<PAGE>
WEITZ PARTNERS, INC.
- --------------------------------------------------------------------------------
PARTNERS VALUE FUND
ANNUAL
REPORT
DECEMBER 31, 1997
ONE PACIFIC PLACE, SUITE 600
1125 SOUTH 103 STREET
OMAHA, NEBRASKA 68124-6008
402-391-1980
800-232-4161
402-391-2125 FAX
<PAGE>
<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 December
31, 1997, 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 19.2 22.9
1997 40.6 33.4
Cumulative 918.5 853.1
Average Annual Compound Growth
(Since inception June 1, 1983) 17.2 16.7
</TABLE>
Average annual total return for the Fund (inception 1/94) and for the
Predecessor Partnership (inception 6/83) for the one, five and ten year periods
ended December 31, 1997, was 40.6%, 21.1% and 17.4%, respectively. These returns
assume redemption at the end of each period.
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 the Weitz
Funds at the address listed on the front cover.
1
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
DECEMBER 31, 1997 - ANNUAL REPORT
January 8, 1998
Dear Fellow Shareholder:
1997 was a terrific year for the Partners Value Fund. Our total return,
after all expenses, was +40.6%, ranking us #1 of 611 "growth and income" funds
(our Lipper Analytical Services category).* This compares to +33.4% for the S&P
500, +24.9% for the Dow, and 27.1% for the average growth and income fund
tracked by Lipper. (Past performance is no guarantee of future success.)
Although it is fun to report a +40.6% year, longer-term performance is
more important. The table below shows Partners Value returns (after deducting
expenses) over various intervals compared to those of the S&P 500 and the
average "growth and income" mutual fund.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
----------- ----------- -----------
<S> <C> <C> <C>
PARTNERS VALUE 40.6% 21.1% 17.4%
S&P 500 33.4 20.2 18.0
Average Growth and Income Fund 27.1 17.6 15.9
</TABLE>
The power of compounding is shown in the table on page 1. As you can see,
the cumulative gain since the fund was started in 1983 has been 918.5%. Thus, an
initial investment of $100,000 would have grown to $1,018,500 at year-end 1997.
It is also clear from this table that the pattern of returns from year to year
has been erratic. This is not to say that the growth patterns of our portfolio
COMPANIES have been erratic (they were not), but if we had tried to jump in and
out of the market, guessing WHEN the stock market would reward us for owning
these stocks, we would undoubtedly have missed some of the gains.
THE YEAR IN REVIEW
The year was a good one for stocks in general. As long as one managed to
miss the implosions of the various "momentum" stocks which disappointed their
fans and the "emerging" Asian markets which turned into SUBMERGING markets this
Fall, it should have been a good year.
*The ranking is based upon total return. The Fund was registered with the
Securities and Exchange Commission 1/1/94. As a result, ranking data from
Lipper Analytical Services is not available for periods prior to such
date.
2
<PAGE>
Cable television stocks, as a group, were the most significant
contributors to our 1997 results. Gains for the year ranged from 57% for U.S.
West Media Group to 222% for Adelphia Cable. For a number of reasons which have
been chronicled in the last few quarterly letters, investor perception of the
group shifted during the year from revulsion, to indifference, to acceptance and
even (dare I say it) mild excitement.
Cellular telephone stocks were also contributors, on balance. Centennial
(+69%), AirTouch (+65%), and CommNet (+28%) were helpful, while 360
Communications (-13%) and CoreComm (-49%) were not.
A few other relatively large positions were especially profitable.
Valassis, whose prosaic coupon business generates lots of excess cash, rose by
75%. NHP spun off Washington Mortgage and was then acquired by Aimco, leaving us
with a gain on the two-part transaction of roughly 100%. Seafield, which was
meant to be a very low risk, moderate return "workout" investment, completed its
reorganization and in the end returned about 90%. The Seafield return was
significantly enhanced by a small venture capital investment which we knew had
potential but which was so speculative that we had valued it at $0. This kind of
good fortune is not something we want to depend on, but it tends to happen
periodically with workouts and "asset plays."
