HEARTLAND GROUP INC, 497, 1999-05-04

HEARTLAND GROUP INC
497, 1999-05-04

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PROSPECTUS/MAY 1, 1999

SHORT DURATION
HIGH-YIELD
MUNICIPAL FUND

HIGH-YIELD
MUNICIPAL BOND FUND

[LOGO APPEARS HERE]

----------------------------

AMERICA'S VALUE INVESTOR (R)

<PAGE>

Prospectus/May 1, 1999

Heartland Short Duration High-Yield Municipal Fund

Heartland High-Yield Municipal Bond Fund

This prospectus contains information you should know about the following mutual
fund portfolios of Heartland Group, Inc. (the "Funds") before you invest.

. Heartland Short Duration High-Yield Municipal Fund -- Its investment objective
is a high level of federally tax-exempt current income with a low degree of
share price fluctuation. This Fund invests primarily in short and intermediate
duration, medium and lower quality municipal obligations and maintains an
average portfolio duration of three years or less.

. Heartland High-Yield Municipal Bond Fund -- Its investment objective is to
maximize after-tax total return by investing for a high level of federally
tax-exempt current income. This Fund invests primarily in medium and lower
quality municipal obligations and maintains an average portfolio duration of
greater than five years.

Each Fund is managed using Heartland Advisors' Municipal Ten-Point Value
Investment Grid(TM), a strict investment discipline designed to identify value.
Each Fund offers investors an attractive investment opportunity combined with
active risk management. Each Fund is a no-load fund. Investors pay no sales fees
or charges to purchase, redeem or exchange their shares.

The Securities and Exchange Commission has not approved the shares of these
Funds or any other mutual fund, nor determined whether this or any other
prospectus is accurate or complete. Anyone who tells you otherwise is committing
a crime.

2
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TABLE OF CONTENTS

THE HEARTLAND APPROACH TO INVESTING 4
- -----------------------------------------------------------------------

RISK/RETURN SUMMARY:

INVESTMENTS, RISKS AND PERFORMANCE 5
- -----------------------------------------------------------------------

Short Duration High-Yield Municipal Fund............................. 5

High-Yield Municipal Bond Fund....................................... 9

Principal Investment Risks...........................................13

Investment Returns...................................................15

Fees and Expenses of the Funds.......................................16

MANAGEMENT OF THE FUNDS 19
- -----------------------------------------------------------------------

Heartland Group......................................................19

Heartland Advisors...................................................19

INVESTMENT OBJECTIVES AND POLICIES 23
- -----------------------------------------------------------------------

General..............................................................23

Credit Quality.......................................................24

Temporary Positions..................................................25

PRINCIPAL INVESTMENTS AND INVESTMENT STRATEGIES 26
- -----------------------------------------------------------------------

Heartland Advisors' Municipal Ten-Point Value Investment Grid(TM)....26

Municipal Obligations................................................27

Other Investments and Investment Strategies..........................29

HOW TO INVEST 34
- -----------------------------------------------------------------------

ACCOUNT POLICIES 36
- -----------------------------------------------------------------------

Redeeming Shares.....................................................38

Exchanging Shares....................................................39

Share Price..........................................................41

Service Fees.........................................................42

SHAREHOLDER INFORMATION AND REPORTING 43
- -----------------------------------------------------------------------

Heartland Value Source(TM)...........................................43

Investment Reports...................................................43

Dividends and Capital Gain Distributions.............................43

Taxes................................................................44

Financial Highlights.................................................45

3
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The Heartland Approach to Investing

Heartland Advisors, Inc. ("Heartland Advisors"), America's Value Investor(R),
selects investments that it believes are undervalued as measured by sets of
criteria known as Heartland Advisors' Ten-Point Value Investment Grids(TM). The
portfolios of the Heartland Funds are actively managed. Although no one can
predict a Fund's future performance, Heartland Advisors believes that the
"value" style of investing will outperform over extended periods, which may
include bear markets as well as volatile or "sideways moving" markets.

Each Fund's investments are selected using Heartland Advisors' Municipal Ten-
Point Value Investment Grid(TM), a set of strict value criteria:

. Essential Service

. Financial Soundness

. Strong Competitive Position

. High Debt Service Coverage

. Experienced Management

. A Financial Stake by Management

. Strong Legal Covenants

. High Yield vs. U.S. Treasuries

. Catalyst for Change

. Willingness to Pay Debt Obligations

Elsewhere in this prospectus you will find a discussion of the differences
between the performance of a mutual fund portfolio and the performance of a
market index, together with an explanation of the different measures of mutual
fund performance.

An investment in a Fund is not a deposit of a bank, nor insured or guaranteed by
the Federal Deposit Insurance Corporation (FDIC) or any other governmental
agency. It is not designed to be a complete investment program, and while you
may make money, you can also lose money. Each Fund's share price will fluctuate.

4
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Risk/Return Summary:

Investments, Risks and Performance

SHORT DURATION HIGH-YIELD MUNICIPAL FUND
- ----------------------------------------

Investment Goal. The Short Duration High-Yield Municipal Fund seeks a high level
of federally tax-exempt current income with a low degree of share price
fluctuation.

Principal Investment Strategies. The Short Duration High-Yield Municipal Fund
invests primarily in medium and lower quality obligations issued by
municipalities ("Municipal Obligations") and maintains an average portfolio
duration of three years or less. Medium and lower quality obligations, sometimes
referred to as "junk bonds," generally offer higher yields than investment grade
securities with similar maturities, but involve greater investment risk,
including the possibility of default or bankruptcy. The Fund seeks to manage
this risk through intensive credit research and may never invest more than 20%
of its total assets in debt obligations rated lower than B-.

Duration Management. The Fund's share price is affected by changes in the value
of bonds held in its portfolio. In general, when interest rates rise, a bond's
value falls, and when interest rates fall, a bond's value rises. Duration
measures the approximate price sensitivity of a bond, or bond mutual fund, to a
one percent (1%) rise or fall in interest rates. For example, all else being
equal, if interest rates rise by 1%, a bond fund with a 3-year duration would
expect its share price to decline by about 3%; conversely, if interest rates
fall by 1%, the Fund would expect to see about a 3% rise in price. When a change
in direction of, or degree of movement in interest rates is anticipated, the
Fund will shorten or lengthen its duration to help manage share price
fluctuation.

5
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retirement, single family or multi-family housing, redevelopment, transportation
or various types of utilities. The Fund also may invest 25% or more of its total
assets in Municipal Obligations whose issuers or projects financed are located
in the same state or geographic region. The Fund may not invest more than 25% of
its total assets in securities of non-governmental issuers whose principal
activities are in the same industry.

Other Investment Strategies. The Fund may invest in other debt and equity
securities and may employ other investment techniques that are not principal
investment strategies, but could impact the Fund's performance.

Risks. The principal risk of investing in the Short Duration High-Yield
Municipal Fund is that its share price and performance will fluctuate, and you
could lose money. The Fund invests in Municipal Obligations, which, like other
debt securities, involve credit risk (the possibility that the issuer will not
make timely principal and interest payments) and market risk (price fluctuations
due to interest changes and other factors). In addition, because the Fund
invests primarily in medium and lower quality Municipal Obligations, the Fund's
portfolio will involve greater investment risk and may be considered more
speculative than a portfolio of higher quality obligations with similar
maturities.

Who Should Consider Investing in the Fund? The Short Duration High-Yield
Municipal Fund is designed for investors who seek higher income than that
generally available from higher quality Municipal Obligations, and who are
willing to accept the higher risk of loss and principal fluctuation associated
with medium and lower quality Municipal Obligations. Because the Fund seeks to
minimize share price fluctuation by maintaining a short portfolio duration, the
Fund may be appropriate for short-term investment needs. However, the Fund's
share price will fluctuate. The Fund is not an appropriate investment for those
whose primary objective is absolute stability of principal.

6
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The Fund may be appropriate as part of your investment portfolio if:

- - You are interested in a value-based approach to fixed-income investing that
uses duration to help limit share price volatility associated with interest
rate risk.

- - You are looking for a high-yield fixed-income alternative to balance your
investment portfolio.

Past Performance. The tables on the following pages provide some indication of
the risks of investing in the Fund by showing the performance of the Short
Duration High-Yield Municipal Fund since its inception. Table I shows how the
Fund's total returns have varied from year to year. Table II shows how the
Fund's average annual total returns compare to those of a broad-based securities
market index. Table III shows the annualized yield for the Fund and the index
for the 30 days ended December 31, 1998.

The Fund commenced operations on January 2, 1997. The performance of a newer
mutual fund may be adversely affected by such factors as uneven cash flows and
absolute size. These factors may make it more difficult for a newer fund to
establish meaningful portfolio positions as quickly and as efficiently as a more
seasoned fund. Newer funds may also experience greater portfolio turnover. Past
performance cannot predict or guarantee future results.

7
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TABLE I

Short Duration High-Yield Municipal Fund --
Year-by-Year Total Returns

A BAR CHART showing Total Returns for Short Duration High-Yield Municipal Fund
for 1997 and 1998:

7.44% 3.65%
1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter: Q2 '97 2.08%
Worst Quarter: Q3 '98 0.39%

TABLE II
<TABLE>
<CAPTION>

Short Duration High-Yield Municipal Fund --
Average Annual Total Return (through 12/31/98)
- ----------------------------------------------------
Since inception
One year (1/2/97)
- ----------------------------------------------------
<S> <C> <C>
Short Duration High-Yield
Municipal Fund 3.65% 5.55%

- ----------------------------------------------------
Lehman Municipal 1-3 Year Non-Investment Grade
Bond Index/1/ 5.44% 6.28%
- ----------------------------------------------------
</TABLE>

/1/The Lehman Municipal 1-3 Year Non-Investment Grade Bond Index is an
unmanaged index and includes issues that have a maximum credit rating of "Ba1,"
were issued as part of a deal of at least $20 million, have an amount
outstanding of at least $3 million, have a maturity of one to three years and
were issued after December 31, 1990.

TABLE III
<TABLE>
<CAPTION>

Yield for the 30 Days Ended 12/31/98 (annualized)
- ------------------------------------------------------
Taxable
Equivalent
Yield/1/
- ------------------------------------------------------
<S> <C> <C>
Short Duration High-Yield
Municipal Fund 5.4% 9.0%
- ------------------------------------------------------
Lehman Municipal 1-3 Year
Non-Investment Grade Bond Index 4.5% 7.5%
- ------------------------------------------------------
</TABLE>

/1/ Based on a federal tax rate of 39.6%.

For current yield information, please call 1-800-432-7856.

8
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HIGH-YIELD MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
Investment Goal. The High-Yield Municipal Bond Fund seeks to maximize after-tax
total return by investing for a high level of federally tax-exempt current
income.

Principal Investment Strategies. The High-Yield Municipal Bond Fund invests
primarily in medium and lower quality Municipal Obligations and maintains an
average portfolio duration of greater than five years. Medium and lower quality
obligations, sometimes referred to as "junk bonds," generally offer higher
yields than investment grade securities with similar maturities, but involve
greater investment risk, including the possibility of default or bankruptcy. The
Fund seeks to manage this risk through intensive credit research and may never
invest more than 20% of its total assets in debt obligations rated lower than
B-.

Duration Management. The Fund's share price is affected by changes in the value
of bonds held in its portfolio. In general, when interest rates rise, a bond's
value falls, and when interest rates fall, a bond's value rises. Duration
measures the approximate price sensitivity of a bond, or bond mutual fund, to a
one percent (1%) rise or fall in interest rates. For example, all else being
equal, if interest rates rise by 1%, a bond fund with a 5-year duration would
expect its share price to decline by about 5%; conversely, if interest rates
fall by 1%, the fund would expect to see abut a 5% rise in price. When a change
in direction of, or degree of movement in interest rates is anticipated, the
Fund will shorten or lengthen its duration to help manage share price
fluctuation.

Concentration. The Fund may invest 25% or more of its total assets in Municipal
Obligations that finance similar types of projects or projects in related
industry sectors. These could include, for example, projects involving community
development, education, health care, hospitals, retirement, single family or
multi-family housing, redevelopment, transportation or various types of
utilities. The Fund also may invest 25% or more of its total assets in Municipal
Obligations whose issuers or projects

9
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financed are located in the same state or geographic region. The Fund may not
invest more than 25% of its total assets in securities of non-governmental
issuers whose principal activities are in the same industry.

Risks. The principal risk of investing in the High-Yield Municipal Bond Fund is
that its share price and performance will fluctuate, and you could lose money.
The Fund invests in Municipal Obligations, which, like other debt securities,
involve credit risk (the possibility that the issuer will not make timely
principal and interest payments) and market risk (price fluctuations due to
interest changes and other factors). In addition, because the Fund invests
primarily in medium and lower quality Municipal Obligations, the Fund's
portfolio will involve greater investment risk and may be considered more
speculative than a portfolio of higher quality obligations with similar
maturities.

Who Should Consider Investing in the Fund? The High-Yield Municipal Bond Fund is
designed for investors who seek higher income than that generally available from
higher quality Municipal Obligations, and who are willing to accept the higher
risk of loss and principal fluctuation associated with long-term medium and
lower quality Municipal Obligations. The Fund is not an appropriate investment
for those whose primary objective is absolute stability of principal because the
Fund's share price will fluctuate.

The Fund may be appropriate as part of your investment portfolio if:

. You are interested in a value-based approach to fixed-income investing that
uses duration to help limit share price volatility associated with interest
rate risk.

. You are looking for a high-yield fixed-income alternative to balance your
investment portfolio.

10
<PAGE>

Past Performance. The tables below provide some indication of the risks of
investing in the Fund by showing the performance of the High-Yield Municipal
Bond Fund since its inception. Table I shows how the Fund's total returns have
varied from year to year. Table II shows how the Fund's average annual total
returns compare to those of a broad-based securities market index. Table III
shows the annualized yield for the Fund and the Index for the 30 days ended
December 31, 1998.

TABLE I

High-Yield Municipal Bond Fund --
Year-by-Year Total Returns

A BAR CHART showing Total Returns for High-Yield Municipal Bond Fund for 1997
and 1998:

11.67% 6.66%
1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter:
Q4 '97 3.61%

Worst Quarter:
Q4 '98 1.16%

11
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TABLE II

High-Yield Municipal Bond Fund --
Average Annual Total Return (through 12/31/98)
- --------------------------------------------------------------------------------
Since
inception
One year (1/2/97)
- --------------------------------------------------------------------------------
High-Yield Municipal Bond Fund 6.66% 9.17%
- --------------------------------------------------------------------------------
Lehman Municipal Non-Investment Grade
Bond Index/(1)/ 6.22% 6.28%
- --------------------------------------------------------------------------------
/(1)/ The Lehman Municipal Non-Investment Grade Bond Index is an unmanaged index
and includes issues that have a maximum credit rating of "Ba1," were
issued as part of a deal of at least $20 million, have an amount
outstanding of at least $3 million, have a maturity of at least one year
and were issued after December 31, 1990.

TABLE III

Yield for the 30 Days Ended 12/31/98 (annualized)

Taxable
Equivalent
Yield/(1)/
- --------------------------------------------------------------------------------
High-Yield Municipal Bond Fund 6.4% 10.6%
- --------------------------------------------------------------------------------
Lehman Municipal Non-Investment Grade
Bond Index 6.0% 10.0%
- --------------------------------------------------------------------------------
/(1)/ Based on a federal tax rate of 39.6%.

For current yield information, please call 1-800-432-7856.

12
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PRINCIPAL INVESTMENT RISKS
- --------------------------

As with any mutual fund, neither Fund can guarantee that it will achieve its
investment goal. Like investing in most mutual funds that invest primarily in
medium and lower quality debt obligations, investing in either Fund involves the
following risks.

Credit Risk. Credit risk is the possibility that the municipality or other legal
entity ("municipality") issuing a security, or its guarantor, will not be able
to make timely principal and interest payments on its obligations. Although
credit ratings issued by credit rating agencies are designed to evaluate these
risks, such ratings are not always accurate. Even if the ratings are accurate
when made, the rating agencies may not always make timely changes in a rating in
response to changes in the economy or in the condition of the issuer that could
affect the likelihood of timely repayment of the Municipal Obligation. Many debt
obligations and, in particular, higher yield debt obligations, are unrated. As a
result, Heartland Advisors uses credit ratings only as a preliminary indicator
of investment quality, relying on its own proprietary credit research and
analysis of Municipal Obligations and continually monitoring portfolio
securities to determine whether credit quality has changed. Credit ratings that
may be considered include, for example, those published by Standard & Poor's,
Moody's Investors Service, Inc. and Fitch ICBA, Inc. Credit risk also includes
the possibility that the interest on an otherwise tax-exempt Municipal
Obligation may be subject to federal income tax for a variety of reasons.

Market Risk. Market risk is the possibility that the value of a Fund's portfolio
securities will decline due to (a) an increase in interest rates, (b) adverse
changes in supply and demand for debt obligations because of market, sector,
industry or political factors, or (c) the unavailability or inaccuracy of key
information about a particular security or market.

13
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"High Yield" Risk. "High yield" risk is a characteristic of medium and lower
quality debt obligations. These obligations offer higher yields, but greater
investment risk than higher quality securities with similar maturities. These
securities sometimes may be referred to as "junk bonds" and are rated below
investment grade, or determined by Heartland Advisors to be of comparable
quality if unrated. In general, these securities are considered to be more
speculative with respect to the issuer's capacity to pay interest and repay
principal, and involve greater risk of issuer default or bankruptcy. High-yield
debt obligations also may be more susceptible to real or perceived adverse
economic conditions or political developments. Any reduction in the value of a
portfolio security as a result of one or more of these factors could adversely
affect a Fund's share price. Investing in lower quality and defaulted securities
also may lead to additional expense if a Fund is required to seek recovery of
principal and interest payments, and a Fund's right to payment may rank behind
those of other creditors of the issuer.

Liquidity Risk. Because secondary trading in high yield bonds may be less active
than secondary trading in higher quality securities, a Fund could experience
difficulty in disposing of portfolio securities. Thin trading in markets for
debt obligations might make it more difficult to value portfolio securities
because of the lack of objective pricing data provided by actively traded
markets. As a result, the valuation process may require greater subjective
judgment.

Concentration Risk. Concentration risk is the risk that a Fund may invest more
than 25% of its assets in Municipal Obligations that are related in such a way
that an economic, business or political development affecting one security could
also not only affect other portfolio securities held by a Fund, but also overall
Fund performance. Concentration may also result in potential volatility, causing
a Fund's share price and performance to fluctuate.

14
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Hedging Risk. Hedging risk is the risk that changes in the value of a hedging
instrument will not match those of the asset or security being hedged. Hedging
is the use of one investment to offset the effects of another investment.
Imperfect or no correlation of the values of the hedging instrument and the
hedged security or asset might occur because of characteristics of the
instruments themselves or unrelated factors involving, for example, the markets
on which the instruments are traded. As a result, hedging strategies may not
always be successful. While hedging strategies can help reduce or eliminate
portfolio losses, they also can reduce or eliminate portfolio gains.

Alternative Minimum Tax Risk. Each Fund may invest without limitation in
Municipal Obligations whose interest is a tax-preference item for purposes of
the federal alternative minimum tax. Accordingly, a Fund's net return may be
lower for those taxpayers who are subject to the alternative minimum tax.

Investment Objectives. Each Fund's investment goal may be changed by its Board
of Directors upon notice to shareholders, but without shareholder approval.

INVESTMENT RETURNS
- ------------------

Portfolio Performance vs. Index Performance. The information about each Fund's
past performance includes a comparison of the Fund's average annual total
returns to a broad-based market index believed to be representative of the
Fund's portfolio. An index is not available for direct investment, and past
performance cannot guarantee or predict future results. The securities included
in an index are not an exact match to the holdings in a mutual fund portfolio.
The performance of a mutual fund portfolio will differ from that of an index.
Unlike an index, a mutual fund portfolio is affected by operating expenses and
cash flow activity caused by daily purchases and redemptions. In addition, a
mutual fund portfolio will differ from the index in the number and size of
holdings or

15
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securities, their relative sector and industry weightings, the market
capitalization of individual securities and the median capitalization of the
index and fund overall. Fee waivers may have been in effect for the Funds during
the periods in which performance information is presented. Without fee waivers,
the Funds' returns and yields would have been lower.

Definitions. Total return measures the change in the share price of a Fund and
assumes the reinvestment of dividends and capital gains. Cumulative total return
is actual return for a given period, but does not indicate how much return
fluctuated during the period. Average annual total return is the hypothetical
constant annual return that would have produced a Fund's cumulative return for a
given period. It should not be confused with actual annual returns, the sum of
which over a given period produces a Fund's cumulative total return. Yield is
annualized net income of a Fund during a 30-day period as a percentage of the
Fund's share price.

FEES AND EXPENSES OF THE FUNDS
- ------------------------------
This summary describes the fees and expenses that you would pay if you buy and
hold shares of the Funds.

Shareholder fees, such as sales loads, redemption fees or exchange fees, are
fees you pay directly from your investment. Because all of the Heartland Funds
are no-load funds, you will not pay any fees when you buy or sell shares of the
Funds. To help control transaction expenses and simplify portfolio management,
each Fund reserves the right, upon 90 days' advance written notice to its
shareholders, to charge an early redemption fee of 1% of the proceeds from
shares redeemed or exchanged that are held for less than 90 days.

16
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Annual fund operating expenses are paid out of a Fund's assets and include fees
for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these expenses directly
but, as shown in the example below, all shareholders bear these costs
indirectly.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)(1)
<TABLE>
<CAPTION>

Short Duration High-Yield
High-Yield Municipal
Municipal Fund Bond Fund
- --------------------------------------------------------------------------------------
<S> <C> <C>
Management fees 0.40% 0.60%
- --------------------------------------------------------------------------------------
Distribution (12b-1) fees 0.25% 0.25%
- --------------------------------------------------------------------------------------
Other expenses 0.15% 0.23%
- --------------------------------------------------------------------------------------
Total annual fund operating expenses(2) 0.80% 1.08%
- --------------------------------------------------------------------------------------
Fee waiver and/or expense reimbursement (0.05%) (0.13%)
- --------------------------------------------------------------------------------------
Net expenses 0.75% 0.95%
======================================================================================
</TABLE>
(1) Heartland Advisors has contractually undertaken to waive fees paid to it by,
and/or pay other expenses of, each of the Short Duration High-Yield Municipal
Fund and High-Yield Municipal Bond Fund through April 30, 2000 so as to limit
the Fund's total annual ordinary operating expenses to 0.75% and 0.95%,
respectively, of average net assets. After that date, the fee waivers and
undertakings to pay other Fund expenses may be continued, terminated or revised
at any time. If a Fund's operating expenses fall below the current expense
limitation, the Fund will repay Heartland Advisors for fees previously waived
and expenses previously reimbursed. Repayment will continue for up to three
years after the fiscal year in which the waiver or reimbursement occurred,
subject to any expense limitation then in effect. Repayment will stop when the
Fund has repaid the entire amount or the three-year period ends.

(2) Each Fund has entered into arrangements with its Custodian whereby interest
earned on uninvested cash balances is used to reduce Custodian expenses. The
ratios do not include these fees. If the Funds did not have fees paid
indirectly, the total annual fund operating expenses of the Short Duration High-
Yield Municipal Fund and High-Yield Municipal Bond Fund would have been 0.81%
and 1.09%, respectively, of average net assets.

17
<PAGE>

Example. (This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in each Fund for the time periods indicated and then
redeem all of your shares at the end of those time periods. The example also
assumes that (a) your investment has a 5% return each year, (b) any contractual
fee waivers will not be renewed after April 30, 2000, and (c) each Fund's total
annual fund operating expenses remain the same as shown in the table above for
periods greater than one year. The assumed return in the example does not
represent actual or future performance, and your actual cost of investing in the
Funds may be higher or lower.)

Short Duration High-Yield
High-Yield Municipal
Municipal Fund Bond Fund
- --------------------------------------------
<S> <C> <C>
One year $ 77 $ 97
- --------------------------------------------
Three years 250 331
- --------------------------------------------
Five years 439 583
- --------------------------------------------
Ten years 985 1,305
- --------------------------------------------
</TABLE>

18
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MANAGEMENT OF THE FUNDS

HEARTLAND GROUP
- -------------------------------------------------------------------------------
The Funds are mutual fund portfolio series of Heartland Group, Inc.
("Heartland"). For each of the Funds, the shares of the Funds offered by this
prospectus are the "no-load" class. No other classes of shares have been
authorized at this time.

Heartland is governed by a Board of Directors that oversees its business
affairs. The Board meets regularly to review the Funds' investments, performance
and expenses. It elects the officers of Heartland and hires the Funds' service
providers, including the Funds' investment advisor. As a matter of policy,
Heartland requires that a majority of its Board members be independent of the
Funds' investment advisor.

HEARTLAND ADVISORS
- -------------------------------------------------------------------------------
Founded in 1982 by William J. Nasgovitz, Heartland Advisors, Inc., America's
Value Investor/R/, is an independent firm owned by its employees. It manages the
Funds' investments subject to the authority of and supervision by the Board of
Directors of Heartland. Heartland Advisors also distributes the Funds' shares
and provides administrative and accounting services to the Funds and shareholder
services to the Funds' investors. In addition to managing the Heartland family
of nine equity and fixed-income mutual funds, Heartland Advisors provides
investment advisory and brokerage services to individuals, institutions and
retirement plans. Its principal offices are located at, and its mailing address
is, 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.

Portfolio Managers. Thomas J. Conlin and Greg D. Winston are co-portfolio
managers of the Funds, having managed each Fund since commencement of its
operations. Messrs. Conlin and Winston are both Chartered Financial Analysts
(CFAs), and Vice Presidents and principals of Heartland Advisors, which they
joined in August 1996. They have been managing municipal investments since 1978
and 1988, respectively.

19
<PAGE>

Management Fee and Expense Limitation. For Heartland Advisors' investment
management services, each of the Funds pays an annual fee, accrued daily and
paid monthly, computed as a percentage of each Fund's average net assets. For
the fiscal year ended December 31, 1998, the Funds paid the following advisory
fees which are set forth as a percentage of average daily net assets:

Fund Advisory Fee
- ----------------------------------------------------------------------------
<S> <C> <C>
Short Duration High-Yield Municipal Fund 0.30% (0.40% before fee waivers)
- -----------------------------------------------------------------------------
High-Yield Municipal Bond Fund 0.41% (0.60% before fee waivers)
- -----------------------------------------------------------------------------
</TABLE>
Through April 30, 2000, Heartland Advisors has contractually agreed to waive
fees paid to it by each of the Short Duration High-Yield Municipal Fund and the
High-Yield Municipal Bond Fund and/or pay other Fund ordinary operating expenses
(excluding brokerage commissions, interest and taxes) to the extent necessary to
ensure that the Fund's total annual ordinary operating expenses do not exceed
the percentage of average net assets noted in "Fees and Expenses of the Funds."
After such time, Heartland Advisors may continue, modify or discontinue these
waivers and/or reimbursements. Any waiver of fees or reimbursement of expenses
is made on an annual basis. If any fees are owed to Heartland Advisors,
Heartland Advisors may pay a Fund's expenses indirectly by reducing the amount
of such fees owed to it by the Fund. Waivers and reimbursements have the effect
of lowering a Fund's overall expense ratio and increasing a Fund's overall
return to investors.

If a Fund's operating expenses fall below the expense limitation, the Fund will
begin paying Heartland Advisors for fees previously waived and expenses
previously reimbursed. This repayment will continue for up to three years after
the end of the fiscal year in which a fee is waived or an expense is paid,
subject to any expense limitation then in effect, until the Fund has repaid
Heartland Advisors for the entire amount or such three-year period expires.

20
<PAGE>

Rule 12b-1 Fees. Each Fund has adopted a plan under Rule 12b-1 whereby the Fund
pays Heartland Advisors a fee of up to 0.25% of the Fund's daily net assets
computed on an annual basis and paid monthly for distributing its shares and
providing certain shareholder services. Because the fee is paid out of the
Fund's assets on an ongoing basis, fees paid under the Rule 12b-1 plan will
increase the cost of your investment and may cost you more over time than paying
other types of sales charges imposed by some mutual funds.

Year 2000 Readiness. Many computer systems use two digits rather than four to
identify the year in a date. These systems, if not modified, will not correctly
handle the change from "99" to "00" on January 1, 2000, causing them to be
unable to accurately perform certain functions ("Year 2000 processing"). This
problem affects virtually all companies and organizations, and, among other
things, could have a negative impact on the handling of securities trades,
payments of interest and dividends, and the pricing of and accounting for
securities portfolios.

Heartland Advisors has taken steps to help assure that its major computer
systems are capable of handling Year 2000 processing. It is also assessing the
readiness of the Funds' custodian and transfer and dividend disbursing agent and
other third parties performing major Year 2000 processing services for the Funds
and Heartland Advisors. Although Heartland Advisors expects all major Fund
computer systems to be ready in time, the Funds could be adversely affected if
Year 2000 processing systems are not properly modified in a timely manner.

Issuers of Municipal Obligations and other securities or instruments in which
the Funds may invest could be affected by the Year 2000 processing issue, as
could the service providers who administer the payment of principal and interest
on Municipal Obligations owned by bondholders, such as the Funds. These problems
might negatively affect the value of the issuers' securities, which, in turn,
could adversely impact the Funds' performance. Heartland Advisors has
established a

21
<PAGE>

process to gather publicly available information about the Year 2000 readiness
of issuers of securities in the Funds' portfolio. However, this process may not
uncover all relevant information, and the information gathered may not be
complete or accurate. Moreover, an issuer's Year 2000 processing readiness is
only one of many factors the Funds' portfolio managers may consider when making
investment decisions, and other factors may receive greater weight.

<PAGE>

Investment Objectives and Policies

GENERAL
- -------------------------------------------------------------------------------
Short Duration High-Yield Municipal Fund. The Short Duration High-Yield
Municipal Fund's investment objective is a high level of federally tax-exempt
current income with a low degree of share price fluctuation. The Fund invests
primarily in medium and lower quality Municipal Obligations and maintains an
average portfolio duration of three years or less. Although there are no
duration restrictions for the individual obligations in the portfolio, it is
anticipated that the Fund will emphasize investments in short and intermediate
duration obligations. Under normal market conditions, the Fund invests at least
65% of its total assets in medium and lower quality Municipal Obligations.

As a fundamental policy, under normal market conditions the Fund will invest at
least 80% of its net assets in Municipal Obligations. The Fund may invest
without limitation in Municipal Obligations the interest on which is a tax-
preference item for purposes of the federal alternative minimum tax.

High-Yield Municipal Bond Fund. The High-Yield Municipal Bond Fund's investment
objective is to maximize after-tax total return by investing for a high level of
federal tax-exempt current income. While there are no duration restrictions for
the Fund or the individual obligations in its portfolio, under normal market
conditions, it is anticipated that the Fund will maintain an average portfolio
duration of greater than five years. Under normal market conditions, the Fund
invests at least 65% of its total assets in medium and lower quality Municipal
Obligations.

<PAGE>

CREDIT QUALITY
- --------------------------------------------------------------------------------
Each Fund invests primarily in medium and lower quality debt obligations. Medium
and lower quality debt obligations are those rated as such by a nationally
recognized statistical rating organization ("NRSRO"); for example, BBB by
Standard & Poor's ("S&P"). Medium and lower quality obligations, sometimes
referred to as "junk bonds," generally offer higher yields than investment grade
securities with similar maturities, but involve greater investment risk,
including the possibility of default or bankruptcy. Each Fund seeks to manage
this risk through intensive credit research and may never invest more than 20%
of its total assets in debt obligations rated lower than B- by S&P or a
comparable rating by another NRSRO. Each Fund may invest in debt obligations
that are in default, but such obligations are not expected to exceed 10% of its
total assets.

NRSROs publishing rating information on which Heartland Advisors may rely
include S&P, Moody's Investors Service, Inc. and Fitch IBCA, Inc., among others.
Each Fund also may invest in unrated securities if Heartland Advisors believes
that such securities are of comparable quality so as to satisfy the foregoing
requirements.

All rating limitations on investments are applied at time of purchase.
Subsequent to purchase, a rated debt obligation may cease to be rated or its
rating may be reduced below the minimum required for purchase by a Fund. Neither
event will require the sale of such a security, but it will be a factor in
considering whether to continue to hold the security. To the extent that ratings
may change as a result of changes in a rating organization or its rating system,
each Fund will attempt to use comparable ratings as standards for selecting
investments.

24
<PAGE>

TEMPORARY POSITIONS
- --------------------------------------------------------------------------------

Each Fund may invest, without limitation, in liquid reserves, including money
market instruments, certificates of deposit, commercial paper, variable rate
demand notes and U.S. Government securities. Normally, it is not anticipated
that such liquid reserves will exceed 20% of a Fund's total assets. However,
under adverse market conditions, or other extraordinary economic or market
conditions, or when the spreads between the yields on medium and high quality
Municipal Obligations are relatively narrow, each Fund may take a temporary
defensive position and invest, without limitation, in higher quality taxable or
tax-exempt Municipal Obligations and other debt securities, including liquid
reserves. Taking a temporary defensive position is not required, and may not be
possible because of market conditions. It also might prevent a Fund from
achieving its investment objective.

25
<PAGE>

Principal Investments
and Investment Strategies

HEARTLAND ADVISORS' MUNICIPAL TEN-POINT VALUE INVESTMENT GRID(TM)
- --------------------------------------------------------------------------------
The following questions illustrate Heartland Advisors' process for evaluating
the value characteristics of Municipal Obligations for the Funds using its
proprietary Municipal Ten-Point Value Investment Grid(TM).

. Essential Service -- Does the municipality provide a vital public service?
Will the demographics of the public sector help ensure the service's continued
importance?

. Financial Soundness -- Are the municipality's financials sound? We prefer low
to moderate debt, rising revenues and ample liquidity.

. Strong Competitive Position -- Does the municipality have a strong competitive
position? We prefer a municipality that holds a #1 or #2 market position (or
an improving position) or one that has a competitive advantage in terms of
service or price.

. High Debt Service Coverage -- Does the municipality have a stable or improving
ability to pay interest and principal on its bonds?

. Experienced Management -- Does the municipality have seasoned, highly
specialized and focused management?

. A Financial Stake by Management -- Does sharing the financial
risk with bondholders give management an incentive for superior performance?

. Strong Legal Covenants -- Do the legal documents adequately protect
bondholders with such provisions as first mortgages, prior claims on revenues,
funding levels of debt reserves, occupancy targets, operating ratios and
control of management's accountability to bondholders?

. High Yield vs. U.S. Treasuries -- Is the yield attractive relative to that
currently available on U.S. Treasuries?

26
<PAGE>

. Catalyst for Change -- Does the municipality enjoy a feature or benefit that
may improve its competitive or financial position, such as new management,
technological advances or changes in the political, economic or regulatory
environment?

. Willingness to Pay Debt Obligations -- Is there public support for the project
to be financed by the municipality and are there legal, tax or political
considerations that could affect its ability to meet its financial
commitments?

MUNICIPAL OBLIGATIONS
- --------------------------------------------------------------------------------
The term "Municipal Obligations" means debt obligations issued by or on behalf
of states, territories or possessions of the United States and sovereign nations
within the territorial boundaries of the United States, the District of Columbia
and their respective political subdivisions, agencies, and instrumentalities,
and corporations duly authorized by them.

The two principal classifications of Municipal Obligations are "general
obligations" and "revenue obligations." General obligations are secured by the
municipality's pledge of its credit and taxing power for the payment of
principal and interest. Revenue obligations are generally payable only from the
revenues from a particular facility or project or, in some cases, from the
proceeds of a special excise tax or other specific revenue source. In most
cases, revenue obligations are not supported by the municipality's general power
to levy taxes.

Municipal Obligations may bear either fixed or variable rates of interest.
Variable rate securities bear rates of interest that are adjusted periodically
according to formulas intended to minimize fluctuation in the value of the
instruments.

Within the two principal classifications of Municipal Obligations, there are
various types of securities, including, in part, municipal bonds, private
activity bonds, municipal notes, mortgage-backed obligations,

27
<PAGE>

municipal leases, loan interests, custodial receipts and participation
certificates.

Private Activity Bonds are a type of revenue obligation issued by municipalities
and other public authorities to provide funding for various privately operated
business facilities ("industrial revenue bonds" or "IRBs"). In most cases IRBs
are not secured by the credit of the municipality, but rather the payment of
principal and interest depends solely upon payments by the user of the
industrial facility financed by the bond or a separate guarantor of the bond. In
some instances, real and personal property is pledged as security for principal
and interest payments.

Mortgage-Backed Municipal Obligations are a type of municipal security issued by
a state, authority or municipality to provide financing for residential housing
mortgages to target groups, generally low income individuals who are first-time
home buyers. A Fund's interest, evidenced by such obligations, is an undivided
interest in a pool of mortgages. Payments made on the underlying mortgages and
passed through to a Fund represent both regularly scheduled principal and
interest payments. A Fund also may receive additional principal payments
representing prepayments of the underlying mortgages. While a certain level of
prepayments can be expected regardless of the interest rate environment, it is
anticipated that prepayment of the underlying mortgages will accelerate in
periods of declining interest rates. In the event a Fund receives principal
prepayments in a declining interest rate environment, the Fund may have to
invest the unanticipated proceeds in lower-yielding securities. This prepayment
risk causes mortgage-backed securities to be more significantly affected by
changes in interest rates than is the case for Municipal Obligations that are
not subject to such prepayments.

28
<PAGE>

Municipal Lease Obligations are another type of revenue obligation issued by
municipalities and other public authorities to acquire land, equipment or
facilities. These obligations are not secured by the credit of the municipality,
but rather the payment of principal and interest depends solely upon payments by
the municipality under a lease or installment purchase contract. Payments by the
municipality may be subject to certain conditions, including, for example,
clauses that do not require the municipality to make lease or contractual
payments unless specific annual appropriations are made by the municipality. If
the municipality stops making payments, the obligations could lose value. Some
of these instruments may be illiquid and, as such, will be subject to each
Fund's 15% limit on illiquid securities.

Participation Interests or Certificates of Participation represent interests in
all or part of specific holdings of Municipal Obligations, including, for
example, municipal lease obligations.

OTHER INVESTMENTS AND INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

In addition to the investments and strategies discussed under "The Heartland
Approach to Investing" and "Principal Investments and Investment Strategies" in
this prospectus, each Fund may engage in the strategies and may purchase and
sell the investments discussed below and in its statement of additional
information.

When-Issued and Delayed-Delivery Securities; Forward Commitments. Each Fund may
purchase securities on a when-issued or delayed-delivery basis, and may purchase
forward commitments. Although the payment and interest terms of these securities
are established at the time the purchaser enters into the commitment, the
securities may be delivered and paid for a month or more after the purchase
date. The Funds purchase securities in this manner in order to secure an
advantageous price and yield, but the value of the security could

29
<PAGE>

change before settlement. Therefore, although the Funds will make such
commitments only with the intention of actually acquiring the securities, they
may sell the securities before settlement if it is deemed advisable for
investment reasons. When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that a Fund will sell securities
with a commitment to purchase similar, but not identical securities at a future
date. Dollar rolls are engaged in when Heartland Advisors believes securities
similar to those sold can be purchased a short time later at a lower price.

Standby Commitments. To facilitate portfolio liquidity, each Fund may obtain
standby commitments when it purchases debt obligations. A standby commitment
gives the holder the right to sell the underlying security back to the seller at
an agreed price on certain dates or within a certain period. Standby commitments
generally increase the cost of the acquisition of the underlying security,
reducing its yield.

Loan Interests. Each Fund may invest in loan interests, which are interests in
amounts owed by a municipality or other borrower to lenders or lending
syndicates. Loan interests purchased by a Fund will vary in maturity, may be
subject to restrictions on resale, are not readily marketable and may be secured
or unsecured. They involve the risk of loss in case of default or bankruptcy of
the borrower or, if in the form of a participation interest, the insolvency of
the financial intermediary.

Illiquid Securities. Neither Fund will invest more than 15% of its net assets in
illiquid securities. For purposes of applying this limitation, an "illiquid
security" means one that may not be sold or disposed of in the ordinary course
of business within seven days at a price approximating the value at which the
security is carried by a Fund. Each Fund may invest in debt obligations that are
purchased in private placements (that is, transactions in which securities have
not been registered under federal law) and that are subject to restrictions on
resale as a matter of contract or law. Private placement notes issued pursuant
to a private

30
<PAGE>

placement exemption provided by Section 4(2) of the Securities Act of 1933 (the
"1933 Act") have been determined to be liquid by Heartland's Board of Directors.
These securities and restricted securities issued under Rule 144A of the 1933
Act that are deemed to be liquid by Heartland Advisors under guidelines
established by the Board of Directors are not subject to a Fund's limitation on
illiquid securities. Municipal lease obligations, which also may be considered
illiquid, may similarly be determined to be liquid in accordance with guidelines
adopted by Heartland's Board of Directors. Absent such determinations, such
securities, and repurchase agreements maturing in more than seven days, are
considered illiquid.

Futures and Options. Each Fund may engage in transactions in options, futures
contracts and options on futures contracts to hedge against anticipated declines
in the market value of portfolio securities and increases in the market value of
securities it intends to acquire. Each Fund may also engage in such transactions
to protect against exposure to interest rate changes. Finally, the Funds may use
these instruments to enhance total return or to invest in eligible asset classes
with greater efficiency and lower cost than is believed to be possible through
direct investments.

Options and futures can be highly volatile investments and involve certain
risks. These strategies require the ability to predict future movements in
securities prices, interest rates, currency exchange rates and other economic
factors. Heartland Advisors' attempts to use such investments 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
(that is, the underlying investment moves in a direction opposite or more than
anticipated), or if the Fund were unable to close out its positions due to
disruptions in the market or lack of liquidity. Over-the-counter options and
futures

31
<PAGE>

generally involve greater credit and liquidity risks than exchange-traded
options and futures. Options and futures traded on foreign exchanges generally
are not regulated by U.S. authorities, and may offer less liquidity and less
protection to a Fund if the other party to the contract defaults.

Borrowing. Each Fund may borrow from any bank or other person up to 5% of total
assets for temporary purposes. A borrowing is presumed to be for temporary
purposes if it is repaid by the Fund within 60 days and is not extended or
renewed. Each Fund also may borrow solely from banks to facilitate the
management of its investment portfolio and make other investments or engage in
other transactions permissible under the 1940 Act which may be considered a
borrowing (such as dollar rolls and reverse repurchase agreements), provided
such borrowings for these purposes do not exceed one-third of total assets.

Currently, each Fund intends to borrow only from banks, for periods not longer
than 60 days, in amounts not to exceed 20% of total assets and only for the
following purposes: (a) to avoid liquidating securities under circumstances
which Heartland Advisors believes are unfavorable to shareholders, such as to
meet large or unexpected redemptions or to purchase debt obligations pending
receipt of proceeds in the settlement of the sale of other portfolio securities;
and (b) when the Fund is scheduled to receive cash in exchange for debt
obligations that are being retired, called or exchanged pursuant to a sinking
fund provision or put feature of the instrument. The extent to which a Fund will
borrow will depend, among other things, on market conditions and interest rates.

Portfolio Turnover. A Fund's portfolio turnover rate indicates changes in its
portfolio of securities and will vary year to year as well as within a year. The
Funds may purchase or sell securities without regard to the length of time the
security has been held to take advantage of short-term differentials in bond
yields consistent with their objective

32
<PAGE>

of seeking tax-exempt interest income. The Funds may engage in short-term
trading if the anticipated benefits are expected by Heartland Advisors to exceed
the transaction costs. Portfolio turnover may also be affected by the sale of
portfolio securities to meet cash requirements for redemption of shares of a
Fund. High portfolio turnover could result in increases in transaction costs and
may result in realized capitalized gains which would be taxable distributions to
shareholders.

