UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED ANNUAL SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANIES
Investment Company Act file number 811-21410
The Weitz Funds
(Exact name of registrant as specified in charter)
(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)
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)
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, 2018
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 over $4 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.
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 over $4 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
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TABLE OF CONTENTS
Value Matters | 4 |
Performance Summary | 7 |
Analyst Corner | 8 |
Value Fund | 10 |
Partners Value Fund | 12 |
Partners III Opportunity Fund | 14 |
Hickory Fund | 16 |
Balanced Fund | 18 |
Core Plus Income Fund | 20 |
Short Duration Income Fund | 23 |
Ultra Short Government Fund | 26 |
Nebraska Tax-Free Income Fund | 27 |
Schedule of Investments | 29 |
Financial Statements | 44 |
Notes to Financial Statements | 54 |
Report of Independent Registered | |
Public Accounting Firm | 64 |
Actual and Hypothetical Expenses for | |
Comparison Purposes | 65 |
Other Information | 66 |
Information About the Trustees and Officers | 68 |
Index Descriptions | 70 |
The management of Weitz Funds has chosen paper for the 72 page 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.
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VALUE MATTERS
April 9, 2018
Dear Fellow Investor,
In the first quarter of 2018, we saw the first serious market volatility in two years. There were days on which the Dow dropped over 1,000 points, and there were more triple-digit moves (in both directions) than in any other quarter since the depths of the financial crisis in 2008. One day in early February, an ETN (exchange traded note) built specifically to profit from an absence of volatility, imploded. It fell over 80% and was liquidated by its sponsor.
The stock market, as measured by the Dow, S&P 500 and Russell indices, suffered its first quarterly loss in about three years. The conservative positioning of our portfolios served us well. The performance table following this letter shows returns over various periods during our 35-year history. As usual, we suggest investors focus on the longer-term results, as they are better reflections of our clients’ long-term returns.
Our investment approach is built on taking advantage of mispriced stocks and bonds. We buy the cheap and sell the expensive, so we are happy to see a rise in volatility and some divergence of performance among market sectors and individual stocks.
The long, steady rise in stock prices from “expensive” to “more expensive” has made it difficult for us to ply our trade.
We think something is changing. Various threats to the bull market (none of which are brand new) are attracting investor attention.
We think something is changing. Investors had been lulled into a bullish complacency by the Fed’s apparent determination to pump up stock and bond prices and to do whatever necessary to avoid investment “unpleasantness.” Now, various threats to the bull market (none of which are brand new) are attracting investor attention. We believe that in the long run, the most important determinant of stock price is the value of the underlying business, but some other factors deserve a mention.
What’s Causing the Volatility?
Tech Stocks. Some of the largest tech companies (members of the FAANG fraternity—Facebook, Amazon, Apple, Netflix and Google) have come under particularly strong pressure. The Cambridge Analytics misuse of Facebook data brought Facebook’s basic business model under scrutiny. Presidential tweets accusing Amazon of hurting small retailers, not paying enough taxes and taking advantage of the U.S. Postal Service caused some wild fluctuations in its stock. Google also dropped almost 15% in the first week in February as questions arose about threats to its advertising business. Facebook, Amazon and Google are great businesses. We own, or have owned, all three in some of our portfolios, but they are not automatic winners regardless of price level—valuation matters, even with FAANGs.
Index Funds and ETFs. Most important index funds and ETFs are capitalization weighted. That is, the assets within the fund are allocated among the component stocks in proportion to the companies’ overall stock market values. Subsequent flows of capital into and out of the fund maintain these proportions. Thus, the stock price movements of the very largest companies (which includes four of the FAANGs) have a disproportionate impact on the volatility of the fund or ETF. And, as money flows into these passive instruments, new units are created by buying each of the component stocks. Large inflows mean large, non-price-sensitive buy orders which can exacerbate volatility of the underlying stocks. The reverse is true when investors sell the funds and the component stocks must be sold on short notice. The short-term fluctuations caused by these trades do not affect the underlying business value of the component companies. This is merely noise in the markets, but the noise can get loud at times and investors can find it unsettling.
Interest Rates and Inflation. Interest rates have been unusually low both because of Fed policy and because inflation has been low by historical standards for several years. Now the Fed is raising short-term rates and letting its bond portfolio self-liquidate as bonds mature. The withdrawal of the Fed’s capital from the bond market puts upward pressure on interest rates. Inflation is beginning to tick up because of economic growth and very low unemployment, and this also pushes interest rates higher.
Rising interest rates act as a headwind for stock and bond prices. The impact is direct for bonds. A 10-year, 2% bond issued at a price of $100.00 falls to $83.65 if comparable bonds soon become available with 4% coupons. With stocks, aside from higher borrowing costs, the impact is less direct. Higher bond yields present stiffer competition for investors’ capital. In a higher-yield environment, stock investors require a higher prospective return from future cash flows, thus a lower starting stock price. As a result, higher interest rates generally lead to lower P/E ratios.
Political climate. The polarization of Congress and the determination of the president to bring change to Washington have injected a large dose of uncertainty into the stock and bond markets. Concerns around the current political climate and ‘what
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might be’ is not helpful for business planning. However, America has withstood an amazing variety of leadership, and we are confident this trend will continue.
War with North Korea and other apocalyptic events are not impossible, but they seem so unlikely that we do not dwell on them in picking stocks and planning investment strategy. Plausible threats and scary headlines will probably move markets from time to time, but we need to emotionally pace ourselves.
Promised regulatory relief has been welcomed by the business community. Budget hawks have also cheered the “streamlining” of various government departments and agencies. We suspect that the actual rule changes and compliance cost savings will be less than anticipated, but from many individual companies’ points of view, there are positives. The potential collateral damage from these changes to citizens, the environment and our image in the world are a different matter, and something we will need to watch closely as investors.
Trade issues are potentially very troublesome. We believe free trade is generally good for business. Tariffs and other impediments to free trade have not worked well in the past and seem particularly unwise given today’s complex global supply chains. The outcomes of “Art of the Deal”-style bluster and backtrack negotiating tactics are hard to predict but seem certain to complicate life for many businesses, farmers, workers, consumers and investors.
The changes to the tax code are significant. While it arguably benefited a different segment of the tax paying population than advertised, it has had a major positive impact on much of corporate America. Ironically, Berkshire Hathaway, whose chairman disagreed with the structure of the cut, was probably the biggest single beneficiary, with roughly $29 billion in one-time tax savings in 2017 plus ongoing savings due to the lowered corporate tax rate. Berkshire is the largest single investment holding among our portfolios, and an increase in book value of about $18,000 per A share is appreciated.
The potential downside of the tax cut is that, in combination with a less-than-conservative spending bill, the impact on the growing budget deficit may well turn out to be inflationary. The president and Congress are apparently already discussing adjustments to both the tax and spending bills, so we must be alert to potential changes.
Finally, fears of impending recession arise from time to time. The recovery from the Great Recession of 2007-09 is in its ninth year. This is one of the longest periods that the U.S. economy has gone without a recession, and its longevity worries some. Most economists seem to agree that both the U.S. and global economies are growing nicely, and we have no argument with that point of view. Our companies are generally growing their earnings and business values, but we always watch carefully for signs of deterioration in industry and company results. We believe that our companies have strong enough balance sheets and competitive positions to withstand a recession (and possibly take advantage of it). Nevertheless, when a recession eventually arrives, investors tend to overreact, and we do not want to be caught unaware.
Our Game Plan
The near-term outlook for the “market” is not the same as the outlook for our next 3-5 years of returns. Historically, after a long bull market, we generally see a period of sideways market “consolidation.” Over the past nine years, company earnings (E) have grown, and the valuation placed on those earnings (P/E) has also grown. It would be perfectly normal to see a period of years in which earnings continued to grow but P/E ratios shrink. The result would be a market that generally moves sideways but with plenty of short-term volatility.
Our investment approach is to take aggressive positions when investors are fearful, and stocks are very cheap; to hold them as markets recover; and to harvest the gains when an overvalued market makes stocks relatively unattractive. We have not enjoyed the protracted period of over-valuation of recent years, but we believe we are entering a period when investors face enough uncertainty that they will present us with lots of opportunities. This is not an environment in which we expect oversized absolute gains, but we are hopeful that it is one in which we can protect capital in the near term and set up the portfolios for very good returns over the next 3-5 years.
Thanks for your patience while we have “waited for our pitch.”
Sincerely,
Wally Weitz | Brad Hinton |
wally@weitzinvestments.com | brad@weitzinvestments.com |
As of March 31, 2018, each of the following portfolio companies constituted a portion of the net assets of Value Fund, Partners Value Fund, Partners III Opportunity Fund, Hickory Fund, and Balanced Fund as follows: Alphabet, Inc. (Parent of Google)-Class C: 5.0%, 4.1%, 4.3%, 0%, and 1.4%. Amazon.com, Inc.: 2.1%, 0%, 0%, 0%, and 0%. Berkshire Hathaway Inc.-Class B: 9.1%, 9.5%, 12.2%, 0%, and 3.0%. Facebook, Inc.-Class A: 2.0%, 0%, 0%, 0%, and 0%. Portfolio composition is subject to change at any time. Current and future portfolio holdings are subject to risk.
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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, 1.24%; Value – Institutional Class, 1.10% (gross); Partners Value – Investor Class, 1.27%; Partners Value –Institutional Class, 1.07% (gross); Partners III Opportunity – Investor Class, 2.29%; Partners III Opportunity – Institutional Class – 1.80%; Hickory, 1.25%; Balanced, 1.01% (gross); Core Plus Income – Investor Class, 1.91% (gross); Core Plus Income – Institutional Class, 1.23% (gross); Short Duration Income – Investor Class, 0.93% (gross); Short Duration Income – Institutional Class, 0.62% (gross); Ultra Short Government, 0.60% (gross); and Nebraska Tax-Free Income, 0.80%. See the Financial Highlights on pages 49 and 51 for more current expense ratios. 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. Performance data represents past performance, which 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 70 for a description of all indices.
(a) On the last business day of 1993, 2005 and 2006, the Partners Value, Partners III Opportunity and Nebraska Tax-Free Income Funds (the “Funds”) succeeded to substantially all of the assets of Weitz Partners II Limited Partnership, Weitz Partners III Limited Partnership and Weitz Income Partners Limited Partnership (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 1.30% and 0.99%, respectively, of each Class’s average daily net assets through July 31, 2018.
(c) Investor Class shares of the Partners III Opportunity and Short Duration 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 Duration Income Fund’s – Investor and Institutional Class shares (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) to 0.68% and 0.48%, respectively, of each Class’s average daily net assets through July 31, 2018.
(d) 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 0.95% of the Fund’s average daily net assets through July 31, 2018.
(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 0.60% and 0.40%, respectively, of each Class’s average daily net assets through July 31, 2018.
(f) The Fund’s past performance is not necessarily an indication of how the Fund will perform in the future. Effective December 16, 2016, the Fund revised its principal investment strategies and policies to permit the Fund to invest in a diversified portfolio of short-term debt securities and to have a fluctuating net asset value. Prior to December 16, 2016, the Fund operated as a “government money market fund” as defined under Rule 2a-7 of the Investment Company Act of 1940 and maintained a stable net asset value of $1.00 per share. The Fund’s past performance reflects the Fund’s prior principal investment strategies and policies. The investment adviser has agreed in writing to limit the total annual fund operating expenses of the Ultra Short Government Fund (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) to 0.20% of the Fund’s average daily net assets through July 31, 2018.
(g) Since inception performance for the Russell 1000 Value and CPI +1% is from May 31, 1986 and December 31, 1988, respectively. The inception date of the Bloomberg Barclays 1-3 Year U.S. Aggregate and 5-Year Municipal Bond was December 31, 1992 and January 29, 1988, respectively.
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PERFORMANCE SUMMARY
Annualized | |||||||||||||||||||||||||
Since Investment | |||||||||||||||||||||||||
Inception | Since | Style Inception | |||||||||||||||||||||||
Fund Name | Date | Inception | 30-year | 20-year | 10-year | (6/30/08) | 5-year | 1-year | Quarter | ||||||||||||||||
Value(b) | 5/09/86 | ||||||||||||||||||||||||
Investor | 10.15 | % | 10.43 | % | 6.88 | % | 7.45 | % | 8.50 | % | 7.78 | % | 9.23 | % | 0.61 | % | |||||||||
Institutional | 10.18 | 10.46 | 6.92 | 7.53 | 8.58 | 7.94 | 9.46 | 0.65 | |||||||||||||||||
Russell 1000 | 10.31 | 10.57 | 6.68 | 9.61 | 10.07 | 13.17 | 13.98 | (0.69 | ) | ||||||||||||||||
Russell 1000 Value(g) | 10.19 | 10.38 | 6.65 | 7.78 | 8.58 | 10.78 | 6.95 | (2.83 | ) | ||||||||||||||||
Partners Value(a)(b) | 6/01/83 | ||||||||||||||||||||||||
Investor | 11.72 | 10.83 | 7.18 | 8.04 | — | 6.19 | 4.28 | (0.48 | ) | ||||||||||||||||
Institutional | 11.74 | 10.87 | 7.23 | 8.13 | — | 6.36 | 4.55 | (0.38 | ) | ||||||||||||||||
Partners III | |||||||||||||||||||||||||
Opportunity(a)(c) | 6/01/83 | ||||||||||||||||||||||||
Investor | 12.14 | 11.70 | 8.14 | 8.83 | — | 4.84 | 1.49 | 1.64 | |||||||||||||||||
Institutional | 12.22 | 11.79 | 8.27 | 9.09 | — | 5.24 | 2.01 | 1.80 | |||||||||||||||||
Russell 3000 | 10.79 | 10.48 | 6.71 | 9.62 | — | 13.03 | 13.81 | (0.64 | ) | ||||||||||||||||
Russell 3000 Value | 11.09 | 10.40 | 6.73 | 7.84 | — | 10.71 | 6.81 | (2.82 | ) | ||||||||||||||||
Hickory | 4/01/93 | 9.53 | — | 5.62 | 7.86 | 8.93 | 5.29 | 2.15 | (1.41 | ) | |||||||||||||||
Russell 2500 | 10.54 | — | 8.57 | 10.28 | 10.39 | 11.55 | 12.31 | (0.24 | ) | ||||||||||||||||
Russell 2500 Value | 10.80 | — | 8.60 | 9.34 | 9.73 | 9.88 | 5.72 | (2.65 | ) | ||||||||||||||||
S&P 500 | — | 10.45 | 6.46 | 9.49 | 10.05 | 13.31 | 13.99 | (0.76 | ) | ||||||||||||||||
Balanced(d) | 10/01/03 | 5.48 | — | — | 6.21 | — | 5.17 | 7.06 | 0.07 | ||||||||||||||||
Blended Index | 7.04 | — | — | 7.12 | — | 8.46 | 8.44 | (0.78 | ) | ||||||||||||||||
Core Plus Income(e) | 7/31/14 | ||||||||||||||||||||||||
Investor | 2.80 | — | — | — | — | — | 1.20 | (0.61 | ) | ||||||||||||||||
Institutional | 3.01 | — | — | — | — | — | 1.40 | (0.56 | ) | ||||||||||||||||
U.S. Aggregate Bond | 2.03 | — | — | — | — | — | 1.20 | (1.46 | ) | ||||||||||||||||
Short Duration | |||||||||||||||||||||||||
Income(c) | 12/23/88 | ||||||||||||||||||||||||
Investor | 5.05 | — | 3.90 | 2.72 | — | 1.03 | 0.44 | (0.33 | ) | ||||||||||||||||
Institutional | 5.10 | — | 3.97 | 2.87 | — | 1.25 | 0.63 | (0.28 | ) | ||||||||||||||||
1-3 Year U.S. Aggregate(g) | — | — | 3.37 | 1.69 | — | 0.78 | 0.25 | (0.20 | ) | ||||||||||||||||
CPI + 1%(g) | 3.54 | — | 3.20 | 2.59 | — | 2.42 | 3.39 | 1.48 | |||||||||||||||||
Ultra Short | |||||||||||||||||||||||||
Government(f) | 8/01/91 | 2.37 | — | 1.75 | 0.29 | — | 0.25 | 0.94 | 0.30 | ||||||||||||||||
6 Month Treasury | 2.96 | — | 2.29 | 0.60 | — | 0.48 | 1.15 | 0.32 | |||||||||||||||||
Nebraska Tax-Free | |||||||||||||||||||||||||
Income(a) | 10/01/85 | 4.54 | — | 3.16 | 2.16 | — | 0.61 | (0.07 | ) | (0.89 | ) | ||||||||||||||
5-Year Municipal Bond(g) | — | — | 3.97 | 3.28 | — | 1.54 | 0.65 | (0.57 | ) |
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ANALYST CORNER
Introduction to Axalta Coating Systems
By Nathan Ritz, CFA
Axalta is a global leader in coatings (paint) for automotive and industrial end markets. They serve light vehicle and commercial vehicle OEMs (original equipment manufacturers) and auto body shops through their automotive refinish segment. Over the past five years, management has pushed to expand their industrial coatings business both through internal investment and bolt-on mergers and acquisitions (M&A). Their industrial coatings segment consists of pipe coatings; powder and coil coatings for appliances, machinery, and architectural end markets; electrical insulation coatings; and most recently wood coatings via their acquisition of Valspar’s North American wood coatings business.
New Management Behind the Wheel
While a young public company (IPO in 2014), Axalta is over a century old, founded in 1866 as a division of DuPont. Under the DuPont umbrella, the automotive coatings business was deemed “non-core” and was harvested for the strong free cash flow the business threw off. This lead to underinvestment in the business and in geographies where there was a longer runway to realizing returns. Additionally, DuPont pushed pricing too hard at OEMs, which led to bad blood and lost contracts. Carlyle Group took the business private in 2013 and brought in new management. In all, 80 of the top 120 executives were replaced.
New CEO Charlie Shaver and his team have taken meaningful steps to improve the business. They have reduced waste and streamlined operations, taking $200 million of costs out since 2014. Management realigned their sales process around the end customer, rationalized their SKU count and focused their R&D on customer value gaps. Capital allocation has improved, as dollars have been directed to the highest impact, risk-adjusted ROI (return on investment) projects. They also took actions to repair customer relationships and invested in growth, including a new foray into Asia. Management identified roughly $2 billion of profit pools that were neglected under DuPont, and we have seen market share gains as their investments have begun to bear fruit. While management has made significant headway, we think there is additional runway ahead. At their investor day last month, management targeted $200 million of additional cost savings over the next four years and approximately $100 million of working capital improvements. This should help drive return on invested capital into the mid-teens over our investment horizon.
A Colorful Moat
Axalta is a critical link in their customers’ production process. They add value to their customers by offering superior coatings chemistry and the largest color library in the industry. Equally, if not more important, they improve their customers’ operations through the application process, where costs are 3-4x the cost of the coating itself. Their core automotive OEM and refinish customers care about quality and increasing the number of cars they can get through the paint booth, as defects/reworks are expensive. For OEMs, Axalta developed “harmonized coatings technologies,” which combines coatings stages (e.g., combined primer and basecoat, basecoat and clearcoat, or wet on wet applications, which removes a curing stage). These application processes increase throughput and take capital, energy and labor costs out of operations. In refinish, we have seen widespread adoption of waterborne coatings, which are more complex to apply but increase the throughput of the paint booth. It is common to see a body shop’s gross profit increase 20-30% once Axalta is brought in. Axalta has technicians in the body shops and on the OEM floor who analyze and improve customer productivity. This intimate partnership with the OEM plant or body shop creates a sticky relationship and gives Axalta pricing power, particularly with refinish customers.
There are several industry trends that have benefited global coatings leaders that we expect to continue going forward. Technology, both in coatings and in application, has become increasingly important, as complexity has increased, and the industry is shifting toward more environmentally friendly coatings. Axalta and PPG are global leaders in waterborne coatings (water replaces oil-derived solvents as the liquefying agent), which have been taking share in Europe, North America and Asia. Importantly, the shift is being driven not only by environmental regulations but also economics given the higher productivity of waterborne coatings. Additionally, we have seen application complexity increase at OEMs as they have grown customization and design complexity (two-tone paint) and have shifted toward mixed substances (aluminum, carbon fiber, plastics, metal alloys). This makes application efficiency and innovation increasingly important. Scale in R&D is important, as is service density. Waterborne has a more complex application process and more stringent climate control requirements in the paint booth. This makes Axalta’s dense network of training and service centers increasingly valuable.
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Finally, another positive secular trend is the growing sophistication among Axalta’s customer base. We have seen consolidation among body shops, driven by economics and indirectly by insurance carriers, which has resulted in outsized growth for multi-shop operators (MSOs). For MSOs, productivity becomes the primary decision driver, favoring Axalta and PPG, a duopoly in the U.S. with close to 85% market share. As these secular trends continue to play out on a global scale, we expect the large entrenched incumbents, Axalta and PPG, to continue to benefit disproportionately compared to smaller peers.
Temporary Roadblocks
We were able to build positions in Axalta beginning in fall of 2017 as the stock dipped on fears around raw material inflation hitting margins, weak OEM pricing and refinish volume concerns due to several of their largest customers de-stocking inventory after a round of acquisitions. We expected these were short-term issues that could be worked through over the next 3-4 quarters. In fact, the inventory adjustment appears to be over, as Axalta reported volume improvement in refinish in Q4 and strong guidance for 2018.
Periods of high raw material inflation lead to margin compression for coatings players. Axalta’s propylene-derived resins and solvents are seeing mid-single to high-single-digit inflation, and some pigments like TiO2 are seeing double-digit inflation. This has led to margin compression that is likely to continue in Q1 and Q2. However, the coatings group has historically exhibited strong pricing power, especially compared to chemical peers, and has been able to pass through raw material inflation. Axalta has price escalators baked into contracts, and certain categories like automotive refinish have been able to pass through pricing with little lag. It takes longer to pass through pricing at auto OEMs given contract renegotiation periods; however, price increases were announced in March (some have taken effect already), and we expect others will flow through as the year progresses. We project margins will inflect for Axalta in the second half of the year as price increases and cost savings take hold.
Multiple Roads
We believe there are multiple avenues Axalta’s management can take to create shareholder value. The first is through continued organic investment and M&A. We think there is a large opportunity set for potential acquisitions where Axalta can leverage their technology, distribution network, procurement scale and operating system to create value and drive strong returns on invested capital. There are 25 coatings companies with revenue over $400 million and over 90 with revenue greater than $100 million. We expect industry consolidation to continue and for Axalta to be a key beneficiary.
The second lever would be an outright sale of the company. In October of last year, Akzo Nobel, the third-largest global coatings company, made an offer for Axalta. Management rejected the offer in November and announced that they were in talks with Asian coatings leader Nippon Paint. Later that month, management announced they ended talks, deeming Nippon’s $37 per share offer as inadequate. There are likely additional industry players interested in Axalta’s assets, and we expect there is a fair probability that Akzo Nobel returns to the table. While a takeout is not our core thesis, we think there is upside from a possible deal in the low $40s per share. Regardless, we expect to earn a low-teens return on our investment on a stand-alone basis.
As of March 31, 2018, Axalta Coating Systems Ltd. constituted a portion of the net assets of Partners Value Fund, Hickory Fund, and Balanced Fund as follows: 2.1%, 2.7%, and 1.4%. Current and future portfolio holdings are subject to risk.
Nathan Ritz, CFA®, Research Analyst, joined Weitz in 2011. He graduated from the University of Nebraska-Lincoln and became a CFA® charterholder in 2015. He previously completed an internship with Moody Aldrich Partners in Boston and worked as an analyst for West Gate Bank.
9 | Q1 2018 ANNUAL REPORT
VALUE FUND
Investment Style: Large-Cap Value
Co-Portfolio Managers: Brad Hinton, CFA and Dave Perkins, CFA
The Value Fund’s Institutional Class returned +0.65% during the first quarter compared to -0.76% for the S&P 500 and -0.69% for the Russell 1000. For the fiscal year, the Fund’s Institutional Class returned +9.46% compared to +13.99% for the S&P 500 and +13.98% for the Russell 1000. Since adopting its large-cap company mandate in June 2008, the Fund has generated annual returns of +8.58% compared to +10.05% for the S&P 500 and +10.07% for the Russell 1000.
The first quarter featured a little of everything for the equity investor. A fast start in January, starring last year’s winners and a boost from newly minted corporate tax legislation, followed by an acceleration in inflation in February that raised concerns about the appropriate Fed response. Lingering trade tensions between the world’s two largest economies began boiling over in March in the form of protectionist trade measures by the U.S. and China. Meanwhile, calls for increased regulation of the global tech titans grew louder following news that Facebook failed to protect user data. This combination of events resulted in an increase of volatility, with the VIX (an index measuring expected future volatility) rising roughly 80% during the quarter after a multi-year period of Fed-induced calm.
Some nine years and the S&P 500 gaining +325% from the end of the financial crisis, investor and media radars are (at least momentarily) registering a more balanced set of opportunities and threats. With this apparent downshift in bullish sentiment, let’s briefly discuss how the Fund is positioned relative to the opportunity set as we see it today. First, we aim to protect, then grow, wealth. Our emphasis on the former has resulted in the Fund underperforming the broader indices the past several years, but our efforts remain squarely focused on generating attractive full-cycle investment returns. Stock prices look more interesting today than they did three months ago, and volatile trading presented attractive buying and selling opportunities during the quarter. As active investors with a long-term investment horizon, we relish periodically choppy markets.
We wrote last quarter about the Fund’s increased exposure to more durable and less cyclical cash flow streams at fair to attractive prices. Just shy of 60% of the Fund’s invested assets fall into this category. Specific examples include Liberty Broadband, LabCorp and Mastercard. Another 12% of the Fund has what we believe to be attractive multi-year tailwinds, albeit with a potentially greater degree of cyclicality. We group Google parent Alphabet, Amazon and Accenture into this category. The remainder of the portfolio consists of more idiosyncratic opportunities like Allergan, Twenty-First Century Fox and Pioneer Natural Resources as well as residual cash, which stood at 12.7% of net assets as of March 31 (vs. 17.7% a year ago). Our appetite for operational turnarounds and significant balance sheet risk is generally low, but especially so today given the sour fruit typically borne of extended periods of abundant low-cost financing.
There was a fair degree of overlap among the Fund’s top contributors for the quarter and fiscal year. Mastercard was the standout performer during both periods, contributing roughly 20% of the Fund’s gains over the last 12 months. We again trimmed our stake early in the quarter but continue to hold a core position believing both Visa and Mastercard are classic examples of wonderful businesses trading at fair prices. Liberty Interactive QVC Group rebounded nicely from overly discounted levels last spring. Following its combination with HSN, we closed the Fund’s position at $28 during the quarter, with shares largely reflecting our view of intrinsic value. Amazon, which joined the Fund following the 2016 presidential election, enjoyed an unusually strong first quarter. We harbor no illusions that everything the company pursues will succeed or that the road ahead is immune from the challenges that inevitably accompany success. In fact, the stock may go down more than we expect in the quarters (even years) ahead, but we agree with Buffett’s admonition “…that it is usually foolish to part with an interest in a business that is both understandable and durably wonderful.” Media distributors Liberty Global and Comcast, and new addition Facebook led the list of quarterly detractors. We lightened our Liberty Global position by approximately 25% early in the first quarter, north of $35, in part to make room for the re-addition of TransDigm to the portfolio. Liberty Global owns valuable fiber assets, but the operating environment in Western Europe has proved trickier than the United States. Comcast’s potential engagement in the bidding process for Sky (and perhaps portions of Twenty-First Century Fox) frustrated those desiring a less adventurous cash-return story. Allergan shares stabilized during the first quarter but remained the largest detractors for the fiscal year. We continue to see significant value in the stock and believe management and the board will work diligently and thoughtfully to unlock it. Rounding out the list of detractors for the fiscal year is Range Resources, which simply put, was an investment we let ride for too long. We acknowledged the company’s acquisition of Memorial Resource Development 18 months ago as a thoughtfully considered strategic risk. It has not proved to be the cash flow generator management envisioned, leaving Range’s balance sheet significantly indebted against a backdrop of unrelenting growth in domestic natural gas supply. We closed the Fund’s position at a loss in March.
As mentioned above, the Fund established a new position in social media platform Facebook during the quarter. As of the time of this writing, the stock is trading roughly 10% below our average purchase price. We believe the fourteen-year-old company has created a uniquely valuable franchise with its flagship Facebook property and complemented it with three nicely growing platforms-Instagram, WhatsApp and Messenger. Facebook reaches over two billion people globally each month, with two-thirds of these users logging in daily. Some 70 million small and mid-sized businesses and 6 million advertisers use Facebook as a means of communicating with current and potential customers. We won’t rehash the data privacy and election controversies presently dominating headlines but acknowledge both as risks to the social network’s two key pillars: 1) user engagement and 2) advertiser return on investment. We (and others) will be closely monitoring management’s efforts to shore up privacy and regain user trust. While we anticipate the stream of ominous-sounding headlines to continue for the foreseeable future, our current view is that users are unlikely to stop engaging with their respective Facebook communities and that advertisers will continue to find Facebook’s platform(s) an efficient means of finding and winning new customers.
CarMax completes the list of new additions to the Fund during the first quarter. CarMax owns and operates used car dealerships across much of the U.S. If you’ve never shopped one of their stores, we’d encourage you to give them a try when it’s time for your next vehicle. Over the past 25 years, CarMax has methodically developed what we believe to be a superior means of purchasing a used car. The concept of marrying no-haggle pricing, deep national inventory and outstanding service isn’t a secret, but it’s proven difficult for competitors of all stripes to replicate. The volume of used cars sold will be volatile over time, but we expect CarMax to continue to earn more business in new and existing markets the old-fashioned way. As the stock fell from the upper $70s last fall to below $60, we established a starter position late in the quarter. We hope to add additional shares at similar or lower prices in the days ahead.
10 | Q1 2018 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 | 10.15 | % | 6.88 | % | 7.45 | % | 8.50 | % | 7.78 | % | 3.32 | % | 9.23 | % | 0.61 | % | |||||||||||||||||
WVAIX - Institutional Class | 10.18 | 6.92 | 7.53 | 8.58 | 7.94 | 3.54 | 9.46 | 0.65 | |||||||||||||||||||||||||
S&P 500 | 10.30 | 6.46 | 9.49 | 10.05 | 13.31 | 10.78 | 13.99 | (0.76 | ) | ||||||||||||||||||||||||
Russell 1000 | 10.31 | 6.68 | 9.61 | 10.07 | 13.17 | 10.39 | 13.98 | (0.69 | ) | ||||||||||||||||||||||||
Russell 1000 Value | 10.19 | * | 6.65 | 7.78 | 8.58 | 10.78 | 7.88 | 6.95 | (2.83 | ) |
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, 2018, 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
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway Inc. - Class B | 9.1 | |||
Liberty Broadband Corp. - Series C | 7.1 | |||
Allergan plc | 6.0 | |||
Alphabet, Inc. - Class C | 5.0 | |||
Laboratory Corp. of America Holdings | 4.8 | |||
Mastercard Inc. - Class A | 4.5 | |||
Oracle Corp. | 4.0 | |||
Liberty Global plc - Class C | 3.7 | |||
Dollar Tree, Inc. | 3.3 | |||
Visa Inc. - Class A | 3.2 | |||
50.7 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 25.4 | |||
Information Technology | 22.4 | |||
Health Care | 15.1 | |||
Financials | 14.1 | |||
Materials | 5.4 | |||
Consumer Staples | 2.0 | |||
Energy | 1.7 | |||
Industrials | 1.2 | |||
Cash Equivalents/Other | 12.7 | |||
100.0 |
Top Performers | Average | |||||||||||
Return | Weight | Contribution | ||||||||||
Mastercard Inc. - Class A | 15.9 | % | 4.3 | % | 0.59 | % | ||||||
Amazon.com, Inc. | 23.8 | 2.0 | 0.35 | |||||||||
Twenty-First Century Fox, Inc. - Class A | 6.8 | 2.3 | 0.27 | |||||||||
QVC Group - Series A | 3.1 | 1.0 | 0.27 | |||||||||
Thermo Fisher Scientific Inc. | 8.8 | 3.0 | 0.23 |
Bottom Performers | Average | |||||||||||
Return | Weight | Contribution | ||||||||||
Comcast Corp. - Class A | (14.4 | )% | 2.6 | % | (0.36 | )% | ||||||
Liberty Global plc - Class C | (10.1 | ) | 4.1 | (0.35 | ) | |||||||
Facebook, Inc. - Class A | (9.4 | ) | 1.8 | (0.33 | ) | |||||||
Dollar Tree, Inc. | (11.6 | ) | 3.0 | (0.29 | ) | |||||||
Wells Fargo & Co. | (13.1 | ) | 2.1 | (0.28 | ) |
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 1.24% and 1.10% (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. Performance data represents past performance, which 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 70 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 2018 ANNUAL REPORT
PARTNERS VALUE FUND
Investment Style: Multi-Cap Value
Co-Portfolio Managers: Wally Weitz, CFA and Brad Hinton, CFA
The Partners Value Fund’s Institutional Class returned -0.38% during the first quarter compared to -0.76% for the S&P 500 and -0.64% for the Russell 3000. For the fiscal year, the Fund’s Institutional Class returned +4.55% compared to +13.99% for the S&P 500 and +13.81% for the Russell 3000. While we held our own during the most recent quarter, the fiscal year was tougher for us and many other value investors.
The Fund’s top contributors for the fiscal year were Berkshire Hathaway, payment networks Visa and Mastercard, and thermal imaging pioneer FLIR Systems. The largest detractors were Allergan, Discovery Communications, Liberty Global and recently sold Range Resources. From an attribution standpoint, our consumer discretionary (e.g., cable and content) stocks primarily drove the performance shortfall. While we are disappointed with the performance of these stocks, we still view them as forward-looking opportunities. In fact, Liberty Broadband and Liberty Global remain among our highest-conviction holdings at today’s prices. We think the odds are high that last year’s losers may well become this year’s winners. Interestingly, technology stocks were not the relative story for us this fiscal year. We owned a lot of them, and our tech holdings performed very well and were in line with the sector.
In the first quarter, during the latest bout of market turbulence, we bought several new positions. Axalta Coating Systems is a leading manufacturer of paint and other coatings for automotive and industrial end markets; Tupperware Brands is a global direct seller of kitchen and home products trading at a very low multiple of free cash flow; CarMax is a retailer of used cars and light trucks and has a unique, time-tested business model; and GCI Liberty is yet another way to invest in Charter Communications at a “double-discount” because of the complex corporate wrapper. Axalta is the largest position of the four. Nathan Ritz describes our in-depth thesis in this quarter’s Analyst Corner, which is included at the beginning of this report.
We eliminated our remaining small energy holdings during the quarter. We sold Pioneer Natural Resources at a healthy gain as crude oil prices rebounded into the $60s per barrel. We also liquidated Range Resources at a loss. While natural gas investments generally have been challenging, our sell decision was sealed by poor drilling developments at the recently acquired Memorial Resource properties. In retrospect, the large acquisition was an ill-advised use of capital for a company with a less-than-pristine balance sheet. On a brighter front, we sold our Twenty-First Century Fox holdings at significant gains after Disney agreed to acquire the company at a price that validated our team’s valuation work.
