTION 17.33%
(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.
1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and capital
gains. Average annual total return reflects annualized change, while total
return reflects aggregate change.
3
<PAGE>
<TABLE>
=========================================================================================================
PORTFOLIO HOLDINGS, EARNINGS PER SHARE ESTIMATES, AND PRICE/EARNINGS RATIOS AS OF 4-20-98 (UNAUDITED)
=========================================================================================================
<CAPTION>
CLOSING PRICE EARNINGS PER SHARE PRICE/EARNINGS RATIO
SECURITY (4-20-98) 1997A 1998E 1999E 1998E 1999E
<S> <C> <C> <C> <C> <C> <C>
Singer Co NV 9 7/8 1.25 1.15 1.50 8.6 6.6
...................................................................................................................................
Philip Services 9 7/16 0.90 1.15 1.40 8.2 6.7
...................................................................................................................................
KLM Royal Dutch Air 42 5/8 -NA- 4.27 5.20 10.0 8.2
...................................................................................................................................
LaSalle Re Holdings 39 1/4 5.30 4.60 4.70 8.5 8.4
...................................................................................................................................
New Holland 26 3/4 2.60 2.85 3.10 9.4 8.6
...................................................................................................................................
Ford Motor 48 9/16 5.35 5.45 5.50 8.9 8.8
...................................................................................................................................
Cummins Engine 52 7/16 5.50 5.25 5.60 10.0 9.4
...................................................................................................................................
Harman International 39 1/2 2.90 3.35 4.15 11.8 9.5
...................................................................................................................................
R&B Falcon Drilling 30 3/4 1.52 2.05 3.25 15.0 9.5
...................................................................................................................................
UCAR International 33 1/4 3.07 3.25 3.50 10.2 9.5
...................................................................................................................................
Cleveland-Cliffs 56 3/8 4.05 4.90 5.75 11.5 9.8
...................................................................................................................................
Partner Re Ltd 51 5/16 4.37 4.50 4.80 11.4 10.7
...................................................................................................................................
PACCAR, Inc. 57 1/8 3.90 5.00 5.25 11.4 10.9
...................................................................................................................................
Burlington Industries 17 1.05 1.35 1.55 12.6 11.0
...................................................................................................................................
International Nickel 18 7/16 -0.08 1.25 1.65 14.8 11.2
...................................................................................................................................
Toll Brothers 28 1/2 1.85 2.20 2.55 13.0 11.2
...................................................................................................................................
Arrow Electronics 27 1/8 2.05 2.05 2.40 13.2 11.3
...................................................................................................................................
Ultramar Diamond 35 1/16 1.80 2.55 3.10 13.8 11.3
...................................................................................................................................
Borg Warner Auto 65 1/2 4.35 4.95 5.75 13.2 11.4
...................................................................................................................................
Fabri-Centers 26 1/4 1.31 1.61 2.30 16.3 11.4
...................................................................................................................................
Diamond Offshore 46 7/16 1.96 3.00 4.05 15.5 11.5
...................................................................................................................................
Lafarge Corp 40 2.50 2.90 3.30 13.8 12.1
...................................................................................................................................
Owens Corning 43 7/8 3.00 2.85 3.60 15.4 12.2
...................................................................................................................................
Asia Pulp & Paper 15 15/16 0.65 1.20 1.30 13.3 12.3
...................................................................................................................................
Callaway Golf 28 13/16 1.85 1.95 2.35 14.8 12.3
...................................................................................................................................
Harnischfeger 30 5/8 2.90 1.40 2.50 21.9 12.3
...................................................................................................................................
Sun Company 42 11/16 2.90 3.10 3.45 13.8 12.4
...................................................................................................................................
Avnet 60 1/2 4.23 4.20 4.80 14.4 12.6
...................................................................................................................................
Burlington Northern 101 3/8 5.95 7.15 8.05 14.2 12.6
...................................................................................................................................
Chase Manhattan 137 8.35 9.60 10.70 14.3 12.8
...................................................................................................................................
National Bank of Canada 30 7/10 1.80 2.20 2.40 14.0 12.8
...................................................................................................................................
Goodyear Tire & Rubber 72 4.75 5.10 5.60 14.1 12.9
...................................................................................................................................
D.R. Horton 21 15/16 1.08 1.40 1.65 15.7 13.3
...................................................................................................................................
Lennar Corporation 35 1.40 2.05 2.60 17.1 13.5
...................................................................................................................................