On the other hand, one of my favorite stocks (and the fund's largest
single position), Redwood Trust, had an awful year. Redwood buys adjustable rate
mortgages and finances them with borrowings, just as a savings and loan company
would, but has a much lower cost structure because it has no branches, employs
very few people, and as a real estate investment trust, pays no taxes. Redwood
started the year at $37 and ended the year at $20, a decline of 46%. Since it
paid $2.15 in dividends and since we sold stock as high as $55 and repurchased
shares as low as $19, our overall total return was not quite that bad, but it
cost us several percentage points of performance. Redwood's volatility was
caused by a combination of unrealistic investor expectations and temporary
earnings disappointments, and I think we will be glad that we were able to buy
more shares in the high teens and low twenties.
In short, a fortunate combination of growth in the business values of our
companies and the willingness of investors to pay more for a unit of business
value (valuation inflation) resulted in a great year for our portfolio.
3
<PAGE>
OUTLOOK
Conditions have been nearly perfect, returns have been well above normal,
and investor expectations are very high. I do not know what comes next for the
economy or the stock market, but it seems reasonable to me to expect more modest
stock returns over the next few years. I am not predicting the end of the world
- -- just a return to more normal rates of growth.
Over-priced stocks can return to fair value quickly, by declining in
price, or slowly, by moving sideways while the values of the underlying
businesses "grow into" the stock prices. In this environment, it is more
difficult, but not impossible for us to find interesting new investments. Three
months ago, I wrote about why I liked Redwood Trust at $30. Today the stock is
$20, and although their growth has been slowed by conditions in the mortgage
market, I am very excited by their prospects. We nearly doubled our Redwood
holdings in the 4th quarter, and as a firm we now own about 14% of the company.
Several others of our companies are doing very well but are misunderstood and/or
overlooked, and we have been adding to those holdings. There are six of us
looking for new investment ideas, and I am confident that we will find something
worthwhile. In the meantime, our cash and short-term bond reserves are just over
20% of the portfolio, so a sharp (but temporary) sinking spell would probably be
good for our long-term performance.
SHAREHOLDER MEETING
Please mark your calendars for our shareholder meeting on Wednesday, May
27 at 4:00 p.m. We will be meeting at the Omaha Marriott again and at this
point, it looks as if we will be able to avoid having any official business to
conduct. That means that we can spend all our time answering your questions and
talking about the things you want to talk about. Between now and then, Rick, Tom
and I are always happy to talk with you about your investments or any questions
you may have about our portfolio or our strategy. Please feel free to call
anytime.
Best regards,
[/S/ WALLACE R. WEITZ]
Wallace R. Weitz
President, Portfolio
Manager
4
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
1997 DIVIDEND INFORMATION
<TABLE>
<S> <C> <C>
APRIL 1997 DIVIDEND
Weitz Partners, Inc. -- Partners Value Fund declared a dividend of $0.5313 per share
payable on April 28, 1997, to shareholders of record on April 25, 1997. The source
for this distribution was:
LONG TERM CAPITAL GAIN $ 0.5313
- --------------------------------------------------------------
---------
---------
</TABLE>
<TABLE>
<S> <C> <C>
JANUARY 1998 DIVIDEND
Weitz Partners, Inc. -- Partners Value Portfolio declared a dividend of $1.3229 per
share payable on January 2, 1998, to shareholders of record on December 31, 1997.
