UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED ANNUAL SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21410
The Weitz Funds
(Exact name of registrant as specified in charter)
Suite 200
1125 South 103 Street
Omaha, NE 68124-1071
(Address of principal executive offices) (Zip code)
Weitz Investment Management, Inc.
The Weitz Funds
Suite 200
1125 South 103 Street
Omaha, NE 68124-1071
(Name and address of agent for service)
Registrant’s telephone number, including area code: 402-391-1980
Date of fiscal year end: March 31
Date of reporting period: March 31, 2016
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Report to Stockholders.
THE WEITZ PHILOSOPHY
Value investing the Weitz Way.
There are no shortcuts in value investing. At Weitz, we dig. And dig some more. We look at hundreds of investment ideas. Our goal: find strong, well-managed but undervalued companies and bonds that offer reasonable risk-adjusted returns. It's no easy task. We do the due diligence. Analyze. Ask tough questions and get the answers. We wait for the right opportunity. Then and only then do we invest your money. Welcome to the Weitz Way.
We're in it with you:
Our employees have the majority of their investable assets in our mutual funds. This alignment of goals allows us to guarantee that we're treating clients' money as if it were our own.
We focus on what we know:
Each of our analysts is a generalist with ever-growing, defined circles of competence. They can spot opportunities anywhere and bring them to the team for consideration.
We think for ourselves:
Our philosophy of independent thinking and high-conviction portfolios enables us to take advantage of value-priced equities and bonds that offer reasonable risk-adjusted returns.
Today we are responsible for approximately $5 billion in investments for our shareholders – individuals, corporations, pension plans, foundations and endowments. And our commitment remains the same: to put our clients first. Always. We do so through our expertise, our flexibility, and our drive to uncover investments that can help them preserve and grow wealth.
Wally Weitz, CFA
President, Portfolio Manager
President, Portfolio Manager
Q1 | 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
TABLE OF CONTENTS
Value Matters | 4 |
Performance Summary | 7 |
Value Fund | 8 |
Partners Value Fund | 10 |
Partners III Opportunity Fund | 12 |
Research Fund | 14 |
Hickory Fund | 16 |
Balanced Fund | 18 |
Core Plus Income Fund | 20 |
Short-Intermediate Income Fund | 23 |
Nebraska Tax-Free Income Fund | 26 |
Government Money Market Fund | 28 |
Schedule of Investments | 30 |
Financial Statements | 48 |
Notes to Financial Statements | 58 |
Report of Independent Registered Public Accounting Firm | 68 |
Actual and Hypothetical Expenses for Comparison Purposes | 70 |
Other Information | 71 |
Information About the Trustees and Officers | 72 |
Index Descriptions | 74 |
The management of Weitz Funds has chosen paper for the 76 page Annual Report from a paper manufacturer certified under the Sustainable Forestry Initiative ® standard. |
Portfolio composition is subject to change at any time and references to specific securities, industries, and sectors referenced in this report are not recommendations to purchase or sell any particular security. Current and future portfolio holdings are subject to risk. See the Schedules of Investments included in this report for the percent of assets in each of the Funds invested in particular industries or sectors.
3 | Q1 2016 ANNUAL REPORT
VALUE MATTERS
April 4, 2016
Dear Fellow Shareholder,
The first quarter of 2016 began with a sharp drop in the stock market. The S&P 500 fell about 10% in the first three weeks. Smaller company stocks fell further, and the Russell 2000 was down about 12% by late January. Panic was in the air. Then, after a few weeks of wobbling sideways, the market drifted back up, closing the quarter roughly unchanged.
The recovery during March, in part, was attributed to Janet Yellen's remarks to the effect that the US and global economies were too weak to allow for the Fed to raise interest rates as rapidly as they had suggested a few months ago. We do not consider this cause for celebration. This pattern of bad news triggering stock market declines, followed by rallies based on the hint of renewed monetary stimulus, has occurred repeatedly over the past two years. We have described it as a "standoff" between positive and negative forces in the world economy.
Our take is that stock and bond prices got ahead of themselves as the Fed injected trillions of dollars into securities markets in order to create a "wealth effect." Artificially depressed interest rates have made fixed income returns unattractive for some time. Speculators have been able to earn trading profits by correctly anticipating the Fed's next short-term move, but we believe this is a version of "picking up quarters in front of an oncoming steamroller." Although not a target-rich environment due to low rates, Fixed Income Portfolio Managers Tom and Nolan were able to find pockets of opportunity during the first quarter, particularly in corporate credits as spreads widened. However, their overall focus remains on protecting shareholder capital by keeping maturities short and credit quality high.
As an aside, the plight of bond investors is worse in Europe and Japan where interest rates on many bonds are negative. (Imagine paying a bank to hold your money or buying a bond that pays no interest and sells at a premium to face value—i.e., guaranteed to lose money if held to maturity.) Economists and central bankers discuss negative interest rates as if they are just an extreme version of "low" rates. This seems somewhat absurd to us, and we suspect that future financial historians will conclude that this version of monetary policy was ill-advised.
Turning to the stock market, interest rates have been kept low, but the influx of new cash from the Fed stopped a couple of years ago. Meanwhile, economic fundamentals have been decidedly mixed. In this environment, our companies' business values have been growing, but their prices are still not in the "bargain" category. So, stock investors are faced with "fair" stock prices and an uninspiring outlook for business and corporate profits. This does not seem to be a recipe for a strong stock market. Fortunately, our companies have managements that are not content to drift passively with the economic current. There are things they can do to grow business value per share despite the mediocre environment.
Bull Market Not Required
We have no idea when the bull market will resume, but fortunately for investors, long-term growth in net worth does not depend on a perpetually rising stock market. Some stocks can go up for company-specific reasons while others are languishing, and companies can create the foundation for future stock market success by growing their business values even while investors are distracted by bad news. Each of our companies is busy trying to improve their position in the world. Below are a few examples.
Redwood Trust ($13 per share) is a "value investor" in mortgages and mortgage securities. It has a culture of prudence, great skills in credit risk assessment and a focus on growth in per share value. The company has struggled to earn good returns in this period of suppressed interest rates yet has continued to pay the dividend that now provides approximately a 9% yield. It has recently made strategic moves that we think position it for more predictable growth going forward. The stock sells at a 14% discount to book value, and we believe it will sell at or above book value again. We think the ingredients are in place for double-digit annual returns over the next few years regardless of what happens to the S&P 500.
Wells Fargo ($49 per share) is one of the country's largest banks, but it has avoided most of the headaches (and risks) associated with the global "money center" banks. It has a strong, conservative lending culture and it added an enormous quantity of cheap deposits during the financial crisis of 2007-09 by acquiring troubled banks. (It also has Warren Buffett, as a 10% owner, looking over its shoulder.) Wells has suffered compressed net interest margins (as has Redwood) in this period of artificially low rates, yet its earnings have grown to over $4 per share in fiscal year 2014 and again in 2015. When interest rates rise, Wells Fargo's margins should widen, earnings should increase and the price investors are willing to pay for those earnings (P/E) may increase.
TransDigm ($220 per share) makes (primarily replacement) parts for the aerospace industry. The company is typically one of two or three suppliers (sometimes the sole supplier) of important but relatively low-cost parts for commercial and military aircraft. As such, they enjoy fairly predictable sales volume and strong pricing power. Growth comes through acquisition and from a rising number of aircraft in service. The company is an active, but very disciplined, acquirer. They buy parts producers, squeeze costs out of the manufacturing process and gradually raise prices.
4 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Management is very disciplined in adhering to its investment criteria, and when acquisition candidates are not available, they return cash to shareholders through share buybacks and large special dividends. Although the stock price is close to our appraised business value, we think the likelihood of further consistent growth, regardless of economic conditions, will reward us for continuing to own the stock over the years.
MasterCard ($95 per share) is basically a royalty on global consumer spending. Regardless of near-term economic growth rates, MasterCard is likely to be able to produce 10-15% annual earnings per share growth over the next several years. Its stock price is also near our appraised value, but if earnings grow at 10-15% per year, they will double in 5-7 years. Even if the P/E paid by investors shrinks a bit, our total return should be very attractive.
We could rest our case here, but long-time shareholders are surely asking, "What about Berkshire Hathaway and the Liberty family of companies?" Well, as a matter of fact, we think their businesses and prospects are at least as good as the companies listed above. Warren Buffett just made a $35 billion acquisition (Precision Castparts) with cash on hand and cheap debt financing. Liberty Media will soon reorganize into three new tracking stocks, potentially aiding recognition of the value of some less well-known assets. The Charter acquisitions of Time Warner Cable and Bright House, which appear to be nearing approval, should have a very positive impact on Liberty Broadband and Liberty Ventures. Mike Fries at Liberty Global never stands still. In fact, Warren Buffett at Berkshire and John Malone and Greg Maffei at the Liberty companies are always working with the excellent raw material they have assembled to build value for us.
We are highly confident that the value of our businesses will continue to grow over time. The stock market may ignore this progress from time to time as it obsesses over Fed policy, China, terrorism, the presidential election, etc., but increased value will inevitably be reflected in higher stock prices.
The stock market may continue to go sideways, or it may suffer a major correction. Or not. We do not know, but over several decades we have learned that while we cannot know…we do not need to know. All we (and our clients!) need is a collection of good businesses, patience and the courage of our convictions. We thank you for your ongoing support.
Sincerely,
Wally Weitz | Brad Hinton | |
wally@weitzinvestments.com | brad@weitzinvestments.com |
As of March 31, 2016: Berkshire Hathaway, Inc. – Class B represented 11.0%, 6.4%, 6.3%, 3.3% and 3.2% of the Partners III Opportunity, Partners Value, Value, Research and Balanced Funds' net assets, respectively. Liberty Broadband Corp. – Series A represented 1.5%, 1.2% and 1.1% of the Hickory, Partners Value and Partners III Opportunity Funds' net assets, respectively. Liberty Broadband Corp. – Series C represented 5.7%, 4.1%, 3.7%, 3.0% and 2.4% of the Partners III Opportunity, Hickory, Value, Partners Value and Research Funds' net assets, respectively. Liberty Global plc – Class C represented 7.9%, 6.2%, 5.8%, 5.5%, 4.5% and 2.0% of the Partners III Opportunity, Partners Value, Value, Research, Hickory and Balanced Funds' net assets, respectively. Liberty Global plc LiLAC – Class C represented 1.2% and 1.1% of the Partners III Opportunity and Hickory Funds' net assets, respectively. Liberty Interactive Corp. QVC Group – Series A represented 4.4%, 3.7%, 3.5%, 2.6%, 2.6% and 2.1% of the Hickory, Partners Value, Value, Partners III Opportunity, Research and Balanced Funds' net assets, respectively. Liberty Media Corp. – Series A represented 1.4%, 1.3% and 1.1% of the Hickory, Partners Value and Partners III Opportunity Funds' net assets, respectively. Liberty Media Corp. – Series C represented 7.5%, 4.7%, 4.6%, 3.8% and 2.8% of the Partners III Opportunity, Value, Partners Value, Research and Hickory Funds' net assets, respectively. Liberty Ventures – Series A represented 4.0% and 3.0% of the Partners III Opportunity and Hickory Funds' net assets, respectively. MasterCard Inc. – Class A represented 3.5%, 2.5%, 1.4% and 1.0% of the Partners III Opportunity, Value, Balanced and Partners Value Funds' net assets, respectively. TransDigm represented 2.6%, 2.5%, 2.0% and 1.9% of the Hickory, Partners III Opportunity, Value and Partners Value Funds' net assets, respectively. Redwood Trust represented 4.0%, 3.9%, 3.0%, 2.1% and 1.7% of the Hickory, Partners III Opportunity, Partners Value, Balanced and Research Funds' net assets, respectively. Wells Fargo represented 2.8%, 1.9% and 1.6% of the Partners III Opportunity, Partners Value and Value Funds' net assets, respectively.
5 | Q1 2016 ANNUAL REPORT
DISCLOSURES
These performance numbers reflect the deduction of annual operating expenses which as stated in the most recent prospectus, and expressed as a percentage of each Fund's or Class's net assets, are: Value – Investor Class, 1.15%; Value – Institutional Class, 1.08% (gross); Partners Value – Investor Class, 1.18%; Partners Value –Institutional Class, 1.05% (gross); Partners III Opportunity – Investor Class, 2.06%; Partners III Opportunity – Institutional Class – 1.69%; Research, 1.60% (gross); Hickory, 1.23%; Balanced, 1.09%; Core Plus Income – Investor Class, 3.18% (gross); Core Plus Income – Institutional Class, 2.55% (gross); Short-Intermediate Income – Investor Class, 0.89% (gross); Short-Intermediate Income – Institutional Class, 0.61%; and Nebraska Tax-Free Income, 0.75%. The returns assume reinvestment of dividends and redemption at the end of each period. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in any of the Funds will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month end may be obtained at www.weitzinvestments.com/funds_and_performance/ fund_performance.fs. Index performance is hypothetical and is shown for illustrative purposes only. See page 74 for a description of all indices.
(a) On the last business day of 1993, 2005, 2006 and 2010, the Partners Value, Partners III Opportunity, Nebraska Tax-Free Income and Research Funds (the "Funds") succeeded to substantially all of the assets of Weitz Partners II Limited Partnership, Weitz Partners III Limited Partnership, Weitz Income Partners Limited Partnership and Weitz Research Fund L.P. (the"Partnerships"), respectively. The investment objectives, policies and restrictions of the Funds are materially equivalent to those of their respective Partnership and the Partnerships were managed at all times with full investment authority by the investment adviser. The performance information includes performance for the Partnerships. The Partnerships were not registered under the Investment Company Act of 1940 and, therefore, were not subject to certain investment or other restrictions or requirements imposed by the 1940 Act or the Internal Revenue Code. If the Partnerships had been registered under the 1940 Act, the Partnerships' performance might have been adversely affected.
(b) Institutional Class shares of the Value and Partners Value Funds became available for sale on July 31, 2014. For performance prior to that date, these tables include the actual performance of each Fund's Investor Class (and use the actual expenses of each Fund's Investor Class) without adjustment. For any such period of time, the performance of each Fund's Institutional Class would have been similar to the performance of each Fund's Investor Class, because the shares of both classes are invested in the same portfolio of securities, but the classes bear different expenses. The investment adviser has agreed in writing to limit the total annual fund operating expenses of the Investor and Institutional Class shares (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) to 1.18% and 0.99%, respectively, of each Class's average daily net assets through July 31, 2016.
(c) Investor Class shares of the Partners III Opportunity and Short-Intermediate Income Funds became available for sale on August 1, 2011. For performance prior to that date, these tables include the actual performance of each Fund's Institutional Class (and use the actual expenses of each Fund's Institutional Class) without adjustment. For any such period of time, the performance of each Fund's Investor Class would have been similar to the performance of each Fund's Institutional Class, because the shares of both classes are invested in the same portfolio of securities, but the classes bear different expenses. The investment adviser has agreed in writing to limit the total annual fund operating expenses of the Short-Intermediate Income Fund – Investor Class shares (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) to 0.85% of the Class's average daily net assets through July 31, 2016.
(d) Starting January 1, 2011, these tables reflect the deduction of the Research Fund's actual operating expenses. For periods of time prior to January 1, 2011, these tables reflect the deduction of annual pro forma operating expenses of 1.50%. Annual operating expenses for the Research Fund, as stated in the Research Fund's Prospectus, are 1.60% (gross) and 0.91% (net) of the Fund's net assets. The investment adviser has agreed, in writing, to limit the total annual fund operating expenses (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) to 0.90% of the Fund's average daily net assets through July 31, 2016.
(e) The investment adviser has agreed in writing to limit the total annual fund operating expenses of the Core Plus Income Fund's Investor and Institutional Class shares (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) to 0.85% and 0.65%, respectively, of each Class's average daily net assets through July 31, 2016.
(f) Since inception performance for the Russell 1000 Value, Barclays Intermediate Credit and CPI +1% is from May 31, 1986; December 31, 1988; and December 31, 1988, respectively. The inception date of the Barclays 5-Year Muni. Bond was January 29, 1988.
6 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
PERFORMANCE SUMMARY
Annualized | ||||||||||||||||||||||||||||
Fund Name | Inception Date | Since Inception | 30-year | 20-year | 10-year | Since Investment Style Inception (6/30/08 | ) | 5-year | 1-year | Quarter | ||||||||||||||||||
Value(b) | 5/09/86 | |||||||||||||||||||||||||||
Investor | 10.19 | % | — | % | 9.11 | % | 4.78 | % | 8.23 | % | 9.33 | % | (8.05 | )% | (0.29 | )% | ||||||||||||
Institutional | 10.20 | — | 9.13 | 4.81 | 8.28 | 9.40 | (7.88 | ) | (0.23 | ) | ||||||||||||||||||
Russell 1000 | 9.96 | — | 8.11 | 7.06 | 8.67 | 11.35 | 0.50 | 1.17 | ||||||||||||||||||||
Russell 1000 Value(f) | 10.01 | — | 8.31 | 5.72 | 7.49 | 10.25 | (1.54 | ) | 1.64 | |||||||||||||||||||
Partners Value(a)(b) | 6/01/83 | |||||||||||||||||||||||||||
Investor | 11.97 | 10.64 | 9.69 | 5.86 | — | 7.97 | (10.61 | ) | 1.73 | |||||||||||||||||||
Institutional | 11.98 | 10.65 | 9.71 | 5.89 | — | 8.03 | (10.45 | ) | 1.76 | |||||||||||||||||||
Partners III | ||||||||||||||||||||||||||||
Opportunity(a)(c) | 6/01/83 | |||||||||||||||||||||||||||
Investor | 12.58 | 11.30 | 11.00 | 6.96 | — | 7.33 | (9.56 | ) | 2.01 | |||||||||||||||||||
Institutional | 12.63 | 11.35 | 11.08 | 7.11 | — | 7.64 | (9.20 | ) | 2.12 | |||||||||||||||||||
Research(a)(d) | 4/01/05 | 7.12 | — | — | 6.87 | — | 8.36 | (8.77 | ) | 4.26 | ||||||||||||||||||
Russell 3000 | — | 9.80 | 8.04 | 6.90 | — | 11.01 | (0.34 | ) | 0.97 | |||||||||||||||||||
Russell 3000 Value | — | 10.02 | 8.34 | 5.60 | — | 9.95 | (2.05 | ) | 1.64 | |||||||||||||||||||
Hickory | 4/01/93 | 9.78 | — | 9.16 | 5.41 | 9.49 | 6.75 | (9.04 | ) | 2.90 | ||||||||||||||||||
Russell 2500 | 10.01 | — | 9.24 | 6.47 | 8.79 | 8.58 | (7.31 | ) | 0.39 | |||||||||||||||||||
Russell 2500 Value | 10.51 | — | 10.07 | 5.80 | 8.63 | 8.33 | (5.20 | ) | 3.33 | |||||||||||||||||||
S&P 500 | — | 9.92 | 7.98 | 7.01 | 8.68 | 11.58 | 1.78 | 1.35 | ||||||||||||||||||||
Balanced | 10/01/03 | 5.29 | — | — | 4.63 | — | 5.73 | (0.80 | ) | 1.69 | ||||||||||||||||||
Blended Index | 6.68 | — | — | 6.24 | — | 8.27 | 2.14 | 1.88 | ||||||||||||||||||||
Core Plus Income(e) | 7/31/14 | |||||||||||||||||||||||||||
Investor | 2.81 | — | — | — | — | — | 1.78 | 3.60 | ||||||||||||||||||||
Institutional | 3.02 | — | — | — | — | — | 2.06 | 3.65 | ||||||||||||||||||||
Barclays U.S. Aggregate Bond | 3.49 | — | — | — | — | — | 1.96 | 3.03 | ||||||||||||||||||||
Short-Intermediate | ||||||||||||||||||||||||||||
Income(c) | 12/23/88 | |||||||||||||||||||||||||||
Investor | 5.33 | — | 4.56 | 3.72 | — | 1.76 | 0.58 | 1.36 | ||||||||||||||||||||
Institutional | 5.37 | — | 4.61 | 3.83 | — | 1.97 | 0.83 | 1.34 | ||||||||||||||||||||
Barclays Intermediate Credit(f) | 6.07 | — | 5.09 | 4.34 | — | 3.01 | 2.06 | 2.45 | ||||||||||||||||||||
CPI + 1%(f) | 3.55 | — | 3.17 | 2.79 | — | 2.30 | 1.86 | 0.93 | ||||||||||||||||||||
Nebraska Tax- | ||||||||||||||||||||||||||||
Free Income(a) | 10/01/85 | 4.86 | — | 3.86 | 2.94 | — | 2.35 | 1.20 | 0.60 | |||||||||||||||||||
Barclays 5-Year Muni. Bond(f) | — | — | 4.51 | 4.24 | — | 3.36 | 2.82 | 1.15 |
7 | Q1 2016 ANNUAL REPORT
VALUE FUND
Investment Style: Large-Cap Value
Co-Portfolio Managers: Brad Hinton, CFA & Dave Perkins, CFA
Fiscal Year Contributors
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Alphabet is a multinational technology company generally specializing in Internet related services and products. Alphabet's core search business (Google) delivered strong operating results which eased investor fears that the company's primary search advertising products would not be as relevant on mobile phones as on desktops. Alphabet's shares rose, as investors priced in a higher rate of long-term growth, renewed operating expense discipline and the announcement of the company's first capital return program. We opportunistically trimmed our position, as the stock price approached our estimate of business value.
Quarterly Contributors
Range Resources is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas. Range shares rallied during the quarter, as the company reduced its debt load by roughly $1.0 billion following the divestiture of two non-core assets (Nora and Bradford County). The company is continuing to pursue a sale of its central-Oklahoma oil properties, which will likely be used to retire additional long-term debt. Other positives included improving natural gas price sentiment (for 2017) and a general thawing in the high yield debt markets. Falling drilling activity in the Marcellus and Utica shales (collective rig counts are down from 170 at peak to 40 at present) and the continued drop in domestic oil production, in time, should bring both oil and natural gas prices up closer to their marginal costs of production. In the interim, Range has 80% of its 2016 gas production hedged at $3.24/MMBtu and is locking in additional 2017 production with the current gas strip close to $2.85. We continue to believe Range will emerge from the downturn a significantly more efficient–and more valuable–company.
Range Resources is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas. Range shares rallied during the quarter, as the company reduced its debt load by roughly $1.0 billion following the divestiture of two non-core assets (Nora and Bradford County). The company is continuing to pursue a sale of its central-Oklahoma oil properties, which will likely be used to retire additional long-term debt. Other positives included improving natural gas price sentiment (for 2017) and a general thawing in the high yield debt markets. Falling drilling activity in the Marcellus and Utica shales (collective rig counts are down from 170 at peak to 40 at present) and the continued drop in domestic oil production, in time, should bring both oil and natural gas prices up closer to their marginal costs of production. In the interim, Range has 80% of its 2016 gas production hedged at $3.24/MMBtu and is locking in additional 2017 production with the current gas strip close to $2.85. We continue to believe Range will emerge from the downturn a significantly more efficient–and more valuable–company.
Liberty Broadband holds a 26% ownership interest in Charter Communications in addition to a minority equity interest in Time Warner Cable. Charter shares have risen as continued improvement in operating results, including net subscriber additions in its legacy video business, demonstrate that management's operating plan is generating positive momentum. Investors are also gaining confidence that the Federal Communications Commission (FCC) is leaning toward approving Charter's proposed acquisitions of Time Warner Cable and Bright House Networks. We believe Charter's operating momentum is sustainable and that the proposed deals are likely to be approved, representing additional upside to our business value estimate for Charter on a stand-alone basis.
New Holdings
McKesson and Comcast
McKesson and Comcast
Fiscal Year Detractors
Endo International is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded and generic pharmaceutical products and medical devices. Growth in the company's branded drug division has been disappointing, owing in part to poor results from several drugs Endo inherited from its acquisition of Auxilium Pharmaceuticals roughly a year ago. In addition, pricing pressure in the company's legacy Qualitest generics business increased, muting the segment's near-term (and potentially long-term) growth trajectory. Finally, liabilities relating to the company's legacy vaginal mesh products increased, following an influx of claims late in 2015. While our business value estimate for Endo has come down, the stock price has declined far more significantly. Using conservative assumptions for the company's business over the next several years, we believe Endo has significant upside potential if management can execute on its growth plans for XIAFLEX (attractive injectible franchise) and BELBUCA (pain patch).
Endo International is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded and generic pharmaceutical products and medical devices. Growth in the company's branded drug division has been disappointing, owing in part to poor results from several drugs Endo inherited from its acquisition of Auxilium Pharmaceuticals roughly a year ago. In addition, pricing pressure in the company's legacy Qualitest generics business increased, muting the segment's near-term (and potentially long-term) growth trajectory. Finally, liabilities relating to the company's legacy vaginal mesh products increased, following an influx of claims late in 2015. While our business value estimate for Endo has come down, the stock price has declined far more significantly. Using conservative assumptions for the company's business over the next several years, we believe Endo has significant upside potential if management can execute on its growth plans for XIAFLEX (attractive injectible franchise) and BELBUCA (pain patch).
Valeant Pharmaceuticals is a multi-national, specialty pharmaceutical and medical device company that develops, manufactures and markets a broad range of brand name, generic and over-the-counter products in over 100 countries. We closed our position in Valeant toward the end of October last year. The stock came under heavy selling pressure as a result of increased political scrutiny around drug pricing and possible wrongdoing at one of its "alternative fulfillment" pharmacy partners. Our decision to sell was ultimately based on a combination of important questions we had difficulty answering regarding potential long-term reputational damage to Valeant's business, the likelihood of difficult payer negotiations, future business model uncertainty and financial leverage. While our investment in Valeant ended on a disappointing note, it was a healthy multi-year contributor to Fund performance.
Quarterly Detractors
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Liberty Global is the largest international cable company, with operations in 14 countries providing video, broadband Internet, fixed-line telephone and mobile services to its customers. Its share price fell early in the quarter after an influential Wall Street analyst downgraded his outlook for the stock, principally due to concerns over continued competitive struggles in Holland (one of Liberty's largest markets). Since that time, Liberty announced it would move its Dutch operations into a 50/50 joint venture with Vodafone. The joint venture structure allows Liberty to combine its strong cable and broadband businesses with Vodafone's mobile offering to create a more competitive, "converged" offering. Liberty also provided Wall Street with an attractive three-year growth outlook during its fourth quarter earnings call, helping shares recover some of the earlier declines. We remain confident of continued growth for Liberty's cable offerings and management's abilities to deliver on their outlook.
Eliminated Holdings
Precision Castparts
Precision Castparts
Please visit the Fund's commentary section on our website for additional information.
8 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | ||||||||||||||||||||||||||
Since Inception (5/9/1986 | ) | 20-year | 10-year | Since Investment Style Inception (6/30/08 | ) | 5-year | 3-year | 1-year | Quarter | ||||||||||||||||||
WVALX - Investor Class | 10.19 | % | 9.11 | % | 4.78 | % | 8.23 | % | 9.33 | % | 6.63 | % | (8.05 | )% | (0.29 | )% | |||||||||||
WVAIX - Institutional Class | 10.20 | 9.13 | 4.81 | 8.28 | 9.40 | 6.74 | (7.88 | ) | (0.23 | ) | |||||||||||||||||
S&P 500 | 9.96 | 7.98 | 7.01 | 8.68 | 11.58 | 11.82 | 1.78 | 1.35 | |||||||||||||||||||
Russell 1000 | 9.96 | 8.11 | 7.06 | 8.67 | 11.35 | 11.52 | 0.50 | 1.17 | |||||||||||||||||||
Russell 1000 Value | 10.01 | * | 8.31 | 5.72 | 7.49 | 10.25 | 9.38 | (1.54 | ) | 1.64 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Value Fund – Investor Class for the period since inception (5/9/86) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 1000 and Russell 1000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Value Fund – Investor Class for the period since inception (5/9/86) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 1000 and Russell 1000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
* Since 5/31/1986
Capitalization
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway Inc. - Class B | 6.3 | |||
Twenty-First Century Fox, Inc. - Class A | 6.1 | |||
Liberty Global plc - Class C | 5.8 | |||
Liberty Media Corp. - Series C | 4.7 | |||
Allergan plc | 3.9 | |||
Liberty Broadband Corp. - Series C | 3.7 | |||
Motorola Solutions, Inc. | 3.7 | |||
Liberty Interactive Corp. QVC Group - Series A | 3.5 | |||
Aon plc - Class A | 3.3 | |||
Alphabet, Inc. - Class C | 3.1 | |||
44.1 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 30.5 | |||
Health Care | 11.4 | |||
Information Technology | 11.4 | |||
Financials | 11.2 | |||
Energy | 7.7 | |||
Industrials | 4.2 | |||
Materials | 3.9 | |||
Consumer Staples | 1.3 | |||
Cash Equivalents/Other | 18.4 | |||
100.0 |
Top Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Range Resources Corp. | 31.7 | % | 2.8 | % | 0.78 | % | ||||
Liberty Broadband Corp. - Series C | 11.7 | 2.8 | 0.56 | |||||||
Berkshire Hathaway Inc. - Class B | 7.5 | 5.8 | 0.50 | |||||||
Aon plc - Class A | 13.7 | 3.0 | 0.42 | |||||||
Motorola Solutions, Inc. | 11.2 | 3.3 | 0.40 |
Bottom Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Endo International plc | (54.0 | )% | 2.5 | % | (1.80 | )% | ||||
Express Scripts Holding Co. | (21.4 | ) | 3.0 | (0.83 | ) | |||||
Liberty Global plc - Class C | (7.9 | ) | 5.7 | (0.57 | ) | |||||
Allergan plc | (14.2 | ) | 3.8 | (0.54 | ) | |||||
Monsanto Co. | (10.4 | ) | 3.2 | (0.42 | ) |
Contributions to Fund performance are based on actual daily holdings. Securities may have been bought or sold during the quarter. Source: FactSet Portfolio Analytics Return shown is the actual quarterly return of the security or combination of share classes.
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of annual operating expenses which as stated in its most recent prospectus are 1.15% and 1.08% (gross) of the Fund's Investor and Institutional Class net assets, respectively. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_performance/fund_ performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
9 | Q1 2016 ANNUAL REPORT
PARTNERS VALUE FUND
Investment Style: Multi-Cap Value
Co-Portfolio Managers: Wally Weitz, CFA & Brad Hinton, CFA
Fiscal Year Contributors
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Alphabet is a multinational technology company generally specializing in Internet related services and products. Alphabet's core search business (Google) delivered strong operating results which eased investor fears that the company's primary search advertising products would not be as relevant on mobile phones as on desktops. Alphabet's shares rose, as investors priced in a higher rate of long-term growth, renewed operating expense discipline and the announcement of the company's first capital return program. We opportunistically trimmed our position, as the stock price approached our estimate of business value.
Quarterly Contributors
Range Resources is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas. Range shares rallied during the quarter, as the company reduced its debt load by roughly $1.0 billion following the divestiture of two non-core assets (Nora and Bradford County). The company is continuing to pursue a sale of its central-Oklahoma oil properties, which will likely be used to retire additional long-term debt. Other positives included improving natural gas price sentiment (for 2017) and a general thawing in the high yield debt markets. Falling drilling activity in the Marcellus and Utica shales (collective rig counts are down from 170 at peak to 40 at present) and the continued drop in domestic oil production, in time, should bring both oil and natural gas prices up closer to their marginal costs of production. In the interim, Range has 80% of its 2016 gas production hedged at $3.24/MMBtu and is locking in additional 2017 production with the current gas strip close to $2.85. We continue to believe Range will emerge from the downturn a significantly more efficient–and more valuable–company.
Range Resources is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas. Range shares rallied during the quarter, as the company reduced its debt load by roughly $1.0 billion following the divestiture of two non-core assets (Nora and Bradford County). The company is continuing to pursue a sale of its central-Oklahoma oil properties, which will likely be used to retire additional long-term debt. Other positives included improving natural gas price sentiment (for 2017) and a general thawing in the high yield debt markets. Falling drilling activity in the Marcellus and Utica shales (collective rig counts are down from 170 at peak to 40 at present) and the continued drop in domestic oil production, in time, should bring both oil and natural gas prices up closer to their marginal costs of production. In the interim, Range has 80% of its 2016 gas production hedged at $3.24/MMBtu and is locking in additional 2017 production with the current gas strip close to $2.85. We continue to believe Range will emerge from the downturn a significantly more efficient–and more valuable–company.
Fossil Group is the fourth largest producer of watches and the largest licenser of watches and jewelry globally. Fossil outperformed during the quarter, as the company reported a rebound in same-store-sales, which grew 1% during the fourth quarter, including positive growth in watches. This calmed some fears of secular decline in the category, including headwinds from the Apple Watch and other wearables. Moreover, Fossil guided to flat revenue in 2016 excluding foreign currency translation, which was well ahead of consensus forecasts. Management reported good reception of their connected accessories product launch and announced a broad product offering across brands which will incorporate Misfit technology and design, in time for the holidays in 2016.
New Holdings
MasterCard
MasterCard
Fiscal Year Detractors
Endo International is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded and generic pharmaceutical products and medical devices. Growth in the company's branded drug division has been disappointing, owing in part to poor results from several drugs Endo inherited from its acquisition of Auxilium Pharmaceuticals roughly a year ago. In addition, pricing pressure in the company's legacy Qualitest generics business increased, muting the segment's near-term (and potentially long-term) growth trajectory. Finally, liabilities relating to the company's legacy vaginal mesh products increased, following an influx of claims late in 2015. While our business value estimate for Endo has come down, the stock price has declined far more significantly. Using conservative assumptions for the company's business over the next several years, we believe Endo has significant upside potential if management can execute on its growth plans for XIAFLEX (attractive injectible franchise) and BELBUCA (pain patch).
Endo International is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded and generic pharmaceutical products and medical devices. Growth in the company's branded drug division has been disappointing, owing in part to poor results from several drugs Endo inherited from its acquisition of Auxilium Pharmaceuticals roughly a year ago. In addition, pricing pressure in the company's legacy Qualitest generics business increased, muting the segment's near-term (and potentially long-term) growth trajectory. Finally, liabilities relating to the company's legacy vaginal mesh products increased, following an influx of claims late in 2015. While our business value estimate for Endo has come down, the stock price has declined far more significantly. Using conservative assumptions for the company's business over the next several years, we believe Endo has significant upside potential if management can execute on its growth plans for XIAFLEX (attractive injectible franchise) and BELBUCA (pain patch).
Valeant Pharmaceuticals is a multi-national, specialty pharmaceutical and medical device company that develops, manufactures and markets a broad range of brand name, generic and over-the-counter products in over 100 countries. We closed our position in Valeant toward the end of October last year. The stock came under heavy selling pressure as a result of increased political scrutiny around drug pricing and possible wrongdoing at one of its "alternative fulfillment" pharmacy partners. Our decision to sell was ultimately based on a combination of important questions we had difficulty answering regarding potential long-term reputational damage to Valeant's business, the likelihood of difficult payer negotiations, future business model uncertainty and financial leverage. While our investment in Valeant ended on a disappointing note, it was a healthy multi-year contributor to Fund performance.
Quarterly Detractors
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Liberty Global is the largest international cable company, with operations in 14 countries providing video, broadband Internet, fixed-line telephone and mobile services to its customers. Its share price fell early in the quarter after an influential Wall Street analyst downgraded his outlook for the stock, principally due to concerns over continued competitive struggles in Holland (one of Liberty's largest markets). Since that time, Liberty announced it would move its Dutch operations into a 50/50 joint venture with Vodafone. The joint venture structure allows Liberty to combine its strong cable and broadband businesses with Vodafone's mobile offering to create a more competitive, "converged" offering. Liberty also provided Wall Street with an attractive three-year growth outlook during its fourth quarter earnings call, helping shares recover some of the earlier declines. We remain confident of continued growth for Liberty's cable offerings and management's abilities to deliver on their outlook.
Eliminated Holdings
ADT Corp, Precision Castparts, XO Group and Iconix Brand Group
ADT Corp, Precision Castparts, XO Group and Iconix Brand Group
Please visit the Fund's commentary section on our website for additional information.
10 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | |||||||||||||||||||||
Since Inception (6/1/1983 | ) | 20-year | 10-year | 5-year | 3-year | 1-year | Quarter | |||||||||||||||
WPVLX - Investor Class | 11.97 | % | 9.69 | % | 5.86 | % | 7.97 | % | 5.24 | % | (10.61 | )% | 1.73 | % | ||||||||
WPVIX - Institutional Class | 11.98 | 9.71 | 5.89 | 8.03 | 5.34 | (10.45 | ) | 1.76 | ||||||||||||||
S&P 500 | 10.72 | 7.98 | 7.01 | 11.58 | 11.82 | 1.78 | 1.35 | |||||||||||||||
Russell 3000 | 10.48 | 8.04 | 6.90 | 11.01 | 11.15 | (0.34 | ) | 0.97 | ||||||||||||||
Russell 3000 Value | 10.96 | 8.34 | 5.60 | 9.95 | 9.08 | (2.05 | ) | 1.64 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Partners Value Fund - Investor Class for the period since inception (6/1/83) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 3000 and Russell 3000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Partners Value Fund - Investor Class for the period since inception (6/1/83) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 3000 and Russell 3000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Capitalization
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway, Inc. - Class B | 6.4 | |||
Liberty Global plc - Class C | 6.2 | |||
Liberty Media Corp. - Series A & C | 5.9 | |||
Liberty Broadband Corp - Series A & C | 4.2 | |||
Twenty-First Century Fox, Inc. - Class A | 3.8 | |||
Liberty Interactive Corp. QVC Group - Series A | 3.7 | |||
Laboratory Corp. of America Holdings | 3.2 | |||
Aon plc - Class A | 3.2 | |||
Redwood Trust, Inc. | 3.0 | |||
Discovery Communications, Inc. - Class A | 2.9 | |||
42.5 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 31.2 | |||
Financials | 17.5 | |||
Information Technology | 12.1 | |||
Industrials | 6.0 | |||
Health Care | 9.2 | |||
Energy | 4.6 | |||
Consumer Staples | 1.5 | |||
Cash Equivalents/Other | 17.9 | |||
100.0 |
Top Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Range Resources Corp. | 23.3 | % | 2.8 | % | 0.71 | % | ||||
Fossil Group, Inc. | 10.2 | 5.8 | 0.62 | |||||||
Liberty Broadband Corp. - Series A & C | 14.0 | 3.0 | 0.56 | |||||||
Colfax Corp. | 27.4 | 2.2 | 0.51 | |||||||
Bershire Hathaway Inc. - Class B | 7.5 | 1.6 | 0.48 |
Bottom Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Endo International plc | (54.0 | )% | 1.3 | % | (0.98 | )% | ||||
Express Scripts Holding Co. | (21.4 | ) | 2.9 | (0.81 | ) | |||||
Liberty Global plc - Class C | (7.9 | ) | 5.9 | (0.49 | ) | |||||
Allergan plc | (14.2 | ) | 2.4 | (0.34 | ) | |||||
Liberty Interactive Corp. QVC Group - Series A | (7.6 | ) | 3.8 | (0.31 | ) |
Contributions to Fund performance are based on actual daily holdings. Securities may have been bought or sold during the quarter. Source: FactSet Portfolio Analytics Return shown is the actual quarterly return of the security or combination of share classes.
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of annual operating expenses which as stated in its most recent prospectus are 1.18% and 1.05% (gross) of the Fund's Investor and Institutional Class net assets, respectively. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_performance/fund_ performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
11 | Q1 2016 ANNUAL REPORT
PARTNERS III OPPORTUNITY FUND
Investment Style: Multi-Cap Alternative
Portfolio Manager: Wally Weitz, CFA
Fiscal Year Contributors
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Angie's List is a nationally-based, local services review provider and marketplace. The business, which began as a consumer pay subscription service, has been progressively lightening the load on subscribers and shifting the cost of the model to advertising service providers. This transition has caused a flattening of top-line growth. The stock appreciated in the fourth quarter of 2015 when IAC/ InterActiveCorp (a company we have owned in the past) made an opportunistic cash offer to buy Angie's List for slightly less than $9 per share. We felt the offer undervalued Angie's business and precluded any opportunity to participate in the upside of the combined entity. The Market apparently agreed, and Angie's stock price traded through the offer price to about $11 per share. We sold our position, as the stock price exceeded our revised estimate of business value.
Quarterly Contributors
Wesco Aircraft is a distributor and provider of supply chain management services to the global aerospace industry. Wesco continues to execute on plans by new management to drive operational excellence and to transition the business to emphasize supply chain and logistics services rather than a prior emphasis on "Ad Hoc" sales dependent on temporary supply shortages.
Wesco Aircraft is a distributor and provider of supply chain management services to the global aerospace industry. Wesco continues to execute on plans by new management to drive operational excellence and to transition the business to emphasize supply chain and logistics services rather than a prior emphasis on "Ad Hoc" sales dependent on temporary supply shortages.
Colfax Corp is a leading manufacturer of pumps, gas handling products and welding equipment. Colfax shares rallied as the company maintained 2016 earnings guidance and demonstrated that the Colfax Business System, a management philosophy and a set of tools based on the concept of continuous improvement, is helping the company to move forward in difficult markets. Although the company is experiencing declining sales in several of its primary end markets including oil & gas, power generation and mining, we believe that Colfax will manage through this period and emerge larger and stronger.
