HEARTLAND GROUP INC, N-30D, 1996-03-01

HEARTLAND GROUP INC
N-30D, 1996-03-01

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<PAGE> 1
[logo] Heartland Funds
Annual Report
December 31, 1995

[photo of people]

Wisconsin Tax Free Fund
<PAGE> 2

FEBRUARY 22, 1996
Dear Fellow Shareholders,

[PHOTO OF PAT RETZER] On a performance basis, 1995 was the best year in
history for the Wisconsin Tax Free Fund. Our Fund's
net asset value increased from $9.21 to $10.30, while
paying out dividends of $.51 per share, for a total return of 17.8%. The Fund's
dividends were 100% exempt from Wisconsin and federal income tax.* On December
31, 1995, the Fund had total assets of $118.2 million, making it by far the
largest, most diversified Wisconsin tax-free fund.

We believe the Fund remains an excellent investment for the following
reasons:

1. MONTHLY TAX-FREE INCOME.
A 5.0% January yield* free from federal and Wisconsin tax, which is
equivalent to a taxable yield of up to 9.1%. (Of course, monthly yields
will fluctuate.) The average annual returns through 12/31/95 for the
one-year period and since inception on 4/3/92 were 17.8% and 7.0%,
respectively.

2. THE FEDERAL RESERVE IS CUTTING INTEREST RATES.
With the economy slowing, the dollar rising and inflation not a problem,
we expect the Fed to continue lowering interest rates, which gives us a
favorable outlook on the bond market.

3. 100% NO-LOAD.
Ours is the only Wisconsin double tax-free fund that has no sales charge
(no front-end, no back-end, no 12b-1). Compare our yield and returns to
the others!

We believe an attractive monthly yield, free from federal and Wisconsin
income tax, and no sales charge all combine to make the Fund a compelling
investment in this period of falling interest rates. If you have any questions
about Wisconsin's largest, most diversified and only no-load tax-free fund,
please call us at 1-800-432-7856.

Sincerely,

/s/ Patrick J. Retzer
Senior Vice President / Director of Fixed Income

* SEC yield annualized for the 30 days commencing 1/1/96. For 1995, 7.32% of the
income from the Fund was an item of tax preference for purposes of computing the
federal alternative minimum tax. The performance data quoted represents past
performance. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.

1
<PAGE> 3
WISCONSIN TAX FREE FUND

[line chart illustrating performance of an assumed investment of $10,000 in the
Heartland Wisconsin Tax Free Fund and the Lehman 20 Year Municipal Bond Index
beginning on 4/3/92 as follows:

<TABLE>
<CAPTION>
Heartland
Wisconsin Fund Lehman Muni Index
<S> <C> <C>
12/31/92 $10,546 $10,966
12/31/93 11,686 12,543
12/31/94 10,928 11,622
12/31/95 12,869 14,058
</TABLE>

Legend in graph states that Past Performance is not predictive of future
returns.

A box in the graph states Average Annual Total Returns as of 12/31/95 as
follows:
one year 17.8%
since inception 4/3/92 7.0%]

- - MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Nineteen ninety-five saw a rebound in the tax free bond market after a dismal
1994. Interest rates dropped substantially due to a slowing economy, low
inflation and the stabilization of the U.S. Dollar versus other major
currencies. The yield on the 30-year Treasury bond dropped from 7.88% at the end
of 1994 to 5.95% at the end of 1995, resulting in substantially higher prices
for intermediate and long-term taxable and tax-free bonds.
With tax-free yields at high levels at the beginning of 1995 and
expectations of positive fundamentals, we had a favorable outlook for the tax-
free bond market and consequently kept the Fund's average maturity rather long
throughout the year, between 21.3 and 19.4 years. That strategy proved
successful for our shareholders as the tax-free bond market turned in a strong
performance and the Heartland Wisconsin Tax Free Fund had the best year since
its inception, with a total return of 17.8%.
The Fund did underperform the Lehman Brothers 20 Year Municipal Bond Index
by a small margin for two reasons. First of all, the Wisconsin Tax Free Fund,
like all mutual funds, incurs operating expenses while the index return does not
reflect any expenses of running a portfolio. Secondly, Wisconsin tax-free bonds
typically yield slightly less than municipal bonds from other states because
their income is exempt from the substantial Wisconsin income tax.
Looking to 1996, we have maintained a relatively long average maturity of
19.4 years because we continue to have a favorable outlook for tax-free bonds,
as well as the bond market in general.

2
<PAGE> 4

Q. HOW IS HEARTLAND'S WISCONSIN TAX FREE FUND DIFFERENT FROM THE OTHERS?

A. Heartland's is Wisconsin's LARGEST, OLDEST, MOST DIVERSIFIED and ONLY 100%
NO-LOAD double tax-free fund.

LARGEST
Our Wisconsin Tax Free Fund is several times the size of the next largest. In
our experience, that gives us a dominant position in the Wisconsin tax-free
market, enabling us to invest in more Wisconsin-based issues than our
competitors and provide our shareholders the benefits of economies of scale.

OLDEST
Heartland has more experience managing a Wisconsin tax-free fund than our
competitors, and is located in Wisconsin in close proximity to the market.

MOST DIVERSIFIED
Since most Wisconsin tax-free issues are not insured, it is important to have a
diversified portfolio. Our Fund currently holds over 200 different issues,
several times the number of issues held by our competitors.

100% NO-LOAD
Our Wisconsin Fund has no sales charges - front-end, back-end or 12b-1 fees. All
of your investment goes to work for you in the Fund. All things being equal, a
fund that has a 12b-1 fee will have a higher expense ratio and, as a result,
will have a lower yield than a fund that doesn't charge investors a 12b-1 fee.
The other Wisconsin funds all have one or more of these sales charges.
Front-end loads cause an immediate reduction in the size of your investment. A
back-end charge functions similarly to a multi-year penalty for early
withdrawal.

TO A WISCONSIN INVESTOR SEEKING AN ATTRACTIVE YIELD, PAID MONTHLY, FREE FROM
FEDERAL AND WISCONSIN INCOME TAX,* WE BELIEVE THE HEARTLAND WISCONSIN TAX FREE
FUND IS THE OBVIOUS CHOICE.

* For 1995, 7.32% of the income from the Fund was an item of tax preference for
purposes of computing the federal alternative minimum tax.

3
<PAGE> 5

- - HEARTLAND WISCONSIN TAX FREE FUND

We believe this creates an opportunity for investors to earn relatively
high tax-free yields. For example, a 5% double tax-free yield is equivalent to a
taxable yield of up to 9.1%, depending on your tax bracket. This compares very
favorably to yields available on taxable investments.
On the table below, find your tax rate and look down the column to find the
taxable equivalent yield you would need to match the Fund's January yield on an
after-tax basis:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE OF DOUBLE-TAX FREE INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Bracket...... 28.0% 31.0% 36.0% 39.6%

Effective
Federal Tax Rates.... 29.4(1) 32.6(1) 37.8(1) 40.8(2)

Wisconsin Tax Rates.. 6.9 6.9 6.9 6.9

Combined Rates....... 34.3% 37.2% 42.1% 44.9%

HEARTLAND
TAX FREE YIELD:* TAX EQUIVALENT YIELDS

- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.0% 7.6% 8.0% 8.6% 9.1%
- --------------------------------------------------------------------------------
</TABLE>

* January SEC yield annualized for the 30 days commencing 1/1/96. For 1995,
7.32% of the income from the Fund was an item of tax preference for
purposes of computing the federal alternative minimum tax.
(1) Based on 28%, 31% and 36% federal rates, adjusted for the phase-out of
itemized deductions and personal exemptions.
(2) Based on 36% federal rate, 10% surcharge and phase-out of itemized
deductions. This chart is for illustrative purposes only, and not intended
to predict actual yields. While market values may fluctuate inversely with
interest rates, interest and principal payments of government bonds are
backed by the full faith of the U.S. Treasury.

4
<PAGE> 6
SHAREHOLDER SERVICES

- - PERSONAL HEARTLAND REPRESENTATIVE
You can speak to a personal Heartland representative between the hours of 7:00
a.m. and 6:30 p.m. CST, Monday through Friday and 8:30 a.m. to 12:30 p.m. CST on
Saturday.