As we described last quarter, we like the makeup of this portfolio. First and foremost, our collection of businesses is priced more reasonably than it has been in several years. Here are a few more specific reasons for optimism:
• | Nearly thirty percent of the Fund is invested in solid businesses that our team thinks are simply mispriced. We have well-researched variant views, and we are aligned with managements that we expect to create and capture value. We believe these stocks have 50% upside potential over the next few years, regardless of how the broader market behaves. Examples include Liberty Broadband, Allergan and Liberty Global. |
• | Thirty-five percent of the Fund is invested in high-quality, durable companies with an excellent chance of being worth significantly more in five years. These stocks provide ballast and peace of mind in an uncertain investing world. We expect to win largely by not losing, with most of the return potential coming from compounding value per share. Examples include Berkshire Hathaway, Visa and Texas Instruments. |
• | Over fifteen percent of the Fund is invested in moderately cheap, bread-and-butter-type companies. The return potential from this bucket is above average, especially on a relative basis if the market takes a breather. Examples include Oracle, Axalta Coating Systems and Redwood Trust. |
• | Five percent of the Fund is invested in opportunistic stocks as we do not think now is the time to be taking significant operating or financial risks. These companies represent mostly “return-to-par” stories, as opposed to deeper turnarounds. DXC Technology is an example in this category, and Tupperware Brands is a more recent addition. |
• | Finally, just shy of fifteen percent of the Fund is comprised of residual cash. As serious volatility surfaces, we have the resources to quickly buy 3-5 new positions from the on-deck list. While we have been conservative for the past several years, this option is worth a lot when dislocations occur. |
We think the Fund has an all-weather blend of return drivers and risk cushions, wrapped in a concentrated package of 26 stocks. Over the right time horizon, we believe that strong stock picking should fare well in an increasingly thematic, ETF-driven world. In the short term, Ben Graham’s concept of the “voting machine” will continue to oscillate wildly. In the long run, though, his “weighing machine” will always carry the day. While no amount of analytics can prove it or convince skeptics, we like our chances against this latter standard, as we have for nearly 35 years.
12 | Q1 2018 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 | 11.72 | % | 7.18 | % | 8.04 | % | 6.19 | % | 1.16 | % | 4.28 | % | (0.48 | )% | |||||||||||||||
WPVIX - Institutional Class | 11.74 | 7.23 | 8.13 | 6.36 | 1.41 | 4.55 | (0.38 | ) | |||||||||||||||||||||
S&P 500 | 10.99 | 6.46 | 9.49 | 13.31 | 10.78 | 13.99 | (0.76 | ) | |||||||||||||||||||||
Russell 3000 | 10.79 | 6.71 | 9.62 | 13.03 | 10.22 | 13.81 | (0.64 | ) | |||||||||||||||||||||
Russell 3000 Value | 11.09 | 6.73 | 7.84 | 10.71 | 7.87 | 6.81 | (2.82 | ) |
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, 2018, 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.
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway Inc. - Class B | 9.5 | |||
Liberty Broadband Corp. - Series A & C | 9.3 | |||
Liberty Global plc - Class C | 5.5 | |||
Visa Inc. - Class A | 5.3 | |||
Laboratory Corp. of America Holdings | 4.9 | |||
Allergan plc | 4.1 | |||
Alphabet, Inc. - Class C | 4.1 | |||
Liberty SiriusXM Group - Series A & C | 3.5 | |||
Mastercard Inc. - Class A | 3.4 | |||
Redwood Trust, Inc. | 3.3 | |||
52.9 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 28.8 | |||
Information Technology | 21.7 | |||
Financials | 17.4 | |||
Health Care | 9.7 | |||
Industrials | 5.7 | |||
Materials | 2.1 | |||
Cash Equivalents/Other | 14.6 | |||
100.0 |
Top Performers | Average | |||||||||||
Return | Weight | Contribution | ||||||||||
Mastercard Inc. - Class A | 15.9 | % | 3.2 | % | 0.43 | % | ||||||
Twenty-First Century Fox, Inc. - Class A | 6.8 | 0.9 | 0.27 | |||||||||
Visa Inc. - Class A | 5.1 | 5.1 | 0.23 | |||||||||
Redwood Trust, Inc. | 6.3 | 3.0 | 0.19 | |||||||||
FLIR Systems, Inc. | 7.6 | 1.3 | 0.17 |
Bottom Performers | Average | |||||||||||
Return | Weight | Contribution | ||||||||||
Colfax Corp. | (19.5 | )% | 2.8 | % | (0.55 | )% | ||||||
Liberty Global plc - Class C | (10.1 | ) | 6.2 | (0.52 | ) | |||||||
Liberty Latin America Ltd. - Class C | (10.8 | ) | 2.2 | (0.26 | ) | |||||||
Wells Fargo & Co. | (13.1 | ) | 1.9 | (0.25 | ) | |||||||
Allison Transmission Holdings, Inc. | (9.0 | ) | 2.9 | (0.25 | ) |
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 1.27% and 1.07% (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. Performance data represents past performance, which 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 70 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 2018 ANNUAL REPORT
PARTNERS III OPPORTUNITY FUND
Investment Style: Multi-Cap Alternative
Portfolio Manager: Wally Weitz, CFA
The Partners III Opportunity Fund’s Institutional Class returned +1.80% in the first calendar quarter compared to -0.76% for the S&P 500 and -0.64% for the Russell 3000 indices. For the fiscal year, the Fund’s Institutional Class returned +2.01% compared to +13.99% for the S&P 500 and +13.81% for the Russell 3000. The recent bout of market volatility proved a more constructive backdrop for the Fund’s strategy, generating positive absolute and relative results, and closed an otherwise challenging fiscal year (for us, and value investors, generally) on a more positive note.
Payment networks Mastercard and Visa, Berkshire Hathaway, analog semiconductor maker Texas Instruments and the recently created GCI Liberty (formed through the combination of Liberty Ventures and Alaskan telecommunications provider GCI) were top contributors to Fund performance in the fiscal year. The strong equity market performance during the first nine months of our fiscal year (April–December 2017) worked against the Fund’s short positions. Despite the modest reversal last quarter, our shorts against ETFs that track the S&P 500 and the Nasdaq 100 were the largest detractors to performance for the fiscal year. On the long side of the ledger, Allergan, Liberty Global and Colfax Corp were also detractors to fiscal year results. We remain confident in their prospects and believe current price levels represent compelling investment opportunities.
After three straight quarters of not just strong, but accelerating, positive returns, the market’s steady ascent has been interrupted by a bout of turbulence. Periods of volatile stock prices are not unusual, though investors’ experience in 2017 lulled many into a false sense of security. Indeed, one such catalyst for the current turmoil was the meltdown of ETFs that allowed investors to bet on continued market calm by shorting the VIX Index (a commonly used benchmark for expected market volatility.)
Not surprisingly, we’ve tried to capitalize on the current turmoil by initiating four new positions. CarMax is a national retailer of used cars, with a strong track record in both its sales and auto financing business. Markel is a widely respected specialty insurance carrier paired with a differentiated investment operation led by fellow value investor Tom Gayner. Tupperware Brands is a global direct seller of kitchen and housewares business trading with an attractive free cash flow yield. Finally, enterprise software and hardware provider Oracle returns to the portfolio after a multi-year hiatus. These purchases were partially offset by some selling, mostly during January’s rally. The Fund also closed its modest position in Amazon on the stock’s continued strength. Subsequent to our sale, Amazon has landed in some political hot water, though we expect CEO Jeff Bezos and company to deftly navigate any potential regulatory changes. At the right price, we’d gladly add Amazon back to our portfolio.
During the first quarter, the Fund’s effective net long position remained generally unchanged from last quarter at approximately 61%. During the quarter, we covered a portion of the Nasdaq short position, resulting in lowered short exposure of 29%. The Fund’s long exposure was at 90% of net assets at quarter end.
We use the proceeds from our market index shorts to concentrate further in our highest-conviction long ideas; investments that we believe have the potential to outperform said index (not just a hot sector or specific subset of its constituents.) That said, much has been made of the so-called FAANG stocks (Facebook, Amazon, Apple, Netflix and Alphabet’s Google–stodgy old Microsoft deserves an honorable mention, too) and their outsized contributions to various index returns. As a result, our S&P 500 and Nasdaq 100 shorts mean we are short the FAANGs, too. However, there’s more behind the scenes than just that; our short portfolio skews toward the S&P 500 (~70%), while our Nasdaq 100 short makes up the remainder (~30%) of the book. These indices have dramatically different weightings of the FAANG complex: roughly 11.5% for the S&P versus approximately 36.5% for the Nasdaq 100. Arithmetic suggests a simplified “look through” FAANG short of roughly 5% of assets. Portfolio context matters, however, and this simplified exercise ignores our long positions in FAANG member Alphabet (over 4%) as well as our broader Technology holdings. On a relative basis, these long positions outperformed the S&P 500’s sector performance this fiscal year.
Investors’ enthusiasm for the FAANGs has waned as regulatory and political pressures mount, and volatility, at least for now, appears the order of the day. We don’t know how long these trends will last but believe that periods like these are more constructive for the long-term oriented, value-minded investor, and we remain on the hunt for opportunities to put capital to work. We appreciate the opportunity to invest with you.
Effective Net Long means (i) the sum of a portfolio’s long positions (such as common stocks, or derivatives where the price increases when an index or position rises), minus (ii) the sum of a portfolio’s short positions (such as, derivatives where the price increases when an index or position falls).
14 | Q1 2018 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 | 12.14 | % | 8.14 | % | 8.83 | % | 4.84 | % | 0.00 | % | 1.49 | % | 1.64 | % | |||||||||||||||
WPOPX - Institutional Class | 12.22 | 8.27 | 9.09 | 5.24 | 0.48 | 2.01 | 1.80 | ||||||||||||||||||||||
S&P 500 | 10.99 | 6.46 | 9.49 | 13.31 | 10.78 | 13.99 | (0.76 | ) | |||||||||||||||||||||
Russell 3000 | 10.79 | 6.71 | 9.62 | 13.03 | 10.22 | 13.81 | (0.64 | ) | |||||||||||||||||||||
Russell 3000 Value | 11.09 | 6.73 | 7.84 | 10.71 | 7.87 | 6.81 | (2.82 | ) |
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, 2018, 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.
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway Inc. - Class B | 12.2 | |||
Liberty Broadband Corp. - Series A & C | 9.0 | |||
Liberty Global plc - Class C | 7.7 | |||
Allergan plc | 5.1 | |||
Laboratory Corp. of America Holdings | 4.9 | |||
Mastercard Inc. - Class A | 4.7 | |||
Redwood Trust, Inc. | 4.6 | |||
Alphabet, Inc. - Class C | 4.3 | |||
Visa Inc. - Class A | 4.1 | |||
Liberty SiriusXM Group - Series A & C | 3.8 | |||
60.4 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 32.2 | |||
Information Technology | 22.7 | |||
Financials | 17.3 | |||
Health Care | 11.1 | |||
Industrials | 6.3 | |||
Securities Sold Short | (28.7 | ) | ||
Short Proceeds/Other | 39.1 | |||
100.0 |
Top Performers | Average | |||||||||||
Return | Weight | Contribution | ||||||||||
Wesco Aircraft Holdings, Inc. | 38.5 | % | 2.5 | % | 0.89 | % | ||||||
Mastercard Inc. - Class A | 15.9 | 4.8 | 0.75 | |||||||||
Amazon.com, Inc. | 23.8 | 0.9 | 0.30 | |||||||||
Redwood Trust, Inc. | 6.3 | 4.2 | 0.28 | |||||||||
GCI Liberty, Inc. - Class A/ | ||||||||||||
Liberty Ventures Group - Series A* | (1.7 | ) | 2.9 | 0.22 |
*GCI Liberty spun-off from Liberty Ventures during the quarter. |
Bottom Performers | Average | |||||||||||
Return | Weight | Contribution | ||||||||||
Liberty Global plc - Class C | (10.1 | )% | 8.2 | % | (0.79 | )% | ||||||
Colfax Corp. | (19.5 | ) | 3.4 | (0.69 | ) | |||||||
PowerShares QQQ Trust, Series 1 (short) | 3.0 | (9.8 | ) | (0.41 | ) | |||||||
Liberty Latin America Ltd. - Class C | (10.8 | ) | 1.4 | (0.13 | ) | |||||||
Discovery Communications, Inc. - Class C | (7.8 | ) | 1.7 | (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 annual operating expenses which as stated in its most recent prospectus are 2.29% and 1.80% 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. Performance data represents past performance, which 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 70 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 2018 ANNUAL REPORT
HICKORY FUND
Investment Style: Small/Mid-Cap Value
Co-Portfolio Managers: Wally Weitz, CFA and Drew Weitz
Investment Style: Small/Mid-Cap Value
Co-Portfolio Managers: Wally Weitz, CFA and Drew Weitz
The Hickory Fund returned -1.41% in the first calendar quarter of 2018 compared to -0.24% for the Russell 2500 Index (the Fund’s primary benchmark.) For the fiscal year ended March 31, 2018, the Fund returned +2.15% compared to +12.31% for the Russell 2500.
The first nine months of our fiscal year, markets relentlessly moved “up and to the right,” with investors celebrating not just strong but accelerating positive returns. January looked to be more of the same, with the S&P 500 Index (a broadly used gauge for “the market”) gaining +7.55% in just the first 18 trading days of 2018. Headlines touted a solid employment picture, strong U.S. economic outlook, coordinated global growth and surging profits thanks to recently enacted corporate tax cuts. Then, the S&P 500 fell more than 10% in 9 trading sessions. Market volatility, largely absent in 2017, has (at least temporarily) returned.
Bouts of volatility are not rare, but recent experience may make it feel that way. For example, during calendar year 2016, the Hickory Fund reported a daily NAV change of greater than 1% (up or down) on 47 different occasions. In 2017, that threshold was met just 8 times. By the end of the first quarter 2018, we’d already surpassed last year’s total.
As you would expect, we are trying to use the recent flip of investors’ psyche from “greed” to “fear” to our advantage. During the first quarter, we continued to build our initial positions in companies like Guidewire Software and Axalta Coating Systems. With the current sentiment being “sell first, ask questions later,” we added to positions like Colfax and Compass Minerals after they reported underwhelming short-term quarterly results. We also looked to our On-Deck list of potential investments for ideas, initiating a position in global kitchen and housewares seller Tupperware Brands (a company we’ve followed since 2015), at what we believe to be an attractively low valuation. These purchases were partially offset by sales, mostly during the strong month of January. We closed our position in FLIR Systems as it traded through our business value estimate, and we eliminated remaining stub positions in National CineMedia, Range Resources and CommerceHub. Over the course of the quarter, our residual cash position decreased to 20.6%.
During the fiscal year as a whole, the Fund’s top contributors included rural telecom provider LICT Corp., Liberty Interactive’s QVC Group (now Qurate Retail Group) and thermal imaging equipment maker FLIR Systems. On the downside, our top detractors were Liberty Global, Colfax Corp. and our now closed position in National CineMedia. When looking at our relative performance for the fiscal year, these detractors, along with some underwhelming returns from our larger-than-benchmark holdings in the Consumer Discretionary sector (generally, media and entertainment) describe our sins of commission. On a relative basis, our sins of omission (at least for the first three quarters) were being underweight technology and healthcare, and the Fund’s conservative posture and cash position.
The current environment appears more constructive for our valuation-driven approach to investing than it did 12 months ago. At the outset of this fiscal year (April 1, 2017), our aggregated portfolio-level P/V (price-to-value, the ratio of a stock’s price to our base case value estimate) approached 0.90; what we’d describe as the more expensive end of a usual valuation range and indicative of an environment where cheap stocks are hard to find. As a result, the Fund was a net seller of equities, and our cash position was on the rise. By comparison, at quarter end (March 31, 2018) the portfolio P/V stood at roughly 0.80, and portfolio activity had been skewed toward buying. A P/V of 0.80 isn’t “the whites of their eyes” cheap in our opinion, but we believe it’s a more fruitful environment for value investing. And while we’re always looking for the next great investment, we continue to like the businesses we currently own. As a group, we believe the last year’s business value growth of our companies outpaced their share prices (with more to come over time), creating more potential upside for shareholders. In the interim, we will continue our search for new opportunities to put capital to work, and we appreciate the opportunity to invest alongside you.
16 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
Returns | Annualized | |||||||||||||||||||||||||||||||
Since | ||||||||||||||||||||||||||||||||
Since | Investment | |||||||||||||||||||||||||||||||
Inception | Style Inception | |||||||||||||||||||||||||||||||
(4/1/1993) | 20-year | 10-year | (6/30/08) | 5-year | 3-year | 1-year | Quarter | |||||||||||||||||||||||||
WEHIX | 9.53 | % | 5.62 | % | 7.86 | % | 8.93 | % | 5.29 | % | 1.22 | % | 2.15 | % | (1.41 | )% | ||||||||||||||||
Russell 2500 | 10.54 | 8.57 | 10.28 | 10.39 | 11.55 | 8.15 | 12.31 | (0.24 | ) | |||||||||||||||||||||||
Russell 2500 Value | 10.80 | 8.60 | 9.34 | 9.73 | 9.88 | 7.26 | 5.72 | (2.65 | ) | |||||||||||||||||||||||
S&P 500 | 9.46 | 6.46 | 9.49 | 10.05 | 13.31 | 10.78 | 13.99 | (0.76 | ) |
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, 2018, 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.
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Liberty Broadband Corp. - Series A & C | 9.2 | |||
LICT Corp. | 5.3 | |||
Laboratory Corp. of America Holdings | 5.0 | |||
Liberty SiriusXM Group - Series A & C | 4.3 | |||
Colfax Corp. | 4.2 | |||
Redwood Trust, Inc. | 4.0 | |||
GCI Liberty, Inc. - Class A | 4.0 | |||
ACI Worldwide, Inc. | 3.7 | |||
QVC Group - Series A | 3.6 | |||
Allison Transmission Holdings, Inc. | 3.4 | |||
46.7 |
Industry Breakdown | ||||
% of Net Assets | ||||
Consumer Discretionary | 37.9 | |||
Industrials | 10.6 | |||
Information Technology | 7.7 | |||
Materials | 5.7 | |||
Telecommunication Services | 5.3 | |||
Health Care | 5.0 | |||
Financials | 4.0 | |||
Real Estate | 3.2 | |||
Cash Equivalents/Other | 20.6 | |||
100.0 |
Top Performers | ||||||||||||
Average | ||||||||||||
Return | Weight | Contribution | ||||||||||
Wesco Aircraft Holdings, Inc. | 38.5 | % | 2.6 | % | 0.93 | % | ||||||
LICT Corp. | 9.0 | 4.6 | 0.42 | |||||||||
XO Group, Inc. | 12.4 | 2.2 | 0.24 | |||||||||
Redwood Trust, Inc. | 6.3 | 3.8 | 0.24 | |||||||||
ACI Worldwide, Inc. | 4.6 | 3.4 | 0.16 |
Bottom Performers | ||||||||||||
Average | ||||||||||||
Return | Weight | Contribution | ||||||||||
Lions Gate Entertainment Corp. - Class A & B (23.6)% | 3.2 | % | (0.85 | )% | ||||||||
Colfax Corp. | (19.5 | ) | 4.0 | (0.80 | ) | |||||||
Compass Minerals International, Inc. | (15.5 | ) | 2.4 | (0.39 | ) | |||||||
Liberty Global plc - Class C | (10.1 | ) | 3.3 | (0.35 | ) | |||||||
Allison Transmission Holdings, Inc. | (9.0 | ) | 3.6 | (0.33 | ) |
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 1.25% 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. Performance data represents past performance, which 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 70 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 2018 ANNUAL REPORT
BALANCED FUND
Investment Style: Conservative Allocation
Portfolio Manager: Brad Hinton, CFA
Investment Style: Conservative Allocation
Portfolio Manager: Brad Hinton, CFA
The Balanced Fund returned +0.07% in the first quarter compared to -0.78% for the Blended Index. For the fiscal year, the Fund returned +7.06% compared to +8.44% for the Blended Index. Total returns well above inflation helped our investors build wealth over the past twelve months. While the Blended Index was a tough bogey, the Fund’s fiscal year results compared quite favorably to similarly positioned conservative allocation funds, with less than 50% exposure to stocks, as evidenced by the Fund’s most recent Morningstar rating. Weitz Balanced Fund (WBALX) received a 4-Star Overall Morningstar RatingTM as of March 31, 2018. The Fund has generated a performance track record ranking in the top third of its Morningstar peer group (allocation--30% to 50% equity) over the one-, five- and ten-year periods as of March 31, 2018.
Broader stock and bond market indices posted slightly negative returns in the first quarter. The Fund’s results were essentially flat in this tougher environment, or up a fraction for those keeping close score. While the final tally showed a ho-hum quarter, the path to get there was anything but tranquil. The chart below shows the year-to-date total return progression of the S&P 500 and the Balanced Fund.
Broader stock and bond market indices posted slightly negative returns in the first quarter. The Fund’s results were essentially flat in this tougher environment, or up a fraction for those keeping close score. While the final tally showed a ho-hum quarter, the path to get there was anything but tranquil. The chart below shows the year-to-date total return progression of the S&P 500 and the Balanced Fund.
Performance data represents past performance, which does not guarantee future results. Additional performance data for the Fund, the Blended Index, and the S&P 500 Index can be found on the next page.
The S&P 500 (the dark blue line) moved sharply in both directions as volatility returned to the markets. The light green line shows that the Fund, by contrast and by design, experienced lower highs and higher lows. Most noteworthy, the S&P 500 declined by 10.1% from January 26 through February 8. During this mild market correction, the Fund fell 4.4%. As we’ve described in the past, the Balanced Fund has a little less “edge” than an all-equity portfolio. We’re more like the guys in the bucket hats chugging along in the pontoon boat, not the thrill seekers going full throttle in the tricked-out Malibu speedboat with the pirate flag. In short, we are willing to trade some upside potential for a slightly smoother overall ride.
For the fiscal year, the Fund had fifteen material (more than 25 bps) contributors and only one material detractor to results. Overall, it was a strong year for stock picking, a credit to our experienced analyst team for finding value in a tough market. Payment networks Visa and Mastercard were the top performers, with Berkshire Hathaway, Guidewire Software and Thermo Fisher Scientific rounding out the top five. Allergan was the only material detractor, which is unusual even in a bull market. Its stock trades at a steep discount to our revised value estimate, with several pipeline catalysts on the 2018 horizon. Other stocks with immaterial negative contributions were Comcast, Axalta Coatings Systems, Compass Minerals and Vulcan Materials.
As of the first quarter, the Fund’s positioning remains relatively conservative. We hold equity stakes in 27 companies representing 44.5% of net assets. We bought Dollar Tree after investors overreacted (in our view) to the company’s more conservative 2018 guidance. This guidance included slower-than-expected revenue growth, near-term margin headwinds due to wage pressure, and unexpected incremental investments funded by tax savings. Our view remains that the dollar store business is a rare example of durable retail, trading at a discounted price. Dave Perkins further articulated our thesis in last May’s Analyst Corner, available at weitz.investments/ DollarTree. We sold Liberty Global near the upper end of its recent trading range, and we eliminated Booking Holdings (f/k/a Priceline Group) when the stock pierced our business value estimate.
Our fixed income holdings include corporate bonds (22.6% of net assets), Treasury securities (29.4%) and a touch of securitized debt (3.5%). We own corporate issues from 28 different companies. We have focused primarily on short-dated, investment-grade (e.g., higher-quality) bonds with an average life of less than two years. Yields for these issues are higher than they have been in several years due to higher base rates and modestly wider spreads. Treasury securities round out the portfolio, providing more ballast. With higher short- term rates, we are once again able to generate 2+% yields without taking much interest rate risk. Not exciting but far better than the post-crisis ZIRP (zero interest-rate policy) environment.
The Fund’s primary investment objectives are long-term capital appreciation and capital preservation. The Fund’s stocks are geared to do most of the heavy lifting on the former, while the bond portfolio is designed to bolster the latter. With short-term interest rates firming, we also are in position to generate a modest current income stream. Ours is an old-fashioned, commonsense approach that isn’t flashy but can play an important role for many investors. Thank you as always for your continued support, and we look forward to updating you on portfolio developments throughout the year.
© 2017 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
The Morningstar RatingTM for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and
50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Balanced Fund was rated against the following numbers of Allocation--30% to 50% Equity funds over the following time periods: 423 funds in the last three years, 354 funds in the last five years, and 261 funds in the last ten years. Past performance is no guarantee of future results.
50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Balanced Fund was rated against the following numbers of Allocation--30% to 50% Equity funds over the following time periods: 423 funds in the last three years, 354 funds in the last five years, and 261 funds in the last ten years. Past performance is no guarantee of future results.
Balanced Fund had a 1-year percentile ranking of 19 out of 511 Allocation—30% to 50% equity funds, 5-year percentile ranking of 30 out of 354 Allocation—30% to 50% equity funds, and 10-year percentile ranking of 18 out of 261 Allocation—30% to 50% equity funds as of March 31, 2018.
18 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
Returns | |||||||||||||||||||||||||
Annualized | |||||||||||||||||||||||||
Since | |||||||||||||||||||||||||
Inception | |||||||||||||||||||||||||
(10/1/2003) | 10-year | 5-year | 3-year | 1-year | Quarter | ||||||||||||||||||||
WBALX | 5.48 | % | 6.21 | % | 5.17 | % | 4.13 | % | 7.06 | % | 0.07 | % | |||||||||||||
Blended | 7.04 | 7.12 | 8.46 | 6.88 | 8.44 | (0.78 | ) | ||||||||||||||||||
S&P 500 | 9.18 | 9.49 | 13.31 | 10.78 | 13.99 | (0.76 | ) | ||||||||||||||||||
Intermediate | |||||||||||||||||||||||||
U.S. Govt/Credit | 3.32 | 2.92 | 1.25 | 0.94 | 0.35 | (0.98 | ) |
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, 2018, as compared with the growth of the Blended, Standard & Poor’s 500 and Bloomberg Barclays Intermediate U.S. Government/Credit Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Top 10 Stock Holdings | ||||
% of Net Assets | ||||
Berkshire Hathaway Inc. - Class B | 3.0 | |||
Laboratory Corp. of America Holdings | 2.9 | |||
Visa Inc. - Class A | 2.8 | |||
Oracle Corp. | 2.3 | |||
Liberty Broadband Corp. - Series C | 2.3 | |||
Praxair, Inc. | 2.1 | |||
Allergan plc | 2.1 | |||
Thermo Fisher Scientific Inc. | 2.0 | |||
Comcast Corp. - Class A | 1.8 | |||
Mastercard Inc. - Class A | 1.7 | |||
23.0 |
Industry Breakdown | ||||
% of Net Assets | ||||
Information Technology | 12.7 | |||
Health Care | 8.2 | |||
Materials | 7.7 | |||
Financials | 7.4 | |||
Consumer Discretionary | 5.3 | |||
Consumer Staples | 3.2 | |||
Total Common Stocks | 44.5 | |||
U.S. Treasury Notes | 26.6 | |||
Corporate Bonds | 23.4 | |||
Cash Equivalents/Other | 2.8 | |||
Mortgage-Backed Securities | 2.5 | |||
Asset-Backed Securities | 0.2 | |||
Total Bonds & Cash Equivalents | 55.5 | |||
100.0 |
Top Stock Performers | ||||||||||||
Average | ||||||||||||
Return | Weight | Contribution | ||||||||||
Booking Holdings Inc. | 19.7 | % | 0.9 | % | 0.25 | % | ||||||
Mastercard Inc. - Class A | 15.9 | 1.7 | 0.23 | |||||||||
Guidewire Software, Inc. | 8.8 | 1.6 | 0.16 | |||||||||
Thermo Fisher Scientific Inc. | 8.8 | 2.0 | 0.16 | |||||||||
Visa Inc. - Class A | 5.1 | 2.8 | 0.14 |
Bottom Stock Performers | ||||||||||||
Average | ||||||||||||
Return | Weight | Contribution | ||||||||||
Comcast Corp. - Class A | (14.4 | )% | 2.0 | % | (0.29 | )% | ||||||
Compass Minerals International, Inc. | (15.5 | ) | 1.3 | (0.20 | ) | |||||||
Praxair, Inc. | (6.2 | ) | 2.3 | (0.12 | ) | |||||||
Vulcan Materials Co. | (10.9 | ) | 1.0 | (0.11 | ) | |||||||
Diageo plc - Sponsored ADR | (6.3 | ) | 1.7 | (0.11 | ) |
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 1.01% (gross) 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. Performance data represents past performance, which 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 70 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 2018 ANNUAL REPORT
CORE PLUS INCOME FUND
Investment Style: Intermediate-Term Bond
Co-Portfolio Managers: Tom Carney, CFA & Nolan Anderson
Core Plus Income Fund’s Institutional Class returned -0.56% for the first calendar quarter compared to a -1.46% return for the Bloomberg Barclays U.S. Aggregate Bond Index (Bloomberg Barclays U.S. Agg), our primary benchmark. For the fiscal year ended March 31, 2018, Core Plus Income Fund’s Institutional Class returned +1.40% compared to a +1.20% return for the Bloomberg Barclays U.S. Agg. The Fund’s performance table following this letter shows returns over various holding periods.
Fiscal 2018 Review
The low volatility environment that characterized much of the past year ended abruptly in the first calendar quarter of the new year. Exuberance over the positive economic impact of the newly enacted tax legislation quickly gave way to worries about trade wars and whether the Federal Reserve would raise short-term interest rates more aggressively than previously expected.
A specific catalyst to heightened investor anxiety came from the January employment report (released in early February) that showed a rising wage component and sparked increased inflation fears. Signs of market stress also emerged as a key corporate funding signal, the spread between the London Interbank Offered Rate (LIBOR) and the overnight indexed swap (OIS) rate, rose to levels not seen since 2009. These developments and others led to increased volatility and stock and credit market weakness as the new year’s first quarter ended.
Included below is a table highlighting the progression for select Treasury yields during the last quarter and past 12 months, since changes in U.S. Treasury yields have an impact on all other fixed-income market segments.
U.S. Treasury Yields (%) | 2-Year | 3-Year | 5-Year | 10-Year |
3/31/2018 | 2.27 | 2.39 | 2.56 | 2.74 |
12/31/2017 | 1.89 | 1.97 | 2.21 | 2.41 |
3/31/2017 | 1.26 | 1.49 | 1.92 | 2.39 |
Source: Bloomberg |
During the past fiscal year, U.S. Treasury bond yields moved higher as the economy continued to exhibit slow but steady strength and the Federal Reserve raised short-term interest rates three times.
Rising “risk-free” (Treasury) interest rates were a headwind for investor returns in the past year, as bond prices and changes in interest rates are inversely related. Declining credit spreads (the incremental return above U.S. Treasury bonds investors demand for owning corporate debt) buoyed investor returns for most of the past fiscal year–but retracted much of those gains in the quarter ended March 31, 2018. A broad measure of corporate bond spreads compiled by ICE Bank of America Merrill Lynch declined to a post-crisis low of 90 basis points in February before finishing the March 31 quarter at 116 basis points, down 8 basis points year over year.
Portfolio Positioning
The table below shows the change in allocation to various sectors from the most recent quarter and compared to a year ago. This summary provides a view over time of how we have allocated capital.
Since our goal is to invest in sectors that we believe offer the best risk-adjusted returns, our allocations may change significantly over time.
Sector (% Net Assets) | 3/31/2018 | 12/31/2017 | 3/31/2017 |
Corporate Bonds | 28.2 | 28.5 | 28.7 |
Corporate Convertible Bonds | 2.5 | 2.4 | 2.1 |
Asset-Backed Securities | 26.7 | 25.9 | 14.0 |
Commercial Mortgage-Backed Securities (CMBS) | 3.1 | 1.2 | 3.5 |
Agency Mortgage-Backed (MBS) | 0.2 | 0.3 | 0.4 |
Non-Agency Mortgage-Backed (MBS) | 4.1 | 4.3 | 1.3 |
Taxable Municipal Bonds | 1.1 | 1.1 | 1.4 |
U.S. Treasury | 32.6 | 33.3 | 42.4 |
Common Stocks | 0.9 | 0.8 | 0.8 |
Cash & Equivalents | 0.6 | 2.2 | 5.4 |
Total | 100.0 | 100.0 | 100.0 |
High Yield* | 12.7 | 13.8 | 6.9 |
* High Yield exposure (as of 3/31/2018) consists of investments in the Corporate, Corporate Convertible, ABS and MBS sectors.
Over the past fiscal year, we continued to increase our exposure to shorter-duration (1-2 year) securitized products, including automobile ABS, consumer ABS and non-agency MBS. Our shift in capital allocation toward securitized products has been driven by our ability to achieve spread pickup relative to investment-grade1 corporate bonds, without taking incremental credit risk. Notably, the Fund continues to have minimal exposure to agency MBS, where we continue to view the risk/return profile to be particularly unattractive.
As of March 31, our high-yield exposure was approximately 12.7%, down from 13.8% as of December 31 (the maximum we are permitted is 25%). Since inception, we have flexed our high yield allocation meaningfully–from a low of 5.9% to a maximum of 24.9%. While we continue to find reasonable shorter-duration (1-2 year), high-yield investment opportunities, we don’t view the overall investment landscape as conducive to taking significant, and longer duration, high-yield credit risk.
Overall portfolio metrics as measured by average effective maturity and average effective duration changed modestly compared to the prior quarter. The average effective maturity remained unchanged at 4.7 years, and the average effective duration decreased to 4.1 years from 4.2 years. These measures provide a guide to the Fund’s interest rate sensitivity. A lower average effective maturity and shorter average effective duration reduce the Fund’s price sensitivity to changes in interest rates (either up or down). Consistent with the Fund’s positioning since inception, we maintain a significantly lower average effective duration profile than our benchmark (4.1 years vs. 6.0 years for the Bloomberg Barclays U.S. Agg).
20 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
The benefit to shareholders of our shorter duration profile in rising interest rate environments is illustrated in the chart below. Since the Fund’s inception, 10-year Treasury rates have increased over 50 bps on three separate occasions. In each case, the Fund demonstrated significantly lower draw downs (i.e., unrealized price declines), resulting in strong relative performance. Should recent fiscal stimulus efforts and/or the continued removal of global quantitative easing result in volatile and upward moving interest rates, we believe the Fund is positioned to react similarly as it has during past rate increases.
Returns During U.S. Treasury Rate | 1/30/2015- | 7/8/2016- | 12/29/2017- |
Increases (%) | 6/10/2015 | 12/15/2016 | 2/21/2018 |
10-Year UST Yield Increase (basis points) | 85 | 124 | 54 |
10-Year UST Range | 1.64-2.49 | 1.36-2.60 | 2.41-2.95 |
Weitz Core Plus Income-Institutional | -0.41 | -1.45 | -1.37 |
Bloomberg Barclays U.S. Agg | -2.77 | -4.28 | -2.45 |
Relative Performance | +2.36 | +2.83 | +1.08 |
Fiscal Year Contributors
Security selection was the key driver of performance. Primary contributors included:
• | U.S. Corporate Credit. Corporate credit performance was led by high-yield investments in energy, industrials and consumer cyclicals. Our high-yield investments benefited from solid coupon income and (unrealized) price appreciation as credit spreads contracted during the fiscal year. Overall positive investment-grade performance was led by investments in communications, information services and REITs. |
• | Securitized Products (ABS, CMBS and MBS) continued to perform at or above expectations with respect to credit performance and average life progression1 while providing steady income and some modest price appreciation during the fiscal year. |
Fiscal Year Detractors
• | Technology-related corporate bonds. Our largest detractor to performance during the fiscal year was the purchase of 7-year new issue Broadcom Communications (AVGO) bonds. Since the bonds were issued in October 2017, credit spreads widened approximately 50 bps due to potential large-scale M&A activity and risk of increased corporate leverage. Despite solid long-term business fundamentals, we did not appropriately account for the event risk associated with an acquisition-oriented management team. Given the uncertainty around potential event risk and risk of significantly increased leverage, we trimmed our position and booked a loss. |
• | Select U.S. Treasury Bonds. Intermediate (7-10 year) Treasuries generated modest negative total returns, as rising rates (declining prices) outpaced the coupon income we collected throughout the fiscal year. |
First Quarter Investment Activity
New investment activity was weighted toward shorter duration (one- to two-year average life) securitized products, including auto asset-backed securities (ABS), consumer ABS and commercial mortgage-backed securities (CMBS). With short-term interest rates climbing on the back of Fed rate hikes, we are achieving higher yields on one- to two-year investments without taking significant incremental credit risk. Our approach to securitized products remains focused on identifying investments with robust structural protections backed by experienced sponsors and management teams with proven experience through economic and capital markets cycles. We believe our two newest CMBS investments fit this investment criteria well. We invested in the inaugural commercial real estate loan securitizations from Varde Capital and TPG RE Finance.
