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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission only (as permitted by Rule 12a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
HEARTLAND GROUP, INC.
(Name of Registrant as Specified in Its Charter)
Not Applicable
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
5) Total fee paid:
____________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
____________________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________________
3) Filing Party:
____________________________________________________________________
4) Date Filed:
____________________________________________________________________
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[Heartland Funds Letterhead]
June 30, 2000
Dear Government Fund Shareholder:
I am writing to you to ask you to vote on a proposed Plan of Liquidation
for the Heartland Government Fund. This action requires the approval of the
majority of shareholders of record on June 26, 2000 at a special shareholder
meeting scheduled for August 8, 2000 at the offices of Heartland Advisors.
Your Board of Directors, the majority of whom are not affiliated with
Heartland Advisors, has unanimously approved the proposed Plan, and recommends
that you vote in favor of it. This package contains important information about
the proposal and the proxy card you will need to vote.
Why is your Board and Fund Management taking this action?
After careful consideration, the Board determined that some action was
required because of the Fund's net shareholder redemptions, declining Fund
assets, and a rising expense ratio. These factors contributed to the Fund's
below average investment performance. After exploring several different options,
the Board concluded a liquidation would allow Fund investors to make their own
individual investment decisions.
As the enclosed material explains, you may exchange or redeem your shares
at any time on or before the scheduled date of the liquidation. If your current
investment is in a Heartland Funds IRA, you may make a tax-free exchange into
another Heartland Fund, or you may liquidate Fund shares held in your Heartland
Fund IRA and transfer or roll over the proceeds on a tax-free basis to another
IRA sponsor. If your current investment is in a regular account, you still may
make an exchange or redemption, but it will be considered a taxable event. If
you do nothing, we will liquidate your account and send you a check for the
proceeds. The liquidation will be a taxable event for regular accounts and
taxable for IRA accounts if not rolled over to another IRA sponsor within 60
days.
Enclosed with this letter is a detailed proxy statement which includes a
question and answer summary. After you have taken the time to carefully review
the material, we ask you to vote promptly by either completing and returning the
enclosed proxy card or by calling the special toll free number on the card.
Please note that you will receive a separate proxy card for each Government Fund
account you have.
I invite you to contact our Shareholder Services Department at toll free
number 1-800-611-0493 regarding this matter. One of our representatives will be
happy to answer any questions you may have. They also can assist you in
exchanging or redeeming your shares or arranging for you to talk with one of our
investment consultants who can discuss additional investment options with you.
I am grateful for your past interest in the Heartland Government Fund and
hope that we can continue to serve you as an investor in one of our other
Heartland Funds.
Sincerely,
William J. Nasgovitz
President
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IMPORTANT QUESTIONS AND ANSWERS
REGARDING THE PROPOSED PLAN OF LIQUIDATION AND DISSOLUTION FOR THE
GOVERNMENT FUND
Although you should read the full text of the enclosed proxy statement, we
hope the following information will assist you in understanding the voting
procedures and information on the Proposal itself. After reading this
information and the proxy statement, please vote promptly. Your prompt vote will
help avoid the expense of having to solicit your proxy again.
GENERAL INFORMATION
Why is the Plan of Liquidation being recommended?
Your Board of Directors believes the Fund will continue to experience sub-
optimal performance because of shrinking assets and a rising expense ratio,
because of an extended period over which bonds have been disfavored as an asset
class and because of the number of mutual funds within its peer group that have
significant economies of scale that contribute to better investment returns.
After considering the possibility of achieving better economies of scale
for the Fund through a merger or sale of the Fund or the retention of a sub-
adviser, the Directors decided that the Fund's investors had chosen the Fund
because of Heartland Advisors' investment style and expertise. The Directors
believed investors would prefer to make their individual choices of an
alternative investment, which is facilitated by a liquidation of the Fund. Other
options would have resulted in the Fund having a new advisor. Further, although
the liquidation would be a taxable event, it is believed that few, if any,
shareholders will recognize a capital gain on their liquidation proceeds given
depreciation in the Fund's net asset value over the past several years.
Who is asking for my vote?
The Board of Directors of your Fund is soliciting your vote. Your
Directors, a majority of who are independent of Heartland Advisors, unanimously
approved the Proposal and recommend that you vote in favor of the liquidation.
Assuming the proposed Plan of Liquidation is approved, what options do I have
with my Government Fund investment? Will I be able to redeem or exchange?
You may redeem or exchange your Government Fund shares at any time through
the date of the liquidation, which is scheduled for August 9th. However,
redemptions by systematic withdrawal or automatic exchange will be suspended
after July 31, 2000.
