HEARTLAND GROUP INC, 497, 2000-06-09

HEARTLAND GROUP INC
497, 2000-06-09

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PROSPECTUS/MAY 1, 2000 (AS SUPPLEMENTED AS OF JUNE 9, 2000)

This Prospectus contains information you should know about the following mutual
fund portfolios of Heartland Group, Inc. (the "Funds") before you invest. Each
Fund is a no-load fund. Investors pay no sales fees to purchase their shares.
Investments for each of the Funds are selected on a value basis.

Equity Funds

- Heartland Select Value Fund - Its investment objective is long-term capital
appreciation. Heartland Advisors will consider companies of all market
capitalization sizes for investment for the Fund.

- 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 and 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.

Municipal Bond Funds

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

- 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.

- Heartland Wisconsin Tax Free Fund - Its investment objective is a high
level of current income that is exempt from federal and Wisconsin personal
income taxes.

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.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS

Page
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<S> <C>
RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE........... 3
The Heartland Approach to Investing.......................... 3
Select Value Fund............................................ 5
Value Plus Fund.............................................. 7
Value Fund...................................................10
Taxable Short Duration Municipal Fund........................12
Short Duration High-Yield Municipal Fund.....................16
High-Yield Municipal Bond Fund...............................19
Wisconsin Tax Free Fund......................................22
Fees and Expenses of the Funds...............................25
Investment Returns...........................................27

MANAGEMENT OF THE FUNDS...........................................28
Heartland Group..............................................28
Heartland Advisors...........................................28

PRINCIPAL INVESTMENT STRATEGIES AND INVESTMENT RISKS..............32
Heartland Advisors' Ten-Point Value Investment Grids(TM).....32
Small Cap and Mid Cap Securities.............................36
Municipal Obligations........................................36
Temporary Positions..........................................40

OTHER INVESTMENT STRATEGIES AND INVESTMENT RISKS..................41
Other Strategies and Risks for Equity Funds..................41
Other Strategies and Risks for Municipal Bond Funds..........42
Other Strategies and Risks for All Funds.....................42
Portfolio Turnover...........................................45

HOW TO INVEST.....................................................46

ACCOUNT POLICIES..................................................54
Redeeming Shares.............................................55
Exchanging Shares............................................57
Share Price..................................................58

SHAREHOLDER INFORMATION AND REPORTING.............................59
Heartland Value Source(TM)...................................59
Investment Reports and Prospectuses..........................59
Dividends and Capital Gain Distributions.....................59
Taxes........................................................60
Financial Highlights.........................................62
</TABLE>

2
<PAGE>

RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE

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.

Equity Ten-Point Value Investment Grid

Heartland Advisors' Equity Ten-Point Value Investment Grid(TM) is used to
evaluate the relative worth of equity securities in the Funds' portfolios.
Investing in equity securities is a principal strategy for the Select Value
Fund, the Value Plus Fund and the Value Fund. The criteria used are:

. Catalyst for recognition . Positive earnings
. Low price/earnings multiple . Business strategy
. High cash flow . Capable management and ownership
. Discount to book value . Value of the company
. Financial soundness . Positive technical analysis

Although no one can predict a Fund's future performance, Heartland Advisors
believes that the "value" style of investing will outperform the "growth" style
of investing over extended periods, which may include bear markets as well as
volatile markets or "sideways moving" markets (i.e., markets that only move
within a narrow range upward or downward over an extended period of time). The
value style may perform less well in markets that favor faster growing
companies.

Fixed Income Ten-Point Value Investment Grid

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.
Investing in fixed-income securities is one of the principal strategies for the
Value Plus Fund. 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

3
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Municipal Ten-Point Value Investment Grid

Heartland Advisors' Municipal Ten-Point Value Investment Grid(TM) is used to
evaluate the relative worth of municipal investments in the Taxable Short
Duration Municipal, Short Duration High-Yield Municipal, High-Yield Municipal
Bond and Wisconsin Tax Free Funds' portfolios. The criteria used are:

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

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

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.

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

4
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SELECT VALUE FUND

Investment Goal. The Select Value Fund seeks long-term capital appreciation by
investing in equity securities whose current market prices, in Heartland
Advisors' judgment, are undervalued relative to their intrinsic value.

Principal Investment Strategies. Heartland Advisors uses its strict value
criteria to identify what it believes are the best available investment
opportunities for the Select Value Fund. Normally, the Fund invests in common
stocks of companies with market capitalizations in excess of $500 million, but
it may invest in companies of all sizes. The median market capitalization of the
Fund is expected to fluctuate over time depending on Heartland Advisors'
perceptions of relative valuations, future prospects and market conditions.

The Select Value Fund generally sells a stock when Heartland Advisors believes
the stock has reached its full valuation, a better valuation opportunity exists
elsewhere or a change in the investment thesis occurs which Heartland Advisors
believes will inhibit the stock's ability to realize its intrinsic value.

Principal Risks. The principal risk of investing in the Select 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. At times the Fund may invest in stocks of small or mid-sized
companies, which are generally more volatile and less liquid than stocks of
larger, more established companies.

The Select Value Fund is a relatively new fund, having commenced operations on
October 11, 1996. In its early years of operation, the performance of a fund may
be adversely affected by factors that may make it more difficult to establish
meaningful portfolio positions as quickly and as efficiently as a more seasoned
fund, such as uneven cash flows, absolute size and greater portfolio turnover.

Who Should Consider Investing in the Fund? The Select Value Fund is designed for
investors who seek long-term capital appreciation from a diversified, actively
managed portfolio of stocks of companies of all sizes. The Fund's investment
style is constructed to fit the core value portion of an investor's equity
portfolio. The Fund is designed for investors who can accept the volatility and
other investment risks of the broad-based equity markets, but 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 Select
Value Fund and provide some indication of the risks of investing in the Fund.
Table I shows 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 two different securities market indices. Past performance
cannot predict or guarantee future results.

5
<PAGE>

TABLE I
Select Value Fund - Year-by-Year Total Returns

[BAR CHART APPEARS HERE]

1997.....22.91% Best Quarter:
1998..... 1.73%
1999..... 1.95% Q2 '97 14.53%

Worst Quarter:

Q3 '98 -15.99%

TABLE II
Select Value Fund - Average Annual Total Return (through 12/31/99)

One Year Since inception (10/11/96)
-------- --------------------------
<S> <C> <C>
Select Value Fund 1.95% 9.48%

S&P Midcap Barra Value Index/(1)/ 2.33% 14.84%

S&P 500 Stock Index/(2)/ 21.04% 28.18%
</TABLE>
________________________

(1) The S&P Midcap Barra Value Index is an unmanaged index of companies within
the S&P Mid Cap 400 Index that have the lowest price-to-book ratios within
the lower 50 percentile of market capitalizations. For comparative
purposes, the value of the S&P Midcap Barra Value Index on September 30,
1996 is used as the beginning value on October 11, 1996. The Select Value
Fund changed its primary benchmark index to the S&P Midcap Barra Value
Index from the S&P 500 Stock Index in connection with a change in its
investment policies effective December 6, 1999. Prior to that date, the
Fund was named the Heartland Large Cap Value Fund and was required to
invest primarily in large-cap stocks. The S&P Midcap Barra Value Index is
believed to be more representative of the Fund for comparative purposes.

(2) The S&P 500 Stock Index is an unmanaged index of 500 stocks representing
major U.S. industries. It is considered representative of the Fund's
investments prior to December 6, 1999 when the Fund invested primarily in
large-cap stocks.

6
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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. Income-producing equity securities include, for example, dividend-paying
common stocks, preferred stocks and convertible securities. Although it may
invest in securities of larger companies, the Fund generally invests in
companies with market 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. 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. There are no limitations on the credit
quality or maturity of the debt securities in which the Fund may invest.

Principal 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.

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.

The Value Plus Fund's investments in 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 rate changes and
other factors). Rising interest rates generally will cause a decline in the
value of debt securities. Normally, credit risk is greater for medium and lower
quality debt securities, and market risk is greater for debt securities with
longer maturities.

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
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 manage these risks
with the careful selection of income-producing securities as an integral part of
their investment portfolio.

7
<PAGE>

Past Performance. The following tables show historical performance of the Value
Plus Fund and provide some indication of the risks of investing in the Fund.
Table I shows 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 two different securities market indices. Table III shows
the annualized yield of the Fund and the indices for the 30 days ended December
31, 1999. Past performance cannot predict or guarantee future results.

TABLE I
Value Plus Fund - Year-by-Year Total Returns

[BAR CHART APPEARS HERE]

1994.......-4.95%
1995.......24.39% Best Quarter:
1996.......33.80%
1997.......30.60% Q2 '99 18.70%
1998......-10.78%
1999........1.67% Worst Quarter:

Q3 '99 -13.91%

TABLE II
Value Plus Fund - Average Annual Total Return (through 12/31/99)

<TABLE>

Since inception
One Year Five Year (10/26/93)
-------- --------- ---------------
<S> <C> <C> <C>

Value Plus Fund 1.67% 14.54% 11.62%

Russell 2000 Value Index/(1)/ -1.49% 13.14% 10.46%

Russell 2000 Index/(2)/ 21.26% 16.69% 13.23%
</TABLE>
________________________

(1) The Russell 2000 Value Index measures the performance of those companies
within the Russell 2000 Index with lower price-to-book ratios and lower
forecasted growth values, and is considered representative of the market
for small cap "value" stocks as opposed to "growth" stocks. The Fund
changed its primary benchmark index to the Russell 2000 Value Index from
the Russell 2000 Index beginning with its fiscal year ended December 31,
1999 because the Russell 2000 Value Index is believed to be more
representative of the Fund for comparative purposes given the Fund's focus
on small cap stocks and "value" style of investing.

(2) The Russell 2000 Index is an unmanaged index of stocks considered
representative of the small cap market.

TABLE III
Yield for the 30 Days Ended 12/31/99 (annualized)

Value Plus Fund 2.49%

Russell 2000 Value Index 2.70%

Russell 2000 Index 1.28%

For current yield information, please call 1.800.432.7856.

8
<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 common
stocks of companies with market capitalizations of less than $750 million
selected on a value basis.

Principal 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.

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 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.

Past Performance. The following tables show historical performance of the Value
Fund and provide some indication of the risks of investing in the Fund. Table I
shows 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 two different securities market indices. Past performance cannot
predict or guarantee future results.

9
<PAGE>

TABLE I
Value Fund - Year-by-Year Total Returns

[BAR CHART APPEARS HERE]
Best Quarter:
1990.....-17.09%
1991......49.35% Q1 '91 29.24%
1992......42.48%
1993......18.77% Worst Quarter:
1994.......1.71%
1995......29.80% Q3 '90 -24.39%
1996......20.99%
1997......23.19%
1998.....-11.46%
1999......25.01%

TABLE II
Value Fund - Average Annual Total Return (through 12/31/99)

Since inception
One Year Five Year Ten Year (12/28/84)
-------- --------- -------- ---------------
<S> <C> <C> <C> <C>

Value Fund 25.01% 16.45% 16.39% 15.64%

Russell 2000 Value Index/(1)/ -1.49% 13.14% 12.45% 12.93%

Russell 2000 Index/(2)/ 21.26% 16.69% 13.40% 13.30%
</TABLE>
________________________

(2) The Russell 2000 Index is an unmanaged index of 2,000 stocks considered
representative of the small cap market.

10
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TAXABLE SHORT DURATION MUNICIPAL FUND

Investment Goal. The Taxable Short Duration Municipal Fund seeks a high level of
current income with a low degree of share price fluctuation.

Principal Investment Strategies. The Taxable Short Duration Municipal Fund
invests primarily in a diversified portfolio of taxable medium and lower-quality
obligations issued by municipalities ("Municipal Obligations"). Although no
duration restrictions apply to the Municipal Obligations in which the Fund
invests, it expects to emphasize short and intermediate duration obligations,
and it maintains an average portfolio duration of three years or less. Certain
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 Standard and Poor's Rating Services ("S&P")
or a comparable rating by another nationally recognized statistical rating
organization.

Duration Management. The value of a bond generally moves in the opposite
direction from a change in interest rates. Duration measures the approximate
price sensitivity of a bond, or a 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.

Taxable Municipal Obligations. Most Municipal Obligations offer income free from
federal income tax. However, another type of Municipal Obligation is subject to
federal income tax for a variety of reasons. These Municipal Obligations do not
qualify for the federal tax exemption because (i) they did not receive the
necessary authorization for tax-exempt treatment from state or local
governmental authorities, (ii) they exceed certain regulatory limitations on the
cost of issuance for tax-exempt financing, or (iii) 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.

Taxable Municipal Obligations may offer yields comparable to those of corporate
debt obligations. However, they also may have less credit risk than corporate
debt obligations because of stronger legal covenants and lower risk of default.

<PAGE>

Consistent with its investment objective, the Taxable Short Duration Municipal
Fund 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 hybrid instruments. A hybrid instrument is an
instrument that has characteristics of securities, futures and options. For
example, an instrument whose principal value and interest rate is tied to a
commodity, currency, or securities index or another interest rate is a hybrid
instrument.

Principal Investment Risks. The principal risk of investing in the Taxable Short
Duration Municipal Fund is that its share price and performance may 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 rate changes and other factors). Rising interest
rates generally will cause the Municipal Obligations held by the Fund to decline
in value. Because the Fund invests primarily in medium and lower quality
obligations, the Fund's portfolio involves risk associated with prolonged
adverse changes in interest rates and the economy generally and greater credit
risks. The Fund's investments may be more thinly traded than secondary trading
in higher quality securities which could create difficulty in valuing and
disposing of the Fund's portfolio securities. Adverse interest rate, economic or
credit conditions could cause the Fund to experience further delays or
difficulties in disposing of portfolio securities.

The Fund commenced operations on December 29, 1998. In its early years of
operation, the performance of a fund may be adversely affected by factors that
may make it more difficult for a newer fund to establish meaningful portfolio
positions as quickly and as efficiently as a more seasoned fund, such as uneven
cash flows, absolute size and greater portfolio turnover.

Who Should Consider Investing in the Fund? The Taxable Short Duration Municipal
Fund is designated for investors who seek higher income than that generally
available from higher quality taxable Municipal Obligations, and who are willing
to accept the higher risk of loss and principal fluctuation associated with
medium and lower quality taxable Municipal Obligations. Because the Taxable
Short Duration Municipal Fund seeks to minimize share price fluctuation by
maintaining a short portfolio duration, this 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.

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 taxable fixed income alternative to balance
your investment portfolio.

12
<PAGE>

. You are investing through an Individual Retirement Account, 401(k) or other
retirement plan for which Municipal Obligations free from federal income tax
would not be appropriate.

. You believe high yield Municipal Obligations can offer superior credit
quality, higher yield potential, and greater price stability compared to high
yield corporate bonds.

Past Performance. The following tables
show historical performance of the
Taxable Short Duration Municipal Fund.
Table I shows the Fund's total return for
1999. Table II provides some indication
of the risks of investing in the Fund by
showing how the Fund's average annual
total returns compare to those of two
different securities market indices.
Table III shows the annualized yields of
the Fund and the indices for the 30 days
ended December 31, 1999. Past performance
cannot predict or guarantee future
results.

Table I

Taxable Short Duration Municipal Fund - Total Return for 1999

[BAR CHART APPEARS HERE]

1999......5.51% Best Quarter:

Q1 '99 1.71%

Worst Quarter:

Q4 '99 1.14%

13
<PAGE>

Table II

Taxable Short Duration Municipal Fund - Average Annual Total Return
(through 12/31/99)

One Year Since Inception (12/29/98)
-------- --------------------------
Taxable Short Duration Municipal Fund 5.51% 6.69%

Merrill Lynch High Yield, U.S.
Corporate, Cash Pay, BB Rated,
1-3 Year Index/(1)/ 3.90% 4.12%

Heartland Customized Short-Term Bond
Index/(2)/ 6.65% 6.62%
----------------------------

(1) The Merrill Lynch High Yield, U.S. Corporate, Cash Pay, BB Rated, 1-3 Year
Index is a market capitalization weighted index including U.S. Domestic and
Yankee, cash pay, high-yield bonds. Qualifying bonds must have at least
$100 million par amount outstanding, and a remaining term to maturity
greater than or equal to one year but less than three years. The quality
range is BB3-BB1 based on the composite rating of Moody's and S&P.
Structured-Note issues, DIBs (deferred interest bonds), and PIKs (pay in
kind bonds) are excluded.

(2) The Heartland Customized Short-Term Bond Index is an equally-weighted index
developed by Heartland Advisors, Inc. consisting of equal allocations of
the Merrill Lynch High Yield, U.S. Corporate, Cash Pay, 1-3 year, BBB
Rated, BB Rated and B Rated Indices, respectively.

Table III

Yield for the 30 Days Ended 12/31/99 (annualized)

Taxable Short Duration Municipal Fund 10.13%

Merrill Lynch High Yield, U.S. Corporate, Cash Pay, BB Rated,
1-3 Year Index 9.89%

Heartland Customized Short-Term Bond Index 9.28%

For current yield information, please call 1.800.432.7856.

14
<PAGE>

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"), the income from which is exempt from
federal personal income tax. Although no duration restrictions apply to the
Municipal Obligations in which the Fund invests, it expects to emphasize short
and intermediate duration obligations, and it 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- by S&P. The Fund may
invest, without limitation, in securities subject to the alternative minimum
tax.

Principal Risks. The Short Duration High-Yield Municipal Fund's share price and
performance may 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 rate changes and
other factors). Rising interest rates generally will cause the Municipal
Obligations held by the Fund to decline in value.

15
<PAGE>

Because the Fund invests primarily in medium and lower quality Municipal
Obligations, the Fund's portfolio involves risk associated with prolonged
adverse changes in interest rates and the economy generally and greater credit
risks. The Fund's investments may be more thinly traded than secondary trading
in higher quality securities, which could create difficulty in valuing and
disposing of the Fund's portfolio securities. Adverse interest rate, economic or
credit conditions could cause the Fund to experience further delays or
difficulties in disposing of portfolio securities. Under these circumstances,
the Fund may elect to borrow to meet its redemption obligations so as to
facilitate a more orderly liquidation of securities in a manner that Heartland
Advisors believes would help maximize the proceeds received by the Fund from the
sale. These borrowings may cause the Fund to incur additional expense, which
would reduce shareholder returns. For these reasons, the Fund is considered more
speculative than a portfolio of higher quality obligations with similar
maturities.

The Fund commenced operations on January 2, 1997. In its early years of
operation, the performance of a fund may be adversely affected by factors that
may make it more difficult for a newer fund to establish meaningful portfolio
positions as quickly and as efficiently as a more seasoned fund, such as uneven
cash flows, absolute size and greater portfolio turnover.

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.

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 following tables show historical performance of the Short
Duration High-Yield Municipal Fund and provide some indication of the risks of
investing in the Fund. 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 yields and taxable equivalent yields of the Fund and the index for
the 30 days ended December 31, 1999. Past performance cannot predict or
guarantee future results.

