[STRONG LOGO]
THE STRONG
SCHAFER VALUE FUND
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT o MARCH 31, 1999
[PICTURE OF STRONG FUNDS BUILDING]
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Strong Investor,
As I review this past year, I can't help but conclude that we are living in
one of the most remarkable eras in modern history. In many ways, it is a Golden
Age of prosperity, with constantly improving living standards, virtually full
employment, and enormous cultural vitality.
Our golden era is primarily driven by the spirit of capitalism, which has
resulted in real economic growth of better than 3%, negligible inflation, and
the lowest unemployment rates in a quarter of a century. Things have rarely
looked so good. My advice: Enjoy it, but remember that good times have a way of
disappearing. Almost overnight.
Not everything in the world is coming up roses. As the fighting in Kosovo
demonstrates, conflict still looms large in the world. Kosovo illustrates just
how delicate the balance is between individual nations and their economies. And
it serves as a constant reminder that everything in life--economies included--is
cyclical.
While the U.S. market has been strong, not every security has shared in the
good times. What we are experiencing today--to borrow a Wall Street phrase--is a
two-tiered market. That is, a market with big differences between the "have" and
"have not" stocks. Close to 70% of stocks out there are still down 20% or more
from their tops, while a precious small percentage are near their historical
highs.
In plain English, today's market has one piece that may be over-valued, and
another piece that appears to be undervalued.
A family's investment portfolio has to distinguish between a careful
strategy and just "playing the market." A serious investor needs to realize that
some stock valuations are at extreme highs and that diversification is more
important than ever. In addition to blue chip and other large-cap stocks, fixed
income products (like long-term bonds) are very attractive and provide an
excellent vehicle for diversifying a portfolio.
(And, although currently out of favor with investors, small- and mid-cap
stocks will rise again. If you buy the idea that markets are cyclical, these
stocks could be an excellent place to invest over the next few years).
Likewise, value investing--the art of buying undervalued companies--is also
out of favor. Value stocks have already been through a pretty severe correction,
and by investing in them now, you can help protect yourself when large-cap and
technology stocks retreat.
At Strong, we're in business to help you achieve your financial goals. Our
Strong Advisor program works with shareholders to build a long term investment
program through balance.
The markets are made up of millions of pieces of input--facts, opinions,
trends, tips, dreams, emotions, speculation, and an abundance of good
old-fashioned hunches. There is also a good deal of wisdom built into the
markets. Some of this wisdom gets distorted over the short-term. Long-term,
however, the essential truth of the investment process emerges. Our job is to
help you maneuver through the clutter and emotion in the marketplace and find
that truth.
Give us a call. We're here to help.
/s/Dick
<PAGE>
THE STRONG
SCHAFER VALUE
FUND
--------
SEMI-ANNUAL REPORT o MARCH 31, 1999
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Schafer Value Fund ...................................2
FINANCIAL INFORMATION
Schedule of Investments .........................................5
Statement of Assets and Liabilities .............................7
Statement of Operations .........................................7
Statements of Changes in Net Assets .............................8
Notes to Financial Statements ...................................9
FINANCIAL HIGHLIGHTS ................................................12
<PAGE>
===============
THE STRONG SCHAFER VALUE FUND
- -----------------------------------===============------------------------------
FUND
HIGHLIGHTS
o For the six months ended March 31, 1999, the Strong Schafer Value Fund
returned 4.45%, compared to the 27.34% gain registered by the S&P 500 Stock
Index (S&P 500).*
o In February and March, the Fund generally bought larger-cap stocks where
earnings growth prospects seemed particularly good. These stocks replaced
some of the portfolio's mid-cap stocks with more clouded earnings
prospects.
o The Fund's holdings in the energy sector were adversely affected by the
decline in the price of oil during much of the reporting period.
