April 5, 2010

Dear Fellow Shareholder:

The stock market continued its recovery during the first calendar quarter of 2010 and our stock funds—Value, Partners Value, Hickory and Partners III Opportunity—earned very strong returns. The market has not returned to its 2007 highs, but a great deal of the damage has been repaired and the outlook is good. The table below shows first quarter and trailing 12-month returns for each Fund. An additional performance table, which can be obtained by clicking here, shows returns for our Funds and several market indices over various holding periods.

The Balanced Fund also enjoyed an excellent quarter (+7.0%) and 12-month period (+39.0%). These returns exceeded its benchmark returns of +3.8% and +32.6%, respectively. The Balanced Fund is a hybrid fund consisting of roughly 60% stocks and 40% bonds. It is designed for endowment funds and individuals who want to own both stocks and bonds but want to leave asset allocation decisions to us.

The Short-Intermediate Income Fund continued to generate strong total returns for the quarter (+1.8%) and 12 months (+10.5%), exceeding its benchmark in both periods. The Nebraska Tax-Free Income Fund earned +0.7% for the quarter and +5.1% for the 12 months and our Government Money Market Fund provided safety and liquidity (although its yield was barely positive). With interest rates at artificially low levels and bond investors seemingly unconcerned about either interest rate or credit risk, Tom is keeping the bond fund portfolios positioned very conservatively—high quality and relatively short average maturities.

The "Great Recession" is apparently over, and investors are celebrating. Stocks have rebounded strongly from the extremely depressed levels of a year ago. It seems likely to us that the recovery in the economy and in corporate earnings will take longer than investors currently expect, but we are focused on individual businesses and we feel good about the prospects for our portfolio companies.

Most of the stocks in our Funds contributed to the good first quarter results. Of particular note (again), several of the Liberty Media entities—Liberty Interactive, Liberty Capital, Liberty Global and Liberty Starz—accounted for over a third of the net gains in our stock funds. We have written about these companies many times before, and they continue to be among our favorite holdings.

Berkshire Hathaway, our largest holding in several of the Funds, was also a major contributor. In connection with its acquisition of the Burlington Northern, Berkshire split its B shares 50-for-1. This led to its addition to the S&P 500 and creation of considerable demand for its shares from index funds. This was undoubtedly a catalyst for the stock’s recent strong performance (+24%), but we believe that the stock was considerably undervalued before this move and that it is still very attractively priced.

Other financial services stocks which contributed in the quarter were Redwood Trust and Willis Group (a major insurance broker). On the other hand, we have not owned any banks for the past few quarters because we believe that investors are underestimating the obstacles to a return to "normalized earnings." Regulatory changes, higher (and more seriously enforced) capital requirements, continued high levels of credit losses and rising interest rates are potentially serious headwinds that we expect to slow the growth in bank earnings. Banks have been staples of our portfolios over the years and we expect that we will invest in them again. For now, though, we believe that the "relief rally" in bank stocks has carried them to levels that may not be justified by earnings for another year or two.

We have also reduced our exposure to healthcare over the past few quarters. Healthcare has many aspects that we like. Its products and services are essential. It is a huge and growing industry. It is complicated and often controversial so investor opinions and emotions (and thus stock prices) can be volatile. We were able to buy some excellent companies, especially in the managed care area, when fears of healthcare "reform" drove the stock prices down a year or two ago. More recently, we have taken profits in some of these as the stocks rose on the realization that fears were overdone. Going forward, we will continue to assess the implications of the new bill and the potential impact of inevitable follow-on legislation. With luck, new opportunities to invest in good companies at cheap prices will emerge.

We are finding a few new investment ideas and have added several stocks to our fund portfolios during the quarter. Progressive Insurance and Weight Watchers were among the more significant recent additions. Both are financially strong companies with good future growth potential but which have fallen from investor favor for reasons we expect to prove temporary.

Our stocks are obviously not as cheap as they were a year ago, but the market recovery started from very depressed levels. Last March, the average stock in our portfolios was selling for less than 50% of our estimate of its business value. Today, our stocks (on average) sell at about 75% of business value, a level from which we have still earned reasonable returns in the past. Our companies are coping reasonably well with the weak economy and we believe that each has substantial upside potential.

We continue to expect an erratically sideways stock market as investors experience alternating periods of optimism and discomfort. Considerable damage was done to the economy and the banking system over the past few years, and consumers’ ability and willingness to borrow and spend have been bruised. The image of a bungee cord that stretched down to an abnormally low point in March of 2009 and that has now returned to a more "normal" level still seems apt. We believe the eventual direction of the market is likely to be up, but investors may need lots of patience over the next year or two. We are optimistic about our chances for earning reasonable returns in this environment and we are grateful for our shareholders’ willingness to stick with us during the recent roller coaster ride.

Sincerely,

Wallace R. Weitz	Bradley P. Hinton
wally@weitzfunds.com	brad@weitzfunds.com

Investors should consider carefully the investment objectives, risks, and charges and expenses of the Funds before investing. The Funds’ Prospectus contains this and other information about the Funds 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 Funds’ quarterly report for the percent of assets of each Fund invested in particular industries or sectors.

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