- - FREQUENT UPDATES BY PORTFOLIO MANAGERS
Concerned about the financial markets? Wondering how your Fund is currently
positioned? Heartland shareholders have free access to regular updates recorded
by each Fund's portfolio manager. Call 24 hours a day.

- - LOW MINIMUM INVESTMENT
Open a regular account with a low initial investment of $1,000. Monthly
automatic investment plans begin with no initial minimum and $50 a month minimum
thereafter.

- - AUTOMATED SERVICES
Automated options include daily prices, account information including your last
two transactions, and prospectus and literature requests. Call 24 hours a day.

[PICTURE OF SHAREHOLDER SERVICES TEAM]

- - AUTOMATIC INVESTMENT PLAN
Make automatic regular investments into any Heartland Fund directly from your
checking account on a monthly or twice-monthly basis.

- - FREE INVESTMENT SEMINARS
Heartland sponsors both local and national investment seminars. You can request
free tickets to the various ISI Money Shows we sponsor. They are a great
opportunity to meet your portfolio managers and visit with other nationally
recognized financial advisors.

1-800-HEARTLN
(1-800-432-7856)

5
<PAGE> 7
HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
QUOTED
MARKET
PAR VALUE
AMOUNT DESCRIPTION COUPON MATURITY NOTE 1(a)
- -------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 98.7%
<S> <C> <C> <C> <C>
WISCONSIN - 70.7%
$ 20,000 Amery, WI Housing Authority - Revenue Bonds .......... 7.375% 05/01/2005 $ 21,250
125,000 Barron, WI Housing Authority - Maplecroft Project .... 0.000 10/01/2004 74,940
35,000 Barron, WI Housing Authority - Maplecroft Project .... 0.000 10/01/2005 19,735
130,000 Barron, WI Housing Authority - Maplecroft Project .... 0.000 10/01/2006 68,904
85,000 Barron, WI Housing Authority - Maplecroft Project .... 0.000 10/01/2007 42,324
130,000 Barron, WI Housing Authority - Maplecroft Project .... 0.000 10/01/2008 60,775
520,000 Barron, WI Housing Authority - Maplecroft Project .... 5.375 10/01/2011 508,300
3,280,000 Brown County, WI Housing Auth. - R.P. Terrace ........ 6.500 06/01/2019 3,431,700
75,000 Dane County, WI Housing Auth. - Forest Harbor Apt .... 5.950 07/01/2013 75,844
25,000 Dane County, WI Housing Auth. - Forest Harbor Apt .... 6.000 07/01/2014 25,183
265,000 De Forest, WI Redev. Auth.- Lease Revenue Bonds ...... 6.200 02/01/2014 280,900
435,000 De Forest, WI Redev. Auth.- Lease Revenue Bonds ...... 6.250 02/01/2018 461,100
685,000 Eau Claire, WI Housing Auth. -London Hill ............ 6.250 05/01/2015 704,694
550,000 Elkhart Lake, WI CDA ................................. 6.000 04/01/2015 563,063
10,000 Franklin, WI CDA ..................................... 5.400 04/01/2003 10,000
250,000 Franklin, WI CDA ..................................... 5.850 04/01/2006 264,293
1,000,000 Franklin, WI CDA ..................................... 6.050 04/01/2008 1,063,750
890,000 Franklin, WI CDA ..................................... 6.100 04/01/2010 952,496
250,000 Franklin, WI CDA ..................................... 6.150 04/01/2012 265,625
3,055,000 Green Bay, WI Housing Authority -Pheasant Run......... 6.500 09/01/2019 3,165,744
100,000 Hartford, WI CDA ..................................... 5.450 12/01/2002 105,875
200,000 Hartford, WI CDA ..................................... 5.800 12/01/2005 215,000
210,000 Hartford, WI CDA ..................................... 6.000 12/01/2007 223,579
225,000 Hartford, WI CDA ..................................... 6.100 12/01/2008 240,750
10,000 Hudson, WI Christian Community Home .................. 8.000 07/01/2005 10,000
55,000 Hudson, WI Christian Community Home .................. 6.700 05/01/2008 56,379
75,000 Hudson, WI Christian Community Home .................. 6.800 05/01/2009 76,866
65,000 Hudson, WI Christian Community Home .................. 6.900 05/01/2010 66,706
250,000 Hudson, WI Christian Community Home .................. 7.000 05/01/2023 255,313
160,000 Jackson, WI CDA - Revenue Bonds ...................... 6.500 12/01/2006 173,106
105,000 Jackson, WI CDA - Revenue Bonds ...................... 6.600 12/01/2007 114,804
180,000 Jackson, WI CDA - Revenue Bonds ...................... 6.700 12/01/2008 198,450
260,000 Jackson, WI CDA - Revenue Bonds ...................... 6.800 12/01/2009 289,775
285,000 Jackson, WI CDA - Revenue Bonds ...................... 6.900 12/01/2010 310,647
350,000 Jackson, WI CDA - Revenue Bonds ...................... 7.000 12/01/2012 389,375
390,000 Jackson, WI CDA - Revenue Bonds ...................... 7.000 12/01/2013 433,388
430,000 Jackson, WI CDA - Revenue Bonds ...................... 7.000 12/01/2014 477,300
345,000 Jackson, WI CDA - Revenue Bonds ...................... 7.000 12/01/2015 382,519
515,000 Jackson, WI CDA - Revenue Bonds ...................... 7.000 12/01/2016 570,363
500,000 Jackson, WI CDA - Revenue Bonds ...................... 7.000 12/01/2017 553,125
1,760,000 La Crosse, WI Housing Authority Forest Park Project .. 6.375 12/01/2018 1,808,400
945,000 La Crosse, WI Housing Authority Ping Manor Project ... 6.000 04/01/2005 963,900
1,100,000 La Crosse, WI Housing Authority Ping Manor Project ... 6.375 04/01/2012 1,142,624
305,000 Madison, WI CDA Dempsey Manor Project ................ 6.400 10/01/2018 314,913
160,000 Madison, WI CDA Dempsey Manor Project ................ 6.650 10/01/2025 162,800
1,435,000 Madison, WI CDA Edgewood College ..................... 6.250 04/01/2014 1,479,843
95,000 Madison, WI CDA Greentree Project - Series A ......... 7.300 09/01/2032 96,663
1,000,000 Madison, WI CDA Meriter Retirement Project ........... 6.125 12/01/2019 1,036,250
45,000 Madison, WI CDA Monticello Apartments Project ........ 7.125 04/01/2009 45,956
100,000 Marinette, WI Housing Authority-Multifamily-Series A.. 6.750 02/01/2024 105,125
165,000 Markesan, WI CDA Elderly Housing Revenue Bonds ....... 6.750 10/01/2009 165,388
190,000 Markesan, WI CDA Elderly Housing Revenue Bonds ....... 6.900 10/01/2011 191,663
</TABLE>