- ---------------------------------------
AVERAGE ANNUAL
TOTAL RETURN(1)
As of 3-31-99
1-year -25.83%
5-year 11.32%
10-year 13.76%
Since Inception 13.39%
(on 10-22-85)
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FIVE LARGEST
STOCK HOLDINGS
As of 3-31-99
SECURITY % OF NET ASSETS
- ---------------------------------------
Cadence Design Systems, Inc. 3.1%
Maytag Corporation 3.0%
Diebold, Inc. 2.9%
Omnicare, Inc. 2.9%
Koninklijke Philips Electronics NV 2.8%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGER
/s/ David K. Schafer
David K. Schafer
Portfolio Manager
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While we continue to rigidly adhere to our longstanding policy of holding only
stocks that have both P/E multiples below those of the S&P 500 and
earnings-per-share growth prospects that appear greater than those of the S&P
500, we have made more than the normal number of changes to the portfolio over
the last six weeks. These changes were made primarily because the mid-cap stocks
we have been increasingly investing in over the past two years have dramatically
lagged the S&P 500. Our overriding goal in making these portfolio changes was to
attempt to bring the future investment results back in line with those we have
achieved over the past 25 years.
We slightly shifted our emphasis in two ways: we reduced the weighting in
mid-cap stocks, and placed a greater emphasis on companies with a strong
potential for making their earnings estimates. Some of the stocks that we have
sold and their industries (in parentheses) include Asia Pulp & Paper (Forest
Products), W.R. Berkeley (Insurance), and Western Resources (Electric Utility).
Stocks that we added to the portfolio include Allstate Corp. (Insurance),
Cadence Design (Computer Software), and Sears (Retail).
As shareholders of the Strong Schafer Value Fund are painfully aware, value
investing has been tough sledding for the past year and a half, and until the
extremely narrowly focused stock market broadens out, value investing
-------------------------------------
AS SHAREHOLDERS OF
THE STRONG SCHAFER
VALUE FUND ARE
PAINFULLY AWARE,
VALUE INVESTING
HAS BEEN TOUGH
SLEDDING FOR THE
PAST YEAR AND A HALF.
-------------------------------------
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* The S&P 500 is an unmanaged index generally representative of the U.S. stock
market. 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 Inc.
2
<PAGE>
will continue to be an uphill struggle. However, we remain convinced that it is
a question of "when" and not "if" our approach will return to favor. These
out-of-favor periods such as the one we have recently experienced, are not new
to value investors (or those of any other investment style), and hardly a period
of five years goes by without value being out of sync with the overall market.
What is different this time is the disparity of returns relative to the S&P 500.
Over the coming months, the changes we have made in the portfolio will,
hopefully, coincide with a broadening in the stock market. When this fundamental
change occurs, we believe that the portfolio will be well positioned to benefit
from a more-inclusive stock market. Therefore, we encourage all investors not to
abandon value investing.
Thank you for your confidence in the Strong Schafer Value Fund.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 3-31-89 to 3-31-99
[GRAPH]
THE STRONG Lipper Growth
SCHAFER VALUE S&P 500 and Income
FUND Index* Funds Index*
3-89 10,000 10,000 10,000
3-90 11,328 11,927 11,286
3-91 12,873 13,646 12,444
3-92 15,302 15,152 13,897
3-93 18,859 17,460 16,155
3-94 21,239 17,717 16,916
3-95 22,653 20,475 18,745
3-96 29,087 27,048 24,142
3-97 34,710 32,410 28,014
3-98 48,942 47,967 38,940
3-99 36,300 56,821 40,543
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of 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 will vary, and you may have a gain or
loss when you sell shares.
- --------------------------------------------------------------------------------
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, and is not annualized.
