April 16, 2008

Dear Fellow Shareholder:

The Balanced Fund had another rough quarter in a tough market. The Fund’s total return in the first calendar quarter was -7.1% versus -4.5% for our primary benchmark, the Blended Index^†. Our poor results over the past year have impacted all of the trailing return comparisons due to the Fund’s relatively short history. The unflattering details are shown below.

The following table shows the results of the Balanced Fund over various time periods through March 31, 2008, along with the Blended Index^†, the S&P 500 (stocks) and the Lehman Brothers Intermediate U.S. Government/Credit Index (bonds).

The numbers speak for themselves - it was a bad year. Last March, coming off a strong fiscal 2007, our stock investments (55% of Fund assets) were increasingly concentrated in industry-leading companies with strong balance sheets. The Fund’s bond investments (roughly 25% of assets) were tilted to U.S. Treasuries and other securities with limited credit risk, and we had nearly 20% of assets in short-term reserves waiting for better opportunities. We thought the portfolio was geared to withstand tough conditions. In retrospect, our positioning was not defensive enough.

Lousy stock results drove the Fund’s negative return, as bonds provided a sturdy but insufficient cushion. Financial stocks in particular are mired in a bear market, as the credit crunch continues to exact a heavy toll on many companies. We booked a well-chronicled, permanent loss on our Countrywide Financial investment. In addition, several of our health care and retail stocks declined significantly. Our value estimates on a handful of stocks did decline moderately during the year. In most cases, however, we think our stocks are experiencing what Ben Graham described as temporary "quotational losses" rather than permanent capital impairments.

In this challenging environment, we have continued to follow a methodical approach to allocating assets. We have not gone into the bunker, nor have we looked for a quick fix. In short, our investment philosophy and process remain the same. Significant portfolio developments over the past year include:

• We bought stocks as they became more attractive. The Fund’s allocation to common stocks is 64%, up from 55% a year ago. We invested 5% of net assets in construction materials companies, and we modestly increased the Fund’s investments in cable television operators and retailers. Our financial investments are now more heavily weighted to world-class companies (Berkshire Hathaway, American Express, Wells Fargo) and businesses with substantial excess capital (Redwood Trust).
• We sold U.S. Treasuries as they became less attractive. We decreased the Fund’s allocation to U.S. Treasuries from 14% to 3% over the past year. Investors have bid Treasury prices up aggressively amid the market turmoil. Our view is that they are now paying a high price for peace of mind. Longer-dated Treasuries have plenty of risk if interest rates rise, while offering very modest potential returns.
• We bought high-quality mortgage-backed securities (MBS) as they became more attractive. Agency-guaranteed mortgage-backed and pass-through securities represent 17% of the Fund, up from 6% last year. We effectively rolled most of the Treasury sale proceeds into MBS with expected lives in the 2-5 year range. These securities offer decent-to-good return potential with little risk of negative surprises.
• Our investments in corporate bonds remain small, though the opportunity set may be growing. Corporate bond yields are higher than they have been in some time, as investors are demanding more compensation for the risks they are taking. Many lower quality bonds again offer equity-like potential returns; however, the risks are quite high due to the lax lending standards of the past few years. We are watching with interest from the sidelines for now.
• Internal "watch-list" securities represent just 3% of Fund assets. We have identified a handful of small positions that are most at risk if conditions worsen. These securities generally have uncorrelated risk profiles. We still own them because our outlook, while muted, is less pessimistic than that of the market. From current depressed prices, the return potential of this small basket of securities is quite high.
• Short-term securities declined from 20% to 8% of Fund assets, primarily as a result of the stock purchases described above.

While recent results have been a disappointing setback, we think the Fund’s longer-term prospects are solid. We believe our stocks are materially cheaper than they were a year ago. Our approach has been to stockpile financially strong companies in case the economy surprises on the downside, rather than trying to maximize recovery returns. As a result, the portfolio is heavily weighted to durable, market-leading businesses. Our bonds consist of high quality, liquid securities that provide stability and a steady source of cash flow. Finally, we continue to hold significant short-term reserves for flexibility. Thank you again for your trust and continued patience.

Please plan to join us at the Scott Conference Center in Omaha at 4:30 p.m. on May 27. The center is located at 6450 Pine Street on the Aksarben campus. There will be no formal business to conduct, so we can devote the entire meeting to answering your questions. Maps and driving directions are available from our client service representatives. We look forward to seeing you there.

Regards,

Bradley P. Hinton
Portfolio Manager
brad@weitzfunds.com

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. The Prospectus 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. 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.

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