New Holdings
Allergan and Lions Gate
Allergan and Lions Gate
Fiscal Year Detractors
Valeant Pharmaceuticals is a multi-national, specialty pharmaceutical and medical device company that develops, manufactures and markets a broad range of brand name, generic and over-the-counter products in over 100 countries. We closed our position in Valeant toward the end of October last year. The stock came under heavy selling pressure as a result of increased political scrutiny around drug pricing and possible wrongdoing at one of its "alternative fulfillment" pharmacy partners. Our decision to sell was ultimately based on a combination of important questions we had difficulty answering regarding potential long-term reputational damage to Valeant's business, the likelihood of difficult payer negotiations, future business model uncertainty and financial leverage. While our investment in Valeant ended on a disappointing note, it was a healthy multi-year contributor to Fund performance.
Valeant Pharmaceuticals is a multi-national, specialty pharmaceutical and medical device company that develops, manufactures and markets a broad range of brand name, generic and over-the-counter products in over 100 countries. We closed our position in Valeant toward the end of October last year. The stock came under heavy selling pressure as a result of increased political scrutiny around drug pricing and possible wrongdoing at one of its "alternative fulfillment" pharmacy partners. Our decision to sell was ultimately based on a combination of important questions we had difficulty answering regarding potential long-term reputational damage to Valeant's business, the likelihood of difficult payer negotiations, future business model uncertainty and financial leverage. While our investment in Valeant ended on a disappointing note, it was a healthy multi-year contributor to Fund performance.
Iconix Brand Group is a brand management company and owner of a diversified portfolio of global consumer brands across entertainment, home segments and fashion for men and women. Over the trailing 12 months, Iconix's share price fell in response to a change in senior management, an accounting restatement, an SEC review and disappointing operating results resulting in a reduction of revenue and cash flow guidance. These events led to additional worries over the ability to refinance near-term debt maturities. As a result, we exited the position.
Quarterly Detractors
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Liberty Ventures is best described as an investment vehicle, with its principle asset being an 18% stake in publicly traded Expedia, Inc. Expedia's stock produced very strong returns in calendar 2015 (+47%); however, Expedia shares declined in the broader market sell-off during the initial six weeks of 2016 before partially recovering. Liberty Ventures also owns a stake in Time Warner Cable. Charter Communications has proposed acquiring Time Warner Cable, subject to Federal Communications Commission (FCC) approval. Under this proposal, (a) Liberty Ventures would exchange its shares of Time Warner Cable for shares of Charter and (b) Liberty Ventures would provide additional capital for the transaction by paying cash for to-be-issued shares of Liberty Broadband, which in turn would pay cash for to-be-issued Charter stock. Although the structure of this transaction is more complex than most, we believe it represents a significant opportunity for value creation at Liberty Ventures.
Eliminated Holdings
ADT Corp, Precision Castparts and Iconix Brand Group
ADT Corp, Precision Castparts and Iconix Brand Group
Please visit the Fund's commentary section on our website for additional information.
12 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | |||||||||||||||||||||
Since Inception (6/1/1983 | ) | 20-year | 10-year | 5-year | 3-year | 1-year | Quarter | |||||||||||||||
WPOIX - Investor Class | 12.58 | % | 11.00 | % | 6.96 | % | 7.33 | % | 4.63 | % | (9.56 | )% | 2.01 | % | ||||||||
WPOPX - Institutional Class | 12.63 | 11.08 | 7.11 | 7.64 | 4.94 | (9.20 | ) | 2.12 | ||||||||||||||
S&P 500 | 10.72 | 7.98 | 7.01 | 11.58 | 11.82 | 1.78 | 1.35 | |||||||||||||||
Russell 3000 | 10.48 | 8.04 | 6.90 | 11.01 | 11.15 | (0.34 | ) | 0.97 | ||||||||||||||
Russell 3000 Value | 10.96 | 8.34 | 5.60 | 9.95 | 9.08 | (2.05 | ) | 1.64 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Partners III Opportunity Fund - Institutional Class for the period since inception (6/1/83) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 3000 and Russell 3000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Partners III Opportunity Fund - Institutional Class for the period since inception (6/1/83) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 3000 and Russell 3000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Capitalization
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway Inc. - Class B | 11.0 | |||
Liberty Media Corp. - Series A & C | 8.6 | |||
Liberty Global plc - Class C | 7.9 | |||
Liberty Broadband Corp. - Series A & C | 6.8 | |||
Wesco Aircraft Holdings, Inc. | 4.2 | |||
Liberty Ventures - Series A | 4.0 | |||
Redwood Trust, Inc. | 3.9 | |||
Colfax Corp. | 3.5 | |||
MasterCard Inc. - Class A | 3.5 | |||
Wells Fargo & Co. | 2.8 | |||
56.2 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 39.6 | |||
Financials | 17.7 | |||
Industrials | 11.3 | |||
Information Technology | 10.0 | |||
Health Care | 6.6 | |||
Energy | 2.4 | |||
Consumer Staples | 1.4 | |||
Securities Sold Short | (30.4 | ) | ||
Short Proceeds/Other | 41.4 | |||
100.0 |
Top Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Wesco Aircraft Holdings, Inc. | 20.2 | % | 4.1 | % | 0.94 | % | ||||
Berkshire Hathaway Inc. - Class B | 7.5 | 11.2 | 0.88 | |||||||
Colfax Corp. | 22.4 | 2.9 | 0.75 | |||||||
Liberty Broadband Corp. - Series A & C | 12.2 | 6.1 | 0.75 | |||||||
Range Resources Corp. | 31.7 | 1.6 | 0.54 |
Bottom Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Liberty Ventures - Series A | (13.3 | )% | 4.0 | % | (0.67 | )% | ||||
Liberty Global plc - Class C | (7.9 | ) | 7.5 | (0.60 | ) | |||||
Express Scripts Holding Co. | (21.4 | ) | 2.0 | (0.56 | ) | |||||
Wells Fargo & Co. | (10.3 | ) | 2.9 | (0.33 | ) | |||||
SPDR S&P 500 ETF Trust (short) | 1.3 | (20.4 | ) | (0.24 | ) |
Contributions to Fund performance are based on actual daily holdings. Securities may have been bought or sold during the quarter. Source: FactSet Portfolio Analytics
Return shown is the actual quarterly return of the security or combination of share classes.
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of annual operating expenses which as stated in its most recent prospectus are 2.06% and 1.69% of the Fund's Investor and Institutional Class net assets, respectively. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_performance/fund_performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
13 | Q1 2016 ANNUAL REPORT
RESEARCH FUND
Investment Style: Multi-Cap Value
Co-Portfolio Managers: Jon Baker, CFA; Barton Hooper, CFA; Dave Perkins, CFA; & Drew Weitz
Fiscal Year Contributors
Angie's List is a nationally-based, local services review provider and marketplace. The business, which began as a consumer pay subscription service, has been progressively lightening the load on subscribers and shifting the cost of the model to advertising service providers. This transition has caused a flattening of top-line growth. The stock appreciated in the fourth quarter of 2015 when IAC/ InterActiveCorp (a company we have owned in the past) made an opportunistic cash offer to buy Angie's List for slightly less than $9 per share. We felt the offer undervalued Angie's business and precluded any opportunity to participate in the upside of the combined entity. The Market apparently agreed, and Angie's stock price traded through the offer price to about $11 per share. We sold our position, as the stock price exceeded our revised estimate of business value.
Angie's List is a nationally-based, local services review provider and marketplace. The business, which began as a consumer pay subscription service, has been progressively lightening the load on subscribers and shifting the cost of the model to advertising service providers. This transition has caused a flattening of top-line growth. The stock appreciated in the fourth quarter of 2015 when IAC/ InterActiveCorp (a company we have owned in the past) made an opportunistic cash offer to buy Angie's List for slightly less than $9 per share. We felt the offer undervalued Angie's business and precluded any opportunity to participate in the upside of the combined entity. The Market apparently agreed, and Angie's stock price traded through the offer price to about $11 per share. We sold our position, as the stock price exceeded our revised estimate of business value.
Post Holdings is a consumer packaged goods holding company whose products are sold through a range of channels, such as grocery, drug stores, foodservice and the Internet. While Post has been transforming itself from a branded cereal manufacturer into a food holding company with a more growth-oriented portfolio, fiscal year appreciation was due to the acquisition of Malt-O-Meal brands, which strengthened the company's cereal business. In addition, a strong performance of the Michael Food's segment and improvements in the company's protein-focused brands contributed to good results. Post also benefited from a capital raise of equity and debt, which decreased its financial leverage, putting the company in a better position to take advantage of future value-enhancing mergers and acquisitions. We eliminated the position in the fourth quarter of 2015 when the stock traded above our business value estimate.
Quarterly Contributors
Fossil Group is the fourth largest producer of watches and the largest licenser of watches and jewelry globally. For the fiscal year Fossil remains one of the larger detractors from performance, however, Fossil outperformed during the quarter, as the company reported a rebound in same-store-sales, which grew 1% during the fourth quarter, including positive growth in watches. This calmed some fears of secular decline in the category, including headwinds from the Apple Watch and other wearables. Moreover, Fossil guided to flat revenue in 2016 excluding foreign currency translation, which was well ahead of consensus forecasts. Management reported good reception of their connected accessories product launch and announced a broad product offering across brands which will incorporate Misfit technology and design, in time for the holidays in 2016.
Fossil Group is the fourth largest producer of watches and the largest licenser of watches and jewelry globally. For the fiscal year Fossil remains one of the larger detractors from performance, however, Fossil outperformed during the quarter, as the company reported a rebound in same-store-sales, which grew 1% during the fourth quarter, including positive growth in watches. This calmed some fears of secular decline in the category, including headwinds from the Apple Watch and other wearables. Moreover, Fossil guided to flat revenue in 2016 excluding foreign currency translation, which was well ahead of consensus forecasts. Management reported good reception of their connected accessories product launch and announced a broad product offering across brands which will incorporate Misfit technology and design, in time for the holidays in 2016.
Summit Materials is a US based construction materials company with cement, aggregates and downstream operations (ready-mix concrete, asphalt, paving) in the Midwest, South and Mid-Atlantic regions. During the quarter, Summit reported strong fourth quarter volumes and strong pricing in aggregates and cement, which calmed investor fears of a slowdown in residential and non-residential construction. Additionally, given the drop in energy prices, investors feared that Summit's largest market, Texas, would contract during 2016. However, the company reported solid growth in Texas (including Houston), and industry data points throughout the quarter alleviated fears of a Texas recession. Finally, strong 2016 guidance from Summit and peers led to a rebound for the entire group during the quarter.
New Holdings
Laboratory Corp. of America Holdings, Summit Materials, Redwood Trust and Apple
Laboratory Corp. of America Holdings, Summit Materials, Redwood Trust and Apple
Fiscal Year Detractors
Valeant Pharmaceuticals is a multi-national, specialty pharmaceutical and medical device company that develops, manufactures and markets a broad range of brand name, generic and over-the-counter products in over 100 countries. We closed our position in Valeant toward the end of October last year. The stock came under heavy selling pressure as a result of increased political scrutiny around drug pricing and possible wrongdoing at one of its "alternative fulfillment" pharmacy partners. Our decision to sell was ultimately based on a combination of important questions we had difficulty answering regarding potential long-term reputational damage to Valeant's business, the likelihood of difficult payer negotiations, future business model uncertainty and financial leverage. While our investment in Valeant ended on a disappointing note, it was a healthy multi-year contributor to Fund performance.
Valeant Pharmaceuticals is a multi-national, specialty pharmaceutical and medical device company that develops, manufactures and markets a broad range of brand name, generic and over-the-counter products in over 100 countries. We closed our position in Valeant toward the end of October last year. The stock came under heavy selling pressure as a result of increased political scrutiny around drug pricing and possible wrongdoing at one of its "alternative fulfillment" pharmacy partners. Our decision to sell was ultimately based on a combination of important questions we had difficulty answering regarding potential long-term reputational damage to Valeant's business, the likelihood of difficult payer negotiations, future business model uncertainty and financial leverage. While our investment in Valeant ended on a disappointing note, it was a healthy multi-year contributor to Fund performance.
Range Resources is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas. Despite a healthy rebound during the first calendar quarter, Range shares remain well below last year's levels thanks to stubbornly low natural gas and NGL prices. Following one of the mildest winters in recent memory, the one-month New York Mercantile Exchange (NYMEX) natural gas futures contract settled in early March at $1.67/MMBtu, its lowest level since 1999. While we cannot predict the timing of a recovery in natural gas prices, the present state of oversupply is unlikely to be permanent. Domestic drilling and completion activity levels are now nearing record lows, with even the industry's most efficient players pulling back (Range is down from 15 active drilling rigs to three). In the meantime, the company's balance sheet has improved (via the monetization of non-core assets), it is drilling more efficient wells and its cost structure has continued to fall (finding and development costs are trending toward $0.20/Mcfe). We expect Range to emerge from the downturn in position to generate attractive per share cash flows in the years ahead.
Quarterly Detractors
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Allergan is a global specialty pharmaceutical company focused on the development, manufacturing, marketing and distribution of generic, brand name, biosimilar and over-the-counter pharmaceutical products. A combination of factors contributed to the decline in Allergan's stock during the quarter, including continued discussions of potential drug price regulation, regulatory delays in closing the company's sale of its generic drug operations to TEVA and uncertainty around the viability of the proposed merger with Pfizer (which, subsequent to quarter end, has officially been called off). We believe the risk of the TEVA sale transaction falling through is low, and the company's collection of durable growth assets, management acumen and balance sheet optionality create multiple paths for durable shareholder value creation in the years ahead. We added to our position during the quarter.
Eliminated Holdings
MRC Global, ADT Corp, Iconix Brand Group, Brown & Brown, Omnicom Group and Monsanto Company
MRC Global, ADT Corp, Iconix Brand Group, Brown & Brown, Omnicom Group and Monsanto Company
Please visit the Fund's commentary section on our website for additional information.
14 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | ||||||||||||||||||
Since Inception (4/1/2005) | 10-year | 5-year | 3-year | 1-year | Quarter | ||||||||||||||
WRESX | 7.12 | % | 6.87 | % | 8.36 | % | 7.48 | % | (8.77 | )% | 4.26 | % | |||||||
S&P 500 | 7.42 | 7.01 | 11.58 | 11.82 | 1.78 | 1.35 | |||||||||||||
Russell 3000 | 7.55 | 6.90 | 11.01 | 11.15 | (0.34 | ) | 0.97 | ||||||||||||
Russell 3000 Value | 6.35 | 5.60 | 9.95 | 9.08 | (2.05 | ) | 1.64 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Research Fund for the period since inception (4/1/05) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 3000 and Russell 3000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Research Fund for the period since inception (4/1/05) through March 31, 2016, as compared with the growth of the Standard & Poor's 500, Russell 3000 and Russell 3000 Value Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Capitalization
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Range Resources Corp. | 6.9 | |||
Allergan plc | 6.2 | |||
Fossil Group, Inc. | 5.5 | |||
Liberty Global plc - Class C | 5.5 | |||
Twenty-First Century Fox, Inc. - Class A | 4.0 | |||
Liberty Media Corp. - Series C | 3.8 | |||
National CineMedia, Inc. | 3.5 | |||
Berkshire Hathaway Inc. - Class B | 3.3 | |||
Apple Inc. | 3.0 | |||
Liberty Interactive Corp. QVC Group - Series A | 2.6 | |||
44.3 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 35.2 | |||
Information Technology | 9.9 | |||
Health Care | 8.9 | |||
Energy | 8.4 | |||
Financials | 5.0 | |||
Industrials | 4.0 | |||
Materials | 1.8 | |||
Consumer Staples | 1.6 | |||
Cash Equivalents/Other | 25.2 | |||
100.0 |
Top Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Range Resources Corp. | 31.7 | % | 6.4 | % | 1.84 | % | ||||
Fossil Group, Inc. | 21.5 | 6.2 | 1.52 | |||||||
Summit Materials, Inc. - Class A | (2.9 | ) | 1.0 | 0.59 | ||||||
The ADT Corp. | 26.1 | 1.1 | 0.54 | |||||||
Apple Inc. | 4.1 | 2.4 | 0.43 |
Bottom Performers | Average | |||||||||
Return | Weight | Contribution | ||||||||
Allergan plc | (14.2 | )% | 6.7 | % | (1.02 | )% | ||||
Express Scripts Holding Co. | (21.4 | ) | 2.7 | (0.87 | ) | |||||
Liberty Global plc - Class C | (7.9 | ) | 5.5 | (0.58 | ) | |||||
Interval Leisure Group, Inc. | (6.7 | ) | 2.6 | (0.36 | ) | |||||
Liberty Interactive Corp. QVC Group - Series A | (7.6 | ) | 2.8 | (0.24 | ) |
Contributions to Fund performance are based on actual daily holdings. Securities may have been bought or sold during the quarter. Source: FactSet Portfolio Analytics
Return shown is the actual quarterly return of the security or combination of share classes.
Returns assume reinvestment of dividends and redemption at the end of each period, and, starting January 1, 2011, reflect the deduction of the Fund's annual operating expenses which as stated in its most recent prospectus are 1.60% (gross) of the Fund's net assets. For periods of time prior to January 1, 2011, the performance numbers reflect the deduction of annual pro forma operating expenses of 1.50%. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_performance/fund_performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
15 | Q1 2016 ANNUAL REPORT
HICKORY FUND
Investment Style: Small- to Mid-Cap Value
Co-Portfolio Managers: Wally Weitz, CFA & Drew Weitz
Fiscal Year Contributors
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Angie's List is a nationally-based, local services review provider and marketplace. The business, which began as a consumer pay subscription service, has been progressively lightening the load on subscribers and shifting the cost of the model to advertising service providers. This transition has caused a flattening of top-line growth. The stock appreciated in the fourth quarter of 2015 when IAC/ InterActiveCorp (a company we have owned in the past) made an opportunistic cash offer to buy Angie's List for slightly less than $9 per share. We felt the offer undervalued Angie's business and precluded any opportunity to participate in the upside of the combined entity. The Market apparently agreed, and Angie's stock price traded through the offer price to about $11 per share. We sold our position, as the stock price exceeded our revised estimate of business value.
Quarterly Contributors
Fossil Group is the fourth largest producer of watches and the largest licenser of watches and jewelry globally. For the fiscal year Fossil remains one of the larger detractors from performance, however, Fossil outperformed during the quarter, as the company reported a rebound in same-store-sales, which grew 1% during the fourth quarter, including positive growth in watches. This calmed some fears of secular decline in the category, including headwinds from the Apple Watch and other wearables. Moreover, Fossil guided to flat revenue in 2016 excluding foreign currency translation, which was well ahead of consensus forecasts. Management reported good reception of their connected accessories product launch and announced a broad product offering across brands which will incorporate Misfit technology and design, in time for the holidays in 2016.
Fossil Group is the fourth largest producer of watches and the largest licenser of watches and jewelry globally. For the fiscal year Fossil remains one of the larger detractors from performance, however, Fossil outperformed during the quarter, as the company reported a rebound in same-store-sales, which grew 1% during the fourth quarter, including positive growth in watches. This calmed some fears of secular decline in the category, including headwinds from the Apple Watch and other wearables. Moreover, Fossil guided to flat revenue in 2016 excluding foreign currency translation, which was well ahead of consensus forecasts. Management reported good reception of their connected accessories product launch and announced a broad product offering across brands which will incorporate Misfit technology and design, in time for the holidays in 2016.
The ADT Corp is a provider of monitored security, interactive home and business automation, and related monitoring services in the United States and Canada. On February 15, ADT shares rose in response to the announcement that Apollo Global Management agreed to acquire ADT for $42 per share, a slight discount to our mid-$40's estimate of business value. Apollo plans to combine ADT with its own alarm monitoring business, Protection One. We exited our position at the end of February for a modest gain.
New Holdings
Lions Gate
Lions Gate
Fiscal Year Detractors
Interval Leisure Group is a provider of non-traditional lodging, encompassing a portfolio of leisure businesses, from exchange and vacation rental to vacation ownership. In the second quarter of 2016, Interval will merge with Starwood's soon-to-be-spun timeshare business. While we like the prospects for and valuation of the combined entity, we believe Starwood's shareholder base is not likely a long-term home for the 70 million-plus shares to be issued in the merger. As a result, we will remain patient, as the stock will likely remain weak until those issued shares fall into more interested hands.
Interval Leisure Group is a provider of non-traditional lodging, encompassing a portfolio of leisure businesses, from exchange and vacation rental to vacation ownership. In the second quarter of 2016, Interval will merge with Starwood's soon-to-be-spun timeshare business. While we like the prospects for and valuation of the combined entity, we believe Starwood's shareholder base is not likely a long-term home for the 70 million-plus shares to be issued in the merger. As a result, we will remain patient, as the stock will likely remain weak until those issued shares fall into more interested hands.
Iconix Brand Group is a brand management company and owner of a diversified portfolio of global consumer brands across entertainment, home segments and fashion for men and women. Over the trailing 12 months, Iconix's share price fell in response to a change in senior management, an accounting restatement, an SEC review and disappointing operating results resulting in a reduction of revenue and cash flow guidance. These events led to additional worries over the ability to refinance near-term debt maturities. As a result, we exited the position.
Quarterly Detractors
Liberty Global is the largest international cable company, with operations in 14 countries providing video, broadband Internet, fixed-line telephone and mobile services to its customers. Its share price fell early in the quarter after an influential Wall Street analyst downgraded his outlook for the stock, principally due to concerns over continued competitive struggles in Holland (one of Liberty's largest markets). Since that time, Liberty announced it would move its Dutch operations into a 50/50 joint venture with Vodafone. The joint venture structure allows Liberty to combine its strong cable and broadband businesses with Vodafone's mobile offering to create a more competitive, "converged" offering. Liberty also provided Wall Street with an attractive three-year growth outlook during its fourth quarter earnings call, helping shares recover some of the earlier declines. We remain confident of continued growth for Liberty's cable offerings and management's abilities to deliver on their outlook.
Liberty Global is the largest international cable company, with operations in 14 countries providing video, broadband Internet, fixed-line telephone and mobile services to its customers. Its share price fell early in the quarter after an influential Wall Street analyst downgraded his outlook for the stock, principally due to concerns over continued competitive struggles in Holland (one of Liberty's largest markets). Since that time, Liberty announced it would move its Dutch operations into a 50/50 joint venture with Vodafone. The joint venture structure allows Liberty to combine its strong cable and broadband businesses with Vodafone's mobile offering to create a more competitive, "converged" offering. Liberty also provided Wall Street with an attractive three-year growth outlook during its fourth quarter earnings call, helping shares recover some of the earlier declines. We remain confident of continued growth for Liberty's cable offerings and management's abilities to deliver on their outlook.
Liberty Ventures is best described as an investment vehicle, with its principle asset being an 18% stake in publicly traded Expedia, Inc. Expedia's stock produced very strong returns in calendar 2015 (+47%); however, Expedia shares declined in the broader market sell-off during the initial six weeks of 2016 before partially recovering. Liberty Ventures also owns a stake in Time Warner Cable. Charter Communications has proposed acquiring Time Warner Cable, subject to Federal Communications Commission (FCC) approval. Under this proposal, (a) Liberty Ventures would exchange its shares of Time Warner Cable for shares of Charter and (b) Liberty Ventures would provide additional capital for the transaction by paying cash for to-be-issued shares of Liberty Broadband, which in turn would pay cash for to-be-issued Charter stock. Although the structure of this transaction is more complex than most, we believe it represents a significant opportunity for value creation at Liberty Ventures.
Eliminated Holdings
ADT Corp and Iconix Brand Group
ADT Corp and Iconix Brand Group
Please visit the Fund's commentary section on our website for additional information.
16 Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | ||||||||||||||||||||||||
Since Inception (4/1/1993) | 20-year | 10-year | Since Investment Style Inception (6/30/08) | 5-year | 3-year | 1-year | Quarter | ||||||||||||||||||
WEHIX | 9.78 | % | 9.16 | % | 5.41 | % | 9.49 | % | 6.75 | % | 4.32 | % | (9.04 | )% | 2.90 | % | |||||||||
Russell 2500 | 10.01 | 9.24 | 6.47 | 8.79 | 8.58 | 8.16 | (7.31 | ) | 0.39 | ||||||||||||||||
Russell 2500 Value | 10.51 | 10.07 | 5.80 | 8.63 | 8.33 | 7.15 | (5.20 | ) | 3.33 | ||||||||||||||||
S&P 500 | 8.95 | 7.98 | 7.01 | 8.68 | 11.58 | 11.82 | 1.78 | 1.35 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Hickory Fund for the period since inception (4/1/93) through March 31, 2016, as compared with the growth of the Russell 2500, Russell 2500 Value and Standard & Poor's 500 Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Hickory Fund for the period since inception (4/1/93) through March 31, 2016, as compared with the growth of the Russell 2500, Russell 2500 Value and Standard & Poor's 500 Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Capitalization
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Liberty Broadband Corp. - Series A & C | 5.6 | |||
Liberty Global plc - Class C | 4.5 | |||
Liberty Interactive Corp. QVC Group - Series A | 4.4 | |||
Liberty Media Corp. - Series A & C | 4.2 | |||
National CineMedia, Inc. | 4.2 | |||
Redwood Trust, Inc. | 4.0 | |||
Allison Transmission Holdings, Inc. | 4.0 | |||
Brown & Brown, Inc. | 3.9 | |||
Laboratory Corp. of America Holdings | 3.7 | |||
Interval Leisure Group, Inc. | 3.6 | |||
42.1 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 39.7 | |||
Financials | 14.0 | |||
Industrials | 12.5 | |||
Information Technology | 5.4 | |||
Health Care | 3.7 | |||
Energy | 2.7 | |||
Telecommunication Services | 1.8 | |||
Consumer Staples | 0.5 | |||
Cash Equivalents/Other | 19.7 | |||
100.0 |
Top Performers | ||||||||||
Average | ||||||||||
Return | Weight | Contribution | ||||||||
The ADT Corp. | 26.1 | % | 2.0 | % | 1.13 | % | ||||
Fossil Group, Inc. | 21.5 | 3.1 | 0.81 | |||||||
Range Resources Corp. | 31.7 | 2.4 | 0.79 | |||||||
Liberty Broadband Corp. - Series A & C | 12.2 | 4.7 | 0.70 | |||||||
Wesco Aircraft Holdings, Inc. | 20.2 | 3.1 | 0.68 | |||||||
Bottom Performers |
Average | ||||||||||
Return | Weight | Contribution | ||||||||
Liberty Ventures - Series A | (13.3 | )% | 2.7 | % | (0.44 | )% | ||||
Liberty Global plc - Class C | (7.9 | ) | 4.4 | (0.38 | ) | |||||
Liberty Interactive Corp. QVC Group - Series A | (7.6 | ) | 4.6 | (0.37 | ) | |||||
Willis Towers Watson plc | (7.4 | ) | 3.4 | (0.29 | ) | |||||
Internal Leisure Group, Inc. | (6.7 | ) | 3.0 | (0.26 | ) |
Contributions to Fund performance are based on actual daily holdings. Securities may have been bought or sold during the quarter. Source: FactSet Portfolio Analytics
Return shown is the actual quarterly return of the security or combination of share classes.
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of the Fund's annual operating expenses which as stated in its most recent prospectus are 1.23% of the Fund's net assets. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/ or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_ performance/fund_performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
17 | Q1 2016 ANNUAL REPORT
BALANCED FUND
Investment Style: Moderate Allocation
Portfolio Manager: Brad Hinton, CFA
Fiscal Year Contributors
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Martin Marietta Materials is a producer of sand, gravel, aggregates and cement (products for the construction industry). During the trailing twelve months, Martin's aggregates volumes, pricing, and incremental margins exceeded investor expectations, as non-residential and public construction showed broad-based strength. The outlook for public volumes over the next several years improved with the passing of the 5-year federal highway bill, dubbed Fixing America's Surface Transportation (FAST) Act, and with state Department of Transportation budgets expanding. Martin also increased, for the third time, its synergy cost-savings target for the 2014 Texas Industries acquisition from the original $70 million to $120 million. They sold their California Oro Grande cement operation for $420 million, the proceeds of which will be used towards their 20 million share repurchase program. The culmination of these positive events pushed Martin Marietta's stock price above our estimate of intrinsic value, and we exited our position during the third quarter of 2015.
Accenture is a leader in providing management consulting, technology and outsourcing services. Accenture's share price appreciation reflects the company's consistent execution of assisting its clients in adopting digital transformation strategies while maintaining strong free cash flow generation and return of capital.
Quarterly Contributors
FLIR Systems is a global leader in infrared and thermal imaging equipment for military and commercial end markets. During the quarter, FLIR benefited from a surge of government orders, which elevated company-wide backlog to the highest level since 2008 (up 6% year over year). Recent high-profile terrorist attacks in Brussels and Paris along with unrest across the Middle East have also led to heightened expectations for FLIR's surveillance and detection equipment going forward. Finally, many investors fearing a slower Europe and a drop off in activity in Brazil and China, expected contraction in FLIR's thermal instruments business during the quarter; however, FLIR reported flat results in the fourth quarter and 5% growth for the full year. North America held up well and China reported solid growth, as preventative maintenance takes hold in Chinese utilities and industrial companies.
FLIR Systems is a global leader in infrared and thermal imaging equipment for military and commercial end markets. During the quarter, FLIR benefited from a surge of government orders, which elevated company-wide backlog to the highest level since 2008 (up 6% year over year). Recent high-profile terrorist attacks in Brussels and Paris along with unrest across the Middle East have also led to heightened expectations for FLIR's surveillance and detection equipment going forward. Finally, many investors fearing a slower Europe and a drop off in activity in Brazil and China, expected contraction in FLIR's thermal instruments business during the quarter; however, FLIR reported flat results in the fourth quarter and 5% growth for the full year. North America held up well and China reported solid growth, as preventative maintenance takes hold in Chinese utilities and industrial companies.
Berkshire Hathaway is a conglomerate holding company owning subsidiaries engaged in a number of business activities. Berkshire shares were helped by the closing of the Precision Castparts acquisition and improved operating performance at its Burlington Northern railroad subsidiary. Berkshire's insurance unit continues to show excellent discipline in underwriting, which results in temporary declines in premium, but means the company will have significant capacity when insurance pricing returns.
New Holdings
Allergan and Comcast
Allergan and Comcast
Fiscal Year Detractors
Range Resources is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas. Despite a healthy rebound during the first calendar quarter, Range shares remain well below last year's levels thanks to stubbornly low natural gas and NGL prices. Following one of the mildest winters in recent memory, the one-month New York Mercantile Exchange (NYMEX) natural gas futures contract settled in early March at $1.67/MMBtu, its lowest level since 1999. While we cannot predict the timing of a recovery in natural gas prices, the present state of oversupply is unlikely to be permanent. Domestic drilling and completion activity levels are now nearing record lows, with even the industry's most efficient players pulling back (Range is down from 15 active drilling rigs to three). In the meantime, the company's balance sheet has improved (via the monetization of non-core assets), it is drilling more efficient wells and its cost structure has continued to fall (finding and development costs are trending toward $0.20/Mcfe). We expect Range to emerge from the downturn in position to generate attractive per share cash flows in the years ahead.
Range Resources is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas. Despite a healthy rebound during the first calendar quarter, Range shares remain well below last year's levels thanks to stubbornly low natural gas and NGL prices. Following one of the mildest winters in recent memory, the one-month New York Mercantile Exchange (NYMEX) natural gas futures contract settled in early March at $1.67/MMBtu, its lowest level since 1999. While we cannot predict the timing of a recovery in natural gas prices, the present state of oversupply is unlikely to be permanent. Domestic drilling and completion activity levels are now nearing record lows, with even the industry's most efficient players pulling back (Range is down from 15 active drilling rigs to three). In the meantime, the company's balance sheet has improved (via the monetization of non-core assets), it is drilling more efficient wells and its cost structure has continued to fall (finding and development costs are trending toward $0.20/Mcfe). We expect Range to emerge from the downturn in position to generate attractive per share cash flows in the years ahead.
Liberty Global is the largest international cable company, with operations in 14 countries providing video, broadband Internet, fixed-line telephone and mobile services to its customers. Liberty Global's portfolio of businesses produced mixed results during the fiscal year. Continued strong results in the UK and Belgium were partially offset by continued competitive pressures and merger integration missteps in Holland, and a poorly received price increase in Germany. Furthermore, the continued strengthening of the US Dollar put a damper on Liberty's results (reported in US Dollars). We believe the company is restoring investor confidence by learning from these missteps, taking actions within the portfolio as needed (e.g., moving the Dutch business into a joint venture with Vodafone) and outlining an achievable three-year growth plan.
Quarterly Detractors
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Express Scripts is the largest stand-alone pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. Negotiations with Anthem, Express Scripts' largest customer, hit an impasse early in the quarter. Anthem elected to bring the details of the disagreement public at a widely attended industry conference in January, providing the investment community a lens into how far the two companies were apart on the economics of their existing contract. Since then, Anthem has also filed a lawsuit against Express Scripts. While we hope a mutually agreeable solution will eventually be achieved, it remains possible (some believe likely) that Anthem will choose not to renew its contract with Express in 2019. We have run scenarios encompassing a range of different outcomes, and we believe Express Scripts' shares are undervalued in all but the most dire. We continue to monitor contract-related developments and are otherwise heartened by improved execution across the other 84% of Express Scripts' enterprise.
Monsanto is a provider of seeds and biotech traits for corn, soybeans and cotton. Monsanto faced a number of headwinds in the first quarter, most notably soft commodity prices, the devaluation of the Argentine Peso and the increasing unlikelihood of large scale M&A. Add weak glyphosate pricing and intense competition in seeds, and the stock is facing what some might call a perfect storm. In fact, US farm income is forecast to be a 13-year low. We remain bullish on Monsanto long term because it's the highest quality franchise in agriculture. It has 35% share of the US corn seed market, a defensible yield advantage over its peers, and the deepest pipeline of R&D and technology in the industry by far. The company has a path to double-digit earnings growth through 2019 via self-help initiatives, which aren't reliant on corn prices recovering (although such an event would certainly be welcome).
Eliminated Holdings
Precision Castparts, Brown & Brown, Omnicom Group and Core Laboratories
Precision Castparts, Brown & Brown, Omnicom Group and Core Laboratories
Please visit the Fund's commentary section on our website for additional information.
18 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | ||||||||||||||||||
Since Inception (10/1/2003 | ) | 10-year | 5-year | 3-year | 1-year | Quarter | |||||||||||||
WBALX | 5.29 | % | 4.63 | % | 5.73 | % | 4.17 | % | (0.80 | )% | 1.69 | % | |||||||
Blended | 6.68 | 6.24 | 8.27 | 7.88 | 2.14 | 1.88 | |||||||||||||
S&P 500 | 8.19 | 7.01 | 11.58 | 11.82 | 1.78 | 1.35 | |||||||||||||
Barclays | |||||||||||||||||||
Intermediate | |||||||||||||||||||
Credit | 3.80 | 4.34 | 3.01 | 1.83 | 2.06 | 2.45 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Balanced Fund for the period since inception (10/1/03) through March 31, 2016, as compared with the growth of the Blended, Standard & Poor's 500 and Barclays Intermediate U.S. Government/Credit Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Balanced Fund for the period since inception (10/1/03) through March 31, 2016, as compared with the growth of the Blended, Standard & Poor's 500 and Barclays Intermediate U.S. Government/Credit Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Portfolio Make Up
Capitalization (Common Stocks)
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway Inc. - Class B | 3.2 | |||
Laboratory Corp. of America Holdings | 2.6 | |||
Twenty-First Century Fox, Inc. - Class A | 2.6 | |||
Redwood Trust, Inc. | 2.1 | |||
Liberty Interactive Corp. QVC Group - Series A | 2.1 | |||
Liberty Global plc - Series C | 2.0 | |||
Allergan plc | 1.9 | |||
Aon plc - Class A | 1.9 | |||
Comcast Corp. - Class A | 1.8 | |||
EOG Resources, Inc. | 1.8 | |||
22.0 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 11.9 | |||
Information Technology | 9.4 | |||
Financials | 9.3 | |||
Health Care | 5.8 | |||
Energy | 3.7 | |||
Consumer Staples | 3.2 | |||
Materials | 2.8 | |||
Industrials | 1.0 | |||
Total Common Stocks | 47.1 | |||
Cash Equivalents/Other | 17.1 | |||
U.S. Treasury Notes | 20.8 | |||
Corporate Bonds | 11.1 | |||
Mortgage-Backed Securities | 2.9 | |||
Asset- & Commercial Mortgage-Backed Securities | 1.0 | |||
Total Bonds & Cash Equivalents | 52.9 | |||
100.0 |
Top Stock Performers | ||||||||||
Average | ||||||||||
Return | Weight | Contribution | ||||||||
Range Resources Corp. | 31.7 | % | 1.5 | % | 0.49 | % | ||||
FLIR Systems, Inc. | 17.8 | 1.6 | 0.26 | |||||||
Berkshire Hathaway Inc. - Class B | 7.5 | 3.1 | 0.24 | |||||||
Aon plc - Class A | 13.7 | 1.7 | 0.24 | |||||||
Motorola Solutions, Inc. | 11.2 | 1.6 | 0.18 |
Bottom Stock Performers | ||||||||||
Average | ||||||||||
Return | Weight | Contribution | ||||||||
Express Scripts Holding Co. | (21.4 | )% | 1.3 | % | (0.36 | )% | ||||
Monsanto Co. | (10.4 | ) | 1.8 | (0.22 | ) | |||||
Liberty Global plc - Class C | (7.9 | ) | 1.9 | (0.18 | ) | |||||
Liberty Interactive Corp. QVC Group - Series A | (7.6 | ) | 2.1 | (0.17 | ) | |||||
Laboratory Corp. of America Holdings | (5.3 | ) | 2.5 | (0.13 | ) |
Contributions to Fund performance are based on actual daily holdings. Securities may have been bought or sold during the quarter. Source: FactSet Portfolio Analytics
Return shown is the actual quarterly return of the security or combination of share classes.
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of the Fund's annual operating expenses which as stated in its most recent prospectus are 1.09% of the Fund's net assets. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_ performance/fund_performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
19 | Q1 2016 ANNUAL REPORT
CORE PLUS INCOME FUND
Investment Style: Intermediate Income
Co-Portfolio Managers: Tom Carney, CFA & Nolan Anderson
The Core Plus Income Fund's Institutional Class returned +3.7% for the first calendar quarter, compared to a +3.0% return for the Barclays US Aggregate Bond Index (Barclays US Agg), our Fund's primary benchmark. For the fiscal year ended March 31, 2016, the Core Plus Income Fund's Institutional Class returned +2.1%, compared to a +2.0% return for the Barclays US Agg.
The performance table on the page following this discussion shows returns for our Fund (after deducting fees and expenses) over various holding periods and returns for the Barclays US Agg.
Fiscal 2016 Review
2016 jumped off to the most volatile start since 2009, as a selloff in China's stock market sparked fears of a global growth slowdown or contraction. Energy prices followed worldwide stock prices down the rabbit hole, with oil prices dropping nearly 30% in the first three weeks of the year. By the time Fed Chair Yellen sat before Congress in early February, global markets were jittery enough to push the intraday 10-year Treasury yield down to 1.5% on the mere mention of the possibility of the US following other central banks (namely, the European Central Bank and Japan) in implementing negative interest rates. Calmer heads prevailed, however, when US payroll data continued to show solid growth and resilience in the US economy. By the end of the first calendar quarter of the year, stocks and oil rebounded meaningfully, as fears of recession receded.
2016 jumped off to the most volatile start since 2009, as a selloff in China's stock market sparked fears of a global growth slowdown or contraction. Energy prices followed worldwide stock prices down the rabbit hole, with oil prices dropping nearly 30% in the first three weeks of the year. By the time Fed Chair Yellen sat before Congress in early February, global markets were jittery enough to push the intraday 10-year Treasury yield down to 1.5% on the mere mention of the possibility of the US following other central banks (namely, the European Central Bank and Japan) in implementing negative interest rates. Calmer heads prevailed, however, when US payroll data continued to show solid growth and resilience in the US economy. By the end of the first calendar quarter of the year, stocks and oil rebounded meaningfully, as fears of recession receded.
During the past fiscal year (March 31, 2015 to March 31, 2016), US Treasury bond yields continued their relentless march lower. For example, 5- and 10-year US Treasury bond yields declined approximately 16 basis points each to 1.2% and 1.8%, respectively (a basis point equals 1/100 of a percent). Declining interest rates resulted in price gains for existing bonds (bond prices and changes in interest rates are inversely related), adding to the coupon returns for most fixed-income investors, our Fund included.
Corporate bonds and other credit sensitive securities underperformed Treasury bonds in the past year, as credit spreads (the incremental return investors demand above US Treasury bonds for owning corporate debt) widened, particularly for non-investment grade or high-yield bonds. A broad measure of corporate bond spreads compiled by Merrill Lynch rose to 170 basis points as of March 31, up 34 basis points year over year. The repricing of credit risk in the high-yield market was more pronounced, with spreads increasing by more than 200 basis points, or a full 2 percent. While the overall marketplace remains expensive by historical standards (i.e., low absolute yield levels), last year's credit repricing presented pockets of opportunity to invest favorably relative to ultra-low US Treasury rates.
