January 13, 2010

Dear Fellow Shareholder:

Each of our Funds enjoyed very good results in 2009, both in relative and absolute terms:

• The Value Fund was up 27.6%, Partners Value +31.3%, Hickory +36.5%, and the Partners III Fund +42.0%. The S&P 500 rose by 26.5%;

• Brad Hinton’s Balanced Fund had a very strong year with a gain of 28.8% vs. its benchmark which gained 18.0%;

• The Short-Intermediate Income Fund earned a total return of +10.8% while its benchmark gained 5.2%. A margin of out-performance of over five percentage points for a conservative bond portfolio is very unusual and earned five-star recognition from Morningstar for Tom Carney;

• The Nebraska Tax-Free Income Fund gained 7.2% vs. the Barclays Capital 5-Year Municipal Index return of +7.4%. Our Government Money Market Fund earned (barely) positive returns in a "near-zero" interest rate environment for short-term government securities but it served its purpose of providing safety and liquidity in an otherwise very uncertain world.

Neither the stock market nor our stock funds have returned to their 2007 highs, but last year’s results represent a good start. The performance table, which can be obtained by clicking here, shows returns for our Funds and several market indices over various holding periods. It is a busy table, but it supports our belief that sensible, conservative value investing works well for long-term investors despite speculative investment bubbles, financial panics and bear markets.

Following this letter in the quarterly report, there are separate sections for each of our Funds. The portfolio manager discussions and portfolio holdings information are designed to explain to shareholders where our returns came from, what worked (and did not work), and how we are positioned going forward. If this report raises additional questions, please feel free to call our client service representatives for clarification or additional detail.

Most of our stocks performed well in 2009. The standouts were generally the ones that investors worried about most in 2008—especially companies whose ability to refinance near-term debt maturities looked questionable in the depths of the credit crisis. Now that money has flooded back to the corporate debt market, companies like Liberty Media have been able to extend maturities and raise fresh capital very cheaply. Thus, the Liberty entities are well-represented in the positive performance attribution tables. Other contributors were companies that grew through the recession, like Comcast, Discovery, and Coinstar and cyclicals that held up well, like Cabela’s and Tyco.

One important holding that held us back somewhat was Berkshire Hathaway, which gained only 2.7% in 2009. Berkshire had prepared beautifully for the financial crisis and was able to deploy tens of billions of dollars on very attractive terms over a period of a few months. Arguably, the recent bear market was among the most successful and productive periods of Warren Buffett’s 45 years at Berkshire. Yet, Wall Street yawned. We hate it when a stock under-performs because we over-paid for it or because management did something to destroy value. But when a company’s value grows significantly, and investors are slow to respond, we are content to buy more shares and wait patiently.

For several quarters, we have suggested that the financial crisis and "Great Recession" caused serious damage to the economy and would take a long time to repair. We believe the worst is over and that we will not experience a repeat of last year’s financial collapse, but we suspect that the 2009 "relief rally" may have raised hopes of further near-term easy profits.

The recent financial trauma has spawned many medical analogies—heart attacks, being hit by a bus, and others even more grisly. Returning to that metaphorical well one more time, we are reminded of a person who sustained multiple serious injuries in 2008, survived to great relief and celebration in 2009, but who now faces a long, hard period of rehab and physical therapy. The prognosis for a full recovery is not in doubt and the prospect of "living happily ever after" (a new bull market) is in sight, but it may take a while.

There are a number of unresolved issues which may test investors’ resolve. Hundreds of billions of dollars of bank capital has been destroyed. The government has provided substitute capital on a temporary basis, but the remaining banks must replenish their capital with earnings. Cheap deposits and wide lending spreads should make this possible, but rebuilding the capital base may take several years.

Government borrowing for economic stimulus and corporate rescues raises fears of inflation, rising interest rates, and dollar weakness. Angst over taxes and regulation unsettle investors. Unemployment and municipal budget cutbacks will be drags on the economy for some time. These obstacles are not insurmountable. We believe the patient will survive and be restored to full health—just not as quickly as many investors hope and expect.

We estimate the value of each business we own and track each stock’s price in relation to that value (price-to-value ratio or P/V). When the rally began last March, the weighted average P/V of our portfolios was very low at well under 50%. Good things seem to happen when our portfolios are that cheap. At year-end, the funds’ P/V ratios were in the 70% range—still a very comfortable level—so we believe our stocks are still reasonably priced.

We entered the last decade at the peak of a 17-year bull market. Stock valuations were very high. Ten years later, most businesses are larger and more valuable, but stocks as a group are actually lower than they were ten years ago because valuations have shrunk. Historically, every time we have seen this type of "lost decade" for stocks, the subsequent ten year period has produced very strong equity returns.

Likewise, in those rare ten-year periods (like 2000-2009) when bonds return more than stocks, equity returns have been very strong in the subsequent ten years. We think it is unfortunate that many investors are abandoning stocks now and chasing bonds after this rare golden period for bonds.

So, we feel very optimistic about the next several years. Investors have become more and more short-term oriented over the past few decades, so they may feel tortured by the two-steps-forward, one-step-back pace of the economic recovery, but "uncertainty" is a part of investment life.

Thanks again to shareholders who have patiently endured a hair-raising period of market volatility. We appreciate the confidence you have placed in our investment team.

Sincerely,

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

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 Schedules of Investments in Securities included in this report for the percent of assets in each of the Funds invested in particular industries or sectors.