The source for this distribution was:
ORDINARY INCOME
- --------------------------------------------------------------
Net Investment Income $ 0.1676
Net Short Term Capital Gains 0.2193
---------
Total Ordinary Income $ 0.3869
---------
---------
LONG TERM CAPITAL GAIN $ 0.9360
- --------------------------------------------------------------
---------
---------
</TABLE>
5
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES
OR UNITS COST VALUE
- ----------- ------------ -------------
<C> <S> <C> <C>
COMMON STOCKS -- 83.5%
BANKING -- 2.5%
10,000 Wells Fargo & Co. $ 1,754,758 $ 3,394,375
------------ -------------
CABLE TELEVISION -- 17.8%
79,000 Adelphia Communications Corp. CL A* 645,012 1,461,500
455,000 Century Communications Corp. CL A* 2,656,136 4,436,250
195,000 Comcast Corp. Special CL A 2,488,988 6,154,687
20,000 Comcast UK Cable Partners Limited CL A* 250,714 188,750
170,000 Tele-Communications, Inc. CL A* 2,093,622 4,749,375
238,000 U.S. West Media Group* 4,318,888 6,872,250
------------ -------------
12,453,360 23,862,812
------------ -------------
CONSUMER PRODUCTS AND SERVICES -- 3.3%
50,000 American Classic Voyages Co.* 489,375 906,250
80,000 Lab Holdings, Inc. 2,473,366 1,860,000
6,650 Lady Baltimore Foods, Inc. 212,725 345,800
110,000 Protection One, Inc. 198,023 1,244,375
------------ -------------
3,373,489 4,356,425
------------ -------------
FEDERAL AGENCIES -- 4.8%
50,000 Federal Home Loan Mortgage Corp. 138,785 2,096,875
40,000 Federal National Mortgage Association 759,888 2,282,500
15,000 SLM Holding Corp. 519,965 2,086,875
------------ -------------
1,418,638 6,466,250
------------ -------------
FINANCIAL SERVICES -- 7.5%
45,000 American Express, Co. 1,347,134 4,016,250
70 Berkshire Hathaway, Inc.* 91,818 3,220,000
40,000 Capital One Financial Corp. 926,068 2,167,500
20,000 Imperial Credit Industries, Inc.* 317,500 410,000
20,000 PS Group, Inc. 181,200 250,000
------------ -------------
2,863,720 10,063,750
------------ -------------
INFORMATION AND DATA PROCESSING -- 2.0%
48,000 BRC Holdings, Inc.* 626,796 1,836,000
175,000 Intelligent Systems Corp.* 164,183 853,125
------------ -------------
790,979 2,689,125
------------ -------------
</TABLE>
See accompanying notes to financial statements.
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>
MEDIA AND ENTERTAINMENT -- 11.2%
23,000 Daily Journal Corp.* $ 231,501 $ 851,000
45,000 TCI Satellite Entertainment CL A* 518,911 309,375
195,000 Tele-Communications Liberty Media CL A* 3,168,032 7,068,750
90,000 Tele-Communications TCI-Ventures Grp A* 1,087,571 2,548,125
115,000 Valassis Communications, Inc.* 1,619,640 4,255,000
------------ -------------
6,625,655 15,032,250
------------ -------------
MORTGAGE BANKING -- 6.4%
100,000 Countrywide Credit Industries, Inc. 1,546,954 4,287,500
50,000 Long Beach Financial Corp.* 325,000 581,250
10,000 New Century Financial Corp.* 110,000 102,500
177,922 Resource Bancshares Mtg. Grp., Inc. 1,870,527 2,902,353
56,666 WMF Group, Limited* 518,494 708,325
------------ -------------
4,370,975 8,581,928
------------ -------------
REAL ESTATE AND CONSTRUCTION -- 6.2%
45,000 Catellus Development Corp.* 257,950 900,000
30,000 Forest City Enterprises, Inc. CL A 671,825 1,743,750
170,000 NHP, Inc.* 2,327,137 4,671,005
45,000 Presley Companies CL A* 64,687 33,750
16,100 SLH Corp.* 102,772 901,600
------------ -------------