16
<PAGE>

Table I

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

[BAR CHART APPEARS HERE]
Best Quarter:
1997......7.44%
1998......3.65% Q2 '97 2.08%
1999......1.42%
Worst Quarter:

Q4 '99 -0.98%

Table II

Short Duration High-Yield Municipal Fund - Average Annual Total Return (through
12/31/99)
<TABLE>
<CAPTION>

One year Since inception (1/02/97)
-------- -------------------------
<S> <C> <C>

Short Duration High-Yield
Municipal Fund 1.42% 4.15%

Lehman Municipal 1-3 Year
Non-Investment Grade Bond Index/(1)/ 3.66% 5.39%

</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

Yield for the 30 Days Ended 12/31/99 (annualized)
<TABLE>
<CAPTION>

Taxable Equivalent Yield/(1)/
-----------------------------

Short-Duration High-Yield Municipal Fund 6.77% 11.21%

Lehman Municipal 1-3 Year
Non-Investment Grade Bond Index 5.62% 9.30%

----------------------------
</TABLE>

(1) Based on a federal tax rate of 39.6%.

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

<PAGE>

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, the income from
which is exempt from federal personal income tax. Although no duration
restrictions apply to the Fund or individual Municipal Obligations in which it
invests, the Fund expects to maintain an average portfolio duration of greater
than five years under normal market conditions. 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 nationally recognized statistical
rating organization. The Fund may invest, without limitation, in securities
subject to the alternative minimum tax.

Principal Risks. The High-Yield Municipal Bond Fund's share price and
performance may 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). Rising interest rates generally will cause the Municipal Obligations
held by the Fund to decline in value.

18
<PAGE>

reasons, the Fund is 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 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 following tables show historical performance of the High-
Yield Municipal Bond Fund and provide some indication of the risks of investing
in the Fund. 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
yields and taxable equivalent yields of the Fund and the index for the 30 days
ended December 31, 1999. Past performance cannot predict or guarantee future
results.

19
<PAGE>

TABLE I

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

[BAR CHART APPEARS HERE]
Best Quarter:
1997......11.67%
1998.......6.66% Q4 '97 3.61%
1999......-2.45%
Worst Quarter:

Q4 '99 -3.33%

TABLE II

High-Yield Municipal Bond Fund - Average Annual Total Return (through 12/31/99)

One Year Since Inception (1/02/97)
-------- -------------------------
<S> <C> <C>
High-Yield Municipal
Bond Fund -2.45% 5.14%

Lehman Municipal
Non-Investment Grade -1.80% 4.99%
Bond Index(1)
</TABLE>
--------------------------

(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 12/31/99 (annualized)
<TABLE>
<CAPTION>
Taxable Equivalent Yield/(1)/
-----------------------------
<S> <C> <C>
High-Yield Municipal Bond Fund 7.66% 12.68%

Lehman Municipal Non-Investment Grade
Bond Index 7.12% 11.79%
</TABLE>
--------------------------
(1) Based on a federal tax rate of 39.6%.

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

20
<PAGE>

WISCONSIN TAX FREE FUND (available to Wisconsin residents only)

Investment Goal. The 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.

Principal Investment Strategies. The Wisconsin Tax Free 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.
Normally, the Fund will not invest more than 20% of its net assets in securities
subject to the alternative minimum tax. The Fund invests primarily in Municipal
Obligations judged by Heartland Advisors to be of investment grade quality. Only
limited categories of Municipal Obligations are exempt from both Wisconsin and
federal personal income tax, which may cause the Fund's investments to be more
concentrated geographically and by industry than a mutual fund that does not
seek to invest in securities offering a double tax exemption.

Principal Risks. The principal risk of investing in the Wisconsin Tax Free Fund
is that its share price and performance may 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 fluctuation due to
interest rate changes and other factors). Rising interest rates generally will
cause the Municipal Obligations held by the Fund to decline in value. The Fund's
investments may also be more thinly traded than other fixed-income securities,
which could create difficulty in valuing and disposing of the Fund's portfolio
securities.

Although 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,
the Fund invests primarily in Municipal Obligations of Wisconsin issuers and may
invest more than 25% of its total assets in Municipal Obligations that finance
similar types of projects or projects in related industry sectors. These factors
may cause the Fund to bear greater risk from the effects of economic, business
or political developments in Wisconsin or affecting issuers and industries
located in that state. Such concentration may result in potential volatility,
causing the Fund's share price and performance to fluctuate.

Although the Fund invests primarily in investment grade obligations, it may
invest in medium and lower quality obligations. The Fund may not invest more
than 20% of its total assets in Municipal Obligations rated below B- by S&P or a
comparable rating by another nationally recognized statistical rating
organization. Medium and lower quality Municipal Obligations, sometimes referred
to as "junk bonds," generally offer higher yields than investment grade
securities with similar maturities, but involve greater investment risks,
including the possibility of default or bankruptcy.

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

21
<PAGE>

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.

Who Should Consider Investing In the Fund? The Wisconsin Tax Free 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 12/31/99) Wisconsin double tax-free fund.

Past Performance. The following tables show historical performance of the
Wisconsin Tax Free Fund and provide some indication of the risks of investing in
the Fund. 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
yields and taxable equivalent yields for the Fund and the index for the 30 days
ended December 31, 1999. Past performance cannot predict or guarantee future
results.

22
<PAGE>

TABLE I
Wisconsin Tax Free Fund - Year-by-Year Total Returns

[BAR CHART APPEARS HERE]
Best Quarter:
1993......10.80%
1994......-6.49% Q1 '95 7.49%
1995......17.78%
1996.......3.81% Worst Quarter:
1997.......8.06%
1998.......5.41% Q1 '94 -4.07%
1999......-3.27%

TABLE II
Wisconsin Tax Free Fund - Average Annual Total Return (through 12/31/99)

One year Five year Since inception (4/3/92)
-------- --------- ------------------------
<S> <C> <C> <C>
Wisconsin Tax Free Fund -3.27% 6.14% 5.12%

Lehman 20-Year Municipal Bond
Index/(1)/ -4.69% 7.36% 6.66%

</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 III
Yield for the 30 Days Ended 12/31/99 (annualized)

Taxable Equivalent Yield/(1)/
-----------------------------
<S> <C> <C>

Wisconsin Tax Free Fund 5.61% 10.30%

Lehman 20-Year Municipal Bond Index 6.04% 11.09%

</TABLE>
________________________

(1) Based upon a combined Wisconsin personal income tax rate of 6.77% and a
federal tax rate of 39.60%, 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
45.54%.

For current yield information, please call 1.800.432.7856.

23
<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 (fees paid directly from your investment).

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Taxable Short
Short Duration High-Yield
Select Value Duration High-Yield Municipal Wisconsin
Value Plus Value Municipal Municipal Bond Tax Free
Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ----
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales
charge (load)
imposed on
purchases None None None None None None None
-----------------------------------------------------------------------------------------------------------------------
Maximum deferred
sales charge (load) None None None None None None None
-----------------------------------------------------------------------------------------------------------------------
Maximum sales
charge (load)
imposed on
reinvested
dividends/
distributions None None None None None None None
------------------------------------------------------------------------------------------------------------------------
Redemption Fee/(1)/ None 1%/(2)/ 1%/(2)/ None None None None
------------------------------------------------------------------------------------------------------------------------
</TABLE>
______________________

(1) You will be charged a $12.00 service fee if you request that your
redemption proceeds be wired to your bank account.

(2) To defray certain transaction expenses and facilitate portfolio management,
the Value Plus Fund and the Value Fund charge an early redemption fee equal
to 1% of the proceeds from shares redeemed or exchanged that are held for
less than 270 days. The early redemption fee does not apply to certain
transactions and accounts (such as IRAs and tax-qualified retirement
plans). The other Funds reserve the right, upon notice to you, to charge
an early redemption fee as well.

24
<PAGE>

Annual Fund Operating Expenses (expenses that are deducted from Fund assets).

Taxable Short
Short Duration High-Yield
Select Value Duration High-Yield Municipal Wisconsin
Value Plus Value Municipal Municipal Bond Tax Free
Fund Fund Fund Fund Fund Fund Fund
------ ----- ----- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>

Management fees 0.75% 0.70% 0.75% 0.60% 0.40% 0.60% 0.65%

Distribution (12b-1)
fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% None

Other expenses 1.58% 0.44% 0.34% 1.42% 0.26% 0.32% 0.17%
----- ----- ----- ----- ----- ----- -----

Total annual Fund
operating expenses 2.58%/(1)(2)/ 1.39% 1.34% 2.27%/(1)(2)/ 0.91%/(1)(2)(3)/ 1.17%/(1)(2)(3)/ 0.82%/(3)/

</TABLE>
____________________________________

(1) For the fiscal year ended December 31, 1999, total annual fund operating
expenses net of fees waived and/or expenses reimbursed by Heartland
Advisors were as follows: 0.74% of average daily net assets for the Select
Value Fund; 0.95% of average daily net assets for the Taxable Short
Duration Municipal Fund; 0.75% of average daily net assets for the Short
Duration High-Yield Municipal Bond Fund; and 0.95% of average daily net
assets for the High-Yield Municipal Bond Fund.

(2) Heartland Advisors is voluntarily waiving fees and/or reimbursing expenses
so that the following Funds' net annual operating expenses (excluding
brokerage commissions, interest and taxes) do not exceed the following
percentages: 1.25% of average daily net assets for the Select Value Fund;
0.95% of average daily net assets for the Taxable Short Duration Municipal
Fund; 0.75% of average daily net assets for the Short Duration High-Yield
Municipal Fund; and 0.95% of average daily net assets for the High-Yield
Municipal Bond Fund. However, Heartland Advisors may terminate or revise
this voluntary undertaking at any time. There are no voluntary
undertakings to waive fees or reimburse expenses for the other Funds.

(3) The Short Duration High Yield Municipal, High-Yield Municipal Bond and
Wisconsin Tax Free Funds have entered into arrangements with the Funds'
Custodian whereby interest earned on uninvested cash balances is used to
reduce Custodian expenses. The ratio does not include these fees paid
indirectly. If the Funds did not have these fees paid indirectly, the
total annual operating expenses of the Short Duration High-Yield Municipal
Fund, High-Yield Municipal Bond Fund and Wisconsin Tax Free Fund would have
been 0.92%, 1.18% and 0.83%, respectively, of average daily net assets.

25
<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, and (b) each Fund's
total annual fund operating expenses remain the same as shown in the preceding
table. 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>
------------------------------------------------------------------------------------------------------------------
Taxable Short
Short Duration
Duration High-Yield High-Yield Wisconsin
Select Value Value Municipal Municipal Municipal Tax Free
Value Fund Plus Fund Fund Fund Fund Bond Fund Fund
---------- --------- ----- --------- ---------- ---------- ---------
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year $ 261 $ 142 $ 136 $ 230 $ 93 $ 119 $ 84
------------------------------------------------------------------------------------------------------------------
Three Years 802 440 425 709 290 372 262
------------------------------------------------------------------------------------------------------------------
Five Years 1,370 761 734 1,215 504 644 455
------------------------------------------------------------------------------------------------------------------
Ten Years 2,915 1,669 1,613 2,605 1,120 1,420 1,014
------------------------------------------------------------------------------------------------------------------
</TABLE>

INVESTMENT RETURN
--------------------------------------------------------------------------------
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

26
<PAGE>

percentage of the Fund's share price. Taxable equivalent yield shows the yield
that you would need to receive from taxable income to match a Fund's tax-free
income.
--------------------------------------------------------------------------------

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 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 and Heartland Advisors, Inc., Heartland's investment advisor and
principal underwriter, each have adopted a code of ethics designed to ensure,
among other things, that the interests of Fund shareholders take precedence over
personal interests of their respective directors, officers and employees. Under
the code, personal investment activities are subject to limitations designed to
avoid both actual and perceived conflicts of interest with the investment
activities of the Funds.

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 various administrative services to the Funds. In addition to
managing the Heartland family of 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, 789 North Water Street, Milwaukee, Wisconsin 53202.

27
<PAGE>

Portfolio Managers. The portfolio managers for the Funds are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Select Value Fund M. Gerard Sandel (lead manager)
Eric J. Miller
William J. Nasgovitz
--------------------------------------------------------------------------------
<S> <C>

Value Plus Fund William J. Nasgovitz
M. Gerard Sandel
--------------------------------------------------------------------------------

Value Fund William J. Nasgovitz
Eric J. Miller
--------------------------------------------------------------------------------

Taxable Short Duration Municipal Fund Thomas J. Conlin
Greg D. Winston
--------------------------------------------------------------------------------

Short Duration High-Yield Municipal Fund Thomas J. Conlin
Greg D. Winston
--------------------------------------------------------------------------------

High-Yield Municipal Bond Fund Thomas J. Conlin
Greg D. Winston
--------------------------------------------------------------------------------

Wisconsin Tax Free Fund Thomas J. Conlin
Greg D. Winston
--------------------------------------------------------------------------------
</TABLE>

Thomas J. Conlin, a Chartered Financial Analyst (CFA), is co-portfolio manager
of the Wisconsin Tax Free Fund, the Taxable Short Duration Municipal Fund, the
Short Duration High-Yield Municipal Fund, and the High-Yield Municipal Bond
Fund. Mr. Conlin has been managing municipal investments since 1978. Mr. Conlin
is also a Vice President of Heartland Advisors, which he joined in 1996.

Eric J. Miller, Certified Management Accountant (CMA), has served as a member of
the portfolio management team for the Select Value Fund since September 1999. He
has also served as co-portfolio manager of the Value Fund since July 1997. Mr.
Miller is a Senior Vice President and a Director of Heartland Advisors, having
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.

William J. Nasgovitz has been on the Select Value Fund's portfolio management
team since September 1999 and is co-portfolio manager for the Value Plus Fund
and the Value Fund, having been a portfolio manager of those Funds since
commencement of their operations. Mr. Nasgovitz has been President, Chief
Executive Officer and a Director of Heartland Advisors for the past five years.
During this same period, he also has been President and a Director of Heartland.

<PAGE>

M. Gerard Sandel has served as the lead portfolio manager for the portfolio
management team for the Select Value Fund, with final authority over investment
decisions, since September 1999, and has been co-portfolio manager of the Value
Plus Fund since June 2000. Mr. Sandel, Certified Financial Analyst (CFA), joined
Heartland Advisors in August 1999 as Senior Vice President and Director of
Equity Research. He was previously a Senior Vice President and principal of
Stein Roe & Farnham Incorporated and portfolio manager for institutional and
mutual fund accounts since July 1997. Prior to that time, Mr. Sandel was Vice
President of M&I Investment Management Corporation since October 1993, where he
was a portfolio manager for institutional and mutual fund accounts.

Greg D. Winston is a co-portfolio manager for the Taxable Short Duration
Municipal Fund, the Short Duration High-Yield Municipal Fund, and the High-Yield
Municipal Bond Fund, having managed each Fund since commencement of its
operations. He also has been co-portfolio manager of the Wisconsin Tax Free Fund
since June 2000. Mr. Winston is a Chartered Financial Analyst (CFA) and a Vice
President and principal of Heartland Advisors, which he joined in 1996. Mr.
Winston has been managing municipal investments since 1988.

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 daily net assets.
For the fiscal year ended December 31, 1999, 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>
-----------------------------------------------------------------------------------------
Select Value Fund 0.58% (0.75% before fee waivers)
-----------------------------------------------------------------------------------------
Value Plus Fund 0.70%
-----------------------------------------------------------------------------------------
Value Fund 0.75%
-----------------------------------------------------------------------------------------
Taxable Short Duration Municipal Fund 0.60%
-----------------------------------------------------------------------------------------
Short Duration High-Yield Municipal Fund 0.40%
-----------------------------------------------------------------------------------------
High-Yield Municipal Bond Fund 0.60%
-----------------------------------------------------------------------------------------
Wisconsin Tax Free Fund 0.65%
-----------------------------------------------------------------------------------------
</TABLE>

From time to time, Heartland Advisors may waive fees paid to it by a 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 a certain percentage of average
net assets. Heartland Advisors may modify or discontinue these waivers and/or
reimbursements at any time without notice. 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.

29
<PAGE>

Waivers and reimbursements have the effect of lowering a Fund's overall expense
ratio and increasing the Fund's overall return to investors.

For the period from April 1, 1999 through April 30, 2000, Heartland Advisors
contractually undertook to waive fees paid to it by the Funds and/or pay other
ordinary expenses (excluding brokerage commissions, interest and taxes) of the
Funds as follows: for the Select Value Fund, expenses in excess of 0.95% of
average daily net assets; for the Taxable Short Duration Municipal Fund,
expenses in excess of 0.95% of average daily net assets; for the Short Duration
High-Yield Municipal Fund, expenses in excess of 0.75% of average daily net
assets; and for the High-Yield Municipal Bond Fund, expenses in excess of 0.95%
of average daily net assets. Through December 31, 1999, Heartland Advisors
voluntarily undertook to pay all interest expenses of these Funds. If a Fund's
operating expenses fall below the contractual expense limitation during the
three years subsequent to the fiscal year in which the contractual
waiver/reimbursement was made, the Fund will repay Heartland Advisors for fees
previously waived or expenses previously reimbursed up to that limitation. No
repayment will be made after the three-year period ends.

Rule 12b-1 Fees. Each Fund, other than the Wisconsin Tax Free 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 average 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 a 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.

30
<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 the "growth" style of investing 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.

- Catalyst for Recognition. We not only look for undervalued securities, but
try to anticipate events which will close the gap between a stock's price
and its intrinsic value. Such a catalyst could be a large repurchase plan,
new products, new technology, margin expansion, or merger activity within
the company's industry.

- Low Price/Earnings Multiple. We look for a stock's price/earnings (P/E)
ratio to be less than the market's average. If the stock is then
"discovered" by Wall Street, the low P/E provides opportunity for a sharp
price increase. Also, if the market drops, low P/E stocks have less
downside risk.

- High Cash Flow. A strong cash flow allows a company to generate greater
wealth over the long term. A high discretionary cash flow, after capital
expenditures and dividends, is especially attractive.

- Discount to Book Value. The stock should be selling below its tangible book
value, which is equal to total assets minus all liabilities and goodwill.

- Financial Soundness. Long-term debt should generally be less than 25% of
total capitalization. During difficult periods, a company's cash flow
should be directed to investments in operations rather than interest
expense. A highly leveraged balance sheet can become a hindrance to
performance and endanger the company's very existence.

- Positive Earnings. We favor companies with improving earnings or upwardly
revised estimates.

31
<PAGE>

- Business Strategy. We critically evaluate management's strategy for growing
the business. How does this strategy differ from their past efforts or
compare to that of their competitors? Why does management believe their
strategy will be successful, and more importantly, why do we?

- Capable Management and Ownership. Capable management will demonstrate an
ability to effectively implement business strategies. Additionally, we
believe meaningful and increasing ownership by officers and directors
validates the business plan, demonstrates their personal commitment to
achieving their designated business goals and aligns their long-term
interest with the shareholders' interest.