W.R. Berkely 46 5/8 2.74 3.10 3.45 15.0 13.5
...................................................................................................................................
Old Republic International 46 5/8 3.15 3.10 3.40 15.0 13.7
...................................................................................................................................
Phillips NV 74 13/16 4.60 4.60 5.45 16.3 13.7
...................................................................................................................................
Southdown 71 7/16 3.90 4.60 5.20 15.5 13.7
...................................................................................................................................
Tektronix 42 3/16 2.32 2.65 3.05 15.9 13.8
...................................................................................................................................
NationsBank 78 4.28 4.60 5.55 17.0 14.1
...................................................................................................................................
Armstrong World 89 3/8 5.22 5.75 6.35 15.5 14.1
...................................................................................................................................
IBP Corporation 22 1/4 1.24 1.30 1.55 17.1 14.4
...................................................................................................................................
Western Resources 40 5/16 2.45 2.65 2.80 15.2 14.4
...................................................................................................................................
Champion Enterprises 29 11/16 1.45 1.70 2.05 17.5 14.5
...................................................................................................................................
Citicorp 159 1/8 8.30 9.35 10.60 17.0 15.0
...................................................................................................................................
Boeing Company 53 1/4 1.05 2.00 3.50 26.6 15.2
...................................................................................................................................
Storage Technology 79 15/16 3.75 4.30 5.10 18.6 15.7
...................................................................................................................................
Phillips Petroleum 50 1/2 3.45 2.90 3.20 17.4 15.8
...................................................................................................................................
Key Corporation 41 1/8 2.10 2.30 2.55 17.9 16.1
...................................................................................................................................
Federal Express 73 15/16 3.50 3.88 4.50 19.1 16.4
...................................................................................................................................
Paine Webber 47 9/16 3.00 2.75 2.90 17.3 16.4
...................................................................................................................................
Repsol 55 3/8 2.75 3.00 3.30 18.5 16.8
...................................................................................................................................
Morgan Dean Witter 82 3/8 3.80 4.35 4.85 18.9 17.0
...................................................................................................................................
GTE Corporation 60 15/16 2.93 3.10 3.50 19.7 17.4
...................................................................................................................................
Electronic Data Systems 43 1.85 2.15 2.45 20.0 17.6
...................................................................................................................................
SBC Communications 41 7/16 3.55 2.05 2.35 20.2 17.6
...................................................................................................................................