3,424,371 8,250,105
------------ -------------
REAL ESTATE INVESTMENT TRUSTS -- 8.4%
50,000 Hanover Capital Mortgage*** 750,000 825,000
65,000 NovaStar Financial, Inc.** 975,000 1,080,625
60,000 NovaStar Financial, Inc. Common 1,080,000 948,750
412,044 Redwood Trust, Inc. 9,444,809 8,395,396
------------ -------------
12,249,809 11,249,771
------------ -------------
TELECOMMUNICATIONS -- 13.3%
250,000 360 Communications Co.* 5,108,520 5,046,875
70,000 Airtouch Communications, Inc.* 1,935,423 2,909,375
260,000 Centennial Cellular Corp. CL A* 3,653,156 5,330,000
33,500 CommNet Cellular, Inc.* 907,488 1,191,344
143,400 Corecomm, Inc.* 3,279,996 1,451,925
40,000 Telephone and Data Systems, Inc. 1,455,575 1,862,500
------------ -------------
16,340,158 17,792,019
------------ -------------
OTHER -- 0.1%
8,300 ONI International, Inc.* 62,630 83
------------ -------------
Total Common Stocks 65,728,542 111,738,893
------------ -------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT COST VALUE
- ----------- ------------ -------------
U.S. GOVERNMENT AND AGENCY SECURITIES -- 6.4%
<C> <S> <C> <C>
$ 2,000,000 Federal Natl. Mtg. Assn. 6.625% 7/12/00 $ 2,000,000 $ 2,036,875
1,000,000 Federal Natl. Mtg. Assn. 7.54% 6/04/04 1,002,836 1,005,625
2,500,000 Federal Home Loan Bank 6.44% 11/28/05 2,503,111 2,567,578
3,000,000 Federal Natl. Mtg. Assn. 6.56% 11/26/07 3,000,000 3,017,754
------------ -------------
Total U.S. Government and Agency Securities 8,505,947 8,627,832
------------ -------------
SHORT-TERM SECURITIES -- 9.2%
6,314,019 Norwest U.S. Government Money Market Fund 6,314,019 6,314,019
1,000,000 Federal Home Loan Bank Discount Note 1/02/98 999,850 999,725
2,000,000 U.S. Treasury Bill 1/08/98 1,998,008 1,998,515
3,000,000 Federal Home Loan Bank Discount Note 3/30/98 2,959,410 2,958,838
------------ -------------
12,271,287 12,271,097
------------ -------------
Total Investments in Securities $ 86,505,776 132,637,822
------------ -------------
------------ -------------
Securities Sold Short -- (3.4%) (4,601,100)
Other Assets Less Liabilities -- 4.3% 5,700,332
-------------
Total Net Assets -- 100% $ 133,737,054
-------------
Net Asset Value Per Share $ 15.453
-------------
-------------
<CAPTION>
SHARES
OR UNITS PROCEEDS VALUE
- ----------- ------------ -------------
<C> <S> <C> <C>
SECURITIES SOLD SHORT
125,200 Apartment Investment & Management Co.+ $ 4,024,570 $ 4,601,100
------------ -------------
------------ -------------
</TABLE>
+Apartment Investment & Management Co. ("AIV") is scheduled to acquire NHP, Inc.
("NHP") in the 1st quarter of 1998. As part of the acquisition, NHP shareholders
are expected to receive approximately .75 share of AIV for each share of NHP.
AIV has been sold short in anticipation of receipt of AIV shares in exchange for
NHP shares currently owned by Partners Value Fund.
*Non-income producing
** These units, purchased in a private placement, consist of one share of
preferred stock convertible to common and one stock purchase warrant and are
restricted securities exempt from registration under the Securities Act of 1933
(the "Act"). Unless registered under the Act or exempted from registration, they
may only be sold to qualified institutional investors or certain accredited
investors.
*** Each unit consists of one share of common stock and one stock purchase
warrant.
See accompanying notes to financial statements.
