<PAGE>
- --------------------------------------------------------------------------------
WEITZ PARTNERS, INC.
BOARD OF DIRECTORS
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
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
QUARTERLY
REPORT
SEPTEMBER 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
<PAGE>
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 September
30, 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 (9 Mos.) 11.6 13.5
Cumulative 578.5 559.8
Average Annual Compound Growth
(Since inception May 23, 1983) 15.4 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 September 30, 1996, was 15.8%, 15.8% and 13.2%, respectively. These
returns assume redemption at the end of each period. Average annual total
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. The performance data presented includes performance for the period
before the Fund became an investment company registered with the Securities and
Exchange Commission. During this time, the Fund was not registered under the
Investment Company Act of 1940 and therefore was not subject to certain
investment restrictions imposed by the 1940 Act. If the Fund had been registered
under the 1940 Act during this time period, the Fund's performance might have
been adversely affected. 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
SEPTEMBER 30, 1996 - QUARTERLY REPORT
October 9, 1996
TO OUR SHAREHOLDERS
PERFORMANCE REVIEW
The value of our Fund grew by 1.4% in the 3rd quarter. This brings our
return for the first three quarters of 1996 to 11.6%. The table below summarizes
total return data (income plus appreciation) for the Fund, the average fund in
our Lipper Analytical Services peer group (Growth and Income funds), and the S&P
500.
<TABLE>
<CAPTION>
3RD Q YEAR TO DATE 1 YEAR 5 YEARS 10 YEARS
----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Partners Value 1.4% 11.6% 15.8% 15.8% 13.2%
Ave. G&I Fund 2.9 12.4 17.2 13.8 12.8
S&P 500 3.1 13.5 20.3 15.2 14.9
Information assumes redemption at the end of each period and reinvestment of dividends.
Information for the Partners Value Fund and the Average Growth and Income Fund reflects
deduction of fees and expenses. The S&P 500 Index is an unmanaged index consisting of
500 companies. Investment expenses are not deducted from the S&P 500 Index.
</TABLE>
The table on page 2 shows year by year performance data for the Fund and
its Predecessor Partnership (after deducting expenses).
COMMENTARY
The small net gain for the quarter belies the fact that the market, and
the Fund, suffered a sharp decline during July. At one point, we had given back
nearly all of our first half gain. The epicenter of the July "correction" was in
the small-capitalization technology stocks, but the shock waves spread
throughout the market. Although the general market recovered and moved to new
highs by the end of the quarter, this was a good reminder that investor anxiety
is high, liquidity is low, and that the market is likely to remain quite
volatile.
The composition of the Fund has not changed dramatically during the
quarter. Financial companies continued to perform well, and I took some profits
in stocks such as Greenpoint Financial and Imperial Credit Industries that were
approaching my valuation targets. Redwood Trust, which I have discussed in past
letters, was a particular standout, with the common rising 14% in the quarter
while the Redwood warrants rose 31%. Cable stocks, on the other hand, were
3
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particularly weak during July, and I made significant additions to several
positions. Although cable stocks have cost us 3-4 percentage points of return
this year, I think they will be good contributors in the future.
Cable industry problems, both real and perceived, have been
well-publicized. (The cover of the current "Business Week" shouts, "CABLE TV --
THE LOOMING CRISIS.") Capital expenditures for system upgrades to allow for
digital compression, cable modems, and telephony have been very expensive, and
the suppliers of digital converter boxes and modems have only recently begun to
deliver the equipment that will allow cable companies to offer the new services.
Direct broadcast by satellite (DBS) has had good success in gaining new
subscribers, and telephone companies are beginning to offer "wireless cable" as
their first step into the video business.
Rick Lawson and I have spent a great deal of time talking to cable
companies, their competitors, and analysts who study the industry. We continue
to believe that cable company prospects are much better than investors realize.
Now that digital set-top boxes and modems are available, the companies will be
able to earn returns on their recent capital investments. As for the new
competition, coaxial cable is still the best-positioned delivery system. With
digital compression, cable will be able to match the number of channels and
video quality of DBS (at lower cost), and will be able to carry local TV
stations and two-way voice, data, and video which are not available by
satellite. Wireless cable has proven to be technically problematical, and the
phone companies do not seem to be moving aggressively to implement wireless.
