<PAGE>
WEITZ PARTNERS, INC.
- --------------------------------------------------------------------------------
PARTNERS VALUE FUND
ANNUAL
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
<PAGE>
HISTORICAL PERFORMANCE INFORMATION
The table below and the graph on page 3 give 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, 1998, calculated in accordance with SEC standardized
formulas.
<TABLE>
<CAPTION>
PERIOD ENDED PARTNERS II S&P 500
- ------------------------------------------------------------------ -------------- -----------
<S> <C> <C>
12/31/83 9.9% 4.2%+
12/31/84 14.5 6.3
12/31/85 40.7 31.7
12/31/86 11.1 18.7
12/31/87 4.3 5.3
12/31/88 14.9 16.5
12/31/89 20.3 31.6
12/31/90 -6.3 -3.1
12/31/91 28.1 30.2
12/31/92 15.1 7.6
12/31/93 23.0 10.1
<CAPTION>
PERIOD ENDED PARTNERS VALUE S&P 500
- ------------------------------------------------------------------ -------------- -----------
<S> <C> <C>
12/31/94 -9.0 1.3
12/31/95 38.7 37.5
12/31/96 19.2 22.9
12/31/97 40.6 33.4
12/31/98 29.1 28.6
Cumulative 1,214.6 1,125.5
Average Annual Compound Growth
(Since inception June 1, 1983) 18.0 17.4
</TABLE>
+ Return is for the period 6/1/83 through 12/31/83
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (JUNE 1, 1983)
--------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Partners Value Fund (and Predecessor Partnership) 29.1% 22.2% 18.8% 18.0%
Standard & Poor's 500 Index 28.6% 24.0% 19.2% 17.4%
</TABLE>
2
<PAGE>
The chart below shows the change in the value of a $100,000 investment in the
Predecessor Partnership and the Fund for the period since inception (June,
1983), through December 31, 1998, as compared with the growth of the Standard &
Poor's 500 Index during the same period. The Standard & Poor's 500 Index is an
unmanaged index consisting of 500 companies. The information assumes
reinvestment of dividends and capital gains distributions. As indicated,
$100,000 originally invested in the Predecessor Partnership on June 1, 1983,
would have been valued at $1,314,592 on December 31, 1998.
PARTNERS VALUE FUND AND PREDECESSOR PARTNERSHIP
INCEPTION (6/1/83) THROUGH 12/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE OF $100,000 INVESTMENT
<S> <C> <C>
Since Inception of Predecessor Partnership
Partners Value S&P 500
$100,000 $100,000
06/01/83 $100,000 $100,000
06/30/83 $100,190 $103,891
07/31/83 $99,719 $100,824
08/31/83 $101,614 $102,330
09/30/83 $107,426 $103,742
10/31/83 $108,876 $102,541
11/30/83 $111,718 $104,703
12/31/83 $109,900 $104,154
01/31/84 $114,703 $103,572
02/29/84 $109,759 $99,926
03/31/84 $111,680 $101,655
04/30/84 $112,238 $102,618
05/31/84 $109,690 $96,942
06/30/84 $111,566 $99,052
07/31/84 $110,238 $97,822
08/31/84 $120,104 $108,281
09/30/84 $122,650 $108,553
10/31/84 $123,840 $109,068
11/30/84 $125,054 $107,845
12/31/84 $125,835 $110,685
01/31/85 $131,649 $119,307
02/28/85 $138,192 $120,760
03/31/85 $146,290 $120,838
04/30/85 $145,910 $120,729
05/31/85 $151,980 $127,703
06/30/85 $155,065 $129,702
07/31/85 $157,267 $129,511
08/31/85 $157,644 $128,397
09/30/85 $158,527 $124,379
10/31/85 $169,656 $130,122
11/30/85 $178,580 $139,046
12/31/85 $177,051 $145,771
01/31/86 $177,582 $146,584
02/28/86 $189,054 $157,532
03/31/86 $197,788 $166,326
04/30/86 $195,573 $164,452
05/31/86 $199,465 $173,193
06/30/86 $199,804 $176,125
07/31/86 $194,769 $166,280
08/31/86 $198,528 $178,610
09/30/86 $195,729 $163,836
10/31/86 $199,174 $173,290
11/30/86 $199,313 $177,501
12/31/86 $196,704 $172,963
01/31/87 $206,598 $196,252
02/28/87 $210,813 $203,998
03/31/87 $216,041 $209,883
04/30/87 $212,390 $208,018
