<PAGE> 1
HEARTLAND GROUP, INC.
FORM N-1A
CROSS-REFERENCE SHEET
TO POST-EFFECTIVE AMENDMENT NO. 20
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Form N-1A
Item No. Prospectus Heading
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PART A
1. Cover Page . . . . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . . . . Fund Expenses
3. Condensed Financial
Information . . . . . . . . . . . . . . . . . Financial Highlights
4. General Description of
Registrant . . . . . . . . . . . . . . . . . . Description of Fund Shares; Investment Objectives and
Policies
5. Management of the Fund . . . . . . . . . . . . . . The Funds and the Heartland Organization; How to Buy
Shares; Net Asset Value Calculation; Portfolio
Transactions
5A. Management's Discussion
of Fund Performance . . . . . . . . . . . . . Not applicable. See Annual Reports
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . . . Description of Fund Shares; Dividends, Capital Gains and
Distributions Taxes; Shareholder Services
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . . . . . How to Buy Shares; Net Asset Value Calculation; How to
Redeem Shares; The Distribution Plan
8. Redemption or Repurchase . . . . . . . . . . . . . How to Redeem Shares; Shareholder Services
9. Pending Legal Proceedings . . . . . . . . . . . . None
</TABLE>
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<TABLE>
<CAPTION>
Form N-1A Statement of Additional
Item No. Information Heading
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PART B
10. Cover Page . . . . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . . . Back Page
12. General Information and
History . . . . . . . . . . . . . . . . . . . Not Applicable
13. Investment Objectives and
Policies . . . . . . . . . . . . . . . . . . . Investment Policies and Methods; Investment Restrictions; Appendix A -
Securities Ratings
14. Management of the Fund . . . . . . . . . . . . . . Management
15. Control Persons and Principal
Holders of Securities . . . . . . . . . . . . Control Persons and Principal Holders of Securities
16. Investment Advisory and
Other Services . . . . . . . . . . . . . . . . The Investment Advisor
17. Brokerage Allocation . . . . . . . . . . . . . . . Portfolio Transactions
18. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . . . Description of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . . . . . . . . . . . . Determination of Net Asset Value Per Share
20. Tax Status . . . . . . . . . . . . . . . . . . . . Tax Status
21. Underwriters . . . . . . . . . . . . . . . . . . . Distribution of Shares
22. Calculation of Performance
Data . . . . . . . . . . . . . . . . . . . . Performance Information
23. Financial Statements . . . . . . . . . . . . . . . Financial Statements
</TABLE>
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HEARTLAND VALUE FUND
HEARTLAND SMALL CAP CONTRARIAN FUND
HEARTLAND VALUE & INCOME FUND
HEARTLAND U.S. GOVERNMENT SECURITIES FUND
Prospectus
April 27, 1995 Revised to July 12, 1995
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INVESTMENT SUMMARY
HEARTLAND VALUE FUND'S investment objective is long-term capital appreciation.
The Fund seeks to achieve its objective through investment in small company
stocks selected on a value basis. The Value Fund will be closed to new
investors effective July 1, 1995.
HEARTLAND SMALL CAP CONTRARIAN FUND'S investment objective is maximum long-term
growth. The Fund seeks to achieve its objective through aggressive, yet
flexible, value investing in small company stocks.
HEARTLAND VALUE & INCOME FUND'S investment objective is capital growth and
current income. The Fund seeks to achieve its objective through investment in
stocks and bonds.
HEARTLAND U.S. GOVERNMENT SECURITIES FUND'S investment objectives are a high
level of current income, liquidity and safety of principal.
- --------------------------------------------------------------------------------
The Heartland Value Fund, the Heartland Small Cap Contrarian Fund, the
Heartland Value & Income Fund, and the Heartland U.S. Government Securities
Fund (collectively, the "Funds") are separate mutual fund portfolios of
Heartland Group, Inc. ("Heartland"). This Prospectus contains information you
should know about the Funds before you invest. Please keep it for reference.
A Statement of Additional Information for the Funds (dated April 27, 1995) has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. It is available at no charge by calling the
Funds' investment advisor and distributor, Heartland Advisors, Inc. ("Heartland
Advisors"), at 1-800-HEARTLN or (414) 347-7777.
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<TABLE>
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TABLE OF CONTENTS
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Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . 6
How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Dividends, Capital Gains Distributions
and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Funds and the Heartland
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Net Asset Value Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Description of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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SHARES OF THE FUNDS ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED
OR GUARANTEED BY, ANY BANKING INSTITUTION, ARE NOT INSURED OR GUARANTEED BY THE
FDIC OR ANY OTHER GOVERNMENTAL AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PROSPECTUS
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1
<PAGE> 4
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FUND EXPENSES
The expense summary format below was developed for use by all mutual funds to
help you make your investment decisions. Of course, you should consider this
expense information along with other important information, including each
Fund's investment objective and performance.
<TABLE>
<CAPTION>
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HEARTLAND HEARTLAND
SMALL CAP HEARTLAND U.S. GOVERNMENT
HEARTLAND CONTRARIAN VALUE & SECURITIES
VALUE FUND FUND INCOME FUND FUND
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<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases None None None None
Maximum sales load imposed on reinvested dividends None None None None
Exchange fees None None None None
Redemption fees (1) None None None None
- --------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees (2) (after fee waivers) .75% .75% .70% .50%
Rule 12b-1 fees .25% .25% .25% .25%
Other expenses (3) .39% .45% .85% .32%
- --------------------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.39% 1.45% 1.80% 1.07%
====================================================================================================================
</TABLE>
(1) The Agent charges a wire fee for the return of redemption proceeds
requested by wire transfer. The fee is currently $7.50. Shares of the
Funds purchased between February 12, 1993 and June 1, 1994 subject to a
contingent deferred sales charge remain subject to such charge upon
redemption of the shares. See "HOW TO REDEEM SHARES."
(2) The management fee shown in the table applicable to the U.S. Government
Securities Fund gives effect to the voluntary waiver by Heartland Advisors
of 0.15 of 1% of the management fee. Without such waiver, the Management
fees and Total Fund Operating Expenses would have been .65% and 1.22% of
average net assets, respectively. Heartland Advisors expects to continue
the waiver for the current fiscal year; however, it may reinstate an
additional portion or all of the fee at any time.
(3) Other expenses set forth in the table for the Small Cap Contrarian Fund
are based on management's estimates for the current fiscal year.
PROSPECTUS
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2
<PAGE> 5
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming: (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
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HEARTLAND HEARTLAND
SMALL CAP HEARTLAND U.S. GOVERNMENT
HEARTLAND CONTRARIAN VALUE & SECURITIES
VALUE FUND FUND INCOME FUND FUND
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<S> <C> <C> <C> <C>
One year $14 $15 $18 $11
Three years $44 $46 $57 $34
Five years $76 N/A $97 $59
Ten years $167 N/A $212 $131
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</TABLE>
The purpose of this expense information is to assist in understanding the
various costs and expenses an investor will bear directly or indirectly in each
of the Funds. More detailed information concerning these expenses is set forth
in the sections of this Prospectus entitled "How To Buy Shares," "The
Distribution Plan" and "The Funds and the Heartland Organization." THE ABOVE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ------------------------------------------
FINANCIAL HIGHLIGHTS
Except as indicated below, the following Financial Highlights table has been
examined by Arthur Andersen LLP, independent public accountants, whose reports
on the financial statements of the Value, Value & Income and U.S. Government
Securities Funds for the fiscal year ended December 31, 1994, are included in
the respective Fund's Annual Report to Shareholders for such period, and
incorporated by reference into the Statement of Additional Information. The
table should be read in conjunction with the audited financial statements and
related notes appearing in each Fund's Annual Report. Additional information
about the Funds' performance is contained in their respective Annual Reports,
which may be obtained without charge by writing or calling Heartland Advisors.
Financial information is not available for the Small Cap Contrarian Fund as its
shares are being offered for the first time in this Prospectus.
PROSPECTUS
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3
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<TABLE>
<CAPTION>
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INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTION
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NET
FISCAL ASSET NET REALIZED DIVIDENDS
YEAR VALUE, NET AND UNREALIZED TOTAL FROM FROM NET DISTRIBUTIONS
ENDED BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT FROM CAPITAL TOTAL
DEC. 31 OF PERIOD INCOME/(LOSS) ON SECURITIES OPERATIONS INCOME GAINS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HEARTLAND VALUE FUND
1985 $ 9.52 $0.01 $3.93 $3.94 $ - $ - $ -
1986 13.46 0.08 1.39 1.47 (0.02) (0.90) (0.92)
1987 14.01 0.06 (1.16) (1.10) (0.14) (1.03) (1.17)
1988 11.74 0.13 3.04 3.17 (0.13) (0.43) (0.56)
1989 14.35 0.13 0.81 0.94 (0.13) (1.34) (1.47)
1990 13.82 0.02 (2.38) (2.36) (0.02) (0.12) (0.14)
1991 11.32 (0.08) 5.66 5.58 - (0.84) (0.84)
1992 16.06 (0.09) 6.91 6.82 - (2.47) (2.47)
1993 20.41 (0.12) 3.95 3.83 - (1.02) (1.02)
1994 23.22 (0.09) 0.47 0.38 - (0.88) (0.88)
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<CAPTION>
HEARTLAND VALUE & INCOME FUND
<S> <C> <C> <C> <C> <C> <C> <C>
10/26/93(1)
to 12/31/93 $10.00 $0.07 $0.45 $0.52 $ (0.07) $ - $ (0.07)
1994 10.45 0.41 (0.92) (0.51) (0.41) - (0.41)
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<CAPTION>
HEARTLAND U.S. GOVERNMENT SECURITIES FUND
<S> <C> <C> <C> <C> <C> <C> <C>
4/9/87(1)
to 12/31/87 $ 9.55 $0.50 $ (0.33) $0.17 $ (0.50) $ - $ (0.50)
1988 9.22 0.76 (0.18) 0.58 (0.76) - (0.76)
1989 9.04 0.77 0.21 0.98 (0.77) - (0.77)
1990 9.25 0.73 0.14 0.87 (0.73) - (0.73)
1991 9.39 0.69 0.83 1.52 (0.69) (0.25) (0.94)
1992 9.97 0.66 0.30 0.96 (0.66) (0.34) (1.00)
1993 9.93 0.56 1.18 1.74 (0.56) (0.61) (1.17)
1994 10.50 0.59 (1.59) (1.00) (0.59) - (0.59)
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</TABLE>
(1) Commencement of operations (3) Annualized
(2) Unaudited (4) Not Annualized
PROSPECTUS
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4
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<TABLE>
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RATIOS AND SUPPLEMENTAL DATA
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RATIO OF
RATIO OF NET NET INVESTMENT
NET ASSET NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO
VALUE, TOTAL END OF AVERAGE TO AVERAGE TURNOVER
END OF PERIOD RETURN* PERIOD NET ASSETS NET ASSETS RATIO
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$13.46 41.4%(2) $ 11,348,013 2.47% 0.24% 64%
14.01 11.0%(2) 28,146,987 1.66% 0.71% 89%
11.74 (8.4)%(2) 27,536,584 1.51% 0.43% 78%
14.35 27.1% 28,499,177 1.71% 0.85% 50%
13.82 6.6% 30,797,831 1.65% 0.86% 88%
11.32 (17.1)% 19,942,598 1.74% 0.14% 76%
16.06 49.4% 29,879,996 1.69% (0.54)% 79%
20.41 42.5% 48,391,112 1.48% (0.49)% 76%
23.22 18.8% 186,518,201 1.51% (0.71)% 51%
22.72 1.7% 339,364,388 1.39% (0.52)% 35%
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$10.45 5.2%(4) $ 5,810,983 1.30%(3) 6.52%(3) 6%
9.53 (5.0)% 9,884,142 1.80% 4.39% 127%
- ----------------------------------------------------------------------------------------------------------
$ 9.22 1.9%(2) $ 12,610,076 1.04%(3) 7.16%(3) 64%
9.04 6.4% 12,414,180 0.95%(5) 8.25% 136%
9.25 11.3% 11,594,574 0.89%(5) 8.45% 142%
9.39 10.0% 16,423,750 0.86%(5) 7.98% 127%
9.97 17.0% 29,101,367 0.92%(5) 7.06% 185%
9.93 10.1% 28,377,978 0.92%(5) 6.71% 149%
10.50 17.8% 66,788,763 1.06%(5) 5.09% 200%
8.91 (9.6)% 64,807,074 1.07%(5) 6.30% 95%
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</TABLE>
(5) Heartland Advisors voluntarily waived the management fee in its entirety
from May 7, 1988 through November 30, 1990. Effective December 1, 1990,
Heartland Advisors partially reinstated a portion of the fee at the rate
of .25 of 1% of average net assets and, effective January 20, 1992 and
January 1, 1993, respectively, reinstated additional portions of the fee
resulting in a rate of .35 of 1% and .50 of 1% of average daily net assets,
respectively.