8
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets:
Investment in securities at value (cost $86,505,776) $132,637,822
Deposits with brokers for securities sold short 4,002,027
Receivable for securities sold 1,727,971
Accrued interest and dividends receivable 318,658
Other 10,495
------------
Total assets 138,696,973
------------
Liabilities:
Securities sold short, at value (proceeds received $4,024,570) 4,601,100
Due to adviser 122,367
Payable for securities purchased 214,751
Other 21,701
------------
Total liabilities 4,959,919
------------
Net assets applicable to outstanding capital stock $133,737,054
------------
------------
Net assets represented by:
Additional paid-in capital (note 4) 71,785,779
Accumulated undistributed net investment income 1,250,834
Accumulated undistributed net realized gains 15,144,925
Net unrealized appreciation of investments 45,555,516
------------
Total representing net assets applicable
to shares outstanding $133,737,054
------------
------------
Net asset value per share of outstanding capital stock
(8,654,541 shares outstanding) $ 15.453
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment income:
Dividends $ 1,891,782
Interest 833,147
-----------
Total investment income 2,724,929
-----------
Expenses (note 3):
Investment advisory fee 1,124,589
Administrative fee 126,978
Directors fees 5,680
Dividends on securities sold short 79,134
Other expenses 142,087
-----------
Total expenses 1,478,468
-----------
Net investment income 1,246,461
-----------
Realized and unrealized gain on investments:
Realized gain on investments 15,266,989
Net unrealized appreciation of investments 22,301,165
-----------
Net realized and unrealized gain on investments 37,568,154
-----------
Net increase in net assets resulting from operations $38,814,615
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Increase in net assets:
From operations:
Net investment income $ 1,246,461 $ 439,636
Net realized gain 15,266,989 8,613,668
Unrealized appreciation 22,301,165 6,036,893
-------------- --------------
Net increase in net assets resulting from operations 38,814,615 15,090,197
-------------- --------------
Distributions to shareholders from:
Net investment income -- (476,435)
Net realized gains (4,460,935) (6,116,607)
-------------- --------------
Total distributions (4,460,935) (6,593,042)
-------------- --------------
Capital share transactions (note 4):
Proceeds from sales 7,020,324 13,203,924
Payments for redemptions (6,051,840) (5,655,658)
Reinvestment of distributions 3,568,479 5,020,102
-------------- --------------
Total increase from capital share transactions 4,536,963 12,568,368
-------------- --------------
Total increase in net assets 38,890,643 21,065,523
-------------- --------------
Net assets:
Beginning of year 94,846,411 73,780,888
-------------- --------------
End of year $ 133,737,054 $ 94,846,411
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
FINANCIAL HIGHLIGHTS
The following financial information provides selected data for a share of the
Partners Value Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994*
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD: $ 11.524 $ 10.384 $ 8.275 $ 10.000
---------- --------- --------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.134 0.057 0.084 0.057
Net gains or losses on securities
(realized and unrealized) 4.326 1.933 3.108 (0.964)
---------- --------- --------- ---------
Total from investment operations 4.460 1.990 3.192 (0.907)
---------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (0.061) (0.237) --
Distributions from realized gains (0.531) (0.789) (0.846) (0.818)
---------- --------- --------- ---------
Total distributions (0.531) (0.850) (1.083) (0.818)
---------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 15.453 $ 11.524 $ 10.384 $ 8.275
---------- --------- --------- ---------
---------- --------- --------- ---------
TOTAL RETURN 40.6% 19.2% 38.7% -9.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000) 133,737 94,846 73,781 51,287
Ratio of expenses to average net assets 1.24% 1.23% 1.27% 1.29%
Ratio of net investment income to average net assets 1.11% 0.51% 0.82% 0.67%
Portfolio turnover rate 30% 37% 51% 33%
Average commission rate paid (per share)+ $ 0.0504 $ 0.0495
</TABLE>
+Required by regulations issued in 1995.
*Fund commenced public offering of shares on January 1, 1994.
See accompanying notes to financial statements.
12
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) ORGANIZATION
Weitz Partners, Inc. (the "Company"), is registered under the Investment
Company Act of 1940 as an open-end management investment company. At
present, there is only one series authorized by the Company, the Partners
Value Fund (the "Fund"). The accompanying financial statements present the
financial position and results of operations of the Fund.
