June 30, 2008            

Dear Fellow Shareholder:

Our take on the recent market action is that investor fears are becoming more generalized—as Warren Buffett discussed last week, recession, inflation and continued stress in the credit markets are upon us and investors are in no mood to buy.  Certain individual companies have particular problems that are worrisome—Lehman, MBIA, Ambac, etc.—none of which we own.  AIG, Fannie Mae and Freddie Mac are controversial and not immune to additional credit losses, and while we think they have considerable recovery potential, our risk/reward assessments are such that we have reduced our exposure to each considerably.  Looking at our other companies individually, each is exposed to cyclical forces and it is widely known that earnings of most have been/will be affected this year, but their longer-term outlooks are sound.

We’ve chosen to stay about 90% invested in most of the funds (about 70% in P-III) because we don’t believe we can get out, sidestep a temporary decline, and get back in effectively.  This makes for scary and distressing days, but shouldn’t do permanent damage.  Most of our companies are generating excess free cash flow (even if their earnings per share are lower than last year) and they can use that extra cash to buy other companies cheaply, buy their own stock, or build reserves for future use.  When panic sets in, logic goes out the window and prices can fall to ridiculously cheap levels, as in 1974, but they don’t STAY there.

The shape of the financial markets has changed and some companies will probably never be as successful as they once were, but the economy should be fine and other companies will be more successful than before.  It’s important that our companies survive this turmoil and we are confident that they will.  It is also important that we adjust our holdings to take advantage of this ‘changing of the guard’ and we think we’re doing that.  How successfully we have done these things won’t be clear for a while, but we believe strongly that owning pieces of good businesses at prices well below the intrinsic value of those businesses is a prescription for long-term investment success.  In the meantime, we’ll have our patience tested.  Our client service representatives can’t make predictions or promises (and they shouldn’t be blamed for what happens to stock prices), but if you have questions about specific companies or our investment strategy, they can pass them on to the portfolio managers and we will be glad to answer any questions we can.

Sincerely,

Wally and Brad

Portfolio composition is subject to change at any time and references to specific securities, industries and sectors are not recommendations to purchase any particular security.

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