- Value of the Company. From the universe of stocks why is this one a
compelling value? We utilize traditional valuation parameters, such as
competitive Price/ EBITDA (Earnings Before Interest, Taxes, Depreciation
and Amortization), Enterprise Value/ EBITDA, Price/Sale and Return on
Equity to determine the appreciation potential of the security. We
determine fair value through means such as discounted cash flow analysis.
Is there more? A franchise value or brand name that cannot be replicated,
or hidden assets that are not reflected on the balance sheet or recognized
in the market.

- Positive Technical Analysis. Technical analysis should indicate that a
stock is presently attractive for investing without undue speculation. We
typically seek "bases" in a stock's price pattern, with the belief that
speculators will not own the stock or be interested in it at that moment. A
stock forms a "base" when its trading range narrows following a movement
up, or more typically, down.

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.

- 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 or total yields tends to reflect the relative value
in fixed-income investments. High "real" rates (i.e., the rate earned by a
bond in excess of inflation) cushion investors against adverse moves in
inflation.

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- 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 (such as U.S. Treasury or
agency securities, mortgage-backed securities, zero coupon bonds, asset-
backed securities and corporate debt securities) 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 or Acceptance. Strong fundamental and technical support
must be accompanied by general market sponsorship or acceptance 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.

- Catalyst for Recognition. 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.

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Municipal Ten-Point Value Investment Grid(TM). Heartland Advisors' Municipal
Ten-Point Value Investment Grid(TM) consists of the following criteria for
selecting Municipal Obligations for the Funds.

. 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?

. 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?

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SMALL CAP AND MID CAP SECURITIES

Equity securities of small and mid cap companies in which the Select Value,
Value Plus and Value Funds invest 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.

Market Capitalizations of Portfolio Securities. The following table shows the
median and weighted average market capitalizations as of December 31, 1999, for
the companies whose equity securities are owned by the Funds with equity
holdings and for the companies included in the indices that are benchmarks for
each of those Funds.

Market Capitalization of Common Stocks in Portfolio (as of 12/31/99)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Median Weighted Average
------ ----------------
--------------------------------------------------------------------------------
<S> <C> <C>
Select Value Fund $1.98 billion $6.39 billion
--------------------------------------------------------------------------------
S&P Midcap Barra Value Index 1.31 billion 2.27 billion
--------------------------------------------------------------------------------
S&P 500 Index 7.97 billion 142.95 billion
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Value Plus Fund $122 million $558 million
--------------------------------------------------------------------------------
Value Fund 91 million 810 million
--------------------------------------------------------------------------------
Russell 2000 Value Index 410 million 790 million
--------------------------------------------------------------------------------
Russell 2000 Index 460 million 1,360 million
--------------------------------------------------------------------------------
</TABLE>

MUNICIPAL OBLIGATIONS

Under normal market conditions, the Taxable Short Duration Municipal Fund
invests at least 65% of its total assets in taxable Municipal Obligations. 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 also invest in tax-exempt Municipal Obligations.

Under normal market conditions, each of the Short Duration High-Yield Municipal
Fund and the High-Yield Municipal Bond Fund invests at least 65% of its total
assets in medium and lower-quality Municipal Obligations, and as a fundamental
policy will invest at least 80% of its net assets in Municipal Obligations.

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<PAGE>

As a matter of fundamental policy, under normal market conditions, the Wisconsin
Tax Free Fund invests at least 80% of its assets so that the income earned
thereon is exempt from both federal and Wisconsin personal income taxes.

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.

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, 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 the 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

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<PAGE>

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.

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.

Credit Quality. The Wisconsin Tax Free Fund invests primarily in "investment
grade" Municipal Obligations. The Taxable Short Duration Municipal, Short
Duration High-Yield Municipal and the High-Yield Municipal Bond Funds each
invest at least 65% of total assets in medium and lower-quality Municipal
Obligations. Investment grade Municipal Obligations are rated "BBB" or above by
S&P or a comparable rating by another nationally recognized statistical rating
organization, or are unrated but believed by Heartland Advisors to be of
investment grade quality. Issuers of investment grade Municipal Obligations have
strong capacity to pay interest and repay principal, while securities rated
below investment grade have speculative characteristics that will vary in degree
with their quality.

Although credit ratings issued by credit rating agencies are designed to
evaluate the risks that a municipality or other issuer will be able to make
timely principal and interest payments on its obligations, 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.

Nationally recognized statistical rating organizations publishing rating
information on which Heartland Advisors may rely include Standard & Poor's
Rating Group, Moody's Investors Services, Inc., and Fitch IBCA, Inc., among
others. The Fund also may invest in unrated securities.

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<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 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 their rating
systems, a Fund will attempt to use comparable ratings as standards for
selecting investments.

Risks Associated with Municipal Obligations. The Taxable Short Duration
Municipal, Short Duration High-Yield Municipal, High-Yield Municipal Bond and
Wisconsin Tax Free Funds' investments in Municipal Obligations involve 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. Securities
with lower credit ratings involve greater credit risk. 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.

"High Yield" Risk. "High yield" risk is a characteristic of medium and lower
quality Municipal Obligations. These obligations offer higher yields, but
greater investment risk than higher quality securities with similar maturities.
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. 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. A Municipal Fund's investments may be more thinly traded than
secondary trading in higher quality securities. This could cause a Fund
difficulty in disposing of portfolio securities and in valuing portfolio
securities because of the lack of objective pricing data provided by actively
traded markets.

Concentration. Although none of the Taxable Short Duration Municipal, Short
Duration High-Yield Municipal, High-Yield Municipal Bond and Wisconsin Tax Free
Funds may invest more than 25% of its total assets in securities of non-
governmental issuers whose principal activities are in the same industry, each
Fund may invest 25% or more of total assets in Municipal Obligations that
finance similar types of projects or projects in related industry sectors or
whose issuers or projects are located in the same state or geographic

38
<PAGE>

region. These factors may cause a Fund to bear greater risk from the effects of
an economic, business or political development affecting a particular region or
industry. Concentration may also result in potential volatility, causing a
Fund's share price and performance to fluctuate.

The Wisconsin Tax Free Fund's investments are more focused geographically and by
industry than a mutual fund with a nationally diversified portfolio of Municipal
Obligations. The value of the Municipal Obligations owned by the Wisconsin Tax
Free 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 Wisconsin Tax Free Fund's policies seek to
minimize this geographic concentration risk in a number of ways. First, the
Wisconsin Tax Free 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 Wisconsin Tax Free 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
Wisconsin Tax Free 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 Wisconsin Tax Free Fund's policies and programs permit 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, economic, political or other 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.

39
<PAGE>

OTHER INVESTMENT STRATEGIES AND INVESTMENT RISKS

In addition to the principal investment strategies discussed above in this
prospectus, each Fund may engage in other non-principal investment strategies
discussed below and in its statement of additional information.

OTHER STRATEGIES AND RISKS FOR EQUITY FUNDS

Influence or Control over Portfolio Companies. As a shareholder of a portfolio
company, each of the Select Value, Value Plus and Value Funds 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
these 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 a Fund would make investments for control only on a
selective basis when Heartland Advisors believes it would be in the best
interests of the Fund and its shareholders.

Foreign Securities. Each of the Select Value, Value Plus and Value Funds 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 nationaliza-

40
<PAGE>

tion; currency blockage (which could prevent cash from being brought back to the
United States); the impact of exchange rate and foreign currency fluctuations on
the market value of foreign securities; more limited availability of public
information regarding security issuers; the degree of governmental supervision
regarding securities markets; different accounting, auditing and financial
standards; difficulties in enforcing legal rights (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.

Initial Public Offerings. Each of the Select Value, Value Plus and Value Funds
may purchase equity securities in initial public offerings ("IPOs"). Such
investments may have a magnified performance impact on a Fund due to the typical
price volatility of securities sold in IPOs. Investments in IPOs also involve
the risks that an active trading market may not develop or be sustained for the
securities and that the issuer may not have a significant operating history or
may not meet market expectations.

OTHER STRATEGIES AND RISKS FOR MUNICIPAL BOND FUNDS

Standby Commitments. To facilitate portfolio liquidity, the Taxable Short
Duration Municipal, Short Duration High-Yield Municipal, High-Yield Municipal
Bond and Wisconsin Tax Free Funds may obtain standby commitments when they
purchase 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 Taxable Short Duration Municipal, Short Duration High-Yield
Municipal, High-Yield Municipal Bond and Wisconsin Tax Free Funds 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.

OTHER STRATEGIES AND RISKS FOR ALL FUNDS

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<PAGE>

High-Yield and Unrated Securities. Each of the Funds 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 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 the Funds may be either unrated or rated by one or
more independent rating organizations that rate the issuer of a security based
on the issuer's financial soundness. Debt securities purchased by a 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.

Borrowing. The extent to which a Fund will borrow will depend, among other
things, on market conditions and interest rates. 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 may also borrow from
banks up to one-third of its total assets for other purposes such as
facilitating the management of its investment portfolio and making other
investments or engaging in other transactions permissible under the 1940 Act
which may be considered a borrowing (such as dollar rolls and reverse repurchase
agreements).

Each Fund (other than the Short Duration High-Yield Municipal and High-Yield
Municipal Bond Funds) presently plans to limit its borrowings to borrowings 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 Advisor believes are unfavorable
to shareholders, such as to meet large or unexpected redemptions; (b) to
purchase debt obligations pending receipt of proceeds in the settlement of the
sale of other portfolio securities; and (c) 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.
Each of the Short Duration High-Yield Municipal and High-Yield Municipal Bond
Funds presently intends to similarly limit its borrowings, except that each such
Fund's borrowings to meet

42
<PAGE>

redemptions may continue for a period of more than 60 days, and its borrowings
for both redemption and temporary purposes are excluded from the 20%, but not
the one-third, of total assets limit on borrowing.

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 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.

The Fund's use of options and futures and other investment techniques for
hedging purposes involve the risk that changes in the value of a hedging
investment 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 can also reduce or eliminate portfolio gains.

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.

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

43
<PAGE>

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

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 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.

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 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.

44
<PAGE>

HOW TO INVEST

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR REGULAR ACCOUNTS
-----------------------------------------------------------------------------------------------------------------------------------
OPEN AN ACCOUNT ADD TO AN ACCOUNT SELL SHARES
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[PICTURE APPEARS HERE] By Telephone
-----------------------------------------------------------------------------------------------------------------------------------
Wire Call 800.443.2862 to obtain an account number and Telephone Purchase by Electronic Check Call us to request your
provide your Social Security or tax ID number. Have your Funds Transfer Available for redemption. A check will be
bank send your investment to Firstar Bank, N.A. with these additional investments of $100 to mailed to the address on the
instructions: $25,000. Your account will be account Express mail delivery is
charged a service fee (currently available on request for an
. ABA #0750-00022 $20.00) if an electronic funds additional charge (currently
. A/C #112-952-137 transfer cannot be processed due to $12.00).
. CREDIT TO: Heartland (name of fund) insufficient funds or a stop
. your Heartland account number transfer. Contact us for a Bank Wire or Electronic Funds Transfer
. name(s) of investor(s) Options Form. These services must be pre-
authorized in writing. To add
Wire Have your bank send your these services, call us to re-
investment to Firstar Bank, N.A. quest an account maintenance
with these instructions: form. Once the Fund has your
bank account information on file,
. ABA #0750-00022 call us to request your redemp-
. A/C #112-952-137 tion. Proceeds will be wired or
. CREDIT TO: Heartland (name of transferred electronically to
fund) your bank. For wires, your
. your Heartland account number account will be charged a
. name(s) of investor(s) service fee (currently $12.00).

Telephone and Wire Redemptions
are subject to a $1,000 minimum.
-----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] In Writing
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

45
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mail a completed application form and a check. Fill out the Additional Investment Write a letter of instruction
Form attached to your statement and that includes:
send with a check. Write your
Heartland account number on your . the names and signatures of
check. all account holders
. your Heartland account
Mail the form and the check. number
. the amount in dollars or
shares you want to sell
. how and where to send the
proceeds

We will mail the proceeds to the
address on the account unless
otherwise requested. A
signature guarantee may be
required.

Mail the letter of instruction.

NOTE: See pages 50-51 for
special information on
redemptions from IRA accounts.
------------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Automatically
------------------------------------------------------------------------------------------------------------------------------------
Complete the application form, including Automatic All Services Call us to request a Systematic Withdrawal Plan Call
Investment Plan section, and return it with your form to add the Automatic In- us to request an account
investment (minimum of $50 per transaction). Investment Plan (minimum of $50 per maintenance form to add the
transaction) to your account. plan. Complete the form,
Complete and return the form along specifying the amount and
with any other required materials. frequency of withdrawals you
would like.
------------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Via the Internet
------------------------------------------------------------------------------------------------------------------------------------
Computer Visit the Heartland web site
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
www.heartlandfunds.com and follow the instructions to
download an account application.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

HOW MAY WE HELP YOU?

1.800.432.7856
www.heartlandfunds.com

Make a check payable to: Heartland Funds

ADDRESSES

Mailing Address
---------------

Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701

Overnight Delivery
------------------

Firstar Mutual Fund Services, LLC
615 East Michigan St.
Milwaukee, WI 53202

CONCEPTS TO UNDERSTAND

Wire Transfer: The fastest way to transfer money from one financial institution
to another. Your bank may charge a fee to send or receive a wire transfer. Mail
the letter of Instruction.

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.

<PAGE>

HOW TO INVEST

<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR IRA ACCOUNTS (APPROPRIATE FOR SELECT VALUE, VALUE PLUS, VALUE AND TAXABLE SHORT DURATION MUNICIPAL FUNDS ONLY)
------------------------------------------------------------------------------------------------------------------------------------
OPEN AN ACCOUNT ADD TO AN ACCOUNT SELL SHARES
------------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] By Telephone
------------------------------------------------------------------------------------------------------------------------------------
Wire After completing and returning an IRA application Telephone Purchase by Electronic IRA redemptions must be
form, call 800.443.2862 to obtain an account number and Funds Transfer Available for requested in writing.
provide your Social Security or tax ID number. Have your additional investments of $100 to
bank send your investment to Firstar Bank, N.A. with these $25,000. Your account will be
instructions: charged a service fee (currently
$20.00) if an electronic funds
. ABA #0750-00022 transfer cannot be processed due to
. A/C #112-952-137 insufficient funds or a stop
. CREDIT TO: Heartland (name of fund) transfer. Contact us for a Bank
. your Heartland account number Options Form.
. name of investor
Wire Have your bank send your
investment to Firstar Bank, N.A.
with these instructions:

. ABA #0750-00022
. A/C #112-952-137
. CREDIT TO: Heartland (name of
fund)
. your Heartland account number
. name(s) of investor(s)
------------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] In Writing
------------------------------------------------------------------------------------------------------------------------------------
Complete and return an IRA application form, and a Fill out the Additional Investment Write a letter of instruction
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
check or IRA transfer form. For direct rollovers of Form attached to your statement and that includes:
assets from employer sponsored qualified plans, mail a send with a check. Write your
completed IRA application. Heartland account number on your . the name and signature of
check. account holder
. your Heartland account
Mail the form and the check. number
. the fund name
. the amount in dollars or
shares you want to sell
. how and where to send the
proceeds
. whether the distribution is
qualified
. whether taxes should be
withheld (we will withhold
10% if you do not give us
instructions)

We will mail the proceeds to the
address on the account, unless
otherwise requested. A
signature guarantee may be
required. Express mail
delivery is available upon
request for an additional charge
(currently $12.00).

Mail the letter of instruction.
------------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Automatically
------------------------------------------------------------------------------------------------------------------------------------
Complete the IRA application form, and the Automatic All Services Call us to request a Systematic Withdrawal Plan
Investment Plan application, and return them with your form to add the Automatic Call us to request an account
investment (minimum of $50 per transaction). Investment Plan (minimum of $50 per maintenance form to add the
transaction) to your account. plan. Complete the form, spec-
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Complete and return the form along ifying the amount and frequency
with any other required materials. of withdrawals you would like.
------------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Via the Internet
------------------------------------------------------------------------------------------------------------------------------------
Computer Visit the Heartland web site
www.heartlandfunds.com and follow the instructions to
download an IRA account application.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

HOW MAY WE HELP YOU?

1.800.432.7856
www.heartlandfunds.com

Make check payable to: Heartland Funds

ADDRESSES

Mailing Address
---------------
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701

Overnight Delivery
------------------
Firstar Mutual Fund Services, LLC
615 East Michigan St.
Milwaukee, WI 53202

CONCEPTS TO UNDERSTAND

Wire Transfer: The fastest way to transfer the amount and frequency of
withdrawals you would like from one financial institution to another. Your bank
may charge a fee to send or receive a wire transfer.

51
<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,
including but not limited to restricting excessive exchange activity that the
officers of Heartland determine is not in the best interests of the Funds or
their shareholders. The Funds also reserve the right to waive or lower any
minimum dollar amounts applicable to the transactions discussed.

Copies of account statements are available upon request. However, if you request
a statement for a period other than for the current or prior year, the Fund's
transfer agent will charge you a research fee (currently $5.00).

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. Net asset value is determined at the close of regular
trading on the New York Stock Exchange (generally 4:00 p.m., Eastern Time).
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, and such orders are priced at the net asset
value per share on that next day. Purchase orders for a Fund are not binding
until accepted by the Fund or its authorized agent. 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.

52
<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 W9 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, different investment minimums and other
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 a 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.

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 informa-

53
<PAGE>

tion 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 days after redemption. The Funds do not guarantee the time of receipt of
your proceeds and are not responsible for delays in mail or wire services. In
limited circumstances as permitted by the Securities and Exchange Commission
(such as when the New York Stock Exchange is closed or trading is restricted, or
when an emergency exists), 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 which may
take up to 15 days. 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.

Redemptions by Check (Taxable Short Duration Municipal and Short Duration High-
Yield Municipal Funds only). You may redeem shares of the Taxable Short Duration
Municipal Fund and 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. Please note that these checks are drawn on a special account at the
Fund's custodian bank, so 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. You may realize a taxable gain or loss when
you redeem shares by check.

Early Redemption Fee. To defray certain transaction expenses and facilitate
portfolio management, each of the Value Fund and the Value Plus Fund will charge
you an early redemption fee of 1% of the current net asset value of shares being
redeemed or exchanged that are held for less than 270 days. The fee applies to
shares being redeemed or exchanged in the order in which they were purchased.
The Funds reserve the right to modify the terms of or terminate the fee at any
time. The fee is normally waived for Value Fund or Value Plus Fund shares
purchased:

54
<PAGE>

- For an account registered as either an Individual Retirement Account (IRA)
or a tax-qualified retirement plan on the books of the Fund's transfer
agent or on the books of other third parties who are authorized agents of
the Fund;

- By automatic reinvestment of income or capital gains distributions from the
Fund, another Heartland Fund or the Firstar Money Market Fund;

- Through an automatic purchase plan offered by the Fund; and

- That are redeemed through an automatic redemption plan offered by the Fund.