YOUR FUND'S
APPROACH
THE STRONG SCHAFER VALUE FUND USES A STRICT VALUE APPROACH. THIS DISCIPLINE IS
APPLIED TO BOTH BUYING AND SELLING. TO AVOID PERSONAL BIAS, EACH STOCK IS
PROPORTIONED EQUALLY IN THE FUND WHEN PURCHASED. THE PRICE PAID FOR A COMPANY,
RELATIVE TO ITS PROFITS, MUST BE BELOW THE AVERAGE OF THE S&P 500. STOCKS ARE
GENERALLY SOLD WHEN THEY BECOME "EXPENSIVE" RELATIVE TO THE S&P 500. THE COMPANY
ALSO MUST HAVE GOOD PROSPECTS FOR INCREASING PROFITS. THE MANAGER'S FOCUS IS TO
SCRUTINIZE THESE PROSPECTS CAREFULLY. THE FUND USES THIS APPROACH TO PURSUE
LONG-TERM CAPITAL APPRECIATION THROUGH INVESTMENTS IN STOCKS.
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MARKET
HIGHLIGHTS
o The healthy U.S. economy, coupled with foreign capital inflows from many
trouble spots, contributed to the strong performance of the large-cap
dominated S&P 500 during the past six months.
o The S&P 500's returns continued to mask an important divergence in the
market. Small- and mid-cap stocks, particularly those in the value camp,
continued to lag while market narrowing continued. Last year, 15 large-cap
stocks (or 7.5% of the stocks in the Index) accounted for over 51% of the
gain in the S&P 500. In the first quarter of 1999, 18 stocks (or 9% of the
total) accounted for 100% of the gain in the S&P 500.
o Asian economic troubles that started during the second half of 1997 seemed
to be moderating and having less negative impact on our economy and stock
market.
3
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<TABLE>
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PORTFOLIO HOLDINGS, EARNINGS PER SHARE ESTIMATES, AND PRICE/EARNINGS RATIOS AS OF 3-31-99 (UNAUDITED)
=====================================================================================================
<CAPTION>
CLOSING PRICE EARNINGS PER SHARE PRICE/EARNINGS RATIO
SECURITY (3-31-99) 1999E 2000E 1999E 2000E
<S> <C> <C> <C> <C> <C>
Allstate Corp $ 37.06 3.28 3.52 11.3 10.5
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Armstrong World Inds Inc 45.19 5.85 6.58 7.7 6.9
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Arrow Electrs Inc 15.00 1.61 1.98 9.3 7.6
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Avnet Inc 36.63 3.50 4.07 10.5 9.0
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BankAmerica Corp New 70.63 4.68 5.48 15.1 12.9
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Borg-Warner Automotive 47.81 4.88 5.56 9.8 8.6
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Burlington Northern Santa Fe 32.88 2.60 2.92 12.6 11.2
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Cadence Design System Inc 25.75 1.41 1.70 18.3 15.2
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Canadian Natl Ry Co 55.63 4.67 5.50 11.9 10.1
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Chase Manahattan Corp New 81.31 5.18 5.77 15.7 14.1
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Chubb Corp 58.56 4.31 4.71 13.6 12.4
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Cleveland Cliffs Inc 34.06 3.80 4.40 9.0 7.7
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DaimlerChrysler AG Ord 85.81 7.17 7.64 12.0 11.2
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Diebold Inc 24.00 1.83 2.07 13.1 11.6
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ECI Telecom Ltd Ord 35.00 2.45 3.03 14.2 11.6
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FDX Corp 92.81 5.29 6.01 17.6 15.5
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Federal Natl Mtg Assn 69.25 3.67 4.12 18.8 15.8
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Ford Mtr Co 56.75 5.31 5.42 10.7 10.5
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Jo-Ann Stores Inc Cl B 10.75 1.73 1.94 6.2 5.5
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Kansas City Pwr & Lt Co 24.63 2.20 2.30 11.2 10.7
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KLM Royal Dutch Airls 27.75 1.73 1.63 16.0 17.0
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Lafarge Corp 28.00 3.49 3.90 8.0 7.2