33
<PAGE>

- --------------------------------------------------------------------------------
HOW TO INVEST

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
INSTRUCTIONS
- ------------------------------------------------------------------------------------------------
OPEN AN ACCOUNT ADD TO AN ACCOUNT
<S> <C>
[PICTURE
APPEARS
HERE] BY TELEPHONE
- ------------------------------------------------------------------------------------------------
WIRE Call 800-443-2862 to obtain an account TELEPHONE PURCHASE Available for
number and provide your Social Security or additional investments of $100 to $25,000.
tax ID number. Have your bank send your Contact us for a Bank Options Form.
investment to Firstar Bank Milwaukee, N.A.
with these instructions: WIRE Have your bank send your
. ABA #0750-00022 investment to Firstar Bank Milwaukee, N.A.
. A/C #112-952-137 with these instructions:
. CREDIT TO: Heartland (name of fund) . ABA #0750-00022
. your Heartland account number . A/C #112-952-137
. name(s) of investor(s) . CREDIT TO: Heartland (name of fund)
. your Heartland account number
. name(s) of investor(s)

[PICTURE
APPEARS
HERE] IN WRITING
- ------------------------------------------------------------------------------------------------
Mail a completed application form Fill out the Additional Investment Form
and a check. attached to your statement and write your
Heartland account number on your check.

Mail the form and the check.

[PICTURE
APPEARS
HERE] AUTOMATICALLY
- ------------------------------------------------------------------------------------------------
Complete the application form, including ALL SERVICES Call us to request a form to add
Automatic Investment Plan section, and return the automatic investment plan feature (minimum
it with your investment (minimum of $50 per of $50 per transaction) to your account (see
transaction). "Services for Fund Investors"). Complete and
return the form along with any other required
materials.

[PICTURE
APPEARS
HERE] VIA THE INTERNET
- ------------------------------------------------------------------------------------------------
COMPUTER Visit the Heartland web site
www.heartlandfunds.com and follow the
instructions to download an account
application.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
HOW TO INVEST

WIRE OR ELECTRONIC FUNDS TRANSFER These services --------------------------------------------
must be elected in advance of use. Once the Fund ADDRESSES
has your bank account information on file, call us --------------------------------------------
to request your transaction. Proceeds will be wired
or transferred electronically to your bank. MAILING ADDRESS
---------------
TELEPHONE AND WIRE REDEMPTIONS are subject to a Firstar Mutual Fund
$1,000 minimum. Services, LLC
P.O. Box 701
Milwaukee, WI
53201-0701

OVERNIGHT DELIVERY
------------------
- --------------------------------------------------- Firstar Mutual Fund
Write a letter of instruction that includes: Services, LLC
. the names and signatures of all accountholders 615 East Michigan St.
. your Heartland account number Milwaukee, WI 53202
. the fund name
. the amount in dollars or shares you want to --------------------------------------------
sell CONCEPTS TO UNDERSTAND
. how and where to send the proceeds --------------------------------------------
WIRE TRANSFER: the fastest way to transfer
We will mail the proceeds to the address on the money from one financial institution to
account, unless otherwise requested. A signature another. Your bank may charge a fee to send
guarantee may be required. or receive a wire transfer.
Mail the letter of Instruction.

- --------------------------------------------------- ELECTRONIC FUNDS TRANSFER: transferring
SYSTEMATIC WITHDRAWAL PLAN Call us to request a money to your bank account electronically
form to add the plan. Complete the form, specifying may take up to eight business days to clear.
the amount and frequency of withdrawals you would EFT usually is available without a fee at
like. all Automated Clearing House (ACH) banks.
Establishing EFT services requires
- --------------------------------------------------- approximately 15 days.
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------
Account Policies

If you wish to make a telephone transaction under one of the purchase or
redemption options, please call Shareholder Services at 1-800-432-7856 or 414-
289-7000. If you have a question about investing or need forms for electing an
option, call Shareholder Services at either number or visit our website at
www.heartlandfunds.com. Please note that you may terminate or change any option
you elect at any time upon five days' advance notice to Heartland Advisors. The
Funds may suspend, modify, or terminate any purchase or redemption option, other
than the option to redeem by mail, at any time without notice to you. The Funds
also reserve the right to waive or lower any minimum dollar amounts applicable
to the transactions discussed.

Time of Purchase and Form of Payment. Shares of the Funds are sold without a
sales charge. Your purchase of a Fund's shares will, therefore, be made at the
net asset value per share next determined after the Fund or its authorized agent
receives your payment. Payment must be in U.S. dollars by check drawn on a bank
in the United States, wire transfer, or electronic transfer. Usually, a Fund
will not accept payment in the form of a check payable to you or a third party,
and endorsed over to the Fund. Shares purchased by checks that are returned will
be canceled and you will be liable for any losses or fees incurred by a Fund or
its agents, including bank handling charges for returned checks.

If your payment is received after 4:00 p.m., Eastern time, your purchase will be
effective on the next business day. Purchase orders for a Fund are not binding
until accepted by the Fund or its authorized agent, and entered on the Fund's
books. A Fund may reject any order its officers determine is not in the best
interests of the Fund or its shareholders, and the offering of Fund shares may
be suspended or limited at any time without notice to shareholders. The Funds
also may reject any order not accompanied by instructions in English. Once
accepted, you may not cancel or revoke your purchase order, but you may redeem
your shares.

36
<PAGE>

Investment Minimums. If you purchase shares directly from a Fund, your initial
investment must be for a minimum of $1,000, except for accounts opened with an
automatic investment plan. Subsequent purchases made by mail, other than through
dividend reinvestment, must be for a minimum of $100. Each Fund may waive or
lower its investment minimums for any reason. Different minimums may apply to
accounts opened through third parties.

Tax Identification Numbers. Under IRS rules, we must receive your correct social
security or tax identification number on a signed Account Application or IRS
Form W-9 when you open your account. Otherwise, you may be subject to an IRS
fine, and we may be required to withhold a percentage (currently 31%) of your
dividend and capital gain distributions and of your redemption proceeds.

Purchases Through Third Parties. You may purchase shares through a third party
broker-dealer or other financial intermediary, but Heartland reserves the right
to refuse purchases through any intermediary arrangement that the officers of
Heartland determine employs investment strategies which are not in the best
interests of the Funds or their shareholders. Shares purchased through third
parties may be subject to special fees and conditions that do not apply if you
purchase your shares directly from the Funds. Third parties also may place
limits on your ability to use the shareholder services or receive shareholder
information described in this prospectus. Heartland has allowed some third
parties to authorize selected designees to accept purchase orders for the third
party on the Funds' behalf. If you purchase shares through a third party which
is also an authorized agent of the Funds, your order will be processed at the
net asset value per share next determined after the third party (or its
authorized designee) receives your order; other orders will be processed at the
net asset value next determined after receipt by the Funds.

37
<PAGE>

REDEEMING SHARES
- --------------------------------------------------------------------------------
Redemptions by Shareholders Who Are Not Individuals. For corporate, trust,
partnership, and other institutional accounts, the persons signing should also
indicate their office or other fiduciary capacity. A certified corporate
resolution evidencing the signing officer's authority to sign on behalf of a
shareholder corporation also is required. Executors, administrators, guardians,
trusts, and other institutional shareholders should call Heartland Advisors
prior to mailing their instructions to determine if other documentation may be
required.

Redeeming Shares By Check. (Short Duration High-Yield Municipal Fund only). You
may redeem shares of the Short Duration High-Yield Municipal Fund by writing
special checks in the amount of $250 or more. This service is provided free of
charge. Because these checks are drawn on a special account at the Fund's
custodian bank, you will be subject to that bank's procedures and rules relating
to its checking accounts. Canceled checks are not returned, but copies may be
obtained upon request. Please note that you may realize a taxable gain or loss
when you redeem shares by check.

Time of Redemption; Form of Instructions and Payment. Your shares will be
redeemed at the net asset value per share next determined after your
instructions, in English, are received by your Fund or its authorized agent in
good order as further explained below. The Funds will not accept an order with
instructions for redemption on a particular date or at a particular price. The
Funds use procedures reasonably designed to authenticate telephone instructions
including, for example, requesting personal identification information from
callers. The Funds are not liable for any losses due to unauthorized or
fraudulent telephone instructions if these procedures are followed. Once
accepted, you may not cancel or revoke your redemption order.

Usually, proceeds are mailed within one or two days of redemption or wired on
the next business day, but in no event are proceeds remitted

38
<PAGE>

to you later than seven business days after redemption. In limited
circumstances, the Funds may elect to suspend the redemption of shares.

Generally, proceeds will be paid in cash, but the Funds reserve the right to pay
redemptions in the amount of $250,000 or more "in kind," which means you would
be paid in portfolio securities. If this occurred, you might incur transaction
costs when you sell the portfolio securities.

If redemption instructions are received in good order for shares that have not
been paid for, your shares will be redeemed, but the Funds reserve the right to
hold the proceeds until payment of the purchase price can be confirmed. This
type of delay can be avoided by purchasing shares by federal funds wire. If you
choose to have your redemption proceeds mailed to you and either the United
States Postal Service is unable to deliver the redemption check to you or the
check remains outstanding for at least six months, the Funds reserve the right
to reinvest the check in shares of the particular Fund at their then current net
asset value until you give the Funds different instructions. No interest will
accrue on amounts represented by uncashed redemption checks.

Early Redemption Fee. To defray certain transaction expenses and facilitate
portfolio management, upon 90 days' advance written notice to you, the Fund
reserves the right to charge you an early redemption fee of 1% of the proceeds
of shares being redeemed or exchanged that are held for less than 90 days.

EXCHANGING SHARES
- --------------------------------------------------------------------------------

Unless you instruct the Funds that you do not want this service, you are
automatically permitted to purchase shares of a Fund with the proceeds of a
redemption for your account in any other Heartland Fund or the Firstar Money
Market Fund, a money market fund sponsored by an affiliate of the Transfer
Agent. This type of transaction is referred to as an "exchange" and may be
effected by writing or calling Heartland

39
<PAGE>

Advisors. Written exchanges may be for any amount, but telephone exchanges may
be for not less than $1,000 and not more than $500,000.

Exchanges with the Firstar Money Market Fund are subject to the terms and
conditions of that fund's prospectus, which may be obtained from Heartland
Advisors. Heartland Advisors receives an annual fee from Firstar Money Market
Fund for shareholder account servicing and recordkeeping and distribution
services in the amount of 0.20% of the average daily net assets of shares for
which Heartland Advisors is the holder or dealer of record.

To minimize Fund expenses and to protect the Funds and their shareholders from
unfair expense burdens, the Funds reserve the right to restrict excessive
exchange activity by any shareholder upon 60 days' advance notice.

Signature Guarantees. To protect your account, the Funds reserve the right to
require a signature guarantee for written redemption instructions. Normally, a
signature guarantee will be required if the redemption proceeds will exceed
$50,000. A signature guarantee will also be required if the proceeds are being
paid to a third party, mailed to an address other than the address listed on the
Funds' records or forwarded to a bank not identified on the Funds' records as
authorized to receive the proceeds. Acceptable guarantors include, among others,
banks and brokerage firms that are members of a domestic stock exchange.
Signatures witnessed by notaries public are not acceptable for this purpose.

Redemptions Through Third Parties. You may redeem shares through a third party
broker-dealer or other financial institution provided the third party presents
documentation satisfactory to the Funds indicating it is your authorized agent.
Third parties may charge fees for their services and impose terms or conditions
that do not apply if you do business directly with the Funds. Heartland has
allowed some third parties to authorize selected designees to accept redemption
orders for

40
<PAGE>

the third party on the Funds' behalf. If you redeem shares through a third party
which is also an authorized agent of the Funds, your order will be processed at
the net asset value per share next determined after the third party (or its
authorized designee) receives your order; other orders will be processed at the
net asset value per share next determined after receipt by the Funds.

Involuntary Redemption. If your account value in any Fund falls below $500 for
three months or more, the Funds may redeem all of your shares in that Fund upon
60 days' advance notice to you. You may avoid involuntary redemption by making
additional investments to bring your account value up to at least $1,000.

SHARE PRICE
- --------------------------------------------------------------------------------
Shares of a Fund are purchased and redeemed at the net asset value per share
next determined following receipt of your order in proper form by the Fund or
its authorized agent. Net asset value is the difference between the values of
the Fund's assets and liabilities divided by the number of shares outstanding.
It is determined at the close of regular trading on the New York Stock Exchange
(generally 4:00 p.m., Eastern Time). Orders received after 4:00 p.m., Eastern
Time, are priced at the net asset value per share determined on the next
business day of the Fund.

If you purchase or redeem shares through a third party which is an authorized
agent of the Funds, your order will be processed at the net asset value per
share next determined after the third party receives your order; other purchases
and redemptions through third parties are processed at the net asset value per
share next determined after receipt by the Funds. Third parties acting as
authorized agents of the Funds are required to segregate orders received after
the close of regular trading on the New York Stock Exchange and transmit those
orders separately for execution at the net asset value per share next
subsequently determined.

41
<PAGE>

Portfolio securities are valued on the basis of market quotations or at fair
value using methods determined by Heartland's Board of Directors. Like most
mutual funds, the Funds generally use a "fair value" methodology to value debt
obligations because market quotations are generally not available for most debt
obligations. Fair values are normally determined by using valuations furnished
by one or more pricing services approved by Heartland's Board of Directors. Debt
securities purchased with remaining maturities of 60 days or less are valued at
acquisition cost, plus or minus any amortized discount or premium.

SERVICE FEES
- --------------------------------------------------------------------------------
If your electronic funds transfer order cannot be processed because of
insufficient funds or a stop payment, Firstar Mutual Fund Services, LLC (the
"Transfer Agent") will charge your account a service fee of $20.00. If you
direct that your redemption proceeds be wired to your bank, the Transfer Agent
will charge a service fee (currently $12.00).

42
<PAGE>

HEARTLAND VALUE SOURCE(TM)
- --------------------------------------------------------------------------------
Heartland Advisors' website, Heartland Value Source,(TM) located at
www.heartlandfunds.com, provides investors with a variety of information about
the Fund, including daily share prices, market updates and shareholder reports.
By calling 1-800-432-7856 and requesting a personal identification number,
shareholders can access their accounts directly to review current balances,
recent transactions and other account information.

INVESTMENT REPORTS
- --------------------------------------------------------------------------------
Shareholder Reports. The Funds' portfolio managers review their strategies and
results in quarterly Value Reports. In addition, semiannually these reports
contain schedules of investments and Fund financial statements. If several
members of a household own a Fund, only one Value Report is mailed to that
address. To receive additional copies, you may call Shareholder Services at 1-
800-432-7856 or (414) 289-7000, or write to Heartland Advisors at 790 North
Milwaukee Street, Milwaukee, WI 53202.

Other Reports. Heartland Advisors also publishes and mails to shareholders News
& Views, a quarterly investment newsletter providing market analysis and
commentary. In addition, it publishes investment research pieces that are mailed
to shareholders periodically.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
- --------------------------------------------------------------------------------
A dividend from net investment income represents the income a Fund earns from
dividends and interest paid on its investments after payment of Fund expenses. A
capital gain or loss is the increase or decrease in the value of a security that
a Fund holds compared to its original purchase price. The gain or loss is
"unrealized" until the security is sold. Each realized capital gain or loss is
either short-term or long-term depending on whether the Fund held the security
for one year or less, or more than one year. This is the case regardless of how
long you hold your Fund shares.

43
<PAGE>

Income dividends are declared by the Funds each day and paid monthly. If a Fund
has net capital gains for a year, the Fund normally will distribute
substantially all of its net capital gains at the end of the year. Both types of
distributions are automatically invested in additional shares for your account
unless you elect on your Account Application to have them invested in another
Heartland Fund or to have them paid to you in cash.

"Buying a Dividend." Please note that if you purchase shares of a Fund just
before the record date of a capital gain distribution, you will receive a
portion of your purchase price back as a taxable distribution. A Fund's net
asset value per share on the record date will be reduced by the amount of the
dividend. This is sometimes referred to as "buying a dividend."

If you choose to have dividends and capital gains distributions, or both, mailed
to you and either the United States Postal Service is unable to deliver the
distribution check to you or the check remains outstanding for at least six
months, the Funds reserve the right to reinvest the check and future
distributions in shares of the particular Fund at their then current net asset
value until you give the Funds different instructions. No interest will accrue
on amounts represented by uncashed distribution checks.

TAXES
- --------------------------------------------------------------------------------
Interest earned by the Funds on Municipal Obligations is in general federally
tax-free when distributed to you. If a Fund earns taxable income from any of its
investments, it will be distributed as a taxable dividend and taxable to you as
ordinary income for federal income tax purposes.

Each Fund may invest in Municipal Obligations the interest on which (less any
related expenses) is a tax preference item for purposes of the federal
alternative minimum tax for individuals (private activity securities). To the
extent that a Fund invests in private activity securities,

44
<PAGE>

individuals who are subject to the alternative minimum tax will be required to
report a portion of the Fund's dividends as a "tax preference item" in
determining their federal alternative minimum tax. Liability for a federal
alternative minimum tax will depend on your individual tax circumstances.

Short-term capital gains will be taxable to you as ordinary income for federal
income tax purposes. Long-term capital gain distributions will be taxable as
long-term capital gains to shareholders. If a Fund declares a distribution in
December, but does not pay it until January of the following year, you still
will be taxed as if the distribution were paid in December. The Transfer Agent
will process your distributions and send you a statement for tax purposes each
year showing the source of distributions for the preceding year.

If you redeem or exchange your shares, the transaction is a taxable event.
Special tax rules apply to non-individual shareholders. State and local tax
rules differ from the federal tax rules described in this prospectus. Because
this tax information is only a general overview, you should consult with your
own tax advisor about the tax consequences of your investment in the Funds.

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following financial highlights tables are intended to help you understand
each Fund's financial performance since commencement of its operations. Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate that an investor would have earned on
an investment in the Funds over the periods presented (assuming reinvestment of
all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, are included in the Annual Report to Shareholders, which is
available upon request.

45
<PAGE>

<TABLE>
<CAPTION>
Short Duration High-Yield High-Yield Municipal
Municipal Fund Bond Fund
------------------------------------ -----------------------------------
For the Jan. 2, 1997/1/ For the Jan. 2, 1997/1/
year ended through year ended through
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period............... $ 10.15 $ 10.00 $ 10.45 $ 10.00
Income from investment operations:
Net investment income........................... 0.53 0.57 0.65 0.68
Net realized and unrealized
gains (losses) on investments.................. (0.17) 0.15 0.03 0.48
-------- -------- ------- -------
Total income from investment operations......... 0.36 0.72 0.68 1.16
Less distributions from:
Net investment income........................... (0.53) (0.57) (0.65) (0.68)
Net realized gains on investments............... -- -- (0.10) (0.03)
-------- -------- ------- -------
Total distributions........................... (0.53) (0.57) (0.75) (0.71)
-------- -------- ------- --------
Net asset value, end of period..................... $ 9.98 $ 10.15 $ 10.38 $ 10.45
======== ======== ======= ========

Total Return....................................... 3.7% 7.4% 6.7% 11.7%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........ $ 149,643 $120,942 $73,455 $30,608
Ratio of net expenses to average net assets..... 0.62%/2/ 0.00%/2/ 0.76%/3/ 0.00%/3/
Ratio of net investment income
to average net assets.......................... 5.26%/2/ 5.33%/2/ 6.01%/3/ 6.01%/3/
Portfolio turnover rate......................... 215% 175% 223% 439%
</TABLE>

(1) Commencement of operations.
(2) If there had been no fees paid indirectly or expense reimbursement and
management fee waiver by the Advisor, the ratios of net expenses to average
net assets for the periods ended December 31, 1998 and December 31, 1997
would have been 0.80% and 0.84%, respectively, and the ratios of net
investment income to average net assets would have been 5.08% and 4.49%,
respectively.
(3) If there had been no fees paid indirectly or expense reimbursement and
management fee waiver by the Advisor, the ratios of net expenses to average
net assets for the periods ended December 31, 1998 and December 31, 1997
would have been 1.08% and 1.25%, respectively, and the ratios of net
investment income to average net assets would have been 5.69% and 4.76%,
respectively.

46
<PAGE>

HEARTLAND FUNDS
General Information and Account/Price Information (24 hours):
1-800-432-7856 or (414) 289-7000
www.heartlandfunds.com

HEARTLAND FUNDS
790 North Milwaukee Street
Milwaukee, Wisconsin 53202

INVESTMENT ADVISOR AND DISTRIBUTOR
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202

CUSTODIAN
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
P.O. Box 701
Milwaukee, Wisconsin 53201-0701

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

COUNSEL
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

47
<PAGE>

If you have any questions about the Funds or would like more information,
including a free copy of the Funds' Statement of Additional Information ("SAI"),
or their Annual or Semi Annual Report, you may call or write Heartland Advisors
at:

Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
1-800-432-7856 or (414) 289-7000
www.heartlandfunds.com

The SAI, which contains more information on the Funds, has been filed with the
Securities and Exchange Commission ("SEC"), and is legally a part of this
prospectus. The Annual and Semi Annual Reports, also filed with the SEC, discuss
market conditions and investment strategies that affected the Fund's performance
during the prior fiscal year and six-month fiscal period, respectively.

To view these documents, along with other related documents, you can visit the
SEC's Internet website (http://www.sec.gov) or the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference Room
can be obtained by calling 1.800.SEC.0330. Additionally, copies of this
information can be obtained, for a duplicating fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.

Investment Company Act File No. 811-4982.

48
<PAGE>

PROSPECTUS/MAY 1, 1999

LARGE CAP VALUE FUND

MID CAP VALUE FUND

VALUE PLUS FUND

VALUE FUND

GOVERNMENT FUND

[LOGO APPEARS HERE]
-----------------------
AMERICA'S VALUE INVESTOR(R)
<PAGE>

PROSPECTUS/MAY 1, 1999

HEARTLAND LARGE CAP VALUE FUND

HEARTLAND MID CAP VALUE FUND

HEARTLAND VALUE PLUS FUND

HEARTLAND VALUE FUND

HEARTLAND GOVERNMENT FUND

This Prospectus contains information you should know about the
following mutual fund portfolios of Heartland Group, Inc. (the "Funds") before
you invest. Investments for each of the Funds are selected on a value basis.

- - HEARTLAND LARGE CAP VALUE FUND -- Its investment objective is long-term
capital appreciation. This Fund seeks to achieve its objective through
investing in stocks of companies with market capitalizations over $1 billion.

- - HEARTLAND MID CAP VALUE FUND -- Its investment objective is long-term capital
appreciation. This Fund seeks to achieve its objective through investing in
mid-cap stocks, those of companies with market capitalizations between $750
million and $5 billion.

- - HEARTLAND VALUE PLUS FUND -- Its investment objectives are capital
appreciation and current income. This Fund seeks to achieve its objectives
primarily through investing in income-producing equity securities of smaller
companies. This Fund also seeks to achieve its objectives through investing in
debt securities.

- - HEARTLAND VALUE FUND -- Its investment objective is long-term
capital appreciation. This Fund seeks to achieve its objective through
investing in small company stocks.

2
<PAGE>

- - HEARTLAND GOVERNMENT FUND -- Its investment objectment are a high level of
current income, liquidity and safety of principal.

Heartland Advisors managers the Funds using its Ten-Point Value Investment
Grid", a strict investment discipline designed to identify value. The Government
Fund also uses certain value criteria for selecting U.S. Government securities.
Each Fund offers investors an attractive investment opportunity combined with
active risk management. Each Fund is a no-load fund. Investors pay no sales fees
or changes to purchase, redeem or exchange their shares.

3
<PAGE>

<TABLE>
<CAPTION>
Table of Contents
<S> <C>
THE HEARTLAND APPROACH TO INVESTING....................... 5
- --------------------------------------------------------------

RISK/RETURN SUMMARY: INVESTMENTS,
RISKS AND PERFORMANCE..................................... 7
- --------------------------------------------------------------
Large Cap Value Fund...................................... 7
Mid Cap Value Fund........................................ 9
Value Plus Fund........................................... 11
Value Fund................................................ 15
Government Fund........................................... 17
Investment Returns........................................ 21
Fees and Expenses of the Funds............................ 22

MANAGEMENT OF THE FUNDS................................... 25
- --------------------------------------------------------------
Heartland Group........................................... 25
Heartland Advisors........................................ 25

PRINCIPAL INVESTMENT STRATEGIES
AND INVESTMENT RISKS...................................... 30
- --------------------------------------------------------------
Heartland Advisors' Ten-Point Value Investment Grids(TM).. 30
Other Investments and Investment Strategies............... 33
Risks..................................................... 37

HOW TO INVEST............................................. 42
- --------------------------------------------------------------

ACCOUNT POLICIES.......................................... 46
- --------------------------------------------------------------
Redeeming Shares.......................................... 47
Exchanging Shares......................................... 49
Share Price............................................... 51
Service Fees.............................................. 52

SHAREHOLDER INFORMATION AND REPORTING..................... 53
- --------------------------------------------------------------
Heartland Value Source(TM)................................ 53
Investment Reports........................................ 53
Dividends and Capital Gain Distributions.................. 53
Taxes..................................................... 54
Financial Highlights...................................... 55
</TABLE>

4
<PAGE>

THE HEARTLAND APPROACH TO INVESTING

Heartland Advisors, Inc. ("Heartland Advisors"), America's Value Investor(R),
selects investments for the Funds that it believes are undervalued as measured
by sets of criteria known as Heartland Advisors' Ten-Point Value Investment
Grids(TM). The portfolios of the Heartland Funds are actively managed. Although
no one can predict a Fund's future performance, Heartland Advisors believes that
the "value" style of investing will outperform over extended periods, which may
include bear markets as well as volatile or "sideways moving" markets. The value
style may perform less well in markets that favor faster growing companies.

Heartland Advisors' Equity Ten-Point Value Investment Grid(TM) is
used to evaluate the relative worth of equity securities in the Funds'
portfolios. The criteria used are:

- - Low price/earnings multiple - High insider ownership
- - High cash flow - Capable management
- - Positive earnings dynamics - Hidden assets
- - Discount to book value - Positive technical analysis
- - Financial soundness - Catalyst for recognition

Heartland Advisors' Fixed Income Ten-Point Value Investment Grid(TM)
is used to evaluate the relative worth of fixed-income securities in the Funds'
portfolios. The criteria used are:

- - Economic trends - Financial soundness
- - Federal Reserve policy - Market sponsorship
- - "Real" interest rates - Positive technical analysis
- - Attractive risk premiums - Innovative asset classes
- - Sector outlook - Catalyst for recognition

Heartland Advisors typically sells securities in the Funds' portfolios when it
considers them to be overvalued relative to other investments using the above
criteria. It also may sell securities to raise cash in response to business
operating needs or, consistent with a Fund's

5
<PAGE>

investment objective, to reposition the Fund's portfolio to maintain relative
industry or market sector weightings or because of market or economic factors.

An investment in a Fund is not a deposit of a bank, nor insured or guaranteed by
the Federal Deposit Insurance Company (FDIC) or any other governmental agency.
No single Fund is designed to be a complete investment program, and while you
may make money, you could also lose money. Each Fund's share price will
fluctuate.

6
<PAGE>

RISK/RETURN SUMMARY:
INVESTMENTS, RISKS AND PERFORMANCE

LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Large Cap Value Fund seeks long-term capital appreciation
through investing in large companies.

PRINCIPAL INVESTMENT STRATEGIES. Under normal market conditions, the Large Cap
Value Fund invests at least 65% of its total assets, and generally almost all of
its assets, in common stocks and other equity securities of companies with
market capitalizations in excess of $1 billion selected on a value basis. It
may, however, invest in other equity securities and debt securities, and may
employ other investment techniques that are not principal investment strategies,
but could impact the Fund's performance.

Large companies typically are global in nature and not dependent solely on the
U.S. economy or stock market. They tend to be widely followed by investment
analysts and their securities tend to be broadly owned by institutional and
individual investors. These characteristics cause the securities of these
companies to be normally more liquid and subject to less price volatility than
stocks of smaller companies.

RISKS. The principal risk of investing in the Large Cap Value Fund is that its
share price and investment return will fluctuate, and you could lose money.
Because the Fund invests in value stocks, it is subject to the risk that their
intrinsic values may never be recognized by the broad market or that their
prices may decline. While investing in value stocks may limit the overall
downside risk of the Fund over time, the Fund may produce more modest gains than
riskier equity funds in exchange for this potentially lower risk. Because the
Fund invests in both global companies and securities of foreign issuers, factors
such as foreign exchange rates, foreign political and economic developments,
and domestic and foreign laws concerning investing outside the United States
could adversely affect the Fund.

7
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND? The Large Cap Value Fund is designed
for investors who seek long-term capital appreciation from a diversified,
actively managed portfolio of large company stocks. It is designed for investors
who can accept the volatility and other investment risks of the broad-based
equity markets, but want an investment stategy that seeks to manage these risks
by investing in companies believed to be undervalued relative to their intrinsic
value.

PAST PERFORMANCE. The following tables show historical perfomance of the Large
Cap Value Fund. Table I provides some indication of the risks of investing in
the Fund by showing how the Fund's total returns have varied from year to year
since January 1, 1997. Table II shows how the Fund's average annual total
returns to those of a broad-based securities market index.

The Fund commenced operations on October 11, 1996. The performance of a newer
mutual fund may be adversely affected by such factors as uneven cash flows and
adsolute size. These factors may make it more difficult for a newer fund to
establish meaningful portfolio positions as quickly and as efficiently as a more
seasoned fund. Newer funds may also experience greater portfolio turnover. Past
performance cannot predict or guarantee future results.

TABLE I

LARGE CAP VALUE FUND -- YEAR-BY-YEAR TOTAL RETURNS

A BAR CHART showing Total Returns for Large Cap Value Fund for 1997 and 1998:

22.91% 1.73%
1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

-------------------------

BEST QUARTER:
Q2 '97 14.53%
=========================

WORST QUARTER:
Q3 '98 -15.99%
-------------------------

8
<PAGE>

TABLE II

LARGE CAP VALUE FUND -- AVERAGE ANNUAL TOTAL RETURN (THROUGH 12/31/98)
- ----------------------------------------------------------------------------------------------
Since inception
One year (10/11/96)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Large Cap Value Fund 1.73% 13.04%
- ----------------------------------------------------------------------------------------------
S&P 500 Index/(1)/ 28.57% 31.51%
- ----------------------------------------------------------------------------------------------
</TABLE>

/(1)/ The S&P 500 Stock Index is an unmanaged index of 500 stocks representing
major U.S. industries.

MID CAP VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Mid Cap Value Fund seeks long-term capital appreciation
through investing in mid-sized companies.

PRINCIPAL INVESTMENT STRATEGIES. Under normal market conditions, the Mid Cap
Value Fund invests at least 65% of its total assets, and generally almost all of
its assets, in common stocks and other equity securities of mid-sized companies
with market capitalizations between $750 million and $5 billion selected on a
value basis. It may, however, invest in other equity securities and debt
securities, and may employ other investment techniques that are not principal
investment strategies, but could impact the Fund's performance.

Mid-sized companies tend to have more experienced management and more
established operating histories than smaller companies. As a result, mid-sized
companies tend to be more widely followed by investment analysts and have
greater financial data and other information readily available than smaller
companies. However, mid-sized companies typically are less well-established and
followed than larger companies, and the securities of mid-sized companies
usually are not as broadly owned. These factors make securities of mid-sized
companies a less efficient market segment, creating potential opportunities for
investors. The Fund seeks to moderate the risks associated with investing in
mid-sized companies by investing in equity securities that offer higher dividend
yields than equity securities in general.

9
<PAGE>

RISKS. The principal risk of investing in the Mid Cap Value Fund is that its
share price and investment return will fluctuate, and you could lose money.
Because the Fund invests in value stocks, it is subject to the risk that their
intrinsic values may never be recognized by the broad market or that their
prices may decline. While investing in value stocks may limit the overall
downside risk of the Fund over time, the Fund may produce more modest gains than
riskier equity funds in exchange for this potentially lower risk. Mid cap
securities tend to be more volatile and less liquid than the securities of
larger companies.

WHO SHOULD CONSIDER INVESTING IN THE FUND? The Mid Cap Value Fund is designed
for investors who seek long-term capital appreciation from a diversified,
actively managed portfolio of mid-size company stocks. It is designed for
investors who seek greater investment return potential than that which is
normally available from the broad-based equity markets and who can tolerate the
greater investment risk and market volatility associated with mid-sized and
smaller companies. It is designed for investors who want an investment strategy
that seeks to manage these risks by investing in companies believed to be
undervalued relative to their intrinsic value.

PAST PERFORMANCE. The following tables show historical performance of the Mid
Cap Value Fund. Table I provides some indication of the risks of investing in
the Fund by showing how the Fund's total returns have varied from year to year
since January 1, 1997. Table II shows how the Fund's average annual total
returns compare to those of a broad-based securities market index.

The Fund commenced operations on October 11, 1996. The performance of a newer
mutual fund may be adversely affected by such factors as uneven cash flows and
absolute size. These factors may make it more difficult for a newer fund to
establish meaningful portfolio positions as quickly and as efficiently as a more
seasoned fund. Newer funds may also experience greater portfolio turnover. Past
performance cannot predict or guarantee future results.

10
<PAGE>

TABLE I

MID CAP VALUE FUND -- YEAR-BY-YEAR TOTAL RETURNS

A BAR CHART showing Total Returns for Mid Cap Value Fund for 1997 and 1998:

22.84% (7.96)%
1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

------------------------

BEST QUARTER:
Q1 '98 14.71%
========================

WORST QUARTER:
Q3 '98 -20.17%

------------------------

<TABLE>
<CAPTION>
TABLE II

MID CAP VALUE FUND -- AVERAGE ANNUAL TOTAL RETURN (THROUGH 12/31/98)
- ------------------------------------------------------------------------------
Since inception
One year (10/11/96)
- ------------------------------------------------------------------------------
<S> <C> <C>
Mid Cap Value Fund -7.96% 8.77%
- ------------------------------------------------------------------------------
S&P Mid Cap 400 Index/(1)/ 19.11% 25.77%
- ------------------------------------------------------------------------------
</TABLE>

/(1)/ The S&P Mid Cap 400 Index is an unmanaged index of 400 stocks generally
representative of the mid cap market.

VALUE PLUS FUND
- --------------------------------------------------------------------------------
INVESTMENT GOAL. The Value Plus Fund seeks capital appreciation and current
income.

PRINCIPAL INVESTMENT STRATEGIES. The Value Plus Fund invests primarily in
income-producing equity securities of smaller companies selected on a value
basis. To further pursue its income objective, the Fund also invests up to 35%
of its total assets in other securities, such as debt securities and cash
equivalents. Although it may invest in securities of larger companies, it
generally invests in companies with market capitalizations of less than $750
million. The Fund seeks to reduce the

11
<PAGE>

capitalizations of less than $750 million. The Fund seeks to reduce the risks
associated with investing in small companies through the income component of its
portfolio. The Fund may employ other investment techniques that are not
principal investment strategies, but could impact the Fund's performance.

RISKS. The principal risk of investing in the Value Plus Fund is that its share
price and investment return will fluctuate, and you could lose money. Because
the Fund invests in value stocks, it is subject to the risk that their intrinsic
values may never be recognized by the broad market or that their prices may
decline. While investing in value stocks may limit the overall downside risk of
the Fund over time, the Fund may produce more modest gains than riskier equity
funds in exchange for this potentially lower risk.

Investing in the equity securities of small cap companies involves a higher
degree of risk than investing in the securities of larger companies. In general,
the prices of securities of small cap companies may be more volatile than those
of larger companies, they may have less market liquidity, and they may be more
likely to be adversely affected by poor economic or market conditions. There is
no assurance that the income-producing features of the Fund will reduce the
risks associated with investing in small companies or the Fund's volatility.

WHO SHOULD CONSIDER INVESTING IN THE FUND? The Value Plus Fund is designed for
investors who seek a combination of capital appreciation from small company
stocks and current dividend income. It is designed for long-term investors who
seek greater investment return potential than that which is normally available
from the broad-based equity markets and who can tolerate the greater investment
risk and market volatility associated with smaller companies. It is designed for
investors who want an investment strategy that seeks to manage these risks by
investing in companies believed to be undervalued relative to their intrinsic
value and who want to moderate these risks with the

12
<PAGE>

careful selection of income-producing securities as an integral part of their
investment portfolio.

PAST PERFORMANCE. The tables on the following page show historical performance
of the Value Plus Fund. Table I provides some indication of the risks of
investing in the Fund by showing how the Fund's total returns have varied from
year to year since January 1, 1994. Table II shows how the Fund's average annual
total returns compare to those of a broad-based securities market index. Table
III shows the annualized yield of the Fund and the index for the 30 days ended
December 31, 1998. Past performance cannot predict or guarantee future results.

13
<PAGE>

TABLE I
VALUE PLUS FUND -- YEAR-BY-YEAR TOTAL RETURNS

A BAR CHART showing Total Returns for Value Plus Fund from 1994 through 1998:

(4.95)% 24.39% 33.80% 30.60% (10.78)%
1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

------------------------

BEST QUARTER:
Q3 '97 15.47%
========================

WORST QUARTER:
Q3 '98 -13.25%

------------------------

TABLE II
VALUE PLUS FUND -- AVERAGE ANNUAL TOTAL RETURN (THROUGH 12/31/98)
- -------------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEAR (10/23/93)
- -------------------------------------------------------------------------------
VALUE PLUS FUND -10.78% 13.01% 13.64%
- -------------------------------------------------------------------------------
RUSSELL 2000 INDEX/(1)/ -2.55% 11.86% 11.74%
- -------------------------------------------------------------------------------
/(1)/ The Russell 2000 Index is an unmanaged index of 2,000 stocks considered
representative of the small cap market.

TABLE III

YIELD FOR THE 30 DAYS ENDED 12/31/98 (ANNUALIZED)
- -------------------------------------------------------------------------------
VALUE PLUS FUND 4.12%
- -------------------------------------------------------------------------------
Russell 2000 Index 1.34%
- -------------------------------------------------------------------------------
For current yield information, please call 1-800-432-7856.

14
<PAGE>

VALUE FUND
- -------------------------------------------------------------------------------
INVESTMENT GOAL. The Value Fund seeks long-term capital appreciation through
investing in small companies.

PRINCIPAL INVESTMENT STRATEGIES. The Value Fund invests primarily in equity
securities of companies with market capitalizations of less than $750 million
selected on a value basis. It may, however, invest in other equity securities
and debt securities, and may employ other investment techniques that are not
principal investment strategies, but could impact the Fund's performance.

RISKS. The principal risk of investing in the Value Fund is that its share price
and investment return will fluctuate, and you could lose money. Because the Fund
invests in value stocks, it is subject to the risk that their intrinsic values
may never be recognized by the broad market or that their prices may decline.
While investing in value stocks may limit the overall downside risk of the Fund
over time, the Fund may produce more modest gains than riskier equity funds in
exchange for this potentially lower risk.

WHO SHOULD CONSIDER INVESTING IN THE FUND? The Value Fund is designed for
investors who seek long-term capital appreciation from small company stocks. It
is designed for investors who seek greater investment return potential than that
which is normally available from the broad-based equity markets and who can
tolerate the greater investment risk and market volatility associated with
smaller companies. It is designed for investors who want an investment strategy
that seeks to manage these risks by investing in companies believed to be
undervalued relative to their intrinsic value.

15
<PAGE>

PAST PERFORMANCE. The following tables show historical performance of the Value
Fund. Table I provides some indication of the risks of investing in the Fund by
showing how the Fund's total returns have varied from year to year over the past
10 years. Table II shows how the Fund's average annual total returns compare to
those of a broad-based securities market index. Past performance cannot predict
or guarantee future results.

TABLE I

VALUE FUND -- YEAR-BY-YEAR TOTAL RETURNS

A BAR CHART showing Total Returns for Value Fund from 1989 through 1998:

6.52% (17.09%) 49.35% 42.48% 18.77% 1.71% 29.80% 20.99% 23.19% (11.46%)
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

------------------------
BEST QUARTER:
91 '91 29.24%
========================
WORST QUARTER:
93 '90 -24.39%
------------------------

TABLE II

VALUE FUND -- AVERAGE ANNUAL TOTAL RETURN (THROUGH 12/31/98)
- -------------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEARS TEN YEARS (12/28/84)
- -------------------------------------------------------------------------------
VALUE FUND -11.46% 11.74% 14.55% 14.99%
- -------------------------------------------------------------------------------
RUSSELL 2000 INDEX/(1)/ -2.55% 11.86% 12.92% 12.74%
- -------------------------------------------------------------------------------
/(1)/ The Russell 2000 Index is an unmanaged index of 2,000 stocks considered
representative of the small cap market.

16
<PAGE>

GOVERNMENT FUND
(FORMERLY THE U.S. GOVERNMENT SECURITIES FUND)
- -------------------------------------------------------------------------------

INVESTMENT GOAL. The Government Fund seeks a high level of current income,
liquidity and safety of principal.

PRINCIPAL INVESTMENT STRATEGIES. The Government Fund will invest at least 80% of
its total assets in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or by other U.S. Government sponsored entities
and repurchase agreements for such securities ("Government securities"). These
securities include U.S. Treasury and agency securities, and mortgage-backed
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. They differ primarily in terms of interest rates, length of
maturities, the nature of the governmental obligation and issuance dates.

The balance of the Fund's assets may be invested in other securities such as
asset-backed and mortgage-backed securities issued by non-governmental entities;
other debt securities; certificates of deposit, bankers' acceptances and time
deposits; and convertible securities and preferred stocks. Any investments in
debt securities will, at the time of purchase, be rated investment grade or, if
unrated, be of comparable quality in the opinion of Heartland Advisors. The Fund
may employ other investment techniques that are not principal investment
strategies, but could impact the Fund's performance.

Although there are no duration restrictions for the Fund or the individual
obligations in its portfolio, under normal market conditions, it is anticipated
that the Fund will maintain an average portfolio duration of three to six years.
Heartland Advisors believes that maintaining a portfolio duration within this
range allows the Fund to seek both high current income and preservation of
capital. Duration measures the rate of sensitivity of a bond or a mutual fund
that invests in bonds to rising or falling interest rates.

17
<PAGE>

RISKS. The principal risk of investing in the Government Fund is that its share
price and investment return will fluctuate, and you could lose money. The
principal risks associated with the fixed-income securities in which the Fund
invests are: interest rate movements; maturity; inflation; principal prepayment;
and the portfolio managers' skill in managing the Fund's portfolio duration.
U.S. Treasury obligations held by the Fund are backed by the "full faith and
credit" of the United States. In the case of U.S. Government agency obligations,
some are backed by the full faith and credit of the United States, while others
are backed only by the right of the issuer to borrow from the U.S. Government
and the credit of the issuing agency. Because there is no guarantee that the
U.S. Government will provide support to such agencies, such securities may
involve risk of loss of principal and interest.

Rising interest rates generally will decrease the value of debt securities held
by the Fund. In addition, debt securities with longer maturities held by the
Fund are more greatly affected by changes in interest rates than securities with
shorter maturities. Prepayment of high interest rate mortgage-backed and asset-
backed securities during times of declining interest rates will tend to lower
the Fund's return and may even result in losses to the Fund if those securities
were acquired at a premium. During periods of rising interest rates, prepayments
of mortgage-backed and asset-backed securities may decline, resulting in the
security becoming less liquid and extending the Fund's duration. As a result,
the Fund's portfolio may experience greater volatility during periods of rising
interest rates than under normal market conditions.

