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WEITZ SERIES FUND, INC.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
Lorraine Chang
John W. Hancock
Richard D. Holland
Thomas R. Pansing, Jr.
Delmer L. Toebben
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 and Government Money Market Portfolios. For
more detailed information about the Funds, their investment objectives,
management, fees and expenses, please see a current prospectus. This report is
not authorized for distribution to prospective investors unless preceded or
accompanied by a current Prospectus.
FIXED INCOME PORTFOLIO
GOVERNMENT MONEY MARKET
PORTFOLIO
QUARTERLY
REPORT
DECEMBER 31, 1998
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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TABLE OF CONTENTS
<TABLE>
<S> <C>
FIXED INCOME PORTFOLIO
Period Overview.......................................................... 3
Schedule of Investments.................................................. 7
GOVERNMENT MONEY MARKET PORTFOLIO
Period Overview.......................................................... 10
Schedule of Investments.................................................. 11
YEAR 2000 UPDATE............................................................... 12
</TABLE>
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
PERFORMANCE SINCE INCEPTION
A long-term perspective on our portfolio'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, five, and
ten year periods ended December 31, 1998.
<TABLE>
<CAPTION>
VALUE OF VALUE OF VALUE OF
INITIAL CUMULATIVE CUMULATIVE TOTAL ANNUAL
$10,000 CAPITAL GAIN REINVESTED VALUE OF RATE OF
PERIOD ENDED INVESTMENT DISTRIBUTIONS DIVIDENDS SHARES 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
Dec. 31, 1996 10,637 13 7,158 17,808 4.4
Dec. 31, 1997 10,916 14 8,419 19,349 8.6
Dec. 31, 1998 10,989 14 9,653 20,656 6.8
</TABLE>
The portfolio's average annual total return for the one, five and ten year
periods ended December 31, 1998, was 6.8%, 6.5% and 7.5%, respectively. These
returns assume redemption at the end of each period and reinvestment of
dividends.
Since inception, the total amount of capital gains distributions reinvested in
shares was $13, and the total amount of income distributions reinvested was
$9,273. 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 the Weitz Funds at the address listed on the front cover.
3
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
DECEMBER 31, 1998 - QUARTERLY REPORT
January 9, 1999
Dear Fellow Shareholder:
The Fixed Income Portfolio's total return for the fourth quarter of 1998
was 0.3%, bringing our total return for the year to 6.8%. This represents a
combination of approximately 6.0% from net investment income (after deduction
fees and expenses) and 0.8% from (unrealized) appreciation of our bonds. The
table below summarizes total return data for our fund as well as the average
intermediate-term, investment grade fixed income fund.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS
----------- -----------
<S> <C> <C>
FIXED INCOME PORTFOLIO 6.8% 6.5%
Average Intermediate Investment
Grade Fixed Income Fund* 7.3% 6.4%
</TABLE>
*Source: Lipper Analytical Services
OVERVIEW
Investor fears of an economic Armageddon eased in the fourth quarter after
the Federal Reserve lowered interest rates three times in as many months. The
corporate bond market, which was virtually shut down in September due to
escalating risk aversion, rebounded somewhat after the Fed's actions. However,
this was still a year in which returns on fixed income investments varied
widely. Treasury interest rates declined across the entire maturity spectrum,
providing gains for these "safe" securities. But junk (now called "high yield"
for diplomatic reasons) bond yields surged, causing prices to decline as
investors shunned these higher risk securities. According to Lipper Inc., the
AVERAGE taxable bond fund produced a total return of +5.6% for 1998 while junk
bond funds FELL 0.5%.
The U.S. economy seems to have come through the most recent Asian and
emerging markets crisis unscathed, growing at a surprising 4-plus percent pace
in the fourth quarter. A
4
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weak manufacturing sector was more than offset by continued strength in the
construction and service sectors. Our juggernaut economy, finishing its eighth
year of expansion, continues to create jobs, lending strength to both the
housing and consumer spending markets.
With domestic inflation low and the condition of many foreign economies
fragile (with Brazil the most recent addition to the list), the Federal Reserve
will likely grapple with the same issues in 1999 as they did last year. They
will need to balance domestic economic strength against the possibility of
another round of trouble abroad that could disrupt our economy. In September,
Alan Greenspan said the United States couldn't remain an "oasis of prosperity
unaffected by a world that is experiencing greatly increased stress". To the
extent that this "stress" does not go away, we would expect 1999 to be another
year of surprises and volatility for bond investors.