05/31/87 $212,857 $209,813
06/30/87 $215,113 $220,407
07/31/87 $220,233 $231,571
08/31/87 $223,735 $240,203
09/30/87 $224,205 $234,936
10/31/87 $205,372 $184,374
11/30/87 $202,024 $169,207
12/31/87 $205,162 $182,107
01/31/88 $211,768 $189,761
02/29/88 $216,639 $198,563
03/31/88 $217,224 $192,437
04/30/88 $220,243 $194,565
05/31/88 $221,498 $196,219
06/30/88 $226,482 $205,216
07/31/88 $228,339 $204,434
08/31/88 $228,248 $197,499
09/30/88 $232,653 $205,903
10/31/88 $234,165 $211,632
11/30/88 $232,315 $208,604
12/31/88 $235,730 $212,239
01/31/89 $244,971 $227,737
02/28/89 $245,951 $222,072
03/31/89 $251,239 $227,245
04/30/89 $262,796 $239,031
05/31/89 $264,820 $248,660
06/30/89 $269,084 $247,259
07/31/89 $278,233 $269,563
08/31/89 $281,711 $274,811
09/30/89 $284,951 $273,690
10/31/89 $280,620 $267,342
11/30/89 $281,237 $272,768
12/31/89 $283,585 $279,307
01/31/90 $268,016 $260,566
02/28/90 $270,401 $263,942
03/31/90 $270,158 $270,930
04/30/90 $269,239 $264,180
05/31/90 $282,082 $289,876
06/30/90 $283,267 $287,921
07/31/90 $278,253 $287,000
08/31/90 $263,033 $261,085
09/30/90 $254,879 $248,396
10/31/90 $244,174 $247,344
11/30/90 $257,481 $263,296
12/31/90 $265,719 $270,624
01/31/91 $282,698 $282,379
02/28/91 $297,907 $302,544
03/31/91 $304,580 $309,862
04/30/91 $308,205 $310,597
05/31/91 $317,050 $323,944
06/30/91 $306,492 $309,113
07/31/91 $314,338 $323,508
08/31/91 $320,185 $330,713
09/30/91 $325,372 $325,175
10/31/91 $326,836 $329,536
11/30/91 $317,064 $316,290
12/31/91 $340,385 $352,400
01/31/92 $344,368 $345,840
02/29/92 $349,534 $350,313
03/31/92 $349,884 $343,506
04/30/92 $351,144 $353,578
05/31/92 $355,077 $355,301
06/30/92 $356,107 $350,015
07/31/92 $359,882 $364,302
08/31/92 $352,972 $356,855
09/30/92 $357,914 $361,047
10/31/92 $354,550 $362,286
11/30/92 $378,730 $374,583
12/31/92 $391,786 $379,177
01/31/93 $403,383 $382,344
02/28/93 $411,088 $387,549
03/31/93 $418,652 $395,719
04/30/93 $407,181 $386,154
05/31/93 $420,089 $396,448
06/30/93 $430,087 $397,604
07/31/93 $437,054 $396,002
08/31/93 $465,200 $410,990
09/30/93 $461,525 $407,836
10/31/93 $477,540 $416,266
11/30/93 $470,854 $412,311
12/31/93 $481,897 $417,294
01/31/94 $487,776 $431,467
02/28/94 $468,693 $419,763
03/31/94 $445,899 $401,486
04/30/94 $447,778 $406,638
05/31/94 $461,030 $413,288
06/30/94 $450,573 $403,163
07/31/94 $460,018 $416,391
08/31/94 $471,439 $433,428
09/30/94 $458,042 $422,844
10/31/94 $462,716 $432,310
11/30/94 $444,211 $416,581
12/31/94 $438,388 $422,746
01/31/95 $453,910 $433,700
02/28/95 $473,035 $450,582
03/31/95 $477,273 $463,855
04/30/95 $487,074 $477,504
05/31/95 $509,272 $496,545
06/30/95 $530,728 $508,068
07/31/95 $550,806 $524,906
08/31/95 $574,487 $526,216
09/30/95 $585,718 $548,410
10/31/95 $575,970 $546,450
11/30/95 $601,664 $570,411
12/31/95 $607,860 $581,397
01/31/96 $634,319 $601,161
02/29/96 $647,783 $606,747
03/31/96 $645,207 $612,589
04/30/96 $649,714 $621,610
05/31/96 $661,948 $637,611
06/30/96 $668,914 $640,039
07/31/96 $628,581 $611,775
08/31/96 $654,865 $624,695
09/30/96 $678,456 $659,822
10/31/96 $680,798 $678,013
11/30/96 $715,453 $729,214
12/31/96 $724,288 $714,767
01/31/97 $750,497 $759,396
02/28/97 $770,295 $765,354
03/31/97 $737,047 $733,965
04/30/97 $745,175 $777,743
05/31/97 $819,389 $825,060
06/30/97 $844,105 $862,002
07/31/97 $892,680 $930,569
08/31/97 $882,200 $878,474
09/30/97 $940,728 $926,555
10/31/97 $960,237 $895,646
11/30/97 $963,862 $937,070
12/31/97 $1,018,501 $953,150
01/31/98 $1,034,656 $963,680
02/28/98 $1,079,578 $1,033,143
03/31/98 $1,187,666 $1,086,006
04/30/98 $1,233,007 $1,096,927