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Please remember, because you were a shareholder of record on the meeting
record date, June 26, 2000, it is still very important for you to vote
regardless of whether you remain invested in the Fund or redeem or exchange
prior to the scheduled liquidation.
If you choose to remain in the Fund, you will receive your portion of the
liquidation proceeds by check along with a confirmation statement shortly after
the liquidation date. Your share of the proceeds will be based upon the number
of shares that you own and the final net asset value of the Fund. If you choose
to exchange into another Heartland Fund or redeem, please call our Shareholder
Services Department at 1.800.432.7856 or your financial intermediary for further
instructions.
What if I hold my shares in an IRA sponsored by Heartland Funds?
If your shares are held in an IRA sponsored by the Heartland Funds, and you
do not exchange your shares for a different Heartland Fund or transfer or roll
over your account to another IRA sponsor prior to the liquidation date, your
current IRA custodian, Firstar Bank, N.A., will liquidate your account. For tax
purposes, the liquidation will be reported as a taxable distribution (and
subject to tax if the proceeds are not rolled over to another IRA within 60
days) and mandatory federal income tax withholding will apply. You will be
mailed a check for the net proceeds. Firstar Bank, N.A. hereby notifies you that
it will resign as custodian of that portion of your IRA assets invested in the
Government Fund on the date of the Fund's liquidation.
For forms and further instructions on exchanging, transferring or rolling
over your IRA, please call our Shareholder Services Department at
1.800.432.7856. Heartland Advisors has undertaken to pay any annual maintenance
fee for the year 2000 and any distribution or transfer fees your custodian may
charge in connection with the Government Fund shares you held as of the meeting
record date, June 26, 2000.
What are the tax consequences of the Plan of Liquidation for me?
The liquidation will be a taxable event to shareholders with taxable
accounts. If your account is taxable, you will recognize a gain or loss with
respect to the shares liquidated in your account based on the difference between
the value of those shares on the liquidation date and the cost basis of those
shares. The gain or loss will be characterized as long term or short term
depending on whether you held those shares for more or less than one year.
On or before January 31, 2001, you will be mailed Forms 1099-Div and 1099-B
reporting the dividend income you earned on your shares through the liquidation
date and the gross proceeds of your liquidation. If your shares are held in an
IRA, you will be mailed a Form 5498 on or before May 31, 2001 reporting any
contributions you invested in the Fund for the year 2000 and, if your proceeds
are liquidated or distributed in connection with the Fund liquidation, you also
will be mailed a Form 1099-R on or before January 31, 2001.
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Shareholders are invited to consult with their own tax advisers for advice
regarding the tax consequences of the Plan of Liquidation given their particular
situation.
How will the Fund be managed until liquidation?
Because the officers of the Fund believe the level of redemption activity
will be higher than normal through the liquidation date, the Fund plans to hold
a significant percentage of its assets in cash and cash equivalents through the
liquidation date. This is expected to reduce returns during the period. However,
Heartland Advisors believes that the transaction costs incurred by the Fund in
selling portfolio securities in anticipation of the liquidation should not be
significant.
How will dividend payments be handled between now and the liquidation date and
will there be additional dividend distributions on the liquidation date?
The Fund accrues dividends daily and pays them monthly. July dividends will
be paid in cash and reinvested if you have elected that option as usual.
Dividends accrued in August will be paid with the liquidation proceeds. No other
distributions are planned.
Will I be able to make additional investments in the Government Fund?
Although not encouraged, you may make purchases through July 31, 2000.
Thereafter, purchases will not be permitted without the express approval of an
officer of Heartland.
Whom do I call if I have questions after reading these materials?
If you have questions about the meeting or the proposal after reading this
material and the proxy statement, please call one of our Shareholder Services
Representatives at our toll free proxy number, 1-800-611-0493. Please note that
if you hold your shares through a financial intermediary, you may receive a call
from our proxy solicitor, D.F. King & Co., reminding you to vote and offering
their assistance in the voting process.
VOTING PROCEDURES
How many votes am I entitled to cast?
Enclosed with your proxy statement is a separate proxy card (or ballot) for
each account you have with the Government Fund. The card lists the number of
shares held in your account as of record date, June 26, 2000. You are entitled
to one vote for each share you owned on that date.
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How do I vote my shares?
You may vote in two easy ways. Please choose the way that is most
convenient for you.
By Phone: If you hold your shares directly with the Government Fund's
transfer agent (and not through an intermediary such as a broker/dealer), you
may vote by calling the telephone number listed on your proxy card. You also
will need to provide the control number on your card. Please note that the
telephone number listed on your proxy card is for the agent of our proxy
tabulator and is not a number for the Heartland Funds.
