<PAGE>
As filed with the Securities and Exchange Commission on October 15, 1996
Registration No. 333-12529
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT No. /1 /
POST-EFFECTIVE AMENDMENT No. / /
Ranson Managed Portfolios
(Exact Name of Registrant as Specified in Charter)
1 North Main
Minot, North Dakota 58703
(Address of Principal Executive Offices)
(701) 852-5292
(Registrant's Telephone Number)
Robert E. Walstad Mark J. Kneedy Conrad G. Goodkind
ND Holdings, Inc. Chapman and Cutler Quarles & Brady
1 North Main 111 West Monroe Street 411 East Wisconsin Avenue
Minot, North Dakota 58703 Chicago, Illinois 60603 Milwaukee, Wisconsin 53202
(Name and Address of (with a copy to the above) (with a copy to the above)
Agent for Service)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
The Registrant has previously filed a declaration registering an indefinite
number of shares of beneficial interest, without par value, pursuant to Rule
24f-2 under the Investment Company Act of 1940. Accordingly, no filing fee is
payable herewith. The Registrant's Rule 24f-2 notice for the year ended July
31, 1996 will be filed on or before September 29, 1996. Registrant is filing a
copy of its earlier declaration under Rule 24f-2 as an exhibit to this
Registration Statement.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
<PAGE>
RANSON MANAGED PORTFOLIOS
(THE NEBRASKA MUNICIPAL FUND)
CROSS REFERENCE SHEET
(Pursuant to Rule 481(a) showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A and
B of Form N-14.)
CAPTION OR SUBHEADING IN PROSPECTUS
ITEM NO. ON FORM N-14 OR STATEMENT OF ADDITIONAL
- --------------------------------------- INFORMATION
-----------------------------------
Part A -- Information Required in the
Prospectus
Item 1. Beginning of the Registration Cover Page
Statement and Outside Front
Cover Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Fee Table, Synopsis Synopsis; Risk Factors; Expenses
Information and Risk
Factors
Item 4. Information About the Synopsis; Background and Reasons
Transaction for the Reorganization;
Additional Information about the
Agreement; Exhibit I
Item 5. Information about the Cover Page; Available Information;
Registrant Synopsis; Risk Factors; Comparison
of Investment Objectives and
Policies; Description of Shares
Issued and Rights; Ownership of
Ranson Fund and Heartland Fund
Shares; Capitalization Table;
Additional Information about the
Ranson Fund and the Heartland
Fund; Incorporation by Reference
of Documents in the Prospectus
<PAGE>
Item 6. Information about the Cover Page of Registration Statement;
Company being Acquired Available Information; Synopsis; Risk
Factors; Comparison of Investment
Objective and Policies; Ownership of
Ranson Fund and Heartland Fund
Shares; Capitalization Table;
Additional Information about the
Ranson Fund and the Heartland Fund;
Incorporation by Reference of
Documents in the Prospectus
Item 7. Voting Information Cover Page of Registration Statement;
Notice of Special Meeting of Share-
holders; Introduction, Voting
Information and Requirements;
Description of Shares Issued and
Rights
Item 8. Interest of Certain Persons Not applicable
and Experts
Item 9. Additional Information Not applicable
Required for Reoffering by
Persons Deemed to be
Underwriters
PART B
Item 10. Cover Page Cover Page of Statement of
Additional Information
Item 11. Table of Contents Not applicable
Item 12. Additional Information about Incorporation by Reference of
the Registrant Documents in the Statement of
Additional Information.
Item 13. Additional Information about Incorporation by Reference of
the Company being Acquired Documents in the Statement of
Additional Information.
Item 14. Financial Statements Historical Financial Statements;
Pro Forma Financial Statements
<PAGE>
Part C. -- Other Information
Information required to be included in Part
C is set forth under the appropriate Item, so
numbered, in Part C of this document.
<PAGE>
HEARTLAND NEBRASKA TAX FREE FUND
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
October 16, 1996
Dear Heartland Nebraska Tax Free Fund Shareholder:
I am writing you at this time about a matter of primary importance to all of our
Heartland Nebraska Tax Free Fund (the "Heartland Fund") shareholders. Those of
us at Heartland have appreciated our reception in Nebraska and the confidence
placed in us by our shareholders. At the same time, however, we recognize that
despite significant efforts, the growth of the Heartland Fund has been limited,
and we have been unable to achieve an asset level at which the Fund could
achieve optimal diversification and economies of scale.
With the above in mind, I am pleased to send this Proxy Statement/Prospectus
that describes and seeks your approval of an Agreement and Plan of
Reorganization involving the Heartland Fund and The Nebraska Municipal Fund (the
"Ranson Fund"), a series of Ranson Managed Portfolios which is managed by Ranson
Capital Corporation ("Ranson"). As a result of the transactions contemplated by
the Agreement, the assets of the two Funds will be consolidated and you will
become a shareholder in the combined Ranson Fund. It is expected that the value
of your Ranson Fund shares will be the same as the value of your Heartland Fund
shares immediately prior to the transaction. The investment objective, policies
and other attributes of the Ranson Fund are similar to those of the Heartland
Fund, although some differences exist which are described in this Proxy
Statement.
After careful consideration, the Board of Directors of Heartland Group has
unanimously approved this transaction and recommends that you read the enclosed
materials carefully and then vote FOR the proposal.
The Board believes that the transaction is fair to, and in the best interests
of, the Heartland Fund shareholders, offering you the following benefits:
<PAGE>
1. The combined Ranson Fund will be more than double the size of the existing
Heartland Fund. This consolidation should significantly increase the
diversification of the Fund's portfolio and allow the Fund to take better
advantage of economies of scale.
2. Ranson Capital's distribution network and capabilities should foster growth
and provide greater efficiencies for the combined Fund as it continues to
grow.
3. Ranson is experienced and knowledgeable in the Nebraska municipal
securities market, and the Ranson Fund's policies are similar to those of
the Heartland Fund with the objective of providing current income that is
exempt from both federal and Nebraska personal income tax.
4. There will be no sales charge or commission to Heartland Fund shareholders
on the Ranson Fund shares received in the transaction.
5. The transaction is structured to be tax-free to the Heartland Fund
shareholders.
YOUR VOTE IS ESSENTIAL TO ACCOMPLISH THE TRANSACTION. WE URGE YOU TO VOTE AS
SOON AS POSSIBLE, AS YOUR PROMPT ATTENTION WOULD ALLOW US TO ACHIEVE A QUORUM AT
THE SPECIAL MEETING OF HEARTLAND FUND SHAREHOLDERS TO BE HELD ON
DECEMBER 2, 1996.
The transaction does not affect any of the other mutual fund series of Heartland
Group. Heartland Advisors will continue to manage and remain committed to those
funds and to serving your other investment needs. If you have any questions,
please feel free to call us at 800-432-7856.
Thank you for your consideration and continued support.
Sincerely,
/s/ William J. Nasgovitz
William J. Nasgovitz
President
<PAGE>
HEARTLAND GROUP, INC.
HEARTLAND NEBRASKA TAX FREE FUND
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Telephone: (414) 289-7000 or (800) 432-7856
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
ON DECEMBER 2, 1996
To the Shareholders of the Heartland
Nebraska Tax Free Fund of the
Heartland Group, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of the Heartland Nebraska Tax Free Fund (the "Heartland Fund"), a
series of Heartland Group, Inc., will be held on Monday, December 2, 1996 at
4:00 p.m., local time, at The Omaha Marriott, 10220 Regency Circle, Omaha,
Nebraska 68114. The purpose of the Meeting is to consider and to act upon the
following proposals:
1. To approve an Agreement and Plan of Reorganization (the
"Agreement") under which The Nebraska Municipal Fund (the "Ranson Fund"),
an investment portfolio of Ranson Managed Portfolios, would acquire all of
the assets, and assume the stated liabilities, of the Heartland Fund and,
in exchange therefor, the Ranson Fund would issue to the Heartland Fund
shares of beneficial interest ("shares") of the Ranson Fund having an
aggregate value equal to the value of the Heartland Fund's assets so
acquired (net of the liabilities assumed). The Heartland Fund would then
make a pro rata distribution of such Ranson Fund shares to its
shareholders, and the Heartland Fund shareholders would thereby become
shareholders of the Ranson Fund. It is expected that the value of each
Heartland Fund shareholder's account with the Ranson Fund after the
exchange would be the same as the value of such shareholder's account in
the Heartland Fund immediately prior to the exchange.
2. To transact upon such other business as may properly come before
the Meeting or any adjournments thereof.
The Board of Directors of Heartland Group, Inc. has fixed the close of
business on October 11, 1996 as the record date for the determination of
shareholders of the Heartland Fund entitled to notice of, and to vote at, the
Meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ Lois Schmatzhagen
--------------------------------------------
Lois Schmatzhagen, Secretary
October 16, 1996
YOUR VOTE IS IMPORTANT -- PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER WHO
DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING INSTRUCTIONS
ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN THE ENCLOSED
POST-PAID ENVELOPE. IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF A SECOND
SOLICITATION, WE ASK YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
<PAGE>
HEARTLAND NEBRASKA TAX FREE FUND
(A Series of Heartland Group, Inc.)
THE NEBRASKA MUNICIPAL FUND
(A PORTFOLIO OF RANSON MANAGED PORTFOLIOS)
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: October 16, 1996
This document is being furnished in connection with the solicitation of
proxies by the Board of Directors of Heartland Group, Inc. ("Heartland Group"),
for use at the Special Meeting of Shareholders of the Heartland Nebraska Tax
Free Fund (the "Heartland Fund"), a series of Heartland Group, to be held on
Monday, December 2, 1996 at 4:00 p.m., local time, at The Omaha Marriott, 10220
Regency Circle, Omaha, Nebraska 68114 (the "Meeting").
The purpose of the Meeting is to consider and vote on the Agreement and
Plan of Reorganization (the "Agreement") involving the Heartland Fund and The
Nebraska Municipal Fund (the "Ranson Fund"), a separate portfolio of Ranson
Managed Portfolios. Under the Agreement, the Ranson Fund would acquire all of
the assets, and assume the stated liabilities, of the Heartland Fund, and, in
exchange therefor, the Ranson Fund would issue to the Heartland Fund shares of
beneficial interest ("shares") of the Ranson Fund. The aggregate value of the
Ranson Fund shares so issued would be equal to the value of the Heartland Fund
assets so acquired (net of the liabilities assumed). The shares of the Ranson
Fund received by the Heartland Fund would then be distributed pro rata to
shareholders of the Heartland Fund, and the Heartland Fund would be liquidated
and discontinued. It is expected that the value of each Heartland Fund
shareholder's account in the Ranson Fund after the proposed transactions (the
"Reorganization") would be the same as the value of such shareholder's account
in the Heartland Fund immediately prior to the Reorganization. This transaction
is being structured as a tax-free reorganization. No sales charge or commission
will be imposed on the Ranson Fund shares issued in the Reorganization. See "The
Agreement."
The Ranson Fund is an investment portfolio of the Ranson Managed
Portfolios, an open-end, series management company. The investment objective of
the Ranson Fund is to seek a high level of current income exempt from both
federal income tax and Nebraska income tax, as is consistent with preservation
of capital. (The Ranson Fund and the Heartland Fund are collectively referred to
herein as the "Funds").
The principal executive office of Ranson Managed Portfolios is 1 North
Main, Minot, North Dakota 58703 (telephone (701) 852-5292 or (800) 601-5593).
The principal executive office of Heartland Group is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202 (telephone (414) 289-7000 or (800) 432-7856).
This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
sets forth concisely information about the Ranson Fund and the Reorganization
that a prospective investor should know before voting on the Reorganization. It
should be read carefully and retained for future reference.
SHARES OF THE RANSON FUND ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANKING INSTITUTION, ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENTAL AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
The Statement of Additional Information, dated October 16, 1996, relating
to this Proxy Statement/Prospectus has been filed with the Securities and
Exchange Commission (the "SEC" or the "Commission") and is incorporated herein
by reference. Copies of the Statement of Additional Information may be obtained
without charge by writing to the Ranson Fund at 1 North Main, Minot, North
Dakota 58703, or by calling Ranson Capital Corporation at (701) 852-5292 or
(800) 601-5593. In addition, the Prospectus and Statement of Additional
Information of the Ranson Fund, each dated November 30, 1995 (as amended March
4, 1996) (the "Ranson Fund Prospectus" and the "Ranson Fund SAI," respectively)
have been filed with the Commission and are incorporated by reference herein. A
copy of the Ranson Fund Prospectus accompanies this Proxy Statement/Prospectus
and copies of the Ranson Fund SAI may be obtained without charge by writing to
or calling the Ranson Fund at the above address or telephone numbers. The
Prospectus and Statement of Additional Information of the Heartland Fund, each
dated April 30, 1996 (the "Heartland Fund Prospectus" and "Heartland Fund SAI"),
have been filed with the Commission, are incorporated by reference herein and
may be obtained without charge by writing to Heartland Advisors, Inc. at 790
North Milwaukee Street, Milwaukee, Wisconsin 53202 or calling (414) 289-7000 or
(800) 432-7856.
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<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Available Information................................................ 5
Introduction, Voting Information and Requirements.................... 5
Synopsis............................................................. 7
Introduction...................................................... 7
The Agreement..................................................... 8
Reasons for the Reorganization.................................... 8
Comparison of Ranson Fund and Heartland Fund...................... 10
Risk Factors......................................................... 23
Geographic Concentration.......................................... 23
Non-Diversified Investment Companies.............................. 24
Investment/Non-Investment Grade Debt.............................. 25
Trading Market of the Debt Obligations............................ 26
Futures Contracts and Options..................................... 26
Illiquid Securities............................................... 26
Forward Commitments............................................... 27
Municipal Lease Obligations....................................... 27
Securities Subject to the Alternative Minimum Tax................. 27
Portfolio Turnover................................................ 27
Pricing of Securities............................................. 28
Comparison of Investment Objectives and Policies..................... 28
Investment Objectives and Policies................................ 28
Investment Restrictions........................................... 32
Portfolio Managers................................................ 36
Management Discussion and Analysis of Performance................. 37
Economic Outlook and Municipal Bonds.............................. 37
Background and Reasons for the Reorganization..................... 37
Additional Information about the Agreement........................... 40
Terms of the Reorganization....................................... 40
Acquisition of Assets and Assumption of Liabilities............... 41
Other Terms....................................................... 42
Federal Tax Consequences.......................................... 43
Related Party Transactions........................................ 44
Description of Shares Issued and Rights.............................. 44
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Ownership of Ranson Fund and Heartland Fund Shares................... 46
Control Persons................................................... 46
Ownership of Officers and Trustees/Directors...................... 46
Capitalization....................................................... 47
Miscellaneous........................................................ 47
Legal Matters..................................................... 47
Auditors.......................................................... 47
Interests of Experts and Counsel.................................. 47
Other Matters..................................................... 47
Additional Information about the Ranson Fund and the Heartland Fund.. 48
Agreement and Plan of Reorganization................................. Exhibit I
</TABLE>
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<PAGE>
AVAILABLE INFORMATION
Ranson Managed Portfolios has filed with the Commission a Registration
Statement on Form N-14 (the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the shares of the
Ranson Fund offered hereby. As permitted by the rules and regulations of the
Commission, this Proxy Statement/Prospectus omits certain information, exhibits
and undertakings contained in the Registration Statement. Such additional
information can be inspected at the principal offices of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, as well as the following regional
offices: Seven World Trade Center, 13th Floor, New York, New York 10048; and
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621.
Copies of the Registration Statement can be obtained from the Commission at
prescribed rates by writing to the Commission at any such address. For further
information, reference is made to the Registration Statement and to the exhibits
thereto.
In addition to the above, the Ranson Fund and the Heartland Fund are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith, file reports and other
information with the SEC. Proxy materials, reports and other information about
the Ranson Fund and the Heartland Fund which are of public record also can be
inspected and copied at public reference facilities maintained by the Commission
at the above addresses and copies of these materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, Washington, D.C. 20549. The Commission also
maintains a Web site at http:\\www.sec.gov that will contain proxy materials,
reports, and other information filed by the Funds.
No person has been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus in
connection with the offer contained in this Proxy Statement/Prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by Ranson Managed Portfolios. This Proxy
Statement/Prospectus does not constitute an offer to sell securities in any
state or other jurisdiction to any person to whom it would be unlawful to make
such offer in such state or jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there have been no changes in the affairs of Ranson
Managed Portfolios subsequent to the date of this Proxy Statement/Prospectus.
INTRODUCTION, VOTING INFORMATION AND REQUIREMENTS
This Proxy Statement/Prospectus is being furnished to the shareholders of
the Heartland Fund in connection with the solicitation of proxies by the Board
of Directors of Heartland Group to be used at a Special Meeting of Shareholders
of the Heartland Fund to be held on Monday, December 2, 1996 at 4:00 p.m.,
local time, at The Omaha Marriott, 10220 Regency Circle, Omaha, Nebraska 68114.
The purpose of the Meeting is to consider and vote on the Agreement, pursuant to
which the Ranson Fund
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<PAGE>
would acquire all of the assets, and assume the stated liabilities, of the
Heartland Fund and, in exchange therefor, would issue to the Heartland Fund
shares of the Ranson Fund. The value of the Ranson Fund shares issued in the
Reorganization would be equal to the value of the Heartland Fund assets so
acquired (net of the liabilities assumed). The Heartland Fund would then
distribute the shares of the Ranson Fund it receives, pro rata, to the Heartland
Fund shareholders, and the Heartland Fund would be liquidated and discontinued.
Any proxy which is properly executed and returned in time to be voted at
the Meeting will be voted in accordance with the instructions marked thereon. In
the absence of such instructions, the proxy will be voted "For" approval of the
Agreement under Proposal 1. The duly appointed proxies may, in their discretion,
vote upon such other matters as may come before the Meeting or any adjournments
thereof. A shareholder may revoke his or her proxy at any time prior to its
exercise by delivering written notice of revocation to the Secretary of
Heartland Group or by executing and delivering a later dated proxy to Heartland
Group or by attending the Meeting in person to vote the shares of the Heartland
Fund held by such shareholder.
The Board of Directors has determined that the shares of the Heartland Fund
are to be voted as a separate series on the proposal to approve the Agreement
and that holders of shares of other series of Heartland Group are not entitled
to vote on the proposal to approve the Agreement. Further, the vote of the
shareholders of the Ranson Fund is not being solicited to approve the Agreement.
The presence at the Meeting, in person or by proxy, of shareholders
representing one-third of all shares outstanding and entitled to vote on the
Agreement constitutes a quorum for the transaction of business. Abstentions and
broker non-votes (i.e., proxies from brokers or other nominee owners indicating
that such persons have not received instructions from the beneficial owners or
other persons entitled to vote the shares as to a matter with respect to which
the brokers or other nominee owners do not have discretionary power to vote)
will be treated as present for purposes of determining the presence or absence
of a quorum.
Approval of the Agreement and the Reorganization contemplated thereby will
require the affirmative vote of "a majority of the outstanding voting
securities" of the Heartland Fund as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). A majority of the outstanding voting
securities means the lesser of (i) 67% or more of the Heartland Fund's shares
present at the Meeting, if shareholders who are the owners of more than 50% of
the Heartland Fund's shares then outstanding are present in person or by proxy,
or (2) more than 50% of the Heartland Fund's outstanding shares. Accordingly,
abstentions and broker non-votes will have the same effect as votes cast against
approval of the Agreement.
In the event that sufficient votes in favor of the proposal to approve the
Agreement are not received by the scheduled time of the Meeting, the persons
named as proxies in the enclosed proxy may propose and vote in favor of one or
more adjournments of the Meeting to permit further solicitation of proxies
without the necessity of further notice. Any such
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<PAGE>
adjournment will require the affirmative vote of a majority of the shares voted
at the session of the Meeting to be adjourned .
Shareholders of record of the Heartland Fund at the close of business on
October 11, 1996 (the "Record Date") will be entitled to notice of and to vote
at the Meeting or any adjournment thereof. Each such shareholder will be
entitled to one vote for each share (and a fractional vote for each fractional
share) held by such shareholders on each matter presented at the Meeting. As of
the Record Date, there were 1,228,616 shares of the Heartland Fund
outstanding. This Proxy Statement/Prospectus and the accompanying proxy are
being mailed to the Heartland Fund shareholders on or about October 17,
1996.
Under Maryland law, shareholders of the Heartland Fund will not be entitled
to any appraisal or similar rights in connection with the Reorganization
contemplated by the Agreement. However, shareholders may redeem their shares of
the Heartland Fund at net asset value prior to the closing of the proposed
Reorganization in the manner specified in the Heartland Fund Prospectus.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus (including a copy of the Agreement attached
hereto as Exhibit I), as well as the Ranson Fund Prospectus, which is
incorporated by reference herein and copies of which accompany this Proxy
Statement/Prospectus. This summary is not intended to be complete and is
qualified in all respects by reference to the more detailed information
appearing elsewhere in this Proxy Statement/Prospectus, the Agreement, the
Ranson Fund Prospectus, and the Heartland Fund Prospectus.
INTRODUCTION
Shareholders of the Heartland Fund will be asked at the Meeting to vote
upon and approve the Agreement and Reorganization contemplated thereby. If
approved by the shareholders of the Heartland Fund, the Reorganization is
expected to be consummated within ten business days following such approval and
satisfaction of any conditions to closing (the "Closing Date").
The Ranson Fund is a series of Ranson Managed Portfolios, an open-end
management company organized as an unincorporated business trust under the laws
of Massachusetts. Ranson Capital Corporation ("Ranson Capital"), a Kansas
corporation, serves as investment adviser to the Ranson Fund. Ranson Capital is
a registered broker-dealer and a wholly-owned subsidiary of The Ranson Company,
Inc., which in turn is a wholly-owned subsidiary of ND Holdings, Inc. ("ND
Holdings"), a North Dakota corporation.
The Heartland Fund is a series of Heartland Group, an open-end management
investment company organized as a Maryland corporation. Heartland Advisors, Inc.
("Heartland Advisors") acts as investment adviser to the Heartland Fund.
Additional information about the Ranson Fund and the Heartland Fund is set forth
below.
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<PAGE>
THE AGREEMENT
The Agreement describes the essential terms of the proposed Reorganization
and is set forth in full in Exhibit I to this Proxy Statement/Prospectus.
Pursuant to the Agreement, the Ranson Fund would acquire all of the assets, and
assume the stated liabilities, of the Heartland Fund and, in exchange therefor,
would issue to the Heartland Fund shares of the Ranson Fund. The aggregate net
asset value of the Ranson Fund shares issued in the Reorganization would be
equal to the aggregate value of the assets of the Heartland Fund (net of its
stated liabilities) acquired in the Reorganization. The Heartland Fund will then
make a pro rata distribution of such Ranson Fund shares to its shareholders. As
a result of the Reorganization, each Heartland Fund shareholder will receive
that number of full and fractional Ranson Fund shares equal in value to such
shareholder's pro rata interest in the net assets transferred to the Ranson Fund
as of the Valuation Date (as hereinafter defined). Heartland Fund shareholders
will not pay any sales load or sales commissions on the shares of the Ranson
Fund they receive in the Reorganization. Additionally, it is a condition to the
closing of the Reorganization that the Heartland Fund and the Ranson Fund
receive a legal opinion to the effect that the Reorganization will qualify as a
tax-free reorganization for federal income tax purposes. Assuming the
Reorganization so qualifies, shareholders of the Heartland Fund will not
recognize any income, gain, or loss for federal income tax purposes as a result
of the exchange in the Reorganization of their shares in the Heartland Fund for
shares of the Ranson Fund. For further information about the tax consequences of
the Reorganization, see "Additional Information About the Agreement -- Federal
Tax Consequences" below.
Contemporaneously with the closing and the Heartland Fund's distribution of
Ranson Fund shares to the Heartland Fund shareholders, the Heartland Fund will
be liquidated. Accordingly, the shareholders of the Heartland Fund would become
shareholders of the Ranson Fund.
Although, each party to the Agreement is responsible for its own legal,
accounting, and other related expenses in connection with the Reorganization,
Ranson Capital has agreed to pay for the cost of solicitation of the vote of the
shareholders of the Heartland Fund on the Reorganization, including the costs of
preparation, printing and distribution of proxy materials, legal and tax
opinions, transfer and stamp taxes, SEC registration costs, the costs of
printing and distributing prospectus supplements describing such matters, and up
to $7,500 for the fees of Heartland Group's legal counsel in connection
therewith. The Ranson Fund is not expected to incur any costs or expenses
relating to the Reorganization.
REASONS FOR THE REORGANIZATION
Heartland Advisors remains committed to serving the shareholders of each
Heartland mutual fund as well as its other advisory clients. Heartland Advisors
has served as investment advisor and distributor to the Heartland Fund since the
Fund commenced operations in September 1993. During that time, Heartland
Advisors has dedicated significant time and resources in an attempt to increase
the size of the Heartland Fund to enable the Fund to operate as a more
economically efficient and diverse mutual fund.
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<PAGE>
Despite Heartland Advisors' efforts to attract assets to the Heartland Fund, the
inflow of assets into the Fund has not increased and, in the view of Heartland
Advisors, the Fund has been unable to achieve an asset level at which it can
offer the desired level of economic efficiencies to its shareholders. Since
Heartland Advisors does not have a local presence in Nebraska and has been
unsuccessful in generating greater interest in the Fund remotely, it has
determined that it would be in the best interests of the Heartland Fund and its
shareholders to consider other alternatives.
As a result, management of Heartland Advisors and the Heartland Fund
reviewed and analyzed possible options, including liquidation of the Heartland
Fund or operation without fee waivers. Management concluded that the course of
action most advantageous to the Heartland Fund shareholders would be to merge or
consolidate assets with another fully operational Nebraska tax-free fund because
potential efficiencies and portfolio diversification could be achieved
immediately. Accordingly, management contacted other Nebraska tax-exempt funds
to determine their interest in a combination of assets and thereafter held
discussions with Ranson Capital and Ranson Managed Portfolios. Such discussions
led to the execution of a letter of intent in December 1995 and the negotiation
and execution of the Agreement in September 1996.
The Board of Directors of Heartland Group considered and unanimously
approved the Agreement and the Reorganization, subject to shareholder approval,
during meetings held on April 15, 1996, July 31, 1996 and August 8, 1996. The
Board of Directors reviewed and requested information about Ranson Capital,
Ranson Managed Portfolios, the Ranson Fund and ND Holdings, met with certain
members of senior management of Ranson Capital and ND Holdings, consulted with
legal counsel, made inquiries and considered numerous factors, including: the
experience, investment philosophy, performance, personnel, operations, resources
and financial condition of Ranson Capital and ND Holdings; a comparison of the
investment objectives, policies, strategies and restrictions of the Funds; the
quality, scope and cost of the advisory and administrative services to be
provided by Ranson Capital, and a comparison of such attributes to those of
Heartland Advisors and other advisors of comparable mutual funds; the
distribution performance, resources and capabilities of Ranson Capital, and the
economies of scale which potentially may be achieved through larger and wider
distribution of shares of the Ranson Fund and consolidation of the assets of the
two Funds; a comparison of the current expense ratios for the two Funds (and an
analysis of the pro forma expense ratio of the Ranson Fund assuming the
Reorganization is consummated); the agreement by Ranson Capital to continue
waiving fees or reimbursing expenses as needed so that the total operating
expenses of the Ranson Fund do not exceed 0.85% of its average net assets during
each of its fiscal years ending July 31, 1997 and 1998; the terms and conditions
of the Agreement and the Reorganization, including the structure of the
transaction as a tax-free reorganization and the fact that no sales charge will
be imposed on the Heartland Fund shareholders in connection with the
Reorganization; alternatives to the Reorganization and the consequences of such
alternatives to the Heartland Fund shareholders; and such other factors deemed
relevant by the Board.
The Board of Directors believes the proposed transaction offers Heartland
Fund shareholders the following benefits, among others: Ranson Capital has
substantial experience
-9-
<PAGE>
and knowledge in investing in Nebraska municipal securities; Ranson Capital's
sales force and network of securities dealers and financial institutions and the
Ranson Fund's distribution plan promote the marketing and distribution of Ranson
Fund shares to potential Nebraska investors, thereby fostering expansion of, and
potential increased efficiencies for, the Ranson Fund; Ranson Capital's greater
presence in Nebraska should encourage future growth of the Ranson Fund and
enable it to take advantage of investment opportunities in the state; the
combined size of the Ranson Fund may result in increased portfolio
diversification, greater buying power, lower transaction costs and other
economies of scale, which should keep total expenses at reasonable levels.
For these and additional reasons set forth below under "Background and
Reasons for the Reorganization," the Board, including the directors who are not
"interested persons" of Heartland Group, as that term is defined in the 1940
Act, has concluded that the Reorganization is fair to, and in the best interests
of, the Heartland Fund and its shareholders and that the economic interests of
existing Heartland Fund shareholders will not be diluted as a result of the
Reorganization, and recommends approval of the Reorganization by Heartland Fund
shareholders. The Board of Trustees of the Ranson Fund has also approved the
Reorganization and determined that the economic interests of existing Ranson
Fund shareholders will not be diluted as a result of the Reorganization. If the
Reorganization is not approved, the Heartland Fund will continue in existence
and the Board of Directors will determine whether to pursue alternative actions,
including possible liquidation and dissolution.
COMPARISON OF RANSON FUND AND HEARTLAND FUND
Discussed below is a brief comparison of the principal features of the
Ranson Fund and Heartland Fund.
Investment Objectives and Policies
The investment objectives of the Ranson Fund and the Heartland Fund are
similar, although some of their investment restrictions differ in important
respects. The investment objective of the Ranson Fund is to achieve as high a
level of current income exempt from both federal income tax and Nebraska income
tax as is consistent with preservation of capital. Under normal market
conditions, the Ranson Fund's assets will be invested in a portfolio of Nebraska
Municipal Securities (as defined below) which, in the opinion of Ranson Capital,
will produce a higher level of current income than would be produced by a
portfolio of Nebraska Municipal Securities rated in only the highest rating
category, but contains Nebraska Municipal Securities which do not present a
significant risk of loss of principal due to credit characteristics. The Ranson
Fund seeks its investment objective by investing primarily in debt obligations
the interest on which is, in the opinion of bond counsel to the issuer, exempt
from both federal income taxation and Nebraska income taxation ("Nebraska
Municipal Securities"). Nebraska Municipal Securities include debt obligations
of Nebraska, its political subdivisions, municipalities, agencies and
authorities issued to obtain funds for various public purposes, as well as debt
obligations of the
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<PAGE>
Commonwealth of Puerto Rico, the Virgin Islands and Guam, the interest on which
is exempt from federal taxation.
The investment objective of the Heartland Fund also is to provide investors
with a high level of current income that is exempt from federal and Nebraska
personal income taxes. The Heartland Fund therefore also invests in debt
obligations issued by Nebraska state and local government subdivisions, as well
as certain general obligations issued by Puerto Rico, Virgin Islands and Guam.
The Heartland Fund does not have any restriction on the amount of its assets
that may be invested in obligations issued by territories and possessions of the
United States, their agencies or instrumentalities. The Ranson Fund, in
contrast, may not invest more than 15% of its total assets in obligations of
Puerto Rico, the Virgin Islands or Guam.
As a matter of fundamental policy, the Ranson Fund and the Heartland Fund
seek to invest at least 80% of their respective assets in securities which
generate income exempt from federal and Nebraska income taxes under normal
conditions. While both the Ranson Fund and the Heartland Fund attempt, under
normal market conditions, to invest all of their respective assets so that
income therefrom will be exempt from federal and Nebraska income tax, both Funds
may also invest in taxable obligations under certain circumstances, such as
during periods of abnormal market conditions or for liquidity purposes.
