N-Q 1 v407414_nq.htm N-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act File number: 811-04982

 

Heartland Group, Inc.

(Exact name of registrant as specified in charter)

 

 

789 N. Water Street, Suite 500, Milwaukee, WI   53202
(Address of principal executive offices)   (Zip code)

 

Vinita K. Paul, Vice President and Chief Compliance Officer

Heartland Group, Inc., 789 N. Water Street, Suite 500, Milwaukee, WI 53202

(Name and address of agent for service)

 

Ellen Drought; Godfrey & Kahn, S.C., 780 N. Water Street, Milwaukee, WI 53202

(With a copy to:)

 

Registrant’s telephone number, including area code: (414) 347-7777

 

 

Date of fiscal year end: December 31, 2015

 

 

Date of reporting period: March 31, 2015

 

 
 

Item 1. Schedule of Investments.

 

 

 

SELECT VALUE FUND - SCHEDULE OF INVESTMENTS  
March 31, 2015 (Unaudited)   
   
    SHARES VALUE
COMMON STOCKS (96.7%)
Airlines (3.0%)
JetBlue Airways Corp.(a) 650,000 $12,512,500
         
Automobiles (0.7%)
Ford Motor Co. 193,499  3,123,074
         
Building Products (2.8%)
Universal Forest Products, Inc. 215,000  11,928,200
         
Capital Markets (1.8%)
The Bank of New York Mellon Corp. 190,000  7,645,600
         
Chemicals (2.9%)
LSB Industries, Inc.(a) 190,000  7,852,700
The Mosaic Co. 95,000  4,375,700
   

12,228,400

Commercial Banks (9.6%)
BB&T Corp. 290,000  11,307,100
Boston Private Financial Holdings, Inc. 770,000  9,355,500
First Interstate BancSystem, Inc. (Class A) 200,000  5,564,000
The PNC Financial Services Group, Inc. 150,000  13,986,000
   

40,212,600

Commercial Services & Supplies (6.1%)
The ADT Corp. 275,000  11,418,000
United Stationers, Inc. 350,000  14,346,500
   

25,764,500

Communications Equipment (4.7%)
ADTRAN, Inc. 330,000  6,161,100
Cisco Systems, Inc. 500,000  13,762,500
   

19,923,600

Consumer Finance (3.6%)
Capital One Financial Corp. 190,000  14,975,800
         
Diversified Telecommunication Services (1.6%)
AT&T, Inc. 200,000  6,530,000
         
Electronic Equipment & Instruments (2.9%)
Fabrinet(a) 650,000  12,343,500
         
Energy Equipment & Services (3.2%)
Tidewater, Inc.(b) 400,000  7,656,000
Unit Corp.(a) 200,000  5,596,000
   

13,252,000

Food Products (3.3%)
Bunge, Ltd. 168,228  13,855,258
         

 

    SHARES VALUE
Health Care Providers & Services (8.7%)
Owens & Minor, Inc. 193,499  $6,548,006
Quest Diagnostics, Inc. 240,000 18,444,000
Triple-S Management Corp.
(Class B)(a)
580,496  11,540,261
   

36,532,267

Hotels, Restaurants & Leisure (2.9%)
Royal Caribbean Cruises, Ltd. 150,000  12,277,500
         
Insurance (3.1%)
Principal Financial Group, Inc. 150,000  7,705,500
Symetra Financial Corp. 217,686  5,106,913
   

12,812,413

IT Services (2.0%)
Teradata Corp.(a) 193,499  8,541,046
         
Machinery (2.3%)
Oshkosh Corp. 193,499  9,440,816
         
Metals & Mining (0.6%)
Haynes International, Inc. 60,000  2,676,600
         
Multiline Retail (1.1%)
Fred's, Inc. (Class A) 266,060  4,546,965
         
Oil, Gas & Consumable Fuels (5.2%)
Devon Energy Corp. 75,000  4,523,250
Hess Corp. 96,749  6,566,354
Scorpio Tankers, Inc. 1,160,990  10,936,526
   

22,026,130

Paper & Forest Products (3.1%)
Boise Cascade Co.(a) 350,000  13,111,000
         
Pharmaceuticals (6.1%)
Pfizer, Inc. 400,000  13,916,000
Teva Pharmaceutical Industries, Ltd. (ADR) 190,000  11,837,000
   

25,753,000

Real Estate Investment Trusts (REITs) (4.6%)
Digital Realty Trust, Inc. 145,000  9,564,200
Franklin Street Properties Corp. 773,994  9,922,603
   

19,486,803

Semiconductors (4.0%)
Photronics, Inc.(a) 1,552,556  13,196,726
Teradyne, Inc. 200,000  3,770,000
   

16,966,726

Software (1.3%)
CA, Inc. 169,311  5,521,232
         
Specialty Retail (3.6%)
American Eagle Outfitters, Inc. 483,746  8,262,382
Murphy USA, Inc.(a) 96,749  7,001,725
   

15,264,107

 

    SHARES VALUE
Thrifts & Mortgage Finance (1.9%)
Washington Federal, Inc. 360,000 $7,849,800
         
TOTAL COMMON STOCKS    
(Cost $320,243,659)   $407,101,437
     
    INTEREST RATE PAR  
AMOUNT
VALUE
SHORT-TERM INVESTMENTS (3.4%)
Time Deposits (3.4%)
JPMorgan Chase (Nassau)(c)(d) 0.03% $14,413,156 $14,413,156
           
TOTAL SHORT-TERM INVESTMENTS  
(Cost $14,413,156)   $14,413,156
     
  INTEREST RATE SHARES VALUE
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (1.1%)
Registered Investment Companies (1.1%)
Invesco Treasury Portfolio Short-Term Investments Trust, Institutional Class(e) 0.01% 4,500,000 $4,500,000
   
TOTAL INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED  
(Cost $4,500,000)   $4,500,000
     
TOTAL INVESTMENTS - (101.2%)
(Cost $339,156,815)   $426,014,593
OTHER ASSETS AND LIABILITIES,   
NET - (-1.2%)
(5,251,496)
TOTAL NET ASSETS - (100.0%) $420,763,097
 

 
 

 

 

HEARTLAND MID CAP VALUE FUND - SCHEDULE OF INVESTMENTS  
March 31, 2015 (Unaudited)   
   
    SHARES VALUE
COMMON STOCKS (99.3%)
Aerospace & Defense (2.3%)
Textron, Inc. 2,232 $98,944
         
Auto Components (1.4%)
Autoliv, Inc. 525  61,829
         
Beverages (1.0%)
Molson Coors Brewing Co. (Class B) 568  42,288
         
Building Products (1.8%)
Owens Corning 1,780 77,252
         
Chemicals (0.9%)
Olin Corp. 1,207  38,672
         
Commercial Banks (12.9%)
First Horizon National Corp. 10,302  147,216
Huntington Bancshares, Inc. 10,516  116,202
Popular, Inc. 4,188  144,025
SunTrust Banks, Inc. 1,812  74,455
Zions Bancorporation 2,991  80,757
   