May Department Stores 65 1/4 2.94 3.16 3.45 20.6 18.9
...................................................................................................................................
Mellon Bank 69 3/4 2.90 3.20 3.60 21.8 19.4
...................................................................................................................................
Northern Trust 76 13/16 2.60 3.00 3.45 25.6 22.3
...................................................................................................................................
Progressive Corporation 136 3/16 4.46 5.15 6.10 26.4 22.3
----------------
STRONG SCHAFER VALUE FUND
PORTFOLIO AVERAGES 15.5 13.2
S&P 500 INDEX 1,116.52 45.36 48.26 51.12 23.1 21.8
A=ACTUAL E=ESTIMATE
4
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares or Unit
Principal Average Market Market
Security Amount Unit Cost Value % Change Value
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 98.8%
AEROSPACE & DEFENSE 1.9%
<S> <C> <C> <C> <C> <C>
The Boeing Company 750,000 $ 49.72 $ 52.13 4.85% $ 39,093,750
AGRICULTURAL EQUIPMENT 2.0%
New Holland NV 1,475,000 23.70 27.25 14.98% 40,193,750
AIRLINE 3.7%
FDX Corporation (b) 550,000 48.11 71.13 47.85% 39,118,750
KLM Royal Dutch Airlines 900,800 41.17 40.63 -1.31% 36,595,000
------------
75,713,750
APPAREL MANUFACTURING 1.0%
Burlington Industries, Inc. (b) 1,159,400 12.15 17.56 44.53% 20,361,963
AUTO & TRUCK PARTS 5.6%
Borg-Warner Automotive, Inc. 611,000 38.66 64.13 65.88% 39,180,375
Cummins Engine Company, Inc. 640,000 50.86 55.13 8.40% 35,280,000
The Goodyear Tire & Rubber Company 502,200 53.54 75.75 41.48% 38,041,650
------------
112,502,025
AUTOMOBILE & TRUCKS 2.8%
Ford Motor Company 646,500 35.62 64.81 81.95% 41,901,281
PACCAR, Inc. 241,500 41.19 59.56 44.60% 14,384,344
------------
56,285,625
BANKS 11.3%
The Chase Manhattan Corporation 296,600 90.13 134.88 49.65% 40,003,925
Citicorp 275,000 108.08 142.00 31.38% 39,050,000
KeyCorp 900,000 23.52 37.81 60.76% 34,031,250
Mellon Bank Corporation 527,100 31.46 63.50 101.84% 33,470,850
National Bank of Canada 2,090,000 12.27 18.93 54.28% 39,554,874
NationsBank Corporation 420,000 61.84 72.94 17.95% 30,633,750
Northern Trust Corporation 159,400 38.75 74.75 92.90% 11,915,150
------------
228,659,799
BROKERAGE 5.2%
Kansas City Southern Industries, Inc. 1,000,000 37.16 44.00 18.41% 44,000,000
Morgan Stanley, Dean Witter & Company 460,000 40.15 72.88 81.52% 33,522,500
Paine Webber Group, Inc. 675,000 13.71 40.13 192.71% 27,084,375
------------
104,606,875
BUILDING MATERIALS 5.8%
Lafarge Corporation 979,600 22.51 38.38 70.50% 37,592,150
Owens Corning 1,240,000 35.64 35.94 0.84% 44,562,500
Southdown, Inc. 510,000 37.43 69.69 86.19% 35,540,625
------------
117,695,275
COMPUTER EQUIPMENT & SERVICE 3.7%
Electronic Data Systems Corporation 796,500 37.26 45.88 23.13% 36,539,438
Storage Technology Corporation (b) 503,200 40.69 76.06 86.93% 38,274,650
------------
74,814,088
ELECTRIC UTILITIES 3.0%
Kansas City Power & Light Company 910,000 31.38 31.50 0.38% 28,665,000
Western Resources, Inc. 734,600 34.54 42.75 23.77% 31,404,150
------------
60,069,150
ELECTRONIC EQUIPMENT & DISTRIBUTION 6.5%
Arrow Electronics, Inc. (b) 1,170,000 29.57 27.06 -8.49% 31,663,125
Avnet, Inc. 600,000 56.16 57.56 2.49% 34,537,500
Philips Electronics NV ADR 510,000 45.90 73.44 60.00% 37,453,125
Tektronix, Inc. 642,850 29.97 44.63 48.92% 28,687,181
------------
132,340,931
FOOD 1.6%
IBP, Inc. 1,428,300 23.96 22.44 -6.34% 32,047,481
5
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares or Unit
Principal Average Market Market
Security Amount Unit Cost Value % Change Value
- --------------------------------------------------------------------------------------------------------------------------
HOUSING RELATED 6.6%
<S> <C> <C> <C> <C> <C>
Armstrong World Industries, Inc. 403,500 $68.59 $ 86.56 26.20% $ 34,927,969