The Heartland Fund, as a matter of fundamental policy, will also seek to
invest its assets so that at least 80% are invested so as to be exempt from the
federal alternative minimum tax. Under abnormal circumstances, however, the
Heartland Fund may invest as much as 100% of its assets in municipal securities
issued to finance private activities whose interest is a "tax preference item"
for purposes of the federal alternative minimum tax. If a Heartland Fund
shareholder is subject to the alternative minimum tax, a portion of his or her
income may not be exempt from federal income tax. The Ranson Fund, in contrast,
has not established any limit on the percentage of its portfolio that may be
invested in securities subject to the alternative minimum tax provisions of
federal tax law, and a substantial portion of the income produced by the Ranson
Fund may be includable in the calculation of alternative minimum taxable income.
As of the date of this Proxy Statement/Prospectus, approximately 17.52% of the
principal amount of the portfolio of the Ranson Fund was invested with income
subject to the federal alternative minimum tax. Shares of the Ranson Fund
therefore will not ordinarily be a suitable investment for investors who are
subject to the alternative minimum tax.
Both Funds seek to invest primarily in investment grade securities. Unlike
the Ranson Fund (which limits its investments in bonds to those of investment
grade), however, the Heartland Fund may invest up to 25% of its assets in lower
quality bonds (those rated below the four highest rating categories or judged of
comparable quality), provided the Heartland Fund may not invest in bonds rated
below B at the time of purchase. These bonds are commonly referred to as "junk
bonds." The Ranson Fund, as a matter of fundamental policy, also may not invest
more than 30% of its assets in unrated securities determined by Ranson Capital
to be "investment grade." The Heartland Fund does not have a similar
restriction.
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<PAGE>
Both Funds may invest in futures contracts and options for hedging purposes
only, subject to certain limitations. The Ranson Fund may not enter into futures
contracts or purchase related options thereon if immediately thereafter the
amount committed to initial margin plus the amount paid for premiums for
unexpired options on futures contracts exceed 5% of the value of the Ranson
Fund's total assets. The Ranson Fund also may not purchase or sell futures
contracts or related options thereon if, immediately thereafter, more than one-
third of its net assets would be hedged. The Heartland Fund may engage in
transactions involving options, futures contracts, and options on future
contracts provided: (i) no more than 5% of its total assets would be committed
to initial margin deposits or premiums on futures contracts; (ii) no more than
20% of the Heartland Fund's net assets would be subject to futures contracts;
(iii) no more than 5% of the Heartland Fund's total assets would be committed to
premiums paid for options; and (iv) no more than 20% of the Heartland Fund's
total assets would be subject to options.
The Heartland Fund may invest in collateralized repurchase agreements but
has no present intention to do so. The Ranson Fund may enter into repurchase
agreements with respect to not more than 10% of its total assets (taken at
current value), except when investing for temporary defensive purposes during
times of adverse market conditions. Both Funds may also invest in securities
issued on a when-issued or delayed delivery basis.
See "Comparison of Investment Objectives and Policies" below for more
information.
Risk Factors
The investment practices of Ranson Fund described above may result in risks
which are different from those currently associated with the investment
practices of Heartland Fund. The Ranson Fund, for instance, may invest without
limitation in securities the interest on which is subject to the alternative
minimum tax. The Heartland Fund seeks to invest its assets so that at least 80%
are invested so as to be exempt from such tax. Both Funds are subject to similar
market and credit risks, including the risks associated with geographic
concentration in Nebraska. For a more complete discussion of Ranson Fund's
investment practices and the risks associated therewith, see "Risk Factors" and
"Comparison of Investment Objectives and Policies" below.
Performance
Yield information (unaudited) for the Ranson Fund and the Heartland Fund
for the one-month period ended July 31, 1996 is set forth below:
<TABLE>
<CAPTION>
Ranson Fund Heartland Fund
----------- --------------
<S> <C> <C>
Current Yield 4.94% 5.42%
Tax-Equivalent Yield/1/ 8.96% 9.83%
- --------------------
</TABLE>
1 Assumes a combined federal and Nebraska income tax rate of 44.9%, based on
an effective federal tax rate of 40.8% and a Nebraska tax rate of 6.9%.
-12-
<PAGE>
Total return information (unaudited) for the Ranson Fund and the Heartland
Fund for periods ended July 31, 1996 is set forth below:
<TABLE>
<CAPTION>
Ranson Fund Heartland Fund
--------------------------- ---------------
With Load/1/ Without Load Without Load/1/
------------ ------------ ---------------
<S> <C> <C> <C>
One-Year Average Annual Total Return 1.24% 5.73% 7.37%
Average Annual Total Return Since
Inception/2/ 2.18% 3.83% 2.62
Cumulative Total Return Since
Inception/2/ 6.00% 10.71% 7.63%
- --------------------
</TABLE>
1 The Ranson Fund imposes a maximum sales load of 4.25% on purchases. The
Heartland Fund does not impose a sales load.
2 The Ranson Fund and the Heartland Fund commenced operations on November 17,
1993 and September 27, 1993, respectively.
Performance figures are historical and reflect reinvestment of all
distributions and changes in net asset value. Performance for both the Ranson
Fund and the Heartland Fund would have been lower had their investment advisers
and distributors not waived a portion of fees. Investment return and principal
value will fluctuate so that an investor's share, when redeemed, may be worth
more or less than their original cost. Past performance cannot guarantee
comparable future results.
Advisory and Administrative Services
Ranson Fund
Ranson Capital, organized in 1990, serves as the investment adviser to the
Ranson Fund pursuant to a Management and Investment Advisory Agreement (the
"Ranson Advisory Agreement"). Ranson Capital is also investment adviser for the
other two series of Ranson Managed Portfolios, The Kansas Municipal Fund and
Kansas Insured Intermediate Fund, which had as of the date of this Proxy
Statement/Prospectus net asset values of approximately $130,000,000 and
$30,000,000, respectively. Until it was acquired by ND Holdings in December
1995, Ranson Capital served as sponsor, portfolio supervisor and securities
evaluator for Series 1 through 78 of the Kansas Tax-Exempt Trust and Series 1
through 5 of the Nebraska Tax-Exempt Trust, which Trusts are series of unit
investment trusts.
Pursuant to the Ranson Advisory Agreement, Ranson Capital supervises and
implements the Ranson Fund's investment activities, is responsible for the
overall management of the Ranson Fund's business affairs, and performs certain
evaluations of the securities held by the Ranson Fund.
-13-
<PAGE>
As compensation for its services, the Ranson Fund agrees to pay Ranson
Capital a monthly management and investment advisory fee equivalent on an annual
basis to .50 of 1% of the Ranson Fund's average daily net assets.
Under the terms of the Ranson Advisory Agreement, Ranson Capital has agreed
to pay all expenses of the Ranson Fund, including the Ranson Fund's management
and investment advisory fee and the Ranson Fund's dividend disbursing,
administrative and accounting services fees (but excluding taxes, brokerage fees
and commissions, if any) that exceed 1.25% of the Ranson Fund's average daily
net assets on an annual basis up to the amount of the investment advisory and
management fee payable by the Ranson Fund to Ranson Capital. Reimbursements by
Ranson Capital for the Ranson Fund's expenses will be paid monthly based on
annualized year-to-date expenses. All other expenses shall be paid by the Ranson
Fund. In addition, from time to time and subject to discontinuance at any time,
Ranson Capital may voluntarily waive portions of its fees and/or assume certain
expenses of the Ranson Fund. This would have the effect of lowering the overall
expense ratio of the Ranson Fund and of increasing the yield to investors.
Ranson Capital voluntarily waived fees during fiscal years 1995 and 1996 and has
agreed to continue doing so through fiscal year ending July 31, 1998, so that
the Ranson Fund's total annual operating expenses do not exceed 0.85% of average
net assets.
ND Resources, Inc. ("Resources"), a wholly-owned subsidiary of ND Holdings,
acts as the Ranson Fund's administrative and accounting services agent. For
these services, Resources receives an administrative and accounting services fee
payable monthly by the Ranson Fund equal to the sum of (i) $2,000 per month and
(ii) 0.05% of the Ranson Fund's average daily net assets on an annual basis for
the Ranson Fund's first $50 million of average daily net assets, 0.04% of the
Ranson Fund's average daily net assets on an annual basis for the Ranson Fund's
next $50 million of average daily net assets, 0.03% of the Ranson Fund's average
daily net assets on an annual basis for the Ranson Fund's next $100 million of
average daily net assets, 0.02% of the Ranson Fund's average daily net assets on
an annual basis for the Ranson Fund's next $300 million of average daily net
assets, and 0.01% of the Ranson Fund's average daily net assets on an annual
basis for the Ranson Fund's average daily net assets in excess of $500 million,
together with reimbursement of Resources' out-of-pocket expenses. This fee and
reimbursement are in addition to the investment advisory and management fee
received by Ranson Capital, which is also indirectly owned by ND Holdings, from
the Ranson Fund.
During the fiscal year ended July 31, 1996, $84,492 in fees accrued under
the Ranson Advisory Agreement with the Ranson Fund, $28,152 of which was waived
by Ranson Capital. During the fiscal year ended July 31, 1996, $17,395.00 in
fees accrued to Ranson Capital under a former administrative and accounting
services agreement with the Ranson Fund, which Ranson Capital elected to waive.
Heartland Fund
Heartland Advisors provides the Heartland Fund with overall investment
advisory and administrative services under an Investment Advisory Agreement (the
"Heartland Advisory
-14-
<PAGE>
Agreement") with Heartland Fund. Heartland Advisors, founded in 1982, also
serves as investment adviser to seven other series of Heartland Group and
provides investment management services for institutions and individuals.
Subject to policies established by Heartland Fund's Board of Directors,
Heartland Advisors makes investment decisions on behalf of the Heartland Fund,
makes available research and statistical data, and supervises the acquisition
and disposition of investments by the Heartland Fund. Heartland Advisors bears
all of its expenses in providing its services under the Heartland Advisory
Agreement and pays all salaries, fees and expenses of the officers and directors
of Heartland Group who are affiliated with Heartland Advisors. The Heartland
Fund bears all other expenses including, but not limited to, necessary office
space, telephone and other communication facilities and personnel competent to
perform administrative, clerical and shareholder relations functions. Under the
Heartland Advisory Agreement, Heartland Advisors receives on an annual basis
0.65 of 1% of average daily net assets of the Heartland Fund. At present,
Heartland Advisors is voluntarily waiving 0.325 of 1% of its investment advisory
fee for the Heartland Fund. Heartland Advisors may reinstate an additional
portion or all of the fee at any time.
Distribution
Ranson Fund
Ranson Capital serves as distributor of the Ranson Fund pursuant to a
Distribution and Services Agreement. Pursuant to this agreement, Ranson Capital
will purchase shares of the Ranson Fund for resale to the public, either
directly or through securities dealers or agents and is obligated to purchase
only those shares for which it has received purchase orders. In addition to
agreements with securities dealers, Ranson Capital may also enter into
agreements with banks or bank affiliates with respect to the sale of Ranson Fund
shares. Under the distribution agreement, Ranson Capital pays the expenses of
distribution of the Ranson Fund shares, including preparation and distribution
of literature relating to the Ranson Fund and its investment performance,
advertising, and public relations materials. The Ranson Fund bears the expenses
of registering its shares with the Commission, sending prospectuses to existing
shareholders, and qualifying and maintaining qualification of the shares for
sale under the securities laws of the various states if necessary. The Ranson
Fund, however, has adopted a shareholder services and distribution plan pursuant
to Rule 12b-1 under the 1940 Act, by which the Ranson Fund will pay Ranson
Capital .25% of the average daily net assets of the Fund and Ranson Capital may
in turn pay firms that sell the Ranson Fund's shares an annual service fee of up
to .25% of average daily net assets of customers accounts in existence for more
than one year for administrative and shareholder services or use some or all of
such payment to pay other distribution expenses which otherwise would be payable
by Ranson Capital.
Heartland Fund
Heartland Advisors also acts as the distributor of shares of the Heartland
Fund. Heartland Advisors has agreed to use its "best efforts" to distribute the
Heartland Fund shares, but has not committed to purchase or sell any specific
number of shares. Under the distribution agreement, Heartland Advisors, as
distributor, will pay the costs and expenses of
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<PAGE>
preparing, printing and distributing materials not prepared by the Heartland
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. The Heartland Fund has no
distribution or shareholder service plan under which 12b-1 or similar fees are
paid by the Fund for distribution or shareholder services.
Expenses
The following table sets forth the shareholder transaction expenses and
annual operating expenses for the Funds' portfolios, including pro forma
expenses (giving effect to the Reorganization as though it had occurred on
August 1, 1995), for the fiscal year ended July 31, 1996:
<TABLE>
<CAPTION>
Pro Forma
Ranson Heartland Combined
Fund Fund Fund
------------ --------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................ 4.25%/(1)/ 0% 4.25%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price)...... None None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds)............. None None None
Redemption Fees (as a percentage of amount
redeemed).......................................... None None/(2)/ None
Exchange Fee......................................... None None None
ANNUAL OPERATING EXPENSES--AFTER WAIVERS
AND REIMBURSEMENTS (as a percentage of average
net assets)/(3)(4)/
Management Fees (After Waivers)/(3)/................. .40% .33% .40%
12b-1 Fees........................................... .25% 0% .25%
Other Expenses/(3)/.................................. .20% .38% .20%
Total Operating Expenses (After Reimbursement)/(4)/.. .85% .71% .85%
</TABLE>
- --------------------
(1) Investors may qualify for a lower sales load. See "Purchase of Shares" in
the accompanying Ranson Fund Prospectus. Heartland Fund shareholders will
not pay any sales load on the shares of the Ranson Fund they receive in the
Reorganization.
(2) Heartland Fund's transfer agent currently charges a wire fee of $10 for the
return of redemption proceeds requested by wire transfer.
(3) The calculation for the Ranson Fund presumes expenses after fee waivers or
reimbursing expenses as needed to limit total operating expenses of the
Ranson Fund to .85% of its average net assets. Before applicable fee
waivers or reimbursements, management fees and other expenses for the
Ranson Fund and the Pro Forma Combined Fund would have been .50% and .63%
of the Fund's average net assets respectively. Similarly, before applicable
fee waivers or reimbursements, the management fees for the Heartland Fund
would have been .65% of its average net assets. The Heartland Fund does not
waive any fees with respect to other expenses.
(4) Before applicable fee waivers or reimbursements, total operating expenses
as a percentage of the respective Fund's average net assets would have been
1.38% for the Ranson Fund, 1.03% for the Heartland Fund, and 1.38% for the
Pro Forma Combined Fund. However, under the terms of Ranson Capital's
investment advisory agreement with the Ranson Fund, Ranson Capital will pay
all expenses of such Fund (excluding taxes, brokerage fees and commissions,
if
-16-
<PAGE>
any) that exceed 1.25% of the Fund's average daily net assets on an annual
basis up to the amount of the advisory fee payable to Ranson Capital.
As shown in the table above, the ratios of total operating expenses to
average net assets for the Ranson Fund on a pro forma combined basis (both
before and after applicable fee waivers and reimbursements) is greater than the
corresponding ratios for the Heartland Fund. However, the expense ratio for the
Ranson Fund on a pro forma combined basis after waivers and reimbursements is
less than the Heartland Fund's expense ratio before waivers and reimbursements.
In addition, Ranson Capital has covenanted to Heartland Group that it will
voluntarily waive fees and reimburse expenses as needed to ensure that the ratio
of total expenses to average net assets for the Ranson Fund does not exceed
0.85% for each of the fiscal years ended July 31, 1997 and 1998.
Example
Investors would pay the following expenses on a $1,000 investment in the
Ranson Fund and the Heartland Fund, assuming the maximum sales load on
purchases, a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ranson Fund.................... $51 $68 $88 $143
Heartland Fund................. $ 7 $23 $40 $ 88
Pro Forma Combined Fund/(1)/... $51 $68 $88 $143
</TABLE>
- --------------------
(1) Because Heartland Fund shareholders will not have to pay a sales load on
the Ranson Fund shares they receive in the Reorganization, the pro forma
expenses they would pay on $1,000 worth of such shares, assuming a 5%
annual return and redemption at the end of each time period, would be as
follows: $9 -- 1 year, $26 -- 3 years, $46 -- 5 years, and $101 -- 10
years.
The purpose of the table is to assist investors in understanding the
various costs and expenses they will bear directly or indirectly. For more
complete descriptions of the various costs and expenses, see "Fee and Expense
Table," "Condensed Financial Information," "Fund Management," "Purchase of
Shares," and "The Distributor" in the accompanying Ranson Fund Prospectus. See
also "Fund Expenses," "Financial Highlights," and "The Fund and the Heartland
Organization" in the Heartland Fund Prospectus. THE ABOVE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN SHOWN.
Sales Charges
Ranson Fund
No sales charges are applicable to the transactions in the Reorganization.
Shares of Ranson Fund may be purchased at their net asset value plus an
initial sales charge. The sales charge represents a percentage of the public
offering price, and ranges from 4.25% to 1.50% of the public offering price on
purchases of under $1,000,000. Purchases of $1,000,000 or more are subject to an
initial sales charge of .75% of the public offering price. Investors may qualify
for a reduced sales charge by stating their intention to invest in the Fund,
during a 13-month period, an amount that would result in a reduced sales charge
and by signing a non-binding letter of intent, or by making concurrent purchases
of shares of the Fund and units of any series of The Nebraska Tax-Exempt Trust
sponsored by
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<PAGE>
Ranson Capital. Shares of the Ranson Fund may be purchased at net asset value
(i.e., without an initial sales charge) where the amount invested is documented
to be proceeds from the redemption of shares of an unrelated investment company
which does not impose a contingent deferred sales charge or redemption fee and
where the investor paid an initial sales charge. Purchases under this program
must be made within 60 days of the redemption date. The Ranson Fund also has a
group investment and reinvestment program which allows investors to purchase
shares of the Fund with a lower minimum initial investment and a lower sales
charge, provided the investor and the group program of which he or she is a
participant meet the applicable cost saving criteria. Certain other categories
of Ranson Fund shareholders may purchase shares of the Fund at net asset value
without the imposition of a sales charge or at a reduced sales charge. For more
information, see "Purchase of Shares" and "Special Programs" in the accompanying
Ranson Fund Prospectus.
Heartland Fund
Shares of Heartland Fund may be purchased at their net asset value without
a sales charge. For more information, see "How to Buy Shares" set forth in the
Heartland Prospectus.
Minimum Purchases
Ranson Fund
The minimum initial investment in the Ranson Fund is $1,000. Minimum
subsequent investments are $100 (excluding reinvestment of dividends and capital
gains). See the "Purchase of Shares" in the accompanying Ranson Fund Prospectus.
Heartland Fund
The minimum initial investment of the Heartland Fund is $10,000. The
minimum additional investment, except for reinvestments of distributions and
investments under the automatic investment plan, is $1,000. See "How to Buy
Shares--Conditions of Your Purchase" in the Heartland Fund Prospectus.
Exchanges
Ranson Fund
The Ranson Fund currently does not offer an exchange privilege between
series of Ranson Managed Portfolios.
Heartland Fund
Shares of the Heartland Fund which have been registered in the shareholders
name for at least 15 days may be exchanged for shares of any other Heartland
fund, or for shares in the Portico Money Market Fund, provided the fund into
which the shareholder wishes to
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<PAGE>
exchange is qualified for sale in the jurisdiction of residence of the
shareholder at the time of the exchange. Under the exchange privilege, each
Heartland fund offers to exchange its shares for shares of another Heartland
fund on the basis of relative net asset value per share, without the payment of
any fees or charges. To qualify for the exchange privilege without further
approval of the Heartland Fund, it is required that shares being exchanged have
a net asset value of at least $1,000 but not more than $500,000. Shares of the
Heartland Fund acquired in exchange for shares of another Heartland fund that
was purchased between February 12, 1993 and June 1, 1994 subject to a contingent
deferred sales charge will remain subject to any such charge applicable upon
ultimate redemption of the shares. However, the exchange of Heartland Fund
shares for Ranson Fund shares in the Reorganization will not be subject to the
contingent deferred sales charge, and the contingent deferred sales charge will
not apply to redemptions of such Ranson Fund shares made following the
Reorganization. Heartland Fund shareholders also may exchange all or a portion
of their shares in the Heartland Fund for shares of the Portico Money Market
Fund at their relative net asset values and also may exchange back into the
Heartland Fund without the imposition of any charges or fees. These exchanges
are subject to the minimum purchase and redemption amounts set forth in the
prospectus for the Portico Money Market Fund. For more information, see
"Shareholder Services" in the Heartland Fund Prospectus.
Redemption Procedures
Ranson Fund
Upon receipt of a redemption request in proper form addressed to the Ranson
Fund's transfer agent, Resources, shares of the Ranson Fund will be redeemed by
it. Telephone redemption requests are not available. The redemption price for
shares of the Ranson Fund is based on net asset value per share next determined
after receipt of the redemption request. Redemption requests must be in writing
and accompanied by any issued certificates. Alternatively, an investor may place
an order to sell shares (whether in certificate or book entry form) through his
or her dealer or agent which has a sales agreement with Ranson Capital and from
which the Ranson Fund prospectus was received, which dealer or agent will
telephone such request to Ranson Capital. The investor will receive the net
asset value next determined after Ranson Capital receives such sell order. The
Ranson Fund does not charge for this transaction. Whether shares are redeemed by
the Ranson Fund or sold through an investor's dealer or agent, a check for the
proceeds ordinarily will be mailed to an investor or his or her agent within
seven calendar days after a redemption request or repurchase order and share
certificates (if any) are received in proper form. For more information, see
"Redemption of Shares" in the Ranson Fund Prospectus.
Shares of the Ranson Fund will be issued at the time of the Reorganization
to shareholders of Heartland Fund. Such Ranson Fund shares will be issued in
book entry form and will accrue dividends and confer all other shareholder
rights.
-19-
<PAGE>
HEARTLAND FUND
Shareholders of the Heartland Fund may redeem their shares on any day the
Heartland Fund is open for business at the next determined net asset value.
Redemptions may be made by telephone or by sending a written request to the
Heartland Fund's transfer agent, Firstar Trust Company ("Firstar"). Shares of
the Heartland Fund acquired in exchange for shares of a Heartland fund subject
to a contingent deferred sales charge may be redeemed at the next determined net
asset value less any applicable contingent deferred sales charge. As indicated
above, the contingent deferred sales charge will not apply to either the
exchange of shares in the Reorganization or subsequent redemptions of Ranson
Fund shares received in the Reorganization. Shareholders may redeem shares
through a broker-dealer or financial institution, which must promptly forward
shareholder instructions to Firstar. The broker-dealer or financial institution
may charge a fee for such services. Shareholders may also redeem their shares by
telephone, unless shareholders elect not to have this privilege on the account
application. There is currently no charge for telephone redemptions, although
one may be imposed in the future. Subject to waiver by the Heartland Fund in
certain instances, the minimum amount that may be redeemed by telephone is
$1,000; all other redemptions may be done by writing to Firstar. For further
information, see "How to Redeem Shares" in the Heartland Fund Prospectus.
Other Shareholder Services/Programs
RANSON FUND
The Ranson Fund has a systematic withdrawal program enabling investors with
accounts of $10,000 or more to redeem shares of the Fund monthly, quarterly or
annually; a preauthorized investment program enabling investors to make monthly
investments of $100 or more in the Fund automatically from their bank or similar
account; and a reinstatement privilege which permits investors to reinvest up to
the full amount of a redemption without a sales charge. See "Special Programs"
in the accompanying Ranson Fund Prospectus.
HEARTLAND FUND
Heartland Fund has an automatic investment plan to permit investors to make
automatic monthly or twice-monthly investments of $100 or more from their
checking or savings account, and a systematic withdrawal plan in which investors
with an account balance of at least $25,000 can set up automatic withdrawals of
at least $100 at monthly, quarterly or annual intervals. See "Shareholder
Services" in the Heartland Fund Prospectus.
Net Asset Value Determinations
Both Funds calculate their respective net asset values per share as of the
close of the New York Stock Exchange regular trading (generally 4:00 p.m.,
Eastern time) on each day that the New York Stock Exchange is open for trading.
Net asset value per share is determined by each Fund by calculating the total
value of such Fund's assets, deducting its liabilities, and dividing the result
by the number of shares outstanding. Most of the
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municipal securities in the portfolios of both Funds do not have readily
available market quotations, requiring the Funds to determine their "fair
values." As noted below, each Fund employs different techniques and procedures
to determine fair value.
RANSON FUND
While many mutual funds (including the Heartland Fund) rely largely on
independent pricing services to provide daily evaluations of their portfolio
securities for which market quotations are not readily available, the Ranson
Fund utilizes Ranson Capital to determine the fair market value of such
securities in the Ranson Fund. Fixed income securities for which quotations are
readily available are valued by the Ranson Fund at the mean between the quoted
bid and asked price. Securities for which quotations are not readily available
(which will constitute a majority of the securities held by the Ranson Fund) are
valued at fair value as determined by Ranson Capital pursuant to procedures
adopted by the Board of Trustees of Ranson Managed Portfolios, using methods
which include consideration of the following: yields or prices of municipal
bonds of comparable quality, type of issue, coupon, maturity and rating,
indications as to value from dealers and national price quotation services and
general market conditions. In making its evaluations, Ranson Capital may employ
electronic data processing techniques and/or a matrix system to assist in such
valuations. The Ranson Fund's portfolio management team is an important source
of information put into the matrix system. The procedures utilized by Ranson
Capital and its valuations are reviewed by the officers of the Ranson Fund under
the general supervision of the Board of Trustees and are periodically reviewed
by the Board of Trustees. In addition, an independent pricing service will
furnish a valuation of the Ranson Fund's portfolio securities on a quarterly
basis, which will be used by the Board of Trustees to test the fairness of the
valuations determined by Ranson Capital. The Board of Trustees of Ranson Managed
Portfolios believes that the nature of the Nebraska municipal bond market is
very specialized and that the Ranson Fund's portfolio management team has a
particular expertise and familiarity with Nebraska Municipal Securities which
makes Ranson Capital well qualified to value the Ranson Fund's portfolio
securities. There is, of course, an inherent conflict of interest and reduced
control over pricing decisions as a result of delegating the pricing
responsibilities to the investment adviser of a fund, but in the case of the
Ranson Fund the Board of Trustees believes that, through various policies and
procedures which have been adopted to compare periodically Ranson Capital's
evaluations with those of independent sources, these concerns have been
addressed.
HEARTLAND FUND
Securities owned by the Heartland Fund are valued on the basis of market
quotations or at their fair value. The Fund generally uses fair value, as market
quotations for most municipal bonds are not readily available on a daily basis.
Fair value of the Heartland Fund's debt securities is determined on the basis of
pricing information provided by an independent pricing service approved by the
Board of Directors of Heartland Group, based primarily upon information
concerning market transactions and dealer quotations for similar securities.
Debt securities having maturities of 60 days of less may be valued at
acquisition cost, plus or minus any amortized discount or premium. Any
securities or other
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assets for which market quotations are not readily available will be valued in
good faith at their fair market value using methods determined by the Board of
Directors.
Other Service Providers to the Funds
RANSON FUND
ND Resources serves as transfer agent for the Ranson Fund and performs
bookkeeping, data processing and administrative services related to the
maintenance of shareholder accounts. First Western Bank & Trust, 900 South
Broadway, Minot, South Dakota 58701, serves as custodian for the Ranson Fund and
has custody of all securities and cash of the Fund and attends to the collection
of principal and income and payment for and collection of proceeds of securities
bought and sold by the Fund. Brady, Martz & Associates, P.C., 24 West Central
Avenue, Minot, North Dakota 58701 is independent auditors of the Ranson Fund.
The Fund's legal counsel is Chapman and Cutler, Chicago, Illinois.
HEARTLAND FUND
Firstar Trust Company, Milwaukee, Wisconsin, serves as custodian, transfer
and dividend disbursing agent for the Heartland Fund. Arthur Andersen LLP,
Milwaukee, Wisconsin, is Heartland Fund's independent auditor and its legal
counsel is Quarles & Brady, Milwaukee, Wisconsin.
RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Ranson
Fund, shareholders should carefully consider the following summary of risk
factors relating to both Ranson Fund and Heartland Fund, in addition to the
other information set forth in this Proxy Statement/Prospectus. A complete
description of risk factors for each Fund is set forth in the Prospectuses of
the Funds and their respective Statements of Additional Information.
GEOGRAPHIC CONCENTRATION
Both Funds pursue their investment objectives by investing in debt
obligations the interest on which is exempt from federal income taxation and
Nebraska income taxation. Investment companies concentrating their investments
in limited geographic areas, such as the Funds, are exposed to greater credit
risks than an investment company investing in a nationally diversified portfolio
of municipal securities. The value of the municipal securities may be closely
tied to local, political, and economic conditions within Nebraska. The Nebraska
economy performed steadily during 1995 as the national economy continued its
slow expansion. The Nebraska economy continued to expand in 1995 with growth in
the labor force, jobs, retail sales, tourism visits and population. Reflecting
the national economy, it is anticipated that the State's economy likely will
grow moderately during the next two years. Historically, the Nebraska economy
tends to be less cyclical than the
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national economy. It typically does not grow as fast as the national economy
during expansions and does not contract as much during recessions.
The Heartland Fund's policies, however, permit it to invest its assets in
securities issued by territories and possessions of the United States, including
Puerto Rico, the Virgin Islands and Guam (the interest on which is exempt from
federal and Nebraska income taxation), and therefore its geographic
concentration may be less than a fund limited solely to investments in one
state. The Ranson Fund may invest up to 15% of its assets in obligations of
Puerto Rico, the Virgin Islands and Guam.
For a more complete discussion of the Nebraska economy, see "Investment
Objective and Policies -- Nebraska Municipal Securities" in the accompanying
Ranson Fund Prospectus.
NON-DIVERSIFIED INVESTMENT COMPANIES
Both Funds are non-diversified investment companies and therefore have the
ability to concentrate investments in particular issuers which may be
advantageous when investing in the applicable tax-exempt obligations, but which
involves an increased risk of loss should an issuer be unable to make interest
or principal payments or should the market value of such securities decline.
Both Funds, however, comply with Subchapter M of the Internal Revenue Code
(the "Code") which, in part, requires that, at the close of each quarter of the
taxable year, those issues which represent more than 5% of a Fund's total assets
be limited in the aggregate to 50% of the Fund's total assets, and that no
single issue exceed 25% of the Fund's total assets.
A substantial portion of the Ranson Fund's portfolio securities (over 25%
of its portfolio) may derive their payment from mortgage loans, utilities, or
from hospitals and other health care facilities. Similarly, the Heartland Fund
may invest 25% or more of its total assets in municipal securities whose revenue
sources are from similar types of projects, such as community development,
education, electric utilities, health care, housing and transportation. There
may be economic, business or political developments or changes that affect
securities of a similar type, such as changes in government regulation,
increased costs of necessary materials, increased competition, or declining
market needs. Therefore, developments affecting a single issuer or industry or
securities financing such projects may have a significant impact on the
respective Fund's performance.
Over 25% of the securities in each Fund's portfolio may be health care
revenue bonds. Ratings of bonds issued for health care facilities are sometimes
based on feasibility studies that contain projections of occupancy levels,
revenues and expenses. A facility's gross receipts and net income available for
debt service may be affected by future events and conditions including demand
for services, the ability of the facility to provide the services required,
physicians' confidence in the facility, management capabilities, competition
with other hospitals, efforts by insurers and governmental agencies to limit
rates, legislation
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establishing state rate-setting agencies, expenses, governmental regulation, the
cost and possible unavailability of malpractice insurance and the termination of
restriction of governmental financial assistance, including that associated with
Medicare, Medicaid and other similar third-party payor programs.