562,655

Commercial Services & Supplies (7.7%)
Brady Corp. (Class A) 3,462  97,940
The ADT Corp. 2,751  114,222
United Stationers, Inc. 3,071  125,880
   

338,042

Communications Equipment (1.7%)
Brocade Communications Systems, Inc. 6,168  73,183
         
Computers & Peripherals (4.4%)
Diebold, Inc. 3,016  106,947
Lexmark International, Inc. (Class A) 2,002  84,765
   

191,712

Containers & Packaging (3.2%)
Avery Dennison Corp. 1,466  77,566
Bemis Co., Inc. 1,325  61,361
   

138,927

Electric Utilities (2.4%)
FirstEnergy Corp. 3,001  105,215
         
Electronic Equipment & Instruments (4.7%)
Avnet, Inc. 2,492  110,894
AVX Corp. 6,790  96,893
   

207,787

Energy Equipment & Services (1.2%)
Unit Corp.(a) 1,908  53,386
         
Food Products (4.3%)
Bunge, Ltd. 1,359  111,927
Dean Foods Co. 4,654  76,931
   

188,858

    SHARES VALUE
Health Care Providers & Services (8.1%)
Health Net, Inc.(a) 861  $52,082
Humana, Inc. 156  27,771
Owens & Minor, Inc. 2,380  80,539
Quest Diagnostics, Inc. 2,535  194,815
   

355,207

Hotels, Restaurants & Leisure (1.9%)
Royal Caribbean Cruises, Ltd. 999  81,768
         
Insurance (11.6%)
Assurant, Inc. 719  44,154
Endurance Specialty Holdings, Ltd. 1,918  117,266
Principal Financial Group, Inc. 1,713  87,997
Reinsurance Group of America, Inc. 1,646  153,391
Symetra Financial Corp. 4,467  104,796
   

507,604

IT Services (7.2%)
ManTech International Corp.
(Class A)
2,453 83,255
Science Applications International Corp. 1,040  53,404
Teradata Corp.(a) 1,912  84,395
The Western Union Co. 4,495  93,541
   

314,595

Machinery (1.4%)
Joy Global, Inc. 1,566  61,356
         
Metals & Mining (0.8%)
Alcoa, Inc. 2,692  34,781
         
Oil, Gas & Consumable Fuels (2.9%)
Ultra Petroleum Corp.(a) 8,158  127,509
         
Professional Services (1.5%)
The Dun & Bradstreet Corp. 528  67,774
         
Real Estate Investment Trusts (REITs) (4.8%)
Digital Realty Trust, Inc. 2,132  140,627
Sun Communities, Inc. 1,071  71,457
   

212,084

Software (3.0%)
CA, Inc. 4,075  132,886
         
Specialty Retail (3.3%)
Abercrombie & Fitch Co. (Class A) 1,026  22,613
Murphy USA, Inc.(a) 989  71,574
Staples, Inc. 3,059  49,816
   

144,003

Thrifts & Mortgage Finance (2.0%)
Washington Federal, Inc. 4,017  87,591
         
Trading Companies & Distributors (0.9%)
Finning International, Inc. (CAD)(f) 2,200  40,924
         
TOTAL COMMON STOCKS    
(Cost $4,159,237)   $4,346,832
     
    INTEREST RATE PAR  
AMOUNT
VALUE
SHORT-TERM INVESTMENTS (1.3%)
Time Deposits (1.3%)
Brown Brothers Harriman
(Grand Cayman)(c)(d)
0.03% $55,069 $55,069
           
TOTAL SHORT-TERM INVESTMENTS  
(Cost $55,069)   $55,069
     
TOTAL INVESTMENTS - (100.6%)
(Cost $4,214,306)   $4,401,901
OTHER ASSETS AND LIABILITIES,
NET -  (-0.6%)
(26,247)
TOTAL NET ASSETS - (100.0%) $4,375,654
 

 


 
 

 

VALUE PLUS FUND - SCHEDULE OF INVESTMENTS  
March 31, 2015 (Unaudited)   
   
    SHARES VALUE
COMMON STOCKS (92.3%)
Building Products (5.0%)
Quanex Building
Products Corp.(g)
3,150,000 $62,181,000
Universal Forest
Products, Inc.(g)
906,241  50,278,251
   

112,459,251

Chemicals (4.9%)
Intrepid Potash, Inc.(a)(g) 3,887,000  44,894,850
Tronox, Ltd. (Class A) 1,300,000  26,429,000
Zep, Inc.(g) 2,200,000  37,466,000
   

108,789,850

Commercial Banks (10.5%)
Berkshire Hills Bancorp, Inc. 725,000  20,082,500
Capital Bank Financial Corp. (Class A)(a) 600,000  16,566,000
CenterState Banks, Inc. 1,575,000  18,758,250
Independent Bank Corp. 610,700  26,791,409
Old National Bancorp 2,750,000  39,022,500
Renasant Corp. 600,000  18,030,000
TCF Financial Corp. 1,750,000  27,510,000
Umpqua Holdings Corp. 2,500,000  42,950,000
Union Bankshares Corp. 1,126,526  25,020,142
   

234,730,801

Commercial Services & Supplies (3.5%)
Brady Corp.
(Class A)(g)
2,000,000  56,580,000
Quad/Graphics, Inc. 900,000  20,682,000
   

77,262,000

Communications Equipment (1.4%)
Acacia Research Corp. 1,500,000  16,050,000
Black Box Corp.(g) 753,277  15,766,088
   

31,816,088

Construction & Engineering (2.7%)
Granite Construction, Inc.(g) 1,725,000  60,616,500
         
Containers & Packaging (0.7%)
Greif, Inc. (Class A) 400,000  15,708,000
         
Diversified Consumer Services (3.5%)
Regis Corp.(a)(g) 4,773,767  78,098,828
         
Electrical Equipment (2.2%)
Encore Wire Corp.(g) 1,282,000  48,562,160
         
                     
    SHARES VALUE
Electronic Equipment & Instruments (5.8%)
CTS Corp.(g) 1,887,800  $33,961,522
Knowles Corp.(a) 2,800,000  53,956,000
Park Electrochemical Corp.(g) 1,900,000  40,964,000
   

128,881,522

Energy Equipment & Services (3.5%)
CARBO Ceramics, Inc. 625,000 19,068,750
Gulf Island Fabrication, Inc.(g) 1,125,000  16,717,500
Unit Corp.(a) 1,500,000  41,970,000
   