05/31/98 $1,208,390 $1,078,094
06/30/98 $1,260,227 $1,121,850
07/31/98 $1,275,324 $1,109,933
08/31/98 $1,131,192 $949,620
09/30/98 $1,147,033 $1,010,457
10/31/98 $1,184,888 $1,092,575
11/30/98 $1,248,029 $1,158,765
12/31/98 $1,314,592 $1,225,494
</TABLE>
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 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.
3
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
DECEMBER 31, 1998 - ANNUAL REPORT
January 1, 1999
Dear Fellow Shareholder:
1998 was a great year for the Partners Value Fund. Our total return
(income plus appreciation, after expenses) was +29.1%. This compares favorably
with the major market indices and our mutual fund peers (see table below), but
more importantly, it does wonders for our shareholders' net worths.
I am especially pleased with these returns since our portfolio included
cash and short-term bond "reserves" ranging from 15-30% during the year. The
high cash levels were a product of new cash flows into the fund, sales of fully
valued stocks, and a shortage of great new investment ideas. We do not try to
"time" the market, but we are more interested in ABSOLUTE value than RELATIVE
value. That is, we would prefer to hold cash than to buy an over-valued stock
just because it was less over-valued than others. (We would find small comfort
in being down 20% just because others were down 30%.) Some would call this
market timing, but we call it disciplined value investing.
The table on page 2 shows annual performance of the fund since it was
started, and the table below compares our performance to that of various market
indices and the other mutual funds in our category (according to Lipper
Analytical Services). All of the performance data assumes reinvestment of
dividends (except Value Line and Russell for which dividend data are not
available) and are calculated after deducting all expenses.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
--------- ----------- -----------
<S> <C> <C> <C>
PARTNERS VALUE FUND 29.1% 22.2% 18.8%
S&P 500 Index 28.6 24.0 19.2
Dow Jones Industrial Average 18.1 22.3 18.8
Value Line Index 5.8 15.3 14.2
Russell 2000 -3.4 10.3 11.1
Average Growth and Income Fund 15.6 18.5 15.8
</TABLE>
Our portfolio continues to be concentrated in three types of businesses --
cable television, cellular telephone, and financial services. This year, cable
and cellular were unusually strong performers as takeover activity drew
attention to the underlying business values. Financial stocks were very weak in
the second half of the year and were a drag on performance for the year. For the
most part, our portfolio has been concentrated outside of the
4
<PAGE>
mainstream of the stock market. This approach has worked for us over the years
because our companies have done well and investor perceptions of them (and thus
their valuations) have improved, but in any given year, our results are likely
to be very different (for better or worse) from the rest of the market.
Meanwhile, back IN the mainstream, some extreme divergences have
developed. There is now a "two-tier" market, in which a few "star" companies
(e.g. Microsoft, Intel, Cisco, Dell, AOL) have attracted (perhaps) more than
their share of investment capital. These stocks have driven the S&P 500 to new
highs, while the "average" stock has lagged. In 1998, the 10 largest companies
(2% of the 500 stocks in the index) accounted for 50% of the S&P's 28.6% gain,
and the 25 largest contributed 85% of the gain. The average New York Stock
Exchange stock DECLINED BY 8% in 1998, and the Russell 2000 was down 3.4%.