If you purchase shares through a broker-dealer or other financial intermediary
who maintains your individual account on its books and an omnibus account with
the Fund's transfer agent, your record keeper may not be able to apply the fee
waiver in all of the circumstances discussed above. Before purchasing shares,
please check with your account representative to determine if the fee waiver is
available.

Upon advance written notice to you, each of the other Heartland Funds reserves
the right to charge you an early redemption fee on shares being redeemed or
exchanged that are held for less than a specified number of 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
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.

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 record keeping 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.

IRAs and Tax-Sheltered Retirement Plans (not appropriate for Short Duration
High-Yield Municipal, High-Yield Municipal Bond or Wisconsin Tax Free Fund).
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 of the Select Value, Value Plus, Value and Taxable Short
Duration Municipal Funds 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.

55
<PAGE>

The IRA custodian charges certain account fees that are subject to changes upon
notice to you, including an annual maintenance fee of $12.50 per Fund account
($25.00 per social security number). Distributions, asset transfers, excess
contribution withdrawals and Roth IRA re-characterizations are each subject to a
$15.00 fee.

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.
Notaries public cannot guarantee signatures.

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 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 an 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) on each day the Exchange is open. 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.

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.

56
<PAGE>

You should always verify your order against your confirmation when you receive
it. Please contact Heartland or the third party with which you placed your order
promptly if you notice any discrepancy.

Portfolio securities are valued on the basis of market quotations or at fair
value using methods determined by Heartland's Board of Directors. The Funds use
a "fair value" methodology to value securities for which market quotations are
not readily available. Fair values of debt securities 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.

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 AND PROSPECTUSES

The Funds' portfolio managers review their strategies and results in Value
Reports, which also contain schedules of investments and Fund financial
statements. Heartland Advisors periodically publishes and mails to shareholders
other investment and performance information. Shareholders also receive annual
prospectus updates.

Whenever practicable, and to the extent permitted by applicable law, a single
report, prospectus or other communication will be mailed to shareholders who
share a single address. In some cases, Heartland may be required to obtain
advance written consent. To receive additional copies, you may call Shareholder
Services at 1.800.432.7856 or 414.289.7000, or write to Heartland Advisors at
789 North Water 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 year or less, or more than one year. This is the case regardless of how
long you hold your Fund shares.

57
<PAGE>

Substantially all of the net investment income of the Select Value and Value
Funds will be paid to shareholders annually as a dividend. The Value Plus Fund
will pay dividends from net investment income quarterly. The Taxable Short
Duration Municipal, Short Duration High-Yield Municipal, High-Yield Municipal
Bond and Wisconsin Tax Free Funds 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
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. Fund dividends and capital gain distributions that are reinvested will be
confirmed on your account statement for the quarter in which the reinvestment is
made.

If you choose to have dividends or capital gain 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.

"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. 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."

TAXES

All income dividend distributions from the Select Value, Value Plus, Value and
Taxable Short Duration Municipal Funds will be taxable to you as ordinary income
for federal income tax purposes. Interest earned by the Short Duration High-
Yield Municipal, High-Yield Municipal Bond and Wisconsin Tax Free Funds is in
general federally tax-free when distributed to you as a dividend; however, if
any such 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 of the Short Duration High-Yield Municipal, High Yield Municipal Bond and
Wisconsin Tax Free Funds 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 a Fund invests in private activity securities, 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 federally alternative minimum tax will
depend on your individual tax circumstances.

58
<PAGE>

Short term capital gains from any Fund will be taxable to shareholders as
ordinary income for federal income tax purposes. Long term capital gain 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 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.

59
<PAGE>

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 statements, are included in the Annual Report to Shareholders, which
is available upon request.

60
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Select Value Fund
----------------------------------------------------------==========================================================================
For the year ended December 31, October 11, 1996/(1)/
---------------------------------------------------------- ----------- through
1999 1998 1997 December 31, 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Data
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.94 $12.30 $10.50 $10.00
------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.17 0.30 0.11 --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on
investments 0.04 (0.10) 2.28 0.50
------ ------ ------ ------
------------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.21 0.20 2.39 0.50
------------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.17) (0.30) (0.11) --
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains on investments (0.25) (0.26) (0.48) --
------ ------ ------ ------
------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.42) (0.56) (0.59) --
------ ------ ------ ------
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.73 $11.94 $12.30 $10.50
====== ====== ====== ======
------------------------------------------------------------------------------------------------------------------------------------
Total Return 1.95% 1.73% 22.91% 5.00%/(2)/
------------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
Net assets, end of period (in thousands) $7,118 $8,025 $7,665 $2,441
------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets 0.74%/(4)/ 0.00%/(4)/ 1.36%/(4)/ 2.73%/(3)/
------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets 1.38%/(4)/ 2.37%/(4)/ 1.14%/(4)/ (.25)%/3/
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 160% 48% 30% 1%
------------------------------------------------------------------------------------------------------------------------------------
</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 ratios of net expenses to average net assets for the years
ended December 31, 1999, 1998 and 1997 would have been 2.58%, 1.92% and
2.00%, respectively, and the ratios of net investment income (loss) to
average net assets would have been (0.46)%, 0.45% and 0.50%, respectively.

61
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Value Plus Fund
=================================================================
For the year ended December 31,

1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.80 $ 16.13 $ 13.73 $ 11.17 $ 9.53
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.46 0.62 0.48 0.38 0.41
----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on (0.25) (2.32) 3.66 3.33 1.89
investments ------- -------- --------- ------- -------
----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 0.21 (1.70) 4.14 3.71 2.30
----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
----------------------------------------------------------------------------------------------------------------------------
Net investment income (0.44) (0.60) (0.48) (0.38) (0.41)
----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investments - (0.03) (1.26) (0.77) (0.25)
------- -------- -------- ------- -------
----------------------------------------------------------------------------------------------------------------------------
Total distributions (0.44) (0.63) (1.74) (1.15) (0.66)
------- -------- -------- ------- -------
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.57 $ 13.80 $ 16.13 $ 13.73 $ 11.17
======= ======== ======== ======= =======
----------------------------------------------------------------------------------------------------------------------------
Total Return 1.67% (10.78)% 30.60% 33.80% 24.39%
----------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $87,065 $174,314 $336,281 $66,582 $19,123
----------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets 1.39% 1.24% 1.12% 1.45% 1.54%
----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 3.05% 3.77% 3.32% 3.23% 3.90%
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 82% 64% 74% 73% 150%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

62
<PAGE>

FINANCIAL HIGHLIGHTS

Value Fund
-----------------------------------------------------------================================================================

----------------------------------------------------------- For the year ended December 31,

1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.29 $ 33.87 $ 31.65 $ 27.95 $ 22.72
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.21)/(1)/ 0.08 0.17 0.06 0.13
-----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on
investments 7.52 (3.97) 7.09 5.78 6.63
---- ------ ---- ---- ----
-----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 7.31 (3.89) 7.26 5.84 6.76
-----------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income -- (0.06) (0.17) (0.06) (0.13)
-----------------------------------------------------------------------------------------------------------------------------------
Net realized gains on investments (0.10) (0.63) (4.87) (2.08) (1.40)
------ ------ ------ ------ ------
-----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.10) (0.69) (5.04) (2.14) (1.53)
------ ------ ------ ------ ------
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.50 $ 29.29 $ 33.87 $ 31.65 $ 27.95
========== ========== ========== =========== ==========
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 25.01% (11.46)% 23.19% 20.99% 29.80%
-----------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,195,067 $1,545,495 $2,126,715 $ 1,626,760 $1,190,926
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets 1.34% 1.15% 1.12% 1.23% 1.29%
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets (0.70)% 0.22% 0.49% 0.22% 0.61%
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 23% 36% 55% 31% 31%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Net investment loss per share is calculated using average shares
outstanding.

63
<PAGE>

FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>

Taxable Short Duration Municipal Fund
============================================
---------------------------------------------------------------------------------------------------------------------------------
For the December 29, 1998(1)
Year ended through
December 31, 1999 December 31, 1998
--------------------- -------------------------
---------------------------------------------------------------------------------------------------------------------------------
Per Share Data
---------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C>
Net asset value, beginning of period $ 10.11 $10.00

Income from investment operations:

Net investment income 0.89 0.00

Net realized and unrealized gains (losses) on investments (0.35) 0.11
------- ------

Total income from investment operations 0.54 0.11

Less distributions from:

Net investment income (0.89) 0.00

Net realized gains on investments -- --
------- ------

Total distributions (0.89) 0.00
------- ------

Net asset value, end of period $ 9.76 $10.11
======= ======
---------------------------------------------------------------------------------------------------------------------------------
Total Return 5.51% 1.15%(2)
---------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data

Net assets, end of period (in thousands) $21,913 $1,227

Ratio of net expenses to average net assets(4) 0.95% 0.48%(3)

Ratio of net investment income to average net assets(4) 9.02% 6.36%(3)

Portfolio turnover rate 43% 0%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) If there had been no expense reimbursement by the Advisor, the ratios of
annualized net expenses to average net assets for the periods ended
December 31, 1999 and 1998 would have been 2.27% and 4.80%, respectively,
and the ratios of annualized net investment income to average net assets
would have been 7.70% and 2.04%, respectively.

64
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Short Duration High-Yield Municipal Fund
========================================
-----------------------------------------------------------------------------------------------------------------------------------
For the For the January 2, 1997/(1)/
year ended year ended through
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -----------------
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Data
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.98 $10.15 $10.00

Income (loss) from investment operations:

Net investment income 0.56 0.53 0.57

Net realized and unrealized gains (losses) on investments (0.42) (0.17) 0.15
----- ----- ----

Total income (loss) from investment operations 0.14 0.36 0.72
===== ==== ====
Less distributions from:

Net investment income (0.56) (0.53) (0.57)

Net realized gains on investments - - -
----- ----- ----

Total distributions (0.56) (0.53) (0.57)
----- ----- ----

Net asset value, end of period $9.56 $9.98 $10.15
===== ===== ======
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 1.42% 3.65% 7.44%
-----------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data

Net assets, end of period (in thousands) $122,152 $149,643 $120,942

Ratio of net expenses to average net assets 0.75%/(2)/ 0.62%/(2)/ 0.00%/(2)/

Ratio of net investment income to average net assets 5.69%/(2)/ 5.26%/(2)/ 5.33%/(2)/

Portfolio turnover rate 71% 215% 175%
-----------------------------------------------------------------------------------------------------------------------------------
</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, 1999, December 31, 1998 and
December 31, 1997 would have been 0.92%, 0.80% and 0.84%, respectively, and
the ratios of net investment income to average net assets would have been
5.52%, 5.08% and 4.49%, respectively.

65
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
High-Yield Municipal Bond Fund `
====================================================================
----------------------------------------------------------------------------------------------------------------------------------
For the For the January 2, 1997(1)
year ended year ended through
December 31, 1999 December 31, 1998 December 31, 1997
------------------------- --------------------- ---------------------
----------------------------------------------------------------------------------------------------------------------------------
Per Share Data
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.38 $ 10.45 $ 10.00

Income (loss) from investment operations:

Net investment income 0.65 0.65 0.68

Net realized and unrealized gains (losses) on (0.88) 0.03 0.48
investments ------- ------- -------

Total income (loss) from investment operations (0.23) 0.68 1.16

Less distributions from:

Net investment income (0.65) (0.65) (0.68)

Net realized gains on investments - (0.10) (0.03)
------- ------- -------
Total distributions
(0.65) (0.75) (0.71)
------- ------- -------
Net asset value, end of period
$ 9.50 $ 10.38 $ 10.45
======= ======= =======
----------------------------------------------------------------------------------------------------------------------------------
Total Return (2.45)% 6.66% 11.67%
----------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data

Net assets, end of period (in thousands) $78,484 $73,455 $30,608

Ratio of net expenses to average net assets 0.95%(2) 0.76%(2) 0.00%(2)

Ratio of net investment income to average net 6.35%(2) 6.01%(2) 6.01%(2)
assets
95% 223% 439%
Portfolio turnover rate
----------------------------------------------------------------------------------------------------------------------------------
</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, 1999, December 31, 1998 and
December 31, 1997 would have been 1.18%, 1.08% and 1.25%, respectively, and
the ratios of net investment income to average net assets would have been
6.12%, 5.69% and 4.76%, respectively.

66
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Wisconsin Tax Free Fund
---------------------------------------------====================================================================================
For the year ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
Per Share Data
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.48 $ 10.44 $ 10.16 $ 10.30 $ 9.21
---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
---------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.51 0.51 0.52 0.51 0.51
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(losses) on investments (0.84) 0.04 0.28 (0.14) 1.09
------ ---- ---- ------ ----
---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations (0.33) 0.55 0.80 0.37 1.60
---------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
---------------------------------------------------------------------------------------------------------------------------------
Net investment income (0.51) (0.51) (0.52) (0.51) (0.51)
------ ------ ------ ------ ------
---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.51) (0.51) (0.52) (0.51) (0.51)
------ ------ ------ ------ ------
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.64 $ 10.48 $ 10.44 $ 10.16 $ 10.30
======== ======== ======== ======== ========
---------------------------------------------------------------------------------------------------------------------------------
Total Return (3.27)% 5.41% 8.06% 3.81% 17.78%
---------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $131,533 $143,417 $131,348 $124,545 $118,513
---------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net
assets 0.82%(1) 0.78%(1) 0.81%(1) 0.80%(1) 0.84%
---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 5.01%(1) 4.90%(1) 5.05%(1) 5.12%(1) 5.23%
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 78% 16% 8% 14% 11%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

_______________________________

(1) The ratio does not include fees paid indirectly. If the Fund did not have
fees paid indirectly, the net expense ratios for the years ended December
31, 1999, 1998, 1997 and 1996 would have been 0.83%, 0.80%, 0.82% and
0.81%, respectively, and the net investment income ratios would have been
5.00%, 4.88%, 5.04% and 5.11%, respectively.

67
<PAGE>

--------------------------------------------------------------------------------
HEARTLAND FUNDS
General Information and Account/Price Information (24 hours):
1.800.432.7856 or 414.289.7000
www.heartlandfunds.com
--------------------------------------------------------------------------------

HEARTLAND FUNDS
789 North Water Street
Milwaukee, Wisconsin 53202

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

CUSTODIAN
Firstar Bank, 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

68
<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.
789 North Water Street
Milwaukee, Wisconsin 53202
1.800.432.7856 or 414.289.7000

You may also obtain the Annual and Semi-Annual Reports and other relevant
information at Heartland Funds' website (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 significantly affected
each 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 1.202.942.8090. Additionally, copies of this
information can be obtained, after paying a duplicating fee, by sending an
e-mail request to [email protected] or by writing the Public Reference Section
of the SEC, Washington, D.C. 20549-0102.

Investment Company Act File No. 811-4982

69
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2000
(as supplemented as of June 9, 2000)

Heartland Select Value Fund
Heartland Value Plus Fund
Heartland Value 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

789 North Water 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 the separate mutual fund series
listed above (the "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 Prospectus for the Funds dated May
1, 2000 (as supplemented as of June 9, 2000). 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

Page
----

INTRODUCTION TO THE FUNDS ................................................... 3
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS ............................. 3
TYPES OF SECURITIES ......................................................... 11
Convertible Securities ................................................. 11
Custodial Receipts and Participation Interests ......................... 11
Debt Securities ........................................................ 11
Derivative Instruments ................................................. 19
Foreign Investments .................................................... 26
Illiquid Securities .................................................... 27
Indexed Securities ..................................................... 28
Investment Companies ................................................... 28
Loan Interests ......................................................... 29
Real Estate Investment Trusts .......................................... 29
Rights and Warrants .................................................... 30
When-Issued and Delayed-Delivery Securities; Forward Commitments ....... 30
PORTFOLIO MANAGEMENT STRATEGIES ............................................. 30
Borrowing .............................................................. 30
Concentration .......................................................... 31
Duration ............................................................... 31
Foreign Currency Transactions .......................................... 32
Influence or Control over Portfolio Companies .......................... 33
Lending Portfolio Securities ........................................... 33
Repurchase Agreements .................................................. 33
Reverse Repurchase Agreements and Dollar Rolls ......................... 34
Short Sales ............................................................ 34
Standby Commitments .................................................... 35
INVESTMENT RESTRICTIONS ..................................................... 35
PORTFOLIO TURNOVER .......................................................... 39
MANAGEMENT .................................................................. 39
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ......................... 43
INVESTMENT ADVISORY AND OTHER SERVICES ...................................... 44
DISTRIBUTION OF SHARES ...................................................... 47
PORTFOLIO TRANSACTIONS ...................................................... 49
DESCRIPTION OF SHARES ....................................................... 53
PURCHASES AND SALES ......................................................... 53
ADDITIONAL INCOME TAX CONSIDERATIONS ........................................ 55
PERFORMANCE INFORMATION ..................................................... 55
FINANCIAL STATEMENTS ........................................................ 59

2
<PAGE>

INTRODUCTION TO THE FUNDS

Each member of the Heartland family of funds is a 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 Select Value Fund 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 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 Select Value Fund

The Heartland Select Value Fund seeks long-term capital appreciation by
investing in equity securities whose current market prices, in Heartland
Advisors' judgment, are undervalued relative to their intrinsic value. Heartland
Advisors uses its strict value criteria to identify what it believes are the
best available investment opportunities for the Fund. Normally, the Fund
invests in common stocks of companies with market capitalizations in excess of
$500 million, but it may invest in companies of all sizes. The median market
capitalization of the Fund is expected to fluctuate over time depending on
Heartland Advisor's perceptions of relative valuations, future prospects and
market conditions. The Fund generally sells a stock when Heartland Advisors
believes the stock has reached its full valuation, a better valuation
opportunity existing elsewhere, or a change in the investment thesis occurs
which Heartland Advisors believes will inhibit the stock's ability to realize
its intrinsic value.

The Fund may invest in other securities, including, without limitation,
preferred stocks, 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. 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 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 selected on a value basis. Although it may invest in
securities of larger companies, it generally invests in those companies with
market 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. 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. There are no limitations on
the credit quality or maturities of 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.

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 CFTC.

Heartland Value Fund

Heartland Value Fund seeks long-term capital appreciation through investing
in small companies. The Fund invests primarily in common stocks 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, preferred stocks, 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.

4
<PAGE>

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.

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"). Although no duration restrictions apply to the
Municipal Obligations in which the Fund invests, it expects to emphasize short
and intermediate duration obligations, and it maintains an average portfolio
duration of three years or less. 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.

Most Municipal Obligations offer income free from federal income tax.
However, another type of Municipal Obligation is subject to federal income tax
for a variety of reasons. These Municipal Obligations do not qualify for the
federal tax exemption because (i) they did not receive the necessary
authorization for tax-exempt treatment from state or local government
authorities, (ii) they exceed certain regulatory limitations on the cost of
issuance for tax-exempt financing, or (iii) 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.