77,756,250

Food Products (2.8%)
Dean Foods Co. 3,800,000  62,814,000
         
Health Care Equipment & Supplies (2.4%)
Invacare Corp.(g) 2,737,413  53,133,186
         
Health Care Providers & Services (2.0%)
Owens & Minor, Inc. 1,300,000  43,992,000
         
Household Durables (3.0%)
MDC Holdings, Inc. 2,350,000  66,975,000
         
Insurance (0.7%)
OneBeacon Insurance
Group, Ltd. (Class A)
1,050,000  15,970,500
         
IT Services (3.3%)
Leidos Holdings, Inc. 775,000  32,519,000
ManTech International Corp. (Class A)(g) 1,250,000  42,425,000
   

74,944,000

Machinery (7.9%)
Albany International Corp.
(Class A)
650,000  25,837,500
Briggs & Stratton Corp.(g) 1,150,000  23,621,000
Dynamic Materials Corp.(g) 846,316  10,807,455
ESCO Technologies, Inc.(g) 725,000  28,260,500
Federal Signal Corp.(g) 3,126,202  49,362,730
FreightCar America, Inc.(g) 975,000  30,644,250
Twin Disc, Inc.(g) 477,975  8,445,818
   

176,979,253

Media (1.4%)
Harte-Hanks, Inc.(g) 4,121,800  32,150,040
         
Metals & Mining (3.4%)
Commercial Metals Co. 1,800,000  29,142,000
Materion Corp.(g) 1,200,000  46,116,000
   

75,258,000

Multiline Retail (2.1%)
Fred's, Inc. (Class A)(g) 2,732,473  46,697,964
         
                     
    SHARES VALUE
Oil, Gas & Consumable Fuels (5.1%)
Stone Energy Corp.(a) 1,700,000  $24,956,000
Ultra Petroleum Corp.(a) 2,810,981  43,935,633
WPX Energy, Inc.(a) 4,100,000  44,813,000
   

113,704,633

Professional Services (4.9%)
CDI Corp.(g) 1,657,083 23,282,016
Heidrick & Struggles International, Inc.(g) 1,775,000 43,629,500
Resources Connection, Inc.(g) 2,444,146  42,772,555
   

109,684,071

Semiconductors (3.9%)
Cypress Semiconductor Corp. 1,500,000  21,165,000
Entegris, Inc.(a) 2,300,000  31,487,000
MKS Instruments, Inc. 1,000,000  33,810,000
   

86,462,000

Specialty Retail (5.7%)
American Eagle Outfitters, Inc. 2,250,000  38,430,000
Chico's FAS, Inc. 3,500,000  61,915,000
Pier 1 Imports, Inc. 2,000,000  27,960,000
   

128,305,000

TOTAL COMMON STOCKS    
(Cost $1,862,302,445)    $2,061,750,897
     
    INTEREST RATE PAR  
AMOUNT
VALUE
SHORT-TERM INVESTMENTS (6.5%)
Time Deposits (6.5%)
JPMorgan Chase (Nassau) (c)(d) 0.03% $146,800,007 $146,800,007
           
TOTAL SHORT-TERM INVESTMENTS  
(Cost $146,800,007)   $146,800,007
     
TOTAL INVESTMENTS - (98.8%)
(Cost $2,009,102,452)     $2,208,550,904
OTHER ASSETS AND LIABILITIES,
NET - (1.2%)
  25,843,205
TOTAL NET ASSETS - (100.0%)   $2,234,394,109
 
                     

 
 

 

 

VALUE FUND - SCHEDULE OF INVESTMENTS  
March 31, 2015 (Unaudited)   
   
    SHARES VALUE
COMMON STOCKS (89.6%)
Aerospace & Defense (1.5%)
AAR Corp. 500,000 $15,350,000
CPI Aerostructures, Inc.(a) 100,000  1,220,000
   

16,570,000

Auto Components (1.5%)
Jason Industries, Inc.(a)(g) 1,200,000  8,496,000
Spartan Motors, Inc. 450,000  2,182,500
Stoneridge, Inc.(a) 500,000  5,645,000
   

16,323,500

Beverages (0.9%)
MGP Ingredients, Inc. 657,463  8,849,452
Primo Water Corp.(a) 217,500  1,137,525
   

9,986,977

Biotechnology (0.0%)(h)
Signal Genetics, Inc.(a)(g) 200,000 430,000
         
Building Products (0.5%)
Gibraltar Industries, Inc.(a) 350,000  5,743,500
         
Chemicals (0.2%)
Zep, Inc. 112,472  1,915,398
         
Commercial Banks (8.2%)
Capital City Bank Group, Inc. 400,000  6,500,000
CoBiz Financial, Inc. 932,896  11,493,279
Heritage Financial Corp. 478,000  8,126,000
MainSource Financial Group, Inc. 500,000  9,820,000
MidSouth Bancorp, Inc. 550,000  8,112,500
Pacific Continental Corp. 400,000  5,288,000
S&T Bancorp, Inc. 100,000  2,838,000
TCF Financial Corp. 1,250,000  19,650,000
TriCo Bancshares 377,320  9,104,731
TriState Capital Holdings, Inc.(a) 1,000,000  10,470,000
   

91,402,510

Commercial Services & Supplies (3.0%)
Fuel Tech, Inc.(a) 593,610  1,857,999
Hudson Technologies, Inc.(a)(g) 2,500,000  10,425,000
Perma-Fix Environmental Services, Inc.(a)(g) 821,400  3,170,604
TRC Cos., Inc.(a)(g)(i) 2,200,000  18,304,000
   

33,757,603

Communications Equipment (3.2%)
Acacia Research Corp. 1,600,000  17,120,000
AgJunction, Inc. (CAD)(a)(f)(g)(i) 5,571,500  3,431,187
InterDigital, Inc. 100,000  5,074,000
PC-Tel, Inc. 750,000  6,000,000
Westell Technologies, Inc.
(Class A)(a)(g)
2,864,386  3,752,346
   

35,377,533

    SHARES VALUE
Computers & Peripherals (0.4%)
QLogic Corp.(a) 300,000  $4,422,000
         
Construction & Engineering (1.0%)
Furmanite Corp.(a) 250,000  1,972,500
Northwest Pipe Co.(a) 400,000  9,180,000
   

11,152,500

Diversified Consumer Services (2.4%)
Lincoln Educational
Services Corp.(g)
2,385,469  5,438,869
Regis Corp.(a) 1,000,000  16,360,000
Universal Technical Institute, Inc. 500,000  4,800,000
   

26,598,869

Diversified Financial Services (0.6%)
Collection House, Ltd.
(AUD)(c)(f)
3,671,436 6,474,290
         
Electrical Equipment (2.1%)
Global Power Equipment
Group, Inc.
513,100  6,772,920
LSI Industries, Inc. 119,646  975,115
Magnetek, Inc.(a)(g) 299,999  11,555,961
Pioneer Power Solutions,
Inc.(a)(g)(i)
500,000  4,500,000
   