* Contingent deferred and initial sales charges in effect for the Funds
prior to June 1, 1994 are not reflected in Total Return as set forth in
the table.
PROSPECTUS
----------
5
<PAGE> 8
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INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES. The investment objectives of each of the Funds are
fundamental and may not be changed without shareholder approval. The investment
policies of the Funds, unless otherwise specified, are not fundamental
policies, and therefore may be changed by the affirmative vote of a majority of
the directors of Heartland. In view of the risks inherent in all investments in
securities, there is no assurance that the investment objectives of the Funds
will be achieved.
The VALUE FUND'S investment objective is long-term capital appreciation.
The SMALL CAP CONTRATIAN FUND'S investment objective is maximum long-term
growth. The Fund seeks to take advantage of both rising and, to a lesser
degree, declining markets.
The VALUE & INCOME FUND'S investment objective is capital growth and current
income.
The U.S. GOVERNMENT SECURITIES FUND'S investment objectives are a high level of
current income, liquidity and safety of principal.
VALUE FUND
Effective July 1, 1995, the Value Fund will be closed to new investors.
Investors who are shareholders of the Value Fund on July 1, 1995, certain
employee benefit plans and certain financial advisers and planners may continue
to add to an existing account or open new accounts. See "How to Buy Shares."
The Fund may resume sales to new investors at some future date, but it has no
present intention to do so.
To achieve long-term capital appreciation, the Value Fund invests primarily in
equity securities of small companies with market capitalizations of less than
$300 million selected on a value basis. Heartland Advisors selects securities
it considers to be underpriced relative to a set of factors, including:
. price/earnings ratio
. market price to book value
. price/cash flow ratio
. earnings growth
. long-term debt/capital
. management capabilities
. undervalued assets
. potential for favorable developments
. insider and institutional ownership
. technical analysis
While the Value Fund may invest in securities of companies with market
capitalizations in excess of $300 million, a majority of the Fund's investments
will be in stocks with smaller market capitalizations. As of March 31, 1995,
the median market capitalization of the companies in the Value Fund's portfolio
was approximately $43 million, with a weighted average market capitalization
for the Fund's portfolio of approximately $135 million. Equity securities of
companies with smaller market capitalizations may involve a higher degree of
risk than investments in the general equity markets in that such securities may
be subject to greater price volatility and may have less market liquidity than
equity securities of companies with larger market capitalizations. The Value
Fund will invest at least 65% of its total assets in equity securities
PROSPECTUS
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6
<PAGE> 9
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of value companies as determined by Heartland Advisors in accordance with the
factors listed above. The Value Fund may also invest in convertible securities
and debt securities rated B or above, and warrants, each up to 5% of the Fund's
net assets.
As a matter of fundamental policy, the Value Fund will not purchase the
securities of any company if, as a result: (i) it would own more than 10% of
the outstanding voting securities of such company; (ii) such holdings would
amount to more than 5% of the Value Fund's total assets; or (iii) more than 25%
of its assets would be concentrated in any one industry. These limitations do
not apply to U.S. government securities. The Value Fund may, from time to time
purchase securities issued by broker-dealers that sell or distribute its shares
or that execute portfolio brokerage transactions for the Value Fund; provided
that any such purchases will only be made in accordance with the limitations
imposed on such purchases by the Securities and Exchange Commission. The Value
Fund will not invest in securities issued by Heartland Advisors or any
affiliate of Heartland Advisors.
SMALL CAP CONTRARIAN FUND
The Small Cap Contrarian Fund seeks to achieve maximum long-term growth by
aggressive, yet flexible, value investing world-wide in growing companies that
are attractively priced. The Fund seeks to take advantage of both rising and,
to a lesser degree, declining markets. Under normal market conditions, at least
65% of the Fund's total assets will be invested in equity securities of smaller
companies with market capitalizations of less than $500 million.
The Small Cap Contrarian Fund takes an aggressive investment approach and may
be appropriate for investors who seek potentially high long-term returns, have
an investment horizon of at least three years, and are willing to accept
certain risks, including risks of short selling, futures and options, foreign
securities, leverage and potentially significant short-term fluctuations in the
Fund's share price. See "Other Investment Policies, Practices and Risk Factors
of the Funds."
The Fund focuses its investments primarily on equity securities of domestic,
multinational and foreign companies whose potential values generally have been
overlooked by other investors. Such companies include attractively priced,
viable businesses that have not yet been discovered or become popular,
previously unpopular companies having growth potential due to changed
circumstances, companies that have declined in value and no longer command an
investor following, and previously popular companies temporarily out of favor
due to short-term factors. Heartland Advisors will consider certain factors in
selecting the companies for the Fund's portfolio, including earnings, cash
flows, book values and debt levels.
Equity securities in which the Fund may invest include common stock,
convertible debt, preferred stock, warrants or other securities exchangeable
for shares of common stock, and other equity securities, including real estate
investment trusts. Equity securities of companies with smaller market
capitalizations may involve a higher degree of risk than investments in the
general equity markets in that such securities may be subject to greater price
volatility and may have less market liquidity than equity securities of
companies with larger market capitalizations.
PROSPECTUS
----------
7
<PAGE> 10
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The Small Cap Contrarian Fund may invest up to, but less than, 35% of its total
assets in debt securities, including lower-quality, high-yielding debt
securities. The Fund may buy debt securities of all types and qualities issued
by both domestic and foreign issuers. For information regarding the risks
associated with investing in lower-quality securities, see "Investment
Quality."
As a matter of fundamental policy, the Small Cap Contrarian Fund will not
purchase the securities of any issuer if, as a result: (i) with respect to 75%
of the Fund's total assets, more than 5% of its total assets would be invested
in such issuer or the Fund would own more than 10% of the outstanding voting
securities of such issuer; or (ii) more than 25% of its assets would be
concentrated in any one industry. These limitations do not apply to U.S.
government securities. The aggressive investment techniques in which the Small
Cap Contrarian Fund may engage may entail risks not encountered by the average
mutual fund. Some techniques, such as short sales, the use of put and call
options and futures, investments in foreign securities, leverage and short-term
trading, may be considered speculative and may also result in higher operating
expenses. See "Other Investment Policies and Practices of the Funds."
VALUE & INCOME FUND
To achieve its objectives, the Value & Income Fund invests in equity and debt
securities. The proportion of the Fund's assets invested in each type of
security will vary from time to time in accordance with Heartland Advisors'
assessment of economic conditions and investment opportunities.
The equity securities in which the Fund primarily invests are securities
selected on a value basis. Heartland Advisors selects equity securities it
considers underpriced relative to a set of factors, including:
. price/earnings ratio
. market price to book value
. price/cash flow ratio
. earnings growth
. long-term debt/capital
. management capabilities
. undervalued assets
. potential for favorable developments
. insider and institutional ownership
. technical analysis
The Value & Income Fund may invest in debt securities and convertible debt
securities of any type that are considered investment grade by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"),
or unrated securities judged by Heartland Advisors to be of comparable
quality. The Fund may also invest up to 25% of its assets in non-investment
grade debt securities and convertible debt securities, provided that the Fund
may not invest in securities rated below B, or judged by Heartland Advisors to
be of comparable quality, at the time of purchase. See "Investment Quality."
The Fund may also invest up to 5% of its net assets in warrants. The Fund
expects to realize income from dividends earned on equity investments and from
interest earned on debt securities. As a matter of fundamental policy, the
Value & Income Fund will not purchase the securities of any issuer if, as a
result: (i) the Fund would own more than 10% of the outstanding voting
securities of such issuer; (ii) with respect to 75%
PROSPECTUS
----------
8
<PAGE> 11
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of the Fund's total assets, more than 5% of its total assets would be invested
in such issuer; (iii) with respect to its total portfolio, more than 10% of the
total assets would be invested in such issuer; or (iv) more than 25% of its
assets would be concentrated in any one industry. These limitations do not
apply to U.S. government securities.
U.S. GOVERNMENT SECURITIES FUND
As a fundamental policy, the U.S. Government Securities Fund will invest at
least 65% of its total assets in obligations issued or guaranteed by the U.S.
government or by its agencies or instrumentalities. The government obligations
in which the Fund may invest may be either direct obligations of the Treasury
or securities issued or guaranteed by government agencies or instrumentalities.
Of the obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, some are backed by the full faith and credit of the U.S.
government and others are backed only by the rights of the issuer to borrow
from the U.S. Treasury (such as Federal Home Loan Bank bonds and Federal
National Mortgage Association securities). Investments in this latter category
of obligations are subject to risk based on the creditworthiness of the issuing
agency or instrumentality, and there is no assurance that the U.S. government
will provide financial support for such agencies or instrumentalities.
Heartland Advisors buys and sells securities after considering economic
conditions, liquidity factors and interest rate trends. Increases in interest
rates may decrease the value of the U.S. Government Securities Fund's portfolio
and decreases in interest rates may increase the value of its portfolio. The
U.S. Government Securities Fund's return will also vary from time to time
depending on fluctuation in market interest rates. The average maturity within
the portfolio will be shifted in response to anticipated changes in interest
rates. The average maturity will be shortened when Heartland Advisors expects
interest rates to rise, and will be lengthened when lower rates are
anticipated.
The U.S. Government Securities Fund may invest up to 35% of its total assets in
corporate debt securities and convertible debt securities, including up to 25%
of its total assets which may be invested in non-investment grade debt
securities and convertible debt securities, provided that the Fund may not
invest in securities rated below B by Moody's or S&P, or judged by Heartland
Advisors to be of comparable quality, at the time of purchase. See "Investment
Quality."
INVESTMENT QUALITY
INVESTMENT GRADE SECURITIES. Investment grade debt securities in which the
Value Fund, the Small Cap Contrarian Fund, the Value & Income Fund and U.S.