You do not need to return your proxy card if you vote by phone.
By Mail: You also may vote by completing and signing the enclosed proxy
card and mailing it in the enclosed postage paid envelope. Please be sure to
sign your name exactly as it appears in your account registration as shown on
the card. If you are signing as an officer of a company, a trustee or other
fiduciary, please indicate your capacity next to your signature.
If you hold your shares through an intermediary, please refer to your proxy
card to determine how you are permitted to vote your shares. Be sure to follow
the instructions provided on the proxy card.
Please do not enclose any purchase checks or other information with your
proxy card because the envelope will be mailed directly to the Fund's proxy
tabulator.
________________
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HEARTLAND GROUP, INC.
Heartland Government Fund
789 North Water Street
Milwaukee, Wisconsin 53202
(414) 289-7000
www.heartlandfunds.com
_______________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
August 8, 2000
_______________________
To the Shareholders of
HEARTLAND GOVERNMENT FUND
A Special Meeting of the Shareholders ("Meeting") of the Heartland
Government Fund (the "Fund") of Heartland Group, Inc. will be held on the fourth
floor of the offices of Heartland Advisors, Inc., 789 North Water Street,
Milwaukee, Wisconsin 53202, on Tuesday, August 8, 2000, at 10:00 a.m. local
time, for the following purposes:
1. To consider and adopt a Plan of Liquidation pursuant to which the Fund
will be dissolved following the liquidation of its assets, the satisfaction of
its known liabilities and the distribution of remaining proceeds to
shareholders; and
2. To transact such other business as may properly come before the
meeting.
Shareholders of record as of the close of business on June 26, 2000, are
entitled to notice of and to vote at the Meeting. If you do not sign and return
the proxy card promptly, the Fund may incur the additional expense of subsequent
mailings.
By Order of the Board of Directors
JILAINE HUMMEL BAUER
Secretary
June 30, 2000
Shareholders are invited to attend the special meeting in person. Whether or not
you plan to attend in person, all shareholders are urged to vote promptly by
completing and returning the enclosed proxy, in the envelope provided. Your vote
is important, no matter how large or small your holdings may be.
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HEARTLAND GROUP, INC.
Heartland Government Fund
789 North Water Street
Milwaukee, Wisconsin 53202
______________________
PROXY STATEMENT
Special Meeting of Shareholders
August 8, 2000
_____________________
INTRODUCTION
This Proxy Statement is furnished to the shareholders of the Heartland
Government Fund (the "Fund") by its Board of Directors in solicitation of
shareholder votes at the Fund's Special Meeting of Shareholders ("Meeting"). The
Meeting is scheduled to be held on the fourth floor of Heartland Advisors, Inc.,
489 North Water Street, Milwaukee, Wisconsin 53202, on Tuesday, August 8, 2000
at 10:00 a.m., local time. The purpose of the Meeting is to consider and vote on
a Plan of Liquidation for the Fund (the "Plan"). The Board of Directors,
including all of the independent directors, recommends that you vote in favor of
the Plan. Subject to Shareholder approval, the liquidation would take place on
or about August 9, 2000.
Only the shareholders of record at the close of business on June 26, 2000
("the Record Date") are entitled to notice of, and to vote at, the Meeting or
any adjournments thereof. As of the Record Date there were 2,802,782.057 issued
and outstanding shares of common stock of the Fund. Each share issued and
outstanding will be entitled to one vote, and each fractional share issued and
outstanding will be entitled to a proportionate share of one vote, at the
Meeting. The Notice of Special Meeting, Proxy Statement and the form of Proxy
was first mailed to shareholders on or about June 30, 2000.
SOLICITATION AND VOTING INFORMATION
Quorum. One-third of the shares outstanding on the Record Date, represented
in person or by Proxy, must be present for the transaction of business at the
Meeting. If a quorum is present at the Meeting, but sufficient votes to approve
the Plan are not received, the persons named as Proxies (or their substitutes)
may propose one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of the shares represented at the Meeting in person or by Proxy.
The persons named as Proxies will vote those Proxies that they are entitled to
vote FOR adoption of the Plan in favor of an adjournment, and will vote those
Proxies required to be voted AGAINST adoption of the Plan against such
adjournment. A shareholder vote may be taken on the Plan prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate.