23,803,996

Electronic Equipment & Instruments (2.0%)
Checkpoint Systems, Inc. 400,000  4,328,000
CUI Global, Inc.(a) 750,000  4,395,000
Fabrinet(a) 400,000  7,596,000
Mercury Systems, Inc.(a) 100,000  1,555,000
Vishay Precision Group, Inc.(a) 250,000  3,982,500
   

21,856,500

Energy Equipment & Services (3.6%)
Newpark Resources, Inc.(a) 958,400  8,731,024
TETRA Technologies,
Inc.(a)
1,077,500  6,658,950
Unit Corp.(a) 600,000  16,788,000
Willbros Group, Inc.(a) 2,500,000  8,275,000
   

40,452,974

Food Products (0.8%)
Hanover Foods Corp.
(Class A)(c)(g)(i)
49,250  5,072,750
Landec Corp.(a) 300,000  4,185,000
   

9,257,750

Health Care Equipment & Supplies (7.5%)
Accuray, Inc.(a)(b)(j) 1,650,000  15,345,000
Digirad Corp.(g) 1,522,189  6,910,738
Fukuda Denshi Co., Ltd.
(JPY)(c)(f)(i)
400,000  22,567,682
Invacare Corp. 1,000,000  19,410,000
Trinity Biotech PLC
(Sponsored ADR)
1,000,000  19,250,000
   

83,483,420

    SHARES VALUE
Health Care Providers & Services (4.8%)
Cross Country Healthcare, Inc.(a) 700,000 $8,302,000
Hooper Holmes,
Inc.(a)(g)(i)
6,242,700  3,246,204
LHC Group, Inc.(a) 200,000  6,606,000
PDI, Inc.(a)(g) 1,490,000  2,011,500
PharMerica Corp.(a) 200,000  5,638,000
Sharps Compliance
Corp.(a)
17,200  109,220
The Ensign Group, Inc. 583,774  27,355,650
   

53,268,574

Hotels, Restaurants & Leisure (1.3%)
Bravo Brio Restaurant Group, Inc.(a)(g) 1,000,000  14,690,000
         
Household Durables (1.5%)
MDC Holdings, Inc. 350,000  9,975,000
WCI Communities,
Inc.(a)
300,000 7,185,000
   

17,160,000

Household Products (0.3%)
Oil-Dri Corp. of America 100,000  3,365,000
         
Insurance (2.4%)
Donegal Group, Inc. (Class A) 300,000  4,716,000
Endurance Specialty Holdings, Ltd. 250,000  15,285,000
State Auto Financial Corp. 300,000  7,287,000
   

27,288,000

Internet Software & Services (0.4%)
TechTarget, Inc.(a) 370,000  4,266,100
         
IT Services (3.5%)
Ciber, Inc.(a) 2,750,000  11,330,000
Computer Task Group, Inc. 601,332  4,395,737
Datalink Corp.(a) 250,000  3,010,000
NCI, Inc. (Class A)(g) 476,430  4,773,829
NeuStar, Inc.
(Class A)(a)
200,000  4,924,000
StarTek, Inc.(a)(g)(i) 1,400,000  10,430,000
   

38,863,566

Life Sciences Tools & Services (3.2%)
Albany Molecular Research, Inc.(a) 160,371  2,822,530
Cambrex Corp.(a) 700,000  27,741,000
Harvard Bioscience,
Inc.(a)
1,000,000  5,820,000
   

36,383,530


 
 
    SHARES VALUE
Machinery (8.3%)
Astec Industries, Inc. 450,000  $19,296,000
Commercial Vehicle Group,
Inc.(a)
750,000  4,830,000
Federal Signal Corp. 1,000,000  15,790,000
FreightCar America, Inc. 400,000  12,572,000
Harsco Corp. 300,000  5,178,000
L.B. Foster Co.
(Class A)
200,000  9,496,000
Lydall, Inc.(a) 500,000  15,860,000
MFRI, Inc.(a) 250,000  1,562,500
PMFG, Inc.(a)(b) 500,000  2,325,000
Supreme Industries, Inc.
(Class A)(g)
750,000  5,872,500
   

92,782,000

Marine (0.1%)
Rand Logistics, Inc.(a) 453,210  1,472,932
         
Metals & Mining (3.3%)
Ampco-Pittsburgh Corp. 350,000  6,111,000
IAMGOLD Corp.
(CAD)(a)(b)(f)
5,000,000  9,316,647
Olympic Steel, Inc. 500,000  6,730,000
Synalloy Corp. 400,000  5,824,000
Teranga Gold Corp.
(CAD)(a)(f)
10,000,000  5,053,097
Timmins Gold Corp.
(CAD)(a)(b)(f)
5,700,000 3,915,361
   

36,950,105

Multiline Retail (1.5%)
Fred's, Inc. (Class A) 1,000,000  17,090,000
         
Oil, Gas & Consumable Fuels (2.1%)
Aegean Marine Petroleum Network, Inc. 700,000  10,059,000
Scorpio Tankers, Inc. 550,000  5,181,000
WPX Energy, Inc.(a) 750,000  8,197,500
   

23,437,500

Paper & Forest Products (0.7%)
Wausau Paper Corp. 359,032  3,421,575
Western Forest Products, Inc. (CAD)(f) 3,000,000  4,666,219
   

8,087,794

Pharmaceuticals (0.8%)
Fuji Pharmaceutical Co., Ltd. (JPY)(c)(f) 500,000  9,417,963
         
Professional Services (4.7%)
Barrett Business Services,
Inc.(g)
500,000  21,420,000
Hudson Global, Inc.(a)(g)(i) 3,250,000  8,872,500
Navigant Consulting, Inc.(a) 1,200,000  15,552,000
RCM Technologies, Inc.(g)(i) 1,100,000  7,370,000
   

53,214,500

Real Estate Investment Trusts (REITs) (1.6%)
CareTrust REIT, Inc. 1,000,000  13,560,000
Jernigan Capital, Inc.(a) 200,000  4,150,000
   

17,710,000

Road & Rail (0.9%)
Marten Transport, Ltd. 450,000  10,440,000
         
    SHARES VALUE
Semiconductors (1.7%)
AXT, Inc.(a) 200,000  $538,000
Cohu, Inc. 300,000  3,282,000
CyberOptics Corp.(a)(g) 600,000  6,042,000
DSP Group, Inc.(a) 750,000  8,985,000
   

18,847,000

Software (1.9%)
ePlus, Inc.(a) 250,846  21,806,043
         
Specialty Retail (2.6%)
Destination Maternity Corp. 150,500  2,266,530
Destination XL Group, Inc.(a) 1,000,000  4,940,000
Outerwall, Inc.(b) 100,000  6,612,000
Sonic Automotive, Inc.
(Class A)
500,000  12,450,000
Systemax, Inc.(a) 225,000  2,749,500
   