Our portfolio outperformed the Barclays US Agg, our Fund's primary benchmark, in the past fiscal year, despite its defensive positioning (i.e., shorter average life and duration relative to the Fund's benchmark). Led by our energy-related corporate bonds, our credit investments turned in strong performance despite an overall widening in credit spreads during the fiscal year. Overall portfolio metrics, as measured by average maturity and duration, changed modestly compared to a year ago. The average maturity of our Fund decreased to 4.4 from 5.5 years, while the Fund's average duration increased to 3.7 from 3.5 years as of March 31, 2015. These measures provide a guide to the Fund's interest rate sensitivity. A shorter average maturity and duration reduces the Fund's price sensitivity to changes in interest rates (either up or down).
As of March 31, our high yield exposure was 21%, up from 19% the prior fiscal year (our maximum threshold is 25%). Our high yield exposure continues to be concentrated in primarily higher quality, shorter-term (average duration of 3.5 years) bonds that we believe have attractive risk/reward profiles. To highlight our preference for higher quality credits in the current market environment, approximately 55% of our non-convertible high yield corporate bond exposure is allocated to BB or split-rated companies (those rated as investment grade by one agency and non-investment grade by at least one other) that we believe have strong asset and liquidity positions.
A noticeable change to highlight is the Fund's Institutional Class 30-day SEC yield, a proxy for the Fund's coupon or cash flow generation. At March 31, the 30-day SEC yield was 3.4%, an increase of approximately 25 basis points from December 31, and up 185 basis points from a year ago. Part of that increase is due to bond price declines in a small portion of the Fund's portfolio. The increase also results from pockets of opportunity we have found to invest in, as interest rates and credit spreads have risen.
The vast majority of Fund investments contributed positively to results in the past fiscal year. The sections below highlight the key contributors and detractors.
Top Fiscal Year Contributors
Non-Convertible Corporate Bonds (43.2% of Fund net assets at 3/31/16) – Despite the credit spread widening highlighted above, the Fund's corporate investments performed well in the past year. The Fund's non-convertible corporate bonds, particularly our energy related corporate bond investments, performed well during the fiscal year and were the largest contributor to Fund performance. Key contributors in the investment-grade segment included the bonds issued by Equity Commonwealth, Kinder Morgan and Wells Fargo. Key non-investment grade detractors included energy related bonds issued by Rose Rock Midstream, Antero Resources and Concho Resources.
Non-Convertible Corporate Bonds (43.2% of Fund net assets at 3/31/16) – Despite the credit spread widening highlighted above, the Fund's corporate investments performed well in the past year. The Fund's non-convertible corporate bonds, particularly our energy related corporate bond investments, performed well during the fiscal year and were the largest contributor to Fund performance. Key contributors in the investment-grade segment included the bonds issued by Equity Commonwealth, Kinder Morgan and Wells Fargo. Key non-investment grade detractors included energy related bonds issued by Rose Rock Midstream, Antero Resources and Concho Resources.
U.S. Treasury Notes (27.5% of Fund net assets at 3/31/16) – US Treasury notes received a safe haven bid during the fiscal year marked by global economic uncertainty (primarily in China and other emerging markets) and increased market volatility. Negative interest policies by other world central banks (notably the ECB and Japan) further aided the appeal of nominally small, but positive, US Treasury rates. Our Treasury holdings primarily consist of intermediate treasury securities with an average maturity of approximately 5.5 years.
Non-Agency Securitized Products (RMBS, CMBS, Auto ABS) (17.2% of Fund net assets at 3/31/16) – This segment of our portfolio continued to perform at or above our expectations with respect to credit performance and average life progression, while providing steady income and minimal price volatility during the fiscal year. Key contributors in this segment included the commercial mortgage-backed securities (CMBS) bonds issued by Redwood Commercial Mortgage and Rialto Real Estate Fund LP, the non-agency residential mortgage-backed securities (RMBS) bonds issued by Oak Hill Advisors Residential Loan Trust and automobile asset-backed securities (auto ABS) bonds led by California Republic Auto Receivables Trust, Credit Acceptance Auto Loan Trust and Santander Auto Drive Receivables Trust.
Top Fiscal Year Detractors
Select Energy Related Corporate Bonds (4.7% of Fund net assets at 3/31/16) – A portion of the Fund's corporate bond holdings in midstream infrastructure companies detracted from results in the past fiscal year. The largest detractors were SemGroup, Williams Partners and DCP Midstream. As midstream operators, all three companies face the risk of declining throughput volumes, as US natural gas, natural gas liquids (NGL's) and oil production declines. However, we believe that each company is managing through the downturn and has a strong collection of midstream assets with exposure to some of the lowest cost US production areas, including the DJ Basin in Colorado, the Marcellus/Utica shales in Pennsylvania and Ohio, and the Permian Basin in Texas.
Select Energy Related Corporate Bonds (4.7% of Fund net assets at 3/31/16) – A portion of the Fund's corporate bond holdings in midstream infrastructure companies detracted from results in the past fiscal year. The largest detractors were SemGroup, Williams Partners and DCP Midstream. As midstream operators, all three companies face the risk of declining throughput volumes, as US natural gas, natural gas liquids (NGL's) and oil production declines. However, we believe that each company is managing through the downturn and has a strong collection of midstream assets with exposure to some of the lowest cost US production areas, including the DJ Basin in Colorado, the Marcellus/Utica shales in Pennsylvania and Ohio, and the Permian Basin in Texas.
Convertible Corporate Debt and Redwood Trust Common Stock (4.1% of Fund net assets at 3/31/16) – The Fund's investment in Redwood Trust common stock (down 20.6%) and the company's 2- and 3-year convertible bonds detracted from results in the past fiscal year. Despite difficult market conditions over the past few years, a volatile interest rate environment and increased competition, Redwood has remained profitable in each of its business segments. The company recently took meaningful steps to right-size its cost and business structure in light of market conditions. The company remains competitively advantaged across its platforms and is well positioned to benefit from potential government-sponsored enterprise reform, the eventual revitalization of private-label residential securitization and future commercial investment opportunities. We continue to view the company as a "value investor" in mortgages and mortgage securities that has a culture of prudence, a renewed focus on growth in per share value and great skills in credit risk assessment. We believe that the market valuation of less than book value now overly discounts Redwood's future earnings capabilities. While we wait for the value to be realized, a dividend yield of nearly 9% should enhance future total return.
20 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Investment Activity
Despite portfolio metrics that were relatively unchanged on the year, it was a very active year for portfolio investment activity. Despite base rates (US Treasury) that generally trended lower during the year, we were able to deploy approximately $8 million (representing approximately 40% of fiscal year end assets) of Fund capital when Treasury rates temporarily trended higher and when credit spreads widened sufficiently (sometimes dramatically) to compensate for the embedded risks. Investment activity was heavily weighted toward corporate bonds, both investment grade and non-investment grade, and securitized products, particularly automobile asset-backed securities (auto ABS) and commercial mortgage-backed securities (CMBS). Examples include:
Despite portfolio metrics that were relatively unchanged on the year, it was a very active year for portfolio investment activity. Despite base rates (US Treasury) that generally trended lower during the year, we were able to deploy approximately $8 million (representing approximately 40% of fiscal year end assets) of Fund capital when Treasury rates temporarily trended higher and when credit spreads widened sufficiently (sometimes dramatically) to compensate for the embedded risks. Investment activity was heavily weighted toward corporate bonds, both investment grade and non-investment grade, and securitized products, particularly automobile asset-backed securities (auto ABS) and commercial mortgage-backed securities (CMBS). Examples include:
Corporate Bonds – High Yield Exploration & Production (E&P) Companies – We invested approximately 7% of Fund net assets in high yield E&Ps, including positions in Antero Resources, Concho Resources, CONSOL Energy and Range Resources. Collectively, these companies own vast acreage positions in two of the lowest cost US shale basins (the Marcellus/Utica and Permian Basin) and operate at or near the low end of the cost curve. Each company continues to manage well through the downturn by lowering operating costs, maintaining commodity hedge positions, selling non-core assets and raising capital.
Structured Securities – Automobile Asset-Backed Securities (ABS) – The Fund invested approximately 11% of net assets in auto ABS, backed by primarily subprime auto loan originators. Our focus is on partnering with strong management teams with proven experience lending through numerous cycles such as Credit Acceptance Corp., DriveTime, Prestige Financial and Santander Consumer USA. During the second half of 2015, auto ABS spreads began widening due to heightened fear of weakening underwriting discipline and the risk of lower used car prices. Although overall credit trends are weakening, with rising delinquencies and higher net charge-offs, credit support for bond investors is also increasing, with higher overcollateralization and subordination levels. We believe the combination of wider credit spreads and stronger credit protection has led to attractive relative-value opportunities in shorter duration (1-2 year weighted average life) assets, as compared to similar quality (A-rated and above) corporate bonds.
Outlook
In spite of setbacks in certain areas of the credit markets (namely energy given the significant decline in commodity prices in the past year), bond investors continue to have the "wind at their backs," thanks to the largesse of central banks worldwide. Ultra-low interest rates in the US government bond market and negative interest rates in much of the remainder of the non-US sovereign bond world seem rather "absurd," as Wally and Brad outline in their investor letter for this quarter. Distortions of markets that defy conventional investing logic seem unlikely to end well–much like the creation of Frankenstein's monster. Therefore, we will continue to position the Fund defensively relative to interest rate exposure, while we patiently seek out areas of opportunity like those mentioned above. We will invest one security at a time, relying on a fundamental, research-based investment approach and remain well positioned to take advantage of any market weakness.
In spite of setbacks in certain areas of the credit markets (namely energy given the significant decline in commodity prices in the past year), bond investors continue to have the "wind at their backs," thanks to the largesse of central banks worldwide. Ultra-low interest rates in the US government bond market and negative interest rates in much of the remainder of the non-US sovereign bond world seem rather "absurd," as Wally and Brad outline in their investor letter for this quarter. Distortions of markets that defy conventional investing logic seem unlikely to end well–much like the creation of Frankenstein's monster. Therefore, we will continue to position the Fund defensively relative to interest rate exposure, while we patiently seek out areas of opportunity like those mentioned above. We will invest one security at a time, relying on a fundamental, research-based investment approach and remain well positioned to take advantage of any market weakness.
21 | Q1 2016 ANNUAL REPORT
CORE PLUS INCOME FUND (CONTINUED)
Returns | Annualized | |||||||||
Since Inception (7/31/2014 | ) | 1-year | Quarter | |||||||
WCPNX - Investor Class | 2.81 | % | 1.78 | % | 3.60 | % | ||||
WCPBX - Institutional Class | 3.02 | 2.06 | 3.65 | |||||||
Barclays U.S. Aggregate Bond | 3.49 | 1.96 | 3.03 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Core Plus Income Fund – Institutional Class for the period since inception (7/31/14) through March 31, 2016, as compared with the growth of the Barclays U.S. Aggregate Bond Index during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Core Plus Income Fund – Institutional Class for the period since inception (7/31/14) through March 31, 2016, as compared with the growth of the Barclays U.S. Aggregate Bond Index during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Credit Quality(a) | ||||
Underlying Securities | % of Securities | |||
U.S. Treasury | 27.8 | |||
U.S. Government Agency Mortgage | ||||
Related Securities(b) | 0.8 | |||
Aaa/AAA | 4.8 | |||
Aa/AA | 6.0 | |||
A/A | 7.3 | |||
Baa/BBB | 27.4 | |||
Ba/BB | 8.4 | |||
B/B | 4.9 | |||
Caa/CCC | 1.8 | |||
Non-Rated | 5.5 | |||
Common Stocks | 2.6 | |||
Cash Equivalents | 2.7 | |||
100.0 |
Financial Attributes | |
Portfolio Summary | |
Average Maturity | 4.4 years |
Average Effective Maturity | 4.3 years |
Average Duration | 3.7 years |
Average Effective Duration | 3.6 years |
Average Coupon | 3.9% |
30-Day SEC Yield - Investor Class | 3.17% |
30-Day SEC Yield - Institutional Class | 3.37% |
Asset Allocation(c)
Maturity Distribution | ||||
Maturity Type | % of Securities | |||
Cash Equivalents | 2.7 | |||
Less than 1 Year | 10.9 | |||
1 - 3 Years | 8.3 | |||
3 - 5 Years | 33.8 | |||
5 - 7 Years | 30.7 | |||
7 - 10 Years | 11.0 | |||
Common Stocks | 2.6 | |||
100.0 |
(a) | The Fund receives credit quality ratings on underlying securities of the Fund when available from Moody s, Fitch, Kroll and others. The Fund will use one rating for an underlying security if that is all that is provided. Ratings and portfolio credit quality may change over time. The Fund itself has not been rated by an independent rating agency. |
(b) | Mortgage related securities issued and guaranteed by government-sponsored entities such as Fannie Mae and Freddie Mac are generally not rated by ratings agencies. Securities which are not rated do not necessarily indicate low quality. Fannie Mae's and Freddie Mac's senior long-term debt are currently rated Aaa and AAA by Moody's and Fitch, respectively. |
(c) | Percent of net assets |
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of annual operating expenses which as stated in its most recent prospectus are 3.18% (gross) and 2.55% (gross) of the Fund's Investor and Institutional Class net assets, respectively. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_performance/fund_ performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
22 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
SHORT-INTERMEDIATE INCOME FUND
Investment Style: Short-Intermediate Income
Portfolio Manager: Tom Carney, CFA
The Short-Intermediate Income Fund's Institutional Class returned +1.3% in the first calendar quarter, compared to a +2.4% return for the Barclays Intermediate US Government/Credit Index (BIGC), our Fund's primary benchmark. For the fiscal year ended March 31, 2016, the Short-Intermediate Income Fund's Institutional Class returned +0.8%, compared to a +2.1% return for the BIGC.
The performance table on the page following this discussion shows returns for our Fund (after deducting fees and expenses) over various holding periods and returns for three Barclays US Government/Credit Indexes (Intermediate, 1-5 year and 1-3 year) and the CPI + 1% for comparison purposes.
Fiscal 2016 Review
2016 jumped off to the most volatile start since 2009, as a selloff in China's stock market sparked fears of a global growth slowdown or contraction. Energy prices followed worldwide stock prices down the rabbit hole, with oil prices dropping nearly 30% in the first three weeks of the year. By the time Fed Chair Yellen sat before Congress in early February, global markets were jittery enough to push the intraday 10-year Treasury yield down to 1.5% on the mere mention of the possibility of the US following other central banks (namely, the European Central Bank and Japan) in implementing negative interest rates. Calmer heads prevailed, however, when US payroll data continued to show solid growth and resilience in the US economy. By the end of the first calendar quarter of the year, stocks and oil rebounded meaningfully, as fears of recession receded.
2016 jumped off to the most volatile start since 2009, as a selloff in China's stock market sparked fears of a global growth slowdown or contraction. Energy prices followed worldwide stock prices down the rabbit hole, with oil prices dropping nearly 30% in the first three weeks of the year. By the time Fed Chair Yellen sat before Congress in early February, global markets were jittery enough to push the intraday 10-year Treasury yield down to 1.5% on the mere mention of the possibility of the US following other central banks (namely, the European Central Bank and Japan) in implementing negative interest rates. Calmer heads prevailed, however, when US payroll data continued to show solid growth and resilience in the US economy. By the end of the first calendar quarter of the year, stocks and oil rebounded meaningfully, as fears of recession receded.
During the past fiscal year (March 31, 2015 to March 31, 2016), US Treasury bond yields continued their relentless march lower. For example, 5- and 10-year US Treasury bond yields declined approximately 16 basis points each to 1.2% and 1.8%, respectively (a basis point equals 1/100 of a percent). Declining interest rates resulted in price gains for existing bonds (bond prices and changes in interest rates are inversely related), adding to the coupon returns for most fixed-income investors, our Fund included.
Corporate bonds and other credit sensitive securities underperformed Treasury bonds in the past year, as credit spreads (the incremental return investors demand above US Treasury bonds for owning corporate debt) widened, particularly for non-investment grade or high-yield bonds. A broad measure of corporate bond spreads compiled by Merrill Lynch rose to 170 basis points as of March 31, up 34 basis points year over year. The repricing of credit risk in the high-yield market was more pronounced, with spreads increasing by more than 200 basis points, or a full 2 percent. While the overall marketplace remains expensive by historical standards (i.e., low absolute yield levels), last year's credit repricing presented pockets of opportunity to invest favorably relative to ultra-low US Treasury rates.
Our portfolio lagged the BIGC, our Fund's primary benchmark, in the past fiscal year, given its purposefully defensive positioning (i.e., shorter average life and duration relative to the benchmark). Overall portfolio metrics, as measured by maturity and duration, changed modestly compared to a year ago. The average maturity of our Fund decreased to 2.5 from 3.6 years, and the average duration was unchanged at 2.2 years. These measures provide a guide to the Fund's interest rate sensitivity. A shorter average maturity and duration reduces the Fund's price sensitivity to changes in interest rates (either up or down). A noticeable change to highlight is the Fund's Institutional Class 30-day SEC yield, a proxy for the Fund's coupon or cash flow generation. At March 31, the 30-day SEC yield was 2.2%, an increase of approximately 70 basis points from a year ago. Part of that increase is due to bond price declines in a small portion of the portfolio. The bulk of the increase, however, results from opportunities we have found to invest in securities with solid risk/reward characteristics.
The vast majority of Fund investments contributed positively to results in the past fiscal year. The sections below highlight the key contributors and detractors.
Top Fiscal Contributors
Non-Convertible Corporate Debt (40.2% of Fund net assets at 3/31/16) – Despite the credit spread widening highlighted above, the Fund's corporate investments performed well in the past year. Key contributors in the investment-grade segment included the bonds issued by Kinder Morgan, Boston Properties, PetroLogistics, Markel Corporation and Equity Commonwealth. Key non-investment grade contributors included the bonds issued by Rose Rock Midstream and Range Resources. Overall, the Fund's corporate bond weighting increased a few percentage points from a year ago.
Non-Convertible Corporate Debt (40.2% of Fund net assets at 3/31/16) – Despite the credit spread widening highlighted above, the Fund's corporate investments performed well in the past year. Key contributors in the investment-grade segment included the bonds issued by Kinder Morgan, Boston Properties, PetroLogistics, Markel Corporation and Equity Commonwealth. Key non-investment grade contributors included the bonds issued by Rose Rock Midstream and Range Resources. Overall, the Fund's corporate bond weighting increased a few percentage points from a year ago.
US Treasury Notes (18.9% of Fund net assets at 3/31/16) – U.S. Treasury notes received a safe haven bid during the fiscal year marked by global economic uncertainty (primarily in China and other emerging markets) and increased market volatility. Negative interest policies by other world central banks (notably the ECB and Japan) further aided the appeal of nominally small, but positive, US Treasury rates.
Government Mortgage-Backed Securities (MBS) issued by Fannie Mae, Freddie Mac and Ginnie Mae (18.7% of Fund net assets at 3/31/16) – Government MBS performed strongly in the past year, as government purchase activity remained strong through the Fed's reinvestment of principal payments back into the MBS marketplace. The result was tighter spreads and higher prices for MBS securities. The Fund's MBS investments created from pools of high-quality, 15-year mortgages were key contributors to fiscal year results. Our government mortgage investments, historically a key part of Fund assets, are selected based on specific characteristics we believe mitigate the risks of prepayment, either too quickly or too slowly. In exchange for the embedded prepayment risks inherent in MBS, we believe we've been adequately compensated by higher coupon income (and therefore overall return) than we could otherwise receive in comparable quality corporate bonds. In the past year, the Fund's government MBS weighting declined from 20.3% to 18.7% due to a lack of favorable investment opportunities.
Non-Agency Securitized Products (RMBS, CMBS, Auto ABS) (11.8% of Fund net assets at 3/31/16) – This segment of our portfolio continued to perform at or above our expectations with respect to credit performance and average life progression while providing steady income and minimal price volatility during the fiscal year. Key contributors in this segment included the commercial mortgage-backed (CMBS) bonds issued by Rialto Real Estate Fund LP, the non-agency residential mortgage-backed securities (RMBS) bonds issued by Oak Hill Advisors Residential Loan Trust, and automobile asset-backed securities (auto ABS) bonds issued by Credit Acceptance Auto Loan Trust and Santander Auto Drive Receivables Trust.
Top Fiscal Detractors
Convertible Corporate Debt and Redwood Trust Common Stock (4.8% of Fund net assets at 3/31/16) – The Fund's investment in Redwood Trust common stock (down 20.6%) and the company's 2- and 3-year convertible bonds detracted from results in the past fiscal year. Despite difficult market conditions over the past few years, a volatile interest rate environment and increased competition, Redwood has remained profitable in each of its business segments. The company recently took meaningful steps to right-size its cost and business structure in light of market conditions. The company remains competitively advantaged across its platforms and is well positioned to benefit from potential government-sponsored enterprise reform, the eventual revitalization of private-label residential securitization and future commercial investment opportunities. We continue to view the company as a "value investor" in mortgages and mortgage securities that has a culture of prudence, a renewed focus on growth in per share value and great skills in credit risk assessment. We believe that the market valuation of less than book value now overly discounts Redwood's future earnings capabilities. While we wait for the value to be realized, a dividend yield of nearly 9% should enhance future total return.
Convertible Corporate Debt and Redwood Trust Common Stock (4.8% of Fund net assets at 3/31/16) – The Fund's investment in Redwood Trust common stock (down 20.6%) and the company's 2- and 3-year convertible bonds detracted from results in the past fiscal year. Despite difficult market conditions over the past few years, a volatile interest rate environment and increased competition, Redwood has remained profitable in each of its business segments. The company recently took meaningful steps to right-size its cost and business structure in light of market conditions. The company remains competitively advantaged across its platforms and is well positioned to benefit from potential government-sponsored enterprise reform, the eventual revitalization of private-label residential securitization and future commercial investment opportunities. We continue to view the company as a "value investor" in mortgages and mortgage securities that has a culture of prudence, a renewed focus on growth in per share value and great skills in credit risk assessment. We believe that the market valuation of less than book value now overly discounts Redwood's future earnings capabilities. While we wait for the value to be realized, a dividend yield of nearly 9% should enhance future total return.
23 | Q1 2016 ANNUAL REPORT
SHORT-INTERMEDIATE INCOME FUND (CONTINUED)
Investment Activity
Despite portfolio metrics that were mostly unchanged on the year, it was a very active year for portfolio investment activity. It's typical that a quarter to a third of Fund assets matures every year, given the Fund requirement to maintain an average life within 2- to 5-years. Last year was no exception. Although base rates (US Treasury) generally trended lower during the year, we were able to deploy approximately $400 million of Fund capital when Treasury rates temporarily trended higher and when credit spreads widened sufficiently (sometimes dramatically) to compensate for the embedded risks. Examples include:
Despite portfolio metrics that were mostly unchanged on the year, it was a very active year for portfolio investment activity. It's typical that a quarter to a third of Fund assets matures every year, given the Fund requirement to maintain an average life within 2- to 5-years. Last year was no exception. Although base rates (US Treasury) generally trended lower during the year, we were able to deploy approximately $400 million of Fund capital when Treasury rates temporarily trended higher and when credit spreads widened sufficiently (sometimes dramatically) to compensate for the embedded risks. Examples include:
Corporate Bonds – Anheuser-Busch InBev Finance, 1.9% 2019 – Anheuser-Busch InBev is the leading global beer brewer and one of the world's top consumer products companies. The company is home to six of the top ten most valuable beer brands. The company generates significant free cash flow, has a history of prudent capital allocation and intends to maintain a solid investment-grade rating. This corporate bond is an example of numerous investments the Fund entered into during the past year; namely, investment-grade companies run by able capital allocators with bonds maturing in approximately two to three years. In a low return world, we believe this roughly 3-year Anheuser-Busch bond offers reasonable return opportunities (approximately 2 percent yield) with minimal credit risk.
Corporate Bonds – Energy Transfer Partners (Regency Energy Partners LP), 6.5% maturing in 2021, callable in 2016 – Energy Transfer Partners is one of the largest energy infrastructure companies in the United States. They own and operate approximately 62,500 miles of natural gas and natural gas liquids pipelines. Energy Transfer Partners operates like a toll road, receiving fees for gathering, processing, transporting and storing natural gas, while generally avoiding commodity price risk. In addition, the company has a long history of being good stewards of capital, who have treated bondholders fairly and as partners in the business. Yielding over 5 percent, our investment in the Energy Transfer Partners investment-grade bond above is an example of the opportunities we've identified in the midstream infrastructure energy space in the past year.
Structured Securities – Rialto Real Estate Fund LP (RIAL) Real Estate Liquidating Trust, 2.75% and 3.00% with average life of approximately 0.4 years – Rialto is one of a series of commercial liquidating trust investments the Fund has made since the third quarter of 2012. Rialto is an institutional investor with a proven track record of resolving commercial real estate loans through economic cycles. Our investment represents an interest in a pool of seasoned commercial loans purchased from a commercial bank at a significant discount to the estimated market value of the real estate collateral (located in a mix of geographies and tenant types). Our credit analysis includes factors such as our investment's senior claim on the loan pool's cash flows, the historical performance of the loan pool, and Rialto's equity position ("skin in the game"). We believe this represents yet another example of finding and investing in high quality cash flows with low credit risk in a marketplace where few such opportunities exist.
Outlook
In spite of setbacks in certain areas of the credit markets (namely energy given the significant decline in commodity prices in the past year), bond investors continue to have the "wind at their backs," thanks to the largesse of central banks worldwide. Ultra-low interest rates in the US government bond market and negative interest rates in much of the remainder of the non-US sovereign bond world seem rather "absurd," as Wally and Brad outline in their investor letter for this quarter. Distortions of markets that defy conventional investing logic seem unlikely to end well–much like the creation of Frankenstein's monster. Therefore, we will continue to position the Fund defensively relative to interest rate exposure, while we patiently seek out areas of opportunity like those mentioned above. We will invest one security at a time, relying on a fundamental, research-based investment approach and remain well positioned to take advantage of any market weakness.
In spite of setbacks in certain areas of the credit markets (namely energy given the significant decline in commodity prices in the past year), bond investors continue to have the "wind at their backs," thanks to the largesse of central banks worldwide. Ultra-low interest rates in the US government bond market and negative interest rates in much of the remainder of the non-US sovereign bond world seem rather "absurd," as Wally and Brad outline in their investor letter for this quarter. Distortions of markets that defy conventional investing logic seem unlikely to end well–much like the creation of Frankenstein's monster. Therefore, we will continue to position the Fund defensively relative to interest rate exposure, while we patiently seek out areas of opportunity like those mentioned above. We will invest one security at a time, relying on a fundamental, research-based investment approach and remain well positioned to take advantage of any market weakness.
24 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | |||||||||||||||||||||
Since Inception (12/23/1988) | 20-year | 10-year | 5-year | 3-year | 1-year | Quarter | ||||||||||||||||
WSHNX - Investor Class | 5.33 | % | 4.56 | % | 3.72 | % | 1.76 | % | 0.85 | % | 0.58 | % | 1.36 | % | ||||||||
WEFIX - Institutional Class | 5.37 | 4.61 | 3.83 | 1.97 | 1.09 | 0.83 | 1.34 | |||||||||||||||
Barclays U.S. Government/Credit | ||||||||||||||||||||||
Intermediate | 6.07 | * | 5.09 | 4.34 | 3.01 | 1.83 | 2.06 | 2.45 | ||||||||||||||
1-5 Year | 5.43 | * | 4.43 | 3.47 | 1.88 | 1.34 | 1.62 | 1.61 | ||||||||||||||
1-3 Year | 4.92 | * | 3.93 | 2.80 | 1.14 | 0.95 | 1.04 | 0.98 | ||||||||||||||
CPI + 1% | 3.55 | * | 3.17 | 2.79 | 2.30 | 1.77 | 1.86 | 0.93 | ||||||||||||||
* Since 12/31/1988 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Short-Intermediate Income Fund –Institutional Class for the period March 31, 2006 through March 31, 2016, as compared with the growth of the Barclays Intermediate U.S. Government/Credit and CPI + 1% Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Short-Intermediate Income Fund –Institutional Class for the period March 31, 2006 through March 31, 2016, as compared with the growth of the Barclays Intermediate U.S. Government/Credit and CPI + 1% Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Credit Quality(a) | ||||
Underlying Securities | % of Securities | |||
U.S. Treasury | 19.0 | |||
U.S. Government Agency Mortgage | ||||
Related Securities(b) | 18.5 | |||
Aaa/AAA | 6.2 | |||
Aa/AA | 6.5 | |||
A/A | 9.0 | |||
Baa/BBB | 22.5 | |||
Ba/BB | 4.7 | |||
B/B | 2.4 | |||
Caa/CCC | 0.1 | |||
Non-Rated | 5.9 | |||
Common Stocks | 2.3 | |||
Cash Equivalents | 2.9 | |||
100.0 |
Financial Attributes | |
Portfolio Summary | |
Average Maturity | 2.5 years |
Average Effective Maturity | 2.5 years |
Average Duration | 2.2 years |
Average Effective Duration | 2.0 years |
Average Coupon | 3.3% |
30-Day SEC Yield - Investor Class | 1.98% |
30-Day SEC Yield - Institutional Class | 2.22% |
Asset Allocation(c)
Maturity Distribution | ||||
Maturity Type | % of Securities | |||
Cash Equivalents | 2.9 | |||
Less than 1 Year | 22.1 | |||
1 - 3 Years | 31.4 | |||
3 - 5 Years | 32.1 | |||
5 - 7 Years | 8.4 | |||
7 - 10 Years | 0.8 | |||
Common Stocks | 2.3 | |||
100.0 |
(a) | The Fund receives credit quality ratings on underlying securities of the Fund when available from Moody s, Fitch, Kroll and others. The Fund will use one rating for an underlying security if that is all that is provided. Ratings and portfolio credit quality may change over time. The Fund itself has not been rated by an independent rating agency. |
(b) | Mortgage related securities issued and guaranteed by government-sponsored entities such as Fannie Mae and Freddie Mac are generally not rated by ratings agencies. Securities which are not rated do not necessarily indicate low quality. Fannie Mae and Freddie Mac s senior long-term debt are currently rated Aaa and AAA by Moody and Fitch, respectively. |
(c) | Percent of net assets |
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of annual operating expenses which as stated in its most recent prospectus are 0.89% (gross) and 0.61% of the Fund's Investor and Institutional Class net assets, respectively. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_performance/fund_ performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
25 | Q1 2016 ANNUAL REPORT
NEBRASKA TAX-FREE INCOME FUND
Investment Style: Municipal Income
Portfolio Manager: Tom Carney, CFA
The Nebraska Tax-Free Income Fund returned +0.6% in the first calendar quarter, compared to a +1.1% return for the Barclays 5-Year Municipal Bond Index, our Fund's primary benchmark. For the fiscal year ended March 31, 2016, the Nebraska Tax-Free Income Fund's total return was +1.2%, compared to a +2.8% return for our benchmark. Our decision to continue shortening the Fund's average life and duration metrics is the principal reason for the Fund's underperformance compared to its primary benchmark. The Fund's 2.1 year duration at March 31 is meaningfully less than the benchmark's 3.8 year duration.
Fiscal 2016 Review
2016 jumped off to the most volatile start since 2009, as a selloff in China's stock market sparked fears of a global growth slowdown or contraction. Energy prices followed worldwide stock prices down the rabbit hole, with oil prices dropping nearly 30% in the first three weeks of the year. By the time Fed Chair Yellen sat before Congress in early February, global markets were jittery enough to push the intraday 10-year Treasury yield down to 1.5% on the mere mention of the potential possibility of the US following other central banks (namely, the European Central Bank and Japan) in implementing negative interest rates. Calmer heads prevailed, however, when US payroll data continued to show solid growth and resilience in the US economy. By the end of the first calendar quarter of the year, stocks and oil rebounded meaningfully as fears of recession receded.
2016 jumped off to the most volatile start since 2009, as a selloff in China's stock market sparked fears of a global growth slowdown or contraction. Energy prices followed worldwide stock prices down the rabbit hole, with oil prices dropping nearly 30% in the first three weeks of the year. By the time Fed Chair Yellen sat before Congress in early February, global markets were jittery enough to push the intraday 10-year Treasury yield down to 1.5% on the mere mention of the potential possibility of the US following other central banks (namely, the European Central Bank and Japan) in implementing negative interest rates. Calmer heads prevailed, however, when US payroll data continued to show solid growth and resilience in the US economy. By the end of the first calendar quarter of the year, stocks and oil rebounded meaningfully as fears of recession receded.
During the past fiscal year (March 31, 2015 to March 31, 2016), US Treasury bond yields continued their relentless march lower. For example, 5- and 10-year US Treasury bond yields declined approximately 16 basis points each to 1.2% and 1.8%, respectively (a basis point equals 1/100 of a percent). Municipal bonds generated reasonable results in the past fiscal year, as they benefited from the solid performance of US Treasury bonds, which tend to have a gravitational effect on all other fixed-income assets. Declining interest rates resulted in price gains for existing bonds (bond prices and changes in interest rates are inversely related), adding to the coupon returns for most fixed-income investors, our Fund included.
Municipal bonds kept pace with their taxable government counterparts, as the yield relationship between tax-free municipal bonds and taxable alternatives was generally unchanged in the past year. High quality 5-year municipal bonds, for example, ended the current fiscal year (March 31) with a yield representing approximately 95% of US Treasuries, unchanged from a year ago. Historically, municipal bonds have yielded less than taxable alternatives given the tax advantages (federally and, typically, state exempt) of municipal bonds. With municipal bonds yielding nearly as much as a comparable Treasury security, municipals possess relative value versus Treasuries. However, the still abnormally low overall interest-rate environment leaves the municipal marketplace with little absolute value, even less than was present a year ago given the decline in interest rates.
Our Fund's results in the past year were acceptable considering our defensive positioning. Income returns were modestly boosted by (unrealized) price gains from declining interest rates. Investment activity in the past year remained focused on bonds with shorter maturities (primarily under seven years).
Turning to portfolio metrics, over the past year the average duration of our Fund declined to 2.1 from 2.3 years, and the average maturity of our bonds decreased to 3.7 from 4.7 years. Overall asset quality of our portfolio remains high, with approximately 88% rated A or better by a number of nationally recognized statistical rating organizations (NRSROs), credit rating agencies recognized by the U.S. Securities and Exchange Commission (SEC).
Please see the following page for additional details regarding the breakdown of our investment holdings by state, sector and rating. Our investments may be wide-ranging, but our analysis is the same. We strive to own only those investments we believe compensate us for the incremental credit risk we assume. Our overall goal is to invest in a portfolio of bonds of varying maturities that we believe represents attractive risk-adjusted returns, taking into consideration the general level of interest rates and the credit quality of each investment.
We expect to continue to position the Fund defensively relative to interest rate exposure while we patiently seek out areas of opportunity. We will invest one security at a time, relying on a fundamental, research-based investment approach and are well positioned to take advantage of any market weakness.
The Fund seeks income that is exempt from federal and Nebraska personal income taxes, but income from the Fund may be subject to federal alternative minimum tax and capital gains taxes.
26 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Returns | Annualized | |||||||||||||||||||||
Since Inception (10/01/1985) | 20-year | 10-year | 5-year | 3-year | 1-year | Quarter | ||||||||||||||||
WNTFX | 4.86 | % | 3.86 | % | 2.94 | % | 2.35 | % | 1.22 | % | 1.20 | % | 0.60 | % | ||||||||
Barclays 5-Year Municipal Bond | –– | 4.51 | 4.24 | 3.36 | 2.24 | 2.82 | 1.15 |
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Nebraska Tax-Free Income Fund for the period March 31, 2006 through March 31, 2016, as compared with the growth of the Barclays 5-Year Municipal Bond Index during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
This chart depicts the change in the value of a $10,000 investment in the Nebraska Tax-Free Income Fund for the period March 31, 2006 through March 31, 2016, as compared with the growth of the Barclays 5-Year Municipal Bond Index during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Financial Attributes | |
Portfolio Summary | |
Average Maturity | 3.7 years |
Average Effective Maturity | 2.3 years |
Average Duration | 2.1 years |
Average Effective Duration | 2.1 years |
Average Coupon | 4.0% |
30-Day SEC Yield | 0.62% |
Municipals exempt from federal and Nebraska income taxes | 86.1% |
Municipals subject to alternative minimum tax | 1.6% |
Maturity Distribution | ||||
Maturity Type | % of Securities | |||
Cash Equivalents | 3.8 | |||
Less than 1 Year | 17.8 | |||
1 - 3 Years | 34.2 | |||
3 - 5 Years | 18.0 | |||
5 - 7 Years | 8.0 | |||
7 - 10 Years | 12.3 | |||
10 Years or more | 5.9 | |||
100.0 |
Asset Allocation(b)
State Breakdown | ||||
% of Net Assets | ||||
Nebraska | 86.1 | |||
Florida | 4.9 | |||
Texas | 2.1 | |||
Arizona | 1.5 | |||
Iowa | 1.3 | |||
Illinois | 0.6 | |||
Cash Equivalents/Other | 3.5 | |||
100.0 |
Credit Quality(a) | ||||
Underlying Securities | % of Securities | |||
Aaa/AAA | 5.7 | |||
Aa/AA | 47.1 | |||
A/A | 34.9 | |||
Baa/BBB | 2.9 | |||
Non-Rated | 5.6 | |||
Cash Equivalents | 3.8 | |||
100.0 |
Sector Breakdown | ||||
% of Net Assets | ||||
Power | 23.1 | |||
Higher Education | 11.2 | |||
Hospital | 8.2 | |||
General | 5.3 | |||
Lease | 5.3 | |||
Airport/Transportation | 4.5 | |||
Water/Sewer | 2.3 | |||
Housing | 0.6 | |||
Total Revenue | 60.5 | |||
City/Subdivision | 5.0 | |||
County | 4.6 | |||
School District | 3.6 | |||
Natural Resource District | 3.4 | |||
Total General Obligation | 16.6 | |||
Escrow/Pre-Refunded | 19.4 | |||
Cash Equivalents/Other | 3.5 | |||
100.0 |
(a) | The Fund receives credit quality ratings on underlying securities of the Fund when available from Moody's, Fitch and others. The Fund will use one rating for an underlying security if that is all that is provided. Ratings and portfolio credit quality may change over time. The Fund itself has not been rated by an independent rating agency. |
(b) | Percent of net assets. |
Returns assume reinvestment of dividends and redemption at the end of each period, and reflect the deduction of the Fund's annual operating expenses which as stated in its most recent prospectus are 0.75% of the Fund's net assets. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and/or reimbursements. Past performance does not guarantee future results. The investment return and the principal value of an investment in this Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month-end may be obtained at www.weitzinvestments.com/funds_and_ performance/fund_performance.fs.
See page 6 for additional performance disclosures. See page 74 for a description of all indices.
Performance information does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
27 | Q1 2016 ANNUAL REPORT
GOVERNMENT MONEY MARKET FUND
Investment Style: Money Market
Portfolio Manager: Tom Carney, CFA
The Government Money Market Fund ended the first calendar quarter with a 7-day effective and current yield of 0.15%.
For money market funds and other ultra-short-term investors, the high point of the past fiscal year was the decision by the Federal Open Market Committee (FOMC) of the Federal Reserve to raise the overnight Fed Funds rate (the overnight lending rate between banks, which is controlled by the Federal Reserve) from 0.25% to 0.50% in December of 2015. This one-quarter-percentage-point move was the first increase in short-term interest rates since 2006. The FOMC cited continued improvement in labor market conditions and confidence that inflation will rise over the medium term to its 2% objective as principal reasons for raising interest rates. The FOMC expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. The FOMC additionally highlighted its expectation that economic conditions will likely evolve in a manner that will warrant only gradual increases in the Fed Funds rate, and that the Fed Funds rate will, for some time, remain below levels expected to prevail in the long run.
The Fed Funds rate affects all investments within the opportunity set of our Fund. We invest in ultra-high-quality, short-term investments (e.g., US Treasury bills and government agency discount notes) that have a weighted average maturity of less than 60 days. As a result, our yield has invariably followed the path dictated by the Federal Reserve's monetary policy, as we frequently reinvest maturing bills and notes in these short-term instruments. As of March 31, 95.5% of our portfolio was invested in US Treasury bills, the balance in high quality Wells Fargo money market funds. The average life of our portfolio at March 31 was approximately 53 days.
While our Fund's 7-day and current yields are still very low, it is encouraging to be able to report on the upward yield progress we have made since the Fed's decision to increase short-term interest rates. We will maintain our focus on high credit quality, preservation of capital and maintaining liquidity for our investors, as we, hopefully, report on a steadily increasing yield in the quarters to come.
Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Sector Breakdown | ||||
% of Net Assets | ||||
U.S. Treasury | 95.5 | |||
Government & Treasury Money Market Funds | 4.5 | |||
100.0 |
28 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
This page intentionally left blank
29 | Q1 2016 ANNUAL REPORT
VALUE FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Common Stocks – 81.6% | ||||||||||
% of Net | ||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||
Cable & Satellite | 11.3 | |||||||||
Liberty Global plc - Class C* (c) | 1,445,000 | 54,274,200 | ||||||||
Liberty Broadband Corp. - Series C* | 590,000 | 34,190,500 | ||||||||
Comcast Corp. - Class A | 275,000 | 16,797,000 | ||||||||
Broadcasting | 7.5 | |||||||||
Liberty Media Corp. - Series C* | 1,150,000 | 43,803,500 | ||||||||
Discovery Communications, Inc. - Class A* | 900,000 | 25,767,000 | ||||||||
Movies & Entertainment | 6.1 | |||||||||
Twenty-First Century Fox, Inc. - Class A | 2,019,005 | 56,289,859 | ||||||||
Internet & Catalog Retail | 3.5 | |||||||||
Liberty Interactive Corp. QVC Group - Series A* | 1,300,000 | 32,825,000 | ||||||||
Advertising | 2.1 | |||||||||
Omnicom Group, Inc. | 236,000 | 19,642,280 | ||||||||
30.5 | 283,589,339 | |||||||||
Health Care | ||||||||||
Pharmaceuticals | 5.6 | |||||||||
Allergan plc* (c) | 136,000 | 36,452,080 | ||||||||
Endo International plc* (c) | 550,000 | 15,482,500 | ||||||||
Health Care Services | 4.9 | |||||||||
Express Scripts Holding Co.* | 380,000 | 26,102,200 | ||||||||
Laboratory Corp. of America Holdings* | 165,000 | 19,326,450 | ||||||||
Health Care Distributors | 0.9 | |||||||||
McKesson Corp. | 57,000 | 8,963,250 | ||||||||
11.4 | 106,326,480 | |||||||||
Information Technology | ||||||||||
IT Services | 4.6 | |||||||||
MasterCard Inc. - Class A | 247,000 | 23,341,500 | ||||||||
Accenture plc - Class A(c) | 169,000 | 19,502,600 | ||||||||
Communications Equipment | 3.7 | |||||||||
Motorola Solutions, Inc. | 450,000 | 34,065,000 | ||||||||
Internet Software & Services | 3.1 | |||||||||
Alphabet, Inc. - Class C* | 38,563 | 28,727,507 | ||||||||
11.4 | 105,636,607 | |||||||||
Financials | ||||||||||
Diversified Financial Services | 6.3 | |||||||||
Berkshire Hathaway Inc. - Class B* | 415,000 | 58,880,200 | ||||||||
Insurance Brokers | 3.3 | |||||||||
Aon plc - Class A(c) | 294,000 | 30,708,300 | ||||||||
Diversified Banks | 1.6 | |||||||||
Wells Fargo & Co. | 300,000 | 14,508,000 | ||||||||
11.2 | 104,096,500 |
$ Principal | ||||||||||
% of Net | Amount | |||||||||
Energy | Assets | or Shares | $ Value | |||||||
Oil & Gas Exploration & Production | 6.7 | |||||||||
Range Resources Corp. | 820,000 | 26,551,600 | ||||||||
Pioneer Natural Resources Co. | 133,000 | 18,718,420 | ||||||||
EOG Resources, Inc. | 245,000 | 17,782,100 | ||||||||
Oil & Gas Equipment & Services | 1.0 | |||||||||
Halliburton Co. | 256,000 | 9,144,320 | ||||||||
7.7 | 72,196,440 | |||||||||
Industrials | ||||||||||
Air Freight & Logistics | 2.2 | |||||||||
United Parcel Service, Inc. - Class B | 197,000 | 20,777,590 | ||||||||
Aerospace & Defense | 2.0 | |||||||||
TransDigm Group, Inc.* | 82,000 | 18,067,880 | ||||||||
4.2 | 38,845,470 | |||||||||
Materials | ||||||||||
Industrial Gases | 2.2 | |||||||||
Praxair, Inc. | 180,000 | 20,601,000 | ||||||||
Fertilizers & Agricultural Chemicals | 1.7 | |||||||||
Monsanto Co. | 180,000 | 15,793,200 | ||||||||
3.9 | 36,394,200 | |||||||||
Consumer Staples | ||||||||||
Beverages | 1.3 | |||||||||
Diageo plc - Sponsored ADR(c) | 115,000 | 12,405,050 | ||||||||
Total Common Stocks (Cost $552,956,119) | 759,490,086 | |||||||||
Cash Equivalents – 18.4% | ||||||||||
U.S. Treasury Bills, 0.28% to 0.45%, | ||||||||||
5/12/16 to 9/22/16(a) | 155,000,000 | 154,856,865 | ||||||||
Wells Fargo Advantage Government Money | ||||||||||
Market Fund - Select Class 0.24%(b) | 16,562,188 | 16,562,188 | ||||||||
Total Cash Equivalents (Cost $171,393,468) | 171,419,053 | |||||||||
Total Investments in Securities (Cost $724,349,587) | 930,909,139 | |||||||||
Other Liabilities in Excess of Other Assets - 0.0% | (512,722 | ) | ||||||||
Net Assets - 100% | 930,396,417 | |||||||||
Net Asset Value Per Share - Investor Class | 38.43 | |||||||||
Net Asset Value Per Share - Institutional Class | 38.56 |
* | Non-income producing |
(a) | Interest rates presented represent the yield to maturity at the date of purchase. |
(b) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(c) | Foreign domiciled corporation. |
The accompanying notes form an integral part of these financial statements.
30 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
PARTNERS VALUE FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Common Stocks – 82.1% | ||||||||||
% of Net | ||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||
Cable & Satellite | 10.4 | |||||||||
Liberty Global plc - Class C* (c) | 1,375,000 | 51,645,000 | ||||||||
Liberty Broadband Corp.* | ||||||||||
Series A | 165,000 | 9,596,400 | ||||||||
Series C | 435,000 | 25,208,250 | ||||||||
Broadcasting | 8.8 | |||||||||
Liberty Media Corp.* | ||||||||||
Series A | 287,400 | 11,102,262 | ||||||||
Series C | 1,000,000 | 38,090,000 | ||||||||
Discovery Communications, Inc. - Class A* | 825,000 | 23,619,750 | ||||||||
Movies & Entertainment | 3.8 | |||||||||
Twenty-First Century Fox, Inc. - Class A | 1,136,925 | 31,697,469 | ||||||||
Internet & Catalog Retail | 3.7 | |||||||||
Liberty Interactive Corp. QVC Group - Series A* | 1,225,000 | 30,931,250 | ||||||||
Textiles, Apparel & Luxury Goods | 2.4 | |||||||||
Fossil Group, Inc.* | 450,000 | 19,989,000 | ||||||||
Hotels, Restaurants & Leisure | 2.1 | |||||||||
Interval Leisure Group, Inc. | 1,160,000 | 16,750,400 | ||||||||
31.2 | 258,629,781 | |||||||||
Financials | ||||||||||
Diversified Financial Services | 6.4 | |||||||||
Berkshire Hathaway Inc. - Class B* | 372,500 | 52,850,300 | ||||||||
Insurance Brokers | 6.2 | |||||||||
Aon plc - Class A(c) | 250,000 | 26,112,500 | ||||||||
Brown & Brown, Inc. | 375,000 | 13,425,000 | ||||||||
Wills Towers Watson plc(c) | 103,812 | 12,318,332 | ||||||||
Mortgage REITs | 3.0 | |||||||||
Redwood Trust, Inc. | 1,900,000 | 24,852,000 | ||||||||
Diversified Banks | 1.9 | |||||||||
Wells Fargo & Co. | 320,000 | 15,475,200 | ||||||||
17.5 | 145,033,332 | |||||||||
Information Technology | ||||||||||
Semiconductors & | ||||||||||
Semiconductor Equipment | 2.8 | |||||||||
Texas Instruments, Inc. | 400,000 | 22,968,000 | ||||||||
Internet Software & Services | 2.4 | |||||||||
Alphabet, Inc. - Class C* | 26,673 | 19,870,051 | ||||||||
Electronic Equipment, | ||||||||||
Instruments & Components | 2.4 | |||||||||
FLIR Systems, Inc. | 600,000 | 19,770,000 | ||||||||
Communications Equipment | 2.3 | |||||||||
Motorola Solutions, Inc. | 250,000 | 18,925,000 | ||||||||
Software | 1.2 | |||||||||
Oracle Corp. | 248,705 | 10,174,522 | ||||||||
IT Services | 1.0 | |||||||||
MasterCard, Inc. - Class A | 90,000 | 8,505,000 | ||||||||
12.1 | 100,212,573 | |||||||||
$ Principal | ||||||||||
% of Net | Amount | |||||||||
Health Care | Assets | or Shares | $ Value | |||||||
Health Care Services | 5.8 | |||||||||
Laboratory Corp. of America Holdings* | 225,000 | 26,354,250 | ||||||||
Express Scripts Holding Co.* | 320,000 | 21,980,800 | ||||||||
Pharmaceuticals | 3.4 | |||||||||
Allergan plc* (c) | 73,000 | 19,566,190 | ||||||||
Endo International plc* (c) | 300,000 | 8,445,000 | ||||||||
9.2 | 76,346,240 | |||||||||
Industrials | ||||||||||
Machinery | 4.1 | |||||||||
Colfax Corp.* | 700,000 | 20,013,000 | ||||||||
Allison Transmission Holdings, Inc. | 530,000 | 14,299,400 | ||||||||
Aerospace & Defense | 1.9 | |||||||||
TransDigm Group, Inc.* | 70,000 | 15,423,800 | ||||||||
6.0 | 49,736,200 | |||||||||
Energy | ||||||||||
Oil & Gas Exploration & Production | 4.6 | |||||||||
Range Resources Corp. | 634,899 | 20,558,030 | ||||||||
Pioneer Natural Resources Co. | 125,000 | 17,592,500 | ||||||||
4.6 | 38,150,530 | |||||||||
Consumer Staples | ||||||||||
Personal Products | 1.5 | |||||||||
Avon Products, Inc. | 2,500,000 | 12,025,000 | ||||||||
Total Common Stocks (Cost $532,922,528) | 680,133,656 | |||||||||
Cash Equivalents – 17.8% | ||||||||||
U.S. Treasury Bills, 0.27% to 0.45%, | ||||||||||
4/21/16 to 9/22/16(a) | 135,000,000 | 134,878,560 | ||||||||
Wells Fargo Advantage Government Money | ||||||||||
Market Fund - Select Class 0.24%(b) | 12,502,665 | 12,502,665 | ||||||||
Total Cash Equivalents (Cost $147,353,638) | 147,381,225 | |||||||||
Total Investments in Securities (Cost $680,276,166) | 827,514,881 | |||||||||
Other Assets Less Other Liabilities - 0.1% | 1,128,461 | |||||||||
Net Assets - 100% | 828,643,342 | |||||||||
Net Asset Value Per Share - Investor Class | 27.66 | |||||||||
Net Asset Value Per Share - Institutional Class | 27.75 |
* | Non-income producing |
(a) | Interest rates presented represent the yield to maturity at the date of purchase. |
(b) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(c) | Foreign domiciled corporation. |
The accompanying notes form an integral part of these financial statements.
31 | Q1 2016 ANNUAL REPORT
PARTNERS III OPPORTUNITY FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Common Stocks – 89.0% | ||||||||||
% of Net | ||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||
Cable & Satellite | 15.8 | |||||||||
Liberty Global plc - Class C* (c) (d) | 1,500,000 | 56,340,000 | ||||||||
Liberty Broadband Corp.* (c) | ||||||||||
Series A | 135,000 | 7,851,600 | ||||||||
Series C | 700,000 | 40,565,000 | ||||||||
Liberty Global plc LiLAC - Class C* (c) (d) | 200,000 | 7,576,000 | ||||||||
Broadcasting | 10.3 | |||||||||
Liberty Media Corp.* (c) | ||||||||||
Series A | 200,000 | 7,726,000 | ||||||||
Series C | 1,400,000 | 53,326,000 | ||||||||
Discovery Communications, Inc. - Class C* | 450,000 | 12,150,000 | ||||||||
Internet & Catalog Retail | 6.6 | |||||||||
Liberty Ventures - Series A* (c) | 725,000 | 28,362,000 | ||||||||
Liberty Interactive Corp. QVC Group - Series A* (c) | 750,000 | 18,937,500 | ||||||||
Movies & Entertainment | 2.1 | |||||||||
Twenty-First Century Fox, Inc. - Class A | 450,000 | 12,546,000 | ||||||||
Lions Gate Entertainment Corp.(d) | 100,000 | 2,185,000 | ||||||||
Hotels, Restaurants & Leisure | 2.0 | |||||||||
Interval Leisure Group, Inc. | 1,000,000 | 14,440,000 | ||||||||
Advertising | 1.9 | |||||||||
National CineMedia, Inc. | 900,000 | 13,689,000 | ||||||||
Textiles, Apparel & Luxury Goods | 0.9 | |||||||||
Fossil Group, Inc.* | 150,000 | 6,663,000 | ||||||||
39.6 | 282,357,100 | |||||||||
Financials | ||||||||||
Diversified Financial Services | 11.0 | |||||||||
Berkshire Hathaway Inc. - Class B* (c) | 550,000 | 78,034,000 | ||||||||
Mortgage REITs | 3.9 | |||||||||
Redwood Trust, Inc.(c) | 2,100,000 | 27,468,000 | ||||||||
Diversified Banks | 2.8 | |||||||||
Wells Fargo & Co.(c) | 420,000 | 20,311,200 | ||||||||
17.7 | 125,813,200 | |||||||||
Industrials | ||||||||||
Machinery | 4.6 | |||||||||
Colfax Corp.* (c) | 865,000 | 24,730,350 | ||||||||
Intelligent Systems Corp.* # † | 2,270,000 | 7,945,000 | ||||||||
Transportation Infrastructure | 4.2 | |||||||||
Wesco Aircraft Holdings, Inc.* | 2,100,000 | 30,219,000 | ||||||||
Aerospace & Defense | 2.5 | |||||||||
TransDigm Group, Inc.* (c) | 80,000 | 17,627,200 | ||||||||
11.3 | 80,521,550 | |||||||||
$ Principal | ||||||||||
% of Net | Amount | |||||||||
Information Technology | Assets | or Shares | $ Value | |||||||
Internet Software & Services | 4.1 | |||||||||
Alphabet, Inc. - Class C* (c) | 27,000 | 20,113,650 | ||||||||
XO Group, Inc.* | 575,000 | 9,228,750 | ||||||||
IT Services | 3.5 | |||||||||
MasterCard Inc. - Class A(c) | 260,000 | 24,570,000 | ||||||||
Semiconductors & | ||||||||||
Semiconductor Equipment | 2.4 | |||||||||
Texas Instruments, Inc.(c) | 300,000 | 17,226,000 | ||||||||
10.0 | 71,138,400 | |||||||||
Health Care | ||||||||||
Health Care Services | 4.7 | |||||||||
Laboratory Corp. of America Holdings* (c) | 170,000 | 19,912,100 | ||||||||
Express Scripts Holding Co.* (c) | 200,000 | 13,738,000 | ||||||||
Pharmaceuticals | 1.9 | |||||||||
Allergan plc* (d) | 50,000 | 13,401,500 | ||||||||
6.6 | 47,051,600 | |||||||||
Energy | ||||||||||
Oil & Gas Exploration & Production | 2.4 | |||||||||
Range Resources Corp.(c) | 300,000 | 9,714,000 | ||||||||
Pioneer Natural Resources Co.(c) | 55,000 | 7,740,700 | ||||||||
2.4 | 17,454,700 | |||||||||
Consumer Staples | ||||||||||
Personal Products | 1.4 | |||||||||
Avon Products, Inc.(c) | 2,000,000 | 9,620,000 | ||||||||
Total Common Stocks (Cost $453,529,535) | 633,956,550 | |||||||||
Cash Equivalents – 9.1% | ||||||||||
U.S. Treasury Bills, 0.28% to 0.45%, | ||||||||||
5/12/16 to 9/22/16(a) | 57,000,000 | 56,929,671 | ||||||||
Wells Fargo Advantage Government Money | ||||||||||
Market Fund - Select Class 0.24%(b) | 8,058,993 | 8,058,993 | ||||||||
Total Cash Equivalents (Cost $64,972,005) | 64,988,664 | |||||||||
Total Investments in Securities (Cost $518,501,540) | 698,945,214 | |||||||||
Due From Broker(c) - 32.2% | 229,714,936 | |||||||||
Securities Sold Short - (30.4%) | (216,290,600 | ) | ||||||||
Options Written - (0.0%) | (341,250 | ) | ||||||||
Other Assets Less Other Liabilities — 0.1% | 452,223 | |||||||||
Net Assets - 100% | 712,480,523 | |||||||||
Net Asset Value Per Share - Investor Class | 13.73 | |||||||||
Net Asset Value Per Share - Institutional Class | 13.96 |
The accompanying notes form an integral part of these financial statements.
32 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Securities Sold Short – (30.4%) | ||||||||||
Shares | $ Value | |||||||||
Ishares Russell 2000 Fund | 230,000 | (25,442,600 | ) | |||||||
PowerShares QQQ Trust, Series 1 | 430,000 | (46,956,000 | ) | |||||||
SPDR S&P 500 ETF Trust | 700,000 | (143,892,000 | ) | |||||||
Total Securities Sold Short (proceeds $216,023,195) | (216,290,600 | ) | ||||||||
Options Written* – (0.0%) | Shares | |||||||||
Expiration date / | subject | |||||||||
Strike price | to option | |||||||||
Covered Call Options | ||||||||||
Colfax Corp. | June 2016 / $30 | 100,000 | (142,500 | ) | ||||||
Pioneer Natural Resources Co. | June 2016 / $145 | 25,000 | (198,750 | ) | ||||||
Total Options Written (premiums received $464,365) | (341,250 | ) |
* | Non-income producing |
† | Controlled affiliate |
# | Illiquid and/or restricted security. |
(a) | Interest rates presented represent the yield to maturity at the date of purchase. |
(b) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(c) | Fully or partially pledged as collateral on securities sold short and options written. |
(d) | Foreign domiciled corporation. |
The accompanying notes form an integral part of these financial statements.
33 | Q1 2016 ANNUAL REPORT
RESEARCH FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Common Stocks – 74.8% | ||||||||||
% of Net | ||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||
Cable & Satellite | 9.6 | |||||||||
Liberty Global plc - Class C* (b) | 34,150 | 1,282,674 | ||||||||
Liberty Broadband Corp. - Series C* | 9,600 | 556,320 | ||||||||
Comcast Corp. - Class A | 6,500 | 397,020 | ||||||||
Textiles, Apparel & Luxury Goods | 6.9 | |||||||||
Fossil Group, Inc.* | 28,999 | 1,288,136 | ||||||||
Compagnie Financiere Richemont | ||||||||||
SA - Unsponsored ADR(b) | 47,000 | 310,200 | ||||||||
Broadcasting | 5.4 | |||||||||
Liberty Media Corp. - Series C* | 23,050 | 877,974 | ||||||||
Discovery Communications, Inc. - Class C* | 14,000 | 378,000 | ||||||||
Movies & Entertainment | 4.0 | |||||||||
Twenty-First Century Fox, Inc. - Class A | 33,680 | 938,998 | ||||||||
Internet & Catalog Retail | 3.9 | |||||||||
Liberty Interactive Corp. QVC Group - Series A* | 23,820 | 601,455 | ||||||||
Amazon.com, Inc.* | 500 | 296,820 | ||||||||
Advertising | 3.5 | |||||||||
National CineMedia, Inc. | 53,960 | 820,732 | ||||||||
Hotels, Restaurants & Leisure | 1.9 | |||||||||
Interval Leisure Group, Inc. | 30,824 | 445,099 | ||||||||
35.2 | 8,193,428 | |||||||||
Information Technology | ||||||||||
Internet Software & Services | 3.7 | |||||||||
XO Group, Inc.* | 33,198 | 532,828 | ||||||||
Alphabet, Inc. - Class C* | 420 | 312,879 | ||||||||
Technology Hardware, Storage | ||||||||||
& Peripherals | 3.0 | |||||||||
Apple Inc. | 6,439 | 701,787 | ||||||||
Software | 1.6 | |||||||||
Guidewire Software, Inc.* | 7,000 | 381,360 | ||||||||
Communications Equipment | 1.6 | |||||||||
Motorola Solutions, Inc. | 5,000 | 378,500 | ||||||||
9.9 | 2,307,354 | |||||||||
Health Care | ||||||||||
Pharmaceuticals | 6.2 | |||||||||
Allergan plc* (b) | 5,422 | 1,453,259 | ||||||||
Health Care Services | 2.7 | |||||||||
Laboratory Corp. of America Holdings* | 2,910 | 340,848 | ||||||||
Express Scripts Holding Co.* | 4,160 | 285,750 | ||||||||
8.9 | 2,079,857 | |||||||||
% of Net | ||||||||||
Energy | Assets | Shares | $ Value | |||||||
Oil & Gas Exploration & Production | 8.4 | |||||||||
Range Resources Corp. | 49,377 | 1,598,827 | ||||||||
Pioneer Natural Resources Co. | 2,575 | 362,405 | ||||||||
8.4 | 1,961,232 | |||||||||
Financials | ||||||||||
Diversified Financial Services | 3.3 | |||||||||
Berkshire Hathaway Inc. - Class B* | 5,370 | 761,896 | ||||||||
Mortgage REITs | 1.7 | |||||||||
Redwood Trust, Inc. | 31,467 | 411,588 | ||||||||
5.0 | 1,173,484 | |||||||||
Industrials | ||||||||||
Machinery | 4.0 | |||||||||
Allison Transmission Holdings, Inc. | 17,170 | 463,247 | ||||||||
Colfax Corp.* | 16,000 | 457,440 | ||||||||
4.0 | 920,687 | |||||||||
Materials | ||||||||||
Construction Materials | 1.8 | |||||||||
Summit Materials, Inc. - Class A* | 21,000 | 408,450 | ||||||||
Consumer Staples | ||||||||||
Personal Products | 1.6 | |||||||||
Avon Products, Inc. | 80,000 | 384,800 | ||||||||
Total Common Stocks (Cost $17,473,812) | 17,429,292 | |||||||||
Cash Equivalents – 22.1% | ||||||||||
Wells Fargo Advantage Government Money | ||||||||||
Market Fund - Select Class 0.24%(a) | 5,133,639 | 5,133,639 | ||||||||
Total Cash Equivalents (Cost $5,133,639) | 5,133,639 | |||||||||
Total Investments in Securities (Cost $22,607,451) | 22,562,931 | |||||||||
Other Assets Less Other Liabilities - 3.1% | 730,191 | |||||||||
Net Assets - 100% | 23,293,122 | |||||||||
Net Asset Value Per Share | 9.79 |
* | Non-income producing |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(b) | Foreign domiciled corporation. |
The accompanying notes form an integral part of these financial statements.
34 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
HICKORY FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Common Stocks – 80.3% | ||||||||||
% of Net | ||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||
Cable & Satellite | 11.3 | |||||||||
Liberty Broadband Corp.* | ||||||||||
Series A | 78,656 | 4,574,633 | ||||||||
Series C | 210,000 | 12,169,500 | ||||||||
Liberty Global plc - Class C* (c) | 360,000 | 13,521,600 | ||||||||
Liberty Global plc LiLAC - Class C* (c) | 85,000 | 3,219,800 | ||||||||
Internet & Catalog Retail | 7.4 | |||||||||
Liberty Interactive Corp. QVC Group - Series A* | 525,000 | 13,256,250 | ||||||||
Liberty Ventures - Series A* | 220,000 | 8,606,400 | ||||||||
Broadcasting | 4.2 | |||||||||
Liberty Media Corp.* | ||||||||||
Series A | 110,000 | 4,249,300 | ||||||||
Series C | 220,000 | 8,379,800 | ||||||||
Advertising | 4.2 | |||||||||
National CineMedia, Inc. | 825,000 | 12,548,250 | ||||||||
Hotels, Restaurants & Leisure | 3.6 | |||||||||
Interval Leisure Group, Inc. | 750,000 | 10,830,000 | ||||||||
Textiles, Apparel & Luxury Goods | 3.4 | |||||||||
Fossil Group, Inc.* | 230,000 | 10,216,600 | ||||||||
Specialty Retail | 3.2 | |||||||||
Murphy USA Inc.* | 155,000 | 9,524,750 | ||||||||
Movies & Entertainment | 2.4 | |||||||||
Lions Gate Entertainment Corp.(c) | 175,000 | 3,823,750 | ||||||||
Live Nation Entertainment, Inc.* | 150,000 | 3,346,500 | ||||||||
39.7 | 118,267,133 | |||||||||
Financials | ||||||||||
Insurance Brokers | 7.3 | |||||||||
Brown & Brown, Inc. | 325,000 | 11,635,000 | ||||||||
Willis Towers Watson plc(c) | 84,937 | 10,078,625 | ||||||||
Mortgage REITs | 4.0 | |||||||||
Redwood Trust, Inc. | 921,367 | 12,051,480 | ||||||||
Office REITs | 2.7 | |||||||||
Equity Commonwealth* | 285,000 | 8,042,700 | ||||||||
14.0 | 41,807,805 | |||||||||
Industrials | ||||||||||
Machinery | 6.7 | |||||||||
Allison Transmission Holdings, Inc. | 440,000 | 11,871,200 | ||||||||
Colfax Corp.* | 285,000 | 8,148,150 | ||||||||
Transportation Infrastructure | 3.2 | |||||||||
Wesco Aircraft Holdings, Inc.* | 670,000 | 9,641,300 | ||||||||
Aerospace & Defense | 2.6 | |||||||||
TransDigm Group, Inc.* | 35,000 | 7,711,900 | ||||||||
12.5 | 37,372,550 | |||||||||
$ Principal | ||||||||||
% of Net | Amount | |||||||||
Information Technology | Assets | or Shares | $ Value | |||||||
Internet Software & Services | 2.7 | |||||||||
XO Group, Inc.* | 504,100 | 8,090,805 | ||||||||
Electronic Equipment, Instruments | ||||||||||
& Components | 2.1 | |||||||||
FLIR Systems, Inc. | 190,000 | 6,260,500 | ||||||||
Software | 0.6 | |||||||||
ACI Worldwide, Inc.* | 92,696 | 1,927,150 | ||||||||
5.4 | 16,278,455 | |||||||||
Health Care | ||||||||||
Health Care Services | 3.7 | |||||||||
Laboratory Corp. of America Holdings* | 95,000 | 11,127,350 | ||||||||
Energy | ||||||||||
Oil & Gas Exploration & Production | 2.7 | |||||||||
Range Resources Corp. | 245,000 | 7,933,100 | ||||||||
Telecommunication Services | ||||||||||
Diversified Telecommunication Services | 1.8 | |||||||||
LICT Corp.* # | 1,005 | 5,301,375 | ||||||||
Consumer Staples | ||||||||||
Personal Products | 0.5 | |||||||||
Avon Products, Inc. | 300,000 | 1,443,000 | ||||||||
Total Common Stocks (Cost $173,787,203) | 239,530,768 | |||||||||
Cash Equivalents – 19.8% | ||||||||||
U.S. Treasury Bills, 0.27% to 0.45%, | ||||||||||
4/21/16 to 9/22/16(a) | 53,000,000 | 52,939,967 | ||||||||
Wells Fargo Advantage Government Money | ||||||||||
Market Fund - Select Class 0.24%(b) | 6,082,167 | 6,082,167 | ||||||||
Total Cash Equivalents (Cost $59,012,344) | 59,022,134 | |||||||||
Total Investments in Securities (Cost $232,799,547) | 298,552,902 | |||||||||
Other Liabilities in Excess of Other Assets - (0.1%) | (383,175 | ) | ||||||||
Net Assets - 100% | 298,169,727 | |||||||||
Net Asset Value Per Share | 47.59 |
* | Non-income producing |
# | Illiquid and/or restricted security. |
(a) | Interest rates presented represent the yield to maturity at the date of purchase. |
(b) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(c) | Foreign domiciled corporation. |
The accompanying notes form an integral part of these financial statements.
35 | Q1 2016 ANNUAL REPORT
BALANCED FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Common Stocks – 47.1% | ||||||||||
% of Net | ||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||
Cable & Satellite | 3.8 | |||||||||
Liberty Global plc - Class C* (e) | 60,000 | 2,253,600 | ||||||||
Comcast Corp. - Class A | 32,500 | 1,985,100 | ||||||||
Movies & Entertainment | 2.6 | |||||||||
Twenty-First Century Fox, Inc. - Class A | 105,000 | 2,927,400 | ||||||||
Internet & Catalog Retail | 2.1 | |||||||||
Liberty Interactive Corp. QVC Group - Series A* | 90,000 | 2,272,500 | ||||||||
Advertising | 1.7 | |||||||||
National CineMedia, Inc. | 125,000 | 1,901,250 | ||||||||
Broadcasting | 1.7 | |||||||||
Discovery Communications, Inc. - Class C* | 70,000 | 1,890,000 | ||||||||
11.9 | 13,229,850 | |||||||||
Information Technology | ||||||||||
IT Services | 2.9 | |||||||||
Accenture plc - Class A(e) | 15,000 | 1,731,000 | ||||||||
MasterCard Inc. - Class A | 16,000 | 1,512,000 | ||||||||
Communications Equipment | 1.7 | |||||||||
Motorola Solutions, Inc. | 25,000 | 1,892,500 | ||||||||
Semiconductors & | ||||||||||
Semiconductor Equipment | 1.7 | |||||||||
Texas Instruments, Inc. | 32,500 | 1,866,150 | ||||||||
Electronic Equipment, | ||||||||||
Instruments & Components | 1.6 | |||||||||
FLIR Systems, Inc. | 55,000 | 1,812,250 | ||||||||
Internet Software & Services | �� | 1.5 | ||||||||
Alphabet, Inc. - Class C* | 2,200 | 1,638,890 | ||||||||
9.4 | 10,452,790 | |||||||||
Financials | ||||||||||
Diversified Financial Services | 3.2 | |||||||||
Berkshire Hathaway Inc. - Class B* | 25,500 | 3,617,940 | ||||||||
Insurance Brokers | 2.9 | |||||||||
Aon plc - Class A(e) | 20,000 | 2,089,000 | ||||||||
Willis Towers Watson plc(e) | 9,437 | 1,119,794 | ||||||||
Mortgage REITs | 2.1 | |||||||||
Redwood Trust, Inc. | 175,000 | 2,289,000 | ||||||||
Office REITs | 1.1 | |||||||||
Equity Commonwealth* | 45,000 | 1,269,900 | ||||||||
9.3 | 10,385,634 | |||||||||
Health Care | ||||||||||
Health Care Services | 3.9 | |||||||||
Laboratory Corp. of America Holdings* | 25,000 | 2,928,250 | ||||||||
Express Scripts Holding Co.* | 20,000 | 1,373,800 | ||||||||
Pharmaceuticals | 1.9 | |||||||||
Allergan plc* (e) | 8,000 | 2,144,240 | ||||||||
5.8 | 6,446,290 | |||||||||
$ Principal | ||||||||||
% of Net | Amount | |||||||||
Energy | Assets | or Shares | $ Value | |||||||
Oil & Gas Exploration & Production | 3.7 | |||||||||
EOG Resources, Inc. | 27,000 | 1,959,660 | ||||||||
Range Resources Corp. | 50,000 | 1,619,000 | ||||||||
Pioneer Natural Resources Co. | 4,000 | 562,960 | ||||||||
3.7 | 4,141,620 | |||||||||
Consumer Staples | ||||||||||
Beverages | 3.2 | |||||||||
Anheuser-Busch InBev SA/NV - Sponsored ADR(e) | 15,000 | 1,869,900 | ||||||||
Diageo plc - Sponsored ADR(e) | 16,000 | 1,725,920 | ||||||||
3.2 | 3,595,820 | |||||||||
Materials | ||||||||||
Fertilizers & Agricultural Chemicals | 1.6 | |||||||||
Monsanto Co. | 20,000 | 1,754,800 | ||||||||
Industrial Gases | 1.2 | |||||||||
Praxair, Inc. | 12,000 | 1,373,400 | ||||||||
2.8 | 3,128,200 | |||||||||
Industrials | ||||||||||
Air Freight & Logistics | 1.0 | |||||||||
United Parcel Service, Inc. - Class B | 10,500 | 1,107,435 | ||||||||
Total Common Stocks (Cost $40,746,142) | 52,487,639 | |||||||||
Corporate Bonds – 10.3% | ||||||||||
American Express Credit Corp. 1.125% 6/05/17 | 500,000 | 499,632 | ||||||||
Anheuser-Busch InBev Finance Inc. 1.9% 2/01/19(e) | 500,000 | 507,348 | ||||||||
Antero Resources Corp. 6.0% 12/01/20 | 600,000 | 573,000 | ||||||||
Bank of America Corp. 1.7% 8/25/17 | 500,000 | 500,844 | ||||||||
Berkshire Hathaway Inc. (Finance Corp.) | ||||||||||
0.95% 8/15/16 | 1,000,000 | 1,001,076 | ||||||||
1.45% 3/07/18 | 100,000 | 100,886 | ||||||||
2.0% 8/15/18 | 500,000 | 509,627 | ||||||||
1.7% 3/15/19 | 100,000 | 101,431 | ||||||||
Comcast Corp. 4.95% 6/15/16 | 193,000 | 194,594 | ||||||||
Concho Resources Inc. 7.0% 1/15/21 | 400,000 | 406,000 | ||||||||
Equity Commonwealth 6.25% 6/15/17 | 500,000 | 513,114 | ||||||||
JPMorgan Chase & Co. 1.35% 2/15/17 | 500,000 | 501,164 | ||||||||
Markel Corp. | ||||||||||
7.125% 9/30/19 | 1,014,000 | 1,167,060 | ||||||||
4.9% 7/01/22 | 400,000 | 438,035 | ||||||||
Range Resources Corp. 5.0% 8/15/22 | 250,000 | 216,875 | ||||||||
U.S. Bancorp 2.2% 11/15/16 | 750,000 | 756,405 | ||||||||
Verizon Communications, Inc. 2.5% 9/15/16 | 857,000 | 863,696 | ||||||||
Wells Fargo & Co. | ||||||||||
1.15% 6/02/17 | 500,000 | 500,627 | ||||||||
1.4% 9/08/17 | 500,000 | 500,996 | ||||||||
4.6% 4/01/21 | 1,250,000 | 1,387,838 | ||||||||
Wells Fargo Bank, N.A. 0.8282% 5/16/16 Floating Rate | 250,000 | 249,908 | ||||||||
Total Corporate Bonds (Cost $11,275,768) | 11,490,156 |
The accompanying notes form an integral part of these financial statements.
36 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Corporate Convertible Bonds – 0.8% | |||||||
$ Principal | |||||||
Amount | $ Value | ||||||
Redwood Trust, Inc. 5.625% 11/15/19(d) (Cost $996,222) | 1,000,000 | 909,375 | |||||
Asset-Backed Securities – 0.4%(c) | |||||||
Cabela's Master Credit Card Trust (CABMT) | |||||||
2011-2A CL A2 — 1.0362% 2019 Floating Rate | |||||||
(0.2 years)(d) (Cost $500,000) | 500,000 | 500,227 | |||||
Commercial Mortgage-Backed Securities – 0.6%(c) | |||||||
Oaktree Real Estate Investments/Sabal (ORES) | |||||||
2014-LV3 CL A — 3.0% 2024 (0.4 years)(d) | 299,425 | 297,537 | |||||
Redwood Commercial Mortgage Corp. (RCMC) | |||||||
2012-CRE1 CL A — 5.62346% 2044 (0.4 years)(d) | 391,182 | 393,576 | |||||
Varde / First City (VFCP) | |||||||
2015-3 CL A — 2.75% 2031 (0.1 years)(d) | 10,497 | 10,493 | |||||
Total Commercial Mortgage-Backed Securities (Cost $700,756) | 701,606 | ||||||
Mortgage-Backed Securities – 2.9%(c) | |||||||
Federal Home Loan Mortgage Corporation | |||||||
Collateralized Mortgage Obligations | |||||||
3649 CL BW — 4.0% 2025 (2.9 years) | 133,900 | 141,493 | |||||
Pass-Through Securities | |||||||
J14649 — 3.5% 2026 (3.2 years) | 176,261 | 186,460 | |||||
E02948 — 3.5% 2026 (3.3 years) | 311,915 | 331,138 | |||||
J16663 — 3.5% 2026 (3.3 years) | 166,962 | 176,294 | |||||
835,385 | |||||||
Federal National Mortgage Association | |||||||
Collateralized Mortgage Obligations | |||||||
2002-91 CL QG — 5.0% 2018 (0.8 years) | 43,962 | 44,951 | |||||
2003-9 CL DB — 5.0% 2018 (0.8 years) | 48,463 | 49,716 | |||||
Pass-Through Securities | |||||||
MA0464 — 3.5% 2020 (1.6 years) | 180,784 | 191,015 | |||||
AR8198 — 2.5% 2023 (2.5 years) | 281,613 | 290,049 | |||||
995755 — 4.5% 2024 (2.6 years) | 32,023 | 34,456 | |||||
MA1502 — 2.5% 2023 (2.6 years) | 240,268 | 247,487 | |||||
AB1769 — 3.0% 2025 (3.2 years) | 167,895 | 176,131 | |||||
AB3902 — 3.0% 2026 (3.6 years) | 292,953 | 306,868 | |||||
AK3264 — 3.0% 2027 (3.6 years) | 228,137 | 238,963 | |||||
1,579,636 | |||||||
Government National Mortgage Association | |||||||
Pass-Through Securities | |||||||
G2 5255 — 3.0% 2026 (3.5 years) | 300,853 | 316,064 | |||||
Non-Government Agency | |||||||
Collateralized Mortgage Obligations | |||||||
J.P. Morgan Mortgage Trust (JPMMT) | |||||||
2014-5 CL A1 — 3.0% 2029 (4.6 years)(d) | 399,417 | 412,344 | |||||
Sequoia Mortgage Trust (SEMT) | |||||||
2012-1 CL 1A1 — 2.865% 2042 (5.0 years) | 96,653 | 96,475 | |||||
508,819 | |||||||
Total Mortgage-Backed Securities (Cost $3,122,047) | 3,239,904 | ||||||
U.S. Treasury Notes – 20.8% | |||||||
$ Principal | |||||||
Amount | |||||||
or Shares | $ Value | ||||||
U.S. Treasury Notes | |||||||
1.0% 9/30/16 | 2,000,000 | 2,005,820 | |||||
0.875% 11/30/16 | 2,000,000 | 2,005,000 | |||||
0.875% 2/28/17 | 2,000,000 | 2,004,726 | |||||
0.625% 5/31/17 | 2,000,000 | 1,999,180 | |||||
0.625% 8/31/17 | 2,000,000 | 1,997,890 | |||||
0.625% 11/30/17 | 3,000,000 | 2,995,665 | |||||
0.75% 2/28/18 | 2,000,000 | 2,000,546 | |||||
1.0% 5/31/18 | 2,000,000 | 2,009,804 | |||||
1.5% 8/31/18 | 2,000,000 | 2,034,218 | |||||
1.25% 11/30/18 | 2,000,000 | 2,022,618 | |||||
2.0% 11/30/20 | 2,000,000 | 2,072,148 | |||||
Total U.S. Treasury Notes (Cost $22,963,858) | 23,147,615 | ||||||
Cash Equivalents – 17.0% | |||||||
U.S. Treasury Bills, 0.27% to 0.47%, | |||||||
4/21/16 to 9/22/16(a) | 17,000,000 | 16,990,622 | |||||
Wells Fargo Advantage Government Money | |||||||
Market Fund - Select Class 0.24%(b) | 1,918,732 | 1,918,732 | |||||
Total Cash Equivalents (Cost $18,904,522) | 18,909,354 | ||||||
Total Investments in Securities (Cost $99,209,315) | 111,385,876 | ||||||
Other Assets Less Other Liabilities — 0.1% | 101,734 | ||||||
Net Assets - 100% | 111,487,610 | ||||||
Net Asset Value Per Share | 13.24 |
* | Non-income producing |
(a) | Interest rates presented represent the yield to maturity at the date of purchase. |
(b) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(c) | Number of years indicated represents estimated average life. |
(d) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. |
(e) | Foreign domiciled corporation. |
The accompanying notes form an integral part of these financial statements.