Over 25% of the securities in each Fund's portfolio may derive their
payment from mortgage loans. Mortgage loans are generally partially or
completely prepaid prior to their final maturities as a result of events such as
sale of the mortgaged premises, default, condemnation or casualty loss. Because
these bonds are subject to extraordinary mandatory redemption in whole or in
part from such prepayments of mortgage loans, a substantial portion of such
bonds will probably be redeemed prior to their scheduled maturities or even
prior to their ordinary call dates. The redemption price of such issues may be
more or less than the offering price of such bonds. Certain of the securities in
each Fund's portfolio may be obligations of issuers whose revenues are primarily
derived from mortgage loans to housing projects for low to moderate income
families. The ability of such issuers to make debt service payments will be
affected by events and conditions affecting financed projects including, among
other things, the achievement and maintenance of sufficient occupancy levels and
adequate rental income, increases in taxes, employment and income conditions
prevailing in local labor markets, utility costs and other operating expenses,
the managerial ability of project managers, changes in laws and governmental
regulations, the appropriation of subsidies and social and economic trends
affecting the localities in which the projects are located. The occupancy of
housing projects may be adversely affected by high rent levels and income
limitations imposed under federal and state programs. Like single-family
mortgage revenue bonds, multi-family mortgage revenue bonds are subject to
redemption and call features, including extraordinary mandatory redemption
features, upon prepayment, sale or non-origination of mortgage loans as well as
upon the occurrence of other events.
Over 25% of the securities in each Fund's portfolio may be obligations of
issuers whose revenues are primarily derived from the sale of electric energy.
Utilities are generally subject to extensive regulations by state utility
commissions which, among other things, establish the rates which may be charged
and the appropriate rate of return on an approved asset base. The problems faced
by such issuers include the difficulty in obtaining approval for timely and
adequate rate increases from the governing public utility commission, the
difficulty in financing large construction programs, the limitations on
operations and increased costs and delays attributable to environmental
considerations, increased competition, recent reductions in estimates of future
demand for electricity in certain areas of the county, the difficulty of the
capital markets in absorbing utility debt, the difficulty in obtaining fuel at
reasonable prices and the effect of energy conservation.
For a more complete discussion of the risks associated with industry
concentration, see "Investment Objective and Policies -- Nebraska Municipal
Securities" in the accompanying Ranson Fund Prospectus.
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INVESTMENT/NON-INVESTMENT GRADE DEBT
Both the Ranson Fund and the Heartland Fund seek to invest primarily in
investment grade securities. Lower quality securities involve a greater risk of
default, including nonpayment of principal and interest, than investment grade
securities; however, the risk of default is present in investment grade
securities. Securities rated in the lowest category of investment grade debt
have speculative characteristics. Investment in medium-quality debt securities
(rated BBB or A by Standard & Poor's Corporation ("S&P") or Baa or A by Moody's
Investors Service, Inc. ("Moody's")) involves greater investment risk, including
the possibility of issuer default or bankruptcy, than investment in higher
quality debt securities. An economic downturn could severely disrupt this market
and adversely affect the value of outstanding bonds and the ability to prepay
principal and interest. Further, the Heartland Fund may invest up to 25% of its
assets in non-investment grade debt securities or "junk bonds." The Ranson Fund
does not invest in debt securities rated below investment grade. Bonds rated
below the top four rating categories are regarded, on balance, as speculative
with respect to the capacity to pay interest and repay principal in accordance
with the terms of the obligation. Accordingly, such bonds involve greater risk,
including risk of default and loss of principal. As of June 30, 1996, the
Heartland Fund did not own any debt securities rated below investment grade.
In addition to the above, an investment in either Fund should be made with
an understanding that the value of the underlying portfolio may decline with
increases in interest rates.
TRADING MARKET OF THE DEBT OBLIGATIONS
The principal trading market for the Funds' portfolio securities generally
will be in the over-the-counter market. As a result, the existence of a liquid
trading market for the respective securities may depend on whether dealers will
make a market in such securities. There can be no assurance that a market will
be made for any of the portfolio securities, that any market for the portfolio
securities will be maintained or of the liquidity of any such market.
FUTURES CONTRACTS AND OPTIONS
Both Funds may invest in futures contracts and options for hedging
purposes. A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may not correlate perfectly with the behavior of the cash
prices of the Fund's portfolio securities. The risk of imperfect correlation may
be increased by the fact that the Funds may trade in futures contracts on
taxable securities, and there is no guarantee that the prices of the taxable
securities will move in a manner similar to the prices of tax-exempt securities.
Another risk is that successful hedging strategies require the ability to
predict future movements in securities prices, interest rates and other economic
factors. The Fund's investment adviser could be incorrect as to the direction or
extent of various interest rate movements or the time span within which these
movements take place. Accordingly, the use of such investments for hedging
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purposes may not be successful and could result in a reduction in the respective
Fund's total return.
ILLIQUID SECURITIES
The Ranson Fund may invest up to 15% of its net assets in illiquid
securities. Illiquid securities include securities the disposition of which is
restricted under federal securities laws, securities which at the time of such
investment are not readily marketable, and repurchase agreements having a
maturity longer than seven days. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them,
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities. The Heartland Fund is permitted to
invest up to 10% of its net assets in illiquid securities.
FORWARD COMMITMENTS
Both Funds may purchase securities on a "when issued" or "delayed delivery"
basis (i.e., obligate themselves to purchase or sell securities with payment and
delivery to occur at a later date). There is a risk of loss to the Funds if the
value of the security declines prior to the settlement date.
MUNICIPAL LEASE OBLIGATIONS
Both the Ranson Fund and the Heartland Fund are permitted to invest in
participations in municipal leases ("lease obligations"). These lease
obligations may be less liquid than many other municipal securities and
therefore may be subject to the risks of illiquidity discussed above. Also,
municipal leases may be subject to the risk of "non-appropriation" which allows
the municipal lessee to terminate the lease and eliminate its obligation to
continue to make lease payments. The Ranson Fund, however, only will purchase
lease obligations which are rated in the top category by either S&P or Moody's
and will not invest more than 15% of its net assets in lease obligations.
SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX
A substantial portion of the income produced by the Ranson Fund may be
includable in the calculation of alternative minimum taxable income. The Ranson
Fund has not established any limit on the percentage of its portfolio that may
be invested in municipal securities subject to the alternative minimum tax
provisions of the Code, which include securities issued to finance private
activities whose interest is a "tax preference item" for purposes of the federal
alternative minimum tax. The Heartland Fund, as a matter of fundamental policy,
seeks to invest its assets so that at least 80% are invested so as to be
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exempt from the federal alternative minimum tax. Consequently, shares of the
Ranson Fund would not ordinarily be a suitable investment for investors who are
subject to the alternative minimum tax. The suitability of shares of the Ranson
Fund for these investors will depend upon a comparison of the yield likely to be
provided from the Fund with the yield from comparable tax-exempt investments not
subject to the alternative minimum tax, and with the yield from comparable fully
taxable investments, in light of each such investor's tax position.
PORTFOLIO TURNOVER
Portfolio transactions will be undertaken by the Ranson Fund principally to
accomplish the Fund's objective in relation to anticipated movements in the
general level of interest rates, but the Fund may also engage in short-term
trading consistent with its objective. Securities may be sold in anticipation of
a market decline (a rise in interest rates) or purchased in anticipation of a
market rise (a decline in interest rates) and later sold. In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what Ranson Capital believes to be a temporary disparity in
the normal yield relationship between the two securities. The Ranson Fund's
investment policies may lead to frequent changes in investments, particularly in
periods of rapidly fluctuating interest rates. The Ranson Fund's portfolio
turnover will not be a limiting factor when the Fund deems it desirable to sell
or purchase securities. A high portfolio turnover (over 100%) may result in
higher transaction and other costs for the Ranson Fund. The Ranson Fund
anticipates that its annual portfolio turnover rate will generally not exceed
75%. However, the Ranson Fund's actual portfolio turnover rates for its fiscal
years ended July 31, 1996 and 1995 were 27.2% and 140%, respectively. The
Heartland Fund's portfolio turnover rates for the years ended December 31, 1995
and 1994 were 5.1% and 32.7%, respectively.
PRICING OF SECURITIES
While many mutual funds (including the Heartland Fund) rely largely on
independent pricing services to provide daily evaluations of their portfolio
securities for which market quotations are not readily available, the Ranson
Fund utilizes Ranson Capital to determine the fair market value of such
securities in the Ranson Fund. Such determinations are based on procedures
adopted by the Board of Trustees of Ranson Managed Portfolios, which include
consideration of yields or prices of municipal bonds of comparable quality, type
of issue, maturity and rating, indications of value from dealers and national
price quotation services and general market conditions. In making its
evaluations Ranson Capital may also employ electronic data processing techniques
and/or a matrix system to assist in such valuations. The Ranson Fund's portfolio
management team is an important source of information put into the matrix
system. The procedures utilized by Ranson Capital and its valuations are
reviewed by the officers of the Ranson Fund under the general supervision of the
Board of Trustees and are periodically reviewed by the Board of Trustees. In
addition, an independent pricing service will furnish a valuation of the Ranson
Fund's portfolio securities on a quarterly basis, which will be used by the
Board of Trustees to test the fairness of the valuations determined by Ranson
Capital. The Board of Trustees of Ranson Managed Portfolios believes that the
nature of the Nebraska municipal bond market is very
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specialized and that the Ranson Fund's portfolio management team has a
particular expertise and familiarity with Nebraska Municipal Securities which
makes Ranson Capital well qualified to value the Ranson Fund's portfolio
securities. There is, of course, an inherent conflict of interest and reduced
control over pricing decisions as a result of delegating the pricing
responsibilities to the investment adviser of a fund, but in the case of the
Ranson Fund the Board of Trustees believes that, through various policies and
procedures which have been adopted to compare periodically Ranson Capital's
evaluations with those of independent sources, these concerns have been
addressed.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES AND POLICIES
Ranson Fund
The investment objective of the Ranson Fund is to provide its shareholders
with as a high level of current income exempt from both federal income tax and
Nebraska income tax as is consistent with preservation of capital. Under normal
market conditions, the Ranson Fund's assets will be invested in a portfolio of
Nebraska Municipal Securities which, in the opinion of Ranson Capital, the
Ranson Fund's investment adviser, will produce a higher level of current income
than would be produced by a portfolio of Nebraska Municipal Securities rated in
only the highest rating category, but contains Nebraska Municipal Securities
which do not present a significant risk of loss due to credit characteristics.
The Ranson Fund seeks to achieve its investment objective by investing
primarily in debt obligations the interest payable on which is, in the opinion
of bond counsel to the issuer, exempt from federal income taxation and Nebraska
income taxation. Nebraska Municipal Securities generally include debt
obligations of the State of Nebraska, its political subdivisions,
municipalities, agencies, and authorities, and certain industrial development
and other revenue bonds, short-term municipal notes, participation interests in
municipal leases (i.e., lease obligations) and tax-exempt commercial paper
issued by such entities. Nebraska Municipal Securities also include debt
obligations of the Commonwealth of Puerto Rico, the Virgin Islands and Guam, the
interest payable on which, in the opinion of bond counsel to the issuer, is
exempt from federal income taxation, but the Ranson Fund is limited to investing
not more than 15% of its total assets in these obligations.
The Ranson Fund has not established any limit on the percentage of its
portfolio that may be invested in Nebraska Municipal Securities subject to the
alternative minimum tax provisions of federal tax law, and a substantial portion
of the income produced by the Ranson Fund may be includable in the calculation
of alternative minimum taxable income. Accordingly, shares of the Ranson Fund
would not ordinarily be a suitable investment for investors who are subject to
the alternative minimum tax.
It is a fundamental policy of the Ranson Fund that under normal
circumstances at least 80% of the fund's assets will be invested in Nebraska
Municipal Securities. The Nebraska Municipal Securities in which the Ranson Fund
invests consist of securities rated within the
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following grades assigned by Moody's: Aaa, Aa, A and Baa for bonds; MIG-1 and
MIG-2 for notes; Prime-1 and Prime-2 for commercial paper; or S&P: AAA, AA, A
and BBB for bonds; SP-1 and SP-2 for notes; A-1 or A-2 for commercial paper.
While ratings at the time of purchase will determine which Nebraska Municipal
Securities may be acquired by the Ranson Fund, a subsequent reduction in rating
will not require the Ranson Fund to dispose of the securities. The Ranson Fund
will purchase unrated Nebraska Municipal Securities which have been determined
to be of investment grade quality at the time of purchase by Ranson Capital. As
a fundamental policy, the Ranson Fund may not invest more than 30% of its assets
in unrated Nebraska Municipal Securities. Further while the Ranson Fund may
invest in lease obligations, the Ranson Fund will purchase only lease
obligations rated in the top category by either S&P or Moody's and will not
invest more than 15% of its net investment assets in lease obligations or any
illiquid securities.
While the Ranson Fund attempts, under normal market conditions, to invest
all of its assets in Nebraska Municipal Securities, the Ranson Fund may
temporarily invest up to 100% of its assets in taxable fixed-income securities
or hold up to 100% of its assets in cash during periods of abnormal market
conditions that dictate taking a defensive posture by investing in such taxable
obligations or cash. In addition, pending the investment or reinvestment in
Nebraska Municipal Securities of proceeds of sales of shares or sales of
portfolio securities or in order to avoid the necessity of liquidating portfolio
investments to meet shareholders' redemption requests, the Ranson Fund may
invest up to 20% of its assets in taxable fixed income securities or cash.
Taxable obligations in which the Ranson Fund may invest include obligations of
the U.S. Government, its agencies and instrumentalities; other debt obligations
of issuers rated in the four highest categories by Moody's or S&P; certificates
of deposits of domestic banks, including their foreign branches, which have
capital, surplus and undivided profits of over $100 million; time deposits;
banker's acceptances and obligations of Nebraska with respect to the foregoing.
The Ranson Fund also may enter into repurchase agreements with respect to
not more than 10% of its total assets, except when investing for temporary
defensive purposes during times of adverse market conditions. Although the
Ranson Fund may enter into repurchase agreements with respect to any securities
which it may acquire, it is the Ranson Fund's present intention to enter into
repurchase agreements only with respect to obligations of the U.S. Government,
its agencies, and instrumentalities, and with respect to Nebraska Municipal
Securities.
The Ranson Fund has a fundamental investment restriction which prohibits
the Fund from investing more than 25% of its total assets in securities of
issuers in any single industry. This restriction, however, does not apply to the
purchase of securities issued by or guaranteed by the U.S. Government, its
agencies, or instrumentalities, or by Nebraska, its political subdivisions,
municipalities, agencies, and authorities. In this regard, health care revenue
bonds, obligations that derive their payment from mortgage loans, and
obligations of issuers whose revenues are primarily derived from the sale of
electric energy may each represent more than 25% of the Nebraska Municipal
Securities in the Ranson Fund's portfolio.
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The Ranson Fund may purchase new issues of Nebraska Municipal Securities
and other securities on a "when issued" or delayed delivery basis ("forward
commitments"), with delivery and payment for the securities normally taking
place within 45 days after the date of the commitment to purchase. There is no
percentage limitation on the Ranson Fund's total assets which may be invested in
forward commitments. The Ranson Fund may realize short-term profits or losses
with the sale of forward commitments, which profits and losses could constitute
capital gains or ordinary income depending on a number of factors, including the
number of sales of such commitments.
The Ranson Fund may also invest in financial futures contracts and related
options thereon for hedging purposes only. The use of these hedging instruments
are subject to further restrictions set forth below under "Investment
Restrictions."
Portfolio transactions in the Ranson Fund will be undertaken principally to
accomplish the Fund's objective in relation to anticipated movements in the
general level of interest rates, but the Fund may also engage in short-term
trading consistent with its objective. The Ranson Fund's investment policies may
lead to frequent changes in investments, particularly in periods of rapidly
fluctuating interest rates. A change in securities held by the Ranson Fund is
known as "portfolio turnover" and a higher rate of portfolio turnover may result
in higher transaction costs for the Fund. The Ranson Fund anticipates that its
annual portfolio turnover rate will not exceed 75%. The Ranson Fund's portfolio
turnover rate will not be a limiting factor when the Fund deems it desirable to
sell or purchase securities.
See "Investment Objective and Policies" in the accompanying Ranson Fund
Prospectus for more information.
Heartland Fund
Similar to that of the Ranson Fund, the investment objective of the
Heartland Fund is to provide investors with a high level of current income that
is exempt from federal and Nebraska personal income taxes. The Heartland Fund
invests primarily in municipal securities that are exempt from personal income
tax in Nebraska and under federal law, including certain Nebraska municipal
securities and securities of other entities meeting such criteria. This
investment policy permits the Heartland Fund also to purchase securities issued
by territories or possessions of the United States, including Puerto Rico, the
Virgin Islands and Guam. Unlike the Ranson Fund, the Heartland Fund may invest a
significant portion of its assets in these obligations. Accordingly, the
Heartland Fund may invest up to 100% of its assets in tax-exempt securities of
issuers outside of Nebraska if such securities are exempt from federal and
Nebraska income tax. As of June 30, 1996, the Heartland Fund had no assets in
tax-exempt securities of issuers outside Nebraska. The Heartland Fund may also
invest 25% or more of its assets in municipal securities whose revenue sources
are from similar types of projects (e.g. health care, housing, transportation).
The Heartland Fund has adopted a fundamental policy pursuant to which the
Heartland Fund will seek to invest at least 80% of its assets so that the income
earned thereon will be exempt from federal and Nebraska personal income taxes.
The Heartland Fund also has
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adopted a fundamental policy pursuant to which the Heartland Fund will seek to
invest its assets so at least 80% are invested so as to be exempt from the
federal alternative minimum tax. However, under abnormal circumstances, the
Heartland Fund may invest as much as 100% of its assets in municipal securities
issued to finance private activities whose interest is a "tax preference item"
for purposes of the federal alternative minimum tax. If the investor is subject
to the alternative minimum tax, a portion of his or her income may not be exempt
from federal income tax. See "Dividends, Distributions and Taxes" in the
Heartland Fund Prospectus.
The Heartland Fund invests primarily in municipal bonds judged by Heartland
Advisors to be investment grade quality. Such securities are considered by
Heartland Advisors to include securities rated at the time of purchase within
the four highest rating categories by Moody's, S&P, or Fitch Investors Service,
Inc. ("Fitch") or securities which are unrated, provided that such securities
are judged by Heartland Advisors, at the time of purchase, to be of comparable
quality to securities rated within such four highest categories. The Heartland
Fund, however, may invest up to 25% of its assets in "junk bonds" (those rated
below the four highest categories by Moody's, S&P or Fitch or judged by
Heartland Advisors to be of comparable quality), provided that the Heartland
Fund may not invest in bonds rated below B at the time of purchase. Bonds rated
below the top four rating categories are regarded on balance, as predominantly
speculative with respect to the capacity to pay interest and repay principal in
accordance with the terms of the obligation.
Although under normal market conditions, the Heartland Fund will seek to
invest all of its assets so that income will be exempt from federal and Nebraska
personal income tax, the Heartland Fund may invest in taxable obligations under
certain circumstances. The Heartland Fund may invest temporarily in certificates
of deposit, bankers' acceptances and other time deposits. Under abnormal market
conditions or for defensive purposes, the Heartland Fund may invest more than
20% of its assets in fixed-income securities, the interest on which is subject
to federal and/or Nebraska personal income tax. These taxable obligations
include securities issued by the United States Government, its agencies,
instrumentalities or authority; corporate debt securities rated in the highest
three categories by Moody's, S&P, or Fitch (or unrated variable rate demand
notes which Heartland Advisors believes have comparable investment
characteristics); commercial paper rated in the highest category by S&P or
Moody's; and certificates of deposits of the 100 largest domestic banks in terms
of assets subject to federal or state regulatory supervision.
The Heartland Fund may also engage in transactions in options, future
contracts, and options on future contracts for hedging purposes. The Heartland
Fund may not use these instruments for speculation and its use of these hedging
instruments is subject to the further limitations described below in "Investment
Restrictions". The Heartland Fund may also purchase securities on a when-issued
or delayed basis and may invest in collateralized repurchase agreements,
although it has no present intention to enter into such agreements. The
Heartland Fund may borrow from banks for temporary or emergency purposes up to
10% of its total assets and pledge up to 10% of its total assets in connection
therewith.
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<PAGE>
See "Investment Objective and Policies" in the Heartland Fund Prospectus
for more information.
INVESTMENT RESTRICTIONS
Set forth below is a comparison of certain investment restrictions of the
Ranson Fund and the Heartland Fund. Several of the investment limitations of the
Ranson Fund and the Heartland Fund are substantially the same. Unless otherwise
noted, the following investment restrictions are fundamental policies.
Fundamental policies may not be changed without the approval of a majority of
such Fund's outstanding shares, as defined in the 1940 Act.
<TABLE>
<CAPTION>
INVESTMENT RESTRICTION RANSON FUND HEARTLAND FUND
<S> <C> <C>
Options and Futures.......... The Ranson Fund, for The Heartland Fund may
hedging purposes, may engage in transactions
enter into financial in options, futures
futures contracts, contracts and options on
options on such futures contracts for
futures, municipal bond hedging purposes. The
index futures contracts Heartland Fund will
and options on limit its use of these
securities. The Ranson hedging instruments so
Fund may not enter into that: (i) no more than
futures contracts or 5% of the Heartland
purchase related Fund's total assets
options thereon if would be committed to
immediately thereafter initial margin deposits
the amount committed to or premiums on futures
initial margin plus the contracts; (ii) no more
amount paid for than 20% of the
premiums for unexpired Heartland Fund's net
options on futures assets would be subject
contracts exceed 5% of to futures contracts;
the value of the Ranson (iii) no more than 5% of
Fund's total assets. the Heartland Fund's
Similarly, the Ranson total assets would be
Fund may not purchase committed to premiums
or sell futures paid for options; and
contracts or related (iv) no more than 20% of
options thereon if, the Heartland Fund's
immediately thereafter, total assets would be
more than one-third of subject to options.
its net assets would be This is not a
hedged. This is not a fundamental policy.
fundamental policy.
Short sales and purchases The Ranson Fund may not The Heartland Fund will
of securities on margin..... purchase securities on not purchase securities
margin, except such on margin or effect
short-term credits as short sales of
may be necessary for securities, except in
the clearance of connection with
purchases and sales of permissible options and
securities. The futures transactions.
Ranson Fund may also This is not a
not make short sales of fundamental policy.
securities or maintain
a short position for
the account of the Fund
including any short
sales "against the box."
Restricted securities........ The Ranson Fund may not Except with respect to
purchase securities investments in
restricted as to repurchase agreements,
resale, if, as a the Heartland Fund may
result, such investment not purchase securities
would exceed 5% of the with legal or
value of the Ranson contractual restrictions
Fund's net assets. on resale if, as a
result of such purchase,
such investments exceed
5% of the value of the
Heartland Fund's assets.
This is not a
fundamental policy.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
INVESTMENT RESTRICTION RANSON FUND HEARTLAND FUND
<S> <C> <C>
Illiquid securities........ The Ranson Fund may not The Heartland Fund may
invest in (a) not invest in: (a)
securities which at the securities which, in the
time of such investment opinion of Heartland
are not readily Fund's adviser, are not,
marketable, including at the time of such
participation interests investment, readily
in municipal leases, marketable; (b)
(b) securities the securities the
disposition of which is disposition of which is
restricted under restricted under federal
federal securities laws securities laws (as
(as described in the described in the above
prior sentence) and (c) restriction); or (c)
repurchase agreements repurchase agreements
maturing in more than maturing in more than
seven days, if, as a seven days, if, as a
result, more than 15% result, more than 10% of
of such Fund's net the Heartland Fund's net
assets (taken at assets (taken at current
current value) would be value) would be invested
invested in securities in securities described
described in (a), (b) in clauses (a), (b) and
and (c) above. (c).
Securities of one issuer... No corresponding The Heartland Fund will
restriction. not purchase more than
10% of the outstanding
voting securities of an
issuer, or invest in a
company to get control
or manage it.
Loans...................... The Ranson Fund may not The Heartland Fund will
make loans to others not make loans, except
except through the that the Heartland Fund
purchase of qualified may (a) acquire publicly
debt obligations and distributed bonds,
the entry into debentures, notes and
repurchase agreements. other debt securities in
which the Heartland Fund
may invest consistent
with its investment
policies, (b) lend
portfolio securities
(provided the aggregate
of such loans may not
exceed 30% of the value
of the Fund's assets),
and (c) enter into
repurchase agreements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
INVESTMENT RESTRICTION RANSON FUND HEARTLAND FUND
<S> <C> <C>
Industry concentration..... Ranson Fund may not Heartland Fund may not
invest more than 25% of invest more than 25% of
its total assets in the its total assets, based
securities of issuers on current market value
in any single industry; at the time of purchase,
provided that there in securities of issuers
shall be no such in any single industry,
limitation on the provided there shall be
purchase of securities no such limitation on
issued or guaranteed by the purchase of
the U.S. Government, Tax-Exempt Obligations
its agencies or (defined as debt
instrumentalities or by obligations issued by or
Nebraska, its political on behalf of states,
subdivisions, territories or
municipalities, possessions of the
agencies and United States or the
authorities. agencies,
instrumentalities and
political subdivisions
the interest payable on
which is, in the opinion
of bond counsel,
excludable from gross
income both for federal
income taxation (except,
in certain instances,
the alternative minimum
tax) and Nebraska
personal income tax),
housing obligations and
securities issued or
guaranteed by the United
States Government, its
agencies or
instrumentalities.
Borrowing.................. The Ranson Fund may not The Heartland Fund may
borrow money, except not borrow money or
from banks for property except for
temporary or emergency temporary or emergency
(not leveraging) purposes. In such
purposes and then in an cases, the Heartland
amount not exceeding Fund may only borrow
10% of the value of the from banks and in an
Ranson Fund's total amount not exceeding 10%
assets (including the of the market value of
amount borrowed). The its total assets (not
Ranson Fund will not including the amount
borrow for leveraging borrowed). The
purposes, and Heartland Fund will not
securities will not be pledge more than 10% of
purchased while its net assets to secure
borrowings are such borrowings. In the
outstanding. Interest event the Heartland
paid on any money Fund's borrowing exceeds
borrowed will reduce 5% of the market value
the Ranson Fund's net of its total assets, the
income. Heartland Fund will not
invest in any additional
portfolio securities
until its borrowings are
reduced to below 5% of
its total assets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
INVESTMENT RESTRICTION RANSON FUND HEARTLAND FUND
<S> <C> <C>
Investment companies....... The Ranson Fund will The Heartland Fund will
not invest more than 5% not invest more than 10%
of its total assets in of the value of its
the securities of any assets in securities of
other single investment other investment
company, nor more than companies. In addition,
10% of its total assets the Heartland Fund will
in the securities of not invest in securities
two or more other of any other investment
investment companies, company if, immediately
except as part of a after such investment,
merger, consolidation more than 3% of the
or acquisition of outstanding voting
assets. This is not a securities of such
fundamental policy. company would be owned
by the Heartland Fund or
more than 5% of the
Heartland Fund's assets
would be invested in
such company. No such
restriction shall apply
to a purchase in
connection with a
merger, consolidation,
acquisition or
reorganization.
</TABLE>
PORTFOLIO MANAGERS
Overall portfolio management strategy for the Ranson Fund is determined by
Ranson Capital under the general supervision and direction of Robert E. Walstad,
the President of the Ranson Fund and of Ranson Capital since January 5, 1996.
Mr. Walstad is also the President of five other open-end funds and of ND Money
Management, Inc., their investment adviser, and has supervised and directed the
management of their portfolios since they commenced operations. Mr. Walstad
started in the securities business with Paine Webber in 1972 as a retail broker.
He became branch manager with Dean Witter Reynolds in 1977 and spent ten years
in that capacity. In 1987, Mr. Walstad founded ND Holdings, which is also
sponsor of Integrity Mutual Funds. The day-to-day management of Ranson Fund,
including credit analysis and the execution of portfolio transactions, is the
responsibility of a portfolio management team, consisting of Monte L. Avery, W.
Dan Korgel and Alex R. Meitzner. Mr. Avery started in the securities business
with Paine Webber in 1981 as a retail broker transferring to Dean Witter in
1982. In 1988, Mr. Avery joined First American Bank & Trust (Minot, ND) to help
start their Invest Center. He transferred back to Dean Witter in 1993 until
joining ND Holdings in 1995. Mr. Avery is responsible for the daily pricing of
the Integrity Mutual Funds as well as their portfolio trading. He is also
portfolio manager for the Integrity Fund of Funds. Mr. Korgel was employed in
the trust banking business for 12 years prior to joining ND Holdings. He was
with the trust department of First American Bank & Trust (Minot, ND) for two
years as head of investments and operations. He joined ND Holdings in May 1988,
and is the portfolio manager of four of the mutual funds which are sponsored by
ND Holdings. He is responsible for the daily portfolio management of those
funds. He is also Corporate Treasurer for ND Holdings. Mr. Meitzner is the
Assistant Vice President -- Investments of Ranson Capital and had been Executive
Vice President of Ranson Capital until January 5, 1996, when he was elected to
his present position. Mr. Meitzner is also Director, Executive Vice
President/Trader of Ranson & Associates, Inc. All portfolio management decisions
are subject to weekly review by Mr. Walstad and to quarterly review by the
Ranson Fund's Board of Trustees.
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<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF PERFORMANCE
Set forth below is Management's discussion of Ranson Fund's performance set
forth in its 1996 Annual Report for the fiscal year ended July 31, 1996.
Due to moderate economic growth and low inflation, the bond market advanced
through the second half of 1995 and into January of 1996. Municipal bond prices
then declined in the February-March-April time frame. Federal Reserve monetary
policy became less accommodative in response to the growth picture in the
American economy.
The Nebraska Municipal Fund turned in steady performance during the past 12
months. The net asset value per share was $10.95 at the beginning of the period
and increased to $11.00 by the end of the reporting period on July 31, 1996. The
portfolio manager continues to invest primarily in high-grade Nebraska tax-
exempt bonds.
GRAPH APPEARS HERE
Comparison of change in value of $10,000 investment in The Nebraska Municipal
Fund and Lehman Bros. Municipal Bond Index (Unaudited)
<TABLE>
<CAPTION>
The Nebraska Municipal The Nebraska Municipal Lehman Bros
Fund w/o sales charge Fund w/max sales charge Municipal Bond Index
---------------------- ----------------------- --------------------
<S> <C> <C> <C>
11/17/1993 $10,000 $ 9,575 $10,000
1994 $ 9,773 $ 9,357 $ 9,892
1995 $10,471 $10,026 $10,673
1996 $11,071 $10,600 $11,376
</TABLE>
ECONOMIC OUTLOOK AND MUNICIPAL BONDS
U.S. economic growth has been slowed by Federal Reserve action and it is
our opinion that inflation will remain under control. This stable environment
should bode well for investing in tax-exempt bonds.
For further information about the performance of the Ranson Fund, see the
Ranson Fund's 1996 Annual Report which is incorporated by reference herein and
may be obtained without charge by writing to the Ranson Fund at the mailing
address or by telephoning the Ranson Fund at the telephone number set forth on
the cover page of this Proxy Statement/ Prospectus.
BACKGROUND AND REASONS FOR THE REORGANIZATION
Heartland Advisors remains committed to serving the shareholders of each
Heartland mutual fund as well as its other advisory clients. Heartland Advisors
has served as investment advisor and distributor to the Heartland Fund since the
Fund commenced operations in September 1993. During that time, Heartland
Advisors has dedicated significant time and resources in an attempt to increase
the size of the Heartland Fund to enable the Fund to operate as a more
economically efficient and diverse mutual fund. Despite Heartland Advisors'
efforts to attract assets to the Heartland Fund, including waiver of one-half of
its management fee, advertising, seminars, promotional tours and various other
strategies, the inflow of assets into the Fund has not increased and, in the
view of Heartland Advisors, the Fund has been unable to achieve an asset level
at which it can offer the desired level of economic efficiencies to its
shareholders. Since Heartland Advisors does not have a local presence in
Nebraska and has been unsuccessful in generating greater interest in the Fund
remotely, it has determined that it would be in the best interests of the
Heartland Fund and its shareholders to consider other alternatives.