29,018,030

Textiles, Apparel & Luxury Goods (0.1%)
Crocs, Inc.(a) 100,000 1,181,000
         
Thrifts & Mortgage Finance (1.6%)
Brookline Bancorp, Inc. 1,250,000  12,562,500
HF Financial Corp.(i) 350,000  5,169,500
   

17,732,000

Trading Companies & Distributors (0.9%)
Lawson Products, Inc.(a) 212,706  4,936,906
Transcat, Inc.(a)(g)(i) 507,751  4,945,495
   

9,882,401

TOTAL COMMON STOCKS    
(Cost $800,501,578)   $1,003,363,358
     
    INTEREST RATE PAR  
AMOUNT
VALUE
SHORT-TERM INVESTMENTS (11.1%)
Time Deposits (11.1%)
Wells Fargo (Grand Cayman)(c)(d) 0.03% $123,931,215 $123,931,215
           
TOTAL SHORT-TERM INVESTMENTS  
(Cost $123,931,215)   $123,931,215
     
  INTEREST RATE SHARES VALUE
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (1.6%)
Registered Investment Companies (1.6%)
Invesco Treasury Portfolio Short-Term Investments Trust, Institutional Class(e) 0.01% 18,469,590 $18,469,590
   
TOTAL INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED  
(Cost $18,469,590)   $18,469,590
     
TOTAL INVESTMENTS - (102.3%)
(Cost $942,902,383)   $1,145,764,163
OTHER ASSETS AND LIABILITIES,
NET - (-2.3%)
(25,505,013)
TOTAL NET ASSETS - (100.0%) $1,120,259,150
 
                   

 
 

 

 

HEARTLAND INTERNATIONAL VALUE FUND - SCHEDULE OF INVESTMENTS  
March 31, 2015 (Unaudited)   
   
    SHARES VALUE
COMMON STOCKS (83.5%)
Austria (0.6%)
Semperit Holding AG (EUR)(f) 3,500 $164,460
         
Belgium (2.7%)
D'ieteren SA (EUR)(f) 22,000  771,643
         
Brazil (1.0%)
Direcional Engenharia SA (BRL)(f) 150,000  293,744
         
Canada (11.4%)
Canam Group, Inc. (CAD)(f) 70,000  685,326
IAMGOLD Corp. (CAD)(a)(f) 250,000  465,832
Redline Communications Group, Inc. (CAD)(a)(f) 250,000  562,552
Reitmans Canada, Ltd. (Class A) (CAD)(f) 125,000  632,624
Total Energy Services, Inc. (CAD)(f) 30,000  333,031
Yamana Gold, Inc. (CAD)(f)(k) 160,000  573,527
   

3,252,892

China (5.9%)
Wasion Group Holdings, Ltd.
(HKD)(c)(f)
1,400,000  1,692,649
         
Germany (5.3%)
Deutz AG (EUR)(c)(f) 140,000  588,573
Einhell Germany AG (EUR)(f) 14,000  421,498
KSB AG (EUR)(f) 1,000  499,991
   

1,510,062

Great Britain (2.7%)
McBride PLC (GBP)(f) 550,000  756,719
         
Greece (0.8%)
Aegean Marine Petroleum Network, Inc. 15,000 215,550
         
Hong Kong (9.6%)
Clear Media, Ltd. (HKD)(f) 700,000  737,683
Dorsett Hospitality International, Ltd. (HKD)(c)(f) 2,500,000  396,453
Keck Seng Investments (HKD)(c)(f) 1,600,000  1,585,156
   

2,719,292

 
    SHARES VALUE
Ireland (2.5%)
Trinity Biotech PLC (ADR) 37,500  $721,875
         
Japan (26.0%)
Fuji Pharma Co., Ltd. (JPY)(c)(f) 40,000  753,437
Fukuda Denshi Co., Ltd.
(JPY)(c)(f)(i)
21,000 1,184,803
Japan Pure Chemical Co., Ltd. (JPY)(c)(f) 30,000  618,240
Kurita Water Industries, Ltd. (JPY)(c)(f)(k) 50,000  1,207,958
Medikit Co., Ltd. (JPY)(f) 20,000  620,336
Miraial Co., Ltd. (JPY)(c)(f) 20,000  243,699
Nippon Seiki Co., Ltd. (JPY)(c)(f) 60,000  1,182,435
Takamatsu Construction Group Co., Ltd. (JPY)(c)(f) 40,000  854,894
Yokogawa Electric Corp.
(JPY)(c)(f)(k)
20,000  215,471
Yushin Precision Equipment Co., Ltd. (JPY)(c)(f) 25,000  505,398
   

7,386,671

Kazakhstan (1.2%)
Halyk Savings Bank of Kazakhstan JSC (GDR)(k) 47,500  351,025
         
Malaysia (0.6%)
Wah Seong Corp. Bhd (MYR)(c)(f) 510,732  170,647
         
Russia (0.7%)
VSMPO-AVISMA Corp.(a)(c) 1,300  200,808
         
South Korea (11.3%)
Daekyo Co., Ltd. (KRW)(f) 150,000  924,783
Mirae Asset Securities Co., Ltd. (KRW)(c)(f)(k) 31,500  1,482,572
Samsung Securities Co., Ltd.
(KRW)(c)(f)(k)
17,500  818,413
   

3,225,768

Ukraine (1.2%)
Motor Sich PJSC (GDR)
(EUR)(c)(f)(i)
30,000  327,091
         
TOTAL COMMON STOCKS
(Cost $21,537,584)   $23,760,896
     
PREFERRED STOCK (3.9%)
Brazil (3.4%)
Banco ABC Brasil SA (BRL)(f) 160,000  578,527
Cia de Saneamento do Parana (BRL)(f) 240,000  383,513
   

962,040

    SHARES VALUE
Germany (0.5%)
KSB AG (EUR)(c)(f) 300 $141,957
         
TOTAL PREFERRED STOCK
(Cost $1,650,113)   $1,103,997
     
    INTEREST RATE PAR  
AMOUNT
VALUE
SHORT-TERM INVESTMENTS (11.8%)
Time Deposits (11.8%)
JPMorgan Chase (Nassau) (c)(d) 0.03% $3,375,083 $3,375,083
           
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,375,083) $3,375,083
     
TOTAL INVESTMENTS - (99.2%)
(Cost $26,562,780) $28,239,976
OTHER ASSETS AND LIABILITIES, NET - (0.8%) 225,001
TOTAL NET ASSETS - (100.0%) $28,464,977
 

 


 
 