Having invested in previous non-performing loan securitizations from both sponsors, we are familiar with their extensive commercial real estate platforms and proven long-term track records investing through multiple real estate cycles. In a market environment with relatively tight credit spreads and high commercial real estate valuations, we invested at the junior-AAA level (i.e., second from the top of the capital structure), with credit support (consisting of subordination from junior securities and the sponsor’s equity interest in the loans) of 39.50% (TPG) and 41.50% (Varde). Given we are likely in the late stages of the commercial real estate cycle, our overall CMBS exposure remains low (3.1%) and conservatively positioned at or near the top of the capital structure.
In high yield, we purchased new positions in 1-2 year bonds issued by Invista, iStar Financial and QVC. We sold our 2-year Mattel bonds at a small profit after further due diligence suggested that we were not getting paid for the risks associated with what could be a long and difficult turnaround.
The chart below, courtesy of Goldman Sachs, highlights a development in the investment-grade corporate bond market, where a picture may help explain the investment story better than the proverbial thousand words. Short-dated investment-grade bond yields (those maturing from 1 to 3 years) are at post-crisis highs, while longer bond yields (those maturing from 7 to 10 years) remain decidedly lower than their post-crisis peak. Declining credit spreads and a flattening yield curve over the past eight years explains much of the difference. As a result, we don’t believe the risk/reward for longer duration credit exposure is appealing on an absolute or relative basis. For context, the Fund’s corporate bond portfolio as of March 31 had an average effective duration of 2.9 years compared to 7.2 years for the Bloomberg Barclays U.S. Agg. When the combination of longer-term Treasury yields and credit spreads provide satisfactory risk-adjusted returns, we have ample capacity to significantly increase the duration of our corporate credit portfolio.
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.
Our portfolio will often be constructed with a shorter average life (i.e., duration) than the Bloomberg Barclays U.S. Agg. We chose this benchmark to highlight that we could periodically invest in longer-term bonds when conditions warrant. The effect over time of our portfolio construction (typically shorter average life) may lead to a penalty when interest rates fall but a boost to relative performance when rates rise.
1Definitions: Investment Grade: We consider investment grade to be those securities rated at least BBB- by one or more credit ratings agencies. Average Life Progression: A measure of repayment speed for a collateral pool (for example, a collection of mortgages may serve as the collateral pool for an issuance of mortgage-backed securities).
21 | Q1 2018 ANNUAL REPORT
CORE PLUS INCOME FUND (CONTINUED)
Returns | ||||||||||||||||
Annualized | ||||||||||||||||
Since Inception | ||||||||||||||||
(7/31/2014) | 3-year | 1-year | Quarter | |||||||||||||
WCPNX - Investor Class | 2.80 | % | 2.46 | % | 1.20 | % | (0.61 | )% | ||||||||
WCPBX - Institutional Class | 3.01 | 2.68 | 1.40 | (0.56 | ) | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 2.03 | 1.20 | 1.20 | (1.46 | ) |
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, 2018, as compared with the growth of the U.S. Aggregate Bond Index during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Credit Quality(a)(d) | |
Underlying Securities | % of Portfolio |
U.S. Treasury | 32.9 |
U.S. Government Agency Mortgage | |
Related Securities(b) | 0.2 |
Aaa/AAA | 11.7 |
Aa/AA | 8.5 |
A/A | 11.9 |
Baa/BBB | 20.9 |
Ba/BB | 3.7 |
B/B | 4.9 |
Caa/CCC | 1.8 |
Non-Rated | 2.5 |
Common Stocks | 0.9 |
Cash Equivalents | 0.1 |
100.0 |
Financial Attributes | |
Portfolio Summary | |
Average Maturity(d) | 4.9 years |
Average Effective Maturity(d) | 4.7 years |
Average Duration(d) | 4.0 years |
Average Effective Duration(d) | 4.1 years |
Average Coupon(d) | 3.7% |
30-Day SEC Yield - Investor Class | 2.88% |
30-Day SEC Yield - Institutional Class | 3.08% |
Maturity Distribution(d) | |
Maturity Type | % of Portfolio |
Cash Equivalents | 0.1 |
Less than 1 Year | 20.3 |
1 - 3 Years | 28.3 |
3 - 5 Years | 13.3 |
5 - 7 Years | 13.1 |
7 - 10 Years | 20.7 |
10 Years or more | 3.3 |
Common Stocks | 0.9 |
100.0 |
(a) | The Fund receives credit quality ratings on underlying securities of the Portfolio when available from credit rating agencies. 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 |
(d) | Source: Bloomberg Analytics |
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 1.91% (gross) and 1.23% (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. Performance data represents past performance, which 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 70 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 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
SHORT DURATION INCOME FUND
Investment Style: Short-Term Bond
Co-Portfolio Managers: Tom Carney, CFA & Nolan Anderson
The Short Duration Income Fund’s Institutional Class returned -0.28% in the first calendar quarter compared to a -0.20% return for the Bloomberg Barclays 1-3 Year U.S. Aggregate Index (Bloomberg Barclays U.S. Agg 1-3), our Fund’s primary benchmark. For the year ended March 31, 2018, the Short Duration Income Fund’s Institutional Class returned +0.63% compared to a +0.25% return for the benchmark. The Fund’s performance table following this letter shows returns over various holding periods for the Fund, its primary index and the CPI + 1% for comparison purposes.
Fiscal 2018 Review
The low volatility environment that characterized much of the past year ended abruptly in the first calendar quarter of the new year. Exuberance over the positive economic impact of the newly enacted tax legislation quickly gave way to worries about trade wars and whether the Federal Reserve would raise short-term interest rates more aggressively than previously expected.
A specific catalyst to heightened investor anxiety came from the January employment report (released in early February) that showed a rising wage component and sparked increased inflation fears. Signs of market stress also emerged as a key corporate funding signal, the spread between the London Interbank Offered Rate (LIBOR) and the overnight indexed swap (OIS) rate, rose to levels not seen since 2009. These developments and others led to increased volatility and stock and credit market weakness as the new year’s first quarter ended.
Included below is a table highlighting the progression for select Treasury yields during the last quarter and past 12 months, since changes in U.S. Treasury yields have an impact on all other fixed-income market segments.
U.S. Treasury Yields (%) | 2-Year | 3-Year | 5-Year | 10-Year |
3/31/2018 | 2.27 | 2.39 | 2.56 | 2.74 |
12/31/2017 | 1.89 | 1.97 | 2.21 | 2.41 |
3/31/2017 | 1.26 | 1.49 | 1.92 | 2.39 |
Source: Bloomberg |
During the past fiscal year, U.S. Treasury bond yields moved higher as the economy continued to exhibit slow but steady strength and the Federal Reserve raised short-term interest rates three times.
Rising “risk-free” (Treasury) interest rates were a headwind for investor returns in the past year, as bond prices and changes in interest rates are inversely related. Declining credit spreads (the incremental return above U.S. Treasury bonds investors demand for owning corporate debt) buoyed investor returns for most of the past fiscal year–but retracted much of those gains in the quarter ended March 31, 2018. A broad measure of corporate bond spreads compiled by ICE Bank of America Merrill Lynch declined to a post-crisis low of 90 basis points in February before finishing the March 31 quarter at 116 basis points, down 8 basis points year over year.
Portfolio Positioning
The table below shows the change in allocation to various sectors from the most recent quarter and compared to a year ago. This summary provides a view over time of how we have allocated capital.
Since our goal is to invest in sectors that we believe offer the best risk-adjusted returns, our allocations may change significantly over time.
Sector (% Net Assets) | 3/31/2018 | 12/31/2017 | 3/31/2017 |
Corporate Bonds | 38.5 | 38.3 | 43.5 |
Corporate Convertible Bonds | 5.5 | 5.3 | 4.0 |
Asset-Backed Securities | 9.3 | 8.6 | 5.7 |
Commercial Mortgage-Backed Securities (CMBS) | 0.8 | 0.4 | 0.8 |
Agency Mortgage-Backed (MBS) | 11.9 | 12.3 | 14.7 |
Non-Agency Mortgage Backed (MBS) | 4.3 | 4.5 | 3.1 |
Taxable Municipal Bonds | 0.4 | 0.4 | 0.4 |
U.S. Treasury | 26.6 | 25.7 | 24.7 |
Common Stocks | 0.8 | 0.7 | 1.1 |
Cash & Equivalents | 1.9 | 3.8 | 2.0 |
Total | 100.0 | 100.0 | 100.0 |
High Yield* | 10.6 | 10.8 | 9.8 |
*High Yield exposure (as of 3/31/2018) consists of investments in the Corporate, Corporate Convertible, ABS and MBS sectors.
Over the past year, we continued to increase our exposure to shorter-duration (1-2 year) securitized products, including automobile ABS, consumer ABS and non-agency MBS. Our shift in capital allocation toward securitized products has been driven by our ability to achieve spread pickup relative to investment-grade1 corporate bonds, without taking incremental credit risk. Agency MBS holdings continued to decline, driven by prepayments and amortization of principal. While agency MBS have held a prominent position in Fund allocations over the years, we believe the current risk/return profile is unattractive.
As of March 31, our high-yield exposure was approximately 11%, unchanged from December 31 (our maximum threshold is 15%). Our high-yield exposure continues to be concentrated in primarily higher-quality, shorter-term bonds that we believe have attractive risk/reward profiles.
Overall portfolio metrics as measured by average maturity and average effective duration changed modestly compared to a year ago. The average effective maturity declined to 2.1 years from 2.2 years, and the average effective duration declined to 1.9 years from 2.0 years. These measures provide a guide to the Fund’s interest rate sensitivity. A lower average effective maturity and shorter average effective duration reduce the Fund’s price sensitivity to changes in interest rates (either up or down).
Fiscal Year Contributors
• | The corporate bond segment was the largest contributor to results in the fiscal year, as strong coupon income and declining credit spreads offset modest (unrealized) price depreciation from rising interest rates. Primary contributors included the real estate investment trust (REIT), banks and consumer, non-cyclical segments. |
23 | Q1 2018 ANNUAL REPORT
SHORT DURATION INCOME FUND (CONTINUED)
• | Securitized Products (ABS, CMBS and MBS) continued to perform at or above expectations with respect to credit performance and average life progression1 while providing steady income and limited price volatility during the quarter. |
Fiscal Year Detractors
• | Select U.S. Treasury bonds. As yields generally rose, prices declined during the year. Longer maturity bonds (particularly those greater than 5 years) experienced the largest price declines. The Fund’s Treasury holdings primarily consist of shorter-term securities with an average maturity of slightly under 2½ years. |
First Quarter Investment Activity
New investment activity was weighted toward shorter duration corporate bonds (under 3 years) to replace maturing securities, U.S. Treasuries, and one- to two-year average life securitized products, including auto asset-backed securities (ABS), consumer ABS and commercial mortgage-backed securities (CMBS). With short-term interest rates continuing to climb on the back of Fed rate hikes, we are achieving higher yields on these shorter-term investments without taking significant incremental credit risk. Corporate bond purchase examples include American Express, Bank of America, Berkshire Hathaway Finance Corp., Capital One Bank, Dominion Energy, Met Life and Morgan Stanley.
The chart below, courtesy of Goldman Sachs, highlights a development in the investment-grade corporate bond market, where a picture may help explain the investment story better than the proverbial thousand words. Short-dated investment-grade bond yields (those maturing from 1 to 3 years) are at post-crisis highs, while longer bond yields (those maturing from 7 to 10 years) remain decidedly lower than their post-crisis peak. Declining credit spreads and a flattening yield curve over the past eight years explains much of the difference. An important investment implication, though, for short-duration investors, like our Fund, is that the prospect for future returns has meaningfully improved since the starting yield, or coupon return, is a key driver for forward returns.
Our approach to securitized products remains focused on identifying investments with robust structural protections backed by experienced sponsors and management teams with proven experience through economic and capital markets cycles. We believe our two newest CMBS investments fit this investment criteria well. We invested in the inaugural commercial real estate loan securitizations from Varde Capital and TPG RE Finance.
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. Noteworthy is our Fund’s maturity distribution and defensive positioning with respect to interest rates: nearly 73.6% of the Fund’s net assets mature in less than three years, with approximately 24.6% maturing in less than one year.
Fund Strategy
Our approach consists primarily of investing in a portfolio of mostly high-quality, short- to intermediate-term bonds with an overall portfolio average duration of 1 to 3½ years, where we believe we can capture most of the “coupon” returns of long-term bonds with less interest rate risk. We do not and will not try to mimic any particular index as we construct our portfolio.
We may invest in fixed income-related investments that are not considered “investment grade” but have favorable risk/reward characteristics (such as high-yield and convertible bonds, preferred and convertible preferred stock). A small percentage of Fund assets may also be invested in high-dividend-paying common stocks, such as longtime Fund holding Redwood Trust. These types of investments have generally enhanced our long-term returns.
We believe our flexible mandate will benefit shareholders over the long term as we seek out potentially mispriced securities and select portfolio assets one security at a time based on our view of opportunities in the marketplace. Our fixed income research is not dependent upon but often benefits from the work our equity teammates conduct on companies and industries in the course of their due diligence.
Overall, we strive to be adequately compensated for the risks assumed in order to maximize investment (or reinvestment) yield and avoid making interest rate “bets,” particularly ones that depend on interest rates going down.
1Definitions: Investment Grade: We consider investment grade to be those securities rated at least BBB- by one or more credit ratings agencies. Average Life Progression: A measure of repayment speed for a collateral pool (for example, a collection of mortgages may serve as the collateral pool for an issuance of mortgage-backed securities).
24 | Q1 2018 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 | 5.05 | % | 3.90 | % | 2.72 | % | 1.03 | % | 1.05 | % | 0.44 | % | (0.33 | )% | |||||||||||||||
WEFIX - Institutional Class | 5.10 | 3.97 | 2.87 | 1.25 | 1.28 | 0.63 | (0.28 | ) | |||||||||||||||||||||
Bloomberg Barclays 1-3 Year U.S. Aggregate | — | 3.37 | 1.69 | 0.78 | 0.68 | 0.25 | (0.20 | ) | |||||||||||||||||||||
CPI + 1% | 3.54 | * | 3.20 | 2.59 | 2.42 | 2.88 | 3.39 | 1.48 |
* Since 12/31/1988
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Short Duration Income Fund – Institutional Class for the period March 31, 2008 through March 31, 2018, as compared with the growth of the 1-3 Year U.S. Aggregate and CPI + 1% Indices during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Credit Quality(a)(d) | |
Underlying Securities | % of Portfolio |
U.S. Treasury | 26.7 |
U.S. Government Agency Mortgage | |
Related Securities(b) | 11.9 |
Aaa/AAA | 6.0 |
Aa/AA | 3.9 |
A/A | 16.2 |
Baa/BBB | 22.4 |
Ba/BB | 3.9 |
B/B | 1.2 |
Caa/CCC | 0.1 |
Non-Rated | 5.6 |
Common Stocks | 0.7 |
Cash Equivalents | 1.4 |
100.0 |
Financial Attributes | |
Portfolio Summary | |
Average Maturity(d) | 2.1 years |
Average Effective Maturity(d) | 2.1 years |
Average Duration(d) | 1.9 years |
Average Effective Duration(d) | 1.9 years |
Average Coupon(d) | 3.2% |
30-Day SEC Yield - Investor Class | 2.23% |
30-Day SEC Yield - Institutional Class | 2.43% |
Maturity Distribution(d) | |
Maturity Type | % of Portfolio |
Cash Equivalents | 1.4 |
Less than 1 Year | 24.6 |
1 - 3 Years | 49.0 |
3 - 5 Years | 18.8 |
5 - 7 Years | 5.2 |
7 - 10 Years | 0.3 |
Common Stocks | 0.7 |
100.0 |
(a) | The Fund receives credit quality ratings on underlying securities of the Portfolio when available from credit rating agencies. 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 |
(d) | Source: Bloomberg Analytics |
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 0.93% (gross) and 0.62% (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. Performance data represents past performance, which 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 70 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 2018 ANNUAL REPORT
ULTRA SHORT GOVERNMENT FUND
Investment Style: Ultra-Short-Term Bond
Co-Portfolio Managers: Tom Carney, CFA & Nolan Anderson
The Ultra Short Government Fund returned +0.30% in the first calendar quarter compared to a +0.32% return for the ICE BofAML US 6-Month Treasury Bill Index (6-Month Treasury), our Fund’s primary benchmark. For the year ended March 31, 2018, the Ultra Short Government Fund returned +0.94% compared to a +1.15% return for the benchmark. The Fund’s performance table following this letter shows returns over various holding periods.
Fiscal 2018 Review
The Ultra Short Government Fund’s first fiscal year after its transition from a money market fund went well. Income, as measured by the Fund’s 30-day yield, has increased, credit quality has remained high and liquidity has been strong.
Short-term interest rates rose steadily in the past year. Three- and six-month Treasury Bills (a surrogate for the investment opportunity set for the Fund) rose nearly a full percent, to 1.7% and 1.9%, respectively at March 31, 2018. The current environment may provide further income/yield improvements for the Fund in 2018 as maturing bonds are reinvested at higher prospective returns, particularly if the Federal Reserve continues its tightening campaign.
The Fund’s first calendar quarter results matched its primary benchmark, as modest price declines in select Fund holdings in the corporate bond and securitized debt segments offset strong income returns in the overall portfolio. The Fund’s fiscal year results lagged its primary benchmark principally due to our decision to maintain a shorter average life/ duration than the benchmark (0.3 duration for the Fund versus 0.5 for the benchmark). Our view was and remains that the Fed will continue raising short-term interest rates, albeit modestly. A shorter average life has allowed the Fund to reinvest maturing bonds at higher rates as the Fed raised short-term interest rates three times in the past year.
The Fund’s principal investment strategies and objectives of providing current income, protecting principal and providing liquidity remain our long-term goals. Under normal market conditions, the Fund will invest at least 80% of its net assets in obligations issued or guaranteed by the U.S. government and its government-related entities. The balance of Fund assets may be invested in U.S. investment-grade debt securities. We consider investment grade to be those securities rated at least BBB- by one or more credit rating agencies. Additionally, the Fund will maintain an average effective duration of one year or less. Duration is a measure of how sensitive the portfolio may be to changes in interest rates. All else equal, a lower duration portfolio of bonds is less sensitive to changes in interest rates than a portfolio of bonds with a higher duration. Over time, this shorter-term focus (duration of less than one year) is intended to generate higher total returns than cash or money market funds, while also taking less interest rate risk than a portfolio of bonds with a higher duration.
The Federal Reserve’s monetary policy decisions (e.g., changes in short-term interest rates) will continue to affect all investments within our opportunity set. As a result, our yield and return will invariably follow the path dictated by the Federal Reserve’s monetary policy, as we frequently reinvest holdings that mature in a short period of time. As of March 31, 78.4% of our portfolio was invested in U.S. Treasury notes, 19.6% was invested in investment grade corporate bonds and asset backed securities, with the balance in a high-quality State Street money market fund. The average effective duration of our portfolio at March 31 was 0.3 years, unchanged from three months ago. The Fund’s 30-day yield increased meaningfully to 1.62% as of March 31, up nearly one percent from a year ago. As mentioned above, we will continue to focus on high credit quality, preservation of capital and maintaining liquidity for our investors.
Growth of $10,000
This chart depicts the change in the value of a $10,000 investment in the Ultra Short Government Fund for the period March 31, 2008 through March 31, 2018, as compared with the growth of the 6-Month Treasury Index during the same period. Index performance is hypothetical and is shown for illustrative purposes only.
Returns | ||||||||||||
Annualized | ||||||||||||
10-Year | 5-Year | 1-Year | ||||||||||
SAFEX | 0.29 | 0.25 | 0.94 | |||||||||
6-Month Treasury | 0.60 | 0.48 | 1.15 |
Sector Breakdown | |
% of Net Assets | |
U.S. Treasury | 78.4 |
Corporate Bonds | 17.7 |
Cash Equivalents/Other | 2.0 |
Asset-Backed Securities | 1.9 |
100.0 |
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 0.60% (gross) 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. The 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 0.20% of the Fund’s average daily net assets through July 31, 2018. Performance data represents past performance, which 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.
The Fund’s past performance is not necessarily an indication of how the Fund will perform in the future. Effective December 16, 2016, the Fund revised its principal investment strategies and policies to permit the Fund to invest in a diversified portfolio of short-term debt securities and to have a fluctuating net asset value. Prior to December 16, 2016, the Fund operated as a “government money market fund” as defined under Rule 2a-7 of the Investment Company Act of 1940 and maintained a stable net asset value of $1.00 per share. The Fund’s past performance reflects the Fund’s prior principal investment strategies and policies.
See page 6 for additional performance disclosures. See page 70 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.
26 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
NEBRASKA TAX-FREE INCOME FUND
Investment Style: Municipal-State Bond
Portfolio Manager: Tom Carney, CFA
Nebraska Tax-Free Income Fund returned -0.89% in the first calendar quarter compared to a -0.57% return for the Bloomberg Barclays 5-Year Municipal Bond Index, our primary benchmark. For the fiscal year ended March 31, 2018, the Nebraska Tax-Free Income Fund’s total return was -0.07% compared to a +0.65% return for the benchmark. The Fund’s performance table following this letter shows returns over various holding periods.
Fiscal 2018 Review
The low volatility environment that characterized the past year ended abruptly in the first calendar quarter of the new year. Exuberance over the positive economic impact of the newly enacted tax legislation quickly gave way to worries about trade wars and whether the Federal Reserve would raise short-term interest rates more aggressively than previously expected. The municipal bond market started the year off particularly poorly, posting the biggest first-quarter loss in more than two decades.
Since changes in U.S. Treasury yields have an impact on all other fixed-income market segments, included below is a table highlighting the progression for select Treasury yields during the last quarter and past 12 months.
U.S. Treasury Yields (%) | 2-Year | 3-Year | 5-Year | 10-Year |
3/31/2018 | 2.27 | 2.39 | 2.56 | 2.74 |
12/31/2017 | 1.89 | 1.97 | 2.21 | 2.41 |
3/31/2017 | 1.26 | 1.49 | 1.92 | 2.39 |
Source: Bloomberg |
During the past fiscal year, U.S. Treasury bond yields moved higher as the economy continued to exhibit slow but steady strength and the Federal Reserve raised short-term interest rates three times. A flattening yield curve was a key development impacting fixed income returns over the past 12 months. The slope of the Treasury and municipal bond yield curve, the difference between short- and long-term interest rates, flattened meaningfully as the year progressed. For example, while overall yield levels rose year over year, the spread difference between the 2-year and 10-year Treasury yield decreased from 113 basis points at the beginning of the year to 47 basis points at year-end. The Treasury curve has not been this flat since before the credit crisis of 2007-08.
Rising “risk-free” (Treasury) interest rates were a headwind for investor returns in the past year, as bond prices and changes in interest rates are inversely related. Municipal bond performance closely matched its taxable government counterparts, as the yield relationship between tax-free municipal bonds and taxable alternatives was mostly unchanged during the year. High-quality 5-year municipal bonds, for example, ended the current fiscal year (March 31) with a yield representing approximately 81% of U.S. Treasuries, essentially unchanged from 82% a year ago. The net effect is that municipal bond yields generally rose in the past year by about the same amount as their taxable government counterparts.
Our Fund’s results in the past year, and particularly in this year’s first quarter, were disappointing despite our defensive positioning. Short-term interest rates rose more than longer-term rates, which impacted Fund results due to the Fund’s larger concentration in shorter-term investments (e.g., approximately two-thirds of Fund assets mature in under 5 years).
Investment activity in the past year was reasonably active, as we took advantage of improved reinvestment opportunities from the increase in the overall interest rate environment. Over the past year, nearly $15 million new investments (approximately 25% of Fund assets) were made.
An example from this year’s first quarter includes a nearly $750,000 investment in the 14-year bonds for Douglas County Hospital Authority #2 (Nebraska Medicine) Revenue Bonds. The bonds are secured by an unconditional promise by Nebraska Medicine (the obligated group) as to timely payment of principal and interest. The obligated group is a clinically integrated health system that includes the Nebraska Medical Center, Bellevue Medical Center and the University of Nebraska Medical Center Physicians.
Nebraska Medicine has a number of clinical specialties, including solid organ and bone marrow transplantation, cancer services, heart care, trauma, neurological sciences, rheumatology and infectious disease/bioterrorism. While nearly two-thirds of Fund assets mature in under 5 years, these bonds represent the type of longer-term investment we have added in the past year; namely, those with very high credit quality and that offer returns/yield at the time of purchase that have, in many cases, exceeded the comparable U.S. Treasury yield. For example, the yield to maturity and yield to call (or yield to worst) at purchase of the 14-year Douglas County Hospital tax-free municipal bonds were approximately 3.46% and 3.16%, respectively. The yield to maturity was greater than 125% of fully taxable U.S. Treasury alternative/ comparable, while the yield to call was nearly 120% more than U.S. Treasury bonds of comparable term. Put differently, the taxable equivalent yield for this investment for a Nebraska resident in the highest Federal tax bracket would be approximately 6.2%.
Fiscal Year Contributors
• | The electricity and public power revenue bond segment was the largest contributor to results in the fiscal year, as strong income returns offset modest (unrealized) price declines due to rising interest rates. Nearly every investment in this segment contributed to results. Primary contributors included the revenue bonds issued by Dawson Nebraska Public Power District, Fremont Nebraska Combined Utility System, Lincoln Nebraska Electric System, Municipal Energy System of Nebraska and Nebraska Public Power District. |
• | General purpose revenue bonds issued by Omaha Nebraska Public Facilities Corporation, Lincoln-Lancaster County Nebraska Public Building Commission and Nebraska State Certificates of Participation. |
• | Higher education revenue bonds issued by Nebraska State College Facilities Corporation, Lincoln Nebraska Education Facilities (Nebraska Wesleyan University) and University of Nebraska Facilities Corporation (Health Center and College of Nursing Projects). |
• | Hospital bond segment led by Douglas County Nebraska Hospital Authority revenue bonds issued for Madonna Rehabilitation Hospital. |
Fiscal Year Detractors
• | The airport segment revenue bonds issued by Greater Orlando FL Aviation Authority, Metropolitan Washington Airport Authority, Miami-Dade County Florida Aviation Authority and San Diego County California Regional Airport. Strong income returns were offset by modest (unrealized) price declines due to rising interest rates. |
Turning to portfolio metrics, over the past year the average effective duration of our Fund increased to 3.7 years from 3.0 years, and the average effective maturity of our bonds increased to 4.1 years from 3.4 years. Overall asset quality of our portfolio remains high, with approximately 84% rated A or better by a number of nationally recognized statistical rating organizations, credit rating agencies recognized by the U.S. Securities and Exchange Commission.
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 will invest one security at a time, relying on a fundamental research-based investment approach, and remain well-positioned with cash and other short-term securities (approximately 25% of Fund assets) 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.
27 | Q1 2018 ANNUAL REPORT
NEBRASKA TAX-FREE INCOME FUND (CONTINUED)
Returns | |||||||||||||||||||||||||||||
Annualized | |||||||||||||||||||||||||||||
Since Inception | |||||||||||||||||||||||||||||
(10/01/1985) | 20-year | 10-year | 5-year | 3-year | 1-year | Quarter | |||||||||||||||||||||||
WNTFX | 4.54 | % | 3.16 | % | 2.16 | % | 0.61 | % | 0.20 | % | (0.07 | )% | (0.89 | )% | |||||||||||||||
5-Year Municipal Bond | — | 3.97 | 3.28 | 1.54 | 1.27 | 0.65 | (0.57 | ) |
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, 2008 through March 31, 2018, as compared with the growth of the 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(c) | 5.2 years |
Average Effective Maturity(c) | 4.1 years |
Average Duration(c) | 3.6 years |
Average Effective Duration(c) | 3.7 years |
Average Coupon(c) | 3.7% |
30-Day SEC Yield | 1.29% |
Municipals exempt from federal and Nebraska income taxes | 87.0% |
Municipals subject to alternative minimum tax | 5.1% |
Maturity Distribution(c) | |
Maturity Type | % of Portfolio |
Cash Equivalents | 5.2 |
Less than 1 Year | 20.1 |
1 - 3 Years | 18.1 |
3 - 5 Years | 22.9 |
5 - 7 Years | 7.5 |
7 - 10 Years | 23.3 |
10 Years or more | 2.9 |
100.0 |
(a) | The Fund receives credit quality ratings on underlying securities of the Portfolio when available from credit rating agencies. 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 |
(c) | Source: Bloomberg Analytics |
State Breakdown | |
% of Net Assets | |
Nebraska | 87.0 |
Florida | 2.7 |
Texas | 1.6 |
District of Columbia | 1.0 |
Iowa | 0.4 |
Washington | 0.4 |
California | 0.4 |
Colorado | 0.2 |
Illinois | 0.2 |
Cash Equivalents/Other | 6.1 |
100.0 |
Credit Quality(a)(c) | |
Underlying Securities | % of Portfolio |
Aaa/AAA | 2.2 |
Aa/AA | 57.9 |
A/A | 24.3 |
Baa/BBB | 3.2 |
Non-Rated | 7.2 |
Cash Equivalents | 5.2 |
100.0 |
Sector Breakdown | |
% of Net Assets | |
Power | 21.6 |
Higher Education | 10.3 |
Airport/Transportation | 6.9 |
Hospital | 6.6 |
Lease | 5.8 |
Certificates of Participation | 5.6 |
Water/Sewer | 3.6 |
Housing | 1.8 |
General | 1.2 |
Total Revenue | 63.4 |
School District | 8.7 |
City/Subdivision | 5.5 |
County | 2.2 |
Natural Resource District | 1.1 |
Total General Obligation | 17.5 |
Escrow/Pre-Refunded | 13.0 |
Cash Equivalents/Other | 6.1 |
100.0 |
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 0.80% 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. Performance data represents past performance, which 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 70 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.
28 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
VALUE FUND
Schedule of Investments
March 31, 2018
Common Stocks – 87.3% | ||||||||||||
% of Net | ||||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||||
Cable & Satellite | 15.6 | |||||||||||
Liberty Broadband Corp. - Series C* | 650,000 | 55,698,500 | ||||||||||
Liberty Global plc - Class C* (c) | 950,000 | 28,908,500 | ||||||||||
Comcast Corp. - Class A | 550,000 | 18,793,500 | ||||||||||
Liberty SiriusXM Group - Series C* | 460,000 | 18,791,000 | ||||||||||
Internet & Direct Marketing Retail | 3.3 | |||||||||||
Amazon.com, Inc.* | 11,500 | 16,644,410 | ||||||||||
Booking Holdings Inc.* | 4,700 | 9,777,833 | ||||||||||
Multiline Retail | 3.3 | |||||||||||
Dollar Tree, Inc.* | 275,000 | 26,097,500 | ||||||||||
Movies & Entertainment | 2.1 | |||||||||||
Twenty-First Century Fox, Inc. - Class A | 450,000 | 16,510,500 | ||||||||||
Automotive Retail | 1.1 | |||||||||||
CarMax, Inc.* | 135,000 | 8,361,900 | ||||||||||
25.4 | 199,583,643 | |||||||||||
Information Technology | ||||||||||||
IT Services | 11.4 | |||||||||||
Mastercard Inc. - Class A | 200,000 | 35,032,000 | ||||||||||
Visa Inc. - Class A | 210,000 | 25,120,200 | ||||||||||
Accenture plc - Class A(c) | 105,000 | 16,117,500 | ||||||||||
DXC Technology Co. | 130,000 | 13,068,900 | ||||||||||
Internet Software & Services | 7.0 | |||||||||||
Alphabet, Inc. - Class C* | 38,000 | 39,208,020 | ||||||||||
Facebook, Inc. - Class A* | 100,000 | 15,979,000 | ||||||||||
Software | 4.0 | |||||||||||
Oracle Corp. | 685,000 | 31,338,750 | ||||||||||
22.4 | 175,864,370 | |||||||||||
Health Care | ||||||||||||
Pharmaceuticals | 6.0 | |||||||||||
Allergan plc(c) | 280,000 | 47,121,200 | ||||||||||
Health Care Services | 4.8 | |||||||||||
Laboratory Corp. of America Holdings* | 232,000 | 37,526,000 | ||||||||||
Life Sciences Tools & Services | 3.1 | |||||||||||
Thermo Fisher Scientific Inc. | 118,000 | 24,362,280 | ||||||||||
Health Care Equipment | 1.2 | |||||||||||
Danaher Corp. | 100,000 | 9,791,000 | ||||||||||
15.1 | 118,800,480 | |||||||||||
Financials | ||||||||||||
Diversified Financial Services | 9.1 | |||||||||||
Berkshire Hathaway Inc. - Class B* | 360,000 | 71,812,800 | ||||||||||
Insurance Brokers | 3.0 | |||||||||||
Aon plc - Class A(c) | 165,000 | 23,154,450 | ||||||||||
Diversified Banks | 2.0 | |||||||||||
Wells Fargo & Co. | 295,000 | 15,460,950 | ||||||||||
14.1 | 110,428,200 | |||||||||||
Materials | ||||||||||||
Industrial Gases | 2.8 | |||||||||||
Praxair, Inc. | 155,000 | 22,366,500 | ||||||||||
Fertilizers & Agricultural Chemicals | 2.6 | |||||||||||
Monsanto Co. | 175,000 | 20,420,750 | ||||||||||
5.4 | 42,787,250 |
$ Principal | ||||||||||||
% of Net | Amount or | |||||||||||
Consumer Staples | Assets | Shares | $ Value | |||||||||
Beverages | 2.0 | |||||||||||
Diageo plc - Sponsored ADR(c) | 115,000 | 15,573,300 | ||||||||||
Energy | ||||||||||||
Oil & Gas Exploration & Production | 1.7 | |||||||||||
Pioneer Natural Resources Co. | 80,000 | 13,742,400 | ||||||||||
Industrials | ||||||||||||
Aerospace & Defense | 1.2 | |||||||||||
TransDigm Group, Inc. | 30,000 | 9,208,200 | ||||||||||
Total Common Stocks (Cost $415,636,687) | 685,987,843 | |||||||||||
Cash Equivalents – 12.8% | ||||||||||||
U.S. Treasury Bills, 1.28% to 1.80%, | ||||||||||||
4/26/18 to 8/16/18(a) | 93,000,000 | 92,727,234 | ||||||||||
State Street Institutional U.S. Government Money | ||||||||||||
Market Fund - Premier Class 1.58%(b) | 7,701,256 | 7,701,256 | ||||||||||
Total Cash Equivalents (Cost $100,441,785) | 100,428,490 | |||||||||||
Total Investments in Securities (Cost $516,078,472) | 786,416,333 | |||||||||||
Other Liabilities in Excess of Other Assets - (0.1%) | (1,012,477 | ) | ||||||||||
Net Assets - 100% | 785,403,856 | |||||||||||
Net Asset Value Per Share - Investor Class | 42.92 | |||||||||||
Net Asset Value Per Share - Institutional Class | 43.29 |
* | 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, 2018. |
(c) | Foreign domiciled entity |
The accompanying notes form an integral part of these financial statements.
