Weitz Funds

Wally Weitz's Market Commentary

Market Update—June 23, 2009

At our annual meeting in May, we used this diagram to illustrate our working assumption about what was happening in the stock market. The smooth, blue saucer-shaped line represents a long, drawn-out recession and recovery in the economy. It could also illustrate the decline and recovery of business values. The more erratic, red line represents the stock market, bouncing back and forth between panicky under-valuation and premature bullishness, hopefully leading to a new bull market and new high price levels. I speculated that after the tremendous rally off the March lows (point C?) we might be at an interim high point, like point D, but that the economic news was still very dreary and that we may well be facing further volatile price swings within a fairly wide trading range.

Now, a month later, the economic news is still mixed to negative and the market has moved generally sideways. As we said at the meeting, we might be at point Y and about to start a new bull market, but our guess is that we still face several more quarters of volatility without meaningful upward progress.

This prognosis is not exciting, but it can be positive for us. We believe that all of our companies have values well-above their stock prices. This means that when the economic recovery does occur and investors regain their confidence, we should earn very good returns from today’s price levels.

In the meantime, although we are willing to wait a year or two for our stocks to reflect full value, some of our stocks have run up from under-valued to fully-valued in a matter of weeks. In these cases, our value discipline leads us to sell them. If these stocks fall back down to depressed levels again, we are more than happy to buy them back. While short-term "trading" is not part of our investment approach, the extra profits generated by responding to these market swings are providing a welcome addition to our results.

The year-to-date returns of our four stock funds and the Balanced Fund have exceeded those of the S&P 500 by 2-14% as of this afternoon. The economy and the stock market are not "out of the woods" yet, but we think we have moved from the "crisis" mode of last fall to a more "normal" period of recession and depressed corporate earnings. The latter is easier for value investors to deal with as we appraise business values, buy cheap stocks and sell expensive ones. The remainder of this year will no doubt test the patience of all of us, but I think the longer-term outlook is clearly positive.

The Value Fund’s (inception 5/86) average annual total returns for the one, five and ten year periods ended March 31, 2009 were -38.6%, -9.0%, and -0.4%, respectively. The Partners Value Fund’s (inception 6/83) average annual total returns for the one, five and ten year periods ended March 31, 2009 were -32.0%, -6.6%, and +0.5%, respectively. The Hickory Fund’s (inception 4/93) average annual total returns for the one, five and ten year periods ended March 31, 2009 were -35.3%, -6.9%, and -2.6%, respectively. The Partners III Opportunity Fund’s (inception 6/83) average annual total returns for the one, five and ten year periods ended March 31, 2009 were -26.7%, -4.7%, and +4.0%, respectively. The Balanced Fund’s (inception 10/03) average annual total returns for the one, five and since inception periods ended March 31, 2009 were -21.9%, -2.5%, and -1.4%, respectively. The returns set forth above assume redemption at the end of each period. These performance numbers reflect the deduction of the Fund’s annual operating expenses which as stated in the most recent Prospectus are 1.16%, 1.16%, 1.23%, 1.54% and 1.13% of the Value, Partners Value, Hickory, Partners III Opportunity and Balanced Fund’s net assets, respectively. This information represents past performance and past performance does not guarantee future results. The investment return and the principal value of an investment in these Funds 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. Performance data current to the most recent month-end may be obtained at www.weitzfunds.com/performance/monthly.asp.

Performance of the Partners III Opportunity Fund (“Partners III Opportunity”) is measured from June 1, 1983, the inception of Weitz Partners III Limited Partnership (“Partners III”). As of December 30, 2005, Partners III Opportunity succeeded to substantially all of the assets of Partners III. The investment objectives, policies and restrictions of Partners III Opportunity are materially equivalent to those of Partners III and Partners III was managed at all times with full investment authority by Wallace R. Weitz & Company. The performance data presented includes performance for the period before Partners III Opportunity became an investment company registered with the Securities and Exchange Commission. During this time, Partners III 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 Partners III had been registered during this period, the Partnership’s performance might have been adversely affected.

Portfolio holdings and asset allocation are subject to change at any time. Current and future portfolio holdings are subject to risk. 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. The Prospectus should be read carefully before investing. Weitz Securities, Inc. is the distributor of The Weitz Funds. A Prospectus and additional information is available from The Weitz Funds, 1125 South 103rd Street, Suite 600, Omaha, NE 68124-6008 or www.weitzfunds.com. You may call us at (402) 391-1980 or (800) 304-9745.

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