(a) Non-income producing security. Includes securities which did not pay at least one dividend in the year preceding the date of this statement.
(b) Loaned security; a portion or all of the security was on loan at March 31, 2015.  See Note 5 in Notes to Schedules of Investments.
(c) Classified as Level 2. Valued using methods determined by the Board of Directors or using systematic fair valuation model provided by an independent pricing service. See Note 3 in Notes to Schedules of Investments.
(d) Time deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rate listed is the 7-day yield as of March 31, 2015.
(e) The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned.  See Note 5 in Notes to Schedules of Investments.  The rate listed is the 7-day yield as of March 31, 2015.
(f) Traded in a foreign country.
(g)  Affiliated company.  See Note 8 in Notes to Schedules of Investments.
(h) Less than 0.005% of net assets.
(i) Illiquid security, pursuant to guidelines established by the Board of Directors.  See Note 2 in Notes to Schedules of Investments.
(j) All or a portion of the security is pledged as collateral on written options. The aggregate market value of the collateralized securities totals $372,000 as of March 31, 2015. See Note 4 in Notes to Schedules of Investments.
(k) All or a portion of the security is pledged as collateral on futures. The aggregate market value of the collateralized securities totals $4,483,511 as of March 31, 2015. See Note 4 in Notes to Schedules of Investments.

 

Common Abbreviations:
ADR American Depositary Receipt.
AG Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e. owned by shareholders.
Bhd Berhad is a Malaysian term for private company.
GDR Global Depositary Receipt.
JSC Joint Stock Company is a company which has the capital of its members pooled in a common fund.
Ltd. Limited.
PJSC Private Joint Stock Company.
PLC Public Limited Company is a publicly traded company which signifies that shareholders have limited liability.
REIT Real Estate Investment Trust.
SA Sociedad Anonima is the Spanish equivalent of a publicly held corporation.
 
Currency Abbreviations:
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
EUR Euro
GBP United Kingdom Pound
HKD Hong Kong Dollar
JPY Japanese Yen
KRW South Korean Won
MYR Malaysian Ringgit
 

 

 

Percentages are stated as a percent of net assets.    
Industry and sector classifications for each security held are generally determined by referencing the Global Industry Classification Standard Codes (GICS) developed by Standard & Poor's and Morgan Stanley Capital International.  Foreign country classifications for each security are generally determined by referencing country of domicile sourced from Factset Research Systems, Inc.    
     
See Notes to Schedules of Investments.    
 

 

 


 
 

 

INTERNATIONAL VALUE FUND - SCHEDULE OF OPEN FUTURES CONTRACTS
March 31, 2015 (Unaudited)          
           
        UNDERLYING FACE AMOUNT UNREALIZED
DESCRIPTION POSITION CONTRACTS EXPIRATION DATE AT VALUE (NOTE 4) APPRECIATION
Euro FX Currency Future Short (10) 6/16/15 $   (1,344,250)     $   196,694 
        $   (1,344,250)     $ 196,694 
           
        UNDERLYING FACE AMOUNT UNREALIZED
DESCRIPTION POSITION CONTRACTS EXPIRATION DATE AT VALUE (NOTE 4) DEPRECIATION
Japanese Yen Currency Future Short (30) 9/15/15 (3,134,250)     $ (29,981)
        $   (3,134,250)     $ (29,981)

 

 

 
 

 

NOTES TO SCHEDULES OF INVESTMENTS

March 31, 2015 (Unaudited)

 

(1)ORGANIZATION

 

Heartland Group, Inc. (the “Corporation”) is registered as an open-end management investment company under the Investment Company Act of 1940, as amended. The capital shares of the Select Value Fund, Mid Cap Value Fund, Value Plus Fund, Value Fund, and International Value Fund (each a “Fund” and collectively, the “Funds”; 150,000,000, 150,000,000, 150,000,000, 150,000,000 and 150,000,000 shares authorized, respectively, effective August 14, 2014), each of which is a diversified fund, are issued by the Corporation. The Select Value Fund, Mid Cap Value Fund, Value Plus Fund, and Value Fund offer Investor Class and Institutional Class shares. The International Value Fund offers Investor Class shares. The International Value Fund was a previously operational fund which was a series of Trust for Professional Managers (the “Predecessor Fund”), a Delaware statutory trust. On April 29, 2013, the Board of Directors of the Corporation (the “Board”) approved the reorganization into the International Value Fund, a newly formed series of the Corporation. The International Value Fund’s fiscal year end changed from May 31 to December 31. The inception date of the Predecessor Fund is October 1, 2010. The inception date of the Mid Cap Value Fund is October 31, 2014.

 

Under the Corporation’s organizational documents, its Officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Corporation. In addition, in the normal course of business, the Corporation enters into contracts with its vendors and others that provide for general indemnifications. The Corporation’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Corporation.

 

(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies followed by the Funds in the preparation of the Schedules of Investments. Each Fund is considered an investment company for financial reporting purposes under Generally Accepted Accounting Principles (“GAAP”). The Funds have applied the guidance of ASC 946.

 

(a)Portfolio securities traded on a national securities exchange or in the over-the-counter market are valued at the closing price on the principal exchange or market as of the close of regular trading hours on the day the securities are being valued, or, sales price on the Composite Market. Lacking any trades, securities are valued at the mean between the most recent quoted bid and asked prices on the principal exchange or market. Foreign securities are valued on the basis of quotations from the primary market in which they are traded, and are translated from the local currency into U.S. dollars using exchange rates as of the close of the New York Stock Exchange (“NYSE”) or using methods determined by the Board. The Funds may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to capture events occurring between the time a foreign exchange closes and the close of the NYSE that may affect the value of the Funds’ securities traded on those foreign exchanges. These are generally categorized as Level 2 in the FASB ASC Topic 820 hierarchy. Debt securities having maturities of 60 days or less may be valued at acquisition cost, plus or minus any amortization or accretion. Securities and other assets for which quotations are not readily available, deemed unreliable or have facts and circumstances that indicate otherwise are valued at their fair value using methods determined by the Board. The Pricing Committee for the Corporation may also make a fair value determination if it reasonably determines that a significant event, which materially affects the value of a security, occurs after the time at which the market price for the security is determined, but prior to the time at which a Fund’s net asset value is calculated. Fair valuation of a particular security is an inherently subjective process, with no single standard to utilize when determining a security’s fair value. As such, different mutual funds could reasonably arrive at a different fair value price for the same security. In each case where a security is fair valued, consideration is given to the facts and circumstances relevant to the particular situation. This consideration includes reviewing various factors set forth in the pricing procedures adopted by the Board and other factors as warranted. In making a fair value determination, factors that may be considered, among others, include: the type and structure of the security; unusual events or circumstances relating to the security’s issuer; general market conditions; prior day’s valuation; fundamental analytical data; size of the holding; cost of the security on the date of purchase; nature and duration of any restriction on disposition; trading activities; and prices of similar securities or financial instruments.

