PORTFOLIO MANAGER'S DISCUSSION & ANALYSIS – NEBRASKA TAX-FREE INCOME FUND

JUNE 30, 2010

Portfolio Manager:  Thomas D. Carney

The Nebraska Tax-Free Income Fund returned +1.5% in the second calendar quarter, compared to a +1.7% return for the Barclays Capital 5-Year Municipal Bond Index, our Fund’s primary benchmark. For the calendar year-to-date, the Fund returned +2.2% compared to +2.5% for our Fund’s primary benchmark.

Commentary

News stories out of Europe took center stage in the second quarter and led, at times, to extreme price action in both the U.S. equity and fixed-income markets. While the problems in Europe didn’t develop overnight, investor reaction seemed to. Televised reports from Greece of protestors clashing with police in response to proposed economic austerity measures was a stark reminder to investors that the credit crisis which began in 2007 had entered a new phase.

The financial crisis that caused what many call the Great Recession has led to a sharp increase in government debt in the developed world as many nations borrowed to stimulate local economies. Outside of wartime, this increase in sovereign debt is unprecedented. For some nations, like Greece, this extra debt burden came at a time when their finances were already stretched.

This attention on sovereign states’ deteriorating fiscal position and growing concern about their ability to repay their bills led to a marked increase in risk aversion. Added to these overseas concerns was domestic economic data that continued to highlight a sluggish recovery marked by high unemployment, modest income growth, lower housing wealth, and tight credit. What had been a ‘risk on’ trade for approximately a year quickly morphed into a ‘risk off’ trade in the second quarter as investors shunned not only highly indebted nations, like Greece, but nearly all risk assets including U.S. equities and corporate bonds.

Like Greece, the finances of state and local governments that back the $2.8 trillion municipal bond market were also in the spotlight in the quarter. Some states (California and Illinois, for example) wrestled to amend 2010 budgets due to revenue shortfalls and larger than expected deficits. However, in the midst of news that could have proved unsettling, municipal bonds performed reasonably well, generating coupon income returns with modest price appreciation (our portfolio included). Municipal bond yields declined but less than their Treasury bond counterparts of similar maturities. As a result, municipal bond yields as a percentage of U.S. Treasuries had risen to parity or above at June 30. This relationship of municipal bond yields equaling or exceeding Treasuries is unusual by historic standards given the tax-advantaged income status of municipal bonds (municipal bond income is exempt from federal income tax). History may not be a fair comparison, though, given today’s low absolute yield environment for both municipal and, particularly, U.S. Treasury bonds.

Nearly all of our Fund’s investments added to results during the quarter. Investment activity was modest during the quarter. For example, we added to existing high quality positions in Public Power Generations of Nebraska, Whelan Energy, by purchasing 9-year bonds with a current yield in excess of 4.5% and a yield to maturity that represented approximately 130% of U.S. Treasuries at the time of purchase.

The average duration of our Fund declined to 3.3 from 3.5 years in the previous quarter and the average maturity fell to 6.8 from 7.0 years. Overall asset quality of our portfolio remains high as we remain focused on security selection and ongoing review of our investments’ fiscal position. We will continue to invest one security at a time, relying on a fundamental research-based investment approach and are well positioned to take advantage of any market weakness.

These performance numbers reflect the deduction of the Fund’s annual operating expenses which as stated in its most recent Prospectus are 0.78% of the Fund’s net assets. The returns assume redemption at the end of each period and reinvestment of dividends. This information represents past performance and past performance does not guarantee future results. The investment return and the principal value of an investment in the 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 lower or higher than the performance data quoted above. Performance data current to the most recent month-end may be obtained at www.weitzfunds.com/performance/monthly.asp.

* All performance numbers assume reinvestment of dividends.

** Performance of the Nebraska Tax-Free Income Fund (the "Fund") is measured from October 1, 1985, the inception of Weitz Income Partners Limited Partnership (the "Partnership"). As of December 29, 2006, the Fund succeeded to substantially all of the assets of the Partnership. The investment objectives, policies and restrictions of the Fund are materially equivalent to those of the Partnership and the Partnership was managed at all times with full investment authority by Wallace R. Weitz & Company. The performance information includes performance for the period before the Fund became an investment company registered with the Securities and Exchange Commission. During this period, the Partnership was not registered under the Investment Company Act of 1940 and, therefore, was not subject to certain investment restrictions imposed by the 1940 Act. If the Partnership had been registered under the 1940 Act during this period, the Partnership’s performance might have been adversely affected.

# Index performance is hypothetical and is for illustrative purposes only.

^(a) Barclays Capital 5-Year Municipal Bond Index is an unmanaged index of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market.

Investors should consider carefully the investment objectives, risks, and charges and expenses of the Fund before investing. The Fund’s Prospectus contains this and other information about the Fund and should be read carefully before investing. Portfolio composition is subject to change at any time and references to specific securities, industries, and sectors referenced in this letter are not recommendations to purchase or sell any particular security. Current and future portfolio holdings are subject to risk. See the Schedule of Investments in Securities included in the Fund’s quarterly report for the percent of assets of the Fund invested in a particular state.

Weitz Securities, Inc. is the distributor of the Weitz Funds.