6
<PAGE> 8
HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
SCHEDULE OF INVESTMENTS [CONT'D] - DECEMBER 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
QUOTED
MARKET
PAR VALUE
AMOUNT DESCRIPTION COUPON MATURITY NOTE 1(a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WISCONSIN - [CONT'D]
$ 100,000 Menomonee Falls, WI CDA Village Square Project ......... 5.200% 08/01/2009 $ 95,125
950,000 Menomonee Falls, WI CDA Village Square Project ......... 5.350 09/01/2016 879,938
215,000 Milwaukee, WI Housing Authority Blatz Apartments ....... 7.500 12/01/2028 226,019
50,000 Milwaukee, WI New Public Housing Authority ............. 5.000 09/01/2010 48,462
100,000 Milwaukee, WI Redevelopment Auth. Campus Town .......... 5.550 11/01/2012 101,750
3,000,000 Milwaukee, WI Redevelopment Auth. Campus Town .......... 5.700 11/01/2018 3,071,250
55,000 Milwaukee, WI Redevelopment Auth. Dynapro, Inc. ........ 5.300 12/01/2007 56,169
65,000 Milwaukee, WI Redevelopment Auth. Dynapro, Inc. ........ 5.350 12/01/2008 66,138
55,000 Milwaukee, WI Redevelopment Auth. Dynapro, Inc. ........ 5.400 12/01/2010 55,344
225,000 Milwaukee, WI Redevelopment Auth. Dynapro, Inc. ........ 5.500 12/01/2013 226,969
1,955,000 Milwaukee, WI Redevelopment Authority MSOE ............. 6.000 10/01/2017 2,011,206
1,385,000 Milwaukee, WI Redevelopment Authority MSOE ............. 6.000 10/01/2017 1,424,818
500,000 Milwaukee, WI Redevelopment Authority Schlitz Park II... 5.000 01/01/2015 510,625
10,000 Milwaukee, WI Redevelopment Auth.-School Improve ....... 0.000 03/01/2004 6,325
1,300,000 Milwaukee, WI Re.Auth. Wis. Ave./M.L. King, Jr. Dr ..... 5.500 03/01/2008 1,349,946
1,705,000 Milwaukee, WI Re.Auth. Wis. Ave./M.L. King, Jr. Dr ..... 5.600 03/01/2009 1,774,666
1,755,000 Milwaukee, WI Re.Auth. Wis. Ave./M.L. King, Jr. Dr ..... 5.600 09/01/2009 1,821,637
11,000,000 Milwaukee, WI Re.Auth. Wis. Ave./M.L. King, Jr. Dr ..... 5.500 09/01/2012 11,137,500
65,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 11/01/2003 42,006
65,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 11/01/2004 39,250
70,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 05/01/2005 40,863
65,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 11/01/2005 36,763
70,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 05/01/2006 38,317
65,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 11/01/2006 34,450
70,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 05/01/2007 35,911
65,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 11/01/2007 32,254
70,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 05/01/2009 31,531
65,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 11/01/2009 28,358
70,000 New Berlin, WI Housing Authority Apple Glen ............ 0.000 05/01/2010 29,575
1,210,000 New Berlin, WI Housing Authority Apple Glen ............ 6.700 11/01/2017 1,294,700
650,000 New Berlin, WI Housing Authority Apple Glen ............ 6.700 11/01/2020 695,500
125,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.400 05/01/2008 133,041
125,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.400 11/01/2008 133,264
105,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.500 05/01/2009 112,008
125,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.600 05/01/2010 134,219
150,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.700 05/01/2011 161,799
155,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.700 11/01/2011 166,162
165,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.800 11/01/2012 178,792
160,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.850 05/01/2013 173,626
165,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.850 11/01/2013 178,406
135,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.900 05/01/2014 146,309
190,000 New Berlin, WI Housing Authority Pinewood Creek ........ 6.900 11/01/2014 206,150
1,015,000 New Berlin, WI Housing Authority Pinewood Creek ........ 7.125 05/01/2024 1,102,543
80,000 Oak Creek, WI Housing Authority Country Oaks II ........ 6.000 08/01/2010 81,300
1,440,000 Oak Creek, WI Housing Authority Country Oaks II ........ 6.200 08/01/2017 1,463,400
2,980,000 Oak Creek, WI Housing Authority Country Oaks II ........ 6.300 08/01/2028 3,117,825
10,000 Oak Creek, WI Housing Authority -Multifamily ........... 7.750 03/01/2031 10,538
100,000 Oak Creek, WI Housing Authority Wood Creek ............. 27.750 07/20/1998 154,625
50,000 Oak Creek, WI Housing Authority Wood Creek ............. 0.000 07/20/2007 25,409
35,000 Oak Creek, WI Housing Authority Wood Creek ............. 0.000 01/20/2010 15,050
125,000 Oak Creek, WI Housing Authority Wood Creek ............. 0.000 01/20/2011 50,248
125,000 Oak Creek, WI Housing Authority Wood Creek ............. 0.000 07/20/2011 48,750
65,000 Oak Creek, WI Housing Authority Wood Creek ............. 0.000 01/20/2012 24,595
125,000 Oak Creek, WI Housing Authority Wood Creek ............. 0.000 01/20/2013 44,219
</TABLE>

7
<PAGE> 9
HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
SCHEDULE OF INVESTMENTS [CONT'D] - DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
QUOTED
MARKET
PAR VALUE
AMOUNT DESCRIPTION COUPON MATURITY NOTE 1(a)
- ----------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 98.7%
<S> <C> <C> <C> <C>

WISCONSIN - [CONT'D]
$ 125,000 Oak Creek, WI Housing Authority Wood Creek ............... 0.000% 07/20/2013 $ 43,193
60,000 Oak Creek, WI Housing Authority Wood Creek ............... 0.000 01/20/2014 19,800
1,000,000 Oak Creek, WI Housing Authority Wood Creek ............... 5.500 07/20/2019 1,007,500
2,130,000 Oak Creek, WI Housing Authority Wood Creek ............... 5.625 07/20/2029 2,079,413
50,000 Omro, WI CDA Revenue Bonds ............................... 5.750 12/01/2006 53,875
335,000 Omro, WI CDA Revenue Bonds ............................... 5.875 12/01/2011 355,938
200,000 Outagamie, WI Housing Authority First Mortgage ........... 5.000 11/15/2003 197,250
5,000 Racine, WI Elderly Housing Authority Lincoln Lutheran .... 7.100 10/01/2004 5,000
50,000 Reedsville, WI - New Public Housing Authority ............ 5.125 04/01/2011 48,834
170,000 Schofield, WI CDA Lease Revenue .......................... 6.000 10/01/2012 175,353
500,000 Schofield, WI CDA Lease Revenue .......................... 6.200 10/01/2017 519,375
315,000 Sheboygan, WI Housing Authority Multifamily Housing ...... 6.900 02/01/2024 327,994
175,000 Sheboygan, WI Housing Authority - Rocky Knoll Project .... 5.250 12/01/2013 165,594
125,000 Sheboygan, WI Housing Authority - Rocky Knoll Project .... 5.300 12/01/2016 118,281
35,000 Slinger, WI Redevelopment Authority ...................... 5.800 09/01/2007 36,418
95,000 Slinger, WI Redevelopment Authority ...................... 5.850 09/01/2008 99,275
540,000 Slinger, WI Redevelopment Authority ...................... 6.250 09/01/2017 567,000
100,000 Stevens Point, WI CDA Mortgage Refunding ................. 6.500 09/01/2006 107,750
560,000 Stevens Point, WI CDA Mortgage Refunding ................. 6.625 09/01/2009 597,800
435,000 Sturtevant, WI CDA Redevelopment Lease ................... 5.700 12/01/2009 441,490
375,000 Sturtevant, WI CDA Redevelopment Lease ................... 5.800 12/01/2010 384,626
200,000 Sturtevant, WI CDA Redevelopment Lease ................... 5.900 12/01/2011 206,250
1,000,000 Sturtevant, WI CDA Redevelopment Lease ................... 6.000 12/01/2015 1,040,000
200,000 Sturtevant, WI CDA Redevelopment Lease ................... 6.500 12/01/2015 216,500
105,000 St. Croix Falls, WI CDA Lease Revenue .................... 5.900 12/01/2006 108,572
115,000 St. Croix Falls, WI CDA Lease Revenue .................... 6.000 12/01/2007 119,600
1,190,000 St. Croix Falls, WI CDA Lease Revenue .................... 6.400 12/01/2014 1,240,575
305,000 Superior, WI RA Superior Memorial Hospital Mortgage ...... 5.700 05/01/2009 316,056
195,000 Sussex, WI CDA Revenue Bond .............................. 5.700 04/01/2007 199,388
1,900,000 Sussex, WI CDA Revenue Bond .............................. 6.100 04/01/2015 1,971,250
270,000 Two Rivers, WI CDA Arch Forest Project ................... 6.350 12/15/2012 284,850
500,000 Waukesha, WI HA - Multifamily Brookfield Woods ........... 6.750 12/01/2034 $ 511,875
5,000 Waukesha, WI HA - Multifamily Summit Woods ............... 7.375 12/01/2024 5,000
10,000 Waukesha, WI HA- Multifamily - Court Apartments .......... 6.300 12/01/2013 10,000
1,000,000 Waukesha, WI HA- Multifamily - Court Apartments .......... 6.000 04/01/2036 941,250
15,000 Waukesha, WI HA - Westgrove Woods II ..................... 8.250 12/01/2020 15,000
20,000 Waukesha, WI HA - Westgrove Woods III .................... 8.000 12/01/2020 20,625
5,000 Waukesha, WI RA - Barstow Associates ..................... 4.875 08/01/2010 5,000
95,000 Waupaca, WI CDA .......................................... 6.100 10/01/2008 99,208
100,000 Waupaca, WI CDA .......................................... 6.100 10/01/2009 104,382
100,000 Waupaca, WI CDA .......................................... 6.200 10/01/2010 104,620
110,000 Waupaca, WI CDA .......................................... 6.200 10/01/2011 115,411
120,000 Waupaca, WI CDA .......................................... 6.200 10/01/2012 126,000
75,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 05/01/2003 49,938
100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 11/01/2003 64,625
105,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 05/01/2004 65,691
100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 11/01/2004 60,384
70,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 05/01/2005 40,863
100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 11/01/2005 56,558
105,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 05/01/2006 57,475
100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 11/01/2006 53,000
105,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 05/01/2007 53,867
100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 11/01/2007 49,621
105,000 Wauwatosa, WI HA - Hawthorne Terrace Project ............. 0.000 05/01/2008 50,400
</TABLE>