37 | Q1 2016 ANNUAL REPORT
CORE PLUS INCOME FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Corporate Bonds – 43. 2% | |||||||
�� | $ Principal | ||||||
Amount | $ Value | ||||||
American Express Credit Corp. 2.25% 8/15/19 | 150,000 | 151,941 | |||||
Antero Resources Corp. 6.0% 12/01/20 | 465,000 | 444,075 | |||||
Berkshire Hathaway Inc. | |||||||
2.1% 8/14/19 | 250,000 | 254,929 | |||||
3.0% 5/15/22 (Finance Corp.) | 200,000 | 208,602 | |||||
Boardwalk Pipelines LLC 5.75% 9/15/19 | 170,000 | 169,944 | |||||
Boston Properties LP | |||||||
5.875% 10/15/19 | 345,000 | 386,170 | |||||
3.125% 9/01/23 | 115,000 | 115,822 | |||||
Concho Resources Inc. 7.0% 1/15/21 | 357,000 | 362,355 | |||||
CONSOL Energy, Inc. 5.875% 4/15/22 | 270,000 | 195,918 | |||||
DCP Midstream LLC | |||||||
9.75% 3/15/19(c) | 375,000 | 360,461 | |||||
5.35% 3/15/20(c) | 200,000 | 172,548 | |||||
DCP Midstream Operating LP 2.5% 12/01/17 | 150,000 | 143,103 | |||||
Equity Commonwealth 5.875% 9/15/20 | 719,000 | 782,875 | |||||
Energy Transfer Partners LP (Regency Energy Partners) | |||||||
6.5% 7/15/21 | 500,000 | 495,000 | |||||
Express Scripts Holding Co. | |||||||
7.25% 6/15/19 | 250,000 | 289,878 | |||||
2.25% 6/15/19 | 250,000 | 252,012 | |||||
Flint Hills Resources LLC (PetroLogistics) 6.25% 4/01/20 | 250,000 | 258,750 | |||||
Kinder Morgan, Inc. (Hiland Partners) 7.25% 10/01/20(c) | 600,000 | 623,250 | |||||
Markel Corp. | |||||||
7.125% 9/30/19 | 125,000 | 143,868 | |||||
4.9% 7/01/22 | 250,000 | 273,772 | |||||
3.625% 3/30/23 | 150,000 | 151,468 | |||||
MPLX LP 4.875% 6/01/25(c) | 190,000 | 173,559 | |||||
Range Resources Corp. 5.0% 8/15/22 | 501,000 | 434,618 | |||||
Rose Rock Midstream LP 5.625% 7/15/22 | 800,000 | 536,000 | |||||
SemGroup Holdings LP 7.5% 6/15/21 | 196,000 | 158,270 | |||||
Vornado Realty LP 2.5% 6/30/19 | 530,000 | 534,792 | |||||
Wells Fargo & Co. 4.6% 4/01/21 | 400,000 | 444,108 | |||||
Williams Partners LP (Access Midstream Partners) | |||||||
6.125% 7/15/22 | 100,000 | 92,975 | |||||
Total Corporate Bonds (Cost $8,692,603) | 8,611,063 | ||||||
Corporate Convertible Bonds – 2.9% | |||||||
Redwood Trust, Inc. | |||||||
4.625% 4/15/18 | 475,000 | 447,094 | |||||
5.625% 11/15/19 | 150,000 | 136,406 | |||||
Total Corporate Convertible Bonds (Cost $624,789) | 583,500 | ||||||
Asset-Backed Securities – 10.8%(b) | |||||||
$ Principal | |||||||
Amount | $ Value | ||||||
California Republic Auto Receivables Trust (CRART) | |||||||
2012-1 CL C — 3.0% 2020 (0.5 years)(c) | 150,000 | 151,166 | |||||
Credit Acceptance Auto Loan Trust (CAALT) | |||||||
2013-2A CL A — 1.5% 2021 (0.2 years)(c) | 197,394 | 197,291 | |||||
2013-2A CL B — 2.26% 2021 (0.7 years)(c) | 180,000 | 179,708 | |||||
2014-1A CL B — 2.29% 2022 (1.2 years)(c) | 290,000 | 288,390 | |||||
DT Auto Owner Trust (DTAOT) | |||||||
2016-1A CL A — 2.0% 2019 (0.9 years)(c) | 171,261 | 171,669 | |||||
2016-1A CL C — 3.54% 2021 (3.1 years)(c) | 215,000 | 216,120 | |||||
Flagship Credit Auto Trust (FCAT) | |||||||
2013-2 CL A — 1.94% 2019 (0.3 years)(c) | 20,134 | 20,134 | |||||
Ford Credit Auto Owner Trust (FORDO) | |||||||
2013-A CL D — 1.86% 2019 (1.0 years) | 175,000 | 175,039 | |||||
Prestige Auto Receivables Trust (PART) | |||||||
2014-1A CL A3 — 1.52% 2020 (0.7 years)(c) | 230,000 | 229,984 | |||||
2016-1A CL A2 — 1.78% 2019 (0.9 years)(c) | 200,000 | 200,294 | |||||
Santander Drive Auto Receivables Trust (SDART) | |||||||
2014-1 CL D — 2.91% 2020 (1.7 years) | 238,000 | 238,194 | |||||
2014-5 CL D ��� 3.21% 2021 (2.2 years) | 80,000 | 80,527 | |||||
Total Asset-Backed Securities (Cost $2,147,376) | 2,148,516 | ||||||
Commercial Mortgage-Backed Securities – 3.9%(b) | |||||||
Oaktree Real Estate Investments/Sabal (ORES) | |||||||
2014-LV3 CL A — 3.0% 2024 (0.4 years)(c) | 199,617 | 198,358 | |||||
Redwood Commercial Mortgage Corp. (RCMC) | |||||||
2012-CRE1 CL A — 5.62346% 2044 (0.4 years)(c) | 255,773 | 257,338 | |||||
Rialto Real Estate Fund II, LP (RIAL) | |||||||
2015-LT7 CL A — 3.0% 2032 (0.3 years)(c) | 191,289 | 191,289 | |||||
2014-LT6 CL A — 2.75% 2024 (0.4 years)(c) | 103,543 | 103,302 | |||||
Varde / First City (VFCP) | |||||||
2015-3 CL A — 2.75% 2031 (0.1 years)(c) | 3,149 | 3,148 | |||||
2014-2 CL A — 2.75% 2030 (0.1 years)(c) | 13,862 | 13,843 | |||||
Total Commercial Mortgage-Backed Securities (Cost $766,827) | 767,278 | ||||||
Mortgage-Backed Securities – 3.4%(b) | |||||||
Federal National Mortgage Association | |||||||
Pass-Through Securities | |||||||
932836 — 3.0% 2025 (3.1 years) | 148,874 | 155,639 | |||||
Non-Government Agency | |||||||
Collateralized Mortgage Obligations | |||||||
Oak Hills Advisors Residential Loan Trust (OHART) | |||||||
2015-NPL1 CL A2 — 4.0% 2055 (1.8 years)(c) | 150,000 | 147,813 | |||||
2014-NPL2 CL A2 — 4.0% 2054 (2.3 years)(c) | 150,000 | 148,872 | |||||
2015-NPL2 CL A2 — 4.0% 2055 (2.7 years)(c) | 150,000 | 147,667 | |||||
Sunset Mortgage Loan Co. (SMLC) | |||||||
2014-NPL2 CL A — 3.721% 2044 (0.7 years)(c) | 68,127 | 67,753 | |||||
512,105 | |||||||
Total Mortgage-Backed Securities (Cost $660,206) | 667,744 |
The accompanying notes form an integral part of these financial statements.
38 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
Taxable Municipal Bonds – 2.2% | $ Principal | ||||||
Amount | |||||||
or Shares | $ Value | ||||||
Alderwood Water and Wastewater District, Washington, Water | |||||||
& Sewer Revenue, Series B, 5.15% 12/01/25 (Cost $437,184) | 400,000 | 438,056 | |||||
U.S. Treasury Notes – 27.5% | |||||||
U.S. Treasury Notes | |||||||
1.625% 6/30/19 | 325,000 | 332,300 | |||||
2.125% 8/31/20 | 410,000 | 426,897 | |||||
2.125% 1/31/21 | 210,000 | 219,015 | |||||
2.0% 5/31/21 | 210,000 | 217,645 | |||||
2.25% 7/31/21 | 875,000 | 917,810 | |||||
2.0% 2/15/22 | 1,160,000 | 1,199,875 | |||||
2.0% 2/15/23 | 850,000 | 875,965 | |||||
2.75% 11/15/23 | 210,000 | 227,497 | |||||
2.5% 5/15/24 | 1,000,000 | 1,063,652 | |||||
Total U.S. Treasury Notes (Cost $5,282,376) | 5,480,656 | ||||||
Common Stocks – 2.6% | |||||||
Equity Commonwealth* | 8,000 | 225,760 | |||||
Monmouth Real Estate Investment Corp. | 4,893 | 58,178 | |||||
Redwood Trust, Inc. | 17,850 | 233,478 | |||||
Total Common Stocks (Cost $502,749) | 517,416 | ||||||
Cash Equivalents – 2.6% | |||||||
Wells Fargo Advantage Government Money | |||||||
Market Fund - Select Class 0.24%(a) | 526,168 | 526,168 | |||||
Total Cash Equivalents (Cost $526,168) | 526,168 | ||||||
Total Investments in Securities (Cost $19,640,278) | 19,740,397 | ||||||
Other Assets Less Other Liabilities - 0.9% | 176,808 | ||||||
Net Assets - 100% | 19,917,205 | ||||||
Net Asset Value Per Share - Investor Class | 10.15 | ||||||
Net Asset Value Per Share - Institutional Class | 10.15 |
* | Non-income producing |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(b) | Number of years indicated represents estimated average life. |
(c) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. |
The accompanying notes form an integral part of these financial statements.
39 | Q1 2016 ANNUAL REPORT
SHORT-INTERMEDIATE INCOME FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Corporate Bonds – 40.2% | |||||||
$ Principal | |||||||
Amount | $ Value | ||||||
ACI Worldwide, Inc. 6.375% 8/15/20(c) | 250,000 | 257,500 | |||||
American Express Bank FSB 6.0% 9/13/17 | 8,475,000 | 9,000,882 | |||||
American Express Co. 8.125% 5/20/19 | 1,000,000 | 1,184,450 | |||||
American Express Credit Corp. | |||||||
1.125% 6/05/17 | 1,500,000 | 1,498,895 | |||||
2.25% 8/15/19 | 11,042,000 | 11,184,906 | |||||
American Realty Capital Properties Operating Partnership LP | |||||||
3.0% 2/06/19 | 1,870,000 | 1,846,401 | |||||
Anheuser-Busch InBev Finance Inc. 1.9% 2/01/19(d) | 13,000,000 | 13,191,061 | |||||
Antero Resources Corp. 6.0% 12/01/20 | 2,425,000 | 2,315,875 | |||||
Bank of America Corp. | |||||||
1.7% 8/25/17 | 5,112,000 | 5,120,634 | |||||
5.75% 12/01/17 | 3,945,000 | 4,193,709 | |||||
Berkshire Hathaway Inc. | |||||||
2.1% 8/14/19 | 2,750,000 | 2,804,222 | |||||
Finance Corp. | |||||||
0.95% 8/15/16 | 4,000,000 | 4,004,304 | |||||
1.6% 5/15/17 | 10,000,000 | 10,085,400 | |||||
1.45% 3/07/18 | 900,000 | 907,970 | |||||
5.4% 5/15/18 | 5,000,000 | 5,452,805 | |||||
2.0% 8/15/18 | 2,500,000 | 2,548,138 | |||||
1.7% 3/15/19 | 900,000 | 912,882 | |||||
2.9% 10/15/20 | 3,000,000 | 3,159,771 | |||||
4.25% 1/15/21 | 1,000,000 | 1,112,684 | |||||
Boardwalk Pipelines LLC 5.75% 9/15/19 | 11,008,000 | 11,004,356 | |||||
Boston Properties LP 5.875% 10/15/19 | 21,095,000 | 23,612,351 | |||||
Cinemark USA, Inc. 7.375% 6/15/21 | 4,632,000 | 4,846,230 | |||||
Comcast Corp. | |||||||
4.95% 6/15/16 | 8,590,000 | 8,660,953 | |||||
5.15% 3/01/20 | 3,000,000 | 3,377,439 | |||||
Concho Resources Inc. 7.0% 1/15/21 | 6,000,000 | 6,090,000 | |||||
D.R. Horton, Inc. 6.5% 4/15/16 | 5,000,000 | 5,003,125 | |||||
DCP Midstream Operating LP 2.5% 12/01/17 | 13,250,000 | 12,640,778 | |||||
Diageo Capital plc 4.85% 5/15/18(d) | 3,941,000 | 4,221,453 | |||||
eBay, Inc. 2.2% 8/01/19 | 3,000,000 | 3,018,141 | |||||
Energy Transfer Partners LP (Regency Energy Partners) | |||||||
6.5% 7/15/21 | 19,374,000 | 19,180,260 | |||||
Equity Commonwealth | |||||||
6.25% 6/15/17 (HRPT Properties Trust) | 3,500,000 | 3,591,798 | |||||
6.65% 1/15/18 (HRPT Properties Trust) | 2,990,000 | 3,143,366 | |||||
5.875% 9/15/20 | 8,000,000 | 8,710,712 | |||||
Expedia, Inc. 7.456% 8/15/18 | 10,000,000 | 11,193,920 | |||||
Express Scripts Holding Co. | |||||||
7.25% 6/15/19 | 5,217,000 | 6,049,174 | |||||
2.25% 6/15/19 | 8,955,000 | 9,027,070 | |||||
Flint Hills Resources LLC (PetroLogistics) 6.25% 4/01/20 | 15,060,000 | 15,587,100 | |||||
Flir Systems, Inc. 3.75% 9/01/16 | 12,848,000 | 12,965,405 | |||||
Ford Motor Credit Co. LLC | |||||||
4.207% 4/15/16 | 10,000,000 | 10,008,970 | |||||
2.145% 1/09/18 | 2,000,000 | 1,998,490 | |||||
2.943% 1/08/19 | 2,000,000 | 2,032,196 | |||||
Goldman Sachs Group, Inc. | |||||||
6.25% 9/01/17 | 2,085,000 | 2,219,943 | |||||
5.95% 1/18/18 | 4,000,000 | 4,291,396 | |||||
JPMorgan Chase & Co. | |||||||
1.0082% 11/21/16 (Bear Stearns) Floating Rate | 15,000,000 | 14,995,440 | |||||
1.35% 2/15/17 | 14,463,000 | 14,496,684 | |||||
6.3% 4/23/19 | 2,500,000 | 2,828,565 | |||||
$ Principal | |||||||
Amount | $ Value | ||||||
JPMorgan Chase Bank, N.A. 6.0% 7/05/17 | 5,000,000 | 5,275,530 | |||||
Kinder Morgan, Inc. (Hiland Partners) 7.25% 10/01/20(c) | 17,499,000 | 18,177,086 | |||||
Laboratory Corp. of America Holdings 3.125% 5/15/16 | 1,250,000 | 1,253,036 | |||||
Markel Corp. | |||||||
7.125% 9/30/19 | 11,859,000 | 13,649,081 | |||||
5.35% 6/01/21 | 10,000,000 | 11,183,660 | |||||
4.9% 7/01/22 | 3,850,000 | 4,216,085 | |||||
McKesson Corp. 1.4% 3/15/18 | 8,815,000 | 8,785,294 | |||||
MetLife Global Funding I | |||||||
1.3% 4/10/17(c) | 1,000,000 | 1,001,687 | |||||
1.875% 6/22/18(c) | 1,000,000 | 1,006,971 | |||||
Omnicom Group, Inc. | |||||||
5.9% 4/15/16 | 7,000,000 | 7,009,471 | |||||
6.25% 7/15/19 | 6,181,000 | 7,005,440 | |||||
Outerwall, Inc. 6.0% 3/15/19 | 200,000 | 171,000 | |||||
Penske Truck Leasing 3.75% 5/11/17(c) | 5,000,000 | 5,078,555 | |||||
Range Resources Corp. 5.0% 8/15/22 | 16,776,000 | 14,553,180 | |||||
Republic Services, Inc. (Allied Waste) 3.8% 5/15/18 | 5,000,000 | 5,216,275 | |||||
Rose Rock Midstream, LP (Finance Corp.) | |||||||
5.625% 7/15/22 | 5,624,000 | 3,768,080 | |||||
Safeway, Inc. 3.4% 12/01/16 | 1,752,000 | 1,756,380 | |||||
SemGroup Holdings LP 7.5% 6/15/21 | 1,000,000 | 807,500 | |||||
Superior Energy Services, Inc. (SESI, LLC) 6.375% 5/01/19 | 5,000,000 | 4,075,000 | |||||
U.S. Bancorp 2.2% 11/15/16 | 4,250,000 | 4,286,295 | |||||
Verizon Communications, Inc. | |||||||
2.5% 9/15/16 | 7,705,000 | 7,765,199 | |||||
1.35% 6/09/17 | 1,000,000 | 1,003,161 | |||||
3.65% 9/14/18 | 2,000,000 | 2,105,364 | |||||
Vornado Realty LP 2.5% 6/30/19 | 13,390,000 | 13,511,072 | |||||
Washington Post Co. 7.25% 2/01/19 | 8,500,000 | 9,180,000 | |||||
Wells Fargo & Co. | |||||||
1.15% 6/02/17 | 1,500,000 | 1,501,881 | |||||
0.90385% 6/15/17 (Wachovia Bank) Floating Rate | 5,000,000 | 4,981,745 | |||||
1.4% 9/08/17 | 7,144,000 | 7,158,231 | |||||
4.6% 4/01/21 | 5,745,000 | 6,378,501 | |||||
Williams Partners LP (Access Midstream Partners) | |||||||
6.125% 7/15/22 | 13,313,000 | 12,377,735 | |||||
Willis North America, Inc. 6.2% 3/28/17 | 14,477,000 | 15,096,717 | |||||
WM Wrigley Jr. Co. 1.4% 10/21/16(c) | 500,000 | 501,114 | |||||
Total Corporate Bonds (Cost $499,938,894) | 505,414,130 | ||||||
Corporate Convertible Bonds – 3.5% | |||||||
Redwood Trust, Inc. | |||||||
4.625% 4/15/18 | 32,350,000 | 30,449,437 | |||||
5.625% 11/15/19 | 14,850,000 | 13,504,219 | |||||
Total Corporate Convertible Bonds (Cost $47,139,569) | 43,953,656 | ||||||
Asset-Backed Securities – 4.7%(b) | |||||||
AmeriCredit Automobile Receivables Trust (AMCAR) | |||||||
2013-5 CL D — 2.86% 2019 (1.8 years) | 4,055,000 | 4,086,476 | |||||
Cabela's Master Credit Card Trust (CABMT) | |||||||
2011-2A CL A2 — 1.0362% 2019 Floating Rate | |||||||
(0.2 years)(c) | 4,500,000 | 4,502,047 | |||||
2012-2A CL A2 — 0.9162% 2020 Floating Rate | |||||||
(1.2 years)(c) | 6,000,000 | 5,992,238 |
The accompanying notes form an integral part of these financial statements.
40 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
$ Principal | |||||||
Amount | $ Value | ||||||
CPS Auto Receivables Trust (CPS) | |||||||
2013-A CL A — 1.31% 2020 (1.0 years)(c) | 1,217,749 | 1,204,479 | |||||
Credit Acceptance Auto Loan Trust (CAALT) | |||||||
2013-2A CL A — 1.5% 2021 (0.2 years)(c) | 5,383,465 | 5,380,665 | |||||
2014-1A CL A — 1.55% 2021 (0.5 years)(c) | 2,075,000 | 2,070,524 | |||||
2013-2A CL B — 2.26% 2021 (0.7 years)(c) | 9,100,000 | 9,085,248 | |||||
DT Auto Owner Trust (DTAOT) | |||||||
2016-1A CL A — 2.0% 2019 (0.9 years)(c) | 5,822,865 | 5,836,750 | |||||
First Investors Auto Owner Trust (FIAOT) | |||||||
2016-1A CL A1 — 1.92% 2020 (0.9 years)(c) | 5,521,308 | 5,530,455 | |||||
Flagship Credit Auto Trust (FCAT) | |||||||
2013-2 CL A — 1.94% 2019 (0.3 years)(c) | 825,508 | 825,483 | |||||
2014-2 CL A — 1.43% 2019 (0.7 years)(c) | 2,663,713 | 2,653,334 | |||||
Prestige Auto Receivables Trust (PART) | |||||||
2014-1A CL A2 — 0.97% 2018 (0.1 years)(c) | 449,594 | 449,346 | |||||
2016-1A CL A2 — 1.78% 2019 (0.9 years)(c) | 7,500,000 | 7,511,020 | |||||
Santander Drive Auto Receivables Trust (SDART) | |||||||
2012-4 CL C — 2.94% 2017 (0.2 years) | 2,118,363 | 2,123,591 | |||||
2014-1 CL D — 2.91% 2020 (1.7 years) | 2,345,000 | 2,346,912 | |||||
Total Asset-Backed Securities (Cost $59,611,083) | 59,598,568 | ||||||
Commercial Mortgage-Backed Securities – 2.8%(b) | |||||||
NLY Commercial Mortgage Trust (NLY) | |||||||
2014-FL1 CL B — 2.1862% 2030 Floating Rate | |||||||
(0.4 years)(c) | 6,425,668 | 6,406,053 | |||||
Oaktree Real Estate Investments/Sabal (ORES) | |||||||
2013-LV2 CL A — 3.081% 2025 (0.1 years)(c) | 251,296 | 250,040 | |||||
2014-LV3 CL A — 3.0% 2024 (0.4 years)(c) | 7,605,399 | 7,557,451 | |||||
Redwood Commercial Mortgage Corp. (RCMC) | |||||||
2012-CRE1 CL A — 5.62346% 2044 (0.4 years)(c) | 4,316,847 | 4,343,259 | |||||
Rialto Real Estate Fund II, LP (RIAL) | |||||||
2015-LT7 CL A — 3.0% 2032 (0.3 years)(c) | 7,779,086 | 7,779,086 | |||||
2014-LT6 CL A — 2.75% 2024 (0.4 years)(c) | 4,545,343 | 4,534,759 | |||||
TPG Opportunities Partners LP (TOPRE) | |||||||
2013-LTR1 CL B — 4.25% 2028 (0.1 years)(c) | 328,102 | 328,025 | |||||
Varde / First City (VFCP) | |||||||
2015-3 CL A — 2.75% 2031 (0.1 years)(c) | 427,233 | 427,051 | |||||
2014-2 CL A — 2.75% 2030 (0.1 years)(c) | 402,008 | 401,456 | |||||
2014-2 CL B — 5.5% 2030 (0.7 years)(c) | 3,000,000 | 2,990,006 | |||||
Total Commercial Mortgage-Backed Securities (Cost $35,073,935) | 35,017,186 | ||||||
Mortgage-Backed Securities – 23.8%(b) | |||||||
Federal Home Loan Mortgage Corporation | |||||||
Collateralized Mortgage Obligations | |||||||
3815 CL AD — 4.0% 2025 (1.1 years) | 497,599 | 512,090 | |||||
3844 CL AG — 4.0% 2025 (1.3 years) | 1,655,636 | 1,706,688 | |||||
2952 CL PA — 5.0% 2035 (2.7 years) | 944,975 | 1,021,845 | |||||
4281 CL AG — 2.5% 2028 (2.8 years) | 2,636,602 | 2,696,969 | |||||
3649 CL BW — 4.0% 2025 (2.9 years) | 3,441,227 | 3,636,372 | |||||
3620 CL PA — 4.5% 2039 (3.2 years) | 2,274,186 | 2,456,384 | |||||
3842 CL PH — 4.0% 2041 (3.7 years) | 2,188,012 | 2,363,301 | |||||
3003 CL LD — 5.0% 2034 (3.8 years) | 2,185,753 | 2,444,390 | |||||
4107 CL LA — 2.5% 2031 (8.0 years) | 6,957,706 | 6,906,172 | |||||
4107 CL LW — 1.75% 2027 (9.7 years) | 3,920,587 | 3,726,699 | |||||
27,470,910 | |||||||
$ Principal | |||||||
Amount | $ Value | ||||||
Pass-Through Securities | |||||||
EO1386 — 5.0% 2018 (0.9 years) | 19,758 | 20,412 | |||||
G18190 — 5.5% 2022 (2.2 years) | 44,504 | 48,753 | |||||
G13300 — 4.5% 2023 (2.4 years) | 249,180 | 267,630 | |||||
G18296 — 4.5% 2024 (2.5 years) | 612,476 | 657,340 | |||||
G18306 — 4.5% 2024 (2.6 years) | 1,302,057 | 1,391,342 | |||||
G13517 — 4.0% 2024 (2.7 years) | 886,866 | 936,951 | |||||
G18308 — 4.0% 2024 (2.7 years) | 1,328,718 | 1,405,774 | |||||
J13949 — 3.5% 2025 (3.1 years) | 6,554,887 | 7,008,526 | |||||
E02804 — 3.0% 2025 (3.2 years) | 4,141,282 | 4,346,974 | |||||
J14649 — 3.5% 2026 (3.2 years) | 4,859,767 | 5,140,969 | |||||
E02948 — 3.5% 2026 (3.3 years) | 12,164,728 | 12,914,410 | |||||
J16663 — 3.5% 2026 (3.3 years) | 10,025,679 | 10,586,067 | |||||
E03033 — 3.0% 2027 (3.4 years) | 6,217,825 | 6,525,911 | |||||
E03048 — 3.0% 2027 (3.5 years) | 11,247,789 | 11,806,333 | |||||
G01818 — 5.0% 2035 (3.8 years) | 2,717,886 | 3,012,260 | |||||
66,069,652 | |||||||
Structured Agency Credit Risk Debt Notes | |||||||
2013-DN1 CL M1 — 3.833% 2023 Floating Rate | |||||||
(1.6 years) | 2,997,210 | 3,066,863 | |||||
Interest Only Securities | |||||||
3974 CL AI — 3.0% 2021 (1.3 years) | 5,904,772 | 221,111 | |||||
96,828,536 | |||||||
Federal National Mortgage Association | |||||||
Collateralized Mortgage Obligations | |||||||
2009-44 CL A — 4.5% 2023 (0.3 years) | 51,909 | 52,194 | |||||
2003-86 CL KT — 4.5% 2018 (0.6 years) | 51,193 | 52,089 | |||||
2003-9 CL DB — 5.0% 2018 (0.8 years) | 96,925 | 99,432 | |||||
2011-19 CL KA — 4.0% 2025 (1.0 years) | 1,455,400 | 1,488,161 | |||||
2010-145 CL PA — 4.0% 2024 (2.1 years) | 1,235,785 | 1,293,428 | |||||
2010-54 CL WA — 3.75% 2025 (2.5 years) | 1,706,308 | 1,792,115 | |||||
4,777,419 | |||||||
Pass-Through Securities | |||||||
256982 — 6.0% 2017 (0.7 years) | 48,079 | 49,210 | |||||
251787 — 6.5% 2018 (1.0 years) | 2,964 | 3,391 | |||||
357414 — 4.0% 2018 (1.0 years) | 224,134 | 233,469 | |||||
254907 — 5.0% 2018 (1.0 years) | 82,293 | 85,260 | |||||
MA0464 — 3.5% 2020 (1.6 years) | 2,850,820 | 3,012,152 | |||||
357985 — 4.5% 2020 (1.7 years) | 110,762 | 116,118 | |||||
888595 — 5.0% 2022 (1.9 years) | 237,326 | 253,910 | |||||
888439 — 5.5% 2022 (2.0 years) | 216,228 | 233,839 | |||||
AD0629 — 5.0% 2024 (2.1 years) | 826,513 | 888,303 | |||||
995960 — 5.0% 2023 (2.2 years) | 702,494 | 755,648 | |||||
AL0471 — 5.5% 2025 (2.2 years) | 3,742,565 | 4,053,769 | |||||
995693 — 4.5% 2024 (2.4 years) | 1,301,517 | 1,381,936 | |||||
AE0031 — 5.0% 2025 (2.4 years) | 1,237,726 | 1,331,123 | |||||
AR8198 — 2.5% 2023 (2.5 years) | 8,249,894 | 8,497,040 | |||||
995692 — 4.5% 2024 (2.5 years) | 1,069,304 | 1,134,053 | |||||
995755 — 4.5% 2024 (2.6 years) | 1,569,138 | 1,688,343 | |||||
930667 — 4.5% 2024 (2.6 years) | 1,037,721 | 1,121,842 | |||||
MA1502 — 2.5% 2023 (2.6 years) | 6,967,778 | 7,177,115 | |||||
890112 — 4.0% 2024 (2.7 years) | 871,248 | 927,448 | |||||
MA0043 — 4.0% 2024 (2.7 years) | 716,573 | 763,016 | |||||
AA4315 — 4.0% 2024 (2.7 years) | 1,770,435 | 1,884,576 | |||||
AA5510 — 4.0% 2024 (2.7 years) | 382,216 | 406,278 | |||||
931739 — 4.0% 2024 (2.8 years) | 432,031 | 460,228 | |||||
AD7073 — 4.0% 2025 (3.0 years) | 1,451,593 | 1,548,619 | |||||
310139 — 3.5% 2025 (3.1 years) | 8,492,589 | 8,981,956 | |||||
AH3429 — 3.5% 2026 (3.1 years) | 21,639,671 | 23,004,820 | |||||
AB1769 — 3.0% 2025 (3.2 years) | 3,861,588 | 4,051,024 | |||||
AB2251 — 3.0% 2026 (3.2 years) | 4,454,129 | 4,676,494 |
The accompanying notes form an integral part of these financial statements.
41 | Q1 2016 ANNUAL REPORT
SHORT-INTERMEDIATE INCOME FUND (CONTINUED)
$ Principal | |||||||
Amount | $ Value | ||||||
AB3902 — 3.0% 2026 (3.6 years) | 2,992,588 | 3,134,733 | |||||
AK3264 — 3.0% 2027 (3.6 years) | 7,437,277 | 7,790,192 | |||||
AB4482 — 3.0% 2027 (3.6 years) | 6,936,322 | 7,265,078 | |||||
555531 — 5.5% 2033 (3.7 years) | 4,988,740 | 5,648,601 | |||||
725232 — 5.0% 2034 (3.8 years) | 439,047 | 488,251 | |||||
995112 — 5.5% 2036 (3.9 years) | 2,183,051 | 2,473,443 | |||||
AL1366 — 2.5% 2027 (4.0 years) | 5,155,161 | 5,318,828 | |||||
MA0587 — 4.0% 2030 (4.2 years) | 7,356,969 | 7,928,842 | |||||
118,768,948 | |||||||
123,546,367 | |||||||
Government National Mortgage Association | |||||||
Interest Only Securities | |||||||
2009-31 CL PI — 4.5% 2037 (0.6 years) | 1,192,834 | 18,665 | |||||
2012-61 CL BI — 4.5% 2038 (1.4 years) | 583,558 | 34,031 | |||||
2010-66 CL IO — 0.01538% 2052 Floating Rate | |||||||
(5.0 years) | 18,746,230 | 225,617 | |||||
278,313 | |||||||
Pass-Through Securities | |||||||
G2 5255 — 3.0% 2026 (3.5 years) | 13,624,331 | 14,313,170 | |||||
14,591,483 | |||||||
Non-Government Agency | |||||||
Collateralized Mortgage Obligations | |||||||
Bayview Opportunity Master Fund IIa Trust (BOMFT) | |||||||
2014-18NPL CL A — 3.2282% 2034 (1.2 years)(c) | 4,897,458 | 4,902,665 | |||||
Citigroup Mortgage Loan Trust, Inc. (CMLTI) | |||||||
2014-A CL A — 4.0% 2035 (2.3 years)(c) | 3,119,217 | 3,213,878 | |||||
J.P. Morgan Mortgage Trust (JPMMT) | |||||||
2014-2 CL 2A2 — 3.5% 2029 (3.4 years)(c) | 6,173,533 | 6,391,801 | |||||
2014-5 CL A1 — 3.0% 2029 (4.6 years)(c) | 11,583,106 | 11,957,971 | |||||
Oak Hill Advisors Residential Loan Trust (OHART) | |||||||
2015-NPL1 CL A1 — 3.4749% 2055 (0.7 years)(c) | 6,557,919 | 6,535,402 | |||||
2014-NPL2 CL A1 — 3.3517% 2054 (1.0 years)(c) | 4,238,941 | 4,213,795 | |||||
2015-NPL2 CL A1 — 3.7214% 2055 (1.2 years)(c) | 5,284,014 | 5,263,124 | |||||
Selene Non-Performing Loans LLC (SNPL) | |||||||
2014-1A CL A — 2.9814% 2054 (0.8 years)(c) | 881,212 | 875,440 | |||||
Sequoia Mortgage Trust (SEMT) | |||||||
2012-2 CL A2 — 3.5% 2042 (0.3 years) | 803,343 | 807,174 | |||||
2012-4 CL A1 — 3.5% 2042 (2.6 years) | 5,243,617 | 5,381,290 | |||||
2013-4 CL A3 — 1.55% 2043 (4.5 years) | 10,702,545 | 10,419,764 | |||||
2012-1 CL 1A1 — 2.865% 2042 (5.0 years) | 2,996,239 | 2,990,736 | |||||
Stanwich Mortgage Loan Co. (STWH) | |||||||
2013-NPL2 CL A — 3.2282% 2059 (0.1 years)(c) | 411,668 | 408,951 | |||||
Sunset Mortgage Loan Co. (SMLC) | |||||||
2014-NPL2 CL A — 3.721% 2044 (0.7 years)(c) | 925,625 | 920,534 | |||||
Washington Mutual, Inc. (WAMU) | |||||||
2003-S7 CL A1 — 4.5% 2018 (0.1 years) | 36,166 | 36,493 | |||||
64,319,018 | |||||||
Total Mortgage-Backed Securities (Cost $293,576,693) | 299,285,404 | ||||||
Taxable Municipal Bonds – 0.5% | |||||||
Iowa State University Revenue 5.8% 7/01/22 | 1,335,000 | 1,477,418 | |||||
Kansas Development Finance Authority Revenue, | |||||||
Series 2015H | |||||||
2.258% 4/15/19 | 1,000,000 | 1,013,900 | |||||
2.608% 4/15/20 | 500,000 | 511,630 | |||||
2.927% 4/15/21 | 750,000 | 769,185 | |||||
$ Principal | |||||||
Amount | |||||||
or Shares | $ Value | ||||||
Omaha, Nebraska Public Facilities Corp., | |||||||
Lease Revenue, Series B, Refunding | |||||||
4.588% 6/01/17 | 815,000 | 847,135 | |||||
4.788% 6/01/18 | 1,000,000 | 1,071,790 | |||||
Total Taxable Municipal Bonds (Cost $5,400,000) | 5,691,058 | ||||||
U.S. Treasury Notes – 18.9% | |||||||
U.S. Treasury Notes | |||||||
0.5% 9/30/16 | 40,000,000 | 40,020,320 | |||||
0.875% 11/30/16 | 20,000,000 | 20,050,000 | |||||
0.875% 1/31/17 | 25,000,000 | 25,060,050 | |||||
0.75% 6/30/17 | 20,000,000 | 20,021,480 | |||||
1.0% 12/15/17 | 25,000,000 | 25,115,725 | |||||
0.875% 1/31/18 | 20,000,000 | 20,054,300 | |||||
1.375% 6/30/18 | 25,000,000 | 25,335,950 | |||||
1.25% 1/31/19 | 15,000,000 | 15,169,335 | |||||
1.625% 6/30/19 | 10,000,000 | 10,224,610 | |||||
2.125% 8/31/20 | 15,000,000 | 15,618,165 | |||||
2.0% 11/30/20 | 20,000,000 | 20,721,480 | |||||
Total U.S. Treasury Notes (Cost $234,508,673) | 237,391,415 | ||||||
Common Stocks – 2.3% | |||||||
Equity Commonwealth* | 250,000 | 7,055,000 | |||||
National CineMedia, Inc. | 344,872 | 5,245,503 | |||||
Redwood Trust, Inc. | 1,255,000 | 16,415,400 | |||||
Total Common Stocks (Cost $26,659,764) | 28,715,903 | ||||||
Cash Equivalents – 2.9% | |||||||
Wells Fargo Advantage Government Money | |||||||
Market Fund - Select Class 0.24%(a) | 36,295,672 | 36,295,672 | |||||
Total Cash Equivalents (Cost $36,295,672) | 36,295,672 | ||||||
Total Investments in Securities (Cost $1,238,204,283) | 1,251,362,992 | ||||||
Other Assets Less Other Liabilities — 0.4% | 4,638,568 | ||||||
Net Assets - 100% | 1,256,001,560 | ||||||
Net Asset Value Per Share - Investor Class | 12.28 | ||||||
Net Asset Value Per Share - Institutional Class | 12.30 |
* | Non-income producing |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(b) | Number of years indicated represents estimated average life. |
(c) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. |
(d) | Foreign domiciled corporation. |
The accompanying notes form an integral part of these financial statements.
42 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
This page intentionally left blank
43 | Q1 2016 ANNUAL REPORT
NEBRASKA TAX-FREE INCOME FUND
Schedule of Investments
March 31, 2016
March 31, 2016
Municipal Bonds – 96.5% | ||||||||||
% of Net | $ Principal | |||||||||
Assets | Amount | $ Value | ||||||||
Arizona | 1.5 | |||||||||
Maricopa County, General Obligation, Peoria Unified | ||||||||||
School District No. 11, Series 2006, 5.0%, 7/01/24, | ||||||||||
Pre-Refunded 7/01/16 @ 100 | 950,000 | 960,802 | ||||||||
Florida | 4.9 | |||||||||
Greater Orlando, Aviation Authority, Revenue, | ||||||||||
Series 2009A, AMT, 6.0%, 10/01/16 | 1,000,000 | 1,027,170 | ||||||||
Miami, Dade County, Aviation Revenue, | ||||||||||
Series 2010A, 4.25%, 10/01/18 | 1,000,000 | 1,080,300 | ||||||||
Orlando Utilities Commission, Utility System Revenue, | ||||||||||
Refunding, Series 2006, 5.0%, 10/01/17 | 1,000,000 | 1,023,640 | ||||||||
3,131,110 | ||||||||||
Illinois | 0.6 | |||||||||
Cook, Kane, Lake and McHenry Counties and State of Illinois, | ||||||||||
General Obligation, Community College District No. 512, | ||||||||||
Series 2009A, 5.0%, 12/01/23 | 100,000 | 110,210 | ||||||||
Illinois Finance Authority, Revenue, Northwestern Memorial | ||||||||||
Hospital, Series 2009A, 5.0%, 8/15/17 | 245,000 | 258,980 | ||||||||
369,190 | ||||||||||
Iowa | 1.3 | |||||||||
Cedar Rapids Community School District, Infrastructure Sales, | ||||||||||
Services and Use Tax Revenue, Series 2011, 4.0%, 7/01/20, | ||||||||||
Pre-Refunded 7/01/17 @ 100 | 600,000 | 624,672 | ||||||||
Iowa Finance Authority, Hospital Revenue, Bond Anticipation | ||||||||||
Notes, Shenandoah Medical Center Project, Series 2015, | ||||||||||
1.75%, 6/01/18 | 250,000 | 250,290 | ||||||||
874,962 | ||||||||||
Nebraska | 86.1 | |||||||||
Adams County, Hospital Authority #1, Revenue, Mary | ||||||||||
Lanning Memorial Hospital Project, Radian Insured, | ||||||||||
Escrowed to Maturity | ||||||||||
4.25%, 12/15/16 | 250,000 | 256,467 | ||||||||
4.4%, 12/15/17 | 250,000 | 265,420 | ||||||||
Buffalo County, General Obligation, Kearney Public Schools | ||||||||||
District 0007, Series 2016 | ||||||||||
2.0%, 12/15/18 | 305,000 | 313,262 | ||||||||
3.0%, 12/15/24 | 250,000 | 271,350 | ||||||||
Cornhusker Public Power District, Electric System Revenue, | ||||||||||
Refunding, Series 2014, 2.25%, 7/01/22 | 260,000 | 267,631 | ||||||||
Douglas County, Educational Facility Revenue, Refunding, | ||||||||||
Creighton University Project, Series 2010A | ||||||||||
5.0%, 7/01/16 | 430,000 | 434,145 | ||||||||
5.6%, 7/01/25 | 400,000 | 459,968 | ||||||||
Douglas County, General Obligation, Refunding, | ||||||||||
Series 2011B, 3.0%, 12/15/19 | 1,155,000 | 1,169,091 | ||||||||
Douglas County, General Obligation, Westside Community | ||||||||||
School District 0066, Series 2015, 2.5%, 12/01/22 | 250,000 | 263,630 | ||||||||
Douglas County, Hospital Authority #1, Revenue, Refunding, | ||||||||||
Alegent Health - Immanuel, AMBAC Insured, | ||||||||||
5.125%, 9/01/17 | 110,000 | 110,167 | ||||||||
Douglas County, Hospital Authority #2, Revenue, | ||||||||||
Boys Town Project, Series 2008, 4.75%, 9/01/28 | 500,000 | 537,060 | ||||||||
Refunding, Children's Hospital Obligated Group, Series 2008B | ||||||||||
5.25%, 8/15/20 | 1,000,000 | 1,055,300 | ||||||||
5.5%, 8/15/21 | 815,000 | 864,707 | ||||||||
5.5%, 8/15/21, Pre-Refunded 8/15/17 @ 100(c) | 615,000 | 655,264 | ||||||||
Douglas County, Hospital Authority #3, Revenue, Refunding, | ||||||||||
Nebraska Methodist Health System | ||||||||||
Series 2008, 5.5%, 11/01/18, Escrowed to Maturity(b) | 275,000 | 296,860 | ||||||||
Series 2015 | ||||||||||
4.0%, 11/01/19 | 110,000 | 119,276 | ||||||||
5.0%, 11/01/20 | 100,000 | 114,173 | ||||||||
5.0%, 11/01/21 | 100,000 | 115,675 | ||||||||
5.0%, 11/01/22 | 250,000 | 293,905 | ||||||||
Fremont, Combined Utility Revenue, Series 2014B, | ||||||||||
3.0%, 7/15/21 | 370,000 | 400,103 | ||||||||
Hastings, Combined Utility Revenue, Refunding, Series 2012 | ||||||||||
2.0%, 10/15/16 | 320,000 | 322,394 | ||||||||
2.0%, 10/15/17 | 430,000 | 437,779 |
$ Principal | |||||||
Amount | $ Value | ||||||
Imperial, General Obligation, Bond Anticipation Notes, | |||||||
Series 2016, 0.9%, 12/15/17 | 250,000 | 249,707 | |||||
Lancaster County, Hospital Authority #1, Revenue, | |||||||
Refunding, Bryan LGH Medical Center Project | |||||||
Series 2006 | |||||||
4.0%, 6/01/19 | 300,000 | 301,284 | |||||
4.25%, 6/01/22 | 235,000 | 235,862 | |||||
Series 2008A | |||||||
5.0%, 6/01/16 | 500,000 | 503,185 | |||||
5.0%, 6/01/17 | 500,000 | 519,690 | |||||
Lincoln-Lancaster County, Public Building Commission, | |||||||
Lease Revenue, | |||||||
Refunding, Series 2015, 3.0%, 12/01/19 | 750,000 | 804,097 | |||||
Series 2016, 3.0%, 12/01/25 | 500,000 | 550,905 | |||||
Lincoln, Airport Authority, Revenue, | |||||||
Tax-Exempt 2014 Series C | |||||||
2.0%, 7/01/17 | 185,000 | 188,010 | |||||
2.0%, 7/01/18 | 185,000 | 189,730 | |||||
2.0%, 7/01/19 | 190,000 | 196,059 | |||||
2.0%, 7/01/21 | 195,000 | 199,967 | |||||
Lincoln, Certificates of Participation, Series 2010A, | |||||||
2.4%, 3/15/17 | 395,000 | 395,585 | |||||
Lincoln, Educational Facilities, Revenue, Refunding, | |||||||
Nebraska Wesleyan University Project, Series 2012 | |||||||
2.25%, 4/01/19 | 645,000 | 665,285 | |||||
2.5%, 4/01/21 | 925,000 | 965,200 | |||||
Lincoln, Electric System Revenue, Refunding | |||||||
Series 2007B, 5.0%, 9/01/18 | 1,000,000 | 1,019,730 | |||||
Series 2012, 5.0%, 9/01/21 | 1,000,000 | 1,194,050 | |||||
Lincoln, General Obligation, Highway Allocation Fund, | |||||||
4.0%, 5/15/23 | 1,000,000 | 1,021,970 | |||||
Lincoln, Parking Revenue, Refunding, Series 2011, | |||||||
3.25%, 8/15/18 | 440,000 | 464,002 | |||||
Lincoln, Sanitary Sewer Revenue, Refunding, Series 2012, | |||||||
1.5%, 6/15/17 | 440,000 | 444,184 | |||||
Lincoln, General Obligation, West Haymarket Joint Public | |||||||
Agency, Series 2011, 5.0%, 12/15/26 | 300,000 | 360,876 | |||||
Municipal Energy Agency of Nebraska, Power Supply | |||||||
System Revenue, Refunding | |||||||
2009 Series A, BHAC Insured, 5.0%, 4/01/20 | 500,000 | 555,120 | |||||
2012 Series A, 5.0%, 4/01/18 | 100,000 | 108,057 | |||||
2013 Series A, 4.0%, 4/01/17 | 250,000 | 258,285 | |||||
Nebraska, Certificates of Participation, | |||||||
Series 2015C | |||||||
1.15%, 9/15/18 | 460,000 | 462,208 | |||||
1.45%, 9/15/19 | 360,000 | 362,873 | |||||
1.7%, 9/15/20 | 200,000 | 202,024 | |||||
Series 2016A, 2.0%, 2/15/19 | 750,000 | 772,043 | |||||
Nebraska Cooperative Republican Platte Enhancement Project, | |||||||
River Flow Enhancement Revenue, Refunding, Series 2015, | |||||||
3.0%, 12/15/17 | 440,000 | 454,758 | |||||
Nebraska Investment Financial Authority, Revenue, Drinking | |||||||
Water State Revolving Fund, Series 2010A, 4.0%, 7/01/25, | |||||||
Pre-Refunded 7/01/17 @ 100 | 750,000 | 780,937 | |||||
Nebraska Investment Financial Authority, Homeownership | |||||||
Revenue, 2011 Series A, 2.4%, 9/01/17 | 340,000 | 346,807 | |||||
Nebraska Public Power District, Revenue | |||||||
2007 Series B, 5.0% | |||||||
1/01/20 | 300,000 | 316,218 | |||||
1/01/20, Pre-Refunded 7/01/17 @ 100 | 95,000 | 100,123 | |||||
1/01/21 | 1,340,000 | 1,411,918 | |||||
1/01/21, Pre-Refunded 7/01/17 @ 100 | 410,000 | 432,111 | |||||
2008 Series B, 5.0%, | |||||||
1/01/19, Pre-Refunded 1/01/18 @ 100 | 250,000 | 268,252 | |||||
2010 Series C, 4.25%, 1/01/17 | 500,000 | 513,940 | |||||
2012 Series A | |||||||
4.0%, 1/01/21 | 500,000 | 561,980 | |||||
5.0%, 1/01/21 | 500,000 | 585,190 | |||||
2012 Series B, 3.0%, 1/01/24 | 1,000,000 | 1,075,930 | |||||
2012 Series C, 5.0% | |||||||
1/01/19, Pre-Refunded 1/01/18 @ 100 | 500,000 | 536,505 | |||||
1/01/25, Pre-Refunded 1/01/18 @ 100 | 750,000 | 804,758 | |||||
2015 Series A-2, 5.0%, 1/01/24 | 250,000 | 298,635 |
The accompanying notes form an integral part of these financial statements.
