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WEITZ SERIES FUND, INC.
BOARD OF DIRECTORS
Carroll E. Fredrickson
John W. Hancock
Richard D. Holland
Thomas R. Pansing, Jr.
Wallace R. Weitz
OFFICERS
Wallace R. Weitz, President
Mary K. Beerling, Vice-President & Secretary
Linda L. Lawson, Vice-President
Richard F. Lawson, Vice-President
INVESTMENT ADVISER
Wallace R. Weitz & Company
DISTRIBUTOR
Weitz Securities, Inc.
CUSTODIAN
Norwest Bank Nebraska, N.A.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Wallace R. Weitz & Company
This report has been prepared for the information of shareholders of Weitz
Series Fund, Inc. -- Fixed Income Portfolio and is not authorized for
distribution to prospective investors unless preceded or accompanied by a
current prospectus which describes the Fund's objectives, policies and other
information.
FIXED INCOME PORTFOLIO
Q U A R T E R L Y
R E P O R T
JUNE 30, 1996
ONE PACIFIC PLACE, SUITE 600
1125 SOUTH 103 STREET
OMAHA, NEBRASKA 68124-6008
402-391-1980
800-232-4161
402-391-2125 FAX
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WEITZ SERIES FUND INC. -- FIXED INCOME PORTFOLIO
PERFORMANCE SINCE INCEPTION
A long-term perspective on our fund's performance is shown below. The table
shows how an investment of $10,000 in the Fixed Income Portfolio at its
inception would have grown over the years (after deducting all fees and expenses
and assuming reinvestment of all dividends). The table also sets forth average
annual total return data for the Fixed Income Portfolio for the one and five
year periods ended June 30, 1996, and for the period since inception, calculated
in accordance with SEC standardized formulas.
<TABLE>
<CAPTION>
VALUE OF VALUE OF VALUE OF
INITIAL CUMULATIVE CUMULATIVE TOTAL
$10,000 CAPITAL GAIN REINVESTED VALUE OF ANNUAL RATE
PERIOD ENDED INVESTMENT DISTRIBUTIONS DIVIDENDS SHARES OF RETURN
- -------------------------- ----------- ----------------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Dec. 23, 1988 $ 10,000 -- -- $ 10,000 --
Dec. 31, 1988 9,939 -- 68 10,007 --
Dec. 31, 1989 10,020 -- 900 10,920 9.1%
Dec. 31, 1990 10,232 12 1,661 11,905 9.0
Dec. 31, 1991 10,625 13 2,597 13,235 11.4
Dec. 31, 1992 10,557 13 3,396 13,966 5.5
Dec. 31, 1993 10,820 14 4,258 15,092 8.1
Dec. 31, 1994 9,961 13 4,763 14,737 -2.4
Dec. 31, 1995 10,847 14 6,199 17,060 15.8
June 30, 1996 (6 Mos.) 10,627 13 6,330 16,970 -0.5
</TABLE>
The Portfolio's average annual total return for the one and five year periods
ended June 30, 1996, and for the period since inception (December 23, 1988),
were 4.4%, 6.5% and 7.3%, respectively. These returns assume redemption at the
end of each period.
Since inception, the total amount of capital gains distributions reinvested in
shares was $13, and the total amount of "income" distributions reinvested was
$6,210. This information represents past performance of the Portfolio and is not
indicative of future performance. The investment return and the principal value
of an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Additional information is
available from Wallace R. Weitz & Co. at the address listed on the front cover.
2
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
JUNE 30, 1996 - QUARTERLY REPORT
July 8, 1996
Dear Fellow Shareholder:
The Fixed Income Portfolio's total return for the second quarter of 1996
was +0.4%, which consisted of +1.6% from net interest income (after deducting
fees and expenses) and -1.2% from (unrealized) depreciation of our bonds. The
year to date return, as shown on the previous page, is -0.5%.
MARKET REVIEW
Interest rates moved modestly higher in the second quarter as the bond
market continued to be buffeted by news of a potentially stronger U.S. economy.