8
<PAGE> 10
HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
SCHEDULE OF INVESTMENTS [CONT'D] - DECEMBER 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
QUOTED
MARKET
PAR VALUE
AMOUNT DESCRIPTION COUPON MATURITY NOTE 1(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WISCONSIN - [CONT'D]
$ 100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 0.000% 11/01/2008 $ 46,506
105,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 0.000 05/01/2009 47,296
100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 0.000 11/01/2009 43,628
105,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 0.000 05/01/2010 44,363
100,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 0.000 11/01/2010 40,820
1,200,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 6.700 11/01/2015 1,246,500
1,060,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 6.700 11/01/2019 1,097,100
670,000 Wauwatosa, WI HA - Hawthorne Terrace Project ................... 6.700 11/01/2022 693,450
2,720,000 West Allis, WI CDA Poblocki Investments Project ................ 6.100 05/01/2007 2,886,600
150,000 Whitewater, WI Multifamily Housing Revenue Bonds ............... 5.375 11/15/2005 152,813
100,000 Winnebago County, WI HA - 1st Mortgage Rev. Bonds .............. 5.625 05/01/2005 101,375
105,000 Winnebago County, WI HA - 1st Mortgage Rev. Bonds .............. 5.625 05/01/2006 106,111
115,000 Winnebago County, WI HA - 1st Mortgage Rev. Bonds .............. 5.625 05/01/2007 115,777
120,000 Winnebago County, WI HA - 1st Mortgage Rev. Bonds .............. 5.625 05/01/2008 120,254
125,000 Winnebago County, WI HA - 1st Mortgage Rev. Bonds .............. 5.625 05/01/2009 124,616
135,000 Winnebago County, WI HA - 1st Mortgage Rev. Bonds .............. 5.625 05/01/2010 133,819
140,000 Winnebago County, WI HA Multifamily Housing .................... 6.750 10/01/2020 140,566
10,000 Winnebago County, WI Housing Authority - Series A .............. 6.000 03/01/1999 10,350
195,000 Winnebago County, WI Housing Authority - Series A .............. 6.875 03/01/2012 203,531
380,000 Winnebago County, WI Housing Authority - Series A .............. 7.125 03/01/2022 397,575
10,000 Winnebago County, WI Housing Authority - Series A .............. 6.100 03/01/2000 10,425
10,000 Winnebago County, WI Housing Authority - Series A .............. 6.200 03/01/2001 10,525
15,000 Winnebago County, WI Housing Authority - Series A .............. 6.300 03/01/2002 15,900
20,000 WHEDA Home Ownership ........................................... 7.375 09/01/2017 20,550
290,000 WHEDA Home Ownership ........................................... 6.100 06/01/2021 325,888
130,000 WHEDA Home Ownership ........................................... 0.000 12/01/2007 41,438
5,000 Wisconsin Rapids, WI HA River Run Project ...................... 7.625 05/01/2009 5,000
60,000 Wittenberg, WI Housing Authority ............................... 7.200 06/20/2030 61,875
-----------
83,783,342
-----------
PUERTO RICO - 20.2%
400,000 Puerto Rico Commonwealth - Public Improvement .................. 5.850 07/01/2011 412,816
420,000 Puerto Rico Commonwealth - Public Improvement .................. 5.500 07/01/2013 418,879
4,450,000 Puerto Rico Commonwealth - Public Improvement .................. 5.250 07/01/2018 4,238,135
635,000 Puerto Rico Commonwealth Hwy / Transportation .................. 6.375 07/01/2008 687,102
5,455,000 Puerto Rico Commonwealth Hwy / Transportation .................. 5.500 07/01/2017 5,359,537
2,915,000 Puerto Rico Commonwealth Hwy / Transportation .................. 5.750 07/01/2018 2,921,734
1,150,000 Puerto Rico Commonwealth Hwy / Transportation .................. 5.250 07/01/2020 1,085,186
990,000 Puerto Rico Electric Power Authority - Series O ................ 0.000 07/01/2017 289,813
3,350,000 Puerto Rico Electric Power Authority ........................... 6.250 07/01/2017 3,527,717
280,000 Puerto Rico Electric Power Authority ........................... 7.000 07/01/2021 320,152
1,560,000 Puerto Rico Housing Bank and Finance Agency .................... 5.250 12/01/2006 1,554,150
135,000 Puerto Rico Housing Finance Corporation ........................ 7.500 10/01/2015 144,113
250,000 Puerto Rico Industrial, Medical, & Environmental Authority ..... 6.000 06/01/2000 263,437
1,625,000 Puerto Rico Municipal Finance Agency ........................... 5.875 07/01/2007 1,706,250
1,000,000 Puerto Rico Public Buildings Authority ......................... 5.500 07/01/2021 971,110
-----------
23,900,131
-----------
GOVERNMENT OF GUAM - 7.8%
3,400,000 Guam Power Authority - Series A ................................ 6.300 10/01/2012 3,472,250
250,000 Guam Power Authority - Series A ................................ 5.250 10/01/2013 228,750
1,000,000 Guam Power Authority - Series A ................................ 5.250 10/01/2023 887,500
1,000,000 Guam Government G.O. - Series A ................................ 5.375 11/15/2013 920,530
3,000,000 Guam Government G.O. - Series A ................................ 5.400 11/15/2018 2,688,750
1,000,000 Guam Airport Authority - Series B .............................. 6.400 10/01/2005 1,045,990
-----------
9,243,770
-----------
</TABLE>

9
<PAGE> 11
HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
SCHEDULE OF INVESTMENTS [CONT'D] - DECEMBER 31, 1995

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
QUOTED
MARKET
PAR VALUE
AMOUNT DESCRIPTION COUPON MATURITY NOTE 1(a)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW PUBLIC HOUSING AUTHORITIES - 0.0%
$ 35,000 Burleigh County, ND - New Public Housing Authority...4.875% 01/01/2011 $ 33,348
------------
33,348

TOTAL INVESTMENTS - 98.7% (Cost $113,562,632) ........................ $116,960,591
Cash and receivables, less liabilities - 1.3% ........................ 1,552,529
------------
TOTAL NET ASSETS (Note 5) (+) ........................................ $118,513,120
============
</TABLE>

(+) Percentages for the various classifications use total net assets
as a basis.
The accompanying notes to financial statements are an integral
part of this schedule.

OPERATIONS:
Net investment income ......................................................... $ 5,840,227 $ 5,680,781
Net realized losses on investments ............................................ (526,526) (378,901)
Net increase in unrealized appreciation (depreciation) on
investments for the period .................................................... 12,775,102 (12,654,512)
------------- -------------
Net increase (decrease) in net assets resulting from operations ........... 18,088,803 (7,352,632)
------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($.51 and $.51 per share, respectively) ....................................... (5,840,227) (5,680,781)
Total distributions .......................................................
------------- -------------

FUND SHARE ACTIVITIES:
Proceeds from shares issued (1,676,647 and 3,803,454 shares, respectively) .... 16,460,562 37,450,244
Net asset value of shares issued in reinvestment of distributions from net
investment income and net realized gains
(407,053 and 404,977 shares, respectively) .................................... 4,034,053 3,894,578
Cost of shares redeemed (1,621,142 and 2,738,810 shares, respectively) ........ (15,978,889) (25,912,208)
Net increase in net assets derived from Fund share activities .............
------------- -------------
TOTAL INCREASE ................................................................