This stock market schizophrenia has unhealthy elements, such as the
vulnerability of the "stars" to nasty declines that would cost investors
(speculators?) billions, and might spread to other stocks. However, I believe
there is some basis for celebration because many of the second tier of
(neglected) stocks are much more reasonably priced, and a little market weakness
could create some terrific bargains.
OUTLOOK FOR OUR PORTFOLIO
As usual, I have no idea what "the market" or our stocks will do in the
short-run. I have thought for some time that we, and investors in general, may
have borrowed some returns from the future and that we should expect lower
absolute returns than we have earned over the past 15 years. However, I like the
companies we own, and I feel good about the long-term prospects for our
portfolio.
- - BANKS AND FINANCIALS
The liquidity crisis that was triggered by economic problems in Asia,
Russia, and the Wall Street hedge fund community did serious (and in some cases,
permanent) damage to some financial companies, but created great opportunities
for others. Some of our mortgage REIT's were forced to sell good assets at
distress prices when their lenders threatened to withdraw credit lines. Their
business values declined accordingly, but we believe they have good recovery
potential. For example, Redwood Trust sells at $14, has a liquidation value over
$19, and has earning power of well over $2 per share (all of which would be paid
out in dividends). As Redwood's earnings recover, we believe the stock will move
up substantially.
We have been adding to our positions in several banks and thrifts, which
are selling at very modest price/earnings levels. We are also buying some small
thrifts which have recently converted from mutual to stock companies. These
thrifts are generally over-capitalized
5
<PAGE>
(allowing for future stock buybacks and dividends) and sell at discounts to
their book values. We do not expect spectacular gains from these stocks, but
they offer a high probability of solid total returns over the years.
Other financial companies such as Freddie Mac, Fannie Mae, Sallie Mae,
American Express, Berkshire Hathaway, and Countrywide Credit are relatively
fully-priced, but in moments of panic over liquidity or credit quality, such as
last September-October, extreme volatility can give us great opportunities to
add to our positions. Smaller companies are also subject to takeovers (e.g.
Headlands by Greenpoint) and partnerships (e.g. New Century with USBancorp)
which could boost our returns.
- - REAL ESTATE
Some real estate companies got carried away over the past few years and
over-borrowed and over-paid for properties. After this year's liquidity crisis,
financing for new projects disappeared, and some leveraged owners are being
forced to sell properties at bargain prices. This has created opportunities for
strong, well-financed companies such as Hilton and Forest City to expand their
portfolios. Other opportunistic real estate investment trusts, such as Fortress,
should also benefit.
One specific real estate market, Las Vegas, is showing signs of temporary
over-building, and the publicly-traded gambling stocks are very depressed.
Hilton's gambling properties, which were spun out at year-end as Park Place
Entertainment, are selling in the open market at about 1/2 of their takeover
value. We believe the value is growing and will eventually be recognized.
- - TELECOMMUNICATIONS
Our cellular stocks were strong this year, as cellular service turned out
to be more popular in rural areas than expected, and as competition in those
areas developed more slowly than expected. Several of our companies received
takeover bids (e.g. 360 Communications, Vanguard, and Centennial), and as this
is written, AirTouch is in negotiations to be acquired. Of our remaining telecom
holdings, Telephone and Data Systems and U.S.Cellular are particularly cheap.
- - CABLE TELEVISION
Last, but not least, a quarterly report on the Partners Value Fund would
not be complete without mention of the cable stocks. Telecommunications, Inc. is
being taken over by AT&T, Century has put itself up for sale, and Comcast and
others are selling at prices very close to takeover value. We really like these
businesses, but their values have been recognized. We have been scaling back our
holdings.
6
<PAGE>
All in all, 1998 was an interesting and profitable year for our fund. I
would guess that 1999 will bring more surprises and volatility, and with luck,
we will be able to take advantage of the opportunities.
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.
Best regards,
/S/ WALLACE R. WEITZ
Wallace R. Weitz
President
7
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
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.
