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WEITZ PARTNERS, 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
Partners, Inc. -- Partners Value Fund 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.
PARTNERS VALUE FUND
Q U A R T E R L Y
R E P O R T
MARCH 31, 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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HISTORICAL PERFORMANCE INFORMATION
The table below gives a long-term perspective of the Partners Value Fund (the
"Fund") and its predecessor, Weitz Partners II -- Limited Partnership (the
"Predecessor Partnership"). (Performance numbers are AFTER deducting all fees
and expenses and assume reinvestment of dividends.) The Fund succeeded to
substantially all of the assets of the Predecessor Partnership, a Nebraska
investment limited partnership as of December 31, 1993. Wallace R. Weitz was
General Partner and portfolio manager for the Predecessor Partnership and is
portfolio manager for the Fund. The Fund's investment objectives and policies
are substantially identical to those of the Predecessor Partnership. The table
also sets forth average annual total return data for the Fund and the
Predecessor Partnership for the one, five and ten year periods ended March 31,
1996, calculated in accordance with SEC standardized formulas.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, PARTNERS II S&P 500
- ---------------------------------------------- --------------- -----------
<S> <C> <C>
1983 (7 Mos.) 9.9% 4.2%
1984 14.5 6.3
1985 40.7 31.7
1986 11.1 18.7
1987 4.3 5.3
1988 14.9 16.5
1989 20.3 31.6
1990 -6.3 -3.1
1991 28.1 30.2
1992 15.1 7.6
1993 23.0 10.1
<CAPTION>
PARTNERS VALUE
---------------
<S> <C> <C>
1994 -9.0 1.3
1995 38.7 37.5
1996 (3 Mos.) 6.1 5.4
Cumulative 545.2 512.6
Average Annual Compound Growth (Since
inception May 23, 1983) 15.6 15.2
</TABLE>
Average annual total return for the Fund (inception 1/94) and for the
Predecessor Partnership (inception 5/83) for the one, five, and ten year periods
ended March 31, 1996, was 35.2%, 16.2% and 12.6%, respectively. These returns
assume redemption at the end of each period. Compound annual returns for the
Predecessor Partnership and the Fund are calculated in accordance with SEC
standardized formulas.
This information represents past performance 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. The S&P 500 is an unmanaged index consisting of 500
companies. Information relating to the S&P 500 assumes reinvestment of
dividends. Additional information is available from Wallace R. Weitz & Co. at
the address listed on the front cover.
2
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WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
MARCH 31, 1996 - QUARTERLY REPORT
April 7, 1996
Dear Fellow Shareholder:
The first quarter of 1996 was a good one for stocks in general and for the
Partners Value Fund. The table below shows 3 and 12 month total returns (after
deducting expenses) for our fund, the S&P 500, and the average equity mutual
fund.
<TABLE>
<CAPTION>
3 MONTHS 12 MONTHS
------------- -------------
<S> <C> <C>
Partners Value Fund 6.1% 35.2%
Standard & Poors 500 Index 5.4 32.1
Average Equity Mutual Fund
(Lipper) 5.7 28.8
</TABLE>
The table on the page opposite this letter shows the performance history
of the fund and its predecessor partnership (after deducting expenses).
INVESTMENT REVIEW
In spite of an increase in long-term interest rates during the quarter,
our "interest-sensitive" financial stocks were the primary contributors to the
first quarter gains. Among our larger holdings, Wells Fargo succeeded in
acquiring First Interstate, and both stocks rose over 20%. Sallie Mae rose 17%
as the new directors' cost-cutting and stock repurchase plans continued to
attract investor attention. Redwood Trust's total return for the quarter was 15%
(and the Redwood warrants rose 32%). Other individual stocks made strong
contributions, such as Catellus (+29%) and Protection One (+44%), but there were
major sectors of the portfolio, such as cellular telephone and cable TV that did
not really participate.
Cable and cellular stocks continue to be under-appreciated by investors.
Many traditional investors ignore these companies because they have leveraged
balance sheets, and because depreciation charges obscure their true earning
power. I find them very attractive, however, for two related reasons. First,
they generate large, recurring, predictable, growing amounts of EXCESS cash that
is not REQUIRED in the business. Second, even though they do not HAVE TO
reinvest their profits in their businesses, they have lucrative reinvestment
opportunities within their own companies. Thus, they have some control over
their own destinies and can grow faster and more predictably than most
companies.