Government Securities Fund may invest are considered by Heartland Advisors to
include securities rated at the time of purchase within the four highest rating
categories assigned by Moody's or S&P, or securities which are unrated,
provided that such securities are judged by Heartland Advisors, at the time of
purchase, to be of comparable quality to securities rated within such four
highest categories. Securities rated in the fourth highest rating category are
more sensitive to economic changes than are securities rated in a higher
category and such securities have speculative characteristics.
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HIGH YIELD SECURITIES. Non-investment grade securities (commonly known as "junk
bonds") in which the Value, Small Cap Contrarian, Value & Income and U.S.
Government Securities Funds may invest may be regarded, on balance, as
predominantly speculative with respect to the capacity to pay interest and
repay principal in accordance with the terms of the obligation. While such
bonds typically offer higher rates of return, they involve greater risk,
including greater risk of default and loss of principal. The prices of these
lower rated bonds may be less sensitive to interest rate changes than higher
rated bonds, but more sensitive to adverse economic changes. Periods of
economic uncertainty and change may cause market price volatility in these
higher yielding bonds and corresponding volatility in the Fund's net asset
value. Furthermore, higher yielding bonds may contain redemption or call
provisions which, if exercised during a declining interest rate environment,
may require the Fund to replace the security with a lower yielding security,
resulting in a decreased return to the Fund. Finally, the secondary trading
market for higher yielding bonds may not be as active as for lower yielding
bonds. As a result, it may be difficult to accurately assess the value of such
bonds (and therefore the respective Fund's securities portfolio), and the
Fund's ability to dispose of such bonds may be limited. For a more detailed
discussion of the risks associated with investing in lower rated securities,
see "Investment Policies and Methods - Non-Investment Grade Securities" in the
Statement of Additional Information. Debt securities rated B, the lowest
category in which the Value, Value & Income and U.S. Government Securities
Funds may invest, are regarded by S&P as having a greater vulnerability to
default but having the ability, at the time they are rated, to meet scheduled
interest and principal payments. Moody's notes that the assurance of interest
and principal payments or of maintenance of other terms of the contract over
any long period of time may be small. The Small Cap Contrarian Fund may invest
in debt securities rated as low as the lowest rating category assigned by
Moody's or S&P, which securities may be even more speculative than B rated
debt. A description of the ratings assigned by Moody's and S&P is contained in
the Statement of Additional Information.
ASSET COMPOSITION
The following table provides a summary of the Value & Income Fund's and U.S.
Government Securities Fund's debt holdings as rated by Moody's or, in the case
of unrated securities, as determined by Heartland Advisors. These figures are
dollar-weighted averages of month-end portfolio holdings during the year ended
December 31, 1994, presented as a percentage of total portfolio holdings. These
percentages are historical and are not necessarily indicative of the quality of
current or future Fund holdings, which may vary.
<TABLE>
<CAPTION>
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MOODY'S RATING VALUE & INCOME U.S. GOVERNMENT SECURITIES
OR EQUIVALENT FUND AVERAGE FUND AVERAGE
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<S> <C> <C>
Aaa 8.2% 68.0%
Aa 0% 0.2%
A 0% 10.9%
Baa 0% 7.0%
Ba 4.5% 10.9%
B 12.2% 0%
</TABLE>
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The dollar-weighted average of debt securities included in these figures and
not rated by Moody's amounted to 3.6% of the Value & Income Fund's total
portfolio. This may include securities rated by other nationally recognized
rating organizations, as well as unrated securities. Unrated securities are not
necessarily lower quality securities. Please refer to the Statement of
Additional Information for a more complete discussion of these ratings.
OTHER INVESTMENT POLICIES, PRACTICES AND RISK FACTORS OF THE FUNDS
In addition to the investments described above for each Fund, the Funds may
invest in securities and employ investment techniques that may present special
risks as described below. Although there is no uniform definition of
"derivative securities," certain instruments in which the Funds may invest may
be considered derivative because the value of the instrument fluctuates
depending upon the value of another security, index, reference interest rate,
or currency. These instruments may include options, futures, options on
futures, forward foreign currency contracts, indexed securities, and certain
stripped obligations and mortgage-backed securities. A more complete discussion
of the Funds' securities and investment techniques and their associated risks,
as well as further investment restrictions to which the Funds may be subject,
is contained in the Statement of Additional Information.
OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Each Fund may
engage in transactions in options, futures contracts, and options on futures
contracts to hedge protectively against anticipated declines in the market
value of its portfolio securities, or against increases in the market values of
securities it intends to purchase, or to manage exposure to changing interest
rates or, with respect to the Value Fund, the Small Cap Contrarian Fund and the
Value & Income Fund, as a hedge against changes in prevailing levels of
currency exchange rates. The Funds will not use these instruments for
speculation. Some options and futures strategies, including selling futures,
buying puts and writing calls, tend to hedge a Fund's investments against price
fluctuations. Other strategies, including buying futures, writing puts, and
buying calls, tend to increase market exposure. Options and futures may be
combined with each other or with forward contracts in order to adjust the risk
and return characteristics of the Fund's overall strategy.
The Value Fund, the Value & Income Fund and the U.S. Government Securities
Fund each may write covered call options and purchase put options that are
traded on recognized U.S. exchanges with respect to specific securities and
enter into closing transactions with respect to such options. The Value Fund
and the Value & Income Fund also may sell covered call options and purchase
put options on foreign currencies and on stock indices composed of securities
of the same general character as each Fund's portfolio and may enter into
closing transactions with respect to such options.
The Value Fund, the Value & Income Fund and the U.S. Government Securities Fund
each may purchase and sell futures contracts, including interest rate futures,
index futures and, with respect to the Value Fund and the Value & Income Fund,
currency futures, that are traded on a recognized U.S. exchange, board of trade
or similar entity, or quoted on an automated quotation system. Each of those
Funds may also write covered call options and purchase put options on futures
contracts and enter into closing transactions with respect to such options.
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The Small Cap Contrarian Fund may buy and sell options and futures, including
purchasing and writing put and call options and options on futures, based on
any type of security, index, or currency related to its investments, including
options and futures traded on foreign exchanges and options not traded on
exchanges. Over-the-counter options generally involve greater credit and
liquidity risks than exchange-traded options.
Each Fund will limit its use of these hedging instruments so that: (i) no more
than 5% of the Fund's total assets would be committed to initial margin
deposits or premiums on futures contracts; (ii) no more than 25% of the Fund's
net assets would be subject to futures contracts; (iii) no more than 5% of the
Fund's total assets would be committed to premiums paid for options; and (iv)
no more than 25% of the Fund's total assets would be subject to options. Each
of these limitations applies immediately after a purchase. A subsequent change
in the applicable percentage resulting from market fluctuations does not
require elimination of any security, option or future from the portfolio.
Consequently, more than 25% of a Fund's assets could be hedged at a date
subsequent to the hedging transaction.
Options and futures can be highly volatile investments and involve certain
risks. Successful hedging strategies require the ability to predict future
movements in securities prices, interest rates and other economic factors.
Heartland Advisors' attempts to use such investments for hedging purposes may
not be successful and could result in reduction of a Fund's total return.
A Fund's potential losses from the use of futures extend beyond its initial
investment in such contracts. Each Fund could also experience losses if the
prices of its options or futures positions were poorly correlated with its
other investments, or if it was unable to close out its positions due to
disruptions in the market or lack of liquidity. Options and futures traded on
foreign exchanges in which the Small Cap Contrarian Fund may invest generally
are not regulated by U.S. authorities, and may offer less liquidity and less
protection to the Fund if the other party to the contract defaults.
SHORT SALES. If the Small Cap Contrarian Fund anticipates that the price of a
security will decline, it may sell the security short (sell a security which
the Fund does not then own for delivery at a future date) and borrow the same
security from a broker or other institution to complete the sale. The Fund may
make a profit or loss depending upon whether the market price of the security
decreases or increases between the date of the short sale and the date on which
the Fund must replace the borrowed security. The Fund will maintain a
segregated account with cash or liquid assets to cover its open short
positions.
The Value Fund, the Small Cap Contrarian Fund and the Value & Income Fund may
each engage in "short sales against the box," a less aggressive short selling
technique which involves selling a security that the Fund owns (or has an
unconditional right to purchase) for delivery at a specified date in the
future, to hedge protectively against anticipated declines in the market price
of its portfolio's securities or to defer an unrealized gain. If the value of
the securities sold short increases prior to the scheduled delivery date, the
Fund loses the opportunity to participate in the gain. Those Funds may also
engage in short sales of securities of an issuer ("acquiror") that has publicly
announced a proposed or a pending transaction in which a portfolio security of
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the Fund will be converted into securities of the acquiror. Each Fund will
maintain a segregated collateral account with its custodian to cover open short
positions in acquiror securities. If the value of an acquiror's security sold
short were to increase relative to the segregated collateral, the Fund would
lose the opportunity to participate in the appreciation and may also be
required to purchase additional shares of the shorted security to close out the
position or settle the position in cash.
The Small Cap Contrarian Fund will not sell short securities whose underlying
value exceeds 25% of its total assets and the Fund will limit short sales,
other than short sales against the box or of acquiror securities, of any one
issuer's securities to 2% of the Fund's total assets and to 2% of any one class
of the issuer's securities. The Value Fund and the Value & Income Fund will
each limit short sales against the box and of acquiror securities so that: (i)
no more than 5% of its total assets would be subject to open short positions;
and (ii) no more than 10% of the Fund's net assets would be held as collateral
for such positions.
FOREIGN SECURITIES. The Value Fund and the Value & Income Fund may invest up to
15% of their respective assets directly in the securities of foreign issuers.
The Small Cap Contrarian Fund may invest up to 25% of its assets in foreign
securities or in any one currency. The Value Fund, the Small Cap Contrarian
Fund and the Value & Income Fund may also invest in foreign securities in
domestic markets through depository receipts and securities of foreign issuers
that are traded on a registered American stock exchange or the NASDAQ National
Market System without regard to the above limitations. While investment in
foreign securities is intended to reduce risk by providing further
diversification, such investments involve certain risks in addition to the
credit and market risks normally associated with domestic securities. Such
risks include: adverse political and economic developments or social
instability; the imposition of foreign withholding taxes or exchange controls;
expropriation or nationalization; currency blockage (which could prevent cash
from being brought back to the United States); the impact of exchange rate and
foreign currency fluctuations on the market value of foreign securities; more
limited availability of public information regarding security issuers; the
degree of governmental supervision regarding securities markets; different
accounting, auditing and financial standards; difficulties in enforcing legal
rights; and the potential for less liquidity and more volatility of foreign
securities markets.
Brokerage commissions, fees for custodial services, and other costs relating to
foreign investments generally are greater than in the U.S. Such markets may
have different clearance and settlement procedures, and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to settle certain
transactions. Inability to sell a portfolio security due to settlement problems
could result either in a loss to the Fund if the value of the portfolio
security subsequently declined, or, if the Fund had entered into a contract to
sell the security, could result in possible claims against the Fund.