8
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
1998 DIVIDEND INFORMATION
<TABLE>
<S> <C> <C>
APRIL 1998 DIVIDEND
Weitz Partners, Inc. -- Partners Value Fund declared a dividend of $0.5143 per share
payable on April 29, 1998, to shareholders of record on April 28, 1998. The source
for this distribution was:
LONG TERM CAPITAL GAIN $ 0.5143
- --------------------------------------------------------------
---------
---------
</TABLE>
<TABLE>
<S> <C> <C>
JANUARY 1999 DIVIDEND
Weitz Partners, Inc. -- Partners Value Portfolio declared a dividend of $1.2094 per
share payable on January 4, 1999, to shareholders of record on December 31, 1998.
The source for this distribution was:
ORDINARY INCOME
- --------------------------------------------------------------
Net Investment Income $ 0.0492
Net Short Term Capital Gain --
---------
Total Ordinary Income $ 0.0492
---------
---------
LONG TERM CAPITAL GAIN $ 1.1602
- --------------------------------------------------------------
---------
---------
</TABLE>
9
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES
OR UNITS COST VALUE
- ------------- -------------- --------------
<C> <S> <C> <C>
COMMON STOCKS -- 73.1%
AUTO SERVICES -- 0.3%
75,000 Insurance Auto Auctions, Inc.* $ 833,250 $ 890,625
-------------- --------------
BANKING -- 3.0%
28,000 Astoria Financial Corp. 1,060,368 1,281,000
84,300 Commercial Federal Corp. 1,981,987 1,954,706
202,000 Golden State Bancorp, Inc.* 4,096,347 3,358,250
60,000 Washington Mutual, Inc. 2,124,626 2,291,250
-------------- --------------
9,263,328 8,885,206
-------------- --------------
CABLE TELEVISION -- 11.2%
64,000 Adelphia Communications Corp. CL A* 485,512 2,928,000
455,000 Century Communications Corp. CL A* 2,656,136 14,432,054
60,000 Comcast Corp. Special CL A 571,524 3,521,250
80,000 MediaOne Group, Inc.* 1,340,420 3,760,000
145,000 Tele-Communications, Inc. CL A* 1,729,343 8,020,313
-------------- --------------
6,782,935 32,661,617
-------------- --------------
CONSUMER PRODUCTS AND SERVICES -- 1.2%
26,000 American Classic Voyages Co.* 251,125 458,250
100,000 Lab Holdings, Inc. 2,676,185 1,750,000
6,650 Lady Baltimore Foods, Inc. 212,725 379,050
100,000 Protection One, Inc. 171,893 856,250
-------------- --------------
3,311,928 3,443,550
-------------- --------------
FEDERAL AGENCIES -- 6.1%
40,000 Fannie Mae 759,888 2,960,000
50,000 Freddie Mac 138,785 3,221,875
242,500 SLM Holding Corp. 6,656,769 11,640,000
-------------- --------------
7,555,442 17,821,875
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
SHARES
OR UNITS COST VALUE
- ------------- -------------- --------------
<C> <S> <C> <C>
FINANCIAL SERVICES -- 7.7%
100,000 Allied Capital Corp. $ 1,687,500 $ 1,731,250
45,000 American Express Co. 1,347,134 4,601,250
60 Berkshire Hathaway, Inc. CL A* 78,698 4,200,000
751,000 Imperial Credit Industries, Inc.* 10,380,152 6,289,625
20,000 PS Group, Inc. 164,200 235,000
202,000 United Asset Management Corp. 5,135,159 5,252,000
81,000 United Panam Financial Corp.* 919,423 339,188
-------------- --------------
19,712,266 22,648,313
-------------- --------------
INFORMATION AND DATA PROCESSING -- 0.4%
9,585 BRC Holdings, Inc.* 62,570 179,719
25,000 Data Transmission Network Corp.* 710,625 721,875
175,000 Intelligent Systems Corp.* 164,183 295,312
-------------- --------------
937,378 1,196,906
-------------- --------------
LODGING AND GAMING -- 3.0%
430,000 Hilton Hotels Corp. 7,687,402 8,223,750
70,000 Park Place Entertainment Corp.* 428,671 446,250
-------------- --------------
8,116,073 8,670,000
-------------- --------------
MEDIA AND ENTERTAINMENT -- 9.3%
23,000 Daily Journal Corp.* 231,501 876,875
190,000 Tele-Communications Liberty Media CL A* 2,093,600 8,751,875
200,000 Tele-Communications TCI-Ventures Grp A* 1,630,639 4,712,500
135,000 TCI Satellite Entertainment, Inc.* 135,000 194,063
244,000 Valassis Communications, Inc.* 6,121,614 12,596,500
-------------- --------------
10,212,354 27,131,813
-------------- --------------
MORTGAGE BANKING -- 5.4%
138,700 Countrywide Credit Industries, Inc. 3,573,136 6,961,006
156,000 Franchise Mortgage Acceptance Co.* 1,488,295 1,209,000
20,000 Headlands Mortgage Co.* 122,500 418,750
128,000 New Century Financial Corp.* 1,262,250 1,712,000