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Required Vote. The favorable vote of the holders of "the majority of the
outstanding shares entitled to vote," either in person or by Proxy, at the
Meeting, provided a quorum is present, is required for adoption of the Plan. The
Investment Company Act of 1940 defines "a majority of the outstanding shares
entitled to vote" for this purpose as the lesser of: (a) more than fifty percent
(50%) of all outstanding shares entitled to vote; or (b) at least two-thirds of
all shares entitled to vote which are represented in person or by proxy at a
meeting at which more than 50% of the outstanding shares are represented either
in person or by proxy. The duly appointed proxies may, in their discretion, vote
upon such other matters as may properly come before the Meeting.
A Proxy may be revoked at any time prior to its use (a) by written notice
of its revocation to the Secretary of the Fund at the above address prior to the
Meeting; (b) by the subsequent execution and return of another Proxy prior to
the Meeting; or (c) by being present and voting at the Meeting, and giving oral
notice of revocation to the Chairman of the Meeting. Attendance at the Meeting
will not in and of itself constitute revocation of your Proxy.
Abstentions and broker non-votes are counted for purposes of determining
whether a quorum is present, but do not represent votes cast with respect to the
Plan. As a result, they have the same effect as a vote against the Plan. "Broker
non-votes" are shares held by a broker or nominee for which an executed Proxy is
received by the Fund, but are not voted as to the Plan because instructions have
not been received from the beneficial owners or person entitled to vote and the
broker or nominee does not have discretionary voting power.
Proxy Solicitation. Solicitation of proxies will be conducted principally
by the mailing of this Proxy Statement and the accompanying proxy card. Proxies
also may be solicited in person, by telephone, or by facsimile by the Fund's
investment advisor, Heartland Advisors, Inc. ("Heartland Advisors") or D.F. King
& Co., Inc. Authorizations to execute proxies may be obtained by telephone or
electronically. If proxies are executed pursuant to telephonic or electronic
authorization, Heartland will use procedures designed to authenticate
shareholders' identities, to allow shareholders to authorize the voting of their
shares in accordance with their instructions, and to confirm that their
instructions have been properly recorded.
Expenses in connection with the solicitation of proxies, including any
expenses in connection with telephone voting, will be borne by the Fund's
investment advisor, Heartland Advisors. Upon request, Heartland Advisors will
reimburse brokers, dealers, banks and voting trustees, or their nominees, for
reasonable expenses incurred in forwarding copies of the proxy materials to the
beneficial owners of shares which such persons hold of record. Additional
solicitation may be performed by officers and employees of Heartland Advisors,
without special compensation, or by third party solicitors. The Fund has engaged
D.F. King & Co., Inc. to be available to assist in the solicitation of proxies,
if needed, for estimated fees of up to approximately $5,000 plus reasonable
out-of-pocket expenses.
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PROPOSAL: ADOPTION OF THE PLAN OF LIQUIDATION FOR THE FUND
At a meeting of the Fund's Board of Directors held on June 8, 2000, the
Directors approved a resolution to recommend to the Fund's shareholders that the
Fund be liquidated in accordance with the Plan. A copy of the Plan is attached
as Appendix A to this Proxy Statement. All descriptions of the Plan in this
----------
Proxy Statement are qualified in their entirety by reference to the terms of the
Plan.
If the Plan is adopted by the Fund's shareholders, the Board of Directors
will proceed on behalf of the Fund to implement the provisions of the Plan as
expeditiously as they deem practicable and in accordance with Maryland law.
Such action will include, among other things, distribution to the shareholders
of the Fund's remaining assets, which will be converted to cash, and termination
of the Fund. The Advisor voluntarily has agreed to pay out of its own funds all
costs of the liquidation, including the costs of preparing, printing and mailing
this proxy statement, proxy solicitation and tabulation fees and other costs
associated with the Meeting, legal fees and accounting fees, but excluding
brokerage commissions incurred by the Fund in selling its portfolio securities,
which will be borne by the Fund.
Background of and Reason for the Plan
Although the Fund is mature, having commenced operations in April 1987, its
assets have declined in recent years from a peak of approximately $67 million at
the end of 1993 to a low of approximately $25.7 million on June 23, 2000.
Negative cash flows during this period have been exacerbated by growing asset
concentration among the Fund's peers with the largest 20 mutual funds in its 571
member peer group accounting for 46% of the universe as measured by assets in
mid-1999/1/.
In addition, the shrinking size of the Fund has caused its gross operating
expense ratio (annualized) to rise over this same period from 1.06% at the end
of 1993 to 1.34% on June 23, 2000. As a result, in recent years Heartland
Advisors has undertaken to waive its fees and pay other Fund operating expenses
so that the Fund's expense ratio would not be excessive relative to its peers.