Management of Heartland Advisors and the Heartland Fund reviewed and
analyzed possible options, including (a) re-imposing a sales load on sales of
Fund shares and
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<PAGE>
implementing a distribution plan providing for Rule 12b-1 fees to make the Fund
more attractive for sale by independent brokers, and discontinuing fee waivers
so that the Fund would operate at its full expense ratio; (b) merging or
consolidating assets with another Nebraska tax-free fund; or (c) liquidating and
dissolving the Heartland Fund, which would result in a taxable event to Fund
shareholders.
Management concluded that the course of action most advantageous to the
Heartland Fund shareholders would be merging or consolidating assets with
another fully operational Nebraska tax-free fund because potential efficiencies
and portfolio diversification could be achieved immediately. In addition, such a
transaction would be effected without transaction costs or sales charges that
would otherwise arise if shareholders chose to invest individually in another
Nebraska tax-free fund, and such a transaction would be tax-free to Heartland
Fund shareholders.
As a result, management contacted other Nebraska tax-exempt funds to
determine their interest in a combination of assets with the Heartland Fund.
More formal discussions evolved from these inquiries between management of
Heartland Advisors and ND Holdings, which was then in the process of acquiring
Ranson Capital. Such discussions led to the execution of a letter of intent in
December 1995 and the negotiation and execution of the Agreement in September
1996.
The Board of Directors of Heartland Group considered and unanimously
approved the Agreement and the Reorganization, subject to shareholder approval,
during meetings held on April 15, 1996, July 31, 1996 and August 8, 1996. The
Board noted that the expense ratio (both before and after waivers and
reimbursements) of the Ranson Fund is higher than that of the Heartland Fund,
although the Ranson Fund's expense ratio after waiver and reimbursements is less
than Heartland Fund's expense ratio before waivers and reimbursements; the
Ranson Fund imposes a sales charge on purchases; a substantial portion of the
income produced by the Ranson Fund may be includable in the calculation of
alternative minimum income; the securities in the Ranson Fund's portfolio for
which market quotations are not readily available are valued by Ranson Capital
and specifically by its portfolio manager rather than by an independent pricing
service as is used by the Heartland Fund and most other mutual funds; and Ranson
Managed Portfolios does not offer a wide variety of other funds or an exchange
privilege. Despite these drawbacks, the Board of Directors believes the proposed
transaction is fair to, and in the best interests of, the Heartland Fund
shareholders, offering them the following benefits, among others: Ranson Capital
has substantial experience and knowledge in investing in Nebraska municipal
securities; Ranson Capital's sales force and network of securities dealers and
financial institutions and the Ranson Fund's distribution plan promote the
marketing and distribution of Ranson Fund shares to potential Nebraska
investors, thereby fostering expansion of, and increased efficiencies for, the
Ranson Fund; Ranson Capital's greater presence in Nebraska should encourage
future growth of the Ranson Fund and enable it to take advantage of investment
opportunities in the state; the combined size of the Ranson Fund may result in
increased portfolio diversification, greater buying power, lower transaction
costs and other economies of scale, which should keep total expenses at
reasonable levels.
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<PAGE>
In determining unanimously to recommend approval of the Reorganization to
shareholders, the Board of Directors reviewed and requested information about
Ranson Capital, Ranson Managed Portfolios, the Ranson Fund and ND Holdings, met
with certain members of senior management of Ranson Capital and ND Holdings,
consulted with legal counsel, made inquiries and considered the following
numerous factors, among others deemed relevant by the Board:
(1) the experience, investment philosophy, performance, personnel,
operations, resources and financial condition of Ranson Capital and ND
Holdings;
(2) a comparison of the investment objectives, policies, strategies
and restrictions of the Funds;
(3) the quality, scope and cost of the advisory and administrative
services to be provided by Ranson Capital, and a comparison of such
attributes to those of Heartland Advisors and other advisors of comparable
mutual funds;
(4) the distribution performance, resources and capabilities of
Ranson Capital, and the economies of scale which potentially may be
achieved through larger and wider distribution of shares of the Ranson Fund
and consolidation of the assets of the two Funds;
(5) a comparison of the various other services (including accounting,
custodial, transfer agency, legal and shareholder services) provided to the
Funds and the associated costs of such services;
(6) a comparison of the current expense ratios for the two Funds (and
an analysis of the pro forma expense ratio of the Ranson Fund assuming the
Reorganization is consummated);
(7) the agreement by Ranson Capital to continue waiving fees or
reimbursing expenses as needed so that the total operating expenses of the
Ranson Fund do not exceed 0.85% of its average net assets during each of
its fiscal years ended July 31, 1997 and 1998;
(8) the terms and conditions of the Agreement and the Reorganization,
including the structure of the transaction as a tax-free reorganization and
the fact that no sales charge will be imposed on the Heartland Fund
shareholders in connection with the Reorganization; and
(9) alternatives to the Reorganization (including liquidation or
operating the Fund without voluntary fee waivers or expense reimbursements)
and the consequences of such alternatives to the Heartland Fund
shareholders.
The Board of Directors of Heartland Group has concluded that the Agreement
and the Reorganization are fair to, and in the best interests of, the Heartland
Fund shareholders.
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<PAGE>
The Board of Directors, including all of the directors who are not interested
persons of Heartland Advisors or Ranson Capital, unanimously approved the
Agreement and the Reorganization, and recommends to the Heartland Fund
shareholders that they vote FOR the Agreement and the Reorganization.
The Board of Directors also considered whether the Reorganization is
consistent with the requirements of Section 15(f) of the 1940 Act. Section 15(f)
of the 1940 Act provides, in substance, that when a sale of an interest in an
investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount of benefit in connection with the transaction so
long as two conditions are satisfied. The first condition is that 75% of the
Board of Directors not be "interested persons" of the proposed or predecessor
investment adviser for the three-year period immediately following the
transaction. The Board of Trustees of Ranson Managed Portfolios will have three
of four members who are not interested persons of Ranson Capital or Heartland
Advisors. In addition, the Heartland Group directors are not and are not
expected to become interested persons of Ranson Capital. A second condition of
Section 15(f) is that no "unfair burden" be imposed on the investment company as
a result of the transactions relating to the sale of such interest or any
express or implied terms, conditions or understandings applicable thereto. The
term "unfair burden" includes any arrangement during the two-year period
following the transaction whereby the fund's investment adviser or any
interested person of such adviser receives or is entitled to receive any
compensation, directly or indirectly: (i) from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of such
company, other than bona fide ordinary compensation as principal underwriter for
such company, or (ii) from such company or its security holders for other than
bona fide investment advisory or other services.
Based on its review of the terms of the Reorganization, including the
provisions of the Agreement and the Sale Agreement (as herein defined), the
Board of Directors is not aware of any express or implied term, condition,
arrangement or understanding which would impose an "unfair burden" on the Ranson
Fund or the Heartland Fund as a result of the Reorganization.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is set forth in full as Exhibit I to
this Proxy Statement/Prospectus.
ACQUISITION OF ASSETS AND ASSUMPTION OF LIABILITIES
Pursuant to the Agreement, the Ranson Fund will acquire all of the assets,
and assume the stated liabilities, of the Heartland Fund and, in exchange
therefor, will issue to the Heartland Fund shares of the Ranson Fund. The
transaction will occur prior to the opening
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<PAGE>
of business on a date which shall be within ten business days following approval
by the Heartland shareholders of the Agreement and the satisfaction of all
conditions to closing or such other time as may be agreed upon by the parties
(the "Closing Date"). Prior to the Closing Date, the Heartland Fund will
endeavor to discharge all of its liabilities and obligations when and as due
prior to such date. The Ranson Fund will not assume any liabilities or
obligations of the Heartland Fund other than those reflected on an unaudited
statement of assets and liabilities of the Heartland Fund, prepared as of the
Valuation Date (defined below). The number of full and fractional shares of the
Ranson Fund to be issued to the Heartland Fund will be equal in aggregate net
asset value to the aggregate value of the Heartland Fund assets (net of its
stated liabilities), computed as of the close of business on the business day
preceding the Closing Date (the "Valuation Date"). All such valuations shall be
made pursuant to the valuation procedures set forth in the attached Ranson Fund
Prospectus and in the Ranson Fund SAI, incorporated by reference herein.
Securities for which market quotes are not available shall be valued as mutually
agreed by Ranson Managed Portfolios and Heartland Group, provided that such
value is consistent with the valuation procedures in the Ranson Fund Prospectus
and SAI.
Because the Heartland Fund's portfolio securities are consistent with the
investment objective and policies of, and otherwise eligible for investment by,
the Ranson Fund, it is not anticipated that any of the securities held by either
Fund will be sold before or after the Reorganization other than in the ordinary
course of business.
Contemporaneously with the Closing, the Heartland Fund would liquidate and
distribute or cause to be distributed, pro rata, to its shareholders of record
as of the close of business on the Valuation Date, the Ranson Fund shares
received by the Heartland Fund in the transaction. Such distribution shall be
accomplished by the establishment of an open account on the share records of the
Ranson Fund in the name of each Heartland Fund shareholder representing a number
of Ranson Fund shares equal to the pro rata interest of such shareholder in the
Ranson Fund shares issued to the Heartland Fund. Accordingly, every shareholder
of the Heartland Fund would own shares of the Ranson Fund immediately after the
Reorganization, the net asset value of which is expected to be equal to the
aggregate net asset value of such shareholder's Heartland Fund shares
immediately prior to the Reorganization. Moreover, because the Ranson Fund
shares would be issued at net asset value in exchange for the net assets of the
Heartland Fund and the aggregate value of those assets would equal the aggregate
value of the Ranson Fund shares issued in exchange therefor, the net asset value
per share of the Ranson Fund would not change as a result of the Reorganization.
Thus, the Reorganization would not result in economic dilution to any Heartland
Fund or Ranson Fund shareholder. Upon such liquidation all issued and
outstanding shares of the Heartland Fund will be canceled on the Heartland
Fund's books and Heartland Fund shareholders will have no further rights as
shareholders of the Heartland Fund.
OTHER TERMS
Ranson Managed Portfolios (on behalf of the Ranson Fund) and Heartland
Group (on behalf of the Heartland Fund) have each made representations and
warranties that are customary in a matter such as the Reorganization. Such
representations and warranties do not survive the Closing and Heartland Fund
shareholders will not be liable for breaches thereof. The consummation of the
Reorganization is also subject to the conditions set forth in the Agreement,
including, without limitation, (a) approval of the Reorganization by the
Heartland Fund's shareholders; (b) receipt of a legal opinion of Chapman and
Cutler that the
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<PAGE>
Reorganization will not result in recognition of gain or loss for federal income
tax purposes for the Ranson Fund, the Heartland Fund or their shareholders; (c)
the Ranson Fund Registration Statement on Form N-14 shall have become effective
under the Securities Act, no stop orders suspending the effectiveness thereof
shall have been issued with respect thereto, and to the best knowledge of the
parties to the Agreement, no investigation or proceeding for that purpose shall
have been instituted or be pending, threatened or contemplated under the
Securities Act; (d) the valuation made by Ranson Capital of the Heartland Fund's
assets immediately prior to the Reorganization does not differ by more than
0.05% from the corresponding valuation conducted by Heartland Group, in each
case using the lower of the two valuations as the base line for calculating the
percentage difference; (e) there shall have been no material adverse changes
since December 31, 1995 in the financial condition, business, operation or
assets of either the Ranson Fund or the Heartland Fund (other than changes
occurring in the ordinary course of business); and (f) the transactions
contemplated by that certain Agreement for Sale and Purchase of Certain Assets
of Heartland Advisors (described below) have been consummated. Notwithstanding
approval of the Heartland Fund's shareholders, the Reorganization may be
terminated at any time prior to the Closing Date (i) by mutual written consent
of Heartland Group and Ranson Managed Portfolios, (ii) by Heartland Group or
Ranson Managed Portfolios if the closing shall not have occurred on or before
January 31, 1997 (or such later date as agreed to by the parties by mutual
written consent), (iii) by Heartland Group or Ranson Managed Portfolios upon a
misrepresentation, breach of warranty or failure to perform any agreement or
covenant by the other in any of its representations, warranties, agreements or
covenants set forth in the Agreement, or (iv) by Ranson Managed Portfolios at
any time the Board of Trustees of Heartland Fund changes its recommendation to
the shareholders. In addition, the Agreement may be amended by mutual written
agreement by Heartland Group and Ranson Managed Portfolios.
Ranson Capital has covenanted to Heartland Group that it will waive fees
and reimburse expenses as needed to ensure that the ratio of total expenses to
average net assets for the Ranson Fund does not exceed 0.85% for each of its
fiscal years ending July 31, 1997 and 1998.
Each party to the Agreement shall bear its own legal, accounting and other
related expenses in connection with the Reorganization. Notwithstanding the
foregoing, Ranson Capital shall pay the cost of solicitation of the vote of
shareholders of the Heartland Fund on the transactions contemplated in the
Agreement, including costs of preparation, printing, and distribution of proxy
materials, legal and tax opinions, transfer and stamp taxes, SEC registration
costs, the costs of printing and distributing prospectus supplements describing
such matters, and up to $7,500 for the fees of Quarles & Brady, the Heartland
Group's legal counsel in connection with the Reorganization. The Ranson Fund is
not expected to incur any costs, fees or expenses in connection with the
Reorganization.
FEDERAL TAX CONSEQUENCES
In the opinion of Chapman and Cutler, the principal federal income tax
consequences that will result from the Reorganization, under currently
applicable law, are as follows:
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<PAGE>
(i) the Reorganization will constitute a tax-free reorganization under Section
368(a)(1)(C) of the Code and Heartland Fund and Ranson Fund will each be a party
to the Reorganization; (ii) no gain or loss will be recognized by the Ranson
Fund on its receipt of all of the assets of the Heartland Fund in exchange for
shares of the Ranson Fund and the assumption by the Ranson Fund of the stated
liabilities of the Heartland Fund; (iii) no gain or loss will be recognized by
the Heartland Fund on its transfer of all of its assets to the Ranson Fund
solely in exchange for shares of the Ranson Fund and the assumption by the
Ranson Fund of the stated liabilities of the Heartland Fund; (iv) no income,
gain or loss will be recognized by a shareholder of the Heartland Fund upon the
receipt of Ranson Fund shares in exchange for their shares of the Heartland
Fund; (v) the adjusted tax basis of the Ranson Fund shares received by a
shareholder of the Heartland Fund pursuant to the Reorganization will equal the
adjusted tax basis of the shares of the Heartland Fund surrendered in exchange
therefor; (vi) the holding period of the Ranson Fund shares received by a
shareholder of the Heartland Fund in the Reorganization will include the period
during which the shares of Heartland Fund surrendered in exchange therefor were
held, provided that the shareholder held such Heartland Fund shares as capital
assets on the Closing Date; (vii) the basis of the assets of the Heartland Fund
in the hands of the Ranson Fund will be the same as the basis of such assets in
the hands of the Heartland Fund immediately prior to the Reorganization; and
(viii) the holding period of the Heartland Fund assets in the hands of the
Ranson Fund will include the holding period of those assets in the hands of the
Heartland Fund immediately prior to the Reorganization.
The foregoing opinions are conditioned upon the accuracy, as of the date
hereof and as of Closing Date, of certain representations upon which Chapman and
Cutler have relied in rendering these opinions, which representations include,
but are not limited to, the following (taking into account for purposes thereof
any events that are part of the plan of reorganization): (A) there is no plan or
intention on the part of the Heartland Fund shareholders who own five percent or
more of the Heartland Fund shares and, to the knowledge of the management of
Heartland Fund, there is no plan or intention on the part of the remaining
shareholders of the Heartland Fund to sell, exchange or otherwise dispose of a
number of shares of the Ranson Fund received in the Reorganization that would
reduce the Heartland Fund shareholders' ownership of the Ranson Fund shares to a
number of shares having a value, as of the date of the Reorganization, of less
than 50% of the value of all of the formerly outstanding shares of the Heartland
Fund as of the same date; (B) the Heartland Fund will transfer at least 90% of
the fair market value of the net assets and at least 70% of the fair market
value of the gross assets held by the Heartland Fund immediately prior to the
Reorganization; (C) following the Reorganization, the Ranson Fund will continue
the historic business of the Heartland Fund or use a significant portion of the
Heartland Fund's business assets in its business; (D) the Heartland Fund will
distribute the shares, securities and other property it receives in the
Reorganization and its other properties, in pursuance of the plan of
Reorganization; (E) the Ranson Fund has no plan or intention to reacquire any of
its shares issued in the Reorganization, except to the extent required by the
1940 Act, as amended, to redeem any of the shares of the Ranson Fund presented
for redemption; and (F) the Ranson Fund has no plan or intention to sell or
otherwise dispose of any of the assets of the Heartland Fund acquired in the
Reorganization,
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<PAGE>
except for dispositions made in the ordinary course of its business and to the
extent necessary to maintain its status as a "regulated investment company."
The foregoing description of the federal income tax consequences of
the Reorganization is made without regard to the particular facts and
circumstances of any shareholder of the Heartland Fund. The Heartland Fund
shareholders are urged to consult their own tax advisors as to the specific
consequences to them of the Reorganization, including the applicability and
effect of state, local, foreign and other tax laws.
RELATED PARTY TRANSACTIONS
ND Holdings and Heartland Advisors have entered into the Agreement for
Sale and Purchase of the Certain Assets of Heartland Advisors (the "Sale
Agreement"), pursuant to which Heartland Advisors agrees to sell and deliver to
Ranson Capital substantially all of the properties and assets (including all
books, records, shareholder lists and supplier lists) of Heartland Advisors
which relate to the Heartland Fund (the "Purchased Assets"). The purchase price
to be paid by ND Holdings to Heartland Advisors for the Purchased Assets will be
equal to 2.25% of the total net asset value of the Heartland Fund as of the
close of business on the business day immediately preceding the closing date of
the transaction.
Heartland Advisors also has executed an Agreement Not To Compete
pursuant to which Heartland Advisors agrees, for a period of five (5) years, not
to sponsor, manage, underwrite or distribute, anywhere within Nebraska, any
registered investment company, the objective of which is to produce income most
of which is exempt from both federal and Nebraska income tax.
Consummation of the transaction described on the Sale Agreement is
contingent upon, among other things, approval of the Agreement by the Heartland
Fund shareholders and consummation of the Reorganization.
DESCRIPTION OF SHARES ISSUED AND RIGHTS
The Heartland Fund is a separate non-diversified series of the Heartland
Group, a diversified, open-end management investment company registered under
the 1940 Act and organized in 1986 as a Maryland corporation, and is subject to
the Maryland General Corporation Law, and its governing documents, its Articles
of Incorporation and its By-laws. Heartland Group is a series company, which
means that the Board of Directors may establish additional series, and may
increase or decrease the number of shares in each series. Currently, Heartland
Group consists of the following series: Small Cap Contrarian Fund, Value Fund,
Mid Cap Value Fund, Large Cap Value Fund, Value Plus Fund, U.S. Government
Securities Fund, Wisconsin Tax Free Fund and Nebraska Tax Free Fund.
The Ranson Fund is a separate non-diversified series of Ranson Managed
Portfolios, a diversified, open-end management investment company registered
under the 1940 Act and organized as a Massachusetts business trust by an
Agreement and Declaration of Trust (the "Trust Agreement") dated August 10,
1990. The Trust Agreement permits its Trustees to issue an unlimited number of
full or fractional shares, without par value, from each series
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designated by the Board of Trustees. At this time, Ranson Managed Portfolios
offers three series of shares: the Ranson Fund, The Kansas Municipal Fund, and
The Kansas Insured Intermediate Fund. Each share of a series represents an equal
proportionate interest in the assets and liabilities belonging to the series
with each other share of such series and is entitled to receive a distribution
out of the net assets belonging to the series as are declared by the Board of
Trustees. In the case of liquidation, subject to the rights of creditors, the
holders of the shares of the series being liquidated will be entitled to receive
a distribution out of the net assets belonging to such series.
Each share of the Ranson Fund and the Heartland Fund is entitled to
one vote (and a fractional vote for a fractional share). The shares of each
Fund do not have cumulative voting rights or preemptive rights. The Heartland
Fund shares do not have dissenters' rights in connection with the
Reorganization.
The Ranson Fund is not required to and does not intend to hold annual
shareholders' meetings. However, the Trust Agreement provides for shareholder
voting with respect to certain matters including (a) the election or removal of
Trustees if a meeting is called for that purpose; (b) any contract as to which
shareholder approval is required under the 1940 Act; (c) any termination or
reorganization of Ranson Managed Portfolios or any series thereof to the extent
provided in the Trust Agreement; and (d) any amendment of the Trust Agreement
(other than amendments designating new series, changing the name of Ranson
Managed Portfolios or a series thereof, and certain changes to correct any
inconsistency with the 1940 Act). The Heartland Fund under its By-laws also does
not require meetings of shareholders to be held annually. However, special
meetings of Heartland Fund shareholders may be called for purposes such as
electing or removing Directors, changing fundamental policies or approving
investment advisory contracts.
In addition, shareholder meetings of the Ranson Fund may be called by
shareholders holding at least 25% (or 10% if the purpose of the meeting is to
determine if a Trustee is to be removed from office) of the Ranson Fund shares
then outstanding. In connection with the shareholders' right to remove a
Trustee, shareholders will be assisted in their communications in such manner.
Special meetings of Heartland Group shareholders may be called by the Secretary
upon the written request of shareholders holding at least 25% of all votes
entitled to be cast at such meeting, which request must state the purposes of
such meeting and the matters proposed to be acted upon.
Shares of the Ranson Fund (and the Heartland Fund) and of the other series
of the Ranson Managed Portfolios (and the Heartland Group) vote together in the
aggregate and not by series unless the 1940 Act requires a separate vote of any
series or when the Trustees (or Directors) have determined the matters only
affect one or more series, then only shareholders of the affected series shall
vote thereon.
Under Massachusetts law, under certain circumstances, a shareholder of the
Ranson Fund may be deemed to have the same type of personal liability for the
obligations of the Ranson Managed Portfolios as does a partner of a partnership.
The Trust Agreement contains an express disclaimer of liability on the part of
shareholders and provides that the
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<PAGE>
Ranson Managed Portfolios shall assume the defense on behalf of shareholders.
Thus, the risk of shareholder liability is slight and limited to circumstances
in which the Ranson Managed Portfolios is unable to meet its obligations.
Shareholders of the Heartland Fund do not have such personal liability.
For further information about the shares of the Ranson Fund, including
voting rights and potential liability with their ownership, see "Description of
Shares and Rights" in the Ranson Fund Prospectus and "Additional Information
Regarding Shares and Rights" in the Ranson Fund SAI. For more information
regarding Heartland Fund shares, see "Description of Fund Shares" in the
Heartland Fund Prospectus and "Description of Shares" in the Heartland Fund SAI.
OWNERSHIP OF RANSON FUND AND HEARTLAND FUND SHARES
CONTROL PERSONS
As of July 31, 1996, no person was known to own, of record or beneficially,
as much as 5% of the outstanding shares of either the Ranson Fund or the
Heartland Fund. Neither the Ranson Fund nor the Heartland Fund is "controlled"
(as that term is defined in the 1940 Act) by any person.
OWNERSHIP OF OFFICERS AND TRUSTEES/DIRECTORS
To the best knowledge of Ranson Managed Portfolios, the beneficial
ownership of shares of Ranson Fund by officers and Trustees of Ranson Managed
Portfolios as a group constituted less than 1% of the outstanding shares of the
Ranson Fund, as of the date of this Proxy Statement/Prospectus. To the best
knowledge of Heartland Group, the beneficial ownership of shares of Heartland
Fund by officers and Directors of Heartland Group as a group constituted less
than 1% of the outstanding shares of Heartland Fund, as of the date of this
Proxy Statement/Prospectus.
CAPITALIZATION; TABLE
The table below sets forth the unaudited capitalization of the Ranson Fund
and the Heartland Fund and indicates the pro forma combined capitalization as of
July 31, 1996 as if the Reorganization had occurred on that date.
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<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Ranson Heartland Combined
Fund Fund Fund
------ --------- ---------
<S> <C> <C> <C>
Net Assets................. $18,076,958 $11,874,382 $29,951,340
Net Asset Value Per Share.. $11.00 $9.05 $11.00
Shares Outstanding......... 1,644,023 1,311,412 2,722,849
</TABLE>
MISCELLANEOUS
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Ranson Fund will
be passed upon by Chapman and Cutler, Chicago, Illinois.
AUDITORS
The firm of Arthur Andersen LLP serves the Heartland Group as independent
accountants. Arthur Andersen LLP has no direct or indirect financial interest in
Heartland Group or its series except as auditors and independent public
accountants. No representative of Arthur Andersen LLP is expected to be present
at the Meeting.
INTERESTS OF EXPERTS AND COUNSEL
No expert or counsel named herein has a substantial interest in the
Heartland Group, Ranson Managed Portfolios, or their respective series, the
Reorganization, or any other transaction contemplated by this Proxy
Statement/Prospectus.
OTHER MATTERS
The Board of Directors of Heartland Group is not aware that any other
matter will be brought before the Meeting. However, unless expressly indicated
otherwise on the enclosed form of proxy, proxies may be voted with discretionary
authority with respect to any other matter that may properly be presented at the
Meeting or any adjournment thereof.
ADDITIONAL INFORMATION ABOUT THE RANSON FUND
AND THE HEARTLAND FUND
For more information with respect to Ranson Fund concerning the following
topics, please refer to the accompanying Ranson Fund Prospectus as indicated:
(i) see the discussion "Highlights of the Fund and Prospectus Summary," "The
Fund," "Fee and Expense Table," "Condensed Financial Information," "Investment
Objective and Policies"
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<PAGE>
and "Fund Management" for further general information regarding the Ranson Fund;
(ii) see the discussion "Highlights of the Fund and Prospectus Summary,"
"Investment Objective and Policies" and "Fund Management" for further
information regarding management of the Ranson Fund; (iii) see the "Highlights
of the Fund and Prospectus Summary" and "Dividends and Taxes" for further
information regarding the distribution policies of the Ranson Fund; (iv) see the
discussion "Highlights of the Fund and Prospectus Summary," "The Fund" and
"Description of Shares and Rights" for further information regarding the shares
of the Ranson Fund; (v) see the discussion "Highlights of the Fund and
Prospectus Summary," "Purchase of Shares," "Special Programs," "Net Asset
Value," "Redemption of Shares" and "Summary of Procedures" for further
information regarding the purchase, redemption and repurchase of Ranson Fund
shares; and (vi) see "Condensed Financial Information" and "Fee and Expense
Table" for further financial information on the Ranson Fund.
For more information with respect to the Heartland Fund concerning the
following topics, please refer to the Heartland Fund Prospectus as indicated:
(i) see the discussion "Investment Summary," "Fund Expenses," "Financial
Highlights," "Investment Objective and Policies" for further general information
regarding the Heartland Fund and its investment policies; (ii) see the
discussion "The Fund and the Heartland Organization," including "Heartland
Advisors" for further information regarding management of the Heartland Fund;
(iii) see the discussion "Description of Fund Shares" for further information
regarding the shares of the Heartland Fund; (iv) see the discussion "How to Buy
Shares," "Net Asset Value Calculation," "Shareholder Services" and "How to
Redeem Shares" for further information regarding the purchase, redemption and
repurchase of Heartland Fund shares; and (v) see "Dividends, Distributions and
Taxes" for the distribution policies of the Heartland Fund.
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<PAGE>
Exhibit I
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") is made as of this
20th day of September, 1996, by and between Ranson Managed Portfolios, an
unincorporated business trust organized under the laws of Massachusetts
("Ranson"), acting on behalf of The Nebraska Municipal Fund, a separate
investment portfolio of Ranson (including its predecessors, "Ranson Fund") and
Heartland Group, Inc., a Maryland corporation (the "Heartland Group"), acting on
behalf of the Heartland Nebraska Tax Free Fund, a separate series of Heartland
Group (the "Heartland Fund").
WITNESSETH:
Whereas, this Agreement is intended to be and is adopted as a "plan of
reorganization", within the meaning of Treas. Reg. Section 1.368-2(g), for a
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended ("Code");
Whereas, the reorganization ("Reorganization") will consist of the transfer
to the Ranson Fund of all of the assets of the Heartland Fund in exchange for
the assumption by the Ranson Fund of the stated liabilities of the Heartland
Fund and the issuance by Ranson of shares of beneficial interest of the Ranson
Fund ("shares") to be distributed contemporaneously with the Closing Date (as
hereinafter defined) to the shareholders of the Heartland Fund in liquidation of
the Heartland Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
Now, Therefore, in consideration of the premises and the mutual promises
herein set forth, agreed as follows:
ARTICLE I
THE REORGANIZATION AND LIQUIDATION OF THE HEARTLAND FUND
Section 1.1. Assets to be Transferred. Subject to the terms and conditions
herein set forth and on the basis of the representations and warranties
contained herein, as of the opening of business on the Closing Date, the
Heartland Fund will assign, deliver and otherwise transfer all of its assets as
set forth in Section 1.2 hereof (the "Heartland Fund Assets") to the Ranson Fund
(or its custodian), and the Ranson Fund will in exchange therefor assume
Heartland Fund's stated liabilities on the Closing Date as set forth in Section
1.3 hereof and deliver to the Heartland Fund the number of shares of the Ranson
Fund, including fractional Ranson Fund shares, determined by dividing the
aggregate value of the Heartland Fund Assets, net of its stated liabilities,
computed in the manner and as of the time and date set forth in Section 2.1
hereof, by the net asset value per share of the Ranson Fund, computed in the
manner and as of the time and date set forth in Section 2.2 hereof. Such
transactions shall take place at the closing provided for in Section 3.1 hereof
("Closing").
<PAGE>
Section 1.2. List of Assets. (a) The Heartland Fund Assets shall consist
of all property and rights, including without limitation all cash, cash
equivalents, securities and dividend and interest receivables owned by the
Heartland Fund, and any deferred or prepaid expenses shown as an asset on the
Heartland Fund's books on the Closing Date.
(b) Promptly following the signing of this Agreement, the Heartland Fund
will provide the Ranson Fund with a list of its assets as of the most reasonably
practical date. On the Closing Date, the Heartland Fund will provide the Ranson
Fund with a list of the Heartland Fund Assets to be assigned, delivered and
otherwise transferred to the Ranson Fund pursuant to this Agreement.
Section 1.3. Liabilities. The Heartland Fund will endeavor to discharge
all of its liabilities and obligations when and as due prior to the Closing
Date. An unaudited Statement of Assets and Liabilities of the Heartland Fund
will be prepared by the Treasurer of the Heartland Fund, as of the Valuation
Date as defined in Section 2.1 hereof, which Statement shall be prepared in
conformity with generally accepted accounting principles consistently applied
from the prior audited period (except for year-end adjustments). On the Closing
Date, the Ranson Fund shall assume such stated liabilities, expenses, costs,
charges and reserves as are set forth on such Statement.
Section 1.4. Dividend. In order for the Heartland Fund to comply with
Section 852(a)(1) of the Code and to avoid having any investment company taxable
income or net capital gain (as defined in Section 852(b)(2) and 1222(11) of the
Code, respectively) in the short taxable year ending on the Closing Date, the
Heartland Fund will on or before the Closing Date (a) declare a dividend in an
amount large enough so that it will have declared dividends of all of its
investment company taxable income and net capital gain, if any, for such taxable
year (determined without regard to any deduction for dividends paid) and (b)
distribute such dividend.
Section 1.5. Liquidation. Contemporaneously with the Closing, the
Heartland Fund will be liquidated and the Heartland Fund will distribute or
cause to be distributed the Ranson Fund shares (including fractional shares)
received from the Ranson Fund pursuant to Section 1.1 pro rata to the Heartland
Fund shareholders of record determined as of the close of business on the
Valuation Date as defined in Section 2.1 (the "Heartland Fund Shareholders").