44 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
$ Principal | |||||||
Amount | $ Value | ||||||
Nebraska State Colleges, Student Fees and Facilities Revenue, | |||||||
Refunding, Wayne State College Project, Series 2016B, | |||||||
1.0%, 7/01/18 | 145,000 | 144,742 | |||||
Wayne State College Project, Series 2016, | |||||||
2.0%, 7/01/17 | 115,000 | 116,582 | |||||
3.0%, 7/01/18 | 200,000 | 208,556 | |||||
3.0%, 7/01/19 | 120,000 | 126,666 | |||||
Nebraska State Colleges Facility Corp., Deferred | |||||||
Maintenance Revenue, MBIA Insured | |||||||
5.0%, 7/15/16 | 200,000 | 202,488 | |||||
4.0%, 7/15/17 | 200,000 | 201,786 | |||||
North Platte, Sewer System Revenue, Refunding, Series 2015, | |||||||
3.0%, 6/15/24 | 250,000 | 260,583 | |||||
Omaha Convention Hotel Corp., Revenue, Refunding, Convention | |||||||
Center Hotel, First Tier, Series 2007, AMBAC | |||||||
Insured, 5.0%, 2/01/20 | 600,000 | 619,698 | |||||
Omaha-Douglas County, General Obligation, Public Building | |||||||
Commission, Series 2014, 5.0%, 5/01/26 | 725,000 | 872,784 | |||||
Omaha, General Obligation, Refunding, Series 2008 | |||||||
5.0%, 6/01/20 | 350,000 | 381,882 | |||||
5.25%, 10/15/19, Pre-Refunded 10/15/18 @ 100 | 250,000 | 277,673 | |||||
Omaha, Public Facilities Corp., Lease Revenue | |||||||
Omaha Baseball Stadium Project | |||||||
Series 2009 | |||||||
4.125%, 6/01/25 | 250,000 | 266,418 | |||||
5.0%, 6/01/23 | 770,000 | 863,008 | |||||
Series 2010, 4.125%, 6/01/29 | 650,000 | 693,966 | |||||
Rosenblatt Stadium Project, Series C | |||||||
3.9%, 10/15/17, Pre-Refunded 10/15/16 @ 100 | 235,000 | 239,308 | |||||
3.95%, 10/15/18, Pre-Refunded 10/15/16 @ 100 | 240,000 | 244,464 | |||||
Omaha Public Power District | |||||||
Electric System Revenue | |||||||
2007 Series A, 4.1%, 2/01/19, | |||||||
Pre-Refunded 2/01/17 @ 100 | 1,000,000 | 1,029,260 | |||||
2012 Series A, 5.0%, 2/01/24 | 2,000,000 | 2,410,920 | |||||
2015 Series B, 5.0%, 2/01/18 | 1,500,000 | 1,616,265 | |||||
Separate Electric System Revenue | |||||||
2015 Series A, 5.0%, 2/01/19 | 500,000 | 556,520 | |||||
Omaha, Sanitary Sewerage System Revenue, Series 2014 | |||||||
5.0%, 11/15/17 | 500,000 | 534,240 | |||||
5.0%, 11/15/22 | 200,000 | 244,534 | |||||
Papillion-La Vista, General Obligation, | |||||||
Refunding, Sarpy County School District #27, | |||||||
Series 2009A, 3.15%, 12/01/17, | |||||||
Pre-Refunded 6/01/16 @100 | 930,000 | 934,278 | |||||
Series 2016A, 2.0%, 12/01/16 | 750,000 | 757,568 | |||||
Sarpy County School District #27, Series 2009, | |||||||
5.0%, 12/01/28 | 500,000 | 548,140 | |||||
Papio-Missouri River Natural Resources District, General | |||||||
Obligation, Flood Protection and Water Quality Enhancement | |||||||
Series 2013 | |||||||
3.0%, 12/15/16 | 400,000 | 406,632 | |||||
3.0%, 12/15/17 | 385,000 | 398,775 | |||||
3.0%, 12/15/18 | 500,000 | 519,045 | |||||
Series 2013B, 5.0%, 12/15/19 | 400,000 | 435,956 | |||||
Series 2015 | |||||||
2.0%, 12/15/20 | 100,000 | 102,287 | |||||
2.25%, 12/15/21 | 100,000 | 102,028 | |||||
4.0%, 12/15/24 | 100,000 | 108,887 | |||||
4.0%, 12/15/25 | 100,000 | 108,374 | |||||
Public Power Generation Agency, Revenue, Whelan Energy | |||||||
Center Unit 2 | |||||||
2007 Series A, Pre-Refunded 1/01/17 @ 100 | |||||||
AGC-ICC AMBAC Insured, 5.0%, 1/01/19 | 1,260,000 | 1,301,706 | |||||
AMBAC Insured, 5.0%, 1/01/18 | 750,000 | 774,825 | |||||
AMBAC Insured, 5.0%, 1/01/26 | 800,000 | 826,480 | |||||
2015 Series A, 5.0%, 1/01/18 | 250,000 | 267,755 | |||||
$ Principal | ||||||||||
% of Net | Amount | |||||||||
Assets | or Shares | $ Value | ||||||||
Sarpy County, Recovery Zone Facility Certificates of | ||||||||||
Participation, Series 2010 | ||||||||||
2.35%, 12/15/18 | 155,000 | 160,481 | ||||||||
2.6%, 12/15/19 | 135,000 | 142,102 | ||||||||
University of Nebraska, Facilities Corp. | ||||||||||
Deferred Maintenance Revenue, | ||||||||||
Series 2006, 5.0%, 7/15/18 | 830,000 | 841,346 | ||||||||
Lease Rental Revenue, NCTA Education Center/Student | ||||||||||
Housing Project, Series 2011, 3.75% 6/15/19 | 285,000 | 309,131 | ||||||||
University of Nebraska, University Revenue, | ||||||||||
Lincoln Student Fees and Facilities, Series 2015A | ||||||||||
2.0%, 7/01/18 | 400,000 | 410,408 | ||||||||
2.0%, 7/01/19 | 600,000 | 619,134 | ||||||||
Omaha Health & Recreation Project | ||||||||||
4.05%, 5/15/19 | 390,000 | 415,022 | ||||||||
5.0%, 5/15/33 | 700,000 | 752,164 | ||||||||
Omaha Student Facilities Project, Series 2007 | ||||||||||
5.0%, 5/15/27, Pre-Refunded 5/15/17 @ 100 | 800,000 | 838,896 | ||||||||
Refunding, Lincoln Parking Project, Series 2013 | ||||||||||
2.0%, 6/01/16 | 310,000 | 310,843 | ||||||||
55,206,283 | ||||||||||
Texas | 2.1 | |||||||||
Harris County, Tax and Subordinate Lien Revenue, | ||||||||||
Refunding, Series 2009C, 5.0%, 8/15/23 | 110,000 | 124,759 | ||||||||
San Antonio, General Obligation, Refunding, Series 2010, | ||||||||||
5.0%, 2/01/19 | 1,195,000 | 1,199,756 | ||||||||
1,324,515 | ||||||||||
Total Municipal Bonds (Cost $60,171,947) | 61,866,862 | |||||||||
Cash Equivalents – 3.8% | ||||||||||
Wells Fargo Advantage Tax-Free Money Market | ||||||||||
Fund - Institutional Class 0.15%(a) | 2,463,383 | 2,463,383 | ||||||||
Total Cash Equivalents (Cost $2,463,383) | 2,463,383 | |||||||||
Total Investments in Securities (Cost $62,635,330) | 64,330,245 | |||||||||
Other Liabilities in Excess of Other Assets - (0.3%) | (196,506 | ) | ||||||||
Net Assets - 100% | 64,133,739 | |||||||||
Net Asset Value Per Share | 10.12 |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
(b) | Annual sinking fund. |
(c) | Security designated to cover an unsettled bond purchase. |
The accompanying notes form an integral part of these financial statements.
45 | Q1 2016 ANNUAL REPORT
GOVERNMENT MONEY MARKET FUND
Schedule of Investments
March 31, 2016
March 31, 2016
U.S. Treasury – 95.5%† | $ Principal | ||||||
Amount | |||||||
or Shares | $ Value | ||||||
U.S. Treasury Bills | |||||||
0.23% 4/14/16 | 10,000,000 | 9,999,200 | |||||
0.21% 4/21/16 | 20,000,000 | 19,997,761 | |||||
0.31% 4/28/16 | 20,000,000 | 19,995,485 | |||||
0.30% 5/19/16 | 15,000,000 | 14,994,120 | |||||
0.32% 6/09/16 | 13,000,000 | 12,992,238 | |||||
0.32% 6/23/16 | 14,000,000 | 13,989,962 | |||||
0.45% 9/22/16 | 10,000,000 | 9,978,588 | |||||
Total U.S. Treasury | 101,947,354 | ||||||
Money Market Funds – 4.5% | |||||||
Wells Fargo Advantage Money Market Funds | |||||||
Government - Select Class 0.24%(a) | 4,722,005 | 4,722,005 | |||||
100% Treasury - Service Class 0.00%(a) | 52,556 | 52,556 | |||||
Total Money Market Funds | 4,774,561 | ||||||
Total Investments in Securities (Cost $106,721,915) | 106,721,915 | ||||||
Other Liabilities in Excess of Other Assets - 0.0% | (33,233 | ) | |||||
Net Assets - 100% | 106,688,682 | ||||||
Net Asset Value Per Share | 1.00 |
† | Interest rates presented represent the yield to maturity at the date of purchase. |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2016. |
The accompanying notes form an integral part of these financial statements.
46 | Q1 2016 ANNUAL REPORT
WEITZINVESTMENTS.COM
This page intentionally left blank
47 | Q1 2016 ANNUAL REPORT
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2016
Short- | Nebraska | Government | |||||||||||||||||||||||||||||
(In U.S. dollars, | Partners | Partners III | Core Plus | Intermediate | Tax-Free | Money | |||||||||||||||||||||||||
except share data) | Value | Value | Opportunity | Research | Hickory | Balanced | Income | Income | Income | Market | |||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Investments in securities at value: | |||||||||||||||||||||||||||||||
Unaffiliated issuers(a) | 930,909,139 | 827,514,881 | 691,000,214 | 22,562,931 | 298,552,902 | 111,385,876 | 19,740,397 | 1,251,362,992 | 64,330,245 | 106,721,915 | |||||||||||||||||||||
Controlled affiliates(a) | — | — | 7,945,000 | — | — | — | — | — | — | — | |||||||||||||||||||||
930,909,139 | 827,514,881 | 698,945,214 | 22,562,931 | 298,552,902 | 111,385,876 | 19,740,397 | 1,251,362,992 | 64,330,245 | 106,721,915 | ||||||||||||||||||||||
Accrued interest and dividends receivable | 779,454 | 330,049 | 79,768 | 10,452 | 55,475 | 218,640 | 170,452 | 8,176,231 | 646,182 | 829 | |||||||||||||||||||||
Due from broker | — | — | 229,714,936 | — | — | — | — | — | — | — | |||||||||||||||||||||
Receivable for securities sold | — | 2,363,305 | 2,116,182 | 737,289 | — | — | 73,466 | — | — | — | |||||||||||||||||||||
Receivable for fund shares sold | 24,522 | 62,190 | 261,379 | — | 10,843 | — | 44,955 | 1,111,020 | — | — | |||||||||||||||||||||
Total assets | 931,713,115 | 830,270,425 | 931,117,479 | 23,310,672 | 298,619,220 | 111,604,516 | 20,029,270 | 1,260,650,243 | 64,976,427 | 106,722,744 | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Dividends payable on securities sold short | — | — | 887,121 | — | — | — | — | — | — | — | |||||||||||||||||||||
Due to adviser | 952,331 | 825,995 | 771,369 | 17,550 | 355,384 | 111,857 | 11,658 | 772,053 | 49,539 | 11,825 | |||||||||||||||||||||
Options written, at value(b) | — | — | 341,250 | — | — | — | — | — | — | — | |||||||||||||||||||||
Payable for securities purchased | — | — | — | — | — | — | — | 2,226,443 | 581,149 | — | |||||||||||||||||||||
Payable for fund shares redeemed | 364,367 | 801,088 | 342,458 | — | 94,109 | 5,049 | 100,407 | 1,650,187 | 212,000 | 20,625 | |||||||||||||||||||||
Securities sold short(c) | — | — | — | 216,290,600 | — | — | — | — | — | — | |||||||||||||||||||||
Other | — | — | — | 4,158 | — | — | — | — | — | 1,612 | |||||||||||||||||||||
Total liabilities | 1,316,698 | 1,627,083 | 218,636,956 | 17,550 | 449,493 | 116,906 | 112,065 | 4,648,683 | 842,688 | 34,062 | |||||||||||||||||||||
Net assets | 930,396,417 | 828,643,342 | 712,480,523 | 23,293,122 | 298,169,727 | 111,487,610 | 19,917,205 | 1,256,001,560 | 64,133,739 | 106,688,682 | |||||||||||||||||||||
Composition of net assets: | |||||||||||||||||||||||||||||||
Paid-in capital | 724,795,362 | 684,344,096 | 524,039,193 | 23,740,305 | 232,800,637 | 98,347,859 | 19,831,404 | 1,242,557,369 | 62,485,103 | 106,688,698 | |||||||||||||||||||||
Accumulated undistributed net investment income (loss) | (874,185 | ) | (498,954 | ) | (1,151,588 | ) | — | (63,796 | ) | 141,277 | 1,265 | 6,108 | 1,943 | — | |||||||||||||||||
Accumulated net realized gain (loss) | (84,312 | ) | (2,440,515 | ) | 9,293,534 | (402,663 | ) | (320,469 | ) | 821,913 | (15,583 | ) | 279,374 | (48,222 | ) | (16 | ) | ||||||||||||||
Net unrealized appreciation (depreciation) of investments | 206,559,552 | 147,238,715 | 180,299,384 | (44,520 | ) | 65,753,355 | 12,176,561 | 100,119 | 13,158,709 | 1,694,915 | — | ||||||||||||||||||||
Net assets | 930,396,417 | 828,643,342 | 712,480,523 | 23,293,122 | 298,169,727 | 111,487,610 | 19,917,205 | 1,256,001,560 | 64,133,739 | 106,688,682 | |||||||||||||||||||||
Net assets(d): | |||||||||||||||||||||||||||||||
Investor Class | 738,086,127 | 531,353,418 | 35,461,187 | 23,293,122 | 298,169,727 | 111,487,610 | 4,808,926 | 100,947,704 | 64,133,739 | 106,688,682 | |||||||||||||||||||||
Institutional Class | 192,310,290 | 297,289,924 | 677,019,336 | 15,108,279 | 1,155,053,856 | ||||||||||||||||||||||||||
Shares outstanding(d) (e): | |||||||||||||||||||||||||||||||
Investor Class | 19,205,565 | 19,213,251 | 2,583,619 | 2,378,072 | 6,264,939 | 8,421,534 | 473,671 | 8,218,380 | 6,339,520 | 106,688,698 | |||||||||||||||||||||
Institutional Class | 4,987,014 | 10,712,666 | 48,511,365 | 1,488,105 | 93,874,608 | ||||||||||||||||||||||||||
Net asset value, offering and | |||||||||||||||||||||||||||||||
redemption price(d): | |||||||||||||||||||||||||||||||
Investor Class | 38.43 | 27.66 | 13.73 | 9.79 | 47.59 | 13.24 | 10.15 | 12.28 | 10.12 | 1.00 | |||||||||||||||||||||
Institutional Class | 38.56 | 27.75 | 13.96 | 10.15 | 12.30 | ||||||||||||||||||||||||||
(a) Cost of investments in securities: | |||||||||||||||||||||||||||||||
Unaffiliated issuers | 724,349,587 | 680,276,166 | 515,602,161 | 22,607,451 | 232,799,547 | 99,209,315 | 19,640,278 | 1,238,204,283 | 62,635,330 | 106,721,915 | |||||||||||||||||||||
Controlled affiliates | — | — | 2,899,379 | — | — | — | — | — | — | — | |||||||||||||||||||||
724,349,587 | 680,276,166 | 518,501,540 | 22,607,451 | 232,799,547 | 99,209,315 | 19,640,278 | 1,238,204,283 | 62,635,330 | 106,721,915 | ||||||||||||||||||||||
(b) Premiums from options written | — | — | 464,365 | — | — | — | — | — | — | — | |||||||||||||||||||||
(c) Proceeds from short sales | — | — | 216,023,195 | — | — | — | — | — | — | — | |||||||||||||||||||||
(d) Funds with a single share class are shown with the Investor Class | |||||||||||||||||||||||||||||||
(e) Indefinite number of no par value shares authorized |
The accompanying notes form an integral part of these financial statements.
48 | Q1 2016 ANNUAL REPORT
STATEMENTS OF OPERATIONS
Year ended March 31, 2016
Short- | Nebraska | Government | |||||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Intermediate | Tax-Free | Money | ||||||||||||||||||||||||||
(In U.S. dollars) | Value | Value | Opportunity | Research | Hickory | Balanced | Income | Income | Income | Market | |||||||||||||||||||||
Investment income: | |||||||||||||||||||||||||||||||
Dividends: | |||||||||||||||||||||||||||||||
Unaffiliated issuers(a) | 5,914,150 | 6,862,073 | 5,366,932 | 119,366 | 2,605,940 | 738,348 | 21,948 | 997,152 | — | — | |||||||||||||||||||||
Controlled affiliates | — | — | 794,500 | — | — | — | — | — | — | — | |||||||||||||||||||||
5,914,150 | 6,862,073 | 6,161,432 | 119,366 | 2,605,940 | 738,348 | 21,948 | 997,152 | — | — | ||||||||||||||||||||||
Interest | 183,745 | 143,454 | 40,058 | 2,882 | 58,263 | 647,411 | 559,743 | 33,905,506 | 1,738,754 | 84,246 | |||||||||||||||||||||
Total investment income | 6,097,895 | 7,005,527 | 6,201,490 | 122,248 | 2,664,203 | 1,385,759 | 581,691 | 34,902,658 | 1,738,754 | 84,246 | |||||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||||||
Investment advisory fees | 9,234,810 | 8,537,897 | 8,881,278 | 237,332 | 3,618,999 | 905,117 | 76,402 | 5,333,128 | 268,197 | 423,076 | |||||||||||||||||||||
Administrative fees and expenses | 737,189 | 697,537 | 631,495 | 69,950 | 572,919 | 232,447 | 86,286 | 939,171 | 177,002 | 193,551 | |||||||||||||||||||||
Shareholder servicing fees: | |||||||||||||||||||||||||||||||
Investor Class | 1,684,267 | 1,533,272 | 158,227 | — | — | — | 10,000 | 305,872 | — | — | |||||||||||||||||||||
Institutional Class | 38,594 | 76,061 | 455,390 | — | — | — | 12,028 | 1,280,402 | — | — | |||||||||||||||||||||
Custodian fees | 19,011 | 18,676 | 20,302 | 3,389 | 12,185 | 4,527 | 2,050 | 22,530 | 2,670 | 3,554 | |||||||||||||||||||||
Dividends on securities sold short | — | — | 4,535,304 | — | — | — | — | — | — | — | |||||||||||||||||||||
Interest | — | — | 2,407,619 | — | — | — | — | — | — | — | |||||||||||||||||||||
Professional fees | 97,452 | 92,339 | 89,120 | 21,408 | 46,468 | 27,790 | 20,151 | 117,992 | 24,347 | 36,879 | |||||||||||||||||||||
Registration fees | 50,553 | 60,613 | 54,803 | 16,899 | 26,477 | 19,760 | 49,405 | 66,806 | 6,132 | 23,924 | |||||||||||||||||||||
Sub-transfer agent fees | 225,438 | 157,705 | 124,080 | 24,200 | 98,242 | 34,670 | 41,234 | 130,225 | 24,786 | 33,719 | |||||||||||||||||||||
Trustees fees | 99,663 | 92,846 | 88,092 | 2,267 | 35,858 | 10,792 | 1,757 | 127,165 | 6,411 | 9,971 | |||||||||||||||||||||
Other | 170,828 | 133,357 | 116,029 | 7,866 | 74,495 | 17,896 | 7,350 | 200,965 | 11,060 | 17,294 | |||||||||||||||||||||
12,357,805 | 11,400,303 | 17,561,739 | 383,311 | 4,485,643 | 1,252,999 | 306,663 | 8,524,256 | 520,605 | 741,968 | ||||||||||||||||||||||
Less expenses waived/reimbursed by investment adviser | (591,142 | ) | (764,115 | ) | — | (169,712 | ) | — | — | (173,443 | ) | (59,154 | ) | — | (691,766 | ) | |||||||||||||||
Net expenses | 11,766,663 | 10,636,188 | 17,561,739 | 213,599 | 4,485,643 | 1,252,999 | 133,220 | 8,465,102 | 520,605 | 50,202 | |||||||||||||||||||||
Net investment income (loss) | (5,668,768 | ) | (3,630,661 | ) | (11,360,249 | ) | (91,351 | ) | (1,821,440 | ) | 132,760 | 448,471 | 26,437,556 | 1,218,149 | 34,044 | ||||||||||||||||
Realized and unrealized gain(loss) on investments: | |||||||||||||||||||||||||||||||
Net realized gain (loss): | |||||||||||||||||||||||||||||||
Unaffiliated issuers | 45,923,282 | 65,111,036 | 65,651,559 | 572,511 | 14,571,440 | 2,532,944 | 13,160 | 2,192,903 | (47,460 | ) | 2,803 | ||||||||||||||||||||
Options written | — | — | 1,887,023 | — | — | — | — | — | — | — | |||||||||||||||||||||
Securities sold short | — | — | (29,180,835 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||
Net realized gain (loss) | 45,923,282 | 65,111,036 | 38,357,747 | 572,511 | 14,571,440 | 2,532,944 | 13,160 | 2,192,903 | (47,460 | ) | 2,803 | ||||||||||||||||||||
Net unrealized appreciation (depreciation): | |||||||||||||||||||||||||||||||
Unaffiliated issuers | (127,672,982 | ) | (175,242,703 | ) | (163,162,103 | ) | (2,749,979 | ) | (54,136,676 | ) | (3,651,050 | ) | (75,908 | ) | (18,344,976 | ) | (413,154 | ) | — | ||||||||||||
Controlled affiliates | — | — | 1,407,400 | — | — | — | — | — | — | — | |||||||||||||||||||||
Options written | — | — | 123,115 | — | — | — | — | — | — | — | |||||||||||||||||||||
Securities sold short | — | — | 36,343,391 | — | — | — | — | — | — | — | |||||||||||||||||||||
Net unrealized appreciation (depreciation) | (127,672,982 | ) | (175,242,703 | ) | (125,288,197 | ) | (2,749,979 | ) | (54,136,676 | ) | (3,651,050 | ) | (75,908 | ) | (18,344,976 | ) | (413,154 | ) | — | ||||||||||||
Net realized and unrealized gain (loss) on investments | (81,749,700 | ) | (110,131,667 | ) | (86,930,450 | ) | (2,177,468 | ) | (39,565,236 | ) | (1,118,106 | ) | (62,748 | ) | (16,152,073 | ) | (460,614 | ) | 2,803 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | (87,418,468 | ) | (113,762,328 | ) | (98,290,699 | ) | (2,268,819 | ) | (41,386,676 | ) | (985,346 | ) | 385,723 | 10,285,483 | 757,535 | 36,847 | |||||||||||||||
(a) Foreign taxes withheld | — | — | 44,250 | 5,213 | 22,575 | 11,616 | — | — | — | — |
The accompanying notes form an integral part of these financial statements.
49 | Q1 2016 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
Value | Partners Value | Partners III Opportunity | Research | ||||||||||||||||||||||
Year ended March 31, | Year ended March 31, | Year ended March 31, | Year ended March 31, | ||||||||||||||||||||||
(In U.S. dollars) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Increase (decrease) in net assets: | |||||||||||||||||||||||||
From operations: | |||||||||||||||||||||||||
Net investment income (loss) | (5,668,768 | ) | (6,532,615 | ) | (3,630,661 | ) | (4,621,925 | ) | (11,360,249 | ) | (11,828,075 | ) | (91,351 | ) | (50,541 | ) | |||||||||
Net realized gain (loss) | 45,923,282 | 121,444,451 | 65,111,036 | 76,976,576 | 38,357,747 | 93,536,807 | 572,511 | 4,035,656 | |||||||||||||||||
Net unrealized appreciation (depreciation) | (127,672,982 | ) | (4,923,228 | ) | (175,242,703 | ) | 20,599,143 | (125,288,197 | ) | (1,535 | ) | (2,749,979 | ) | (1,085,618 | ) | ||||||||||
Net increase (decrease) in net assets resulting from operations | (87,418,468 | ) | 109,988,608 | (113,762,328 | ) | 92,953,794 | (98,290,699 | ) | 81,707,197 | (2,268,819 | ) | 2,899,497 | |||||||||||||
Distributions to shareholders from: | |||||||||||||||||||||||||
Net investment income(b): | |||||||||||||||||||||||||
Investor Class | — | — | — | — | — | — | — | — | |||||||||||||||||
Institutional Class | — | — | — | — | — | — | |||||||||||||||||||
Net realized gains(b): | |||||||||||||||||||||||||
Investor Class | (96,114,658 | ) | (84,283,717 | ) | (76,768,038 | ) | (26,815,484 | ) | (6,965,155 | ) | (2,165,747 | ) | (3,079,814 | ) | (3,850,663 | ) | |||||||||
Institutional Class | (22,272,270 | ) | (8,233,675 | ) | (36,641,643 | ) | (7,644,847 | ) | (100,503,708 | ) | (33,312,240 | ) | |||||||||||||
Total distributions | (118,386,928 | ) | (92,517,392 | ) | (113,409,681 | ) | (34,460,331 | ) | (107,468,863 | ) | (35,477,987 | ) | (3,079,814 | ) | (3,850,663 | ) | |||||||||
Fund share transactions(b): | |||||||||||||||||||||||||
Investor Class | (35,765,020 | ) | (54,054,283 | ) | (101,270,168 | ) | (71,265,185 | ) | (19,153,273 | ) | (12,571,692 | ) | 3,034,598 | 2,300,271 | |||||||||||
Institutional Class | 31,067,130 | 10,200,938 | 49,259,471 | 46,098,679 | (145,917,548 | ) | (192,593,706 | ) | |||||||||||||||||
Net increase (decrease) from fund share transactions | (4,697,890 | ) | (43,853,345 | ) | (52,010,697 | ) | (25,166,506 | ) | (165,070,821 | ) | (205,165,398 | ) | 3,034,598 | 2,300,271 | |||||||||||
Total increase (decrease) in net assets | (210,503,286 | ) | (26,382,129 | ) | (279,182,706 | ) | 33,326,957 | (370,830,383 | ) | (158,936,188 | ) | (2,314,035 | ) | 1,349,105 | |||||||||||
Net assets: | |||||||||||||||||||||||||
Beginning of period | 1,140,899,703 | 1,167,281,832 | 1,107,826,048 | 1,074,499,091 | 1,083,310,906 | 1,242,247,094 | 25,607,157 | 24,258,052 | |||||||||||||||||
End of period | 930,396,417 | 1,140,899,703 | 828,643,342 | 1,107,826,048 | 712,480,523 | 1,083,310,906 | 23,293,122 | 25,607,157 | |||||||||||||||||
Undistributed net investment income (loss) | (874,185 | ) | (1,793,996 | ) | (498,954 | ) | (1,116,085 | ) | (1,151,588 | ) | (3,236,947 | ) | — | — |
(a) | Initial offering of shares on July 31, 2014 |
(b) | Funds with a single share class are shown with the Investor Class |
The accompanying notes form an integral part of these financial statements.
50 | Q1 2016 ANNUAL REPORT
Hickory | Balanced | Core Plus Income | Short-Intermediate Income | Nebraska Tax-Free Income | Government Money Market | |||||||||||||||||||||||||||||
Year ended March 31, | Year ended March 31, | Year ended March 31, | Eight months ended March 31, | Year ended March 31, | Year ended March 31, | Year ended March 31, | ||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015(a) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||
(1,821,440 | ) | (2,503,951 | ) | 132,760 | (146,338 | ) | 448,471 | 87,133 | 26,437,556 | 25,461,508 | 1,218,149 | 1,494,700 | 34,044 | 12,273 | ||||||||||||||||||||
14,571,440 | 45,281,768 | 2,532,944 | 7,973,661 | 13,160 | 7,904 | 2,192,903 | 5,732,257 | (47,460 | ) | 807 | 2,803 | 114 | ||||||||||||||||||||||
(54,136,676 | ) | (7,802,251 | ) | (3,651,050 | ) | (3,161,304 | ) | (75,908 | ) | 176,027 | (18,344,976 | ) | (4,173,420 | ) | (413,154 | ) | (19,341 | ) | — | — | ||||||||||||||
(41,386,676 | ) | 34,975,566 | (985,346 | ) | 4,666,019 | 385,723 | 271,064 | 10,285,483 | 27,020,345 | 757,535 | 1,476,166 | 36,847 | 12,387 | |||||||||||||||||||||
— | — | — | — | (100,913 | ) | (28,896 | ) | (1,922,796 | ) | (2,006,049 | ) | (1,254,130 | ) | (1,475,000 | ) | (34,044 | ) | (12,273 | ) | |||||||||||||||
(350,624 | ) | (58,128 | ) | (25,323,122 | ) | (25,491,139 | ) | |||||||||||||||||||||||||||
(48,187,197 | ) | (24,246,012 | ) | (5,916,094 | ) | (6,054,129 | ) | (7,599 | ) | — | (359,372 | ) | (63,417 | ) | — | — | (1,937 | ) | — | |||||||||||||||
(24,826 | ) | — | (4,183,664 | ) | (674,752 | ) | ||||||||||||||||||||||||||||
(48,187,197 | ) | (24,246,012 | ) | (5,916,094 | ) | (6,054,129 | ) | (483,962 | ) | (87,024 | ) | (31,788,954 | ) | (28,235,357 | ) | (1,254,130 | ) | (1,475,000 | ) | (35,981 | ) | (12,273 | ) | |||||||||||
(57,423,156 | ) | (83,203,133 | ) | (7,188,984 | ) | 62,595 | 881,537 | 3,875,352 | (11,077,521 | ) | 2,183,525 | (5,371,199 | ) | (267,726 | ) | (1,765,423 | ) | (15,705,328 | ) | |||||||||||||||
3,379,933 | 11,694,582 | (116,650,272 | ) | (134,447,746 | ) | |||||||||||||||||||||||||||||
(57,423,156 | ) | (83,203,133 | ) | (7,188,984 | ) | 62,595 | 4,261,470 | 15,569,934 | (127,727,793 | ) | (132,264,221 | ) | (5,371,199 | ) | (267,726 | ) | (1,765,423 | ) | (15,705,328 | ) | ||||||||||||||
(146,997,029 | ) | (72,473,579 | ) | (14,090,424 | ) | (1,325,515 | ) | 4,163,231 | 15,753,974 | (149,231,264 | ) | (133,479,233 | ) | (5,867,794 | ) | (266,560 | ) | (1,764,557 | ) | (15,705,214 | ) | |||||||||||||
445,166,756 | 517,640,335 | 125,578,034 | 126,903,549 | 15,753,974 | — | 1,405,232,824 | 1,538,712,057 | 70,001,533 | 70,268,093 | 108,453,239 | 124,158,453 | |||||||||||||||||||||||
298,169,727 | 445,166,756 | 111,487,610 | 125,578,034 | 19,917,205 | 15,753,974 | 1,256,001,560 | 1,405,232,824 | 64,133,739 | 70,001,533 | 106,688,682 | 108,453,239 | |||||||||||||||||||||||
(63,796 | ) | (420,203 | ) | 141,277 | — | 1,265 | 1,191 | 6,108 | 172,518 | 1,943 | 37,924 | — | — |
The accompanying notes form an integral part of these financial statements.
51 | Q1 2016 ANNUAL REPORT
STATEMENT OF CASH FLOWS
Partners III Opportunity | |
(In U.S. dollars) | Year Ended March 31, 2016 |
Increase (decrease) in cash: | ||||
Cash flows from operating activities: | ||||
Net decrease in net assets from operations | (98,290,699 | ) | ||
Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities: | ||||
Purchases of investment securities | (247,956,785 | ) | ||
Proceeds from sale of investment securities | 528,751,391 | |||
Proceeds from securities sold short | 78,049,310 | |||
Short positions covered | (128,221,255 | ) | ||
Sale of short-term investment securities, net | 2,777,012 | |||
Net unrealized depreciation on investments, options and short sales | 125,288,197 | |||
Net realized gain on investments, options and short sales | (38,357,747 | ) | ||
Increase in accrued interest and dividends receivable | (74,618 | ) | ||
Decrease in due from broker | 54,227,419 | |||
Increase in receivable for securities sold | (2,116,182 | ) | ||
Decrease in receivable for fund shares sold | 2,576,772 | |||
Increase in dividends payable on securities sold short | 393,838 | |||
Decrease in due to adviser | (413,081 | ) | ||
Decrease in payable for securities purchased | (4,166,136 | ) | ||
Increase in payable for fund shares redeemed | 78,638 | |||
Decrease in other liabilities | (6,390 | ) | ||
Net cash provided by operating activities | 272,539,684 | |||
Cash flows from financing activities: | ||||
Proceeds from sales of fund shares | 85,528,073 | |||
Payments for redemptions of fund shares | (353,546,928 | ) | ||
Cash distributions to shareholders | (4,520,829 | ) | ||
Net cash used in financing activities | (272,539,684 | ) | ||
Net increase (decrease) in cash | — | |||
Cash: | ||||
Balance, beginning of period | — | |||
Balance, end of period | — | |||
Supplemental disclosure of cash flow information: | ||||
Cash payments for interest | 2,414,009 | |||
Noncash financing activities: | ||||
Reinvestment of shareholder distributions | 102,948,034 |
The accompanying notes form an integral part of these financial statements.
52 | Q1 2016 ANNUAL REPORT
This page intentionally left blank
53 |Q1 2016 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
The following financial information provides selected data, in U.S. dollars, for a share outstanding throughout the periods indicated.