WHO SHOULD CONSIDER INVESTING IN THE FUND? The Government Fund is designed for
investors seeking a higher yield than a money market fund or an insured bank
certificate of deposit with less fluctuation in net asset value than a longer-
term bond fund. Unlike money market funds, however, the Fund does not seek to
maintain a stable net asset value and shares in the Fund are not insured like a
bank deposit account.

18
<PAGE>

PAST PERFORMANCE. The tables below show historical performance of the Government
Fund. Table I provides some indication of the risks of investing in the Fund by
showing how the Fund's total returns have varied from year to year over the past
10 years. Table II shows how the Fund's average annual total returns compare to
those of a broad-based securities market index. Table III shows the yield for
the Fund and the index for the 30 days ended December 31, 1998. Past performance
cannot predict or guarantee future results.

TABLE I

GOVERNMENT FUND -- YEAR-BY-YEAR TOTAL RETURNS

A BAR CHART showing Total Returns for Government Fund from 1989 through 1998:

11.31% 9.98% 16.97% 10.08% 17.82% (9.64%) 19.00% 2.00% 9.69% 8.15%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

------------------------
BEST QUARTER:
Q5 '91 7.10%
========================
Q1 '94 -4.81%
------------------------

19
<PAGE>

<TABLE>
<CAPTION>
TABLE II

GOVERNMENT FUND -- AVERAGE ANNUAL TOTAL RETURN (THROUGH 12/31/98)
- -----------------------------------------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEARS TEN YEARS (4/9/87)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT FUND 8.15% 5.40% 9.22% 8.56%
- -----------------------------------------------------------------------------------------------------------
LEHMAN INTERMEDIATE TREASURY INDEX/(1)/ 8.62% 6.46% 8.34% 7.90%
- -----------------------------------------------------------------------------------------------------------
</TABLE>

/(1)/ The Lehman Intermediate Treasury Index is an unmanaged index of all
Treasury securities issued by the U.S. Government with maturities of
greater than one year but less than 10 years and at least $100 million in
outstanding issuance.

TABLE III

YIELD FOR THE 30 DAYS ENDED 12/31/98 (ANNUALIZED)
- --------------------------------------------------------------------------------
GOVERNMENT FUND 5.5%
- --------------------------------------------------------------------------------
LEHMAN INTERMEDIATE TREASURY INDEX 5.0%
- --------------------------------------------------------------------------------
For current yield information, please call 1-800-432-7856.

20
<PAGE>

INVESTMENT RETURNS
- --------------------------------------------------------------------------------

PORTFOLIO PERFORMANCE VS. INDEX PERFORMANCE. The information about each Fund's
past performance includes a comparison of the Fund's average annual total
returns to a broad-based market index believed to be representative of the
Fund's portfolio. An index is not available for direct investment, and past
performance cannot guarantee or predict future results. The securities included
in an index are not an exact match to the holdings in a mutual fund portfolio.
The performance of a mutual fund portfolio will differ from that of an index.
Unlike an index, a mutual fund portfolio is affected by operating expenses and
cash flow activity caused by daily purchases and redemptions. In addition, a
mutual fund portfolio will differ from the index in the number and size of
holdings or securities, their relative sector and industry weightings, the
market capitalization of individual securities and the median capitalization of
the index and fund overall. Fee waivers may have been in effect for the Funds
during the periods in which performance information is presented. Without fee
waivers, the Funds' returns and yields would have been lower.

DEFINITIONS. Total return measures the change in the share price of a Fund and
assumes the reinvestment of dividends and capital gains. Cumulative total return
is actual return for a given period, but does not indicate how much return
fluctuated during the period. Average annual total return is the hypothetical
constant annual return that would have produced a Fund's cumulative return for a
given period. It should not be confused with actual annual returns, the sum of
which over a given period produces a Fund's cumulative total return. Yield is
annualized net income of a Fund during a 30-day period as a percentage of the
Fund's share price.

21
<PAGE>

FEES AND EXPENSES OF THE FUNDS
- --------------------------------------------------------------------------------
This summary describes the fees and expenses that you would pay if you buy and
hold shares of the Funds.

SHAREHOLDER FEES, such as sales loads, redemption fees or exchange fees, are
fees you pay directly from your investment. Because all of the Heartland Funds
are no-load funds, you will not pay any fees when you buy or sell shares of the
Funds. To help control transaction expenses and simplify portfolio management,
each Fund reserves the right, upon 90 days' advance written notice to its
shareholders, to charge an early redemption fee of 1% of the proceeds from
shares redeemed or exchanged that are held for less than 90 days.

ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and include fees
for portfolio management, maintenance of shareholder acccounts, shareholder
servicing, accounting and other services. You do not pay these expenses directly
but, as shown in the example below, all shareholders bear these costs
indirectly.

22
<PAGE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)./1/

<TABLE>
<CAPTION>
LARGE CAP MID CAP VALUE PLUS VALUE GOVERNMENT
VALUE FUND VALUE FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management fees 0.75% 0.75% 0.70% 0.75% 0.65%
- -----------------------------------------------------------------------------------------------------------
Distribution (12b-1) fees 0.25% 0.25% 0.25% 0.25% 0.25%
- -----------------------------------------------------------------------------------------------------------
Other expenses 0.92% 0.34% 0.26%/(2)/ 0.15% 0.26%
- -----------------------------------------------------------------------------------------------------------
Total annual fund operating expenses 1.92% 1.34% 1.21% 1.15% 1.16%
- -----------------------------------------------------------------------------------------------------------
Fee waiver and/or expense reimbursement (0.97%) (0.09%) (0.00%) (0.00%) (0.36%)
- -----------------------------------------------------------------------------------------------------------
Net expenses 0.95% 1.25% 1.21% 1.15% 0.80%
- -----------------------------------------------------------------------------------------------------------
</TABLE>

/(1)/ Heartland Advisors has contractually undertaken to waive fees paid to it
by the Funds and to pay other ordinary expenses of the Funds on an annual
basis through April 30, 2000 as follows: for the Large Cap Value Fund,
expenses in excess of 0.95% of average net assets; for the Mid Cap Value
Fund, expenses in excess of 1.25% of average net assets; and for the
Government Fund, expenses in excess of 0.80% of average net assets. After
that date, these fee waivers and expense reimbursement undertakings may be
continued, terminated or revised at any time. If a Fund's operating
expenses fall below the current expense limitation, the Fund will repay
Heartland Advisors for expenses previously reimbursed. Repayment will
continue for up to three years after the fiscal year in which the
reimbursement occurred, subject to any expense limitation then in effect.
Repayment will stop when the Fund has repaid the entire amount or the
three-year period ends.

/(2)/ Not including interest expense of 0.03%.

23
<PAGE>

EXAMPLE. (This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in each Fund for the time periods indicated and then
redeem all of your shares at the end of those time periods. The example also
assumes that (a) your investment has a 5% return each year, (b) any contractual
fee waivers will not be renewed after April 30, 2000, and (c) each Fund's total
annual fund operating expenses remain the same as shown in the table on the
preceding page for periods greater than one year. The assumed return in the
example does not represent actual or future performance, and your actual cost of
investing in the Funds may be higher or lower.)

<TABLE>
<CAPTION>
LARGE CAP MID CAP VALUE PLUS VALUE GOVERNMENT
VALUE FUND VALUE FUND FUND FUND FUND
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year $2,197 $2,127 $2,123 $2,117 $2,182
- ----------------------------------------------------------------------------
Three Years 509 416 384 365 333
- ----------------------------------------------------------------------------
Five Years 947 725 665 633 604
- ----------------------------------------------------------------------------
Ten Years 2,164 1,605 1,466 1,398 1,377
- ----------------------------------------------------------------------------
</TABLE>

24
<PAGE>

MANAGEMENT OF THE FUNDS

HEARTLAND GROUP
- --------------------------------------------------------------------------------
The Funds are mutual fund portfolio series of Heartland Group, Inc.
("Heartland"). For each of the Funds, the shares offered by this prospectus are
the "no-load" class. No other classes of shares have been authorized at this
time.

HEARTLAND ADVISORS
- --------------------------------------------------------------------------------
Founded in 1982 by William J. Nasgovitz, Heartland Advisors, Inc., America's
Value Investor(R), is an independent firm owned by its employees. It manages
the Funds' investments subject to the authority of and supervision by the Board
of Directors of Heartland. Heartland Advisors also distributes the Funds' shares
and provides administrative and accounting services to the Funds and shareholder
services to the Funds' investors. In addition to managing the Heartland family
of nine equity and fixed-income mutual funds, Heartland Advisors provides
investment advisory and brokerage services to individuals, institutions and
retirement plans. Its principal offices are located at, and its mailing address
is, 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.

PORTFOLIO MANAGERS. James P. Holmes, Chartered Financial Analyst ("CFA"), is
portfolio manager for the Large Cap Value Fund and has managed the Fund since
its inception. Mr. Holmes is a Vice President and principal of Heartland
Advisors, which he joined in July 1996. Prior to that time, Mr. Holmes had been
a Managing Director of Dreman Value Advisors, Inc. and its predecessor since
1986, with responsibility for portfolio management of institutional accounts.

25
<PAGE>

Michael A. Berry, Ph.D., is portfolio manager for the MID CAP VALUE FUND and has
managed the Fund since its inception. Dr. Berry is a Vice President of Heartland
Advisors, which he joined in July 1996. Prior to that time, Dr. Berry had been
the portfolio manager of the Kemper-Dreman Small Cap Value Fund, a Managing
Director of Dreman Value Advisors, Inc. and Chief Equity Strategist for Zurich
Kemper Investments since September 1995. Dr. Berry had been associated with
Dreman Value Advisors' predecessor since 1984 and also served as a Professor of
Finance at James Madison University and at the University of Virginia.

William J. Nasgovitz is co-portfolio manager for the VALUE PLUS FUND and the
VALUE FUND and has been a portfolio manager of each Fund since commencement of
its operations. For the past five years, Mr. Nasgovitz has been President, Chief
Executive Officer and a Director of Heartland Advisors. During this same period,
he also has been President and a Director of Heartland.

Eric J. Miller, Certified Management Accountant ("CMA"), is co-portfolio manager
of the VALUE FUND with Mr. Nasgovitz. Mr. Miller, a Senior Vice President and a
Director of Heartland Advisors, has co-managed the Fund since July 1997. He
joined the firm as a portfolio manager and research analyst for advisory clients
in January 1994. Prior to that time, Mr. Miller had been with American Appraisal
Associates, Inc. since 1986, serving as Vice President, Head of U.S. Appraisal
Operations.

Patrick J. Retzer, Certified Public Accountant ("CPA"), is co-portfolio manager
of the GOVERNMENT FUND and has been a manager of the Fund since October 1988.
Mr. Retzer also is co-manager of the VALUE PLUS FUND with Mr. Nasgovitz and has
been a manager of that Fund since July 1997. Mr. Retzer is a Senior Vice
President and a Director of Heartland Advisors, and has been associated with the
firm in various capacities since 1988.

26
<PAGE>

Lawrence J. Pavelec, CFA, is co-portfolio manager of the GOVERNMENT FUND. Mr.
Pavelec is a Vice President of Heartland Advisors, which he joined in October
1998. Prior to that time, Mr. Pavelec was Director of Fixed Income at M&I
Investment Management Corporation, with which he was associated in various
capacities since 1985.

MANAGEMENT FEE AND EXPENSE LIMITATION. For Heartland Advisors' investment
management services, each of the Funds pays an annual fee, accrued daily and
paid monthly, computed as a percentage of each Fund's average net assets. For
the fiscal year ended December 31, 1998, the Funds paid the following advisory
fees which are set forth as a percentage of average daily net assets:

<TABLE>
<CAPTION>
FUND ADVISORY FEE
- --------------------------------------------------------------------------------
<S> <C>
Large Cap Value Fund 0% (0.75% before fee waivers)
- --------------------------------------------------------------------------------
Mid Cap Value Fund 0.75%
- --------------------------------------------------------------------------------
Value Plus Fund 0.70%
- --------------------------------------------------------------------------------
Value Fund 0.75%
- --------------------------------------------------------------------------------
Government Fund 0.25% (0.65% before fee waivers)
- --------------------------------------------------------------------------------
</TABLE>

Through April 30, 2000, Heartland Advisors has contractually agreed to waive
fees paid to it by each of the Large Cap Value Fund, the Mid Cap Value Fund, and
the Government Fund and/or pay other Fund ordinary operating expenses (excluding
brokerage commissions, interest and taxes) to the extent necessary to ensure
that the Fund's total annual ordinary operating expenses do not exceed the
percentage of average net assets noted in "Fees and Expenses of the Funds."
After such time, Heartland Advisors may continue, modify or discontinue these
waivers and/or reimbursements. Any waiver of fees or reimbursement of expenses
is made on an annual basis. If any fees are owed to Heartland Advisors by a
Fund, Heartland Advisors may pay the Fund's expenses indirectly by reducing the
amount of such fees owed to it by the Fund. Waivers and reimbursements have the
effect

27
<PAGE>

of lowering the Fund's overall expense ratio and increasing the Fund's overall
return to investors.

RULE 12B-1 FEES. Each Fund has adopted a plan under Rule 12b-1 whereby the Fund
pays Heartland Advisors a fee of up to 0.25% of the Fund's daily net assets
computed on an annual basis and paid monthly for distributing its shares and
providing certain shareholder services. Because the fee is paid out of the
Fund's assets on an ongoing basis, fees paid under the Rule 12b-1 plan will
increase the cost of your investment and may cost you more over time than paying
other types of sales charges imposed by some mutual funds.

YEAR 2000 READINESS. Many computer systems use two digits rather than four to
identify the year in a date. These systems, if not modified, will not correctly
handle the change from "99" to "00" on January 1, 2000, causing them to be
unable to accurately perform certain functions ("Year 2000 processing"). This
problem affects virtually all companies and organizations, and, among other
things, could have a negative impact on the handling of securities trades,
payments of interest and dividends, and the pricing of and accounting for
securities portfolios.

28
<PAGE>

to be ready in time, the Funds could be adversely affected if Year 2000
processing systems are not properly modified in a timely manner.

In addition, the issuers of the Funds' portfolio securities could have Year 2000
processing issues, as could the service providers who administer the payment of
principal and interest on fixed-income securities owned by investors, such as
the Funds. These problems might negatively affect the value of the issuer's
securities, which, in turn, could adversely impact the Funds' performance.
Heartland Advisors has established a process to gather publicly available
information about the Year 2000 readiness of portfolio companies. However, this
process may not uncover all relevant information, and the information gathered
may not be complete or accurate. Moreover, an issuer's Year 2000 processing
readiness is only one of many factors a Fund's portfolio manager may have
considered when making investment decisions, and other factors may receive
greater weight.

29
<PAGE>

PRINCIPAL INVESTMENT STRATEGIES
AND INVESTMENT RISKS

Heartland Advisors, America's Value Investor(R), selects investments
for the Funds that it believes are undervalued as measured by sets of criteria
known as Heartland Advisors' Ten-Point Value Investment Grids(TM). The
portfolios of the Heartland Funds are actively managed. Although no one can
predict a Fund's future performance, Heartland Advisors believes that the
"value" style of investing will outperform over extended periods, which may
include bear markets as well as volatile or "sideways moving" markets. The value
style may perform less well in markets that favor faster growing companies.

HEARTLAND ADVISORS'
TEN-POINT VALUE INVESTMENT GRIDS(TM)
- --------------------------------------------------------------------------------
Equity Ten-Point Value Investment Grid(TM). Heartland Advisors' Equity Ten-
Point Value Investment Grid(TM) consists of the following criteria for selecting
equity securities.

- - Low Price/Earnings Multiple. Is the stock's price/earnings ratio less than the
average in the marketplace? If so, and the stock is then "discovered" by Wall
Street, the low P/E provides an opportunity for a price increase. Also, if the
market drops, low P/E stocks have less downside risk.

- - High Cash Flow. Does the company have high cash flow? Strong cash flow permits
a company to finance expansion internally, repurchase shares or increase its
dividends.

- - Positive Earnings Dynamics. Does the company have improving earnings or
upwardly revised estimates? Heartland Advisors favors companies with prospects
for improved earnings.

- - Discount to Book Value. Is the stock selling at prices below its tangible book
value? A company's book value -- assets minus liabilities -- gives an
indication of what it would be worth if liquidated. Heartland Advisors likes
to buy a stock for less than book value.

30
<PAGE>

Stocks that are very popular with investors may sell at five or more times
book value.

- - Financial Soundness. How much debt does a company have relative to its equity?
Heartland Advisors prefers companies whose balance sheets have a ratio of debt
to total capital of no more than 25%.

- - High Insider Ownership. Does management own a significant percentage of a
company's stock, and are they buying shares? Executives who invest in their
own companies usually have aligned their interests with those of other
shareholders.

- - Capable Management. Do the top decision-makers have a realistic vision for the
company as well as a history of success and the drive to accomplish their
goals? The ability of management and management's plans for the company's
prosperity are of paramount importance.

- - Hidden Assets. Does the company have undervalued assets? These may include
understated natural resources, real estate, overfunded pension plans or fixed
assets worth substantially more than their stated book value.

- - Positive Technical Analysis. How has the stock's price performed over time?
Heartland Advisors prefers to buy stocks whose prices have experienced limited
fluctuation over long periods.

- - Catalyst for Recognition. Is there a factor that could potentially ignite
market interest in the stock and close the gap between the stock's price and
Heartland Advisors' assessment of its true value? Examples of a catalyst
include a new product or technology, a large repurchase plan, or merger
activity.

FIXED INCOME TEN-POINT VALUE INVESTMENT GRID(TM). Heartland Advisors' Fixed
Income Ten-Point Value Investment Grid(TM) consists
of the following criteria for selecting fixed-income securities.

- - Economic Trends. Identifying the trend in economic growth is a main
determinant to formulating our investment strategy. Heartland Advisors
combines the perspectives of trusted outside economists with our own
independent analysis to develop a short- and long-term outlook.

31
<PAGE>

- - Federal Reserve Policy. The potential for the Federal Reserve to shift
monetary policy has significant implications for market interest rates, the
yield curve and sector weightings.

- - "Real" Interest Rates. Over long periods of time the relationship between
inflation and nominal yields tends to reflect the relative value in fixed-
income investments. High "real" rates cushion investors against adverse moves
in inflation.

- - Attractive Risk Premiums. The relative attractiveness of fixed-income
investments is gauged by the "risk premium," or additional yield to U. S.
Treasury securities. Heartland Advisors studies historical relationships in an
attempt to discover pricing anomalies and profit from their reversion to the
mean.

- - Sector Outlook. Each of the fixed-income sectors offers different risk/return
attributes at different points of the economic and interest rate cycle.
Heartland Advisors typically favors corporate bonds during periods of stronger
economic growth, while Treasuries are favored in times of slowing growth and
uncertainty.

- - Financial Soundness. Heartland Advisors employs primary research to assess an
issuer's financial soundness, which is essential to evaluating the quality and
value of debt instruments.

- - Market Sponsorship. Strong fundamental and technical support must be
accompanied by general market sponsorship for an investment to achieve full
value.

- - Positive Technical Analysis. Technical analysis is employed to identify
turning points and confirm trends derived from fundamental analysis. Technical
analysis can be used as a tool to reveal market sentiment.

- - Innovative Asset Classes. The capital markets are constantly evolving with
innovative securities and investment strategies. Discerning investors who
capitalize on the pricing inefficiencies that typically surround new
developments, such as commercial mortgage-backed securities and taxable
municipal bonds, may capture significant additional returns.

32
<PAGE>

- - Catalyst for Recognition. To maximize total return, Heartland Advisors not
only looks for undervalued securities, but tries to anticipate events which
will close the gap between an investment's current price and its intrinsic
value. For example, investing in securities disfavored by investors fleeing
the market for short-term, technical reasons may create opportunities for
"value" investors.

MARKET CAPITALIZATIONS OF PORTFOLIO SECURITIES. The following table shows the
median and weighted average market capitalizations as of December 31, 1998, for
the companies whose equity securities are owned by the Funds with equity
holdings and for the companies included in the index that is the benchmark for
each of those Funds.

MARKET CAPITALIZATION OF COMMON STOCKS IN PORTFOLIO (AS OF 12/31/98)

<TABLE>
<CAPTION>
Median Weighted Average
<S> <C> <C>
Large Cap Value Fund $4.4 billion $8.4 billion
S&P 500 Index/(1)/ 7.8 billion 87.7 billion

Mid Cap Value Fund $1.5 billion $2.0 billion
S&P Mid Cap 400 Index/(1)/ 1.8 billion 8.7 billion

Value Plus Fund $134 million $543 million
Value Fund 74 million 343 million
Russell 2000 Index/(1)/ 430 million 880 million
</TABLE>

/(1)/Source: Prudential Securities, Inc.

OTHER INVESTMENTS AND INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

In addition to the investment strategies discussed under "The Heartland Approach
to Investing" in this prospectus, each Fund may engage in the strategies and may
purchase and sell the investments discussed below and in its statement of
additional information.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; FORWARD COMMITMENTS. Each Fund may
purchase may purchase securities on a when-issued or delayed-delivery basis, and
may purchase forward commitments.

33
<PAGE>

Although the payment and interest terms of these securities are established at
the time the purchaser enters into the commitment, the securities may be
delivered and paid for a month or more after the purchase date. The Funds
purchase securities in this manner in order to secure an advantageous price and
yield but the value of the security could change before settlement. Therefore,
although a Fund will make such commitments only with the intention of actually
acquiring the securities, it may sell the securities before settlement if it is
deemed advisable for investment reasons. When-issued or delayed-delivery
securities may sometimes be purchased on a "dollar roll" basis, meaning that a
Fund will sell securities with a commitment to purchase similar, but not
identical, securities at a future date. Dollar rolls are engaged in when
Heartland Advisors believes securities similar to those sold can be purchased a
short time later at a lower price.

Borrowing. Each Fund may borrow from any bank or other person up to 5% of total
assets for temporary purposes. A borrowing is presumed to be for temporary
purposes if it is repaid by a Fund within 60 days and is not extended or
renewed. Each Fund also may borrow solely from banks to facilitate the
management of its investment portfolio to make other investments or engage in
other transactions permissible under the 1940 Act which may be considered a
borrowing (such as dollar rolls and reverse repurchase agreements), provided
such borrowings for these purposes do not exceed one-third of total assets.

Currently, each Fund intends to borrow only from banks, for periods of not
longer than 60 days, in amounts not to exceed 20% of total assets and only for
the following purposes: (a) to avoid liquidating securities under circumstances
which Heartland Advisors believes are unfavorable to shareholders, such as to
meet large or unexpected redemptions or to purchase debt obligations pending
receipt of proceeds in the settlement of the sale of other portfolio securities;
and (b) when the Fund is scheduled to receive cash in exchange for debt
obligations that are being retired, called or exchanged pursuant to a sinking
fund provision

34
<PAGE>

or put feature of the instrument. The extent to which a Fund will borrow will
depend, among other things, on market conditions and interest rates.

DURATION MANAGEMENT. A Fund's share price is affected by changes in the value of
bonds held in its portfolio. In general, when interest rates rise, a bond's
value falls, and when interest rates fall, a bond's value rises. Duration
measures the approximate price sensitivity of a bond, or bond mutual fund, to a
one percent (1%) rise or fall in interest rates. For example, all else being
equal, if interest rates rise by 1%, a bond fund with a 3-year duration would
expect its share price to decline by about 3%; conversely, if interest rates
fall by 1%, the fund would expect to see about a 3% rise in price. When a change
in direction of, or degree of movement in interest rates is anticipated, the
Fund will shorten or lengthen its duration to help manage share price
fluctuation.

ILLIQUID SECURITIES. No Fund will invest more than 15% of its net assets in
illiquid securities. For purposes of applying this limitation, an "illiquid
security" means one that may not be sold or disposed of in the ordinary course
of business within seven days at a price approximating the value at which the
security is carried by a Fund. Each Fund may invest in debt obligations that are
purchased in private placements (that is, transactions in which securities have
not been registered under federal law) and that are subject to restrictions on
resale as a matter of contract or law. Private placement notes issued pursuant
to a private placement exemption provided by Section 4(2) of the Securities Act
of 1933 (the "1933 Act") have been determined to be liquid by Heartland's Board
of Directors. These securities and restricted securities issued under Rule 144A
of the 1933 Act that are deemed to be liquid by Heartland Advisors under
guidelines established by the Board of Directors are not subject to a Fund's
limitation on illiquid securities. Municipal lease obligations, which may be
considered illiquid, may similarly be determined to be liquid in accordance with
guidelines adopted by Heartland's Board of Directors. Absent such
determinations, such securities, and repurchase agreements maturing in more than
seven days, are considered illiquid.

35
<PAGE>

INFLUENCE OR CONTROL OVER PORTFOLIO COMPANIES. As a shareholder of a portfolio
company, each Fund reserves the right to freely communicate its views as a
shareholder on matters of policy to the company's management, board of directors
and other shareholders when a policy may affect the value of the Fund's
investment. In exercising this right, each of the Funds (other than the
Government Fund and, to a lesser degree, the Large Cap Value and Mid Cap Value
Funds) may, from time to time, use its ownership interest in a portfolio company
to seek to influence or control the company's management. For example, a Fund
might take steps, either individually or as part of a group, (a) to actively
support, oppose or influence a company's decision-making, (b) to seek changes in
a company's management or board of directors, (c) to effect the sale of all or
some of a company's assets or (d) to vote to participate in or oppose a takeover
of a portfolio company or an acquisition by a portfolio company. A Fund would
engage in such activities in an effort to protect and maximize the value of its
investment on behalf of the Fund's shareholders. The extent to which a Fund
might invest for purposes of obtaining control or influencing management would
depend, among other things, on facts and circumstances specific to the issuer as
well as general market conditions.

Investing for purposes of obtaining control or influencing management could
result in additional expense to a Fund, including expenses associated with
operational or regulatory requirements and the ongoing cost of potential
litigation. It could also restrict a Fund's ability to freely dispose of the
securities of a portfolio company with respect to which it is deemed to be
investing for control, which might adversely affect the Fund's liquidity as well
as the sales price of those securities. Finally, greater public disclosure is
required regarding a Fund's investment and trading strategies in regulatory
filings relating to such securities.

It is expected that only the Value and Value Plus Funds, and to a lesser degree
the Mid Cap Value and Large Cap Value Funds, would make investments for control
on a selective basis when Heartland Advisors believes it would be in the best
interests of the Fund and its shareholders.

36
<PAGE>

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. Each Fund may utilize other
investments and investment techniques from time to time that may impact Fund
performance, including options, futures and other strategic transactions. Each
Fund is limited to 5% of net assets, for initial margin and premium amounts on
futures positions considered speculative under regulations of the Commodities
Futures Trading Commission ("CFTC").

RISKS
- --------------------------------------------------------------------------------
SMALL CAP AND MID CAP SECURITIES. Equity securities of small and mid cap
companies involve a higher degree of risk than investments in the broad-based
equity markets. In general, the prices of the securities of small and mid cap
companies may be more volatile than those of larger companies, they may have
less market liquidity, and they may be more likely to be adversely affected by
poor economic or market conditions. Small and mid cap companies may have
relatively lower revenues, limited product lines, less management depth and a
lower share of the market for their products or services as compared to larger
companies, any or all of which could give rise to their greater risk. A Fund's
position in such securities may be substantial in relation to the market for
such securities. As a result, it may be difficult at times for a Fund to dispose
of such securities at prevailing market prices in order to meet redemptions or
other cash needs.

FOREIGN SECURITIES. Each Fund may invest in foreign securities (including
depository receipts) traded both within and, to a lesser degree, outside of the
United States. Investments in foreign securities may be subject to certain risks
in addition to those normally associated with domestic stocks. These risks are
greater with respect to companies domiciled in developing countries.

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

37
<PAGE>

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 (particularly with regard to
depository receipts in which the holders may not have the same rights as
shareholders); and the potential for less liquidity and more volatility on
foreign securities markets than on United States securities markets. Moreover,
brokerage commissions, fees for custodial services and other costs related to
foreign investments generally are greater than in the United States. 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 trades. The inability to sell a portfolio security due to settlement
problems could result either in a loss to a 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.

EUROPEAN ECONOMIC AND MONETARY UNION (EMU). Certain European countries have
joined the EMU in an effort to, among other things, reduce barriers between
countries and eliminate fluctuations in their currencies. The EMU has
established a single European currency, the euro, which was introduced on
January 1, 1999, and is scheduled to replace the existing national currencies of
all initial EMU participants by July 1, 2002. Certain securities, beginning with
government and corporate bonds, have now redenominated in the euro and trade and
make dividend and other payments only in euros. Major European markets now trade
securities in euro denominations. If the Funds hold investments in countries
with currencies replaced by the euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting
will be impacted. Because this change to a single currency is new and untested,
the

38
<PAGE>

establishment of the euro may result in market volatility. Accordingly, it
is not possible to predict the impact of the euro on the business or financial
condition of European issuers which the Funds may hold in their portfolios, and
their impact on the value of the Funds' shares and performance. To the extent
the Funds hold non-United States dollar (euro or other) denominated securities,
they will continue to be exposed to currency risk due to fluctuations in those
currencies versus the United States dollar.

HIGH-YIELD AND UNRATED SECURITIES. Each of the Funds (other than the Government
Fund) may invest a portion of its assets in non-investment grade debt
securities, including securities in default. Non-investment grade securities
(commonly known as "junk bonds") in which each Fund may invest may be regarded
as predominantly speculative with regard 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 a Fund's net asset value. Furthermore, higher
yielding bonds may contain redemption or call provisions which, if exercised in
a declining interest rate environment, may require a 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 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 a Fund's ability to dispose of such bonds may be
limited.

Debt securities purchased by each of the Funds (other than the Government Fund)
may be either unrated or rated by one or more independent rating organizations
that rate the issuer of a security

39
<PAGE>

based on the issuer's financial soundness. Debt securities purchased by each
Fund may be rated in any rating category established by a rating organization.
If a debt security is rated below investment grade or unrated, Heartland
Advisors conducts its own assessment of the creditworthiness of the issuer.

FUTURES AND OPTIONS. Each Fund may engage in transactions in options, futures
contracts and options on futures contracts to hedge against anticipated declines
in the market value of portfolio securities and increases in the market value of
securities it intends to acquire. Each Fund may also engage in such transactions
to protect against exposure to interest rate changes or changes in currency
exchange rates. Finally, the Funds may use these instruments to enhance total
return or to invest in eligible asset classes with greater efficiency and lower
cost than is believed to be possible through direct investments.

40
<PAGE>

TEMPORARY POSITIONS. Under adverse market conditions, or other extraordinary
economic or market conditions, each Fund may take a temporary defensive position
and invest, without limitation, in liquid reserves such as money market
instruments, certificates of deposit, commercial paper, short-term corporate
debt securities, variable rate demand notes, Government securities and
repurchase agreements. Taking a temporary defensive position is not required,
and may not be possible because of market conditions. It also might prevent a
Fund from achieving its investment objective.

INVESTMENT OBJECTIVES. Each Fund's investment goal may be changed by Heartland's
Board of Directors upon notice to shareholders, but without shareholder
approval.

41
<PAGE>

- --------------------------------------------------------------------------------
HOW TO INVEST

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR REGULAR ACCOUNTS
- ------------------------------------------------------------------------------------------------
OPEN AN ACCOUNT ADD TO AN ACCOUNT
<S> <C>
[PICTURE
APPEARS
HERE] BY TELEPHONE
- ------------------------------------------------------------------------------------------------
WIRE Call 800-443-2862 to obtain an account TELEPHONE PURCHASE Available for
number and provide your Social Security or additional investments of $100 to $25,000.
tax ID number. Have your bank send your Contact us for a Bank Options Form.
investment to Firstar Bank Milwaukee, N.A.
with these instructions: WIRE Have your bank send your
. ABA #0750-00022 investment to Firstar Bank Milwaukee, N.A.
. A/C #112-952-137 with these instructions:
. CREDIT TO: Heartland (name of fund) . ABA #0750-00022
. your Heartland account number . A/C #112-952-137
. name(s) of investor(s) . CREDIT TO: Heartland (name of fund)
. your Heartland account number
. name(s) of investor(s)

Mail the form and the check.

[PICTURE
APPEARS
HERE] VIA THE INTERNET
- ------------------------------------------------------------------------------------------------
COMPUTER Visit the Internet web site
www.heartlandfunds.com and follow the
instructions to download an account
application.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
HOW TO INVEST

WIRE OR ELECTRONIC FUNDS TRANSFER These services --------------------------------------------
must be pre-authorized in writing. Once the Fund ADDRESSES
has your bank account information on file, call us --------------------------------------------
to request your transaction. Proceeds will be wired
or transferred electronically to your bank. MAILING ADDRESS
---------------
TELEPHONE AND WIRE REDEMPTIONS are subject to a Firstar Mutual Fund
$1,000 minimum. Services, LLC
P.O. Box 701
Milwaukee, WI
53201-0701

OVERNIGHT DELIVERY
------------------
- --------------------------------------------------- Firstar Mutual Fund
Write a letter of instruction that includes: Services, LLC
. the names and signatures of all accountholders 615 East Michigan St.
. your Heartland account number Milwaukee, WI 53202
. the Fund name
. the amount in dollars or shares you want to --------------------------------------------
sell CONCEPTS TO UNDERSTAND
. how and where to send the proceeds --------------------------------------------
WIRE TRANSFER: the fastest way to transfer
We will mail the proceeds to the address on the money from one financial institution to
account, unless otherwise requested. A signature another. Your bank may charge a fee to send
guarantee may be required. or receive a wire transfer.
Mail the letter of Instruction.

NOTE: See page 45 for special information on
redemptions from IRA accounts.

43
<PAGE>

- --------------------------------------------------------------------------------
HOW TO INVEST

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR IRA ACCOUNTS
- ------------------------------------------------------------------------------------------------
OPEN AN ACCOUNT ADD TO AN ACCOUNT
<S> <C>
[PICTURE
APPEARS
HERE] BY TELEPHONE
- ------------------------------------------------------------------------------------------------
WIRE Call 800-443-2862 to obtain an account TELEPHONE PURCHASE Available for
number and provide your Social Security or additional investments of $100 to $25,000.
tax ID number. Have your bank send your Contact us for a Bank Options Form.
investment to Firstar Bank Milwaukee, N.A.
with these instructions: WIRE Have your bank send your
. ABA #0750-00022 investment to Firstar Bank Milwaukee, N.A.
. A/C #112-952-137 with these instructions:
. CREDIT TO: Heartland (name of fund) . ABA #0750-00022
. your Heartland account number . A/C #112-952-137
. name(s) of investor(s) . CREDIT TO: Heartland (name of fund)
. your Heartland account number
. name(s) of investor(s)

[PICTURE
APPEARS
HERE] IN WRITING
- ------------------------------------------------------------------------------------------------
Mail a completed IRA application form, Fill out the Additional Investment Form
and a check or IRA transfer form. For attached to your statement and write your
direct rollovers of asets from employer Heartland account number on your check.
sponsored qualified plans, mail a
completed IRA application. Mail the form and the check.

[PICTURE
APPEARS
HERE] AUTOMATICALLY
- ------------------------------------------------------------------------------------------------
Complete the IRA application form, and the ALL SERVICES Call us to request a form to add
Automatic Investment Plan application, and the automatic investment plan feature (minimum
return them with your investment (minimum of of $50 per transaction) to your account (see
$50 per transaction). "Services for Fund Investors"). Complete and
return the form along with any other required
materials.

44
<PAGE>

- ---------------------------------------------------------------------------------------------------
HOW MAY WE HELP YOU?
- ---------------------------------------------------------------------------------------------------
<S> <C>
SELL SHARES 1-800-432-7856
www.heartlandfunds.com
Make checks payable
- --------------------------------------------------- to: HEARTLAND FUNDS
IRA redemptions must be requested in writing.
--------------------------------------------
Write a letter of instruction that includes: ADDRESSES
. the name and signature of accountholder --------------------------------------------
. your Heartland account number MAILING ADDRESS
. the fund name ---------------
. the amount in dollars or shares you want to Firstar Mutual Fund
sell Services, LLC
. how and where to send the proceeds P.O. Box 701
. whether the distribution is qualified Milwaukee, WI
or premature 53201-0701
. whether taxes should be withheld (we will
withhold 10% if you do not give us OVERNIGHT DELIVERY
instructions) ------------------
Firstar Mutual Fund
We will mail the proceeds to the address on the Services, LLC
account, unless otherwise requested. A signature 615 East Michigan St.
guarantee may be required. Milwaukee, WI 53202
Mail the letter of Instruction.
--------------------------------------------
- --------------------------------------------------- CONCEPTS TO UNDERSTAND
SYSTEMATIC WITHDRAWAL PLAN Call us to request a --------------------------------------------
form to add the plan. Complete the form, specifying WIRE TRANSFER: the fastest way to transfer
the amount and frequency of withdrawals you would money from one financial institution to
like. another. Your bank may charge a fee to send
or receive a wire transfer.
- ---------------------------------------------------
ELECTRONIC FUNDS TRANSFER: transferring
money to your bank account electronically
may take up to eight business days to clear.
EFT usually is available without a fee at
all Automated Clearing House (ACH) banks.
Establishing EFT services requires
approximately 15 days.

</TABLE>

<PAGE>

ACCOUNT POLICIES

If you wish to make a telephone transaction under one of the purchase or
redemption options described, please call Shareholder Services at 1-800-432-7856
or 414-289-7000. If you have a question about investing or need forms for
electing an option, call Shareholder Services at either number or visit our
website at www.heartlandfunds.com. Please note that you may terminate or change
any option you elect at any time upon five days' advance notice to Heartland
Advisors. The Funds may suspend, modify or terminate any purchase or redemption
option, other than the option to redeem by mail, at any time without notice to
you. The Funds also reserve the right to waive or lower any minimum dollar
amounts applicable to the transactions discussed.

TIME OF PURCHASE AND FORM OF PAYMENT. Shares of the Funds are sold without a
sales charge. Your purchase of a Fund's shares will, therefore, be made at the
net asset value per share next determined after the Fund or its authorized agent
receives your payment. Payment must be in U.S. dollars by check drawn on a bank
in the United States, wire transfer or electronic transfer. Usually, a Fund will
not accept payment in the form of a check payable to you or a third party, and
endorsed over to the Fund. Shares purchased by checks that are returned will be
canceled and you will be liable for any losses or fees incurred by the Fund or
its agents, including bank handling charges for returned checks.

If your payment is received after 4:00 p.m., Eastern Time, your purchase will be
effective on the next business day. Purchase orders for a Fund are not binding
until accepted by the Fund or its authorized agent, and entered on the Fund's
books. A Fund may reject any order its officers determine is not in the best
interests of the Fund or its shareholders, and the offering of Fund shares may
be suspended or limited at any time without notice to shareholders. The Fund
also may reject any order not accompanied by instructions in English. Once
accepted, you may not cancel or revoke your purchase order, but you may redeem
your shares.

46
<PAGE>

INVESTMENT MINIMUMS. If you purchase shares directly from a Fund, your initial
investment must be for a minimum of $1,000 (or $5,000 for the Value Fund),
except for accounts opened under prototype Individual Retirement Accounts
("IRAs") or tax-sheltered retirement plans sponsored by Heartland, and accounts
opened with an automatic investment plan. Subsequent purchases made by mail,
other than through dividend reinvestment, must be for a minimum of $100. Each
Fund may waive or lower its investment minimums for any reason. Different
minimums may apply to accounts opened through third parties.

TAX IDENTIFICATION NUMBERS. Under IRS rules, we must receive your correct social
security or tax identification number on a signed Account Application or IRS
Form W-9 when you open your account. Otherwise, you may be subject to an IRS
fine, and we may be required to withhold a percentage (currently 31%) of your
dividend and capital gain distributions and of your redemption proceeds.

PURCHASES THROUGH THIRD PARTIES. You may purchase shares through a third party
broker-dealer or other financial intermediary, but Heartland reserves the right
to refuse purchases through any intermediary arrangement that the officers of
Heartland determine employs investment strategies which are not in the best
interests of the Funds or their shareholders. Shares purchased through third
parties may be subject to special fees and conditions that do not apply if you
purchase your shares directly from the Fund. Third parties also may place limits
on your ability to use the shareholder services or receive shareholder
information described in this prospectus. Heartland has allowed some third
parties to authorize selected designees to accept purchase orders for the third
party on the Fund's behalf. If you purchase shares through a third party which
is also an authorized agent of the Funds, your order will be processed at the
net asset value per share next determined after the third party (or its
authorized designee) receives your order; other orders will be processed at the
net asset value next determined after receipt by the Funds.

47
<PAGE>

REDEEMING SHARES
- --------------------------------------------------------------------------------
REDEMPTIONS BY SHAREHOLDERS WHO ARE NOT INDIVIDUALS. For corporate, trust,
partnership, and other institutional accounts, the persons signing should also
indicate their office or other fiduciary capacity. A certified corporate
resolution evidencing the signing officer's authority to sign on behalf of a
shareholder corporation also is required. Executors, administrators, guardians,
trusts, and other institutional shareholders should call Heartland Advisors
prior to mailing their instructions to determine if other documentation may be
required.

TIME OF REDEMPTION; FORM OF INSTRUCTIONS AND PAYMENT. Your shares will be
redeemed at the net asset value per share next determined after your
instructions, in English, are received by your Fund or its authorized agent in
good order as further explained below. The Funds will not accept an order with
instructions for redemption on a particular date or at a particular price. The
Funds use procedures reasonably designed to authenticate telephone instructions
including, for example, requesting personal identification information from
callers. The Funds are not liable for any losses due to unauthorized or
fraudulent telephone instructions if these procedures are followed. Once
accepted, you may not cancel or revoke your redemption order.

Usually, proceeds are mailed within one or two days of redemption or wired on
the next business day, but in no event are proceeds remitted to you later than
seven business days after redemption. In limited circumstances, the Funds may
elect to suspend the redemption of shares.

If redemption instructions are received in good order for shares that have not
been paid for, your shares will be redeemed, but the Funds reserve the right to
hold the proceeds until payment of the

48
<PAGE>

purchase price can be confirmed. This type of delay can be avoided by purchasing
shares by federal funds wire. If you choose to have your redemption proceeds
mailed to you and either the United States Postal Service is unable to deliver
the redemption check to you or the check remains outstanding for at least six
months, the Funds reserve the right to reinvest the check in shares of the
particular Fund at their then

current net asset value until you give the Funds different instructions. No
interest will accrue on amounts represented by uncashed
redemption checks.

EARLY REDEMPTION FEE. To defray certain transaction expenses and facilitate
portfolio management, upon 90 days' advance written notice to you, the Fund
reserves the right to charge you an early redemption fee of 1% of the proceeds
of shares being redeemed or exchanged that are held for less than 90 days.

EXCHANGING SHARES
- --------------------------------------------------------------------------------
Unless you instruct the Funds that you do not want this service, you are
automatically permitted to purchase shares of a Fund with the proceeds of a
redemption for your account in any other Heartland Fund or the Firstar Money
Market Fund, a money market fund sponsored by an affiliate of the Transfer
Agent. This type of transaction is referred to as an "exchange" and may be
effected by writing or calling Heartland Advisors. Written exchanges may be for
any amount, but telephone exchanges may be for not less than $1,000 and not more
than $500,000.