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Lockheed Martin Corp 37.69 3.39 3.65 11.1 10.3
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May Dept Stores Co 39.13 2.79 3.11 14.0 12.6
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Maytag Corp 60.38 3.63 4.08 16.6 14.8
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Mellon Bk Corp 70.38 3.61 4.04 19.5 17.4
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Merrill Lynch & Co Inc 88.44 4.58 5.00 19.3 17.7
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Northrop Grumman Corp 59.88 6.13 6.60 9.6 9.1
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Omnicare Inc 19.06 1.38 1.74 13.8 10.9
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Paine Webber Group Inc 39.88 2.94 3.17 13.6 12.6
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PartnerRE Ltd 40.50 4.47 4.73 9.1 8.6
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Petroleum Geo-Svcs ADR 15.25 1.23 1.58 12.4 9.6
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Philip Morris Cos 35.19 3.33 3.79 10.6 9.3
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Koninklijke Philips Electrs Sponsored 82.44 4.51 5.97 18.3 13.8
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Raytheon Co Cl B 58.63 3.70 4.13 15.9 14.2
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Sears Roebuck & Co 45.19 3.69 4.09 12.3 11.0
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Southdown Inc 53.69 5.51 6.06 9.7 8.9
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Storage Technology Corp 27.88 2.48 2.94 11.2 9.5
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SLM Hldg Corp 41.75 3.24 3.64 12.9 11.5
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Summit Bancorp 39.00 2.84 3.08 13.7 12.6
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UCAR Intl Inc 14.13 1.92 2.61 7.4 5.4
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Wells Fargo & Co New 35.06 2.22 2.58 15.8 13.6
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STRONG SCHAFER VALUE FUND PORTFOLIO AVERAGES 12.5 11.1
S&P 500 INDEX 1,286.37 42.74 46.32 30.1 27.8
E=ESTIMATE
4
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES MARCH 31,1999 (Unaudited)
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===================================================================================================================
STRONG SCHAFER VALUE FUND
===================================================================================================================
<CAPTION>
Shares or Unit
Principal Average Market Market
Security Amount Unit Cost Value % Change Value
- -------------------------------------------------------------------------------------------------------------------
Common Stocks 99.6%
AEROSPACE & DEFENSE 5.8%
<S> <C> <C> <C> <C> <C>
Lockheed Martin Corporation 670,000 $ 40.50 $37.69 -6.94% $ 25,250,625
Northrop Grumman Corporation 142,200 105.84 59.88 -43.42% 8,514,225
Raytheon Company Class B 460,000 56.25 58.63 4.23% 26,967,500
------------
60,732,350
AIRLINE 2.4%
KLM Royal Dutch Airlines 900,900 41.17 27.75 -32.60% 24,999,975
AIR TRANSPORT 2.6%
FDX Corporation (b) 300,000 38.21 92.81 142.89% 27,843,750
AUTO PARTS 2.7%
Borg-Warner Automotive, Inc. 600,000 38.38 47.81 24.57% 28,687,500
AUTOMOBILE 5.1%
DaimlerChrysler AG (b) 300,000 88.14 85.81 -2.64% 25,743,750
Ford Motor Company 485,000 21.93 56.75 158.78% 27,523,750
------------
53,267,500
BANKS 12.8%
BankAmerica Corporation 385,000 61.11 70.63 15.58% 27,190,625
The Chase Manhattan Corporation 330,000 38.05 81.31 113.69% 26,833,125
Mellon Bank Corporation 385,000 24.69 70.38 185.05% 27,094,375
Summit Bancorp 700,000 39.48 39.00 -1.22% 27,300,000
Wells Fargo Company 730,000 36.85 35.06 -4.86% 25,595,625
------------
134,013,750
BROKERAGE 5.3%
Merrill Lynch & Company, Inc. 310,000 46.78 88.44 89.06% 27,415,625
Paine Webber Group, Inc. 710,000 16.24 39.88 145.57% 28,311,250
------------
55,726,875
CEMENT 4.8%
Lafarge Corporation 837,500 21.31 28.00 31.39% 23,450,000