FOREIGN CURRENCY TRANSACTIONS. Foreign securities are subject to currency risk,
that is, the risk that the U.S. dollar value of these securities may be
affected favorably or unfavorably by changes in foreign currency exchange
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rates and exchange control regulations. To manage this risk and facilitate the
purchase and sale of foreign securities, the Value Fund, the Small Cap
Contrarian Fund and the Value & Income Fund may engage in foreign currency
transactions involving the purchase and sale of forward foreign currency
exchange contracts (agreements to exchange one currency for another at a future
date), or they may engage in transactions in options on foreign currencies,
currency futures contracts, or options on currency futures contracts. Although
foreign currency transactions will be used to protect the Funds from adverse
currency movements, they involve the risk that anticipated currency movements
will not be accurately predicted and a Fund's total return could be adversely
affected as a result.
MORTGAGE-BACKED SECURITIES. The U.S. Government Securities Fund may invest a
substantial portion of its assets in mortgage-backed securities issued by the
U.S. government, its agencies or instrumentalities. These securities represent
interests in pools of mortgages, and may include stripped mortgage-backed
securities. Mortgage-backed securities may be guaranteed by the issuing
governmental agency and, as is the case with GNMA certificates, may also be
backed by the full faith and credit of the U.S. government. Mortgage-backed
securities are subject to prepayment risk, that is, the possibility that
prepayments on the underlying mortgages will cause the principal and interest
on the mortgage-backed securities to be paid prior to their maturities, and the
value of these securities may be significantly affected by changes in interest
rates. Prepayments during a period of declining interest rates may result in
the Fund having to invest the unanticipated proceeds in lower-yielding
securities.
ZERO COUPON BONDS AND STRIPPED SECURITIES. The Small Cap Contrarian Fund, the
Value & Income Fund and the U.S. Government Securities Fund may invest in zero
coupon bonds, which do not pay current interest, but are purchased at a
discount from their face value with principal and accrued interest paid at
maturity. Those Funds may also invest in stripped obligations, which are the
separate income or principal components of a debt instrument, issued by the
U.S. government or its agencies and instrumentalities. The market value of zero
coupon bonds and stripped obligations may be subject to greater volatility in
response to changes in interest rates than other debt securities.
INDEXED SECURITIES. The Small Cap Contrarian Fund, the Value & Income Fund and
the U.S. Government Securities Fund may invest in indexed securities whose
value is linked to currencies, interest rates, commodities, indices, or other
financial indicators. Most indexed securities are short to intermediate term
fixed-income securities whose values at maturity, or interest rates, rise or
fall according to the change in one or more specified underlying instruments.
Indexed securities may be positively or negatively indexed (i.e., their value
may increase or decrease if the underlying instrument appreciates) and may have
return characteristics similar to direct investments in the underlying
instrument or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself and the
market for indexed securities may be thinner than the market for securities in
general, which can adversely affect the availability of market quotations and
the prices at which indexed securities are sold.
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REAL ESTATE INVESTMENT TRUSTS. The Small Cap Contrarian Fund may invest up to
10% of its total assets in real estate investment trusts ("REITs"). REITs are
subject to volatility from risks associated with investments in real estate and
investments dependent on income from real estate, such as fluctuating demand
for real estate and sensitivity to adverse economic conditions. In addition,
the failure of a REIT in which the Fund has invested to continue to qualify as
a REIT for tax purposes would have an adverse impact on the value of the Fund's
investment.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities to
institutional investors or broker-dealers to a maximum of 30% of its assets,
where such loans are callable at any time and are continuously secured by
collateral consisting of cash or liquid assets at least equal to the value of
the security loaned. The collateral received by a Fund will be invested in
short-term debt instruments. The respective Fund receives amounts equal to
earned income for having made the loans. The respective Fund is the beneficial
owner of the loaned securities in that any gain or loss in the market price
during the loan period inures to the Fund. Thus, when the loan is terminated,
the value of the securities may be more or less than their value at the
beginning of the loan. In determining whether to lend its portfolio securities,
each Fund takes into account the creditworthiness of the borrower since the
Fund could experience costs and delays in recovering loaned securities or
exercising its rights to the collateral in the event of bankruptcy of the
borrower. Each Fund may pay a fee to placing brokers in connection with loans
of its portfolio securities.
REPURCHASE AGREEMENTS. The Small Cap Contrarian Fund, Value & Income Fund and
the U.S. Government Securities Fund may enter into repurchase agreements with
banks and broker-dealers, under which the Fund purchases securities and agrees
to sell them back at a specified time and price. The difference between the
amount the Fund pays for the securities and the amount it receives upon resale
is accrued as interest and reflected in its net income. In the event of a
bankruptcy or default of certain sellers of repurchase agreements, the Fund
could experience costs and delays in liquidating the underlying security, which
is held as collateral, and the Fund might incur a loss if the value of the
collateral held declines during this period. In determining whether to enter
into a repurchase agreement, the respective Fund will take into account the
creditworthiness of the counterparty. The Small Cap Contrarian Fund, Value &
Income Fund and the U.S. Government Securities Fund will use repurchase
agreements as a means of making short-term investments, and will invest in
repurchase agreements of a duration of seven days or less in an amount not
exceeding 25% of their respective net assets. Each Fund's ability to invest in
repurchase agreements that mature in more than seven days is subject to an
investment restriction that limits investment in "illiquid" securities,
including such repurchase agreements, to 10% of net assets.
REVERSE REPURCHASE AGREEMENTS. The Small Cap Contrarian Fund may enter into
reverse repurchase agreements with banks and broker-dealers, under which the
Fund sells a portfolio security to such party in return for cash and the Fund
agrees to repurchase the instrument at a particular price and time. While a
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reverse repurchase agreement is outstanding, the Fund will maintain
appropriate liquid assets in a segregated custodial account to cover its
obligations under the agreement. To the extent that the value of the security
the Fund agrees to repurchase declines, the Fund may experience a loss. Reverse
repurchase transactions may increase fluctuations in the market value of the
Fund's assets and may be viewed as a form of leverage. In determining whether
to enter into a reverse repurchase agreement, the Fund will take into account
the creditworthiness of the counterparty.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Small Cap Contrarian, Value
& Income and U.S. Government Securities Funds may purchase and sell securities
on a "when-issued" and "delayed delivery" basis, i.e., obligate themselves to
purchase or sell securities with delivery and payment to occur at a later date
in order to secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. The market value of a security may
increase or decrease between the time that the Fund makes its commitment and
the time the security is delivered. Each Fund will make such commitments only
with the intention of actually acquiring the securities, but may sell the
securities before settlement date if it is deemed advisable for investment
reasons. At the time a Fund makes a commitment to purchase an obligation, it
will record the transaction and reflect the value of the obligation in
determining its net asset value. The custodian will maintain on a daily basis a
separate account consisting of cash or liquid securities with a value at least
equal to the amount of the Fund's commitments to purchase when-issued
obligations. There are no limitations on the percentage of the Fund's assets
which may be invested in such securities; however, it is not expected that at
any one time more than 25% of its assets would be so invested.
SHORT-TERM INVESTMENTS. Each Fund may invest a portion of its portfolio in
liquid reserves to meet its cash flow requirements. Under normal conditions,
none of the Funds anticipates that such reserves will exceed 10% of its assets.
Such reserves may be increased to enable a Fund to take advantage of buying
opportunities or may be increased up to 100% of a Fund's assets for temporary
defensive purposes. Such reserves will be invested in money market instruments,
including certificates of deposit, commercial paper, short-term corporate debt
securities, and U.S. government securities.
BORROWINGS AND LEVERAGE. As a fundamental policy, the Value, Value & Income and
U.S. Government Securities Funds will not borrow money or property except for
temporary or emergency purposes. If one of those Funds ever should borrow
money, it would only borrow from banks and in an amount not exceeding 10% of
the market value of its total assets (not including the amount borrowed). None
of the Value, Value & Income and U.S. Government Securities Funds will pledge
more than 15% of its net assets to secure such borrowings. In the event one of
those Funds' borrowings exceeds 5% of the market value of its total assets, the
Fund will not invest in any additional portfolio securities until its
borrowings are reduced to below 5% of its total assets. For purposes of these
restrictions, collateral arrangements for premium and margin payments in
connection with a Fund's hedging activities are not deemed to be a pledge of
assets.
The Small Cap Contrarian Fund may borrow from banks
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up to one-third of its total assets, and may pledge its assets in connection
with such borrowings. If the Small Cap Contrarian Fund makes additional
investments while borrowings are outstanding, this may be construed as a form
of leverage. This leverage may exaggerate changes in the Small Cap Contrarian
Fund's share value and the gains and losses on the Fund's investments. Leverage
also creates interest expenses that may exceed the return on investments made
with the borrowings.
ILLIQUID INVESTMENTS. Under the supervision of, and pursuant to the guidelines
adopted by, the Board of Directors, Heartland Advisors determines which of a
Fund's investments are classified as illiquid. The absence of a trading market
can make it difficult to ascertain a market value for illiquid investments.
Disposing of illiquid investments may involve time-consuming negotiation and
legal expenses, and it may be difficult or impossible for a Fund to sell such
an investment promptly at an acceptable price. None of the Funds may invest
more than 10% of their respective net assets in illiquid investments.
PORTFOLIO TURNOVER. The Value Fund and the Value & Income Fund will not trade
portfolio securities for short-term profits, but when circumstances warrant,
securities may be sold without regard to their holding period. During the
fiscal years ended December 31, 1994 and 1993, the portfolio turnover rates for
the Value Fund were 35% and 51%, respectively, and for the U.S. Government
Securities Fund were 95% and 200%, respectively. The portfolio turnover rate
for the Value & Income Fund for the fiscal year ended December 31, 1994 was
127% and for the period from October 26, 1993 (commencement of operations) to
December 31, 1993 was 6%. Annual portfolio turnover for the Small Cap
Contrarian Fund is expected to be less than 200%. A high turnover rate may
increase transaction costs and may affect taxes paid by shareholders to the
extent short-term gains are distributed.
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HOW TO BUY SHARES
SHARE PRICE
The Fund's shares are sold without a sales charge. Each Fund's share price is
the net asset value per share next determined following receipt of an order in
proper form or receipt of funds by the Agent if purchase is made by wire. Net
asset value is calculated daily as described under "Net Asset Value
Calculation." Firstar Trust Company serves as the Fund's transfer and dividend
disbursing agent (the "Agent").
PROSPECTUS
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<PAGE> 20
OPENING AN ACCOUNT AND PURCHASING SHARES
BY MAIL TO: BY OVERNIGHT MAIL TO:
Firstar Trust Company Firstar Trust Company
Mutual Fund Services, 3rd Floor Mutual Fund Services, 3rd Floor
P.O. Box 701 615 East Michigan Street
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
To Open an Account:
Complete and sign the Account Application. Make your check payable to either
Heartland Value Fund, Heartland Small Cap Contrarian Fund, Heartland Value &
Income Fund or Heartland U.S. Government Securities Fund and mail to one of the
addresses above.
If you are you are investing through a tax-sheltered
retirement plan, such as an IRA, you will need to use a special application
To Add to an Account:
Make your check payable to the Fund you are invested in, indicate your Fund
account number on your check, and mail to one of the addresses above. You may
also include an "Additional Investment Form" from a prior account statement
with your check.
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BY WIRE: (NOT AVAILABLE FOR INVESTMENTS IN RETIREMENT PLANS)
Firstar National Bank
ABA #0750-00022
Firstar Trust MFS A/C #112-952-137
777 East Wisconsin Avenue, Milwaukee, WI 53202
CREDIT TO: Heartland (name of Fund), (your account number and the title of the
account)
To Open an Account:
Call the Agent at 1-800-248-1162 for an account number prior to sending the
wire. Specify Fund name, include your name, and your new account number, and
wire as described above. Then complete, sign and mail the Account Application
to one of the addresses above for mail or overnight mail.