 

(b)The Funds’ policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies (“RICs”) and to distribute substantially all of their taxable income to their shareholders. The Funds accordingly pay no Federal income taxes, and no Federal income tax provision is recorded.

 

(c)For financial reporting purposes, transactions are accounted for on trade date on the last business day of the reporting period. Net realized gains and losses on investments are computed on the identified cost basis. The portion of security gains and losses resulting from changes in foreign exchange rates is included with net realized and unrealized gains or losses from investments. Dividend income is recognized on the ex-dividend date, and interest income is recognized on an accrual basis. The Funds amortize premium and accrete discount on investments utilizing the effective interest method. Foreign dividend income may be subject to foreign withholding taxes.

 

(d)At March 31, 2015, the Value Fund and International Value Fund had 8.38% and 5.31% of net assets, respectively, that were illiquid as defined pursuant to guidelines established by the Board.

 

(e)A restricted security is a security that has been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933 (the “Act”) or pursuant to the resale limitations provided by Rule 144 under the Act, or an exemption from the registration requirements of the Act. Whether a restricted security is illiquid is determined pursuant to guidelines established by the Board. Not all restricted securities are considered to be illiquid. As of March 31, 2015, the Funds did not hold any restricted securities.

 

(f)The Funds isolate the portion of the results of operations from changes in foreign exchange rates on investments from those resulting in market prices of securities held. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between trade and settlement date on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the respective Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in the exchange rate. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse political, social, regulatory, and economic developments. Foreign security prices can be affected by exchange rate and foreign currency fluctuations, less publicly available information, and different accounting, auditing, legal, and financial standards. Foreign investments may also be less liquid than investments in U.S. issuers. This risk may be heightened in emerging or developing markets. Foreign securities usually are denominated and traded in foreign currencies, while the Funds value assets in U.S. dollars. The exchange rates between foreign currencies and the U.S. dollar fluctuate continuously. As a result, the values of the Funds’ non-U.S. investments will be affected favorably or unfavorably by changes in currency exchange rates relative to the U.S. dollar.

 

(g)The accompanying Schedules of Investments were prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Schedules of Investments. Actual results could differ from these estimates.

 

 
 

 

(3)FAIR VALUE MEASUREMENTS

 

The Funds follow the Fair Value Statement, under which various inputs are used in determining the value of the Funds’ investments.

 

The basis of the hierarchy is dependent upon the various “inputs” used to determine the value of the Funds’ investments. These inputs are summarized in the three broad levels listed below:

 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that a Fund has the ability to access at the measurement date.

 

Level 2 - Other significant observable inputs include quoted prices which are not active, quoted prices for similar assets or liabilities in active markets, or input other than quoted prices that are observable (either directly or indirectly) for the asset or liability. Includes short term investments in time deposits, international securities that use a systematic fair valuation model, and portfolio securities and other financial instruments lacking any sales referenced in Note 2.

 

Level 3 - Significant unobservable prices or inputs (includes the Board’s and Pricing Committee’s own assumptions in determining the fair value of investments).

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The following is a summary of the inputs used to value the Funds’ investments as of March 31, 2015:

 

SELECT VALUE FUND                
Investments in Securities  Level 1 – Quoted and   Level 2 – Other Significant   Level 3 – Significant     
at Value  Unadjusted Prices(1)   Observable Inputs(1)(2)   Unobservable Inputs(3)   Total 
Common Stocks  $407,101,437   $   $   $407,101,437 
Short-Term Investments       14,413,156        14,413,156 
Investments Purchased with Cash Collateral from Securities Loaned   4,500,000            4,500,000 
Total  $411,601,437   $14,413,156   $   $426,014,593 
                     
MID CAP VALUE FUND                    
Investments in Securities   Level 1 – Quoted and    Level 2 – Other Significant    Level 3 – Significant      
at Value   Unadjusted Prices(1)    Observable Inputs(1)(2)    Unobservable Inputs(3)    Total 
Common Stocks  $4,346,832   $   $   $4,346,832 
Short-Term Investments       55,069        55,069 
Total  $4,346,832   $55,069   $   $4,401,901 
                     
VALUE PLUS FUND                    
Investments in Securities   Level 1 – Quoted and    Level 2 – Other Significant    Level 3 – Significant      
at Value   Unadjusted Prices(1)    Observable Inputs(1)(2)    Unobservable Inputs(3)    Total 
Common Stocks  $2,061,750,897   $   $   $2,061,750,897 
Short-Term Investments       146,800,007        146,800,007 
Total  $2,061,750,897   $146,800,007   $   $2,208,550,904 
                     
VALUE FUND                    
Investments in Securities   Level 1 – Quoted and    Level 2 – Other Significant    Level 3 – Significant      
at Value   Unadjusted Prices(1)    Observable Inputs(1)(2)    Unobservable Inputs(3)    Total 
Common Stocks  $959,830,673   $43,532,685   $   $1,003,363,358 
Short-Term Investments       123,931,215        123,931,215 
Investments Purchased with Cash Collateral from Securities Loaned   18,469,590            18,469,590 
Total  $978,300,263   $167,463,900   $   $1,145,764,163 
                     
Other Financial Instruments(4)                    
Liabilities                    
Written Options  $   $(4,000)  $   $(4,000)
Total  $   $(4,000)  $   $(4,000)

 

 
 

 

INTERNATIONAL VALUE FUND            
Investments in Securities   Level 1 - Quoted and   Level 2 - Other Significant   Level 3 - Significant    
at Value   Unadjusted Prices(1)   Observable Inputs(1)(2)   Unobservable Inputs(3)   Total
Common Stocks                
Austria $ 164,460 $ $ $ 164,460
Belgium   771,643       771,643
Brazil   293,744       293,744
Canada   3,252,892       3,252,892
China     1,692,649     1,692,649
Germany   921,489   588,573     1,510,062
Great Britain   756,719       756,719
Greece   215,550       215,550
Hong Kong   737,683   1,981,609     2,719,292
Ireland   721,875       721,875
Japan   620,336   6,766,335     7,386,671
Kazakhstan   351,025       351,025
Malaysia     170,647     170,647
Russia     200,808     200,808
South Korea   924,783   2,300,985     3,225,768
Ukraine     327,091     327,091
Preferred Stock                
Brazil   962,040       962,040
Germany     141,957     141,957
Short-Term Investments     3,375,083     3,375,083
Total $ 10,694,239 $ 17,545,737 $ $ 28,239,976
                 
Other Financial Instruments(4)                
Assets                
Futures Contracts $ 196,694 $ $ $ 196,694
Liabilities                
Futures Contracts $ (29,981) $ $ $ (29,981)
Total $ 166,713 $ $ $ 166,713

 

(1)The Funds measure transfers between levels as of the beginning and end of the financial reporting period. Transfers between Level 1 and Level 2 as of March 31, 2015 resulted from securities priced using a systematic fair valuation model or quoted prices which were not active at either the beginning or end of the period.