29 | Q1 2018 ANNUAL REPORT
PARTNERS VALUE FUND
Schedule of Investments
March 31, 2018
Common Stocks – 85.4% | ||||||||||||
% of Net | ||||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||||
Cable & Satellite | 21.2 | |||||||||||
Liberty Broadband Corp.* | ||||||||||||
Series A | 165,000 | 13,992,000 | ||||||||||
Series C | 550,000 | 47,129,500 | ||||||||||
Liberty Global plc - Class C* (c) | 1,200,000 | 36,516,000 | ||||||||||
Liberty SiriusXM Group* | ||||||||||||
Series A | 120,000 | 4,932,000 | ||||||||||
Series C | 450,000 | 18,382,500 | ||||||||||
Liberty Latin America Ltd. - Class C* (c) | 725,000 | 13,840,250 | ||||||||||
GCI Liberty, Inc. - Class A* | 100,000 | 5,286,000 | ||||||||||
Internet & Direct Marketing Retail | 3.0 | |||||||||||
QVC Group - Series A* | 800,000 | 20,136,000 | ||||||||||
Broadcasting | 2.1 | |||||||||||
Discovery Communications, Inc. - Class C* | 700,000 | 13,664,000 | ||||||||||
Consumer Durables & Apparel | 1.5 | |||||||||||
Tupperware Brands Corp. | 200,000 | 9,676,000 | ||||||||||
Automotive Retail | 1.0 | |||||||||||
CarMax, Inc.* | 110,000 | 6,813,400 | ||||||||||
28.8 | 190,367,650 | |||||||||||
Information Technology | ||||||||||||
IT Services | 10.4 | |||||||||||
Visa Inc. - Class A | 295,000 | 35,287,900 | ||||||||||
Mastercard Inc. - Class A | 130,000 | 22,770,800 | ||||||||||
DXC Technology Co. | 107,143 | 10,771,086 | ||||||||||
Internet Software & Services | 4.1 | |||||||||||
Alphabet, Inc. - Class C* | 26,000 | 26,826,540 | ||||||||||
Software | 3.1 | |||||||||||
Oracle Corp. | 445,000 | 20,358,750 | ||||||||||
Semiconductors & | ||||||||||||
Semiconductor Equipment | 3.0 | |||||||||||
Texas Instruments, Inc. | 190,000 | 19,739,100 | ||||||||||
Electronic Equipment, Instruments | ||||||||||||
& Components | 1.1 | |||||||||||
FLIR Systems, Inc. | 150,000 | 7,501,500 | ||||||||||
21.7 | 143,255,676 | |||||||||||
Financials | ||||||||||||
Diversified Financial Services | 9.5 | |||||||||||
Berkshire Hathaway Inc. - Class B* | 315,000 | 62,836,200 | ||||||||||
Mortgage REITs | 3.3 | |||||||||||
Redwood Trust, Inc. | 1,400,000 | 21,658,000 | ||||||||||
Insurance Brokers | 2.8 | |||||||||||
Aon plc - Class A(c) | 132,500 | 18,593,725 | ||||||||||
Diversified Banks | 1.8 | |||||||||||
Wells Fargo & Co. | 225,000 | 11,792,250 | ||||||||||
17.4 | 114,880,175 | |||||||||||
Health Care | ||||||||||||
Health Care Services | 4.9 | |||||||||||
Laboratory Corp. of America Holdings* | 200,000 | 32,350,000 | ||||||||||
Pharmaceuticals | 4.1 | |||||||||||
Allergan plc(c) | 160,000 | 26,926,400 | ||||||||||
Health Care Equipment | 0.7 | |||||||||||
Danaher Corp. | 50,000 | 4,895,500 | ||||||||||
9.7 | 64,171,900 |
$ Principal | ||||||||||||
% of Net | Amount | |||||||||||
Industrials | Assets | or Shares | $ Value | |||||||||
Machinery | 5.7 | |||||||||||
Colfax Corp.* | 600,000 | 19,140,000 | ||||||||||
Allison Transmission Holdings, Inc. | 465,000 | 18,162,900 | ||||||||||
5.7 | 37,302,900 | |||||||||||
Materials | ||||||||||||
Specialty Chemicals | 2.1 | |||||||||||
Axalta Coating Systems Ltd.* (c) | 450,000 | 13,585,500 | ||||||||||
Total Common Stocks (Cost $333,314,884) | 563,563,801 | |||||||||||
Cash Equivalents – 15.2% | ||||||||||||
U.S. Treasury Bills, 1.27% to 1.80%, | ||||||||||||
4/26/18 to 8/16/18(a) | 87,000,000 | 86,752,714 | ||||||||||
State Street Institutional U.S. Government Money | ||||||||||||
Market Fund - Premier Class 1.58%(b) | 13,413,547 | 13,413,547 | ||||||||||
Total Cash Equivalents (Cost $100,180,354) | 100,166,261 | |||||||||||
Total Investments in Securities (Cost $433,495,238) | 663,730,062 | |||||||||||
Other Liabilities in Excess of Other Assets - (0.6%) | (3,608,121 | ) | ||||||||||
Net Assets - 100% | 660,121,941 | |||||||||||
Net Asset Value Per Share - Investor Class | 31.31 | |||||||||||
Net Asset Value Per Share - Institutional Class | 31.59 |
* | 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, 2018. |
(c) | Foreign domiciled entity |
The accompanying notes form an integral part of these financial statements.
30 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
PARTNERS III OPPORTUNITY FUND
Schedule of Investments
March 31, 2018
Common Stocks – 89.6% | ||||||||||||
% of Net | ||||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||||
Cable & Satellite | 23.5 | |||||||||||
Liberty Broadband Corp.* (c) | ||||||||||||
Series A | 135,000 | 11,448,000 | ||||||||||
Series C | 550,000 | 47,129,500 | ||||||||||
Liberty Global plc - Class C* (c) (d) | 1,650,000 | 50,209,500 | ||||||||||
Liberty SiriusXM Group* (c) | ||||||||||||
Series A | 200,000 | 8,220,000 | ||||||||||
Series C | 400,000 | 16,340,000 | ||||||||||
GCI Liberty, Inc. - Class A* (c) | 237,302 | 12,543,784 | ||||||||||
Liberty Latin America Ltd. - Class C* (c) (d) | 400,000 | 7,636,000 | ||||||||||
Internet & Direct Marketing Retail | 3.2 | |||||||||||
QVC Group - Series A* (c) | 550,000 | 13,843,500 | ||||||||||
Liberty Expedia Holdings, Inc. - Series A* (c) | 175,000 | 6,874,000 | ||||||||||
Broadcasting | 1.5 | |||||||||||
Discovery Communications, Inc. - Class C* | 500,000 | 9,760,000 | ||||||||||
Movies & Entertainment | 1.5 | |||||||||||
Liberty Formula One Group* (c) | ||||||||||||
Series A | 50,000 | 1,464,500 | ||||||||||
Series C | 150,000 | 4,627,500 | ||||||||||
Liberty Braves Group* (c) | ||||||||||||
Series A | 20,000 | 454,600 | ||||||||||
Series C | 140,000 | 3,194,800 | ||||||||||
Automotive Retail | 1.4 | |||||||||||
CarMax, Inc.* | 150,000 | 9,291,000 | ||||||||||
Consumer Durables & Apparel | 1.1 | |||||||||||
Tupperware Brands Corp. | 150,000 | 7,257,000 | ||||||||||
32.2 | 210,293,684 | |||||||||||
Information Technology | ||||||||||||
IT Services | 11.9 | |||||||||||
Mastercard Inc. - Class A(c) | 175,000 | 30,653,000 | ||||||||||
Visa Inc. - Class A | 225,000 | 26,914,500 | ||||||||||
DXC Technology Co. | 200,000 | 20,106,000 | ||||||||||
Internet Software & Services | 5.5 | |||||||||||
Alphabet, Inc. - Class C* (c) | 27,000 | 27,858,330 | ||||||||||
XO Group, Inc.* | 400,000 | 8,300,000 | ||||||||||
Semiconductors & | ||||||||||||
Semiconductor Equipment | 2.8 | |||||||||||
Texas Instruments, Inc.(c) | 180,000 | 18,700,200 | ||||||||||
Application Software | 1.8 | |||||||||||
Intelligent Systems Corp.* # † | 2,270,000 | 11,599,700 | ||||||||||
Software | 0.7 | |||||||||||
Oracle Corp. | 100,000 | 4,575,000 | ||||||||||
22.7 | 148,706,730 | |||||||||||
Financials | ||||||||||||
Diversified Financial Services | 12.2 | |||||||||||
Berkshire Hathaway Inc. - Class B* (c) | 400,000 | 79,792,000 | ||||||||||
Mortgage REITs | 4.6 | |||||||||||
Redwood Trust, Inc.(c) | 1,950,000 | 30,166,500 | ||||||||||
Property & Casualty Insurance | 0.5 | |||||||||||
Markel Corp.* | 2,500 | 2,925,625 | ||||||||||
17.3 | 112,884,125 | |||||||||||
Health Care | ||||||||||||
Pharmaceuticals | 5.1 | |||||||||||
Allergan plc(d) | 200,000 | 33,658,000 |
$ Principal | ||||||||||||
% of Net | Amount | |||||||||||
Assets | or Shares | $ Value | ||||||||||
Health Care Services | 4.9 | |||||||||||
Laboratory Corp. of America Holdings* (c) | 200,000 | 32,350,000 | ||||||||||
Health Care Equipment | 1.1 | |||||||||||
Danaher Corp. | 70,000 | 6,853,700 | ||||||||||
11.1 | 72,861,700 | |||||||||||
Industrials | ||||||||||||
Machinery | 3.3 | |||||||||||
Colfax Corp.* (c) | 675,000 | 21,532,500 | ||||||||||
Aerospace & Defense | 3.0 | |||||||||||
Wesco Aircraft Holdings, Inc.* | 1,900,000 | 19,475,000 | ||||||||||
6.3 | 41,007,500 | |||||||||||
Total Common Stocks (Cost $342,592,424) | 585,753,739 | |||||||||||
Cash Equivalents – 7.6% | ||||||||||||
U.S. Treasury Bills, 1.49% to 1.65%, | ||||||||||||
4/19/18 to 6/07/18(a) | 38,000,000 | 37,904,587 | ||||||||||
State Street Institutional U.S. Government Money | ||||||||||||
Market Fund - Premier Class 1.58%(b) | 12,194,490 | 12,194,490 | ||||||||||
Total Cash Equivalents (Cost $50,104,375) | 50,099,077 | |||||||||||
Total Investments in Securities (Cost $392,696,799) | 635,852,816 | |||||||||||
Due From Broker(c) - 31.8% | 207,760,767 | |||||||||||
Securities Sold Short - (28.7%) | (187,620,500 | ) | ||||||||||
Options Written - (0.0%) | (50,000 | ) | ||||||||||
Other Liabilities in Excess of Other Assets - (0.3%) | (2,101,694 | ) | ||||||||||
Net Assets - 100% | 653,841,389 | |||||||||||
Net Asset Value Per Share - Investor Class | 14.28 | |||||||||||
Net Asset Value Per Share - Institutional Class | 14.69 | |||||||||||
Securities Sold Short – (28.7%) | ||||||||||||
PowerShares QQQ Trust, Series 1 | 350,000 | (56,045,500 | ) | |||||||||
SPDR S&P 500 ETF Trust | 500,000 | (131,575,000 | ) | |||||||||
Total Securities Sold Short (proceeds $142,330,693) | (187,620,500 | ) |
Options Written* – (0.0%) | ||||||||||||
Shares | ||||||||||||
subject | ||||||||||||
$ Notional | to option | |||||||||||
Covered Call Options | ||||||||||||
QVC Group - Series A, April 2018 / $27 | 2,700,000 | 100,000 | (30,000 | ) | ||||||||
QVC Group - Series A, April 2018 / $28 | 2,800,000 | 100,000 | (20,000 | ) | ||||||||
Total Options Written (premiums received $315,185) | (50,000 | ) |
* | 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, 2018. |
(c) | Fully or partially pledged as collateral on securities sold short and outstanding written options. |
(d) | Foreign domiciled entity |
The accompanying notes form an integral part of these financial statements.
31 | Q1 2018 ANNUAL REPORT
HICKORY FUND
Schedule of Investments
March 31, 2018
Common Stocks – 79.4% | ||||||||||||
% of Net | ||||||||||||
Consumer Discretionary | Assets | Shares | $ Value | |||||||||
Cable & Satellite | 23.1 | |||||||||||
Liberty Broadband Corp.* | ||||||||||||
Series A | 50,000 | 4,240,000 | ||||||||||
Series C | 210,000 | 17,994,900 | ||||||||||
Liberty SiriusXM Group* | ||||||||||||
Series A | 75,000 | 3,082,500 | ||||||||||
Series C | 180,000 | 7,353,000 | ||||||||||
GCI Liberty, Inc. - Class A* | 185,000 | 9,779,100 | ||||||||||
Liberty Global plc - Class C* (c) | 250,000 | 7,607,500 | ||||||||||
Liberty Latin America Ltd. - Class C* (c) | 315,000 | 6,013,350 | ||||||||||
Movies & Entertainment | 5.8 | |||||||||||
Lions Gate Entertainment Corp.(c) | ||||||||||||
Class A | 125,000 | 3,228,750 | ||||||||||
Class B | 150,000 | 3,612,000 | ||||||||||
Liberty Formula One Group* | ||||||||||||
Series A | 27,500 | 805,475 | ||||||||||
Series C | 125,000 | 3,856,250 | ||||||||||
Liberty Braves Group* | ||||||||||||
Series A | 11,000 | 250,030 | ||||||||||
Series C | 105,000 | 2,396,100 | ||||||||||
Internet & Direct Marketing Retail | 5.6 | |||||||||||
QVC Group - Series A* | 350,000 | 8,809,500 | ||||||||||
Liberty Expedia Holdings, Inc. - Series A* | 125,000 | 4,910,000 | ||||||||||
Consumer Durables & Apparel | 2.0 | |||||||||||
Tupperware Brands Corp. | 100,000 | 4,838,000 | ||||||||||
Automotive Retail | 1.4 | |||||||||||
Murphy USA Inc.* | 45,000 | 3,276,000 | ||||||||||
37.9 | 92,052,455 | |||||||||||
Industrials | ||||||||||||
Machinery | 7.6 | |||||||||||
Colfax Corp.* | 320,000 | 10,208,000 | ||||||||||
Allison Transmission Holdings, Inc. | 210,000 | 8,202,600 | ||||||||||
Aerospace & Defense | 3.0 | |||||||||||
Wesco Aircraft Holdings, Inc.* | 700,000 | 7,175,000 | ||||||||||
10.6 | 25,585,600 | |||||||||||
Information Technology | ||||||||||||
Software | 5.3 | |||||||||||
ACI Worldwide, Inc.* | 375,000 | 8,895,000 | ||||||||||
Guidewire Software, Inc.* | 50,000 | 4,041,500 | ||||||||||
Internet Software & Services | 2.4 | |||||||||||
XO Group, Inc.* | 275,000 | 5,706,250 | ||||||||||
7.7 | 18,642,750 | |||||||||||
Materials | ||||||||||||
Metals & Mining | 3.0 | |||||||||||
Compass Minerals International, Inc. | 120,000 | 7,236,000 | ||||||||||
Specialty Chemicals | 2.7 | |||||||||||
Axalta Coating Systems Ltd.* (c) | 220,000 | 6,641,800 | ||||||||||
5.7 | 13,877,800 | |||||||||||
Telecommunication Services | ||||||||||||
Diversified Telecommunication Services 5.3 | ||||||||||||
LICT Corp.* # | 1,005 | 12,763,500 |
$ Principal | ||||||||||||
% of Net | Amount | |||||||||||
Health Care | Assets | or Shares | $ Value | |||||||||
Health Care Services | 5.0 | |||||||||||
Laboratory Corp. of America Holdings* | 75,000 | 12,131,250 | ||||||||||
Financials | ||||||||||||
Mortgage REITs | 4.0 | |||||||||||
Redwood Trust, Inc. | 635,000 | 9,823,450 | ||||||||||
Real Estate | ||||||||||||
Equity REITs | 3.2 | |||||||||||
Equity Commonwealth* | 250,000 | 7,667,500 | ||||||||||
Total Common Stocks (Cost $112,518,782) | 192,544,305 | |||||||||||
Cash Equivalents – 20.7% | ||||||||||||
U.S. Treasury Bills, 1.28% to 1.80%, | ||||||||||||
4/19/18 to 8/16/18(a) | 46,500,000 | 46,375,299 | ||||||||||
State Street Institutional U.S. Government Money | ||||||||||||
Market Fund - Premier Class 1.58(b) | 3,966,478 | 3,966,478 | ||||||||||
Total Cash Equivalents (Cost $50,347,384) | 50,341,777 | |||||||||||
Total Investments in Securities (Cost $162,866,166) | 242,886,082 | |||||||||||
Other Liabilities in Excess of Other Assets - (0.1%) | (278,007 | ) | ||||||||||
Net Assets - 100% | 242,608,075 | |||||||||||
Net Asset Value Per Share | 51.58 |
* | 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, 2018. |
(c) | Foreign domiciled entity |
The accompanying notes form an integral part of these financial statements.
32 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
BALANCED FUND
Schedule of Investments
March 31, 2018
Common Stocks – 44.5% | ||||||||||||
% of Net | ||||||||||||
Information Technology | Assets | Shares | $ Value | |||||||||
IT Services | 5.5 | |||||||||||
Visa Inc. - Class A | 28,500 | 3,409,170 | ||||||||||
Mastercard Inc. - Class A | 12,000 | 2,101,920 | ||||||||||
Accenture plc - Class A(e) | 8,000 | 1,228,000 | ||||||||||
Software | 3.8 | |||||||||||
Oracle Corp. | 62,500 | 2,859,375 | ||||||||||
Guidewire Software, Inc.* | 22,000 | 1,778,260 | ||||||||||
Semiconductors & | ||||||||||||
Semiconductor Equipment | 2.0 | |||||||||||
Marvell Technology Group Ltd.(e) | 60,000 | 1,260,000 | ||||||||||
Texas Instruments, Inc. | 11,000 | 1,142,790 | ||||||||||
Internet Software & Services | 1.4 | |||||||||||
Alphabet, Inc. - Class C* | 1,700 | 1,754,043 | ||||||||||
12.7 | 15,533,558 | |||||||||||
Health Care | ||||||||||||
Health Care Services | 2.9 | |||||||||||
Laboratory Corp. of America Holdings* | 22,000 | 3,558,500 | ||||||||||
Pharmaceuticals | 2.1 | |||||||||||
Allergan plc(e) | 15,000 | 2,524,350 | ||||||||||
Life Sciences Tools & Services | 2.0 | |||||||||||
Thermo Fisher Scientific Inc. | 12,000 | 2,477,520 | ||||||||||
Health Care Equipment | 1.2 | |||||||||||
Danaher Corp. | 15,000 | 1,468,650 | ||||||||||
8.2 | 10,029,020 | |||||||||||
Materials | ||||||||||||
Construction Materials | 2.1 | |||||||||||
Martin Marietta Materials, Inc. | 6,500 | 1,347,450 | ||||||||||
Vulcan Materials Co. | 11,000 | 1,255,870 | ||||||||||
Industrial Gases | 2.1 | |||||||||||
Praxair, Inc. | 18,000 | 2,597,400 | ||||||||||
Specialty Chemicals | 1.4 | |||||||||||
Axalta Coating Systems Ltd.* (e) | 55,000 | 1,660,450 | ||||||||||
Metals & Mining | 1.1 | |||||||||||
Compass Minerals International, Inc. | 23,000 | 1,386,900 | ||||||||||
Fertilizers & Agricultural Chemicals | 1.0 | |||||||||||
Monsanto Co. | 10,000 | 1,166,900 | ||||||||||
7.7 | 9,414,970 | |||||||||||
Financials | ||||||||||||
Diversified Financial Services | 3.0 | |||||||||||
Berkshire Hathaway Inc. - Class B* | 18,500 | 3,690,380 | ||||||||||
Insurance Brokers | 1.6 | |||||||||||
Aon plc - Class A(e) | 14,000 | 1,964,620 | ||||||||||
Mortgage REITs | 1.6 | |||||||||||
Redwood Trust, Inc. | 125,000 | 1,933,750 | ||||||||||
Diversified Banks | 1.2 | |||||||||||
JPMorgan Chase & Co. | 12,500 | 1,374,625 | ||||||||||
7.4 | 8,963,375 | |||||||||||
Consumer Discretionary | ||||||||||||
Cable & Satellite | 4.1 | |||||||||||
Liberty Broadband Corp. - Series C* | 32,500 | 2,784,925 | ||||||||||
Comcast Corp. - Class A | 65,000 | 2,221,050 |
$ Principal | ||||||||||||
% of Net | Amount | |||||||||||
Assets | or Shares | $ Value | ||||||||||
Multiline Retail | 1.2 | |||||||||||
Dollar Tree, Inc.* | 15,000 | 1,423,500 | ||||||||||
5.3 | 6,429,475 | |||||||||||
Consumer Staples | ||||||||||||
Beverages | 3.2 | |||||||||||
Diageo plc - Sponsored ADR(e) | 15,000 | 2,031,300 | ||||||||||
Anheuser-Busch InBev SA/NV - Sponsored ADR(e) | 17,000 | 1,868,980 | ||||||||||
3.2 | 3,900,280 | |||||||||||
Total Common Stocks (Cost $38,162,140) | 54,270,678 | |||||||||||
Corporate Bonds – 22.6% | ||||||||||||
American Express Credit Corp. 8.125% 5/20/19 | 500,000 | 529,611 | ||||||||||
Anheuser-Busch InBev Finance Inc. 1.9% 2/01/19 | 500,000 | 498,622 | ||||||||||
Apple Inc. 1.55% 2/08/19 | 1,000,000 | 992,331 | ||||||||||
Bank of America Corp. | ||||||||||||
2.6% 1/15/19 | 1,250,000 | 1,251,380 | ||||||||||
2.25% 4/21/20 | 1,000,000 | 984,246 | ||||||||||
Berkshire Hathaway Inc. (Finance Corp.) | ||||||||||||
2.0% 8/15/18 | 500,000 | 499,018 | ||||||||||
1.7% 3/15/19 | 800,000 | 794,608 | ||||||||||
4.25% 1/15/21 | 300,000 | 312,318 | ||||||||||
Broadcom Corp. 2.2% 1/15/21 | 1,000,000 | 971,601 | ||||||||||
Capital One Bank USA, N.A. 8.8% 7/15/19 | 500,000 | 535,920 | ||||||||||
Capital One Financial Corp. 2.45% 4/24/19 | 718,000 | 714,927 | ||||||||||
Diageo Capital plc 4.85% 5/15/18(e) | 300,000 | 300,853 | ||||||||||
Discovery Communications, Inc. 2.2% 9/20/19 | 1,000,000 | 990,039 | ||||||||||
Dollar General Corp. 1.875% 4/15/18 | 1,079,000 | 1,078,538 | ||||||||||
Equity Commonwealth 5.875% 9/15/20 | 700,000 | 728,297 | ||||||||||
Fidelity National Information Services, Inc. 2.85% 10/15/18 | 800,000 | 800,469 | ||||||||||
First Republic Bank 2.375% 6/17/19 | 1,200,000 | 1,192,264 | ||||||||||
Ford Motor Credit Co. LLC 2.24% 6/15/18 | 500,000 | 499,415 | ||||||||||
Fortive Corp. 1.8% 6/15/19 | 500,000 | 494,099 | ||||||||||
Goldman Sachs Group, Inc. | ||||||||||||
2.9% 7/19/18 | 500,000 | 500,752 | ||||||||||
2.6% 12/27/20 | 500,000 | 492,926 | ||||||||||
JPMorgan Chase & Co. | ||||||||||||
1.625% 5/15/18 | 375,000 | 374,620 | ||||||||||
2.60725% 3/09/21 Floating Rate (Qtrly LIBOR + 55) | 750,000 | 752,176 | ||||||||||
The Manitowoc Co., Inc. 12.75% 8/15/21(d) | 500,000 | 565,000 | ||||||||||
Markel Corp. | ||||||||||||
7.125% 9/30/19 | 1,014,000 | 1,074,482 | ||||||||||
4.9% 7/01/22 | 410,000 | 431,758 | ||||||||||
3.625% 3/30/23 | 500,000 | 501,194 | ||||||||||
Marriott International, Inc. 3.0% 3/01/19 | 500,000 | 500,611 | ||||||||||
Moody’s Corp. 2.75% 7/15/19 | 559,000 | 557,314 | ||||||||||
QUALCOMM Inc. 1.85% 5/20/19 | 500,000 | 496,596 | ||||||||||
Roper Technologies, Inc. 2.05% 10/01/18 | 1,000,000 | 997,720 | ||||||||||
U.S. Bancorp 2.35% 1/29/21 | 1,000,000 | 985,726 | ||||||||||
Valmont Industries 6.625% 4/20/20 | 1,000,000 | 1,069,296 | ||||||||||
Wells Fargo & Co. | ||||||||||||
2.15% 1/15/19 | 1,000,000 | 995,715 | ||||||||||
2.125% 4/22/19 | 800,000 | 795,283 | ||||||||||
4.6% 4/01/21 | 1,250,000 | 1,298,097 | ||||||||||
WM Wrigley Jr. Co. 2.4% 10/21/18(d) | 1,000,000 | 998,857 | ||||||||||
Total Corporate Bonds (Cost $27,774,428) | 27,556,679 |
The accompanying notes form an integral part of these financial statements.
33 | Q1 2018 ANNUAL REPORT
BALANCED FUND (CONTINUED)
Corporate Convertible Bonds – 0.8% | ||||||||
$ Principal | ||||||||
Amount | $ Value | |||||||
Redwood Trust, Inc. 5.625% 11/15/19 (Cost $998,214) | 1,000,000 | 1,010,000 | ||||||
Asset-Backed Securities – 0.2%(c) | ||||||||
Flagship Credit Auto Trust (FCAT)(d) | ||||||||
2014-2 CL C — 3.95% 2020 (0.9 years) (Cost $253,129) | 250,000 | 252,040 | ||||||
Mortgage-Backed Securities – 2.5%(c) | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
Collateralized Mortgage Obligations | ||||||||
3649 CL BW — 4.0% 2025 (2.5 years) | 73,462 | 76,097 | ||||||
Pass-Through Securities | ||||||||
J14649 — 3.5% 2026 (2.9 years) | 114,416 | 116,752 | ||||||
E02948 — 3.5% 2026 (3.0 years) | 185,552 | 189,468 | ||||||
J16663 — 3.5% 2026 (3.1 years) | 109,438 | 111,672 | ||||||
493,989 | ||||||||
Federal National Mortgage Association | ||||||||
Pass-Through Securities | ||||||||
MA0464 — 3.5% 2020 (0.9 years) | 56,852 | 58,014 | ||||||
AR8198 — 2.5% 2023 (2.0 years) | 152,416 | 151,745 | ||||||
MA1502 — 2.5% 2023 (2.2 years) | 131,140 | 130,564 | ||||||
995755 — 4.5% 2024 (2.2 years) | 17,216 | 17,955 | ||||||
AB1769 — 3.0% 2025 (2.9 years) | 102,336 | 102,810 | ||||||
AB3902 — 3.0% 2026 (3.3 years) | 181,465 | 182,308 | ||||||
AK3264 — 3.0% 2027 (3.3 years) | 144,693 | 145,365 | ||||||
788,761 | ||||||||
Government National Mortgage Association | ||||||||
Pass-Through Securities | ||||||||
G2 5255 — 3.0% 2026 (3.3 years) | 186,125 | 186,820 | ||||||
Non-Government Agency | ||||||||
Collateralized Mortgage Obligations | ||||||||
J.P. Morgan Mortgage Trust (JPMMT)(d) | ||||||||
2014-5 CL A1 — 3.0% 2029 (3.1 years) | 247,549 | 245,428 | ||||||
2017-3 CL 2A2 — 2.5% 2047 (5.3 years) | 916,959 | 894,474 | ||||||
Sequoia Mortgage Trust (SEMT) | ||||||||
2017-CH1 CL A11 — 3.5% 2047 (2.0 years)(d) | 413,590 | 415,490 | ||||||
2012-1 CL 1A1 — 2.865% 2042 (3.0 years) | 23,364 | 23,541 | ||||||
1,578,933 | ||||||||
Total Mortgage-Backed Securities (Cost $3,063,721) | 3,048,503 | |||||||
U.S. Treasury – 26.6% | ||||||||
U.S. Treasury Notes | ||||||||
1.5% 8/31/18 | 2,000,000 | 1,996,855 | ||||||
0.875% 10/15/18 | 2,000,000 | 1,988,309 | ||||||
1.25% 11/30/18 | 2,000,000 | 1,990,052 | ||||||
1.125% 1/31/19 | 1,000,000 | 992,113 | ||||||
1.625% 3/31/19 | 1,000,000 | 995,058 | ||||||
1.25% 4/30/19 | 1,000,000 | 990,331 | ||||||
1.625% 7/31/19 | 1,000,000 | 992,601 | ||||||
1.625% 8/31/19 | 1,000,000 | 991,779 | ||||||
1.5% 10/31/19 | 1,000,000 | 988,318 | ||||||
1.375% 12/15/19 | 1,000,000 | 985,119 | ||||||
1.25% 1/31/20 | 1,000,000 | 981,700 |
$ Principal | ||||||||
Amount | ||||||||
or Shares | $ Value | |||||||
1.375% 2/15/20 | 1,000,000 | 983,353 | ||||||
1.5% 6/15/20 | 1,000,000 | 982,403 | ||||||
1.375% 8/31/20 | 1,000,000 | 977,099 | ||||||
2.0% 11/30/20 | 2,000,000 | 1,980,849 | ||||||
2.0% 2/28/21 | 1,000,000 | 988,849 | ||||||
1.375% 5/31/21 | 1,000,000 | 967,842 | ||||||
1.125% 8/31/21 | 1,000,000 | 956,403 | ||||||
1.875% 11/30/21 | 2,000,000 | 1,958,240 | ||||||
1.75% 2/28/22 | 1,000,000 | 972,349 | ||||||
2.125% 6/30/22 | 2,000,000 | 1,967,986 | ||||||
1.875% 8/31/22 | 1,000,000 | 972,490 | ||||||
2.0% 11/30/22 | 1,000,000 | 975,914 | ||||||
2.0% 2/15/23 | 1,000,000 | 974,247 | ||||||
1.625% 5/31/23 | 2,000,000 | 1,906,988 | ||||||
2.5% 8/15/23 | 1,000,000 | 995,082 | ||||||
Total U.S. Treasury (Cost $32,754,849) | 32,452,329 | |||||||
Cash Equivalents – 2.6% | ||||||||
U.S. Treasury Bill 1.65% 4/19/18(a) | 2,500,000 | 2,498,077 | ||||||
State Street Institutional U.S. Government Money | ||||||||
Market Fund - Premier Class 1.58%(b) | 689,852 | 689,852 | ||||||
Total Cash Equivalents (Cost $3,187,826) | 3,187,929 | |||||||
Total Investments in Securities (Cost $106,194,307) | 121,778,158 | |||||||
Other Assets Less Other Liabilities — 0.2% | 291,032 | |||||||
Net Assets - 100% | 122,069,190 | |||||||
Net Asset Value Per Share | 14.20 |
* | 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, 2018. |
(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 entity |
The accompanying notes form an integral part of these financial statements.