To Add to An Account:
Specify Fund name, include your name and account number, and wire as described
above.
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BY TELEPHONE TO THE AGENT:
1-800-248-1162 or 414-287-3702
To Open an Account:
Unless you have elected not to have this privilege on the Account Application,
you may call to exchange from another Heartland fund account with the same
registration, including name, address and taxpayer ID number. See "Shareholder
Services-Exchange Privilege."
To Add to an Account:
Unless you have elected not to have this privilege on the Account Application,
you may call to exchange from another Heartland fund account with the same
registration, including name, address and taxpayer ID. See "Shareholder
Services-Exchange Privilege."
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AUTOMATICALLY:
To Open an Account:
Not available.
To Add to An Account:
Use Heartland's automatic investment plan. Sign up for this service on your
Account Application, or call 1-800-HEARTLN to add it.
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THROUGH SECURITIES REPRESENTATIVES:
To Open an Account:
You may purchase shares through a broker-dealer or financial institution which
must promptly forward the order, together with payment, to the Agent. The
broker-dealer or financial institution may charge a fee for such services.
To Add to An Account:
You may purchase shares through a broker-dealer or financial institution which
must promptly forward the order, together with payment, to the Agent. The
broker-dealer or financial institution may charge a fee for such services.
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CONDITIONS OF YOUR PURCHASE.
MINIMUM INVESTMENTS. The minimum initial investment for each Fund is $1,000,
except in the case of retirement plan investors and investors who elect to
invest through the automatic investment plan (see "SHAREHOLDER SERVICES"). The
minimum additional investment, except for reinvestments of distributions and
investments under the automatic investment plan, is $100.
PURCHASES THROUGH SERVICE PROVIDERS. If you purchase shares through a program
of services offered or administered by a broker-dealer, financial institution,
or other service provider, you should read the program materials provided by
the service provider, including information relating to fees, in conjunction
with this Prospectus. Certain features of a Fund may not be available or may be
modified in connection with the program of services provided. When shares are
purchased this way, the service provider, rather than its customer, may be the
shareholder of record of the shares. Certain service providers may receive
compensation from the Funds or Heartland Advisors for providing such services.
OTHER CONDITIONS. All purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks. Cash will not be accepted for the purchase of shares. If a
check fails to clear, the purchase to which the check relates will be cancelled
and the prospective investor will be liable for any losses or fees incurred by
the Funds or the Funds' Agent, including without limitation a $15 fee to cover
bank handling charges for returning checks due to insufficient funds. When
purchases are made by check, a Fund can hold payment on redemption of shares so
purchased until the Fund is reasonably satisfied that the check has cleared. To
avoid such a delay, an investor can wire federal funds as described
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above from a bank, which may charge a fee for that service. Wiring federal
funds means that the bank sends money to a bank account maintained by a Fund
through the Federal Reserve System.
VALUE FUND CLOSING TO NEW INVESTORS
Effective July 1, 1995, the Value Fund will be closed to new investors, except
as described below. Investors who hold shares of the Value Fund, either in
their own name or through a service provider, on July 1, 1995, may continue to
add to an existing account or may open a new Value Fund account (i) through the
purchase of additional Value Fund shares, (ii) through the reinvestment of
dividends and cash distributions on any Value Fund shares owned, and (iii)
through exchanges from other Heartland Fund accounts or a Portico Money Market
Fund account. New accounts which a Value Fund investor may open include
accounts where the shareholder is the owner, a joint owner, or a custodian for
a minor child. Employee benefit plans that became shareholders before the July
1, 1995 closing date may continue to purchase Fund shares in the course of
their normal operations. Employee benefit plans that purchase shares through
Heartland Advisors, or through a program of services offered or administered by
a service provider that has an existing service agreement with the Value Fund
or Heartland Advisors on July 1, 1995, may also purchase Value Fund shares
after the closing date. Financial advisers or planners with at least $3 million
of clients assets invested in the Value Fund as of July 1, 1995 may also
continue to purchase shares of the Fund on behalf of new or existing clients.
Shareholders of other Heartland Funds who are not also shareholders of the
Value Fund will not be able to exchange into the Value Fund after June 30,
1995. The discussion elsewhere in this Prospectus regarding the purchase of
shares of the Value Fund is qualified by this limitation. The Value Fund may
resume sales to new investors at some future date, but it has no present
intention to do so.
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HOW TO REDEEM SHARES
Shareholders may have any or all of their shares redeemed as described below on
any day the Funds are open for business at the next determined net asset value
(see "Net Asset Value Calculation"). Shares of the Funds purchased between
February 12, 1993 and June 1, 1994 subject to a contingent deferred sales
charge remain subject to such charge upon redemption of shares.
PROSPECTUS
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<PAGE> 23
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BY TELEPHONE TO THE AGENT:
1-800-248-1162 You may redeem by calling the Agent,
or unless you elected not to have this
(414) 287-3702 privilege on your account application.
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THROUGH SECURITIES REPRESENTATIVES:
You may redeem shares through a broker-dealer or financial institution, which
must promptly forward your instructions to the Agent. The broker-dealer or
financial institution may charge a fee for such services.
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BY MAIL TO:
Firstar Trust Company Send a written request specifying
Mutual Fund Services, 3rd Floor the name of the Fund, the number of
P.O. Box 701 shares to be redeemed, your name, your
Milwaukee, WI 53201-0701 account number, and any additional
documents listed below that apply to
your particular account. The Agent
cannot accept requests specifying
a particular date for redemption
BY OVERNIGHT DELIVERY TO: or other special conditions.
Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 East Michigan Street
Milwaukee, WI 53202
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TYPE OF
REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Letter of instruction signed by all
Sole Proprietorship, Custodial, persons authorized to sign for the
General Partners account, exactly as it is registered,
accompanied by signature guarantee(s) if
required.
Corporations, Associations Letter of instruction accompanied by
a corporate resolution. The letter must
be signed by at least one individual
authorized (via corporate resolution) to
act on the account. The corporate
resolution must include a corporate seal
or signature guarantee.
Trusts Letter of instruction signed by the
Trustee(s) (as Trustee(s)), with
signature guarantee(s). (If the
Trustee's name is not registered on
the account, provide a copy of the
trust document, certified within the
last 60 days.)
If you do not fall into any of these registration categories (i.e., executors,
administrators, conservators, or guardians), please call the Agent for further
instructions.
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PROSPECTUS
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TELEPHONE REDEMPTIONS. Shares may be redeemed by telephone to the Agent, unless
the shareholder elects not to have this privilege on the account application.
By establishing the telephone redemption service, the shareholder assumes some
risks for unauthorized transactions. Heartland Advisors has implemented
procedures designed to reasonably assure that telephone instructions are
genuine. These procedures include recording telephone conversations, requesting
verification of various pieces of personal information and providing written
confirmation of such transactions. If the Agent, the Funds, Heartland Advisors
or any of their employees fails to abide by these procedures, the Funds may be
liable to a shareholder for losses he or she suffers from any resulting
unauthorized transaction(s). However, none of the Agent, the Custodian, the
Funds, Heartland Advisors or any of their employees will be liable for losses
suffered by a shareholder which result from following telephone instructions
reasonably believed to be genuine after verification pursuant to these
procedures.
There is currently no charge for telephone redemptions, although a charge may
be imposed in the future. During periods of substantial economic or market
changes, telephone redemptions may be difficult to implement. If a shareholder
is unable to contact the Agent by telephone, shares may also be redeemed by
delivering the redemption request to the Agent in person or by mail as
described above. The Agent and the Funds reserve the right to change, modify or
terminate this telephone redemption service at any time.
SIGNATURE GUARANTEES. To protect your account, the Agent and the Funds from
fraud, signature guarantees are required for certain redemptions. Signature
guarantees enable the Agent to be sure that you are the person who has
authorized a redemption from your account. Signature guarantees are required
for: (1) any redemption by mail if the proceeds are to be paid to someone other
than the person(s) or organization in whose name the account is registered or
are to be sent to an address other than the address of the registered holder of
the shares; (2) any redemptions by mail which request that the proceeds be wired
to a bank; (3) any redemptions by mail where the redemption proceeds exceed
$25,000; and (4) requests to transfer the registration of shares to another
owner. These requirements may be waived by the Funds in certain instances.
The following institutions are acceptable guarantors: (a) commercial banks,
savings and loan associations and savings banks, which are members of the
Federal Deposit Insurance Corporation; (b) credit unions; (c) trust companies;
(d) firms which are members of a domestic stock exchange; and (e) foreign
branches of any of the above. The Agent cannot accept guarantees from notaries
public.
SENDING REDEMPTION PROCEEDS. The Agent will not send redemption proceeds until
all payments for the shares being redeemed have cleared, which may take up to
15 days from the purchase date.
BY MAIL. The Agent mails checks for redemption proceeds typically within one
or two days, but not later than seven days, after it receives the request and
all necessary documents. The Agent will send redemption proceeds in accordance
with your instructions.
BY WIRE. The Agent will normally wire redemption proceeds to your bank the next
business day after receiving the redemption request and all necessary
documents. The signatures on any written request for a wire redemption must be
guaranteed. The Agent currently deducts a $7.50 wire charge from the redemption
proceeds. This charge is subject to change. You will be responsible for any
charges which your bank may make for receiving wires.
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CERTAIN CONDITIONS. If, due to redemption or transfer, a shareholder's account
drops below $500 for three months or more, the Funds have the right to redeem
the shareholder's account, after giving 60 days notice, unless the shareholder
makes additional investments to bring the account value to $1,000. No
contingent deferred sales charge will be imposed on any involuntary redemption.
A Fund may suspend the right to redeem shares for any period during which (a)
the New York Stock Exchange is closed or the Securities and Exchange Commission
determines that trading on the Exchange is restricted; (b) there is an
emergency as a result of which it is not reasonably practicable for the Fund to
sell its portfolio securities or to calculate the fair value of its net assets;
or (c) the Securities and Exchange Commission may permit for the protection of
shareholders.
CONTINGENT DEFERRED SALES CHARGE
The following information regarding redemptions of shares subject to contingent
deferred sales charges applies only to shares of the Funds that were purchased
between February 12, 1993 and June 1, 1994 subject to a contingent deferred
sales charge and does not apply to shares of the Funds purchased on or after
June 1, 1994.
REDEMPTION PRICE. Shares of each Fund purchased between February 12, 1993 and
June 1, 1994 that are redeemed within three years of purchase may be subject to
a contingent deferred sales charge at the rates set forth below. The charge
will be assessed on an amount equal to the lesser of the cost of the shares
being redeemed or their net asset value at the time of redemption. Accordingly,
no sales charge will be imposed on increases in net asset value above the
initial purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains distributions.