3
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We have not made any major changes in portfolio composition during the
last quarter. A few stocks were taken in mergers, we added a few new ones, and
we added to several existing positions, especially our cellular stocks. As I
write this, we are about 90% invested in common stocks.
OUTLOOK
Conditions have been nearly ideal for stocks for some time. Interest rates
have been low and trending lower. Corporate profits have been rising strongly.
The supply of stock has shrunk because of takeovers and stock buybacks, while
the quantity of capital available to buy stocks has been expanding. Rising stock
prices have attracted more stock investors, whose buying has caused stock prices
to rise... A virtuous circle.
Periodic "corrections" are inevitable, and investors who would be
seriously troubled by a decline of 10-20% in the value of their fund shares
should probably not invest in the Partners Value Fund or any type of equity
investment. On the other hand, I feel very good about the long-term prospects
for our stocks, and we have about 10% of the portfolio in cash and reserves
which are available for buying bargains if a correction occurs.
WELCOME TO ERIC BALL
Eric joined us in February. His background includes three years as a
securities analyst for a brokerage firm, eight years in research and portfolio
management for an investment counseling firm, and most recently, managing over
$400 million at a bank. Eric will be doing a combination of research and
investment counseling work. He is available to meet with retirement plan
participants and individual shareholders, and I would encourage clients with
investment questions to call him and get acquainted.
ANNUAL MEETING
On Wednesday, May 29, 1996, we will have our annual meeting for
shareholders at the Omaha Marriott. The meeting room will open at 4:00 pm for
snacks and drinks, and the business meeting will start at 4:30. This is a great
opportunity to ask questions about your investment and to meet the members of
our staff that you have been talking to on the phone. If you plan to join us for
the meeting, please let Mary Bickels know so we can plan for the right number of
people.
Best regards,
/s/ WALLACE WEITZ
Wallace R. Weitz
President
4
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WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR UNITS COST MARKET VALUE
- ---------- ----------- -------------
<C> <S> <C> <C>
COMMON STOCKS -- 89.8%
BANKING -- 17.3%
40,000 Bank America Corp. $ 1,748,625 $ 3,100,000
10,000 Calumet Bancorp, Inc.* 266,250 277,500
80,000 Dime Bancorp, Inc.* 897,200 990,000
64,958 Fidelity Federal Bank CL A* 519,664 617,101
20,000 First Interstate Bancorp 1,649,616 3,470,000
52,500 Glendale Federal Bank* 493,740 951,563
80,000 Greenpoint Financial 2,160,725 2,200,000
9,000 Wells Fargo & Co. 1,345,125 2,349,000
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9,080,945 13,955,164
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CABLE TELEVISION -- 14.9%
70,000 Adelphia Communications CL A* 891,250 490,000
140,000 Century Communications Corp. CL A* 1,140,123 1,356,250
220,000 Comcast Corporation CL A 3,070,516 3,891,250
170,000 Tele-Communications, Inc. CL A* 2,675,879 3,155,625
42,000 Tele-Communications Liberty Media CL A* 861,591 1,107,750
40,000 Time Warner, Inc. 761,457 1,635,000
20,000 U.S. West Media Group* 391,930 410,000
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9,792,746 12,045,875
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CONSUMER PRODUCTS AND SERVICES -- 4.2%
50,000 American Classic Voyages Co.* 489,375 412,500
6,650 Lady Baltimore Foods* 212,725 365,750
70,000 Playtex Products, Inc.* 534,919 507,500
75,000 Protection One, Inc.* 426,875 1,106,250
27,300 Seafield Capital Corp. 1,000,509 1,010,100
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2,664,403 3,402,100
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FEDERAL AGENCIES -- 8.3%
25,000 Federal Home Loan Mortgage Corp. 546,129 2,131,250
70,000 Federal National Mortgage Association 1,336,588 2,231,250
30,000 Student Loan Marketing Association 1,123,048 2,302,500
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3,005,765 6,665,000
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FINANCIAL SERVICES -- 10.8%
45,000 American Express 1,347,134 2,221,875
70 Berkshire Hathaway, Inc.* 91,818 2,369,500
40,000 Capital One Financial Corp. 926,068 1,100,000
40,000 Imperial Thrift & Loan Association* 441,875 560,000
20,000 PS Group, Inc.* 211,200 222,500
60,000 Salomon, Inc. 2,603,366 2,250,000