Income (loss) from Investment Operations | Distributions | |||||||||||||||||||||
Years ended March 31, unless otherwise noted | Net asset value, beginning of period | Net investment income (loss) | Net gain (loss) on securities(realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from realized gains | Total distributions | |||||||||||||||
Value - Investor Class | ||||||||||||||||||||||
2016 | 46.93 | (0.25 | )(a) | (3.27 | ) | (3.52 | ) | — | (4.98 | ) | (4.98 | ) | ||||||||||
2015 | 46.20 | (0.24 | )(a) | 4.76 | 4.52 | — | (3.79 | ) | (3.79 | ) | ||||||||||||
2014 | 38.61 | (0.17 | ) | 7.76 | 7.59 | — | — | — | ||||||||||||||
2013 | 32.98 | (0.02 | ) | 5.68 | 5.66 | (0.03 | ) | — | (0.03 | ) | ||||||||||||
2012 | 30.07 | 0.04 | 2.94 | 2.98 | (0.07 | ) | — | (0.07 | ) | |||||||||||||
Value - Institutional Class | ||||||||||||||||||||||
2016 | 46.99 | (0.17 | )(a) | (3.28 | ) | (3.45 | ) | — | (4.98 | ) | (4.98 | ) | ||||||||||
Eight months ended 3/31/2015(b) | 44.80 | (0.26 | )(a) | 4.50 | 4.24 | — | (2.05 | ) | (2.05 | ) | ||||||||||||
Partners Value - Investor Class | ||||||||||||||||||||||
2016 | 35.05 | (0.14 | )(a) | (3.47 | ) | (3.61 | ) | — | (3.78 | ) | (3.78 | ) | ||||||||||
2015 | 33.20 | (0.14 | )(a) | 3.09 | 2.95 | — | (1.10 | ) | (1.10 | ) | ||||||||||||
2014 | 27.75 | (0.14 | ) | 5.59 | 5.45 | — | — | — | ||||||||||||||
2013 | 23.25 | (0.06 | ) | 4.56 | 4.50 | — | — | — | ||||||||||||||
2012 | 22.05 | (0.07 | ) | 1.27 | 1.20 | — | — | — | ||||||||||||||
Partners Value - Institutional Class | ||||||||||||||||||||||
2016 | 35.09 | (0.08 | )(a) | (3.48 | ) | (3.56 | ) | — | (3.78 | ) | (3.78 | ) | ||||||||||
Eight months ended 3/31/2015(b) | 33.22 | (0.11 | )(a) | 2.91 | 2.80 | — | (0.93 | ) | (0.93 | ) | ||||||||||||
Partners III Opportunity - Investor Class | ||||||||||||||||||||||
2016 | 17.12 | (0.25 | )(a) | (1.30 | ) | (1.55 | ) | — | (1.84 | ) | (1.84 | ) | ||||||||||
2015 | 16.43 | (0.22 | )(a) | 1.41 | 1.19 | — | (0.50 | ) | (0.50 | ) | ||||||||||||
2014 | 14.26 | (0.17 | )(a) | 2.71 | 2.54 | — | (0.37 | ) | (0.37 | ) | ||||||||||||
2013 | 12.90 | (0.12 | )(a) | 2.40 | 2.28 | — | (0.92 | ) | (0.92 | ) | ||||||||||||
Eight months ended 3/31/2012(c) | 12.08 | (0.09 | )(a) | 0.91 | 0.82 | — | — | — | ||||||||||||||
Partners III Opportunity - Institutional Class | ||||||||||||||||||||||
2016 | 17.31 | (0.19 | )(a) | (1.32 | ) | (1.51 | ) | — | (1.84 | ) | (1.84 | ) | ||||||||||
2015 | 16.55 | (0.17 | )(a) | 1.43 | 1.26 | — | (0.50 | ) | (0.50 | ) | ||||||||||||
2014 | 14.33 | (0.12 | )(a) | 2.71 | 2.59 | — | (0.37 | ) | (0.37 | ) | ||||||||||||
2013 | 12.93 | (0.08 | )(a) | 2.40 | 2.32 | — | (0.92 | ) | (0.92 | ) | ||||||||||||
2012 | 12.63 | (0.07 | )(a) | 0.67 | 0.60 | — | (0.30 | ) | (0.30 | ) | ||||||||||||
Research | ||||||||||||||||||||||
2016 | 12.21 | (0.04 | ) | (0.95 | ) | (0.99 | ) | — | (1.43 | ) | (1.43 | ) | ||||||||||
2015 | 12.76 | (0.02 | ) | 1.46 | 1.44 | — | (1.99 | ) | (1.99 | ) | ||||||||||||
2014 | 10.83 | (0.03 | ) | 2.35 | 2.32 | — | # | (0.39 | ) | (0.39 | ) | |||||||||||
2013 | 11.07 | 0.01 | 0.65 | 0.66 | (0.01 | ) | (0.89 | ) | (0.90 | ) | ||||||||||||
2012 | 10.38 | 0.01 | 1.20 | 1.21 | (0.01 | ) | (0.51 | ) | (0.52 | ) |
* | Annualized |
† | Not Annualized |
# | Amount less than $0.01 |
(a) | Based on average daily shares outstanding |
(b) | Initial offering of shares on July 31, 2014 |
(c) | Initial offering of shares on August 1, 2011 |
(d) | Included in the expense ratio is 0.27%, 0.24%, 0.11%, 0.14% and 0.12% related to interest expense and 0.50%, 0.29%, 0.16%, 0.28% and 0.24% related to dividend expense on securities sold short for the periods ended March 31, 2016, 2015, 2014, 2013 and 2012, respectively. |
(e) | Included in the expense ratio is 0.27%, 0.24%, 0.12%, 0.14% and 0.11% related to interest expense and 0.51%, 0.29%, 0.15%, 0.27% and 0.18% related to dividend expense on securities sold short for the periods ended March 31, 2016, 2015, 2014, 2013 and 2012, respectively. |
The accompanying notes form an integral part of these financial statements.
54 | Q1 2016 ANNUAL REPORT
Ratios/Supplemental Data | |||||||||||||||||||
Ratio of expenses to average net assets | |||||||||||||||||||
Net asset value, end of period | Total Return (%) | Net assets, end of period ($000) | Prior to fee waivers (%) | Net of fee waivers (%) | Ratio of net investment income (loss) to average net assets (%) | Portfolio turnover rate (%) | |||||||||||||
38.43 | (8.05 | ) | 738,086 | 1.23 | 1.18 | (0.59 | ) | 47 | |||||||||||
46.93 | 10.19 | 940,646 | 1.20 | 1.18 | (0.54 | ) | 36 | ||||||||||||
46.20 | 19.66 | 1,167,282 | 1.18 | 1.18 | (0.41 | ) | 19 | ||||||||||||
38.61 | 17.20 | 1,013,552 | 1.20 | 1.20 | (0.07 | ) | 20 | ||||||||||||
32.98 | 9.94 | 1,011,671 | 1.20 | 1.20 | 0.11 | 31 | |||||||||||||
38.56 | (7.88 | ) | 192,310 | 1.08 | 0.99 | (0.39 | ) | 47 | |||||||||||
46.99 | 9.57 | † | 200,254 | 1.08 | * | 0.99 | * | (0.87 | )* | 36 | |||||||||
27.66 | (10.61 | ) | 531,353 | 1.26 | 1.18 | (0.45 | ) | 31 | |||||||||||
35.05 | 8.99 | 789,853 | 1.22 | 1.18 | (0.42 | ) | 26 | ||||||||||||
33.20 | 19.64 | 1,074,499 | 1.18 | 1.18 | (0.46 | ) | 19 | ||||||||||||
27.75 | 19.35 | 844,213 | 1.19 | 1.19 | (0.25 | ) | 24 | ||||||||||||
23.25 | 5.44 | 707,174 | 1.20 | 1.20 | (0.32 | ) | 31 | ||||||||||||
27.75 | (10.45 | ) | 297,290 | 1.07 | 0.99 | (0.25 | ) | 31 | |||||||||||
35.09 | 8.51 | † | 317,973 | 1.05 | * | 0.99 | * | (0.49 | )* | 26 | |||||||||
13.73 | (9.56 | ) | 35,461 | 2.33 | (d) | 2.33 | (d) | (1.63 | ) | 46 | |||||||||
17.12 | 7.38 | 68,490 | 2.06 | (d) | 2.01 | (d) | (1.33 | ) | 45 | ||||||||||
16.43 | 17.94 | 78,586 | 1.84 | (d) | 1.68 | (d) | (1.10 | ) | 20 | ||||||||||
14.26 | 18.81 | 19,702 | 2.25 | (d) | 1.85 | (d) | (0.93 | ) | 32 | ||||||||||
12.90 | 6.79 | † | 11,497 | 2.31 | (d)* | 1.80 | (d)* | (1.06 | )* | 44 | |||||||||
13.96 | (9.20 | ) | 677,019 | 1.95 | (e) | 1.95 | (e) | (1.26 | ) | 46 | |||||||||
17.31 | 7.76 | 1,014,821 | 1.69 | (e) | 1.69 | (e) | (1.00 | ) | 45 | ||||||||||
16.55 | 18.20 | 1,163,661 | 1.43 | (e) | 1.43 | (e) | (0.78 | ) | 20 | ||||||||||
14.33 | 19.08 | 664,770 | 1.59 | (e) | 1.59 | (e) | (0.61 | ) | 32 | ||||||||||
12.93 | 4.92 | 609,424 | 1.48 | (e) | 1.48 | (e) | (0.61 | ) | 44 | ||||||||||
9.79 | (8.77 | ) | 23,293 | 1.62 | 0.90 | (0.39 | ) | 73 | |||||||||||
12.21 | 12.22 | 25,607 | 1.59 | 0.90 | (0.21 | ) | 76 | ||||||||||||
12.76 | 21.40 | 24,258 | 1.58 | 0.90 | (0.28 | ) | 58 | ||||||||||||
10.83 | 7.02 | 19,119 | 1.70 | 0.90 | 0.10 | 97 | |||||||||||||
11.07 | 12.32 | 16,299 | 1.83 | 0.90 | 0.15 | 124 |
The accompanying notes form an integral part of these financial statements.
55 | Q1 2016 ANNUAL REPORT
FINANCIAL HIGHLIGHTS (CONTINUED)
The following financial information provides selected data, in U.S. dollars, for a share outstanding throughout the periods indicated.
Income (loss) from Investment Operations | Distributions | |||||||||||||||||||||
Years ended March 31, unless otherwise noted | Net asset value, beginning of period | Net investment income (loss) | Net gain (loss) on securities (realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from realized gains | Total distributions | |||||||||||||||
Hickory | ||||||||||||||||||||||
2016 | 59.51 | (0.30 | ) | (4.79 | ) | (5.09 | ) | — | (6.83 | ) | (6.83 | ) | ||||||||||
2015 | 57.87 | (0.35 | ) | 5.00 | 4.65 | — | (3.01 | ) | (3.01 | ) | ||||||||||||
2014 | 50.22 | (0.34 | ) | 7.99 | 7.65 | — | — | — | ||||||||||||||
2013 | 42.53 | (0.25 | ) | 7.94 | 7.69 | — | — | — | ||||||||||||||
2012 | 41.12 | (0.26 | ) | 1.67 | 1.41 | — | — | — | ||||||||||||||
Balanced | ||||||||||||||||||||||
2016 | 14.07 | 0.02 | (0.13 | ) | (0.11 | ) | — | (0.72 | ) | (0.72 | ) | |||||||||||
2015 | 14.22 | (0.02 | ) | 0.54 | 0.52 | — | (0.67 | ) | (0.67 | ) | ||||||||||||
2014 | 13.58 | (0.03 | ) | 1.34 | 1.31 | — | # | (0.67 | ) | (0.67 | ) | |||||||||||
2013 | 12.39 | 0.04 | 1.20 | 1.24 | (0.05 | ) | (0.05 | ) | ||||||||||||||
2012 | 11.74 | 0.06 | 0.67 | 0.73 | (0.08 | ) | (0.08 | ) | ||||||||||||||
Core Plus Income - Investor Class | ||||||||||||||||||||||
2016 | 10.21 | 0.22 | (a) | (0.04 | ) | 0.18 | (0.22 | ) | (0.02 | ) | (0.24 | ) | ||||||||||
Eight months ended 3/31/2015(b) | 10.00 | 0.09 | (a) | 0.20 | 0.29 | (0.08 | ) | — | (0.08 | ) | ||||||||||||
Core Plus Income - Institutional Class | ||||||||||||||||||||||
2016 | 10.20 | 0.25 | (a) | (0.04 | ) | 0.21 | (0.24 | ) | (0.02 | ) | (0.26 | ) | ||||||||||
Eight months ended 3/31/2015(b) | 10.00 | 0.10 | (a) | 0.20 | 0.30 | (0.10 | ) | — | (0.10 | ) | ||||||||||||
Short-Intermediate Income - Investor Class | ||||||||||||||||||||||
2016 | 12.48 | 0.22 | (a) | (0.15 | ) | 0.07 | (0.23 | ) | (0.04 | ) | (0.27 | ) | ||||||||||
2015 | 12.49 | 0.19 | (a) | 0.02 | 0.21 | (0.21 | ) | (0.01 | ) | (0.22 | ) | |||||||||||
2014 | 12.67 | 0.19 | (a) | (0.15 | ) | 0.04 | (0.22 | ) | — | (0.22 | ) | |||||||||||
2013 | 12.47 | 0.17 | (a) | 0.26 | 0.43 | (0.23 | ) | — | # | (0.23 | ) | |||||||||||
Eight months ended 3/31/2012(c) | 12.51 | 0.12 | (a) | 0.02 | 0.14 | (0.18 | ) | — | (0.18 | ) | ||||||||||||
Short-Intermediate Income - Institutional Class | ||||||||||||||||||||||
2016 | 12.50 | 0.25 | (a) | (0.15 | ) | 0.10 | (0.26 | ) | (0.04 | ) | (0.30 | ) | ||||||||||
2015 | 12.51 | 0.22 | (a) | 0.02 | 0.24 | (0.24 | ) | (0.01 | ) | (0.25 | ) | |||||||||||
2014 | 12.68 | 0.22 | (a) | (0.15 | ) | 0.07 | (0.24 | ) | — | (0.24 | ) | |||||||||||
2013 | 12.48 | 0.19 | (a) | 0.26 | 0.45 | (0.25 | ) | — | # | (0.25 | ) | |||||||||||
2012 | 12.39 | 0.23 | (a) | 0.13 | 0.36 | (0.27 | ) | — | (0.27 | ) | ||||||||||||
Nebraska Tax-Free Income | ||||||||||||||||||||||
2016 | 10.19 | 0.18 | (0.06 | ) | 0.12 | (0.19 | ) | — | (0.19 | ) | ||||||||||||
2015 | 10.19 | 0.22 | — | # | 0.22 | (0.22 | ) | — | (0.22 | ) | ||||||||||||
2014 | 10.44 | 0.23 | (0.20 | ) | 0.03 | (0.23 | ) | (0.05 | ) | (0.28 | ) | |||||||||||
2013 | 10.44 | 0.21 | 0.01 | 0.22 | (0.21 | ) | (0.01 | ) | (0.22 | ) | ||||||||||||
2012 | 10.09 | 0.25 | 0.36 | 0.61 | (0.26 | ) | — | # | (0.26 | ) | ||||||||||||
Government Money Market | ||||||||||||||||||||||
2016 | 1.00 | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ | |||||||||
2015 | 1.00 | — | ^ | — | ^ | — | ^ | — | ^ | — | — | ^ | ||||||||||
2014 | 1.00 | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ | |||||||||
2013 | 1.00 | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ | |||||||||
2012 | 1.00 | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ | — | ^ |
* | Annualized |
† | Not Annualized |
# | Amount less than $0.01 |
^ | Amount less than $0.001 |
(a) | Based on average daily shares outstanding |
(b) | Initial offering of shares on July 31, 2014 |
(c) | Initial offering of shares on August 1, 2011 |
The accompanying notes form an integral part of these financial statements.
56 | Q1 2016 ANNUAL REPORT
Ratios/Supplemental Data | |||||||||||||||||||
Ratio of expenses to average net assets | |||||||||||||||||||
Net asset value, end of period | Total Return (%) | Net assets, end of period ($000) | Prior to fee waivers (%) | Net of fee waivers (%) | Ratio of net investment income (loss) to average net assets (%) | Portfolio turnover rate (%) | |||||||||||||
47.59 | (9.04 | ) | 298,170 | 1.24 | 1.24 | (0.50 | ) | 27 | |||||||||||
59.51 | 8.31 | 445,167 | 1.23 | 1.23 | (0.54 | ) | 26 | ||||||||||||
57.87 | 15.23 | 517,640 | 1.22 | 1.22 | (0.62 | ) | 30 | ||||||||||||
50.22 | 18.08 | 432,086 | 1.26 | 1.26 | (0.62 | ) | 32 | ||||||||||||
42.53 | 3.43 | 330,257 | 1.27 | 1.27 | (0.64 | ) | 38 | ||||||||||||
13.24 | (0.80 | ) | 111,488 | 1.11 | 1.11 | 0.12 | 35 | ||||||||||||
14.07 | 3.73 | 125,578 | 1.09 | 1.09 | (0.12 | ) | 37 | ||||||||||||
14.22 | 9.86 | 126,904 | 1.10 | 1.10 | (0.20 | ) | 36 | ||||||||||||
13.58 | 10.02 | 98,105 | 1.12 | 1.12 | 0.30 | 47 | |||||||||||||
12.39 | 6.25 | 88,531 | 1.14 | 1.14 | 0.51 | 46 | |||||||||||||
10.15 | 1.78 | 4,809 | 2.35 | 0.85 | 2.20 | 26 | |||||||||||||
10.21 | 2.90 | † | 3,950 | 3.17 | * | 0.85 | * | 1.39 | * | 8 | † | ||||||||
10.15 | 2.06 | 15,108 | 1.37 | 0.65 | 2.39 | 26 | |||||||||||||
10.20 | 2.96 | † | 11,804 | 2.54 | * | 0.65 | * | 1.56 | * | 8 | † | ||||||||
12.28 | 0.58 | 100,948 | 0.91 | 0.85 | 1.77 | 23 | |||||||||||||
12.48 | 1.64 | 113,709 | 0.89 | 0.84 | 1.51 | 30 | |||||||||||||
12.49 | 0.35 | 111,675 | 0.91 | 0.81 | 1.55 | 36 | |||||||||||||
12.67 | 3.46 | 78,418 | 0.97 | 0.82 | 1.36 | 37 | |||||||||||||
12.47 | 1.11 | † | 53,090 | 1.15 | * | 0.80 | * | 1.58 | * | 44 | |||||||||
12.30 | 0.83 | 1,155,054 | 0.62 | 0.62 | 2.00 | 23 | |||||||||||||
12.50 | 1.88 | 1,291,524 | 0.61 | 0.61 | 1.73 | 30 | |||||||||||||
12.51 | 0.56 | 1,427,037 | 0.61 | 0.61 | 1.73 | 36 | |||||||||||||
12.68 | 3.69 | 1,424,860 | 0.62 | 0.62 | 1.55 | 37 | |||||||||||||
12.48 | 2.93 | 1,402,505 | 0.61 | 0.61 | 1.84 | 44 | |||||||||||||
10.12 | 1.20 | 64,134 | 0.78 | 0.78 | 1.82 | 13 | |||||||||||||
10.19 | 2.14 | 70,002 | 0.75 | 0.75 | 2.14 | 12 | |||||||||||||
10.19 | 0.33 | 70,268 | 0.73 | 0.73 | 2.11 | 2 | |||||||||||||
10.44 | 2.02 | 103,764 | 0.70 | 0.70 | 1.97 | 14 | |||||||||||||
10.44 | 6.14 | 93,589 | 0.71 | 0.71 | 2.43 | 8 | |||||||||||||
1.00 | 0.03 | 106,689 | 0.70 | 0.05 | 0.03 | ||||||||||||||
1.00 | 0.01 | 108,453 | 0.67 | 0.01 | 0.01 | ||||||||||||||
1.00 | 0.01 | 124,158 | 0.67 | 0.03 | 0.01 | ||||||||||||||
1.00 | 0.03 | 107,918 | 0.70 | 0.04 | 0.03 | ||||||||||||||
1.00 | 0.03 | 77,367 | 0.72 | 0.01 | 0.03 |
The accompanying notes form an integral part of these financial statements.
57 | Q1 2016 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
March 31, 2016
(1) Organization
The Weitz Funds (the "Trust") is registered under the Investment Company Act of 1940 as an open-end management investment company issuing shares in series, each series representing a distinct portfolio with its own investment objectives and policies. At March 31, 2016, the Trust had ten series in operation: Value Fund, Partners Value Fund, Partners III Opportunity Fund, Research Fund, Hickory Fund, Balanced Fund, Core Plus Income Fund (commenced investment operations on July 31, 2014), Short-Intermediate Income Fund, Nebraska Tax-Free Income Fund and Government Money Market Fund (individually, a "Fund", collectively, the "Funds").
The Weitz Funds (the "Trust") is registered under the Investment Company Act of 1940 as an open-end management investment company issuing shares in series, each series representing a distinct portfolio with its own investment objectives and policies. At March 31, 2016, the Trust had ten series in operation: Value Fund, Partners Value Fund, Partners III Opportunity Fund, Research Fund, Hickory Fund, Balanced Fund, Core Plus Income Fund (commenced investment operations on July 31, 2014), Short-Intermediate Income Fund, Nebraska Tax-Free Income Fund and Government Money Market Fund (individually, a "Fund", collectively, the "Funds").
On July 31, 2014, the Value and Partners Value Funds divided their outstanding shares whereby the shares held in accounts with balances exceeding $1.0 million were designated Institutional Class shares. In total, 4,039,479 shares of Value Fund with a net asset value of $180,968,653 and 7,711,642 shares of Partners Value Fund with a net asset value of $256,180,756 were redesignated. All remaining shares that were not designated as new Institutional Class shares were renamed Investor Class shares.
Currently, the Value, Partners Value, Partners III Opportunity, Core Plus Income and Short-Intermediate Income Funds each offer two classes of shares: Institutional Class and Investor Class shares. Each class of shares has identical rights and privileges, except with respect to certain class specific expenses such as administration and shareholder servicing fees, voting rights on matters affecting a single class of shares and exchange privileges. Income, realized and unrealized gains and losses, and expenses of the Funds not directly attributable to a specific class of shares are allocated to the two classes on the basis of daily net assets of each class. Fees and expenses relating to a specific class are charged directly to that share class. All other Funds offer one class of shares.
The investment objective of the Value, Partners Value, Partners III Opportunity, Research and Hickory Funds (the "Weitz Equity Funds") is capital appreciation. Each of the Weitz Equity Funds invests principally in common stocks and a variety of securities convertible into common stocks such as rights, warrants, convertible preferred stock and convertible bonds.
The investment objectives of the Balanced Fund are current income, capital preservation and long-term capital appreciation. The Fund invests principally in a portfolio of U.S. equity and fixed income securities.
The investment objective of both the Core Plus Income and Short-Intermediate Income Funds is current income consistent with the preservation of capital. Under normal circumstances, the Funds will invest at least 80% of their net assets in fixed income securities such as U.S. Government and agency securities, corporate debt securities and mortgage-backed securities. The Core Plus Income Fund has a more flexible strategy and will typically have a longer portfolio duration.
The investment objective of the Nebraska Tax-Free Income Fund is to provide a high level of current income that is exempt from both federal and Nebraska personal income taxes. The Fund, under normal circumstances, invests at least 80% of its net assets in municipal securities that generate income exempt from Nebraska state income tax and from federal income tax or in open or closed-end mutual funds, which in turn invest in such assets.
The investment objective of the Government Money Market Fund is current income consistent with the preservation of capital and maintenance of liquidity. The Fund invests substantially all of its assets in debt obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities and repurchase agreements on such securities with remaining maturities not exceeding thirteen months. The Fund limits its average portfolio maturity to sixty days or less.
(2) Significant Accounting Policies
The following accounting policies are in accordance with accounting principles generally accepted in the United States.
The following accounting policies are in accordance with accounting principles generally accepted in the United States.
(a) Valuation of Investments
Investments are carried at value determined using the following valuation methods:
Investments are carried at value determined using the following valuation methods:
• | Securities traded on a national or regional securities exchange 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 ask prices; securities listed on the NASDAQ exchange are valued using the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will be the last sales price unless the reported trade for the security is outside the range of the bid/ask price. In such cases, the NOCP will be normalized to the nearer of the bid or ask price. |
• | Short sales traded on a national or regional securities exchange are valued at the last sales price; if there were no sales on that day, short sales are valued at the mean between the latest available and representative bid and ask prices. |
• | Securities not listed on an exchange are valued at the mean between the latest available and representative bid and ask prices, if available. |
• | 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 a traded option is the last sales price at which such option is traded or, in the absence of a sale on or about the close of the exchange, the mean of the closing bid and ask prices. |
• | Money market funds are valued at the quoted net asset value. Short-term securities are valued at amortized cost, which approximates current value. |
• | The value of securities for which market quotations are not readily available or are deemed unreliable, including restricted and not readily marketable securities, is determined in good faith in accordance with procedures approved by the Trust's Board of Trustees. Such valuation procedures and methods for valuing securities may include, but are not limited to: multiple of earnings, multiple of book value, discount from value of a similar freely-traded security, purchase price, private transaction in the security or related securities, the nature and duration of restrictions on disposition of the security and a combination of these and other factors. |
• | Investment securities held by the Government Money Market Fund are carried at amortized cost, which approximates market value. Pursuant to Rule 2a-7 of the Investment Company Act of 1940, amortized cost, as defined, is a method of valuing securities at acquisition cost, adjusted for amortization of premium or accretion of discount. |
The Trust has established a Pricing Committee, composed of oficers and employees of Weitz Investment Management, Inc., to supervise the daily valuation process. The Board of Trustees has also established a Valuation Committee, composed of the independent Trustees, to oversee the Pricing Committee and the valuation process. The Pricing Committee provides oversight of the approved procedures, evaluates the effectiveness of the pricing policies and reports to the Valuation Committee of the Board of Trustees. When determining the reliability of third party pricing information, the Pricing Committee, among other things, monitors the daily change in prices and reviews transactions among market participants.
(b) Option Transactions
The Funds, except for the Government Money Market Fund, may purchase put or call options. When a Fund purchases an option, an amount equal to the premium paid is recorded as an asset and is subsequently marked-to-market daily. Premiums paid for purchasing options that expire unexercised are recognized on the expiration date as realized losses. If an option is exercised, the premium paid is subtracted
The Funds, except for the Government Money Market Fund, may purchase put or call options. When a Fund purchases an option, an amount equal to the premium paid is recorded as an asset and is subsequently marked-to-market daily. Premiums paid for purchasing options that expire unexercised are recognized on the expiration date as realized losses. If an option is exercised, the premium paid is subtracted
58 | Q1 2016 ANNUAL REPORT
from the proceeds of the sale or added to the cost of the purchase to determine whether a Fund has realized a gain or loss on the related investment transaction. When a Fund enters into a closing transaction, a Fund realizes a gain or loss depending upon whether the amount from the closing transaction is greater or less than the premium paid.
The Funds, except for the Government Money Market Fund, may write put or call options. When a Fund writes an option, an amount equal to the premium received is recorded as a liability and is subsequently marked-to-market daily. Premiums received for writing options that expire unexercised are recognized on the expiration date as realized gains. If an option is exercised, the premium received is subtracted from the cost of the purchase or added to the proceeds of the sale to determine whether a Fund has realized a gain or loss on the related investment transaction. When a Fund enters into a closing transaction, a Fund realizes a gain or loss depending upon whether the amount from the closing transaction is greater or less than the premium received.
The Funds attempt to limit market risk and enhance their income by writing (selling) covered call options. The risk in writing a covered call option is that a Fund gives up the opportunity of profit if the market price of the financial instrument increases. A Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. The risk in writing a put option is that a Fund is obligated to purchase the financial instrument underlying the option at prices which may be significantly different than the current market price.
(c) Securities Sold Short
The Funds, except for the Government Money Market Fund, may engage in selling securities short, which obligates a Fund to replace a security borrowed by purchasing the same security at the current market value. A 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. A Fund realizes a gain if the price of the security declines between those dates.
The Funds, except for the Government Money Market Fund, may engage in selling securities short, which obligates a Fund to replace a security borrowed by purchasing the same security at the current market value. A 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. A Fund realizes a gain if the price of the security declines between those dates.
(d) Federal Income Taxes
It is the policy of each Fund 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; therefore, no provision for income or excise taxes is required.
It is the policy of each Fund 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; therefore, 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 Funds.
The Funds have reviewed their tax positions taken on federal income tax returns, for each of the three open tax years and as of March 31, 2016, and have determined that no provisions for income taxes are required in the Funds' financial statements.
The following permanent differences between net asset components for financial reporting and tax purposes were reclassified at the end of the fiscal year (in U.S. dollars):
Value | Partners Value | Partners III Opportunity | Research | Hickory | Balanced | Core Plus Income | Short- Intermediate Income | ||||||||||||||||||
Paid-in capital | (6,589,758 | ) | (4,251,684 | ) | (13,445,608 | ) | (1,031 | ) | (2,177,847 | ) | — | — | — | ||||||||||||
Accumulated undistributed | |||||||||||||||||||||||||
net investment income | 6,588,579 | 4,247,792 | 13,445,608 | 91,351 | 2,177,847 | 8,517 | 3,140 | 641,952 | |||||||||||||||||
Accumulated net realized | |||||||||||||||||||||||||
gain (loss) | 1,179 | 3,892 | — | (90,320 | ) | — | (8,517 | ) | (3,140 | ) | (641,952 | ) |
The differences are primarily due to net operating losses and principal paydown adjustments. These reclassifications have no impact on the net asset value of the Funds.
(e) Securities Transactions
Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains or losses are determined by specifically identifying the security sold.
Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains or losses are determined by specifically identifying the security sold.
Income dividends less foreign tax withholding (if any), dividends on short positions and distributions to shareholders are recorded on the ex-dividend date. Interest, including amortization of discount or premium, is accrued as earned.
(f) Dividend Policy
The Funds declare and distribute income dividends and capital gains distributions as may be required to qualify as a regulated investment company under the Internal Revenue Code.
The Funds declare and distribute income dividends and capital gains distributions as may be required to qualify as a regulated investment company under the Internal Revenue Code.
Generally, the Core Plus Income, Short-Intermediate Income and Nebraska Tax-Free Income Funds pay income dividends on a quarterly basis. The Government Money Market Fund declares dividends daily and pays dividends monthly. All dividends and distributions are reinvested automatically, unless the shareholder elects otherwise.
(g) Other
Expenses that are directly related to a Fund are charged directly to that Fund. Other operating expenses of the Trust are prorated to each Fund on the basis of relative net assets or another appropriate basis. Income, realized and unrealized gains and losses and expenses (other than class specific expenses) are allocated to each class of shares based on its relative net assets, except that each class separately bears expenses related specifically to that class, such as transfer agent fees and registration fees.
Expenses that are directly related to a Fund are charged directly to that Fund. Other operating expenses of the Trust are prorated to each Fund on the basis of relative net assets or another appropriate basis. Income, realized and unrealized gains and losses and expenses (other than class specific expenses) are allocated to each class of shares based on its relative net assets, except that each class separately bears expenses related specifically to that class, such as transfer agent fees and registration fees.
(h) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
59 | Q1 2016 ANNUAL REPORT
(3) Fund Share Transactions
Year ended March 31, 2016 | Year ended March 31, 2015 | ||||||||||||
Value - Investor Class | Shares | $ Amount | Shares | $ Amount | |||||||||
Sales | 638,000 | 26,869,406 | 1,133,090 | 52,127,484 | |||||||||
Redemptions | (3,695,435 | ) | (155,173,028 | ) | (4,057,693 | ) | (185,618,749 | ) | |||||
Reinvestment of distributions | 2,217,973 | 92,538,602 | 1,743,011 | 79,436,982 | |||||||||
Net increase (decrease) | (839,462 | ) | (35,765,020 | ) | (1,181,592 | ) | (54,054,283 | ) | |||||
Value - Institutional Class* | |||||||||||||
Sales | 508,269 | 21,918,589 | 458,935 | 21,062,317 | |||||||||
Redemptions | (294,560 | ) | (12,195,895 | ) | (394,304 | ) | (18,095,868 | ) | |||||
Reinvestment of distributions | 511,237 | 21,344,436 | 157,958 | 7,234,489 | |||||||||
Net increase (decrease) | 724,946 | 31,067,130 | 222,589 | 10,200,938 | |||||||||
Partners Value - Investor Class | |||||||||||||
Sales | 1,216,876 | 37,229,570 | 2,688,703 | 90,667,540 | |||||||||
Redemptions | (7,018,414 | ) | (211,651,681 | ) | (5,548,979 | ) | (187,152,123 | ) | |||||
Reinvestment of distributions | 2,478,836 | 73,151,943 | 739,067 | 25,219,398 | |||||||||
Net increase (decrease) | (3,322,702 | ) | (101,270,168 | ) | (2,121,209 | ) | (71,265,185 | ) | |||||
Partners Value - Institutional Class* | |||||||||||||
Sales | 1,408,442 | 42,031,989 | 1,314,169 | 44,960,082 | |||||||||
Redemptions | (831,059 | ) | (24,266,381 | ) | (124,000 | ) | (4,307,533 | ) | |||||
Reinvestment of distributions | 1,074,600 | 31,493,863 | 158,872 | 5,446,130 | |||||||||
Net increase (decrease) | 1,651,983 | 49,259,471 | 1,349,041 | 46,098,679 | |||||||||
Partners III Opportunity - Investor Class | |||||||||||||
Sales | 787,638 | 11,832,353 | 1,826,997 | 30,178,117 | |||||||||
Redemptions | (2,660,062 | ) | (37,766,982 | ) | (2,736,959 | ) | (44,851,404 | ) | |||||
Reinvestment of distributions | 454,392 | 6,781,356 | 127,366 | 2,101,595 | |||||||||
Net increase (decrease) | (1,418,032 | ) | (19,153,273 | ) | (782,596 | ) | (12,571,692 | ) | |||||
Partners III Opportunity - Institutional Class | |||||||||||||
Sales | 4,944,586 | 73,695,720 | 10,353,618 | 172,339,237 | |||||||||
Redemptions | (21,424,637 | ) | (315,779,946 | ) | (23,505,892 | ) | (389,596,914 | ) | |||||
Reinvestment of distributions | 6,359,601 | 96,166,678 | 1,481,055 | 24,663,971 | |||||||||
Net increase (decrease) | (10,120,450 | ) | (145,917,548 | ) | (11,671,219 | ) | (192,593,706 | ) | |||||
Research | |||||||||||||
Sales | 79,345 | 819,186 | 189,211 | 2,251,624 | |||||||||
Redemptions | (86,008 | ) | (857,483 | ) | (86,672 | ) | (1,059,625 | ) | |||||
Reinvestment of distributions | 288,209 | 3,072,895 | 92,573 | 1,108,272 | |||||||||
Net increase (decrease) | 281,546 | 3,034,598 | 195,112 | 2,300,271 | |||||||||
Hickory | |||||||||||||
Sales | 396,695 | 20,673,746 | 676,197 | 38,467,653 | |||||||||
Redemptions | (2,521,703 | ) | (124,823,500 | ) | (2,467,278 | ) | (140,383,046 | ) | |||||
Reinvestment of distributions | 909,598 | 46,726,598 | 326,455 | 18,712,260 | |||||||||
Net increase (decrease) | (1,215,410 | ) | (57,423,156 | ) | (1,464,626 | ) | (83,203,133 | ) | |||||
Balanced | |||||||||||||
Sales | 491,175 | 6,519,277 | 908,440 | 12,789,346 | |||||||||
Redemptions | (1,430,350 | ) | (19,557,267 | ) | (1,194,282 | ) | (16,735,499 | ) | |||||
Reinvestment of distributions | 437,254 | 5,849,006 | 285,790 | 4,008,748 | |||||||||
Net increase (decrease) | (501,921 | ) | (7,188,984 | ) | (52 | ) | 62,595 |
60 | Q1 2016 ANNUAL REPORT
Year ended March 31, 2016 | Year ended March 31, 2015 | ||||||||||||
Shares | $ Amount | Shares | $ Amount | ||||||||||
Core Plus Income - Investor Class* | |||||||||||||
Sales | 103,418 | 1,049,187 | 392,640 | 3,931,860 | |||||||||
Redemptions | (27,627 | ) | (276,162 | ) | (8,449 | ) | (85,404 | ) | |||||
Reinvestment of distributions | 10,824 | 108,512 | 2,865 | 28,896 | |||||||||
Net increase (decrease) | 86,615 | 881,537 | 387,056 | 3,875,352 | |||||||||
Core Plus Income - Institutional Class* | |||||||||||||
Sales | 381,505 | 3,887,905 | 1,151,379 | 11,639,923 | |||||||||
Redemptions | (87,637 | ) | (883,422 | ) | (340 | ) | (3,470 | ) | |||||
Reinvestment of distributions | 37,456 | 375,450 | 5,742 | 58,129 | |||||||||
Net increase (decrease) | 331,324 | 3,379,933 | 1,156,781 | 11,694,582 | |||||||||
Short-Intermediate Income - Investor Class | |||||||||||||
Sales | 2,127,886 | 26,223,023 | 4,526,659 | 56,613,916 | |||||||||
Redemptions | (3,208,886 | ) | (39,575,247 | ) | (4,520,740 | ) | (56,494,373 | ) | |||||
Reinvestment of distributions | 185,365 | 2,274,703 | 165,598 | 2,063,982 | |||||||||
Net increase (decrease) | (895,635 | ) | (11,077,521 | ) | 171,517 | 2,183,525 | |||||||
Short-Intermediate Income - Institutional Class | |||||||||||||
Sales | 18,650,517 | 230,471,447 | 21,718,694 | 272,245,722 | |||||||||
Redemptions | (30,419,689 | ) | (375,584,635 | ) | (34,451,441 | ) | (431,783,688 | ) | |||||
Reinvestment of distributions | 2,315,263 | 28,462,916 | �� | 2,009,620 | 25,090,220 | ||||||||
Net increase (decrease) | (9,453,909 | ) | (116,650,272 | ) | (10,723,127 | ) | (134,447,746 | ) | |||||
Nebraska Tax-Free Income | |||||||||||||
Sales | 663,014 | 6,729,520 | 802,733 | 8,231,787 | |||||||||
Redemptions | (1,304,161 | ) | (13,238,682 | ) | (892,272 | ) | (9,139,793 | ) | |||||
Reinvestment of distributions | 112,526 | 1,137,963 | 62,741 | 640,280 | |||||||||
Net increase (decrease) | (528,621 | ) | (5,371,199 | ) | (26,798 | ) | (267,726 | ) | |||||
Government Money Market | |||||||||||||
Sales | 61,508,489 | 61,508,489 | 70,090,394 | 70,090,394 | |||||||||
Redemptions | (63,306,051 | ) | (63,306,051 | ) | (85,806,529 | ) | (85,806,529 | ) | |||||
Reinvestment of distributions | 32,139 | 32,139 | 10,807 | 10,807 | |||||||||
Net increase (decrease) | (1,765,423 | ) | (1,765,423 | ) | (15,705,328 | ) | (15,705,328 | ) |
* Initial offering of shares on July 31, 2014
4) Related Party Transactions
Each Fund has retained Weitz Investment Management, Inc. (the "Adviser") as its investment adviser. In addition, the Trust has an agreement with Weitz Securities, Inc. (the "Distributor"), a company under common control with the Adviser, to act as distributor for shares of the Trust. Certain officers of the Trust are also officers and directors of the Adviser and the Distributor.
Each Fund has retained Weitz Investment Management, Inc. (the "Adviser") as its investment adviser. In addition, the Trust has an agreement with Weitz Securities, Inc. (the "Distributor"), a company under common control with the Adviser, to act as distributor for shares of the Trust. Certain officers of the Trust are also officers and directors of the Adviser and the Distributor.
Under the terms of management and investment advisory agreements, the Adviser is paid a monthly fee based on average daily net assets. The annual investment advisory fee schedule for each of the Weitz Equity Funds is as follows:
Value and Partners Value Funds (effective July 31, 2014):
Greater Than | Less Than or Equal To | Rate | ||||||||
$ | 0 | $ | 1,000,000,000 | 0.90 | % | |||||
1,000,000,000 | 2,000,000,000 | 0.85 | % | |||||||
2,000,000,000 | 3,000,000,000 | 0.80 | % | |||||||
3,000,000,000 | 5,000,000,000 | 0.75 | % | |||||||
5,000,000,000 | 0.70 | % |
Partners III Opportunity Fund:
Greater Than | Less Than or Equal To | Rate | ||||||||
$ | 0 | $ | 1,000,000,000 | 1.00 | % | |||||
1,000,000,000 | 2,000,000,000 | 0.95 | % | |||||||
2,000,000,000 | 3,000,000,000 | 0.90 | % | |||||||
3,000,000,000 | 5,000,000,000 | 0.85 | % | |||||||
5,000,000,000 | 0.80 | % |
Research and Hickory Funds (Value and Partners Value prior to July 31, 2014):
Greater Than | Less Than or Equal To | Rate | ||||||||
$ | 0 | $ | 2,500,000,000 | 1.00 | % | |||||
2,500,000,000 | 5,000,000,000 | 0.90 | % | |||||||
5,000,000,000 | 0.80 | % |
The Balanced Fund pays the Adviser, on a monthly basis, an annual advisory fee equal to 0.80% of the Fund's average daily net assets.
The Core Plus Income, Short-Intermediate Income, Nebraska Tax-Free Income and Government Money Market Funds each pay the Adviser, on a monthly basis, an annual advisory fee equal to 0.40% of the respective Fund's average daily net assets.
The Adviser also provides administrative services, including shareholder administrative services, to each Fund pursuant to agreements which provide that the Funds will pay the Adviser a monthly fee based on the average daily net assets of each respective Fund and/or a fee per account, plus third party expenses directly related to providing such services.
Prior to July 31, 2014, the Partners III Opportunity and Short-Intermediate Income Funds had Service and Distribution plans which authorized the Funds to pay the Distributor a distribution fee payable monthly equal to 0.25% per annum, of the average daily net assets of each Fund's respective Investor Class.
Through July 31, 2016, the Adviser has agreed in writing to reimburse the Research and Government Money Market Funds or to pay directly a portion of the Funds' expenses to the extent that total expenses
61 | Q1 2016 ANNUAL REPORT
(excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) exceed 0.90% and 0.20%, respectively, of each Fund's average daily net assets. In addition, for the year ended March 31, 2016, the Adviser voluntarily reimbursed expenses to limit the expenses of the Government Money Market Fund to 0.05% of the Fund's average daily net assets. The expenses reimbursed by the Adviser for the Research and Government Money Market Funds for the year ended March 31, 2016, were $169,712 and $691,766, respectively.
Through July 31, 2016, the Adviser has agreed in writing to reimburse the Value and Partners Value Funds or to pay directly a portion of each Fund's expenses to the extent that each Class' total annual fund operating expenses (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) exceed 1.18% and 0.99% of the Investor and Institutional Class shares' average daily net assets, respectively.
Through July 31, 2016, the Adviser has agreed in writing to reimburse the Core Plus Income Fund or to pay directly a portion of the Fund's expenses to the extent that each Class' total annual fund operating expenses (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) exceed 0.85% and 0.65% of the Investor and Institutional Class shares' average daily net assets, respectively.
Through July 31, 2016, the Adviser has agreed in writing to reimburse the Short-Intermediate Income Fund or to pay directly a portion of the Fund's Investor Class expenses to the extent that the Fund's Investor Class total annual fund operating expenses (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) exceed 0.85% of the Investor Class shares average daily net assets.
The expenses reimbursed by the Adviser for the Value, Partners Value, Core Plus Income and Short-Intermediate Income Funds for the year ended March 31, 2016, were $407,990; $533,804; $67,874; $59,154 for the Investor Class shares and $183,152; $230,311; $105,569; $0 for the Institutional Class shares, respectively.
