<PAGE>
- -------------------------------------------------------------------------------
THE STRONG
SCHAFER VALUE FUND II
ANNUAL REPORT * DECEMBER 31, 1997
[PIE CHART OF ASSET DIVERSIFICATION EMPHASIZING STOCKS]
[STRONG FUNDS LOGO]
STRONG FUNDS
<PAGE>
- -------------------------------------------------------------------------------
THE STRONG SCHAFER
VALUE FUND II
ANNUAL REPORT * DECEMBER 31, 1997
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Schafer Value Fund II.........................................2
FINANCIAL INFORMATION
Schedule of Investments in Securities....................................5
Statement of Assets and Liabilities......................................6
Statement of Operations..................................................7
Statement of Changes in Net Assets.......................................8
Notes to Financial Statements............................................9
FINANCIAL HIGHLIGHTS.........................................................11
REPORT OF INDEPENDENT ACCOUNTANTS............................................12
[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936 * Milwaukee, Wisconsin 53201
Strong Funds are offered by prospectus only. 6962A98
<PAGE>
THE STRONG SCHAFER VALUE FUND II
AS WE LOOK FORWARD TO 1998, WE REMAIN FULLY COMMITTED TO OUR VALUE INVESTMENT
PHILOSOPHY.
The Strong Schafer Value Fund II invests in common stocks with the primary goal
of long-term capital appreciation with current income being an important, but
secondary, objective.
PERFORMANCE
Overall 1997 was a good year for U.S. stocks. As measured by the S&P 500
Index*, the stock market gained 33.36% through December 31, 1997. However, the
economic slowdowns and currency crises that spread through Asia late in the
year led to a sharp selloff in global markets, and to a lesser extent in the
U.S. market, in the fourth quarter.
The problems in Asia had a negative impact on the Fund's holdings of foreign
stocks (just over 15% at year end) and U.S. companies with substantial business
interests worldwide. While our selective investments in technology issues
performed well during this period, the Fund's holdings in consumer cyclical,
capital equipment, and basic materials sectors suffered.
For the period since the Strong Schafer Value Fund II's inception on October
10, 1997 through year end, the Fund posted a slight loss of 0.81% (1) compared
with a small gain of 0.72% on the S&P 500 over the same period. The S&P 500
Index is the benchmark against which the Fund is measured.
A PATIENT, DISCIPLINED PROCESS
As we look forward to 1998, we remain fully committed to our value investment
philosophy. We will continue our search for stocks whose price/earnings
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. At year end we owned 30 stocks, but
as the Fund grows larger we intend to further diversify the portfolio so it
more closely models the Strong Schafer Value Fund, which holds about 55 stocks.
Our disciplined buy-and-sell process should also result in a low turnover of
securities within the Fund--in the range of 20 to 25% annually. Under normal
conditions, at least half of the Fund's securities would be held for the entire
year.
2
<PAGE>
GROWTH OF THE FUND
The Strong Schafer Value Fund II's assets grew to over $700,000 in the few
months since its inception, and we have invested 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.
OUR 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 15.2 times our estimate of 1997 earnings-- significantly below the
S&P 500's estimated price/earnings ratio of 21.4. We believe the Fund's
holdings will show earnings-per-share growth of more than 12.6% in 1998, while
the consensus estimate of earnings growth for the S&P 500 during the same
period is 6.6%.
Thank you for your investment in the Strong Schafer Value Fund II. We
appreciate your confidence in our investment approach.
Sincerely,
/s/ David K. Schafer
David K. Schafer
Portfolio Manager
[PHOTO OF DAVID K. SCHAFER]
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 10-10-97 to 12-31-97
[GRAPH]
THE STRONG SCHAFER LIPPER GROWTH AND
VALUE FUND II S & P 500 INDEX INCOME FUNDS INDEX
9-97 10,000 10,000 10,000
10-97 9,580 9,464 9,775
11-97 9,670 9,902 10,048
12-97 9,919 10,072 10,217
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, 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.
===============================================================================
===============================
TOTAL RETURN(1)
As of 12-31-97
===============================
SINCE INCEPTION -0.81%
(on 10-10-97)
===============================
- -------------------------------------------------------------------------------
* 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 Total return is not annualized and measures aggregate change in the value of
an investment in the Fund, assuming reinvestment of dividends. The Fund's
returns include the effect of deducting the Fund's expenses, but do not
include charges and expenses attributable to any particular insurance
product. Including such insurance fees and expenses in the Fund's return
quotations has the effect of decreasing the performance quoted.