34 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
CORE PLUS INCOME FUND
Schedule of Investments
March 31, 2018
Corporate Bonds – 28.2% | ||||||||
$ Principal | ||||||||
Amount | $ Value | |||||||
Anheuser-Busch InBev Finance Inc. 3.3% 2/01/23 | 200,000 | 200,266 | ||||||
AT&T Inc. 3.9% 8/14/27 | 750,000 | 756,099 | ||||||
Bank of America Corp. 2.25% 4/21/20 | 300,000 | 295,274 | ||||||
Berkshire Hathaway Inc. Finance Corp. 3.0% 5/15/22 | 200,000 | 200,148 | ||||||
Boardwalk Pipelines LLC 5.75% 9/15/19 | 225,000 | 232,830 | ||||||
Boston Properties LP 3.125% 9/01/23 | 555,000 | 545,377 | ||||||
Broadcom Corp. 3.125% 1/15/25 | 350,000 | 331,177 | ||||||
Calumet Specialty Products Partners LP | ||||||||
11.5% 1/15/21(c) | 80,000 | 89,450 | ||||||
6.5% 4/15/21 | 350,000 | 341,250 | ||||||
7.625% 1/15/22 | 357,000 | 355,215 | ||||||
CNX Resources Corp. 5.875% 4/15/22 | 92,000 | 92,805 | ||||||
Discovery Communications, Inc. 2.95% 3/20/23 | 400,000 | 385,757 | ||||||
Dominion Resources, Inc. 2.962% 7/01/19 | 100,000 | 99,839 | ||||||
Donnelley Financial Solutions, Inc. 8.25% 10/15/24 | 108,000 | 114,615 | ||||||
Equifax Inc. 2.3% 6/01/21 | 100,000 | 97,015 | ||||||
Equity Commonwealth 5.875% 9/15/20 | 1,319,000 | 1,372,320 | ||||||
FLIR Systems, Inc. 3.125% 6/15/21 | 400,000 | 396,425 | ||||||
Goldman Sachs Group, Inc. 2.9669% 4/30/18 Floating | ||||||||
Rate (Qtrly LIBOR + 120) | 137,000 | 137,079 | ||||||
Invista B.V. 4.25% 10/15/19(c) | 150,000 | 150,540 | ||||||
iStar Inc. 5.0% 7/01/19 | 250,000 | 250,949 | ||||||
JPMorgan Chase & Co. 2.60725% 3/09/21 | ||||||||
Floating Rate (Qtrly LIBOR + 55) | 150,000 | 150,435 | ||||||
L Brands, Inc. 5.625% 2/15/22 | 40,000 | 41,700 | ||||||
The Manitowoc Co., Inc. 12.75% 8/15/21(c) | 550,000 | 621,500 | ||||||
Markel Corp. | ||||||||
7.125% 9/30/19 | 125,000 | 132,456 | ||||||
4.9% 7/01/22 | 250,000 | 263,267 | ||||||
3.625% 3/30/23 | 200,000 | 200,478 | ||||||
MPLX LP 4.875% 6/01/25 | 190,000 | 198,578 | ||||||
NGL Energy Partners LP | ||||||||
5.125% 7/15/19 | 565,000 | 565,000 | ||||||
7.5% 11/01/23 | 148,000 | 149,110 | ||||||
NXP BV 4.625% 6/01/23(c) (d) | 100,000 | 102,030 | ||||||
QVC, Inc. 3.125% 4/01/19 | 100,000 | 99,964 | ||||||
Range Resources Corp. 5.0% 8/15/22 | 301,000 | 292,722 | ||||||
RELX plc 3.5% 3/16/23 | 200,000 | 200,416 | ||||||
Sprint Spectrum Co. LLC 3.36% 3/20/23(c) (e) | 218,750 | 217,930 | ||||||
TC PipeLines LP | ||||||||
4.65% 6/15/21 | 160,000 | 164,634 | ||||||
4.375% 3/13/25 | 45,000 | 45,436 | ||||||
Valmont Industries, Inc. 6.625% 4/20/20 | 500,000 | 534,648 | ||||||
Wells Fargo & Co. | ||||||||
4.6% 4/01/21 | 400,000 | 415,391 | ||||||
2.1% 7/26/21 | 200,000 | 193,196 | ||||||
Total Corporate Bonds (Cost $11,026,051) | 11,033,321 | |||||||
Corporate Convertible Bonds – 2.5% | ||||||||
Redwood Trust, Inc. | ||||||||
4.625% 4/15/18 | 475,000 | 477,375 | ||||||
5.625% 11/15/19 | 150,000 | 151,500 | ||||||
4.75% 8/15/23 | 350,000 | 340,130 | ||||||
Total Corporate Convertible Bonds (Cost $975,821) | 969,005 |
Asset-Backed Securities – 26.7%(b) | ||||||||
$ Principal | ||||||||
Amount | $ Value | |||||||
AmeriCredit Automobile Receivables Trust (AMCAR) | ||||||||
2015-2 CL D — 3.0% 2021 (1.4 years) | 110,000 | 110,023 | ||||||
Ascentium Equipment Receivables Trust (ACER)(c) | ||||||||
2015-2A CL B — 2.62% 2019 (0.4 years) | 114,000 | 113,948 | ||||||
2016-2A CL E — 6.79% 2024 (2.5 years) | 422,000 | 445,408 | ||||||
Chrysler Capital Auto Receivables Trust (CCART)(c) | ||||||||
2014-BA CL D — 3.44% 2021 (0.7 years) | 108,000 | 108,429 | ||||||
Commercial Credit Group Receivables Trust (CCG)(c) | ||||||||
2017-1 CL A1 — 1.35% 2018 (0.0 years) | 9,114 | 9,114 | ||||||
Conn Funding II, LP (CONN)(c) | ||||||||
2017-A CL A — 2.73% 2019 (0.1 years) | 25,601 | 25,600 | ||||||
2017-B CL A — 2.73% 2020 (0.4 years) | 250,571 | 250,178 | ||||||
Credit Acceptance Auto Loan Trust (CAALT)(c) | ||||||||
2015-2A CL C — 3.76% 2024 (0.7 years) | 250,000 | 250,796 | ||||||
2016-2A CL C — 4.29% 2024 (1.4 years) | 260,000 | 263,120 | ||||||
DT Auto Owner Trust (DTAOT)(c) | ||||||||
2016-1A CL C — 3.54% 2021 (0.3 years) | 156,603 | 157,052 | ||||||
2016-3A CL C — 3.15% 2022 (0.6 years) | 120,000 | 120,172 | ||||||
Enterprise Fleet Financing LLC (EFF)(c) | ||||||||
2017-2 CL A2 — 1.97% 2023 (1.0 years) | 350,000 | 347,546 | ||||||
Exeter Automobile Receivables Trust (EART)(c) | ||||||||
2016-3A CL A — 1.84% 2020 (0.3 years) | 49,204 | 49,065 | ||||||
2017-3A CL A — 2.05% 2021 (0.7 years) | 280,454 | 278,959 | ||||||
2016-3A CL B — 2.84% 2021 (1.1 years) | 368,000 | 368,346 | ||||||
2016-2A CL C — 5.96% 2022 (1.3 years) | 480,000 | 498,629 | ||||||
2017-2A CL B — 2.82% 2022 (1.5 years) | 160,000 | 158,987 | ||||||
First Investors Auto Owners Trust (FIAOT)(c) | ||||||||
2015-2A CL D — 4.22% 2021 (2.0 years) | 287,000 | 289,243 | ||||||
Flagship Credit Auto Trust (FCAT)(c) | ||||||||
2014-2 CL C — 3.95% 2020 (0.9 years) | 460,000 | 463,754 | ||||||
2015-2 CL B — 3.08% 2021 (1.0 years) | 315,000 | 315,099 | ||||||
GM Financial Automobile Leasing Trust (GMALT) | ||||||||
2015-2 CL C — 2.99% 2019 (0.2 years) | 150,000 | 150,103 | ||||||
Honor Automobile Trust Securitization (HATS)(c) | ||||||||
2016-1A CL A — 2.94% 2019 (0.2 years) | 62,258 | 62,284 | ||||||
2016-1A CL B — 5.76% 2021 (0.6 years) | 400,000 | 408,674 | ||||||
Marlette Funding Trust (MFT)(c) | ||||||||
2016-1A CL A — 3.06% 2023 (0.1 years) | 47,457 | 47,457 | ||||||
2017-1A CL A — 2.827% 2024 (0.5 years) | 152,250 | 152,300 | ||||||
2016-1A CL B — 4.78% 2023 (0.6 years) | 500,000 | 506,131 | ||||||
2017-1A CL B — 4.114% 2024 (1.2 years) | 350,000 | 352,834 | ||||||
2016-1A CL C — 9.09% 2023 (1.4 years) | 100,000 | 105,849 | ||||||
OneMain Direct Auto Receivables Trust (ODART)(c) | ||||||||
2016-1A CL A — 2.04% 2021 (0.1 years) | 27,581 | 27,565 | ||||||
2016-1A CL B — 2.76% 2021 (0.4 years) | 250,000 | 250,006 | ||||||
2016-1A CL C — 4.58% 2021 (0.8 years) | 350,000 | 350,741 | ||||||
2017-1A CL B — 2.88% 2021 (2.0 years) | 200,000 | 197,760 | ||||||
OneMain Financial Issuance Trust (OMFIT)(c) | ||||||||
2014-2A CL C — 4.33% 2024 (0.4 years) | 300,000 | 301,326 | ||||||
2015-1A CL A — 3.19% 2026 (0.7 years) | 200,640 | 201,324 | ||||||
2014-2A CL D — 5.31% 2024 (0.9 years) | 100,000 | 100,513 | ||||||
2015-2A CL C — 4.32% 2025 (1.4 years) | 200,000 | 199,765 | ||||||
2015-2A CL D — 5.64% 2025 (1.9 years) | 280,000 | 284,506 | ||||||
2015-1A CL D — 6.63% 2026 (2.3 years) | 400,000 | 402,388 | ||||||
Santander Drive Auto Receivables Trust (SDART) | ||||||||
2014-1 CL D — 2.91% 2020 (0.2 years) | 345,455 | 345,841 | ||||||
2016-3 CL B — 1.89% 2021 (0.8 years) | 269,000 | 267,702 | ||||||
2014-5 CL D — 3.21% 2021 (1.0 years) | 80,000 | 80,419 | ||||||
SoFi Consumer Loan Program LLC (SCLP)(c) | ||||||||
2016-2 CL A — 3.09% 2025 (1.0 years) | 376,948 | 377,609 | ||||||
2016-3 CL A — 3.05% 2025 (1.2 years) | 98,803 | 98,756 | ||||||
2017-1 CL A — 3.28% 2026 (1.3 years) | 56,007 | 56,126 |
The accompanying notes form an integral part of these financial statements.
35 | Q1 2018 ANNUAL REPORT
CORE PLUS INCOME FUND (CONTINUED)
$ Principal | ||||||||
Amount | $ Value | |||||||
Springleaf Funding Trust (SLFT)(c) | ||||||||
2015-AA CL A — 3.16% 2024 (0.6 years) | 176,558 | 176,738 | ||||||
2015-AA CL C — 5.04% 2024 (2.0 years) | 200,000 | 200,189 | ||||||
Westlake Automobile Receivables Trust (WLAKE)(c) | ||||||||
2017-1A CL C — 2.7% 2022 (1.2 years) | 117,000 | 116,712 | ||||||
Total Asset-Backed Securities (Cost $10,464,147) | 10,445,086 | |||||||
Commercial Mortgage-Backed Securities – 3.1%(b) | ||||||||
FORT CRE LLC (FCRE)(c) | ||||||||
2016-1A CL A2 — 3.86125% 2036 Floating Rate | ||||||||
(Mthly LIBOR + 150) (0.3 years) | 200,000 | 201,404 | ||||||
TPG Real Estate Finance (TRTX)(c) (d) | ||||||||
2018-FL1 CL AS — 2.538% 2035 Floating Rate | ||||||||
(Mthly LIBOR + 95) (1.5 years) | 400,000 | 400,750 | ||||||
VMC Finance LLC (VMC)(c) | ||||||||
2018-FL1 CL AS — 2.77926% 2035 Floating Rate | ||||||||
(Mthly LIBOR + 120) (2.1 years) | 400,000 | 401,709 | ||||||
VSD LLC (VSD)(c) | ||||||||
2017-PLT1 CL A — 3.6% 2043 (0.6 years) | 223,840 | 223,537 | ||||||
Total Commercial Mortgage-Backed Securities (Cost $1,223,840) | 1,227,400 | |||||||
Mortgage-Backed Securities – 4.3%(b) | ||||||||
Federal National Mortgage Association | ||||||||
Pass-Through Securities | ||||||||
932836 — 3.0% 2025 (2.9 years) | 87,153 | 87,555 | ||||||
Non-Government Agency | ||||||||
Collateralized Mortgage Obligations | ||||||||
COLT Funding LLC (COLT)(c) | ||||||||
2017-2 CL A1A — 2.415% 2047 (1.2years) | 321,234 | 322,520 | ||||||
Flagstar Mortgage Trust (FSMT)(c) | ||||||||
2017-1 CL 2A2 — 3.0% 2047 (6.4 years) | 318,037 | 315,174 | ||||||
J.P. Morgan Mortgage Trust (JPMMT)(c) | ||||||||
2016-3 CL 2A1 — 3.0% 2046 (4.0 years) | 316,374 | 313,525 | ||||||
2017-3 CL 2A2 — 2.5% 2047 (5.3 years) | 320,936 | 313,066 | ||||||
Sequoia Mortgage Trust (SEMT)(c) | ||||||||
2017-CH1 CL A11 — 3.5% 2047 (2.0 years) | 330,872 | 332,392 | ||||||
1,596,677 | ||||||||
Total Mortgage-Backed Securities (Cost $1,708,817) | 1,684,232 | |||||||
Taxable Municipal Bonds – 1.1% | ||||||||
Alderwood Water and Wastewater District, Washington, Water | ||||||||
& Sewer Revenue, Series B, 5.15% 12/01/25 (Cost $418,677) | 400,000 | 420,264 | ||||||
U.S. Treasury – 32.6% | ||||||||
U.S. Treasury Notes/Bonds | ||||||||
2.0% 5/31/21 | 500,000 | 493,451 | ||||||
2.0% 2/15/23 | 545,000 | 530,965 | ||||||
2.75% 11/15/23 | 710,000 | 714,889 | ||||||
2.5% 5/15/24 | 1,000,000 | 991,325 |
$ Principal | ||||||||
Amount | ||||||||
or Shares | $ Value | |||||||
2.0% 5/31/24 | 600,000 | 577,454 | ||||||
2.0% 2/15/25 | 970,000 | 927,769 | ||||||
2.25% 11/15/25 | 1,000,000 | 967,499 | ||||||
1.625% 5/15/26 | 760,000 | 698,712 | ||||||
1.5% 8/15/26 | 350,000 | 317,486 | ||||||
2.0% 11/15/26 | 1,650,000 | 1,555,358 | ||||||
2.25% 2/15/27 | 1,875,000 | 1,801,140 | ||||||
2.375% 5/15/27 | 2,000,000 | 1,939,345 | ||||||
2.5% 5/15/46 | 1,400,000 | 1,270,368 | ||||||
Total U.S. Treasury (Cost $13,187,572) | 12,785,761 | |||||||
Common Stocks – 0.9% | ||||||||
Equity Commonwealth* | 4,000 | 122,680 | ||||||
Redwood Trust, Inc. | 14,850 | 229,729 | ||||||
Total Common Stocks (Cost $295,612) | 352,409 | |||||||
Cash Equivalents – 0.0% | ||||||||
State Street Institutional U.S. Government Money | ||||||||
Market Fund - Premier Class 1.58%(a) | 24,390 | 24,390 | ||||||
Total Cash Equivalents (Cost $24,390) | 24,390 | |||||||
Total Investments in Securities (Cost $39,324,927) | 38,941,868 | |||||||
Other Assets Less Other Liabilities — 0.6% | 226,466 | |||||||
Net Assets - 100% | 39,168,334 | |||||||
Net Asset Value Per Share - Investor Class | 10.09 | |||||||
Net Asset Value Per Share - Institutional Class | 10.10 |
* | Non-income producing |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2018. |
(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 entity |
(e) | Annual sinking fund |
The accompanying notes form an integral part of these financial statements.
36 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
SHORT DURATION INCOME FUND
Schedule of Investments
March 31, 2018
Corporate Bonds – 38.5% | ||||||||
$ Principal | ||||||||
Amount | $ Value | |||||||
ACI Worldwide, Inc. 6.375% 8/15/20(c) | 250,000 | 252,898 | ||||||
American Express Co. 8.125% 5/20/19 | 5,616,000 | 5,948,590 | ||||||
American Express Credit Corp. 2.25% 8/15/19 | 11,042,000 | 10,978,924 | ||||||
Anheuser-Busch InBev Finance Inc. | ||||||||
2.2% 8/01/18 | 5,000,000 | 4,996,332 | ||||||
1.9% 2/01/19 | 13,000,000 | 12,964,168 | ||||||
3.3% 2/01/23 | 4,800,000 | 4,806,379 | ||||||
Apple Inc. 1.55% 2/08/19 | 1,000,000 | 992,331 | ||||||
AT&T Inc. | ||||||||
2.375% 11/27/18 | 5,368,000 | 5,366,416 | ||||||
2.85% 2/14/23 | 1,000,000 | 1,005,411 | ||||||
Bank of America Corp. | ||||||||
1.95% 5/12/18 | 105,000 | 104,952 | ||||||
2.65% 4/01/19 | 6,175,000 | 6,172,339 | ||||||
2.25% 4/21/20 | 12,000,000 | 11,810,955 | ||||||
Berkshire Hathaway Inc. | ||||||||
2.1% 8/14/19 | 2,750,000 | 2,741,205 | ||||||
Finance Corp. | ||||||||
5.4% 5/15/18 | 5,000,000 | 5,015,843 | ||||||
2.0% 8/15/18 | 2,500,000 | 2,495,091 | ||||||
1.7% 3/15/19 | 2,400,000 | 2,383,825 | ||||||
2.02802% 1/10/20 Floating Rate (Qtrly LIBOR + 32) | 7,000,000 | 7,016,315 | ||||||
2.9% 10/15/20 | 3,000,000 | 3,019,349 | ||||||
4.25% 1/15/21 | 4,200,000 | 4,372,453 | ||||||
Boardwalk Pipelines LLC 5.75% 9/15/19 | 11,008,000 | 11,391,063 | ||||||
Boston Properties LP | ||||||||
5.875% 10/15/19 | 11,440,000 | 11,883,766 | ||||||
3.125% 9/01/23 | 9,560,000 | 9,394,235 | ||||||
Calumet Specialty Products Partners LP | ||||||||
11.5% 1/15/21(c) | 450,000 | 503,156 | ||||||
7.625% 1/15/22 | 900,000 | 895,500 | ||||||
Capital One Bank USA, N.A. | ||||||||
2.3% 6/05/19 | 7,000,000 | 6,953,479 | ||||||
8.8% 7/15/19 | 3,500,000 | 3,751,437 | ||||||
Capital One Financial Corp. 2.5% 5/12/20 | 5,000,000 | 4,923,753 | ||||||
Citigroup Inc. 1.75% 5/01/18 | 2,872,000 | 2,870,218 | ||||||
Comcast Corp. 5.15% 3/01/20 | 3,000,000 | 3,122,071 | ||||||
Dell Inc. 3.48% 6/01/19(c) | 5,000,000 | 5,023,695 | ||||||
Diageo Capital plc 4.85% 5/15/18(d) | 3,941,000 | 3,952,212 | ||||||
Discovery Communications, Inc. 2.95% 3/20/23 | 1,600,000 | 1,543,030 | ||||||
Dominion Resources, Inc. 2.962% 7/01/19 | 9,883,000 | 9,867,136 | ||||||
eBay, Inc. 2.2% 8/01/19 | 3,000,000 | 2,975,448 | ||||||
Enterprise Products Partners LP 1.65% 5/07/18 | 2,545,000 | 2,542,617 | ||||||
Equifax Inc. 2.3% 6/01/21 | 2,900,000 | 2,813,431 | ||||||
Equity Commonwealth 5.875% 9/15/20 | 14,195,000 | 14,768,822 | ||||||
Expedia Group, Inc. 7.456% 8/15/18 | 10,000,000 | 10,167,086 | ||||||
Express Scripts Holding Co. | ||||||||
2.25% 6/15/19 | 8,955,000 | 8,901,737 | ||||||
7.25% 6/15/19 | 5,217,000 | 5,480,386 | ||||||
Fifth Third Bank 1.625% 9/27/19 | 2,000,000 | 1,965,901 | ||||||
First Republic Bank 2.375% 6/17/19 | 1,828,000 | 1,816,215 | ||||||
Flir Systems, Inc. 3.125% 6/15/21 | 2,600,000 | 2,576,761 | ||||||
Ford Motor Credit Co. LLC | ||||||||
2.943% 1/08/19 | 2,000,000 | 2,001,071 | ||||||
2.021% 5/03/19 | 10,000,000 | 9,897,157 | ||||||
1.897% 8/12/19 | 1,000,000 | 984,629 | ||||||
Fortive Corp. 1.8% 6/15/19 | 750,000 | 741,149 | ||||||
Goldman Sachs Group, Inc. | ||||||||
2.9669% 4/30/18 Floating Rate (Qtrly LIBOR + 120) | 6,600,000 | 6,603,824 | ||||||
2.9% 7/19/18 | 2,500,000 | 2,503,759 | ||||||
2.88875% 12/13/19 Floating Rate (Qtrly LIBOR + 80) | 6,250,000 | 6,289,750 | ||||||
2.90447% 4/23/20 Floating Rate (Qtrly LIBOR + 116) | 5,479,000 | 5,557,302 | ||||||
2.6% 12/27/20 | 1,500,000 | 1,478,777 |
$ Principal | ||||||||
Amount | $ Value | |||||||
Graham Holdings Co. 7.25% 2/01/19 | 8,500,000 | 8,793,250 | ||||||
Invista B.V. 4.25% 10/15/19(c) | 2,980,000 | 2,990,728 | ||||||
JPMorgan Chase & Co. | ||||||||
6.3% 4/23/19 | 2,500,000 | 2,594,139 | ||||||
2.60725% 3/09/21 Floating Rate (Qtrly LIBOR + 55) | 1,850,000 | 1,855,367 | ||||||
JPMorgan Chase Bank, N.A. 2.86108% 9/23/19 Floating | ||||||||
Rate (Qtrly LIBOR + 59) | 12,000,000 | 12,062,333 | ||||||
The Manitowoc Co., Inc. 12.75% 8/15/21(c) | 8,950,000 | 10,113,500 | ||||||
Markel Corp. | ||||||||
7.125% 9/30/19 | 11,859,000 | 12,566,356 | ||||||
5.35% 6/01/21 | 10,000,000 | 10,603,581 | ||||||
4.9% 7/01/22 | 3,850,000 | 4,054,313 | ||||||
Mattel, Inc. 2.35% 5/06/19 | 532,000 | 522,690 | ||||||
MetLife Global Funding I(c) | ||||||||
1.875% 6/22/18 | 1,000,000 | 998,673 | ||||||
1.75% 12/19/18 | 1,000,000 | 994,530 | ||||||
2.3% 4/10/19 | 2,000,000 | 1,990,797 | ||||||
Morgan Stanley 6.625% 4/01/18 | 2,400,000 | 2,400,000 | ||||||
NGL Energy Partners LP 5.125% 7/15/19 | 2,200,000 | 2,200,000 | ||||||
Omnicom Group, Inc. 6.25% 7/15/19 | 6,181,000 | 6,441,544 | ||||||
Plains All American Pipeline, LP 2.6% 12/15/19 | 1,345,000 | 1,328,019 | ||||||
QUALCOMM Inc. 1.85% 5/20/19 | 1,500,000 | 1,489,788 | ||||||
Range Resources Corp. 5.0% 8/15/22 | 11,876,000 | 11,549,410 | ||||||
RELX plc 3.5% 3/16/23 | 1,800,000 | 1,803,747 | ||||||
Republic Services, Inc. 3.8% 5/15/18 | 5,000,000 | 5,005,051 | ||||||
Roper Technologies, Inc. 2.05% 10/01/18 | 3,500,000 | 3,492,020 | ||||||
Sprint Spectrum Co. LLC 3.36% 3/20/23(c) (e) | 4,156,250 | 4,140,664 | ||||||
U.S. Bancorp 2.35% 1/29/21 | 14,000,000 | 13,800,162 | ||||||
U.S. Bank, N.A. 2.0613% 1/24/20 Floating | ||||||||
Rate (Qtrly LIBOR + 32) | 7,000,000 | 7,004,420 | ||||||
Valmont Industries, Inc. 6.625% 4/20/20 | 2,226,000 | 2,380,254 | ||||||
VEREIT, Inc. 3.0% 2/06/19 | 1,870,000 | 1,870,639 | ||||||
Walt Disney Co. 0.875% 7/12/19 | 1,000,000 | 979,135 | ||||||
Wells Fargo & Co. | ||||||||
2.15% 1/15/19 | 4,531,000 | 4,511,587 | ||||||
2.125% 4/22/19 | 2,800,000 | 2,783,492 | ||||||
4.6% 4/01/21 | 5,745,000 | 5,966,056 | ||||||
2.1% 7/26/21 | 10,100,000 | 9,756,418 | ||||||
3.5% 3/08/22 | 7,900,000 | 7,923,227 | ||||||
Wells Fargo Bank, N.A. 2.15% 12/06/19 | 10,000,000 | 9,893,736 | ||||||
Total Corporate Bonds (Cost $436,270,688) | 435,443,975 | |||||||
Corporate Convertible Bonds – 5.5% | ||||||||
Redwood Trust, Inc. | ||||||||
4.625% 4/15/18 | 32,350,000 | 32,511,750 | ||||||
5.625% 11/15/19 | 14,850,000 | 14,998,500 | ||||||
4.75% 8/15/23 | 14,650,000 | 14,236,870 | ||||||
Total Corporate Convertible Bonds (Cost $61,845,005) | 61,747,120 | |||||||
Asset-Backed Securities – 9.3%(b) | ||||||||
AmeriCredit Automobile Receivables Trust (AMCAR) | ||||||||
2013-5 CL D — 2.86% 2019 (0.2 years) | 4,055,000 | 4,058,878 | ||||||
Ascentium Equipment Receivables Trust (ACER)(c) | ||||||||
2016-2A CL E — 6.79% 2024 (2.5 years) | 1,600,000 | 1,688,750 | ||||||
Commercial Credit Group Receivables Trust (CCG)(c) | ||||||||
2017-1 CL A1 — 1.35% 2018 (0.0 years) | 36,456 | 36,457 | ||||||
2018-1 CL A1 — 1.85% 2019 (0.3 years) | 5,118,706 | 5,118,950 |
The accompanying notes form an integral part of these financial statements.
37 | Q1 2018 ANNUAL REPORT
SHORT DURATION INCOME FUND (CONTINUED)
$ Principal | ||||||||
Amount | $ Value | |||||||
Conn Funding II, LP (CONN)(c) | ||||||||
2017-A CL A — 2.73% 2019 (0.1 years) | 102,403 | 102,398 | ||||||
2017-B CL A — 2.73% 2020 (0.4 years) | 2,568,355 | 2,564,325 | ||||||
Credit Acceptance Auto Loan Trust (CAALT)(c) | ||||||||
2015-1A CL B — 2.61% 2023 (0.1 years) | 51,868 | 51,892 | ||||||
2016-2A CL C — 4.29% 2024 (1.4 years) | 300,000 | 303,600 | ||||||
Enterprise Fleet Financing LLC (EFF)(c) | ||||||||
2017-2 CL A1 — 1.5% 2018 (0.0 years) | 1,066,593 | 1,066,603 | ||||||
Exeter Automobile Receivables Trust (EART)(c) | ||||||||
2016-3A CL A — 1.84% 2020 (0.3 years) | 1,672,936 | 1,668,221 | ||||||
2015-1A CL C — 4.1% 2020 (0.6 years) | 650,000 | 655,710 | ||||||
2017-3A CL A — 2.05% 2021 (0.7 years) | 2,874,652 | 2,859,333 | ||||||
2016-2A CL C — 5.96% 2022 (1.3 years) | 5,100,000 | 5,297,937 | ||||||
Honor Automobile Trust Securitization (HATS)(c) | ||||||||
2016-1A CL A — 2.94% 2019 (0.2 years) | 747,099 | 747,410 | ||||||
2016-1A CL B — 5.76% 2021 (0.6 years) | 6,170,000 | 6,303,792 | ||||||
Marlette Funding Trust (MFT)(c) | ||||||||
2017-1A CL A — 2.827% 2024 (0.5 years) | 2,283,754 | 2,284,499 | ||||||
2017-2A CL A — 2.39% 2024 (0.5 years) | 3,044,981 | 3,038,184 | ||||||
2016-1A CL B — 4.78% 2023 (0.6 years) | 2,500,000 | 2,530,657 | ||||||
2017-3A CL A — 2.36% 2024 (0.7 years) | 2,347,984 | 2,339,555 | ||||||
2018-1A CL A — 2.61% 2028 (0.9 years) | 4,213,232 | 4,207,247 | ||||||
2017-1A CL B — 4.114% 2024 (1.2 years) | 1,650,000 | 1,663,359 | ||||||
2017-2A CL B — 3.19% 2024 (1.3 years) | 3,000,000 | 2,993,275 | ||||||
OneMain Direct Auto Receivables Trust (ODART)(c) | ||||||||
2016-1A CL A — 2.04% 2021 (0.1 years) | 413,712 | 413,475 | ||||||
2016-1A CL C — 4.58% 2021 (0.8 years) | 9,650,000 | 9,670,425 | ||||||
2017-2A CL B — 2.55% 2023 (2.1 years) | 7,000,000 | 6,880,199 | ||||||
OneMain Financial Issuance Trust (OMFIT)(c) | ||||||||
2014-2A CL C — 4.33% 2024 (0.4 years) | 700,000 | 703,094 | ||||||
2015-2A CL C — 4.32% 2025 (1.4 years) | 4,800,000 | 4,794,363 | ||||||
2015-2A CL D — 5.64% 2025 (1.9 years) | 6,000,000 | 6,096,559 | ||||||
2015-1A CL D — 6.63% 2026 (2.3 years) | 1,600,000 | 1,609,553 | ||||||
Santander Drive Auto Receivables Trust (SDART) | ||||||||
2014-1 CL D — 2.91% 2020 (0.2 years) | 2,087,867 | 2,090,199 | ||||||
Securitized Term Auto Receivables Trust (SSTRT)(c) (d) | ||||||||
2017-2A CL A1 — 1.42% 2018 (0.1 years) | 121,666 | 121,667 | ||||||
SoFi Consumer Loan Program LLC (SCLP)(c) | ||||||||
2018-1 CL A1 — 2.55% 2027 (0.9 years) | 1,404,849 | 1,400,793 | ||||||
2016-2 CL A — 3.09% 2025 (1.0 years) | 4,566,462 | 4,574,462 | ||||||
2016-3 CL A — 3.05% 2025 (1.2 years) | 889,224 | 888,802 | ||||||
2017-1 CL A — 3.28% 2026 (1.3 years) | 784,099 | 785,761 | ||||||
Springleaf Funding Trust (SLFT)(c) | ||||||||
2015-AA CL A — 3.16% 2024 (0.6 years) | 6,665,053 | 6,671,864 | ||||||
2015-AA CL C — 5.04% 2024 (2.0 years) | 6,800,000 | 6,806,411 | ||||||
Total Asset-Backed Securities (Cost $105,370,153) | 105,088,659 | |||||||
Commercial Mortgage-Backed Securities – 0.8%(b) | ||||||||
FORT CRE LLC (FCRE)(c) | ||||||||
2016-1A CL A1 — 3.36125% 2036 Floating Rate | ||||||||
(Mthly LIBOR + 150) (0.2 years) | 339,410 | 339,490 | ||||||
TPG Real Estate Finance (TRTX)(c) (d) | ||||||||
2018-FL1 CL A — 2.338% 2035 Floating Rate | ||||||||
(Mthly LIBOR + 75) (1.1 years) | 3,500,000 | 3,506,562 | ||||||
VMC Finance LLC (VMC)(c) | ||||||||
2018-FL1 CL A — 2.39926% 2035 Floating Rate | ||||||||
(Mthly LIBOR + 82) (1.4 years) | 2,000,000 | 2,002,998 | ||||||
VSD LLC (VSD)(c) | ||||||||
2017-PLT1 CL A — 3.6% 2043 (0.6 years) | 3,693,353 | 3,688,366 | ||||||
Total Commercial Mortgage-Backed Securities (Cost $9,532,764) | 9,537,416 |
Mortgage-Backed Securities – 16.2%(b) | ||||||||
$ Principal | ||||||||
Federal Home Loan Mortgage Corporation | Amount | $ Value | ||||||
Collateralized Mortgage Obligations | ||||||||
3815 CL AD — 4.0% 2025 (0.2 years) | 47,764 | 47,863 | ||||||
3844 CL AG — 4.0% 2025 (0.5 years) | 354,998 | 356,602 | ||||||
4281 CL AG — 2.5% 2028 (2.4 years) | 1,426,646 | 1,404,642 | ||||||
3649 CL BW — 4.0% 2025 (2.5 years) | 1,887,962 | 1,955,689 | ||||||
2952 CL PA — 5.0% 2035 (3.0 years) | 477,292 | 495,668 | ||||||
3620 CL PA — 4.5% 2039 (3.9 years) | 1,280,141 | 1,338,387 | ||||||
3842 CL PH — 4.0% 2041 (4.7 years) | 1,340,996 | 1,378,508 | ||||||
3003 CL LD — 5.0% 2034 (4.8 years) | 1,313,319 | 1,394,978 | ||||||
4107 CL LA — 2.5% 2031 (5.2 years) | 6,957,664 | 6,585,578 | ||||||
4107 CL LW — 1.75% 2027 (7.8 years) | 3,920,550 | 3,496,284 | ||||||
18,454,199 | ||||||||
Pass-Through Securities | ||||||||
EO1386 — 5.0% 2018 (0.1 years) | 831 | 836 | ||||||
G18190 — 5.5% 2022 (1.7 years) | 20,658 | 21,472 | ||||||
G13300 — 4.5% 2023 (1.9 years) | 127,430 | 132,478 | ||||||
G18296 — 4.5% 2024 (2.2 years) | 328,269 | 341,326 | ||||||
G18306 — 4.5% 2024 (2.2 years) | 683,142 | 710,311 | ||||||
G13517 — 4.0% 2024 (2.3 years) | 453,807 | 467,814 | ||||||
G18308 — 4.0% 2024 (2.3 years) | 708,969 | 731,215 | ||||||
J13949 — 3.5% 2025 (2.8 years) | 4,045,546 | 4,136,109 | ||||||
J14649 — 3.5% 2026 (2.9 years) | 3,154,622 | 3,219,019 | ||||||
E02804 — 3.0% 2025 (2.9 years) | 2,577,589 | 2,591,758 | ||||||
E02948 — 3.5% 2026 (3.0 years) | 7,236,556 | 7,389,267 | ||||||
J16663 — 3.5% 2026 (3.1 years) | 6,571,488 | 6,705,635 | ||||||
E03033 — 3.0% 2027 (3.2 years) | 3,892,605 | 3,914,092 | ||||||
E03048 — 3.0% 2027 (3.3 years) | 7,447,793 | 7,488,942 | ||||||
G01818 — 5.0% 2035 (5.0 years) | 1,542,790 | 1,664,306 | ||||||
39,514,580 | ||||||||
Structured Agency Credit Risk Debt Notes | ||||||||
2013-DN1 CL M1 — 5.0207% 2023 Floating Rate | ||||||||
(Mthly LIBOR + 340) (0.3 years) | 444,170 | 447,689 | ||||||
58,416,468 | ||||||||
Federal National Mortgage Association | ||||||||
Collateralized Mortgage Obligations | ||||||||
2010-145 CL PA — 4.0% 2024 (1.5 years) | 564,344 | 571,550 | ||||||
2010-54 CL WA — 3.75% 2025 (2.0 years) | 847,961 | 856,614 | ||||||
1,428,164 | ||||||||
Pass-Through Securities | ||||||||
251787 — 6.5% 2018 (0.1 years) | 77 | 86 | ||||||
357414 — 4.0% 2018 (0.2 years) | 12,896 | 13,271 | ||||||
254907 — 5.0% 2018 (0.3 years) | 8,545 | 8,683 | ||||||
MA0464 — 3.5% 2020 (0.9 years) | 896,507 | 914,839 | ||||||
357985 — 4.5% 2020 (1.1 years) | 38,069 | 38,521 | ||||||
888595 — 5.0% 2022 (1.4 years) | 103,420 | 107,171 | ||||||
888439 — 5.5% 2022 (1.5 years) | 107,214 | 110,989 | ||||||
AD0629 — 5.0% 2024 (1.6 years) | 396,911 | 414,244 | ||||||
995960 — 5.0% 2023 (1.7 years) | 345,669 | 357,684 | ||||||
995693 — 4.5% 2024 (2.0 years) | 673,835 | 702,482 | ||||||
AL0471 — 5.5% 2025 (2.0 years) | 1,656,054 | 1,731,077 | ||||||
AR8198 — 2.5% 2023 (2.0 years) | 4,465,041 | 4,445,384 | ||||||
AE0031 — 5.0% 2025 (2.1 years) | 645,033 | 678,905 | ||||||
995692 — 4.5% 2024 (2.1 years) | 560,081 | 584,043 | ||||||
MA1502 — 2.5% 2023 (2.2 years) | 3,803,068 | 3,786,338 | ||||||
995755 — 4.5% 2024 (2.2 years) | 843,581 | 879,808 | ||||||
890112 — 4.0% 2024 (2.2 years) | 450,178 | 463,286 | ||||||
AA4315 — 4.0% 2024 (2.3 years) | 932,025 | 959,268 | ||||||
MA0043 — 4.0% 2024 (2.3 years) | 361,982 | 372,523 | ||||||
930667 — 4.5% 2024 (2.3 years) | 539,506 | 562,592 | ||||||
AA5510 — 4.0% 2024 (2.3 years) | 218,992 | 225,377 | ||||||
931739 — 4.0% 2024 (2.4 years) | 242,680 | 249,834 | ||||||
AD7073 — 4.0% 2025 (2.7 years) | 758,147 | 780,452 | ||||||
310139 — 3.5% 2025 (2.8 years) | 4,914,447 | 5,014,942 |
The accompanying notes form an integral part of these financial statements.