Taxable Municipal Obligations may offer yields comparable to those of
corporate debt obligations. However, they also may have less credit risk than
corporate debt obligations because of stronger legal covenants and lower risk of
default.

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.

5
<PAGE>

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, the income from which is exempt
from federal personal income tax. Although no duration restrictions apply to
the Municipal Obligations in which the Fund invests, it expects to emphasize
short and intermediate duration 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.

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.

6
<PAGE>

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,
the income from which is exempt from federal personal income tax. Although no
duration restrictions apply to the Fund or individual Municipal Obligations in
which it invests, the Funds expects to maintain an average portfolio duration of
greater than five years under normal market conditions. 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.

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. Normally, the Fund will not
invest more than 20% of its net assets in securities subject to the alternative
minimum tax.

7
<PAGE>

Only limited categories of Municipal Obligations are exempt from Wisconsin
personal income tax, which may cause the Fund's investments to be more
concentrated geographically and by industry than a mutual fund that does not
seek to invest in issuers offering a double tax exemption.

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.

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

8
<PAGE>

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 1999, the state's unemployment rate was 3.0%, 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 1999), 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, and (iii) 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. 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.

9
<PAGE>

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 $16 billion, or approximately 42% of GDP. Trade, finance and
services have undergone dynamic growth over the past decade and now account for
58% of GDP. The unemployment rate (seasonally adjusted) has remained at
approximately 13 to 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. 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.

10
<PAGE>

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 Select 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, 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.

11
<PAGE>

Debt obligations rated high and some debt obligations rated medium quality
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 Select Value, Value Plus, Value and Wisconsin
Tax Free Funds may invest up to 35% of its total assets 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 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:

. 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

12
<PAGE>

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.

13
<PAGE>

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, 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.

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<PAGE>

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 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.

15
<PAGE>

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.

Government Obligations. Each Fund may 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.

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<PAGE>

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.

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

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<PAGE>

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 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

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<PAGE>

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. 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 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

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<PAGE>

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 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.

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<PAGE>

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.

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.

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<PAGE>

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 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.

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<PAGE>

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 net 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.

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

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<PAGE>

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 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

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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 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.

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<PAGE>

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.

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). 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.

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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 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.

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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 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.

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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.

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.

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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.

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.

PORTFOLIO MANAGEMENT STRATEGIES

The following information supplements the discussion of the Funds'
investment objectives and policies in their respective prospectuses.

Borrowing

The extent to which a Fund will borrow will depend, among other things, on
market conditions and interest rates. 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 may also borrow from banks up to
one-third of its total assets for other purposes such as facilitating the
management of its investment portfolio and making other investments or engaging
in other transactions permissible under the 1940 Act which may be considered a
borrowing (such as dollar rolls and reverse repurchase agreements).

Each Fund (other than the Short Duration High-Yield Municipal and High-
Yield Municipal Bond Funds) presently plans to limit its borrowings to
borrowings 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;
(b) to purchase debt obligations pending receipt of proceeds in the settlement
of the sale of other portfolio securities; and (c) 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. Each of
the Short Duration High-Yield Municipal and High-Yield Municipal Bond Funds
presently intends to similarly limit its borrowings, except that such Fund's
borrowings to meet redemptions may continue for a period

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of more than 60 days, and its borrowings for both redemption and temporary
purposes are excluded from the 20%, but not the one-third, of total assets limit
on borrowing.

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 Taxable
Short Duration 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.

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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 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

32
<PAGE>

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 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 Select Value, Value and Value Plus 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 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.

33
<PAGE>

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.

Short Sales

Each 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.

34
<PAGE>

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:

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.

------------------------
(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.

35
<PAGE>

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.

36
<PAGE>

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 restrictions 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 Select 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 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.

The Value Fund 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 Fund will regard the entity which has the ultimate
responsibility for payment of principal and interest as the issuer. The Value
Fund may not purchase more than 10% of the outstanding voting securities of an
issuer.

37
<PAGE>

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. The Select Value Fund 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. The
Select Value Fund also will not pledge more than 15% of its net assets to secure
its permitted borrowings.

Each of the Value Plus and Value 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 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.

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

38
<PAGE>

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.

39
<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, 1999 and 1998, the portfolio turnover rates for the Funds
were as follows:

-------------------------------------------------------
1999 1998
---- ----
-------------------------------------------------------
Select Value Fund 160% 48%
-------------------------------------------------------
Value Plus Fund 82% 64%
-------------------------------------------------------
Value Fund 23% 36%
-------------------------------------------------------
Taxable Short Duration Municipal Fund 43% 0%
-------------------------------------------------------
Short Duration High-Yield Municipal Fund 71% 215%
-------------------------------------------------------
High-Yield Municipal Bond Fund 95% 223%
-------------------------------------------------------
Wisconsin Tax-Free Fund 78% 16%
-------------------------------------------------------

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.

Position with Principal Occupation
Name and Address Age Heartland During Past Five Years
--------------------------- --- ------------------ -----------------------

William J. Nasgovitz 54 President and President, Chief
789 North Water Street Director* Executive Officer and
Milwaukee, WI 53202 Director, Heartland
Advisors, Inc., since
1982; Director of Capi
tal Investments, Inc.,
since 1989 (small
business investment com
pany).

Hugh F. Denison 53 Director* Educator; Shareholder
789 North Water Street Ombuds man, Heartland
Milwaukee, WI 53202 Advisors, Inc., since
January 1998; Vice
President, Director of
Research and Director,
Heartland Advisors, 1988
to 1996.

40
<PAGE>

Position with Principal Occupation
Name and Address Age Heartland During Past Five Years
--------------------------- --- ------------------ -----------------------
Jon D. Hammes 51 Director President, The Hammes
Suite 305 Company (a commercial
18000 West Sarah Lane real estate develop
Brookfield, WI 53045 ment company) since 1991.

A. Gary Shilling 62 Director President, A. Gary
500 Morris Avenue Shilling & Company, Inc.
Springfield, NJ 07081 (economic consul tants
and investment advisors)
since 1978.

Allan H. Stefl 55 Director Senior Vice President,
800 North Brand Boulevard Communications, Nestle
Glendale, CA 91203 USA, since 1993.

Linda F. Stephenson 58 Director President and Chief
100 East Wisconsin Avenue Executive Officer,
Milwaukee, WI 53202 Zigman Joseph Stephenson
(a public relations and
marketing communications
firm) since 1989.

Jilaine Hummel Bauer 43 Vice President and Senior Vice President
789 North Water Street Secretary and General Counsel,
Milwaukee, WI 53202 Heartland Advisors, Inc.
since January 1998;
Secretary, Heartland
Advisors, Inc. since
August 1999; Senior Vice
President, Stein Roe &
Farnham Incorporated,
1992 to 1998.

Paul T. Beste 43 Vice President and Chief Operating Officer,
789 North Water Street Principal Heartland Advisors, Inc.
Milwaukee, WI 53202 Accounting Officer since December 1999 and
Director, Heartland
Advisors, Inc. since
June 8, 2000; Senior
Vice President--
Investment Operations,
Heartland Advisors, Inc.
September 1998 to 1999;
Investment Operations
Officer, Heartland
Advisors, 1997 to 1998;
Director of
Taxes/Compliance, Strong
Capital Management,
Inc., 1992 to 1997.

Kenneth J. Della 36 Vice President Senior Vice President
789 North Water Street and Treasurer, Heartland
Milwaukee, WI 53202 Advisors, Inc. since
September 1998; Chief
Financial Officer,
Heartland Advisors, 1995
to 1998; employed by
Heartland Advisors since
1992.

Scott R. Powell 37 Vice President Senior Vice President -
Marketing,

41
<PAGE>

Position with Principal Occupation
Name and Address Age Heartland During Past Five Years
--------------------------- --- ------------------ -----------------------
Heartland
Advisors, Inc. since
May, 1999; Vice
President -
Sales/Marketing, CIMCO,
Inc./CUNA Mutual, 1997
to 1999; Vice President
- Third Party Sales, T.
Rowe Price Associates,
1996 to 1997; Investment
Officer, CIMCO,
Inc./CUNA Mutual, 1993
to 1996.

Nicole J. Best Treasurer Employed by Heartland
Advisors, Inc. since
March 1998; employed by
Arthur Andersen LLP
1995-1998; student prior
to 1995.

------------------
* Directors who are "interested persons" (as defined in the 1940 Act) of
Heartland Advisors.

Heartland pays the compensation of the Directors who are not officers,
directors or employees of Heartland Advisors. The following compensation was
paid to the Directors who are not "interested persons" of Heartland Advisors for
their services during the fiscal year ended December 31, 1999:

Total
Compensation
Aggregate Pension or from Heartland
Compensation from Retirement Fund Complex
Director Each Heartland Fund Benefits (9 Funds)
--------------------------- --------------------- ---------- --------------

Willard H. Davidson* $2,864 (Select Value) None $30,816
$2,866 (Value Plus)
$10,092 (Value)
$2,332 (Government)
$2,052 (Taxable
Short Duration
Municipal)
$2,982 (Short
Duration High-Yield
Municipal)
$2,577 (High-Yield
Municipal Bond)
$2,920 (Wisconsin
Tax Free)
$2,131 (MidCap
Value)**

Jon D. Hammes $2,864 (Select Value) None $30,816
$2,866 (Value Plus)
$10,092 (Value)
$2,332 (Government)
$2,052 (Taxable
Short Duration
Municipal)
$2,982 (Short
Duration High-Yield
Municipal)
$2,577 (High-Yield
Municipal Bond)
$2,920 (Wisconsin
Tax Free)
$2,131 (MidCap
Value)**

A. Gary Shilling $2,864 (Select Value) None $30,816

42
<PAGE>

$2,866 (Value Plus)
$10,092 (Value)
$2,332 (Government)
$2,052 (Taxable
Short Duration
Municipal)
$2,982 (Short
Duration High-Yield
Municipal)
$2,577 (High-Yield
Municipal Bond)
$2,920 (Wisconsin
Tax Free)
$2,131 (MidCap
Value)**

Linda F. Stephenson $2,864 (Select Value) None $30,816
$2,866 (Value Plus)
$10,092 (Value)
$2,332 (Government)
$2,052 (Taxable
Short Duration
Municipal)
$2,982 (Short
Duration High-Yield
Municipal)
$2,577 (High-Yield
Municipal Bond)
$2,920 (Wisconsin
Tax Free)
$2,131 (MidCap
Value)**

Allen H. Stefl $2,864 (Select Value) None $30,816
$2,866 (Value Plus)
$10,092 (Value)
$2,332 (Government)
$2,052 (Taxable
Short Duration
Municipal)
$2,982 (Short
Duration High-Yield
Municipal)
$2,577 (High-Yield
Municipal Bond)
$2,920 (Wisconsin
Tax Free)
$2,131 (Mid Cap
Value)**

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

* Mr. Davidson retired as a director on December 1, 1999.

** The Heartland Mid Cap Value Fund was dissolved in December 1999.

In addition, the Directors who are not "interested persons" of Heartland
Advisors each received $1,184 in 1999 from Heartland Advisors for attendance at
a special meeting of Heartland in connection with changes made to the investment
objectives and policies of the Large Cap Value Fund and the dissolution of
another series of Heartland (the Mid Cap Value Fund). In April 2000, Heartland
implemented a deferred compensation program for its Directors under which they
may elect to defer all or a portion of their compensation and invest the
deferral in "phantom" shares of any Heartland Fund.

43
<PAGE>

Code of Ethics

Heartland and Heartland Advisors have adopted a code of ethics under Rule
17j-1 of the 1940 Act. The code of ethics permits officers, directors and
employees of Heartland and Heartland Advisors to invest in securities, including
securities that may be held by the Funds, subject to certain restrictions
imposed by the Code to avoid actual or potential conflicts of interest.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of February 3, 2000, no person controlled any of the Funds and the
directors and officers of Heartland Group, Inc. as a group owned less than 1% of
the outstanding shares of the Value Fund, Short Duration High-Yield Municipal
Fund and Wisconsin Tax Free Fund, and owned 10.46% of the Select Value Fund,
1.62% of the Value Plus Fund, 1.78% of the High-Yield Municipal Bond Fund and
2.10% 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:

Record or Beneficial Holder Fund No. of Shares (%)
--------------------------- --------------------------- --------------------

Charles Schwab & Co., Inc. Value Plus 887,978 15.3%
ATTN: Mutual Funds Value 4,700,517 14.7%
101 Montgomery Street Taxable Short Duration
San Francisco, CA Municipal 739,910 29.6%
94104-4122 Short Duration High-Yield
Municipal 2,841,248 22.9%
High-Yield Municipal Bond 2,036,751 26.4%

Firstar Trust Company Value Plus 324,893 5.6%
City of Milwaukee
P.O. Box 1787
Milwaukee, WI 53201-1787

National Financial Value Plus 527,550 9.1%
Services Corp. Value 2,297,142 7.2%
FBO The Exclusive Benefit Taxable Short Duration
of Our Customers Municipal
One World Financial Short Duration High-Yield 273,752 10.9%
Center, 5th Floor Municipal 1,177,580 9.5%
200 Liberty Street High-Yield Municipal Bond 657,096 8.5%
New York, NY 10281-1003

National Financial Taxable Short Duration 144,444 5.8%
Services Corp. Municipal
FBO The Exclusive Benefit
of Our Customers
55 Water Street, Floor 32
New York, NY 10041-3299

Merle F. Cook & Select Value 32,611 5.9%
Sharon L. Cook JT Ten
5666 W. Greenbrook Drive
Brown Deer, WI 53223-2331

Rulon L. Griffith Trust & High-Yield Municipal Bond 464,811 6.0%
Danny D. Griffith Trust
U/A Dtd June 14, 94

44
<PAGE>

Record or Beneficial Holder Fund No. of Shares (%)
--------------------------- ---- -----------------
P.O. Box 56
Mohnton, PA 19540-0056

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 eight equity and fixed income mutual funds, and also provides
investment management services for individuals, institutions and retirement
plans. As of December 31, 1999 Heartland Advisors had approximately $2.7 billion
in 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 Select 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 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 fee waivers and
expense reimbursements as discussed in the Funds' Prospectuses.

45
<PAGE>

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:

1997 1998 1999
---- ---- ----

Select Value Fund (10/11/96):
Fees actually paid $26,585 $0 $44,253
Fees waived $13,774 $63,119 $12,773

Value Plus Fund:
Fees actually paid $1,292,331 $2,030,188 $940,772
Fees waived $0 $0 $0

Value Fund:
Fees actually paid $14,673,206 $14,781,523 $9,210,325
Fees waived $0 $0 $0

Taxable Short Duration Municipal Fund
(12/28/98):
Fees actually paid N/A $30 $48,505
Fees waived N/A $0 $0

Short Duration High-Yield Municipal Fund
Fees actually paid
Fees waived $0 $443,079 $609,797
$214,608 $144,279 $0
High-Yield Municipal Bond Fund
Fees actually paid $0 $255,237 $557,904
Fees waived $82,569 $77,559 $0

Wisconsin Tax-Free Fund:
Fees actually paid $819,186 $889,967 $939,834
Fees waived $0 $0 $0

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

46
<PAGE>

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 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 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 Select
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. On or about July 1,
2000, these services will be performed by Bisys Fund Services Ohio, Inc. (BISYS)
for an annual fee based

47
<PAGE>

on total assets of all Heartland Funds prorated among the Funds in an amount
equal to 0.035 of 1% on the first $2 billion in average daily net assets; 0.025
of 1% on the next $2 billion in average daily net assets and 0.015 of 1% of
average daily net assets in excess of $3 billion.

Custodian and Transfer and Dividend Disbursing Agent

Firstar Bank, 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, 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 auditing, tax and accounting
services when engaged by Heartland to do so.

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 monthly 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

48
<PAGE>

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, 2001 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 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, 1999, the Funds paid the
following amounts under the Rule 12b-1 Plan: $14,751 for the Select Value Fund;
$335,990 for the Value Plus Fund; $3,070,108 for the Value Fund; $26,947 for the
Taxable Short Duration Municipal Fund; $381,123 for the Short Duration High-
Yield Municipal Fund; and $232,460 for the High-Yield Municipal Bond Fund.
During the fiscal year ended December 31, 1999, Heartland Advisors waived a
portion of its fees for the Select Value Fund. Had no fee waivers been in
effect, the Fund would have paid $19,009 pursuant to the Rule 12b-1 Plan.

The principal types of activities for which the Funds made payments (net of
waivers) under the Rule 12b-1 Plan for the fiscal year ended December 31, 1999
were as follows:

<TABLE>
<CAPTION>
Printing/Mailing
of Prospectuses
Advertising/ (Other than to Sales
Sales Current Underwriter Broker-Dealer Personnel
Literature Investors) Compensation Compensation * Compensation
---------- ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Select Value Fund $ 2,367 $ 9,776 - - - $ 2,608 - - -
Value Plus Fund 18,919 125,606 - - - 179,068 $11,497
Value Fund 118,148 634,562 - - - 2,290,081 27,317
</TABLE>

49
<PAGE>

<TABLE>
<CAPTION>
Printing/Mailing
of Prospectuses
Advertising/ (Other than to Sales
Sales Current Underwriter Broker-Dealer Personnel
Literature Investors) Compensation Compensation * Compensation
---------- ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Taxable Short Duration 5,129 17,281 - - - 4,537 - - -
Municipal Fund

Short Duration High- 18,995 102,193 - - - 259,935 - - -
Yield Municipal Fund

High-Yield Municipal 69,733 60,350 - - - 102,377 - - -
Bond Fund
</TABLE>

* Includes compensation to Heartland Advisors, other broker-dealers and
financial institutions.

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

50
<PAGE>

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 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.

51
<PAGE>

During the last three fiscal years, the aggregate commissions on portfolio
transactions paid by the Funds were as follows:

Year ended December 31,
1999 1998 1997
---- ---- ----
Select Value Fund $ 56,430 $ 20,765 $ 16,006
Value Plus Fund 992,403 1,021,269 830,002
Value Fund 4,232,124 3,453,660 3,925,925
Taxable Short Duration Municipal Fund 1,571 13 N/A
Short Duration High-Yield Municipal Fund 23,499 28,206 13,133
High-Yield Municipal Bond Fund 10,263 12,847 6,730
Wisconsin Tax Free Fund 10,005 12,475 34,385

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:

Year ended December 31,
1999 1998 1997
---- ---- ----
Select Value Fund $ 0 $ 0 $ 0
Value Plus Fund 4,500 25,357 12,093
Value Fund 45,066 99,091 159,609
Taxable Short Duration Municipal Fund 0 0 N/A
Short Duration High-Yield Municipal Fund 0 0 0
High-Yield Municipal Bond Fund 0 0 0
Wisconsin Tax Free Fund 0 0 0

For the fiscal year ended 1999, the following table presents additional
information regarding brokerage commissions paid to Heartland Advisors:

% of Aggregate Dollar Amount
of Transactions Involving
% of Aggregate Brokerage Payment of Commissions
Commissions Effected through
Paid to Heartland Advisors Heartland Advisors
-------------------------- ------------------
Value Plus Fund 0.5% 0.8%
Value Fund 3.4% 4.9%

52
<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, 1999:

Amount of Commissions
Paid to Brokers Total Dollar
or Dealers Who Amount Involved
Supplied Research in Such
Services to Transactions
Fund Heartland Advisors (000's)
---- ------------------ -------

Select Value Fund $ 41,071 $ 13,763

Value Plus Fund 708,525 153,255

Value Fund 2,269,115 395,042

Taxable Short Duration Municipal 0 0
Fund

Short Duration High-Yield 0 0
Municipal Fund

High-Yield Municipal Bond Fund 0 0

Wisconsin Tax Free Fund 0 0

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 1999, 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). At December 31, 1999 the Fund no longer held these securities.