The Fund's investment objective is capital appreciation. The Fund invests
principally in common stocks, preferred stocks and a variety of securities
convertible into equity such as rights, warrants, preferred stocks and
convertible bonds. The following accounting policies are in accordance with
accounting policies generally accepted in the investment company industry.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) VALUATION OF INVESTMENTS
Investments are carried at value determined using the following valuation
methods:
- Securities traded on a national or regional securities exchange and
over-the-counter securities traded on the NASDAQ national market are
valued at the last sales price; if there were no sales on that day,
securities are valued at the mean between the latest available and
representative bid and asked prices.
- Securities not listed on an exchange are valued at the mean between
the latest available and representative bid and ask prices.
- The value of certain debt securities for which market quotations are
not readily available may be based upon current market prices of
securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors.
- The value of securities for which market quotations are not readily
available, including restricted and not readily marketable
securities, is determined in good faith under the supervision of the
Fund's Board of Directors.
When the Fund writes a call option, an amount equal to the premium
received by the Fund is included in the Fund's statement of assets and
liabilities as a liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option
written. The current market value of a traded option is the last sales
price on the principal
13
<PAGE>
exchange on which such option is traded, or, in the absence of such sale,
the latest ask quotation. When an option expires on its stipulated
expiration date or the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. When a call
option is exercised, the Fund realizes a gain or loss from the sale of
the underlying security and the proceeds from such sale are increased by
the premium originally received. Although no call options were written in
the year ended December 31, 1997, such options are authorized.
The risk in writing a call option is that the Fund gives up the
opportunity of profit if the market price of the security increases. The
Fund also has the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist.
(B) FEDERAL INCOME TAXES
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders, no provision for
income or excise taxes is required.
Net investment income and net realized gains may differ for financial
statement and tax purposes. The character of distributions made during
the year from net investment income or net realized gains may differ from
their ultimate characterization for Federal income tax purposes. Also,
due to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gains were recorded by the Fund.
(C) SECURITY TRANSACTIONS AND DISTRIBUTIONS TO SHAREHOLDERS
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Income dividends and dividends on short
positions are recorded on the ex-dividend date. Interest, including
amortization of discount and premium, is accrued as earned. Distributions
to shareholders are recorded on the ex-dividend date.
Realized gains or losses are determined by specifically identifying the
issue sold.
(D) 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
14
<PAGE>
at the date of the financial statements and the reported amounts of
increase and decrease in net assets from operations during the period.
Actual results could differ from those estimates.
(E) SECURITIES SOLD SHORT
The Fund is engaged in selling securities short, which obligates the Fund
to replace a security borrowed by purchasing the same security at the
current market value. The Fund incurs a loss if the price of the security
increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund realizes a gain if the
price of the security declines between those dates.
The Fund is required to establish a margin account with the broker
lending the security sold short. While the short sale is outstanding, the
broker retains the proceeds of the short sale. The Fund will place in a
segregated account a sufficient amount of cash and securities as required
by applicable federal securities regulations in order to cover the
transaction.
(3) RELATED PARTY TRANSACTIONS
The Fund has retained Wallace R. Weitz & Company (the "Adviser") as its
exclusive investment adviser. In addition, the Company has an agreement with
Weitz Securities, Inc. (the "Distributor") to act as distributor for the
Fund's shares. Certain officers and directors of the Company are also
officers and directors of the Adviser and the Distributor.
Under the terms of a management and investment advisory agreement, the
Adviser receives an investment advisory fee equal to 1% per annum of the
Fund's average daily net asset value. The Adviser has agreed to reimburse
the Fund up to the amount of advisory fees paid to the extent that total
expenses exceed 1.50% of the Fund's average annual daily net asset value.
The expenses incurred by the Fund did not exceed the percentage limitation
during the year ended December 31, 1997.
Under the terms of an administration agreement, certain services are being
provided including the transfer of shares, disbursement of dividends, fund
accounting and related administrative services of the Fund for which the
Adviser is being paid a monthly fee. During the year ended December 31,
1997, the fee was calculated at an average annual rate of .12% of the Fund's
average daily net assets.
The Distributor received no compensation for distribution of the Fund's
shares.