3
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================
PORTFOLIO HOLDINGS, EARNINGS PER SHARE ESTIMATES, AND PRICE/EARNINGS RATIOS AS OF 1-20-98 (UNAUDITED)
=====================================================================================================
CLOSING PRICE EARNINGS PER SHARE PRICE/EARNINGS RATIO
SECURITY (1-20-98) 1996A 1997E 1998E 1997E 1998E
<S> <C> <C> <C> <C> <C> <C>
Owens Corning 28.19 4.65 3.75 3.75 7.5 7.5
............................................................................................................
Cleveland-Cliffs 45.31 5.16 4.40 5.21 10.3 8.7
............................................................................................................
New Holland 24.94 1.68 2.59 2.85 9.6 8.8
............................................................................................................
Asia Pulp & Paper 10.75 0.15 0.65 1.10 16.5 9.8
............................................................................................................
Partner Re Ltd 44.81 4.41 4.35 4.50 10.3 10.0
............................................................................................................
UCAR International 38.31 3.00 3.21 3.65 11.9 10.5
............................................................................................................
Borg Warner Auto 53.19 3.27 4.35 4.95 12.2 10.7
............................................................................................................
Philip Services 13.13 0.51 0.90 1.20 14.6 10.9
............................................................................................................
Chase Manhattan 107.19 6.95 8.35 9.70 12.8 11.1
............................................................................................................
Harnischfeger 36.69 2.40 2.90 3.20 12.7 11.5
............................................................................................................
Goodyear Tire & Rubber 63.56 4.45 4.75 5.25 13.4 12.1
............................................................................................................
Lafarge Corp 34.00 1.90 2.50 2.80 13.6 12.1
............................................................................................................
Armstrong World 72.75 5.05 5.20 5.80 14.0 12.5
............................................................................................................
Citicorp 118.69 7.50 8.30 9.50 14.3 12.5
............................................................................................................
Champion Enterprises 20.81 1.43 1.45 1.65 14.4 12.6
............................................................................................................
Old Republic International 39.19 2.33 2.78 3.08 14.1 12.7
............................................................................................................
Arrow Electronics 31.38 1.97 2.05 2.40 15.3 13.1
............................................................................................................
W.R. Berkely 41.13 2.40 2.80 3.10 14.7 13.3
............................................................................................................
R&B Falcon Drilling 32.13 1.13 1.52 2.40 21.1 13.4
............................................................................................................
Repsol 43.94 3.15 2.73 3.27 16.1 13.4
............................................................................................................
Storage Technology 60.81 3.15 3.75 4.35 16.2 14.0
............................................................................................................
IBP Corporation 20.50 2.06 1.31 1.45 15.6 14.1
............................................................................................................
Avnet 63.88 4.31 4.23 4.35 15.1 14.7
............................................................................................................
Western Resources 40.31 2.60 2.45 2.70 16.5 14.9
............................................................................................................
May Department Stores 53.19 3.10 3.10 3.45 17.2 15.4
............................................................................................................
Boeing Company 43.56 1.60 1.05 2.75 41.5 15.8
............................................................................................................
GTE Corporation 50.63 2.89 2.93 3.10 17.3 16.3
............................................................................................................
Federal Express 66.38 2.70 3.50 4.00 19.0 16.6
............................................................................................................
Mellon Bank 59.25 2.58 2.90 3.20 20.4 18.5
............................................................................................................
Electronic Data Systems 42.75 0.84 1.85 2.15 23.1 19.9
..............