49
<PAGE>

IRAs AND TAX-SHELTERED RETIREMENT PLANS. Heartland sponsors an IRA plan for
individual investors as well as SIMPLE IRAs and other tax-sheltered retirement
plans for self-employed persons and employers. Each Fund is available for
investment under these programs at the reduced initial investment minimum of
$500. Booklets describing the programs and the forms necessary for establishing
accounts under them are available on request from Heartland Advisors. The annual
maintenance fee of IRAs is waived for account holders whose IRA assets at
Heartland total $10,000 or more.

SIGNATURE GUARANTEES. To protect your account, the Funds reserve the right to
require a signature guarantee for written redemption instructions. Normally, a
signature guarantee will be required if the redemption proceeds will exceed
$50,000. A signature guarantee will also be required if the proceeds are being
paid to a third party, mailed to an address other than the address listed on the
Fund's records or forwarded to a bank not identified on the Fund's records as
authorized to receive the proceeds. Acceptable guarantors include, among others,
banks and brokerage firms that are members of a domestic stock exchange.
Signature witnesses by notaries public are not acceptable for this purpose.

REDEMPTIONS THROUGH THIRD PARTIES. You may redeem shares through a third party
broker-dealer or other financial institution provided the third party presents
documentation satisfactory to the Funds indicating it is your authorized agent.
Third parties may charge fees for their services and impose terms or conditions
that do not apply if you do business directly with the Funds. Heartland has
allowed some third parties to authorize selected designees to accept redemption
orders for

50
<PAGE>

the third party on the Fund's behalf. If you redeem shares through a third party
which is also an authorized agent of the Funds, your order will be processed at
the net asset value per share next determined after the third party (or its
authorized designee) receives your order; other orders will be processed at the
net asset value per share next determined after receipt by the Funds.

INVOLUNTARY REDEMPTION. If your account value in any Fund falls below $500 for
three months or more, the Funds may redeem all of your shares in that Fund upon
60 days' advance notice to you. You may avoid involuntary redemption by making
additional investments to bring your account value up to at least $1,000.

SHARE PRICE
- --------------------------------------------------------------------------------

Shares of a Fund are purchased and redeemed at the net asset value per share
next determined following receipt of your order in proper form by the Fund or
its authorized agent. Net asset value is the difference between the values of
the Fund's assets and liabilities divided by the number of shares outstanding.
It is determined at the close of regular trading on the New York Stock Exchange
(generally 4:00 p.m., Eastern Time). Orders received after 4:00 p.m., Eastern
Time, are priced at the net asset value per share determined on the next
business day of the Fund.

If you purchase or redeem shares through a third party which is an authorized
agent of the Funds, your order will be processed at the net asset value per
share next determined after the third party receives your order; other purchases
and redemptions through third parties are processed at the net asset value per
share next determined after receipt by the Fund. Third parties acting as
authorized agents of the Funds are required to segregate orders received after
the close of regular trading on the New York Stock Exchange and transmit those
orders separately for execution at the net asset value per share next
subsequently determined.

51
<PAGE>

52
<PAGE>

SHAREHOLDER INFORMATION AND REPORTING

HEARTLAND VALUE SOURCE(TM)
- --------------------------------------------------------------------------------

Heartland Advisors' website, Heartland Value Source(TM), located at
www.heartlandfunds.com, provides investors with a variety of information about
the Funds, including daily share prices, market updates and shareholder reports.
By calling 1-800-432-7856 and requesting a personal identification number,
shareholders can access their accounts directly to review current balances,
recent transactions and other account information.

INVESTMENT REPORTS
- -------------------------------------------------------------------------------

Shareholder Reports. The Funds' portfolio managers review their strategies and
results in quarterly Value Reports. In addition, semi-annually these reports
contain schedules of investments and Fund financial statements. If several
members of a household own a Fund, only one Value Report is mailed to that
address. To receive additional copies, you may call Shareholder Services at
1-800-432-7856 or (414) 289-7000, or write to Heartland Advisors at 790 North
Milwaukee Street, Milwaukee, WI 53202.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------

A dividend from net investment income represents the income a Fund earns from
dividends and interest paid on its investments, after payment of Fund expenses.
A capital gain or loss is the increase or decrease in the value of a security
that a Fund holds compared to its original purchase price. The gain or loss is
"unrealized" until the security is sold. Each realized capital gain or loss is
either short-term or long-term depending on whether the Fund held the security
for one

<PAGE>

year or less, or more than one year. This is the case regardless of how long you
hold your Fund shares.

Substantially all of the net investment income of the Large Cap Value, Mid Cap
Value and Value Funds will be paid to shareholders annually as a dividend. The
Value Plus Fund will pay dividends from net investments income quarterly. The
Government Fund will declare dividends from net investment income daily and pay
them monthly. If a Fund has net capital gains for a year, the Fund normally will
distribute substantially all of its net capital gains at at the end of the year.
Both types of distributions are automatically invested in additional shares for
your account unless you elect on your Account Application to have them invested
in another Heartland Fund or to have them paid to you in cash.

"Buying Dividend." Please note that if you purchase shares of a Fund just before
the record date of a capital gain distribution, you will receive a portion of
your purchase price back as a taxable distribution. The Fund's net asset value
per share on the record date will be reduced by the amount of the dividend. This
is sometimes referred to as "buying a dividend."

If you choose to have dividends or capital gains distribution, or both, mailed
to you and either the United States Postal Service is unable to deliver the
distribution check to you or the check remains outstanding for least six months,
the Funds reserve the right to reinvest the check and future distributions in
shares of the particular Fund at their then current net asset value until you
give the Funds different instructions. No interest will accrue on amounts
represented by uncashed distribution checks.

TAXES

All income dividend distributions and short-term capital gains will be taxable
to shareholders as ordinary income for federal income tax purposes. Long-term
capital gain will be taxable as long-

54
<PAGE>

term capital gains to shareholders. If a Fund declares a distribution in
December, but does not pay it until January of the following year, you still
will be taxed as if the distribution were paid in December. The Transfer Agent
will process your distribution and send you a statement for tax purposes each
year showing the source of distributions for the preceding year.

If you redeem or exchange your shares, the transaction is a taxable event.
Special tax rules apply to non-individual shareholders and shareholders owning
Fund shares in IRAs and tax-sheltered retirement plans. State and local tax
rules differ from the federal tax rules described in this prospectus. Because
this tax information is only a general overview, you should consult with your
own tax advisor about the tax consequences of your investment in the Funds.

FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following financial highlights tables are intended to help you understand
each Fund's financial performance for the past 5 years or since inception.
Certain information reflects financial results for a single Fund share. The
total returns in the tables represent the rate that an investor would have
earned or lost on an investment in the Funds over the period presented (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Funds'
financial statement, are included in the Annual Report to Shareholders, which is
available upon request.

55
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Large Cap Value Fund
-------------------------------------------------------------------
Oct. 11, 1996/(1)/
For the year ended December 31, through
1998 1997 Dec. 31, 1996
-------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................ $ 12.30 $ 10.50 $ 10.00
Income (loss) from investment operations:
Net investment income............................. 0.30 0.11 --
Net realized and unrealized gains (losses)
on investments.................................. (0.10) 2.28 0.50
------------ ------------ ------------
Total income (loss) from investment
operations.................................... 0.20 2.39 0.50
Less distributions from:
Net investment income............................. (0.30) (0.11) --
Net realized gains on investments................. (0.26) (0.48) --
------------ ------------ ------------
Total distributions............................. (0.56) (0.59) --
------------ ------------ ------------
Net asset value, end of period...................... $ 11.94 $ 12.30 $ 10.50
============ ============ ============
Total Return........................................ 1.7% 22.9% 5.0%/(2)/

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands).................................. $ 8,025 $ 7,665 $ 2,441
Ratio of net expenses to average
net assets...................................... 0.00%/(4)/ 1.36%/(4)/ 2.73%/(3)/
Ratio of net investment income (loss)
to average net assets........................... 2.37%/(4)/ 1.14%/(4)/ (0.25)%/(3)/
Portfolio turnover rate........................... 48% 30% 1%

<CAPTION>
Mid Cap Value Fund
-------------------------------------------------------------------
Oct. 11, 1996/(1)/
For the year ended December 31, through
1998 1997 Dec. 31, 1996
-------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................ $ 12.78 $ 10.66 $ 10.00
Income (loss) from investment operations:
Net investment income............................. 0.07 0.05 --
Net realized and unrealized gains (losses)
on investments.................................. (1.09) 2.38 0.66
------------ ------------ ------------
Total income (loss) from investment
operations.................................... (1.02) 2.43 0.66
Less distributions from:
Net investment income............................. (0.07) (0.05) --
Net realized gains on investments................. -- (0.26) --
------------ ------------ ------------
Total distributions............................. (0.07) (0.31) --
------------ ------------ ------------
Net asset value, end of period...................... $ 11.69 $ 12.78 $ 10.66
============ ============ ============
Total Return........................................ (8.0)% 22.8% 6.6%/(2)/

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands).................................. $ 34,686 $ 36,558 $ 6,934
Ratio of net expenses to average
net assets...................................... 1.25%/(5)/ 1.29%/(5)/ 1.94%/(3)/
Ratio of net investment income (loss)
to average net assets........................... 0.52%/(5)/ 0.54%/(5)/ (0.16)%/(3)/
Portfolio turnover rate........................... 47% 48% 4%
</TABLE>

/(1)/ Commencement of operations.
/(2)/ Not annualized.
/(3)/ Annualized.
/(4)/ If there had been no expense reimbursement or management fee waiver by the
Advisor, the ratio of net expenses to average net assets for the years
ended December 31, 1998 and 1997 would have been 1.92% and 2.00%,
respectively, and the ratio of net investment income to average net assets
would have been 0.45% and 0.50%, respectively.
/(5)/ If there had been no expense reimbursement or management fee waiver by the
Advisor, the ratio of net expenses to average net assets for the years
ended December 31, 1998 and 1997 would have been 1.34% and 1.32%,
respectively, and the ratio of net investment income to average net assets
would have been 0.43% and 0.51%, respectively.
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Value Plus Fund
-----------------------------------------------------------------------------
For the year ended December 31,
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year.................. $ 16.13 $ 13.73 $ 11.17 $ 9.53 $ 10.45
Income (loss) from investment operations:
Net investment income............................. 0.62 0.48 0.38 0.41 0.41
Net realized and unrealized gains (losses)
on investments.................................. (2.32) 3.66 3.33 1.89 (0.92)
--------- --------- --------- -------- ---------
Total income (loss) from investment
operations.................................... (1.70) 4.14 3.71 2.30 (0.51)
Less distributions from:
Net investment income............................. (0.60) (0.48) (0.38) (0.41) (0.41)
Net realized gains on investments................. (0.03) (1.26) (0.77) (0.25) --
--------- --------- --------- -------- ---------
Total distributions............................. (0.63) (1.74) (1.15) (0.66) (0.41)
--------- --------- --------- -------- ---------
Net asset value, end of year........................ $ 13.80 $ 16.13 $ 13.73 $ 11.17 $ 9.53
========= ========= ========= ======== =========
Total Return/(1)/................................... (10.8)% 30.6% 33.8% 24.4% (4.9)%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in thousands)............ $ 174,314 $ 336,281 $ 66,582 $ 19,123 $ 9,884
Ratio of operating expenses to average
net assets...................................... 1.21% 1.12% 1.45% 1.54% 1.80%
Ratio of interest expense to average
net assets...................................... 0.03% -- -- -- --
Ratio of net investment income to average
net assets...................................... 3.77% 3.32% 3.23% 3.90% 4.39%
Portfolio turnover rate........................... 64% 74% 73% 150% 127%
</TABLE>

/(1)/ The contingent deferred sales charge in effect for the Fund prior to June
1, 1994 is not reflected in Total Return.
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Value Fund
------------------------------------------------------------------------------------
For the year ended December 31,
1998 1997 1996 1995 1994
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year........... $ 33.87 $ 31.65 $ 27.95 $ 22.72 $ 23.22
Income (loss) from investment operations:
Net investment income (loss)............... 0.08 0.17 0.06 0.13 (0.09)
Net realized and unrealized gains (losses)
on investments........................... (3.97) 7.09 5.78 6.63 0.47
----------- ----------- ---------- ---------- --------
Total income (loss) from investment
operations............................... (3.89) 7.26 5.84 6.76 0.38

Less distributions from:
Net investment income...................... (0.06) (0.17) (0.06) (0.13) --
Net realized gains on investments.......... (0.63) (4.87) (2.08) (1.40) (0.88)
----------- ----------- ---------- ---------- --------
Total distributions...................... (0.69) (5.04) (2.14) (1.53) (0.88)
----------- ----------- ---------- ---------- --------
Net asset value, end of year................. $ 29.29 $ 33.87 $ 31.65 $ 27.95 $ 22.72
=========== =========== ========== ========== ========

Total Return/(1)/............................ (11.5)% 23.2% 21.0% 29.8% 1.7%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in thousands)..... $ 1,545,495 $ 2,126,715 $1,626,760 $1,190,926 $339,364
Ratio of net expenses to average net assets 1.15% 1.12% 1.23% 1.29% 1.39%
Ratio of net investment income (loss) to
average net assets....................... 0.22% 0.49% 0.22% 0.61% (0.52)%
Portfolio turnover rate.................... 36% 55% 31% 31% 35%
</TABLE>

/(1)/ The contigent deferred and initial sales charges in effect for the Fund
prior to June 1, 1994 are not reflected in Total Return.

<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Government Fund (formerly the U.S. Government Securities Fund)
------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year........... $ 9.85 $ 9.54 $ 9.96 $ 8.91 $ 10.50
Income (loss) from investment operations:
Net investment income...................... 0.57 0.58 0.59 0.60 0.59
Net realized and unrealized gains (losses)
on investments........................... 0.21 0.31 (0.42) 1.05 (1.59)
---------- --------- -------- ---------- -------
Total income (loss) from investment
operations............................... 0.78 0.89 0.17 1.65 (1.00)
Less distributions from:
Net investment income...................... (0.57) (0.58) (0.59) (0.60) (0.59)
---------- --------- -------- ---------- -------
Total distributions...................... (0.57) (0.58) (0.59) (0.60) (0.59)
---------- --------- -------- ---------- -------
Net asset value, end of year................. $ 10.06 $ 9.85 $ 9.54 $ 9.96 $ 8.91
========== ========= ======== ========== =======
Total Return/(1)/............................ 8.1% 9.7% 2.0% 19.0% (9.6)%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in thousands)..... $ 54,866 $ 48,562 $ 51,713 $ 66,261 $64,807

Ratio of net expenses to average net
assets/(2)/.............................. 0.76% 0.87% 1.06% 1.07% 1.07%
Ratio of net investment income to
average net assets/(2)/.................. 5.73% 6.12% 6.36% 6.31% 6.30%
Portfolio turnover rate.................... 90% 143% 30% 97% 95%
</TABLE>

/(1)/ The contingent deferred and initial sales charges in effect for the Fund
prior to June 1, 1994 are not reflected in Total Return.
/(2)/ If there had been no expense reimbursement or management fee waiver by the
Advisor, the ratios of net expenses to average net assets for the years
ended December 31, 1998, 1997, 1996, 1995 and 1994, would have been
1.16%, 1.20%, 1.21%, 1.22% and 1.22%, respectively, and the ratios of net
investment income to average net assets would have been 5.33%, 5.79%,
6.21%, 6.16% and 6.15%, respectively.
<PAGE>

HEARTLAND FUNDS
General Information and Account/Price Information (24 hours):
1-800-432-7856 or (414) 289-7000
www.heartlandfunds.com

HEARTLAND FUNDS
790 North Milwaukee Street
Milwaukee, Wisconsin 53202

INVESTMENT ADVISOR AND DISTRIBUTOR
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202

CUSTODIAN
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
P.O. Box 701
Milwaukee, Wisconsin 53201-0701

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

COUNSEL
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

<PAGE>

If you have any questions about the Heartland Funds or would like more
information, including a free copy of the Funds' Statement of Additional
Information ("SAI"), or their Annual or Semi-Annual Reports, you may call or
write Heartland Advisors at:

Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
1-800-432-7856 or (414) 289-7000
www.heartlandfunds.com

The SAI, which contains more information on the Funds, has been filed with the
Securities and Exchange Commission ("SEC"), and is legally a part of this
prospectus. The Annual and Semi-Annual Reports, also filed with the SEC, discuss
market conditions and investment strategies that affected each Fund's
performance during the prior fiscal year and six-month fiscal period,
respectively.

Investment Company Act File No. 811-4982

<PAGE>

PROSPECTUS/MAY 1, 1999

WISCONSIN
TAX FREE FUND

[LOGO APPEARS HERE]
--------------------------
AMERICA'S VALUE INVESTOR(R)
<PAGE>

PROSPECTUS/MAY 1, 1999

HEARTLAND WISCONSIN TAX FREE FUND

This Fund seeks to provide investors with a high level of current income that is
exempt from federal and Wisconsin personal income taxes. It invests primarily in
municipal obligations that are exempt from personal income tax in Wisconsin and
under federal law, including certain Wisconsin municipal obligations and
securities of other entities meeting such criteria. The Fund is managed using
Heartland Advisors' Municipal Ten-Point Value Investment Grid(TM), a strict
investment discipline designed to identify value. The Fund offers investors an
attractive investment opportunity combined with active risk management. The Fund
is a no-load fund. Investors pay no sales fees or charges to purchase, redeem or
exchange their shares.

The Securities and Exchange Commission has not approved the shares of this Fund
or any other mutual fund, nor determined whether this or any other prospectus is
accurate or complete. Anyone who tells you otherwise is committing a crime.

2
<PAGE>

Table of Contents

<TABLE>
<CAPTION>
<S> <C>
RISK/RETURN SUMMARY:
INVESTMENTS, RISKS AND PERFORMANCE.................................. 5
- -----------------------------------------------------------------------
Investment Goal..................................................... 5
Principal Investment Strategies..................................... 5
Principal Investment Risks.......................................... 7
Who Should Consider Investing?...................................... 10
Past Performance.................................................... 11
Fees and Expenses of the Fund....................................... 13

MANAGEMENT OF THE FUND.............................................. 15
- -----------------------------------------------------------------------
Heartland Group..................................................... 15
Heartland Advisors.................................................. 15

INVESTMENT OBJECTIVE AND POLICIES................................... 18
- -----------------------------------------------------------------------
General............................................................. 18
Credit Quality...................................................... 18
Geographic Concentration............................................ 19
Temporary Positions................................................. 20

PRINCIPAL INVESTMENTS AND
INVESTMENT STRATEGIES............................................... 21
- -----------------------------------------------------------------------
Heartland Advisors' Municipal Ten-Point Value Investment Grid(TM)... 21
Municipal Obligations............................................... 22
Other Investments and Investment Strategies......................... 24
</TABLE>

3
<PAGE>

<TABLE>
<S> <C>
HOW TO INVEST....................................................... 28
- -----------------------------------------------------------------------

ACCOUNT POLICIES.................................................... 30
- -----------------------------------------------------------------------
Redeeming Shares.................................................... 32
Exchanging Shares................................................... 33
Share Price......................................................... 35
Service Fees........................................................ 36

SHAREHOLDER INFORMATION AND REPORTING............................... 37
- -----------------------------------------------------------------------
Heartland Value Source(TM).......................................... 37
Investment Reports.................................................. 37
Dividends and Capital Gain Distributions............................ 37
Taxes............................................................... 38
Financial Highlights................................................ 39
</TABLE>

4
<PAGE>

RISK/RETURN SUMMARY: INVESTMENTS,
RISKS AND PERFORMANCE

INVESTMENT GOAL
- --------------------------------------------------------------------------------
The Fund seeks to provide investors with a high level of current income that is
exempt from federal and Wisconsin personal income taxes.

PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund invests primarily in debt obligations issued by municipalities
("Municipal Obligations") that are exempt from personal income tax in Wisconsin
and under federal law, including certain Municipal Obligations issued by
Wisconsin entities and securities of other entities meeting such criteria. The
Fund invests primarily in Municipal Obligations judged by Heartland Advisors to
be of investment grade quality. As a fundamental policy, the Fund will seek to
invest at least 80% of its assets so that the income earned thereon will be
exempt from federal and Wisconsin personal income tax. Under normal market
conditions, the Fund will invest all of its assets so that the income therefrom
will be exempt from federal and Wisconsin personal income tax.

HEARTLAND ADVISORS' MUNICIPAL TEN-POINT VALUE INVESTMENT GRID(TM). The Fund's
investments are selected using Heartland Advisors' Municipal Ten-Point Value
Investment Grid(TM), a set of strict value criteria:

- - Essential Service
- - Financial Soundness
- - Strong Competitive Position
- - High Debt Service Coverage
- - Experienced Management
- - A Financial Stake by Management
- - Strong Legal Covenants
- - High Yield vs. U.S. Treasuries
- - Catalyst for Change
- - Willingness to Pay Debt Obligations

5
<PAGE>

CONCENTRATION. Only limited categories of Municipal Obligations are exempt from
Wisconsin personal income tax, including:

- - Higher education bonds issued by the State of Wisconsin

- - Public housing and redevelopment authority bonds issued by Wisconsin
municipalities

- - Certain bonds issued by the Wisconsin Housing and Economic Development
Authority

- - Wisconsin Housing Finance Authority Bonds

- - Certain general obligation bonds issued by the District of Columbia, Puerto
Rico, the Virgin Islands and Guam

- - Certain public housing agency bonds issued by agencies located
outside of Wisconsin

Although most of the Municipal Obligations held by the Fund will be issued by
Wisconsin entities, it is possible that the Fund may invest a significant
portion of its assets in obligations issued by territories and possessions of
the United States, the District of Columbia, and their respective agencies or
instrumentalities. The Fund may invest up to 100% of its assets in tax-exempt
securities of issuers outside of Wisconsin if such securities bear interest
which is exempt from federal and Wisconsin personal income tax.

The Fund may also invest 25% or more of its total assets in Municipal
Obligations that finance similar types of projects or projects in related
industry sectors. These could include, for example, projects involving community
development, education, health care, hospitals, retirement, single family or
multi-family housing, redevelopment, transportation or various types of
utilities. The Fund may not invest more than 25% of its total assets in
securities of non-governmental issues whose principal activities are in the same
industry. In addition, as a matter of fundamental policy, the Fund will not
purchase a security if, as a result thereof, more than 25% of its total assets
would be invested in

6
<PAGE>

a single issuer, or the Fund would own more than 10% of the outstanding voting
securities of a single issuer. These limitations do not include securities
issued or guaranteed by the U.S. Government, or a state or territory of the
United States, or the District of Columbia, or their respective agencies,
instrumentalities, municipalities or political subdivisions.

OTHER INVESTMENT STRATEGIES. The Fund may invest in other debt and equity
securities (including convertible securities and securities paying interest
which is subject to federal and/or Wisconsin personal income tax), and may
employ other investment techniques that are not principal investment strategies
but could impact the Fund's performance.

PRINCIPAL INVESTMENT RISKS
- --------------------------------------------------------------------------------
The principal risk of investing in the Fund is that its share price and
performance may fluctuate, and you could lose money. The value of your
investment in the Fund will be affected primarily by changes in the value of its
portfolio of Municipal Obligations. Investing in Municipal Obligations and,
thus, the Fund involves the following risks:

CREDIT RISK. Credit risk is the possibility that the municipality or other legal
entity ("municipality") issuing a security, or its guarantor, will not be able
to make timely principal and interest payments on its obligations. Although
credit ratings issued by credit rating agencies are designed to evaluate these
risks, such ratings are not always accurate. Even if the ratings are accurate
when made, the rating agencies may not always make timely changes in a rating in
response to changes in the economy or in the condition of the issuer that could
affect the likelihood of timely repayment of the Municipal Obligation. Many debt
obligations and, in particular, higher yield debt obligations, are unrated. As a
result, Heartland Advisors uses credit ratings only as a preliminary indicator
of investment quality, relying on its own proprietary credit research and
analysis of Municipal Obligations and continually monitoring portfolio
securities to determine whether credit

7
<PAGE>

quality has changed. Credit ratings that may be considered include, for example,
those published by Standard & Poor's Rating Group, Moody's Investors Service,
Inc. and Fitch ICBA, Inc.

MARKET RISK. Market risk is the possibility that the value of the Fund's
portfolio securities will decline due to (a) an increase in interest rates, (b)
adverse changes in supply and demand for debt obligations because of market,
sector, industry or political factors, or (c) the unavailability or inaccuracy
of key information about a particular security or market.

"HIGH YIELD" RISK. "High yield" risk is a characteristic of medium and lower
quality debt obligations. Although the Fund invests primarily in investment
grade obligations, it also may invest in medium and lower quality debt
obligations. These obligations offer higher yields, but greater investment risk
than higher quality securities with similar maturities. These securities
sometimes may be referred to as "junk bonds" and are rated below investment
grade, or determined by Heartland Advisors to be of comparable quality if
unrated. In general, these securities are considered to be more speculative with
respect to the issuer's capacity to pay interest and repay principal, and
involve greater risk of issuer default or bankruptcy. High-yield debt
obligations also may be more susceptible to real or perceived adverse economic
conditions or political developments. Any reduction in the value of a portfolio
security as a result of one or more of these factors could adversely affect the
Fund's share price. Investing in lower quality and defaulted securities also may
lead to additional expense if the Fund is required to seek recovery of principal
and interest payments, and the Fund's right to payment may rank behind those of
other creditors of the issuer.

8
<PAGE>

LIQUIDITY RISK. Because secondary trading of Municipal Obligations issued within
Wisconsin may be less active than trading in other fixed-income securities, the
Fund could experience difficulty in disposing of portfolio securities. Thin
trading in markets for debt obligations might make it more difficult to value
portfolio securities because of the lack of objective pricing data provided by
actively traded markets. As a result, the valuation process may require greater
subjective judgment.

CONCENTRATION RISK. The Fund's portfolio is subject to both geographic and
industry concentration risk. The value of the Municipal Obligations held by the
Fund and overall Fund performance may be affected by local political and
economic conditions and developments within Wisconsin and to a lesser extent,
Puerto Rico, Guam and the Virgin Islands. In addition, an economic, business or
political development affecting a particular project, type of project or
industry could affect the value of the Municipal Obligations held by the Fund
and overall Fund performance. Geographic or industry concentration may also
result in potential volatility, causing the Fund's share price and performance
to fluctuate.

The Fund is not "diversified" within the meaning of the Investment Company Act
of 1940, which means that the Fund may invest a greater percentage of its assets
in a particular issuer than other funds which are diversified. As a result,
developments affecting a single issuer could have a significant effect on the
Fund's performance.

HEDGING RISK. Hedging risk is the risk that changes in the value of a hedging
instrument will not match those of the asset or security being hedged. Hedging
is the use of one investment to offset the effects of another investment.
Imperfect or no correlation of the values of the hedging instrument and the
hedged security or asset might occur because of characteristics of the
instruments themselves or unrelated factors involving, for example, the markets
on which the instruments

9
<PAGE>

are traded. As a result, hedging strategies may not always be successful. While
hedging strategies can help reduce or eliminate portfolio losses, they also can
reduce or eliminate portfolio gains.

ALTERNATIVE MINIMUM TAX RISK. Although the Fund may invest without limitation in
Municipal Obligations whose interest is a tax-preference item for purposes of
the federal alternative minimum tax, as a matter of policy the Fund will limit
its investments in such securities to no more than 20% of its net assets.
Accordingly, the Fund's net return may be lower for those taxpayers who are
subject to the alternative minimum tax.

INVESTMENT OBJECTIVES. The Fund's investment goal may be changed by the Fund's
Board of Directors upon notice to shareholders, but without shareholder
approval.

WHO SHOULD CONSIDER INVESTING?
- --------------------------------------------------------------------------------

The Fund may be appropriate as part of your investment portfolio if:
- - You seek a high level of current income that is exempt from both federal and
Wisconsin income tax.

- - You prefer to invest in a Wisconsin tax-free fund that has no sales charge.

- - You would rather invest in municipal agencies and developments located
primarily in Wisconsin.

- - You want to invest in a Wisconsin tax-free fund that is managed in Wisconsin.

- - You would like to take advantage of the diversification provided by the
largest (as of 12/31/98) Wisconsin double tax-free fund.

10
<PAGE>

PAST PERFORMANCE
- --------------------------------------------------------------------------------

The tables on pages 11 and 12 show historical performance of the Fund. Table I
provides some indication of the risks of investing in the Fund by showing how
the Fund's total returns have varied from year to year since January 1, 1993.
Table II shows how the Fund's average annual total returns compare to those of a
broad-based securities market index. Table III shows the annualized yields and
taxable equivalent yields for the Fund and the index for the 30 days ended
December 31, 1998. Past performance cannot predict or guarantee future results.

An investment in the Fund is not a deposit of any bank, nor insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
governmental agency. It is not designed to be a complete investment program, and
while you may make money, you can also lose money. The Fund's share price will
fluctuate.

TABLE I

WISCONSIN TAX FREE FUND - YEAR-BY-YEAR TOTAL RETURNS

A BAR CHART showing Total Returns for Wisconsin Tax Free Fund from 1993 through
1998:

10.80% (6.49)% 17.78% 3.81% 8.06% 5.41%
1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

----------------------------
BEST QUARTER:

Q1 `95 7.45%
============================
WORST QUARTER:

Q1 `94 -4.07%
----------------------------

11
<PAGE>

<TABLE>
<CAPTION>
TABLE II

WISCONSIN TAX FREE FUND - AVERAGE ANNUAL TOTAL RETURN (THROUGH 12/31/98)
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEAR (4/3/92)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wisconsin Tax Free Fund 5.41% 5.42% 6.42%
- -----------------------------------------------------------------------------------------------
Lehman 20-Year Municipal Bond Index(1) 6.82% 6.75% 8.45%
- -----------------------------------------------------------------------------------------------
</TABLE>

(1) The Lehman 20-Year Municipal Bond Index is an unmanaged index of certain
investment grade municipal securities with maturities between 17 and 22
years.

<TABLE>
<CAPTION>
TABLE III

YIELD FOR THE 30 DAYS ENDED 12/31/98 (ANNUALIZED)
- -----------------------------------------------------------------------------------------------
TAXABLE
EQUIVALENT YIELD(1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Wisconsin Tax Free Fund 4.5% 8.3%
- -----------------------------------------------------------------------------------------------
Lehman 20-Year Municipal Bond Index 4.9% 9.1%
- -----------------------------------------------------------------------------------------------
</TABLE>

(1) Based upon a combined Wisconsin personal income tax rate of 6.9% and a
federal income tax rate of 39.6%, adjusted for the maximum phase-out of
itemized deductions and personal exemptions and adjusted to reflect the
deductibility of state taxes, resulting in an effective combined rate of
45.6%.

For current yield information, please call 1-800-432-7856.

An index is not available for direct investment and past performance cannot
guarantee or predict future results. The securities included in an index are not
an exact match to the holdings in a mutual fund portfolio. The performance of a
mutual fund will differ from that of an index. Unlike an index, a mutual fund
portfolio is affected by operating expenses and cash flow activity caused by
daily purchases and redemptions. In addition, a mutual fund portfolio will
differ from the index in the number and size of holdings or securities, their
relative sector and industry weightings, the market capitalization of individual
securities and the median capitalization of the index and Fund overall.

12
<PAGE>

Total return measures the change in the share price of the Fund and assumes the
reinvestment of all dividends and capital gains. Cumulative total return is
actual return for a given period, but does not indicate how much return
fluctuated during the period. Average annual total return is the hypothetical,
constant annual return that would have produced the Fund's cumulative return for
a given period. It should not be confused with actual annual returns, the sum of
which over a given period produces the Fund's cumulative total return. Yield is
annualized net income of the Fund during a 30-day period as a percentage of the
Fund's share price. Taxable equivalent yield shows the yield that you would need
to receive from taxable income to match the Fund's tax-free yield.

FEES AND EXPENSES OF THE FUND
- --------------------------------------------------------------------------------

This summary describes the fees and expenses that you would pay if you buy and
hold shares of the Fund.

ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and include fees
for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these expenses directly
but, as shown in the example below, all shareholders bear these costs
indirectly.

13
<PAGE>

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
<S> <C>
Management fees 0.65%
- --------------------------------------------------------------------------------
Distribution (12b-1) fees None
- --------------------------------------------------------------------------------
Other expenses 0.13%
- --------------------------------------------------------------------------------
Total annual fund operating expenses/(1)/ 0.78%
- --------------------------------------------------------------------------------
</TABLE>

/(1)/ The Fund has entered into arrangements with its Custodian whereby interest
earned on uninvested cash balances is used to reduce Custodian expenses.
The ratio does not include these fees. If the Fund did not have fees paid
indirectly, total annual fund operating expenses would have been 0.80%.

EXAMPLE. (This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those time periods. The example also
assumes that your investment has a 5% return each year and that the Fund's total
annual fund operating expenses remain the same. The assumed return in the
example does not represent actual or future performance, and your actual cost of
investing in the Fund may be higher or lower.)

<TABLE>
<CAPTION>
WISCONSIN TAX FREE FUND
- ----------------------------------------------
<S> <C>
One Year $ 80
- ----------------------------------------------
Three Years 249
- ----------------------------------------------
Five Years 433
- ----------------------------------------------
Ten Years 966
- ----------------------------------------------
</TABLE>

14
<PAGE>

MANAGEMENT OF THE FUND

HEARTLAND GROUP
- --------------------------------------------------------------------------------

The Fund is a mutual fund portfolio series of Heartland Group, Inc.
("Heartland"). The shares of the Fund offered by this prospectus are the "no-
load" class. No other classes of shares have been authorized at this time.

Heartland is governed by a Board of Directors that oversees its business
affairs. The Board meets regularly to review the Fund's investments, performance
and expenses. It elects the officers of Heartland and hires the Fund's service
providers, including its investment advisor. As a matter of policy, Heartland
requires that a majority of its Board members be independent of the Fund's
investment advisor.

HEARTLAND ADVISORS
- --------------------------------------------------------------------------------

Founded in 1982 by William J. Nasgovitz, Heartland Advisors, Inc., America's
Value Investor,(R) is an independent firm owned by its employees. It manages the
Fund's investments subject to the authority of and supervision by the Board of
Directors of Heartland. Heartland Advisors also distributes the Fund's shares
and provides administrative and accounting services to the Fund and shareholder
services to the Fund's investors. In addition to managing the Heartland family
of nine equity and fixed-income mutual funds, Heartland Advisors provides
investment advisory and brokerage services to individuals, institutions and
retirement plans. Its principal offices are located at, and its mailing address
is, 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.

PORTFOLIO MANAGERS. Patrick J. Retzer and Thomas J. Conlin are co-portfolio
managers of the Fund. Mr. Retzer, a Certified Public Accountant (CPA), has been
a manager of the Fund since commencement of its operations. Mr. Retzer is a
Senior Vice President and Director of Heartland Advisors, and has been
associated with the firm in various capacities since 1988.

15
<PAGE>

Mr. Conlin, a Chartered Financial Analyst (CFA), is a Vice President of
Heartland Advisors, which he joined in 1996. He has been managing municipal
investments since 1978.

Management Fee. For Heartland Advisors' investment management services, the Fund
pays an annual fee, accrued daily and paid monthly, computed as a percentage of
the Fund's average net assets. For the fiscal year ended December 31, 1998, the
Fund paid advisory fees of 0.65% of average daily net assets. Year 2000
Readiness. Many computer systems use two digits rather than four to identify the
year in a date. These systems, if not modified, will not correctly handle the
change from "99" to "00" on January 1, 2000, causing them to be unable to
accurately perform certain functions ("Year 2000 processing"). This problem
affects virtually all companies and organizations, and, among other things,
could have a negative impact on the handling of securities trades, payments of
interest and dividends, and the pricing of and accounting for securities
portfolios.

Heartland Advisors has taken steps to help assure that its major computer
systems are capable of handling Year 2000 processing. It is also assessing the
readiness of the Fund's custodian and transfer and dividend disbursing agent and
other third parties performing major Year 2000 processing services for the Fund
and Heartland Advisors. Although Heartland Advisors expects all major Fund
computer systems to be ready in time, the Fund could be adversely affected if
Year 2000 processing systems are not properly modified in a timely manner.

16
<PAGE>

Issuers of Municipal Obligations and other securities in which the Fund may
invest could be affected by the Year 2000 processing issue, as could the service
providers who administer the payment of principal and interest on Municipal
Obligations owned by bondholders, such as the Fund. These problems might
negatively affect the value of the issuers' securities, which, in turn, could
adversely impact the Fund's performance. Heartland Advisors has established a
process to gather publicly available information about the Year 2000 readiness
of issuers of portfolio securities. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuer's Year 2000 processing readiness is only one of
many factors the Fund's portfolio managers may consider when making investment
decisions, and other factors may receive greater weight.

17
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

GENERAL
- --------------------------------------------------------------------------------
The Fund seeks to provide investors with a high level of current income that is
exempt from federal and Wisconsin personal income taxes. The Fund invests
primarily in municipal securities that are exempt from personal income tax in
Wisconsin and under federal law, including certain Municipal Obligations issued
by Wisconsin entities and securities of other entities meeting such criteria.

As a fundamental policy, under normal market conditions the Fund will invest at
least 80% of its net assets in tax-exempt Municipal Obligations. The Fund may
invest in Municipal Obligations the interest on which is a tax-preference item
for purposes of the federal alternative minimum tax, although as a matter of
policy the Fund limits its investments in such securities to no more than 20% of
the Fund's net assets.

CREDIT QUALITY
- --------------------------------------------------------------------------------
Although the Fund invests primarily in investment grade Municipal Obligations,
it may also invest in medium and lower quality debt obligations. Medium and
lower quality debt obligations are those rated as such by a nationally
recognized statistical rating organization ("NRSRO"); for example, BBB by
Standard & Poor's Rating Group ("S&P"). Medium and lower quality obligations,
sometimes referred to as "junk bonds," generally offer higher yields than
investment grade securities with similar maturities, but involve greater
investment risk, including the possibility of default or bankruptcy. The Fund
seeks to manage this risk through intensive credit research and may never invest
more than 20% of its total assets in debt obligations rated lower than B- by S&P
or a comparable rating by another NRSRO.

NRSROs publishing rating information on which Heartland Advisors may rely
include S&P, Moody's Investors Services, Inc., and Fitch IBCA, Inc., among
others. The Fund also may invest in unrated securities if Heartland Advisors
believes that such securities are of comparable quality so as to satisfy the
foregoing requirements.

18
<PAGE>

All rating limitations on investments are applied at time of purchase.
Subsequent to purchase, a rated debt obligation may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such a security, but it will be a factor
in considering whether to continue to hold the security. To the extent that
ratings may change as a result of changes in a rating organization or their
rating systems, the Fund will attempt to use comparable ratings as standards for
selecting investments.

GEOGRAPHIC CONCENTRATION
- --------------------------------------------------------------------------------
Because the Fund concentrates its investments in limited geographic areas, it is
exposed to greater credit risks than an investment company investing in a
nationally diversified portfolio of Municipal Obligations. The value of the
Municipal Obligations owned by the Fund are closely tied to local, political and
economic conditions and developments within Wisconsin. Other risks include
possible tax changes, legislative or judicial action, environmental concerns and
differing levels of supply and demand for debt obligations exempt from federal
and Wisconsin personal income tax. However, the Fund's policies seek to minimize
this geographic concentration risk in a number of ways. First, the Fund intends
to comply with the provisions of Subchapter M of the Internal Revenue Code.
These requirements provide, among other things, that, at the close of each
quarter of the Fund's taxable year, (a) those issues which represent more than
5% of the Fund's total assets be limited in the aggregate to 50% of the Fund's
total assets, and (b) no single issue exceed 25% of the Fund's total assets. As
a matter of fundamental policy, the Fund will not (a) purchase a security if, as
a result, more than 25% of its total assets would be invested in a single
issuer, other than securities issued or guaranteed by the United States
Government, or a state or territory of the United States, or the District of
Columbia, or their agencies, instrumentalities, municipalities or political
subdivisions; or (b) purchase more than 10% of the outstanding voting securities
of an issuer. Moreover, since the Fund's policies and programs per-

19
<PAGE>

mit it to purchase securities issued by territories or possessions of the United
States which are exempt from federal and Wisconsin personal income tax, the
geographic concentration is less than if the Fund was limited solely to
investments in one state.

TEMPORARY POSITIONS
- --------------------------------------------------------------------------------
Under adverse market conditions or other extraordinary economic or market
conditions, the Fund may take a temporary defensive position and invest, without
limitation, in taxable Municipal Obligations and other debt securities, or hold
assets in liquid reserves. Taking a temporary defensive position is not
required, and may not be possible because of market conditions. It also might
prevent the Fund from achieving its investment objective.

20
<PAGE>

PRINCIPAL INVESTMENTS AND INVESTMENT STRATEGIES

HEARTLAND ADVISORS' MUNICIPAL TEN-POINT VALUE INVESTMENT GRID(TM)
- --------------------------------------------------------------------------------
The following questions illustrate Heartland Advisors' process for
evaluating the value characteristics of Municipal Obligations for the Fund using
its proprietary Municipal Ten-Point Value Investment Grid.(TM)

- - Essential Service - Does the municipality provide a vital public
service? Will the demographics of the public sector help ensure the service's
continued importance?

- - Financial Soundness - Are the municipality's financials sound? We prefer low
to moderate debt, rising revenues and ample liquidity.

- - Strong Competitive Position - Does the municipality have a strong competitive
position? We prefer a municipality that holds a #1 or #2 market position (or
an improving position) or one that has a competitive advantage in terms of
service or price.

- - High Debt Service Coverage - Does the municipality have a stable or improving
ability to pay interest and principal on its bonds?

- - Experienced Management - Does the municipality have seasoned, highly
specialized and focused management?

- - A Financial Stake by Management - Does sharing the financial risk with
bondholders give management an incentive for superior performance?

- - Strong Legal Covenants - Do the legal documents adequately protect bondholders
with provisions like first mortgages, prior claims on revenues, funding levels
of debt reserves, occupancy targets, operating ratios and control of
management's accountability to bondholders?

- - High Yield vs. U.S. Treasuries - Is the yield attractive relative to that
currently available on U.S. Treasuries?

21
<PAGE>

- - Catalyst for Change - Does the municipality enjoy a feature or benefit that
may improve its competitive or financial position, such as new management,
technological advances or changes in the political, economic or regulatory
environment?

- - Willingness to Pay Debt Obligations - Is there public support for the project
to be financed by the municipality and are there legal, tax or political
considerations that could affect its ability to meet its financial
commitments?

MUNICIPAL OBLIGATIONS
- --------------------------------------------------------------------------------
The term "Municipal Obligations" means debt obligations issued by or on behalf
of states, territories or possessions of the United States, sovereign nations
within the territorial boundaries of the United States, the District of Columbia
and their respective political subdivisions, agencies and instrumentalities, and
corporations duly authorized by them.

Within the two principal classifications of Municipal Obligations, there are
various types of securities, including, in part, municipal bonds,
private activity bonds, municipal notes, mortgage-backed obligations, municipal
leases, loan interests, custodial receipts and participation certificates.

22
<PAGE>

Mortgage-Backed Municipal Obligations are a type of municipal security issued by
a state, authority or municipality to provide financing for residential housing
mortgages to target groups, generally low income individuals who are first-time
home buyers. The Fund's interest, evidenced by such obligations, is an undivided
interest in a pool of mortgages. Payments made on the underlying mortgages and
passed through to the Fund represent both regularly scheduled principal and
interest payments. The Fund also may receive additional principal payments
representing prepayments of the underlying mortgages. While a certain level of
prepayments can be expected regardless of the interest rate environment, it is
anticipated that prepayment of the underlying mortgages will accelerate in
periods of declining interest rates. In the event the Fund receives principal
prepayments in a declining interest rate environment, the Fund may have to
invest the unanticipated proceeds in lower-yielding securities. This prepayment
risk causes mortgage-backed securities to be more significantly affected by
changes in interest rates than is the case for Municipal Obligations that are
not subject to such prepayments.