For the Fund's 1999 fiscal year, these fee waivers and expense payments were
$231,422. Despite these subsidies, due to asset concentration within a select
number of its peers, the weighted expense ratio for the Fund's peer group has
been far lower than even the Fund's subsidized expense ratio. In mid-1999 the
weighted expense ratio for the peer group was 0.69% compared to the Fund's
subsidized ratio of 0.80%1. As a result, Heartland Advisors decided not to renew
its undertaking to waive fees and pay Fund operating expenses when it expired on
April 30, 2000.
With shrinking assets and a rising expense ratio, it has been increasingly
difficult for the Fund to maintain competitive yields and returns and it has
experienced sub-optimal performance over the near-term. As of March 31, 2000,
measuring one-year total returns, Lipper, Inc. ranked the Fund in the bottom
quartile of mutual funds in its U.S. Government
____________________
/1/ Report prepared by Investment Counseling, Inc.
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category. As of the same date, the Fund's overall Morningstar rating was 2 stars
compared to an average rating of 3.3 stars for all mutual funds in the Fund's
intermediate-term Government category. The Fund's average annual total return
for 1999 was -3.90% compared to 0.41% for the Lehman Intermediate Treasury Index
for the same period. The Fund's performance in 1999 also caused its average
annual total returns for the five-year period ending December 1999 to lag behind
the Lehman Intermediate Treasury Index. Moreover, the volatility of the Fund's
investment performance over recent years is believed to have contributed to the
Fund's experience of net redemptions.
Due to the combination of these factors and the fact that the bond market
in general has been out of favor for some time, Heartland Advisors believes it
will be difficult for the Fund to achieve meaningful asset growth and
competitive expense levels and that net redemptions could further impair
performance.
Given this outlook, and its belief that the Fund required investment
competencies different from its core competencies in the equity and municipal
bond value disciplines, Heartland Advisors considered various strategic options
for the Fund, but ultimately concluded that continuation of the Fund was no
longer advisable, and recommended to the Fund's Board of Directors that the Fund
be liquidated with all costs of the liquidation, including the cost of this
proxy solicitation, to be borne by Heartland Advisors.
On June 8, 2000, the Board of Directors of Heartland Group, Inc. formally
met to consider Heartland Advisors' recommendation to liquidate the Fund.
Although other options were discussed, including the possible merger of the Fund
with another mutual fund and the possibility of retaining a sub-adviser,
liquidation was determined to be the most viable option. A merger of the Fund
with another similar mutual fund did not appear feasible due to the absence of a
similar fund within the Heartland family of mutual funds, the small size of the
Fund, the probability of a further reduction in its assets prior to completion
of the merger and the expenses of the transaction. For the same reasons,
management believed it to be unlikely that the Fund could be sold to another
mutual fund complex. Finally, the possibility of retaining a sub-adviser to
manage the Fund was believed to be remote because of Fund size, the limitation
on the fees that could be paid to the sub-adviser and the possibility of
continued net redemptions. Moreover, all of these options would have conflicted
with the preference of many shareholders who invested in the Fund because of
Heartland Advisors' experience and investment style.
The timing of the Board's consideration of a liquidation of the Fund was
influenced by the announced intention of the Fund's portfolio manager to pursue
other interests and the lack of assurance that a replacement portfolio manager
could achieve acceptable investment performance. In reaching this decision and
the decision that a liquidation was in the best interests of the Fund's
shareholders, the Board reviewed and discussed information provided by
management regarding the liquidation and authorized and approved the Plan after
considering the following factors:
1. The size of the Fund, the decline in size over the past five years and
Heartland Advisors' belief that the Fund will continue to decline in size;
2. The difficulties experienced by the Fund in realizing economies of
scale because of its size, including the inability of the Fund to achieve
competitive annual operating expense ratios even with fee waivers and expense
reimbursements from Heartland Advisors, and Heartland Advisors' recent decision
to discontinue such waivers and reimbursements;
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3. The likely adverse effects of higher operating expenses and net
redemptions on the Fund's investment performance; and
4. The lack of viable options, including the likely inability to find a
suitable mutual fund complex interested in assuming sponsorship of the Fund
through an acquisition, or an interested sub-adviser whose investment style and
experience was sufficiently similar to that of Heartland Advisors.
Plan of Liquidation
If the Plan is approved by shareholders, Heartland Advisors will proceed to
sell all of the Fund's portfolio securities and other assets for cash. The Fund
will apply the cash proceeds to the payment, satisfaction and discharge of all
its existing debts and obligations and distribute the remaining proceeds to
shareholders in a liquidating distribution. Thereafter, the Fund will terminate
its operations, and wind up its affairs.