The amount of the contingent deferred sales charge, if any, will vary depending
on the number of years from the time of payment for the purchase of the shares
until the time of redemption of such shares. The following table sets forth
rates of the contingent deferred sales charge for the Funds:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONTINGENT DEFERRED
SALES CHARGE AS A %
YEAR SINCE PURCHASE OF DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
- -------------------------------------------------------------------------------
<S> <C>
First 3.0%
Second 2.0%
Third 1.0%
Fourth and thereafter None
- -------------------------------------------------------------------------------
</TABLE>
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible rate being charged. Therefore, it will be assumed that the
redemption is first of shares purchased prior to the adoption of a contingent
deferred sales charge, then of shares held for over three years or shares
acquired pursuant to reinvestment of dividends or distributions and then of
shares held longest during the three-year period. The charge will not be
applied to dollar amounts representing an increase in the net asset value since
the time of purchase.
AN EXAMPLE. Assume an investor purchased one hundred shares at $10 per share
(at a cost of $1,000), and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares through dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to the charge because of dividend reinvestment. With
respect to the remaining 40 shares, the charge is applied only to the original
cost of $10 per share and not to the increase in net asset value of $2 per
share. Therefore,
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$400 of the $600 redemption proceeds will be charged at a rate of 2.0% (the
applicable rate in the second year after purchase).
REDEMPTIONS AT NET ASSET VALUE. The contingent deferred sales charge is waived
with respect to the following limited classes of redemptions: (i) redemptions
following the death or disability (as defined in the Internal Revenue Code of
1986) of a shareholder if the Fund is notified of the death or disability at
the time redemption is requested and such request is made within one year after
such death or disability; (ii) redemptions in connection with retirement plan
distributions (a) resulting from the death or disability of the employee or the
tax-free return of an excess contribution or (b) to the extent that the
redemption represents a minimum required distribution to a shareholder who has
attained the age at which distributions are required to commence; (iii)
redemptions by current or retired directors and officers of Heartland and
Heartland Advisors, full-time employees of Heartland Advisors and retirement
plans for such employees, and registered representatives of broker-dealers who
have signed dealer agreements with Heartland Advisors for their personal
accounts; (iv) redemptions by managed accounts of Heartland Advisors or an
affiliated company or redemptions by companies affiliated with Heartland; (v)
redemptions by any tax-exempt employee benefit plan for which continuation of
its investment in a Fund would be improper under applicable law or regulation,
subject to the Fund's right to require an opinion of counsel to that effect;
and (vi) redemptions by registered investment companies or their shareholders
resulting from reorganization transactions with a Fund. The term "employee"
includes an employee's spouse (including the surviving spouse of a deceased
employee) and children under 21 and retired employees. The contingent deferred
sales charge is also waived in limited circumstances in conjunction with
certain shareholder services. (See "Shareholder Services.") The shareholder
must certify to the Fund, at the time of redemption, that certain
qualifications are met and that the shareholder is entitled to waiver of the
contingent deferred sales charge. The waiver will be granted subject to
confirmation of the investor's entitlement.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
Each Fund offers a number of shareholder services designed to facilitate
investment in its shares. Full details of each of the services and instructions
as to how to participate in the various services can be obtained from the Funds
or Heartland Advisors.
AUTOMATIC DIVIDEND REINVESTMENT. You may automatically reinvest all dividends
and distributions or elect to receive them in the form of a check. If your
dividends and distributions are reinvested, they will automatically purchase
additional shares of your current Fund, or shares of one of the other three
Funds, as indicated on your account application, at the net asset value
determined on the dividend or distribution payment date, without any sales
charge or fees. You may change your election at any time by writing Heartland
Advisors. Heartland Advisors must receive any change seven days prior to a
payment date for it to be effective for that payment.
TAX-SHELTERED RETIREMENT PLANS. Shares of each Fund are available for purchase
in connection with the following tax-sheltered retirement plans: (i) Keogh
Plans (H.R. 10) for self-employed individuals; (ii) Qualified Corporate Pension
and Profit-Sharing Plans for employees; (iii) Individual Retirement Accounts
and Simplified Employee Pension Plans for individuals and employers; and (iv)
403(b) Plans for employees of most non-profit organizations.
PROSPECTUS
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<PAGE> 27
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The minimum initial retirement plan investment in any Fund is $500 ($250 in the
case of a spousal IRA). Firstar Trust Company, as the trustee of the Individual
Retirement Account plan, charges a $12.50 annual maintenance fee (subject to
change by the trustee) for each Individual Retirement Account. For other
tax-sheltered retirement plans, the individual investor must employ a
self-directed plan. Detailed information concerning these plans and copies of
the plans are available from Heartland Advisors. This information should be
read carefully and consultation with an attorney or tax advisor may be
advisable.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan of each Fund offers a
simple way to maintain a regular investment program. By completing the
automatic investment portion of the account application attached to this
Prospectus, you may arrange automatic transfers (minimum $50 per transaction)
from your checking account to your account in one of the Funds on a monthly or
twice-monthly basis. IRA contributions through the automatic investment plan
apply as a current year purchase and may not be applied as prior year
contributions. The application must be accompanied by a "voided" check, and be
received at least 14 business days prior to the initial transaction. Once
enrolled in the automatic investment plan, you may change the monthly amount or
terminate your participation at any time by writing the Agent. Allow five
business days for a change to become effective. Your bank must be a member of
Automated Clearing House. If the automatic purchase cannot be made due to
insufficient funds or a stop payment, a $15 service fee will be assessed. If
you stop making automatic investments when your aggregate investment in a Fund
is less than $500, the Fund reserves the right to redeem your account after
giving 60 days notice, unless you make additional investments to bring your
account value to $1,000. The program will automatically be terminated upon
redemption of all shares, including an exchange of all shares to another fund.
You will receive a confirmation of each transaction from the Agent and your
regular bank account statement will show the debit transaction each month.
SYSTEMATIC WITHDRAWAL PLAN. You can set up automatic withdrawals from your
account at monthly, quarterly, or annual intervals. To begin distributions, you
must have an initial balance of $25,000 in your account and withdraw at least
$100 per payment but no more than 2%, 6%, 12% or 24% of your initial account
balance each monthly, quarterly, semi-annual or annual payment, respectively.
Shares redeemed under the plan will be redeemed at their net asset value. To
establish the systematic withdrawal plan, request a form by calling
1-800-HEARTLN. The systematic withdrawal plan may be terminated by you or by
the Funds at any time by written notice. The minimum investment accepted while
a withdrawal plan is in effect is $1,000.
EXCHANGE PRIVILEGE. Shares of a Fund which have been registered in your name
for at least 15 days may be exchanged for shares of any other Heartland fund,
or for shares in the Portico Money Market Fund, provided the fund into which
you wish to exchange is qualified for sale in the jurisdiction of residence
which you state at the time you make the exchange. Before initiating an
exchange, you should obtain from Heartland Advisors and carefully read the
prospectus relating to the fund into which you wish to exchange.
Exchanges Among Heartland Funds. Under the exchange privilege, each Heartland
fund offers to exchange its shares for shares of another Heartland fund on the
basis of relative net asset value per share, without the payment of any fees or
charges. In order to qualify for the exchange privilege without further
approval of the Fund, it is required that the shares being exchanged have a net
PROSPECTUS
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<PAGE> 28
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asset value of at least $1,000, but not more than $500,000. In addition, if you
have certificates for any shares being exchanged, you must surrender such
certificates in the same manner as in redemption of shares.
Exchanges with Portico. Shareholders may exchange all or a portion of their
shares in the Funds for shares of the Portico Money Market Fund at their
relative net asset values and may also exchange back into a Heartland fund
without the imposition of any charges or fees. These exchanges are subject to
the minimum purchase and redemption amounts set forth in the prospectus for the
Portico Money Market Fund. No charge to shareholders is imposed in connection
with this exchange; however, Heartland Advisors, as distributor, is entitled to
receive a fee from the Portico Money Market Fund for certain distribution and
support services at the annual rate of .20 of 1% of the average daily net asset
value of the shares for which it is the holder or dealer of record.
How to Exchange. To exercise the exchange privilege, you need to do one of the
following: (a) contact the Agent by telephone (1-800-248-1162 or 414-287-3702)
and request the exchange, unless you have elected not to have this telephone
privilege by so indicating on the Account Application; (b) complete an Exchange
Application available from the Fund's Agent and submit it to the Agent; or (c)
contact your broker-dealer or financial institution (either in writing or by
telephone) who will advise Heartland of the exchange, but who may charge a fee
for such service. See "HOW TO REDEEM SHARES - Telephone Redemptions" for
information on transactions by telephone.
Exchanges of Shares Subject to a Contingent Deferred Sales Charge. Shares of
the Funds that were purchased between February 12, 1993 and June 1, 1994
subject to a contingent deferred sales charge that are exchanged for shares of
any other Heartland fund or shares of the Portico Money Market Fund will remain
subject to the contingent deferred sales charge schedule of the original
shares, payable upon ultimate redemption of the new shares. For purposes of
computing the sales charge payable upon redemption of the new shares, the
holding period for the original shares is added to the holding period of the
new shares.
Tax and Other Considerations. An exchange between funds is treated as a sale
for federal income tax purposes and, depending upon the circumstances, a short
or long-term capital gain or loss may be realized. If you have questions as to
the tax consequences of an exchange, you should consult your tax advisor. The
exchange privilege may be modified or terminated at any time upon 60 days prior
written notice. Although an investor may make up to four exchanges in any
calendar year, Heartland reserves the right to limit the number of exchanges
beyond that.
REINVESTMENT PRIVILEGE. If you redeem shares of the Funds that were purchased
between February 12, 1993 and June 1, 1994 subject to a contingent deferred
sales charge, and then reinvest all or part of the redemption proceeds in any
Heartland Fund, you will receive a pro rata credit from Heartland Advisors
based on the amount of any contingent deferred sales charge paid relative to
the number of shares reinvested. In order to exercise the reinvestment
privilege, you must send written notice of your reinvestment to the Fund or the
Agent not more than 30 days after the shares are redeemed. Redemption proceeds
will be reinvested on the basis of net asset value of the shares in effect
immediately after receipt of the written request and the shares will continue
to be subject to the contingent deferred sales charge as if redemption had not
occurred. Any capital gains tax incurred on redemption of shares of a Fund is
not altered by the subsequent exercise of
PROSPECTUS
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<PAGE> 29
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this privilege. If redemption resulted in a loss and reinvestment is made in
shares of a Fund, the loss will not be recognized.
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DIVIDENDS, CAPITAL GAINS, DISTRIBUTIONS AND TAXES
DIVIDENDS. Substantially all of the Value Fund's and the Small Cap Contrarian
Fund's net investment income will be paid to shareholders annually as a
dividend. With respect to the Value & Income Fund, dividends will be paid to
shareholders quarterly. In the U.S. Government Securities Fund, dividends will
be declared daily and paid monthly. Dividends may be taken in cash or
additional shares at net asset value. Dividends and capital gain distributions
will be automatically reinvested in additional shares of the same Fund or
another Fund, unless a shareholder has elected in writing to the Agent to
receive dividends and capital gain distributions in cash.
DISTRIBUTIONS. Capital gains distributions for each Fund, if any, will normally
be paid within 30 days after the end of the fiscal year.
TAXES. Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code (the "Code") and, if so qualified,
will not be subject to federal income taxes to the extent its earnings are
timely distributed. Each Fund also intends to make distributions as required by
the Code to avoid the imposition of a 4% excise tax.