23
<PAGE>

subject to certain conditions, including, for example, clauses that do not
require the municipality to make lease or contractual payments unless specific
annual appropriations are made by the municipality. If the municipality stops
making payments, the obligations could lose value. Some of these instruments may
be illiquid and, as such, will be subject to the Fund's 15% limit on illiquid
securities.

Participation Interests or Certificates of Participation represent interests in
all or part of specific holdings of Municipal Obligations, including, for
example, municipal lease obligations.

OTHER INVESTMENTS AND INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
In addition to the investments and strategies discussed under "Fund Highlights"
and "Principal Investments and Investment Strategies"
in this prospectus, the Fund may engage in the strategies and may
purchase and sell the investments discussed below and in its statement of
additional information.

When-Issued and Delayed-Delivery Securities; Forward Commitments. The Fund may
purchase securities on a when-issued or delayed-delivery basis, and may purchase
forward commitments. Although the payment and interest terms of these securities
are established at the time the purchaser enters into the commitment, the
securities may be delivered and paid for a month or more after the purchase
date. The Fund purchases securities in this manner in order to secure an
advantageous price and yield, but the value of the security could change before
settlement. Therefore, although the Fund will make such commitments only with
the intention of actually acquiring the securities, it may sell the securities
before settlement if it is deemed advisable for investment reasons. When-issued
or delayed-delivery securities may sometimes be purchased on a "dollar roll"
basis, meaning that the Fund will sell securities with a commitment to purchase
similar, but not identical, securities at a future date. Dollar rolls are
engaged in

24
<PAGE>

when Heartland Advisors believes securities similar to those sold can
be purchased a short time later at a lower price.

Standby Commitments. To facilitate portfolio liquidity, the Fund may obtain
standby commitments when it purchases debt obligations. A standby commitment
gives the holder the right to sell the underlying security back to the seller at
an agreed price on certain dates or within a specified period. Standby
commitments generally increase the cost of the acquisition of the underlying
security, reducing its yield.

Loan Interests. The Fund may invest in loan interests, which are interests in
amounts owed by a municipality or other borrower to lenders or lending
syndicates. Loan interests purchased by the Fund will vary in maturity, may be
subject to restrictions on resale, are not readily marketable and may be secured
or unsecured. They involve the risk of loss in case of default or bankruptcy of
the Borrower or, if in the form of a participation interest, the insolvency of
the financial intermediary.

Illiquid Securities. The Fund will not invest more than 15% of its net assets in
illiquid securities. For purposes of applying this limitation, an "illiquid
security" means one that may not be sold or disposed of in the ordinary course
of business within seven days at a price approximating the value at which the
security is carried by the Fund. The Fund may invest in debt obligations that
are purchased in private placements (that is, transactions in which securities
have not been registered under federal law) and that are subject to restrictions
on resale as a matter of contract or law. Private placement notes issued
pursuant to the private placement exemption provided by Section 4(2) of the
Securities Act of 1933 (the "1933 Act") have been determined to be liquid by
Heartland's Board of Directors. These securities and restricted securities
issued under Rule 144A of the 1933 Act that are deemed to be liquid by Heartland
Advisors under guidelines established by the Board of Directors are not subject
to the Fund's limitation on illiquid securities. Municipal lease obligations,
which also may be considered illiquid, may similarly be determined to be liquid
in accordance with guidelines

25
<PAGE>

adopted by Heartland's Board of Directors. Absent such determinations, such
securities, and repurchase agreements maturing in more than seven days, are
considered illiquid.

Futures and Options. The Fund may engage in transactions in options, futures
contracts and options on futures contracts to hedge against anticipated declines
in the market value of portfolio securities and increases in the market value of
securities it intends to acquire. The Fund may also engage in such transactions
to protect against exposure to interest rate changes. Finally, the Fund may use
these instruments to enhance total return or to invest in eligible asset classes
with greater efficiency and lower cost than is believed to be possible through
direct investments.

Options and futures can be highly volatile investments and involve certain
risks. These strategies require the ability to predict future movements in
securities prices, interest rates, currency exchange rates and other economic
factors. Heartland Advisors' attempts to use such investments may not be
successful and could result in reduction of the Fund's total return. The Fund's
potential losses from the use of futures extend beyond its initial investment in
such contracts. The Fund could also experience losses if the prices of its
options or futures positions were poorly correlated with its other investments
(that is, the underlying investment moves in a direction opposite or more than
anticipated), or if the Fund were unable to close out its positions due to
disruptions in the market or lack of liquidity. Over-the-counter options and
futures generally involve greater credit and liquidity risks than exchange-
traded options and futures. Options and futures traded on foreign exchanges
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.

26
<PAGE>

Borrowing. The Fund may borrow from any bank or other person up to 5% of total
assets for temporary purposes. A borrowing is presumed to be for temporary
purposes if it is repaid by the Fund within 60 days and is not extended or
renewed. The Fund also may borrow solely from banks to facilitate the management
of its investment portfolio and make other investments or engage in other
transactions permissible under the 1940 Act which may be considered a borrowing
(such as dollar rolls and reverse repurchase agreements), provided such
borrowings for these purposes do not exceed one-third of total assets.

Currently, the Fund intends to borrow only from banks, for periods not longer
than 60 days, in amounts not to exceed 20% of total assets and only for the
following purposes: (a) to avoid liquidating securities under circumstances
which Heartland Advisors believes are unfavorable to shareholders, such as to
meet large or unexpected redemptions or to purchase debt obligations pending
receipt of proceeds in the settlement of the sale of other portfolio securities;
and (b) when the Fund is scheduled to receive cash in exchange for debt
obligations that are being retired, called or exchanged pursuant to a sinking
fund provision or put feature of the instrument. The extent to which the Fund
will borrow will depend, among other things, on market conditions and interest
rates.

27
<PAGE>

- --------------------------------------------------------------------------------
HOW TO INVEST

Mail the form and the check.

28
<PAGE>

<TABLE>
<CAPTION>
HOW TO INVEST

29
<PAGE>

ACCOUNT POLICIES

If you wish to make a telephone transaction under one of the purchase or
redemption options, please call Shareholder Services at 1-800-432-7856 or 414-
289-7000. If you have a question about investing or need forms for electing an
option, call Shareholder Services at either number or visit our website at
www.heartlandfunds.com. Please note that you may terminate or change any option
you elect at any time upon five days' advance notice to the Fund. The Fund may
suspend, modify, or terminate any purchase or redemption option, other than the
option to redeem by mail, at any time without notice to you. The Fund also
reserves the right to waive or lower any minimum dollar amounts applicable to
the transactions discussed.

Time of Purchase and Form of Payment. Shares of the Fund are sold without a
sales charge. Your purchase of the Fund's shares will, therefore, be made at the
net asset value per share next determined after the Fund or its authorized agent
receives your payment. Payment must be in U.S. dollars by check drawn on a bank
in the United States, wire transfer, or electronic transfer. Usually, the Fund
will not accept payment in the form of a check payable to you or a third party,
and endorsed over to the Fund. Shares purchased by checks that are returned will
be canceled and you will be liable for any losses or fees incurred by the Fund
or its agents, including bank handling charges for returned checks.

If your payment is received after 4:00 p.m., Eastern time, your purchase will be
effective on the next business day. Purchase orders are not binding until
accepted by the Fund or its authorized agent, and entered on the Fund's books.
The Fund may reject any order its officers determine is not in the best
interests of the Fund or its shareholders, and the offering of Fund shares may
be suspended or limited at any time without notice to shareholders. The Fund
also may reject any order not accompanied by instructions in English. Once
accepted, you may not cancel or revoke your purchase order, but you may redeem
your shares.

30
<PAGE>

Investment Minimums. If you purchase shares directly from the Fund, your initial
investment must be for a minimum of $1,000, except for accounts opened with an
automatic investment plan. Subsequent purchases made by mail, other than through
dividend reinvestment, must be for a minimum of $100. The Fund may waive or
lower its investment minimums for any reason. Different minimums may apply to
accounts opened through third parties.

Purchases Through Third Parties. You may purchase shares through a third party
broker-dealer or other financial institution, but Heartland reserves the right
to refuse purchases through any intermediary arrangement that the officers of
Heartland determine employs investment strategies which are not in the best
interests of the Fund or its shareholders. Shares purchased through third
parties may be subject to special fees and conditions that do not apply if you
purchase your shares directly from the Fund. Third parties also may place limits
on your ability to use the shareholder services or receive shareholder
information described in this prospectus. Heartland has allowed some third
parties to authorize selected designees to accept purchase orders for the third
party on the Fund's behalf. If you purchase shares through a third party which
is also an authorized agent of the Fund, your order will be processed at the net
asset value per share next determined after the third party (or its authorized
designee) receives your order; other orders will be processed at the net asset
value next determined after receipt by the Fund.

31
<PAGE>

Time of Redemption; Form of Instructions and Payment. Your shares will be
redeemed at the net asset value per share next determined after your
instructions, in English, are received by the Fund or its authorized agent in
good order as further explained below. The Fund will not accept an order with
instructions for redemption on a particular date or at a particular price. The
Fund uses procedures reasonably designed to authenticate telephone instructions
including, for example, requesting personal identification information from
callers. The Fund is not liable for any losses due to unauthorized or fraudulent
telephone instructions if these procedures are followed. Once accepted, you may
not cancel or revoke your redemption order.

Usually, proceeds are mailed within one or two days of redempion or wired on the
next business day, but in no event are proceeds remitted to you later than seven
business days after redemption. In limited circumstances, the Fund may elect to
suspend the redemption of shares.

Generally, proceeds will be paid in cash, but the Fund reserves the right to pay
redemptions in the amount of $250,000 or more "in kind," which means you would
be paid in portfolio securities. If this occurred, you might incur transaction
costs when you sell the portfolio securities.

If redemption instructions are received in good order for shares that have not
been paid for, your shares will be redeemed, but the Fund reserves

32
<PAGE>

the right to hold the proceeds until payment of the purchase price can be
confirmed. This type of delay can be avoided by purchasing shares by federal
funds wire. If you choose to have your redemption proceeds mailed to you and
either the United States Postal Service is unable to deliver the redemption
check to you or the check remains outstanding for at least six months, the Fund
reserves the right to reinvest the check in shares of the particular Fund at
their then current net asset value until you give the Fund different
instructions. No interest will accrue on amounts represented by uncashed
redemption checks.

EXCHANGING SHARES
- --------------------------------------------------------------------------------
Unless you instruct the Fund that you do not want this service, you are
automatically permitted to purchase shares of the Fund with the proceeds of a
redemption for your account in any other Heartland Fund or the Firstar Money
Market Fund, a money market fund sponsored by an affiliate of the Transfer
Agent. This type of transaction is referred to as an "exchange" and may be
effected by writing or calling Heartland Advisors. Written exchanges may be for
any amount, but telephone exchanges may be for not less than $1,000 and not more
than $500,000.

33
<PAGE>

To minimize Fund expenses and to protect the Fund and its shareholders from
unfair expense burdens, the Fund reserves the right to restrict excessive
exchange activity by any shareholder upon 60 days' advance notice.

Signature Guarantees. To protect your account, the Fund reserves the right to
require a signature guarantee for written redemption instructions. Normally, a
signature guarantee will be required if the redemption proceeds will exceed
$50,000. A signature guarantee will also be required if the proceeds are being
paid to a third party, mailed to an address other than the address listed on the
Fund's records or forwarded to a bank not identified on the Fund's record as
authorized to receive the proceeds. Acceptable guarantors include, among others,
banks and brokerage firms that are members of a domestic stock exchange.
Signatures witnessed by notaries public are not acceptable for this purpose.

Redemption Through Third Parties. You may redeem shares through a third party
broker-dealer or other financial institutions provided the third party presents
documentation satisfactory to the Fund indicating it is your authorized agent.
Third parties may charge fees for their services and impose terms or conditions
that do not apply if you do business directly with the Fund. Heartland has
allowed some third parties to authorize selected designees to accept redemption
orders for the third party on the Fund's behalf. If you redeem shares through a
third party which is also an authorized agent of the Fund, your order will be
processed at the net asset value per share next determined after the third party
(or its authorized designee) receives your order; other orders will be processed
at the net asset value per share next determined after receipt by the Fund.

Involuntary Redemption. If your account value in the Fund falls below $500 for
three months or more, the Fund may redeem all of your shares upon 60 days'
advance notice to you. You may avoid involuntary redemption by making additional
investments to bring your account value up to at least $1,000.

34
<PAGE>

SHARE PRICE
- --------------------------------------------------------------------------------

Fund shares are purchased and redeemed at the net asset value per share next
determined following receipt of your order in proper form by the Fund or its
authorized agent. Net asset value is the difference between the values of the
Fund's assets and liabilities divided by the number of shares outstanding. It is
determined at the close of regular trading on the New York Stock Exchange
(generally 4:00 p.m., Eastern Time). Orders received after 4:00 p.m., Eastern
Time, are priced at the net asset value per share determined on the next
business day of the Fund.

If you purchase or redeem shares through a third party which is an authorized
agent of the Fund, your order will be processed at the net asset value per share
next determined after the third party receives your order; other purchases and
redemptions through third parties are processed at the net asset value per share
next determined after receipt by the Fund. Third parties acting as authorized
agents of the Fund are required to segregate orders received after the close of
regular trading on the New York Stock Exchange and transmit those orders
separately for execution at the net asset value per share subsequently
determined.

Portfolio securities are valued on the basis of market quotations or at fair
value using methods determined by Heartland's Board of Directors. Like most
mutual funds, the Fund generally uses a "fair value" methodology to value debt
obligations because market quotations are generally not available for most debt
obligations. Fair values are normally determined by using valuations furnished
by one or more pricing services approved by Heartland's Board of Directors. Debt
securities purchased with remaining maturities of 60 days or less are valued at
acquisition cost, plus or minus any authorized discounts or premium.

35
<PAGE>

SERVICE FEES
- --------------------------------------------------------------------------------

If your electronic funds transfer order cannot be processed because of
insufficient funds or a stop payment, Firstar Mutual Fund Services, LLC (the
"Transfer Agent") will charge your account a service fee of $20.00. If you
direct that your redemption proceeds be wired to your bank, the Transfer Agent
will charge a service fee (currently $12.00).

<PAGE>

SHAREHOLDER INFORMATION AND REPORTING

HEARTLAND VALUE SOURCE(TM)
- --------------------------------------------------------------------------------

Heartland Advisors' website, Heartland Value Source(TM),located at
www.heartlandfunds.com, provides investors with a variety of information about
the Fund, including daily share price, market updates and shareholder reports.
By calling 1-800-432-7856 and requesting a personal identification number,
shareholders can access their accounts directly to review current balances,
recent transactions and other account information.

INVESTMENT REPORTS
- --------------------------------------------------------------------------------

Shareholder Reports. The Fund's portfolio managers review their strategies and
results in quarterly Value Reports. In addition, semi-annually these reports
contain schedules of investments and Fund financial statements. If several
members of a household own the Fund, only one Value Report is mailed to that
address. To receive additional copies, you may call Shareholder Services at
1-800-432-7856 or (414) 289-7000, or write to Heartland Advisors at 790 North
Milwaukee Street, Milwaukee, WI 53202.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------

A dividend from net investment income represents the income the Fund earns from
dividends and interest paid on its investments, after payment of Fund expenses.
A capital gain or loss is the increase or decrease in the value of a security
that the Fund holds compared to its original purchase price. The gain or loss is
"unrealized" until the security is sold. Each realized capital gain or loss is
either short-term or long-term depending on whether the Fund hold the security
for one year or less, or more than one year. This is the case regardless of how
long you hold your Fund shares.

<PAGE>

Income dividends are declared each business day and paid monthly. If the Fund
has net capital gains for a year, the Fund normally will distribute
substantially all of its net capital gains at the end of the year. Both types of
distributions are automatically invested in additional shares for your account
unless you elect on your Account Application to have them invested in another
Heartland Fund or to have them paid to you in cash.

"Buying a Dividend." Please note that if you purchase shares just before the
record date of a capital gain distribution, you will receive a portion of your
purchase price back as a taxable distribution. The Fund's net asset value per
share on the record date will be reduced by the amount of the dividend. This is
sometimes referred to as "buying a dividend."

If you choose to have dividends and capital gains distributions, or both, mailed
to you and either the United States Postal Service is unable to deliver the
distribution check to you or the check remains outstanding for at least six
months, the Fund reserves the right to reinvest the check and future
distributions in shares of the Fund at their then current net asset value until
you give the Fund different instructions. No interest will accrue on amounts
represented by uncashed distribution checks.

TAXES
- -------------------------------------------------------------------------------
Interest earned by the Fund on Municipal Obligations is, in general, federally
tax-free when distributed to you as dividends. If the Fund earns taxable income
from any of its investments, it will be distributed as a taxable dividend and
taxable to you as ordinary income for federal income tax purposes.

The Fund may invest in Municipal Obligations the interest on which (less any
related expenses) is a tax-preference item for the purposes of the federal
alternative minimum tax for individuals (private activity securities). To the
extent that the Fund invests in private activity securities, individuals who are
subject to the alternative minimum tax

38
<PAGE>

will be required to report a portion of the Fund's dividends as a "tax
preference item" in determining their federal alternatives minimum tax.
Liability for a federal alternative minimum tax will depend on your individual
tax circumstances.

Short-term capital gain distributions will be taxable to you as ordinary income
for federal income tax purposes. Long-term capital gain distributions will be
taxable as long-term capital gains. If the Fund declares a distribution in
December, but does not pay it until January of the following year, you still
will be taxed as if the distribution were paid in December. The Transfer Agent
will process your distributions and send you a statement for tax purposes each
year showing the source of distributions for the preceding year.

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following financial highlights table is intended to help you understand the
Funds financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Fund over the periods presented (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Annual Report to Shareholders, which is available upon request.

<PAGE>

<TABLE>
<CAPTION>
Wisconsin Tax Free Fund
----------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year................. $ 10.44 $ 10.16 $ 10.30 $ 9.21 $ 10.38
Income (loss) from investment operations:
Net investment income.......................... 0.51 0.52 0.51 0.51 0.51
Net realized and unrealized gains (losses)
on investments................................ 0.04 0.28 (0.14) 1.09 (1.17)
----------- --------- --------- --------- -----------
Total income (loss) from investment operations 0.55 0.80 0.37 1.60 (0.66)
Less distributions from:

Net investment income.......................... (0.51) (0.52) (0.51) (0.51) (0.51)
----------- --------- --------- --------- -----------
Total distributions.......................... (0.51) (0.52) (0.51) (0.51) (0.51)
----------- --------- --------- --------- -----------
Net asset value, end of year....................... $ 10.48 $ 10.44 $ 10.16 $ 10.30 $ 9.21
=========== ========= ========= ========= ===========

Total Return/1/.................................... 5.4% 8.1% 3.8% 17.8% (6.5)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ....... $ 143,417 $ 131,348 $ 124,545 $ 118,513 $ 101,749
Ratio of net expenses to average net assets 0.78%/(2)/ 0.81%/(2)/ 0.80%/(2)/ 0.84% 0.85%
Ratio of net investment income
to average net assets........................ 4.90% 5.5% 5.12% 5.23% 5.28%
Portfolio turnover rate ...................... 16% 8% 14% 11% 22%
</TABLE>

(1) The front-end sales charge in effect for the Fund prior to June 1, 1994 is
not reflected in Total Return.
(2) The ratio does not include fees paid indirectly. If the Fund did not have
fees paid indirectly, the expense ratio would have been 0.80% for 1998,
0.82% for 1997 and 0.81% for 1996. Disclosure of fees paid indirectly was
not required prior to December 31, 1995.

<PAGE>

HEARTLAND FUNDS
General Information and Account/Price Information (24 hours):
1-800-432-7856 or (414) 289-7000
www.heartlandfunds.com

HEARTLAND FUNDS
790 North Milwaukee Street
Milwaukee, Wisconsin 53202

INVESTMENT ADVISOR AND DISTRIBUTOR
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202

CUSTODIAN
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
P.O. Box 701
Milwaukee, Wisconsin 53201-0701

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

COUNSEL
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

<PAGE>

If you have any questions about the Fund or would like more information,
including a free copy of the Fund's Statement of Additional information ("SAI"),
or its Annual of Semi-Annual Report, you may call or write Heartland Advisors
at:

Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
1-800-432-7856 or (414) 289-7000
www.heartlandfunds.com

The SAI, which contains more information on the Fund, has been filed with the
Securities and Exchange Commission ("SEC"), and is legally a part of this
prospectus. The Annual and Semi-Annual Reports, also filed with the SEC, discuss
market conditions and investment strategies that affected the Fund's performance
during the prior fiscal year and six-month fiscal period, respectively.

Investment Company Act File No. 811-4982

42
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1999

HEARTLAND LARGE CAP VALUE FUND
HEARTLAND MID CAP VALUE FUND
HEARTLAND VALUE PLUS FUND
HEARTLAND VALUE FUND
HEARTLAND GOVERNMENT FUND
HEARTLAND TAXABLE SHORT DURATION MUNICIPAL FUND
HEARTLAND SHORT DURATION HIGH-YIELD MUNICIPAL FUND
HEARTLAND HIGH-YIELD MUNICIPAL BOND FUND
HEARTLAND WISCONSIN TAX FREE FUND

790 North Milwaukee Street, Milwaukee, Wisconsin 53202
(414) 289-7000 or 1-800-432-7856
www.heartlandfunds.com

Heartland Group, Inc. ("Heartland") is registered as an open-end,
management investment company consisting of nine separate mutual fund series
("Funds"). This Statement of Additional Information ("SAI") relates to all of
the Funds, each of which has a distinct investment objective and program.

This SAI is not a prospectus, but provides you with additional information
that should be read in conjunction with the prospectuses for the Funds named
above (each a "Prospectus"), all of which are dated May 1, 1999, with the
exception of the Prospectus for the Heartland Taxable Short Duration Municipal
Fund, which is dated December 29, 1998. You may obtain a free copy of any
Fund's Prospectus and an account application by contacting the distributor,
Heartland Advisors, Inc. ("Heartland Advisors"), at the street or website
address, or at either telephone number listed above.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION TO THE FUNDS.................................................................... 3
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS.............................................. 3
TYPES OF SECURITIES.......................................................................... 12
Convertible Securities.................................................................. 12
Custodial Receipts and Participation Interests.......................................... 12
Debt Securities......................................................................... 12
Derivative Instruments.................................................................. 20
Foreign Investments..................................................................... 27
Illiquid Securities..................................................................... 28
Indexed Securities...................................................................... 28
Investment Companies.................................................................... 29
Loan Interests.......................................................................... 29
Real Estate Investment Trusts........................................................... 30
Rights and Warrants..................................................................... 30
When-Issued and Delayed-Delivery Securities; Forward Commitments........................ 30
PORTFOLIO MANAGEMENT STRATEGIES.............................................................. 31
Borrowing............................................................................... 31
Concentration........................................................................... 31
Duration................................................................................ 31
Foreign Currency Transactions........................................................... 32
Lending Portfolio Securities............................................................ 33
Repurchase Agreements................................................................... 34
Reverse Repurchase Agreements and Dollar Rolls.......................................... 34
Short Sales............................................................................. 35
Standby Commitments..................................................................... 35
INVESTMENT RESTRICTIONS...................................................................... 35
PORTFOLIO TURNOVER........................................................................... 39
MANAGEMENT................................................................................... 39
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.......................................... 41
INVESTMENT ADVISORY AND OTHER SERVICES....................................................... 42
DISTRIBUTION OF SHARES....................................................................... 46
PORTFOLIO TRANSACTIONS....................................................................... 47
DESCRIPTION OF SHARES........................................................................ 51
PURCHASES AND SALES.......................................................................... 51
ADDITIONAL INCOME TAX CONSIDERATIONS......................................................... 52
PERFORMANCE INFORMATION...................................................................... 53
FINANCIAL STATEMENTS......................................................................... 56
</TABLE>

2
<PAGE>

INTRODUCTION TO THE FUNDS

The Heartland family of funds consists of nine separate series of Heartland
Group, Inc., a Maryland corporation formed in 1986 and registered as an open-
end, management investment company under the Investment Company Act of 1940 (the
"1940 Act"). Each Fund is a diversified fund (other than the Wisconsin Tax Free
Fund, which is non-diversified) and has a distinct investment objective and
program. The Heartland Large Cap and Mid Cap Value Funds commenced operations
on October 11, 1996. The Heartland Value Plus Fund commenced operations on
October 26, 1993. The Heartland Value Fund commenced operations on December 28,
1984. The Heartland Government Fund (formerly the Heartland U.S. Government
Securities Fund) commenced operations on April 9, 1987. The Heartland Taxable
Short Duration Municipal Fund commenced operations on December 29, 1998. The
Heartland Short Duration High-Yield Municipal and High-Yield Municipal Bond
Funds commenced operations on January 2, 1997. The Heartland Wisconsin Tax Free
Fund commenced operation on April 3, 1992.

INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS

HEARTLAND LARGE CAP VALUE FUND

The Heartland Large Cap Value Fund seeks long-term capital appreciation
through investing in large companies. Under normal market conditions, the Fund
invests at least 65% of its total assets, and generally almost all of its
assets, in common stocks and other equity securities of companies with market
capitalizations in excess of $1 billion selected on a value basis. It may,
however, invest in other securities, including, without limitation, equity
securities of smaller companies, debt securities, warrants, convertible
securities, foreign securities and cash equivalents. There are no credit
quality limitations on the convertible or debt securities in which the Fund may
invest.

Large companies typically are global in nature and are not dependent solely
on the U.S. economy or stock market. They tend to be widely followed by
investment analysts and their securities tend to be broadly owned by
institutional and individual investors. These characteristics cause the
securities of large companies to be normally more liquid and subject to less
price volatility than stocks of smaller companies.

Although not a principal investment strategy, the Fund may utilize other
investments and investment techniques from time to time which may impact Fund
performance, including options, futures and other structured transactions. The
Fund is limited to 5% of net assets for initial margin and premium amounts on
futures positions considered speculative under regulations of the Commodities
Futures Trading Commission ("CFTC").

Under adverse market conditions or other extraordinary economic or market
conditions, the Fund may take a temporary defensive position and hold assets in
liquid reserves such as money market instruments, certificates of deposit,
commercial paper, short-term corporate debt securities, variable rate demand
notes, U.S. Government securities and repurchase agreements. Taking a temporary
defensive position is not required, and may not be possible because of market
conditions. It also might prevent the Fund from achieving its investment
objective.

In pursuing its objective, the Fund may, from time to time, use its
ownership interest in a portfolio company to seek to influence or control the
company's management. The Fund also may employ the investment techniques
described in its Prospectus and in the sections of this SAI titled "Types of
Securities" and "Portfolio Management Strategies." The Fund's investment
objective may be changed with the approval of the Board of Directors and notice
to shareholders, but without shareholder approval.

3
<PAGE>

HEARTLAND MID CAP VALUE FUND

The Heartland Mid Cap Value Fund seeks long-term capital appreciation
through investing in mid-size companies. Under normal market conditions, the
Fund invests at least 65% of its total assets, and generally almost all of its
assets, in common stocks and other equity securities of mid-sized companies with
market capitalizations between $750 million and $5 billion selected on a value
basis. It may, however, invest in other securities, including, without
limitation, equity securities of larger and smaller companies, debt securities,
warrants, convertible securities, foreign securities and cash equivalents.
There are no credit quality limitations on the convertible or debt securities on
which the Fund may invest.

Mid-sized companies tend to have more experienced management and more
established operating histories than smaller companies. As a result, mid-sized
companies tend to be more widely followed by investment analysts and have
greater financial data and other information readily available than small
companies. However, mid-sized companies typically are less well-established and
followed than larger companies, and the securities of mid-sized companies
usually are not as broadly owned. These factors make securities of mid-sized
companies a less efficient market segment, creating potential opportunities for
investors.

HEARTLAND VALUE PLUS FUND

The Heartland Value Plus Fund seeks capital appreciation and current
income. The Fund invests primarily in income-producing equity securities of
smaller companies. To further pursue its income objective, the Fund also
invests up to 35% of its total assets in other securities, including, without
limitation, debt securities and cash equivalents. Although it may invest in
securities of larger companies, it generally invests in those companies with
market capitalizations of less than $750 million selected on a value basis.
There are no credit quality limitations on the convertible or debt securities on
which the Fund may invest.

The equities in which the Fund invests include dividend-paying common
stocks, preferred stocks, warrants, convertible securities and real estate
investment trusts. Debt securities purchased by the Fund may be either unrated
or rated by one or more independent rating organizations that rate the issuer of
the security based on the issuer's financial soundness. Debt securities
purchased by the Fund may be rated in any rating category established by a
rating organization. If a debt security is rated below investment grade or is
unrated, Heartland Advisors conducts its own assessment of the creditworthiness
of the issuer.

4
<PAGE>

HEARTLAND VALUE FUND

Heartland Value Fund seeks long-term capital appreciation through investing
in small companies. The Fund invests primarily in equity securities of
companies with market capitalizations of less than $750 million selected on a
value basis. It may, however, invest in other securities, including, without
limitation, equity securities of larger companies, debt securities, warrants,
convertible securities, foreign securities and cash equivalents. There are no
credit quality limitations on the convertible or debt securities in which the
Fund may invest.

HEARTLAND GOVERNMENT FUND (FORMERLY THE HEARTLAND U. S. GOVERNMENT
SECURITIES FUND)

The Heartland Government Fund seeks a high level of current income,
liquidity and safety and principal. The Fund will invest at least 80% of its
total assets in obligations issued or guaranteed by the U.S. Government, by its
agencies or instrumentalities or by other U.S. Government sponsored entities,
and repurchase agreements for such securities ("Government securities"). These
securities include, without limitation, U. S. Treasury and agency securities,
and mortgage-backed securities issued or guaranteed by the U.S. Government, its
agencies or

5
<PAGE>

instrumentalities. They differ primarily in terms of interest rates, length of
maturities, the nature of the governmental obligation and issuance dates.

Mortgage-backed securities may include hybrid and structured mortgage
related instruments, such as collateralized mortgage obligations ("CMOs") and
stripped mortgaged-backed securities ("SMBs"). SMBs may be divided into
different classes each of which might receive a different combination of the
interest and principal from the underlying mortgage loans. In certain cases, a
class may receive either all of the interest ("interest only" or "IO" class) or
all of the principal ("principal only" or "PO" class). The Fund will limit its
aggregate investments in IO and PO classes to 10% of net assets.

The balance of the Fund's assets may be invested in other securities
including, without limitation, pooled debt securities, such as asset-backed and
mortgage-backed securities issued by non-governmental entities; commercial paper
and other debt obligations of foreign governments, domestic and foreign
corporations and other business organizations; certificates of deposit, bankers'
acceptances and time deposits; and convertible securities and preferred stocks.
Any investments in debt securities will, at the time of purchase, be rated
invested grade or, if unrated, be of comparable quality in the opinion of
Heartland Advisors.

Heartland Advisors buys and sells securities for the Government Fund after
considering economic conditions, liquidity factors and interest rate trends. It
also may use sector rotation, security selection, duration management and yield-
curve positioning strategies.

Although there are no duration restrictions for the Government Fund or the
individual obligations in its portfolio, under normal market conditions, it is
anticipated that the Fund will maintain an average portfolio duration of three
to six years. Heartland Advisors believes that maintaining a portfolio duration
within this range allows the Fund to seek both high current income and
preservation of capital.

HEARTLAND TAXABLE SHORT DURATION MUNICIPAL FUND

The Heartland Taxable Short Duration Municipal Fund seeks a high level of
current income with a low degree of share price fluctuation. The Fund seeks to
achieve this objective by investing primarily in a diversified portfolio of
taxable medium and lower quality obligations issued by municipalities
("Municipal Obligations"), and maintains an average portfolio duration of three
years or less.

6
<PAGE>

Under normal market conditions, the Fund invests at least 65% of net assets
in taxable Municipal Obligations. Consistent with its investment objective, the
Fund also may invest up to 35% of net assets in other debt securities;
convertible securities; preferred and common stocks, and other equity
securities; warrants or other securities exchangeable for shares of equity
securities; foreign securities; options; futures; and other structured
transactions. When Heartland Advisors considers the yield on Municipal
Obligations exempt from federal income tax to be high in relation to taxable
Municipal Obligations, the Fund may invest in tax-exempt Municipal Obligations.

The Fund invests primarily in medium and lower quality debt obligations.
Medium and lower quality debt obligations are those rated as such by a
nationally recognized statistical rating organization ("NRSRO"); for example,
BBB by Standard & Poors' Ratings Service ("S&P"). The Fund may not invest more
than 20% of its total assets in debt obligations rated lower than B- by S&P or a
comparable rating by another NRSRO. It may invest in debt obligations that are
in default, but such obligations are not expected to exceed 10% of total assets.

Taxable Municipal Obligations are rated using the same criteria as
corporate obligations. NRSROs publishing rating information on which Heartland
Advisors may rely include S&P, Moody's Investors Service, Inc., Duff & Phelps
Rating Co., Thomson BankWatch, Inc., and Fitch IBCA, Inc., among others. The
Fund also may invest in unrated securities if Heartland Advisors believes that
such securities are of comparable quality so as to satisfy the foregoing
requirements.

Any assets not otherwise invested will be held in liquid reserves. Liquid
reserves include, but are not limited to, money market instruments, repurchase
agreements, certificates of deposit, commercial paper, short-term corporate debt
securities, variable rate demand notes and U.S. Government securities. Under
adverse market conditions, other extraordinary economic or market conditions, or
when the spreads between the yields on medium and high quality taxable municipal
obligations are relatively narrow, the Fund may take a temporary defensive
position and invest without limitation in higher quality taxable or tax-exempt
Municipal Obligations and other debt securities, or hold assets in liquid
reserves. Taking a temporary defensive position is not required, and may not be
possible because of market conditions. It also might prevent the Fund from
achieving its investment objective.

In pursuing its objective, the Fund may employ the investment techniques
described in the Prospectus and in the sections of this SAI titled "Types of
Securities" and "Portfolio Management Strategies." The Fund's investment
objective may be changed with the approval of the Board of Directors and notice
to shareholders, but without shareholder approval.

HEARTLAND SHORT DURATION HIGH-YIELD MUNICIPAL FUND

The Heartland Short Duration High-Yield Municipal Fund seeks a high level
of federally tax-exempt current income with a low degree of share price
fluctuation. The Fund invests primarily in short and intermediate duration,
medium and lower quality Municipal Obligations and maintains an average
portfolio duration of three years or less. Under normal market conditions, the
Fund invests at least 65% of its total assets in medium and lower quality
Municipal Obligations. However, the Fund may not invest more than 20% of its
total assets in Municipal Obligations rated lower than B- by S&P or a comparable
rating by another NRSRO. It may invest in debt obligations that are in default,
but such obligations are not expected to exceed 10% of total assets. The Fund
also may invest, without limitation, in higher quality debt obligations. Under
normal market conditions, however, the Fund is unlikely to emphasize higher
quality debt obligations, since generally they offer lower yields than medium
and lower quality bonds with similar maturities.

As a fundamental policy, under normal market conditions, the Fund will
invest at least 80% of its net assets in Municipal Obligations. The Fund may
invest, without limitation, in Municipal Obligations whose interest is a tax-
preference item for purposes of the federal alternative minimum tax.

7
<PAGE>

Consistent with its investment objectives, the Fund also may invest in
other debt securities; taxable Municipal Obligations; convertible securities;
preferred and common stocks, and other equity securities; warrants or other
securities exchangeable for shares of equity securities; foreign securities;
options; futures; and other structured transactions.

In pursuing its objective, the Fund may employ the investment techniques
described in its Prospectus and in the sections of this SAI titled "Types of
Securities" and "Portfolio Management Strategies." The Fund's investment
objective may be changed with the approval of the Board of Directors and notice
to shareholders, but without shareholder approval.

HEARTLAND HIGH-YIELD MUNICIPAL BOND FUND

Heartland High-Yield Municipal Bond Fund seeks to maximize after-tax total
return by investing for a high level of federally tax-exempt current income.
The Fund invests primarily in medium and lower quality Municipal Obligations.
While there are no duration restrictions for the Fund's obligations, it is
anticipated that the Fund will maintain an average portfolio duration of greater
than five years. Under normal market conditions, the Fund invests at least 65%
of its total assets in medium and lower quality Municipal Obligations. However,
the Fund may not invest more than 20% of its total assets in Municipal
Obligations rated lower than B- by S&P or a comparable rating by another NRSRO.
It may invest in debt obligations that are in default, but such obligations are
not expected to exceed 10% of total assets. The Fund may also invest without
limitation in higher quality debt obligations. Under normal market conditions,
however, the Fund is unlikely to emphasize higher quality debt obligations,
since generally they offer lower yields than medium and lower quality bonds with
similar maturities.

As a fundamental policy, under normal market conditions, the Fund will
invest at least 80% of its net assets in Municipal Obligations. The Fund may
invest without limitation in Municipal Obligations whose interest is a tax-
preference item for purposes of the federal alternative minimum tax.

Consistent with its investment objective, the Fund also may invest in other
debt securities; taxable Municipal Obligations; convertible securities;
preferred and common stocks, and other equity securities; warrants or other
securities exchangeable for shares of equity securities; foreign securities;
options; futures; and other structured transactions.

8
<PAGE>

HEARTLAND WISCONSIN TAX FREE FUND

Heartland Wisconsin Tax Free Fund seeks to provide investors with a high
level of current income that is exempt from federal and Wisconsin personal
income taxes. The Fund invests primarily in Municipal Obligations that are
exempt from personal income tax in Wisconsin and under federal law, including
certain Municipal Obligations issued by Wisconsin entities and securities of
other entities meeting such criteria. The Fund invests primarily in Municipal
Obligations judged by Heartland Advisors to be of investment grade quality.

As a matter of fundamental policy, the Fund will seek to invest at least
80% of its assets so that the income earned thereon will be exempt from federal
and Wisconsin personal income tax. Under normal market conditions, the Fund will
seek to invest all of its assets so that income therefrom will be exempt from
federal and Wisconsin personal income taxes. The Fund may invest in Municipal
Obligations the interest on which is a tax-preference item for purposes of the
federal alternative minimum tax, although as a matter of policy will limit its
investments in such securities to not more than 20% of the Fund's net assets.

Only limited categories of Municipal Obligations are exempt from Wisconsin
personal income taxes. These include higher education bonds issued by the State
of Wisconsin, Public Housing Authority bonds issued by Wisconsin municipalities,
Redevelopment Authority Bonds issued by Wisconsin municipalities, certain bonds
issued by the Housing and Economic Development Authority, Wisconsin Housing
Finance Authority Bonds, certain General Obligation Bonds issued by the District
of Columbia, Puerto Rico, the Virgin Islands and Guam, and certain public
housing agency bonds issued by agencies located outside Wisconsin. Although
most of the Municipal Obligations held by the Fund will be issued by Wisconsin
entities, it is possible that the Fund may invest a significant portion of its
assets and obligations issued by territories and possessions of the United
States, the District of Columbia, and their respective agencies or
instrumentalities. The Fund may invest up to 100% of its assets in tax-exempt
securities of issuers outside Wisconsin if such securities bear interest which
is exempt from federal and Wisconsin personal income taxes.

The Fund may invest up to 20% of net assets in other debt securities;
convertible securities; preferred and common stocks, and other equity
securities; warrants or other securities exchangeable for shares of equity
securities; foreign securities; options; futures; and other structured
transactions. The Fund may invest up to 35% of its total assets in non-
investment grade debt securities. However, the Fund may not invest more than
20% of its total assets in debt obligations rated lower than B- by S&P or a
comparable rating by another NRSRO.

Any assets not otherwise invested will be held in liquid reserves. Liquid
reserves include, but are not limited to, money market instruments, repurchase
agreements, certificates of deposit, commercial paper, short-term corporate debt
securities, variable rate demand notes and U.S. Government securities. Under
adverse market conditions or other extraordinary economic or market conditions,
the Fund may take a temporary defensive position and hold assets in liquid
reserves. Taking a temporary defensive position is not required, and may not be
possible because of market conditions. It also might prevent the Fund from
achieving its investment objective.

DIVERSIFICATION. The number of issues of securities which meet the
Wisconsin Tax Free Fund's investment objective and criteria may be somewhat
limited. As a result, a relatively high percentage of the Fund's assets may be
invested from time to time in the obligations of a limited number of issuers,
some of which may be subject to the same economic trends and/or be located in
the same geographic area. The Fund's portfolio securities may therefore be more
susceptible to any single economic, political or regulatory occurrence than the
portfolio securities of diversified investment companies.

9
<PAGE>

The Wisconsin Tax Free Fund will operate as a non-diversified management
investment company under the 1940 Act, but intends to comply with the
diversification requirements contained in the Internal Revenue Code of 1986.
These provisions of the Internal Revenue Code currently require that, at the end
of each quarter of the Fund's taxable year: (a) at least 50% of the market value
of the Fund's assets must be invested in cash, government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets; and (b) not more than 25% of the value of the Fund's total assets can be
invested in the securities of any one issuer (other than government securities
or the securities of other regulated investment companies). In addition, as a
matter of fundamental policy, the Fund may not purchase more than 10% of the
outstanding voting securities of an issuer or invest in a security if, as a
result thereof, more than 25% of the Fund's total assets would be invested in a
single issuer (other than securities issued or guaranteed by the U.S.
Government, a state or territory of the United States, the District of Columbia,
or their respective agencies, instrumentalities, municipalities or political
subdivisions).

GEOGRAPHIC CONCENTRATIONS. The following information is a brief summary of
factors affecting Wisconsin, Puerto Rico, Guam and the Virgin Islands,
jurisdictions in which the Wisconsin Tax Free Fund may invest a portion of its
assets, and does not purport to be a complete description of such factors.

Factors Affecting Wisconsin. Wisconsin's economy, although fairly diverse,
---------------------------
is primarily concentrated in the manufacturing services and trade sectors and is
influenced by the vast supply of resources in the state. This diversification
has caused the state's economy to continue to outperform the national economy.
Federal, state and local government is also a major employer. The top five
industrial output rankings, based on value of shipments, include dairy products,
motor vehicles and equipment, miscellaneous converted paper products, paper
mills and meat products.

Wisconsin continues to outperform the national economy. The state's annual
unemployment rate over the last 10 years has been below the national average.
In December 1998, the state's unemployment rate was 3.1%, compared to a national
average unemployment rate of approximately 4.0%. The state is highly ranked in
terms of job creation, especially in the creation of manufacturing jobs. Since
1987, the state's personal income tax rate has been reduced from 7.9% to 6.77%
(for 1998), and current Governor, Tommy G. Thompson, has expressed his desire to
implement further reductions. At the same time, state spending has been
controlled.

It is anticipated that the Wisconsin economy will experience continued
growth (although possibly at a slower rate) in the near future, with the state's
labor market expected to remain tight during those years.

The state has an extremely diverse revenue-raising structure.
Approximately 36% of the total revenue is delivered from the various taxes
levied by the state. The remainder comes from (i) investment income, (ii)
various kinds of fees, licenses, permits, and service charges paid by users of
specific services, privileges or facilities, (iii) investment income, and (iv)
gifts, donations and contributions.

Wisconsin's tax structure has a diverse underlying base consisting of
income, general and special product sales and property value. Over 60% of all
general fund taxes collected by the state are returned to local units of
government. The remaining funds are used for payments to individuals and
organizations (16%) and state programs (24%).