Such distribution shall be accomplished by the establishment of an open account
on the share records of the Ranson Fund in the name of each Heartland Fund
Shareholder representing a number of Ranson Fund shares equal to the pro rata
interest of such Shareholder in the Ranson Fund shares issued to the Heartland
Fund. Heartland Group shall instruct Ranson that the pro rata interest of each
Heartland Fund Shareholder, as certified by the Heartland Fund's transfer agent,
in the Ranson Fund shares be registered on the books of the Ranson Fund in full
and fractional shares in the name of each Heartland Fund Shareholder. Upon such
liquidation all issued and outstanding shares of the Heartland Fund will be
canceled on the Heartland Fund's books and the Heartland Fund Shareholders will
have no further rights as such Shareholders.
Section 1.6. Termination, Winding Up. After the Closing, the Heartland
Fund shall not conduct any business except in connection with the winding up of
its affairs and shall file, or make provision for filing of, all reports it is
required by law to file. After the Closing, the Heartland Fund may terminate its
status as a designated series of Heartland
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<PAGE>
Group under Maryland law and its shares may be deregistered under the Securities
Act of 1933, as amended (the "1933 Act"), and applicable state securities laws.
Section 1.7. Books and Records. Copies of all books and records of or
pertaining to the Heartland Fund, including those in connection with its
obligations under Investment Company Act of 1940, as amended (the "1940 Act"),
the Code, state blue sky laws or otherwise in connection with this Agreement,
will promptly after the Closing be delivered to officers of the Ranson Fund or
their designee. Following the Closing, Heartland Group shall be entitled to have
access to such books and records as necessary to prepare required reports, tax
returns and other documents, and, to the extent required by applicable laws, to
retain copies of such books and records.
ARTICLE II
THE CALCULATION
Section 2.1. The Heartland Fund Valuation. The value of the Heartland Fund
Assets shall be the value of such assets computed as of the close of business on
the business day preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Ranson Fund's then current prospectus and statement of additional
information. The stock transfer books of the Heartland Fund shall be permanently
closed as of the close of business on the Valuation Date, and only requests for
the redemption of the shares of the Heartland Fund received in proper form prior
to the close of trading on the New York Stock Exchange on the Valuation Date
shall be accepted by the Heartland Fund. Redemption requests thereafter received
shall be deemed to be redemption requests for the Ranson Fund (assuming that the
transactions contemplated by this Agreement have been consummated).
Section 2.2. The Ranson Fund Valuation. The net asset value of shares of
the Ranson Fund shall be the net asset value per share computed on the Valuation
Date, using the valuation procedures set forth in the Ranson Fund's then current
prospectus and statement of additional information.
Section 2.3. The Ranson Fund Shares. The number of Ranson Fund shares
(including fractional shares, if any) to be issued hereunder shall be determined
by dividing the value of the Heartland Fund Assets, net of the liabilities
assumed by the Ranson Fund pursuant to Section 1.3 hereof, determined in
accordance with Section 2.1 hereof, by the net asset value of a Ranson Fund
share determined in accordance with Section 2.2 hereof.
Section 2.4. Computations. All computations of value shall be made by
Ranson Capital Corporation ("RCC") with the approval of Heartland Group in
accordance with RCC's regular practice in pricing the Ranson Fund (subject to
adjustments, if any, agreed to by the parties). Ranson shall cause RCC to
deliver to Heartland Group a copy of its valuation report at the Closing.
Securities for which market quotes are not available shall be valued as mutually
agreed by Ranson and Heartland Group, provided that such value is consistent
with the valuation procedures set forth in the Ranson Fund's then current
prospectus and statement of additional information.
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<PAGE>
Section 2.5. Shadow Valuation. Promptly following the date of this
Agreement, Heartland Group and Ranson shall each cause a valuation of the
Heartland Fund's portfolio securities and other assets to be conducted in
accordance with their respective valuation policies and practices as of the
close of business on a mutually acceptable date, which in any event shall not be
more than 30 days after the date of this Agreement. This shadow pricing
procedure shall be repeated as of the close of business on a date which is not
more than 10 days prior to the Valuation Date.
Section 2.6. Expense Limitation. Ranson and RCC agree to voluntarily waive
fees or reimburse expenses as necessary to ensure that the ratio of total
expenses to average net assets for the Ranson Fund does not exceed 0.85% during
each of its fiscal years ended July 31, 1997 and 1998.
ARTICLE III
CLOSING AND CLOSING DATE
Section 3.1. Closing Date. The Closing of the transactions contemplated
hereby shall take place prior to opening of business on a date (the "Closing
Date") which shall be within ten (10) business days following approval by the
Heartland Fund shareholders of this Agreement and the Reorganization and the
satisfaction of all conditions to Closing (except those which by their terms can
only be satisfied on Closing); or such other time as may be agreed upon by
Ranson and the Heartland Group.
Section 3.2. Portfolio Securities. Portfolio securities held by the
Heartland Fund and represented by a certificate or written instrument shall be
presented by it or on its behalf to First Western Bank & Trust (the
"Custodian"), custodian for the Ranson Fund, for examination no later than two
business days preceding the Valuation Date. Such portfolio securities (together
with any cash or other assets) shall be delivered by the Heartland Fund to the
Custodian for the account of the Ranson Fund on or before the Closing Date in
conformity with applicable custody provisions under the 1940 Act and duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof in accordance with the custom of brokers. The portfolio
securities shall be accompanied by all necessary federal and state stock
transfer stamps or a check for the appropriate purchase price of such stamps
(which amounts shall be paid or reimbursed by RCC, as provided in Section 10.2
below). Portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the 1940 Act, or with a qualified
foreign custodian under Rule 17f-5 of the 1940 Act shall be delivered on or
before the Closing Date by book entry in accordance with customary practices of
such depositories and the Custodian. The cash delivered shall be in the form of
a Federal Funds wire, payable to the order of "First Western Bank & Trust,
Custodian for The Nebraska Municipal Fund."
Section 3.3. Postponement of Valuation. In the event that on the Valuation
Date (a) any exchange shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on any exchange or
elsewhere shall be disrupted so that, in the judgment of both Ranson and
Heartland Group, accurate appraisal of the value of the net assets of the Ranson
Fund or the Heartland Fund Assets is impracticable, the Valuation Date shall be
postponed until the first business day after the day when trading shall have
been
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<PAGE>
fully resumed without restriction or disruption and reporting shall have been
restored. The Closing Date shall be postponed as necessary to coordinate with
any such postponement of the Valuation Date.
Section 3.4. The Heartland Fund Shareholders. The Heartland Fund shall
deliver to the Ranson Fund or its designee (a) at the Closing a list, certified
by its Secretary, of the names, addresses and taxpayer identification numbers of
the Heartland Fund Shareholders and the number of outstanding Heartland Fund
shares owned by each such shareholder, all as of the Valuation Date (after
giving effect to the payment of dividends and any reinvestments of such
dividends, described in Section 1.4 above), and (b) as soon as practicable after
the Closing all original documentation (including Internal Revenue Service
forms, certificates, certifications and correspondence) relating to the
Heartland Fund Shareholders' taxpayer identification numbers and their liability
for or exemption from back-up withholding. The Ranson Fund shall issue and
deliver to Heartland Fund Shareholders a confirmation evidencing delivery of
Ranson Fund shares to be credited on the Closing Date to the Heartland Fund
Shareholders or provide evidence reasonably satisfactory to the Heartland Fund
that such Ranson Fund shares have been credited to the account established on
the books of the Ranson Fund for each Heartland Fund Shareholder as provided in
Section 1.5 of this Agreement. At the Closing each party shall deliver to the
other such bills of sale, assignments, assumption agreements, receipts or other
documents as such other party or its counsel may reasonably request to effect
the consummation of the transactions contemplated by the Agreement.
ARTICLE IV
COVENANTS OF RANSON AND HEARTLAND GROUP
Section 4.1. Registration Statement. Ranson will prepare and file with the
Securities and Exchange Commission ("Commission") a registration statement on
Form N-14 under the Securities Act of 1933, as amended ("1933 Act"), relating to
the Ranson Fund shares to be issued to the Heartland Fund Shareholders pursuant
to the Reorganization ("Registration Statement"), which Registration Statement
shall include a combined proxy statement/prospectus, notice of meeting, form of
proxy and statement of additional information ("Proxy Materials") . Heartland
Group will assist Ranson with the preparation of, and will be entitled to review
and comment on, the Proxy Materials included in the Registration Statement.
Heartland Group will further provide Ranson with such other information and
documents relating to the Heartland Fund as are reasonably necessary for the
preparation of the Registration Statement.
Section 4.2. Shareholders Meeting. Heartland Group will call a meeting of
shareholders of the Heartland Fund to consider and act upon this Agreement and
the Reorganization and take all other action necessary to obtain approval of the
transactions contemplated herein and therein. Ranson will prepare, with
assistance from Heartland Group, the Proxy Materials to be used in connection
with such meeting and Ranson will furnish Heartland Group with a current
effective prospectus relating to the Ranson Fund shares for inclusion in the
Proxy Materials and with such other information relating to the Ranson Fund as
is reasonably necessary for the preparation and distribution of the Proxy
Materials.
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<PAGE>
Section 4.3. Shareholder Information. Prior to the Closing Date, Heartland
Group will assist Ranson in obtaining such information as Ranson reasonably
requests concerning the beneficial ownership of the shares of the Heartland
Fund.
Section 4.4. Cooperation. Subject to the provisions of this Agreement,
Ranson and Heartland Group will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
Section 4.5. Earning and Profits. As promptly as practicable, but in any
case within 60 days after the Closing Date, Heartland Group shall furnish or
cause to be furnished to Ranson, such information as Ranson reasonably requests
to enable Ranson to determine the Heartland Fund's earnings and profits for
federal income tax purposes that will be carried over to the Ranson Fund
pursuant to Section 381 of the Code.
Section 4.6. Final Tax Returns. As soon after the Closing Date as is
reasonably practicable, Heartland Group shall prepare and file all federal and
other tax returns and reports of the Heartland Fund required by law to be filed
with respect to all periods ending through and after the Closing Date but not
theretofore filed.
Section 4.7. Continuation of the Ranson Fund. Ranson agrees to use all
reasonable efforts to obtain the approvals and authorizations required by the
1933 Act, the 1940 Act and such of the state Blue Sky and securities laws as it
may deem appropriate in order to continue its operations and the operations of
the Ranson Fund after the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HEARTLAND GROUP
Heartland Group, on behalf of the Heartland Fund, represents and warrants
to Ranson as follows:
Section 5.1. Heartland Fund Shares. All issued and outstanding shares of
the Heartland Fund are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable with no personal liability
attaching to the ownership thereof. All such shares will, at the time of
Closing, be held by the persons and in the amounts set forth in the list of
shareholders of record submitted to the Ranson Fund pursuant to Section 3.4
hereof. The Heartland Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares, nor is there
outstanding any security convertible into any of its shares.
Section 5.2. Title. The Heartland Fund has, and at the Closing Date will
have, good and marketable title to the Heartland Fund Assets, subject to no
liens, security interests or other encumbrances (except for liens relating to
investment practices described in Heartland Fund's current prospectus and
Statement of Additional Information ("SAI")), and full right, power and
authority to assign, deliver and otherwise transfer the Heartland Fund Assets
hereunder, and upon delivery and payment for the Heartland Fund Assets, the
Ranson Fund
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will acquire clear title thereto (except for liens relating to investment
practices described in Heartland Fund's current prospectus and SAI), subject to
no restrictions on the full transfer thereof, including such restrictions as
might arise under the 1933 Act (other than Rule 144A, privately placed or
illiquid securities, if any). No financing statement covering all or any portion
of assets and naming the Heartland Fund, as debtor, has been filed in any public
office, and the Heartland Fund has not signed any financing statement or
security agreement as debtor or borrower which financing statement or security
agreement covers all or any portion of the Heartland Fund Assets.
Section 5.3. Proxy Materials. On the effective date of the Registration
Statement, at the time of the meeting of the Heartland Fund's shareholders and
on the Closing Date, the written information provided by Heartland Group for
inclusion in the Proxy Materials shall be accurate and complete in all material
respects and shall comply in all material respects with applicable federal
securities and other laws and all regulations thereunder;
Section 5.4. No Distribution. Heartland Fund is not acquiring the Ranson
Fund shares to be issued hereunder for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
Section 5.5. Net Asset Value Calculations. Except as previously disclosed
to the Ranson Fund in writing, and except as have been fully corrected, there
have been no material miscalculations of the net asset value of the Heartland
Fund during the past 12 months and all such calculations have been done in
accordance with the provisions of Rule 2a-4 under the 1940 Act.
Section 5.6. Authority. (a) Heartland Group has full legal power and
authority to enter into and perform this Agreement, and, except for obtaining
approval of the Heartland Fund's shareholders as described in Section 4.2 above
and obtaining the required third-party consents set forth in Schedule 5.6
attached hereto and hereby made a part hereof, the execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement in accordance with their terms will not violate any provision of law,
or the articles of incorporation, by-laws, or result in the forfeiture or
cancellation of any license, permit, consent, approval, accreditation or
authorization respecting the Heartland Fund and required in order for the Ranson
Fund to carry on the business of the Heartland Fund following the Closing, or
result in the breach, termination, cancellation or acceleration of any provision
of or constitute a default under or result in the creation of any lien, claim or
encumbrance pursuant to any court order, judgment or decree order or any
indenture, license, permit, authorization, or other instrument to which
Heartland Group is a party or by which any of its properties may be bound, which
would have a material adverse effect on the Heartland Fund Assets or the
business of the Heartland Fund. Heartland Group agrees to obtain, prior to the
Closing Date, all consents of third parties, which shall be required to sell and
transfer to the Ranson Fund the Heartland Fund Assets and to consummate the
transactions hereunder.
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(b) The directors of Heartland Group have taken all necessary action to
authorize and approve the execution, delivery and performance of this Agreement
and all of the transactions contemplated hereby.
Section 5.7. Operations. Except as disclosed on Schedule 5.7 attached
hereto and hereby made a part hereof, since December 31, 1995 there has not been
any material adverse change in the business, operations, financial position,
properties and other assets of the Heartland Fund (other than changes occurring
in the ordinary course of business), and since such date, the business of the
Heartland Fund has been conducted in the usual, regular and ordinary manner.
Except as disclosed on Schedule 5.7 attached hereto, since December 31, 1995,
the following is true with respect to the Heartland Fund and the operation of
the Heartland Fund's business:
(a) All material transactions involving the Heartland Fund, have been
accurately and fully recorded or otherwise reflected in books and records
of the Heartland Fund;
(b) The Heartland Fund has not sold, exchanged, conveyed or otherwise
disposed, or subjected to lien, pledge, hypothecation, mortgage, or other
encumbrance, any assets or properties other than sales or other
transactions in the ordinary course of business or as described in the
Heartland Fund's current prospectus and SAI;
(c) The Heartland Fund has paid its debts and liabilities, including
taxes, fees, levies and assessments in the ordinary course as they have
matured;
(d) The Heartland Fund has not incurred any material debt, obligation
or liability (other than those incurred in the ordinary course of its
business) which presently subjects, or with the passage of time or upon
default will subject, its assets to any lien, claim, charge, mortgage or
other encumbrance (other than liens related to investment practices
described in the Heartland Fund's current prospectus and SAI);
(e) The Heartland Fund has not altered, amended, terminated or
discharged any written or oral contract, lease, plan, commitment or
agreement to which the Heartland Fund is presently a party which is
required to be listed on Schedule 5.12(a) hereto, nor waived any material
right with respect thereto, nor permitted or consented to such alteration,
amendment, termination or discharge, nor has it committed a breach or
default in any of the provisions thereof;
(f) The Heartland Fund has not entered into any written or oral
contract except in the ordinary course of business at the prices and upon
the terms consistent with their past practices and which do not violate any
representation, warranty or covenant of this Agreement;
(g) The Heartland Fund has materially complied with all laws
applicable to the conduct of its business;
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(h) There has not occurred any transaction or event, nor is any
anticipated, which does or may adversely affect the Heartland Fund's
business or the Heartland Fund Assets in any material respect (other than
changes occurring in the ordinary course of business).
Section 5.8. Right to Inspect the Properties and Records. Ranson and its
agents, attorneys, accountants, employees, contractors and other authorized
representatives shall have the right, during normal business hours and upon
reasonable notice, to the extent the Ranson Fund reasonably deems appropriate,
to examine the properties and records of the Heartland Fund, and to make such
tests, surveys, investigations and other inspections in such manner as the
Ranson Fund may reasonably deem necessary; provided that such inspection will
not interfere with the conduct of the Heartland Fund's business. No
investigation or examination by the Ranson Fund or any of its agents or
representatives of such properties and records of the Heartland Fund shall
affect the representations and warranties of the Heartland Fund contained in
this Agreement.
Section 5.9. Preservation of Business Relationships. The Heartland Fund
will use all reasonable efforts (without making any commitment on behalf of the
Ranson Fund) to preserve the relationships of the Heartland Fund's agents and
shareholders, and others having business relationships with the Heartland Fund.
Section 5.10. Material Agreements. Schedule 5.10 attached hereto and
hereby made a part hereof lists all material contracts, agreements,
understandings or other commitments of the Heartland Fund. The Heartland Fund
has delivered or made available to the Ranson Fund complete and accurate copies
of all documents referred to on Schedule 5.10 attached hereto, each of which is
in effect and valid and enforceable against the Heartland Fund and, to the
knowledge of Heartland Group, valid and enforceable against the other party in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors generally and by general principles of equity.
Section 5.11. Licenses, Permits and Approvals. Attached hereto as Schedule
5.11 and hereby made a part hereof is a list of all material licenses, permits,
authorizations and approvals required by any Federal, state or local
government's administrative or judicial authorities in connection with the
operation of the Heartland Fund's business as presently being conducted by the
Heartland Fund and the ownership of its assets, all of which are in full force
and effect.
Section 5.12. Organization and Qualification of The Heartland Fund.
Heartland Group is a duly organized and validly existing as a corporation in
good standing under the laws of Maryland, has full corporate power and authority
to own its assets and to conduct its business as it is now being conducted, and
is duly qualified or registered to do business and is in good standing in each
jurisdiction which requires such qualification or registration or is subject to
no material liability by reason of its failure to be so qualified. The Heartland
Fund is a duly designated series of capital stock of Heartland Group. Complete
and correct
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copies as of the date hereof of the articles of incorporation and by-laws of
Heartland Group have previously been delivered to Ranson.
Section 5.13. Certain SEC Filings, Materials and Financial Statements of
the Heartland Fund. (a) Heartland Group has heretofore furnished complete
copies of all proxy statements, and reports, documents or other materials
relating to the Heartland Fund filed by or on behalf of the Heartland Fund with
the Securities and Exchange Commission ("SEC") on or after January 1, 1995
(collectively, the Heartland Fund "SEC Materials"). The Heartland Fund SEC
Materials (i) were prepared in all material respects in accordance with the
applicable requirements of the 1933 Act, the 1934 Act, the Investment Advisers
Act of 1940 (the "Advisers Act"), and the 1940 Act, as applicable, and the rules
and regulations under each of them, (ii) as of their respective dates did not
contain any untrue statement of a material fact, and (iii) as of their
respective dates did not omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The Heartland Fund has previously furnished to Ranson Fund the
audited annual and unaudited interim financial statements listed on Schedule
5.13 attached hereto with respect to the Heartland Fund for all such periods on
or after January 1, 1995 (the "Heartland Fund Financial Statements"). Such
Heartland Fund Financial Statements are true and correct in all material
respects and present fairly the financial position and results of operations of
the Heartland Fund for the periods then ended, all in conformity with generally
accepted accounting principles applied on a consistent basis, except for year-
end adjustments and as otherwise noted therein or as disclosed on Schedule 5.13
attached hereto.
Section 5.14. Absence of Certain Changes in Accounting Practices or Events
with Respect to the Heartland Fund. Between the date of the latest Heartland
Fund Financial Statements provided to the Ranson Fund and listed in Schedule
5.13 and the date hereof except as disclosed on Schedule 5.14, there has not
been any change in accounting methods, principles or practices of the Heartland
Fund having a material adverse effect on the financial condition or results of
operations of the Heartland Fund, nor any resignation of the independent
certified public accountants and auditors of the Heartland Fund due to a
conflict or disagreement with management of the Heartland Fund.
Section 5.15. Fund Litigation. No litigation, claim, action, proceeding
or investigation is pending or, to the knowledge of Heartland Group, threatened
or probable of assertion against or relating to the Heartland Fund, before any
court or governmental or regulatory authority or body acting in an investigative
or adjudicative capacity seeking injunctive relief or monetary damages which (a)
involves or relates to the Heartland Fund, and (b) which, if adversely
determined, could have material adverse effect on the Reorganization
contemplated by this Agreement, or on the business, results of operations or
financial position of the Heartland Fund. Neither the directors of Heartland
Group, nor any of their affiliates is subject to any outstanding order, writ,
injunction or decree relating to the Heartland Fund or such persons relationship
thereto which has had or could reasonably be expected to have a material adverse
effect on the business operations of the Heartland Fund or the Heartland Fund's
compliance with applicable laws. In connection with the
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Heartland Fund, no person (as defined therein) is disqualified from, or has any
investigation pending which could result in her, him or its being disqualified
from, serving or acting pursuant to Section 9 of the 1940 Act. To the knowledge
of Heartland Group, the Heartland Fund is not under investigation for violation
of any law or regulation related to or affecting the business of the Heartland
Fund.
Section 5.16. Certain Additional Representations and Warranties as to the
Heartland Fund. (a) True and correct copies of all of the investment advisory
agreements, underwriting agreements, forms of sales agreements to which
Heartland Fund is a party and all other material agreements with respect to the
Heartland Fund (i) have been delivered to the Ranson Fund, (ii) are in full
force and effect, and (iii) comply in all respects with the 1940 Act, the
Advisers Act, all state securities laws, all requirements of the National
Association of Securities Dealers, Inc. (the "NASD"), and the rules and
regulations thereunder. Heartland Advisors, Inc. ("Seller") is the Heartland
Fund's investment advisor and the investment advisory agreement, sales or
distribution agreements and underwriting agreement with the Heartland Fund were
duly approved in accordance with the applicable provisions of the 1940 Act, the
Advisers Act, the 1934 Act and all other applicable federal and state laws,
rules and regulations.
(b) Seller is the only entity having a sales or distribution agreement
with the Heartland Fund. To the knowledge of Heartland Group, for all periods on
or after January 1, 1994, Seller is and has been (i) duly registered or licensed
as broker-dealer under the 1934 Act and the securities laws of each state or
other jurisdiction wherein the nature of its activities in connection with such
agreement requires such registration or licensing, (ii) a member in good
standing of the NASD, and (iii) a member in good standing in the Securities
Investors Protection Corporation, with all assessments due thereto having been
paid, or is not required to be such a member. To the knowledge of Heartland
Group, Seller is registered under the Advisers Act and is registered or licensed
as an investment adviser under the securities laws of each state wherein the
nature of its activities requires such registration or licensing.
(c) There are no judgments, special consent judgments or SEC orders on or
with regard to the Heartland Fund, or restrictions on the Heartland Fund
resulting from the exercise of control over the Heartland Fund's actions by
another party, currently in effect which have had or could reasonably be
expected to have a material adverse effect on the business or operations of the
Heartland Fund as presently conducted. All orders of exemption issued to the
Heartland Fund, or to Seller with respect to the Heartland Fund, by any
regulatory agency, including the SEC and the Internal Revenue Service, which is
necessary and material to the conduct of the business of the Heartland Fund have
been obtained and are currently in full force and effect, no proceeding has been
commenced to revoke any such order and, to the best knowledge and belief of the
Heartland Fund, no such proceeding is contemplated by any such regulatory
agency.
(d) Heartland Group is duly registered with the SEC as a series, open-end
management investment company under the 1940 Act, and since the inception of the
Heartland Fund and with respect to the Heartland Fund, has been and is in
material
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compliance with the 1940 Act, and the SEC regulations promulgated thereunder,
including the requirements to file semi-annual or annual reports on N-SAR with
the SEC; the prospectuses, SAIs and, as applicable, sales materials relating to
the Heartland Fund have been duly filed with the SEC (where required to be so
filed), and, except as noted in Schedule 5.16(d) attached hereto and hereby made
a part hereof, applicable state securities authorities (where required to be so
filed) and, as applicable, the NASD; and the Heartland Fund has filed with the
SEC and other applicable federal or state agencies or authorities such notices
or reports required under applicable federal or state laws, rules or regulations
for the sale of its shares, the conduct of its business or the ownership of its
assets, except, in each case, where the failure to file any such notice or
report could not reasonably be expected to have a material adverse effect on the
Heartland Fund.
(e) Except as described in Schedule 5.16(e) attached hereto and hereby
made a part hereof, shares of the Heartland Fund have been duly authorized for
sale and are, and for at least all periods on or after January 1, 1995, have
been, duly qualified for sale (or exempt from qualification) under the
securities laws of each jurisdiction in which they have been sold or offered for
sale, which jurisdictions have been listed separately for the Heartland Fund in
a statement previously given by the Heartland Fund to the Ranson Fund.
(f) Shares of the Heartland Fund have been duly registered under the 1933
Act by means of a Registration Statement on Form N-1A, said registration
statement has become effective under the 1933 Act, no stop order suspending the
effectiveness of such registration statement has been issued, no proceedings for
that purpose have been instituted or threatened by the SEC and such registration
statement has remained and continues to remain effective. Copies of the current
prospectus, statement of additional information and registration statement of
the Heartland Fund have been delivered or made available to the Ranson Fund.
(g) The independent public accountants for the Heartland Fund who have
certified the financial statements of the Heartland Fund which have been filed
with the SEC have been selected and ratified in accordance with the applicable
provisions of the 1940 Act.
(h) The Heartland Fund has fully complied in all material respects with
all applicable laws regarding the withholding of taxes, including (without
limitation), if applicable, withholding of federal income taxes under Sections
1441, 1442 and 3406 of the Code.
(i) The Heartland Fund has properly prepared, executed and timely filed,
caused to be timely filed or timely filed a proper request for extension all
federal, state and local tax returns for income, franchise, sales, withholding,
property, excise and other taxes required to be filed by it and has paid all
taxes, assessments, fees and other governmental charges shown on said returns or
by assessment or otherwise required to be paid by it, except where the failure
so to file or to pay would not have a material adverse effect on the Heartland
Fund Assets or the business of the Heartland Fund. All of such returns are
complete and accurate in all material respects and have been prepared in
accordance with all applicable legal requirements. No material tax liabilities,
disallowances or assessments relating to the business or assets of the Heartland
Fund have been assessed or proposed and the Heartland
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Fund is not aware of any reasonable basis for any such assessment. The reserves
and provisions, if any, for taxes on the books of the Heartland Fund are
adequate for the periods to which they pertain. Without in any way limiting the
representations and warranties set forth above or in other Sections of this
Agreement, the Heartland Fund qualifies as a "regulated investment company"
under Section 851 of the Code, and has so qualified during its entire existence.
The Heartland Fund is not and has not been liable for tax under Section 4982 of
the Code. The Heartland Fund has fully complied in all material respects with
all applicable laws regarding all applicable information reporting requirements,
including, but not limited to, Section 6042 of the Code. The Heartland Fund has
satisfied the requirements of Section 852(a) of the Code for each of its tax
years during its entire existence.
(j) Minute Books. The minute books of Heartland Group contain complete
and accurate records, in all material respects, of all meetings and other
corporate actions of its shareholders and boards of directors where any matters
pertaining to the Heartland Fund were addressed or considered, including all
committees thereof.
(k) Portfolio Valuation. The portfolio securities of the Heartland Fund
have at all times during the Heartland Fund's existence, been valued in
accordance with Section 2(a)(41) of the 1940 Act.
(l) Portfolio Securities. The portfolio securities of the Heartland Fund
include only those securities described in the current prospectus and/or SAI of
the Heartland Fund in accordance with all applicable securities laws, rules or
regulations and are consistent with applicable investment objectives, policies
and restrictions of the Heartland Fund.
Section 5.17. Disclosure. No representation or warranty made herein by
Heartland Group, and no written statement, certificate or Schedule given or to
be given to the Ranson Fund as required by this Agreement contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained herein under the circumstances under which they
were made not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF RANSON
Ranson, on behalf of the Ranson Fund, represents and warrants to Heartland
Group as follows:
Section 6.1. Capitalization. The capitalization of Ranson consists of an
unlimited number of shares of beneficial interest, no par value per share. The
Ranson Fund shares to be issued and delivered to the Heartland Fund for the
account of the Heartland Fund Shareholders pursuant to the terms of this
Agreement will, at the Closing Date, have been duly authorized and, when so
issued and delivered, will be duly and validly issued Ranson Fund shares, and
will be fully paid and non-assessable with no personal liability attaching to
the ownership thereof, will be duly registered with the SEC pursuant to an
effective
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Registration Statement on Form N-14, and will be duly registered or qualified
for sale pursuant to the blue sky laws of each state where a Heartland Fund
Shareholder resides, except where exempt from such state registration or
qualification requirements. No shareholder of Ranson Fund will have any
preemptive right or right of subscription or purchase in respect of any such
Ranson Fund shares.
Section 6.2. Authority of the Ranson Fund. (a) Ranson has the full legal
power and authority to enter into and perform this Agreement and the execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement in accordance with their terms will not violate
any provision of law, trust instruments or by-laws of the Ranson Fund or result
in the forfeiture or cancellation of any license, permit, consent, approval,
accreditation or authorization respecting the Ranson Fund or its business, or
result in the breach, termination, cancellation or acceleration of any provision
of or constitute a default under or result in the creation of any lien, claim or
encumbrance pursuant to any indenture, license, permit, authorization, court
order, judgment or decree agreement or other instrument to which the Ranson Fund
is a party or by which any of its properties may be bound.
(b) The trustees of Ranson have taken all necessary action to authorize
and approve the execution, delivery and performance of this Agreement and all of
the transactions contemplated hereby and thereby.
Section 6.3. Organization and Qualification of The Ranson Fund. Ranson
is a duly organized and validly existing unincorporated business trust in good
standing under the laws of Massachusetts, has full power and authority to own
its assets and to conduct its business as it is now being conducted, and is duly
qualified or registered to do business and is in good standing in each
jurisdiction which requires such qualification or registration or is subject to
no material liability by reason of its failure to be so qualified. The Ranson
Fund is a duly designated series of shares of beneficial interest of Ranson.
Complete and correct copies as of the date hereof of the agreement and
declaration of trust and by-laws of each of the Ranson Fund have previously been
delivered to the Heartland Fund.
Section 6.4. Certain SEC Filings, Materials and Financial Statements of
the Ranson Fund. (a) Ranson has heretofore furnished complete copies of all
proxy statements, reports, documents or other materials relating to RCC's
responsibilities to the Ranson Fund as investment adviser, or distributor, as
the case may be, filed with the SEC on or after January 1, 1995 with complete
copies of all proxy statements, reports, documents or other materials relating
to the Ranson Fund filed with the SEC on or after January 1, 1995 (collectively,
the "Ranson SEC Materials"). The Ranson SEC Materials (i) were prepared in all
material respects in accordance with the applicable requirements of the 1933
Act, the Act, the Advisers Act, and the 1940 Act, as the case may be, and the
rules and regulations under each of them, (ii) as of their respective dates did
not contain any untrue statement of a material fact, and (iii) as of their
respective dates did not omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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(b) The Ranson Fund has previously furnished to Seller the audited annual
and unaudited interim financial statements listed on Schedule 6.4 attached
hereto and hereby made a part hereof with respect to the Ranson Fund for all
such periods on or after January 1, 1995 (the "Ranson Fund Financial
Statements"). Such Ranson Fund Financial Statements are true and correct and
present fairly the financial position and results of operations of the Ranson
Fund for the periods then ended, all in conformity with generally accepted
accounting principles applied on a consistent basis, except as otherwise noted
therein or as disclosed on Schedule 6.4 attached hereto and hereby made a part
hereof.