322,000 Resource Bancshares Mtg. Grp., Inc. 4,204,873 5,333,125
41,449 WMF Group, Limited* 379,258 248,694
-------------- --------------
11,030,312 15,882,575
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
SHARES
OR UNITS COST VALUE
- ------------- -------------- --------------
<C> <S> <C> <C>
REAL ESTATE AND CONSTRUCTION -- 0.8%
55,000 Catellus Development Corp.* $ 378,550 $ 787,188
60,000 Forest City Enterprises, Inc. CL A 671,825 1,575,000
10,000 Syntroleum Corp.* 31,917 61,875
-------------- --------------
1,082,292 2,424,063
-------------- --------------
REAL ESTATE INVESTMENT TRUSTS -- 7.2%
155,000 Capital Automotive REIT 1,644,377 2,305,625
407,830 Fortress Investment Corp. 8,033,374 6,933,110
245,500 Hanover Capital Mortgage Holdings, Inc. 3,649,114 1,074,062
24,000 Healthcare Financial Partners Units** 2,400,000 2,400,000
367,300 NovaStar Financial, Inc. 6,013,405 2,272,669
423,952 Redwood Trust, Inc. 9,571,344 5,935,328
-------------- --------------
31,311,614 20,920,794
-------------- --------------
TELECOMMUNICATIONS -- 17.5%
84,900 Alltel Corp. 2,046,370 5,078,081
30,000 Airtouch Communications, Inc.* 797,086 2,163,750
241,400 Cellular Communications of Puerto Rico* 2,359,495 4,465,900
350,500 Centennial Cellular Corp. CL A* 6,056,159 14,370,500
218,900 Corecomm, Limited* 2,185,120 3,447,675
355,000 Telephone and Data Systems, Inc. 14,384,619 15,952,813
149,000 United States Cellular Corp.* 4,451,062 5,662,000
-------------- --------------
32,279,911 51,140,719
-------------- --------------
OTHER -- 0.0%
8,300 ONI International, Inc.* 62,630 83
-------------- --------------
Total Common Stocks 142,491,713 213,718,139
-------------- --------------
WARRANTS -- 0.0%
399,500 Hanover Capital Mtg. Holdings, Inc., Expiring 9/15/00 31,211 49,937
370,000 NovaStar Financial, Inc., Expiring 2/03/01 185,000 23,125
-------------- --------------
216,211 73,062
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT COST VALUE
- -------------- -------------- --------------
<C> <S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES -- 3.7%
$ 3,000,000 U.S. Treasury Note 5.50% 3/31/00 $ 2,996,790 $ 3,030,939
2,000,000 Fannie Mae 6.625% 7/12/00 2,000,000 2,047,966
2,500,000 Federal Home Loan Bank 6.44% 11/28/05 2,502,718 2,675,645
3,000,000 Fannie Mae 6.56% 11/26/07 3,000,000 3,102,462
-------------- --------------
Total U.S. Government and Agency Securities 10,499,508 10,857,012
-------------- --------------
SHORT-TERM SECURITIES -- 23.5%
23,946,395 Norwest U.S. Government Money Market Fund 23,946,395 23,946,395
5,000,000 Federal Farm Credit Bank 5.54% 1/04/99 5,000,000 5,000,000
5,000,000 Federal Farm Credit Bank Discount Note 1/07/99 4,995,558 4,997,880
4,984,000 Federal Home Loan Bank Discount Note 2/05/99 4,959,772 4,961,537
15,000,000 Freddie Mac Discount Note 2/12/99 14,911,450 14,917,620
15,000,000 U.S. Treasury Bill 4/15/99 14,812,367 14,827,875
-------------- --------------
68,625,542 68,651,307
-------------- --------------
Total Investments in Securities $ 221,832,974 293,299,520
-------------- --------------
Covered Call Options Written at Market Value -- (0.2%) (613,000)
Securities Held Short -- (2.0%) (6,020,000)
Other Assets Less Liabilities -- 1.9% 5,664,961
--------------
Total Net Assets -- 100% $ 292,331,481
--------------
Net Asset Value Per Share $ 17.676
--------------
--------------
<CAPTION>
SHARES
OR UNITS PROCEEDS VALUE
- -------------- -------------- --------------
<C> <S> <C> <C>
SECURITIES SOLD SHORT
80,000 AT&T Corp. $ 5,285,385 $ 6,020,000
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
SCHEDULE OF INVESTMENTS IN SECURITIES, CONTINUED
<TABLE>
<CAPTION>
EXPIRATION
NO. OF DATE/STRIKE
CONTRACTS PRICE VALUE
- ------------- --------------- -----------
<C> <S> <C> <C>
COVERED CALL OPTIONS WRITTEN AT
MARKET VALUE
200 American Express Apr. 1999/100 $ (198,750)
20 Century Communications Corp. CL A Feb. 1999/30 (8,250)
100 Century Communications Corp. CL A May 1999/35 (39,375)
140 Comcast Corp. Special Class A July 1999/60 (92,750)
200 Countrywide Credit Industries, Inc. Apr. 1999/50 (90,000)
200 Valassis Communications, Inc. Apr. 1999/45 (173,750)
20 Valassis Communications, Inc. Apr. 1999/50 (10,125)
-----------
Total call options written (premiums received $542,361) $ (613,000)