As of March 31, 2016, the controlling shareholder of the Adviser held shares totaling approximately 30%, 70%, 14%, 37%, 37%, 62% and 14% of the Partners III Opportunity, Research, Hickory, Balanced, Core Plus Income, Nebraska Tax-Free Income and Government Money Market Funds, respectively.
(5) Distributions to Shareholders and Distributable Earnings
The tax character of distributions paid by the Funds are summarized as follows (in U.S. dollars):
The tax character of distributions paid by the Funds are summarized as follows (in U.S. dollars):
Year ended March 31, | Year ended March 31, | Year ended March 31, | Year ended March 31, | ||||||||||||||||||||||
Distributions paid from: | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Value | Partners Value | Partners III Opportunity | Research | ||||||||||||||||||||||
Ordinary income | — | — | — | — | — | — | 293,463 | — | |||||||||||||||||
Long-term capital gains | 118,386,928 | 92,517,392 | 113,409,681 | 34,460,331 | 107,468,863 | 35,477,987 | 2,786,351 | 3,850,663 | |||||||||||||||||
Total distributions | 118,386,928 | 92,517,392 | 113,409,681 | 34,460,331 | 107,468,863 | 35,477,987 | 3,079,814 | 3,850,663 |
Hickory | Balanced | Core Plus Income | Short-Intermediate Income | ||||||||||||||||||||||
Ordinary income | — | — | — | — | 477,959 | 86,997 | 27,585,680 | 27,497,188 | |||||||||||||||||
Long-term capital gains | 48,187,197 | 24,246,012 | 5,916,094 | 6,054,129 | 6,003 | 27 | 4,203,274 | 738,169 | |||||||||||||||||
Total distributions | 48,187,197 | 24,246,012 | 5,916,094 | 6,054,129 | 483,962 | 87,024 | 31,788,954 | 28,235,357 |
Nebraska Tax-Free Income | Government Money Market | ||||||||||||||||||||||||
Ordinary income | 13,270 | 30,838 | 35,981 | 12,273 | |||||||||||||||||||||
Tax exempt income | 1,240,860 | 1,444,162 | — | — | |||||||||||||||||||||
Total distributions | 1,254,130 | 1,475,000 | 35,981 | 12,273 |
As of March 31, 2016, the components of distributable earnings on a tax basis were as follows (in U.S. dollars)
Partners | Partners III | |||||||||||||||
Value | Value | Opportunity | Research | Hickory | ||||||||||||
Qualified late year ordinary loss deferral | (874,185 | ) | (498,954 | ) | (1,151,588 | ) | — | (63,796 | ) | |||||||
Undistributed long-term gains | — | — | 9,484,076 | — | — | |||||||||||
Post October capital loss deferral | (84,312 | ) | (429,570 | ) | — | (294,414 | ) | (320,469 | ) | |||||||
Net unrealized appreciation (depreciation) | 206,559,552 | 145,227,770 | 180,108,842 | (152,769 | ) | 65,753,355 | ||||||||||
205,601,055 | 144,299,246 | 188,441,330 | (447,183 | ) | 65,369,090 |
Short- | Nebraska | Government | ||||||||||||||
Core Plus | Intermediate | Tax-Free | Money | |||||||||||||
Balanced | Income | Income | Income | Market | ||||||||||||
Undistributed ordinary income | 141,277 | 1,265 | 6,108 | — | 1,612 | |||||||||||
Undistributed tax exempt income | — | — | — | 1,943 | — | |||||||||||
Undistributed long-term gains | 824,873 | — | 279,374 | — | — | |||||||||||
Capital loss carryforwards | — | — | — | (1,651 | ) | — | ||||||||||
Post October capital loss deferral | — | (15,583 | ) | — | (46,571 | ) | (16 | ) | ||||||||
Net unrealized appreciation (depreciation) | 12,173,601 | 100,119 | 13,158,709 | 1,694,915 | — | |||||||||||
13,139,751 | 85,801 | 13,444,191 | 1,648,636 | 1,596 |
62 | Q1 2016 ANNUAL REPORT
The Value, Partners Value, Partners III Opportunity and Hickory Funds elected to defer ordinary losses arising after December 31, 2015. Such losses are treated for tax purposes as arising on April 1, 2016.
The Value, Partners Value, Research, Hickory, Core Plus Income, Nebraska Tax-Free Income and Government Money Market Funds elected to defer realized capital losses arising after October 31, 2015. Such losses are treated for tax purposes as arising on April 1, 2016.
Capital loss carryforwards represent tax basis capital losses that may be carried over to offset future realized capital gains, if any. To the extent that carryforwards are used, no capital gains distributions will be made. During the fiscal year, the Funds utilized capital loss carryforwards to offset realized capital gains. The character and utilization of the carryforwards are as follows (in U.S. dollars):
Nebraska | Government | ||||||
Tax-Free | Money | ||||||
Income | Market | ||||||
Long term (no expiration) | (1,651 | ) | — | ||||
Capital loss carryforwards utilized | — | 882 |
The cost of investments for Federal income tax purposes is summarized as follows (in U.S. dollars):
Short- | Nebraska | Government | |||||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Intermediate | Tax-Free | Money | ||||||||||||||||||||||||||
Value | Value | Opportunity | Research | Hickory | Balanced | Income | Income | Income | Market | ||||||||||||||||||||||
Tax Cost | 724,349,587 | 682,287,11 | 518,692,082 | 22,715,700 | 232,799,547 | 99,212,275 | 19,640,278 | 1,238,204,283 | 62,635,330 | 106,721,915 |
At March 31, 2016, the aggregate gross unrealized appreciation and depreciation of investments, based on cost for Federal income tax purposes, are summarized as follows (in U.S. dollars):
Short- | Nebraska | |||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Intermediate | Tax-Free | ||||||||||||||||||||||||
Value | Value | Opportunity | Research | Hickory | Balanced | Income | Income | Income | ||||||||||||||||||||
Appreciation | 232,220,377 | 191,757,808 | 190,437,586 | 1,745,131 | 82,240,938 | 12,867,093 | 352,775 | 27,196,900 | 1,698,625 | |||||||||||||||||||
Depreciation | (25,660,825 | ) | (46,530,038 | ) | (10,184,454 | ) | (1,897,900 | ) | (16,487,583 | ) | (693,492 | ) | (252,656 | ) | (14,038,191 | ) | (3,710 | ) | ||||||||||
Net | 206,559,552 | 145,227,770 | 180,253,132 | (152,769 | ) | 65,753,355 | 12,173,601 | 100,119 | 13,158,709 | 1,694,915 |
(6) Securities Transactions
Purchases and proceeds from maturities or sales of investment securities of the Funds, excluding short-term securities and U.S. government obligations, are summarized as follows (in U.S. dollars):
Purchases and proceeds from maturities or sales of investment securities of the Funds, excluding short-term securities and U.S. government obligations, are summarized as follows (in U.S. dollars):
Short- | Nebraska | |||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Intermediate | Tax-Free | ||||||||||||||||||||||||
Value | Value | Opportunity | Research | Hickory | Balanced | Income | Income | Income | ||||||||||||||||||||
Purchases | 393,071,545 | 237,991,406 | 375,889,619 | 14,570,615 | 80,289,297 | 29,393,847 | 9,013,725 | 261,814,663 | 8,124,960 | |||||||||||||||||||
Proceeds | 464,135,593 | 346,727,232 | 603,346,906 | 16,530,096 | 162,337,461 | 39,833,314 | 3,908,097 | 346,796,374 | 10,143,500 |
(a) Illiquid and Restricted Securities
The Funds own certain securities that have a limited trading market and/or certain restrictions on trading and therefore may be illiquid and/or restricted. Such securities have been valued at fair value in accordance with the procedures described in Note (2)(a). Because of the inherent uncertainty of valuation, these values may differ from the values that would have been used had a ready market for these securities existed and these differences could be material. Illiquid and/or restricted securities owned at March 31, 2016, include the following:
The Funds own certain securities that have a limited trading market and/or certain restrictions on trading and therefore may be illiquid and/or restricted. Such securities have been valued at fair value in accordance with the procedures described in Note (2)(a). Because of the inherent uncertainty of valuation, these values may differ from the values that would have been used had a ready market for these securities existed and these differences could be material. Illiquid and/or restricted securities owned at March 31, 2016, include the following:
Acquisition | Partners III | |||||||||
Date | Opportunity | Hickory | ||||||||
Intelligent Systems Corp. | 12/03/91 | $ | 2,899,379 | $ | — | |||||
LICT Corp. | 9/09/96 | — | 2,228,509 | |||||||
Total cost of illiquid and/or restricted securities | 2,899,379 | 2,228,509 | ||||||||
Value at March 31, 2016 | 7,945,000 | 5,301,375 | ||||||||
Percent of net assets at March 31, 2016 | 1.1 | % | 1.8 | % |
(b) Options Written
Transactions relating to options written for the year ended March 31, 2016, are summarized as follows:
Partners III Opportunity | |||||||
Number of Contracts | $ Premiums | ||||||
Options outstanding, beginning of period | — | — | |||||
Options written | 3,450 | 2,453,638 | |||||
Options expired | (1,500 | ) | (1,417,764 | ) | |||
Options closed | (700 | ) | (571,509 | ) | |||
Options outstanding, end of period | 1,250 | 464,365 |
63 | Q1 2016 ANNUAL REPORT
The locations in the Statements of Assets and Liabilities as of March 31, 2016, of the Funds' derivative positions, none of which are designated as hedging instruments are as follows (in U.S. dollars):
Average | Gross | ||||||||||||||||
Fair Value of | Month-End | Notional | |||||||||||||||
Asset | Liability | Notional | Amount | ||||||||||||||
Fund | Type of Derivative | Location | Derivatives | Derivatives | Amount | Outstanding | |||||||||||
Partners III | Call options written | Options written, at value | — | (341,250 | ) | 6,822,917 | 6,625,000 | ||||||||||
Opportunity |
Transactions in derivative instruments during the year ended March 31, 2016, by the Funds, are recorded in the following locations in the Statements of Operations (in U.S. dollars):
Change in | |||||
Realized | Unrealized | ||||
Fund | Type of Derivative | Location | Gain (Loss) | Location | Gain (Loss) |
Partners III Opportunity | Call options written | Net realized gain (loss) - options written | 1,887,023 | Net unrealized appreciation (depreciation) - options written | 123,115 |
(7) Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of 1940, are those in which a Fund's holdings of an issuer represent 5% or more of the outstanding voting securities of the issuer. A summary of each Fund's holdings in the securities of such issuers is set forth below:
Affiliated issuers, as defined under the Investment Company Act of 1940, are those in which a Fund's holdings of an issuer represent 5% or more of the outstanding voting securities of the issuer. A summary of each Fund's holdings in the securities of such issuers is set forth below:
Number of | Number of Shares | Realized | ||||||||||||||||||||
Shares Held | Gross | Gross | Held | Value | Dividend | Gains/ | ||||||||||||||||
March 31, 2015 | Additions | Reductions | March 31, 2016 | March 31, 2016 | Income | (Losses) | ||||||||||||||||
Partners III Opportunity: | ||||||||||||||||||||||
Intelligent Systems Corp.† | 2,270,000 | — | — | 2,270,000 | $ | 7,945,000 | $ | 794,500 | $ | — |
†Controlled affiliate in which the Fund owns 25% or more of the outstanding voting securities.
(8) Contingencies
Each Fund indemnifies the Trust's officers and trustees for certain liabilities that might arise from their performance of their duties to each of the Funds. Additionally, in the normal course of business the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Each Fund indemnifies the Trust's officers and trustees for certain liabilities that might arise from their performance of their duties to each of the Funds. Additionally, in the normal course of business the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
(9) Financial Instruments With Off-Balance Sheet Risks
Option contracts written and securities sold short result in off-balance sheet risk as the Fund's ultimate obligation to satisfy the terms of the contract or the sale of securities sold short may exceed the amount recognized in the Statements of Assets and Liabilities.
Option contracts written and securities sold short result in off-balance sheet risk as the Fund's ultimate obligation to satisfy the terms of the contract or the sale of securities sold short may exceed the amount recognized in the Statements of Assets and Liabilities.
The Funds are required to maintain collateral in a segregated account to provide adequate margin as determined by the broker.
(10) Margin Borrowing Agreement
The Partners III Opportunity Fund has a margin account with its prime broker, Merrill Lynch, under which the Fund may borrow against the value of its securities, subject to regulatory limitations. Interest accrues at the federal funds rate plus 0.625% (0.875% at March 31, 2016). Interest is accrued daily and paid monthly. The Partners III Opportunity Fund held a cash balance of $229,714,936, with the broker at March 31, 2016.
The Partners III Opportunity Fund has a margin account with its prime broker, Merrill Lynch, under which the Fund may borrow against the value of its securities, subject to regulatory limitations. Interest accrues at the federal funds rate plus 0.625% (0.875% at March 31, 2016). Interest is accrued daily and paid monthly. The Partners III Opportunity Fund held a cash balance of $229,714,936, with the broker at March 31, 2016.
The Partners III Opportunity Fund is exposed to credit risk from its prime broker who effects transactions and extends credit pursuant to a prime brokerage agreement. The Adviser attempts to minimize the credit risk by monitoring credit exposure and the creditworthiness of the prime broker.
(11) Concentration of Credit Risk
Approximately 86% of the Nebraska Tax-Free Income Fund's net assets are in obligations of political subdivisions of the State of Nebraska, which are subject to the credit risk associated with the non-performance of such issuers.
Approximately 86% of the Nebraska Tax-Free Income Fund's net assets are in obligations of political subdivisions of the State of Nebraska, which are subject to the credit risk associated with the non-performance of such issuers.
(12) Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are used in determining the value of the Funds' investments and are summarized in the following fair value hierarchy:
Various inputs are used in determining the value of the Fund's investments. These inputs are used in determining the value of the Funds' investments and are summarized in the following fair value hierarchy:
• | Level 1 – quoted prices in active markets for identical securities; |
• | Level 2 – other significant observable inputs (including quoted prices for similar securities); |
• | Level 3 – significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments). |
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
A description of the valuation techniques applied to the Funds' major categories of assets and liabilities measured at fair value on a recurring basis follows.
64 | Q1 2016 ANNUAL REPORT
• | Equity securities. Securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Preferred stock and other equities traded on inactive markets or valued by reference to similar instruments are categorized in Level 2. |
• | Corporate and Municipal bonds. The fair values of corporate and municipal bonds are estimated using various techniques, which may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads and fundamental data relating to the issuer. Although most corporate and municipal bonds are categorized in Level 2 of the fair value hierarchy, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3. |
• | Asset-backed securities. The fair values of asset-backed securities (including non-government agency mortgage- backed securities and interest-only securities) are generally estimated based on models that consider the estimated cash flows of each tranche of the entity, a benchmark yield and an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. Certain securities are valued principally using dealer quotations. To the extent the inputs are observable and timely, the values would be categorized in Level 2 of the fair value hierarchy; otherwise they would be categorized as Level 3. |
• | U.S. Government securities. U.S. Government securities are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers and reference data. Certain securities are valued principally using dealer quotations. U.S. Government securities are categorized in Level 1 or Level 2 of the fair value hierarchy depending on the inputs used and market activity levels for specific securities. |
• | U.S. agency securities. U.S. agency securities are comprised of two main categories consisting of agency issued debt and mortgage-backed securities. Agency issued debt securities are generally valued in a manner similar to U.S. Government securities. Mortgage-backed securities include collateralized mortgage obligations, to-be-announced (TBA) securities and mortgage pass-through certificates. Mortgage-backed securities are generally valued using dealer quotations. Depending on market activity levels and whether quotations or other data are used, these securities are typically categorized in Level 2 of the fair value hierarchy. |
• | Restricted and/or illiquid securities. Restricted and/or illiquid securities for which quotations are not readily available are valued in accordance with procedures approved by the Trust's Board of Trustees. Restricted securities issued by publicly traded companies are generally valued at a discount to similar publicly traded securities. Restricted or illiquid securities issued by nonpublic entities may be valued by reference to comparable public entities or fundamental data relating to the issuer or both. Depending on the relative significance of valuation inputs, these instruments may be classified in either Level 2 or Level 3 of the fair value hierarchy. |
• | Derivative instruments. Listed derivatives, such as the Funds' equity option contracts, that are valued based on closing prices from the exchange or the mean of the closing bid and ask prices are generally categorized in Level 2 of the fair value hierarchy. |
The following is a summary of inputs used, in U.S. dollars, as of March 31, 2016, in valuing the Funds' assets and liabilities carried at fair value. The Schedule of Investments for each Fund provides a detailed breakdown of each category.
Value | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Common Stocks | 759,490,086 | — | — | 759,490,086 | |||||
Cash Equivalents | 171,419,053 | — | — | 171,419,053 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 930,909,139 | — | — | 930,909,139 |
Partners Value | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Common Stocks | 680,133,656 | — | — | 680,133,656 | |||||
Cash Equivalents | 147,381,225 | — | — | 147,381,225 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 827,514,881 | — | — | 827,514,881 |
Partners III Opportunity | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Common Stocks | |||||||||
Industrials | 72,576,550 | 7,945,000 | — | 80,521,550 | |||||
Other | 553,435,000 | — | — | 553,435,000 | |||||
Cash Equivalents | 64,988,664 | — | — | 64,988,664 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 691,000,214 | 7,945,000 | — | 698,945,214 | |||||
Liabilities: | |||||||||
Securities Sold | |||||||||
Short | (216,290,600) | — | — | (216,290,600) | |||||
Options Written | — | (341,250) | — | (341,250) |
Research | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Common Stocks | 17,429,292 | — | — | 17,429,292 | |||||
Cash Equivalents | 5,133,639 | — | — | 5,133,639 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 22,562,931 | — | — | 22,562,931 |
65 | Q1 2016 ANNUAL REPORT
Hickory | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Common Stocks | |||||||||
Telecommunication | |||||||||
Services | — | 5,301,375 | — | 5,301,375 | |||||
Other | 234,229,393 | — | — | 234,229,393 | |||||
Cash Equivalents | 59,022,134 | — | — | 59,022,134 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 293,251,527 | 5,301,375 | — | 298,552,902 |
Balanced | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Common Stocks | 52,487,639 | — | — | 52,487,639 | |||||
Corporate Bonds | — | 11,490,156 | — | 11,490,156 | |||||
Corporate | |||||||||
Convertible | |||||||||
Bonds | — | 909,375 | — | 909,375 | |||||
Asset-Backed | |||||||||
Securities | — | 500,227 | — | 500,227 | |||||
Commercial | |||||||||
Mortgage- | |||||||||
Backed Securities | — | 701,606 | — | 701,606 | |||||
Mortgage- | |||||||||
Backed Securities | — | 3,239,904 | — | 3,239,904 | |||||
U.S. Treasury | |||||||||
Notes | — | 23,147,615 | — | 23,147,615 | |||||
Cash Equivalents | 18,909,354 | — | — | 18,909,354 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 71,396,993 | 39,988,883 | — | 111,385,876 |
Core Plus Income | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Corporate Bonds | — | 8,611,063 | — | 8,611,063 | |||||
Corporate | |||||||||
Convertible | |||||||||
Bonds | — | 583,500 | — | 583,500 | |||||
Asset-Backed | |||||||||
Securities | — | 2,148,516 | — | 2,148,516 | |||||
Commercial | |||||||||
Mortgage- | |||||||||
Backed Securities | — | 767,278 | — | 767,278 | |||||
Mortgage- | |||||||||
Backed Securities | — | 667,744 | — | 667,744 | |||||
Taxable | |||||||||
Municipal Bonds | — | 438,056 | — | 438,056 | |||||
U.S. Treasury | |||||||||
Notes | — | 5,480,656 | 5,480,656 | ||||||
Common Stocks | 517,416 | — | — | 517,416 | |||||
Cash Equivalents | 526,168 | — | — | 526,168 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 1,043,584 | 18,696,813 | — | 19,740,397 |
Short-Intermediate Income | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Corporate Bonds | — | 505,414,130 | — | 505,414,130 | |||||
Corporate | |||||||||
Convertible | |||||||||
Bonds | — | 43,953,656 | — | 43,953,656 | |||||
Asset-Backed | |||||||||
Securities | — | 59,598,568 | — | 59,598,568 | |||||
Commercial | |||||||||
Mortgage- | |||||||||
Backed Securities | — | 35,017,186 | — | 35,017,186 | |||||
Mortgage- | |||||||||
Backed Securities | — | 299,285,404 | — | 299,285,404 | |||||
Taxable | |||||||||
Municipal Bonds | — | 5,691,058 | — | 5,691,058 | |||||
U.S. Treasury | |||||||||
Notes | — | 237,391,415 | — | 237,391,415 | |||||
Common Stocks | 28,715,903 | — | — | 28,715,903 | |||||
Cash Equivalents | 36,295,672 | — | — | 36,295,672 | |||||
Total Investments in Securities | 65,011,575 | 1,186,351,417 | — | 1,251,362,992 |
66 | Q1 2016 ANNUAL REPORT
Nebraska Tax-Free Income | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Municipal Bonds | — | 61,866,862 | — | 61,866,862 | |||||
Cash Equivalents | 2,463,383 | — | — | 2,463,383 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 2,463,383 | 61,866,862 | — | 64,330,245 |
Government Money Market | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities | |||||||||
U.S. Treasury | 101,947,354 | — | — | 101,947,354 | |||||
Money Market | |||||||||
Funds | 4,774,561 | — | — | 4,774,561 | |||||
Total | |||||||||
Investments in | |||||||||
Securities | 106,721,915 | — | — | 106,721,915 |
For transfers between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the transfer. During the year ended March 31, 2016, there were no transfers between Level 1, Level 2 and Level 3.
During the year ended March 31, 2016, there were no assets in which significant unobservable inputs (Level 3) were used.
(13) Subsequent Events
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
67 | Q1 2016 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of The Weitz Funds
We have audited the accompanying statements of assets and liabilities of The Weitz Funds, comprising the Value Fund, Partners Value Fund, Partners III Opportunity Fund, Research Fund, Hickory Fund, Balanced Fund, Core Plus Income Fund, Short-Intermediate Income Fund, Nebraska Tax-Free Income Fund, and Government Money Market Fund (collectively referred to as the "Funds"), including the schedules of investments, as of March 31, 2016, and the related statements of operations (and statement of cash flows for Partners III Opportunity Fund) for the year then ended, the changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2016, by correspondence with the custodian and brokers. 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 each of The Weitz Funds referred to above as of March 31, 2016, the results of their operations (and cash flows for Partners III Opportunity Fund) for the year then ended, the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Cincinnati, Ohio
May 6, 2016
May 6, 2016
68 | Q1 2016 ANNUAL REPORT
This page intentionally left blank
69 | Q1 2016 ANNUAL REPORT
ACTUAL AND HYPOTHETICAL EXPENSES
FOR COMPARISON PURPOSES
FOR COMPARISON PURPOSES
Example
As a shareholder of one or more of the Funds, you incur two types of costs: (1) transaction costs, including any transaction fees that you may be charged if you purchase or redeem your Fund shares through certain financial institutions; and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2015 through March 31, 2016.
As a shareholder of one or more of the Funds, you incur two types of costs: (1) transaction costs, including any transaction fees that you may be charged if you purchase or redeem your Fund shares through certain financial institutions; and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2015 through March 31, 2016.
Actual Expenses
The first line for each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid from 10/01/15 – 3/31/16" to estimate the expenses you paid on your account during this period.
The first line for each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid from 10/01/15 – 3/31/16" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each Fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of the Fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a specific Weitz Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The second line for each Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each Fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of the Fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a specific Weitz Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs charged by certain financial institutions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if you incurred transactional fees, your costs would have been higher. Actual and hypothetical expenses for each Fund are provided in this table.
Beginning Account | Ending Account | Annualized | Expenses Paid from | ||||||||||||
Value 10/01/15 | Value 3/31/16 | Expense Ratio | 10/01/15-3/31/16(1) | ||||||||||||
Value - Investor Class | Actual | $ | 1,000.00 | $ | 1,005.92 | 1.18 | % | $ | 5.92 | ||||||
Hypothetical(2) | 1,000.00 | 1,019.10 | 1.18 | 5.96 | |||||||||||
Value - Institutional Class | Actual | 1,000.00 | 1,006.67 | 0.99 | 4.97 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,020.05 | 0.99 | 5.00 | |||||||||||
Partners Value - Investor Class | Actual | 1,000.00 | 1,011.88 | 1.18 | 5.94 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,019.10 | 1.18 | 5.96 | |||||||||||
Partners Value - Institutional Class | Actual | 1,000.00 | 1,012.52 | 0.99 | 4.98 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,020.05 | 0.99 | 5.00 | |||||||||||
Partners III Opportunity - Investor Class | Actual | 1,000.00 | 1,017.35 | 2.33 | 11.75 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,013.35 | 2.33 | 11.73 | |||||||||||
Partners III Opportunity - Institutional Class | Actual | 1,000.00 | 1,019.26 | 1.95 | 9.84 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,015.25 | 1.95 | 9.82 | |||||||||||
Research | Actual | 1,000.00 | 1,054.66 | 0.90 | 4.62 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,020.50 | 0.90 | 4.55 | |||||||||||
Hickory | Actual | 1,000.00 | 1,053.21 | 1.24 | 6.36 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,018.80 | 1.24 | 6.26 | |||||||||||
Balanced | Actual | 1,000.00 | 1,043.98 | 1.11 | 5.67 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,019.45 | 1.11 | 5.60 | |||||||||||
Core Plus Income - Investor Class | Actual | 1,000.00 | 1,019.13 | 0.85 | 4.29 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,020.75 | 0.85 | 4.29 | |||||||||||
Core Plus Income - Institutional Class | Actual | 1,000.00 | 1,020.25 | 0.65 | 3.28 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,021.75 | 0.65 | 3.29 | |||||||||||
Short-Intermediate Income - Investor Class | Actual | 1,000.00 | 1,007.96 | 0.85 | 4.27 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,020.75 | 0.85 | 4.29 | |||||||||||
Short-Intermediate Income - Institutional Class | Actual | 1,000.00 | 1,009.18 | 0.62 | 3.11 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,021.90 | 0.62 | 3.13 | |||||||||||
Nebraska Tax-Free Income | Actual | 1,000.00 | 1,007.84 | 0.78 | 3.92 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,021.10 | 0.78 | 3.94 | |||||||||||
Government Money Market | Actual | 1,000.00 | 1,000.30 | 0.05 | 0.25 | ||||||||||
Hypothetical(2) | 1,000.00 | 1,024.75 | 0.05 | 0.25 |
(1) | Expenses are equal to the annualized expense ratio for the Fund, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183/366). |
(2) | Assumes 5% total return before expenses. |
70 | Q1 2016 ANNUAL REPORT
OTHER INFORMATION
Proxy Voting Policy
A description of the Funds' proxy voting policies and procedures is available without charge, upon request by (i) calling 800-304-9745, (ii) on the Funds' website at weitzinvestments.com; and (iii) on the SEC's website at sec.gov.
A description of the Funds' proxy voting policies and procedures is available without charge, upon request by (i) calling 800-304-9745, (ii) on the Funds' website at weitzinvestments.com; and (iii) on the SEC's website at sec.gov.
Information on how each of the Funds voted proxies relating to portfolio securities during each twelve month period ended June 30 is available: (i) on the Funds' website at weitzinvestments.com and (ii) on the SEC's website at sec.gov.
Form N-Q
The Funds file complete schedules of their portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds' Form N-Q is available on the SEC's website at sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. A list of the Funds' quarter-end holdings is available on the Funds' website at weitzinvestments.com within 15 days after the end of each quarter and remains available on the website until the list is updated in the subsequent quarter.
The Funds file complete schedules of their portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds' Form N-Q is available on the SEC's website at sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. A list of the Funds' quarter-end holdings is available on the Funds' website at weitzinvestments.com within 15 days after the end of each quarter and remains available on the website until the list is updated in the subsequent quarter.
Tax Information
Of the distributions paid during the fiscal year, the amounts that may be considered qualified dividend income and for corporate shareholders, the amounts that may qualify for the corporate dividends received deduction, are summarized as follows (in U.S. dollars):
Of the distributions paid during the fiscal year, the amounts that may be considered qualified dividend income and for corporate shareholders, the amounts that may qualify for the corporate dividends received deduction, are summarized as follows (in U.S. dollars):
Short- | ||||
Core Plus | Intermediate | |||
Research | Income | Income | ||
Qualified dividend income | 165,144 | 2,345 | 368,943 | |
Corporate dividends received deduction | 165,267 | 2,345 | 368,943 |
The information and distributions reported herein may differ from the information and distributions reported to shareholders for the calendar year ended December 31, 2015, which was reported in conjunction with your 2015 Form 1099-DIV.
71 | Q1 2016 ANNUAL REPORT
INFORMATION ABOUT THE TRUSTEES AND OFFICERS
The individuals listed below serve as Trustees or Oficers of the Trust. Each Trustee of the Weitz Funds serves until a successor is elected and qualified or until resignation. Each Officer of the Weitz Funds is elected annually by the Trustees.
The address of all Officers and Trustees is 1125 South 103rd Street, Suite 200, Omaha, Nebraska 68124.
Interested Trustees* Wallace R. Weitz (Age: 66) Position(s) Held with Trust: President; Portfolio Manager; Trustee Length of Service (Beginning Date): 1986 Principal Occupation(s) During Past 5 Years: President, Weitz Funds; Chairman of the Board and Chief Investment Officer (2015 to Present), President (1983 to 2014), Weitz Investment Management, Inc. Number of Portfolios Overseen in Fund Complex: 10 Other Directorships During Past 5 Years: Cable One, Inc. (2015 to Present) Thomas R. Pansing (Age: 70) Position(s) Held with Trust: Trustee Length of Service (Beginning Date): 1986 Principal Occupation(s) During Past 5 Years: Partner, Pansing Hogan Ernst & Bachman LLP, a law firm Number of Portfolios Overseen in Fund Complex: 10 Other Directorships During Past 5 Years: N/A | Roland J. Santoni (Age: 74) Position(s) Held with Trust: Trustee Length of Service (Beginning Date): 2004 Principal Occupation(s) During Past 5 Years: Managing Director (2010 to Present) Gary and Mary West Foundation Number of Portfolios Overseen in Fund Complex: 10 Other Directorships During Past 5 Years: N/A Delmer L. Toebben (Age: 85) Position(s) Held with Trust: Trustee Length of Service (Beginning Date): 1996 Principal Occupation(s) During Past 5 Year: Retired Number of Portfolios Overseen in Fund Complex: 10 Other Directorships During Past 5 Years: N/A Justin B. Wender (Age: 46) Position(s) Held with Trus: Trustee Length of Service (Beginning Date): 2009 Principal Occupation(s) During Past 5 Years: Managing Partner, Stella Point Capital, LP, a private equity firm (2010 to Present) Number of Portfolios Overseen in Fund Complex: 10 Other Directorships During Past 5 Years: N/A | |
* | Mr. Weitz is a Director and Officer of Weitz Investment Management, Inc., investment adviser to the Weitz Funds, and as such is considered an " interested person" of the Trust, as that term is defined in the Investment Company Act of 1940 (an "Interested Trustee"). Mr. Pansing performs certain legal services for the investment adviser and the Weitz Funds and, therefore, is also classified as an "Interested Trustee." | |
Independent Trustees Lorraine Chang (Age: 65) Position(s) Held with Trust: Trustee; Chair, Board of Trustees Length of Service (Beginning Date): 1997 Principal Occupation(s) During Past 5 Years: Independent Management Consultant Number of Portfolios Overseen in Fund Complex: 10 Other Directorships During Past 5 Years: N/A John W. Hancock (Age: 68) Position(s) Held with Trust: Trustee Length of Service (Beginning Date): 1986 Principal Occupation(s) During Past 5 Years: CPA, Hancock & Dana, PC, an accounting firm Number of Portfolios Overseen in Fund Complex: 10 Other Directorships During Past 5 Years: N/A |
72 | Q1 2016 ANNUAL REPORT
Officers | |
Thomas D. Carney (Age: 52) | |
Position(s) Held with Trust: Vice President | |
Length of Service (Beginning Date): 2015 | |
Principal Occupation(s) During Past 5 Years: Vice President, Weitz Funds (2015 to Present); Portfolio Manager, Weitz Investment Management, Inc. (1996 to Present) | |
John R. Detisch (Age: 51) | |
Position(s) Held with Trust: Vice President, General Counsel, | |
Secretary and Chief Compliance Officer | |
Length of Service (Beginning Date): 2011 | |
Principal Occupation(s) During Past 5 Years: Vice President, General Counsel, Secretary and Chief Compliance Officer, Weitz Funds; Vice President, General Counsel, Assistant Secretary and Chief Compliance Officer, Weitz Investment Management, Inc. | |
Bradley P. Hinton (Age: 48) | |
Position(s) Held with Trust: Vice President | |
Length of Service (Beginning Date): 2006 | |
Principal Occupation(s) During Past 5 Years: Vice President, Weitz Funds; Vice President, Portfolio Manager and Director of Research, Weitz Investment Management, Inc. | |
Jo Ann Quinif (Age: 40) | |
Position(s) Held with Trust: Vice President | |
Length of Service (Beginning Date): 2015 | |
Principal Occupation(s) During Past 5 Years: Vice President, Weitz Funds (2015 to Present); Vice President (2015 to Present) and Director of Marketing and Client Services (2008 to Present), Weitz Investment Management, Inc. | |
Kenneth R. Stoll (Age: 54) | |
Position(s) Held with Trust: Vice President and Chief Financial Officer | |
Length of Service (Beginning Date): 2004 | |
Principal Occupation(s) During Past 5 Years: Vice President and Chief Financial Officer, Weitz Funds; President and Chief Financial Officer (2015 to Present), Vice President and Chief Operating Officer (2004 to 2014), Weitz Investment Management, Inc. | |
The Statement of Additional Information for the Weitz Funds, which can be obtained without charge by calling 800-304-9745, includes additional information about the Trustees and Officers of the Weitz Funds. |
73 | Q1 2016 ANNUAL REPORT
INDEX DESCRIPTIONS
Russell 1000® | The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. |
Russell 1000® Value | The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. |
Russell 3000® | The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. |
Russell 3000® Value | The Russell 3000 Value Index measures the performance of the broad value segment of the U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. |
Russell 2500TM | The Russell 2500 Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as "SMID" cap. The Russell 2500 Index is a subset of the Russell 3000 Index. It includes approximately 2,500 of the smallest securities based on a combination of their market cap and current index membership. |
Russell 2500TM Value | The Russell 2500 Value Index measures the performance of the small to mid-cap value segment of the U.S. equity universe. It includes those Russell 2500 companies that are considered more value oriented relative to the overall market as defined by Russell's leading style methodology. |
S&P 500® | The S&P 500 is an unmanaged index consisting of 500 companies generally representative of the market for the stocks of large-size U.S. companies. |
Blended | The Blended Index blends the S&P 500 with the Barclays Intermediate U.S. Government/Credit Index by weighting their total returns at 60% and 40%, respectively. The portfolio is rebalanced monthly. |
Barclays U.S. Aggregate Bond | The Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). |
Barclays Intermediate U.S. Government Credit | The Barclays Intermediate U.S. Government/Credit Index ("BIGC") is the non-securitized portion of the U.S. Aggregate Index and includes Treasuries, government-related issues and corporates with maturities from one to ten years. |
CPI + 1% | The CPI + 1% is created by adding 1% to the annual percentage change in the Consumer Price Index ("CPI") as determined by the U.S. Department of Labor Statistics. There can be no guarantee that the CPI will reflect the exact level of infiation at any time. |
Barclays 5-Year Municipal Bond | The Barclays 5-Year Municipal Bond Index is a capitalization weighted bond index created by Barclays intended to be representative of major municipal bonds of all quality ratings with an average maturity of approximately five years. |
74 | Q1 2016 ANNUAL REPORT
Board of Trustees | Distributor |
Lorraine Chang | Weitz Securities, Inc. |
John W. Hancock | |
Thomas R. Pansing, Jr. | Transfer Agent and Dividend |
Roland J. Santoni | Paying Agent |
Delmer L. Toebben | Weitz Investment Management, Inc. |
Wallace R. Weitz | |
Justin B. Wender | Sub-Transfer Agent |
Boston Financial Data Services, Inc. | |
Investment Adviser | |
Weitz Investment Management, Inc. | NASDAQ symbols: |
1125 South 103rd Street, Suite 200 | Value Fund |
Omaha, NE 68124-1071 | Investor Class - WVALX |
(800) 304-9745 | Institutional Class - WVAIX |
Partners Value Fund | |
Custodian | Investor Class - WPVLX |
Wells Fargo Bank, N.A. | Institutional Class - WPVIX |
Partners III Opportunity Fund | |
Investor Class - WPOIX | |
Officers | Institutional Class - WPOPX |
Wallace R. Weitz, President | Research Fund - WRESX |
Thomas D. Carney, Vice President | Hickory Fund - WEHIX |
John R. Detisch, Vice President, General Counsel, | Balanced Fund - WBALX |
Secretary & Chief Compliance Officer | Core Plus Income Fund |
Bradley P. Hinton, Vice President | Investor Class - WCPNX |
Jo Ann Quinif, Vice President | Institutional Class - WCPBX |
Kenneth R. Stoll, Vice President & Chief | Short-Intermediate Income Fund |
Financial Officer | Investor Class - WSHNX |
Institutional Class - WEFIX | |
Nebraska Tax-Free Income Fund - WNTFX | |
Government Money Market Fund - WGMXX |
Help us conserve resources by receiving your report electronically.
Visit us online at weitzinvestments.com.
Visit us online at weitzinvestments.com.
Simply log in to your account and select "Electronic Delivery."
An investor should consider carefully the investment objectives, risks, and charges and expenses of the Funds before investing. The Funds' Prospectus contains this and other information about the Funds. The Prospectus should be read carefully before investing.
5/13/16
75 | Q1 2016 ANNUAL REPORT
Item 2. Code of Ethics.
As of the end of the period covered by this report, the Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party (the “Code of Ethics”). During the period covered by this report, there were no amendments, nor did the Registrant grant any waivers, including any implicit waivers, from any provision of the Code of Ethics.
The Code of Ethics is attached hereto as Exhibit 12(a)(1).
Item 3. Audit Committee Financial Expert.
The Registrant’s board of trustees has determined that the Registrant has at least one “audit committee financial expert” (as defined in Item 3 of Form N-CSR) serving on its audit committee. John Hancock is an “audit committee financial expert” and is “independent” (as each term is defined in Item 3 of Form N-CSR).
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees. Fees for audit services provided to the Registrant were $327,830 and $315,920 for fiscal years ended March 31, 2016 and 2015, respectively. |
(b) | Audit Related Fees. The aggregate fees billed in each of the last two fiscal years for audit related-services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this item were $29,540 and $28,680 for fiscal years ended March 31, 2016 and 2015, respectively. The fees, paid by Weitz Investment Management, Inc., the Registrant’s investment adviser and transfer agent, were payment for the principal accountant performing internal control reviews of the Registrant’s transfer agent. |
(c) | Tax Fees. Fees for tax services, which consisted of income and excise tax compliance services, were $47,380 and $46,000 for the fiscal years ended March 31, 2016 and 2015, respectively. |
(d) | All Other Fees. Fees for all other services totaled $12,460 and $12,095 for fiscal years ended March 31, 2016 and 2015, respectively. |
(e) | (1) The Registrant’s Audit Committee has adopted Pre-Approval Policies and Procedures. The Audit Committee must pre-approve all audit services and non-audit services that the principal accountant provides to the Registrant. The Audit Committee must also pre-approve any engagement of the principal accountant to provide non-audit services to the Registrant’s investment adviser, or any affiliate of the adviser that provides ongoing services to the Registrant, if such non-audit services directly impact the Registrant’s operations and financial reporting. |
(2) No services described in items (b) were pre-approved by the Audit Committee pursuant to Rule 2-01(c)(7)(i)(c) of Regulation S-X. |
(f) | All of the work in connection with the audit of the Registrant during the years ended March 31, 2016 and 2015 was performed by full-time employees of the Registrant’s principal accountant. |
(g) | The aggregate fees billed by the principal accountant for non-audit services to the Registrant, the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant were $156,780 and $133,925 for the years ended March 31, 2016 and 2015, respectively. |
(h) | The Registrant’s Audit Committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal auditor’s independence. |
Item 5. Audit Committee of Listed Registrants.
Not applicable.
The Schedule of Investments in securities of unaffiliated issuers is included as part of the Report to Shareholders.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Not applicable.
(a) Based on an evaluation of the Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) (the "Disclosure Controls") as of a date within 90 days prior to the filing date (the "Filing Date") of this report on Form N-CSR (the "Report"), the Registrant's principal executive officer and financial officer have concluded that the Disclosure Controls are reasonably designed to ensure that information required to be disclosed by the Registrant in the Report is recorded, processed, summarized and reported by the Filing Date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the Registrant's management, including the Registrant's principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant's second fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.
(a)(1) The Code of Ethics is attached hereto.
(a)(2) The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940 are attached hereto.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) of the Investment Company Act of 1940 and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The Weitz Funds | ||
By (Signature and Title)* | /s/ Wallace R. Weitz | |
Wallace R. Weitz, President | ||
Date May 13, 2016 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Wallace R. Weitz | |
Wallace R. Weitz, President | ||
Date May 13, 2016 |
By (Signature and Title)* | /s/ Kenneth R. Stoll | |
Kenneth R. Stoll, Chief Financial Officer | ||
Date May 13, 2016 |
* Print the name and title of each signing officer under his or her signature.