Future federal budget proposals which include reductions in federal aid
would have a more immediate effect on individuals, local governments and other
service providers than the state directly. Such proposals, if enacted, would
increase the likelihood that the state will be asked to increase its support of
the affected parties. Implementing choices posed by the federal budget would
involve state legislative action.

Wisconsin may increase appropriations from or reduce taxes below the levels
established in its budget. In recent past years, Wisconsin has adopted
appropriation measures subsequent to passage of its budget act.

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However, it has been the state's policy that supplemental appropriations adopted
by the State Legislature will be within revenue projections for that fiscal
period or balanced by reductions in other appropriations. Thus, spending from
additional appropriations historically has been matched by reduced
disbursements, increased revenues or a combination of both. The State
Constitution requires the Legislature to provide for an annual tax sufficient to
defray the estimated expenses of the state for each year, and when the expenses
of any year exceed income, the Legislature must provide for a tax for the
ensuing year sufficient, with other sources of income, to pay such deficiency as
well as the estimated expenses for the ensuing year.

Wisconsin has experienced and expects to continue to experience certain
periods when its general fund is in a negative cash position. State statutes
provide certain administrative remedies to deal with these periods. The
Secretary of Administration may temporarily reallocate up to 5% of the general
purpose revenue appropriations then in effect. This amount is nearly $500
million for the fiscal year ending June 30, 1999. The statutes mandate that all
payments shall be in accordance with the following order of preference: (1) all
direct and indirect payments of principal on Wisconsin general obligation debt
must have first priority and may not be prorated or reduced; (2) all direct and
indirect payments of principal and interest on operating notes have second
priority and may not be prorated or reduced; (3) all Wisconsin employee payrolls
have third priority and may not be prorated or reduced; and (4) all other
payments shall be paid in a priority determined by the Secretary of
Administration and may be prorated or reduced.

Unforeseen events or variations may cause a decrease in the receipts or
cash flow to the state's agencies. It is not clear what effect, if any, such
events would have on the Fund.

Factors Affecting Puerto Rico. The Wisconsin Tax Free Fund may invest in
-----------------------------
obligations of the Commonwealth of Puerto Rico and its political subdivisions,
agencies and instrumentalities, that qualify as double tax-exempt Municipal
Obligations. The majority of Puerto Rico's debt is issued by 10 of the major
public agencies that are responsible for many of its public functions, such as
water, wastewater, highways, telecommunications, education and public
construction.

The Puerto Rico economy generally parallels the economic cycles of the
United States, as most goods are imported from the U.S. Interest rates also
generally mirror those of the United States. Once primarily supported by
agriculture, Puerto Rico's economy now has a diverse, technology-oriented
manufacturing base. In terms of Gross Domestic Product, manufacturing
contributes $19 billion, or 41% of GDP. Finance, insurance and real estate
services have undergone dynamic growth over the past decade and now account for
14% of GDP. The unemployment rate (seasonally adjusted) has remained at
approximately 14% during the past few years.

Puerto Rico's economy historically has benefitted from tax incentives
contained in Section 936 of the Internal Revenue Code, which allows U.S.
domestic corporations with a substantial amount of their business operations in
Puerto Rico to claim a tax credit that effectively eliminates their U.S. income
tax on income from those operations. The enactment of the Omnibus Budget
Reconciliation Act of 1993 imposed certain limitations on the amount of the
credit available to domestic corporations. Legislation passed in 1996 further
reduces these tax incentives, with a general phaseout of the credit by the year
2006. It is impossible to predict with certainty what effect the elimination of
the Section 936 credit will have on the business operations of U.S. corporation
in Puerto Rico; however, it is likely to lessen Puerto Rico's competitive
advantage, especially in attracting new businesses to the Commonwealth.

Factors Affecting Guam. Guam, the westernmost territory of the U.S., is
----------------------
located 3,800 miles to the west-southwest of Honolulu, Hawaii and approximately
1,550 miles southeast of Japan. Guam's economy is heavily dependent upon the
U.S. military and tourism, particularly from Japan. Employment in Guam is
concentrated in the public sector with approximately 30% in local government and
federal jobs. Major private sector employment categories include construction,
trade and services. Guam has experienced U.S. military reductions, and it is
unclear whether plans to increase tourism may succeed in limiting the negative
effects of such reductions.

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The government of Guam has taken steps to improve its financial position which
include the development of local labor; however, there can be no assurances that
an improvement will be realized.

Factors Affecting the Virgin Islands. The United States Virgin Islands
------------------------------------
include St. Thomas, St. John and St. Croix. The islands are located in the
Lesser Antilles, 1,100 east, southeast of Miami. Historically a center of sugar
production and commerce, by the 1980s tourism had become the leading economic
factor in the Virgin Islands. The Caribbean's most popular tourist destination,
the Virgin Islands received over 1.5 million visitors in 1997. Circumstances
which negatively impact the tourism industry, such as natural disasters and
economic difficulties in the United States generally, and to a lesser extent
other countries, could have a negative impact on the overall economy of the
Virgin Islands.

TYPES OF SECURITIES

The following information supplements the discussion of the Funds'
investments described in their respective Prospectuses.

CONVERTIBLE SECURITIES

Convertible securities in which the Funds may invest include any bonds,
debentures, notes, preferred stocks or other securities that may be converted
into or exchanged for a specified amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. By investing in convertible securities, a Fund obtains the right to
benefit from the capital appreciation potential in the underlying common stock
upon exercise of the conversion right, while generally earning higher current
income than would be available if the stock were purchased directly. In
determining whether to purchase a convertible security, Heartland Advisors will
look to the conversion feature and consider substantially the same investment
criteria it would consider if purchasing the underlying common stock. However,
these securities will nevertheless be subject to the same quality and investment
limitations applicable to the Funds' investments in debt securities.

The value of a convertible security is a function of its "investment
value," which is determined by its yield in comparison with the yields of other
securities of comparable quality and maturity that do not have the conversion
privilege, and its "conversion value," which is the security's worth if
converted into the underlying common stock. Investment value is typically
influenced by interest rates and the credit standing of the issuer. Conversion
value is determined by the market price of the underlying common stock and
generally decreases as the convertible security approaches maturity.

CUSTODIAL RECEIPTS AND PARTICIPATION INTERESTS

Each Fund may invest in custodial receipts which represent ownership in
future interest or principal payments, or both, on certain securities that are
underwritten by securities dealers or banks.

Each Fund may also invest in participation interests in securities.
Participation interests give a Fund an undivided interest in a security in the
proportion that the Fund's participation interest bears to the principal amount
of the security.

DEBT SECURITIES

The Funds may invest in debt securities of corporate and governmental
issuers. The Large Cap Value, Mid Cap Value, Value Plus and Value Funds may
invest up to 35% of their respective total assets in debt securities. The other
Funds may invest all of their assets in debt securities. The risks inherent in
short-, intermediate- and long-term debt securities depend on a variety of
factors, including the term of the obligations,

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<PAGE>

the size of a particular offering and the credit quality and rating of the
issuer, in addition to general market conditions.

In general, the longer the maturity of a debt obligation, the higher its
yield and the greater its sensitivity to changes in interest rates. Conversely,
the shorter the maturity, the lower the yield but the greater the price
stability. A decline in the prevailing levels of interest rates will generally
increase the value of the securities held by the Fund, and an increase in rates
will generally have the opposite effect.

Yields on debt securities depend on a variety of factors, including the
financial condition of the issuer or other obligor thereon or the revenue source
from which debt service is payable, the general economic and monetary
environment, conditions in the relevant market, the size of a particular issue,
maturity of the obligation and the rating of the issue.

Debt obligations rated in the highest through the medium quality categories
are commonly referred to as "investment-grade" debt obligations. Investment-
grade debt obligations are generally believed to have relatively low degrees of
credit risk. However, medium-quality debt obligations, while considered
investment grade, may have some speculative characteristics, since their
issuers' capacity for repayment may be more vulnerable to adverse economic
conditions or changing circumstances than that of higher-rated issuers. Each
Fund's investment program permits it to invest in securities rated below
investment grade (or unrated securities believed to be of comparable quality by
Heartland Advisors). Each of the Large Cap Value, Mid Cap Value, Value Plus,
Value and Wisconsin Tax Free Funds may invest up to 35% of its total assets in
non-investment grade debt securities. The Government Fund may not invest in
non-investment grade debt securities. Under normal market conditions, the
Taxable Short Duration Municipal, Short Duration High-Yield Municipal and High-
Yield Municipal Bond Funds invest at least 65% of their respective assets in
non-investment grade debt securities. The Taxable Short Duration Municipal,
Short Duration High-Yield Municipal, High-Yield Municipal Bond and Wisconsin Tax
Free Funds may not invest more than 20% of their respective total assets in debt
obligations rated lower than B- by S&P or a comparable rating by another NRSRO.
The principal value of lower-rated securities generally will fluctuate more
widely than higher-quality securities. Lower-quality securities entail a
higher degree of risk as to the payment of interest and return of principal.
Such securities are also subject to special risks, discussed below. To
compensate investors for taking on such increased risk, issuers deemed to be
less creditworthy generally must offer their investors higher interest rates
than do issuers with better credit ratings.

In conducting its credit research and analysis, Heartland Advisors
considers both qualitative and quantitative factors to evaluate the
creditworthiness of individual issuers. Heartland Advisors also relies, in
part, on credit ratings compiled by a number of NRSROs.

All ratings limitations are applied at the time of purchase. Subsequent to
purchase, a debt security may cease to be rated or its rating may be reduced
below the minimum required for purchase by a Fund. Neither event will require
the sale of such a security, but it will be a factor in considering whether to
continue to hold the security. To the extent that ratings change as a result of
changes in a rating organization or their rating systems, the Fund will attempt
to use comparable ratings as standards for selecting investments.

"HIGH-YIELD" RISK. Each Fund's investment program (other than that of the
Government Fund) permits it to invest in non-investment grade debt obligations,
sometimes referred to as "junk bonds" (hereinafter referred to as "lower-quality
securities"). Lower-quality securities are those securities that are rated
lower than investment grade and unrated securities believed by Heartland
Advisors to be of comparable quality. Although these securities generally offer
higher yields than investment grade securities with similar maturities, lower-
quality securities involve greater risks, including the possibility of default
or bankruptcy. In general, they are regarded to be more speculative with
respect to the issuer's capacity to pay interest and repay principal. Other
potential risks associated with investing in high-yield securities include:

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. Effect of Interest Rates and Economic Changes. The market for
lower-quality and comparable unrated securities is relatively new and its growth
has paralleled a long economic expansion. As a result, it is not clear how this
market would withstand a prolonged recession or economic downturn. Such
conditions could severely disrupt the market for, and adversely affect the value
of, such securities.

All interest-bearing securities typically experience price
appreciation when interest rates decline and price depreciation when interest
rates rise. The market values of lower-quality and comparable unrated
securities tend to reflect individual issuer developments to a greater extent
than do higher rated securities, which react primarily to fluctuations in the
general level of interest rates. Lower-quality and comparable unrated
securities also tend to be more sensitive to economic conditions than are higher
rated securities. As a result, they generally involve more credit risk than
securities in the higher-rated categories. During an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of lower-
quality and comparable unrated securities may experience financial stress and
may not have sufficient revenues to meet their payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific corporate developments, the issuer's inability to meet specific
projected business forecasts or the unavailability of additional financing. The
risk of loss due to default by an issuer of the securities is significantly
greater than issues of higher-rated securities because such securities are
generally unsecured and are often subordinated to their creditors. Further, if
the issuer of a lower-quality or comparable unrated security defaulted, a Fund
might incur additional expense to seek recovery. Periods of economic
uncertainty and changes would also generally result in increased volatility in
the market prices of these securities and thus in a Fund's net asset value.

As previously noted, the value of a lower-quality or comparable
unrated security generally will decrease in a rising interest rate market, and a
Fund's net asset value will decline correspondingly. If a Fund experiences
unexpected net redemptions in such a market, it may be forced to liquidate a
portion of its portfolio securities without regard to their investment merits.
Due to the limited liquidity of lower-quality and comparable unrated securities
(discussed below), a Fund may be forced to liquidate these securities at a
substantial discount. Any such liquidation could force the Fund to sell the more
liquid portion of its portfolio.

. Credit Risk. Credit ratings issued by credit rating agencies are
designed to evaluate the safety of principal and interest payments of rated
securities. They do not, however, evaluate the market value risk of lower-
quality securities, and therefore may not fully reflect the true risks of an
investment. In addition, credit rating agencies may or may not make timely
changes in a rating to reflect changes in the economy or in the condition of the
issuer that affect the market value of the security. Consequently, credit
ratings, including, for example, those published by Standard & Poor's, Moody's
Investors Service and Fitch ICBA, Inc., are used only as a preliminary indicator
of investment quality. Investments in lower-quality and comparable unrated
obligations will be more dependent on Heartland Advisors' credit analysis than
would be the case with investments in investment-grade debt obligations.
Accordingly, Heartland's Board of Directors and Heartland Advisors monitor the
issuers of junk bonds held in a Fund's portfolio to assess and determine whether
the issuers will have sufficient cash flow to meet required principal and
interest payments, and to assure the continued liquidity of such bonds so that
the Fund can meet redemption requests.

. Legal Risk. Securities in which a Fund may invest, including
Municipal Obligations, are subject to the provisions of bankruptcy, insolvency,
reorganization and other laws affecting the rights and remedies of creditors,
such as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress, state legislatures or other governmental agencies extending the time
for payment of principal or interest, or both, or imposing other constraints
upon enforcement of such obligations within constitutional limitations. There
is also the possibility that, as a result of litigation or other conditions, the
power or ability of issuers to make principal and interest payments on their
debt securities may be materially impaired.

From time to time, legislation designed to limit the use of certain
lower-quality and comparable unrated securities by certain issuers may be
adopted. It is anticipated that if legislation is enacted or proposed,

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<PAGE>

it could have a material affect on the value of these securities and the
existence of a secondary trading market for such securities.

. Liquidity Risk. A Fund may have difficulty disposing of certain
lower quality and comparable unrated securities because there may be a thin
trading market for such securities. Because not all dealers maintain markets in
all lower-quality and comparable unrated securities, there is no established
retail secondary market for many of these securities. The Funds anticipate that
such securities could be sold only to a limited number of dealers or
institutional investors. To the extent a secondary trading market does exist,
it generally is not as liquid as the secondary market for higher-rated
securities. The lack of a liquid secondary market may have an adverse impact on
the market price of the security and disposition of the security may involve
time-consuming negotiation and legal expense. As a result, a Fund's net asset
value and ability to dispose of particular securities when necessary to meet the
Fund's liquidity needs, or in response to a specific economic event, may be
affected.

MUNICIPAL OBLIGATIONS. Each Fund may, and the Taxable Short Duration
Municipal, Short Duration High-Yield Municipal, High-Yield Municipal Bond and
Wisconsin Tax Free Funds will primarily, invest in Municipal Obligations. The
term "Municipal Obligations" as used in the Funds' Prospectuses and this SAI
means debt obligations issued by or on behalf of states, territories or
possessions of the United States and sovereign nations within the territorial
boundaries of the United States, the District of Columbia and their respective
political subdivisions, agencies, and instrumentalities, and corporations duly
authorized by them. Municipal Obligations are generally issued to obtain funds
for various public purposes, including the construction or improvement of a wide
range of public facilities such as airports, bridges, highways, housing,
hospitals, nursing homes, mental health facilities, mass transportation,
schools, and water and sewer works. Other public purposes for which Municipal
Obligations may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses and lending such funds to other public
institutions and facilities. Municipal Obligations may also be issued by or on
behalf of public bodies to obtain funds to provide for the construction,
equipping, repair or improvement of housing facilities, convention or trade show
facilities, airport, mass transit, industrial, port or parking facilities, and
certain local facilities for water supply, gas, electricity, sewage or solid
waste disposal.

The two principal classifications of Municipal Obligations are "general
obligations," which are secured by the municipality's pledge of its credit and
taxing power for the payment of principal and interest, and "revenue
obligations," which are generally payable only from the revenues from a
particular facility or project, or, in some cases, from the proceeds of a
special excise tax or other specific revenue source. In addition, certain kinds
of "private activity bonds" ("industrial revenue bonds" or "IRBs") are issued
by public authorities to provide funding for various privately operated
industrial facilities. In most cases, IRBs are not secured by the credit of the
municipality, but rather the payment of principal and interest is dependent
solely upon payments by the user of the industrial facility financed by the bond
or a separate guarantor of the bond. In some instances, real and personal
property is pledged as security for principal and interest payments.

Taxable Municipal Obligations. There is another type of Municipal
Obligation, which is subject to federal income tax for a variety of reasons.
The Taxable Short Duration Municipal Fund focuses on this type. These Municipal
Obligations do not qualify for the federal exemption because (a) they did not
receive necessary authorization for tax-exempt treatment from state or local
government authorities, (b) they exceed certain regulatory limitations on the
cost of issuance for tax-exempt financing or (c) they finance public or private
activities that do not qualify for the federal income tax exemption. These non-
qualifying activities might include, for example, certain types of multi-family
housing, certain professional and local sports facilities, refinancing of
certain municipal debt, and borrowing to replenish a municipality's underfunded
pension plan.

Each Fund may also invest in the following types of Municipal Obligations:

Municipal Notes. The principal kinds of municipal notes in which the
Funds may invest include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes. Notes sold in

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anticipation of collection of taxes, a bond sale or receipt of other revenues
are usually general obligations of the issuing municipality or agency. Project
notes, which are guaranteed by the United States Department of Housing and Urban
Development and secured by the full faith and credit of the United States, are
issued by local agencies.

Municipal Commercial Paper. Municipal commercial paper typically
represents very short-term, unsecured, negotiable promissory notes. These
obligations are often issued to provide interim construction financing or to
meet seasonal working capital needs of municipalities and are paid from general
revenues of municipalities or are refinanced with long-term debt. In most
cases, municipal commercial paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the event of
default by the issuer of the commercial paper.

Municipal Lease Obligations. The Funds may invest in state or local
municipal leases. Municipal leases may take the form of a lease with an option
to purchase, an installment purchase or a conditional sales contract which is
entered into by state and local governments and other public authorities to
purchase or lease land, equipment or facilities, such as fire, sanitation or
police vehicles or telecommunications equipment, buildings or other capital
assets. Municipal lease obligations, which are secured by payments by the
municipality under the lease or sales contract but are not backed by the
municipality's credit, frequently have the special risks described below.
Municipal lease obligations that are illiquid are subject to each Fund's
limitation on investments in illiquid securities. See the section of this SAI
titled "Illiquid Securities."

Leases and installment purchase or conditional sale contracts (which
usually provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for public bodies to acquire
property and equipment without needing to comply with all of the constitutional
and statutory requirements for the issuance of debt. Often municipal leases
contain "non-appropriation" clauses that provide that the public body has no
obligation to make future payments under the lease unless money is specifically
appropriated for such purpose each year (the "non-appropriation" clause). In
addition, protections extended to holders of indebtedness under relevant state
law do not extend to owners of municipal leases. Finally, municipal leases may
provide for termination at the option of the municipality at the end of each
fiscal year for any reason or, in some cases, automatically if not affirmatively
renewed. If a lease is terminated or not renewed, the lessor is without
recourse to the general credit of the municipality and may be limited to
repossession of the leased property. The disposition of the leased property by
the lessor in the event of a lease termination might prove difficult and could
result in a loss to the holders of participation interests.

Mortgage-Backed Municipal Obligations. The Funds may invest in
mortgage-backed Municipal Obligations, which finance residential housing
mortgages to target groups, generally low income individuals who are first-time
home buyers. An investment in such obligations represents an undivided interest
in a pool of mortgages. Payments made on the underlying mortgages and passed
through to the investor represent both regularly scheduled principal and
interest payments, as well as additional principal payments representing
prepayments of the underlying mortgages. While a certain level of prepayments
can be expected regardless of the interest rate environment, prepayment of the
underlying mortgages usually accelerates in periods of declining interest rates.
Accelerated prepayment could result in a Fund having to invest the unanticipated
proceeds in lower-yielding securities. This prepayment risk causes mortgage-
backed securities to be more significantly affected by changes in interest rates
than is the case for other types of Municipal Obligations.

Credit Enhanced Securities. The Funds may invest in credit enhanced
securities, which are Municipal Obligations that are either insured as to the
timely payment of principal and interest or backed by (a) the full faith and
credit of the U.S. Government, (b) agencies or instrumentalities of the U.S.
Government or (c) U.S. Government securities. Municipal Obligations may be
insured when purchased by a Fund or a Fund may purchase insurance in order to
turn an uninsured Municipal Obligation into an insured Municipal Obligation.

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GOVERNMENT OBLIGATIONS. Each Fund may, and the Government Fund will
primarily, invest in securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities. These securities include a variety of
Treasury securities, which differ in their interest rates, maturities and times
of issuance. Treasury Bills generally have maturities of one year or less;
Treasury Notes generally have maturities of one to ten years; and Treasury Bonds
generally have maturities of greater than ten years. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, such as Government
National Mortgage Association pass-through certificates, are supported by the
full faith and credit of the U.S. Treasury; other obligations, such as those of
the Federal Home Loan Banks, are secured by the right of the issuer to borrow
from the Treasury; other obligations, such as those issued by the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase certain obligations of the agency or
instrumentality; and other obligations, such as those issued by the Student Loan
Marketing Association, are supported only by the credit of the instrumentality
itself. Although the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law.

FLOATING AND VARIABLE RATE SECURITIES. Each Fund may invest in securities
which offer a variable or floating rate of interest. Floating rate securities
generally provide for automatic adjustment of the interest rate whenever some
specified interest rate index changes. Variable rate securities, on the other
hand, provide for automatic establishment of a new interest rate at fixed
intervals. Interest rates on floating and variable rate securities are based on
a designated rate or a specified percentage thereof, such as a bank's prime
rate.

Floating or variable rate securities typically include a demand feature
entitling the holder to demand payment of the obligation on short notice at par
plus accrued interest. Some securities which do not have floating or variable
interest rates may be accompanied by puts producing similar results and price
characteristics. The issuer of these securities normally has a corresponding
right, after a given period, to prepay in its discretion the outstanding
principal amount of the note plus accrued interest upon a specified number of
days notice to the noteholders. When considering the maturity of any instrument
which may be sold or put to the issuer or a third party, the Fund may consider
the instrument's maturity to be shorter than its stated maturity.

DEFERRABLE SUBORDINATED SECURITIES. Certain securities have been issued
recently which have long maturities and are deeply subordinated in the issuer's
capital structure. They generally have 30-year maturities and permit the issuer
to defer distributions for up to five years. These characteristics give the
issuer more financial flexibility than is typically the case with traditional
bonds. As a result, the securities may be viewed by rating agencies and bank
regulators as possessing certain "equity-like" features. However, the
securities are treated as debt securities by market participants, and each Fund
intends to treat them as such as well. These securities may offer a mandatory
put or remarketing option that creates an effective maturity date significantly
shorter than the stated one. Each Fund may invest in these securities to the
extent their yield, credit and maturity characteristics are consistent with the
Fund's investment objective and strategies.

INFLATION-INDEXED BONDS. Each Fund may invest in inflation-indexed bonds
issued by the U.S. Government, its agencies or instrumentalities. Inflation-
indexed bonds are fixed income securities whose principal value is periodically
adjusted according to the rate of inflation. The interest rate on these bonds
is generally fixed at issuance at a rate lower than typical bonds. Over the
life of an inflation-indexed bond, however, interest will be paid based on a
principal value that is adjusted for inflation.

If the periodic adjustment rate measuring inflation falls, the principal
value of inflation-indexed bonds will be adjusted downward and, as a result, the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. If any such downward adjustment in the
principal value of an inflation-indexed bond exceeds the interest otherwise
includable in a Fund's gross income for the relevant tax year, the excess will
be treated as an ordinary loss.

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If the periodic adjustment rate measuring inflation increases, the
principal value of inflation-indexed bonds will be adjusted upward and, as a
result, the interest payable on these securities (calculated with respect to a
larger principal amount) will be increased. Any increase in the principal
amount of an inflation-indexed bond will be considered taxable ordinary income
and will be includable in a Fund's gross income in the period in which it
accrues, even though investors do not receive their principal until maturity,
subject to offset against any tax loss carryforwards from earlier tax years.
There can be no assurance that the applicable inflation index for the security
will accurately measure the real rate of inflation (or deflation) in the prices
of goods and services.

MORTGAGE-RELATED AND ASSET-BACKED SECURITIES. Mortgage-related securities
in which the Funds may invest include mortgage pass-through securities and
derivative mortgage securities, such as collateralized mortgage obligations and
stripped mortgage-backed securities, issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or by private issuers, generally
originators and investors in mortgage loans, including savings associations,
mortgage bankers, commercial banks, investment bankers, and special purpose
entities (collectively, "private lenders"). Mortgage-backed securities issued
by private lenders may be supported by pools of mortgage loans or other
mortgage-backed securities that are guaranteed, directly or indirectly, by the
U.S. Government or one of its agencies or instrumentalities, or they may be
issued without any governmental guarantee of the underlying mortgage assets but
with some form of non-governmental credit enhancement.

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. Asset-backed debt obligations represent direct or
indirect participation in, or are secured by and payable from, assets such as
motor vehicle installment sales contracts, other installment loan contracts,
home equity loans, leases of various types of property, and receivables from
credit card or other revolving credit arrangements. The credit quality of most
asset-backed securities depends primarily on the credit quality of the assets
underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement of the
securities. Payments or distributions of principal and interest on asset-backed
debt obligations may be supported by non-governmental credit enhancements
including letters of credit, reserve funds, overcollateralization, and
guarantees by third parties. The market for privately issued asset-backed debt
obligations is smaller and less liquid than the market for government sponsored
mortgage-backed securities.

In general, mortgage-related and asset-backed securities have yield and
maturity characteristics corresponding to the underlying assets. Unlike
traditional debt securities, which may pay a fixed rate of interest until the
entire principal amount comes due at maturity, payments on certain mortgage-
related and asset-backed securities include both interest and a partial
repayment of principal. Besides the scheduled repayment of principal,
repayments of principal on mortgage-related and asset-backed securities may
result from the voluntary prepayment, refinancing, or foreclosure of the
underlying mortgage loans or other assets. Prepayments may result in early
payment of the applicable mortgage-related or asset-backed securities. In that
event, a Fund may be unable to invest the proceeds from the early payment of the
mortgage-related or asset-backed securities in an investment that provides as
high a yield as the mortgage-related or asset-backed securities. Consequently,
early payment associated with mortgage-related and asset-backed securities may
cause these securities to experience significantly greater price and yield
volatility than that experienced by traditional fixed-income securities. During
periods of falling interest rates, the rate of prepayments generally tends to
increase, thereby tending to decrease the life of mortgage-related and asset-
backed securities. During periods of rising interest rates, the rate of
prepayments generally decreases, thereby tending to increase the life of
mortgage-related and asset-backed securities. If the life of a mortgage-related
or asset-backed security is inaccurately predicted, a Fund may not be able to
realize the rate of return it expected.

Mortgage-related and asset-backed securities are less effective than other
types of securities as a means of "locking in" attractive long-term interest
rates. One reason is the need to reinvest prepayments of principal; another is
the possibility of significant unscheduled prepayments resulting from declines
in interest rates. During periods of declining interest rates, prepayments
likely would have to be reinvested at lower rates. As a result, these
securities may have less potential for capital appreciation during periods of
declining interest rates than

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other securities of comparable maturities, although they may have a similar risk
of decline in market value during periods of rising interest rates.

Prepayments may cause losses in securities purchased at a premium. At
times, some of the mortgage-related and asset-backed securities in which a Fund
may invest may have higher than market yields and, therefore, will be purchased
at a premium above their par value. Unscheduled prepayments, which are made at
par, will cause the Fund to experience a loss equal to any unamortized premium.
In addition, the value of mortgage-related and asset-backed securities may
change due to changes in the market's perception of the creditworthiness of the
issuer, and the mortgage-related and asset-backed securities markets in general
may be adversely affected by changes in governmental regulation or tax policies.

Certain characteristics of adjustable rate mortgage securities ("ARMs") may
make them more susceptible to prepayments than other mortgage-related
securities. Unlike fixed rate mortgages, the interest rates on adjustable rate
mortgages are adjusted at regular intervals, generally based on a specified,
published interest rate index. Investments in ARMs allow a Fund to participate
in changing interest rate levels through regular adjustments in the coupons of
the underlying mortgages, resulting in more variable current income and
potentially shorter duration characteristics than longer-term fixed rate
mortgage securities. The extent to which the values of ARMs fluctuate with
changes in interest rates will depend on the frequency of the interest resets on
the underlying mortgages, and the specific indexes underlying the ARMs, as
certain indexes closely mirror market interest rate levels and others tend to
lag changes in market rates.

ARMs will frequently have caps and floors which limit the maximum amount by
which the interest rate on the underlying mortgage loans may move up or down
during each adjustment period and over the life of the loan. Interest rate caps
on ARMs may cause them to decrease in value in an increasing interest rate
environment and may also prevent their income from increasing to levels
commensurate with prevailing interest rates. Conversely, interest rate floors on
ARMs may cause their income to remain higher than prevailing interest rate
levels and result in an increase in the value of such securities. However, this
increase may be tempered by an acceleration of prepayments. In general, ARMs
tend to experience higher levels of prepayment than other mortgage-related
securities. During favorable interest rate environments, holders of adjustable
rate mortgages have greater incentives to refinance with fixed rate mortgages in
order to avoid interest rate risk. In addition, significant increases in the
index rates used for adjustment of the mortgages may result in increased
delinquency, default and foreclosure rates, which in turn would increase the
rate of prepayment on the ARMs.

Collateralized mortgage obligations ("CMOs") are designed to reduce the
risk of prepayment for investors by issuing multiple classes of securities, each
having different maturities, interest rates and payment schedules, and with the
principal and interest on the underlying mortgages allocated among the several
classes in various ways. Payment of interest or principal on some classes or
series of CMOs may be subject to contingencies or some classes or series may
bear some or all of the risk of default on the underlying mortgages. CMOs of
different classes or series are generally retired in sequence as the underlying
mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid
ahead of schedule, the classes or series of a CMO with the earliest maturities
generally will be retired prior to their maturities. Thus, the early retirement
of particular classes or series of a CMO held by a Fund would have the same
effect as the prepayment of mortgages underlying other mortgage-related
securities. The prices of certain CMOs, depending on their structure and the
rate of prepayments, can be volatile and the market for certain CMOs may not be
as liquid as the market for other securities in general.

Similarly, prepayments could also result in losses on stripped mortgage-
backed and asset-backed securities. Stripped mortgage-backed and asset-backed
securities are commonly structured with two classes that receive different
portions of the interest and principal distributions on a pool of loans. A Fund
may invest in both the interest-only or "IO" class and the principal-only or
"PO" class, although the Government Fund will limit its aggregate investments in
IO and PO classes to 10% of net assets. The yield to maturity on an IO class of
stripped mortgage-backed or asset-backed securities is extremely sensitive not
only to changes in prevailing interest rates

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but also to the rate of principal payments (including prepayments) on the
underlying assets. A rapid rate of principal prepayments may have a measurable
adverse effect on a Fund's yield to maturity to the extent it invests in IOs. If
the assets underlying the IO experience greater than anticipated prepayments of
principal, a Fund may fail to recoup fully its initial investment in these
securities. Conversely, POs tend to increase in value if prepayments are greater
than anticipated and decline if prepayments are slower than anticipated. Complex
instruments such as CMOs and stripped mortgage-backed securities may have a
structure that makes their reaction to interest rates and other factors
difficult to predict, potentially making their price highly volatile.

The secondary market for stripped mortgage-backed and asset-backed
securities may be more volatile and less liquid than that for other securities,
potentially limiting the Funds' ability to obtain market quotations for those
securities or to buy or sell those securities at any particular time.

It is anticipated that certain entities may create loan pools offering
pass-through investments in addition to the types discussed above, including
securities with underlying pools of derivative mortgage-related and asset-backed
securities. As new types of mortgage-related and asset-backed securities are
developed and offered to investors, Heartland Advisors will, consistent with
each Fund's objective and investment policies, consider making investments in
such new types of securities.

ZERO-COUPON, STEP-COUPON AND PAY-IN-KIND SECURITIES. Each Fund may invest
in zero-coupon, step-coupon and pay-in-kind securities. These securities are
debt securities that do not make regular cash interest payments. Zero-coupon
and step-coupon securities are sold at a deep discount to their face value.
Pay-in-kind securities pay interest through the issuance of additional
securities. Because such securities do not pay current cash income, the price
of these securities can be volatile when interest rates fluctuate. While these
securities do not pay current cash income, federal income tax law requires the
holders of the zero-coupon, step-coupon and pay-in-kind securities to include in
income each year the portion of the original issue discount (or deemed discount)
and other non-cash income on such securities accrued during that year. In order
to continue to qualify for treatment as a "regulated investment company" under
the Internal Revenue Code and avoid a certain excise tax, a Fund may be required
to distribute a portion of such discount and income and may be required to
dispose of other portfolio securities, which could occur in periods of adverse
market conditions, in order to generate cash to meet these distribution
requirements.

DERIVATIVE INSTRUMENTS

Each Fund may invest in a broad array of financial instruments and
securities, the value of which is "derived" from the performance of an
underlying asset or a "benchmark" such as a security index, an interest rate, or
a currency. In particular, each Fund may engage in transactions in options,
futures contracts, options on futures contracts and hybrid instruments to (a)
hedge against anticipated declines in the market value of its portfolio
securities or currencies and against increases in the market values of
securities or currencies it intends to acquire, (b) to manage exposure to
changing interest rates (duration management), (c) to enhance total return or
(d) to invest in eligible asset classes with greater efficiency and lower cost
than is possible through direct investment.

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 in order to adjust the risk and return characteristics
of a Fund's overall strategy. Futures, options and options on futures have
durations which, in general, are closely related to the duration of the
underlying securities. Holding long futures or call option positions will
lengthen the duration of a Fund's portfolio by approximately the same amount of
time that holding an equivalent amount of the underlying securities would.

WRITING COVERED OPTIONS. Each Fund may write covered put and call options
on any securities or futures contracts in which it may invest, on any securities
index based on or related to securities in which it may invest, or on any
currency in which Fund investments may be denominated. A call option on an asset
written by a Fund obligates the Fund to sell the specified asset to the holder
(purchaser) at a stated price (the exercise price) if the option is exercised
before a specified date (the expiration date). A put option on an asset written
by a Fund

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<PAGE>

obligates the Fund to buy the specified asset from the purchaser at the exercise
price if the option is exercised before the expiration date.

The term "covered" means that a Fund will (a) in the case of a call option,
own the asset subject to the option or have an unconditional right to purchase
the same underlying asset at a price equal to or less than the exercise price of
the "covered" option or, in the case of a put option, have an unconditional
right to sell the same underlying asset at a price equal to or greater than the
exercise price of the "covered" option, or (b) establish and maintain, for the
term of the option, a segregated account consisting of cash or other liquid
assets, either of which may be quoted or denominated in any currency, having a
value at least equal to the Fund's obligation under the option, or (c) purchase
an offsetting option or any other option which, by virtue of its exercise price
or otherwise, reduces the Fund's net exposure on its written option position. A
Fund may cover call options on a securities index by owning securities whose
price changes are expected to be similar to those of the underlying index.

Writing put or call options can enable a Fund to enhance income by reason
of the premiums paid by the purchaser of such options. Through receipt of the
option premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
asset in return for the exercise price, even if its current value is greater, a
call writer gives up some ability to participate in the price increases in the
underlying asset. Conversely, if the price of the underlying asset rises, a put
writer would generally expect to profit, although its gain would be limited to
the amount of the premium it received for writing the put because it did not own
the underlying asset and therefore would not benefit from the appreciation in
price. If the price of the underlying asset falls, the put writer would expect
to suffer a loss, which loss could be substantial, because a put writer must be
prepared to pay the exercise price for the option's underlying asset if the
other party to the option chooses to exercise it. However, the loss should be
less than the loss experienced if a Fund had purchased the underlying asset
directly because the premium received for writing the option will mitigate the
effects of the decline.

A Fund may enter into closing transactions with respect to options by
purchasing an option identical to the one it has written (for exchange-listed
options) or by entering into an offsetting transaction with the counterparty to
such option (for over-the-counter, or "OTC" options). A Fund's ability to
establish and close out positions in exchange-listed options depends on the
existence of a liquid market; however, there can be no assurance that such a
market will exist at any particular time or that a Fund will be able to effect
such closing transactions at a favorable price. In addition, although a Fund
will enter into OTC options only with counterparties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund will in fact be able to close out an OTC option position
at any time prior to its expiration or that the Fund will be able to effect such
closing transactions at a favorable price.

PURCHASING OPTIONS. Each Fund may purchase put and call options on any
securities or futures contracts in which it may invest, on any securities index
based on or related to securities in which it may invest or on any currency in
which Fund investments may be denominated. A Fund would normally purchase call
options in anticipation of an increase, or put options in anticipation of a
decrease, in the market value of securities or currencies of the type in which
it may invest. A Fund may enter into closing transactions with respect to such
options by writing an option identical to the one it has purchased (for
exchange-listed options) or by entering into an offsetting transaction with the
counterparty to such option (for OTC options). A Fund may also exercise such
options or allow them to expire.

A Fund would normally purchase call options in anticipation of an increase
in the market value of the underlying assets. As the holder of a call option, a
Fund has the right to purchase the underlying asset at the exercise price at any
time during the option period. A call buyer typically attempts to participate
in potential price increases of the underlying asset with risk limited to the
cost of the option, including the premium paid and transaction costs, if such
asset prices fall. At the same time, the buyer can expect to suffer a loss if
such asset prices do not rise sufficiently to offset the cost of the option.

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A Fund would normally purchase put options in anticipation of a decrease in
the market value of the underlying assets. As the holder of a put option, a
Fund has the right to sell the underlying asset at any time during the option
period. A Fund may also purchase put options on a security or currency related
to its investments as a defensive technique in order to protect against an
anticipated decline in the value of the underlying asset. Such hedge protection
is provided only during the life of the put option when a Fund, as holder of the
put option, is able to sell the underlying asset at the put exercise price
regardless of any decline in the underlying asset's market price. The premium
paid for the put option and any transaction costs would reduce any gain
otherwise available for distribution when the asset is eventually sold.

FUTURES CONTRACTS. Each Fund may purchase and sell futures contracts,
including, but not limited to, interest rate, index or foreign currency futures
contracts that are traded on a recognized U.S. exchange, board of trade or
similar entity, or quoted on an automated quotation system. The Funds may
engage in transactions in futures contracts for "short" hedging or "long"
strategies as described below.

When a Fund purchases a futures contract, it agrees to purchase a specified
underlying instrument at a specified future date. When a Fund sells a futures
contract, it agrees to sell the underlying instrument at a specified future
date. The price at which the purchase and sale will take place is fixed when a
Fund enters into the contract. While a Fund may make or take delivery of the
underlying instrument whenever it appears economically advantageous to do so,
positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or loss as discussed below.

A Fund may take a "short" position in the futures market by selling futures
contracts in an attempt to hedge against an anticipated rise in interest rates
or a decline in market prices or foreign currency rates that would adversely
affect the value of the Fund's portfolio securities. As part of its hedging
strategy, a Fund may sell futures contracts on (i) securities held by the Fund
or securities with characteristics similar to those of the Fund's portfolio
securities, (ii) currencies in which its portfolio securities are quoted or
denominated or on one currency to hedge against fluctuations in the value of
securities denominated in a different currency if there is an established
historical pattern of correlation between the two currencies, or (iii) other
financial instruments, securities indices or other indices, if, in the opinion
of Heartland Advisors, there is a sufficient degree of correlation between price
trends for the Fund's portfolio securities and such futures contracts. A
successful short hedging position would result in any depreciation in the value
of portfolio securities being substantially offset by appreciation in the value
of the futures position. Conversely, any unanticipated appreciation in the
value of a Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.

A Fund may also take a "long" position in the futures market by purchasing
futures contracts. This strategy would be employed, for example, when interest
rates are falling or securities prices are rising and a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. A Fund
may also purchase futures contracts to alter the investment characteristics of
or currency exposure associated with portfolio securities, as a substitute for
transactions in securities or foreign currencies, or to gain or increase
exposure to a particular securities market or currency.

The purchaser of a futures contract is not required to pay for and the
seller of a futures contract is not required to deliver the underlying
instrument unless the contract is held until the delivery date. However, upon
entering into a futures contract, and to maintain an open position in futures
contracts, a Fund would be required to deposit "initial margin" in a segregated
account in the name of the executing futures commission merchant when the
contract is entered into. The initial margin required for a particular futures
contract is set by the exchange on which the contract is traded and may be
significantly modified from time to time by the exchange during the term of the
contract. Futures contracts are customarily purchased and sold on initial
margins that may range upward from less than 5% of the value of the contract
being traded. There may be certain circumstances, such as periods of high
volatility, that cause an exchange to increase the level of a Fund's initial
margin payment. Unlike margin in securities transactions, initial margin on
futures contracts does not represent a borrowing to a

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Fund, but rather is in the nature of a performance bond or good-faith deposit
that is returned to the Fund upon termination of the transaction assuming all
contractual obligations have been satisfied.

Each day that a Fund has an open position in a futures contract or an
option on a futures contract it will pay or receive cash, called "variation
margin," to or from the futures broker equal to the daily change in value of the
futures contract. This process is known as "marking to market." Variation
margin paid or received by a Fund does not represent a borrowing or a loan, but
rather represents settlement between the Fund and the broker of the amount one
would owe the other if the futures contract had expired at the close of the
previous day. When a Fund purchases an option on a future, all that is at risk
is the premium paid plus transaction costs. Alternatively, when a Fund
purchases or sells a futures contract or writes a call or put option thereon, it
is subject to daily variation margin calls that could be substantial in the
event of adverse price movements. A Fund may be required to sell securities at
a time when such sales are disadvantageous in the event the Fund has
insufficient cash to meet daily variation margin requirements. In computing
daily net asset value, each Fund will mark to market the current value of any
open futures contracts. The Funds expect to earn interest income on their
margin deposits.

Futures contracts can be held until their delivery dates, or can be closed
out before then if a liquid secondary market is available; however, there can be
no assurance that such a market will exist at any particular time or that a Fund
will be able to effect such closing transactions at a favorable price. Closing
out an open futures contract purchase or sale is effected by entering into an
offsetting futures contract sale or purchase, respectively, for the same
aggregate amount of the identical securities and the same delivery date. If a
Fund closes out an open futures contract by entering into an offsetting futures
contract, and the offsetting purchase price is less than the original sale
price, a Fund realizes a gain; if it is more, the Fund realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, a Fund realizes a gain; if it is less, the Fund realizes a loss. The
transaction costs must also be included in these calculations. There can be no
assurance, however, that a Fund will be able to enter into an offsetting
transaction with respect to a particular futures contract at a particular time.
If a Fund is not able to enter into an offsetting transaction, the Fund will
continue to be required to maintain the margin deposits on the futures contract.

The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a Fund's exposure to positive and negative price
fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When a Fund sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Movements in the prices of futures
contracts or options on futures contracts may not correlate perfectly with
movements in the prices of the underlying instruments due to certain
characteristics of the futures markets. In particular, daily variation margin
calls may cause certain participants in futures markets to liquidate futures or
options on futures contracts positions to avoid being subject to further calls.
These liquidations could distort the normal price relationship between the
futures or options and the underlying instruments by increasing price
volatility. Temporary price distortion may also be caused by increased
participation by speculators in the futures markets as a result of initial
margin deposit requirements being less onerous than in the securities markets.

