• Do the Funds invest in foreign stocks?
• May the Funds invest in options, futures and illiquid securities? May they borrow money to leverage their investment? May they sell short?
• What is Weitz Funds' position on socially responsible investing?
• What are the appropriate stock market indices or "benchmarks" one should use to evaluate the investment results of the Weitz Funds?
• What is Weitz Funds' proxy voting policy?

A small percentage of each stock fund may be invested in foreign securities. However, we rarely buy foreign stocks because they generally fall outside our "circle of competence." Differences in language, accounting standards, culture, and unfamiliarity with foreign economies and business practices place us at a disadvantage to others who have more experience in foreign markets.

Our five stock funds are allowed considerable investment flexibility, and each fund is bound by a slightly different set of investment restrictions. The Prospectus and Statement of Additional Information for the funds describe these restrictions and risks relating to each fund. However, we can make a few generalizations:

Put and Call Options. We are allowed to buy and sell options in all of the stock funds. As a practical matter, we have sold (written) puts and/or calls in each of the funds but we generally do not buy puts and calls. Writing covered options is generally considered more conservative than buying options, but writing is not risk-free.

Futures. We generally do not buy or sell futures.

Illiquid Securities. The vast majority of the securities we buy are traded on an organized stock exchange or an established over-the-counter market and are considered "liquid" securities. Occasionally, we may buy a private placement of stock that is not immediately marketable, shares of a public company that are temporarily restricted from open market trading, or shares that are so inactively traded that there is no publicly available market price that can be used to value the security position on a day-to-day basis. In these cases, a special pricing committee determines a price that is used to value the securities for purposes of calculating net asset value of the fund each day. In the aggregate, illiquid securities may not make up more than 15% of any fund's portfolio.

Margin Borrowing. The Partners III Opportunity Fund is the only fund that currently may borrow to leverage its portfolio.

Selling Short. Short selling involves selling borrowed securities in the hope or expectation of replacing them at a lower cost in the future. Short sales may be used conservatively, as when we try to lock in the takeover premium in a stock-for-stock merger. Short sales may also be used more aggressively to try to profit from an expected decline in the price of a specific security. Although each stock fund is allowed to sell securities short, all of the funds except Partners III have historically limited themselves to the more conservative uses of short sales. Partners III, however, sells short seeking to profit from security price decline. This type of short sale may involve more risk than shorts used for hedging or arbitrage purposes.

Each of the funds has a different set of investment objectives and a different risk profile. Thus, each fund will approach each of these investments or investment techniques differently. Investors should read our answer to the FAQ "What are the differences among the stock funds?" and the funds' Prospectus to gain a better understanding of what to expect from each fund.

At Weitz Funds, we don't describe our funds as explicitly "socially responsible" but all of our analysts and portfolio managers are sensitive to the impacts that our companies have on their employees and the rest of society. Aside from our preference to own and be associated with companies and managements we admire and which make a positive difference in the world, companies that have integrity problems usually make bad investments.

Wal-Mart has been criticized for certain labor practices, for the pressure it exerts on suppliers to obtain favorable pricing, and for the impact it has on smaller competitors. Gambling can be criticized as a regressive tax on the poor. Many investors are concerned with alcohol, production of weapons (especially nuclear), withholding of care by managed care companies, hospitals in which abortions are performed, etc. I have a personal aversion to tobacco companies and certain types of lending businesses. These are all difficult issues.

As a trustee of the Presbyterian Foundation (charged with management of the church's endowment funds) during the 1980s, we wrestled with the practical issues of devising social responsibility screens to help our managers avoid owning stock in companies whose conduct or products were objectionable to our constituency. Agreeing on criteria and monitoring compliance were very difficult. Very few companies are completely above reproach in all respects. At Weitz Funds, we don't ignore these issues in managing our funds, but our primary emphasis is on earning good returns for our investors.

Many investors like to own funds that focus their investments on companies of a certain size (e.g. small-, medium-, or large-capitalization stocks) or whose stocks are statistically cheap ("value") or expensive ("growth") based on price-to-earnings, price-to-sales, or price-to-book value ratios. In evaluating these funds' performance, they compare the funds' investment results to market indices designed to track these sub-sectors of the stock market. Thus, performance of a "small-cap growth" fund can be compared to a "small-cap growth" index. This can be a useful way to measure a manager's performance within his own conventionally-defined investment universe, if the manager undertakes to invest only in stocks within that universe.