(4) CAPITAL STOCK
The Company is authorized to issue a total of 1,000,000,000 shares of common
stock with a par value of $.00001 per share. Fifty million of these shares
have been authorized by the Board of
15
<PAGE>
Directors to be issued by the Fund. The Board of Directors may authorize
additional shares in series without shareholder approval. Each share of
stock will have a pro rata interest in the assets of the Fund to which the
stock of that series relates and will have no other interest in the assets
of any other series.
Transactions in the capital stock of the Fund are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
---------- -----------
<S> <C> <C>
Transactions in shares:
Shares issued.............................................................. 575,844 1,195,364
Shares redeemed............................................................ (478,830) (504,774)
Reinvested dividends....................................................... 326,905 435,093
---------- -----------
Net increase............................................................. 423,919 1,125,683
---------- -----------
---------- -----------
</TABLE>
On October 27, 1997, the Board of Directors declared a dividend from net
investment income of $.1676 per share and a distribution of $1.1553 per
share from net realized gains payable January 2, 1998 to shareholders of
record December 31, 1997 and ex-dividend as of January 2, 1998.
(5) SECURITIES TRANSACTIONS
Purchases and proceeds from maturities or sales of investment securities of
the Fund, other than short-term securities, aggregated $31,008,332 and
$39,652,609, respectively. The cost of investments for Federal income tax
purposes is $86,602,974. At December 31, 1997, the aggregate gross
unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, were $50,905,541 and $5,471,793, respectively.
16
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Weitz Partners, Inc. -- Partners Value Fund:
We have audited the accompanying statements of assets and liabilities of
Weitz Partners, Inc. -- Partners Value Fund, including the schedule of
investments in securities, as of December 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets and
the financial highlights for each of the two years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The financial
highlights for all years prior to January 1, 1996, were audited by other
auditors whose report, dated January 19, 1996, expressed an unqualified opinion
on those statements.
We conducted our audits 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 and brokers. 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 audits provide 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
Weitz Partners, Inc. -- Partners Value Fund as of December 31, 1997, the results
of its operations, changes in its net assets, and financial highlights for the
periods indicated above in conformity with generally accepted accounting
principles.
[/S/ MCGLADREY & PULLEN, LLP]
New York, New York
January 20, 1998
17
<PAGE>
WEITZ PARTNERS, 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
Partners, Inc. -- Partners Value Fund. For more detailed information about the
Fund, its 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S ANNUAL REPORT, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 86,505,776
<INVESTMENTS-AT-VALUE> 132,637,822
<RECEIVABLES> 2,046,629
<ASSETS-OTHER> 4,012,522
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 138,696,973
<PAYABLE-FOR-SECURITIES> 214,751
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,745,168
<TOTAL-LIABILITIES> 4,959,919
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,785,779
<SHARES-COMMON-STOCK> 8,654,541
<SHARES-COMMON-PRIOR> 8,230,622
<ACCUMULATED-NII-CURRENT> 1,250,834
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,144,925
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45,555,516
<NET-ASSETS> 133,737,054
<DIVIDEND-INCOME> 1,891,782
<INTEREST-INCOME> 833,147
<OTHER-INCOME> 0
<EXPENSES-NET> (1,478,468)
<NET-INVESTMENT-INCOME> 1,246,461
<REALIZED-GAINS-CURRENT> 15,266,989
<APPREC-INCREASE-CURRENT> 22,301,165
<NET-CHANGE-FROM-OPS> 38,814,615
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4,460,935)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 575,844
<NUMBER-OF-SHARES-REDEEMED> (478,830)
<SHARES-REINVESTED> 326,905
<NET-CHANGE-IN-ASSETS> 38,890,643
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,343,243
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,124,589
<INTEREST-EXPENSE> 9,142
<GROSS-EXPENSE> 1,478,468
<AVERAGE-NET-ASSETS> 112,132,676
<PER-SHARE-NAV-BEGIN> 11.524
<PER-SHARE-NII> 0.134
<PER-SHARE-GAIN-APPREC> 4.326
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.531)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.453
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