LIMITATIONS ON FUTURES AND OPTIONS ON FUTURES TRANSACTIONS. The Funds will
engage in transactions in futures contracts and options thereon either for bona
fide hedging purposes or to seek to increase total return, in each case in
accordance with the rules and regulations of the Commodity Futures Trading
Commission. A Fund may hold positions in futures contracts and related options
that do not qualify as bona fide hedging positions if, as a result, the sum of
initial margin deposits and premiums paid to establish such positions, after
taking into account unrealized profits and unrealized losses on such contracts,
does not exceed 5% of the Fund's total assets; provided, however, that in the
case of an option which is in-the-money at the time of purchase, the in-the-
money amount may be excluded in calculating the 5% limitation.

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COMBINED POSITIONS. Each Fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
exercise price and buying a call option at a lower price, in order to reduce the
risks of the written call option in the event of a substantial price increase.
Because combined positions involve multiple trades, they may result in higher
transaction costs and may be more difficult to open and close out.

RISKS IN OPTIONS AND FUTURES TRANSACTIONS. Options and futures can be
highly volatile investments and involve certain risks. A decision about
whether, when and how to use options and futures involves skill and judgment,
and even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior, or market or interest rate trends. Successful
options and futures strategies require the ability to predict future movements
in securities prices, interest rates and other economic factors. There are
significant differences between the securities markets, the currency markets and
the options and futures markets that could result in an imperfect correlation
between the markets, causing a given transaction not to achieve its objectives.
Options and futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
instrument and the time remaining until expiration of the contract, which may
not affect prices of the underlying instruments the same way. Imperfect
correlation may also result from different levels of demand in the options and
futures markets and the markets for the underlying instruments, from structural
differences in how options and futures and securities are traded or from
imposition of daily price fluctuation limits or trading halts or suspensions by
an exchange. If price changes in a Fund's options or futures positions are
poorly correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.

Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match a Fund's current or anticipated investments exactly. A Fund may
invest in options and futures contracts based on securities with different
issuers, maturities or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures positions
will not track the performance of the Fund's other investments. For example,
even the use of an option or a futures contract on a securities index may result
in an imperfect correlation since the index generally will be composed of a much
broader range of securities than the securities in which a Fund likely is to be
invested. To the extent that a Fund's options or futures positions do not match
its current or anticipated investments, there is an increased risk that the
options or futures positions will not track performance of the Fund's other
investments. Moreover, a Fund may purchase or sell options and futures contracts
with a greater or lesser value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in volatility
between the contract and the securities, although this may not be successful in
all cases.

Because of the low margin deposits required, futures trading involves a
high degree of leverage. A relatively small price movement in futures contracts
could result in an immediate and substantial gain or loss to a Fund. Therefore,
a purchase or sale of a futures contract may result in losses in excess of the
amount invested in the futures contract by a Fund.

There can be no assurance that a liquid secondary market will exist for any
particular options or futures contracts at any particular time. On volatile
trading days when the price fluctuation limit is reached or a trading halt or
suspension is imposed, it may be impossible for a Fund to enter into new
positions, close out existing positions or dispose of assets held in a
segregated account. These events may also make an option or futures contract
difficult to price. If the secondary market for a futures contract is not
liquid because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions and potentially require a Fund to continue
to hold the position until delivery or expiration regardless of changes in its
value. As a result, a Fund's access to other assets held to cover its options
or futures positions could also be impaired. Similarly, if a Fund is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise

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<PAGE>

the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying securities or currencies.

FEDERAL TAX TREATMENT OF OPTIONS AND FUTURES CONTRACTS. The Funds may enter
into certain options and futures contracts which may or may not be treated as
Section 1256 contracts or straddles under the Internal Revenue Code.
Transactions which are considered Section 1256 contracts will be considered to
have been closed at the end of a Fund's fiscal year and any gains or losses will
be recognized for tax purposes at that time. Generally, such gains or losses and
gains or losses from the normal closing or settlement of such transactions will
be characterized as 60% long-term and 40% short-term regardless of the holding
period of the instrument. A Fund will be required to recognize net gains or
losses on such transactions when determining the Fund's distribution
requirements even though it may not have closed the transaction and received
cash to pay such distribution.

An options or futures contract may be considered a position in a straddle
for tax purposes, in which case a loss on any position in the straddle may be
subject to deferral to the extent of unrealized gain in an offsetting position.

In order for a Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income (that is, dividends,
interest, income derived from loans of securities and gains from the sale of
securities or currencies). Options, futures and forward foreign exchange
contracts entered into for an investment purpose are qualifying income. See
"Portfolio Management Strategies - Foreign Currency Transactions" for a
discussion of forward foreign exchange contracts.

The Taxpayer Relief Act of 1997 (the "Act") imposed constructive sale
treatment for federal income tax purposes on certain hedging strategies with
respect to appreciated securities. Under these rules, taxpayers will recognize
gain, but not loss, with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act) or futures or
"forward contracts" (as defined by the Act) with respect to the same or
substantially identical property, or if they enter into such transactions and
then acquire the same or substantially identical property. These changes
generally apply to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations that will
treat as constructive sales certain transactions that have substantially the
same effect as short sales, offsetting notional principal contracts, and futures
or forward contracts to deliver the same or substantially similar property.

HYBRID INSTRUMENTS. Each Fund may invest in hybrid instruments, a type of
potentially high-risk derivative which combines the characteristics of futures
contracts or options with those of debt, preferred equity, or a depository
instrument. Generally, a hybrid instrument will be a debt security or other
evidence of indebtedness on which a portion of or all interest payments, and/or
the principal or stated amount payable at maturity, redemption, or retirement,
is determined by reference to prices, securities, currencies, intangibles,
goods, articles, or commodities, or by another objective index, economic factor,
or other measure, such as interest rates, currency exchange rates, commodity
indexes and securities indexes. Thus, hybrid instruments may take a variety of
forms, including, but not limited to, debt instruments with interest or
principal payments or redemption terms determined by reference to the value of a
currency, or commodity or securities index at a future point in time, preferred
stock with dividend rates determined by reference to the value of a currency or
convertible securities with the conversion terms related to a particular
commodity.

Since hybrid instruments reflect a combination of the characteristics of
futures or options with those of securities, hybrid instruments may entail
significant risks that are not associated with a similar investment in a
traditional debt instrument that has a fixed principal amount, is denominated in
U.S. dollars or bears interest either at a fixed rate or a floating rate
determined by reference to a common, nationally published benchmark. Although
the risks of a particular hybrid instrument will depend upon the terms of the
instrument, such risks may include, without limitation, the possibility of
significant changes in the benchmarks or underlying assets to which

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the instrument is linked. Such risks generally depend upon factors that are
unrelated to the operations or credit quality of the issuer (although credit
risk of the issuer is a consideration) of the hybrid instrument and that may not
be readily foreseen by the purchaser, such as economic and political events, the
supply and demand for the underlying assets and interest rate movements. The
benchmarks and underlying assets to which hybrid instruments are linked may also
result in greater volatility and market risk, including leverage risk which may
occur when the hybrid instrument is structured so that a given change in a
benchmark or underlying asset is multiplied to produce greater change in the
value of the hybrid instrument, thereby magnifying the risk of loss as well as
the potential for gain. In addition, hybrid instruments may also carry liquidity
risk since the instruments are often "customized" to meet the needs of the
particular investor. See the section of this SAI titled "Types of Securities -
Derivative Instruments - Risks in Options and Futures Transactions" above.

SWAP AGREEMENTS. Each Fund may enter into swap agreements and may purchase
or sell related caps, floors and collars. It would enter into these
transactions primarily to preserve a desired return or spread on a particular
investment or portion of its portfolio, as a duration management technique or to
protect against any increase in the price of, or the currency exchange rate
applicable to, securities it anticipates purchasing at a later date. The Funds
intend to use these techniques for hedging purposes and not for speculation.

Swap agreements are generally individually negotiated agreements, primarily
entered into by institutional investors, in which the parties agree to exchange
the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to a
"notional amount" (that is, the return on, or increase in, value of a particular
dollar amount invested at a particular interest rate) in a particular foreign
currency or in a "basket" of securities representing a particular index. A
Fund's successful use of these instruments will depend, in part, on Heartland
Advisors' ability to predict correctly whether certain types of investments are
likely to produce greater returns than other investments.

Depending on its structure, a swap agreement may increase or decrease the
exposure to changes in the value of an index of securities, the value of a
particular security or group of securities or foreign currency values. Depending
on how it is used, a swap agreement may increase or decrease the overall
volatility of a Fund's investments and its net asset value. The performance of
a swap agreement is determined by the change in the specific currency, market
index or security, or other factors that determine the amounts of payments due
to and from a Fund. A Fund's obligation under a swap agreement, which is
generally equal to the net amount to be paid or received under the agreement
based on the relative values of the positions held by each party to the
agreement, will be accrued daily (offset against amounts owed to the Fund) and
any accrued but unpaid net amounts owed to a swap counterparty will be covered
by the maintenance of the segregated account consisting of cash and/or other
appropriate liquid assets having a value at least as great as the commitment
underlying the obligations.

Swap agreements may include interest rate caps, which entitle the purchaser
to receive payments on a notional principal amount from the party selling the
cap to the extent that a specified index exceeds a predetermined interest rate
or amount; interest rate floors, which entitle the purchaser to receive payments
on a notional principal amount from the party selling such floor to the extent
that a specified index falls below a predetermined interest rate or amount; and
interest rate collars, under which a party sells a cap and purchases a floor, or
vice versa, in an attempt to protect itself against interest rate movements
exceeding given minimum or maximum levels.

If a swap agreement calls for payments by a Fund, it must be prepared to
make such payments when due. If the counterparty's creditworthiness declines, or
in the event of a default of the counterparty, the value of the swap agreement
would likely decline, potentially resulting in a loss of the amount expected to
receive under a swap agreement. A Fund will enter into swap agreements only
with counterparties that Heartland Advisors reasonably believes are capable of
performing under the swap agreements. The swap market is largely unregulated
and swap agreements may be considered to be illiquid.

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FOREIGN INVESTMENTS

Each Fund may invest up to 25% of its assets directly in the securities of
foreign issuers traded outside the United States (Non-U.S. Traded Foreign
Securities), except that the Government Fund may invest up to 20% of its assets
in Non-U.S. Traded Foreign Securities. Each Fund may also invest without
limitation in foreign securities through depository receipts, as discussed
below; securities of foreign issuers that are traded on a registered U.S. stock
exchange or the Nasdaq National Market; and foreign securities guaranteed by a
United States person.

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. The value of securities, and dividends and interest earned from
such securities, can change significantly when foreign currencies strengthen or
weaken relative to the U.S. dollar. Foreign securities markets may have lower
trading volume and less liquidity than U.S. markets, and prices on some foreign
markets can be highly volatile. Many foreign countries lack uniform accounting,
auditing and disclosure standards comparable to those applicable to U.S.
companies, and it may be more difficult to obtain reliable information regarding
a foreign issuer's financial condition and operations. In addition, the costs
of investing overseas, including non-U.S. withholding taxes, brokerage
commissions, and custodial costs, are generally higher than for U.S.
investments. 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 a 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 markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers and securities markets may be subject to less
government regulation than their U.S. counterparts. Foreign security trading
practices, including those involving the release of assets in advance of
payment, may involve increased risks in the event of a failed trade or the
insolvency of a broker-dealer, and may involve substantial delays. It also may
be difficult to enforce legal rights in foreign countries.

Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including, but not limited to, the possibility
of expropriation or nationalization of assets, confiscatory taxation, or
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest, or adverse diplomatic
developments. There is no assurance that Heartland Advisors will be able to
anticipate these political events or counter their effects.

The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities. Equity securities of foreign
companies with smaller market capitalizations may involve a higher degree of
risk than investments in the general foreign equity markets and such securities
may be subject to even greater price volatility and may have less market
liquidity than equity securities of foreign issuers with larger market
capitalizations.

The Funds may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable where the issuer is domiciled, they may
be less liquid than foreign securities of the same class that are not subject to
such restrictions.

American Depository Receipts ("ADRs") are certificates evidencing ownership
of shares of a foreign-based issuer held by a U.S. bank or similar financial
institution as depository. Designed for use in U.S. securities

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markets, ADRs are alternatives to the direct purchase of the underlying
securities in their national markets and currencies. The limitations on the
Funds' investments in foreign securities do not apply to investments in ADRs or
to securities of foreign issuers that are traded on a registered U.S. stock
exchange or the NASDAQ National Market. However, ADR holders may not have all of
the legal rights of shareholders.

A Depository Receipt may be sponsored or unsponsored. If a Fund is
invested in an unsponsored Depository Receipt, the Fund is likely to bear its
proportionate share of the expenses of the depository, and it may have greater
difficulty in receiving shareholder communications than it would have with a
sponsored ADR.

ILLIQUID SECURITIES

Each Fund may invest in illiquid securities. However, no Fund may acquire
illiquid securities if, as a result, more than 15% of the value of the Fund's
net assets would be invested in such securities. For purposes of applying this
limitation, an "illiquid security" means one that may not be sold or disposed of
in the ordinary course of business within seven days at a price approximating
the value at which the security is carried by a Fund.

Under guidelines established by, and the oversight of, Heartland's Board of
Directors, Heartland Advisors determines which securities are illiquid for
purposes of this limitation. Certain securities exempt from registration or
issued in transactions exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), such as securities that may be resold
to institutional investors under Rule 144A under the Securities Act and
municipal lease obligations, may be considered by Heartland Advisors to be
liquid under guidelines adopted by Heartland's Board of Directors. The Board of
Directors has determined that private placement notes issued pursuant to Section
4(2) of the Securities Act generally are readily marketable even though they are
subject to certain legal restrictions on resale. These securities, as well as
Rule 144A securities and municipal lease obligations, deemed to be liquid
pursuant to the guidelines adopted by Heartland's Board of Directors, are not
treated as being subject to the limitation on illiquid securities.

Restricted securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act, or in a registered public offering. Where registration is required, a Fund
may be obligated to pay all or part of the registration expense and a
considerable period may elapse between the time it decides to seek registration
and the time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions
were to develop, a Fund might obtain a less favorable price than prevailed when
it decided to seek registration of the security.

Repurchase agreements maturing in more than seven days are deemed to be
illiquid.

To the extent it invests in illiquid or restricted securities, a Fund may
encounter difficulty in determining a market value for such securities.
Disposing of illiquid or restricted invests may involve time-consuming
negotiations and legal expense, and it may be difficult or impossible for a Fund
to sell such an investment promptly and at an acceptable price. In addition, if
a Fund holds a material percentage of its assets in illiquid or restricted
securities, it may experience difficulty meeting its redemption obligations.

INDEXED SECURITIES

Each Fund may purchase securities whose prices are indexed to the prices of
other securities, securities indexes, or other financial indicators. Indexed
securities typically are debt securities or deposits whose value at maturity or
coupon rate is determined by reference to a specific instrument or statistic.
For example, certain debt securities in which a Fund may invest may include
securities whose interest rates are determined by reference to one or more
specific financial indicators, such as LIBOR, resulting in a security whose
interest payments tend to rise and fall together with the financial indicator.
Indexed securities may be positively or negatively indexed; that is, their
maturity value may increase when the specified underlying instrument's value
increases, resulting in a security that performs similarly to the underlying
instrument, or their maturity value may decline when the

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underlying instrument increases, resulting in a security whose price
characteristics are similar to a put on the underlying instrument.

The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the U.S. and abroad. At the
same time, indexed securities are subject to the credit risks associated with
the issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Recent issuers of indexed securities
have included banks, corporations, and certain U.S. government agencies.

The market for indexed securities may be thinner and less active than the
market for securities in general, which can adversely affect the prices at which
indexed securities are sold. Judgment plays a greater role in valuing certain
indexed securities than is the case for securities for which more external
sources for quotations and last-sale information are available. Adverse
publicity and changing investor perceptions may affect the ability to value
accurately indexed securities and a Fund's ability to dispose of these
securities.

INVESTMENT COMPANIES

Each Fund may invest in the securities of other investment companies,
including unit investment trust or closed-end management companies, as permitted
under the 1940 Act. At present, the 1940 Act provisions limit a Fund so that
(a) no more than 10% of its total assets may be invested in securities of other
investment companies, (b) it may not own securities of any one investment
company having a value in excess of 5% of the Fund's total assets, and (c) it
may not own more than 3% of the total outstanding voting stock of any one
investment company. As a shareholder of another investment company, a Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses of the Fund.

LOAN INTERESTS

Each Fund may invest in loan interests, which are interests in amounts owed
by a municipality or other borrower to lenders or lending syndicates. Loan
interests purchased by a Fund will vary in maturity, may be subject to
restrictions on resale, are not readily marketable and may be secured or
unsecured. They involve the risk of loss in case of default or bankruptcy of
the borrower or, if in the form of a participation interest, the insolvency of
the financial intermediary. If a Fund acquires a loan interest under which the
Fund derives its rights directly from the borrower, such loan interests are
separately enforceable by the Fund against the borrower and all payments of
interest and principal are typically made directly to the Fund from the
borrower. In the event that a Fund and other lenders become entitled to take
possession of shared collateral being held in connection with a loan interest as
a result of default or insolvency, it is anticipated that such collateral would
be held in the custody of an institution for their mutual benefit.

Typically, the U.S. or foreign commercial bank, insurance company, finance
company, or other financial institution that originates, negotiates and
structures the loan interest (the "Agent") administers the terms of the loan
agreement. As a result, a Fund will generally rely on the Agent to receive and
forward to the Fund its portion of the principal and interest payments on the
loan. A Fund may also rely on the Agent and the other members of the lending
syndicate to use appropriate credit remedies against the borrower, if necessary.
However, a Fund may be required to perform certain tasks on its own behalf in
the event the Agent does not perform certain administrative or enforcement
functions.

A Fund may incur certain costs and delays in realizing payment on a loan
interest, or suffer a loss of principal and/or interest, in the event the Agent
becomes insolvent or enters into receivership or bankruptcy proceedings.
Indebtedness of borrowers whose creditworthiness is poor involves substantially
greater risks, and may be highly speculative. In addition, there is no
assurance that the liquidation of collateral from a secured loan would satisfy
the borrower's obligation, or that the collateral can be liquidated.

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REAL ESTATE INVESTMENT TRUSTS

Each Fund may invest up to 10% of its total assets in real estate
investment trusts ("REITs") which may own real estate properties ("equity
REITs") or may make or purchase mortgages on real estate ("mortgage REITs"). The
Government Fund has no present intent to invest in 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. Equity REITs may be adversely affected by rising interest rates,
which may increase the costs of obtaining financing for real estate projects or
cause investors to demand a high annual yield from future distributions.
Mortgage REITs may experience diminished yields during periods of declining
interest rates if they hold mortgages that the mortgagors elect to prepay during
such periods. In addition, the failure of a REIT in which a 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.

Some REITs have relatively small market capitalizations, which could
increase their market volatility. REITs tend to depend upon specialized
management skills and may have limited diversification causing them to be
subject to risks inherent in operating and financing a limited number of
properties.

RIGHTS AND WARRANTS

Each Fund may purchase rights and warrants, which are securities giving the
holder the right, but not the obligation, to purchase the underlying securities
at a predetermined price during a specified period or perpetually. Rights and
warrants are considered more speculative than certain other types of investments
because they generally have no voting rights, pay no dividends, and have no
rights with respect to the assets of the corporation issuing them. In addition,
the prices or rights and warrants do not necessarily move parallel to the prices
of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration dates.

The Government Fund has no present intent to invest in warrants.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; FORWARD COMMITMENTS

Each Fund may purchase securities on a when-issued or delayed-delivery
basis, and may purchase forward commitments. Payment and interest terms of
these securities are set out at the time a Fund enters into the commitment to
purchase, but normally the securities are not issued, and delivery and payment
for such obligations normally does not take place, for a month or more after the
purchase date. In a forward commitment transaction, a Fund contracts to
purchase securities for a fixed price at a future date beyond customary
settlement time. Obligations purchased on a when-issued or forward commitment
basis involve a risk of loss if the value of the security purchased declines
prior to the settlement date, and may increase fluctuation in a Fund's net asset
value.

On the date a Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, it will record the transaction and
reflect the value of the obligation in determining its net asset value. In
addition, a Fund will establish and maintain, for the term of the position, a
segregated account consisting of cash or other liquid assets, either of which
may be quoted or denominated in any currency, having a value at least equal to
the Fund's obligation under the position.

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PORTFOLIO MANAGEMENT STRATEGIES

The following information supplements the discussion of the Funds'
investment objectives and policies in their respective prospectuses.

BORROWING

Each Fund may borrow from any bank or other person up to 5% of its total
assets for temporary purposes. A borrowing is presumed to be for temporary
purposes if it is repaid by the Fund within 60 days and is not extended or
renewed.

Each Fund also may borrow solely from banks to facilitate the management of
its investment portfolio and make other investments or engage in other
transactions permissible under the 1940 Act which may be considered a borrowing
(such as dollar rolls and reverse repurchase agreements), provided such
borrowings for these purposes do not exceed one-third of total assets.

Currently, each Fund intends to borrow only from banks, for periods not
longer than 60 days, in amounts not to exceed 20% of total assets and only for
the following purposes: (a) to avoid liquidating securities under circumstances
that Heartland Advisors believes are unfavorable to shareholders, such as to
meet large or unexpected redemptions or to purchase debt obligations pending
receipt of proceeds in the settlement of the sale of other portfolio securities;
(b) when the Fund is scheduled to receive cash in exchange for debt obligations
that are being retired, called or exchanged pursuant to a sinking fund or put
feature of the instrument. The extent to which a Fund will borrow will depend,
among other things, on market conditions and interest rates.

CONCENTRATION

The Taxable Short Duration Municipal, Short Duration High-Yield Municipal,
High-Yield Municipal Bond and Wisconsin Tax Free Funds may invest 25% or more of
their respective total assets in Municipal Obligations that finance similar
types of projects or projects in related industry sectors. These could include,
for example, projects involving community development, education, health care,
hospitals, retirement, single-family or multi-family housing, redevelopment,
transportation or various types of utilities. There may be economic, business
or political developments or changes that affect all obligations of a similar
type, or in related sectors, such as proposed legislation affecting the
financing of certain projects, judicial decisions relating to the validity of
certain projects or the means of financing them, shortages or price increases of
necessary materials, or declining market needs for such projects. Therefore,
developments affecting a single industry or the securities financing similar
types of projects, could have a significant effect on a Fund's overall
performance.

These Funds also may invest 25% or more of their respective total assets in
Municipal Obligations whose issuers or projects financed are located in the same
state or other geographic region. If a Fund were to concentrate its investments
in such a geographic territory, developments and events that have a greater
effect on the economy of that geographic territory than on the national or
global economy may tend to have a greater effect on the Fund's net asset value
than would be the case for a less geographically concentrated investment
portfolio. These Funds may not invest more than 25% of their respective total
assets in securities of non-governmental issuers whose principal business
activities are in the same industry.

DURATION

Duration incorporates a bond's yield, coupon interest payments, final
maturity and call features into a single measure. Depending on the relative
magnitude of these payments and features, the market values of debt obligations
may respond differently to changes in the level and structure of interest rates.
Duration is a measure of the approximate price sensitivity of a bond (or bond
mutual fund) to a one percent (1%) rise or fall in interest rates. The
Government Fund generally maintains a duration of three to six years, the
Taxable Short Duration

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Municipal Fund and Short Duration High-Yield Municipal Fund will have an average
portfolio duration of three years or less, and the High-Yield Municipal Bond
Fund will have an average portfolio duration of greater than five years. None of
the other Funds has specific portfolio duration limitations.

For any fixed-income security with interest payments occurring prior to the
payment of principal, duration is always less than maturity. In general, all
other things being equal, the lower the stated or coupon rate of interest of a
fixed-income security, the longer the duration of the security; conversely, the
higher the stated or coupon rate of interest of a fixed-income security, the
shorter the duration of the security. Duration is not a static measure or a
complete measure of portfolio risk. Changing conditions and perceptions,
including market fluctuations and changing credit fundamentals, may modify an
obligation's duration and, independently, have other adverse or positive effects
on the value of a security.

Futures, options, and options on futures have durations that, in general,
are closely related to the duration of the securities which underlie them.
Holding long futures or call option positions will lengthen a Fund's duration by
approximately the same amount that holding an equivalent amount of the
underlying securities would. Short futures or put option positions have
durations roughly equal to the negative duration of the securities that underlie
these positions, and have the effect of reducing portfolio duration by
approximately the same amount that selling an equivalent amount of the
underlying securities would have.

FOREIGN CURRENCY TRANSACTIONS

To manage the currency risk accompanying investments in foreign securities
and to facilitate the purchase and sale of foreign securities, the Funds may
engage in foreign currency transactions on a spot, or cash, basis at the spot
rate prevailing in the foreign currency exchange market or through forward
foreign currency exchange contracts ("forward contracts"). Forward contracts
are contractual obligations to purchase or sell a specific currency at a future
date (or within a specified time period) at a price set at the time of the
contract. These contracts are usually entered into with banks and broker-
dealers, are not exchange traded and are usually for less than one year, but may
be renewed.

The Funds may use these instruments for hedging or any other lawful purpose
consistent with their respective investment objectives.

When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock in" the U.S. dollar
price of the security. By entering into a forward contract for the purchase or
sale, for a fixed amount of U.S. dollars, of the amount of foreign currency
involved in the underlying security transaction, a Fund will be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received.

In addition, when Heartland Advisors believes that the currency of a
particular foreign country may suffer a substantial decline against another
currency, including the U.S. dollar, it may enter into a forward contract to
sell or buy the amount of the former foreign currency, approximating the value
of some or all of a Fund's portfolio securities denominated in such foreign
currency. Alternatively, where appropriate, a Fund may hedge all or part of its
foreign currency exposure through the use of a basket of currencies or a proxy
currency where such currency or currencies act as an effective proxy for other
currencies. In such a case, a Fund may enter into a forward contract where the
amount of the foreign currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging technique may be
more efficient and economical than entering into separate forward contracts for
each currency it holds.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and

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the date it matures. The projection of short-term currency market movement is
extremely difficult and the successful execution of a short-term hedging
strategy is highly uncertain. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer-term
investment decisions made with regard to overall diversification strategies.
However, Heartland Advisors believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of a Fund will be served.

Successful use of forward currency contracts will depend on Heartland
Advisors' skill in analyzing and predicting currency values. Forward contracts
may substantially change a Fund's investment exposure to changes in currency
exchange rates, and could result in losses to the Fund if currencies do not
perform as Heartland Advisors anticipates. For example, if a currency's value
rose at a time when Heartland Advisors had hedged a Fund by selling that
currency in exchange for U.S. dollars, the Fund would be unable to participate
in the currency's appreciation. There might be imperfect correlation, or even
no correlation, between price movements of an instrument and price movements of
investments being hedged. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as speculative or
other pressures on the markets in which these instruments are traded. In
addition, a Fund's use of currency-related derivative instruments is always
subject to the risk that the currency in question could be devalued by the
foreign government. In such a case, any long currency positions would decline
in value and could adversely affect any hedging position maintained by a Fund.
There is no assurance that Heartland Advisors' use of forward currency contracts
will be advantageous to a Fund or that it will hedge at an appropriate time.

Forward foreign exchange contracts may or may not be treated as Section
1256 contracts or straddles under the Internal Revenue Code. See "Types of
Securities - Derivative Instruments - Federal Tax Treatment of Options and
Futures Contracts."

INFLUENCE OR CONTROL OVER PORTFOLIO COMPANIES

As a shareholder of a portfolio company, each Fund reserves the right to
freely communicate its views on matters of policy to the company's management,
board of directors and other shareholders when a policy may affect the value of
the Fund's investment. In exercising this right, each of the Funds (other than
the Government Fund and, to a lesser degree, the Large Cap Value and Mid Cap
Value Funds) may, from time to time, use its ownership interest in a portfolio
company to seek to influence or control the company's management. For example,
a Fund might take steps, either individually or as part of a group, (a) to
actively support, oppose or influence a company's decision-making, (b) to seek
changes in a company's management or board of directors, (c) to effect the sale
of all or some of a company's assets or (d) to vote to participate in or oppose
a takeover of a portfolio company or an acquisition by a portfolio company. A
Fund would engage in such activities in an effort to protect and maximize the
value of its investment on behalf of the Fund's shareholders. The extent to
which a Fund might invest for purposes of obtaining control or influencing
management would depend, among other things, on facts and circumstances specific
to the issuer as well as general market conditions.

It is expected that only the Value and Value Plus Funds, and to a lesser
degree the Mid Cap Value and Large Cap Value Funds, would make investments for
control on a selective basis when Heartland Advisors believes it would be in the
best interests of the Fund and its shareholders.

LENDING PORTFOLIO SECURITIES

Each Fund may lend its portfolio securities to institutional investors or
broker-dealers up to a maximum of one-third of its total 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
lent. The collateral received by a Fund will be invested in short-term debt
instruments. A Fund receives amounts equal to earned income for having made the
loans. A 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

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more or less than their value at the beginning of the loan. In determining
whether to lend its portfolio securities, a 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. A Fund may pay a fee to
placing brokers in connection with loans of its portfolio securities.

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with certain banks or
nonbank dealers. In a repurchase agreement, a Fund buys a security at one
price, and at the time of sale the seller agrees to repurchase the obligation at
a mutually agreed upon time and price (usually within seven days). The
repurchase agreement thereby determines the yield during the purchaser's holding
period, while the seller's obligation to repurchase is secured by the value of
the underlying security. Repurchase agreements which mature in more than seven
days will be treated as illiquid securities under the guidelines adopted by
Heartland's Board of Directors and will be subject to each Fund's limitation on
investments in illiquid securities. See "Types of Securities - Illiquid
Securities" above.

Heartland Advisors will monitor, on an ongoing basis, the value of the
underlying securities to ensure that the value equals or exceeds the repurchase
price plus accrued interest. Since the underlying securities are not owned by a
Fund but only constitute collateral for the seller's obligation to repay the
purchase price, repurchase agreements could involve certain risks in the event
of a default or insolvency of the other party to the agreement, including
possible delays or restrictions upon the Fund's ability to dispose of and costs
in connection with the disposal of the underlying securities. Although no
definitive creditworthiness criteria are used, Heartland Advisors reviews the
creditworthiness of the banks and nonbank dealers with which the Funds enter
into repurchase agreements to evaluate those risks. A Fund may, under certain
circumstances, deem repurchase agreements collateralized by U.S. government
securities to be investments in U.S. government securities.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

Each 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 agrees to repurchase the instrument at a particular price
and time. A Fund generally retains the right to interest and principal payments
on the security. While a reverse repurchase agreement is outstanding, a Fund
will establish and maintain a segregated account consisting of cash or other
liquid assets, either of which may be quoted or denominated in any currency,
having a value at least equal to the Fund's obligation under the agreement.

Each Fund may also enter into dollar rolls, in which the Fund would sell
securities for delivery in the current month and simultaneously contract to
purchase substantially similar securities on a specified future date. While a
Fund would forego principal and interest paid on the securities during the roll
period, the Fund would be compensated by the difference between the current
sales price and the lower price for the future purchase as well as by any
interest earned on the proceeds of the initial sale. A Fund also could be
compensated through the receipt of fee income equivalent to a lower forward
price. At the time of entering into a dollar roll, a Fund will establish and
maintain a segregated account consisting of cash or other liquid assets, either
of which may be quoted or denominated in any currency, having a value at least
equal to the Fund's obligation to buy the securities.

To the extent the value of the security that a Fund agrees to purchase
pursuant to a reverse repurchase agreement or a dollar roll declines, the Fund
may experience a loss. Reverse repurchase transactions and dollar rolls may
increase fluctuations in the market value of a Fund's assets and may be viewed
as a form of leverage. In determining whether to enter into a reverse repurchase
agreement or dollar roll, a Fund will take into account the creditworthiness of
the counterparty.

34
<PAGE>

SHORT SALES

Each Fund (other than the Government Fund) may engage in short sales of
securities under certain circumstances. Selling securities "short against the
box" involves selling a security that a 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. 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. A Fund may also engage in short sales of securities of an issuer
("acquirer") that has publicly announced a proposed or a pending transaction in
which a portfolio security of the Fund will be converted into securities of the
acquirer. A Fund will maintain a segregated collateral account with its
custodian to cover open short positions in acquirer securities. If the value of
an acquirer'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.

STANDBY COMMITMENTS

To facilitate portfolio liquidity, the Funds may obtain standby commitments
from brokers, dealers or banks with respect to debt securities in their
portfolios. A standby commitment gives the holder the right to sell the
underlying security to the seller at an agreed-upon price, generally equal to
the amortized cost of the underlying security plus accrued interest, on certain
dates or within a specified period. Standby commitments generally increase the
cost of the acquisition of the underlying security, thereby reducing its yield.
Standby commitments are subject to the issuer's ability to fulfill its
obligation upon demand. Although no definitive creditworthiness criteria are
used, Heartland Advisors evaluates those risks by reviewing the creditworthiness
of the brokers, dealers and banks from which a Fund obtains standby commitments
to evaluate those risks.

INVESTMENT RESTRICTIONS

Each Fund has adopted the following investment restrictions. Unless
otherwise expressly provided herein, any restriction that is expressed as a
percentage is adhered to at the time of investment or other transaction; a later
change in percentage resulting from changes in the value of a Fund's assets will
not be considered a violation of the restriction. Calculations based on total
assets do not include cash collateral held in connection with portfolio lending
activities.

Restrictions that are designated as fundamental policies cannot be changed
without the majority approval of shareholders as defined in the 1940 Act. Non-
fundamental restrictions may be changed by the Heartland Board of Directors
without shareholder approval.

Under the 1940 Act, "majority approval of shareholders" means approval by
the lesser of (1) the holders of 67% or more of a Fund's shares represented at a
meeting of shareholders at which the holders of at least 50% of the Fund's
outstanding shares are present in person or by proxy or (2) more than 50% of the
Fund's outstanding shares.

FUNDAMENTAL RESTRICTIONS COMMON TO THE FUNDS

As a matter of fundamental policy, which may not be changed without
shareholder approval, no Fund may:

35
<PAGE>

1. Concentration. Invest more than 25% of total assets in securities of
--------------
non-governmental issuers whose principal business activities are in the same
industry; provided, however, that there shall be no limitation on the purchase
of Municipal Obligations and of securities issued or guaranteed by national
governments/1/, their agencies or instrumentalities.

2. Real Estate. Purchase or sell real estate, except the Fund may (i)
------------
acquire real estate as a result of ownership of securities or other instruments,
(ii) invest in securities or other instruments backed by real estate, and (iii)
invest in securities of companies that are engaged in the real estate business
and those that invest in real estate, including, but not limited to, real estate
investment trusts.

3. Borrowing. Borrow money or property, except the Fund may (i) make
----------
investments or engage in other transactions permissible under the 1940 Act which
may involve borrowing, provided that the combination of such activities shall
not exceed 33 1/3% of total assets (including the amount borrowed), less the
Fund's liabilities (other than borrowings), and (ii) borrow up to an additional
5% of its total assets (not including the amount borrowed) from a bank for
temporary purposes. Any borrowing which comes to exceed these limits shall be
reduced in accordance with applicable law.

4. Loans. Make loans, except the Fund may (i) acquire publicly
------
distributed or privately placed debt securities and purchase debt, (ii) purchase
money market instruments and enter into repurchase agreements, and (iii) lend
portfolio securities. No Fund may lend portfolio securities if, as a result
thereof, the aggregate of all such loans would exceed 33 1/3% of total assets
taken at market value at the time of such loan.

5. Underwriting. Underwrite the securities of other persons, except to
-------------
the extent that the Fund may be deemed to be an underwriter within the meaning
of the Securities Act in connection with the purchase and sale of portfolio
securities.

6. Senior Securities. Issue senior securities, except to the extent
------------------
permitted under the 1940 Act.

7. Commodity Interests. Purchase or sell physical commodities unless
--------------------
acquired as a result of ownership of securities or other instruments, except the
Fund may purchase or sell futures contracts, options on futures contracts and
other derivative instruments, and it may invest in securities or other
instruments backed by physical commodities or in the securities of companies
engaged in commodities businesses.

OTHER FUNDAMENTAL RESTRICTIONS

In addition to the fundamental instructions common to all the Funds, the
Funds have fundamental policies on diversification, pledging of assets, short
sales and affiliate transactions, as described below.

DIVERSIFICATION. Each of the Large Cap Value, Mid Cap Value, Short
Duration High-Yield Municipal and High-Yield Municipal Bond Funds (a) may not,
with respect to 75% of its total assets, invest more than 5% of the fair market
of its assets in securities of any one issuer, other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities; and (b)
may not, with respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of an issuer.

The Value Plus Fund (a) may not, with respect to 75% of its total assets,
invest more than 5% of the fair market value of its assets in securities of any
one issuer, other than securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, and (b) may not invest more than 10% of the
fair market value of

_____________________

/1/ For so long as it is the position of the staff of the SEC that foreign
governments are industries for purposes of mutual fund policies concerning
concentration, they shall not be included within the types of governmental
issuers excluded from the Funds' concentration policies.

36
<PAGE>

its total assets in securities of any one issuer, other than securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. The
Value Plus Fund also may not purchase more than 10% of the outstanding voting
securities of an issuer.

Each of the Value and Government Funds may not invest more than 5% of the
fair market value of its assets in securities of any one issuer, except for U.S.
Government agency securities and securities backed by the U.S. Government, its
agencies or instrumentalities, which may be purchased without limitation. For
the purposes of this limitation, the Funds will regard the entity which has the
ultimate responsibility for payment of principal and interest as the issuer. In
addition, each of the Value and Government Funds may not purchase more than 10%
of the outstanding voting securities of an issuer.

The Taxable Short Duration High-Yield Municipal Fund may not, with respect
to 75% of total assets, purchase the securities of any one issuer, except for
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if, as a result, (a) more than 5% of total assets would be
invested in the securities of that issuer, or (b) the Fund would hold more than
10% of the outstanding voting securities of that issuer.

The Wisconsin Tax Free Fund may not invest in a security if, as a result
thereof, more than 25% of the Fund's total assets would be invested in a single
issuer, other than securities issued or guaranteed by the U.S. Government, or a
state or territory of the United States, or the District of Columbia, or their
agencies, instrumentalities, municipalities or political subdivisions. In
addition, the Wisconsin Tax Free Fund may not purchase more than 10% of the
outstanding voting securities of an issuer.

PLEDGING OF ASSETS. Each of the Large Cap Value and Mid Cap Value Funds
may not mortgage, hypothecate or pledge any of its assets as security for any of
its obligations, except as required for otherwise permissible borrowings
(including reverse repurchase agreements), short sales, futures, options and
other hedging activities. These Funds also will not pledge more than 15% of its
net assets to secure its permitted borrowings.

Each of the Value Plus, Value and Government Funds may not pledge more than
15% of its net assets to secure its permitted borrowings.

The Taxable Short Duration Municipal Fund has no fundamental policy on
pledging of assets.

Each of the Short Duration High-Yield Municipal and High-Yield Municipal
Bond Funds may not mortgage, hypothecate or pledge any of its assets as security
for any of its obligations, except as required for otherwise permissible
borrowings, including reverse repurchase agreements, when-issued and delayed-
delivery securities, futures, options and other hedging activities.

The Wisconsin Tax Free Fund may not pledge more than 10% of its net assets
to secure its permitted borrowings.

SHORT SALES. The Government Fund may not effect short sales of securities.

The Value Fund may sell securities short when it either: (a) holds a long
position in the same security which equals or exceeds the number of shares sold
short, or (b) holds a long position in a security with respect to which there
has been a public announcement of a proposed transaction that would result in
the conversion of the securities so held into an equal or greater number of
shares of the securities sold short; provided that the Fund may not effect any
such short sale of securities if, as a result thereof, the aggregate value of
all of its open short positions would exceed 5% of the Fund's total assets, or
if more than 10% of its net assets would be held as collateral for such short
positions.

The other Funds do not have a fundamental restriction governing short
sales.

37
<PAGE>

AFFILIATE PURCHASES. The Government Fund may not purchase or retain the
securities of any issuer if the officers, directors, advisors or managers of the
Fund owning beneficially more than 1.5% of the securities of such issuer
together own beneficially 5% of such securities; provided no officer or director
shall be deemed to own beneficially securities held in other accounts managed by
such person or held in employee or similar plans for which such person acts as
trustee.

The other Funds do not have a fundamental restriction governing affiliate
purchases.

NON-FUNDAMENTAL RESTRICTIONS

Each Fund's investment objective (set forth in its Prospectus) and the
following non-fundamental restrictions are subject to change by Heartland's
Board of Directors without shareholder approval.

No Fund may:

1. Investment Companies. Purchase securities of other open-end or
---------------------
closed-end investment companies, except as permitted by the 1940 Act. Subject
to approval by the Heartland Board of Directors, the Fund may invest all (or
substantially all) of its assets in the securities of a single open-end
investment company (or series thereof) with the same investment objective and
substantially the same investment policies and restrictions as the Fund in
connection with a "master/feeder" arrangement. The Fund and one or more other
mutual funds or other eligible investors with identical investment objectives
("Feeders") would invest all (or a portion) of their respective assets in the
shares of another investment company (the "Master") that had the same investment
objective and substantially the same investment policies and restrictions as the
Feeders. The Fund would invest in this manner in an effort to achieve economies
of scale associated with having the Master make investments in portfolio
companies on behalf of the Feeders.

2. Illiquid Securities. Purchase a security if, as a result, more than
--------------------
15% of net assets would be invested in illiquid securities.

3. Margin Purchases. Purchase securities on margin, except that the Fund
-----------------
may (i) obtain short-term credit necessary for the clearance and settlement of
purchases and sales of portfolio securities, and (ii) make margin deposits as
required in connection with permissible options, futures, options on futures,
short selling and other arbitrage activities.

4. Short Sales. Sell securities short, unless the Fund owns or has the
------------
right to obtain securities equivalent in kind and amount to the securities sold
short, or unless it covers such short sale as required by the current rules and
positions of the Securities and Exchange Commission ("SEC") or its staff, and
provided that transactions in options, futures, options on futures, or other
derivative instruments are not deemed to constitute selling securities short.

5. Concentration. For purposes of a Fund's fundamental restriction on
--------------
concentration, industries shall be determined by reference to the
classifications specified in the Fund's annual and semiannual reports. For so
long as it is the position of the staff of the SEC that foreign governments are
industries for purposes of such restriction, investments in foreign governments
shall be so limited.

6. Futures Contracts. Purchase a futures contract or an option on a
------------------
futures contract if, with respect to positions in futures and futures options
which do not represent bona fide hedging transactions, the aggregate initial
margin and premiums required to establish such positions, less the amount by
which such positions are in the money within the meaning of the Commodity
Exchange Act, would exceed 5% of the Fund's net assets.

7. Real Estate Investment Trusts. Invest more than 10% of its total
------------------------------
assets in real estate investment trusts.

38
<PAGE>

PORTFOLIO TURNOVER

Portfolio turnover for each Fund is the ratio of the lesser of annual
purchases or sales of portfolio securities by the Fund to the average monthly
value of portfolio securities owned by the Fund, not including securities
maturing in less than 12 months. A 100% portfolio turnover rate would occur,
for example, if the lesser of the value of purchases or sales of a Fund's
portfolio securities for a particular year were equal to the average monthly
value of the portfolio securities owned by the Fund during the year. For the
fiscal years ended December 31, 1998 and 1997, the portfolio turnover rates for
the Funds were as follows:

<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Large Cap Value Fund 48% 30%

Mid Cap Value Fund 47% 48%

Value Plus Fund 64% 74%

Value Fund 36% 55%

Government Fund 90% 143%

Taxable Short Duration Municipal Fund N/A N/A

Short Duration High-Yield Municipal Fund 215% 175%

High-Yield Municipal Bond Fund 223% 439%

Wisconsin Tax-Free Fund 16% 8%
</TABLE>

No information regarding portfolio turnover rates for 1997 and 1998 is available
for the Taxable Short Duration Municipal Fund because it did not commence
operations until December 29, 1998.