Southdown, Inc. 506,000 36.58 53.69 46.77% 27,165,875
------------
50,615,875
COMMERCIAL SERVICE 2.9%
Diebold, Inc. 1,255,000 28.86 24.00 -16.84% 30,120,000
COMPUTER EQUIPMENT & SERVICE 2.3%
Storage Technology Corporation (b) 850,000 19.51 27.88 42.90% 23,693,750
COMPUTER SOFTWARE 3.1%
Cadence Design Systems, Inc. (b) 1,250,000 24.05 25.75 7.07% 32,187,500
ELECTRIC UTILITIES 2.6%
Kansas City Power & Light Company 1,120,000 30.93 24.63 -20.37% 27,580,000
ELECTRONIC EQUIPMENT & DISTRIBUTION 7.5%
Arrow Electronics, Inc. (b) 1,549,200 26.91 15.00 -44.26% 23,238,000
Avnet, Inc. 692,600 56.33 36.63 -34.97% 25,366,475
Koninklijke Philips Electronics NV ADR 360,000 37.64 82.44 119.02% 29,677,500
------------
78,281,975
HEALTHCARE - PATIENT CARE 2.9%
Omnicare, Inc. 1,580,000 24.85 19.06 -23.30% 30,118,750
HOUSEHOLD APPLIANCES & FURNISHINGS 3.0%
Maytag Corporation 525,000 56.46 60.38 6.94% 31,696,875
HOUSING RELATED 2.0%
Armstrong World Industries, Inc. 470,600 68.42 45.19 -33.95% 21,265,237
INSURANCE 7.9%
The Allstate Corporation 715,000 39.48 37.06 -6.13% 26,499,687
Chubb Corporation 500,000 62.41 58.56 -6.17% 29,281,250
PartnerRE, Ltd. 670,000 39.47 40.50 2.61% 27,135,000
------------
82,915,937
</TABLE>
5
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) MARCH 31,1999 (Unaudited)
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=======================================================================================================================
STRONG SCHAFER VALUE FUND
=======================================================================================================================
<CAPTION>
Shares or Unit
Principal Average Market Market
Security Amount Unit Cost Value % Change Value
- -----------------------------------------------------------------------------------------------------------------------
METALS & MINING 3.3%
<S> <C> <C> <C> <C> <C>
Cleveland-Cliffs, Inc. (c) 296,100 $ 42.17 $ 34.06 -19.23% $ 10,085,906
UCAR International, Inc. (b) 1,746,900 30.88 14.13 -54.24% 24,674,963
-------------
34,760,869
MORTGAGE & RELATED SERVICE 2.4%
Federal National Mortgage Association 370,000 71.83 69.25 -3.59% 25,622,500
OIL WELL EQUIPMENT & SERVICE 0.6%
Petroleum Geo-Services ADR (b) 392,800 15.99 15.25 -4.63% 5,990,200
PERSONAL & COMMERCIAL LENDING 2.4%
SLM Holding Corporation 600,000 44.15 41.75 -5.44% 25,050,000
RAILROAD 4.4%
Burlington Northern Santa Fe Corporation 820,000 28.13 32.88 16.89% 26,957,500
Canadian National Railway Company 339,500 56.50 55.63 -1.54% 18,884,688
-------------
45,842,188
RETAIL 5.7%
Jo-Ann Stores, Inc. Class B (b) 459,500 20.03 10.75 -46.33% 4,939,625
May Department Stores Company 720,000 29.42 39.13 33.00% 28,170,000
Sears, Roebuck & Company 590,000 46.91 45.19 -3.67% 26,660,625
-------------
59,770,250
TELECOMMUNICATION EQUIPMENT 2.7%
ECI Telecom, Ltd. 800,000 37.51 35.00 -6.69% 28,000,000
TOBACCO 2.4%
Philip Morris Companies, Inc. 730,000 40.30 35.19 -12.68% 25,686,875
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Total Common Stocks (Cost $1,023,495,810) 1,044,470,481
- -----------------------------------------------------------------------------------------------------------------------
Short-Term Investments (a) 1.9%
Commercial Paper
Interest Bearing 1.6%
American Express Company, 5.00%, Due 4/01/99 $17,000,000 100.00 100.00 0.00% 17,000,000
Interest Bearing, Due Upon Demand 0.3%
Sara Lee Corporation, 4.54% 2,892,927 100.00 100.00 0.00% 2,892,927
- -----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $19,892,927) 19,892,927
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Investments in Securities, 101.5% (Cost $1,043,388,737) 1,064,363,408
Other Assets and Liabilities, Net (1.5%) (15,409,577)
- -----------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $1,048,953,831
=======================================================================================================================
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 6 of Notes to Financial Statements).