Each Fund will distribute substantially all of its net investment income and
net capital gains to investors. Distributions from a Fund's income and
short-term capital gains are taxed as dividends, and long-term capital gain
distributions are taxed as long-term capital gains. Distributions of long-term
capital gains will be taxable to the investor as long-term capital gains
regardless of the length of time shares have been held. A portion of each
Fund's dividends may qualify for the dividends received deduction for
corporations. The Funds' distributions are taxable when they are paid, whether
a shareholder takes them in cash or reinvests them in additional shares, except
that distributions declared in December and paid in January are taxable as if
paid on December 31. The federal income tax status of all distributions will be
reported to shareholders annually.
"BUYING A DIVIDEND." On the record date for a distribution by a Fund, its share
price is reduced by the amount of the distribution. If you buy shares just
before the record date ("buying a dividend"), you will pay the full price for
the shares, and then receive a portion of the price back as a taxable
distribution.
OTHER TAX INFORMATION. Under federal tax law, some shareholders may be subject
to a 31% withholding on reportable dividends, capital gains distributions, and
redemption payments ("backup withholding"). Generally, investors subject to
backup withholding will be those for whom a taxpayer identification number is
not on file with the Fund or who, to the Fund's knowledge, have furnished an
incorrect number. In order to avoid this withholding requirement, an investor
must certify on the account application that the taxpayer identification number
provided is correct and that the investment is not otherwise subject to backup
withholding, or is exempt from backup withholding.
The foregoing tax discussion is general in nature and each investor is advised
to consult his or her tax advisor for additional information.
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THE FUNDS AND THE HEARTLAND ORGANIZATION
The Board of Directors provides broad supervision over the affairs of each
Fund, and the officers are responsible for its operations.
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<PAGE> 30
HEARTLAND ADVISORS
Heartland Advisors provides the Funds with overall investment advisory and
administrative services under an Investment Advisory Agreement with Heartland.
Subject to policies established by Heartland's Board of Directors, Heartland
Advisors makes investment decisions on behalf of each Fund, makes available
research and statistical data, and supervises the acquisition and disposition
of investments by each Fund. Heartland Advisors is also the distributor for
each Fund.
Heartland Advisors, founded in 1982, serves as the investment advisor for the
Heartland Wisconsin Tax Free and Nebraska Tax Free Funds, two additional series
of Heartland, and also provides investment management services for individuals,
and institutional accounts, such as pension funds and profit-sharing plans. As
of March 31, 1995, Heartland Advisors had approximately $1.1 billion in assets
under management. Heartland Advisors' principal mailing address is 790 North
Milwaukee Street, Milwaukee, Wisconsin 53202. William J. Nasgovitz, a Director
and President of Heartland and Heartland Advisors, is a controlling person of
Heartland Advisors through his ownership of a majority of its voting common
stock. Hugh F. Denison and Patrick J. Retzer are also Directors of Heartland
and officers and Directors of Heartland Advisors.
Heartland Advisors bears all of its expenses in providing services under its
Investment Advisory Agreement and pays all salaries, fees and expenses of the
officers and directors of Heartland who are affiliated with Heartland Advisors.
Each Fund bears all of its other expenses including, but not limited to,
necessary office space, telephone and other communications facilities and
personnel competent to perform administrative, clerical and shareholder
relations functions; a pro rata portion of salary, fees and expenses (including
legal fees) of those directors, officers and employees of Heartland who are not
officers, directors or employees of Heartland Advisors; interest expenses; fees
and expenses of the Custodian, Transfer and Dividend Disbursing Agent; taxes
and governmental fees; brokerage commissions and other expenses incurred in
acquiring or disposing of portfolio securities; expenses of registering and
qualifying shares for sale with the Securities and Exchange Commission and
state securities commissions; accounting and legal costs; insurance premiums;
expenses of maintaining the Fund's legal existence and of shareholder meetings;
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses; and fees and expenses of membership in industry
organizations.
For the fiscal year ended December 31, 1994, the Value Fund paid advisory fees
of $1,985,370, or approximately 0.75 of 1% of average net assets during that
year. The Small Cap Contrarian Fund pays Heartland Advisors an annual fee for
its advisory services at the rate of 0.75 of 1% of the Fund's average daily net
assets. While the advisory fees paid by the Value Fund and the Small Cap
Contrarian Fund are larger than the fees paid by most mutual funds, the Board
of Directors believes they are consistent with the fees paid by many funds with
similar investment characteristics and objectives. For the fiscal year ended
December 31, 1994, the Value & Income Fund paid advisory fees of $63,697, or
approximately 0.70 of 1% of the Fund's average daily net assets.
For the fiscal year ended December 31, 1994, the U.S. Government Securities
Fund paid advisory fees of $361,242, or approximately .50 of 1% of average net
assets. Heartland Advisors voluntarily waived a portion of its fee during that
year; had no fee waiver been in effect, the U.S. Government Securities Fund
would have paid $469,614 in advisory fees, or 0.65 of 1% of average net assets
for the year. At present, Heartland Advisors is voluntarily waiving 0.15 of 1%
of its investment advisory
PROSPECTUS
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fee for the U.S. Government Securities Fund, resulting in a currently effective
annual rate of 0.5 of 1% of average daily net assets. Heartland Advisors may
reinstate an additional portion or all of the fee at any time.
PORTFOLIO MANAGERS. William J. Nasgovitz and Hugh F. Denison have served as
portfolio managers for the Value Fund since commencement of its operations and
October of 1988, respectively. Mr. Nasgovitz and Patrick J. Retzer have served
as portfolio managers for the U.S. Government Securities Fund since October of
1988 and Mr. Nasgovitz has served as portfolio manager for the Small Cap
Contrarian Fund and the Value & Income Fund since commencement of their
respective operations. Mr. Nasgovitz has been President and a Director of
Heartland Advisors and Heartland since 1982 and was Senior Vice
President-Investments with Dain Bosworth Incorporated from 1988 to June of
1992. Mr. Denison has been Vice President and a Director of Heartland Advisors
since 1988 and a Director of Heartland since 1989. Mr. Retzer has been Vice
President and Treasurer of Heartland Advisors and Heartland since 1987, a
Director of Heartland Advisors since 1988 and a Director of Heartland since
1993.
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THE DISTRIBUTION PLAN
Each Fund has adopted a Distribution Plan which, among other things, requires
it to pay Heartland Advisors, as distributor, a quarterly distribution fee of
up to 0.25 of 1% of its average daily net assets computed on an annual basis.
Under each Plan, the Fund is obligated to pay distribution fees only to the
extent of expenses actually incurred by Heartland Advisors, as distributor, for
the current year, and thus there will be no carry-over expenses from previous
years. These expenses may include expenses incurred for media advertising, the
printing and mailing of prospectuses to persons other than shareholders, the
printing and mailing of sales literature, answering routine questions relating
to a Fund, and payments to selling representatives, authorized securities
dealers, financial institutions, or other service providers for providing
services in assisting investors with their investments and/or for providing
administrative, accounting and other services with respect to a Fund's
shareholders. No fee paid by a Fund under the Plans may be used to reimburse
Heartland Advisors for expenses incurred in connection with another Fund. Each
Distribution Plan will continue in effect, if not sooner terminated in
accordance with its terms, for successive one-year periods, provided that each
such continuance is specifically approved by the vote of the Directors,
including a majority of the Directors who are not interested persons, of
Heartland. For further information regarding the Distribution Plans, see the
Statement of Additional Information.
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NET ASSET VALUE CALCULATION
Each Fund's share price or net asset value per share is computed daily by
dividing the total value of the investments and other assets of the Fund, less
any liabilities, by the total outstanding shares of the Fund. The net asset
value per share is determined as of the close of the New York Stock Exchange
regular trading (generally 4:00 p.m. Eastern time) on each day the New York
Stock Exchange is opened.
Securities owned by the Funds are valued on the basis of market quotations or
at their fair value. Fair value of any of the Funds' debt securities for which
market quotations are not readily available will be determined by a pricing
service approved by Heartland's Board of Directors, based primarily upon
information concerning market transactions and dealer quotations for similar
securities. Debt securities having maturities of 60 days or less may be valued
at acquisition cost, plus or minus
PROSPECTUS
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any amortized discount or premium. Any securities or other assets for which
market quotations are not readily available will be valued in good faith at
their fair market value using methods determined by Heartland's Board of
Directors.
Foreign securities are valued on the basis of quotations from the
primary market in which they are traded, and are translated from the local
currency into U.S. dollars using current exchange rates. Fluctuations in the
value of such currencies in relation to the U.S. dollar may affect the net
asset value of Fund shares even if there has not been any change in the foreign
currency denominated values of such securities.
- --------------------------------------------------------------------------------
DESCRIPTION OF FUND SHARES
Heartland is a diversified open-end management investment company registered
under the Investment Company Act of 1940, which was organized in 1986 as a
Maryland corporation. The authorized common stock of Heartland consists of one
billion shares, $0.001 par value per share. Heartland is a series company,
which means the Board of Directors may establish additional series, and may
increase or decrease the number of shares in each series. The Funds are each a
separate diversified mutual fund series of Heartland. Currently, the Heartland
family of funds consists of the following series:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMENCED AUTHORIZED
FUND OPERATIONS SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Value Fund 12/28/84 100,000,000
Small Cap Contrarian Fund 4/27/95 100,000,000
Value & Income Fund 10/26/93 100,000,000
U.S. Government
Securities Fund 4/9/87 100,000,000
Wisconsin Tax Free Fund 4/3/92 100,000,000
Nebraska Tax Free Fund 9/27/93 100,000,000
</TABLE>
Each share has one vote, and when issued and paid for in accordance with the
terms of the offering will be fully paid and non-assessable. On matters
affecting an individual Heartland fund (such as approval of advisory contracts
and changes in fundamental policy of a fund) a separate vote of the shares of
that fund is required. Shares of a fund are not entitled to vote on any matter
not affecting that fund. All shares of each Heartland fund vote together in the
election of Directors at each meeting of shareholders at which directors are to
be elected and on other matters as provided by law, or Heartland's Articles of
Incorporation or Bylaws. Heartland's Bylaws do not require that meetings of
shareholders be held annually. However, special meetings of shareholders may be
called for purposes such as electing or removing directors, changing
fundamental policies or approving investment advisory contracts.
Shares of stock are redeemable at net asset value, less any applicable
contingent deferred sales charge, at the option of the shareholder. Shares
have no preemptive, cumulative voting, subscription or conversion rights and
are freely transferable. Shares can be issued as full shares or fractions of
shares. A fraction of a share has the same kind of rights and privileges as a
full share on a pro rata basis. Shareholder inquiries should be directed to
the Funds at the address shown on the back cover of the Prospectus.
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PORTFOLIO TRANSACTIONS
As provided in its Investment Advisory Agreement, Heartland Advisors is
responsible for each Fund's portfolio decisions and the placing of portfolio
transactions. Purchase and sale orders for a Fund's portfolio securities may be
effected through brokers who charge a commission for their services, although
it is expected that transactions in debt securities will generally be conducted
with dealers acting as principals.
PROSPECTUS
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30
<PAGE> 33
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In executing such transactions, Heartland Advisors seeks to obtain the best
net results for each Fund, taking into account such factors as price (including
the brokerage commission or dealer spread), size of order, competitive
commissions on similar transactions, difficulty of execution and operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. While Heartland Advisors seeks reasonably competitive rates, it
does not necessarily pay the lowest commission or spreads available.