38 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
$ Principal | ||||||||
Amount | $ Value | |||||||
AH3429 — 3.5% 2026 (2.9 years) | 12,923,324 | 13,211,990 | ||||||
AB1769 — 3.0% 2025 (2.9 years) | 2,353,732 | 2,364,636 | ||||||
AB2251 — 3.0% 2026 (3.0 years) | 2,930,637 | 2,944,234 | ||||||
AB3902 — 3.0% 2026 (3.3 years) | 1,853,709 | 1,862,317 | ||||||
AK3264 — 3.0% 2027 (3.3 years) | 4,716,994 | 4,738,903 | ||||||
AB4482 — 3.0% 2027 (3.4 years) | 4,383,957 | 4,404,324 | ||||||
AL1366 — 2.5% 2027 (3.4 years) | 3,275,186 | 3,234,607 | ||||||
555531 — 5.5% 2033 (4.3 years) | 3,078,251 | 3,392,063 | ||||||
MA0587 — 4.0% 2030 (4.4 years) | 4,640,140 | 4,797,356 | ||||||
725232 — 5.0% 2034 (4.5 years) | 276,218 | 298,310 | ||||||
995112 — 5.5% 2036 (4.6 years) | 1,327,870 | 1,461,303 | ||||||
66,111,842 | ||||||||
67,540,006 | ||||||||
Government National Mortgage Association | ||||||||
Pass-Through Securities | ||||||||
G2 5255 — 3.0% 2026 (3.3 years) | 8,428,791 | 8,460,291 | ||||||
Non-Government Agency | ||||||||
Collateralized Mortgage Obligations | ||||||||
Citigroup Mortgage Loan Trust, Inc. (CMLTI)(c) | ||||||||
2014-A CL A — 4.0% 2035 (2.2 years) | 1,519,934 | 1,572,147 | ||||||
COLT Funding LLC (COLT)(c) | ||||||||
2017-2 CL A1A — 2.415% 2047 (1.2 years) | 4,544,290 | 4,562,473 | ||||||
Flagstar Mortgage Trust (FSMT)(c) | ||||||||
2017-1 CL 2A2 — 3.0% 2047 (6.4 years) | 3,316,676 | 3,286,812 | ||||||
J.P. Morgan Mortgage Trust (JPMMT)(c) | ||||||||
2014-2 CL 2A2 — 3.5% 2029 (3.0 years) | 3,742,850 | 3,787,296 | ||||||
2014-5 CL A1 — 3.0% 2029 (3.1 years) | 7,178,930 | 7,117,431 | ||||||
2016-3 CL 2A1 — 3.0% 2046 (4.0 years) | 3,041,935 | 3,014,545 | ||||||
2017-3 CL 2A2 — 2.5% 2047 (5.3 years) | 12,516,490 | 12,209,568 | ||||||
Sequoia Mortgage Trust (SEMT) | ||||||||
2017-CH1 CL A11 — 3.5% 2047 (2.0 years)(c) | 3,391,439 | 3,407,021 | ||||||
2012-4 CL A1 — 3.5% 2042 (2.1 years) | 2,671,207 | 2,643,942 | ||||||
2012-1 CL 1A1 — 2.865% 2042 (3.0 years) | 724,290 | 729,761 | ||||||
2013-4 CL A3 — 1.55% 2043 (4.4 years) | 6,770,126 | 6,479,429 | ||||||
Washington Mutual, Inc. (WAMU) | ||||||||
2003-S7 CL A1 — 4.5% 2018 (0.1 years) | 1,618 | 1,620 | ||||||
48,812,045 | ||||||||
Total Mortgage-Backed Securities (Cost $182,520,013) | 183,228,810 | |||||||
Taxable Municipal Bonds – 0.4% | ||||||||
Iowa State University Revenue | ||||||||
5.8% 7/01/22, Pre-Refunded 7/01/18 @ 100 | 1,335,000 | 1,347,709 | ||||||
Kansas Development Finance Authority Revenue, Series 2015H | ||||||||
2.258% 4/15/19 | 1,000,000 | 998,530 | ||||||
2.608% 4/15/20 | 500,000 | 500,625 | ||||||
2.927% 4/15/21 | 750,000 | 753,885 | ||||||
Omaha, Nebraska Public Facilities Corp., | ||||||||
Lease Revenue, Series B, Refunding 4.788% 6/01/18 | 1,000,000 | 1,004,130 | ||||||
Total Taxable Municipal Bonds (Cost $4,585,000) | 4,604,879 | |||||||
U.S. Treasury – 26.6% | ||||||||
U.S. Treasury Notes | ||||||||
1.375% 6/30/18 | 25,000,000 | 24,973,608 | ||||||
0.75% 9/30/18 | 20,000,000 | 19,884,568 | ||||||
1.5% 12/31/18 | 10,000,000 | 9,957,375 |
$ Principal | ||||||||
Amount | ||||||||
or Shares | $ Value | |||||||
1.25% 1/31/19 | 15,000,000 | 14,896,927 | ||||||
0.875% 5/15/19 | 25,000,000 | 24,643,113 | ||||||
1.625% 6/30/19 | 10,000,000 | 9,932,654 | ||||||
1.5% 10/31/19 | 15,000,000 | 14,824,770 | ||||||
1.375% 1/31/20 | 15,000,000 | 14,765,340 | ||||||
1.625% 3/15/20 | 15,000,000 | 14,808,383 | ||||||
1.375% 8/31/20 | 10,000,000 | 9,770,992 | ||||||
2.125% 8/31/20 | 15,000,000 | 14,920,429 | ||||||
2.0% 11/30/20 | 20,000,000 | 19,808,489 | ||||||
1.125% 2/28/21 | 15,000,000 | 14,465,103 | ||||||
2.25% 3/31/21 | 12,000,000 | 11,947,460 | ||||||
1.375% 4/30/21 | 10,000,000 | 9,693,111 | ||||||
1.125% 7/31/21 | 15,000,000 | 14,367,203 | ||||||
2.0% 7/31/22 | 12,000,000 | 11,742,178 | ||||||
2.0% 2/15/23 | 7,500,000 | 7,306,853 | ||||||
1.5% 2/28/23 | 15,000,000 | 14,261,850 | ||||||
2.0% 5/31/24 | 15,000,000 | 14,436,344 | ||||||
2.25% 10/31/24 | 10,000,000 | 9,740,233 | ||||||
Total U.S. Treasury (Cost $305,338,020) | 301,146,983 | |||||||
Common Stocks – 0.8% | ||||||||
Redwood Trust, Inc. (Cost $5,206,616) | 545,000 | 8,431,150 | ||||||
Cash Equivalents – 1.6% | ||||||||
State Street Institutional U.S. Government Money | ||||||||
Market Fund - Premier Class 1.58%(a) | 18,167,352 | 18,167,352 | ||||||
Total Cash Equivalents (Cost $18,167,352) | 18,167,352 | |||||||
Total Investments in Securities (Cost $1,128,835,611) | 1,127,396,344 | |||||||
Other Assets Less Other Liabilities — 0.3% | 3,803,761 | |||||||
Net Assets - 100% | 1,131,200,105 | |||||||
Net Asset Value Per Share - Investor Class | 12.09 | |||||||
Net Asset Value Per Share - Institutional Class | 12.11 |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2018. |
(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 entity |
(e) | Annual sinking fund |
The accompanying notes form an integral part of these financial statements.
39 | Q1 2018 ANNUAL REPORT
ULTRA SHORT GOVERNMENT FUND
Schedule of Investments
March 31, 2018
Corporate Bonds – 17.7% | ||||||||
$ Principal | ||||||||
Amount | $ Value | |||||||
American Express Co. 1.55% 5/22/18 | 775,000 | 773,886 | ||||||
Amgen Inc. 6.15% 6/01/18 | 975,000 | 979,887 | ||||||
AT&T Inc. 5.6% 5/15/18 | 1,936,000 | 1,942,756 | ||||||
Bank of America Corp. | ||||||||
6.875% 4/25/18 | 1,555,000 | 1,559,089 | ||||||
1.95% 5/12/18 | 1,725,000 | 1,724,219 | ||||||
Berkshire Hathaway Energy Co. 5.75% 4/01/18 | 950,000 | 950,000 | ||||||
Berkshire Hathaway Inc. (Finance Corp.) 5.4% 5/15/18 | 1,283,000 | 1,287,065 | ||||||
Citigroup Inc. 6.125% 5/15/18 | 600,000 | 602,358 | ||||||
Comcast Corp. 5.7% 5/15/18 | 1,730,000 | 1,736,608 | ||||||
Enterprise Products Partners LP 1.65% 5/07/18 | 1,500,000 | 1,498,596 | ||||||
Fidelity National Information Services, Inc. 2.0% 4/15/18 | 599,000 | 598,835 | ||||||
Ford Motor Credit Co. LLC | ||||||||
5.0% 5/15/18 | 700,000 | 701,723 | ||||||
2.24% 6/15/18 | 400,000 | 399,532 | ||||||
General Motors Financial Co. Inc. 3.25% 5/15/18 | 550,000 | 550,154 | ||||||
John Deere Capital Corp. 5.35% 4/03/18 | 500,000 | 500,000 | ||||||
Morgan Stanley | ||||||||
6.625% 4/01/18 | 1,200,000 | 1,200,000 | ||||||
2.125% 4/25/18 | 1,000,000 | 999,765 | ||||||
Republic Services, Inc. 3.8% 5/15/18 | 465,000 | 465,470 | ||||||
Total Corporate Bonds (Cost $18,477,993) | 18,469,943 | |||||||
Asset-Backed Securities – 1.9% | ||||||||
Ally Auto Receivables Trust (ALLYA) | ||||||||
2014-2 CL C — 2.35% 2020 (1.0 years) | 1,000,000 | 999,247 | ||||||
Commercial Credit Group Receivables Trust (CCG)(b) | ||||||||
2017-1 CL A1 — 1.35% 2018 (0.0 years) | 72,913 | 72,913 | ||||||
2018-1 CL A1 — 1.85% 2019 (0.3 years) | 818,993 | 819,032 | ||||||
Credit Acceptance Auto Loan Trust (CAALT)(b) | ||||||||
2015-1A CL B — 2.61% 2023 (0.1 years) | 19,840 | 19,849 | ||||||
Securitized Term Auto Receivables Trust (SSTRT)(b) (c) | ||||||||
2017-2A CL A1 — 1.42% 2018 (0.1 years) | 60,833 | 60,834 | ||||||
Total Asset-Backed Securities (Cost $1,971,833) | 1,971,875 | |||||||
U.S. Treasury – 78.4% | ||||||||
U.S. Treasury Notes | ||||||||
0.75% 4/15/18 | 5,000,000 | 4,998,527 | ||||||
0.75% 4/30/18 | 4,500,000 | 4,497,097 | ||||||
1.0% 5/15/18 | 10,000,000 | 9,992,101 | ||||||
0.875% 5/31/18 | 5,000,000 | 4,993,291 | ||||||
1.125% 6/15/18 | 16,500,000 | 16,478,579 | ||||||
1.375% 7/31/18 | 12,500,000 | 12,482,346 | ||||||
1.5% 8/31/18 | 9,000,000 | 8,985,848 | ||||||
1.375% 9/30/18 | 7,500,000 | 7,479,754 | ||||||
1.75% 10/31/18 | 5,000,000 | 4,993,645 | ||||||
1.25% 11/15/18 | 6,750,000 | 6,718,507 | ||||||
Total U.S. Treasury (Cost $81,649,721) | 81,619,695 |
Cash Equivalents – 1.2% | ||||||||
Shares | $ Value | |||||||
State Street Institutional U.S. Government Money | ||||||||
Market Fund - Premier Class 1.58%(a) | 1,214,730 | 1,214,730 | ||||||
Total Cash Equivalents (Cost $1,214,730) | 1,214,730 | |||||||
Total Investments in Securities (Cost $103,314,277) | 103,276,243 | |||||||
Other Assets Less Other Liabilities — 0.8% | 885,734 | |||||||
Net Assets – 100% | 104,161,977 | |||||||
Net Asset Value Per Share | 10.00 |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2018. |
(b) | 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. |
(c) | Foreign domiciled entity |
The accompanying notes form an integral part of these financial statements.
40 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
NEBRASKA TAX-FREE INCOME FUND
Schedule of Investments
March 31, 2018
Municipal Bonds – 93.9% | ||||||||||||
% of Net | $ Principal | |||||||||||
Assets | Amount | $ Value | ||||||||||
California | 0.4 | |||||||||||
San Diego County Regional Airport Authority, Subordinate | ||||||||||||
Airport Revenue, Series 2017B, AMT, 5.0%, 7/01/25 | 200,000 | 230,076 | ||||||||||
Colorado | 0.2 | |||||||||||
Colorado Bridge Enterprise, Senior Revenue, Central 70 | ||||||||||||
Project, Series 2017, AMT, 4.0%, 12/31/23 | 100,000 | 106,269 | ||||||||||
District of Columbia | 1.0 | |||||||||||
Metropolitan Washington Airports Authority, Aviation System | ||||||||||||
Revenue, Refunding, Series 2017A, AMT, 5.0%, 10/01/27 | 500,000 | 586,145 | ||||||||||
Florida | 2.7 | |||||||||||
Greater Orlando Aviation Authority, Priority Subordinated | ||||||||||||
Airport Facilities Revenue, Series 2017A, AMT, | ||||||||||||
5.0%, 10/01/25 | 500,000 | 575,360 | ||||||||||
Miami, Dade County, Aviation Revenue, | ||||||||||||
Series 2010A, 4.25%, 10/01/18 | 1,000,000 | 1,012,900 | ||||||||||
1,588,260 | ||||||||||||
Illinois | 0.2 | |||||||||||
Cook, Kane, Lake and McHenry Counties and State of | ||||||||||||
Illinois, General Obligation, Community College | ||||||||||||
District No. 512, Series 2009A, 5.0%, 12/01/23, | ||||||||||||
Pre-Refunded 12/01/18 @ 100 | 100,000 | 102,272 | ||||||||||
Iowa | 0.4 | |||||||||||
Iowa Finance Authority, Hospital Revenue, Bond | ||||||||||||
Anticipation Notes, Shenandoah Medical Center Project, | ||||||||||||
Series 2015, 1.75%, 6/01/18 | 250,000 | 249,592 | ||||||||||
Nebraska | 87.0 | |||||||||||
Blair, Water System Revenue, Series 2016, AMT, | ||||||||||||
2.2%, 12/15/22 | 175,000 | 170,403 | ||||||||||
2.45%, 12/15/23 | 125,000 | �� | 121,164 | |||||||||
2.65%, 12/15/24 | 100,000 | 95,421 | ||||||||||
2.85%, 12/15/25 | 100,000 | 95,643 | ||||||||||
3.0%, 12/15/26 | 100,000 | 95,189 | ||||||||||
3.1%, 12/15/27 | 100,000 | 94,673 | ||||||||||
3.2%, 12/15/28 | 100,000 | 94,508 | ||||||||||
3.35%, 12/15/29 | 100,000 | 94,149 | ||||||||||
3.5%, 12/15/30 | 100,000 | 94,007 | ||||||||||
Buffalo County, General Obligation, Kearney Public | ||||||||||||
Schools District 0007, Series 2016 | ||||||||||||
2.0%, 12/15/18 | 305,000 | 305,884 | ||||||||||
3.0%, 12/15/24 | 250,000 | 259,070 | ||||||||||
Cass County, General Obligation, Refunding, Weeping | ||||||||||||
Water Public School District 0022, Series 2017 | ||||||||||||
2.05%, 12/15/25 | 375,000 | 348,896 | ||||||||||
2.2%, 12/15/26 | 250,000 | 233,258 | ||||||||||
Chadron, Sales Tax and General Obligation, Aquatic Center, | ||||||||||||
Series 2016, 1.6%, 7/15/22 | 400,000 | 383,748 | ||||||||||
Columbus, Combined Revenue, Refunding, Series 2016, | ||||||||||||
AGM Insured | ||||||||||||
4.0%, 12/15/26 | 100,000 | 110,917 | ||||||||||
4.0%, 12/15/27 | 100,000 | 110,343 | ||||||||||
Cornhusker Public Power District, Electric System Revenue, | ||||||||||||
Refunding, Series 2014, 2.25%, 7/01/22 | 260,000 | 260,718 | ||||||||||
Dawson Public Power District, Electric System Revenue, | ||||||||||||
Refunding, | ||||||||||||
Series 2013C, 3.0%, 12/01/22 | 200,000 | 200,696 | ||||||||||
Series 2016A | ||||||||||||
2.0%, 6/15/26 | 170,000 | 157,175 | ||||||||||
2.1%, 6/15/27 | 105,000 | 96,276 | ||||||||||
Series 2016B | ||||||||||||
2.5%, 6/15/28 | 135,000 | 127,282 | ||||||||||
3.0%, 6/15/29 | 245,000 | 245,073 | ||||||||||
3.0%, 6/15/30 | 355,000 | 350,694 |
$ Principal | ||||||||
Amount | $ Value | |||||||
Douglas County, Educational Facility Revenue, Refunding, | ||||||||
Creighton University Project, Series 2010A, 5.6%, 7/01/25, | ||||||||
Pre-Refunded 7/01/20 @ 100 | 400,000 | 433,736 | ||||||
Douglas County, General Obligation, | ||||||||
Omaha Public School District 0001 | ||||||||
Series 2015, 5.0%, 12/15/28 | 1,000,000 | 1,152,640 | ||||||
Series 2016, 5.0%, 12/15/29 | 350,000 | 415,016 | ||||||
Refunding, Elkhorn Public School District 0010, Series 2016B | ||||||||
3.0%, 6/15/18 | 200,000 | 200,588 | ||||||
3.0%, 12/15/18 | 100,000 | 100,983 | ||||||
Westside Community School District 0066, Series 2015, | ||||||||
2.5%, 12/01/22 | 250,000 | 252,305 | ||||||
Douglas County, Hospital Authority #2, Revenue, | ||||||||
Boys Town Project, Series 2008, 4.75%, 9/01/28, | ||||||||
Pre-Refunded 9/01/18 @ 100 | 500,000 | 506,625 | ||||||
Madonna Rehabilitation Hospital Project, Series 2014, | ||||||||
5.0%, 5/15/26 | 500,000 | 551,960 | ||||||
Nebraska Medicine, Series 2016, 4.0%, 5/15/32 | 700,000 | 738,192 | ||||||
Douglas County, Hospital Authority #3, Revenue, Refunding, | ||||||||
Nebraska Methodist Health System | ||||||||
Series 2008, 5.5%, 11/01/18, Escrowed to Maturity(b) | 155,000 | 158,443 | ||||||
Series 2015 | ||||||||
4.0%, 11/01/18 | 250,000 | 252,897 | ||||||
4.0%, 11/01/19 | 110,000 | 113,243 | ||||||
5.0%, 11/01/20 | 100,000 | 107,056 | ||||||
5.0%, 11/01/21 | 100,000 | 109,257 | ||||||
5.0%, 11/01/22 | 250,000 | 277,557 | ||||||
Fremont, Combined Utility Revenue, Series 2014B, | ||||||||
3.0%, 7/15/21 | 370,000 | 381,218 | ||||||
Hamilton County, General Obligation, Hampton Public | ||||||||
School District 0091, Series 2016, 1.0%, 12/15/19 | 300,000 | 295,158 | ||||||
Kearney, General Obligation, Highway Allocation Fund, | ||||||||
Refunding, Series 2017, 1.0%, 6/15/18 | 175,000 | 174,688 | ||||||
Lincoln-Lancaster County, Public Building Commission, | ||||||||
Lease Revenue, | ||||||||
Refunding, Series 2015, 3.0%, 12/01/19 | 750,000 | 766,515 | ||||||
Series 2016, 3.0%, 12/01/25 | 500,000 | 520,870 | ||||||
Lincoln, Airport Authority, Revenue, 2014 Series C | ||||||||
2.0%, 7/01/18 | 185,000 | 185,253 | ||||||
2.0%, 7/01/19 | 190,000 | 191,024 | ||||||
2.0%, 7/01/21 | 195,000 | 195,421 | ||||||
Lincoln, Educational Facilities, Revenue, Refunding, | ||||||||
Nebraska Wesleyan University Project, Series 2012 | ||||||||
2.25%, 4/01/19 | 645,000 | 647,786 | ||||||
2.5%, 4/01/21 | 925,000 | 934,879 | ||||||
Lincoln, Electric System Revenue, Refunding, | ||||||||
Series 2012 | ||||||||
5.0%, 9/01/21 | 1,000,000 | 1,101,560 | ||||||
5.0%, 9/01/28 | 1,000,000 | 1,117,080 | ||||||
Series 2016, 3.0%, 9/01/28 | 1,000,000 | 1,005,440 | ||||||
Lincoln, General Obligation, Highway Allocation Fund, | ||||||||
Refunding, Series 2016 | ||||||||
5.0%, 5/15/22 | 100,000 | 111,923 | ||||||
5.0%, 5/15/23 | 135,000 | 153,405 | ||||||
Lincoln, Parking Revenue, Refunding, Series 2011, | ||||||||
3.25%, 8/15/18 | 440,000 | 442,570 | ||||||
Lincoln, General Obligation, West Haymarket Joint Public Agency, | ||||||||
Series 2011, 5.0%, 12/15/26 | 300,000 | 331,935 | ||||||
Loup River Public Power District, Electric System Revenue, | ||||||||
Refunding, Series 2016 | ||||||||
5.0%, 12/01/18 | 500,000 | 511,290 | ||||||
5.0%, 12/01/19 | 500,000 | 527,155 | ||||||
Madison County, Hospital Authority #1, Revenue, Refunding, | ||||||||
Faith Regional Health Services Project, Series 2017A | ||||||||
5.0%, 7/01/21 | 475,000 | 511,304 | ||||||
5.0%, 7/01/23 | 250,000 | 275,105 |
The accompanying notes form an integral part of these financial statements.
41 | Q1 2018 ANNUAL REPORT
NEBRASKA TAX-FREE INCOME FUND (CONTINUED)
$ Principal | ||||||||
Amount | $ Value | |||||||
Municipal Energy Agency of Nebraska, Power Supply | ||||||||
System Revenue, Refunding | ||||||||
2009 Series A, BHAC Insured, | ||||||||
5.0%, 4/01/20, Pre-Refunded 4/01/19 @ 100 | 500,000 | 516,805 | ||||||
2012 Series A, 5.0%, 4/01/18 | 100,000 | 100,000 | ||||||
2016 Series A | ||||||||
5.0%, 4/01/21 | 250,000 | 271,617 | ||||||
5.0%, 4/01/27 | 350,000 | 406,129 | ||||||
Nebraska, Certificates of Participation, | ||||||||
Series 2015C | ||||||||
1.15%, 9/15/18 | 460,000 | 458,123 | ||||||
1.45%, 9/15/19 | 360,000 | 356,764 | ||||||
1.7%, 9/15/20 | 200,000 | 199,570 | ||||||
Series 2016A, 2.0%, 2/15/19 | 750,000 | 752,505 | ||||||
Series 2017B, 1.35%, 7/15/20 | 785,000 | 769,959 | ||||||
Nebraska Investment Financial Authority, Single Family | ||||||||
Housing Revenue 2016 Series C, 1.85%, 3/01/23 | 100,000 | 97,556 | ||||||
Nebraska Public Power District, Revenue | ||||||||
2012 Series A | ||||||||
4.0%, 1/01/21 | 500,000 | 527,660 | ||||||
5.0%, 1/01/21 | 500,000 | 540,965 | ||||||
2012 Series B, 3.0%, 1/01/24 | 1,000,000 | 1,025,370 | ||||||
2015 Series A-2, 5.0%, 1/01/24 | 250,000 | 275,020 | ||||||
2016 Series C | ||||||||
4.0%, 1/01/19 | 880,000 | 895,418 | ||||||
5.0%, 1/01/35 | 480,000 | 544,814 | ||||||
Nebraska State Colleges, Facilities Corp., Deferred | ||||||||
Maintenance Revenue, Refunding, Series 2016, | ||||||||
AGM Insured, 4.0%, 7/15/28 | 750,000 | 806,902 | ||||||
Nebraska State Colleges, Student Fees and Facilities Revenue, | ||||||||
Refunding, Wayne State College Project, Series 2016B, | ||||||||
1.0%, 7/01/18 | 145,000 | 144,523 | ||||||
Wayne State College Project, Series 2016, | ||||||||
3.0%, 7/01/18 | 200,000 | 200,642 | ||||||
3.0%, 7/01/19 | 120,000 | 121,763 | ||||||
North Platte, Sewer System Revenue, Refunding, Series 2015, | ||||||||
3.0%, 6/15/24 | 250,000 | 252,550 | ||||||
Omaha-Douglas County, General Obligation, Public Building | ||||||||
Commission, Series 2014, 5.0%, 5/01/26 | 725,000 | 804,648 | ||||||
Omaha, General Obligation, | ||||||||
Refunding, Series 2008 | ||||||||
5.0%, 6/01/20 | 255,000 | 256,433 | ||||||
5.0%, 6/01/20, Pre-Refunded 6/01/18 @ 100 | 95,000 | 95,520 | ||||||
5.25%, 10/15/19, Pre-Refunded 10/15/18 @ 100 | 250,000 | 254,948 | ||||||
Various Purpose and Refunding, Series 2016A | ||||||||
4.0%, 4/15/22 | 815,000 | 878,187 | ||||||
4.0%, 4/15/23 | 185,000 | 201,151 | ||||||
Omaha, Public Facilities Corp., Lease Revenue | ||||||||
Omaha Baseball Stadium Project | ||||||||
Refunding, Series 2016A, 4.0%. 6/01/28 | 1,335,000 | 1,439,984 | ||||||
Series 2009 | ||||||||
4.125%, 6/01/25, Pre-Refunded 6/01/19 @ 100 | 250,000 | 257,053 | ||||||
5.0%, 6/01/23, Pre-Refunded 6/01/19 @ 100 | 770,000 | 799,437 | ||||||
Series 2010, 4.125%, 6/01/29(b) | 650,000 | 671,788 | ||||||
Omaha Public Power District, | ||||||||
Electric System Revenue | ||||||||
2012 Series A, 5.0%, 2/01/24, | ||||||||
Pre-Refunded 2/01/22 @ 100 | 2,000,000 | 2,220,760 | ||||||
2015 Series A, 2.85%, 2/01/27 | 500,000 | 503,455 | ||||||
Separate Electric System Revenue | ||||||||
2015 Series A, 5.0%, 2/01/19 | 500,000 | 513,580 | ||||||
Omaha, Sanitary Sewerage System Revenue, | ||||||||
Refunding, Series 2016 | ||||||||
5.0%, 4/01/26 | 250,000 | 295,035 | ||||||
4.0%, 4/01/31 | 350,000 | 373,174 | ||||||
Series 2014, 5.0%, 11/15/22 | 200,000 | 225,294 | ||||||
Papillion, General Obligation, Tax Supported Recreational | ||||||||
Facilities, Series 2017, 3.0%, 9/15/24 | 420,000 | 430,454 |
$ Principal | ||||||||
Amount | $ Value | |||||||
Papillion-La Vista, General Obligation, Sarpy County | ||||||||
School District #27, | ||||||||
Refunding, Series 2017A | ||||||||
2.05%, 12/01/24 | 150,000 | 148,887 | ||||||
2.2%, 12/01/25 | 150,000 | 148,533 | ||||||
2.3%, 12/01/26 | 275,000 | 272,220 | ||||||
Series 2009, 5.0%, 12/01/28, Pre-Refunded | ||||||||
12/01/18 @ 100 | 500,000 | 511,360 | ||||||
Papio-Missouri River Natural Resources District, General | ||||||||
Obligation, Flood Protection and Water Quality Enhancement, | ||||||||
Refunding, Series 2017, 5.0%, 12/15/26 | 185,000 | 204,882 | ||||||
Series 2013B, 5.0%, 12/15/19, Pre-Refunded | ||||||||
7/26/18 @ 100 | 400,000 | 404,380 | ||||||
Series 2015 | ||||||||
2.0%, 12/15/20 | 100,000 | 100,127 | ||||||
2.25%, 12/15/21 | 100,000 | 99,998 | ||||||
4.0%, 12/15/24 | 100,000 | 103,733 | ||||||
4.0%, 12/15/25 | 100,000 | 103,668 | ||||||
Public Power Generation Agency, Revenue, Refunding, | ||||||||
Whelan Energy Center Unit 2, 2015 Series A, 5.0%, 1/01/28 | 200,000 | 225,944 | ||||||
Sarpy County, General Obligation, Bellevue Public School | ||||||||
District 0001, Series 2017 | ||||||||
5.0%, 12/15/27 | 250,000 | 294,643 | ||||||
5.0%, 12/15/29 | 550,000 | 652,652 | ||||||
Sarpy County, Certificates of Participation, | ||||||||
Series 2016, 1.75%, 6/15/26 | 500,000 | 458,840 | ||||||
Sarpy County, Recovery Zone Facility Certificates of | ||||||||
Participation, Series 2010 | ||||||||
2.35%, 12/15/18 | 155,000 | 155,880 | ||||||
2.6%, 12/15/19 | 135,000 | 137,025 | ||||||
South Sioux City, Combined Electric, Water and Sewer Revenue, | ||||||||
Refunding, Series 2014A | ||||||||
1.9%, 6/01/20 | 280,000 | 280,384 | ||||||
2.25%, 6/01/21 | 250,000 | 251,143 | ||||||
Thayer County, General Obligation Hospital, Refunding, | ||||||||
Series 2017, 1.3%, 9/01/20 | 400,000 | 390,400 | ||||||
University of Nebraska, Facilities Corp., | ||||||||
Lease Rental Revenue, NCTA Education Center/Student Housing | ||||||||
Project, Series 2011, 3.75% 6/15/19 | 285,000 | 292,250 | ||||||
Revenue, Refunding, Health Center and College of Nursing | ||||||||
Projects, Series 2016, 5.0%, 7/15/29 | 380,000 | 446,625 | ||||||
Revenue, UNMC Global Center Project, Series 2017, | ||||||||
5.0%, 12/15/18 | 1,000,000 | 1,023,980 | ||||||
University of Nebraska, University Revenue, | ||||||||
Kearney Student Housing Project, Series 2017 | ||||||||
3.0%, 7/01/25 | 100,000 | 102,957 | ||||||
2.5%, 7/01/26 | 210,000 | 207,369 | ||||||
3.0%, 7/01/27 | 100,000 | 102,108 | ||||||
Lincoln Student Fees and Facilities, Series 2015A | ||||||||
2.0%, 7/01/18 | 400,000 | 400,500 | ||||||
2.0%, 7/01/19 | 600,000 | 602,868 | ||||||
Omaha Health & Recreation Project | ||||||||
4.05%, 5/15/19, Pre-Refunded 5/15/18 @ 100 | 390,000 | 391,166 | ||||||
5.0%, 5/15/33, Pre-Refunded 5/15/18 @ 100 | 700,000 | 702,863 | ||||||
Refunding, Omaha Student Housing Project, | ||||||||
Series 2017A, 5.0%, 5/15/30 | 100,000 | 118,618 | ||||||
Series 2017B, 5.0%, 5/15/30 | 725,000 | 859,981 | ||||||
Upper Republican Natural Resources District, Limited | ||||||||
Obligation Occupation Tax, River Flow Enhancement, | �� | |||||||
Refunding, Series 2017B, AGM Insured | ||||||||
4.0%, 12/15/25 | 245,000 | 260,668 | ||||||
4.0%, 12/15/27 | 395,000 | 417,740 | ||||||
Village of Boys Town, Revenue, Refunding, Boys Town | ||||||||
Project, Series 2017, 3.0%, 9/01/28 | 700,000 | 704,361 | ||||||
50,961,573 |
The accompanying notes form an integral part of these financial statements.
42 | Q1 2018 ANNUAL REPORT |
WEITZINVESTMENTS.COM
$ Principal | ||||||||||||
% of Net | Amount | |||||||||||
Assets | or Shares | $ Value | ||||||||||
Texas | 1.6 | |||||||||||
Austin, Airport System Revenue, Series 2017B, AMT, | ||||||||||||
5.0%, 11/15/26 | 250,000 | 290,388 | ||||||||||
Harris County, Tax and Subordinate Lien Revenue, | ||||||||||||
Refunding, Series 2009C, 5.0%, 8/15/23 | 110,000 | 114,820 | ||||||||||
Houston, General Obligation, Public Improvement, | ||||||||||||
Refunding, Series 2014A, 5.0%, 3/01/26 | 500,000 | 566,225 | ||||||||||
971,433 | ||||||||||||
Washington | 0.4 | |||||||||||
Port of Seattle, Intermediate Lien Revenue, | ||||||||||||
Series 2017C, AMT, 5.0%, 5/01/26 | 200,000 | 233,022 | ||||||||||
Total Municipal Bonds (Cost $55,583,610) | 55,028,642 | |||||||||||
Cash Equivalents – 5.2% | ||||||||||||
State Street Institutional U.S. Government Money | ||||||||||||
Market Fund - Premier Class 1.58%(a) | 3,046,400 | 3,046,400 | ||||||||||
Total Cash Equivalents (Cost $3,046,400) | 3,046,400 | |||||||||||
Total Investments in Securities (Cost $58,630,010) | 58,075,042 | |||||||||||
Other Assets Less Other Liabilities – 0.9% | 528,889 | |||||||||||
Net Assets – 100% | 58,603,931 | |||||||||||
Net Asset Value Per Share | 9.76 |
(a) | Rate presented represents the annualized 7-day yield at March 31, 2018. |
(b) | Annual sinking fund |
The accompanying notes form an integral part of these financial statements.
43 | Q1 2018 ANNUAL REPORT
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2018 |
Short | Nebraska | |||||||||||||||||||||||||||||||||||
(In U.S. dollars, | Partners | Partners III | Core Plus | Duration | Ultra Short | Tax-Free | ||||||||||||||||||||||||||||||
except share data) | Value | Value | Opportunity | Hickory | Balanced | Income | Income | Government | Income | |||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
Investments in securities at value: | ||||||||||||||||||||||||||||||||||||
Unaffiliated issuers(a) | 786,416,333 | 663,730,062 | 624,253,116 | 242,886,082 | 121,778,158 | 38,941,868 | 1,127,396,344 | 103,276,243 | 58,075,042 | |||||||||||||||||||||||||||
Controlled affiliates(a) | — | — | 11,599,700 | — | — | — | — | — | — | |||||||||||||||||||||||||||
786,416,333 | 663,730,062 | 635,852,816 | 242,886,082 | 121,778,158 | 38,941,868 | 1,127,396,344 | 103,276,243 | 58,075,042 | ||||||||||||||||||||||||||||
Accrued interest and dividends receivable | 330,634 | 143,858 | 166,347 | 79,827 | 435,870 | 253,521 | 6,682,354 | 718,867 | 585,631 | |||||||||||||||||||||||||||
Due from broker | — | — | 207,760,767 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Receivable for securities sold | — | — | — | — | — | — | — | 18,000,000 | — | |||||||||||||||||||||||||||
Receivable for fund shares sold | 30,776 | 37,092 | 39,164 | 658 | — | — | 338,026 | — | — | |||||||||||||||||||||||||||
Cash | 6,500 | — | — | — | 45,186 | 8,078 | 422,477 | — | — | |||||||||||||||||||||||||||
Total assets | 786,784,243 | 663,911,012 | 843,819,094 | 242,966,567 | 122,259,214 | 39,203,467 | 1,134,839,201 | 121,995,110 | 58,660,673 | |||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||
Dividends payable on securities sold short | — | — | 652,094 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Due to adviser | 922,672 | 744,059 | 709,173 | 293,441 | 99,412 | 14,462 | 482,629 | 17,711 | 56,742 | |||||||||||||||||||||||||||
Options written, at value(b) | — | — | 50,000 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Payable for securities purchased | — | 2,567,616 | 891,731 | — | — | — | 2,013,766 | 17,803,608 | — | |||||||||||||||||||||||||||
Payable for fund shares redeemed | 457,715 | 477,396 | 54,207 | 65,051 | 90,612 | 20,671 | 1,142,701 | 2,300 | — | |||||||||||||||||||||||||||
Securities sold short(c) | — | — | 187,620,500 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 9,514 | — | |||||||||||||||||||||||||||
Total liabilities | 1,380,387 | 3,789,071 | 189,977,705 | 358,492 | 190,024 | 35,133 | 3,639,096 | 17,833,133 | 56,742 | |||||||||||||||||||||||||||
Net assets | 785,403,856 | 660,121,941 | 653,841,389 | 242,608,075 | 122,069,190 | 39,168,334 | 1,131,200,105 | 104,161,977 | 58,603,931 | |||||||||||||||||||||||||||
Composition of net assets: | ||||||||||||||||||||||||||||||||||||
Paid-in capital | 480,609,805 | 414,655,999 | 417,242,565 | 151,112,348 | 100,584,679 | 39,546,935 | 1,135,395,637 | 104,200,408 | 59,186,305 | |||||||||||||||||||||||||||
Accumulated undistributed net investment income (loss) | (737,540 | ) | (371,208 | ) | (910,390 | ) | (224,897 | ) | 221,238 | 30,606 | 550,610 | 1,610 | 45,860 | |||||||||||||||||||||||
Accumulated net realized gain (loss) | 35,193,730 | 15,602,326 | 39,377,819 | 11,700,708 | 5,679,422 | (26,148 | ) | (3,306,875 | ) | (2,007 | ) | (73,266 | ) | |||||||||||||||||||||||
Net unrealized appreciation (depreciation) of investments | 270,337,861 | 230,234,824 | 198,131,395 | 80,019,916 | 15,583,851 | (383,059 | ) | (1,439,267 | ) | (38,034 | ) | (554,968 | ) | |||||||||||||||||||||||
Net assets | 785,403,856 | 660,121,941 | 653,841,389 | 242,608,075 | 122,069,190 | 39,168,334 | 1,131,200,105 | 104,161,977 | 58,603,931 | |||||||||||||||||||||||||||
Net assets(d): | ||||||||||||||||||||||||||||||||||||
Investor Class | 578,344,623 | 328,648,052 | 24,807,633 | 242,608,075 | 122,069,190 | 7,273,726 | 113,237,634 | 58,603,931 | ||||||||||||||||||||||||||||
Institutional Class | 207,059,233 | 331,473,889 | 629,033,756 | 31,894,608 | 1,017,962,471 | 104,161,977 | ||||||||||||||||||||||||||||||
Shares outstanding(d)(e): | ||||||||||||||||||||||||||||||||||||
Investor Class | 13,475,157 | 10,495,085 | 1,736,786 | 4,703,183 | 8,594,913 | 720,566 | 9,365,448 | 6,005,452 | ||||||||||||||||||||||||||||
Institutional Class | 4,783,543 | 10,493,740 | 42,818,443 | 3,159,260 | 84,038,724 | 10,420,061 | ||||||||||||||||||||||||||||||
Net asset value, offering and redemption price(d): | ||||||||||||||||||||||||||||||||||||
Investor Class | 42.92 | 31.31 | 14.28 | 51.58 | 14.20 | 10.09 | 12.09 | 9.76 | ||||||||||||||||||||||||||||
Institutional Class | 43.29 | 31.59 | 14.69 | 10.10 | 12.11 | 10.00 | ||||||||||||||||||||||||||||||
(a) Cost of investments in securities: | ||||||||||||||||||||||||||||||||||||
Unaffiliated issuers | 516,078,472 | 433,495,238 | 389,797,420 | 162,866,166 | 106,194,307 | 39,324,927 | 1,128,835,611 | 103,314,277 | 58,630,010 | |||||||||||||||||||||||||||
Controlled affiliates | — | — | 2,899,379 | — | — | — | — | — | — | |||||||||||||||||||||||||||
516,078,472 | 433,495,238 | 392,696,799 | 162,866,166 | 106,194,307 | 39,324,927 | 1,128,835,611 | 103,314,277 | 58,630,010 | ||||||||||||||||||||||||||||
(b) Premiums from options written | — | — | 315,185 | — | — | — | — | — | — | |||||||||||||||||||||||||||
(c) Proceeds from short sales | — | — | 142,330,693 | — | — | — | — | — | — | |||||||||||||||||||||||||||
(d) Funds with a single share class are shown with the Investor Class, except for the Ultra Short Government Fund which has been designated Institutional Class | ||||||||||||||||||||||||||||||||||||
(e) Indefinite number of no par value shares authorized |
The accompanying notes form an integral part of these financial statements.