-----------
-----------
</TABLE>
*Non-income producing
** Each unit, which is restricted as to sale, consists of five shares of common
stock and one stock purchase warrant. The company distributed an additional
warrant per unit to unitholders during 1998. The warrants currently have no
value or cost assigned to them.
See accompanying notes to financial statements.
14
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
Assets:
Investment in securities at value (cost $221,832,974) $293,299,520
Deposits with brokers for securities sold short
and covered call options written 5,843,929
Receivable for securities sold 128,555
Accrued interest and dividends receivable 659,346
Other 10,495
-----------
Total assets 299,941,845
-----------
Liabilities:
Securities sold short, at value (proceeds received $5,285,385) 6,020,000
Due to adviser 304,436
Payable for securities purchased 646,068
Covered call options written, at value (proceeds received $542,361) 613,000
Other expenses 26,860
-----------
Total liabilities 7,610,364
-----------
Net assets applicable to outstanding capital stock $292,331,481
-----------
-----------
Net assets represented by:
Additional paid-in capital (note 4) 198,954,601
Accumulated undistributed net investment income 695,750
Accumulated undistributed net realized gains 22,019,838
Net unrealized appreciation of investments 70,661,292
-----------
Total representing net assets applicable
to shares outstanding $292,331,481
-----------
-----------
Net asset value per share of outstanding capital stock
(16,538,775 shares outstanding) $ 17.676
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 877,691
Interest 2,154,606
----------
Total investment income 3,032,297
----------
Expenses (note 3):
Investment advisory fee 1,905,319
Administrative fee 276,929
Directors fees 6,256
Dividends on securities sold short 26,400
Other expenses 165,909
----------
Total expenses 2,380,813
----------
Net investment income 651,484
----------
Realized and unrealized gain on investments:
Net realized gain on securities $22,206,787
Net realized gain on options written 266,936
Net realized loss on securities sold short (333,955)
----------
Net realized gain 22,139,768
Net unrealized appreciation of investments 25,105,776
----------
Net realized and unrealized gain on investments 47,245,544
----------
Net increase in net assets resulting from operations $47,897,028
----------
----------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
Increase in net assets:
From operations:
Net investment income $ 651,484 $ 1,246,461
Net realized gain 22,139,768 15,266,989
Net unrealized appreciation 25,105,776 22,301,165
-------------- --------------
Net increase in net assets resulting from operations 47,897,028 38,814,615
-------------- --------------
Distributions to shareholders from:
Net investment income (1,206,568) --
Net realized gains (15,264,855) (4,460,935)
-------------- --------------
Total distributions (16,471,423) (4,460,935)
-------------- --------------
Capital share transactions (note 4):
Proceeds from sales 145,291,184 7,020,324
Payments for redemptions (31,930,637) (6,051,840)
Reinvestment of distributions 13,808,275 3,568,479
-------------- --------------
Total increase from capital share transactions 127,168,822 4,536,963
-------------- --------------
Total increase in net assets 158,594,427 38,890,643
-------------- --------------
Net assets:
Beginning of year 133,737,054 94,846,411
-------------- --------------
End of year $ 292,331,481 $ 133,737,054
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
17
<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,
1998 1997 1996 1995 1994*
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD: $ 15.45 $ 11.52 $ 10.38 $ 8.28 $ 10.00
---------- --------- --------- --------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.06 0.13 0.06 0.08 0.06
Net gains or losses on securities
(realized and unrealized) 4.00 4.33 1.93 3.11 (0.96)
---------- --------- --------- --------- ---------
Total from investment operations 4.06 4.46 1.99 3.19 (0.90)
---------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.16) -- (0.06) (0.24) --
Distributions from realized gains (1.67) (0.53) (0.79) (0.85) (0.82)