Transactions in smaller companies in which the Value Fund and the Small Cap
Contrarian Fund invest may involve specialized services on the part of the
broker and thereby entail higher commissions or spreads than would be paid in
transactions involving more widely traded securities.
The Funds will not deal with Heartland Advisors in any transaction in which
Heartland Advisors acts as a principal. However, Heartland Advisors may serve
as broker to a Fund in over-the-counter transactions conducted on an agency
basis. Pursuant to plans adopted by Heartland's Board of Directors for each of
the Funds under, and subject to, the provisions of Rule 10f-3 under the
Investment Company Act of 1940, the Funds may purchase securities in an
offering from an underwriter which is a member of an underwriting syndicate of
which Heartland Advisors is also a member. The plans and Rule 10f-3 limit the
securities that may be so purchased, the time and manner of purchase, the
underwriting discount and amount of purchase, and require a review by the Board
of Directors of any such transactions at least quarterly.
Heartland Advisors may serve as a broker for any Heartland fund; however, in
order for Heartland Advisors to effect any portfolio transactions for the
funds, the commissions, fees or other remuneration received by Heartland
Advisors must be reasonable and fair compared to, and will not ordinarily be
larger than, the commissions, fees or other remuneration paid to other brokers
in connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange or on NASDAQ during a comparable
period of time.
Allocation of transactions, including their frequency, to various dealers is
determined by Heartland Advisors in its best judgment and in a manner deemed
fair and reasonable to shareholders. The primary consideration is prompt and
efficient execution of orders in an effective manner at the most favorable
price. Subject to this primary consideration, Heartland Advisors may also
consider sales of the shares of any or all of the Heartland funds as a factor
in the selection of broker-dealers to execute portfolio transactions.
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PERFORMANCE INFORMATION
From time to time each Fund may advertise its "yield" and "total return." Yield
is based on historical earnings and total return is based on historical
distributions; neither is intended to indicate future performance. The "yield"
of a Fund refers to the income generated by an investment in that fund over a
one-month period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during the month is assumed to be generated each month over a
12-month period and is shown as a percentage of the investment.
"Total return" of a Fund refers to the average annual total return for one,
five and ten-year periods (or the portion thereof during which a Fund has been
in existence). Total return is the change in redemption value of shares
purchased with an initial $1,000 investment, assuming the reinvestment of
dividends
PROSPECTUS
----------
31
<PAGE> 34
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and capital gain distributions and the redemption of the shares at the end of
the period. Prior to June 1, 1994, shares of the Funds had been sold subject to
a contingent deferred sales charge and prior to February 12, 1993, shares of
the Value and U.S. Government Securities Funds had been sold subject to an
initial sales charge, neither of which are reflected in the total return
figures, rather the figures reflect the current no-load sales structure.
Performance information should be considered in light of the particular Fund's
investment objectives and policies, characteristics and quality of its
portfolio securities and the market conditions during the applicable period,
and should not be considered as a representation of what may be achieved in the
future. Further information is contained in the Statement of Additional
Information.
Each Fund may, from time to time, compare its performance to other mutual funds
with similar investment objectives and to the industry as a whole, as quoted by
ranking services and publications, such as Lipper Analytical Services, Inc.,
CDA Technologies, Forbes, Money and Business Week. These rating services and
magazines rank the performance of the Funds against all funds over specified
periods and in specified categories. The Value Fund and the Small Cap
Contrarian Fund would appear in the Small Company Growth or Capital
Appreciation categories, the U.S. Government Securities Fund would appear in
the Fixed Income or U.S. Government Bond categories and the Value & Income Fund
would appear in the Growth and Income category. Each Fund may also compare its
performance to recognized stock and bond market indices, including Standard &
Poors 500 Stock Index, the Russell 2000 Stock Index, and the Lehman
Intermediate Government Bond Index.
PROSPECTUS
----------
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<PAGE> 35
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Notes:
PROSPECTUS
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<PAGE> 36
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HEARTLAND FUNDS
General Information:
1-800-HEARTLN or (414) 347-7777
Account/Price Information:
1-800-248-1162 (24 hrs.) or (414) 287-3702
- --------------------------------------------------------------------------------
HEARTLAND FUNDS
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
INVESTMENT ADVISOR and DISTRIBUTOR
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AND
DIVIDEND DISBURSING AGENT
Firstar Trust Company
Mutual Fund Services, 3rd Floor
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
AUDITOR
Arthur Andersen LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PROSPECTUS
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<PAGE> 37
<TABLE>
<S><C>
[Heartland HEARTLAND FUNDS Overnight Mail to: Regular Mail to:
Funds -------------------- Firstar Trust Company Firstar Trust Company
Logo] Account Application 615 E. Michigan P.O. Box 701
For help with this application, or for an Milwaukee, WI 53202 Milwaukee, WI 53201-0701
IRA or KEOGH account application, please call -------------------------------------------------------
1-800-HEARTLN. Account/Price Information: 1-800-248-1162 (24 hrs.) or
(414) 287-3702
General Information: 1-800-HEARTLN or (414) 347-7777
-------------------------------------------------------
1A. INDIVIDUAL AND JOINT ACCOUNTS 2. MAILING ADDRESS
Individual Account: Use Lines 1 & 3
Joint Account: Use Lines 1, 2 & 3 8._______________________________________________________
Street or P.O. Box
1._________________________________________________________
First name Initial Last name _______________________________________________________
City / State / Zip
2._________________________________________________________ _______________________________________________________
Joint tenant Initial Last name Home Phone (area code + number) Work Phone
3. EMPLOYER INFORMATION (REQUIRED BY THE NASD)
SOCIAL SECURITY NUMBER
3._________________________________________________________ 9._______________________________________________________
Social Security Number of Individual on Line 1 Employer Name
________________________________________________________
Occupation
1B. UNIFORM GIFT TO MINOR ACCOUNT (UGMA)
________________________________________________________
4._________________________________________________________ Street or P.O. Box
Custodian's Name
________________________________________________________
5._________________________________________________________ City / State / Zip
Minor's Name Minor's Social Security Number
/ / Yes / / No I am an associated person of a NASD
Member Firm, other than Heartland Advisors, Inc.
If yes, name of NASD Member Firm __________________
1C. CORPORATE PARTNERSHIPS, TRUSTS & OTHER
4. INVESTMENT
6.__________________________________________________________ I wish to open a Heartland account in the indicated amount
Name of Corporation or Entity Tax ID Number (minimum initial investment of $1,000, or no minimum
investment with the Automatic Investment Plan):
Make check payable to: Amount
/ /Heartland Value Fund (closed to new
investors effective 7/1/95) $_______________
7. REGISTRATION TYPE: / / Unincorporated Association / / Heartland Small Cap Contrarian Fund $_______________
/ / Heartland Value & Income Fund $_______________
/ / Corporation / / Partnership / / Trust / / Heartland U.S. Government
Securities Fund $_______________
5. AUTOMATIC MONTHLY INVESTMENT PLAN
Each month on the / /5th, / /20th or / / 5th and 20th, please withdraw AUTHORIZATION TO MY BANK
from my checking account in the amount of $_____________ and invest in - Please Attach Voided Check -
my: (Conditions on reverse side.)
/ / Value Fund account ($50 min., closed to new investors ________________________________________________________
effective 7/1/95) Bank Name
/ / Small Cap Contrarian account ($50 min.) ________________________________________________________
Name(s) on your Bank Account
/ / Value & Income Fund account ($50 min.) ________________________________________________________
Bank Address
/ / U.S. Government Securities Fund account ($50 min.) ________________________________________________________
Account Number
________________________________________________________
City / State / Zip
________________________________________________________
I (We) have read and understand the conditions of Heartland Funds Signature of Owner(s) - Required for Automatic Investing
Automatic Investment Plan. I (We) also understand that the Plan may
be terminated or modified at any time without notice by Heartland
Funds or Firstar Trust Company.
</TABLE>
<PAGE> 38
BE SURE TO COMPLETE ALL APPLICABLE SECTIONS AND SIGN!
<TABLE>
<S><C>
6. DIVIDENDS AND CAPITAL GAINS 8. INVESTMENT INFORMATION
All dividends and capital gains distributions a) What other funds do you own?_________________________
will be reinvested in the same Heartland fund _____________________________________________________
UNLESS a box below is checked.
/ / Pay dividends and capital gains distributions b) What is your average investment?_____________________
in cash. _____________________________________________________
/ / I would like to diversify my portfolio by c) Annual Income $ __________________________________
investing my distributions in another fund: d) Net Worth $ __________________________________
/ / Value Fund (closed to new
investors effective 7/1/95) A/C #____________ / / I am a resident of Wisconsin or Nebraska, please
/ / Small Cap Contrarian Fund A/C #____________ send a prospectus for the Heartland Wisconsin Tax
/ / Value & Income Fund A/C #____________ Tax Free and Nebraska Tax Free Funds.
/ / U.S. Government Securities / / Please send a prospectus for the Portico Money
Fund A/C #____________ Market Fund
7. TELEPHONE PRIVILEGES 9. DUPLICATE STATEMENT FOR ADVISOR/PLANNER
I (We) hereby authorize the Agent to honor any Please send duplicate confirmation statements to the
telephone requests believed to be genuine in Financial Advisor, Planner or other interested party as
accordance with the procedures discussed in the listed below:
prospectus UNLESS refused by checking the _______________________________________________________
appropriate box below. Name of Advisor/Planner/Dealer
TO WITHHOLD SUCH AUTHORIZATION, YOU MUST CHECK _______________________________________________________
THE APPROPRIATE BOX BELOW. Company Name
_______________________________________________________
Telephone EXCHANGE Privilege Address
/ / NO telephone exchange privilege for me or _______________________________________________________
my Advisor. City/State/Zip
_______________________________________________________
Telephone REDEMPTION Privilege Advisor/Planner/Dealer No.
/ /NO telephone redemption privilege for me X______________________________________________________
or my Advisor. Customer Signature (authorizes duplicate statements)
10. SHAREHOLDER SIGNATURE(S)
I (We) am (are) or legal age to have received X______________________________________________________
and read the Prospectus and agree to its terms. Signature of Shareholder Date
I authorize any instruction contained herein
and certify, under penalties of perjury X______________________________________________________
Signature of Co-Owner (if any) Date
1. that the social security or other taxpayer
identification number is correct, and SIGN HERE IF APPLICABLE TO YOUR ACCOUNT:
(strike if not true) _______________________________________________________
2. that I am not subject to withholding either Corporate Officer/Partner/Trustee Title
because I have not been notified that I am
subject to withholding as a result of a _______________________________________________________
failure to report all interest or dividends, Corporate Officer/Partner/Trustee Title
or I was subject to withholding and the
Internal Revenue Service has notified me
that I am no longer subject to withholding.
- ------------------------------------------------------------------------------------------------------------------------
AUTOMATIC INVESTING - AUTHORIZATION TO MY BANK
(continued from reverese side)
I (We) authorize you via the ACH Network to honor all debit entries initiated by me from time to time through Mellon
Bank on behalf of the Firstar Trust Company. All such debits are subject to sufficient collected funds in my account
to pay the debit when presented.
I (We) agree that your treatment of each entry, and your rights to respect it, shall be the same as if it were signed
personally by me (or either or both os us as appropriate). I (We) further agree that if any such entries are dishonored
with good and sufficient cause, you shall be under no liability whatsoever.
</TABLE>