</TABLE>
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
March 31,1999 (Unaudited)
STRONG SCHAFER
VALUE FUND
--------------
ASSETS:
Investments in Securities, at Market Value
Unaffiliated Issuers (Cost of $1,030,900,889) $1,054,277,502
Affiliated Issuers (Cost of $12,487,848) 10,085,906
Receivable for Securities Sold 24,237,245
Dividends and Interest Receivable 2,129,006
Receivable from Fund Shares Sold 329,581
Other Assets 123,242
--------------
Total Assets 1,091,182,482
LIABILITIES:
Payable for Securities Purchased 41,013,473
Payable for Fund Shares Redeemed 999,887
Accrued Operating Expenses and Other Liabilities 215,291
--------------
Total Liabilities 42,228,651
--------------
NET ASSETS $1,048,953,831
==============
NET ASSETS CONSIST OF:
Capital Stock (250,000,000 shares authorized, $.10 par value) $ 2,027,199
Paid-in Capital 1,136,510,382
Accumulated Net Investment Loss (3,124,910)
Accumulated Net Realized Loss (107,433,511)
Net Unrealized Appreciation 20,974,671
--------------
Net Assets $1,048,953,831
==============
Capital Shares Outstanding 20,271,991
NET ASSET VALUE PER SHARE $51.74
======
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 1999 (Unaudited)
Strong Schafer
Value Fund
--------------
INCOME:
Dividends
Unaffiliated Issuers (net of withholding taxes of $96,001) $ 11,780,817
Affiliated Issuers 530,700
Interest 670,111
------------
Total Income 12,981,628
EXPENSES:
Investment Advisory Fees 6,950,830
Custodian Fees 16,406
Shareholder Servicing Costs 1,712,416
Other 608,194
------------
Total Expenses 9,287,846
------------
NET INVESTMENT INCOME 3,693,782
REALIZED AND UNREALIZED GAIN (Loss):
Net Realized Loss on:
Investments - Unaffiliated Issuers (105,503,589)
Investments - Affiliated Issuers (4,288,417)
------------
Net Realized Loss (109,792,006)
Net Change in Unrealized Appreciation/Depreciation 195,123,489
------------
NET GAIN ON INVESTMENTS 85,331,483
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 89,025,265
============
See Notes to Financial Statements.
