PORTFOLIO MANAGER'S DISCUSSION & ANALYSIS – SHORT-INTERMEDIATE INCOME FUND

JUNE 30, 2010

Portfolio Manager:  Thomas D. Carney

The Short-Intermediate Income Fund returned +1.4% in the second calendar quarter, compared to a +3.0% return for the Barclays Capital Intermediate U.S. Government/Credit Index (BCIGC), our Fund’s primary benchmark. For the calendar year-to-date, the Fund returned +3.2% compared to +4.6% for the BCIGC.

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 were 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.

U.S. Treasury bonds were the hands down winner in the second quarter performance derby as investors sought their perceived safety and soundness in a race to flee risk assets, particularly Euro-denominated sovereign debt like Greece. Interest rates declined dramatically and prices rose all across the Treasury yield curve. The 2-year Treasury yield hit an all-time low during the quarter, declining 45 basis points (a basis point represents one one-hundredth of a percentage point) to 0.60% at June 30. The 10-year Treasury yield fell below 3% for the first time since April 2009, down approximately one full percent to 2.9% at quarter-end. Time will tell if America deserves these low interest rates or if it has simply been the beneficiary of, currently, possessing a reserve currency and of being, as the magazine The Economist recently described, “the one-eyed currency in the land of the blind.”

Below investment-grade, or high-yield bonds were the performance laggards (prices declined) during the quarter as they took their cue from the equity market. Higher quality, investment-grade corporate bonds, however, benefited from the significant rally in U.S. government bonds, the base rates for corporate bond pricing. They failed, though, to keep pace with their Treasury counterparts as spreads widened during the quarter, the first spread widening in over a year. A broad measure of corporate bond spreads (the incremental return investors demand above U.S. Treasury bonds for owning corporate debt) composed by Merrill Lynch rose from 163 basis points at March 31 to 209 at June 30.

Principal contributors to our Fund’s results in the quarter were U.S. Treasury bonds (up as much as 8%) and most of our investment-grade corporate bond investments as they benefited from the decline in the base Treasury rates. Reflecting the strong tail wind provided by the large decline in base Treasury rates, approximately 90% of Fund holdings contributed positive investment results to performance in the quarter. Noteworthy corporate bond contributors included Willis Group 7-year notes, Coinstar 4-year convertible bonds (sold during the quarter), Berkshire Hathaway 8-year notes, and Washington Post 9-year bonds.

Detractors to Fund performance included Redwood Trust common stock (down 3.4%) and some non investment-grade investments such as USG 6-year; Level 3 4-year and QVC 7- and 9-year bonds. Despite this quarter’s price declines, we feel confident about the future income and return potential of this portion of our portfolio. Our decision to retain a meaningful cash/reserve position (approximately 20% at quarter end) and our overall low portfolio duration was also a limiter to Fund results in the quarter.

Investment activity in the quarter was concentrated in the corporate bond portion of our portfolio and included additions to existing positions in Expedia, Republic Services, Mohawk Industries, Vornado Realty Trust, Leucadia National Corporation and Valmont Industries. New positions include, for example, 5- and 6-year callable bonds issued by DIRECTV and 3- and 4-year bonds issued by Wrigley’s (now owned by Mars and a subsidiary of Berkshire Hathaway) at spreads to Treasuries and absolute yields that we believe compensate us for the incremental risk of ownership.

We also continued to add high-quality ‘step-up’ notes issued by various government agencies as a way to capture reasonable interest income and protect against a possible rise in rates. These shorter-term securities, presently 8 years or less, provide an increasing rate of interest over the life of the bonds. An example would be Freddie Mac ‘step-up’ notes maturing in 2018. This bond provides a 3% interest rate for 3 years and 5% thereafter. Further, the bond becomes callable by the issuer at par in December of this year. If not called within the 3 years, the issuer loses its right to call the bonds and it becomes a non-callable 5-year bond. The possible rising coupon and revaluation should this investment become a 5-year non-callable bond will help lessen any decline in value if interest rates rise.

Overall portfolio metrics changed modestly during the quarter with the average maturity decreasing to 3.6 from 3.9 years and average duration declined to 1.7 from 1.9 years. Sector weightings were also mostly unchanged during the quarter. The overall credit quality of our portfolio remains high with approximately 62% of the portfolio invested in AAA-rated securities, U.S. Treasury, U.S. government agency-guaranteed Mortgage-Backed Securities (MBS) and cash.

Given the increased number of new shareholders in the Fund in the past year, we thought it might be helpful to review the Fund’s investment strategy. Longtime shareholders may wish to skip this section or read it as a review.

Our investment approach consists primarily of investing in a portfolio of mostly high quality, short-to-intermediate-term bonds where we believe we can capture most of the “coupon” returns of long-term bonds with materially less interest-rate risk. We do not and will not try to mimic any particular index as we construct our portfolio. We select assets for our portfolio one security at a time based on our view of opportunities in the marketplace. Our corporate bond research is supplemented by credit work we do on companies and industries in the course of our equity analysis.

Over the years, our portfolio has often been constructed with a shorter average life (i.e. duration) and higher quality than the BCIGC. We chose this benchmark to highlight that we could periodically invest longer term and/or lower quality when conditions warrant. The effect over time of our portfolio construction (typically shorter average life) has been a penalty when interest rates fall but a boost to performance when rates rise.

For a small portion of our portfolio (currently about 11% but never greater than 15%), we may also invest in other fixed-income related investments that have favorable risk/reward characteristics (such as high-yield and convertible bonds, preferred and convertible preferred stock, or high dividend paying common stock). These types of investments have generally enhanced our Fund’s historical returns.

Overall, we strive to be adequately compensated for the risks assumed in order to maximize our investment (or reinvestment) yield and avoid making interest rate “bets,” particularly ones that depend on interest rates going down. We are willing to trade some upside in a rapidly falling interest-rate environment in exchange for enhanced capital preservation.

In closing, we would echo/repeat the comments from our Annual Report. Today’s lower credit spread environment leaves few undiscovered areas of opportunity between various fixed-income sectors. Coupled with the ultra low Treasury interest rates, we encourage fixed-income investors to temper future return expectations. While the prospects for inflation, the bond investor’s boogeyman, appear low for the remainder of 2010, we remain wary of the longer-term inflationary implications of the enormous deficit spending to combat the credit crisis. Hopefully we can learn from the Greek experience and avoid serious fiscal and monetary mistakes. Absent evidence of fiscal restraint, we expect to continue to position the Fund defensively relative to interest rate exposure while we patiently seek out areas of opportunity. 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 0.71% of the Fund’s net assets. The returns assume redemption at the end of each period. 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.

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

^(a) Barclays Capital Intermediate U.S. Government/Credit Index is a total return performance benchmark consisting of government securities and publicly issued corporate debt with maturities from one to ten years and rated at least BBB by Standard & Poor’s or Baa by Moody’s Investor Service.

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 particular industries or sectors.