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 general, investment opportunities are allocated pro rata
among clients that have comparable investment objectives and positions where
sufficient quantities or trading values of a security make such allocation
practicable. However, because many of the securities owned by clients of
Heartland Advisors have a limited trading market, it may not be possible to
always 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. Initial public offerings ("IPOs") will be
allocated on a random basis to all participating accounts in a manner Heartland
Advisors believes will lead to a fair and equitable distribution of IPOs over
time. In general, an account will participate in an IPO allocation only if the
portfolio manager for the account believes the IPO is an appropriate investment
for the account.

53
<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, eight 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.

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<PAGE>

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.

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.

55
<PAGE>

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.

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.

56
<PAGE>

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(1+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).

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,
1999 are as follows:

10 Years, or,
if Less, From
Commencement
Fund 1 Year 5 Years of Operations
---- ------ ------- -------------

Select Value Fund (10/11/96) 1.95% N/A 9.48%

Value Plus Fund (10/26/93) 1.67% 14.54% 11.62%

Value Fund 25.01% 16.45% 16.39%

Taxable Short Duration Municipal Fund 5.51% N/A 6.69%

Short Duration High-Yield Municipal Fund 1.42% N/A 4.15%
(1/2/97)

High-Yield Municipal Bond Fund (1/2/97) -2.45% N/A 5.14%

Wisconsin Tax Free Fund (4/3/92) -3.27% 6.14% 5.12%

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

57
<PAGE>

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

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 Select Value and Value Funds
typically have not advertised their yields. The yields (including, where
applicable, taxable equivalent yields) for the remaining Funds for the 30 days
ended December 31, 1999, were as follows:

30-Day Yield ended
Fund December 31, 1999 Taxable Equivalent Yield
---- ----------------- ------------------------
Value Plus Fund 2.49% N/A
Taxable Short Duration Municipal 10.13% N/A
Fund
Short Duration High-Yield 6.77% 11.21%/(1)/
Municipal Fund
High-Yield Municipal Bond Fund 7.66% 12.68%/(1)/
Wisconsin Tax Free Fund 5.61% 10.30%/(2)/

__________________

(1) Based on a federal tax rate of 39.6%.

(2) Based on a combined Wisconsin tax rate of 6.77% and a federal tax rate of
39.60%, 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 45.54%.

58
<PAGE>

Comparisons

In advertising and sales literature, the performance of a Fund may be
compared with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, other accounts, limited
liability investment companies or partnerships managed or advised by the
Adviser, and other competing investment and deposit products available from or
through other financial institutions. The composition of these indexes,
averages or accounts differs from that of the Funds. The comparison of a Fund
to an alternative investment should consider differences in features and
expected performance.

A Fund may also note (or provide reprints of articles or charts containing)
its mention (including performance or other comparative rankings) in newspapers,
magazines, or other media from time to time. Newspapers and magazines that might
mention the Funds include, but are not limited to, the following:

Barron's Los Angeles Times
Bloomberg Personal Finance The Milwaukee Business Journal
Business Week Milwaukee Journal Sentinel
Changing Times Milwaukee Magazine
Chicago Money
Chicago Tribune The Mutual Fund Letter
Chicago Sun-Times Mutual Fund Values (Morningstar)
Crain's Chicago Business Newsweek
Consumer Reports The New York Times
Consumer Digest Pensions and Investments
Financial Planning Personal Investor
FA Advisor Smart Money
Forbes Time
Fortune USA Today
Institutional Investor U.S. News and World Report
Investment News The Wall Street Journal
Investor's Daily Worth
Kiplinger's Personal Finance

When a newspaper, magazine or other publication mentions the Adviser or a
Fund, such mention may include: (i) listings of some or all of a Fund's
holdings; (ii) descriptions of characteristics of some or all of the securities
held by a Fund, including price-to-earnings, price-to-sale, and price-to-book
value ratios, earnings, growth rates and other statistical information, and
comparisons of that information to similar statistics for the securities
comprising any of the indexes or averages listed below; and (iii) descriptions
of the economic and market outlook generally and for a Fund, in the view of a
portfolio manager or the Adviser.

Various newspapers and publications including those listed above may also
made mention of a Fund's portfolio manager. Portfolio managers and other
members of the Adviser's staff may make presentations at conferences or trade
shows, appear on television or radio programs, or conduct or participate in
telephone conference calls, and the Funds may announce those presentations,
appearances or calls to some or all shareholders, or to potential investors in
the Funds. Biographical and other information about a Fund's portfolio manager,
including the information about awards received by that portfolio manager or
mentions of the manager in the media, may also be described or quoted in Fund
advertisements or sales literature.

Each Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.

The performance of the Funds may be compared to market indexes or averages,
including, but not limited to the indices referred to in the Funds'
prospectuses. The Funds' performance may also be compared to

59
<PAGE>

mutual fund industry indexes or averages, including, but not limited to those
published by Lipper Inc., Morningstar, Inc. and Value Line.

Lipper and Morningstar, Inc. ("Morningstar") classify, calculate and
publish the Lipper and Morningstar averages, respectively, which are unweighted
averages of total return performance of mutual funds. The Funds may also use
comparative performance as computed in a ranking by Lipper or category averages
and rankings provided by another independent service. Should Lipper or another
service reclassify a Fund to a different category or develop (and place a Fund
into) a new category, each Fund may compare its performance or ranking against
other funds in the newly assigned category, as published by the service.
Moreover, the Funds may compare their performance or ranking against all funds
tracked by Lipper or another independent service, and may cite its ratings,
recognition or other mention by Morningstar or any other entity. Morningstar's
rating system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is computed by
subtracting a Fund's risk score (which is a function of the Fund's monthly
returns less the 3-month Treasury bill return) from the Fund's load-adjusted
total return score. This numerical score is then translated into rating
categories, with the top 10% labeled five star, the next 22.5% labeled four
star, the next 35% labeled three star, the next 22.5% labeled two star, and the
bottom 10% one star.

To illustrate the historical returns on various types of financial assets,
the Funds may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks, small company stocks, long-term corporate bonds, long-term government
bonds, intermediate-term government bonds and U.S. Treasury bills. Similarly,
the Funds may use Ibbotson's historical data regarding the Consumer Price Index.
The Funds may also use historical data compiled by Prudential Securities, Inc.,
or by other similar sources believed by the Funds to be accurate, illustrating
the past performance of small-capitalization stocks, large-capitalization
stocks, common stocks, equity stocks, growth stocks (small-capitalization,
large-capitalization or both) and value stocks (small-capitalization, large-
capitalization or both).

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, 1999 and for the
fiscal year or period then ended are hereby incorporated by reference. Copies
of the Funds' Annual and Semi-Annual Reports may be obtained without charge by
writing to Heartland Advisors, Inc., 789 North Water Street, Milwaukee,
Wisconsin 53202, by calling 1-800-432-7856 or (414) 289-7000, or by visiting
the Heartland website at www.heartlandfunds.com.

60
<PAGE>

[logo] Heartland Funds
----------------------
AMERICA'S VALUE INVESTOR(R)

GOVERNMENT FUND

JUNE 9, 2000
<PAGE>

PROSPECTUS/MAY 1, 2000 (AS SUPPLEMENTED ON JUNE 9, 2000)

Heartland Government Fund

This Prospectus contains information you should know about Heartland Government
Fund (the "Fund"), a mutual fund portfolio of Heartland Group, Inc., before you
invest. The Fund is a no-load fund. Investors pay no sales fees to purchase
their shares.

The Fund seeks to provide investors with a high level of current income,
liquidity and safety of principal. It invests primarily 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. This fund is a no-load fund. Investors pay no sales fees to
purchase their shares.

The Securities and Exchange Commission has not approved the shares of the 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.

NOTE: On June 8, 2000, the Heartland Board of Directors adopted a Plan of
Liquidation (the "Plan") for the Fund. In approving the Plan, the Board
considered a number of factors, including the difficulty experienced by the Fund
in realizing economies of scale because of its size and the intense competitive
environment in which the Fund operates. A special meeting of the Fund's
shareholders has been scheduled for August 8, 2000. Subject to shareholder
approval, the Fund's assets will be promptly liquidated and the proceeds
remaining will be distributed to shareholders after known Liabilities are
satisfied. Details of the transaction and other information about the Plan will
be set forth in a proxy statement to be mailed to Fund shareholders in early
July 2000.

Fund purchases will continue to be accepted through July 31, 2000, and
thereafter at the discretion of the officers of the Fund. Redemptions will
continue to be accepted through the date of 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 during this period, which is expected to
reduce the Fund's investment return.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE.................... 3
Investment Goal....................................................... 3
Principal Investment Strategies....................................... 3
Principal Investment Risks............................................ 4
Who Should Consider Investing?........................................ 4
Past Performance...................................................... 5
Fees and Expenses of the Fund......................................... 6
Investment Returns.................................................... 7

MANAGEMENT OF THE FUND..................................................... 8
Heartland Group....................................................... 8
Heartland Advisors.................................................... 8

PRINCIPAL INVESTMENT STRATEGIES AND INVESTMENT RISKS....................... 10
Heartland Advisors' Fixed Income Ten-Point Value Investment Grid(TM).. 10
Temporary Positions................................................... 11
Other Investment Strategies and Investment Risks...................... 11

HOW TO INVEST.............................................................. 14

ACCOUNT POLICIES........................................................... 22
Redeeming Shares...................................................... 23
Exchanging Shares..................................................... 24
Share Price........................................................... 26

SHAREHOLDER INFORMATION AND REPORTING...................................... 26
Heartland Value Source(TM)............................................ 26
Investment Reports and Prospectuses................................... 26
Dividends and Capital Gain Distributions.............................. 27
Taxes................................................................. 27
Financial Highlights.................................................. 28
</TABLE>

2
<PAGE>

RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE

INVESTMENT GOAL

The Government Fund seeks to provide investors with a high level of current
income, liquidity and safety of principal.

PRINCIPAL INVESTMENT STRATEGIES

The 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. There are no
restrictions on the types of Government securities in which the Fund may invest,
and they will 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; 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.

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

Heartland Advisors typically sells securities in the Fund's portfolio 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 the Fund's investment objective, to
reposition the Fund's portfolio to maintain relative industry or market sector
weightings or because of market or economic factors.

Duration Management. 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 a 1% rise or fall in interest rates. For

3
<PAGE>

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.

PRINCIPAL INVESTMENT 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.

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. Each Fund's
share price will fluctuate.

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

WHO SHOULD CONSIDER INVESTING?

The 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.

4
<PAGE>

PAST PERFORMANCE

The tables below show historical performance of the Fund and provide some
indication of the risks of investing in the Fund. Table I shows 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, 1999. Past performance cannot predict
or guarantee future results.

TABLE I
Government Fund - Year-by-Year Total Returns

[BAR CHART APPEARS HERE]
--------------------
1990.......9.98% Best Quarter:
1991......16.97% --------------------
1992......10.08%
1993......17.82% --------------------
1994......-9.64% Q3 '91 7.10%
1995......19.00%
1996.......2.00% Worst Quarter:
1997.......9.69%
1998.......8.15% Q1 '94 -4.81%
1999......-3.90% --------------------

TABLE II
Government Fund - Average Annual Total Return (through 12/31/99)

One Five Ten Since inception
Year Year Year (4/9/87)
---- ---- ---- --------

Government Fund -3.90% 6.71% 7.63% 7.52%

Lehman Intermediate Treasury Index/(1)/ 0.41% 6.92% 7.09% 7.29%

________________________

(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.

5
<PAGE>

TABLE III
Yield for the 30 Days Ended 12/31/99 (annualized)

Government Fund 6.33%

Lehman Intermediate Treasury Index 6.34%

For current yield information, please call 1.800.432.7856.

FEES AND EXPENSES OF THE FUND

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

Shareholder Fees (fees paid directly from your investment).

Maximum sales charge (load) imposed on purchases None

Maximum deferred sales charge (load) None

Maximum sales charge (load) imposed on reinvested None
dividends/distributions

Redemption fee/(1)/ None

___________________________

(1) You will be charged a $12.00 service fee if you request that your
redemption proceeds be wired to your bank account.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets).

Management fees 0.65%

Distribution (12b-1) fees 0.25%

Other expenses 0.35%
----

Total annual Fund operating expenses 1.25%/(1)/

____________________________________

(1) For the fiscal year ended December 31, 1999, total annual fund operating
expenses net of fees waived and/or expenses reimbursed by Heartland
Advisors were 0.80% of average daily net assets.

6
<PAGE>

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 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, and (b) each Fund's
total annual fund operating expenses remain the same as shown in the preceding
table. 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.)

One Year $ 127

Three Years 397

Five Years 686

Ten Years 1,511

INVESTMENT RETURNS

Portfolio Performance vs. Index Performance. The information about the 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 the Fund overall. Fee waivers may have been in effect for the
Fund during the periods in which performance information is presented. Without
fee waivers, the Fund's returns and yields would have been lower.

Definitions. Total return measures the change in the share price of the 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 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 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.

7
<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 the Fund's 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 various administrative services to the Fund. In addition to
managing the Heartland family of 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, 789 North Water Street, Milwaukee, Wisconsin 53202.

Portfolio Manager. Patrick J. Retzer, Certified Public Accountant (CPA), is
portfolio manager of the Government Fund and has been a manager of that Fund
since October 1988. Mr. Retzer has been associated with Heartland Advisors,
Inc. in various capacities since 1988.

Management Fee and Expense Limitation. 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 daily net assets. For
the fiscal year ended December 31, 1999, the Fund paid advisory fees of 0.54% of
average daily net assets (0.65% before fee waivers).

8
<PAGE>

discontinue these waivers and/or reimbursements at any time without notice. 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 of lowering a Fund's
overall expense ratio and increasing the Fund's overall return to investors.

For the period from April 1, 1999 through April 30, 2000, Heartland Advisors
contractually undertook to waive fees paid to it by the Fund and/or pay other
ordinary expenses (excluding brokerage commissions, interest and taxes) of the
Fund in excess of 0.80% of average daily net assets. If the Fund's operating
expenses fall below the contractual expense limitation during the three years
subsequent to the fiscal year in which the contractual waiver/reimbursement was
made, the Fund will repay Heartland Advisors for fees previously waived or
expenses previously reimbursed up to that limitation. No repayment will be made
after the three-year period ends.

Rule 12b-1 Fees. The 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 average 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 a
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.

9
<PAGE>

PRINCIPAL INVESTMENT STRATEGIES AND INVESTMENT RISKS

HEARTLAND ADVISORS' 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 for the Fund.

- 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 or total yields tends to reflect the relative value in
fixed-income investments. High "real" rates (i.e., the rate earned by a bond
in excess of inflation) cushion investors against adverse moves in inflation.

- Sector Outlook. Each of the fixed-income sectors (such as U.S. Treasury or
agency securities, mortgage-backed securities, zero coupon bonds, asset-
backed securities and corporate debt securities) 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 or Acceptance. Strong fundamental and technical support
must be accompanied by general market sponsorship or acceptance for an
investment to achieve full value.

10
<PAGE>

- Catalyst for Recognition. 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.

TEMPORARY POSITIONS

Under adverse market, economic, political or other conditions, the 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 the Fund from achieving its investment objective.

OTHER INVESTMENT STRATEGIES AND INVESTMENT RISKS

In addition to the principal investment strategies discussed above in this
prospectus, the Fund may engage in other non-principal investment strategies
discussed below and in its statement of additional information.

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 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, the Fund intends to borrow only from banks, for periods of no 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.

11
<PAGE>

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 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.

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 or changes in currency
exchange rates. 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 United States authorities, and may offer less
liquidity and less protection to the Fund if the other party to the contract
defaults.

The Fund's use of options and futures and other investment techniques for
hedging purposes involves 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.

12
<PAGE>

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 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 the 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.

Other Investments and Investment Techniques. The Fund may utilize other
investments and investment techniques from time to time that may impact Fund
performance, including options, futures and other strategic 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").

13
<PAGE>

HOW TO INVEST

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR REGULAR ACCOUNTS
-----------------------------------------------------------------------------------------------------------------------------------
OPEN AN ACCOUNT ADD TO AN ACCOUNT SELL SHARES
-----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] By Telephone
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wire Call 800.443.2862 to obtain an account number and Telephone Purchase by Electronic Check Call us to request
provide your Social Security or tax ID number. Have your Funds Transfer Available for your redemption. A check
bank send your investment to Firstar Bank, N.A. with these additional investments of $100 to will be mailed to the
instructions: $25,000. Your account will be address on the account.
charged a service fee (currently Express mail delivery is
. ABA #0750-00022 $20.00) if an electronic funds available on request for an
. A/C #112-952-137 transfer cannot be processed due to additional charge (currently
. CREDIT TO: Heartland (name of fund) insufficient funds or a stop $12.00).
. your Heartland account number transfer. Contact us for a Bank
. name(s) of investor(s) Options Form. Wire or Electronic Funds
Transfer These services must be
Wire Have your bank send your pre-authorized in writing. To
investment to Firstar Bank, N.A. add these services, call us to
with these instructions: request an account maintenance
form. Once the Fund has your
. ABA #0750-00022 bank account information on
. A/C #112-952-137 file, call us to request your
. CREDIT TO: Heartland (name of redemption. Proceeds will be
fund) wired or transferred
. your Heartland account number electronically to your bank.
. name(s) of investor(s) For wires, your account will be
charged a service fee
(currently $12.00).

Telephone and Wire Redemptions
are subject to a $1,000 minimum.
------------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] In Writing
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

14
<PAGE>

<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
Mail a completed application form and a check. Fill out the Additional Investment Write a letter of instruction
Form attached to your statement and that includes:
send with a check. Write your
Heartland account number on your . the names and signatures of
check. all account holders
. your Heartland account number
Mail the form and the check. . the amount in dollars or
shares you want to sell
. how and where to send the
proceeds

We will mail the proceeds to the
address on the account unless
otherwise requested. A signature
guarantee may be required.

Mail the letter of instruction.