Champion Enterprises, Inc. (b) 1,353,800 16.83 26.69 58.59% 36,129,537
D.R. Horton, Inc. 308,400 19.13 21.25 11.08% 6,553,500
Harman International Industries, Inc. 834,000 39.25 44.00 12.10% 36,696,000
Lennar Holmes, Inc. 137,700 21.03 34.44 63.77% 4,742,044
Singer Company NV 1,246,600 18.28 10.56 -42.23% 13,167,212
Toll Brothers, Inc. (b) 60,000 26.82 28.13 4.88% 1,687,500
--------------
133,903,762
INSURANCE 7.2%
W.R. Berkley Corporation 762,100 33.68 47.38 40.68% 36,104,488
LaSalle Re Holdings, Ltd. 560,400 24.32 41.94 72.45% 23,501,775
Old Republic International Corporation 816,000 24.55 44.31 80.49% 36,159,000
PartnerRe, Ltd. 720,000 40.11 49.13 22.49% 35,370,000
The Progressive Corporation 111,000 39.55 134.69 240.56% 14,950,312
--------------
146,085,575
LEISURE PRODUCT 1.8%
Callaway Golf Company 1,262,000 28.98 29.00 0.07% 36,598,000
MACHINERY 1.9%
Harnischfeger Industries, Inc. 1,100,000 38.18 34.19 -10.45% 37,606,250
METALS & MINING 4.7%
Cleveland-Cliffs, Inc. (c) 577,600 42.94 53.75 25.17% 31,046,000
Inco, Ltd. 1,870,000 20.29 18.69 -7.93% 34,945,625
UCAR International, Inc. (b) 910,000 39.72 31.38 -21.00% 28,551,250
--------------
94,542,875
OIL 7.4%
Phillips Petroleum Company 750,000 47.94 49.94 4.17% 37,453,125
Repsol SA Sponsored ADR 770,000 42.44 50.88 19.89% 39,173,750
Sun Company, Inc. 870,000 41.40 40.88 -1.26% 35,561,250
Ultramar Diamond Shamrock Corporation 1,060,000 30.18 35.25 16.80% 37,365,000
--------------
149,553,125
OIL WELL EQUIPMENT & SERVICE 4.1%
Diamond Offshore Drilling, Inc. 900,000 40.83 45.38 11.14% 40,837,500
R & B Falcon Corporation (b) 1,400,000 22.46 29.63 31.92% 41,475,000
--------------
82,312,500
PAPER & FOREST PRODUCTS 1.4%
Asia Pulp & Paper Company, Ltd. ADR 1,929,800 10.31 14.88 44.33% 28,705,775
POLLUTION CONTROL 1.8%
Philip Services Corporation (b) 3,550,000 14.40 10.44 -27.50% 37,053,125
RAILROAD 1.9%
Burlington Northern Santa Fe Corporation 366,500 86.81 104.00 19.80% 38,116,000
RETAIL - DEPARTMENT STORE 1.9%
May Department Stores Company 599,900 46.07 63.50 37.83% 38,093,650
RETAIL - SPECIALTY 0.5%
Fabri-Centers of America, Inc. Class A (b) 12,500 23.86 31.13 30.47% 389,063
Fabri-Centers of America, Inc. Class B (b) 356,500 21.73 26.75 23.10% 9,536,375
--------------
9,925,438
TELECOMMUNICATIONS 3.5%
GTE Corporation 637,000 46.32 59.88 29.27% 38,140,375
SBC Communications, Inc. 732,000 26.68 43.63 63.53% 31,933,500
--------------
70,073,875
- --------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $1,596,236,194) 1,996,954,412
- --------------------------------------------------------------------------------------------------------------------------
6
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Market
Security Amount Value
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 1.1%
COMMERCIAL PAPER
INTEREST BEARING 1.1%
American Express Company:
<S> <C> <C>
5.69%, Due 4/01/98 $ 9,000,000 $ 9,000,000
5.75%, Due 4/02/98 13,300,000 13,300,000
--------------
22,300,000
INTEREST BEARING, DUE UPON DEMAND 0.0%
General Mills, Inc., 5.29% 19,809 19,809
Johnson Controls, Inc., 5.29% 353,267 353,267
Sara Lee Corporation, 5.29% 399,730 399,730
--------------
772,806
- --------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $23,072,806) 23,072,806
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES 99.9% (COST $1,619,309,000) 2,020,027,218
Other Assets & Liabilities, Net 0.1% 1,080,974
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $2,021,108,192
==========================================================================================================================
LEGEND
- --------------------------------------------------------------------------------------------
(a) Short-term investments include any security which has a maturity of less than one year.
(b) Non-income producing security.
(c) Affiliated issuer (See Note 7 of notes to financial statements).
See notes to financial statements.