PORTFOLIO REVIEW
All in all, 1999 was a good year for the Fixed Income Portfolio. Quality
was rewarded in 1998, and our portfolio remains concentrated in government
agency securities (44% as of year-end). Our strategy is to produce reasonable
returns over time without exposing the portfolio to excessive credit or interest
rate risks. By investing in short to intermediate-term bonds, we will continue
to earn most of the "coupon" returns of longer-term bonds with LOWER overall
interest rate risk.
We continue to search for investments that have favorable risk/reward
characteristics. The disruption in the credit markets during the fourth quarter
provided us the opportunity to add Redwood Trust 9.74% convertible preferred to
our portfolio. Redwood is a $4 billion mortgage real estate investment trust
(whose common stock we own in the equity funds). Its business was depressed last
year because of high prepayments of mortgages, but the company had insulated its
balance sheet from the worst of the effects of the liquidity crisis experienced
last fall. We believe Redwood has a solid business with good management and that
the preferred stock should deliver secure income over time. The Redwood
preferred provides an 11.6% current yield and an up-side potential should its
common stock price improve.
5
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The following table shows a profile of our portfolio as of December 31:
<TABLE>
<S> <C>
Average Maturity 6.9 years
Average Duration 2.9 years
Average Coupon 7.0%
30-Day SEC Yield at 12-31-98 5.3%
Average Rating AA
</TABLE>
SHAREHOLDER MEETING -- WEDNESDAY, MAY 26, 1999
Please plan to join us at the Omaha Marriott Hotel at 4:30 p.m. on May 26.
At this time, it appears that we will not need to have a formal business
meeting, so we will be able to get right to a discussion of our investments and
a question and answer period with the portfolio managers. In the meantime, if
you have questions about your account, please feel free to call Client Services.
If you have any questions about any of our investments or strategy, please
call either of us any time.
Best regards,
/S/ WALLACE R. WEITZ /S/ THOMAS CARNEY
Wallace R. Weitz Thomas D. Carney
President, Portfolio Manager Portfolio Manager
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
RATING FACE AMOUNT COST VALUE
- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 23.6%
A $ 500,000 Lehman Brothers Holdings Notes 7.625% 7/15/99 $ 500,046 $ 503,681
A 500,000 Salomon, Inc. Sr. Notes 7.125% 8/01/99 500,000 504,722
A 500,000 Phillip Morris Notes 7.125% 8/15/02 500,000 524,662
BBB 500,000 Tenneco, Inc. Notes 8.075% 10/01/02 498,792 534,159
750,000 Superior Financial Corp. Sr. Notes 8.65% 4/01/03 750,000 762,514
A+ 48,000 Homeside, Inc. 11.25% 5/15/03 48,000 56,400
Ba3 500,000 USA Networks, Inc. 7.0% 7/01/03 487,611 498,125
250,000 Local Financial Corp. 11.0% 9/08/04 250,000 253,750
BBB 1,000,000 ConAgra, Inc. Sub. Notes 7.4% 9/15/04 1,000,000 1,075,430
BB- 750,000 Century Communications Sr. Notes 9.5% 3/1/05 803,644 836,250
A 600,000 General Motors Acceptance Corp. Debs. 6.625% 10/15/05 597,534 633,643
BBB- 500,000 Dime Savings 10.5% 11/15/05 519,824 527,500
BB+ 375,000 CalEnergy Sr. Notes 9.5% 9/15/06 403,320 409,688
BBB 500,000 Harcourt General 6.5% 5/15/11 485,265 477,500
AA- 1,000,000 Merrill Lynch 7.15% 7/30/12 1,000,000 1,040,941
AAA 1,000 Berkshire Hathaway, Inc. Debs. 9.75% 1/15/18 1,045 1,052
------------ ------------
Total Corporate Bonds 8,345,081 8,640,017
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MORTGAGE-BACKED SECURITIES -- 22.3%
AAA 16,983 Fannie Mae 11.0% 1/01/01 (Avg. Life 0.9 years) 17,184 17,638
AAA 42,786 Freddie Mac 9.5% 9/01/03 (Avg. Life 1.8 years) 42,787 45,154
AAA 500,000 Fannie Mae REMIC Planned Amortization Class 7.5% 495,961 508,867