We are strong believers that investors should focus their investments within what Warren Buffett calls their "circle of competence." However, we believe that a fund manager's expertise is more likely to center on certain industries or types of businesses (manufacturing, services, technology, etc.) than on companies that fit a certain size or statistical valuation profile. The collective circle of competence of our analysts and portfolio managers is certainly not all-inclusive, but we believe it does include some small, some medium, and some large companies as well as some statistically cheap and other statistically expensive stocks. We believe investors should applaud managers who are flexible enough to invest in multiple sub-sectors or "style boxes" but who are disciplined (and discerning) enough to invest only in those businesses they understand.

But (you say) I believe in, and/or my clients expect me to invest in, a portfolio of funds, each of which specializes in a separate Morningstar or Lipper category.

Diversification among portfolio managers and investment "styles" dampens volatility and reduces the probability of significant under-performance, but we believe that in today's investment world, the "styles" are defined too mechanically. Assigning each manager a discrete "style box" in a two-dimensional matrix overlooks the reality that managers' circles of competence are of different sizes and shapes and they overlap in non-quantifiable ways. This is not to say that managers should not be held accountable for performance, but that investors (clients) should use benchmarks that, more or less, coincide with the managers' expertise.

We favor service businesses over manufacturers. We feel more competent to invest in financial and media stocks than rapidly changing businesses like computer technology. We tend to avoid capital-intensive commodity businesses. As individuals and as an investment team, we are always trying to learn and expand our circle, but it is certainly finite. It also does not fit neatly into one of the currently fashionable categories. So, we would suggest that we be held to the standard of all U.S. stocks—S&P 500, Wilshire 5000, Russell 3000, or whatever broad index one prefers. We are required to select one index for regulatory reporting purposes, and that choice is the S&P 500. In our reports to shareholders, we also include comparisons to other indices such as the Russell 2000 (small companies) because some shareholders find these comparisons interesting. We have found that each sector tends to take its turn as the popular, over-achieving group, but that if we can out-perform each of them over 10, 20 or more years (and we have), we have done a good job.

Until the day when the "go-anywhere" fund becomes a more widely recognized category for investment, consultants and advisors will have a difficult time with our Funds. We apologize for the headaches we cause on this score, but we believe we need to be faithful to our investment philosophy.

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Weitz Funds has delegated proxy voting decisions on securities held in each Fund's portfolio to its investment adviser, Wallace R. Weitz & Company ("Weitz & Co."). Weitz & Co. has adopted Proxy Voting Policies and Procedures ("Proxy Voting Policies") that provide that proxies on portfolio securities will be voted for the exclusive benefit, and in the best economic interest of the Funds' shareholders, as determined by Weitz & Co. in good faith, subject to any restrictions or directions of a Fund. Such voting responsibilities will be exercised in a manner that is consistent with the general antifraud provisions of the Investment Advisers Act of 1940, as well as Weitz & Co.'s fiduciary duties under federal and state law to act in the best interest of its clients. The Board of Trustees of the Funds has approved the Proxy Voting Policies.

On certain routine proposals (such as those which do not change the structures, bylaws or operations of a company), Weitz & Co. will generally vote in the manner recommended by management. Non-routine proposals (such as those affecting corporate governance, compensation and other corporate events) and shareholder proposals will generally be reviewed on a case-by-case basis. An investment analyst/portfolio manager will review each such proposal and decide how the proxy will be voted. With respect to all non-routine proposals and shareholder proposals, if a decision is made to consider voting in a manner other than that recommended by management, the analyst/portfolio manager will make a recommendation to a committee comprised of all investment analysts and portfolio managers (the "Proxy Voting Committee") as to how to vote the proxy and the Proxy Voting Committee will make the final determination as to how to vote the proxy in the best economic interests of the client.

In certain circumstances where, for example, restrictions on ownership of a particular security beyond the control of Weitz & Co. make it impossible for Weitz & Co. to acquire as large a position in that security as it determines is in the best interests of its clients, Weitz & Co. may, from time to time, enter into a voting agreement with an issuer of securities held in the account of a client which provides that the issuer will vote certain of the issuer's proxies. Weitz & Co. will enter into such voting agreements only when it determines that it is in the best interests of the client to do so. Any such voting agreement will provide that any shares subject to the agreement be voted by the issuer in a manner that mirrors the votes cast on such matter by all other shareholders.

If Weitz & Co. determines that voting a particular proxy would create a conflict of interest between the interests of a Fund and its shareholders on the one hand, and Weitz & Co.'s own interests, the interests of the Funds' distributor, or the interests of an affiliated person of the Funds, Weitz & Co., or the Funds' distributor on the other hand, Weitz & Co. will either (i) disclose such conflict of interest to the Corporate Governance Committee of the Board of Trustees and obtain the consent of the committee before voting the proxy; (ii) vote such proxy based upon the recommendations of an independent third party such as a proxy voting service; or (iii) delegate the responsibility for voting the particular proxy to the Corporate Governance Committee of the Board of Trustees.