Section 6.5. Absence of Certain Changes or Events with Respect to the
Ranson Fund. Between the date of the latest Ranson Fund Financial Statements
provided to the Heartland Fund and listed in Schedule 6.4 and the Closing Date:
(a) there has been no material adverse change in the financial condition,
results of operations, business, assets or liabilities of the Ranson Fund or the
status of the Ranson Fund as a regulated investment company under the Code; and
(b) there has not been any change in accounting methods, principles or practices
of the Ranson Fund having a material adverse effect on the financial condition
or results of operations of the Ranson Fund, nor any resignation of the
independent certified public accountants and auditors of the Ranson Fund due to
a conflict or disagreement with management of the Ranson Fund.
Section 6.6. Fund Litigation. No litigation, claim, action, proceeding
or investigation is pending or, to the knowledge of the Ranson Fund, threatened
or probable of assertion against or relating to the Ranson Fund, before any
court or governmental or regulatory authority or body acting in an investigative
or adjudicative capacity seeking injunctive relief or monetary damages which (a)
involves or relates to the Ranson Fund, and (b) which, if adversely determined,
could have material adverse effect on the Reorganization contemplated by this
Agreement or on the business, results of operations or financial position of the
Ranson Fund. Neither trustees of the Ranson Fund, nor any of their affiliates is
subject to any outstanding order, writ, injunction or decree relating to the
Ranson Fund or such persons relationship thereto which has had or could
reasonably be expected to have a material adverse effect on the business
operations of the Ranson Fund or the Ranson Fund's compliance with applicable
laws. In connection with the Ranson Fund, no person (as defined therein) is
disqualified from, or has any investigation pending which could result in her,
him or its being disqualified from, serving or acting pursuant to Section 9 of
the 1940 Act.
Section 6.7. Fund Regulatory Compliance. The Ranson Fund has all
permits, licenses, approvals, authorizations of and registrations with and under
all federal, state and local laws, authorities and agencies required by the
Ranson Fund to carry on any part of its business as presently conducted ("Ranson
Fund's Regulatory Approvals") the lack of which would have a material adverse
effect on such conduct. All such Ranson Fund's Regulatory Approvals are in full
force and effect, and to the best of the knowledge and belief of the Ranson
Fund, no suspension or cancellation of any of them is threatened.
Section 6.8. Information in Registration Statement on Form N-14 of the
Ranson Fund. The Registration Statement, including the Proxy Materials, when
effective, shall
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comply in all material respects with the provisions of the 1933 Act, the 1940
Act and the regulations thereunder, and shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances under which such statement was made, not misleading; provided
however, that no representation or warranty is made with respect to written
information provided by Heartland Group for inclusion in the Proxy Materials.
Section 6.9. Certain Additional Representations and Warranties as to the
Ranson Fund. (a) True and correct copies of all of the investment advisory
agreements, underwriting agreements, forms of sales agreements to which the
Ranson Fund is a party and all other material agreements with respect to the
Ranson Fund (i) have been delivered to the Heartland Fund, (ii) are in full
force and effect, and (iii) comply in all respects with the 1940 Act, the
Advisers Act, all state securities laws, all requirements of the NASD, and the
rules and regulations thereunder. Ranson Capital or its affiliates, as the case
may be, has all requisite power and authority to perform its or his investment
advisory agreements, sales or distribution agreements and underwriting
agreements with the Ranson Fund and all such agreements were duly approved in
accordance with the applicable provisions of the 1940 Act, the Advisers Act, the
1934 Act and all other applicable federal and state laws, rules and regulations.
(b) Ranson Capital is the only entity having a sales or distribution
agreement with the Ranson Fund and for all periods on or after July 11, 1990,
Ranson Capital is and has been (i) duly registered or licensed as broker-dealer
under the 1934 Act and the securities laws of each state or other jurisdiction
wherein the nature of its activities in connection with such agreement requires
such registration or licensing, (ii) a member in good standing of the NASD, and
(iii) a member in good standing in the Securities Investors Protection
Corporation, with all assessments due thereto having been paid, or is not
required to be such a member. Ranson Capital is registered under the Advisers
Act and is registered or licensed as an investment adviser under the securities
laws of each state wherein the nature of its activities requires such
registration or licensing.
(c) There are no judgments, special consent judgments or SEC orders on or
with regard to the Ranson Fund, RCC or its distributor, administrator, transfer
agent or custodian, or restrictions on the Ranson Fund resulting from the
exercise of control over the Ranson Fund's actions by another party, currently
in effect which have had or could reasonably be expected to have an adverse
effect on the business or operations of the Ranson Fund as presently conducted.
All orders of exemption issued to the Ranson Fund, or to RCC with respect to the
Ranson Fund, by any regulatory agency, including the SEC and the Internal
Revenue Service, which is necessary and material to the conduct of the business
of the Ranson Fund have been obtained and are currently in full force and
effect, no proceeding has been commenced to revoke any such order and, to the
best knowledge and belief of the Ranson Fund, no such proceeding is contemplated
by any such regulatory agency.
(d) Ranson is duly registered with the SEC as a series, open-end
management investment company under the 1940 Act, and since the inception of the
Ranson Fund and
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with respect to the Ranson Fund, has been and is in material compliance with the
1940 Act, and the SEC regulations promulgated thereunder, including the
requirements to file semi-annual or annual reports on N-SAR with the SEC; the
prospectuses, Statements of Additional Information and, as applicable, sales
materials of the Ranson Fund have been duly filed with the SEC, and, except as
noted in Schedule 6.9(d) attached hereto and hereby made a part hereof,
applicable state securities authorities and, as applicable, the NASD; and the
Ranson Fund has filed with the SEC and other applicable federal or state
agencies or authorities such notices or reports required under applicable
federal or state laws, rules or regulations for the sale of its shares, the
conduct of its business or the ownership of its assets, except, in each case,
where the failure to file any such notice or report could not reasonably be
expected to have a material adverse effect on the Ranson Fund. The Ranson Fund
is duly registered or licensed and in good standing, and its securities are
properly registered for sale, under the securities laws of each jurisdiction in
which such qualification is necessary.
(e) Except as described in Schedule 6.9(e) attached hereto and hereby
made a part hereof, shares of the Ranson Fund have been duly authorized for sale
and are, and for at least all periods on or after November 17, 1993, have been,
duly qualified for sale under the securities laws of each jurisdiction in which
they have been sold or offered for sale, which jurisdictions have been listed
separately for the Ranson Fund in a statement previously given by the Heartland
Fund by the Ranson Fund.
(f) Shares of the Ranson Fund have been duly registered under the 1933
Act on a Registration Statement on Form N-1A, such registration statement has
become effective under the 1933 Act, no stop order suspending the effectiveness
of such registration statement has been issued, no proceedings for that purpose
have been instituted or threatened by the SEC and such registration statement
has remained and continues to remain effective. Such registration statement has,
at all times when a prospectus with respect to the securities to which such
registration statement relates has been required to be delivered, complied in
all material respects with the requirements of the 1933 Act and the 1940 Act,
and such registration statement has not included at any time any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Copies of the current
prospectus, statement of additional information and registration statement of
the Ranson Fund have been delivered or made available to Heartland Group.
(g) The independent public accountants for the Ranson Fund who have
certified the financial statements of the Ranson Fund which have been filed with
the SEC have been selected and ratified in accordance with the applicable
provisions of the 1940 Act.
(h) The Ranson Fund has fully complied in all material respects with all
applicable laws regarding the withholding of taxes, including (without
limitation), if applicable, withholding of federal income taxes under Sections
1441, 1442 and 3406 of the Code.
(i) The Ranson Fund has and will have on or prior to the Closing Date
properly prepared, executed and timely filed, caused to be timely filed or
timely filed a proper
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request for extension all federal, state and local tax returns for income,
franchise, sales, withholding, property, excise and other taxes applicable to it
and has paid and will have paid all taxes, assessments, fees and other
governmental charges shown on said returns or by assessment or otherwise
required to be paid by it or on account of its properties and assets as of or
prior to the Closing Date. All of such returns are complete and accurate in all
material respects and have been prepared in accordance with all applicable legal
requirements. No tax liabilities, disallowances or assessments relating to the
business or assets of any of the Ranson Fund have been assessed or proposed or
will have been assessed or proposed as of the Closing Date and the Ranson Fund
is not aware of any basis for any such assessment. The federal income tax
returns of the Ranson Fund for prior periods have not been audited by the
Internal Revenue Service. The reserves and provisions, if any, for taxes on the
books of the Ranson Fund are adequate for the periods to which they pertain.
Without in any way limiting the representations and warranties set forth above
or in other Sections of this Agreement, the Ranson Fund qualifies as a
"regulated investment company" under Section 851 of the Code, and has so
qualified during its entire existence. The Ranson Fund is not and has not been
liable for tax under Section 4982 of the Code. The Ranson Fund has fully
complied in all material respects with all applicable laws regarding all
applicable information reporting requirements, including, but not limited to,
Section 6042 of the Code. The Ranson Fund has satisfied the requirements of
Section 852(a) of the Code for each of its tax years during its entire
existence.
(j) Minute Books. The minute books of Ranson contain complete and
accurate records, in all material respects, of all meetings and other corporate
actions of its shareholders and board of trustees where any matters pertaining
to the Ranson Fund were addressed or considered, including all committees
thereof.
(k) Portfolio Valuation. The portfolio securities of the Ranson Fund
have at all times during the Ranson Fund's existence been valued in accordance
with Section 2(a)(41) of the 1940 Act.
(l) Portfolio Securities. The portfolio securities of the Ranson Fund
include only those securities described in the applicable prospectus and/or SAI
of the Ranson Fund in accordance with all applicable securities laws, rules or
regulations and are consistent with applicable investment objectives, policies
and restrictions of the Ranson Fund.
Section 6.10. Disclosure. No representation or warranty made
herein by the Ranson Fund, and no written statement, certificate or schedule
given or to be given to the Heartland Fund as required by this Agreement
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements contained herein under the circumstances
under which they were made not misleading.
Section 6.11. Representations Regarding the Reorganization. (a)
Ranson has no plan or intention to reacquire any of the shares issued in the
Reorganization, except to the extent required by the 1940 Act to redeem any of
the shares Ranson Fund presented for redemption.
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(b) The Ranson Fund has no plan or intention to sell or otherwise dispose
of any of the assets of the Heartland Fund acquired in the Reorganization, other
than in the ordinary course of its business and to the extent necessary to
maintain its status as a "regulated investment company" under the Code.
(c) Following the Reorganization, the Ranson Fund will continue the
"historic business" of the Heartland Fund (within the meaning of Section
1.368-1(d) of the Income Tax Regulations under the Code).
Section 6.12. Condition of RCC. (a) The balance sheet of RCC as of
December 31, 1995 (previously delivered to Heartland Group) has been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis and fairly reflects the financial condition of RCC as of such date; since
December 31, 1995 there has not been any change in RCC's financial condition,
assets, liabilities or business that would have a material adverse effect on its
ability to provide management and other services to Ranson and the Ranson Fund.
(b) RCC is registered as an investment advisor under the Investment
Advisers Act and in all states where it is required to be so registered. RCC is
in compliance with all laws, rules and regulations applicable to its business of
providing management and other services to Ranson and the Ranson Fund. Neither
RCC nor any affiliated person of RCC is ineligible to serve as an employee,
officer, director, member of an advisory board, investment advisor, depositor or
principal underwriter of any registered investment company by reason of a
conviction of a felony or misdemeanor, described in Section 9(a)(1) of the 1940
Act and is not subject to any order issued by the SEC under Section 9(b) of the
1940 Act.
(c) No litigation, proceeding or governmental investigation or inquiry is
pending or, to Ranson's knowledge, threatened against RCC that, if determined
against RCC, would be reasonably likely to have a material adverse effect on
Ranson or the Ranson Fund or on RCC's ability to provide management and other
services to Ranson or the Ranson Fund.
Section 6.13. Operations. Except as disclosed on Schedule 6.13 attached
hereto and hereby made a part hereof, since December 31, 1995 there has not been
any material adverse change in the business, operations, financial position,
properties or other assets of the Ranson Fund (other than changes occurring in
the ordinary course of business), and since such date the business of the Ranson
Fund has been conducted in the usual, regular and ordinary manner. Except as
disclosed on Schedule 6.13 attached hereto, since December 31, 1995 the
following has been true with respect to the Ranson Fund and operation of the
Ranson Fund's business:
(a) All material transactions involving the Ranson Fund have been
accurately and fully recorded or otherwise reflected in the books and
records of the Ranson Fund;
(b) The Ranson Fund has not sold, exchanged, conveyed or otherwise
disposed of, or subject to lien, pledge, hypothecation, mortgage or other
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encumbrance, any assets or properties other than sales or other
transactions in the ordinary course of business or as described in the
Ranson Fund's current Prospectus and Statement of Additional Information;
(c) The Ranson Fund has paid its debts and liabilities, including
taxes, fees, levies and assessments in the ordinary course as they have
matured;
(d) The Ranson Fund has not incurred any material debt, obligation or
liability (other than those incurred in the ordinary course of its
business) which presently subjects, or with the passage of time or upon
default will subject, its assets to any lien, claim, charge, mortgage or
other encumbrance (other than liens related to investment practices
described in the Ranson Fund's current Prospectus and Statement of
Additional Information);
(e) The Ranson Fund has not altered, amended, terminated or discharged
any written or oral material contract, lease, plan, commitment or agreement
to which the Ranson Fund is presently a party which is required to be
listed on Schedule 6.16 hereto, nor waived any material right with respect
thereto, nor permitted or consented to such alteration, amendment,
termination or discharge, nor has it committed a breach or default in any
of the provisions thereof;
(f) The Ranson Fund has not entered into any written or oral contract
except in the ordinary course of business at the prices and upon the terms
consistent with its past practices and which do not violate any
representation, warranty or covenant of this Agreement;
(g) The Ranson Fund has materially complied with all laws applicable
to the conduct of its business; and
(h) There has not occurred any transaction or event, nor is any
anticipated, which does or may adversely affect the Ranson Fund's business
or the Ranson Fund's assets in any material respect (other than changes
occurring in the ordinary course of business).
Section 6.14. Right to Inspect the Properties and Records. Heartland
Group and its agents, attorneys, accountants, employees, contractors and other
authorized representatives shall have the right, during normal business hours
and upon reasonable notice to the extent Heartland Group reasonably deems
appropriate, to examine the properties and records of the Ranson Fund, and to
make such tests, surveys, investigations and other inspections in such manner as
Heartland Group may reasonably deem necessary; provided that such inspection
shall not interfere with the conduct of the Ranson Fund's business. No
investigation or examination by Heartland Group or any of its agents or
representatives of such properties and records of the Ranson Fund shall affect
the representations and warranties contained in this Agreement.
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Section 6.15. Preservation of Business Relationships. Ranson will use
all efforts to preserve the relationships of the Ranson Fund's agents and
shareholders and others having business relationships with the Ranson Fund.
Section 6.16. Material Agreements. Schedule 6.16 attached hereto and
hereby made a part hereof lists all material contracts, agreements,
understandings or other commitments of the Ranson Fund. The Ranson Fund has
delivered or made available to Heartland Group complete and accurate copies of
all documents referred to on Schedule 6.16 attached hereto, each of which is in
effect and valid and enforceable against the Ranson Fund and, to the knowledge
of Ranson, valid and enforceable against the other party in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors generally and by
general principles of equity.
Section 6.17. Third Party Consents. Except for the approvals and
consents listed on Schedule 6.17 attached hereto and hereby made a part hereof,
and all of which have been obtained or, as of the Closing Date, will have been
obtained, there are no approvals or consents of any third parties necessary or
required for Ranson validly and legally to enter into this Agreement and to
perform its obligations hereunder.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF HEARTLAND GROUP
The obligations of the Heartland Group under this Agreement are, at the
option of the Heartland Group, subject to the fulfillment at or prior to the
Closing Date of each of the following conditions, upon the unfulfillment of any
of which, at the option of Heartland Group, this Agreement may be terminated
with the effect set forth in Section 11.2 hereof:
Section 7.1. Accuracy of Representations, Warranties and Covenants. The
representations and warranties of Ranson set forth in Article 6 hereof shall be
true and correct in all material respects as of the date when made and as of the
Closing Date, except to the extent necessary to reflect the consummation of the
transactions provided for herein and except as otherwise permitted hereby. The
Ranson Fund shall have duly performed and complied in all material respects with
all agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date. Ranson shall
have delivered to the Heartland Fund a certificate dated the Closing Date to the
effect set forth in this Section 7.1.
Section 7.2. No Adverse Changes. There shall have been no material
adverse change since December 31, 1995 in the financial condition, business,
operations or assets of the Ranson Fund (other than those occurring in the
ordinary course of business).
Section 7.3. Approval of Legal Matters by Counsel. There shall have been
furnished to counsel for the Heartland Fund, certified copies of such corporate
records of Ranson relating to the Ranson Fund and copies of such documents as
such counsel may reasonably
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have requested. All legal matters and proceedings in connection with this
Agreement and the transactions contemplated hereby shall be reasonably
satisfactory to counsel for Seller.
Section 7.4. Approval by Fund Shareholders. All necessary approvals of
the shareholders of the Heartland Fund with respect to the Reorganization under
this Agreement shall have been obtained.
Section 7.5. Receipt of Closing Documents. Heartland Group shall have
received all of the closing documents referred to in Section 9.2 hereof.
Section 7.6. Legal Opinion as to Reorganization. Heartland Group shall
have received a favorable opinion from Chapman and Cutler (based on such
representations as such firm shall reasonably request), addressed to the Ranson
Fund and the Heartland Fund, which opinion may be relied upon by the
shareholders of Ranson Fund and Heartland Fund, with respect to the federal
income tax consequences of the Reorganization, substantially in the form
attached hereto as Exhibit A and hereby made a part hereof.
Section 7.7. Legal Opinion. The Heartland Fund shall have received an
opinion from Chapman and Cutler, counsel to the Ranson Fund, dated as of the
Closing Date, in the form attached hereto as Exhibit B.
Section 7.8. Registration Statement. The Registration Statement on Form
N-14 shall have become effective under the 1933 Act, no stop orders suspending
the effectiveness thereof shall have been issued with respect thereto, and, to
the best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
Section 7.9. Asset Purchase Agreement. The transactions contemplated by
that certain Agreement for Sale and Purchase of the Certain Assets of Heartland
Advisors, Inc. shall have been consummated.
Section 7.10. No Adverse Proceedings. There shall be no action, suit,
proceeding or claim instituted or threatened by Heartland Group, or a third
party, relating to the transactions contemplated by this Agreement which would
delay or materially adversely affect the consummation of the transactions
contemplated hereby.
Section 7.11. Differences in Shadow Valuations. The shadow valuations of
the assets of the Heartland Fund conducted by Heartland Group pursuant to
Section 2.5 of this Agreement shall not differ by more than 0.05% from the
corresponding valuations conducted by Ranson, in each case using the smaller of
the two corresponding valuations as the base line for computing the percentage
variation.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE RANSON FUND
The obligations of the Ranson Fund under this Agreement are, at its option,
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions, upon the nonfulfillment of any of which, at the option of
the Ranson Fund, this Agreement may be terminated with the effect set forth in
Section 10.2 hereof:
Section 8.1. Accuracy of Representations, Warranties and Covenants.
The representations and warranties of the Heartland Fund set forth in Article 5
hereof shall be true and correct in all material respects as of the date when
made and as of the Closing Date, except to the extent necessary to reflect the
consummation of the transactions provided for herein and except as otherwise
permitted hereby. The Heartland Fund shall have duly performed and complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date. The Heartland Fund shall have delivered to the Ranson Fund on the Closing
Date a certificate dated the day of the Closing Date to the effect set forth in
this Section 8.1.
Section 8.2. Board of Directors Actions. The board of directors of
Heartland Group shall have (i) given all required approvals with respect to the
transactions hereunder, in form and substance reasonably acceptable to the
Ranson Fund, and (ii) called a meeting of the shareholders of the Heartland Fund
and recommended that the shareholders approve the Reorganization and the
transactions hereunder; provided, however, that nothing herein shall be deemed
to require the Heartland Fund's Board of Directors to take, or to refrain from
taking, any action which the Board of Directors, in good faith and in
consultation with counsel, determines advisable to take or refrain from taking
in order to fulfill its fiduciary duties under applicable law.
Section 8.3. Fund Shareholder Approvals. The shareholders of the
Heartland Fund shall have given all approvals with respect to the Reorganization
under this Agreement.
Section 8.4. No Adverse Changes. There shall have been no material
adverse changes since December 31, 1995 in the financial condition, business,
operations or assets of the Heartland Fund (other than changes occurring in the
ordinary course of business).
Section 8.5. Approval of Legal Matters by Counsel. There shall have been
furnished to counsel for the Ranson Fund certified copies of such corporate and
business records of the Heartland Fund and copies of such documents as such
counsel may reasonably have requested. All legal matters and proceedings in
connection with this Agreement, the Ancillary Documents and the transactions
contemplated hereby and thereby shall have been reasonably satisfactory to
counsel for the Ranson Fund.
Section 8.6. No Adverse Proceedings. There shall be no action, suit,
proceeding or claim instituted or threatened by the Heartland Fund, or a third
party relating to the
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transactions contemplated by this Agreement or the Ancillary Documents which
would delay or materially adversely affect the consummation of the transactions
hereby and thereby.
Section 8.7. Statement of Heartland Fund Assets. Heartland Fund shall
have delivered to the Ranson Fund a statement of Heartland Fund Assets and its
liabilities, together with a list of Heartland Fund's securities and other
assets showing the respective adjusted bases and holding periods thereof for
income tax purposes, as of the Closing Date, certified by the Treasurer of
Heartland Fund.
Ranson should agree to do a shadow valuation of Heartland Fund's portfolio
following signing to determine any differences in how the securities are valued.
Section 8.8. Differences in Shadow Valuations. The shadow valuations of
the assets of the Heartland Fund conducted by Heartland Group pursuant to
Section 2.5 of this Agreement shall not differ by more than 0.05% from the
corresponding valuations conducted by Ranson, in each case using the lower of
the two corresponding valuations as the base line for calculating the percentage
difference.
Section 8.9. Certain Heartland Fund Assets. On the Closing Date, the
Heartland Fund Assets shall include no assets that the Ranson Fund, by reason of
charter limitations or otherwise, may not legally acquire. Ranson shall review a
list of the assets of the Heartland Fund promptly following the date hereof and
inform Heartland Group of any assets which may not be acquired by the Ranson
Fund.
Section 8.10. Registration Statement. The Registration Statement,
including the Proxy Materials, but only insofar as it relates to the Ranson
Fund, filed as a part thereof, shall have been approved by the Board of Trustees
of the Ranson Fund.
Section 8.11. Legal Opinion as to Reorganization. Ranson shall have
received a favorable opinion from Chapman and Cutler (based on such
representations as such firm shall reasonably request), addressed to the Ranson
Fund and the Heartland Fund, which opinion may be relied upon by the
shareholders of Ranson Fund and Heartland Fund, with respect to the federal
income tax consequences of the Reorganization substantially in the form attached
hereto as Exhibit A and hereby made a part hereof.
Section 8.12. Legal Opinion. The Ranson Fund shall have received a legal
opinion from Quarles & Brady, counsel to the Heartland Fund dated as of the
Closing Date, in the form attached hereto as Exhibit C.
ARTICLE IX
CLOSING DOCUMENTS
Section 9.1. Documents to be Delivered by the Heartland Fund to the Ranson
Fund. The Heartland Fund agrees to deliver to the Ranson Fund on the Closing
Date the following:
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(a) Bills of Sale, Assignments and Transfers. Good and sufficient
bills of sale, assignments, instruments of conveyance, and other
instruments of transfer, duly executed by the Heartland Fund, in forms
satisfactory to the Ranson Fund and its counsel, with covenants or
warranties as shall be necessary to assign and transfer to and vest in the
Ranson Fund good and merchantable title to all the Heartland Fund Assets,
free and clear of any and all liabilities, liens, claims and encumbrances
except those specifically permitted by this Agreement.
(b) Consents to Assignments. All consents of third parties which are
necessary, in the opinion of counsel for the Ranson Fund, to effectively
transfer the Heartland Fund Assets in the manner provided for herein, in
form and substance satisfactory to said counsel unless waived in writing by
the Ranson Fund.
(c) Officer's Certificates. Certificate of the President or Vice
President of Heartland Group, dated the Closing Date, certifying that the
conditions precedent set forth in Section 8.1 have been fulfilled.
(d) Certificates of Secretarial Officers. Certificate of the
Secretary of Heartland Group dated the Closing Date with respect to (i) the
articles of incorporation of Heartland Group, (ii) the by-laws of Heartland
Group, (iii) the board and shareholder resolutions contemplated hereby, and
(iv) the incumbency of certain officers of Heartland Group and the specimen
signatures of those officers of Heartland Group executing documents.
(e) Lien Search. Good and sufficient evidence reasonably satisfactory
to counsel for the Ranson Fund that (i) there are no chattel mortgages,
security interests, judgments, claims or other liens outstanding against
any of the Heartland Fund Assets except those specifically permitted by
this Agreement and (ii) the Heartland Fund has good, marketable title to
all of the Heartland Fund Assets.
(f) Counsel's Opinion. Opinion of counsel for the Heartland Fund
addressed to the Ranson Fund dated the Closing Date, to the effect set
forth in Exhibit C.
(g) Other Documents. Such other documents and showings as shall
reasonably be required by the Ranson Fund and its counsel.
Section 9.2. Documents to be Delivered by the Ranson Fund. The Ranson
Fund agrees to deliver to the Heartland Fund, on the Closing Date the following:
(a) Officer's Certificate. Certificate of the President or a Vice
President of the Ranson Fund dated the Closing Date certifying that the
conditions precedent set forth in Section 7.1 hereof have been fulfilled.
(b) Certificate of Secretarial Officers of the Ranson Fund. A
Certificate of the respective Secretary or an Assistant Secretary of the
Ranson Fund dated the Closing Date with respect to (i) the trust
instruments of the Ranson Fund, (ii) the by-
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laws of the Ranson Fund, (iii) trustee resolutions contemplated hereby, and
(iv) the incumbency of certain officers of the Ranson Fund and the specimen
signatures of those officers of the Ranson Fund executing documents.
(c) Issuance of Shares. The Ranson Fund shares to be issued
pursuant hereto.
(d) Counsel's Opinions. Opinions of counsel for the Ranson Fund,
addressed to the Heartland Fund, dated the Closing Date in the forms
attached hereto as Exhibits A and B.
(e) Other Documents. Such other documents and showings as shall
reasonably be required by the Heartland Fund and it counsel.
Section 9.3. Declaration of Dividend. Heartland Fund shall have declared
and paid a dividend or dividends and/or other distributions that, together with
all previous such dividends or distributions, shall have the effect of
distributing to the Heartland Fund Shareholders all of Heartland Fund's
investment company taxable income (computed without regard to any deduction for
dividends paid) and all of its net capital gain (after reduction for any capital
loss carry-forward and computed without regard to any deduction for dividends
paid) for all taxable years ending on or before the Closing Date.
ARTICLE X
FURTHER AGREEMENTS
Section 10.1. Commissions and Expenses of Sale. Each party to this
Agreement shall bear its own legal, accounting and other related expenses in
connection with the purchase and sale provided for herein except as provided in
Sections 10.2 hereof. Each of the parties hereto represents and warrants that,
it has not incurred any obligation or liability, contingent or otherwise, for
broker's, finder's or advisor's fees in connection with the transactions
provided for herein and each agrees to hold the others harmless from and against
all such liability arising out of contracts, express or implied, which may be
asserted against the non-contracting parties.
Section 10.2. Cost of Proxy Solicitation. Ranson Capital shall pay for
the cost of solicitation of the vote of the shareholders of the Heartland Fund
on the transactions contemplated hereby, including the costs of preparation,
printing and distribution of the Proxy Materials, legal and tax opinions,
transfer and stamp taxes, SEC registration costs, the costs of printing and
distributing prospectus supplements describing such matters, and up to $7,500
for the fees of Quarles & Brady, Heartland Group's legal counsel in connection
therewith. The Ranson Fund shall incur no costs or expenses in connection with
this Agreement or the proxy materials.
Section 10.3. Solicitation of Shareholder Vote. The Heartland Fund will
use all reasonable efforts, prior to the Closing Date, to recommend to
shareholders of such Heartland Fund the approval of the transactions
contemplated by this Agreement as it relates
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to the Heartland Fund, and to solicit its shareholders with regard to the
approval of the transactions contemplated by this Agreement, pursuant to the
provisions of Section 14 of the 1934 Act and Sections 15 and 20 of the 1940 Act
and consistent with all requirements of the 1934 Act and the 1940 Act applicable
thereto.
Section 10.4. Information to Be Furnished. Ranson will furnish Heartland
Group with copies of all written comments or the substance of oral comments
received from the staff of the SEC with regard to the proxy statement of the
Heartland Fund and the Heartland Fund will cooperate with the Ranson Fund in
revising, if necessary, the proxy materials to comply with such comments. Ranson
shall not file the Registration Statement or any amendment without the prior
consent of Heartland Group or its counsel.
Section 10.5. Conduct of Business of the Heartland Fund and the Ranson
Fund. From and after the date of this Agreement and until the Closing Date,
Heartland Group shall: (a) maintain its books, accounts and records in
accordance with generally accepted accounting principles and practices
consistently applied; (b) materially comply with all laws applicable to the
conduct of its business; (c) conduct its business only in the usual, regular and
ordinary course and in substantially the same manner as heretofore conducted,
and not introduce any method of operation in respect of such business, except in
a manner consistent with prior practice; (d) without the written consent of the
Ranson Fund, make no change in its By-laws which would materially affect the
Heartland Fund; (e) use all reasonable efforts to preserve its business
organization intact, and to preserve the goodwill of the Heartland Fund's
investors and others having business relations with it; (f) not take any action
which would, or with the passage of time could, jeopardize its qualification as
a "regulated investment company" under Section 851 of the Code; and (g) except
as contemplated by this Agreement, not enter into any other transactions other
than in the ordinary course of business. From and after the date of this
Agreement and until the Closing Date, the Ranson Fund shall: (a) maintain its
books, accounts and records in accordance with generally accepted accounting
principles and practices consistently applied; (b) materially comply with all
laws applicable to the conduct of its business; (c) conduct its business only in
the usual, regular and ordinary course and in substantially the same manner as
heretofore conducted, and not introduce any method of operation in respect of
such business, except in a manner consistent with prior practice; (d) without
the written consent of the Heartland Fund make no change in its Agreement and
Declaration of Trust or By-laws; (e) use its best efforts to preserve its
business organization intact, and to preserve the goodwill of its investors and
others having business relations with it; (f) not take any action which would,
or with the passage of time could, jeopardize its qualification as a "regulated
investment company" under Section 851 of the Code; and (g) except as
contemplated by this Agreement, not enter into any other transactions other than
in the ordinary course of business.
Section 10.6. Nonsurvival of Representations, Warranties or Covenants.
Except as set forth below, none of the representations, warranties or covenants
in this Agreement or in any certificate or investment delivered pursuant to this
Agreement shall survive the Closing Date and no party shall, therefore, have any
recourse therefor against any other party in connection therewith. This Section
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing Date.
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Section 10.7. Obligations of Parties. (a) Ranson and Heartland Group
hereby acknowledge and agree that the Ranson Fund is a separate investment
portfolio of Ranson, that Ranson is executing this Agreement on behalf of the
Ranson Fund, and that, subject to Section 10.2, any amounts payable by Ranson
under or in connection with this Agreement shall be payable solely from the
revenues and assets of the Ranson Fund, although none is expected.
(b) Ranson and Heartland Group hereby acknowledge and agree that the
Heartland Fund is a separate investment portfolio of Heartland Group, that
Heartland Group is executing this Agreement on behalf of the Heartland Fund, and
that, subject to Section 10.2, any amounts payable by Heartland Group under or
in connection with this Agreement shall be payable solely from the revenues and
assets of the Heartland Fund.
Section 10.8. Specific Performance. The parties agree that irreparable
damage would result if any of the provisions of this Agreement were not
performed in accordance with their terms or were otherwise breached.