NOTE: See pages 18-19 for special
information on redemptions from
IRA accounts.
----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Automatically
----------------------------------------------------------------------------------------------------------------------------------
Complete the application form, including Automatic All Services Call us to request a Systematic Withdrawal Plan Call us
Investment Plan section, and return it with your form to add the Automatic to request an account maintenance
investment (minimum of $50 per transaction). Investment Plan (minimum of $50 per form to add the plan. Complete the
transaction) to your account. form, specifying the amount and
Complete and return the form along frequency of withdrawals you would
with any other required materials. like.
-----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Via the Internet
-----------------------------------------------------------------------------------------------------------------------------------
Computer Visit the Heartland web site
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

15
<PAGE>

<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
www.heartlandfunds.com and follow the instructions to
download an account application.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

HOW MAY WE HELP YOU?

1.800.432.7856
www.heartlandfunds.com

Make a check payable to: Heartland Funds

ADDRESSES

Mailing Address
---------------

Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701

Overnight Delivery
------------------

Firstar Mutual Fund Services, LLC
615 East Michigan St.
Milwaukee, WI 53202

CONCEPTS TO UNDERSTAND

Wire Transfer: the fastest way to transfer money from one financial institution
to another. Your bank may charge a fee to send or receive a wire transfer.
Mail the letter of Instruction.

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.

16
<PAGE>

HOW TO INVEST

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR IRA ACCOUNTS
-----------------------------------------------------------------------------------------------------------------------------------
OPEN AN ACCOUNT ADD TO AN ACCOUNT SELL SHARES
-----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] By Telephone
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wire After completing and returning an IRA application Telephone Purchase by Electronic IRA redemptions must be
form, call 800.443.2862 to obtain an account number and Funds Transfer Available for requested in writing.
provide your Social Security or tax ID number. Have your additional investments of $100 to
bank send your investment to Firstar Bank, N.A. with these $25,000. Your account will be
instructions: charged a service fee (currently
$20.00) if an electronic funds
. ABA #0750-00022 transfer cannot be processed due to
. A/C #112-952-137 insufficient funds or a stop
. CREDIT TO: Heartland (name of fund) transfer. Contact us for a Bank
. your Heartland account number Options Form.
. name of investor
Wire Have your bank send your
investment to Firstar Bank, N.A.
with these instructions:

. ABA #0750-00022
. A/C #112-952-137
. CREDIT TO: Heartland
(name of fund)
. your Heartland account number
. name(s) of investor(s)
-----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] In Writing
-----------------------------------------------------------------------------------------------------------------------------------
Complete and return an IRA application form, and a check or Fill out the Additional Investment Write a letter of instruction
IRA transfer form. For direct rollovers of assets from Form attached to your statement and that includes:
employer sponsored qualified plans, mail a send with a check. Write
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

17
<PAGE>

<TABLE>
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
completed IRA application. your Heartland account number . the name and signature of
on your check. account holder
. your Heartland account
Mail the form and the check. number
. the fund name
. the amount in dollars or
shares you want to sell
. how and where to send the
proceeds
. whether the distribution is
qualified
. whether taxes should be
withheld (we will
withhold 10% if you do not
give us instructions)

We will mail the proceeds to the
address on the account, unless
otherwise requested. A signature
guarantee may be required.
Express mail delivery is
available upon request for an
additional charge (currently
$12.00)

Mail the letter of instruction.
-----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Automatically
-----------------------------------------------------------------------------------------------------------------------------------
Complete the IRA application form, and the Automatic All Services Call us to request a Systematic Withdrawal Plan
Investment Plan application, and return them with your form to add the Automatic Call us to request an account
investment (minimum of $50 per transaction). Investment Plan (minimum of $50 per maintenance form to add the
transaction) to your account. plan. Complete the form,
Complete and return the form along specifying the amount and
with any other required frequency of withdrawals you
would like.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

18
<PAGE>

<TABLE>
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
materials.
-----------------------------------------------------------------------------------------------------------------------------------
[PICTURE APPEARS HERE] Via the Internet
-----------------------------------------------------------------------------------------------------------------------------------
Computer Visit the Heartland web site
www.heartlandfunds.com and follow the instructions to
download an IRA account application.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

19
<PAGE>

HOW MAY WE HELP YOU?

1.800.432.7856
www.heartlandfunds.com

Make checks payable to: Heartland Funds

ADDRESSES

Mailing Address
---------------
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701

Overnight Delivery
------------------
Firstar Mutual Fund Services, LLC
615 East Michigan St.
Milwaukee, WI 53202

CONCEPTS TO UNDERSTAND

Wire Transfer: the fastest way to transfer the amount and frequency of
withdrawals you would like from one financial institution to another. Your bank
may charge a fee to send or receive a wire transfer.

20
<PAGE>

ACCOUNT POLICIES

Please note that you may terminate or change any option you elect at any time
upon five days' advance notice to Heartland Advisors.

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,
including but not limited to restricting excessive exchange activity that the
officers of Heartland determine is not in the best interests of the Fund or its
shareholders. The Fund also reserves the right to waive or lower any minimum
dollar amounts applicable to the transactions discussed.

Copies of account statements are available upon request. However, if you
request a statement for a period other than for the current or prior year, the
Fund's transfer agent will charge you a research fee (currently $5.00).

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. Net asset value is determined at the close of
regular trading on the New York Stock Exchange (generally 4:00 p.m., Eastern
Time). 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, and such orders are priced at the net asset
value per share on that next day. Purchase orders for the Fund are not binding
until accepted by the Fund or its authorized agent. 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.

21
<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
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. The 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 W9 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 Fund or its shareholders. Shares purchased through third
parties may be subject to special fees, different investment minimums and other
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 Funds.

REDEEMING SHARES

22
<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 redemption or wired on
the next business day, but in no event are proceeds remitted to you later than
seven days after redemption. The Fund does not guarantee the time of receipt of
your proceeds and are not responsible for delays in mail or wire services. In
limited circumstances as permitted by the Securities and Exchange Commission
(such as when the New York Stock Exchange is closed or trading is restricted, or
when an emergency exists), 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 the right to
hold the proceeds until payment of the purchase price can be confirmed which may
take up to 15 days. 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 reserve 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.

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

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
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

23
<PAGE>

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

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. The 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.

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 records as
authorized to receive the proceeds. Acceptable guarantors include, among
others, banks and brokerage firms that are members of a domestic stock exchange.
Notaries public cannot guarantee signatures.

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 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 in that Fund upon
60 days' advance notice to you. You may avoid an involuntary redemption by
making additional investments to bring your account value up to at least $1,000.

24
<PAGE>

SHARE PRICE

Shares of the 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) on each day the Exchange is open. 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. 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 next
subsequently determined.

You should always verify your order against your confirmation when you receive
it. Please contact Heartland or the third party with which you placed your
order promptly if you notice any discrepancy.

Portfolio securities are valued on the basis of market quotations or at fair
value using methods determined by Heartland's Board of Directors. The Fund uses
a "fair value" methodology to value securities for which market quotations are
not readily available. Debt securities purchased with remaining maturities of 60
days or less are valued at acquisition cost, plus or minus any amortized
discount or premium.

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 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 AND PROSPECTUSES

The Fund's portfolio manager reviews his strategies and results in Value
Reports, which also contain schedules of investments and Fund financial
statements. Heartland Advisors periodically publishes and mails to shareholders
other investment and performance information. Shareholders also receive annual
prospectus updates.

25
<PAGE>

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 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.

The Fund will declare dividends from net investment income daily and pay them
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. Fund dividends
and capital gain distributions that are reinvested will be confirmed on your
account statement for the quarter in which the reinvestment is made.

If you choose to have dividends or capital gain 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 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.

"Buying a Dividend." Please note that if you purchase shares of the 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."

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 term capital gains to shareholders. 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 distribution and send you a
statement for tax purposes each year showing the source of distributions for the
preceding year.

26
<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand the
Fund's 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 or lost on an investment
in the Fund over the period 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.

27
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Government Fund
----------------------------------------------------------=======================================================================
For the year ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
---------------------------------------------------------------------------------------------------------------------------------

Net asset value, beginning of period $ 10.06 $ 9.85 $ 9.54 $ 9.96 $ 8.91
---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
---------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.57 0.57 0.58 0.59 0.60
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on (0.95) 0.21 0.31 (0.42) (1.05)
investments --------- -------- -------- -------- --------
---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (0.38) 0.78 0.89 0.17 1.65
---------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
---------------------------------------------------------------------------------------------------------------------------------
Net investment income (0.57) (0.57) (0.58) (0.59) (0.60)
--------- -------- -------- -------- --------
---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.57) (0.57) (0.58) (0.59) (0.60)
--------- -------- -------- -------- --------
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.11 $ 10.06 $ 9.85 $ 9.54 $ 9.96
========= ======== ======== ======== ========
---------------------------------------------------------------------------------------------------------------------------------
Total Return (3.90)% 8.15% 9.69% 2.00% 19.00%
---------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 42,760 $ 54,886 $ 48,562 $ 51,713 $ 66,261
---------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets/1/ 0.80% 0.76% 0.87% 1.06% 1.07%
---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net 5.93% 5.73% 6.12% 6.36% 6.31%
assets/1/
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 185% 90% 143% 30% 97%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) 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, 1999, 1998, 1997, 1996 and 1995 would have been 1.25%,
1.16%, 1.20%, 1.21% and 1.22%, respectively, and the ratios of net
investment income to average net assets would have been 5.48%, 5.33%,
5.79%, 6.21% and 6.16%, respectively.

28
<PAGE>

--------------------------------------------------------------------------
HEARTLAND FUNDS
General Information and Account/Price Information (24 hours):
1.800.432.7856 or 414.289.7000
www.heartlandfunds.com
--------------------------------------------------------------------------

HEARTLAND FUNDS
789 North Water Street
Milwaukee, Wisconsin 53202

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

CUSTODIAN
Firstar Bank, 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

29
<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 or Semi-Annual Reports, you may call or write Heartland Advisors
at:

Heartland Advisors, Inc.
789 North Water Street
Milwaukee, Wisconsin 53202
1.800.432.7856 or 414.289.7000

You may also obtain the Annual and Semi-Annual Reports and other relevant
information at Heartland Funds' website (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 significantly 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 1.202.942.8090. Additionally, copies of this
information can be obtained, after paying a duplicating fee, by sending an e-
mail request to [email protected] or by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-0102.

Investment Company Act File No. 811-4982

30
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2000
(as supplemented as of June 9, 2000)

HEARTLAND GOVERNMENT FUND

789 North Water 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 separate mutual fund series,
including the Heartland Government Fund (the "Fund"). This Statement of
Additional Information ("SAI") relates to the Fund and its 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 Prospectus for the Fund
dated May 1, 2000 (as supplemented as of June 9, 2000). You may obtain a free
copy of the 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 FUND............................................... 3
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND......................... 3
TYPES OF SECURITIES.................................................... 4
Government Obligations............................................ 4
Debt Securities................................................... 4
Derivative Instruments............................................ 8
Foreign Investments............................................... 15
Illiquid Securities............................................... 16
Indexed Securities................................................ 17
Investment Companies.............................................. 17
Loan Interests.................................................... 17
When-Issued and Delayed-Delivery Securities; Forward Commitments.. 18
PORTFOLIO MANAGEMENT STRATEGIES........................................ 18
Borrowing......................................................... 18
Duration.......................................................... 19
Foreign Currency Transaction...................................... 19
Lending Portfolio Securities...................................... 20
Repurchase Agreements............................................. 21
Reverse Repurchase Agreements and Dollar Rolls.................... 21
Standby Commitments............................................... 21
INVESTMENT RESTRICTIONS................................................ 22
PORTFOLIO TURNOVER..................................................... 24
MANAGEMENT............................................................. 24
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.................... 27
INVESTMENT ADVISORY AND OTHER SERVICES................................. 28
DISTRIBUTION OF SHARES................................................. 30
PORTFOLIO TRANSACTIONS................................................. 31
DESCRIPTION OF SHARES.................................................. 33
PURCHASES AND SALES.................................................... 34
ADDITIONAL INCOME TAX CONSIDERATIONS................................... 35
PERFORMANCE INFORMATION................................................ 35
FINANCIAL STATEMENTS................................................... 39
</TABLE>

2
<PAGE>

INTRODUCTION TO THE FUND

The Heartland Government Fund (the "Fund") is one of eight 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"). The Fund is a diversified fund and has a distinct
investment objective and program from the other Heartland Group Funds. The Fund
commenced operations on April 9, 1987.

INVESTMENT OBJECTIVES AND POLICIES OF THE FUND

The 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
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; 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.

Heartland Advisors buys and sells securities for the 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 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.

3
<PAGE>

TYPES OF SECURITIES

The following information supplements the discussion of the Fund's
investments described in its Prospectus.

Government Obligations

The 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.

Debt Securities

The Fund may invest in debt securities of corporate and governmental
issuers up to the full value of its assets. The risks inherent in short-,
intermediate- and long-term debt securities depend on a variety of factors,
including the term of the obligations, the size of a particular offering and the
credit quality and rating of the issuer, in addition to general market
conditions.

4
<PAGE>

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 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 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.

Floating and Variable Rate Securities. The 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.

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 the 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. The 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. The 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.

5
<PAGE>

inflation-indexed bond exceeds the interest otherwise includable in the Fund's
gross income for the relevant tax year, the excess will be treated as an
ordinary loss.

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 the 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 Fund 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.

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, the 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, the Fund may not be able to realize the rate
of return it expected.

6
<PAGE>

these securities may have less potential for capital appreciation during periods
of declining interest rates than 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 the
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 the 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.

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 the 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.

7
<PAGE>

and PO classes will be limited 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 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 the 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, the 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 Fund's 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 the
Fund's objective and investment policies, consider making investments in such
new types of securities.

Zero-Coupon, Step-Coupon and Pay-in-Kind Securities. The 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, the 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

The 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, the 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 the 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 the 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 the Fund's portfolio by approximately the same amount
of time that holding an equivalent amount of the underlying securities would.

8
<PAGE>

Writing Covered Options. The 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 the 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 the Fund 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 the 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. The 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 the 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 the Fund had purchased the underlying asset
directly because the premium received for writing the option will mitigate the
effects of the decline.

The 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). The 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 the Fund will be able to effect
such closing transactions at a favorable price. In addition, although the 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. The 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. The 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. The 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). The Fund may also exercise such
options or allow them to expire.

9
<PAGE>

The 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, the 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.

The 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, the
Fund has the right to sell the underlying asset at any time during the option
period. The 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 the 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. The 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 Fund may engage
in transactions in futures contracts for "short" hedging or "long" strategies as
described below.

When the Fund purchases a futures contract, it agrees to purchase a
specified underlying instrument at a specified future date. When the 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 the Fund enters into the contract. While the 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.

The 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, the 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 the Fund's portfolio securities would be substantially offset by
a decline in the value of the futures position.

The 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 the 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. The 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.

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entering into a futures contract, and to maintain an open position in futures
contracts, the 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 the Fund's initial
margin payment. Unlike margin in securities transactions, initial margin on
futures contracts does not represent a borrowing to the 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 the 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 the 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 the Fund purchases an option on a future, all that is at risk
is the premium paid plus transaction costs. Alternatively, when the 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. The 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, the Fund will mark to market the current value of any
open futures contracts. The Fund expects to earn interest income on its 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 the
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 the
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, the 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, the 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 the Fund will be able to enter into an offsetting
transaction with respect to a particular futures contract at a particular time.
If the 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 the Fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When the 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.

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<PAGE>

Limitations on Futures and Options on Futures Transactions. The Fund 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. The 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 net 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.

Combined Positions. The Fund may purchase and write options in combination
with other Heartland Funds series, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the 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 the 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 the Fund's current or anticipated investments exactly. The 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 the Fund likely is to
be invested. To the extent that the 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, the 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 the 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 the Fund.

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<PAGE>

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 the 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 the Fund to
continue to hold the position until delivery or expiration regardless of changes
in its value. As a result, the Fund's access to other assets held to cover its
options or futures positions could also be impaired. Similarly, if the Fund is
unable to effect a closing sale transaction with respect to options it has
purchased, it would have to exercise 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 Fund 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 the 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. The 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.

In order for the 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.

Hybrid Instruments. The 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

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<PAGE>

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.

Swap Agreements. The 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 Fund intends 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. The
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 the 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 the Fund. The 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.

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<PAGE>

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 the 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. The 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.

Foreign Investments

The Fund may invest up to 20% of its assets in Non-U.S. Traded Foreign
Securities. The Fund may 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 the Fund if the value of the portfolio
security subsequently declined, or, if the Fund had entered into a contract to
sell the security, could result in possible claims against the Fund.

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<PAGE>

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 Fund 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 markets, ADRs are
alternatives to the direct purchase of the underlying securities in their
national markets and currencies. The limitations on the Fund's 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 the 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

The Fund may invest in illiquid securities. However, the Fund may not
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 the Fund.

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, the
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, the 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, the 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 the
Fund to sell such an

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<PAGE>

investment promptly and at an acceptable price. In addition, if the Fund holds a
material percentage of its assets in illiquid or restricted securities, it may
experience difficulty meeting its redemption obligations.

Indexed Securities

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

Investment Companies

The 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 the 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, the 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

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. If the 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 the 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.

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<PAGE>

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, the 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. The 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, the 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.

The 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.

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. Payment and interest terms of these
securities are set out at the time the 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, the 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 the Fund's net
asset value.

On the date the 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, the 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.

PORTFOLIO MANAGEMENT STRATEGIES

The following information supplements the discussion of the Fund's
investment objectives and policies in their respective prospectuses.

Borrowing

The 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. The Fund may also borrow from banks up to one-third of its total assets
for other purposes such as facilitating the management of its investment
portfolio and making other investments or engaging in other transactions
permissible under the 1940 Act which may be considered a borrowing (such as
dollar rolls and reverse repurchase agreements).

The Fund presently plans to limit its borrowings to borrowings only from
banks, for periods not longer than 60 days, in amounts not to exceed 20% of its
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, continuing or unexpected redemptions;
(b) to purchase debt obligations pending receipt of proceeds in the settlement
of the sale of other portfolio securities; and (c) when the Fund is scheduled to
receive

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<PAGE>

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 the Fund will borrow will depend, among other things, on market
conditions and interest rates.

Duration

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 the 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

The Funds may use these instruments for hedging or any other lawful purpose
consistent with their respective investment objectives.

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<PAGE>

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.

Lending Portfolio Securities

The 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 the Fund will be invested in short-term debt
instruments. The Fund receives amounts equal to earned income for having made
the loans. The Fund is the beneficial owner of the loaned securities in that any
gain or loss in the market price during the loan period inures to the Fund.
Thus, when the loan is terminated, the value of the securities may be more or
less than their value at the beginning of the loan. In determining whether to
lend its portfolio securities, the 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. The Fund may pay a fee to placing brokers in
connection with loans of its portfolio securities.

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<PAGE>

Repurchase Agreements

The Fund may enter into repurchase agreements with certain banks or nonbank
dealers. In a repurchase agreement, the 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 the 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
the 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 Fund enters
into repurchase agreements to evaluate those risks. The 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

The 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. The Fund generally retains the right to interest and principal
payments on the security. While a reverse repurchase agreement is outstanding,
the 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.