If the Plan is approved on August 8, 2000, the Fund expects the liquidating
distribution will be paid to shareholders on August 9, 2000. However, the exact
date of the distribution depends on the time required to liquidate the assets of
the Fund. Thus, while the Fund will be liquidated as expeditiously as is prudent
upon approval of the Plan, there can be no guarantee that the liquidation will
in fact be completed on August 9, 2000.
Shareholders may redeem their shares at net asset value on any business day
through and including the date of the liquidating distribution. Shareholders
are directed to the section titled "Redeeming Shares" in the Fund's Prospectus
for more information on redemptions. No shareholder will have any dissenter's
rights or right of appraisal with respect to the liquidation and dissolution of
the Fund.
Tax Consequences of the Plan to Shareholders
The following is a summary of the federal income tax consequences to
shareholders of implementing the Plan. Shareholders should consult with their
own tax advisers for advice regarding the application of current federal tax law
in their particular situations and with respect to state, local, foreign, and
other tax consequences of the plan.
The liquidation will be a taxable transaction to shareholders.
Shareholders will recognize a gain or loss with respect to liquidation proceeds
they receive, based on the difference between the value of those proceeds and
the shareholder's tax basis in the Fund shares surrendered in the liquidation.
The gain or loss will be a long-term capital gain or loss if a shareholder has
held the Fund shares as a capital asset for more than one year. Management
believes that most shareholders of the Fund will recognize a capital loss
because of the fact that the Fund's net asset value per share of $8.82 at June
23, 2000 is less than the net asset value per share at the end of each of the
past five years ($9.11 in 1999, $10.06 in 1998, $9.85 in 1997, $9.54 in 1996 and
$9.96 in 1995).
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The deduction of capital losses in excess of capital gains is limited. All
capital gains and losses recognized by a shareholder in a year must be totaled,
and any capital loss will be deductible only to the extent of capital gains
plus, in the case of a non-corporate taxpayer, up to $3,000 of ordinary income.
Non-corporate shareholders may carry forward their net capital loss in future
years until the loss is exhausted. A corporation may not use a capital loss to
offset ordinary income, but generally may carry a capital loss back three years
and forward for five years. Currently the maximum federal ordinary income tax
rate for an individual is 39.6%, and the maximum long-term capital gains tax
rate is 20%. Short-term capital gains that are not offset against capital
losses are taxed at the taxpayer's ordinary income tax rate.
Immediately prior to completion of the liquidation, the Fund will make a
final distribution of its net investment income and short-term capital gains, if
any, which will be taxable to each shareholder as ordinary income. The Fund will
pay its last monthly income dividend in July, with any additional dividends paid
with the liquidation proceeds. The Fund will not have any short term capital
gains. The Fund will also recognize gain or loss on the disposition of its
portfolio securities in connection with the liquidation. However, it is expected
that the Fund will have a net capital loss on the sale of its portfolio
securities in the liquidation; given the fact that the Fund would have net
capital losses of more than $2,000,000 if it had been liquidated on March 31,
2000. Moreover, on March 31, 2000, the Fund had federal income tax capital loss
carry forwards of more than $6,000,000, which would be available to offset any
gains realized by the Fund on the disposition of portfolio securities. The
balance of the Fund's net capital loss carry forwards after disposition of its
portfolio securities will not carry over or otherwise be available to offset any
capital gains that the Fund shareholders may have in the future.
The consummation of these and the other transactions contemplated by the
Plan will be treated as a plan of complete liquidation for tax purposes.
The Board of Directors of the Fund recommends that you vote FOR approval of
---
the plan of liquidation.
OTHER BUSINESS
The Board of Directors has not been informed and is not aware that any
other business will be brought before the Meeting other than the matter set
forth in this Proxy Statement. However, it is the intention of the persons
acting pursuant to the enclosed Proxy card to vote the shares represented by
such Proxies in accordance with their best judgment with respect to any other
matter that may be properly presented to the Meeting or any adjournment thereof.
By signing and returning your Proxy card, you give the Proxy holder
discretionary authority as to any such matter or matters.