S&P 500 INDEX 972.66 45.36 48.37 21.4 20.1
STRONG SCHAFER VALUE FUND PORTFOLIO AVERAGES 90.10 6.24 7.03 15.2 12.9
A=ACTUAL E=ESTIMATE
</TABLE>
4
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
- -------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 99.8%
AEROSPACE & DEFENSE 3.1%
The Boeing Company 450 $22,022
AIRLINE 3.5%
Federal Express Corporation (b) 400 24,425
AUTO & TRUCK PARTS 6.8%
Borg-Warner Automotive, Inc. 500 26,000
The Goodyear Tire & Rubber Company 350 22,269
--------
48,269
BANK - MONEY CENTER 6.7%
Chase Manhattan Corporation 200 21,900
Citicorp 200 25,287
--------
47,187
BANK - SUPER REGIONAL 3.9%
Mellon Bank Corporation 450 27,281
COMPUTER - PERIPHERAL EQUIPMENT 3.5%
Storage Technology Corporation (b) 400 24,775
COMPUTER SERVICE 3.7%
Electronic Data Systems Corporation 600 26,362
ELECTRIC POWER 3.7%
Western Resources, Inc. 600 25,800
ELECTRONIC PARTS DISTRIBUTION 7.0%
Arrow Electronics, Inc. (b) 800 25,950
Avnet, Inc. 350 23,100
--------
49,050
FOOD 2.8%
IBP, Inc. 950 19,891
HOUSING 3.5%
Champion Enterprises, Inc. (b) 1,200 24,675
HOUSING RELATED 6.1%
Armstrong World Industries, Inc. 300 22,425
Owens Corning 600 20,475
--------
42,900
INSURANCE - MULTI-LINE 3.2%
Old Republic International Corporation 600 22,313
INSURANCE - PROPERTY & CASUALTY 7.0%
W.R. Berkley Corporation 550 24,131
Partners RE, Ltd. ADR 550 25,506
--------
49,637
MACHINERY - AGRICULTURE 2.8%
New Holland NV 750 19,828
MACHINERY - MISCELLANEOUS 2.8%
Harnischfeger Industries, Inc. 550 19,422
METALS & MINING 7.0%
Cleveland-Cliffs, Inc. 500 22,906
Lafarge Corporation 900 26,606
--------
49,512
OIL - INTERNATIONAL INTEGRATED 3.0%
Repsol S.A. Sponsored ADR 500 21,281
OIL WELL EQUIPMENT & SERVICE 3.6%
Reading & Bates Corporation (b) 600 25,125
PAPER & FOREST PRODUCTS 2.7%
Asia Pulp & Paper Company, Ltd. ADR 1,900 19,119
POLLUTION CONTROL 3.3%
Philip Services Corporation (b) 1,600 23,000
RETAIL - DEPARTMENT STORE 3.0%
May Department Stores Company 400 21,075
STEEL 3.4%
UCAR International, Inc. (b) 600 23,963
TELEPHONE 3.7%
GTE Corporation 500 26,125
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $700,338) 703,037
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 3.3%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.49% $11,800 11,800
Pitney Bowes Credit Corporation, 5.33% 11,200 11,200
Wisconsin Electric Power Company, 5.49% 100 100
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $23,100) 23,100
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES 103.1% (COST $723,438) 726,137
Other Assets and Liabilities, Net (3.1%) (21,458)
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $704,679
==============================================================================
COUNTRY DIVERSIFICATION
- ------------------------------------------------------------------------------
Percentage of Net Assets
- ------------------------------------------------------------------------------
United States........................................................... 87.5%
Bermuda................................................................. 3.7
Canada.................................................................. 3.3
Spain................................................................... 3.0
Netherlands............................................................. 2.8
Singapore............................................................... 2.7
Other Assets and Liabilities, Net....................................... (3.0)
- ------------------------------------------------------------------------------
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.
Percentages are stated as a percent of net assets.
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
December 31, 1997
ASSETS:
Investments in Securities, at Value (Cost of $723,438) $726,137
Dividends and Interest Receivable 914
Other Assets 3,777
--------
Total Assets 730,828
LIABILITIES:
Payable for Securities Purchased 22,454
Accrued Operating Expenses and Other Liabilities 3,695
--------
Total Liabilities 26,149
--------
NET ASSETS $704,679
========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $704,978
Accumulated Net Realized Loss (2,998)
Net Unrealized Appreciation 2,699
--------
Net Assets $704,679
========
Capital Shares Outstanding (Unlimited Number Authorized) 71,149
NET ASSET VALUE PER SHARE $9.90
=====
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the Period Ended December 31, 1997 (Note 1)
INCOME
Interest $ 874
Dividends 2,010
------
Total Income 2,884
EXPENSES:
Investment Advisory Fees 1,310
Custodian Fees 35
Shareholder Servicing Costs 175
Legal Fees 325
Directors' Fees 102
Other 47
------
Total Expenses 1,994
------
NET INVESTMENT INCOME 890
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Loss on Investments (2,998)
Change in Unrealized Appreciation/Depreciation on Investments 2,699
------
NET LOSS (299)
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 591
======
See notes to financial statements.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
DEC. 31, 1997
-------------
(NOTE 1)
OPERATIONS:
Net Investment Income $ 890
Net Realized Loss (2,998)
Change in Unrealized Appreciation/Depreciation 2,699
--------
Increase in Net Assets Resulting from Operations 591
DISTRIBUTIONS:
From Net Investment Income (890)
In Excess of Net Investment Income (426)
--------
Total Distributions (1,316)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 705,151
Proceeds from Reinvestment of Dividends 1,316
Payment for Shares Redeemed (1,063)
--------
Increase in Net Assets from Capital Share Transactions 705,404
--------
TOTAL INCREASE IN NET ASSETS 704,679
NET ASSETS:
Beginning of Period --
--------
End of Period $704,679
========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 71,125
Issued in Reinvestment of Dividends 136
Redeemed (112)
------
Net Increase in Shares of the Fund 71,149
======
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
December 31, 1997
1. ORGANIZATION
The Strong Schafer Value Fund II commenced operations on October 10, 1997,
and is a diversified series of the Strong Variable Insurance Funds, Inc., an
open-end management investment company registered under the Investment
Company Act of 1940. The Fund offers and sells its shares only to separate
accounts of insurance companies for the purpose of funding variable annuity
and variable life insurance contracts.