For example, job creation remained strong in the quarter as did sales of both
new and existing homes. Good news for the economy can be bad news for bond
investors if it results in higher inflation. However, inflation measured at both
the consumer and producer level remained low, reflecting an inability of
businesses to raise prices. Given the mixed economic signals, the Federal
Reserve opted to leave short-term interest rates unchanged.
So far in 1996, interest rates have increased approximately 1% across the
yield curve. This year's back up in interest rates may ultimately create the
same effect that a Fed tightening would have. Namely, higher borrowing costs for
everything from autos and homes to business investment could act as a drag on
growth going forward. If evidence of an overheating economy remains more elusive
than real, the prospects for bond investments going forward could prove quite
positive.
PORTFOLIO REVIEW
During the quarter, we increased the average coupon on the portfolio to 7%
while maintaining the average maturity at approximately 9 years. The entire
portfolio is listed later in this report, but the following table provides a
snap-shot of some of the vital characteristics of the portfolio as of June 30:
<TABLE>
<S> <C>
Average Maturity 9.3 years
Average Duration 5.1 years
Average Coupon 7.0%
30-Day SEC Yield at 6-30-96 6.5%
Average Rating AA
</TABLE>
3
<PAGE>
FIXED INCOME FUNDAMENTALS
We thought it might be informative to add a section to our quarterly
letter that could address some of our shareholder's questions about bond
investing. Possible future topics might include some basics such as why bond
prices fall when interest rates rise, as well as more complicated concepts, such
as duration, the yield curve, and interest rate swaps. With fears of renewed
inflation and rising interest rates in 1996, we thought that a timely topic for
this letter would be a discussion of real rates of return -- what they are and
why they should be important to investors.
The "total" return on any investment consists of some combination of
income (in the form of interest or dividends) and price appreciation or
depreciation, realized or not. However, inflation can eat into that return and
cause a decline in purchasing power. The "real" rate of return is the "net"
return an investor receives after taking inflation into account. It can be
forecast by subtracting an estimated inflation rate from the total return
expected on a particular investment. In the case of a bond, if the expected
total return is 7% and the projected inflation rate over the life of the bond is
3%, the real rate of return would be 4%.
Real interest rates are important in that they represent the all inclusive
return provided by a particular investment. If inflation rates are high, as they
were in the early 1980's, real rates of return can be and have been negative. In
those instances, inflation diminished the economic returns and purchasing power
was lost. Currently, however, inflation remains benign while interest rates have
increased. The net effect has been an increase in real interest rates which
could bode well for bonds if inflation remains low.
We hope our brief discussions on certain mechanics of bond investing will
be helpful to you. Feel free to call either of us if you have any questions
about the portfolio, bond investing in general or any other parts of our letter.
Best regards,
<TABLE>
<S> <C>
/s/ Wallace Weitz /s/ Thomas Carney
Wallace R. Weitz Thomas Carney
President, Portfolio Manager Portfolio Manager
</TABLE>
4
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
RATING AMOUNT COST MARKET VALUE
- ------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 32.7%
AA- $ 500,000 Norwest Financial Corp. Notes 7.1% 11/15/96 $ 500,000 $ 502,115
A 500,000 Lehman Brothers Holdings Notes 7.625% 7/15/99 500,244 508,933
BBB 500,000 Salomon, Inc. Sr. Notes 7.125% 8/1/99 500,000 501,117