7
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Strong Schafer Value Fund
------------------------------------
<CAPTION>
Six Months Ended Year Ended
March 31, 1999 Sept. 30, 1998
-------------- --------------
(Unaudited)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 3,693,782 $ 11,553,761
Net Realized Gain (Loss) (109,792,006) 5,547,326
Net Change in Unrealized Appreciation/Depreciation 195,123,489 (478,303,192)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations 89,025,265 (461,202,105)
DISTRIBUTIONS:
From Net Investment Income (9,533,194) (13,340,621)
From Net Realized Gain on Investments -- (32,880,858)
-------------- --------------
Total Distributions (9,533,194) (46,221,479)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 153,301,284 1,316,428,586
Proceeds from Reinvestment of Distributions 9,181,919 44,633,159
Payment for Shares Redeemed (620,752,969) (743,425,263)
-------------- --------------
Net Increase (Decrease) in Net Assets from Capital Share Transactions (458,269,766) 617,636,482
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS: (378,777,695) 110,212,898
NET ASSETS:
Beginning of Period 1,427,731,526 1,317,518,628
-------------- --------------
End of Period $1,048,953,831 $1,427,731,526
============== ==============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 2,783,005 20,130,827
Issued in Reinvestment of Distributions 159,187 712,307
Redeemed (11,309,011) (11,784,062)
----------- -----------
Net Increase (Decrease) in Shares of the Fund (8,366,819) 9,059,072
=========== ===========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
1. ORGANIZATION
Strong Schafer Value Fund, Inc. (the "Fund") 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, 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 fair value.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
The Fund intends 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 the Fund
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 in these financial statements. 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 premiums and discounts.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
March 31, 1999 (Unaudited)
3. RELATED PARTY TRANSACTIONS
Strong Schafer Capital Management LLC (the "LLC") provides management and
investment advisory services to the Fund. The Investment Advisory Agreement
(the "Advisory Agreement") provides that, subject to the direction of the
Fund's Board of Directors, the LLC is responsible for the management of the
Fund's portfolio. The LLC 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 Advisory Agreement. The Advisory Agreement provides for a monthly fee
computed at an annual rate of 1.0% of the Fund's average daily net assets.
Investment advisory fees payable to the LLC at March 31, 1999 were $193.
Unaffiliated directors' fees paid during the six months ended March 31,
1999 were $22,500.
In September, 1997, Schafer Capital Management, Inc. ("Schafer") and Strong
Capital Management, Inc. ("Strong") entered into a Limited Liability
Company Agreement (the "LLC Agreement") forming the LLC. The LLC Agreement
provides that Schafer and Strong shall be members of the LLC, with Schafer
as the managing member, and grants to Strong an option to purchase
Schafer's interest in the LLC. This option is first exercisable on January
10, 2001, or earlier in the event of certain other circumstances, subject
to obtaining necessary regulatory approvals, including approval of the
Fund's shareholders. As managing member of the LLC, Schafer will provide
ongoing management and investment advisory services to the Fund and will
perform all obligations of the LLC under the investment advisory agreement
between the Fund and the LLC. These changes do not affect the current
investment approach or philosophy outlined in the Fund's Prospectus.
Schafer, 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. Moreover, the investment
advisory fee rate payable by the Fund to the LLC under the investment
advisory agreement is the same.
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. Fund
accounting service fees paid to Strong for the six months ended March 31,
1999 were $50,208. Shareholder recordkeeping and related service fees are
based upon contractually established rates for each open and closed
shareholder account. Shareholder recordkeeping and related service fees
payable to Strong at March 31, 1999 were $152,246. 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, 1999 were $9,831.
Pursuant to a distribution agreement, Strong Investments, Inc., an indirect
subsidiary of Strong, has agreed to act at the request of the Fund and the
LLC 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.
4. INVESTMENT TRANSACTIONS
Aggregate purchases and proceeds from sales of investment securities
(excluding short-term investments) during the six months ended March 31,
1999 were $529,222,066 and $985,595,795, respectively.
5. INCOME TAX INFORMATION
At March 31, 1999, the cost of investments in securities for federal income
tax purposes was $1,045,247,250. Net unrealized appreciation of securities
was $19,116,158, consisting of gross unrealized appreciation and
depreciation of $158,953,556 and $139,837,398, respectively.