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 -- Securities of the Fund are valued through
valuations obtained from a commercial pricing service or the mean of the
bid and asked prices, when no last sales price is available. Securities
for which market quotations are not readily available, when held by the
Fund, 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.
The Fund may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration
to pertinent factors, including recent private sales, market conditions
and the issuer's financial performance. The Fund generally bears the
costs, if any, associated with the disposition of restricted securities.
The Fund held no restricted securities at December 31, 1997.
(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) 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.
(E) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(F) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recorded on the accrual basis
and includes amortization of premium and discounts.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
December 31, 1997
3. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Fund are affiliated, provides investment advisory and
shareholder recordkeeping and related services to the Fund. Investment
advisory fees, which are established by terms of the Advisory Agreement, are
based on an annualized rate of 1.00% of the average daily net assets of the
Fund. Advisory fees and expenses are subject to reimbursement by the
Advisor if the Fund's operating expenses exceed certain levels. Shareholder
recordkeeping and related service fees are based on the lesser of 0.15% of
the average daily net assets of the Fund or a contractually established rate
for each participant account.
Schafer Capital Management, Inc. ("Schafer") manages the investments of the
Fund under an agreement with the Advisor. Schafer is compensated by the
Advisor (not the Fund) and bears all of its own expenses in providing
subadvisory services.
The Fund may invest cash reserves in money market funds sponsored and
managed by the Advisor, subject to certain limitations. The terms of such
transactions are identical to those of non-related entities except that, to
avoid duplicate investment advisory fees, advisory fees of the Fund are
reduced by an amount equal to advisory fees paid to the Advisor under its
investment advisory agreement with the money market funds.
The amount payable to the Advisor at December 31, 1997 was $3,627. The
Advisor owns 70.4% of the outstanding shares of the Fund at December 31,
1997.
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long term securities for the period
ended December 31, 1997 were $721,581 and $18,245, respectively.
5. INCOME TAX INFORMATION
At December 31, 1997, the cost of investments in securities for federal
income tax purposes was $723,438. Net unrealized appreciation of securities
was $2,699, consisting of gross unrealized appreciation and depreciation of
$33,246 and $30,547, respectively. At December 31, 1997, the Fund had a
capital loss carryover of $2,998, which expires in 2005.
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the period ended December 31, 1997 which is designated as
qualifying for the dividends-received deduction is 100% (unaudited).
10
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED PER-SHARE DATA (a)
---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -------------------------------------
Net Asset Net Realized Total In Excess Net Asset
Value, Net and Unrealized from From Net of Net Value,
Beginning Investment Losses on Investment Investment Investment Total End of
Year Ended of Period Income Investments Operations Income Income Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dec. 31, 1997 $10.00 $0.01 ($0.09) ($0.08) ($0.01) ($0.01) ($0.02) $9.90
</TABLE>
<TABLE>
<CAPTION>
RATIOS AND SUPPLEMENTAL DATA
------------------------------------------------------------------
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
<S> <C> <C> <C> <C> <C> <C>
Dec. 31, 1997 -0.8% $705 1.5%* 0.7%* 3.1% $0.0603
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) Inception date is October 10, 1997. Total return and portfolio turnover rate are not annualized.
11
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Schafer Value Fund II
We have audited the accompanying statement of assets and liabilities of Strong
Schafer Value Fund II (one of the portfolios constituting the Strong Variable
Insurance Funds, Inc.), including the schedule of investments in securities, as
of December 31, 1997, and the related statements of operations and changes in
net assets, and the financial highlights for the period from October 10, 1997
(inception) to December 31, 1997. 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 audit.
We conducted our audit 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 December 31, 1997 by correspondence with the custodian. 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 audit provides 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 II as of December 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
period from October 10, 1997 to December 31, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
February 4, 1998
<PAGE>
12
<PAGE>
[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936 * Milwaukee, WI 53201 7033B98
Strong Funds are offered by prospectus only.