NET ASSETS AT THE BEGINNING OF THE YEAR ............................................ 101,748,818 99,349,617
------------- -------------

NET ASSETS AT THE END OF THE YEAR (NOTE 5) ......................................... $ 118,513,120 $ 101,748,818
============= =============
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.

10
<PAGE> 12
<TABLE>
<CAPTION>
HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at quoted market value (Cost $113,562,632) .............. $116,960,591
Accrued interest ................................................................... 1,949,243
Deferred organization expense (Note 3) ............................................. 3,792
-----------
Total assets ................................................................... 118,913,626
-----------

LIABILITIES:
Payable to transfer agent .......................................................... 304,801
Payable for Fund shares redeemed ................................................... 91,913
Payable to Advisor for deferred organization expense (Note 3) ...................... 3,792
-----------
Total liabilities .............................................................. 400,506
-----------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES
($.001 par value, 100,000,000 shares authorized, 11,504,660 shares outstanding) .... $118,513,120
============
NET ASSET VALUE PER SHARE
Net asset value and offering price per share ($.001 par value,
100,000,000 shares authorized [$118,513,12/11,504,660 shares outstanding]).......... $ 10.30
============
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest .................................................. $ 6,781,914
------------

EXPENSES:
Management fees (Note 2) .................................. 728,848
Transfer agent fees ....................................... 104,435
Professional and legal fees ............................... 31,879
Postage ................................................... 14,741
Printing and communications ............................... 13,401
Custodian fees ............................................ 7,330
Amortization of organization expenses (Note 3) ............ 3,033
Directors' fees ........................................... 2,167
Registration fees ......................................... 1,500
Other operating expenses .................................. 34,353
------------
Total expenses ........................................ 941,687
------------
Net investment income ..................................... 5,840,227
------------

REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS-NET:
NET REALIZED LOSSES ON INVESTMENTS ........................ (526,526)
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS .... 12,775,102
------------
NET GAINS ON INVESTMENTS .............................. 12,248,576
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 18,088,803
============
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

11
<PAGE> 13

HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 APRIL 3, 1992 (1)
---------------------- THROUGH
1995 1994 1993 DECEMBER 31, 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 9.21 $ 10.38 $ 9.85 $ 9.70
Income from investment operations:
Net investment income ........................ .51 .51 .49 .37
Net realized and unrealized gains
(losses) on securities ....................... 1.09 (1.17) .55 .15
-------- -------- ------- -------
Total income from investment operations ...... 1.60 (.66) 1.04 .52

Less distributions:
Distributions from net investment income ..... (.51) (.51) (.49) (.37)
Distributions from net realized gains ........ -- -- (.02) --
-------- -------- ------- -------
Total distributions .......................... (.51) (.51) (.51) (.37)

Net asset value, end of period .................... $ 10.30 $ 9.21 $ 10.38 $ 9.85
======== ======== ======= =======

Total return (3) .................................. 17.78% (6.49)% 10.80% 7.32%(2)

Supplemental data and ratios:
Net assets, end of period (in thousands) ..... $118,513 $101,749 $99,350 $36,304
Ratio of expenses to average net assets ...... 0.84% 0.85% 0.84% 0.82%(2)
Ratio of net investment income to average
net assets ................................... 5.23% 5.28% 4.81% 4.87%
Portfolio turnover rate ...................... 11% 22% 6% 7%(2)
</TABLE>

(1) Commencement of operations
(2) Annualized
(3) The front-end sales charge in effect for the Fund prior to June 1, 1994 is
not reflected in Total Return as set forth in the table.

The accompanying notes to financial statements are an integral part of this
statement.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The Heartland Wisconsin Tax Free Fund ("The Fund") is a separate series of
Heartland Group, Inc. The assets and liabilities of each portfolio of
Heartland Group, Inc. are segregated, with a shareholder's interest limited
to the portfolio in which the shareholder owns shares. The following is a
summary of significant accounting policies of the Fund:

(a) Each security is valued using bid side market quotations, prices
provided by market makers or estimates of market values obtained from
pricing services or yield data relating to instruments or securities
with similar characteristics. Short-term investments are recorded at
cost which approximates market.

(b) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and
intends to distribute substantially all income to its shareholders
and otherwise comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. As of December 31, 1995,
the Fund has a Federal income tax capital loss carry forward of
$905,426 expiring in 2003.

(c) The Fund declares daily and pays monthly distributions from net
investment income. Net capital gains, if any, are distributed
annually. The amount of dividends and distributions from net
investment income and net realized capital gains are determined in
accordance with Federal income tax regulations, which may differ from
generally accepted accounting principles. To the extent these book and
tax differences are permanent in nature, such amounts are reclassified
to paid-in capital in excess of par value.

12
<PAGE> 14
HEARTLAND WISCONSIN TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(d) The Fund records security transactions at cost no later than the first
business day after the trade date. Net realized gains and losses on
investments are computed on the specific identification cost method.
Interest income is recorded on the accrual basis. The cost amounts as
reflected in the Schedule of Investments are the same for Federal
income tax purposes. The Fund amortizes discounts on original issue
discount securities, and all premiums using the effective interest
method.
(e) Dividends to shareholders are recorded on the ex-dividend date.
(f) The Fund may enter into futures contracts to provide protection
against adverse movements in the prices of securities in the
portfolio. Upon entering into futures contracts, the Fund pledges to
the broker securities equal to the minimum "initial margin"
requirements of the exchange. Additionally, the Fund receives from or
pays to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as
"variation margin", and are recorded by the Fund as realized gains or
loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.

The use of futures contracts involves, to varying degrees,
elements of market risk in excess of the amount recognized in the
statement of assets and liabilities. The predominant risk is that
the movement of the futures contracts price may result in a
loss which could render the portfolio's hedging strategy
unsuccessful. No futures contracts were open on December 31, 1995.
(g) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from the estimates.
2) INVESTMENT ADVISOR, MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES.
The Fund has a management agreement with Heartland Advisors, Inc. (the
"Advisor") with whom certain officers and directors of the Fund are
affiliated, to serve as investment advisor and manager. Under the
terms of the agreement, the Fund will pay the Advisor a monthly
management fee at the annual rate of .65 of 1% of the Fund's average
daily net assets.

As permitted under Rule 10f-3 of the Investment Company Act of 1940,
the Board of Directors of the Fund has adopted a plan which will allow the
Fund, under certain conditions described in the Rule, to acquire
newly-issued securities from syndicates in which the Distributor is a
member.
3) DEFERRED ORGANIZATION EXPENSES.
Organization expenses have been deferred and are being amortized on a
straight-line basis over sixty months. Payments for these expenses
were advanced by the Advisor who will be reimbursed by the Fund over
the same period. The proceeds of any redemption of the initial shares
by the original shareholders will be reduced by a pro-rata portion of
any then unamortized expenses. Unamortized deferred organization
expenses and the related payable to the Advisor at December 31, 1995
were $3,792.
4) INVESTMENT TRANSACTIONS.
For the year ending December 31, 1995, the cost of purchases and the
proceeds from sales of investment securities (excluding short-term
securities) were $14,192,471 and $11,979,450, respectively.

5) SOURCES OF NET ASSETS.

As of December 31, 1995, the sources of net assets were as follows:

<TABLE>
<S> <C>
Fund shares issued and outstanding .................................................$ 116,020,587
Net unrealized appreciation on investments ......................................... 3,397,959
Accumulated net realized losses on investments ..................................... (905,426)
-------------
$ 118,513,120
-------------

Aggregate gross unrealized appreciation (depreciation) as of December 31, 1995,
based on investment cost for Federal income tax purposes is as follows:

Aggregate gross unrealized appreciation ............................................$ 4,189,605
Aggregate gross unrealized depreciation ............................................ (791,646)
-------------
Net unrealized appreciation on investments .........................................$ 3,397,959
-------------
</TABLE>

13
<PAGE> 15

We have audited the accompanying schedule of investments, including the
statement of assets and liabilities, of Heartland Wisconsin Tax Free Fund (the
"Fund," one of the series comprising Heartland Group, Inc., a Maryland
corporation) as of December 31, 1995 and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of operations for the periods
presented, the changes in net assets for each of the the two years in the period
then ended, and the financial highlights for each of the periods presented in
conformity with generally accepted accounting principles.