They have also conceded (after experiments such as U.S. West's in Omaha) that
"over-building," or building a second, competing coaxial system, is not
economically feasible.
In short, the cable business is no longer a monopoly, but cable has
actually been adding subscribers in the face of DBS because the market is
growing, and we believe that cable is in a good competitive position. Cable
company cash flows are already growing at double digit rates, and the new
products and services should insure future growth. I think the stocks will do
well because the business fundamentals are good, and because expectations are
low.
Looking forward, we continue to face the problem of investing in a
relatively expensive market. I do not believe it makes sense to "get out" of the
market, because it is almost impossible to know when to, and have the courage
to, reenter. Furthermore, the transaction costs (bid-asked spreads as well as
commissions) and (for some) taxes, make market timing an expensive and risky
business. I still believe that the best long-term results are earned by value
investors who have the courage to buy when others are fearful, and to sell when
valuations are excessive. This simple approach does not insulate us from
TEMPORARY declines in market value, but it should produce reasonable returns
without exposing us to PERMANENT loss of capital.
4
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INVESTMENT QUESTIONS?
Shareholders often have questions about the quarterly report, the
investment portfolio, and our investment philosophy as well as personal
questions about assessing investment risk, diversification, and allocation of
capital among different types of investments. We hope that you will feel free to
call Eric Ball or any of our other analysts and portfolio managers if we can be
helpful in any of these areas. Mary Bickels is also available to help with the
mechanics of IRA's and other retirement accounts and to answer any questions you
might have about your statements or other administrative matters.
Best regards,
/s/ Wallace R. Weitz
Wallace R. Weitz
President
5
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WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR UNITS COST VALUE
- ----------- ------------ -------------
<C> <S> <C> <C>
COMMON STOCKS -- 88.1%
BANKING -- 11.7%
35,000 Bank America Corp. $ 1,526,625 $ 2,874,375
70,000 Bank Plus Corp.* 564,097 743,750
80,000 Dime Bancorp, Inc.* 897,200 1,070,000
25,000 Poughkeepsie Savings Bank, FSB 121,875 128,125
22,333 Wells Fargo & Co. 2,994,740 5,806,580
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6,104,537 10,622,830
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CABLE TELEVISION -- 18.0%
80,000 Adelphia Communications Corp. CL A* 957,500 810,000
207,700 Century Communications Corp. CL A* 1,458,112 1,557,750
260,000 Comcast Corp. CL A 3,700,556 3,997,500
260,000 Tele-Communications, Inc. CL A* 4,032,785 3,883,750
115,000 Tele-Communications Liberty Media CL A* 2,671,693 3,291,875
46,000 Time Warner, Inc. 962,442 1,776,750
60,000 U.S. West Media Group* 1,076,685 1,012,500
------------ -------------
14,859,773 16,330,125
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CONSUMER PRODUCTS AND SERVICES -- 2.5%
50,000 American Classic Voyages Co.* 489,375 468,750
6,650 Lady Baltimore Foods, Inc. 212,725 299,250
20,000 Protection One, Inc.* 108,750 252,500
35,000 Seafield Capital Corp. 1,293,109 1,242,500
------------ -------------
2,103,959 2,263,000
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FEDERAL AGENCIES -- 8.3%
25,000 Federal Home Loan Mortgage Corp. 546,129 2,446,875
70,000 Federal National Mortgage Association 1,336,588 2,441,250
35,000 Student Loan Marketing Association 1,480,488 2,611,875
------------ -------------
3,363,205 7,500,000
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FINANCIAL SERVICES -- 7.7%
45,000 American Express, Co. 1,347,134 2,081,250