MANAGEMENT

Heartland is governed by a Board of Directors that oversees its business
affairs, and meets regularly to review the Funds' investments, performance and
expenses. The Board elects the officers of Heartland and hires the Funds'
service providers, including the Funds' investment advisor, Heartland Advisors,
Inc. The policy of Heartland is that the majority of Board members are
independent of Heartland Advisors. The Directors and officers of Heartland are
listed below, together with their principal occupations during the past five
years.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE POSITION WITH HEARTLAND DURING PAST FIVE YEARS
- ---------------- --- ----------------------- ----------------------
<S> <C> <C> <C>
William J. Nasgovitz 54 President and Director* President, Chief Executive Officer
790 North Milwaukee Street and Director, Heartland Advisors,
Milwaukee, WI 53202 Inc., since 1982; Director of Capital
Investments, Inc., since 1989 (small
business investment company).
</TABLE>

39
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE POSITION WITH HEARTLAND DURING PAST FIVE YEARS
- ---------------- --- ----------------------- ----------------------
<S> <C> <C> <C>
Willard H. Davidson 80 Director Director of Artos Engineering
3726 North Lake Drive Company since 1984; financial and
Milwaukee, WI 53211 business consultant since 1984.

Hugh F. Denison 53 Director* Educator; Shareholder Ombudsman,
790 North Milwaukee Street Heartland Advisors, Inc., since
Milwaukee, WI 53202 January 1998; Vice President, Di-
rector of Research and Director,
Heartland Advisors, 1988 to 1996.

Jon D. Hammes 51 Director President, The Hammes Company (a
Suite 305 commercial real estate development
18000 West Sarah Lane company) since 1991.
Brookfield, WI 53045

Patrick J. Retzer 41 Vice President, Senior Vice President and Director of
790 North Milwaukee Street Treasurer Heartland Advisors, Inc. since 1987;
Milwaukee, WI 53202 and Director* Treasurer, Heartland Advisors, 1987
to September 1998.

A. Gary Shilling 62 Director President, A. Gary Shilling &
500 Morris Avenue Company, Inc. (economic con-
Springfield, NJ 07081 sultants and investment advisors)
since 1978.

Allan H. Stefl 55 Director Senior Vice President,
800 North Brand Boulevard Communications, Nestle USA, since
Glendale, CA 91203 1993.

Linda F. Stephenson 58 Director President and Chief Executive Of-
100 East Wisconsin Avenue ficer, Zigman Joseph Stephenson (a
Milwaukee, WI 53202 public relations and marketing
communications firm) since 1989.

Jilaine Hummel Bauer 43 Vice President Senior Vice President and General
790 North Milwaukee Street Counsel, Heartland Advisors, Inc.
Milwaukee, WI 53202 since January 1998; Senior Vice Pres-
ident, Stein Roe & Farnham
Incorporated, 1992 to 1997.

Paul T. Beste 43 Vice President and Prin- Senior Vice President--Investment
790 North Milwaukee Street cipal Accounting Officer Operations, Heartland Advisors, Inc.
Milwaukee, WI 53202 since September 1998; Investment
Operations Officer, Heartland
Advisors, 1997 to 1998; Director of
Taxes/Compliance, Strong Capital
Management, Inc., 1992 to 1997.
</TABLE>

40
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE POSITION WITH HEARTLAND DURING PAST FIVE YEARS
- ---------------- --- ----------------------- ----------------------
<S> <C> <C> <C>
Kenneth J. Della 36 Vice President Senior Vice President and Treasurer,
790 North Milwaukee Street Heartland Advisors, Inc. since
Milwaukee, WI 53202 September 1998; Chief Financial
Officer, Heartland Advisors, 1995 to
1998; employed by Heartland
Advisors since 1992.

Lois J. Schmatzhagen 56 Secretary Secretary, Heartland Advisors, Inc.
790 North Milwaukee Street since 1988.
Milwaukee, WI 53202
</TABLE>

____________________

* Directors who are "interested persons" (as defined in the 1940 Act) of
Heartland Advisors.

Heartland pays the compensation of the five Directors who are not officers,
directors or employees of Heartland Advisors. The following compensation was
paid to the other Directors who are not "interested persons" of Heartland
Advisors for their services during the fiscal year ended December 31, 1998:

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE PENSION OR FROM HEARTLAND
COMPENSATION FROM RETIREMENT AND FUND
DIRECTOR HEARTLAND BENEFITS COMPLEX
-------- --------- --------- -------
<S> <C> <C> <C>
Willard H. Davidson $32,000 None $32,000
Jon D. Hammes $32,000 None $32,000
A. Gary Shilling $30,000 None $30,000
Linda F. Stephenson $32,000 None $32,000
Allen H. Stefl* $ 6,000 None $ 6,000
</TABLE>

__________________________

* Mr. Stefl joined the Board in October 1998.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of January 29, 1999, no person controlled any of the Funds. As of
January 29, 1999, the Directors and officers of Heartland Group, Inc. as a group
(13 persons) owned less than 1% of the outstanding shares of the Mid Cap Value
Fund, Value Plus Fund, Value Fund, Short Duration High-Yield Municipal Fund,
High-Yield Municipal Bond Fund and Wisconsin Tax Free Fund, and owned 3.1% of
the Large Cap Value Fund, 2.8% of the Government Fund and 3.9% of the Taxable
Short Duration Municipal Fund. As of such date, no person was known to
management to own, beneficially or of record, 5% or more of the outstanding
shares of any of the Funds except as follows:

41
<PAGE>

<TABLE>
<CAPTION>
RECORD OR BENEFICIAL HOLDER FUND NO. OF SHARES (%)
- --------------------------- ---- -----------------
<S> <C> <C>
Charles Schwab & Co., Inc. Large Cap Value 66,629 (10.6%)
ATTN: Mutual Funds Mid Cap Value 1,582,714 (57.8%)
101 Montgomery Street Value Plus 2,618,723 (22.1%)
San Francisco, CA 94104-4122 Value 9,219,322 (18.5%)
Government 663,246 (12.4%)
Short Duration High-Yield Municipal 4,153,630 (27.4%)
High-Yield Municipal Bond 2,203,817 (27.5%)

National Financial Services Mid Cap Value 147,211 (5.4%)
Corporation FBO The Exclusive Value Plus 1,358,328 (11.5%)
Benefit of Our Customers Value 3,634,590 (7.3%)
One World Financial Center Short Duration High-Yield Municipal 1,809,253 (11.9%)
5th Floor, 200 Liberty Street High-Yield Municipal Bond 1,045,483 (13.1%)
New York, NY 10281-1003

The Trust Company of Knoxville Value Plus 1,330,925 (11.2%)
P.O. Box 789
Knoxville, TN 37901-0789

Heartland Advisors, Inc. Large Cap Value 43,522 (6.9%)
ATTN: Ken Della Taxable Short Duration Municipal 10,145 (5.4%)
790 North Milwaukee Street
Milwaukee, WI 53202

Catherine J. Polaski Large Cap Value 41,888 (6.7%)
5329 Highway 38
Franksville, WI 53126

Mary T. Smarelli and John V. Doherty Taxable Short Duration Municipal 33,244 (17.8%)
Transit Express Inc., Profit Sharing Acct.
424 W. Cherry Street
Milwaukee, WI 53212-3820

Lorraine J. Koeper Taxable Short Duration Municipal 24,155 (12.9%)
4396 N. Wildwood Avenue
Shorewood, WI 53211-1436
</TABLE>

INVESTMENT ADVISORY AND OTHER SERVICES

Heartland Advisors provides investment management and administrative
services to the Funds pursuant to identical Investment Advisory Agreements with
respect to all of the Funds, except the Taxable Short Duration Municipal Fund,
for which it provides such services pursuant to a separate Investment Management
Agreement and an Administration Agreement. All of these agreements are
collectively referred to as the "Management Agreements." William J. Nasgovitz,
a Director and the President of Heartland, controls Heartland Advisors by virtue
of his ownership of a majority of its outstanding capital stock and serves as
its President and a Director. In addition to serving as investment advisor to
the Funds, Heartland Advisors also serves as the distributor for the shares of
the Funds. Heartland Advisors, founded in 1982, serves as the investment
advisor for Heartland's nine equity and fixed income mutual funds, and also
provides investment management services for individuals, institutions and
retirement plans. As of January 29, 1999 Heartland Advisors had approximately
$3 billion in

42
<PAGE>

assets under management. Mr. Nasgovitz intends to retain control of Heartland
Advisors through the continued ownership of a majority of its outstanding voting
stock.

Under the Management Agreements, each of the Large Cap Value, Mid Cap Value
and Value Funds pays Heartland Advisors an annual management fee at the rate of
0.75% of the respective Fund's average daily net assets; the Value Plus Fund
pays Heartland Advisors an annual management fee at the rate of 0.70% of the
Fund's average daily net assets; the Government Fund pays Heartland Advisors an
annual management fee at the rate of 0.65% of the first $100 million of the
Fund's average daily net assets, 0.50% of the next $400 million of assets, and
0.40% of assets in excess of $500 million; the Taxable Short Duration Municipal
Fund pays Heartland Advisors an annual fee for its investment management
services at the rate of 0.45% of the average of the Fund's average daily net
assets and an annual fee for its administrative services at the rate of 0.15% of
the Fund's average daily net assets; the Short Duration High-Yield Municipal
Fund pays Heartland Advisors an annual management fee at the rate of 0.40% of
the Fund's average daily net assets; the High-Yield Municipal Bond Fund pays
Heartland Advisors an annual management fee at the rate of 0.60% of the Fund's
average daily net assets; and the Wisconsin Tax Free Fund pays Heartland
Advisors an annual management fee at the rate of 0.65% of the Fund's average
daily net assets. The fees are paid in monthly installments. Heartland
Advisors has agreed to certain contractual fee waivers and expense
reimbursements as discussed in the Funds' Prospectuses.

The following table sets forth the management fees actually paid by each
Fund to Heartland Advisors and the amount of management fees waived by Heartland
Advisors for the last three fiscal years or, if shorter, since commencement of
the Fund's operations:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
LARGE CAP VALUE FUND (10/11/96):
Fees actually paid $ 2,325 $ 26,585 $ 0
Fees waived $ 0 $ 13,774 $ 63,119
MID CAP VALUE FUND (10/11/96):
Fees actually paid $ 6,037 $ 184,843 $ 308,896
Fees waived $ 0 $ 0 $ 0
VALUE PLUS FUND:
Fees actually paid $ 218,448 $ 1,292,331 $ 2,030,188
Fees waived $ 0 $ 0 $ 0
VALUE FUND:
Fees actually paid $10,877,255 $14,673,206 $14,781,523
Fees waived $ 0 $ 0 $ 0
GOVERNMENT FUND:
Fees actually paid $ 291,423 $ 146,128 $ 133,403
Fees waived $ 87,427 $ 155,522 $ 219,542
TAXABLE SHORT DURATION MUNICIPAL FUND
(12/28/98):
Fees actually paid N/A N/A $ 0
Fees waived N/A N/A $ 30
</TABLE>

43
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
SHORT DURATION HIGH-YIELD MUNICIPAL FUND
(1/2/97):
Fees actually paid N/A $ 0 $ 443,079
Fees waived N/A $ 214,608 $ 144,279

HIGH-YIELD MUNICIPAL BOND FUND (1/2/97):
Fees actually paid N/A $ 0 $ 255,237
Fees waived N/A $ 82,569 $ 77,559
WISCONSIN TAX-FREE FUND:
Fees actually paid $ 789,698 $ 819,186 $ 889,967
Fees waived $ 0 $ 0 $ 0
</TABLE>

Under the Management Agreements, Heartland Advisors manages the investment
operations of the Funds and provides administrative services. Subject to the
supervision and control of the Board of Directors, Heartland Advisors is
authorized to formulate and maintain a continuing investment program with
respect to the Funds and to determine the selection, amount, and time to buy,
sell or lend securities or other investments for the Funds, including the
selection of entities with or through which such purchases, sales or loans are
to be effected. In addition, Heartland Advisors supervises the business and
affairs of the Funds and provides such services and facilities as may be
required for effective administration of the Funds. Heartland Advisors will
permit any of its officers or employees to serve without compensation from the
Funds as directors or officers of Heartland if elected to such positions.

Heartland Advisors at its own expense furnishes all executive and other
personnel to the Funds, paying all salaries and fees of the officers and
directors of Heartland who are employed by Heartland Advisors or its affiliates.
In addition, Heartland Advisors provides office space and other facilities
required to render the services set forth above. Heartland Advisors is not
required to pay or provide any credit for services provided by Heartland's
custodian, transfer agent or other agents without additional costs to Heartland.
Moreover, if Heartland Advisors pays or assumes any expenses of Heartland or a
Fund which it is not required to pay or assume under the Management Agreements,
Heartland Advisors will not be obligated to pay or assume the same or similar
expense in the future.

The Funds bear all their other expenses including all charges of
depositories, custodians and other agencies for the safekeeping and servicing of
their cash, securities and other property; all expenses of maintaining and
servicing shareholder accounts, including all charges for transfer, shareholder
recordkeeping, dividend disbursing, redemption and other agents for the benefit
of the Funds; all charges for equipment or services used for obtaining price
quotations or for communication with the Funds' custodian, transfer agent or any
other agent selected by Heartland; all charges for accounting services provided
to the Funds by Heartland Advisors or any other provider of such services; all
charges for services of Heartland's independent auditors and legal counsel; all
compensation of directors and officers (other than those employed by or who
serve as directors of Heartland Advisors or its affiliates), all expenses of
Heartland's officers and directors incurred in connection with their services to
the Funds, and all expenses of meetings of the directors or committees thereof;
all expenses incidental to holding meetings of shareholders, including expenses
of printing and supplying to each record-date shareholder notice and proxy
solicitation materials, and all other proxy solicitation expenses; all expenses
of printing of annual or more frequent revisions of the Funds' prospectuses,
statements of additional information and shareholder reports, and of supplying
to each then existing shareholder copies of such materials as required by
applicable law; all expenses of bond and insurance coverage required by law or
deemed advisable by the Heartland Board of

44
<PAGE>

Directors; all brokers' commissions and other normal charges incident to the
purchase, sale or lending of portfolio securities; all taxes and governmental
fees payable to federal, state or other governmental agencies, domestic or
foreign, including all stamp or other transfer taxes; all expenses of
registering and maintaining the registration of Heartland under the 1940 Act
and, to the extent no exemption is available, expenses of registering shares
under the Securities Act of 1933, of qualifying and maintaining qualification of
Heartland and of shares of the Funds for sale under the securities laws of
various states or other jurisdictions, and of registration and qualification of
Heartland under all other laws applicable to Heartland or its business
activities; all interest on indebtedness and commitment fees for lines of
credit, if any, incurred by Heartland or the Funds; and all fees, dues and other
expenses incurred by Heartland in connection with membership in any trade
association or other investment company organization. Any expenses that are
attributable solely to the organization, operation or business of a particular
Fund shall be paid solely out of that Fund's assets. Any expenses incurred by
Heartland that are not solely attributable to a particular Fund are apportioned
in such a manner as Heartland Advisors determines is fair and appropriate, or as
otherwise specified by the Board of Directors.

The Management Agreements provide that neither Heartland Advisors, nor any
of its directors, officers, shareholders, agents or employees shall have any
liability to Heartland or any shareholder of Heartland for any error of
judgment, mistake of law, loss arising out of any investment, or any other act
or omission in the performance by Heartland Advisors of its duties under the
agreement, except for loss or liability resulting from willful misfeasance, bad
faith or gross negligence on Heartland Advisors' part or from reckless disregard
by Heartland Advisors of its obligations and duties under the agreement.

BOOKKEEPING AND ACCOUNTING AGREEMENT

Heartland Advisors receives a fee for performing certain bookkeeping and
accounting services for the Funds pursuant to a separate agreement with
Heartland. For services provided to each Fund, Heartland Advisors receives a
monthly fee at an annual rate of $12,500 plus: in the case of the Government
Fund, Taxable Short Duration Municipal Fund, Short Duration High-Yield Municipal
Fund, High-Yield Municipal Bond Fund and Wisconsin Tax Free Fund, 0.0085 of 1%
of each such Fund's average daily net assets over $50 million; in the case of
the Large Cap Value Fund, Mid Cap Value Fund and Value Fund, 0.0075 of 1% of
each such Fund's average daily net assets over $50 million; and in the case of
the Value Plus Fund, 0.008 of 1% of such Fund's average daily net assets over
$50 million.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

Firstar Bank Milwaukee, N.A. acts as custodian for the Funds (the
"Custodian"). The Custodian is responsible for, among other things, holding all
securities and cash, handling the receipt and delivery of securities, and
receiving and collecting income from investments. Subcustodians may provide
custodial services for certain assets of the Funds held domestically and outside
the U.S. Firstar Mutual Fund Services, LLC acts as transfer and dividend
disbursing agent for the Funds. The address for Firstar Bank Milwaukee, N.A. is
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, and the address for
Firstar Mutual Fund Services, LLC is P.O. Box 701, Milwaukee, Wisconsin 53201-
0701.

INDEPENDENT PUBLIC ACCOUNTANTS

PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, serves as independent public accountants for the Funds. In
this capacity, the accountants audit the annual financial statements of the
Funds and report thereon, prepare and/or review certain regulatory reports and
the federal income tax returns, and perform other professional accounting,
auditing, tax and accounting services when engaged by Heartland to do so.

45
<PAGE>

DISTRIBUTION OF SHARES

Heartland Advisors acts as principal underwriter and distributor of the
shares of the Funds. Heartland Advisors has agreed to use its "best efforts" to
distribute the Funds' shares, but has not committed to purchase or sell any
specific number of shares. The Distribution Agreement for each Fund will
continue in effect from year to year as long as it is approved at least annually
by the vote of a majority of the members of Heartland's Board who are not
interested persons of Heartland Advisors or the Fund and by the vote of either a
majority of Heartland's Board or a majority of the outstanding voting securities
of the Fund. The Distribution Agreement may be terminated upon 60 days' written
notice by either party and will automatically terminate in the event of its
assignment. Under the Distribution Agreement, Heartland Advisors will pay for
the costs and expenses of preparing, printing and distributing materials not
prepared by a Fund and used by Heartland Advisors in connection with its
offering of shares for sale to the public, including the additional costs of
printing copies of the prospectus and of annual and interim reports to
shareholders other than copies required for distribution to shareholders or for
filing under the federal securities laws, and any expenses of advertising
incurred by Heartland Advisors in connection with the offering of the shares.

RULE 12B-1 PLAN

Each Fund (other than the Wisconsin Tax Free Fund) has adopted a
distribution plan (the "Rule 12b-1 Plan") which, among other things, requires it
to pay Heartland Advisors, as distributor, a quarterly fee of up to 0.25% of its
average daily net assets computed on an annual basis. Heartland Advisors has
agreed to certain voluntary fee waivers and expense reimbursements as discussed
in the Funds' respective Prospectuses.

The fee represents compensation for distributing and servicing each Fund's
shares. Covered distribution expenses include, but are not limited to, the
printing of prospectuses and reports used for sales purposes, advertisements,
expenses of preparation and printing of sales literature, expenses associated
with electronic marketing and sales media and communications, and other sales or
promotional expenses, including compensation paid to any securities dealer or
other person who renders assistance in distributing or promoting the sale of
Fund shares, who has incurred any of the aforementioned expenses on behalf of
the Fund pursuant to either a Dealer Agreement or other authorized arrangement.
Covered servicing expenses include, but are not limited to, costs associated
with relationship management, retirement plan enrollment meetings, investment
and educational meetings, conferences and seminars, and the cost of collateral
materials for such events. Each Fund is obligated to pay fees under the Rule
12b-1 Plan 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. No fee paid by a Fund under the Rule 12b-1
Plan may be used to reimburse Heartland Advisors for expenses incurred in
connection with another Fund.

Under the Rule 12b-1 Plan, Heartland Advisors provides the Directors for
their review promptly after the end of each quarter a written report on
disbursements under the Rule 12b-1 Plan and the purposes for which such
payments were made, plus a summary of the expenses incurred by Heartland
Advisors under the Rule 12b-1 Plan. In approving the Rule 12b-1 Plan in
accordance with the requirements of Rule 12b-1, the Directors considered various
factors, including the amount of the distribution fee. The Directors determined
that there is a reasonable likelihood that the Rule 12b-1 Plan will benefit each
Fund and its shareholders.

The Rule 12b-1 Plan will remain in effect until April 30, 2000 and will
continue in effect from year to year thereafter only so long as such continuance
is specifically approved at least annually by the vote of the Directors,
including a majority of the Directors who are not interested persons of
Heartland, cast in person at a meeting called for such purpose.

The Rule 12b-1 Plan may be terminated with respect to each Fund, without
penalty, by vote of a majority of the Directors who are not interested persons,
or by vote of a majority of the outstanding voting securities of the Fund and
shall terminate automatically in the event of any act that terminates the
Distribution Agreement with

46
<PAGE>

Heartland Advisors relating to that Fund. Any change in the Rule 12b-1 Plan that
would materially increase the distribution cost to the Fund requires shareholder
approval; otherwise, it may be amended by the Directors, including a majority of
the Directors who are not interested persons, by vote cast in person at a
meeting called for the purpose of voting upon such amendment. So long as the
Rule 12b-1 Plan is in effect, the selection or nomination of the Directors who
are not interested persons is committed to the discretion of such Directors.

During the fiscal year ended December 31, 1998, the Funds paid the
following amounts under the Rule 12b-1 Plan, all of which was spent on
compensation to dealers, financial institutions and other service providers,
including Heartland Advisors: $0 for the Large Cap Value Fund; $102,965 for the
Mid Cap Value Fund; $725,067 for the Value Plus Fund; $4,927,174 for the Value
Fund; $133,425 for the Government Fund; $0 for the Taxable Short Duration
Municipal Fund; $341,659 for the Short Duration High-Yield Municipal Fund; and
$131,814 for the High-Yield Municipal Bond Fund. During the fiscal year ended
December 31, 1998, Heartland Advisors waived a portion of its fees; had no fee
waivers been in effect, the Large Cap Value Fund, the Taxable Short Duration
Municipal Fund, the Short Duration High-Yield Municipal Fund and the High-Yield
Municipal Bond Fund would have paid $21,040, $18, $366,790 and $138,665 ,
respectively, pursuant to the Rule 12b-1 Plan.

PORTFOLIO TRANSACTIONS

As provided in the Management Agreements, Heartland Advisors is responsible
for the Funds' portfolio decisions and the placing of portfolio transactions. In
executing such transactions, Heartland Advisors seeks to obtain the best net
results for the Funds, 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.

Allocation of portfolio brokerage 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 the Funds' shareholders. The primary
consideration is prompt and efficient execution of orders in an effective manner
at the most favorable price. Where more than one broker or dealer is believed
to be capable of providing a combination of best net price and execution with
respect to a particular portfolio transaction, Heartland Advisors often selects
a broker or dealer that has furnished it with investment research products or
services such as: economic, industry or company research reports or investment
recommendations; subscriptions to financial publications or research data
compilations; compilations of securities prices, earnings, dividends and similar
data; computerized databases; quotation equipment and services; research or
analytical computer software and services; or services of economic and other
consultants. Information so received will enable Heartland Advisors to
supplement its own research and analysis with the views and information of other
securities firms, and may be used for the benefit of clients of Heartland
Advisors other than the Funds. Research services may include advice as to the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Such selections are not
made pursuant to any agreement or understanding with any of the brokers or
dealers. However, Heartland Advisors does in some instances request a broker to
provide a specific research or brokerage product or service which may be
proprietary to the broker or produced by a third party and made available by the
broker and, in such instances, the broker in agreeing to provide the research or
brokerage product or service frequently will indicate to Heartland Advisors a
specific or minimum amount of commissions which it expects to receive by reason
of its provision of the product or service. Heartland Advisors does not agree
with any broker to direct such specific or minimum amounts of commissions;
however, Heartland Advisors does maintain an internal procedure to identify
those brokers who provide it with research products or services and the value of
such products or services, and Heartland Advisors endeavors to direct sufficient
commissions on client transactions (including commissions on transactions in
fixed income securities effected on an agency basis and, in the case of
transactions

47
<PAGE>

for certain types of clients, dealer selling concessions on new issues of
securities) to ensure the continued receipt of research products or services
Heartland Advisors feels are useful.

In a few instances, Heartland Advisors receives from brokers products or
services which are used by the Adviser both for investment research and for
administrative, marketing, or other non-research or brokerage purposes.
Heartland Advisors has a policy of not allocating brokerage business in return
for products or services other than brokerage or research services in accordance
with the provisions of Section 28(e) of the Securities Exchange Act of 1934. In
such instances, Heartland Advisors makes a good faith effort to determine the
relative proportion of its use of such product or service which is for
investment research or brokerage, and that portion of the cost of obtaining such
product or service may be defrayed through brokerage commissions generated by
client transactions, while the remaining portion of the costs of obtaining the
product or service is paid by Heartland Advisors in cash.

Heartland does not believe the Funds pay brokerage commissions higher than
those obtainable from other brokers in return for research or brokerage products
or services provided by brokers. Research or brokerage products or services
provided by brokers may be used by Heartland Advisors in servicing any or all of
its clients (including the Funds), and such research products or services may
not necessarily be used by Heartland Advisors in connection with client accounts
(including the Funds) which paid commissions to the brokers providing such
product or service.

For particular transactions, the Funds may pay higher commissions to
brokers (other than Heartland Advisors) than might be charged if a different
broker had been selected, if, in Heartland Advisors' opinion, this policy
furthers the objective of obtaining best price and execution. The allocation of
orders among brokers and the commission rates paid is reviewed periodically by
Heartland's Board of Directors.

Subject to the above considerations, Heartland Advisors may itself effect
portfolio transactions as a broker for the Funds. The commissions, fees or
other remuneration received by Heartland Advisors must be reasonable and fair
compared to 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 or commodities exchange, or on the Nasdaq
Stock Market during a comparable period of time. This standard would allow
Heartland Advisors to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a commensurate arm's-length
transaction. Furthermore, the Board of Directors, including a majority of the
directors who are not interested persons, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to Heartland Advisors are consistent with the foregoing standard.
Brokerage transactions with Heartland Advisors are also subject to such
fiduciary standards as may be imposed upon Heartland Advisors by applicable law.

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 the Funds in over-the-counter transactions conducted on an agency
basis. Pursuant to plans adopted by Heartland's Board of Directors for the
Funds under, and subject to, the provisions of Rule 10f-3 under the 1940 Act,
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.

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<PAGE>

During the last three fiscal years, the aggregate commissions on portfolio
transactions paid by the Funds were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Large Cap Value Fund $ 4,995 $ 16,006 $ 20,765
Mid Cap Value Fund 18,036 120,274 105,727
Value Plus Fund 149,195 830,002 1,021,269
Value Fund 2,822,252 3,925,925 3,453,660
Government Fund 75 6,222 5,009
Taxable Short Duration Municipal Fund N/A N/A 13
Short Duration High-Yield Municipal Fund N/A 13,133 28,206
High-Yield Municipal Bond Fund N/A 6,730 12,847
Wisconsin Tax Free Fund 31,509 34,385 12,475
</TABLE>

Of the aggregate commissions on portfolio transactions paid by the Funds
during the last three fiscal years, the following amounts were paid to Heartland
Advisors as broker:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1997 1998
-------- -------- -------
<S> <C> <C> <C>
Large Cap Value Fund $ 0 $ 0 $ 0
Mid Cap Value Fund 0 306 0
Value Plus Fund 4,028 12,093 25,357
Value Fund 285,057 159,609 99,091
Government Fund 0 0 0
Taxable Short Duration Municipal Fund N/A N/A 0
Short Duration High-Yield Municipal Fund N/A 0 0
High-Yield Municipal Bond Fund N/A 0 0
Wisconsin Tax Free Fund 0 0 0
</TABLE>

For the fiscal year ended 1998, the following table presents additional
information regarding brokerage commissions paid to Heartland Advisors:

<TABLE>
<CAPTION>
% OF AGGREGATE DOLLAR AMOUNT
% OF AGGREGATE BROKERAGE OF TRANSACTIONS INVOLVING
COMMISSIONS PAYMENT OF COMMISSIONS
PAID TO HEARTLAND ADVISORS EFFECTED THROUGH HEARTLAND ADVISORS
--------------------------- ------------------------------------
<S> <C> <C>
Value Plus Fund 2.5% 3.0%
Value Fund 2.9% 3.3%
</TABLE>

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<PAGE>

The table below shows information on brokerage commissions paid by the
Funds to brokers or dealers who supplied research services to Heartland Advisors
during the fiscal year ended December 31, 1998:

<TABLE>
<CAPTION>
AMOUNT OF COMMISSIONS
PAID TO BROKERS
OR DEALERS WHO
SUPPLIED TOTAL DOLLAR
RESEARCH SERVICES TO AMOUNT INVOLVED
FUND HEARTLAND ADVISORS IN SUCH TRANSACTIONS
- ---- ------------------ --------------------
<S> <C> <C>
Large Cap Value Fund $ 20,474 $ 6,265,777
Mid Cap Value Fund 105,455 33,640,915
Value Plus Fund 814,732 201,652,895
Value Fund 2,665,993 558,915,742
Government Fund 1,640 8,437,890
Taxable Short Duration Municipal Fund 0 0
Short Duration High-Yield Municipal Fund 0 0
High-Yield Municipal Bond Fund 0 0
Wisconsin Tax Free Fund 0 0
</TABLE>

Under the 1940 Act, American Physicians Services Group, Inc. may be deemed
an affiliated broker-dealer of Heartland Advisors since Heartland Advisors holds
or controls more than 5% of its outstanding voting shares. During the Funds'
three most recent fiscal years, the Funds placed no portfolio transactions with
and paid no broker commissions to American Physicians Services Group, Inc.

During 1998, the Value Fund owned securities of Dain Rauscher Corporation,
one of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940
Act); as of December 31, 1998 the value of those securities was $2,994,250.

TRADE ALLOCATION POLICY

Heartland Advisors will seek to treat each client (including the Funds)
fairly and equitably, consistent with its obligations under Section 206 of the
Investment Advisers Act of 1940, and where applicable, Sections 17(d) and 17(j)
of the 1940 Act. In making such allocations, it is recognized that Heartland
Advisors will not generally be able to allocate trades pro rata among all
accounts (including the Funds) with similar investment objectives and comparable
investment positions, especially in small and micro cap securities and certain
fixed income investments.

The principal factors that Heartland Advisors will consider in making
allocations among client accounts (including the Funds) are the characteristics
and needs of the clients, including: (a) their respective investment objectives,
(b) current securities positions, (c) cash availability for investment or cash
needs, and (d) similar factors.

50
<PAGE>

DESCRIPTION OF SHARES

Heartland Group, Inc. is a series company, which means the Board of
Directors may establish additional series and classes within series, and may
increase or decrease the number of shares in each class or series, all without
shareholder approval. The Funds are each a separate mutual fund series of
Heartland. Currently, nine series are authorized and outstanding, and there is
only one class within each series. The authorized common stock of Heartland
consists of one billion shares, par value $0.001 per share. 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. Shares have no preemptive, cumulative
voting, subscription or conversion rights and are freely transferable. In the
interest of economy and convenience, certificates representing shares purchased
are not issued. However, such purchases are confirmed to the investor and
credited to their accounts on the books maintained by the Funds' transfer agent.
The investor will have the same rights of ownership with respect to shares as if
certificates had been issued.

Shareholders have the right to vote on 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 the Articles of Incorporation or Bylaws of
Heartland. 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. Heartland may fill vacancies on the
Board or appoint new directors; provided, however, that at all times at least
two-thirds of the directors have been elected by shareholders. Moreover,
pursuant to Heartland's Bylaws, any director may be removed by the affirmative
vote of a majority of the outstanding shares of Heartland; and holders of 10% or
more of the outstanding shares of Heartland can require that a special meeting
of shareholders be called for the purpose of voting upon the question of removal
of one or more directors.

Shareholders of each series of a series company, such as Heartland, vote
together with each share of each series in the company on matters affecting all
series (such as election of directors), with each share entitled to a single
vote. On matters affecting only one series (such as a change in that series'
fundamental investment restrictions), only the shareholders of that series are
entitled to vote. On matters relating to all the series but affecting the
series differently (such as a new investment advisory agreement), separate votes
by series are required.

PURCHASES AND SALES

DETERMINATION OF NET ASSET VALUE

Each Fund's shares are sold at the next determined net asset value per
share. Each Fund determines the net asset value per share by subtracting the
Fund's liabilities (including accrued expenses and dividends payable) from the
Fund's total assets (the value of the securities the Fund holds plus cash or
other assets, including interest accrued but not yet received) and dividing the
result by the total number of shares outstanding.

Portfolio securities which are traded on stock exchanges are valued at the
last sale price as of the close of business on the day the securities are being
valued, or, lacking any sales, at the latest bid price. Each over-the-counter
security for which the last sale price on the day of valuation is available from
Nasdaq is valued at that price, or, lacking any sales, at the latest bid price.
All other securities traded in the over-the-counter market are valued at the
most recent bid prices as obtained from one or more dealers that make markets in
the securities. Portfolio securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the broadest and
most representative market.

Securities and other assets for which market quotations are not readily
available will be valued at their fair value as determined in good faith by
Heartland's Board of Directors or its designee.

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<PAGE>

DEBT SECURITIES. Debt securities are valued by a pricing service approved
by Heartland's Board of Directors that uses various valuation methodologies such
as matrix pricing and other analytical pricing models as well as market
transactions and dealer quotations. Debt securities purchased with maturities of
60 days or less shall be valued at acquisition cost, plus or minus any amortized
discount or premium. Because Heartland Advisors believes that there currently
is no uniform methodology for valuing foreign debt, such securities must be
valued pursuant to the fair value procedures adopted by Heartland's Board of
Directors.

ILLIQUID AND THINLY TRADED SECURITIES. The lack of a liquid secondary
market for certain securities may make it more difficult for a Fund to obtain
accurate market quotations for purposes of valuing a Fund's portfolio. If market
quotations are not available, these securities will be valued in accordance with
procedures established by Heartland's Board of Directors. Judgment may,
therefore, play a greater role in valuing these securities. Market quotations
are generally available on many lower quality and comparable unrated issues only
from a limited number of dealers, and may not necessarily represent firm bids of
such dealers or prices for actual sales. During periods of thin trading, the
spread between bid and asked prices is likely to increase significantly. In
addition, adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower quality and
comparable unrated securities, especially in a thinly traded market.

FOREIGN INVESTMENTS. In the event that (i) a foreign investment held by a
Fund is traded in both a local and foreign form, (ii) each such form may be
converted or exchanged for the other, and (iii) Heartland Advisors reasonably
determines that the rights and privileges of holders of either form are
comparable for valuation purposes, then Heartland Advisors may value the Fund's
investment based on the form for which current market quotes are most readily
available even if such form is not the form of investment held by the Fund. If
Heartland Advisors has reason to believe that circumstances exist which could
reasonably be expected to have a material impact on the valuation of one form
over the other, such as limitations on the ability to convert or exchange
between forms, limitations on foreign ownership of securities or currency
regulations, Heartland Advisors shall value the particular investment based on
market quotations or a fair value determination with respect to the same form as
that held by the Fund.

On any business day of a Fund on which the principal exchange on which a
foreign security is traded is closed (for example, a local holiday), but trading
occurs in the U.S. on either a national exchange or over-the-counter as reported
by the exchange or through Nasdaq, respectively, then the last sales price from
such source shall be used. If no sales price is available from such source,
then the prior day's valuation of the security shall be used.

REDEMPTION-IN-KIND

Each Fund intends to pay all redemptions in cash and is obligated to redeem
shares solely in cash up to the lesser of $250,000 or one percent of the net
assets of the Fund during any 90-day period for any one shareholder. However,
redemptions in excess of such limit may be paid wholly or partly by a
distribution in kind of securities or other Fund assets if Heartland Advisors
determines that existing conditions make cash payments undesirable. If
redemptions were made in kind, the redeeming shareholders may incur a gain or
loss for tax purposes and transaction costs.

ADDITIONAL INCOME TAX CONSIDERATIONS

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 as a regular corporation 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.

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<PAGE>

Each series of a series company, such as Heartland, is treated as a single
entity for federal income tax purposes, so that the net investment income and
the net realized capital gains and losses of one series are not combined with
those of another series in the same company.

To the extent a Fund invests in foreign securities, it may be subject to
withholding and other taxes imposed by foreign countries. Tax treaties between
certain countries and the United States may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in the Code.

PERFORMANCE INFORMATION

GENERAL

From time to time the Funds may advertise their "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 annual average return for 1-, 5-, and 10-year periods (or
for the periods the Fund has been in operation). Total return is the change in
redemption value of shares purchased with an initial $1,000 investment, assuming
the reinvestment of dividends and capital gain distributions and the redemption
of the shares at the end of the period.

Performance information should be considered in light of a 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. Investors should consider these factors and possible differences in the
methods used in calculating performance information when comparing a Fund's
performance to performance figures published for other investment vehicles.

TOTAL RETURN

Average annual total return is computed by finding the average annual
compounded rates of return over the 1-, 5-, and 10-year periods (or for the
periods a Fund has been in operation) ended on the date of the respective Fund's
balance sheet that would equate the initial amount invested to the ending
redeemable value, according to the following formula:

P(I + T)/n/ = ERV

Where:

P = a hypothetical initial payment of $1,000;

T = average annual total return;

n = number of years; and

ERV = ending redeemable value for a hypothetical $1,000 payment made
at the beginning of the 1-, 5-, or 10-year periods at the end
of the 1-, 5-, or 10-year periods (or fractional portion).

53
<PAGE>

In some circumstances a Fund may advertise its total return for a 1-, 2-,
or 3-year period, or the total return since the Fund commenced operations. In
such circumstances the Fund will adjust the values used in computing return to
correspond to the length of the period for which the information is provided.

The average annual total returns for the Funds for the one, five and ten-
year periods, or, if less, from commencement of operations through December 31,
1998 are as follows:

<TABLE>
<CAPTION>
10 YEARS, OR,
IF LESS, FROM
COMMENCEMENT
FUND 1 YEAR 5 YEARS OF OPERATIONS
- ---- ------ ------- -------------
<S> <C> <C> <C>
Large Cap Value Fund (10/11/96) 1.73% N/A 13.04%
Mid Cap Value Fund (10/11/96) -7.96% N/A 8.77%
Value Plus Fund (10/26/93) -10.78% 13.01% 13.64%
Value Fund -11.46% 11.74% 14.55%
Government Fund 8.15% 5.40% 9.22%
Short Duration High-Yield Municipal 3.65% N/A 5.55%
Fund (1/2/97)
High-Yield Municipal Bond Fund (1/2/97) 6.66% N/A 9.17%
Wisconsin Tax Free Fund (4/3/92) 5.41% 5.42% 6.42%
</TABLE>

Because the Taxable Short Duration Municipal Fund first commenced the
public offering of its shares on December 28, 1998, no total return information
is quoted herein.

A Fund may also advertise its cumulative total return, which represents the
simple change in value of an investment in the Fund over a stated period and may
be quoted as a percentage or as a dollar amount. Total returns and cumulative
total returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to illustrate the
relationship between these factors and their contributions to total return.

YIELD

Yield quotations are based on a 30-day (or one-month) period, and are
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:

a-b
Yield = 2[(---+1)/6/-1)
cd

54
<PAGE>

Where:

a = dividends and interest earned during the period;

b = expenses accrued for the period (net of reimbursements);

c = the average daily number of shares outstanding during the period
that were entitled to receive dividends; and

d = the maximum offering price per share on the last day of the
period.

Taxable equivalent yield is computed by dividing that portion of the yield
of a Fund (as computed above) which is tax-exempt by one minus a stated income
tax rate and adding the product to that portion, if any, of the yield of such
Fund that is not tax-exempt.

Although they may do so in the future, the Large Cap Value, Mid Value Cap
and Value Funds typically have not calculated or advertised their yields.
Because the Taxable Short Duration Municipal Fund first commenced the public
offering of its shares on December 28, 1998, no yield quotations are included
herein. The yields (including, where applicable, taxable equivalent yields) for
the remaining Funds for the 30 days ended December 31, 1998, were as follows:

<TABLE>
<CAPTION>
30-DAY YIELD ENDED
FUND DECEMBER 31, 1998 TAXABLE EQUIVALENT YIELD
---- ----------------- ------------------------
<S> <C> <C>
Value Plus Fund 4.1% N/A
Government Fund 5.5% N/A
Short Duration High-Yield Municipal Fund 5.4% 9.0%/(1)/
High-Yield Municipal Bond Fund 6.4% 10.6%/(1)/
Wisconsin Tax Free Fund 4.5% 8.3%/(2)/
</TABLE>

__________________

(1) Based on a federal tax rate of 39.6%.

(2) Based on a combined Wisconsin tax rate of 6.8% and a federal tax rate of
39.6%, adjusted for the maximum phase-out of itemized deductions and
personal exemptions and adjusted to reflect the deductibility of state
taxes, resulting in an effective combined rate of 45.5%.

When advertising yield, a Fund will not advertise a one-month or a 30-day
period which ends more than 45 days before the date on which the advertisement
is published.

COMPARISONS

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, Inc., Morningstar,
Inc., CDA Technologies, Forbes, Fortune, Money, Business Week, Value Line, Inc.,
Kiplinger's, Smart Money, Financial World, Barron's and The Wall Street Journal.
These rating services and periodicals rank the performance of the Funds against
all funds over specified periods and in specified categories. Each Fund also may
compare its performance to a wide variety of indexes or averages. There are
similarities and differences between the investments that a Fund may purchase
and the investments measured by the indexes or averages and the composition of
the indexes or averages will differ from that of a Fund.

55
<PAGE>

From time to time, marketing materials may portray the historical returns
of various asset classes. Such presentations will typically compare the average
annual rates of return of inflation, U.S. Treasury bills, long-term corporate
bonds, long-term government bonds, intermediate-term government bonds, common
stocks and small stocks. There are important differences between each of these
investments that should be considered in viewing any such comparison. The
market value of stocks will fluctuate with market conditions, and investments in
smaller-capitalization companies involve investment risks in addition to those
presented by investments in larger-capitalization companies, including the
potential or greater price volatility and lower market liquidity. In exchange
for greater volatility, stocks have generally performed better than bonds or
cash over time. Bond prices generally will fluctuate inversely with interest
rates and other market conditions, and the prices of bonds with longer
maturities generally will fluctuate more than those of shorter-maturity bonds.
Interest rates for bonds may be fixed at the time of issuance, and payment of
principal and interest may be guaranteed by the issuer and, in the case of U.S.
Treasury obligations, backed by the full faith and credit of the U.S. Treasury.

FINANCIAL STATEMENTS

The financial statements, related notes and related reports of
PricewaterhouseCoopers, LLP, independent public accountants, contained in the
Annual Reports to Shareholders of the Funds as of December 31, 1998 and for the
fiscal year or period then ended are hereby incorporated by reference. Copies
of the Funds' Annual Reports may be obtained without charge by writing to
Heartland Advisors, Inc., 790 North Milwaukee Street, Milwaukee, Wisconsin
53202, or by calling 1-800-432-7856 or (414) 289-7000.