Milwaukee, Wisconsin ARTHUR ANDERSEN LLP
February 9, 1996

This material may only be used when preceded or accompanied by the Fund's
prospectus.

14
<PAGE> 16

[logo] Heartland Funds
Annual Report
December 31, 1995

[photo of people]

Nebraska Tax Free Fund

<PAGE> 17

FEBRUARY 22, 1996
Dear Fellow Shareholders,

[PHOTO OF PAT RETZER] On a performance basis, 1995 was the best year in
history for the Nebraska Tax Free Fund. Our Fund's net
asset value increased from $8.23 to $9.37, while
paying out dividends of $.45 per share, for a total
return of 19.7%. The Fund's dividends were 100% exempt from Nebraska and
federal income tax.* On December 31, 1995, the Fund had 578 shareholders and
total assets of $13.3 million.

We believe the Fund remains an excellent investment for the following
reasons:

1. MONTHLY TAX-FREE INCOME.
A 5.0% January yield* free from federal and Nebraska tax, which is
equivalent to a taxable yield of up to 9.1%. (Of course, monthly
yields will fluctuate.) The average annual returns through 12/31/95
for the one-year period and since inception on 9/27/93 were 19.7% and
3.6%, respectively.

2. THE FEDERAL RESERVE IS CUTTING INTEREST RATES.
With the economy slowing, the dollar rising and inflation not a
problem, we expect the Fed to continue lowering interest rates, which
gives us a favorable outlook on the bond market.

3. 100% NO-LOAD.
Ours is the only Nebraska double tax-free fund that has no sales
charge (no front-end, no back-end, no 12b-1). Compare our yield and
returns to the others!

We believe an attractive monthly yield, free from federal and Nebraska
income tax, and no sales charge all combine to make the Fund a compelling
investment in this period of falling interest rates. If you have any questions
about Nebraska's only no-load tax-free fund, please call us at 1-800-432-7856.

Sincerely,

/s/ Patrick J. Retzer
Senior Vice President / Director of Fixed Income

* SEC yield annualized for the 30 days commencing 1/1/96. For 1995, 20.98% of
the income from the Fund was an item of tax preference for purposes of computing
the federal alternative minimum tax. The performance data quoted represents past
performance. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.

1
<PAGE> 18
NEBRASKA TAX FREE FUND

[line chart illustrating performance of an assumed investment of $10,000 in the
Heartland Nebraska Tax Free Fund and the Lehman 20 Year Municipal Bond Index
beginning on 9/27/93 as follows:

<TABLE>
<CAPTION>
Heartland
Nebraska Fund Lehman Muni Index
<S> <C> <C>
12/31/93 $ 9,971 $10,147
12/31/94 9,040 9,402
12/31/95 10,821 11,374
</TABLE>

Legend in graph states that Past Performance is not predictive of future
returns.

A box in the graph states Average Annual Total Returns as of 12/31/95 as
follows:
one year 19.7%
since inception 9/27/93 3.6%]

- - MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

Nineteen ninety-five saw a rebound in the tax free bond market after a dismal
1994. Interest rates dropped substantially due to a slowing economy, low
inflation and the stabilization of the U.S. Dollar versus other major
currencies. The yield on the 30-year Treasury bond dropped from 7.88% at the end
of 1994 to 5.95% at the end of 1995, resulting in substantially higher prices
for intermediate and long-term taxable and tax-free bonds.
With tax-free yields at high levels at the beginning of 1995 and
expectations of positive fundamentals, we had a favorable outlook for the tax-
free bond market and consequently kept the Fund's average maturity rather long
throughout the year, between 19.6 and 18.3 years. That strategy proved
successful for our shareholders as the tax-free bond market turned in a strong
performance and the Heartland Nebraska Tax Free Fund had the best year since its
inception, with a total return of 19.7%.
The Fund did underperform the Lehman Brothers 20 Year Municipal Bond Index
by a small margin for two reasons. First, the Nebraska Tax Free Fund, like all
mutual funds, incurs operating expenses while the index return does not reflect
any expenses of running a portfolio. Second, Nebraska tax-free bonds typically
yield slightly less than municipal bonds from other states because their income
is exempt from the substantial Nebraska income tax.
Looking to 1996, we have maintained a relatively long average maturity of
18.3 years because we continue to have a favorable outlook for tax-free bonds,
as well as the bond market in general.

2
<PAGE> 19
- - HEARTLAND NEBRASKA TAX FREE FUND

THE VALUE OF DOUBLE TAX-FREE INCOME
Some investors have avoided tax-free funds because of fears of a flat tax.
Recent events, in our view, dramatically decrease the probability of a flat tax
becoming law anytime soon. Not only does the presidential candidate who
campaigned on the basis of a flat tax seem to be losing momentum, but the flat
tax issue seems to be fading from most political debates.
We believe this creates an opportunity for investors to earn relatively
high tax-free yields. For example, a 5% double tax-free yield is equivalent to a
taxable yield of up to 9.1%, depending on your tax bracket. This compares very
favorably to yields available on taxable investments.
On the table below, find your tax rate and look down the column to find the
taxable equivalent yield you would need to match the Fund's January yield on an
after-tax basis:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
VALUE OF DOUBLE-TAX FREE INCOME
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Bracket ........... 28.0% 31.0% 36.0% 39.6%

Effective
Federal Tax Rates ......... 29.4(1) 32.6(1) 37.8(1) 40.8(2)

Nebraska Tax Rates ........ 6.9 6.9 6.9 6.9

Combined Rates ............ 34.3% 37.2% 42.1% 44.9%

HEARTLAND
TAX FREE YIELD:* TAX EQUIVALENT YIELDS
- ----------------------------------------------------------------------------------
5.0% 7.6% 8.0% 8.6% 9.1%
- ----------------------------------------------------------------------------------
</TABLE>

* January SEC yield annualized for the 30 days commencing 1/1/96. For 1995,
20.98% of the income from the Fund was an item of tax preference for
purposes of computing the federal alternative minimum tax.
(1) Based on 28%, 31% and 36% federal rates, adjusted for the phase-out of
itemized deductions and personal exemptions.
(2) Based on 36% federal rate, 10% surcharge and phase-out of itemized
deductions. This chart is for illustrative purposes only, and not intended
to predict actual yields. While market values may fluctuate inversely with
interest rates, interest and principal payments of government bonds are
backed by the full faith of the U.S. Treasury.

3
<PAGE> 20
SHAREHOLDER SERVICES

- - LOW MINIMUM INVESTMENT
Open a regular account with an initial investment of $10,000. Monthly automatic
investment plans begin with no initial minimum and $100 a month minimum
thereafter.

- - AUTOMATED SERVICES
Automated options include daily prices, account information including your last
two transactions, and prospectus and literature requests. Call 24 hours a day.

[picture of Shareholder Services Team]

- - AUTOMATIC INVESTMENT PLAN
Make automatic regular investments into any Heartland Fund directly from your
checking account on a monthly or twice-monthly basis.