The 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 the
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. The 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, the 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 the 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 the 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, the Fund will take into account the
creditworthiness of the counterparty.

Standby Commitments

To facilitate portfolio liquidity, the Fund 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

21
<PAGE>

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 the Fund obtains standby commitments to evaluate those risks.

INVESTMENT RESTRICTIONS

The 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 the 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.

Under the 1940 Act, "majority approval of shareholders" means approval by
the lesser of (1) the holders of 67% or more of the 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

As a matter of fundamental policy, which may not be changed without
shareholder approval, the Fund may not:

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

_________________

(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 Fund's concentration policies.

22
<PAGE>

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. The Fund may not 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.

8. Diversification. The Fund 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 Fund will regard the entity which has the
ultimate responsibility for payment of principal and interest as the issuer. In
addition, the Fund may not purchase more than 10% of the outstanding voting
securities of an issuer.

9. Pledging of Assets. The Fund may not pledge ore than 15% of its net
assets to secure its permitted borrowings.

10. Short Sales. The Fund may not effect short sales of securities.

11. Affiliate Purchases. The 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.

Non-Fundamental Restrictions

The 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.

The Fund may not:

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

23
<PAGE>

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, 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 the 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.

PORTFOLIO TURNOVER

Portfolio turnover for the 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 the 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, 1999 and 1998, the portfolio turnover rates for
the Fund were as follows: 185% in 1999 and 90% in 1998.

MANAGEMENT

Heartland is governed by a Board of Directors that oversees its business
affairs, and meets regularly to review the Fund's investments, performance and
expenses. The Board elects the officers of Heartland and hires the Fund's
service providers, including the Fund's 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.

24
<PAGE>

<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
789 North Water Street Officer and Director,
Milwaukee, WI 53202 Heartland Advisors, Inc.,
since 1982; Director of
Capital Investments, Inc.,
since 1989 (small business
investment company).

Hugh F. Denison 53 Director* Educator; Shareholder
789 North Water Street Ombudsman, Heartland Advisors,
Milwaukee, WI 53202 Inc., since January 1998; Vice
President, Director of
Research and Director,
Heartland Advisors, 1988 to
1996.

Jon D. Hammes 51 Director President, The Hammes Company
Suite 305 (a commercial real estate
18000 West Sarah Lane development company) since
Brookfield, WI 53045 1991.
</TABLE>

____________________

* Directors who are "interested persons" (as defined in the 1940 Act) of
Heartland Advisors.

<TABLE>
<S> <C> <C> <C>
A. Gary Shilling 62 Director President, A. Gary Shilling &
500 Morris Avenue Company, Inc. (economic
Springfield, NJ 07081 consultants and investment
advisors) since 1978.

Allan H. Stefl 55 Director Senior Vice President,
800 North Brand Boulevard Communications, Nestle USA,
Glendale, CA 91203 since 1993.

Linda F. Stephenson 58 Director President and Chief Executive
100 East Wisconsin Avenue Officer, Zigman Joseph
Milwaukee, WI 53202 Stephenson (a public relations
and marketing communications
firm) since 1989.

Jilaine Hummel Bauer 43 Vice President and Senior Vice President and
789 North Water Street Secretary General Counsel, Heartland
Milwaukee, WI 53202 Advisors, Inc. since January
1998; Secretary, Heartland
Advisors, Inc. since August
1999; Senior Vice President,
Stein Roe & Farnham
</TABLE>

25
<PAGE>

Paul T. Beste 43 Vice President and Chief Operating Officer,
789 North Water Street Principal Accounting Heartland Advisors, Inc. since
Milwaukee, WI 53202 Officer December 1999 and Director,
Heartland Advisors, Inc. since
June 8, 2000; Senior Vice
President--Investment
Operations, Heartland
Advisors, Inc. September 1998
to 1999; Investment Operations
Officer, Heartland Advisors,
1997 to 1998; Director of
Taxes/Compliance, Strong
Capital Management, Inc., 1992
to 1997.

Kenneth J. Della 36 Vice President Senior Vice President and
789 North Water Street Treasurer, Heartland Advisors,
Milwaukee, WI 53202 Inc. since September 1998;
Chief Financial Officer,
Heartland Advisors, 1995 to
1998; employed by Heartland
Advisors since 1992.

Scott R. Powell 37 Vice President Senior Vice President -
Marketing, Heartland Advisors,
Inc. since May, 1999; Vice
President - Sales/Marketing,
CIMCO, Inc./CUNA Mutual, 1997
to 1999; Vice President -
Third Party Sales, T. Rowe
Price Associates, 1996 to
1997; Investment Officer,
CIMCO, Inc./CUNA Mutual, 1993
to 1996.

Nicole J. Best Treasurer Employed by Heartland
Advisors, Inc. since March
1998; employed by Arthur
Andersen LLP 1995-1998;
student prior to 1995.
</TABLE>

____________________

* Directors who are "interested persons" (as defined in the 1940 Act) of
Heartland Advisors.

26
<PAGE>

<TABLE>
<CAPTION>
Total
Compensation
Pension or from Heartland
Total Compensation Retirement Fund Complex (9
Director from the Government Fund Benefits Funds)
-------- ------------------------ -------- -------
<S> <C> <C> <C>
Willard H. Davidson* $2,332 None $30,816

Jon D. Hammes $2,332 None $30,816

A. Gary Shilling $2,332 None $30,816

Linda F. Stephenson $2,332 None $30,816

Allen H. Stefl $2,332 None $30,816
</TABLE>

___________________

* Mr. Davidson retired as a director on December 1, 1999.

In addition, the Directors who are not "interested persons" of
Heartland Advisors each received $1,184 in 1999 from Heartland Advisors for
attendance at a special meeting of Heartland in connection with changes made to
the investment objectives and policies of the Large Cap Value Fund and the
dissolution of another series of Heartland (the Mid Cap Value Fund). In April
2000, Heartland implemented a deferred compensation program for its Directors
under which they may elect to defer all or a portion of their compensation and
invest the deferral in "phantom" shares of any Heartland Fund.

Code of Ethics

Heartland and Heartland Advisors have adopted a code of ethics under
Rule 17j-1 of the 1940 Act. The code of ethics permits officers, directors and
employees of Heartland and Heartland Advisors to invest in securities, including
securities that may be held by the Fund, subject to certain restrictions imposed
by the Code to avoid actual or potential conflicts of interest.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of February 3, 2000, no person controlled the Fund and the directors and
officers of Heartland Group, Inc. as a group owned 2.91% of the 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 the Fund except as follows:

Record or Beneficial Holder No. of Shares (%)
--------------------------- -----------------

Charles Schwab & Co., Inc. 533,200 11.8%
ATTN: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122

Washington State Funeral Directors 390,035 8.7%
Association - Master Trust
2950 Northup Way, Ste. 105
Bellevue, WA 98004-1406

27
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

Heartland Advisors provides investment management and administrative
services to the Fund pursuant to an Investment Advisory Agreement.
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 Fund, Heartland Advisors also serves as the
distributor for the shares of the Fund. Heartland Advisors, founded in 1982,
serves as the investment advisor for Heartland's eight equity and fixed income
mutual funds, and also provides investment management services for individuals,
institutions and retirement plans. As of December 31, 1999 Heartland Advisors
had approximately $2.7 billion in 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 Investment Advisory Agreement, the 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 fees are paid in monthly
installments.

The following table sets forth the management fees actually paid by the
Fund to Heartland Advisors and the amount of management fees waived by Heartland
Advisors for the last three fiscal years:

<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Fees actually paid $146,128 $133,403 $275,751

Fee waived $155,522 $219,542 $ 53,221
</TABLE>

Under the Investment Advisory Agreement, Heartland Advisors manages the
investment operations of the Fund 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 Fund and to determine the selection, amount, and time to buy,
sell or lend securities or other investments for the Fund, 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 Fund and provides such services and facilities as may be required
for effective administration of the Fund. Heartland Advisors will permit any of
its officers or employees to serve without compensation from the Fund 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 Fund, 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 the
Fund which it is not required to pay or assume under the Investment Advisory
Agreement, Heartland Advisors will not be obligated to pay or assume the same or
similar expense in the future.

The Fund bears all its other expenses including all charges of
depositories, custodians and other agencies for the safekeeping and servicing of
its 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 Fund; all charges for equipment or services used for obtaining price
quotations or for communication with the Fund's custodian, transfer agent or any
other agent selected by Heartland; all charges for accounting services provided
to the Fund by Heartland Advisors or any other provider

28
<PAGE>

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 Fund, 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
Fund's prospectus, statement 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 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 Fund
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 Fund;
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 this Fund in particular shall be paid solely out of this 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 Investment Advisory Agreement provides 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 Fund pursuant to a separate agreement with
Heartland. For services provided to the Fund, Heartland Advisors receives a
monthly fee at an annual rate of $12,500 plus 0.0085 of 1% of the Fund's average
daily net assets over $50 million.

Custodian and Transfer and Dividend Disbursing Agent

Firstar Bank, N.A. acts as custodian for the Fund (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 Fund held domestically and outside the U.S. Firstar
Mutual Fund Services, LLC acts as transfer and dividend disbursing agent for the
Fund. The address for Firstar Bank, 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 Fund. In this capacity,
the accountants audit the annual financial

29
<PAGE>

statements of the Fund and report thereon, prepare and/or review certain
regulatory reports and the federal income tax returns, and perform other
professional auditing, tax and accounting services when engaged by Heartland to
do so.

DISTRIBUTION OF SHARES

Heartland Advisors acts as principal underwriter and distributor of the
shares of the Fund. Heartland Advisors has agreed to use its "best efforts" to
distribute the Fund's shares, but has not committed to purchase or sell any
specific number of shares. The Distribution Agreement for the 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 the 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

The Fund has adopted a distribution plan (the "Rule 12b-1 Plan") which,
among other things, requires it to pay Heartland Advisors, as distributor, a
monthly 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 Fund's Prospectus.

The fee represents compensation for distributing and servicing the 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. The 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 the Fund under the Rule 12b-1
Plan may be used to reimburse Heartland Advisors for expenses incurred in
connection with another fund.

30
<PAGE>

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 the 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 Heartland Advisors relating to the 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, 1999, the Fund paid $126,528
under the Rule 12b-1 Plan.

The principal types of activities for which the Fund made payments (net of
waivers) under the Rule 12b-1 Plan for the fiscal year ended December 31, 1999
were as follows: $12,151 for advertising/sales literature; $15,670 for printing
and mailing of prospectus (other than to current investors); and $66,707 for
broker-dealer compensation (including compensation to Heartland Advisors, other
broker-dealers and financial institutions).

PORTFOLIO TRANSACTIONS

As provided in the Investment Advisory Agreement, Heartland Advisors is
responsible for the Fund's portfolio decisions and the placing of portfolio
transactions. In executing such transactions, Heartland Advisors seeks to obtain
the best net results for the Fund, taking into account such factors as price
(including the brokerage commission or dealer spread), size of order,
competitive commissions on similar transactions, difficulty of execution and
operational facilities of the firm involved and the firm's risk in positioning a
block of securities. While Heartland Advisors seeks reasonably competitive
rates, it does not necessarily pay the lowest commission or spreads available.

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 Fund's 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 Fund. 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

31
<PAGE>

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 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.

Heartland does not believe the Fund pays 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 Fund), and such research products or services may not
necessarily be used by Heartland Advisors in connection with client accounts
(including the Fund) which paid commissions to the brokers providing such
product or service.

For particular transactions, the Fund 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 Fund. 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 Fund 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 Fund in over-the-counter transactions conducted on an agency
basis. Pursuant to plans adopted by Heartland's Board of Directors for the Fund
under, and subject to, the provisions of Rule 10f-3 under the 1940 Act, the Fund
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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During the last three fiscal years, the commissions on portfolio
transactions paid by the Fund for the year ended December 31 were $35,988 in
1999; $5,009 in 1998; and $6,222 in 1997. During the last three fiscal years
for the year ended December 31, no commissions on portfolio transactions were
paid to Heartland Advisors as broker. No brokerage commissions were paid by the
Fund to brokers or dealers who supplied research services to Heartland Advisors
during the fiscal year ended December 31, 1999.

Trade Allocation Policy

Heartland Advisors will seek to treat each client (including the Fund)
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 general, investment opportunities are allocated pro rata
among clients that have comparable investment objectives and positions where
sufficient quantities or trading values of a security make such allocation
practicable. However, because many of the securities owned by clients of
Heartland Advisors have a limited trading market, it may not be possible to
always allocate trades pro rata among all accounts (including the Fund) 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 Fund) 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. Initial public offerings ("IPOs") will be
allocated on a random basis to all participating accounts in a manner Heartland
Advisors believes will lead to a fair and equitable distribution of IPOs over
time. In general, an account will participate in an IPO allocation only if the
portfolio manager for the account believes the IPO is an appropriate investment
for the account.

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 Fund is a separate mutual fund series of Heartland.
Currently, eight 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 Fund's transfer agent. The
investor will have the same rights of ownership with respect to shares as if
certificates had been issued.

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PURCHASES AND SALES

Determination of Net Asset Value

The Fund's shares are sold at the next determined net asset value per
share. The 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.

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.

Illiquid and Thinly Traded Securities. The lack of a liquid secondary
market for certain securities may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the 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
the 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

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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 the 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

The 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

The 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. The Fund also intends to make
distributions as required by the Code to avoid the imposition of a 4% excise
tax.

To the extent that the 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 Fund may advertise its "yield" and "total return."
Yield is based on historical earnings and total return is based on historical
distributions; neither is intended to indicate future performance. The "yield"
of the 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.

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Performance information should be considered in light of the 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 the 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 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(1 + 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).

In some circumstances the Fund may advertise its total return for a 1-, 2-,
or 3-year period. 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 Fund for the 1-, 5- and 10-year
periods are as follows:

1 Year 5 Years 10 Years
------ ------- --------

-3.90% 6.71% 7.63%

The 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.

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Yield

a - b
Yield = 2[(----- + 1)/6/ - 1]
cd

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 the 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 the
Fund that is not tax-exempt.

The yield for the Fund for the 30 days ended December 31, 1999 was 6.33%.

Comparisons

In advertising and sales literature, the performance of the Fund may be
compared with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, other accounts, limited
liability investment companies or partnerships managed or advised by the
Adviser, and other competing investment and deposit products available from or
through other financial institutions. The composition of these indexes, averages
or accounts differs from that of the Fund. The comparison of the Fund to an
alternative investment should consider differences in features and expected
performance.

The Fund may also note (or provide reprints of articles or charts
containing) its mention (including performance or other comparative rankings) in
newspapers, magazines, or other media from time to time. Newspapers and
magazines that might mention the Fund include, but are not limited to, the
following:

Barron's Forbes
Bloomberg Personal Finance Fortune
Business Week Institutional Investor
Changing Times Investment News
Chicago Investor's Daily
Chicago Tribune Kiplinger's Personal Finance
Chicago Sun-Times Los Angeles Times
Crain's Chicago Business The Milwaukee Business Journal
Consumer Reports Milwaukee Journal Sentinel
Consumer Digest Milwaukee Magazine
Financial Planning Money
FA Advisor The Mutual Fund Letter
Mutual Fund Values (Morningstar) Newsweek

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The New York Times USA Today
Pensions and Investments U.S. News and World Report
Personal Investor The Wall Street Journal
Smart Money Worth
Time

When a newspaper, magazine or other publication mentions the Adviser or the
Fund, such mention may include: (i) listings of some or all of the Fund's
holdings; (ii) descriptions of characteristics of some or all of the securities
held by the Fund, including price-to-earnings, price-to-sale, and price-to-book
value ratios, earnings, growth rates and other statistical information, and
comparisons of that information to similar statistics for the securities
comprising any of the indexes or averages listed below; and (iii) descriptions
of the economic and market outlook generally and for the Fund, in the view of a
portfolio manager or the Adviser.

Various newspapers and publications including those listed above may also
made mention of the Fund's portfolio manager. Portfolio managers and other
members of the Adviser's staff may make presentations at conferences or trade
shows, appear on television or radio programs, or conduct or participate in
telephone conference calls, and the Fund may announce those presentations,
appearances or calls to some or all shareholders, or to potential investors in
the Fund. Biographical and other information about a Fund's portfolio manager,
including the information about awards received by that portfolio manager or
mentions of the manager in the media, may also be described or quoted in Fund
advertisements or sales literature.

The Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.

The performance of the Fund may be compared to market indexes or averages,
including, but not limited to the indices referred to in the Fund's prospectus.
The Fund's performance may also be compared to mutual fund industry indexes or
averages, including, but not limited to those published by Lipper Inc.,
Morningstar, Inc. and Value Line.

Lipper and Morningstar, Inc. ("Morningstar") classify, calculate and
publish the Lipper and Morningstar averages, respectively, which are unweighted
averages of total return performance of mutual funds. The Fund may also use
comparative performance as computed in a ranking by Lipper or category averages
and rankings provided by another independent service. Should Lipper or another
service reclassify the Fund to a different category or develop (and place the
Fund into) a new category, the Fund may compare its performance or ranking
against other funds in the newly assigned category, as published by the service.
Moreover, the Fund may compare its performance or ranking against all funds
tracked by Lipper or another independent service, and may cite its ratings,
recognition or other mention by Morningstar or any other entity. Morningstar's
rating system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is computed by
subtracting the Fund's risk score (which is a function of the Fund's monthly
returns less the 3-month Treasury bill return) from the Fund's load-adjusted
total return score. This numerical score is then translated into rating
categories, with the top 10% labeled five star, the next 22.5% labeled four
star, the next 35% labeled three star, the next 22.5% labeled two star, and the
bottom 10% one star.

To illustrate the historical returns on various types of financial
assets, the Fund may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks, small company stocks, long-term corporate bonds, long-term government
bonds, intermediate-term government bonds and U.S. Treasury bills. Similarly,
the Fund may use Ibbotson's historical data regarding the Consumer Price Index.
The Fund may also use historical data compiled by Prudential Securities, Inc.,
or by other similar sources believed by the Fund to be accurate, illustrating
the past performance of small-capitalization

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stocks, large-capitalization stocks, common stocks, equity stocks, growth stocks
(small-capitalization, large-capitalization or both) and value stocks (small-
capitalization, large-capitalization or both).

FINANCIAL STATEMENTS

The financial statements, related notes and related reports of
PricewaterhouseCoopers, LLP, independent public accountants, contained in the
Annual Report to Shareholders of the Fund as of December 31, 1999 for the fiscal
year or period then ended are hereby incorporated by reference. Copies of the
Fund's Annual and Semi-Annual Reports may be obtained without charge by writing
to Heartland Advisors, Inc., 789 North Water Street, Milwaukee, Wisconsin 53202,
by calling 1-800-432-7856 or (414) 289-7000, or by visiting the Heartland
website at www.heartlandfunds.com.