44 | Q1 2018 ANNUAL REPORT |
STATEMENTS OF OPERATIONS
Year ended March 31, 2018 |
Short | Nebraska | |||||||||||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Duration | Ultra Short | Tax-Free | |||||||||||||||||||||||||||||||
(In U.S. dollars) | Value | Value | Opportunity | Hickory | Balanced | Income | Income | Government | Income | |||||||||||||||||||||||||||
Investment income: | ||||||||||||||||||||||||||||||||||||
Dividends: | ||||||||||||||||||||||||||||||||||||
Unaffiliated issuers(a) | 5,208,869 | 4,265,022 | 3,830,481 | 928,029 | 730,524 | 12,432 | 610,400 | — | — | |||||||||||||||||||||||||||
Interest | 1,282,933 | 1,334,304 | 1,919,374 | 662,246 | 1,153,804 | 1,086,585 | 30,412,885 | 1,141,445 | 1,372,416 | |||||||||||||||||||||||||||
Total investment income | 6,491,802 | 5,599,326 | 5,749,855 | 1,590,275 | 1,884,328 | 1,099,017 | 31,023,285 | 1,141,445 | 1,372,416 | |||||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||||||
Investment advisory fees | 7,368,963 | 6,395,698 | 6,840,012 | 2,668,175 | 890,815 | 153,243 | 4,778,001 | 301,141 | 244,412 | |||||||||||||||||||||||||||
Administrative fees and expenses | 613,088 | 558,965 | 497,092 | 417,275 | 250,416 | 148,033 | 820,069 | 175,063 | 183,133 | |||||||||||||||||||||||||||
Shareholder servicing fees: | ||||||||||||||||||||||||||||||||||||
Investor Class | 1,089,035 | 786,196 | 67,349 | — | — | 10,135 | 299,161 | — | — | |||||||||||||||||||||||||||
Institutional Class | 36,699 | 85,410 | 250,140 | — | — | 18,685 | 1,131,047 | 10,038 | — | |||||||||||||||||||||||||||
Custodian fees | 18,570 | 16,455 | 27,997 | 8,105 | 9,434 | 9,490 | 36,056 | 6,955 | 7,498 | |||||||||||||||||||||||||||
Dividends on securities sold short | — | — | 3,241,731 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Professional fees | 88,763 | 82,782 | 77,634 | 45,600 | 34,164 | 30,273 | 121,335 | 32,471 | 29,589 | |||||||||||||||||||||||||||
Registration fees | 43,980 | 48,860 | 45,299 | 22,779 | 21,149 | 33,896 | 66,559 | 23,786 | 5,460 | |||||||||||||||||||||||||||
Sub-transfer agent fees | 222,473 | 131,610 | 104,982 | 91,378 | 38,458 | 42,884 | 134,857 | 33,929 | 25,325 | |||||||||||||||||||||||||||
Trustees fees | 83,275 | 72,895 | 70,125 | 27,623 | 12,306 | 3,884 | 122,577 | 10,113 | 6,260 | |||||||||||||||||||||||||||
Other | 130,475 | 89,413 | 73,149 | 41,090 | 15,939 | 6,365 | 186,808 | 12,859 | 8,533 | |||||||||||||||||||||||||||
9,695,321 | 8,268,284 | 11,295,510 | 3,322,025 | 1,272,681 | 456,888 | 7,696,470 | 606,355 | 510,210 | ||||||||||||||||||||||||||||
Less expenses waived/reimbursed by investment adviser | (194,658 | ) | (249,113 | ) | — | — | (59,749 | ) | (289,369 | ) | (1,751,933 | ) | (405,594 | ) | — | |||||||||||||||||||||
Net expenses | 9,500,663 | 8,019,171 | 11,295,510 | 3,322,025 | 1,212,932 | 167,519 | 5,944,537 | 200,761 | 510,210 | |||||||||||||||||||||||||||
Net investment income (loss) | (3,008,861 | ) | (2,419,845 | ) | (5,545,655 | ) | (1,731,750 | ) | 671,396 | 931,498 | 25,078,748 | 940,684 | 862,206 | |||||||||||||||||||||||
Realized and unrealized gain (loss) on investments: | ||||||||||||||||||||||||||||||||||||
Net realized gain (loss): | ||||||||||||||||||||||||||||||||||||
Unaffiliated issuers | 62,971,261 | 35,922,927 | 64,877,033 | 23,837,210 | 7,257,714 | (6,975 | ) | 1,300,998 | (228 | ) | (34,006 | ) | ||||||||||||||||||||||||
Options written | — | — | 107,656 | — | — | — | 114,997 | — | — | |||||||||||||||||||||||||||
Securities sold short | — | — | (17,077,051 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
Net realized gain (loss) | 62,971,261 | 35,922,927 | 47,907,638 | 23,837,210 | 7,257,714 | (6,975 | ) | 1,415,995 | (228 | ) | (34,006 | ) | ||||||||||||||||||||||||
Net unrealized appreciation (depreciation): | ||||||||||||||||||||||||||||||||||||
Unaffiliated issuers | 13,403,481 | (1,698,449 | ) | (16,242,168 | ) | (15,569,568 | ) | 356,714 | (493,281 | ) | (19,062,177 | ) | (2,236 | ) | (846,001 | ) | ||||||||||||||||||||
Controlled affiliates | — | — | 1,191,750 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Options written | — | — | 265,185 | — | — | — | 70,003 | — | — | |||||||||||||||||||||||||||
Securities sold short | — | — | (14,101,493 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) | 13,403,481 | (1,698,449 | ) | (28,886,726 | ) | (15,569,568 | ) | 356,714 | (493,281 | ) | (18,992,174 | ) | (2,236 | ) | (846,001 | ) | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 76,374,742 | 34,224,478 | 19,020,912 | 8,267,642 | 7,614,428 | (500,256 | ) | (17,576,179 | ) | (2,464 | ) | (880,007 | ) | |||||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 73,365,881 | 31,804,633 | 13,475,257 | 6,535,892 | 8,285,824 | 431,242 | 7,502,569 | 938,220 | (17,801 | ) | ||||||||||||||||||||||||||
(a) Foreign taxes withheld | — | — | — | 3,713 | 9,601 | — | — | — | — |
The accompanying notes form an integral part of these financial statements.
45 | Q1 2018 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
Value | Partners Value | Partners III Opportunity | Hickory | |||||||||||||||||||||||||||||
Year ended March 31, | Year ended March 31, | Year ended March 31, | Year ended March 31, | |||||||||||||||||||||||||||||
(In U.S. dollars) | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Increase (decrease) in net assets: | ||||||||||||||||||||||||||||||||
From operations: | ||||||||||||||||||||||||||||||||
Net investment income (loss) | (3,008,861 | ) | (3,192,755 | ) | (2,419,845 | ) | (1,821,881 | ) | (5,545,655 | ) | (6,530,070 | ) | (1,731,750 | ) | (1,265,972 | ) | ||||||||||||||||
Net realized gain (loss) | 62,971,261 | 32,591,851 | 35,922,927 | (2,079,364 | ) | 47,907,638 | 21,892,172 | 23,837,210 | 2,344,197 | |||||||||||||||||||||||
Net unrealized appreciation (depreciation) | 13,403,481 | 50,374,828 | (1,698,449 | ) | 84,694,558 | (28,886,726 | ) | 46,718,737 | (15,569,568 | ) | 29,836,129 | |||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 73,365,881 | 79,773,924 | 31,804,633 | 80,793,313 | 13,475,257 | 62,080,839 | 6,535,892 | 30,914,354 | ||||||||||||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||||||||||||||
Net investment income(a): | ||||||||||||||||||||||||||||||||
Investor Class | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Institutional Class | — | — | — | — | — | — | ||||||||||||||||||||||||||
Net realized gains(a): | ||||||||||||||||||||||||||||||||
Investor Class | (43,230,191 | ) | — | (8,283,431 | ) | — | (1,237,322 | ) | (450,948 | ) | (12,830,462 | ) | — | |||||||||||||||||||
Institutional Class | (14,133,559 | ) | — | (7,418,949 | ) | — | (28,992,835 | ) | (9,034,420 | ) | ||||||||||||||||||||||
Return of capital(a): | ||||||||||||||||||||||||||||||||
Investor Class | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Institutional Class | — | — | — | — | — | — | ||||||||||||||||||||||||||
Total distributions | (57,363,750 | ) | — | (15,702,380 | ) | — | (30,230,157 | ) | (9,485,368 | ) | (12,830,462 | ) | — | |||||||||||||||||||
Fund share transactions(a): | ||||||||||||||||||||||||||||||||
Investor Class | (72,382,271 | ) | (160,901,195 | ) | (109,960,340 | ) | (150,687,609 | ) | (2,909,506 | ) | (8,964,256 | ) | (23,596,529 | ) | (56,584,907 | ) | ||||||||||||||||
Institutional Class | 11,492,448 | (18,977,598 | ) | 15,256,368 | (20,025,386 | ) | (16,220,456 | ) | (66,385,487 | ) | ||||||||||||||||||||||
Net increase (decrease) from fund share transactions | (60,889,823 | ) | (179,878,793 | ) | (94,703,972 | ) | (170,712,995 | ) | (19,129,962 | ) | (75,349,743 | ) | (23,596,529 | ) | (56,584,907 | ) | ||||||||||||||||
Total increase (decrease) in net assets | (44,887,692 | ) | (100,104,869 | ) | (78,601,719 | ) | (89,919,682 | ) | (35,884,862 | ) | (22,754,272 | ) | (29,891,099 | ) | (25,670,553 | ) | ||||||||||||||||
Net assets: | ||||||||||||||||||||||||||||||||
Beginning of period | 830,291,548 | 930,396,417 | 738,723,660 | 828,643,342 | 689,726,251 | 712,480,523 | 272,499,174 | 298,169,727 | ||||||||||||||||||||||||
End of period | 785,403,856 | 830,291,548 | 660,121,941 | 738,723,660 | 653,841,389 | 689,726,251 | 242,608,075 | 272,499,174 | ||||||||||||||||||||||||
Undistributed net investment income (loss) | (737,540 | ) | (1,208,394 | ) | (371,208 | ) | (907,781 | ) | (910,390 | ) | (2,542,368 | ) | (224,897 | ) | — |
(a) Funds with a single share class are shown with the Investor Class, except for the Ultra Short Government Fund which has been designated Institutional Class
The accompanying notes form an integral part of these financial statements.
46 | Q1 2018 ANNUAL REPORT |
Short Duration | Ultra Short | Nebraska | ||||||||||||||||||||||||||||||||||||
Balanced | Core Plus Income | Income | Government | Tax-Free Income | ||||||||||||||||||||||||||||||||||
Year ended March 31, | Year ended March 31, | Year ended March 31, | Year ended March 31, | Year ended March 31, | ||||||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||
671,396 | 111,928 | 931,498 | 539,071 | 25,078,748 | 25,029,733 | 940,684 | 262,146 | 862,206 | 1,059,486 | |||||||||||||||||||||||||||||
7,257,714 | 3,837,636 | (6,975 | ) | 394,851 | 1,415,995 | (996,408 | ) | (228 | ) | (153 | ) | (34,006 | ) | 8,962 | ||||||||||||||||||||||||
356,714 | 3,050,576 | (493,281 | ) | 10,103 | (18,992,174 | ) | 4,394,198 | (2,236 | ) | (35,798 | ) | (846,001 | ) | (1,403,882 | ) | |||||||||||||||||||||||
8,285,824 | 7,000,140 | 431,242 | 944,025 | 7,502,569 | 28,427,523 | 938,220 | 226,195 | (17,801 | ) | (335,434 | ) | |||||||||||||||||||||||||||
(452,372 | ) | (292,979 | ) | (157,148 | ) | (129,058 | ) | (2,045,826 | ) | (1,676,679 | ) | (818,694 | ) | (1,059,081 | ) | |||||||||||||||||||||||
(748,946 | ) | (411,467 | ) | (22,624,511 | ) | (23,730,853 | ) | (940,684 | ) | (262,146 | ) | |||||||||||||||||||||||||||
(2,851,555 | ) | (3,344,298 | ) | (21,045 | ) | (75,492 | ) | — | (254,793 | ) | — | — | ||||||||||||||||||||||||||
(85,223 | ) | (211,290 | ) | — | (3,237,153 | ) | — | — | ||||||||||||||||||||||||||||||
— | — | — | — | — | (14,356 | ) | — | — | — | — | ||||||||||||||||||||||||||||
— | — | — | (203,189 | ) | ||||||||||||||||||||||||||||||||||
(3,303,927 | ) | (3,637,277 | ) | (1,012,362 | ) | (827,307 | ) | (24,670,337 | ) | (29,117,023 | ) | (940,684 | ) | (262,146 | ) | (818,694 | ) | (1,059,081 | ) | |||||||||||||||||||
(1,101,597 | ) | 3,338,417 | 851,560 | 1,699,413 | 20,043,162 | (6,057,739 | ) | (3,532,391 | ) | 233,593 | ||||||||||||||||||||||||||||
8,522,073 | 8,642,485 | (69,764,710 | ) | (51,164,900 | ) | 6,135,346 | (8,623,636 | ) | ||||||||||||||||||||||||||||||
(1,101,597 | ) | 3,338,417 | 9,373,633 | 10,341,898 | (49,721,548 | ) | (57,222,639 | ) | 6,135,346 | (8,623,636 | ) | (3,532,391 | ) | 233,593 | ||||||||||||||||||||||||
3,880,300 | 6,701,280 | 8,792,513 | 10,458,616 | (66,889,316 | ) | (57,912,139 | ) | 6,132,882 | (8,659,587 | ) | (4,368,886 | ) | (1,160,922 | ) | ||||||||||||||||||||||||
118,188,890 | 111,487,610 | 30,375,821 | 19,917,205 | 1,198,089,421 | 1,256,001,560 | 98,029,095 | 106,688,682 | 62,972,817 | 64,133,739 | |||||||||||||||||||||||||||||
122,069,190 | 118,188,890 | 39,168,334 | 30,375,821 | 1,131,200,105 | 1,198,089,421 | 104,161,977 | 98,029,095 | 58,603,931 | 62,972,817 | |||||||||||||||||||||||||||||
221,238 | — | 30,606 | 1,644 | 550,610 | — | 1,610 | — | 45,860 | 2,348 |
The accompanying notes form an integral part of these financial statements.
47 | Q1 2018 ANNUAL REPORT
STATEMENT OF CASH FLOWS
Partners III Opportunity | ||
(In U.S. dollars) | Year ended March 31, 2018 |
Increase (decrease) in cash: | ||||
Cash flows from operating activities: | ||||
Net increase in net assets from operations | 13,475,257 | |||
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | ||||
Purchases of investment securities | (120,613,767 | ) | ||
Proceeds from sale of investment securities | 204,437,860 | |||
Short positions covered | (68,862,044 | ) | ||
Sale of short-term investment securities, net | 17,309,159 | |||
Net unrealized depreciation on investments, options and short sales | 28,886,726 | |||
Net realized gain on investments, options and short sales | (47,907,638 | ) | ||
Increase in accrued interest and dividends receivable | (63,145 | ) | ||
Decrease in due from broker | 22,401,645 | |||
Decrease in receivable for securities sold | 240,982 | |||
Decrease in receivable for fund shares sold | 485,854 | |||
Decrease in dividends payable on securities sold short | (1,540 | ) | ||
Decrease in due to adviser | (38,864 | ) | ||
Increase in payable for securities purchased | 891,731 | |||
Decrease in payable for fund shares redeemed | (1,282,097 | ) | ||
Net cash provided by operating activities | 49,360,119 | |||
Cash flows from financing activities: | ||||
Proceeds from sales of fund shares | 60,494,957 | |||
Payments for redemptions of fund shares | (106,041,429 | ) | ||
Cash distributions to shareholders | (3,813,647 | ) | ||
Net cash used in financing activities | (49,360,119 | ) | ||
Net increase (decrease) in cash | — | |||
Cash: | ||||
Balance, beginning of period | — | |||
Balance, end of period | — | |||
Noncash financing activities: | ||||
Reinvestment of shareholder distributions | 26,416,510 |
The accompanying notes form an integral part of these financial statements.
48 | Q1 2018 ANNUAL REPORT |
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49 | Q1 2018 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 | |||||||||||||||||||||||||||
Net gain (loss) | Dividends | |||||||||||||||||||||||||||
Net asset value, | on securities | Total from | from net | Distributions | ||||||||||||||||||||||||
Years ended March 31, | beginning of | Net investment | (realized | investment | investment | from | Total | |||||||||||||||||||||
unless otherwise noted | period | income (loss) | and unrealized) | operations | income | realized gains | distributions | |||||||||||||||||||||
Value - Investor Class | ||||||||||||||||||||||||||||
2018 | 42.20 | (0.18 | )(a) | 3.96 | 3.78 | — | (3.06 | ) | (3.06 | ) | ||||||||||||||||||
2017 | 38.43 | (0.16 | )(a) | 3.93 | 3.77 | — | — | — | ||||||||||||||||||||
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 | — | — | — | ||||||||||||||||||||
Value - Institutional Class | ||||||||||||||||||||||||||||
2018 | 42.44 | (0.09 | )(a) | 4.00 | 3.91 | — | (3.06 | ) | (3.06 | ) | ||||||||||||||||||
2017 | 38.56 | (0.08 | )(a) | 3.96 | 3.88 | — | — | — | ||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
2018 | 30.72 | (0.15 | )(a) | 1.47 | 1.32 | — | (0.73 | ) | (0.73 | ) | ||||||||||||||||||
2017 | 27.66 | (0.09 | )(a) | 3.15 | 3.06 | — | — | — | ||||||||||||||||||||
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 | — | — | — | ||||||||||||||||||||
Partners Value - Institutional Class | ||||||||||||||||||||||||||||
2018 | 30.91 | (0.06 | )(a) | 1.47 | 1.41 | — | (0.73 | ) | (0.73 | ) | ||||||||||||||||||
2017 | 27.75 | (0.02 | )(a) | 3.18 | 3.16 | — | — | — | ||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
2018 | 14.74 | (0.19 | )(a) | 0.40 | 0.21 | — | (0.67 | ) | (0.67 | ) | ||||||||||||||||||
2017 | 13.73 | (0.20 | )(a) | 1.40 | 1.20 | — | (0.19 | ) | (0.19 | ) | ||||||||||||||||||
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 | ) | ||||||||||||||||||
Partners III Opportunity - Institutional Class | ||||||||||||||||||||||||||||
2018 | 15.07 | (0.12 | )(a) | 0.41 | 0.29 | — | (0.67 | ) | (0.67 | ) | ||||||||||||||||||
2017 | 13.96 | (0.13 | )(a) | 1.43 | 1.30 | — | (0.19 | ) | (0.19 | ) | ||||||||||||||||||
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 | ) | ||||||||||||||||||
Hickory | ||||||||||||||||||||||||||||
2018 | 53.11 | (0.37 | ) | 1.55 | 1.18 | — | (2.71 | ) | (2.71 | ) | ||||||||||||||||||
2017 | 47.59 | (0.25 | ) | 5.77 | 5.52 | — | — | — | ||||||||||||||||||||
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 | — | — | — |
* | Annualized |
† | Not Annualized |
(a) | Based on average daily shares outstanding |
(b) | Initial offering of shares on July 31, 2014 |
(c) | Included in the expense ratio is 0.00%, 0.08%, 0.27%, 0.24% and 0.11% related to interest expense and 0.47%, 0.54%, 0.50%, 0.29% and 0.16% related to dividend expense on securities sold short for the periods ended March 31, 2018, 2017, 2016, 2015 and 2014, respectively. |
(d) | Included in the expense ratio is 0.00%, 0.08%, 0.27%, 0.24% and 0.12% related to interest expense and 0.47%, 0.55%, 0.51%, 0.29% and 0.15% related to dividend expense on securities sold short for the periods ended March 31, 2018, 2017, 2016, 2015 and 2014, respectively. |
The accompanying notes form an integral part of these financial statements.
50 | Q1 2018 ANNUAL REPORT |
Ratios/Supplemental Data | ||||||||||||||||||||||||||
Ratio of expenses | ||||||||||||||||||||||||||
to average net assets | ||||||||||||||||||||||||||
Ratio of net | ||||||||||||||||||||||||||
investment income | Portfolio | |||||||||||||||||||||||||
Net asset value, | Net assets, end of | Prior to fee | Net of fee | (loss) to average | turnover | |||||||||||||||||||||
end of period | Total Return (%) | period ($000) | waivers (%) | waivers (%) | net assets (%) | rate (%) | ||||||||||||||||||||
42.92 | 9.23 | 578,345 | 1.22 | 1.22 | (0.42 | ) | 15 | |||||||||||||||||||
42.20 | 9.81 | 638,993 | 1.24 | 1.22 | (0.42 | ) | 24 | |||||||||||||||||||
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 | |||||||||||||||||||
43.29 | 9.46 | 207,059 | 1.09 | 0.99 | (0.20 | ) | 15 | |||||||||||||||||||
42.44 | 10.06 | 191,299 | 1.10 | 0.99 | (0.19 | ) | 24 | |||||||||||||||||||
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 | ||||||||||||||||
31.31 | 4.28 | 328,648 | 1.25 | 1.25 | (0.46 | ) | 12 | |||||||||||||||||||
30.72 | 11.06 | 429,226 | 1.27 | 1.24 | (0.33 | ) | 16 | |||||||||||||||||||
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 | |||||||||||||||||||
31.59 | 4.55 | 331,474 | 1.07 | 0.99 | (0.20 | ) | 12 | |||||||||||||||||||
30.91 | 11.39 | 309,497 | 1.07 | 0.99 | (0.08 | ) | 16 | |||||||||||||||||||
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 | ||||||||||||||||
14.28 | 1.49 | 24,808 | 2.14 | (c) | 2.14 | (c) | (1.30 | ) | 31 | |||||||||||||||||
14.74 | 8.94 | 28,561 | 2.29 | (c) | 2.29 | (c) | (1.43 | ) | 23 | |||||||||||||||||
13.73 | (9.56 | ) | 35,461 | 2.33 | (c) | 2.33 | (c) | (1.63 | ) | 46 | ||||||||||||||||
17.12 | 7.38 | 68,490 | 2.06 | (c) | 2.01 | (c) | (1.33 | ) | 45 | |||||||||||||||||
16.43 | 17.94 | 78,586 | 1.84 | (c) | 1.68 | (c) | (1.10 | ) | 20 | |||||||||||||||||
14.69 | 2.01 | 629,034 | 1.63 | (d) | 1.63 | (d) | (0.79 | ) | 31 | |||||||||||||||||
15.07 | 9.52 | 661,165 | 1.80 | (d) | 1.80 | (d) | (0.93 | ) | 23 | |||||||||||||||||
13.96 | (9.20 | ) | 677,019 | 1.95 | (d) | 1.95 | (d) | (1.26 | ) | 46 | ||||||||||||||||
17.31 | 7.76 | 1,014,821 | 1.69 | (d) | 1.69 | (d) | (1.00 | ) | 45 | |||||||||||||||||
16.55 | 18.20 | 1,163,661 | 1.43 | (d) | 1.43 | (d) | (0.78 | ) | 20 | |||||||||||||||||
51.58 | 2.15 | 242,608 | 1.24 | 1.24 | (0.65 | ) | 20 | |||||||||||||||||||
53.11 | 11.60 | 272,499 | 1.25 | 1.25 | (0.44 | ) | 7 | |||||||||||||||||||
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 |
The accompanying notes form an integral part of these financial statements.
51 | Q1 2018 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 | |||||||||||||||||||||||||||
Net gain (loss) | Dividends | |||||||||||||||||||||||||||
Net asset value, | on securities | Total from | from net | Distributions | ||||||||||||||||||||||||
Years ended March 31, | beginning of | Net investment | (realized | investment | investment | from | Total | |||||||||||||||||||||
unless otherwise noted | period | income (loss) | and unrealized) | operations | income | realized gains | distributions | |||||||||||||||||||||
Balanced | ||||||||||||||||||||||||||||
2018 | 13.63 | 0.08 | 0.87 | 0.95 | (0.05 | ) | (0.33 | ) | (0.38 | ) | ||||||||||||||||||
2017 | 13.24 | 0.01 | 0.80 | 0.81 | (0.03 | ) | (0.39 | ) | (0.42 | ) | ||||||||||||||||||
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 | ) | ||||||||||||||||||
Core Plus Income—Investor Class | ||||||||||||||||||||||||||||
2018 | 10.23 | 0.23 | (a) | (0.12 | ) | 0.11 | (0.22 | ) | (0.03 | ) | (0.25 | ) | ||||||||||||||||
2017 | 10.15 | 0.23 | (a) | 0.21 | 0.44 | (0.23 | ) | (0.13 | ) | (0.36 | ) | |||||||||||||||||
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 | ||||||||||||||||||||||||||||
2018 | 10.23 | 0.25 | (a) | (0.11 | ) | 0.14 | (0.24 | ) | (0.03 | ) | (0.27 | ) | ||||||||||||||||
2017 | 10.15 | 0.25 | (a) | 0.21 | 0.46 | (0.25 | ) | (0.13 | ) | (0.38 | ) | |||||||||||||||||
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 Duration Income—Investor Class | ||||||||||||||||||||||||||||
2018 | 12.27 | 0.23 | (a) | (0.18 | ) | 0.05 | (0.23 | ) | — | (0.23 | ) | |||||||||||||||||
2017 | 12.28 | 0.23 | (a) | 0.04 | 0.27 | (0.24 | )(e) | (0.04 | ) | (0.28 | ) | |||||||||||||||||
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 | ) | |||||||||||||||||
Short Duration Income—Institutional Class | ||||||||||||||||||||||||||||
2018 | 12.29 | 0.26 | (a) | (0.18 | ) | 0.08 | (0.26 | ) | — | (0.26 | ) | |||||||||||||||||
2017 | 12.30 | 0.26 | (a) | 0.04 | 0.30 | (0.27 | )(e) | (0.04 | ) | (0.31 | ) | |||||||||||||||||
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 | ) | |||||||||||||||||
Ultra Short Government(c) | ||||||||||||||||||||||||||||
2018 | 10.00 | 0.09 | —# | 0.09 | (0.09 | ) | — | (0.09 | ) | |||||||||||||||||||
2017 | 10.00 | 0.03 | —# | 0.03 | (0.03 | ) | — | (0.03 | ) | |||||||||||||||||||
2016 | 10.00 | —# | —# | —# | —# | —# | —# | |||||||||||||||||||||
2015 | 10.00 | —# | —# | —# | —# | — | —# | |||||||||||||||||||||
2014 | 10.00 | —# | —# | —# | —# | —# | —# | |||||||||||||||||||||
Nebraska Tax-Free Income | ||||||||||||||||||||||||||||
2018 | 9.90 | 0.14 | (0.15 | ) | (0.01 | ) | (0.13 | ) | — | (0.13 | ) | |||||||||||||||||
2017 | 10.12 | 0.17 | (0.22 | ) | (0.05 | ) | (0.17 | ) | — | (0.17 | ) | |||||||||||||||||
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 | ) |
* | 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) | Prior to December 16, 2016, this Fund was known as the Government Money Market Fund. All per share amounts, for all periods, have been adjusted to reflect a 1-for-10 reverse split, which was effective December 16, 2016. In addition, on December 16, 2016, the Fund changed from a constant $1.00 net asset value per share money market fund to an ultra short government fund (that is not a money market fund). |
(d) | Because calculations of portfolio turnover exclude securities whose maturity or expiration date was one year or less when the Fund acquired the securities, the Fund has no portfolio turnover information to report for this period. |
(e) | Includes a return of capital distribution of less than $0.01. |
The accompanying notes form an integral part of these financial statements.
52 | Q1 2018 ANNUAL REPORT |
Ratios/Supplemental Data | ||||||||||||||||||||||||||
Ratio of expenses | ||||||||||||||||||||||||||
to average net assets | ||||||||||||||||||||||||||
Ratio of net | ||||||||||||||||||||||||||
investment income | Portfolio | |||||||||||||||||||||||||
Net asset value, | Net assets, end of | Prior to fee | Net of fee | (loss) to average | turnover | |||||||||||||||||||||
end of period | Total Return (%) | period ($000) | waivers (%) | waivers (%) | net assets (%) | rate (%) | ||||||||||||||||||||
14.20 | 7.06 | 122,069 | 1.05 | 1.00 | 0.55 | 40 | ||||||||||||||||||||
13.63 | 6.32 | 118,189 | 1.11 | 1.11 | 0.10 | 26 | ||||||||||||||||||||
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 | |||||||||||||||||||
10.09 | 1.20 | 7,274 | 1.65 | 0.60 | 2.26 | 43 | ||||||||||||||||||||
10.23 | 4.41 | 6,522 | 1.90 | 0.77 | 2.26 | 54 | ||||||||||||||||||||
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 | † | |||||||||||||||
10.10 | 1.40 | 31,895 | 1.09 | 0.40 | 2.47 | 43 | ||||||||||||||||||||
10.23 | 4.61 | 23,854 | 1.22 | 0.57 | 2.47 | 54 | ||||||||||||||||||||
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 | † | |||||||||||||||
12.09 | 0.44 | 113,238 | 0.91 | 0.68 | 1.93 | 34 | ||||||||||||||||||||
12.27 | 2.15 | 94,817 | 0.93 | 0.80 | 1.85 | 38 | ||||||||||||||||||||
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 | ||||||||||||||||||||
12.11 | 0.63 | 1,017,962 | 0.62 | 0.48 | 2.12 | 34 | ||||||||||||||||||||
12.29 | 2.38 | 1,103,272 | 0.62 | 0.58 | 2.07 | 38 | ||||||||||||||||||||
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 | ||||||||||||||||||||
10.00 | 0.94 | 104,162 | 0.60 | 0.20 | 0.94 | 25 | ||||||||||||||||||||
10.00 | 0.25 | 98,029 | 0.66 | 0.14 | 0.25 | — | ||||||||||||||||||||
10.00 | 0.03 | 106,689 | 0.70 | 0.05 | 0.03 | (d) | ||||||||||||||||||||
10.00 | 0.01 | 108,453 | 0.67 | 0.01 | 0.01 | (d) | ||||||||||||||||||||
10.00 | 0.01 | 124,158 | 0.67 | 0.03 | 0.01 | (d) | ||||||||||||||||||||
9.76 | (0.07 | ) | 58,604 | 0.84 | 0.84 | 1.41 | 24 | |||||||||||||||||||
9.90 | (0.54 | ) | 62,973 | 0.79 | 0.79 | 1.66 | 29 | |||||||||||||||||||
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 |
The accompanying notes form an integral part of these financial statements.
53 | Q1 2018 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
March 31, 2018
(1) Organization
(1) Organization
The Weitz Funds (the “Trust”) is registered under the Investment Company Act of 1940 (the “’40 Act”) 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, 2018, the Trust had nine series in operation: Value Fund, Partners Value Fund, Partners III Opportunity Fund, Hickory Fund, Balanced Fund, Core Plus Income Fund, Short Duration Income Fund (formerly known as the Short-Intermediate Income Fund), Ultra Short Government Fund and Nebraska Tax-Free Income Fund (individually, a “Fund”, collectively, the “Funds”).
Currently, the Value, Partners Value, Partners III Opportunity, Core Plus Income and Short Duration 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 and Hickory Funds (the “Weitz Equity Funds”) is capital appreciation.
The investment objectives of the Balanced Fund are long-term capital appreciation and capital preservation.
The investment objectives of the Core Plus Income Fund are current income and capital preservation.
The investment objective of the Short Duration Income Fund is current income consistent with the preservation of capital.
Effective December 16, 2016, the Government Money Market Fund’s name was changed to the Ultra Short Government Fund and the Fund ceased operating as a “money market fund” pursuant to Rule 2a-7 of the ’40 Act. While the Ultra Short Government Fund’s investment strategy changed, its investment objective remained the same, which is current income consistent with the preservation of capital and maintenance of liquidity.
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.
Investment strategies and risk factors of each Fund are discussed in the Funds’ Prospectus.
(2) Significant Accounting Policies
The Funds are investment companies and apply the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies. 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:
• | 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 that 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. |
• | 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. |
The Trust has established a Pricing Committee, composed of officers 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 Ultra Short Government 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 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 Ultra Short Government 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.
54 | Q1 2018 ANNUAL REPORT |
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 Ultra Short Government 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.
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, 2018, 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):
Short- | ||||||||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Duration | Ultra Short | ||||||||||||||||||||||||||||
Value | Value | Opportunity | Hickory | Balanced | Income | Income | Government | |||||||||||||||||||||||||
Paid-in capital | (558,395 | ) | (2,858,076 | ) | (7,177,633 | ) | (1,506,853 | ) | — | — | — | — | ||||||||||||||||||||
Accumulated undistributed net investment income | 3,479,715 | 2,956,418 | 7,177,633 | 1,506,853 | 2,214 | 3,558 | 142,199 | 1,610 | ||||||||||||||||||||||||
Accumulated net realized gain (loss) | (2,921,320 | ) | (98,342 | ) | — | — | (2,214 | ) | (3,558 | ) | (142,199 | ) | (1,610 | ) |
The differences are primarily due to net operating losses, principal paydown adjustments and distribution re-designations. These reclassifications have no impact on the net asset value of the Funds.