70 Berkshire Hathaway, Inc.* 91,818 2,250,500
40,000 Capital One Financial Corp. 926,068 1,195,000
7,000 Imperial Credit Industries, Inc.* 36,061 256,375
20,000 PS Group, Inc.* 211,200 257,500
20,000 Salomon, Inc. 760,540 912,500
------------ -------------
3,372,821 6,953,125
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</TABLE>
6
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
SHARES
OR UNITS COST VALUE
- ----------- ------------ -------------
<C> <S> <C> <C>
INFORMATION AND DATA PROCESSING -- 2.5%
50,000 BRC Holdings, Inc.* $ 540,880 $ 1,800,000
175,000 Intelligent Systems Corp.* 164,183 492,188
------------ -------------
705,063 2,292,188
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MORTGAGE BANKING -- 6.5%
155,000 Countrywide Credit Industries, Inc. 2,509,454 3,971,875
144,450 Resource Bancshares Mtg. Grp. Inc.* 1,550,365 1,877,850
------------ -------------
4,059,819 5,849,725
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PUBLISHING AND BROADCASTING -- 5.2%
23,000 Daily Journal Corp.* 231,501 690,000
44,100 Gabelli Global Multimedia Trust, Inc. 300,321 303,187
70,000 Katz Media Group, Inc.* 841,750 621,250
120,000 Valassis Communications, Inc.* 1,685,960 1,875,000
20,000 Walt Disney Co. 1,148,724 1,267,500
------------ -------------
4,208,256 4,756,937
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REAL ESTATE AND CONSTRUCTION -- 6.0%
190,000 Catellus Development Corp.* 1,156,245 1,876,250
20,000 Forest City Enterprises, Inc. CL A 671,825 980,000
120,000 NHP, Inc.* 1,694,810 2,272,500
250,000 Presley Companies CL A* 579,273 312,500
------------ -------------
4,102,153 5,441,250
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REAL ESTATE INVESTMENT TRUSTS -- 6.4%
150,140 Redwood Trust, Inc. 2,724,131 4,804,480
50,000 Redwood Trust, Inc. Warrants, Expiring 12/31/97 137,200 850,000
10,000 Thornburg Mortgage Asset Corp. 149,350 162,500
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3,010,681 5,816,980
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TELECOMMUNICATIONS -- 13.2%
125,000 360 Communications Co.* 2,894,910 2,937,500
80,000 Airtouch Communications, Inc.* 2,232,273 2,210,000
90,000 Cellular Communications of Puerto Rico, Inc.* 2,402,177 2,295,000
205,000 Centennial Cellular Corp. CL A* 3,285,768 2,793,125
24,000 CommNet Cellular, Inc.* 656,275 693,000
25,000 Telephone and Data Systems, Inc. 904,050 1,006,250
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12,375,453 11,934,875
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OTHER -- 0.1%
8,300 ONI International, Inc.* 74,250 2,075
15,625 Package Machinery Co.* 77,500 68,359
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151,750 70,434
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Total Common Stocks 58,417,470 79,831,469
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</TABLE>
7
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WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COST VALUE
- ----------- ------------ -------------
U.S. GOVERNMENT AND AGENCY SECURITIES -- 8.2%
<C> <S> <C> <C>
$ 1,000,000 Federal Home Loan Bank Discount Note 12/19/96 $ 988,348 $ 988,578
2,000,000 Federal Natl Mtg. Assn. 6.625% 7/12/00 2,000,000 2,005,938
2,000,000 Federal Home Loan Bank 6.535% 3/21/01 2,000,000 1,982,498
2,500,000 Federal Home Loan Bank 6.44% 11/28/05 2,503,604 2,419,531
------------ -------------
Total U.S. Government and Agency Securities 7,491,952 7,396,545
------------ -------------
SHORT-TERM SECURITIES -- 4.8%
4,379,168 Norwest U.S. Government Money Market Fund, 5.0% 4,379,168 4,379,168
------------ -------------
Total Investments in Securities $ 70,288,590 91,607,182
------------ -------------
------------
Other Assets Less Liabilities -- (1.1%) (959,993)
-------------
Total Net Assets -- 100% $90,647,189
-------------
-------------
Net Asset Value Per Share $ 11.590
-------------
-------------
</TABLE>
*Non-income producing
8