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SECURITY OWNERSHIP
The following table sets forth information with respect to each shareholder
that was known to hold of record or beneficially own 5% or more of the
outstanding shares of the Fund as of June 16, 2000.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Fund
---------------- ---------------------- ---------------
<S> <C> <C>
Charles Schwab & Co., Inc. 452,706.276 14.695%
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Washington State Funeral Directors 398,499.351 12.936%
Association - Master Trust
2950 Northrup Way, Suite 105
Bellevue, WA 98004-1406
</TABLE>
As of June 16, 2000, the current directors and executive officers of the
Fund beneficially owned shares of the Fund as follows:
<TABLE>
<CAPTION>
Name Number of Shares Beneficially Owned
---- -----------------------------------
<S> <C>
Kenneth J. Della/1/ 23,661.404/1/
William J. Nasgovitz 19,653.637
A. Gary Shilling/2/ 1,298.303/2/
==========
Directors and executive officers as a group
(11 persons) 24,959.707
</TABLE>
/1/ Includes 23,661.404 shares as to which Mr. Della has voting power as a
trustee for the Heartland Advisors 401(k) retirement plan but as to which
he disclaims beneficial ownership.
/2/ Includes 1,298.303 shares that are held by Heartland Advisors for Mr.
Shilling's benefit under a deferred compensation plan.
ADDITIONAL INFORMATION
Financial Statements
The Fund's audited financial statements, the related footnotes and the
Report thereon of PricewaterhouseCoopers, LLP, independent public accountants,
contained in the Fund's Annual Report to Shareholders as of December 31, 1999
and for the fiscal year then ended are hereby incorporated by reference. The
Fund's Annual and Semi-Annual Reports to Shareholders may be obtained as
described below under the caption "Reports to Shareholders."
7
<PAGE>
Service Providers
Heartland Advisors, 789 North Water Street, Milwaukee, Wisconsin 53202, is
the Fund's investment advisor. It also serves as the Fund's principal
distributor and administrator. Firstar Bank, N.A., 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, is the Fund's custodian, and Firstar Mutual Fund
Services, LLC, 615 East Michigan Street, Milwaukee, Wisconsin 53202, is the
Fund's transfer and dividend disbursing agent.
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, serves as independent accountants and auditors to the Fund.
Representatives of PricewaterhouseCoopers will not be present at the Meeting.
Shareholder Meetings
The Fund is not required to hold annual meetings of shareholders. The Fund
is not required to hold a shareholder meeting in any year in which the election
of directors, approval of an investment advisory agreement or ratification of
the selection of independent public accountants is not required to be acted
upon. Meetings of shareholders of the Fund will be held when and as determined
to be necessary by the Board of Directors and as required by the Investment
Company Act of 1940. However, shareholders of the Fund wishing to submit
proposals for inclusion in a proxy statement for any future shareholder meetings
should send their written proposals to the Secretary of the Fund, c/o Heartland
Advisors, Inc., 789 North Water Street, Milwaukee, Wisconsin 53202.
Reports to Shareholders
The Fund's Annual Report dated December 31, 1999, have been sent to
shareholders of the Fund. Upon request, the Fund will furnish to shareholders,
without a charge, a copy of its Annual Report. All shareholder requests should
be directed to Heartland Advisors, Inc., 789 North Water Street, Milwaukee,
Wisconsin 53202, by telephoning 1-800-432-7856 or by contacting our website at
www.heartlandfunds.com. The SEC also maintains a website at www.sec.gov that
contains documents filed by the Fund. Shareholders can read and print them by
entering the EDGAR database on the SEC's website and following the directions.
By Order of the Board of Directors
JILAINE HUMMEL BAUER
Secretary
Milwaukee, Wisconsin
June 30, 2000
8
<PAGE>
Appendix A
----------
HEARTLAND GROUP, INC.
HEARTLAND GOVERNMENT FUND
PLAN OF LIQUIDATION
The following Plan of Liquidation (the "Plan") of the Heartland Government
Fund (the "Fund") shall be effective only upon the approval of the Plan at a
Special Meeting of Shareholders by the affirmative vote of the holders of a
majority of the outstanding shares of the Fund as of the Record Date.
Article I. Actions to be Taken Prior to Liquidation of the Fund:
(a) As directed by the Board of Directors, the Fund shall proceed with
the business of winding up its affairs.
(b) The proper officers of the Fund are hereby authorized to perform
such acts, execute and deliver such documents, and do all the
things as may be reasonably necessary or advisable to complete the
liquidation and dissolution of the Fund, including, but not
limited to, the following: (i) fulfill or discharge the contracts
of the Fund; (ii) collect the Fund's assets; (iii) sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part
of the remaining property and assets of the Fund to one or more
persons at public or private sale for consideration which may
consist in whole or in part of cash, securities or other property
of any kind; (iv) discharge or pay the liabilities of the Fund;
(v) prosecute, settle or compromise claims of the Fund or to which
the Fund is subject; (vi) file final state and federal tax returns
and any amendments thereto; and (vii) do or cause to be done all
other acts necessary or appropriate to liquidate the business of
the Fund.