4/25/19 (Avg. Life 2.1 years)
AAA 500,000 Fannie Mae REMIC Planned Amortization Class 6.5% 486,609 502,282
10/25/18 (Avg. Life 2.8 years)
AAA 1,000,000 Freddie Mac REMIC Planned Amortization Class 7.0% 1,003,522 1,014,627
8/15/20 (Avg. Life 3.1 years)
AAA 500,000 Freddie Mac REMIC Planned Amortization Class 6.65% 490,839 503,673
9/15/21 (Avg. Life 3.3 years)
AAA 1,000,000 Freddie Mac REMIC Planned Amortization Class 6.75% 992,194 1,009,807
12/15/21 (Avg. Life 4.4 years)
AAA 1,000,000 Freddie Mac REMIC Planned Amortization Class 7.0% 976,650 1,019,458
4/15/21 (Avg. Life 4.6 years)
AAA 1,000,000 Freddie Mac REMIC Planned Amortization Class 7.0% 1,019,465 1,020,618
8/15/21 (Avg. Life 5.0 years)
AAA 500,000 Freddie Mac REMIC Planned Amortization Class 7.0% 495,561 506,860
7/15/21 (Avg. Life 5.0 years)
AAA 1,000,000 Freddie Mac REMIC Planned Amortization Class 7.0% 1,003,656 1,020,803
9/15/09 (Avg. Life 5.3 years)
AAA 963,067 Fannie Mae 6.5% 6/01/18 (Avg. Life 5.6 years) 961,902 974,200
------------ ------------
Total Mortgage-Backed Securities 7,986,330 8,143,987
------------ ------------
</TABLE>
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
RATING FACE AMOUNT COST VALUE
- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
TAXABLE MUNICIPAL BONDS -- 3.5%
AAA $ 325,000 Baltimore Maryland 7.25% 10/15/05 $ 329,260 $ 357,594
AAA 500,000 Stratford Connecticut 6.55% 2/15/13 500,000 521,455
AAA 155,000 Oklahoma Hsg. Fin. Auth. 8.7% 9/01/13 155,000 155,775
AAA 240,000 Oklahoma Hsg. Fin. Auth. 7.3% 12/01/14 240,000 241,200
------------ ------------
Total Taxable Municipal Bonds 1,224,260 1,276,024
------------ ------------
U.S. GOVERNMENT AND AGENCY
SECURITIES -- 43.8%
AAA 99,960 U.S. Treasury Zero Coupon Receipts 2/15/99 97,650 99,418
AAA 2,000,000 Fannie Mae 5.75% 4/15/03 1,993,993 2,056,244
AAA 2,000,000 Federal Home Loan Bank 5.125% 9/15/03 2,000,000 1,997,670
AAA 2,500,000 Fannie Mae 7.55% 6/10/04 2,500,000 2,526,842
AAA 100,000 U.S. Treasury Note 8.25% 5/15/05 103,307 104,594
AAA 1,000,000 Freddie Mac 7.09% 6/01/05 1,001,048 1,025,312
AAA 1,000,000 Fannie Mae 7.27% 8/24/05 1,000,655 1,036,178
AAA 2,000,000 Federal Home Loan Bank 6.04% 9/08/05 2,000,000 2,009,618
AAA 500,000 Federal Home Loan Bank 6.44% 11/28/05 500,541 535,129
AAA 1,000,000 Fannie Mae 6.64% 2/02/06 1,000,000 1,001,013
AAA 500,000 Freddie Mac 6.407% 2/22/06 497,324 508,838
AAA 1,000,000 Fannie Mae 7.15% 10/11/06 987,136 1,048,956
AAA 1,000,000 Fannie Mae 6.56% 11/26/07 1,000,000 1,034,154
AAA 1,000,000 Fannie Mae 6.50% 3/19/08 992,348 1,023,221
------------ ------------
Total U.S. Government and Agency Securities 15,674,002 16,007,187
------------ ------------
</TABLE>
8
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
RATING SHARES COST VALUE
- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
COMMON STOCKS - 0.6%
46,500 Hanover Capital Mortgage Holdings, Inc. $ 419,081 $ 203,437
------------ ------------
NON-CONVERTIBLE PREFERRED STOCKS -- 2.2%
Caa 5,000 Crown American Realty Trust 11.0% Pfd. Series A 250,000 244,375
22,200 Redwood Trust, Inc. 9.74% Pfd. Class B 583,492 577,200
------------ ------------
Total Non-Convertible Preferred Stocks 833,492 821,575
------------ ------------
<CAPTION>
FACE
AMOUNT
-----------
<S> <C> <C> <C> <C>
SHORT-TERM SECURITIES -- 2.7%
$ 987,464 Norwest U.S. Government Money Market Fund 987,464 987,464
------------ ------------
Total Investments in Securities $ 35,469,710 36,079,691
------------ ------------
------------
Other Assets Less Liabilities -- 1.3% 482,742
------------
Total Net Assets -- 100% $ 36,562,433
------------
------------
Net Asset Value Per Share $ 11.145
------------
------------
</TABLE>
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WEITZ SERIES FUND, INC.