1-800-432-7856
(1-800-HEARTLN)

4
<PAGE> 21

HEARTLAND NEBRASKA TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
QUOTED
MARKET
PAR VALUE
AMOUNT DESCRIPTION COUPON MATURITY NOTE 1 (a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS - 98.2%
$ 25,000 Antelope County, NE School District - Series A ........... 5.250% 12/15/2012 $ 24,613
40,000 Antelope County, NE School District - Series B ........... 5.250 12/15/2012 39,380
20,000 Antelope County, NE School District - Series A ........... 5.300 12/15/2013 19,693
45,000 Antelope County, NE School District - Series B ........... 5.300 12/15/2013 44,308
25,000 Antelope County, NE School District - Series A ........... 5.350 12/15/2014 24,750
45,000 Antelope County, NE School District - Series B ........... 5.350 12/15/2014 44,550
55,000 Arapahoe, NE Various Purpose Bonds ....................... 5.400 11/15/2008 55,799
25,000 Arapahoe, NE Various Purpose Bonds ....................... 5.450 11/15/2009 25,094
70,000 Arapahoe, NE Various Purpose Bonds ....................... 5.500 11/15/2013 70,000
150,000 Boone County, NE - Health Center Project ................. 5.400 12/15/2013 146,625
300,000 Cass County, NE School District #1 ....................... 6.250 12/01/2014 320,922
245,000 Cedar County, NE School District #45 ..................... 5.250 11/15/2010 241,325
100,000 Cedar County, NE School District #45 ..................... 5.350 11/15/2014 98,375
15,000 Consumer's Public Power District ......................... 5.100 01/01/2003 15,000
25,000 David City, NE Industrial Development Revenue ............ 6.400 12/15/2002 26,375
125,000 Dawson County, NE Sanitation and Imprv. District ......... 6.950 02/01/2005 126,449
55,000 Dixon County NE Ponca Public Schools ..................... 4.800 12/01/2005 54,519
40,000 Hall County, NE Hospital Auth. Regency Retirement ........ 5.450 12/01/2008 38,287
35,000 Hall County, NE Hospital Auth. Regency Retirement ........ 5.500 12/01/2009 33,436
45,000 Hall County, NE Hospital Auth. Regency Retirement ........ 5.500 12/01/2010 42,694
85,000 Hall County, NE Hospital Auth. Regency Retirement ........ 6.000 12/01/2018 83,088
270,000 Hastings, NE Electrical Systems .......................... 5.200 01/01/2013 260,550
25,000 Hastings, NE Various Purpose Bonds - Series 1993 ......... 5.550 07/15/2011 25,024
115,000 Hemingford, NE Refunding Bonds (General Obligation) ...... 5.600 02/15/2012 115,863
100,000 Kearney County, NE School District #503 .................. 6.150 12/15/2012 104,064
200,000 Kearney, NE Combined Utility Revenue Bonds ............... 6.100 06/01/2014 210,998
40,000 La Vista, NE Facilities Corporation Revenue Bonds ........ 5.400 12/15/2010 39,314
65,000 La Vista, NE Facilities Corporation Revenue Bonds ........ 5.400 12/15/2011 63,538
960,000 Lincoln, NE Electrical Systems - Series A ................ 5.250 09/01/2015 932,976
170,000 Lincoln, NE Parking Revenue Bonds ........................ 5.100 08/15/2012 164,392
285,000 Lincoln, NE Parking Revenue Bonds ........................ 5.200 08/15/2013 277,083
215,000 Lincoln, NE Parking Revenue Bonds ........................ 5.200 08/15/2014 207,744
115,000 Malcolm, NE Water Bonds .................................. 5.700 02/15/2006 117,731
45,000 Merrick County, NE School District #49 ................... 6.200 07/01/2010 45,732
50,000 Merrick County, NE School District #49 ................... 6.250 07/01/2014 50,875
100,000 Merrick County, NE School District #4 .................... 5.350 01/15/2011 97,119
100,000 Merrick County, NE School District #4 .................... 5.350 01/15/2012 97,000
500,000 Municipal Energy Agency of Nebraska ...................... 6.000 04/01/2017 523,470
100,000 NE Educational Finance Auth. - Midland Lutheran College .. 6.250 06/15/2015 101,804
50,000 Nebraska Higher Education LN Program ..................... 6.250 06/01/2018 52,170
1,350,000 Nebraska Higher Education LN Program ..................... 5.875 06/01/2014 1,360,125
150,000 NE Investment Finance Auth. - Gr. Plains Med.Center ...... 6.500 05/15/2014 158,063
10,000 NE Investment Finance Auth. - Single Family Mtg .......... 7.900 08/15/2014 10,000
295,000 NE Investment Finance Auth. - FHA - Muirfield Greens ..... 6.800 12/01/2015 316,019
525,000 NE Investment Finance Auth. - FHA - Muirfield Greens ..... 6.850 12/01/2025 561,094
100,000 Nebraska Public Power District - Series C ................ 5.000 01/01/2009 97,825
600,000 Nebraska Public Power District - Series B ................ 5.250 01/01/2013 586,338
110,000 Nebraska Public Power District ........................... 6.125 01/01/2015 115,890
1,000,000 Nebraska Public Power District - Series C ................ 5.000 01/01/2017 933,660
300,000 Nebraska State College Board of Trustees.................. 5.700 07/01/2011 300,375
</TABLE>

<PAGE> 22
HEARTLAND NEBRASKA TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
SCHEDULE OF INVESTMENTS - [CONT'D]
DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
QUOTED
MARKET
PAR VALUE
AMOUNT DESCRIPTION COUPON MATURITY NOTE 1 (a)
- ------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 98.2% - [CONT'D]
<S> <C> <C> <C> <C>
$ 450,000 Nebraska State Educational Services Unit #3 ........ 5.500% 06/01/2013 450,563
80,000 Omaha, NE Public Power District - Series B ......... 5.600 02/01/2012 81,850
390,000 Omaha, NE Public Power District .................... 5.250 02/01/2013 383,682
590,000 Omaha, NE Public Power District .................... 5.300 02/01/2016 573,858
200,000 Omaha, NE Public Power District .................... 5.700 02/01/2017 202,606
105,000 Papillion, NE Various Purpose Bonds (Series 1994B).. 6.150 07/01/2012 107,888
75,000 Saunders County, NE School District #9 ............. 5.400 12/01/2014 74,125
235,000 Saunders County, NE School District #9 ............. 5.450 12/01/2016 233,550
125,000 Saunders County, NE School District #9 ............. 5.450 12/01/2017 124,210
25,000 Saunders County, NE School District #9 ............. 5.500 12/01/2018 25,000
200,000 Stanton County, NE School District #003 ............ 5.300 11/15/2012 198,000
100,000 University of Nebraska-Omaha Student Center ........ 5.300 05/15/2012 102,892
350,000 University of Nebraska-Omaha Student Center ........ 5.350 05/15/2013 362,418
200,000 University of Nebraska-Omaha Student Center ........ 5.250 05/15/2014 203,000
100,000 Washington County, NE School District .............. 5.800 07/15/2011 101,750
40,000 Washington County, NE GO Courthouse Bonds .......... 5.200 01/01/2008 40,150
125,000 Washington County, NE GO Courthouse Bonds .......... 5.350 01/01/2011 124,553
160,000 Washington County, NE GO Courthouse Bonds .......... 5.450 01/01/2014 160,200
-----------
13,052,413
-----------

TOTAL INVESTMENTS - 98.2% (Cost $13,079,750)........ 13,052,413
Cash and receivables, less liabilities - 1.8%....... 244,755
-----------
TOTAL NET ASSETS (NOTE 5) (+)....................... $13,297,168
===========
</TABLE>

(+) Percentages for the various classifications use total net assets
as a basis.

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at quoted market value (Cost $13,079,750) .............. $13,052,413
Cash .............................................................................. 61,264
Accrued interest .................................................................. 193,892
Deferred organization expense (Note 3) ............................................ 9,268
-----------
Total assets .................................................................. 13,316,837
-----------
LIABILITIES:
Payable for fund shares redeemed .................................................. 10,401
Payable to Advisor for deferred organization expense (Note 3) ..................... 9,268
-----------
Total liabilities ............................................................. 19,669
-----------

NET ASSETS APPLICABLE TO OUTSTANDING SHARES
($.001 par value, 100,000,000 shares authorized, 1,419,104 shares outstanding) .... $13,297,168
===========
NET ASSET VALUE PER SHARE
Net asset value and offering price per share ($.001 par value,
100,000,000 shares authorized [$13,297,168/1,419,104 shares outstanding]) ......... $ 9.37
===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

<PAGE> 23

HEARTLAND NEBRASKA TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest................................................................................................... $ 768,679

EXPENSES:
Management fees (Note 2)................................................................................... 86,128
Transfer agent fees........................................................................................ 25,838
Professional and legal fees................................................................................ 8,596
Amortization of organization expenses (Note 3) ............................................................ 3,370
Postage.................................................................................................... 2,840
Directors' fees............................................................................................ 2,367
Printing and communications................................................................................ 2,242
Registration fees.......................................................................................... 1,555
Custodian fees............................................................................................. 1,464
-------------
Other operating expenses................................................................................... 8,730
-------------
Total expenses ............................................................................................ 143,130
-------------
Less expenses reimbursed by Advisor (Note 2)............................................................... (43,063)
-------------
Net expenses........................................................................................... 100,067
-------------
Net investment income...................................................................................... 668,612
-------------

REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS-NET:
NET REALIZED LOSSES ON INVESTMENTS ....................................................................... (58,657)
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS.................................................... 1,752,085
-------------
NET GAINS ON INVESTMENTS............................................................................. 1,693,428
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $ 2,362,040
=============
</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................................... $ 668,612 $ 655,946
Net realized losses on investments .............................................. (58,657) (166,419)
Net increase (decrease) in unrealized appreciation on investments ............... 1,752,085 (1,721,709)
------------ ------------
Net increase (decrease) in net assets resulting from operations ............. 2,362,040 (1,232,182)
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($.45 and $.45 per share, respectively) ......................................... (668,612) (655,946)
------------ ------------
Total distributions ......................................................... (668,612) (655,946)
------------ ------------

FUND SHARE ACTIVITIES:
Proceeds from shares issued (130,083 and 845,840 shares, respectively) .......... 1,154,916 7,690,779
Net asset value of shares issued in reinvestment of distributions from
net investment income (54,782 and 55,844 shares, respectively) .................. 489,042 483,330
Cost of shares redeemed (287,912 and 320,662 shares, respectively) .............. (2,566,505) (2,757,960)
------------ ------------
Net increase (decrease) in net assets derived from Fund share activities .... (922,547) 5,416,149
------------ ------------

TOTAL INCREASE .................................................................. 770,881 3,528,021

NET ASSETS AT THE BEGINNING OF THE YEAR .............................................. 12,526,287 8,998,266
------------ ------------
NET ASSETS AT THE END OF THE YEAR (NOTE 5) ........................................... $ 13,297,168 $ 12,526,287
============ ============

</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
<PAGE> 24

HEARTLAND NEBRASKA TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED 9/27/93 (1)
DECEMBER 31 THROUGH
1995 1994 12/31/93
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period ......................... $ 8.23 $ 9.56 $ 9.70
Income from investment operations:
Net investment income ........................................ .45 .45 .11
Net realized and unrealized gains (losses) on securities .... 1.14 (1.33) (.14)
--------- -------- --------
Total from investment operations ............................. 1.59 (.88) (.03)
Less distributions:
Distributions from net investment income ..................... (.45) (.45) (.11)
Distributions from net realized gains ........................ -- -- --
--------- -------- --------
Total distributions .......................................... (.45) (.45) (.11)

Net asset value, end of period ................................. $ 9.37 $ 8.23 $ 9.56
========= ======== ========

Total return (2) ............................................... 19.70% (9.33)% (.29)%(3)

Supplemental data and ratios:
Net assets, end of period (in thousands)....................... $13,297 $12,526 $8,998
Ratio of expenses to average net assets (4) ................... 0.76% 0.81% 0.13%(5)
Ratio of net investment income to average net assets........... 5.06% 5.23% 4.65%(5)
Portfolio turnover rate........................................ 5% 33% 3%
</TABLE>

(1) Commencement of operations.
(2) The front-end sales charge in effect for the Fund prior to June 1,
1994 is not reflected in Total Return as set forth in the table.
(3) Not annualized.
(4) Heartland Advisors voluntarily waived the management fee in its
entirety from September 27, 1993 through December 31, 1993. Effective
January 1, 1994, Heartland Advisors partially reinstated a portion
of the fee at a rate of .325 of 1% of average net assets.
(5) Annualized.

The accompanying notes to financial statements are an integral part of this
statement.

<PAGE> 25
HEARTLAND NEBRASKA TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The Heartland Nebraska Tax Free Fund ("The Fund") is a separate series of
Heartland Group, Inc. The assets and liabilities of each portfolio of
Heartland Group, Inc. are segregated, with a shareholder's interest limited
to the portfolio in which the shareholder owns shares. The following is a
summary of significant accounting policies of the Fund:
(a) Each security is valued using bid side market quotations, prices
provided by market makers or estimates of market values obtained from
pricing services or yield data relating to instruments or securities
with similar characteristics. Short-term instruments are recorded at
cost which approximates market.
(b) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and
intends to distribute substantially all income to its shareholders
and otherwise comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. As of December 31, 1995,
the Fund has a Federal tax capital loss carry forward of $225,403
expiring in 2003.
(c) The Fund declares daily and pays monthly distributions from net
investment income. Net capital gains, if any, are distributed
annually. The amount of dividends and distributions from net
investment income and net realized gains are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. To the extent these book and tax
differences are permanent in nature, such amounts are reclassified to
paid-in capital in excess of par value.
(d) The Fund records security transactions at cost no later than the first
business day after the trade date. Net realized gains and losses on
investments are computed on the specific identification cost method.
Interest income is recorded on the accrual basis. The cost amounts as
reflected in the Schedule of Investments are the same for Federal
income tax purposes. The Fund amortizes discounts on original issue
discount securities, and all premiums using the effective interest
method.
(e) Dividends to shareholders are recorded on the ex-dividend date.
(f) The Fund may enter into futures contracts to provide protection
against adverse movements in the prices of securities in the
portfolio. Upon entering into futures contracts, the Fund pledges to
the broker securities equal to the minimum "initial margin"
requirements of the exchange. Additionally, the Fund receives from or
pays to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as
"variation margin", and are recorded by the Fund as realized gains or
loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.

2) INVESTMENT ADVISOR, MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES.
The Fund has a management agreement with Heartland Advisors, Inc. (the
"Advisor") with whom certain officers and directors of the Fund are
affiliated, to serve as investment advisor and manager. Under the terms of
the agreement, the Fund will pay the Advisor a monthly management fee at
the annual rate of .65 of 1% of the Fund's average daily net assets. The
Advisor voluntarily waived the management fee in its entirety from
September 27, 1993 (commencement of operations) to December 31,1993. As of
January 1, 1994, the Advisor began collecting a partial fee at the annual
rate of .325% of the Fund's average daily net assets. The Advisor may
reinstate any portion or all of the management fee at any time.

<PAGE> 26
HEARTLAND NEBRASKA TAX FREE FUND
(A SERIES OF HEARTLAND GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS - [CONT'D]
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
3) DEFERRED ORGANIZATION EXPENSES.
Organization expenses have been deferred and are being amortized on a
straight-line basis over sixty months. Payments for these expenses were
advanced by the Advisor who will be reimbursed by the Fund over the same
period. The proceeds of any redemption of the initial shares by the
original shareholders will be reduced by a pro-rata portion of any then
unamortized expenses. Unamortized deferred organization expenses and the
related payable to the Advisor at December 31, 1995 were $9,268.

4) INVESTMENT TRANSACTIONS.
For the year ended December 31, 1995, the cost of purchases and the
proceeds from sales of investment securities (excluding short-term
securities) were $665,578 and $1,592,347, respectively.

5) SOURCES OF NET ASSETS.
As of December 31, 1995, the sources of net assets were as follows:

<TABLE>
<S> <C>
Fund shares issued and outstanding ................................................. $ 13,549,908
Net unrealized depreciation on investments ......................................... (27,337)
Accumulated net realized losses on investments ..................................... (225,403)
------------
$ 13,297,168
============

Aggregate gross unrealized appreciation (depreciation) as of December 31, 1995,
based on investment cost for Federal income tax purposes is as follows:

Aggregate gross unrealized appreciation ............................................ $ 125,549
Aggregate gross unrealized depreciation ............................................ (152,886)
------------
Net unrealized depreciation on investments ......................................... $ (27,337)
============

</TABLE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of Heartland Nebraska Tax Free Fund:
We have audited the accompanying schedule of investments, including the
statement of assets and liabilities, of Heartland Nebraska Tax Free Fund (the
"Fund," one of the series comprising Heartland Group, Inc., a Maryland
corporation) as of December 31, 1995 and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for the
periods presented. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of operations for the periods
presented, the changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented in
conformity with generally accepted accounting principles.

Milwaukee, Wisconsin ARTHUR ANDERSEN LLP
February 9, 1996