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5,621,461 8,723,875
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</TABLE>
5
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WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
SHARES
OR UNITS COST MARKET VALUE
- ---------- ----------- -------------
<C> <S> <C> <C>
INFORMATION AND DATA PROCESSING -- 2.7%
50,000 Business Records Corp. Hldg. Co.* $ 540,880 $ 1,850,000
175,000 Intelligent Systems Corp.* 164,183 350,000
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705,063 2,200,000
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MORTGAGE BANKING -- 7.2%
155,000 Countrywide Credit, Inc. 2,509,454 3,429,375
33,000 Imperial Credit Industries, Inc.* 171,500 808,500
100,000 Resource Bancshares Mtg. Grp.* 1,128,490 1,562,500
----------- -------------
3,809,444 5,800,375
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PUBLISHING AND BROADCASTING -- 3.0%
23,000 Daily Journal Corp.* 231,501 759,000
100,000 Valassis Communications, Inc.* 1,369,960 1,662,500
----------- -------------
1,601,461 2,421,500
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REAL ESTATE AND CONSTRUCTION -- 6.9%
330,000 Catellus Development Corp.* 2,175,120 2,557,500
365 Central Steel and Wire Co. 179,125 224,840
20,000 Forest City Enterprises CL A 671,825 735,000
100,000 NHP, Inc.* 1,326,435 1,850,000
125,000 Presley Companies CL A* 399,586 203,125
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4,752,091 5,570,465
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REAL ESTATE INVESTMENT TRUSTS -- 3.6%
120,000 Redwood Trust, Inc. 2,103,590 2,460,000
50,000 Redwood Trust, Inc. Warrants** 137,200 312,500
10,000 Thornburg Mortgage Asset Corp. 149,350 143,750
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2,390,140 2,916,250
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TELECOMMUNICATIONS -- 10.8%
55,000 Airtouch Communications, Inc.* 1,549,925 1,711,875
55,000 Cellular Communications of Puerto Rico, Inc.* 1,504,155 1,485,000
25,000 Cellular Communications, Inc.* 1,251,250 1,278,125
160,000 Centennial Cellular Corp. CL A* 2,597,642 2,440,000
24,000 CommNet Cellular, Inc.* 656,275 669,000
25,000 Telephone and Data Systems, Inc. 904,050 1,156,250
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8,463,297 8,740,250
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OTHER -- 0.1%
8,300 ONI International, Inc.* 74,250 2,075
15,625 Package Machinery Co.* 77,500 54,687
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151,750 56,762
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Total Common Stocks 52,038,566 72,497,616
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</TABLE>
6
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WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
SHARES
OR UNITS COST MARKET VALUE
- ---------- ----------- -------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 0.8%
65,420 Forest Oil Corp. $.75 Cv. Pfd. $ 659,143 $ 654,200
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<CAPTION>
FACE
AMOUNT
- ----------
<C> <S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES -- 10.0%
$ 900,000 U.S. Treasury Bill 5.217% 05/16/96**** 894,268 893,940
2,000,000 Federal Natl Mtg. Assn 6.625% 7/12/00 2,000,000 1,995,625
2,000,000 Federal Home Loan Bank 6.535% 3/21/01 2,000,000 1,993,664
750,000 Federal Home Loan Bank 6.55% 11/15/02 750,000 740,691
2,500,000 Federal Home Loan Bank 6.44% 11/28/05 2,503,802 2,460,937
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Total U.S. Government and Agency 8,148,070 8,084,857
Securities
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SHORT-TERM SECURITIES -- 1.1%
887,811 Norwest U.S. Government Money Market Fund, 4.8% 887,811 887,811
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Total Investments in Securities $61,733,590*** 82,124,484
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Other Assets Less Liabilities -- (1.7%) (1,382,157)
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Total Net Assets -- 100% $80,742,327
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Net Asset Value Per Share $ 11.022
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</TABLE>
*Non-income Producing
**Each warrant allows for the purchase of 1 share of common stock at $14.99;
expiration date is 12/31/97
***Also approximates cost for federal income tax purposes
****Interest rates presented for treasury bills are based upon yield to maturity
rate(s) at date(s) of purchase
7
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