10
<PAGE>
- --------------------------------------------------------------------------------
6. INVESTMENTS IN AFFILIATES
Affiliated issuers, as defined under the Investment Company Act of 1940,
include those in which the Fund's holdings represent 5% or more of the
outstanding voting securities of the issuer. A summary of transactions in
the securities of these issuers during the six months ended March 31, 1999
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, 1998 -
Oct. 1, 1998 and Additions Reductions March 31, 1999 1999 March 31, 1999
------------ ------------- ---------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cleveland-Cliffs, Inc. 577,600 -- 281,500 296,100 $10,085,906 $433,200
Harman International Industries, Inc. 1,030,000 -- 1,030,000 -- -- 97,500
</TABLE>
7. SPECIAL MEETING OF SHAREHOLDERS
At a shareholder meeting held on October 15, 1998, in Princeton, NJ,
shareholders (1) elected a new Board of Directors, (2) approved the
adoption of a new investment advisory agreement between the LLC and the
Fund (prior to such meeting Schafer was the advisor to the Fund, now
Schafer is the LLC's Managing Member - see Note 3), and (3) ratified the
appointment of PricewaterhouseCoopers LLP as independent auditors of the
Fund.
Strong Shafer Value Fund
Shares Voted 17,093,447.995
---------------------------------------
Proposals Affirmative Withhold
- --------- ----------- --------
1. Election of Directors
David K. Schafer 98.590% 1.410%
Timothy C. Collins 98.375 1.625
Mary P. English 98.373 1.627
Phillip P. Young 98.624 1.376
Affirmative Against Abstain
----------- ------- -------
2. Adopt Advisory Agreement 96.322% 1.850% 1.828%
3. Ratify Selection of Auditors 97.814 1.048 1.138
11
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
STRONG SCHAFER VALUE FUND
- --------------------------------------------------------------------------------------------------------------------------------
Period Ended
-------------------------------------------------------------------
<CAPTION>
March 31, Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $49.85 $67.29 $47.28 $43.46 $36.54 $36.21
Income From Investment Operations
Net Investment Income 0.12 0.40 0.39 0.47 0.36 0.26
Net Realized and Unrealized Gains (Losses) on Investments 2.13 (15.81) 21.48 5.00 8.53 1.34
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.25 (15.41) 21.87 5.47 8.89 1.60
Less Distributions
From Net Investment Income (0.36) (0.59) (0.43) (0.38) (0.33) (0.19)
From Net Realized Gains -- (1.44) (1.43) (1.27) (1.64) (1.08)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (2.03) (1.86) (1.65) (1.97) (1.27)
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $51.74 $49.85 $67.29 $47.28 $43.46 $36.54
================================================================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Total Return +4.5% -23.5% +47.5% +13.0% +26.0% +4.4%
Net Assets, End of Period (In Millions) $1,049 $1,428 $1,318 $389 $163 $68
Ratio of Expenses to Average Net Assets 1.3%* 1.2% 1.2% 1.3% 1.3% 1.5%
Ratio of Net Investment Income to Average Net Assets 0.5%* 0.7% 0.8% 1.2% 1.2% 1.0%
Portfolio Turnover Rate 39.2% 39.0% 22.5% 17.8% 33.2% 28.5%
</TABLE>
* Calculated on an annualized basis
(a) Information presented relates to a share of capital stock of the Fund.
(b) For the six months ended March 31, 1999 (Unaudited).
See Notes to Financial Statements.
12
<PAGE>
DIRECTORS
David K. Schafer
Timothy C. Collins
Mary P. English
Phillip P. Young
OFFICERS
David K. Schafer, President
James P. Cullen, Vice President
Brendan J. Spillane, Secretary and Treasurer
Thomas P. Lemke, Assistant Vice President
John S. Weitzer, Assistant Secretary
INVESTMENT ADVISOR
Strong Schafer Capital Management, LLC
P.O. Box 8808, Princeton, NJ 08540
DISTRIBUTOR
Strong Investments, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Bank Milwaukee, N.A.
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Sidley & Austin
1 First National Plaza, Chicago, IL 60603
<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.strongfunds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds Distributors, Inc. 11583E99 SSVAL