(e) Securities Transactions
Securities 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.
Generally, the Core Plus Income, Short Duration Income and Nebraska Tax-Free Income Funds pay income dividends on a quarterly basis. The Ultra Short Government 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.
(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.
(3) Fund Share Transactions |
Year ended March 31, 2018 | Year ended March 31, 2017 | |||||||||||||||
Shares | $ Amount | Shares | $ Amount | |||||||||||||
Value - Investor Class | ||||||||||||||||
Sales | 245,819 | 10,559,055 | 291,928 | 11,556,078 | ||||||||||||
Redemptions | (2,904,810 | ) | (124,648,038 | ) | (4,355,399 | ) | (172,457,273 | ) | ||||||||
Reinvestment of distributions | 992,054 | 41,706,712 | — | — | ||||||||||||
Net increase (decrease) | (1,666,937 | ) | (72,382,271 | ) | (4,063,471 | ) | (160,901,195 | ) |
55 | Q1 2018 ANNUAL REPORT
Year ended March 31, 2018 | Year ended March 31, 2017 | |||||||||||||||
Shares | $ Amount | Shares | $ Amount | |||||||||||||
Value - Institutional Class | ||||||||||||||||
Sales | 370,081 | 15,871,158 | 511,911 | 20,334,221 | ||||||||||||
Redemptions | (397,304 | ) | (17,225,992 | ) | (991,618 | ) | (39,311,819 | ) | ||||||||
Reinvestment of distributions | 303,459 | 12,847,282 | — | — | ||||||||||||
Net increase (decrease) | 276,236 | 11,492,448 | (479,707 | ) | (18,977,598 | ) | ||||||||||
Partners Value - Investor Class | ||||||||||||||||
Sales | 196,491 | 6,186,772 | 517,644 | 14,678,569 | ||||||||||||
Redemptions | (3,919,027 | ) | (123,923,405 | ) | (5,759,984 | ) | (165,366,178 | ) | ||||||||
Reinvestment of distributions | 246,710 | 7,776,293 | — | — | ||||||||||||
Net increase (decrease) | (3,475,826 | ) | (109,960,340 | ) | (5,242,340 | ) | (150,687,609 | ) | ||||||||
Partners Value - Institutional Class | ||||||||||||||||
Sales | 825,840 | 26,291,070 | 764,351 | 22,103,089 | ||||||||||||
Redemptions | (522,436 | ) | (16,636,524 | ) | (1,462,950 | ) | (42,128,475 | ) | ||||||||
Reinvestment of distributions | 176,269 | 5,601,822 | — | — | ||||||||||||
Net increase (decrease) | 479,673 | 15,256,368 | (698,599 | ) | (20,025,386 | ) | ||||||||||
Partners III Opportunity - Investor Class | ||||||||||||||||
Sales | 547,742 | 7,949,833 | 254,763 | 3,612,738 | ||||||||||||
Redemptions | (834,808 | ) | (12,091,006 | ) | (934,863 | ) | (13,019,132 | ) | ||||||||
Reinvestment of distributions | 86,582 | 1,231,667 | 33,751 | 442,138 | ||||||||||||
Net increase (decrease) | (200,484 | ) | (2,909,506 | ) | (646,349 | ) | (8,964,256 | ) | ||||||||
Partners III Opportunity - Institutional Class | ||||||||||||||||
Sales | 3,547,724 | 52,545,124 | 2,163,035 | 30,625,453 | ||||||||||||
Redemptions | (6,330,477 | ) | (93,950,423 | ) | (7,441,377 | ) | (105,581,643 | ) | ||||||||
Reinvestment of distributions | 1,725,691 | 25,184,843 | 642,482 | 8,570,703 | ||||||||||||
Net increase (decrease) | (1,057,062 | ) | (16,220,456 | ) | (4,635,860 | ) | (66,385,487 | ) | ||||||||
Hickory | ||||||||||||||||
Sales | 193,055 | 10,396,158 | 345,905 | 17,104,540 | ||||||||||||
Redemptions | (808,482 | ) | (43,866,640 | ) | (1,480,422 | ) | (73,689,447 | ) | ||||||||
Reinvestment of distributions | 188,188 | 9,873,953 | — | — | ||||||||||||
Net increase (decrease) | (427,239 | ) | (23,596,529 | ) | (1,134,517 | ) | (56,584,907 | ) | ||||||||
Balanced | ||||||||||||||||
Sales | 486,654 | 6,915,990 | 519,358 | 6,983,613 | ||||||||||||
Redemptions | (742,365 | ) | (10,508,805 | ) | (541,433 | ) | (7,240,890 | ) | ||||||||
Reinvestment of distributions | 177,478 | 2,491,218 | 273,687 | 3,595,694 | ||||||||||||
Net increase (decrease) | (78,233 | ) | (1,101,597 | ) | 251,612 | 3,338,417 | ||||||||||
Core Plus Income - Investor Class | ||||||||||||||||
Sales | 239,325 | 2,451,341 | 215,852 | 2,237,465 | ||||||||||||
Redemptions | (169,645 | ) | (1,735,968 | ) | (71,653 | ) | (740,518 | ) | ||||||||
Reinvestment of distributions | 13,301 | 136,187 | 19,715 | 202,466 | ||||||||||||
Net increase (decrease) | 82,981 | 851,560 | 163,914 | 1,699,413 | ||||||||||||
Core Plus Income - Institutional Class | ||||||||||||||||
Sales | 1,157,490 | 11,888,041 | 942,669 | 9,672,988 | ||||||||||||
Redemptions | (399,693 | ) | (4,079,800 | ) | (159,680 | ) | (1,653,260 | ) | ||||||||
Reinvestment of distributions | 69,788 | 713,832 | 60,581 | 622,757 | ||||||||||||
Net increase (decrease) | 827,585 | 8,522,073 | 843,570 | 8,642,485 |
56 | Q1 2018 ANNUAL REPORT |
Year ended March 31, 2018 | Year ended March 31, 2017 | |||||||||||||||
Shares | $ Amount | Shares | $ Amount | |||||||||||||
Short Duration Income - Investor Class | ||||||||||||||||
Sales | 4,946,676 | 60,560,427 | 2,822,978 | 34,888,898 | ||||||||||||
Redemptions | (3,475,321 | ) | (42,556,897 | ) | (3,471,878 | ) | (42,885,336 | ) | ||||||||
Reinvestment of distributions | 167,243 | 2,039,632 | 157,370 | 1,938,699 | ||||||||||||
Net increase (decrease) | 1,638,598 | 20,043,162 | (491,530 | ) | (6,057,739 | ) | ||||||||||
Short Duration Income - Institutional Class | ||||||||||||||||
Sales | 18,905,284 | 232,351,392 | 17,806,912 | 220,538,916 | ||||||||||||
Redemptions | (26,428,380 | ) | (324,179,104 | ) | (24,062,586 | ) | (298,094,938 | ) | ||||||||
Reinvestment of distributions | 1,804,816 | 22,063,002 | 2,138,070 | 26,391,122 | ||||||||||||
Net increase (decrease) | (5,718,280 | ) | (69,764,710 | ) | (4,117,604 | ) | (51,164,900 | ) | ||||||||
Ultra Short Government | ||||||||||||||||
Sales | 4,617,178 | 46,164,098 | 34,767,394 | 43,614,815 | ||||||||||||
Redemptions | (4,086,722 | ) | (40,860,827 | ) | (36,558,503 | ) | (52,456,235 | ) | ||||||||
1-for-10 reverse split | — | — | (95,199,960 | ) | — | |||||||||||
Reinvestment of distributions | 83,219 | 832,075 | 108,757 | 217,784 | ||||||||||||
Net increase (decrease) | 613,675 | 6,135,346 | (96,882,312 | ) | (8,623,636 | ) | ||||||||||
Nebraska Tax-Free Income | ||||||||||||||||
Sales | 223,108 | 2,206,241 | 636,946 | 6,414,061 | ||||||||||||
Redemptions | (634,561 | ) | (6,283,254 | ) | (717,977 | ) | (7,214,586 | ) | ||||||||
Reinvestment of distributions | 54,910 | 544,622 | 103,506 | 1,034,118 | ||||||||||||
Net increase (decrease) | (356,543 | ) | (3,532,391 | ) | 22,475 | 233,593 |
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.
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:
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 | % |
Hickory Fund:
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 0.70% of the Fund’s average daily net assets.
The Core Plus Income, Short Duration Income and Nebraska Tax-Free Income 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 Ultra Short Government Fund pays the Adviser, on a monthly basis, an annual advisory fee equal to 0.30% of the Fund’s average daily net assets (effective December 16, 2016). Prior to December 16, 2016, the Ultra Short Government Fund paid an annual advisory fee equal to 0.40%.
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.
The Adviser has agreed in writing to reimburse the Balanced and Ultra Short Government Funds (through July 31, 2018) or to pay directly a portion of the Funds’ expenses to the extent that total expenses (excluding taxes, interest, brokerage costs, acquired fund fees and expenses and extraordinary expenses) exceed 0.95% and 0.20%, respectively, of each Fund’s average daily net assets. The expenses reimbursed by the Adviser for the Balanced and Ultra Short Government Funds for the year ended March 31, 2018, were $59,749 and $405,594, respectively.
Through July 31, 2018, 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 1.30% and 0.99% of the Investor and Institutional Class shares’ average daily net assets, respectively.
Through July 31, 2018, 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 0.60% and 0.40% of the Investor and Institutional Class shares’ average daily net assets, respectively.
Through July 31, 2018, the Adviser has agreed in writing to reimburse the Short Duration 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
57 | Q1 2018 ANNUAL REPORT
and expenses and extraordinary expenses) exceed 0.68% and 0.48% of the Investor and Institutional Class shares’ average daily net assets, respectively.
The expenses reimbursed by the Adviser for the Value, Partners Value, Core Plus Income and Short Duration Income Funds for the year ended March 31, 2018, were $0; $0; $74,806 and $239,230 for the Investor
Class shares and $194,658; $249,113; $214,563 and $1,512,703 for the Institutional Class shares, respectively.
As of March 31, 2018, the controlling shareholder of the Adviser held shares totaling approximately 33%, 21%, 38%, 43%, 15% and 67% of the Partners III Opportunity, Hickory, Balanced, Core Plus Income, Ultra Short Government and Nebraska Tax-Free Income 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):
Year ended March 31, | Year ended March 31, | Year ended March 31, | Year ended March 31, | |||||||||||||||||||||||||||||
Distributions paid from: | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Value | Partners Value | Partners III Opportunity | Hickory | |||||||||||||||||||||||||||||
Ordinary income | — | — | — | — | — | — | 154,488 | — | ||||||||||||||||||||||||
Long-term capital gains | 57,363,750 | — | 15,702,380 | — | 30,230,157 | 9,485,368 | 12,675,974 | — | ||||||||||||||||||||||||
Total distributions | 57,363,750 | — | 15,702,380 | — | 30,230,157 | 9,485,368 | 12,830,462 | — | ||||||||||||||||||||||||
Balanced | Core Plus Income | Short Duration Income | Ultra Short Government | |||||||||||||||||||||||||||||
Ordinary income | 832,062 | 1,222,313 | 924,524 | 757,672 | 24,670,337 | 27,843,194 | 940,684 | 262,146 | ||||||||||||||||||||||||
Long-term capital gains | 2,471,865 | 2,414,964 | 87,838 | 69,635 | — | 1,056,284 | — | — | ||||||||||||||||||||||||
Return of capital | — | — | — | — | — | 217,545 | — | — | ||||||||||||||||||||||||
Total distributions | 3,303,927 | 3,637,277 | 1,012,362 | 827,307 | 24,670,337 | 29,117,023 | 940,684 | 262,146 | ||||||||||||||||||||||||
Nebraska Tax-Free Income | ||||||||||||||||||||||||||||||||
Ordinary income | 26,345 | 12,551 | ||||||||||||||||||||||||||||||
Tax-exempt income | 792,349 | 1,046,530 | ||||||||||||||||||||||||||||||
Total distributions | 818,694 | 1,059,081 |
As of March 31, 2018, the components of distributable earnings on a tax basis were as follows (in U.S. dollars):
Partners III | ||||||||||||||||||||
Value | Partners Value | Opportunity | Hickory | Balanced | ||||||||||||||||
Undistributed ordinary income | — | — | — | — | 480,952 | |||||||||||||||
Qualified late year ordinary loss deferral | (737,540 | ) | (371,208 | ) | (910,390 | ) | (224,897 | ) | — | |||||||||||
Undistributed long-term gains | 35,193,730 | 15,602,326 | 39,383,723 | 11,700,708 | 5,419,708 | |||||||||||||||
Net unrealized appreciation (depreciation) | 270,337,861 | 230,234,824 | 198,125,491 | 80,019,916 | 15,583,851 | |||||||||||||||
304,794,051 | 245,465,942 | 236,598,824 | 91,495,727 | 21,484,511 | ||||||||||||||||
Short Duration | Ultra Short | Nebraska Tax-Free | ||||||||||||||||||
Core Plus Income | Income | Government | Income | |||||||||||||||||
Undistributed ordinary income | 30,606 | 550,610 | 11,124 | — | ||||||||||||||||
Undistributed tax-exempt income | — | — | — | 45,860 | ||||||||||||||||
Capital loss carryforwards | — | (3,306,875 | ) | (586 | ) | (73,266 | ) | |||||||||||||
Post October capital loss deferral | (26,148 | ) | — | (1,421 | ) | — | ||||||||||||||
Net unrealized appreciation (depreciation) | (383,059 | ) | (1,439,267 | ) | (38,034 | ) | (554,968 | ) | ||||||||||||
(378,601 | ) | (4,195,532 | ) | (28,917 | ) | (582,374 | ) |
The Value, Partners Value, Partners III Opportunity and Hickory Funds elected to defer ordinary losses arising after December 31, 2017. Such losses are treated for tax purposes as arising on April 1, 2018.
The Core Plus Income and Ultra Short Government Funds elected to defer realized capital losses arising after October 31, 2017. Such losses are treated for tax purposes as arising on April 1, 2018.
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):
Short Duration | Ultra Short | Nebraska Tax-Free | ||||||||||||||
Partners Value | Income | Government | Income | |||||||||||||
Short term (no expiration) | — | (699,164 | ) | (586 | ) | — | ||||||||||
Long term (no expiration) | — | (2,607,711 | ) | — | (73,266 | ) | ||||||||||
Capital loss carryforwards utilized | 3,026,723 | — | — | — |
58 | Q1 2018 ANNUAL REPORT |
At March 31, 2018, the cost of investments for Federal income tax purposes is summarized as follows (in U.S. dollars):
Short | Nebraska | |||||||||||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Duration | Ultra Short | Tax-Free | |||||||||||||||||||||||||||||||
Value | Value | Opportunity | Hickory | Balanced | Income | Income | Government | Income | ||||||||||||||||||||||||||||
Tax Cost | 516,078,472 | 433,495,238 | 392,702,703 | 162,866,166 | 106,194,307 | 39,324,927 | 1,128,835,611 | 103,314,277 | 58,630,010 |
At March 31, 2018, 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 | Duration | Ultra Short | Tax-Free | |||||||||||||||||||||||||||||||
Value | Value | Opportunity | Hickory | Balanced | Income | Income | Government | Income | ||||||||||||||||||||||||||||
Appreciation | 285,251,434 | 247,641,061 | 256,412,324 | 82,902,505 | 17,280,033 | 192,471 | 8,777,246 | 504 | 231,035 | |||||||||||||||||||||||||||
Depreciation | (14,913,573 | ) | (17,406,237 | ) | (58,286,833 | ) | (2,882,589 | ) | (1,696,182 | ) | (575,530 | ) | (10,216,513 | ) | (38,538 | ) | (786,003 | ) | ||||||||||||||||||
Net | 270,337,861 | 230,234,824 | 198,125,491 | 80,019,916 | 15,583,851 | (383,059 | ) | (1,439,267 | ) | (38,034 | ) | (554,968 | ) |
(6) Securities Transactions
Purchases and proceeds from maturities or sales of investment securities of the Funds for the year ended March 31, 2018, excluding short-term securities and U.S. government obligations, are summarized as follows (in U.S. dollars):
Short | Nebraska | |||||||||||||||||||||||||||||||||||
Partners | Partners III | Core Plus | Duration | Ultra Short | Tax-Free | |||||||||||||||||||||||||||||||
Value | Value | Opportunity | Hickory | Balanced | Income | Income | Government | Income | ||||||||||||||||||||||||||||
Purchases | 102,911,701 | 68,900,675 | 189,475,811 | 40,864,012 | 32,921,711 | 20,606,003 | 265,715,851 | 7,765,883 | 13,805,148 | |||||||||||||||||||||||||||
Proceeds | 175,902,788 | 141,202,275 | 204,053,605 | 72,449,922 | 26,481,784 | 10,250,214 | 312,204,215 | 5,792,421 | 15,090,000 |
(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, 2018, 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, 2018 | 11,599,700 | 12,763,500 | |||||||
Percent of net assets at March 31, 2018 | 1.8 | % | 5.3 | % |
(b) Options Written
The locations in the Statements of Assets and Liabilities as of March 31, 2018, 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 | ||||||||||||||||
Liability | Notional | Amount | ||||||||||||||||
Fund | Type of Derivative | Location | Asset Derivatives | Derivatives | Amount | Outstanding | ||||||||||||
Partners III Opportunity | Call options written | Options written, at value | — | (50,000 | ) | 2,016,667 | 5,500,000 | |||||||||||
Short Duration Income | Call options written | Options written, at value | — | — | 250,000 | — |
59 | Q1 2018 ANNUAL REPORT
Transactions in derivative instruments during the year ended March 31, 2018, 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) | ||||||
Net unrealized appreciation | |||||||||||
Partners III Opportunity | Call options written | Net realized gain (loss) - options written | 107,656 | (depreciation) - options written | 265,185 | ||||||
Net unrealized appreciation | |||||||||||
Short Duration Income | Call options written | Net realized gain (loss) - options written | 114,997 | (depreciation) - options written | 70,003 |
(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:
Number of | Number of | Change in | ||||||
Shares Held | Gross | Gross | Shares Held | Value | Dividend | Realized | Unrealized | |
March 31, 2017 | Additions | Reductions | March 31, 2018 | March 31, 2018 | Income | Gain (Loss) | Gain (Loss) | |
Partners III Opportunity: | ||||||||
Intelligent Systems Corp.† | 2,270,000 | — | — | 2,270,000 | $11,599,700 | $ — | $ — | $1,191,750 |
† 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.
(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.
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, Bank of America 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% (2.305% at March 31, 2018). Interest is accrued daily and paid monthly. The Partners III Opportunity Fund held a cash balance of $207,760,767, with the broker at March 31, 2018.
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 87% 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:
· | 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.
· | 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. |
60 | Q1 2018 ANNUAL REPORT |
• 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 1 of the fair value hierarchy. |
The following is a summary of inputs used, in U.S. dollars, as of March 31, 2018, 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 | 685,987,843 | — | — | 685,987,843 | ||||||||||||
Cash Equivalents | 100,428,490 | — | — | 100,428,490 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 786,416,333 | — | — | 786,416,333 | ||||||||||||
Partners Value | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Common Stocks | 563,563,801 | — | — | 563,563,801 | ||||||||||||
Cash Equivalents | 100,166,261 | — | — | 100,166,261 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 663,730,062 | — | — | 663,730,062 |
Partners III Opportunity | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Common Stocks | ||||||||||||||||
Information | ||||||||||||||||
Technology | 137,107,030 | 11,599,700 | — | 148,706,730 | ||||||||||||
Other | 437,047,009 | — | — | 437,047,009 | ||||||||||||
Cash Equivalents | 50,099,077 | — | — | 50,099,077 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 624,253,116 | 11,599,700 | — | 635,852,816 | ||||||||||||
Liabilities: | ||||||||||||||||
Securities | ||||||||||||||||
Sold Short | (187,620,500 | ) | — | — | (187,620,500 | ) | ||||||||||
Options Written | (50,000 | ) | — | — | (50,000 | ) | ||||||||||
Hickory | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Common Stocks | ||||||||||||||||
Telecommunication | ||||||||||||||||
Services | — | 12,763,500 | — | 12,763,500 | ||||||||||||
Other | 179,780,805 | — | — | 179,780,805 | ||||||||||||
Cash Equivalents | 50,341,777 | — | — | 50,341,777 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 230,122,582 | 12,763,500 | — | 242,886,082 | ||||||||||||
Balanced | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Common Stocks | 54,270,678 | — | — | 54,270,678 | ||||||||||||
Corporate Bonds | — | 27,556,679 | — | 27,556,679 | ||||||||||||
Corporate | ||||||||||||||||
Convertible | ||||||||||||||||
Bonds | — | 1,010,000 | — | 1,010,000 | ||||||||||||
Asset-Backed | ||||||||||||||||
Securities | — | 252,040 | — | 252,040 | ||||||||||||
Mortgage- | ||||||||||||||||
Backed Securities | — | 3,048,503 | — | 3,048,503 | ||||||||||||
U.S. Treasury | — | 32,452,329 | — | 32,452,329 | ||||||||||||
Cash Equivalents | 3,187,929 | — | — | 3,187,929 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 57,458,607 | 64,319,551 | — | 121,778,158 |
61 | Q1 2018 ANNUAL REPORT
Core Plus Income | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Corporate Bonds | — | 11,033,321 | — | 11,033,321 | ||||||||||||
Corporate | ||||||||||||||||
Convertible | ||||||||||||||||
Bonds | — | 969,005 | — | 969,005 | ||||||||||||
Asset-Backed | ||||||||||||||||
Securities | — | 10,445,086 | — | 10,445,086 | ||||||||||||
Commercial | ||||||||||||||||
Mortgage- | ||||||||||||||||
Backed Securities | — | 1,227,400 | — | 1,227,400 | ||||||||||||
Mortgage- | ||||||||||||||||
Backed Securities | — | 1,684,232 | — | 1,684,232 | ||||||||||||
Taxable | ||||||||||||||||
Municipal Bonds | — | 420,264 | — | 420,264 | ||||||||||||
U.S. Treasury | — | 12,785,761 | — | 12,785,761 | ||||||||||||
Common Stocks | 352,409 | — | — | 352,409 | ||||||||||||
Cash Equivalents | 24,390 | — | — | 24,390 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 376,799 | 38,565,069 | — | 38,941,868 | ||||||||||||
Short Duration Income | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Corporate Bonds | — | 435,443,975 | — | 435,443,975 | ||||||||||||
Corporate | ||||||||||||||||
Convertible | ||||||||||||||||
Bonds | — | 61,747,120 | — | 61,747,120 | ||||||||||||
Asset-Backed | ||||||||||||||||
Securities | — | 105,088,659 | — | 105,088,659 | ||||||||||||
Commercial | ||||||||||||||||
Mortgage- | ||||||||||||||||
Backed Securities | — | 9,537,416 | — | 9,537,416 | ||||||||||||
Mortgage- | ||||||||||||||||
Backed Securities | — | 183,228,810 | — | 183,228,810 | ||||||||||||
Taxable | ||||||||||||||||
Municipal Bonds | — | 4,604,879 | — | 4,604,879 | ||||||||||||
U.S. Treasury | — | 301,146,983 | — | 301,146,983 | ||||||||||||
Common Stocks | 8,431,150 | — | — | 8,431,150 | ||||||||||||
Cash Equivalents | 18,167,352 | — | — | 18,167,352 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 26,598,502 | 1,100,797,842 | — | 1,127,396,344 |
Ultra Short Government | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Corporate Bonds | — | 18,469,943 | — | 18,469,943 | ||||||||||||
Asset-Backed | ||||||||||||||||
Securities | — | 1,971,875 | — | 1,971,875 | ||||||||||||
U.S. Treasury | — | 81,619,695 | — | 81,619,695 | ||||||||||||
Cash Equivalents | 1,214,730 | — | — | 1,214,730 | ||||||||||||
Total | ||||||||||||||||
Investments | ||||||||||||||||
in Securities | 1,214,730 | 102,061,513 | — | 103,276,243 | ||||||||||||
Nebraska Tax-Free Income | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: | ||||||||||||||||
Municipal Bonds | — | 55,028,642 | — | 55,028,642 | ||||||||||||
Cash Equivalents | 3,046,400 | — | — | 3,046,400 | ||||||||||||
Total | ||||||||||||||||
Investments in | ||||||||||||||||
Securities | 3,046,400 | 55,028,642 | — | 58,075,042 |
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, 2018, there were no transfers between Level 1, Level 2 and Level 3.
During the year ended March 31, 2018, 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 additional subsequent events requiring recognition or disclosure in the financial statements.
62 | Q1 2018 ANNUAL REPORT |
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63 | Q1 2018 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of The Weitz Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of The Weitz Funds (the “Trust”) (comprising Value Fund, Partners Value Fund, Partners III Opportunity Fund, Hickory Fund, Balanced Fund, Core Plus Income Fund, Short Duration Income Fund, Ultra Short Government Fund, and Nebraska Tax-Free Income Fund (collectively referred to as the “Funds”)), including the schedules of investments, as of March 31, 2018, and the related statements of operations, cash flows (as applicable), changes in net assets and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds comprising The Weitz Funds at March 31, 2018, the results of their operations, cash flows (as applicable), changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Statements of changes in | ||||
Funds comprising The Weitz Funds | Statement of operations | net assets | Statement of cash flows | Financial Highlights |
Value Fund | For the year ended | For each of the two years in the | N/A | For each of the five years in the |
Partners Value Fund | March 31, 2018 | period ended March 31, 2018 | period ended March 31, 2018 | |
Hickory Fund | ||||
Balanced Fund | ||||
Short Duration Income Fund | ||||
Ultra Short Government Fund | ||||
Nebraska Tax-Free Income Fund | ||||
Core Plus Income Fund | For the year ended | For each of the two years in the | N/A | For each of the three years in the |
March 31, 2018 | period ended March 31, 2018 | period ended March 31, 2018 | ||
and the period from July 31, 2014 | ||||
(commencement of operations) | ||||
through March 31, 2015 | ||||
Partners III Opportunity Fund | For the year ended | For each of the two years in the | For the year ended | For each of the five years in the |
March 31, 2018 | period ended March 31, 2018 | March 31, 2018 | period ended March 31, 2018 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2018, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of The Weitz Funds investment companies since 2004.
Cincinnati, Ohio
May 15, 2018
May 15, 2018
64 | Q1 2018 ANNUAL REPORT |
ACTUAL AND HYPOTHETICAL EXPENSES 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, 2017 through March 31, 2018.
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 10/01/17 – 3/31/18” 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.
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 10/01/17 | Value 3/31/18 | Expense Ratio | 10/01/17-3/31/18(1) | ||
Actual | $ 1,000.00 | $ 1,036.20 | 1.22% | $ 6.19 | |
Value - Investor Class | Hypothetical(2) | 1,000.00 | 1,018.90 | 1.22 | 6.14 |
Actual | 1,000.00 | 1,037.12 | 0.99 | 5.03 | |
Value - Institutional Class | Hypothetical(2) | 1,000.00 | 1,020.05 | 0.99 | 4.99 |
Actual | 1,000.00 | 1,013.13 | 1.26 | 6.32 | |
Partners Value - Investor Class | Hypothetical(2) | 1,000.00 | 1,018.70 | 1.26 | 6.34 |
Actual | 1,000.00 | 1,014.62 | 0.99 | 4.97 | |
Partners Value - Institutional Class | Hypothetical(2) | 1,000.00 | 1,020.05 | 0.99 | 4.99 |
Actual | 1,000.00 | 990.81 | 2.15 | 10.67 | |
Partners III Opportunity - Investor Class | Hypothetical(2) | 1,000.00 | 1,014.25 | 2.15 | 10.80 |
Actual | 1,000.00 | 993.73 | 1.60 | 7.95 | |
Partners III Opportunity - Institutional Class | Hypothetical(2) | 1,000.00 | 1,017.00 | 1.60 | 8.05 |
Actual | 1,000.00 | 969.41 | 1.25 | 6.14 | |
Hickory | Hypothetical(2) | 1,000.00 | 1,018.75 | 1.25 | 6.29 |
Actual | 1,000.00 | 1,018.90 | 0.95 | 4.78 | |
Balanced | Hypothetical(2) | 1,000.00 | 1,020.25 | 0.95 | 4.78 |
Actual | 1,000.00 | 995.58 | 0.60 | 2.99 | |
Core Plus Income - Investor Class | Hypothetical(2) | 1,000.00 | 1,022.00 | 0.60 | 3.02 |
Actual | 1,000.00 | 996.56 | 0.40 | 1.99 | |
Core Plus Income - Institutional Class | Hypothetical(2) | 1,000.00 | 1,023.00 | 0.40 | 2.02 |
Actual | 1,000.00 | 995.18 | 0.68 | 3.38 | |
Short Duration Income - Investor Class | Hypothetical(2) | 1,000.00 | 1,021.60 | 0.68 | 3.43 |
Actual | 1,000.00 | 996.17 | 0.48 | 2.39 | |
Short Duration Income - Institutional Class | Hypothetical(2) | 1,000.00 | 1,022.60 | 0.48 | 2.42 |
Actual | 1,000.00 | 1,005.43 | 0.20 | 1.00 | |
Ultra Short Government | Hypothetical(2) | 1,000.00 | 1,024.00 | 0.20 | 1.01 |
Actual | 1,000.00 | 989.31 | 0.86 | 4.27 | |
Nebraska Tax-Free Income | Hypothetical(2) | 1,000.00 | 1,020.70 | 0.86 | 4.33 |
(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 (182/365). |
(2) | Assumes 5% total return before expenses. |
65 | Q1 2018 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.
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.
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):
Hickory | Balanced | |
Qualified dividend income | 154,488 | 575,827 |
Corporate dividends received deduction | 154,488 | 575,827 |
The information and distributions reported herein may differ from the information and distributions reported to shareholders for the calendar year ended December 31, 2017, which was reported in conjunction with your 2017 Form 1099-DIV.
66 | Q1 2018 ANNUAL REPORT |
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67 | Q1 2018 ANNUAL REPORT
INFORMATION ABOUT THE TRUSTEES AND OFFICERS
The individuals listed below serve as Trustees or Officers 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: 68) 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 Co-Chief Investment Officer, President (1983 to 2014), Weitz Investment Management, Inc. Number of Portfolios Overseen in Fund Complex: 9 Other Directorships During Past 5 Years: Cable One, Inc. (2015 to Present) Thomas R. Pansing (Age: 72) 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: 9 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: 67) 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: 9 Other Directorships During Past 5 Years: N/A John W. Hancock (Age: 70) 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: 9 Other Directorships During Past 5 Years: N/A | Roland J. Santoni (Age: 76) 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: 9 Other Directorships During Past 5 Years: N/A Position(s) Held with Trust: Trustee Length of Service (Beginning Date): 1996 Principal Occupation(s) During Past 5 Years: Retired Number of Portfolios Overseen in Fund Complex: 9 Other Directorships During Past 5 Years: N/A Justin B. Wender (Age: 48) Position(s) Held with Trust: 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: 9 Other Directorships During Past 5 Years: N/A |
68 | Q1 2018 ANNUAL REPORT |
Officers | |
Thomas D. Carney (Age: 54) | |
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: 53) | |
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: 50) | |
Position(s) Held with Trust: Vice President | |
Length of Service (Beginning Date): 2006 | |
Principal Occupation(s) During Past 5 Years: Vice President, Weitz Funds; Co-Chief Investment Officer (2017 to Present), Director of Research (2004 to 2017), Vice President and Portfolio Manager, Weitz Investment Management, Inc. | |
Kenneth R. Stoll (Age: 56) | |
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. | |
Andrew S. Weitz (Age 38) | |
Position(s) Held with Trust: Vice President | |
Length of Service (Beginning Date): 2018 | |
Principal Occupation(s) During Past 5 Years: Vice President, Weitz Funds (2018 to Present); Director of Equity Research (2017 to Present); Vice President (2017 to Present) and Portfolio Manager, 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.
69 | Q1 2018 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&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 Bloomberg Barclays Intermediate U.S. |
Government/Credit Index by weighting their total returns at 60% and 40%, respectively. The | |
portfolio is rebalanced monthly. | |
Bloomberg Barclays | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the |
U.S. Aggregate Bond | investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. |
Bloomberg Barclays | The Bloomberg Barclays 1-3 Year U.S. Aggregate Index is generally representative of the market for |
1-3 Year U.S. Aggregate | investment grade, U.S. dollar denominated, fixed-rate taxable bonds with maturities from one to |
three years. | |
Bloomberg Barclays | The Bloomberg Barclays Intermediate U.S. Government/Credit Index (“BIGC”) is the non- |
Intermediate U.S. | securitized portion of the U.S. Aggregate Index and includes Treasuries, government-related issues |
Government/Credit | 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 inflation at any time. | |
ICE BofAML US | The ICE BofAML US 6-Month Treasury Bill Index is an unmanaged index that is generally |
6-Month Treasury Bill | representative of the market for U.S. Treasury Bills. |
Bloomberg Barclays | The Bloomberg Barclays 5-Year Municipal Bond Index is a capitalization weighted bond index |
5-Year Municipal Bond | created by Bloomberg Barclays intended to be representative of major municipal bonds of all quality |
ratings with an average maturity of approximately five years. |
70 | Q1 2018 ANNUAL REPORT |
Board of Trustees | Distributor |
Lorraine Chang | Weitz Securities, Inc. |
John W. Hancock | |
Thomas R. Pansing, Jr. | Transfer Agent and Dividend Paying Agent |
Roland J. Santoni | |
Delmer L. Toebben | Weitz Investment Management, Inc. |
Wallace R. Weitz | |
Justin B. Wender | Sub-Transfer Agent |
Investment Adviser | DST Asset Manager Solutions, Inc. |
Weitz Investment Management, Inc. | |
1125 South 103rd Street, Suite 200 | NASDAQ symbols: |
Omaha, NE 68124-1071 | |
(800) 304-9745 | Value Fund |
Investor Class - WVALX | |
Custodian | Institutional Class - WVAIX |
Partners Value Fund | |
State Street Bank and Trust Company | Investor Class - WPVLX |
Institutional Class - WPVIX | |
Officers | Partners III Opportunity Fund |
Investor Class - WPOIX | |
Wallace R. Weitz, President | Institutional Class - WPOPX |
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 |
Kenneth R. Stoll, Vice President & Chief | Institutional Class - WCPBX |
Financial Officer | Short Duration Income Fund |
Andrew S. Weitz, Vice President | Investor Class - WSHNX |
Institutional Class - WEFIX | |
Ultra Short Government Fund - SAFEX | |
Nebraska Tax-Free Income Fund - WNTFX |
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5/25/18
71 | Q1 2018 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 $287,540 and $327,830 for fiscal years ended March 31, 2018 and 2017, 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 $30,430 and $34,540 for fiscal years ended March 31, 2018 and 2017, 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 and an additional consent for 3/31/17. |
(c) | Tax Fees. Fees for tax services, which consisted of income and excise tax compliance services, were $49,780 and $48,330 for the fiscal years ended March 31, 2018 and 2017, respectively. |
(d) | All Other Fees. Fees for all other services totaled $12,830 and $12,460 for fiscal years ended March 31, 2018 and 2017, 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, 2018 and 2017 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 $159,690 and $155,040 for the years ended March 31, 2018 and 2017, 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.
Item 6. Schedule of Investments.
The Schedule of Investments in securities of unaffiliated issuers is included as part of the Report to Shareholders.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Investment Companies.
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.
Item 10. Submissions of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(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.
Item 12. Exhibits
(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 22, 2018
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 22, 2018
By (Signature and Title)* /s/ Kenneth R. Stoll
Kenneth R. Stoll, Chief Financial Officer
Date May 22, 2018
* Print the name and title of each signing officer under his or her signature.