GOVERNMENT MONEY MARKET PORTFOLIO
DECEMBER 31, 1998 - QUARTERLY REPORT
January 15, 1998
Dear Shareholder:
The yield on our Government Money Market Portfolio ended the year with 7
and 30-day yields of 4.2%.
The Federal Reserve continued to lower short-term interest rates in the
fourth quarter as international events and the possible repercussions to our
domestic economy took center stage. For all of 1998, short-term interest rates
(which have a direct impact on our portfolio) declined approximately 3/4
percent. Changes by the Fed in monetary policy and the effect such policy has on
short-term interest rates will continue to determine the yield on our portfolio
going forward.
We would welcome any questions or comments you may have.
Best regards,
/S/ WALLACE R. WEITZ /S/ THOMAS CARNEY
Wallace R. Weitz Thomas D. Carney
President, Portfolio Manager Portfolio Manager
10
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WEITZ SERIES FUND, INC.
GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
RATING FACE AMOUNT VALUE
- --------- ----------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES -- 94.7%*
AAA $ 5,000 U.S. Treasury Bill 5.232% 1/07/99 $ 5,000
AAA 1,000,000 Federal Farm Credit Bank Discount Note 5.539% 1/07/99 999,112
AAA 5,250,000 U.S. Treasury Bill 4.183% 1/14/99 5,242,240
AAA 1,400,000 Federal Home Loan Bank Discount Corp. Note 5.135% 1/15/99 1,397,278
AAA 7,500,000 Federal Home Loan Bank Discount Corp. Note 5.084% 2/19/99 7,449,367
AAA 3,000,000 Federal Home Loan Bank Discount Corp. Note 5.114% 2/24/99 2,977,500
AAA 1,000,000 Federal Home Loan Bank Discount Corp. Note 5.058% 3/12/99 990,414
AAA 2,500,000 Federal Home Loan Bank Discount Corp. Note 4.862% 3/31/99 2,470,951
AAA 3,500,000 Federal Farm Credit Bank Discount Note 4.748% 4/19/99 3,451,910
------------
Total U.S. Government and Agency Securities 24,983,772
------------
SHORT-TERM SECURITIES -- 5.2%
1,375,957 Norwest Treasury Money Market Fund, 4.081% 1,375,957
------------
Total Investments in Securities (Cost $26,359,729)** 26,359,729
------------
Other Assets Less Liabilities -- 0.1% 18,543
------------
Total Net Assets -- 100% $ 26,378,272
------------
------------
</TABLE>
*Interest rates presented for treasury bills and discount notes are based upon
yield to maturity rate(s) at date(s) of purchase.
**Cost is the same for Federal income tax purposes.
11
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WEITZ SERIES FUND, INC. -- FIXED INCOME PORTFOLIO AND
GOVERNMENT MONEY MARKET PORTFOLIO
YEAR 2000 UPDATE
Wallace R. Weitz & Company ("Weitz"), investment adviser and administrator
for the Weitz Funds has developed a plan to address whether its systems will
operate correctly after December 31, 1999. The plan has been reviewed by Weitz's
management and by the Board of Directors of Weitz Series Fund, Inc. and Weitz
Partners, Inc. Weitz has assigned one employee to take the lead on Year 2000
issues and is also working with a consulting firm to assist in the remediation
of hardware and software systems. Regular reports are made to the Board of
Directors. Weitz has agreed to commit the resources necessary to address the
Year 2000 issue.
Weitz's local area network is comprised of a single file server and
individual workstations with desktop machines, related peripherals and software
developed by third parties. Such software is a combination of off-the-shelf
applications and accounting or industry specific applications developed by third
party vendors. Weitz has no internally developed or modified software
applications. Due to the recent growth of the Weitz Funds, Weitz has replaced or
expanded the majority of its network. These changes have all been effected with
Year 2000 compliance issues in mind. Weitz has been in communication with
critical third party service providers who have provided assurances to us that
they are either Year 2000 compliant or are in the final stages of testing. As
Weitz investigates certain possible changes in third party service providers, we
intend to make Year 2000 inquiries and obtain assurances about the Year 2000
readiness of such providers.
With respect to the companies in which the Weitz Funds invest, Weitz intends
to review the disclosure included in regular filings with the Securities and
Exchange Commission for certain of those companies in which the funds have a
significant investment. In addition, Weitz receives and will continue to receive
Y2K readiness information from securities analysts and from certain of the
issuing companies themselves. Such information is reviewed as it becomes
available. Weitz and the Weitz Funds have no reason to believe that these steps
will not be sufficient to avoid any material adverse impact on the Funds,
although there can be no assurance of this.
12