7
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------
March 31, 1998 (Unaudited)
ASSETS:
<S> <C>
Investments in Securities, at Market Value (Cost of $1,619,309,000) $2,020,027,218
Dividends and Interest Receivable 2,110,026
Receivable from Fund Shares Sold 1,246,806
Other Assets 51,767
--------------
Total Assets 2,023,435,817
LIABILITIES:
Payable for Fund Shares Redeemed 417,399
Due to Investment Advisor 1,584,165
Accrued Operating Expenses and Other Liabilities 326,061
--------------
Total Liabilities 2,327,625
--------------
NET ASSETS $2,021,108,192
==============
NET ASSETS CONSIST OF:
Capital Stock (250,000,000 shares authorized, $.10 par value) $ 2,879,201
Paid-in Capital 1,576,937,985
Undistributed Net Investment Income 1,539,512
Undistributed Net Realized Gain 39,033,261
Net Unrealized Appreciation 400,718,233
--------------
Net Assets $2,021,108,192
==============
Capital Shares Outstanding 28,792,010
NET ASSET VALUE PER SHARE $70.20
======
</TABLE>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the Six Months Ended March 31, 1998 (Unaudited)
INCOME:
Dividends $ 13,780,534
Interest 855,181
------------
Total Income 14,635,715
EXPENSES:
Investment Advisory Fees 7,806,099
Custodian Fees 22,796
Shareholder Servicing Costs 1,252,858
Other 518,131
------------
Total Expenses 9,599,884
------------
NET INVESTMENT INCOME 5,035,831
REALIZED AND UNREALIZED GAIN:
Net Realized Gain on Investments 47,565,033
Change in Unrealized Appreciation/Depreciation on Investments 96,563,858
------------
NET GAIN 144,128,891
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $149,164,722
============
8
See notes to financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPT. 30, 1997
---------------- --------------
(UNAUDITED)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 5,035,831 $ 6,467,778
Net Realized Gain 47,565,033 33,191,786
Change in Unrealized Appreciation/Depreciation 96,563,858 266,090,855
-------------- --------------
Increase in Net Assets Resulting from Operations 149,164,722 305,750,419
DISTRIBUTIONS:
From Net Investment Income (8,010,474) (4,149,409)
From Net Realized Gains (38,211,006) (13,812,350)
-------------- --------------
Total Distributions (46,221,480) (17,961,759)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 809,149,339 856,205,901
Proceeds from Reinvestment of Distributions 44,633,160 17,495,106
Payment for Shares Redeemed (253,136,177) (233,352,907)
-------------- --------------
Increase in Net Assets from Capital Share Transactions 600,646,322 640,348,100
-------------- --------------
TOTAL INCREASE IN NET ASSETS 703,589,564 928,136,760
NET ASSETS:
Beginning of Period 1,317,518,628 389,381,868
-------------- --------------
End of Period $2,021,108,192 $1,317,518,628
============== ==============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 12,386,923 15,163,183
Issued in Reinvestment of Distributions 712,307 340,173
Redeemed (3,886,958) (4,159,413)
---------- ----------
Net Increase in Shares of the Fund 9,212,272 11,343,943
========== ==========
9
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
March 31, 1998 (Unaudited)
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.
(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.
Foreign denominated assets may involve greater risks than domestic
transactions, including currency, political and economic, regulatory and
market risks.
(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. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected
as a component of such gains or losses.
(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 $7,500.
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 six months ended March 31, 1998
were $9,250.
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
approval of the Fund's shareholders, will cause the LLC to become the
investment advisor to the Fund. The LLC Agreement further provides that the
Advisor and Strong shall be members of the LLC, with the Advisor as the
managing member, and grants to Strong an option to 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 is expected to remain the same.
5. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investment securities (excluding cash
equivalents) during the six months ended March 31, 1998 were $821,788,995
and $273,371,979, respectively.
6. INCOME TAX INFORMATION
At March 31, 1998, the cost of investments in securities for federal income
tax purposes was $1,619,817,297. Net unrealized appreciation of securities
was $400,209,921, consisting of gross unrealized appreciation and
depreciation of $454,309,567 and $54,099,646, respectively.
7. INVESTMENTS IN AFFILIATES
Affiliated issuers, as defined under the Investment Company Act of 1940,
include those in which the Fund's holdings of an issuer represent 5% or more
of the outstanding voting securities of the issuer, and any other Strong
Fund. A summary of transactions in the securities of these issuers during
the period ended March 31, 1998 is as follows:
<TABLE>
<CAPTION>
BALANCE OF GROSS GROSS SALES BALANCE OF VALUE DIVIDEND INCOME
SHARES HELD PURCHASES AND SHARES HELD MARCH 31, OCT. 1, 1997 -
OCT. 1, 1997 AND ADDITIONS REDUCTIONS MARCH 31, 1998 1998 MARCH 31, 1998
------------ ------------- ----------- -------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cleveland-Cliffs, Inc. 500,300 77,300 -- 577,600 $31,046,000 $374,758
</TABLE>
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
Year Ended of Period Income Investments Operations Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mar. 31, 1998(c) $67.29 $0.18 $ 4.76 $ 4.94 ($0.35) ($1.68) ($2.03) $70.20
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>
<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
Year Ended Return Thousands) Net Assets Net Assets Rate Paid(b)
<S> <C> <C> <C> <C> <C> <C>
Mar. 31, 1998(c) +9.9% $2,021,108 1.2%* 0.6%* 17.5% $0.0643
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%
* Calculated on an annualized basis.
(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.
(c) For the six months ended March 31, 1998 (Unaudited). Total return and portfolio turnover rate are not
annualized.
</TABLE>
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. 7661D98 98SVAL