A 500,000 Phillip Morris Notes 7.125% 8/15/02 500,000 497,628
BBB- 500,000 Tenneco, Inc. Notes 7.875% 10/1/02 497,988 514,882
B+ 75,000 Homeside Inc. 11.25% 5/15/03 75,000 76,687
A+ 1,000,000 Merrill Lynch Notes 7.25% 6/14/04 997,837 1,007,458
BBB- 1,000,000 ConAgra, Inc. Sub. Notes 7.4% 9/15/04 1,000,000 996,206
A- 600,000 General Motors Acceptance Corp. Debs. 6.625%
10/15/05 596,871 568,697
BB 200,000 Dime Savings 10.5% 11/15/05 216,481 216,000
AAA 1,000 Berkshire Hathaway, Inc. Debs. 9.75% 1/15/18 1,063 1,058
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Total Corporate Bonds 5,385,484 5,390,781
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MORTGAGE-BACKED SECURITIES -- 10.1%
AAA 80,377 Federal Home Loan Mtg. REMIC Planned Amortization
Class 9% 11/15/19 (Avg. Life 0.7 years) 80,377 80,377
AAA 91,616 Federal Natl. Mtg Assn. 11% 1/1/01 (Avg. Life 1.9
years) 94,056 95,281
AAA 102,427 Federal Home Loan Mtg. Corp. 9.5% 9/1/03
(Avg. Life 2.8 years) 102,530 106,268
AAA 500,000 Federal Natl. Mtg. Assn. REMIC Planned
Amortization Class 6.5% 10/25/18 (Avg. Life 7.4
years) 484,918 462,656
AAA 500,000 Federal Home Loan Mtg. Corp. REMIC Planned
Amortization Class 6.65% 9/15/21 (Avg. Life 8.6
yrs) 489,826 459,375
AAA 500,000 Federal Home Loan Mtg. Corp. REMIC Planned
Amortization Class 7.0% 7/15/21 (Avg. Life 12.3
yrs) 495,067 459,688
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Total Mortgage-Backed Securities 1,746,774 1,663,645
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TAXABLE MUNICIPAL BONDS -- 5.4%
AA+ 155,000 Missouri Hsg. Dev. Comm. 8.6% 9/1/05 156,063 155,775
AAA 250,000 Oklahoma Hsg. Fin. Auth. 8.7% 9/1/13 250,000 251,250
AAA 500,000 Oklahoma Hsg. Fin. Auth. 7.3% 12/1/14 500,000 480,910
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Total Taxable Municipal Bonds 906,063 887,935
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</TABLE>
5
<PAGE>
WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
FACE
RATING AMOUNT COST MARKET VALUE
- ------ ---------- ----------- ------------
U.S. GOVERNMENT AND AGENCY SECURITIES -- 48.2%
<S> <C> <C> <C> <C>
AAA $ 100,125 U.S. Treasury Zero Coupon Receipts 5.329% 2/15/97* $ 96,789 $ 96,562
AAA 100,100 U.S. Treasury Zero Coupon Receipts 5.760% 2/15/98* 91,443 90,456
AAA 500,000 U.S. Treasury Note 6% 5/31/98 496,806 498,828
AAA 99,960 U.S. Treasury Zero Coupon Receipts 5.916% 2/15/99* 85,775 84,392
AAA 250,000 Federal Natl. Mtg. Assn. 6.625% 7/12/00 250,000 248,401
AAA 2,500,000 Federal Natl. Mtg. Assn. 7.55% 6/10/04 2,498,080 2,489,844
AAA 500,000 Federal Natl. Mtg. Assn. 8.05% 7/14/04 506,717 502,565
AAA 100,000 U.S. Treasury Note 8.25% 5/15/05 104,605 105,094
AAA 1,000,000 Federal Home Loan Mtg. Corp. 7.09% 6/1/05 1,002,911 977,393
AAA 500,000 Federal Home Loan Bank 6.44% 11/28/05 500,740 480,862
AAA 1,000,000 Federal Natl. Mtg. Assn. 6.64% 2/02/06 1,000,000 942,508
AAA 500,000 Federal Home Loan Mtg. Corp. 6.407% 2/22/06 496,391 470,986
AAA 1,000,000 Federal Home Loan Mtg. Corp. 6.77% 3/21/11 919,464 939,062
----------- ------------
Total U.S. Government and Agency Securities 8,049,721 7,926,953
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SHORT-TERM SECURITIES -- 2.3%
383,016 Norwest U.S. Government Money Market Fund, 4.9% 383,016 383,016
----------- ------------
Total Investments in Securities $16,471,058** 16,252,330
-----------
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Other Assets Less Liabilities -- 1.3%
211,865
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Total Net Assets -- 100% $16,464,195
------------
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Net Asset Value Per Share $ 10.778
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</TABLE>
*Interest rates presented for zero coupon bonds are based upon yield to maturity
rate(s) at date(s) of purchase
**Also approximates cost for federal income tax purposes
6