---------- --------- --------- --------- ---------
Total distributions (1.83) (0.53) (0.85) (1.09) (0.82)
---------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.68 $ 15.45 $ 11.52 $ 10.38 $ 8.28
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
TOTAL RETURN 29.1% 40.6% 19.2% 38.7% -9.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000) 292,331 133,737 94,846 73,781 51,287
Ratio of expenses to average net assets 1.25% 1.24% 1.23% 1.27% 1.29%
Ratio of net investment income to average net assets 0.34% 1.11% 0.51% 0.82% 0.67%
Portfolio turnover rate 36% 30% 37% 51% 33%
</TABLE>
*Fund commenced public offering of shares on January 1, 1994.
See accompanying notes to financial statements.
18
<PAGE>
WEITZ PARTNERS, INC. -- PARTNERS VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) ORGANIZATION AND BUSINESS CHANGES
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
19
<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.
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 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.
20
<PAGE>
(E) SECURITIES SOLD SHORT
The Fund periodically engages 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 would incur 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 would
realize 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, 1998.
Under the terms of an administration agreement, the Adviser provides certain
services including the transfer of shares, disbursement of dividends, fund
accounting and related administrative services of the Fund. The Adviser
receives an administration fee equal to 0.15% per annum of the Fund's
average daily net asset value.
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 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.
21
<PAGE>
Transactions in the capital stock of the Fund are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
------------ -----------
<S> <C> <C>
Transactions in shares:
Shares issued............................................................ 8,950,496 575,844
Shares redeemed.......................................................... (2,006,948) (478,830)
Reinvested dividends..................................................... 940,686 326,905
------------ -----------
Net increase........................................................... 7,884,234 423,919
------------ -----------
------------ -----------
</TABLE>
On November 3, 1998, the Board of Directors declared a dividend from net
investment income of $0.0492 per share and a distribution of $1.1602 per
share from net realized gains payable January 4, 1999, to shareholders of
record December 31, 1998 and ex-dividend as of January 4, 1999.
(5) SECURITIES TRANSACTIONS
Purchases and proceeds from maturities or sales of investment securities of
the Fund, other than short-term securities, aggregated $117,531,281 and
$59,947,264, respectively. The cost of investments for Federal income tax
purposes is $221,954,741. At December 31, 1998, the aggregate gross
unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, were $90,526,139 and $19,181,360, respectively.
Transactions relating to covered call options during the year ended December
31, 1998, are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS PREMIUM
----------- -----------
<S> <C> <C>
Options written, beginning of period -- --
Options written, during the period 1,320,000 $ 809,297
Options exercised, during the period (300,000) (210,358)
Options expired, during the period (140,000) (56,578)
----------- -----------
Options outstanding, end of period 880,000 $ 542,361
----------- -----------
----------- -----------
</TABLE>
22
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Weitz Partners, Inc. -- Partners Value Fund:
We have audited the accompanying statement of assets and liabilities of
Weitz Partners, Inc. -- Partners Value Fund, including the schedule of
investments in securities, as of December 31, 1998, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the three 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, 1998, 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, 1998, 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 15, 1999
23
<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 MINNESOTA, 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.