Article II. State and Regulatory Filings; Delisting
(a) The proper officer(s) shall prepare (or have prepared) and file
with the Maryland Department of Assessments and Taxation Articles
Supplementary to Heartland Group, Inc.'s Articles of Incorporation
reflecting the elimination of the series of Heartland Group,
Inc.'s Common Stock known as the Heartland Government Fund.
(b) The proper officer(s) shall make any other filings that are
required under the Maryland General Corporation Law in order for
the Fund to be liquidated.
(c) The proper officer(s) will notify the Commodity Futures Trading
Commission and the National Futures Association of the Fund's
termination, if necessary or appropriate.
A-1
<PAGE>
Article III. Liquidation Procedures
(a) The proper officer(s) of the Fund shall cause to be prepared a
notice to shareholders to prove their interests in the Fund, and
to mail such notice, together with a form of letter of transmittal
for the surrender of share certificates and such other information
as said officers shall find necessary or desirable, to
shareholders of record of the Fund as of June 26, 2000.
(b) The proper officer(s) of the Fund shall apply the Fund=s assets to
the payment, satisfaction and discharge of all existing debts and
obligations of the Fund, including necessary expenses of
liquidation, and distribute in one or more payments the remaining
assets and all dividend income and investment company net capital
gain among the shareholders of the Fund, with each shareholder
receiving his proportionate share of each payment.
(c) The proper officer(s) of the Fund may, if such officers deem it
appropriate, establish a reserve to meet the costs of its
liquidation, including the costs of its deregistration as an
investment company under the 1940 Act and its required tax
filings, and any contingent liabilities of the Fund, including any
claims or actions to which the Fund is or may be subject, and any
amount that is placed in such reserve shall be deducted from the
net assets distributable to shareholders until the contingent
liabilities have been settled or otherwise determined and
discharged.
(d) In the event that the Fund is unable to distribute all of the net
assets distributable to shareholders because of the inability to
locate shareholders to whom liquidation distributions are payable,
the proper officer(s) of the Fund may create in the name and on
behalf of the Fund a liquidation trust with a financial
institution and, subject to applicable abandoned property laws,
deposit any remaining assets of the Fund in such trust for the
benefit of the stockholders that cannot be located. The expense of
any such trust shall be charged against the assets held therein.
HEARTLAND GROUP, INC.,
Heartland Government Fund
By: /s/ William J. Nasgovitz
---------------------------------
William J. Nasgovitz, President
ATTEST:
/s/ Jilaine Hummel Bauer
-------------------------------
Jilaine Hummel Bauer, Secretary
A-2
<PAGE>
[Heartland
Logo] Heartland Funds
---------------------------
AMERICA'S VALUE INVESTOR
*** CONTROL NUMBER: 999 999 999 999 99 ***
HEARTLAND GROUP, INC.
Heartland Government Fund
Revocable Proxy for Special Meeting of Shareholders. This Proxy Is Solicited on
Behalf of the Board of Directors
The undersigned hereby appoints William J. Nasgovitz, Hugh F. Denison and Paul
T. Beste, and each of them, proxy, with full power of substitution, to vote all
shares of stock the undersigned is entitled to vote at the Special Meeting of
Shareholders of the Heartland Government Fund to be held on the fourth floor of
Heartland Advisors, Inc., 789 North Water Street, Milwaukee, Wisconsin 53202, at
10:00 a.m. on Tuesday, August 8, 2000, or at any adjournment thereof, with
respect to the matters set forth on this proxy and described in the Notice of
Special Meeting and Proxy Statement, receipt of which is hereby acknowledged.
The Proposal affecting your Fund is listed on the reverse side. Be sure to read
the detailed discussion of this proposal in the Proxy Statement.
Dated: ___________________, 2000
(Please sign exactly as name appears at left. If
stock is owned by more than one person, all owners
should sign. Persons signing as executors,
administrators, trustees or in similar capacities
should so indicate.)
________________________________________________
________________________________________________
BE SURE TO SIGN YOUR PROXY CARD!
<PAGE>
Shares represented by this proxy will be voted as directed by the Shareholder.
IF NO DIRECTION IS SUPPLIED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
---
Please vote by filling in the appropriate box below using blue or black ink or
dark pencil. Do not use red ink.
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. To consider and adopt a Plan of Liquidation pursuant to which the Fund
will be dissolved following the liquidation of its assets, the satisfaction [_] [_] [_]
of its known liabilities, and the distribution of remaining proceeds to
shareholders.
2. To transact such other business as may properly come before the meeting.
[_] [_] [_]
</TABLE>