Accordingly, each party shall be entitled to the remedy of specific performance
to enforce the terms and provisions of this Agreement.
Section 10.9. Updating of Schedules. The Schedules which have been
delivered by Heartland Fund to the Ranson Fund prior to the execution of this
Agreement have been prepared by Heartland Fund and will be updated by Heartland
Fund to include information as of such date as may be requested by the Ranson
Fund from time to time and delivered to the Ranson Fund with any and all changes
specifically marked so that all such Schedules are true, accurate and complete
in all respects. The Schedules which have been delivered by the Ranson Fund to
Heartland Fund prior to the execution of this Agreement have been prepared by
the Ranson Fund and will be updated by the Ranson Fund to include information as
of such date as may be requested by Heartland Fund from time to time and
delivered to Heartland Fund with any and all changes specifically marked so that
all such Schedules are true, accurate and complete in all respects.
Section 10.10. Section 15(f) of the 1940 Act. (a) Each of Ranson and
Heartland Group shall use its reasonable best efforts to assure compliance with
the conditions of Section 15(f) of the Act as it applies to the transactions
contemplated by this Agreement.
(b) Ranson shall for a period of not less than three (3) years after the
Closing Date, use its reasonable best efforts to assure that no more than 25% of
the members of the board of trustees of Ranson shall be "interested persons" (as
defined in the 1940 Act) of Heartland Advisors, Inc. or any affiliated person of
Heartland Advisors, Inc. Without limiting the generality of the foregoing,
Ranson will not take, recommend or endorse any action that would cause more than
25% of the number of members of its board of trustees to be such "interested
persons."
(c) Ranson presents and warrants that there is no express or implied
understanding, arrangement or intention on its part to impose an "unfair burden"
within the meaning of Section 15(f) of the 1940 Act on the Ranson Fund as a
result of the transactions
-28-
<PAGE>
contemplated hereby, and that for a period of not less than two (2) years after
the Closing Date, it shall not take or recommend any act that would constitute
an "unfair burden" on the Ranson Fund.
ARTICLE XI
TERMINATION, AMENDMENTS AND WAIVER
Section 11.1. Termination. This Agreement may not be terminated at any
time prior to the Closing Date by any party, except that this Agreement may be
terminated:
(a) by mutual written consent of the parties hereto;
(b) by either Ranson, on the one hand, or Heartland Group, on the
other hand, by written notice to the other, if the Closing shall not have
occurred on or before January 31, 1997, or such later date to which the
parties shall have extended this Agreement by mutual written consent;
(c) by Ranson, if there has been a misrepresentation, breach of
warranty or failure to perform any agreement or covenant on the part of
Heartland Group in any of its representations, warranties, agreements or
covenants set forth in this Agreement resulting in the failure of any
condition in Article 8 hereof;
(d) by Heartland Group, if there has been a misrepresentation, breach
of warranty or failure to perform any agreement or covenant on the part of
Ranson in any of its representations, warranties, agreements or covenants
set forth in this Agreement resulting in the failure of any condition in
Article 7 hereof; and
(e) by Ranson at any time if the board of directors of the Heartland
Fund changes its recommendations to the shareholders.
Any termination of this Agreement pursuant to this Section 11.1 shall be by
notice in writing to the other party.
Section 11.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 11.1 hereof or the Closing does not occur by
reason of any of the conditions in Articles 8 and 7 hereof not being satisfied,
then there shall be no other liability on the part of any party to the other
(except for the payment and/or reimbursement of expenses as described in Section
10.2); provided, however, that such termination shall not preclude liability
attaching to a party who has caused the termination hereof by willful act or
willful failure to act in violation of the terms and provisions of this
Agreement.
Section 11.3. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
-29-
<PAGE>
Section 11.4. Waiver. Any terms or provisions of this Agreement may be
waived in writing at any time by the party which is entitled to the benefits
thereof, or their respective counsel. The failure of either party at any time or
times to require performance of any provision hereof shall in no manner affect
such party's right at a later time to enforce the same. No waiver by any party
of a condition or of the breach of any term, covenant, representation or
warranty of this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other condition or of the
breach of any other term, covenant, representation or warranty of this
Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, telegraphed or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by such
party by like notice):
(a) If to the Ranson Fund at: 1 North Main
Minot, North Dakota 58703
Attention: Robert E. Walstad
with a copy to: Chapman and Cutler
111 West Monroe, Suite 1500
Chicago, Illinois 60603-4080
Attention: Mark Kneedy
with a copy to: KPMG Peat Marwick
4200 Norwest Center
90 South 7th Street
Minneapolis, Minnesota 55402
Attention: David Brown
with a copy to: Peter A. Quist
1821 South Grandview Lane, #8
Bismark, North Dakota 58501
-30-
<PAGE>
(b) If to Heartland Group: Heartland Group, Inc.
790 N. Milwaukee Street
Milwaukee, Wisconsin 53202
Attention: Lorraine J. Koeper
with a copy to: Quarles & Brady
411 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Fredrick G. Lautz
Written notice given by any other method shall be deemed effective only when
actually received by the party to whom given.
Section 12.2. Further Assurance. Each of the parties hereto hereby
agrees that after the Closing Date, it will from time to time, upon the
reasonable request of another party hereto, take such further action as the
other may reasonably request to carry out the transfer and sale of assets and
assumption of liabilities contemplated by this Agreement, including, without
limitation, the execution and delivery of all further evidences and instruments
of transfer and assignment.
Section 12.3. Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each and all of which shall be deemed for all
purposes to be one agreement.
Section 12.4. Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
Section 12.5. Miscellaneous. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and undertakings, both
written and oral, between the parties, with respect to the subject matter
hereof; (b) is not intended to confer upon any other person any rights or
remedies hereunder, it being expressly agreed that there are no third party
beneficiaries of this Agreement, including any creditors of the Heartland Fund;
(c) shall be binding upon and inure to the benefit of the Ranson Fund and the
Heartland Fund, and their respective permitted successors and assigns; (d) may
not be assigned by any party prior to the Closing; and (e) shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of Wisconsin.
Section 12.6. Publicity. Neither the parties to this Agreement nor their
respective directors, officers, stockholders, employees or agents shall issue
any press release or other announcement with respect to this Agreement, or
otherwise make any disclosures relating thereto to the press without the prior
consent of the other parties, which consent shall not be unreasonably withheld;
provided, however, that such consent shall not be required where such release,
announcement or disclosure is required by applicable law or the rules or
regulations of a securities exchange, other self-regulatory authority or
governmental agency.
-31-
<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
Ranson Managed Portfolios, acting on
behalf of The Nebraska Municipal Fund
By /s/ Robert E. Walstad
---------------------------------------
Its President
-----------------------------------
Heartland Group, Inc., acting on behalf of
the Heartland Nebraska Tax Free Fund
By /s/ Patrick J. Retzer
---------------------------------------
Its Vice President/Treasurer
-----------------------------------
-32-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION, DATED AS
OF SEPTEMBER 20, 1996, BY AND
BETWEEN RANSON MANAGED PORTFOLIOS
AND HEARTLAND GROUP, INC.
DISCLOSURE SCHEDULES
OF
RANSON MANAGED PORTFOLIOS
<PAGE>
SCHEDULE 6.4
1. Unaudited financial statements for the six-month period ending January 31,
1996.
2. Audited financial statements for the fiscal year ended July 31, 1995.
3. Audited financial statements for the fiscal year ended July 31, 1996.
<PAGE>
SCHEDULES 6.9(d), 6.9(e), 6.13 AND 6.17
The response to the above-listed Schedules is NONE.
<PAGE>
SCHEDULE 6.16
1. Administrative and Accounting Services Agreement between Ranson Managed
Portfolios and ND Resources, Inc.
2. Transfer Services Agreement between Ranson Managed Portfolios and ND
Resources, Inc.
3. Distribution and Services Agreement between Ranson Managed Portfolios and
Ranson Capital Corporation.
4. Shareholder Services Plan of Ranson Fund.
5. Management and Investment Advisory Agreement between Ranson Managed
Portfolios and Ranson Capital Corporation.
6. Custodian Agreement between Ranson Managed Portfolios and First Western
Bank & Trust.
7. Agreements with dealers entered into in the ordinary course of business.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION, DATED AS
OF SEPTEMBER 20, 1996, BY AND
BETWEEN RANSON MANAGED PORTFOLIOS
AND HEARTLAND GROUP, INC.
DISCLOSURE SCHEDULES
<PAGE>
SCHEDULE 5.6
None
<PAGE>
SCHEDULE 5.7
None
<PAGE>
SCHEDULE 5.10
1. Investment Advisory Agreement, dated January 12, 1987, between Heartland
Group, Inc. and Heartland Advisors, Inc., as amended by Schedule A to
incorporate the Heartland Nebraska Tax Free Fund upon effectiveness of its
registration.
2. Distribution Agreement, dated March 12, 1992, between Heartland Group, Inc.
and Heartland Advisors, Inc., as amended by Amendment No. 1, dated December
17, 1992, and as further amended by Schedule A to incorporate the Heartland
Nebraska Tax Free Fund upon its effectiveness with the SEC.
3. Custodian Contract, dated February 10, 1987, between Heartland Group, Inc.
and Firstar Trust Company, as amended to incorporate the Heartland Nebraska
Tax Free Fund by letter, dated September 1, 1993.
4. Transfer and Dividend Disbursing Agent Letter Agreement, dated February 6,
1987, between Heartland Group, Inc. and Firstar Trust Company, as amended
to incorporate the Heartland Nebraska Tax Free Fund by letter, dated
September 1, 1993.
5. Agreement for Participation in the Mutual Fund Quotation Program of the
National Association of Securities Dealers, Inc., dated December 1, 1993.
6. Financial Services Agreement, dated September 1, 1993, between Heartland
Group, Inc., Firstar Trust Company, Financial Data Services, Inc. and
Merrill Lynch, Pierce, Fenner & Smith, Inc.
7. Blue Sky Compliance Servicing Agreement, dated May 1, 1995, between
Heartland Group, Inc. and Firstar Trust Company
<PAGE>
SCHEDULE 5.11
1. Registration of the securities of the Nebraska Tax Free Fund with the
Securities and Exchange Commission and the Nebraska Department of Banking
and Finance, Bureau of Securities.
2. Federal tax identification number for the Nebraska Tax Free Fund:
39-1767599
<PAGE>
SCHEDULE 5.13
1. Unaudited financial statements for the six-month period ending June 30,
1995
2. Audited financial statements for the year ended December 31, 1995
3. Unaudited financial statements for the six-month period ending June 30,
1996
<PAGE>
SCHEDULE 5.14
None
<PAGE>
SCHEDULE 5.16(d)
None
<PAGE>
SCHEDULE 5.16(e)
None
<PAGE>
Exhibit A
CHAPMAN AND CUTLER
FORM OF TAX OPINION
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603-4080
_______, 1996
ND Holdings, Inc.
1 North Main
Minot, North Dakota 58703
Heartland Group, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Ladies and Gentlemen:
We are representing Ranson Managed Portfolios, an unincorporated business
trust organized under the laws of Massachusetts ("Ranson"), acting on behalf of
the Nebraska Municipal Fund (the "Ranson Fund"), in connection with the proposed
transfer of all of the assets and the stated liabilities of the Heartland
Nebraska Tax Free Fund (the "Heartland Fund"), a separate series of the
Heartland Group, Inc., a Maryland corporation (the "Heartland Group"), to the
Ranson Fund in exchange for the issuance to the Heartland Fund of Ranson Fund
shares, followed by the pro rata distribution of such shares to the Heartland
Fund shareholders in liquidation of the Heartland Fund (the "Reorganization"),
pursuant to the Reorganization Agreement, as hereinafter defined. We understand
that the following steps have been or will be taken in order to accomplish the
Reorganization:
(a) On the Closing Date (as defined in the Reorganization Agreement),
the Heartland Fund will assign, deliver and otherwise transfer all of its
assets to the Ranson Fund and the Ranson Fund will in exchange therefor
assume all of the stated liabilities of the Heartland Fund and deliver to
the Heartland Fund shares of the Ranson Fund.
(b) In the Reorganization, the Heartland Fund will distribute the
Ranson Fund shares received to the shareholders of the Heartland Fund and
thereupon the Heartland Fund will liquidate. Upon liquidation of the
Heartland Fund, all issued and outstanding shares of the Heartland Fund
will be canceled on the Heartland Fund's books and the Heartland Fund
shareholders will have no further rights as such shareholders.
<PAGE>
(c) The number of Ranson Fund shares (including fractional shares, if
any) to be issued will be determined by dividing the value of the Heartland
Fund assets, net of the liabilities assumed by the Ranson Fund, by the net
asset value of a Ranson Fund share.
(d) Pursuant to the Reorganization Agreement, at the Closing Date, the
Ranson Fund will succeed to all of the assets and stated liabilities of the
Heartland Fund.
(e) Ranson Capital Corporation will pay all expenses of the Heartland
Fund that are solely and directly related to the Reorganization (subject to
the limitations set forth in the Reorganization Agreement and the Agreement
for Sale and Purchase of Certain Assets of the Heartland Advisors, Inc.),
but will not pay any other expenses of the Heartland Fund. The shareholders
of the Ranson Fund and the Heartland Fund will pay their respective
expenses, if any, involved in connection with the Reorganization.
In connection with the Reorganization, we have reviewed an executed
counterpart of the Agreement and Plan of Reorganization (the "Reorganization
Agreement") by and between Ranson, acting on behalf of the Ranson Fund, and the
Heartland Group, acting on behalf of the Heartland Fund, dated as of September
20, 1996, and, in rendering the opinions set forth herein, with your permission
and with the consent of the Ranson Fund, we have assumed that the facts and
representations contained in letters to us from the Ranson Fund and the
Heartland Group, acting on behalf of the Heartland Fund, both dated
_______________, 1996, were true and correct when made and will remain true and
correct as of the Effective Time and, as to representations qualified by the
knowledge of the management of the Heartland Group and the Ranson Fund, the
underlying facts as of the Effective Time will be consistent with such
knowledge.
Based upon the foregoing and an examination of such matters of law as we
have deemed necessary, we are of the opinion that:
(1) the Reorganization will constitute a tax-free "reorganization"
within the meaning of Section 368(a) of the Code, and Heartland Fund and
Ranson Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code;
(2) no gain or loss will be recognized by the Ranson Fund on its
receipt of all of the assets of the Heartland Fund in exchange for shares
of the Ranson Fund and the assumption by the Ranson Fund of all the stated
liabilities of the Heartland Fund;
(3) no gain or loss will be recognized by the Heartland Fund on its
transfer of all of its assets to the Ranson Fund solely in exchange for
shares of the Ranson Fund and the assumption by the Ranson Fund of all the
stated liabilities of the Heartland Fund;
2
<PAGE>
(4) no income, gain or loss will be recognized by a shareholder of
Heartland Fund upon the receipt of Ranson Fund shares in exchange for their
shares of Heartland Fund;
(5) the adjusted tax basis of the Ranson Fund shares received by a
shareholder of Heartland Fund pursuant to the Reorganization will equal the
adjusted tax basis of the shares of Heartland Fund surrendered in exchange
therefor;
(6) the holding period of the Ranson Fund shares received by a
shareholder of Heartland Fund in the Reorganization will include the period
during which the shares of Heartland Fund surrendered in exchange therefor
were held, provided that the shareholder held such Heartland Fund shares as
capital assets on the Closing Date;
(7) the basis of the assets of the Heartland Fund in the hands of the
Ranson Fund will be the same as the basis of such assets in the hands of
the Heartland Fund immediately prior to the Reorganization; and
(8) the holding period of the Heartland Fund assets in the hands of
the Ranson Fund will include the holding period of those assets in the
hands of the Heartland Fund immediately prior to the Reorganization.
An opinion of counsel is predicated upon all the facts and conditions as
set forth in the opinion and is based upon counsel's analysis of the statutes,
regulatory interpretations and case law in effect as of the date of the opinion.
It is neither a guarantee of the current status of the law nor should it be
accepted as a guarantee that a court of law or an administrative agency will
concur in the opinion.
Our opinion is limited to the specific matters expressed herein and no
further opinions are intend to be (or should be) inferred therefrom. We are
admitted to practice law in the State of Illinois. The opinions set forth herein
are limited to the federal laws of the United States.
We hereby consent to the references to this opinion in Post-Effective
Amendment No. 1 to Ranson Fund's Registration Statement on Form N-14 as
initially filed with the Securities and Exchange Commission on September 23,
1996 and to the filing of a form of this opinion as an exhibit thereto.
Very truly yours,
Chapman and Cutler
SGF
3
<PAGE>
Exhibit B
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603-4080
_______________, 1996
Heartland Group, Inc.
Heartland Nebraska Tax Free Fund
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Re: Agreement and Plan of Reorganization
------------------------------------
Ladies and Gentlemen:
We have acted as special transaction counsel to Ranson Managed Portfolios
("Ranson") in connection with the Agreement and Plan of Reorganization dated as
of September , 1996 (the "Agreement"), by and between Ranson, acting on behalf
of The Nebraska Municipal Fund (the "Ranson Fund") and Heartland Group, Inc.
("Heartland Group"), acting on behalf of the Heartland Nebraska Tax Free Fund,
and the transactions contemplated thereby. We are rendering this opinion
pursuant to Section 7.7 of the Agreement. The law covered by the opinions
expressed herein is limited to the federal law of the United States, the laws of
the State of Illinois and the laws of the Commonwealth of Massachusetts relating
to the organization and operation of business trusts. We note that the Agreement
is governed by the laws of the State of Wisconsin. We have assumed, with your
permission, that the laws of the State of Wisconsin relating to the Agreement
are identical to the laws of the State of Illinois and we express no opinion as
to the laws of the State of Wisconsin.
We have made such investigation and examined such documents, corporate
records, instruments and matters of law as we have deemed necessary or
appropriate for the purpose of rendering the opinions expressed herein, and are
familiar with the corporate proceedings taken by Ranson and the Ranson Fund in
connection with the transactions contemplated by the Agreement. In rendering
such opinions, we have assumed (i) the genuineness of all signatures, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to original documents of all documents submitted to us as certified or
photostatic copies, (iv) the due and valid execution and delivery of the
Agreement by the Heartland Group, (v) the due authorization of each person
executing the Agreement on behalf of the Heartland Group, and (vi) that the
Agreement is the valid and binding obligation of the Heartland Group,
enforceable against the Heartland Group, in accordance with its terms. We have
also, to the extent we deemed such reliance proper, relied upon certificates of
<PAGE>
Heartland Group Inc.
_________, 1996
Page 2
public officials and, as to matters of fact material to the opinions expressed
herein, on the representations and warranties of Ranson Fund set forth in the
Agreement, on certificates of officers of Ranson Fund delivered to you pursuant
to the terms of the Agreement, and/or on factual certificates delivered directly
to us by officers of Ranson Fund or of Ranson Capital Corporation.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that:
1. Ranson has been duly organized and is validly existing as a business
trust in good standing under the laws of the Commonwealth of Massachusetts.
2. Ranson is an open-end, non-diversified management investment company
registered under the Investment Company Act of 1940, as amended. The Ranson Fund
is a separate series of Ranson.
3. Ranson has all necessary power and authority to execute, deliver and
perform its obligations under the Agreement, and such execution, delivery and
performance have been duly authorized and approved by all requisite corporate
action on the part of Ranson.
4. The Agreement has been duly executed and delivered by Ranson and
constitutes the valid and binding obligation of Ranson, enforceable against
Ranson in accordance with its terms, except as enforceability may be subject to
the effect of any applicable bankruptcy, insolvency (including without
limitation the laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting creditors' rights generally and to the
effect of general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
5. The Ranson Fund is authorized to issue an unlimited number of shares,
without par value.
6. Shares of the Ranson Fund outstanding on the date hereof (including
the shares issued to the Heartland Nebraska Tax Free Fund pursuant to the
Agreement) have been duly authorized and validly issued, are fully paid and are
nonassessable (except for the potential liability of shareholders described in
the Ranson Fund's prospectus dated November 30, 1995 (as amended March 4, 1996)
under the caption "Description of Shares and Rights").
The opinions expressed herein are furnished by us solely for your benefit,
and they may not be relied upon, quoted from, or delivered to any person other
than your legal counsel in this matter without our express prior written
consent. This opinion speaks only
<PAGE>
Heartland Group, Inc.
___________, 1996
Page 3
as of the date hereof and is limited to present statutes, laws and regulations
and to the facts as they currently exist, and we assume no obligation to update
or supplement this opinion.
Very truly yours,
Chapman and Cutler
<PAGE>
Exhibit C
QUARLES & BRADY
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4497
_________________, 1996
Ranson Managed Portfolios
The Nebraska Municipal Fund
1 North Main
Minot, North Dakota 58703
Re: Agreement and Plan of Reorganization
------------------------------------
Ladies and Gentlemen:
We have acted as special transaction counsel to Heartland Group, Inc.
("Heartland Group") in connection with the Agreement and Plan of Reorganization
dated as of September __, 1996 (the "Agreement"), by and between Heartland
Group, acting on behalf of Heartland Nebraska Tax Free Fund (the "Fund") and
Ranson Managed Portfolios ("Ranson"), acting on behalf of The Nebraska Municipal
Fund, and the transactions contemplated thereby. We are rendering this opinion
pursuant to Section 8.12 of the Agreement. The law covered by the opinions
expressed herein is limited to the federal law of the United States, the laws of
the State of Wisconsin and the General Corporation Law of Maryland.
We have made such investigation and examined such documents, corporate
records, instruments and matters of law as we have deemed necessary or
appropriate for the purpose of rendering the opinions expressed herein, and are
familiar with the corporate proceedings taken by Heartland Group and the Fund in
connection with the transactions contemplated by the Agreement. In rendering
such opinions, we have assumed (i) the genuineness of all signatures, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to original documents of all documents submitted to us as certified or
photostatic copies, (iv) the due and valid execution and delivery of the
Agreement by Ranson, (v) the due authorization of each person executing the
Agreement on behalf of Ranson, and (vi) that the Agreement is the valid and
binding obligation of Ranson, enforceable against Ranson in accordance with its
terms. We have also, to the extent be deemed such reliance proper, relied upon
certificates of public officials and, as to matters of fact material to the
opinions expressed herein, on the representations and warranties of Heartland
Group set forth in the Agreement, on certificates of officers of Heartland Group
delivered to you pursuant to the
<PAGE>
Ranson Managed Portfolios
_____________, 1996
Page -2-
terms of the Agreement, and/or on factual certificates delivered directly to us
by officers of Heartland Group or of Heartland Advisors, Inc.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that:
1. Heartland Group is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland.
2. Heartland Group is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended.
The Fund is a separate non-diversified series of Heartland Group.
3. Heartland Group has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Agreement, and such
execution, delivery and performance have been duly authorized and approved
by all requisite corporate action on the part of Heartland Group.
4. The Agreement has been duly executed and delivered by Heartland
Group and constitutes the valid and binding obligation of Heartland Group,
enforceable against Heartland Group in accordance with its terms, except as
enforceability may be subject to the effect of any applicable bankruptcy,
insolvency (including without limitation the laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting creditors'
rights generally and to the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
5. The authorized capital stock of Heartland Group consists of
1,000,000,000 shares of common stock, par value $.001 per share, of which
100,000,000 shares are authorized for issuance by the Fund.
6. Shares of the Fund outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are nonassessable.
The opinions expressed herein are furnished by us solely for your benefit,
and they may not be relied upon, quoted from, or delivered to any person other
than your legal counsel in this matter without our express prior written
consent. This opinion speaks only as of the date hereof and is limited to
present statutes, laws and regulations and to the facts as they currently exist,
and we assume no obligation to update or supplement this opinion.
Very truly yours,
QUARLES & BRADY
<PAGE>
Part B
Statement of Additional Information
Dated October 16, 1996
Ranson Managed Portfolios
1 North Main
Minot, North Dakota 58703
1-800-601-5593
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Proxy Statement/Prospectus dated October 16, 1996,
relating to the reorganization (the "Reorganization") involving the Heartland
Nebraska Tax Free Fund (the "Heartland Fund"), a series of the Heartland Group,
Inc. (the "Heartland Group") and The Nebraska Municipal Fund (the "Ranson
Fund"), a series of the Ranson Managed Portfolios. In connection with the
Reorganization, the Ranson Fund would acquire all of the assets, and assume the
stated liabilities, of the Heartland Fund and, in exchange therefor, would issue
to the Heartland Fund shares of the Ranson Fund. The aggregate net asset value
of the Ranson Fund shares issued to the Heartland Fund in the Reorganization
would be equal to the aggregate value of the assets of the Heartland Fund (net
of its stated liabilities) acquired in the Reorganization. The shares of the
Ranson Fund received by the Heartland Fund would then be distributed pro rata to
shareholders of the Heartland Fund, and the Heartland Fund would be liquidated
and discontinued. As a result of the Reorganization, shareholders of the
Heartland Fund would become shareholders of the Ranson Fund. It is expected that
the value of each Heartland Fund shareholder's account in the Ranson Fund after
the Reorganization would be the same as the value of such shareholder's account
in the Heartland Fund immediately prior to the Reorganization.
Except for the unaudited pro forma financial statements contained herein,
the information otherwise required to be set forth in this Statement of
Additional Information is included in: (i) the Prospectus and the Statement of
Additional Information of the Ranson Fund, each dated November 30, 1995 (as
amended March 4, 1996) (the "Ranson Fund Prospectus" and the "Ranson Fund SAI,"
respectively); (ii) the Prospectus and the Statement of Additional Information
of the Heartland Fund, each dated April 30, 1996 (the "Heartland Fund
Prospectus" and the "Heartland Fund SAI," respectively); (iii) the Ranson Fund's
1996 Annual Report to Shareholders (the "Ranson Annual Report"); (iv) the
Heartland Fund's 1995 Annual Report to Shareholders (the "Heartland Annual
Report"); and (v) the Heartland Fund's Semi-Annual Report to Shareholders for
the period ending June 30, 1996 (the "Heartland Semi-Annual Report"). The Ranson
Fund Prospectus, the Ranson Fund SAI, the Heartland Fund Prospectus, the
Heartland Fund SAI, the Ranson Annual Report, the Heartland Annual Report and
the Heartland Semi-Annual Report are all incorporated by reference herein.
A copy of the Proxy Statement/Prospectus, the Ranson Fund Prospectus, the
Ranson Fund SAI and the Ranson Annual Report may be obtained free of charge by
writing to the Ranson Fund at 1 North Main, Minot, North Dakota 58703, or by
calling Ranson Capital Corporation at (800) 601-5593. A copy of the Heartland
Fund Prospectus, the Heartland Fund
<PAGE>
SAI and the Heartland Annual and Semi-Annual Reports may be obtained free of
charge by writing to Heartland Advisors, Inc. at 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202 or calling Heartland Advisors at (800) 432-7856.
EXPERTS
The audited financial statements of the Ranson Fund incorporated by
reference into this Statement of Additional Information have been audited by
Brady, Martz & Associates, P.C., independent public accountants, as indicated on
their reports with respect thereto, which is also incorporated by reference into
this Statement of Additional Information in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report. The audited
financial statements of the Heartland Fund incorporated by reference into this
Statement of Additional Information have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, which also is incorporated by reference into this Statement of
Additional Information, in reliance upon the authority of said firm as experts
in accounting and auditing in giving said report.
HISTORICAL FINANCIAL STATEMENTS
The following audited financial statements and footnotes thereto of the
Ranson Fund, together with the Independent Auditor's Report, are incorporated
herein by reference from the Ranson Annual Report: the Statement of Assets and
Liabilities as of July 31, 1996, Statements of Operations for the fiscal year
ended July 31, 1996, Statement of Changes in Net Assets for the fiscal years
ending July 31, 1995 and July 31, 1996, Schedule of Investments as of July 31,
1996, the Financial Highlights, and the Notes to the Financial Statements.
The following audited financial statements and footnotes thereto of the
Heartland Fund, together with the Report of the Independent Public Accountants
thereon, are incorporated herein by reference from the Heartland Annual Report:
the Statement of Assets and Liabilities as of December 31, 1995, Statement of
Operations for the year ended December 31, 1995, Statement of Changes in Net
Assets for the years ending December 31, 1994 and 1995, Schedule of Investments
as of December 31, 1995, the Financial Highlights, and the Notes to the
Financial Statements.
The following unaudited financial statements and footnotes thereto of the
Heartland Fund, are incorporated by reference from the Heartland Semi-Annual
Report: the Statement of Assets and Liabilities as of June 30, 1996, Statement
of Operations for the six months ending June 30, 1996, Statement of Changes in
Net Assets for the six months ending June 30, 1996, Schedule of Investments as
of June 30, 1996, the Financial Highlights, and the Notes to the Financial
Statements.
PRO FORMA FINANCIAL STATEMENTS
Set forth below are the following unaudited pro forma financial statements:
the unaudited Pro Forma Combining Statement of Assets and Liabilities for the
Ranson Fund and
-2-
<PAGE>
Heartland Fund as of July 31, 1996, assuming the Reorganization had been
consummated on that date; the unaudited Pro Forma Combining Statement of
Operations for the Ranson Fund and Heartland Fund for the year ended July 31,
1996, assuming the Reorganization had been consummated on August 1, 1995; and
the unaudited Pro Forma Combining Schedule of Investments of the Ranson Fund and
Heartland Fund as of July 31, 1996, assuming the Reorganization had been
consummated on that date.
This unaudited pro forma financial information should be read in
conjunction with, and is qualified in its entirety by, the historical financial
statements of the Ranson Fund and Heartland Fund incorporated by reference into
this Statement of Additional Information. These unaudited financial statements
are intended for information purposes only, and are not necessarily indicative
of the future financial position or future results of the Ranson Fund.
-3-
<PAGE>
THE NEBRASKA MUNICIPAL FUND AND
HEARTLAND NEBRASKA TAX FREE FUND PORTFOLIOS
Pro Forma Combining Statement of Assets and Liabilities
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
The Heartland
Nebraska Nebraska
Municipal Tax Free Pro Forma
Fund Fund Combined Adjustments Effect
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments:
Long-term investments in
securities. (See
schedule of investments) $18,717,989 $11,593,666 $30,311,655 $ -- $30,311,655
----------- ----------- ----------- ------------- -----------
Cash $ 26,382 $ 199,264 $ 225,646 $ -- $ 225,646
----------- ----------- ----------- ------------- -----------
Receivables:
Fund shares sold $ 20,498 $ -- $ 20,498 $ -- $ 20,498
Dividends and interest 245,827 148,102 393,929 -- 393,929
----------- ----------- ----------- ------------- -----------
Total receivables $ 266,325 $ 148,102 $ 414,427 $ -- $ 414,427
----------- ----------- ----------- ------------- -----------
Other assets $ 12,861 $ 7,302 $ 20,163 $ (7,302)(a) $ 12,861
----------- ----------- ----------- ------------- -----------
Total Assets $19,023,557 $11,948,334 $30,971,891 $ (7,302) $30,964,589
=========== =========== =========== ============= ===========
Liabilities:
Payables:
Security purchases payable $ 846,725 $ -- $ 846,725 $ -- $ 846,725
Dividends payable -- 9,366 9,366 13,865 (b) 23,231
Fund shares redeemed 81,160 53,851 135,011 -- 135,011
Accrued expenses 18,714 10,735 29,449 (21,167)(c) 8,282
----------- ----------- ----------- ------------- -----------
Total liabilities $ 946,599 $ 73,952 $ 1,020,551 $ (7,302) $ 1,013,249
----------- ----------- ----------- ------------- -----------
Net Assets
Capital stock $18,211,996 $12,605,369 $30,817,365 $ -- $30,817,365
Undistributed net realized
gains (losses) on investments (219,774) (302,255) (522,029) -- (522,029)
Net unrealized appreciation
(depreciation) on investments 84,736 (428,732) (343,996) -- (343,996)
----------- ----------- ----------- ------------- -----------
Total net assets $18,076,958 $11,874,382 $29,951,340 $ -- $29,951,340
----------- ----------- ----------- ------------- -----------
Total Liabilities and
Net Assets $19,023,557 $11,948,334 $30,971,891 $ (7,302) $30,964,589
=========== =========== =========== ============= ===========
Net asset value and redemption
price per share $ 11.00 $ 9.05 $ 11.00
=========== =========== ===========
Maximum offering price per share $ 11.49 $ 9.05 $ 11.49
=========== =========== ===========
Conversion Pro Forma
Shares Outstanding Adjustment Shares
Reconciliation
Net assets $18,076,958 $11,874,382 $29,951,340
Shares authorized Unlimited 100,000,000 Unlimited
Shares issued and outstanding 1,644,035 1,311,412 (232,598)(d) 2,722,849
Net asset value and
redemption price $ 11.00 $ 9.05 $ 11.00
</TABLE>
The accompanying notes to the pro forma combining financial statements are an
integral part of these statements.
