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Shareholder Letter Archive

PORTFOLIO MANAGER LETTER – NEBRASKA TAX-FREE INCOME FUND
September 30, 2007 – SEMI-ANNUAL REPORT

October 15, 2007

Dear Fellow Shareholder:

The Nebraska Tax-Free Income Fund’s total return for the third quarter of 2007 was +1.6%, which consisted of approximately +1.0% from net interest income (after deducting fees and expenses) and +0.6% from (unrealized) appreciation of our bonds. Our Fund’s primary benchmark, the Lehman Brothers 5-Year Municipal Bond Index, returned +2.6%.

The table below shows the results of the Nebraska Tax-Free Income Fund over various time periods through September 30, 2007, along with the Lehman Brothers 5-Year Municipal Bond Index, our primary benchmark. The key measures of the Fund’s portfolio (average maturity and duration) have most closely resembled this Lehman Brothers index. As a reminder, we don’t manage the Fund to mimic any particular index but thought it would be informative to provide an example of a broadly constructed unmanaged index whose credit quality and maturity composition were similar to the Fund.

	Total Return*	Average Annual Total Returns*
	1-Year	3-Year	5-Year	10-Year	15-Year	20-Year
Nebraska Tax-Free Income Fund**	2.9%	2.9%	3.1%	4.4%	4.8%	5.4%
Lehman Brothers 5-Year Municipal Bond Index^#	3.8	2.8	3.0	4.6	5.0	N/A

These performance numbers reflect the deduction of the Fund’s annual operating expenses which as stated in its most recent Prospectus are 1.03% of the Fund’s net assets. 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 higher or lower than the performance data quoted above. Click here for performance data current to the most recent month-end.

* All performance numbers assume reinvestment of dividends and/or income.

** As of December 29, 2006, the Fund succeeded to substantially all of the assets of Weitz Income Partners Limited Partnership (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 these periods, 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 these periods, the Partnership’s performance might have been adversely affected.

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

The following table shows a profile of our portfolio as of September 30:

Average Maturity	7.5years
Average Duration	3.2 years
30-Day SEC Yield at 9-30-07	3.5%
Average Rating	AA
Income from municipals exempt from federal
and Nebraska income taxes	Over 80%
Income subject to alternative minimum tax	Less than 10%

Overview

After rising early in the third quarter, municipal bond yields ended the quarter lower as investors sought a safe haven from turmoil that had gripped much of the U.S. fixed-income marketplace. Reaction to this market unrest was an immense flight to the safety and security of U.S. Treasury securities and other high quality bonds. Municipal bond investors benefited (as did our Fund) from this flight to quality as prices rose (yields fell). A broad measure of municipal bond yields as measured by the Bond Buyer 20 Bond Index (index of 20 general obligation municipal bonds), fell 12 basis points (a basis point is 1/100 of one percent) in the quarter. Our performance was solid but trailed our primary benchmark given our sizable short-term investment position, which includes auction rated securities (14.2%). Our short-term investments provide attractive current income but little-to-no, unrealized, price appreciation. They will provide good support, however, should interest rates increase.

Since many of the same variables have similar impacts on both the municipal and taxable bond market, please see the "Overview" section included in the Short-Intermediate Income Fund shareholder letter included in the shareholder report for additional highlights from the second quarter.

Portfolio Review

Despite an overall decline in the level of municipal bond yields near the end of the quarter, we were able to take advantage of a mid-quarter rise in rates that allowed us to invest Fund assets at attractive levels. An example would be an investment that increased our existing position in Blair, Nebraska water revenue bonds. These 5-year bonds, that yielded 4.80% at purchase, were issued to enlarge and improve Blair’s water treatment plant to accommodate Cargill Incorporated’s nearly one-quarter billion dollar expansion to its existing campus. Cargill, one of the largest privately owned companies in the world, is an international marketer, processor and distributor of agriculture, food, financial and industrial products and services in 63 countries. Our investment is enhanced by a water service agreement between Cargill and the city of Blair that unconditionally obligates Cargill to make fixed monthly payments that are sufficient to cover the debt service on the bonds issued for the project.

Another investment to highlight during the quarter was a student facilities project for the University of Nebraska at Omaha. These AA-rated revenue bonds were issued to finance the construction of additional housing and parking facilities on the campus of the University of Nebraska at Omaha. Given the attractive pricing for this high quality issuer, we added two longer-term bonds (9 and 20-year) in order to lock in these higher rates.

While the vital signs (average maturity, duration and rating) of our portfolio have not changed much from last quarter, we remain on the look-out for opportunities like those mentioned above to position our Fund for reasonable-to-good future returns.

Outlook

In the minutes of the meeting during which the Fed made the decision to lower short-term interest rates in September, the Committee expressed a desire to avoid giving the "mistaken impression" that they were "more certain about the economic outlook than was in fact the case". We concur as we have used different words to convey the same message over time. It does appear plausible, if not likely, that the ramifications from this summer’s credit crunch have yet to be fully felt. And the policy response (i.e. lower short-term rates) may be sowing the seeds of tomorrow’s inflation by accelerating the decline of the dollar exchange rate, for example. These potential challenges suggest to us that, for the time being, maintaining our mostly higher-quality, shorter average-life portfolio is the proper course of action. We believe our Fund should continue to generate reasonable returns over time and are well-positioned to take advantage of future opportunities.

We welcome any questions you may have and appreciate the confidence in and support of the Fund and our firm.

Best Regards,

Thomas D. Carney
Portfolio Manager

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 a particular state.

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