-4-
<PAGE>
THE NEBRASKA MUNICIPAL FUND AND
HEARTLAND NEBRASKA TAX FREE FUND PORTFOLIOS
Pro Forma Combinnig Statement of Operations
for the Year Ended July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
The Heartland
Nebraska Nebraska
Municipal Tax Free Pro Forma
Fund Fund Combined Adjustments Effect
-------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $960,630 $728,398 $1,689,028 $ -- $1,689,028
Dividends 8,088 -- 8,088 -- 8,088
-------- -------- ---------- -------- ----------
Total investment income $968,718 $728,398 $1,697,116 $ -- $1,697,116
-------- -------- ---------- ----------- ----------
Expenses:
Investment advisory fees $ 84,492 $ 82,896 $ 167,388 $(19,130)(e) $ 148,258
Distribution fees 42,246 -- 42,246 31,883 (e) 74,129
Custodian fees 10,784 1,708 12,492 6,430 (e) 18,922
Transfer agent fees 45,119 14,886 60,005 19,166 (e) 79,171
Accounting service fees 35,320 8,507 43,827 18,149 (e) 61,976
Audit and legal fees 2,870 8,574 11,444 (5,722)(f) 5,722
Printing and postage 3,124 5,795 8,919 (4,459)(f) 4,460
Insurance 435 -- 435 -- 435
Trustee's fees 1,210 4,007 5,217 (4,007)(f) 1,210
License fees, and registration 2,039 1,926 3,965 (1,926)(f) 2,039
Amortization of
organization costs 5,527 3,370 8,897 (3,370)(a) 5,527
-------- -------- ---------- ----------- ----------
Total expenses $233,166 $131,669 $ 364,835 $ 37,014 $ 401,849
Less expenses waived or
absorbed by the Fund's
manager 129,053 41,447 170,500 50,879 (g) 221,379
-------- -------- ---------- ----------- ----------
Net expenses $104,113 $ 90,222 $ 194,335 $(13,865)(g) $ 180,470
-------- -------- ---------- ----------- ----------
Net investment income $864,605 $638,176 $1,502,781 $ 13,865 $1,516,646
-------- -------- ---------- ----------- ----------
Net realized loss on
investments $(15,386) $(69,596) $ (84,982) $ -- $ (84,982)
Net unrealized appreciation
on investments 23,173 376,838 400,011 -- 400,011
-------- -------- ---------- ----------- ----------
Net realized and
unrealized gains on
investments $ 7,787 $307,242 $ 315,029 $ -- $ 315,029
-------- -------- ---------- ----------- ----------
Net increase in net assets
resulting from operations $872,392 $945,418 $1,817,810 $ 13,865 $1,831,675
======== ======== ========== =========== ==========
</TABLE>
The accompanying notes to the pro forma combining financial statements are an
integral part of these statements.
-5-
<PAGE>
THE NEBRASKA MUNICIPAL FUND AND
HEARTLAND NEBRASKA TAX FREE FUND PORTFOLIOS
Pro Forma Combining Schedule of Investments(b)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
The Heartland
Nebraska Nebraska
Municipal Tax Free
Fund Fund Pro Forma
Coupon Ppincipal Portfolio Portfolio Combined
Description Rate Maturity Amount Value Value Value
- ----------------------------------------------- --------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
GENERAL OBLIGATION (11.90%)
Douglas County, NE (Law
Enforcement Center) G.O. 95 5.750% 07/01/10 $ 275,000 $ 281,988 $ $ 281,988
Lincoln, NE G.O.
Strm Swr & Drng System 95 5.500 06/01/14 200,000 198,150 198,150
Lincoln, NE G.O.
Strm Swr & Drng System 95 5.500 06/01/15 200,000 196,718 196,718
Lincoln, NE G.O. Various Purpose 95 5.500 12/01/15 200,000 195,254 195,254
Lincoln/Lancaster Counties,
NE Publ Bldg. Comm. Rev. 5.875 10/15/23 850,000 837,768 837,768
Omaha, NE Various Purpose 94 6.250 12/01/12 250,000 263,730 263,730
Omaha, NE Various Purpose 94 6.250 12/01/14 250,000 261,508 261,508
Arapahoe, NE Various Purpose 5.400 11/15/08 55,000 55,970 55,970
Arapahoe, NE Various Purpose 5.450 11/15/09 25,000 25,188 25,188
Arapahoe, NE Various Purpose 5.500 11/15/13 70,000 67,113 67,113
Dawson County, NE Sanitation and
Improvement District 6.950 12/01/05 125,000 126,746 126,746
Hastings, NE Various Purpose
Bonds - Series 1993 5.550 07/15/11 25,000 25,045 25,045
Hemingford, NE Ref. (Gen Oblig) 5.600 02/15/12 115,000 113,419 113,419
Lincoln, NE Parking Rev Bonds 5.100 08/15/12 170,000 156,825 156,825
Lincoln, NE Parking Rev Bonds 5.200 08/15/13 285,000 263,625 263,625
Lincoln, NE Parking Rev Bonds 5.200 08/15/14 215,000 197,263 197,263
Papillion, NE Var Pur Series 1994B 6.150 07/01/12 105,000 106,181 106,181
Washington County, NE GO Courthouse 5.200 01/01/08 40,000 39,600 39,600
Washington County, NE GO Courthouse 5.450 01/01/14 160,000 153,395 153,395
---------- ---------- ----------
$2,235,116 $1,330,370 $3,565,486
---------- ---------- ----------
FINANCIAL/BUSINESS SERVICES (12.08%)
NE Hgr. Educ. Loan Pgm.
Jr. Subord. Term 93-2 A-6 6.450% 06/01/18 $ 400,000 $ 402,048 $ $ 402,048
NE Hgr. Educ. Loan Pgm.
Sr/Sub. Term 93-2 A-5B 6.250 06/01/18 750,000 736,343 736,343
NE Educational Finance Auth. --
Midland Lutheran College 6.250 06/15/15 100,000 97,760 97,760
Nebraska Higher Education LN
Program - Series A 6.250 06/01/18 50,000 50,327 50,327
Nebraska Higher Education LN
Program - Series B 5.875 06/01/14 1,350,000 1,312,875 1,312,875
NE Investment Finance Auth. --
Gr. Plains Med. Center 6.500 05/15/14 150,000 153,375 153,375
NE Investment Finance Auth. --
Single Family Mtg. 7.900 08/15/14 10,000 10,000 10,000
NE Investment Finance Auth. --
FHA - Muirfield Greens 6.800 12/01/15 290,000 305,588 305,588
NE Investment Finance Auth. -
FHA - Muirfield Greens 6.850 12/01/25 525,000 551,906 551,906
---------- ---------- ----------
$1,138,391 $2,481,831 $3,620,222
---------- ---------- ----------
</TABLE>
-6-
<PAGE>
Schedule of Investments (continued)
<TABLE>
<CAPTION>
The Heartland
Nebraska Nebraska
Municipal Tax Free
Fund Fund Pro Forma
Coupon Principal Portfolio Portfolio Combined
Description Rate Maturity Amount Value Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
HOUSING (6.84%)
Neb. Invst. Fin. Auth. (Muirfield) Multifam.
Rev. 92 6.800% 12/01/15 $100,000 $ 100,272 $ $ 100,272
Neb. Investment Finance Auth.
Single Family Mtg. Rev. 6.600 09/01/20 740,000 735,464 735,464
Neb. Invst. Finance Auth.
Single Family Hsg. Rev. 95 A 6.500 09/01/18 400,000 390,932 390,932
Nebraska Invst. Finance Auth.
Single Family Mtg. Rev. 5.950 03/01/27 250,000 244,158 244,158
NE Invt. Fin. Auth.
Multifamily Housing Rev. 6.200 06/01/28 500,000 477,940 477,940
La Vista, NE Fac Corp Rev. 5.400 12/15/10 40,000 37,780 37,780
La Vista, NE Fac Corp Rev. 5.400 12/15/11 65,000 60,938 60,938
---------- ----------- ----------
$1,948,766 $ 98,718 $2,047,484
---------- ----------- ----------
INSURED/GUARANTEED (17.65%)
Douglas County, NE SD #17 (Millard)
G.O. 94C MBIA Insured 5.650% 12/15/05 $400,000 $ 415,748 $ $ 415,748
Cass Co., NE USD #1
Genl. Oblig. FGIC Insured 6.350 12/01/19 300,000 309,612 309,612
Lincoln, NE (Lincoln Genl. Hosp.)
Rev. & Ref. 93A CGIC Insured 6.200 12/01/14 100,000 102,906 102,906
Neb. MuniEnergy Agcy Pwr. Sup Sys.
Rev. Ref. 92A AMBAC Insured 6.000 04/01/17 500,000 508,270 508,270
Otoe County, NE SD #111 (Nebraska
City) Ref. 95AMBAC Insured 5.800 11/15/14 400,000 402,448 402,448
Buffalo Co., NE (Srs. Char. Hlth. Care)
Hosp. Rev 91 MBIA Insured 6.375 05/15/04 250,000 268,590 268,590
Buffalo Co., NE (Srs. Char. Hlth. Care)
Rev 91 MBIA Insured 6.625 05/15/09 300,000 323,235 323,235
LancCo., NE (Bryan Meml Hosp.)
Auth. #1 Rev. 92 MBIA Insured 6.600 06/01/12 100,000 107,403 107,403
LancCo., NE (Bryan Meml Hosp.)
Auth. #1 Rev. 92 MBIA Insured 6.700 06/01/22 250,000 265,687 265,687
Nebraska Educ Fin Auth (Creighton
Univ) Rev. 94 MBIA Insured 5.700 11/01/04 450,000 462,083 462,083
Northeast Nebraska Solid Waste
Facility Rev. MBIA 5.900 05/15/15 600,000 589,938 589,938
Lincoln, NE (Lincoln Genl. Hosp.)
Rev. & Ref. 93B CGIC Insured 6.200 12/01/14 50,000 51,453 51,453
Douglas Cty, NE Hosp. Dist. #2
Rev. MBIA Insured 5.500 11/15/21 340,000 329,460 329,460
Gage Cty, NE SD #15 Gen Oblig
AMBAC Insured 5.900 12/15/16 850,000 846,863 846,863
NE Education Fin. Auth. (Creighton
Univ.) Rev. AMBAC Insured 5.950 01/01/11 300,000 303,285 303,285
---------- ----------- ----------
$5,286,981 $ -- $5,286,981
---------- ----------- ----------
</TABLE>
-7-
<PAGE>
Schedule of Investments (continued)
<TABLE>
<CAPTION>
THE HEARTLAND
NEBRASKA NEBRASKA
MUNICIPAL TAX FREE
FUND FUND PRO FORMA
COUPON PRINCIPAL PORTFOLIO PORTFOLIO COMBINED
DESCRIPTION RATE MATURITY AMOUNT VALUE VALUE VALUE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
MEDICAL CARE (2.89%)
Univ. of Neb. Facs. Corp. (U. of NE
Med. Ctr.) Rev. Ref. 93 5.250% 07/01/11 $250,000 $242,072 $ $242,072
Scotts Bluff Co., NE (Reg II West
Med. Ctr.) Hosp Rev 92 6.450 12/15/04 275,000 292,342 292,342
Boone County, NE -- Boon County
Health Center Project 5.400 12/15/13 150,000 140,438 140,438
Hall County NE, Hosp. Auth.
Regency Retirement 5.450 12/01/08 40,000 36,845 36,845
HalL County NE, Hosp. Auth.
Regency Retirement 5.500 12/01/09 35,000 32,099 32,099
Hall County NE, Hosp. Auth.
Regency Retirement 5.500 12/01/10 45,000 40,894 40,894
Hall County NE, Hosp. Auth.
Regency Retirement 6.000 12/01/18 85,000 78,413 78,413
-------- -------- --------
$534,414 $328,689 $863,103
-------- -------- --------
REAL ESTATE (2.56%)
Omaha, NE Prkg. Facs Corp.
(Omaha Park 4/5) Lse. Rev. 95 Aa-1 5.700% 09/15/15 $750,000 $740,385 $ $740,385
David City, NE Industrial Dev Rev 6.400 12/15/02 25,000 25,906 25,906
-------- -------- --------
$740,385 $ 25,906 $766,291
-------- -------- --------
SCHOOL (15.74%)
Chadron St College, NE Student
Fees & Facs. Rev. Ref. 94 5.700% 07/01/11 $240,000 $232,606 $ $232,606
Univ of Neb (Omaha Student Ctr)
Brd. of Rgts. Rev. 93 5.250 05/15/10 250,000 244,237 244,237
Douglas Co., NE SD #1 (Omaha)
G.O. Ref. 93 B 5.000 12/15/11 200,000 190,410 190,410
Dawson Cty, NE (Lexington) SD #1 G.O. 5.350 12/15/11 125,000 121,367 121,367
Dawson Cty, NE (Lexington) SD #1 G.O. 5.400 12/15/12 135,000 130,864 130,864
Dawson Cty, NE (Lexington) SD #1 G.O. 5.450 12/15/13 115,000 111,248 111,248
Dawson Cty, NE (Lexington) SD #1 G.O. 5.450 12/15/14 140,000 135,282 135,282
Lancaster Cty, NE (Lincoln) SD #1 G.O. 5.600 07/15/06 150,000 151,830 151,830
Washington Cty, NE (Blair) SD #1 G.O. 5.900 07/15/15 135,000 135,486 135,486
Antelope County, NE SD - Series A 5.250 12/15/12 25,000 23,487 23,487
Antelope County, NE SD - Series B 5.250 12/15/12 40,000 37,579 37,579
Antelope County, NE SD - Series A 5.300 12/15/13 20,000 18,754 18,754
Antelope County, NE SD - Series B 5.300 12/15/13 45,000 42,197 42,197
Antelope County, NE SD - Series A 5.350 12/15/14 25,000 23,531 23,531
Antelope County, NE SD - Series B 5.350 12/15/14 45,000 42,356 42,356
Cass County, NE School District #1 6.250 12/01/14 300,000 312,960 312,960
Cedar County, NE School District #45 5.250 11/15/10 245,000 245,613 245,613
Cedar County, NE School District #45 5.350 11/15/14 100,000 93,625 93,625
Dixon County, NE, Ponca Pub Schools 4.800 12/01/05 55,000 52,731 52,731
Kearney County, NE SD #503 6.150 12/15/12 100,000 100,281 100,281
Merrick County, NE SD #49 6.200 07/01/10 45,000 45,148 45,148
Merrick County, NE SD #49 6.250 07/01/14 50,000 50,125 50,125
Merrick County, NE SD #4 5.350 01/15/11 100,000 93,525 93,525
Merrick County, NE SD #4 5.350 01/15/12 100,000 93,250 93,250
Nebraska State Colleges Brd of Trustees 5.700 07/01/11 300,000 288,375 288,375
Nebraska State Educational Serv Unit #3 5.500 06/01/13 450,000 434,250 434,250
Saunders County, NE SD #9 5.400 12/01/14 75,000 70,616 70,616
Saunders County, NE SD #9 5.450 12/01/16 235,000 221,854 221,854
Saunders County, NE SD #9 5.450 12/01/17 125,000 117,834 117,834
Saunders County, NE SD #9 5.500 12/01/18 25,000 23,688 23,688
Stanton County, NE SD #003 5.300 11/15/12 200,000 190,000 190,000
University of Nebraska-Omaha Student Ctr. 5.350 05/15/13 350,000 341,373 341,373
</TABLE>
-8-
<PAGE>
Schedule of Investments (continued)
<TABLE>
<CAPTION>
The Heartland
Nebraska Nebraska
Municipal Tax Free
Fund Fund Pro Forma
Coupon Principal Portfolio Portfolio Combined
Description Rate Maturity Amount Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
University of Nebraska-Omaha Student Ctr. 5.250 05/15/14 200,000 196,250 196,250
Washington County, NE School District 5.800 07/15/11 100,000 100,250 100,250
----------- ----------- -----------
$ 1,453,330 $ 3,259,652 $ 4,712,982
----------- ----------- -----------
Utilities (27.89%)
Hastings, NE Electric Rev. 6.300% 01/01/19 $ 370,000 $ 380,663 $ 380,663
Hastings, NE Electric System
Rev. Ref. 93 5.200 01/01/13 100,000 93,875 93,875
Lincoln, NE Electric System Rev's Aa 5.750 09/01/16 750,000 744,435 744,435
Nebraska Pub Pwr Dist Power
Supply System Rev. 93 6.125 01/01/15 390,000 395,756 395,756
Nebraska Pub Pwr Dist Power
Supply System Rev. 93 5.750 01/01/20 750,000 730,890 730,890
Omaha, NE Pub Pwr Dist Electric
System Rev. 93B 5.700 02/01/17 250,000 246,580 246,580
Omaha, NE Pub Pwr Dist Electric
System Rev. 86A 6.000 02/01/15 330,000 326,545 326,545
Omaha, NE Pub Pwr Dist Electric
System Rev. 92B 6.200 02/01/17 500,000 516,790 516,790
Grand Island, NE Sewer System
Revenue 94 6.000 04/01/14 250,000 257,035 257,035
Kearney, NE Comb Utilities Rev. 94 6.100 06/01/14 400,000 395,600 395,600
Lincoln, NE Water Rev. and Ref. 93 5.300 08/15/11 200,000 196,686 196,686
Consumer's Public Power District 5.100 01/01/03 15,000 15,000 15,000
Hastings, NE Electrical Systems 5.200 01/01/13 270,000 248,400 248,400
Kearney, NE Comb Utility Rev Bonds 6.100 06/01/14 200,000 203,994 203,994
Lincoln, NE Electrical Syst - Series A 5.250 09/01/15 960,000 898,714 898,714
Municipal Energy Agency of NE 6.000 04/01/17 500,000 510,045 510,045
Nebraska Pub Power Dist - Series C 5.000 01/01/09 100,000 95,299 95,299
Nebraska Pub Power Dist - Series B 5.250 01/01/13 600,000 567,048 567,048
Nebraska Pub Power Dist - Series C 5.000 01/01/17 1,000,000 898,010 898,010
Omaha, NE Pub Power Dist - Series B 5.600 02/01/12 80,000 79,372 79,372
Omaha, NE Public Power District 5.300 02/01/18 590,000 552,618 552,618
----------- ----------- -----------
$ 4,284,855 $ 4,068,500 $ 8,353,355
----------- ----------- -----------
Total Municipal Bonds 17,622,238 $11,593,666 $29,215,904
---------- ----------- -----------
Short Term Tax-Exempt Securities
Federated tax free trust $ 1,095,751 $ -- $ 1,095,751
----------- ----------- -----------
Total Investments in Securities $18,717,989 $11,593,666 $30,311,655
=========== =========== ===========
</TABLE>
Percentages shown are a percent of combined net assets.
The accompanying notes are an integral part of these financial statements.
-9-
<PAGE>
THE NEBRASKA MUNICIPAL FUND AND
HEARTLAND NEBRASKA TAX FREE FUND
Notes to Pro Forma Combining Financial Statements
July 31, 1996
(Unaudited)
Summary of Pro Forma Financial Statements and Assumptions
The Reorganization to which the foregoing pro forma financial statements
relate involves the transfer of all assets of the Heartland Nebraska Tax Free
Fund (net of its liabilities) to the Nebraska Municipal Fund, in exchange for
shares of common stock of The Nebraska Municipal Fund, and the pro rata
distribution, on the closing date, of such shares of The Nebraska Municipal Fund
to the shareholders of the Heartland Nebraska Tax Free Fund as provided in the
plan. The Funds will not be responsible for any of the expenses associated with
the Reorganization which are estimated at $45,000.
The foregoing unaudited pro forma financial statements consist of: (i) Pro
Forma Combining Statements of Assets and Liabilities as of July 31, 1996,
assuming the Reorganization had been consummated on that date; (ii) Pro Forma
Combining Statement of Operations for the year ended July 31, 1996, giving
effect to the Reorganization as if it had been consummated on August 1, 1995;
and (iii) Pro Forma Combining Schedule of Investments as of July 31, 1996,
assuming the Reorganization had been consummated on that date.
Because of the similarities in the investment objectives and policies of
the Heartland Nebraska Tax Free Fund and The Nebraska Municipal Fund, and the
fact that all of the portfolio securities of the Heartland Nebraska Tax Free
Fund are eligible for investment by The Nebraska Municipal Fund, it is not
anticipated that any securities held by either Fund will be sold before or after
the Reorganization, other than in the ordinary course of business. Accordingly,
the presentation of the Pro Forma Combining Schedule of Investments assumes that
the investment manager will not sell any of the securities in connection with
the Reorganization. Therefore, no adjustment column is presented.
The pro forma adjustments to the foregoing pro forma combining financial
statements consist of:
a. The adjustment to other assets in the Pro Forma Combining
Statement of Assets and Liabilities reflects the write off of the remaining
deferred organization costs of the Heartland Nebraska Tax Free Fund in
connection with the Reorganization. The adjustment to amortization of
organization costs in the Pro Forma Combining Statement of Operations
reflects the fact that such amortization will not occur if remaining
deferred organization costs are written off.
b. Assumes the reduction in pro forma net expenses is distributed to
the shareholders of the Combined Fund.
c. Reflects the adjustments made to pro forma net expenses as shown
on the Pro Forma Combining Statement of Operations and described in notes
e, f and g below, and the adjustment for forgiveness of the amount payable
to the adviser for deferred organization costs.
d. In the Reorganization, The Nebraska Municipal Fund will issue a
number of its shares equal to the amount obtained by dividing the total net
asset value of the Heartland Tax Free Fund by the net asset value per share
of the Nebraska Municipal Fund. These newly issued Nebraska Municipal Fund
shares will then be distributed to the Heartland Nebraska Tax Free Fund
shareholders in exchange for the then outstanding Heartland Nebraska Tax
Free Fund shares which will be canceled. As a consequence, a share
reconciliation representing the difference between the number of The
Nebraska Municipal Fund shares to be issued in the Reorganization and the
number of Heartland Nebraska Tax Free Fund shares given up in the
Reorganization is shown. The share reconciliation represents a decrease in
the number of outstanding shares of the Combined Fund because of net asset
value per share of The Nebraska Municipal Fund is higher than that of the
Heartland Nebraska Tax Free Fund.
e. The adjustments to the investment advisory fee, distribution fee,
custodian fee, transfer agent fee, and accounting service fee reflect the
increase (decrease) in expenses assuming the Combined Fund operated under
The Nebraska Municipal Fund's fee structure for the entire year ended July
31, 1996.
f. Reductions in audit and legal fees, printing and postage,
trustees' fees, license, registration, and other fees reflect the
elimination of duplicative costs.
g. The adjustment to expenses waived or absorbed by the Fund's
manager and resulting net expenses assumes the Combined Fund operated under
The Nebraska Municipal Fund's fee structure for the entire year ended July
31, 1996.
-10-
<PAGE>
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
The following is a summary of the rights of indemnification set forth in
the Agreement and Declaration of Trust of Registrant (see Exhibit 1.1).
Article VIII of the Agreement and Declaration of Trust of Registrant provides
generally that any person who is or has been a trustee or officer of Registrant
(including persons who serve at the request of Registrant as directors, trustees
or officers of another organization and including persons who served as officers
and directors of the Registrant) shall be indemnified by Registrant to the
fullest extent permitted by law against liabilities and expenses reasonably
incurred by such person in connection with any claim, suit or proceeding in
which such person becomes involved as a party or otherwise by virtue of being or
having been such a trustee, director or officer and against amounts incurred in
settlement thereof. It is further provided in such Agreement and Declaration of
Trust that no indemnification shall be provided in the event that it is
determined that such person was engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office or that such person did not act in good faith in the reasonable belief
that his action was in the best interests of Registrant. In the event of a
settlement or other disposition not involving a final determination of the
foregoing matters by a court or other body, no indemnification shall be provided
unless such determination is made by a vote of a majority of the "disinterested"
trustees acting on the matter or a written opinion of independent legal counsel.
The right to indemnification as so provided may be insured against by policies
maintained by the Registrant and shall continue as to any person who has ceased
to be a trustee or officer of Registrant.
Expenses of preparation and presentation of a defense by a person claiming
indemnification may be advanced by Registrant provided generally that such
person undertakes to repay any such advances if it is ultimately determined that
he is not entitled to indemnification and provided that either such undertaking
is secured by appropriate security or a majority of the "disinterested" trustees
acting on the matter or independent legal counsel in a written opinion
determines that there is reason to believe that such person ultimately will be
found entitled to indemnification.
The Agreement and Declaration of Trust provides further that in the event
that any shareholder or former shareholder shall be found to be personally
liable solely by reason of his being a shareholder and not because of acts or
omissions of such person, such shareholder shall be entitled out of assets of
the Registrant to be indemnified against all loss and expense arising from such
liability (provided there is no liability to reimburse any shareholder for taxes
paid by reason of such shareholder's ownership of shares or for losses suffered
by reason of any changes in value of any of Registrant's assets).
<PAGE>
The Agreement and Declaration of Trust (Article IV, Section 2(o)) provides
specifically that the trustees have the power to purchase and pay for insurance
out of assets of Registrant as they deem necessary or appropriate for the
conduct of its business including policies insuring shareholders, trustees,
officers, employees, agents, investment managers, principal underwriters or
independent contracts or Registrant against claims or liabilities arising by
reason of such persons holding or having held any such office or position with
Registrant or by reason of any action alleged to have been taken or omitted by
such person in such office or position including any action taken or omitted
that may be determined to constitute negligence whether or not the Registrant
would have the power to indemnify such person against such liability.
The provisions with respect to indemnification in the Agreement and
Declaration of Trust of Registrant do not affect any rights of indemnification
that persons other than those specifically covered may have whether under
contract or otherwise under law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the provisions of Registrant's Agreement and Declaration
of Trust, or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liability (other than
the payment by the Registrant of expenses incurred or paid by a trustee, officer
or controlling person of Registrant in the successful defense of any action,
suit or proceeding) as asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 16. Exhibits
See Exhibit Index following the Signature Page of this Registration
Statement, which Exhibit Index is incorporated herein by reference.
Item 17. Undertakings
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities
Act, the reoffering prospectus will contain the information called for
by the applicable registration form for the reofferings by persons who
may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
(3) The Registrant agrees to file, by post-effective amendment, an
opinion of counsel supporting the tax consequences of the proposed
Reorganization promptly after receipt of such opinion.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned duly
authorized in the City of Minot, in the State of North Dakota on the 14th day of
October, 1996.
Ranson Managed Portfolios
by /s/ Robert E. Walstad
--------------------------
Robert E. Walstad, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 14th day of October, 1996:
Signatures Title
/s/ Robert E. Walstad Trustee, Chairman of the Board,
---------------------- President and Treasurer (Principal
Robert E. Walstad Executive Officer and Principal
Accounting Officer)
/s/ Lynn W. Aas Trustee
- -----------------------
Lynn W. Aas
/s/ Orlin W. Backes Trustee
- -----------------------
Orlin W. Backes
/s/ Arthur A. Link Trustee
- -----------------------
Arthur A. Link
-3-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1.1. Agreement and Declaration of Trust dated August 10, 1990 (incorporated
by reference to Form N-1A [File No. 33-36324] filed on behalf of
Ranson Managed Portfolios -- The Kansas Municipal Fund).
2.1. By-Laws (incorporated by reference to Form N-1A [File No. 33-36324]
filed on behalf of Ranson Managed Portfolios -- The Kansas Municipal
Fund).
3.1. Not applicable.
4.1. Agreement and Plan of Reorganization: See Exhibit I to Part A of this
Registration Statement.
5.1. Not applicable.
6.1. Management and Investment Advisory Agreement between Registrant and
Ranson Capital Corporation.(1)
7.1. Distribution and Services Agreement between Registrant and Ranson
Capital Corporation.(1)
7.2. Form of Dealer's Agreement.(1)
9.1. Custodian Agreement between Registrant and First Western Bank & Trust
(incorporated by reference to Form N-1A [File No. 33-36324] filed on
behalf of Ranson Managed Portfolios -- The Oklahoma Municipal Fund).
10.1. Form of Accounting and Administrative Services Agreements between
Registrant and ND Resources, Inc. (incorporated by reference to
Form N-1A [File No. 33-36324] filed on behalf of Ranson Managed
Portfolios -- The Oklahoma Municipal Fund).
10.2. Shareholder Services Plan between the Ranson Fund and Ranson Capital
Corporation.(1)
11.1. Opinion and Consent of Chapman and Cutler.(2)
12.1. Tax Opinion Relating to Reorganization and Consent of Chapman and
Cutler (to be filed in a post-effective amendment).
14.1. Consent of Brady, Martz & Associates, P.C.(2)
14.2. Consent of Arthur Andersen LLP.(2)
15.1. Not applicable.
17.1. Declaration of Registrant under Rule 24f-2.(2)
17.2. Form of Proxy.
</TABLE>
- ----------------
(1) Previously filed as part of Registrant's Registration Statement on Form
N-1A [File No. 33-36324], Post-Effective Amendment No. 11 and incorporated
by reference herein.
(2) Incorporated by reference to the initial Registration Statement filed on
Form N-14 for Registrant.
-4-
<PAGE>
Exhibit 17.2
HEARTLAND GROUP, INC.
HEARTLAND NEBRASKA TAX FREE FUND
REVOCABLE PROXY FOR SPECIAL MEETING OF SHAREHOLDERS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints William J. Nasgovitz and Patrick J. Retzer, and
each of them, as attorneys-in-fact and proxies of the undersigned, with full
power of substitution, to vote all shares of stock the undersigned is entitled
to vote at the Special Meeting of Shareholders of Heartland Nebraska Tax Free
Fund to be held on Monday, December 2, 1996 at 4:00 p.m., local time at The
Omaha Marriott, 10220 Regency Circle, Omaha, Nebraska 68114 or at any
adjournment thereof, with respect to the matters set forth on this proxy and
described in the Notice of a Special Meeting of Shareholders and Combined Proxy
Statement and Prospectus, receipt of which is hereby acknowledged.
Dated:________________________________ , 1996
_____________________________________________
(Please sign exactly as name appears at left.)
____________________________________________
(If stock is owned by more than one person,
all owners should sign. Persons signing as
executors, administrators, trustees or in
similar capacities should so indicate.)
<PAGE>
Shares represented by this proxy will be voted as directed by the stockholder.
IF NO DIRECTION IS SUPPLIED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
- --------------------------------------------------------------------------------
1. To approve the Agreement and Plan of Reorganization (as described in the
Combined Proxy Statement and Prospectus) and the transactions contemplated
thereby, including the acquisition of all the assets, and assumption of the
stated liabilities, of the Heartland Nebraska Tax Free Fund ("Heartland
Fund") by The Nebraska Municipal Fund, an investment portfolio of Ranson
Managed Portfolios ("Ranson Fund"), the issuance to the Heartland Fund of
Ranson Fund shares in connection therewith, the distribution of such shares
to the Heartland Fund shareholders in liquidation of the Heartland Fund,
and the cancellation of the outstanding shares of the Heartland Fund.
For [_] Against [_] Abstain [_]
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the meeting.
For Against Abstain
- --------------------------------------------------------------------------------
continued and to be signed on the reverse side