 

Security amounts in the International Value Fund that were transferred into and out of Levels 1 and 2 at March 31, 2015 were as follows:

 

 INTERNATIONAL VALUE FUND  LEVEL 1 – Quoted Prices   LEVEL 2 – Other Significant Observable Inputs
   Transfers In    Transfers (Out)    Transfers In    Transfers (Out) 
Common Stocks  $4,434,138   $(1,585,156)  $1,585,156   $(4,434,138)
Preferred Stocks   962,040            (962,040)
Short-Term Investments                
Total  $5,396,178   $(1,585,156)  $1,585,156   $(5,396,178)

 

(2)For detailed industry descriptions and common stocks identified as Level 2 within the hierarchy, see the accompanying Schedules of Investments.

 

(3)The Funds measure Level 3 activity as of the beginning and end of the financial period. For the six months ended March 31, 2015, the Funds did not have significant unobservable inputs (Level 3) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.

 

(4)Other financial instruments are derivative instruments not reflected in the Schedules of Investments, such as covered calls, covered puts, and futures, which are valued at net unrealized appreciation (depreciation).

 

  

 
 

 

(4)DERIVATIVE INSTRUMENTS

 

The Derivatives Statement requires enhanced disclosure about the Funds’ derivative and hedging activities, including how such activities are accounted for and their effects on the Funds’ financial position, performance, and cash flows. The Funds may invest in a broad array of financial instruments and securities, the value of which is “derived” from the performance of an underlying asset or a “benchmark” such as a security index, an interest rate, or a currency. In particular, each Fund may engage in transactions in options, futures, options on futures contracts (a) to hedge against anticipated declines in the market value of its portfolio securities or currencies and against increases in the market values of securities or currencies it intends to acquire, (b) to manage exposure to changing interest rates (duration management), (c) to enhance total return, or (d) to invest in eligible asset classes with a greater efficiency and lower cost than is possible through direct investment.

 

Options and futures can be highly volatile investments and involve certain risks. These strategies require the ability to anticipate future movements in securities prices, interest rates, currency exchange rates, and other economic factors. Attempts to use such investments may not be successful and could result in reduction of a Fund’s total return. Each Fund could experience losses if the prices of its options or futures positions move in a direction different than anticipated, or if the Fund were unable to close out its positions due to disruptions in the market or lack of liquidity. Over-the-counter options generally involve greater credit and liquidity risks than exchange-traded options. Options and futures traded on foreign exchanges generally are not regulated by U.S. authorities, and may offer less liquidity and less protection to a Fund if the other party to the contract defaults.

 

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

 

WARRANTS

 

Each Fund may invest in warrants. A Fund may purchase warrants issued by domestic and foreign companies to purchase newly created equity securities consisting of common and preferred stock. Warrants are securities that give the holder the right, but not the obligation, to purchase equity issues of the company issuing the warrants, or a related company, at a fixed price either on a date certain or during a set period. The equity security underlying a warrant is authorized at the time the warrant is issued or is issued together with the warrant.

 

If the market price of the underlying security is below the exercise price of the warrant on its expiration date, the warrant will generally expire without value. The value of a warrant may decline because of a decline in the value of the underlying security, the passage of time, changes in interest rates or in the dividend or other policies of the company whose equity underlies the warrant, a change in the perception as to the future price of the underlying security, or any combination thereof. As of March 31, 2015, the Funds did not hold any warrants.

 

FUTURES CONTRACTS

 

Each Fund may enter into futures contracts for hedging purposes. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Upon entering into a futures contract, the Fund is required to deposit an initial margin with the broker in an amount equal to a certain percentage of the contract amount. The Fund receives from or pays to the broker, on a daily basis, an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as “variation margin,” and are recorded by the Fund as unrealized gains or losses. When the futures contract is closed, the Fund records a gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The average notional amount of short futures contracts held by the International Value Fund during the period was $(5,843,126). As of March 31, 2015, the Select Value, Mid Cap Value, Value Plus, and Value Funds had no open futures positions.

 

A Fund’s potential losses from the use of futures extend beyond its initial investment in such contracts. The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized. The predominant risk is that the movement of a futures contract’s price may result in a loss, which could render a Fund’s hedging strategy unsuccessful. There is minimal counterparty credit risk since futures contracts are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

 

The fair value of derivative instruments held by the International Value Fund as reported in the Schedule of Open Futures Contracts as of March 31, 2015 was as follows:

 

      Asset Derivatives   Liability Derivatives 
Risk Exposure     Unrealized Appreciation*   Unrealized Depreciation* 
Foreign Exchange Currency Contracts — Futures  Receivable from variation margin  $196,694   $(29,981)
Total     $196,694   $(29,981)

 

* Reflects cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Schedule of Open Futures Contracts.

 

OPTIONS CONTRACTS

 

The Funds may enter into options transactions for hedging purposes and will not use these instruments for speculation. Each Fund may write covered put and call options on any securities or futures contracts in which it may invest, on any securities index based on or related to securities in which it may invest, or on any currency in which Fund investments may be denominated. A call option on an asset written by a Fund obligates the Fund to sell the specified asset to the holder (purchaser) at a stated price (the exercise price) if the option is exercised before a specified date (the expiration date). A put option on an asset written by a Fund obligates the Fund to buy the specified asset from the purchaser at the exercise price if the option is exercised before the expiration date. Premiums received when writing options are recorded as liabilities and are subsequently adjusted to the current value of the options written. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options, which are either exercised or closed, are offset against the proceeds received or amount paid on the transaction to determine realized gains or losses. The Value Fund had the following transactions in written covered call/put options during the three months ended March 31, 2015:

 

   VALUE FUND
   NUMBER OF CONTRACTS   PROCEEDS 
Balance at December 31, 2014   7,000   $352,672 
Options Written   400    3,600 
Options Expired   (5,000)   (222,295)
Options Exercised   (2,000)   (130,377)
Balance at March 31, 2015   400   $3,600 

 

 
 

 

FUND NAME  NUMBER OF CONTRACTS   WRITTEN OPTIONS AT VALUE* 
VALUE FUND        
Accuray, Inc., $10.00, 04/17/2015 (Covered Call)   (400)   (4,000)
Total Written Options   (400)   (4,000)

 

* Amounts reflect a liability of the Fund.

 

(5)SECURITIES LENDING

 

The Funds have entered into an agreement with Brown Brothers Harriman & Co. (the “Lending Agent”), dated November 30, 2011 (“Securities Lending Agreement”), to provide securities lending services to the Funds. Under this program, the proceeds (cash collateral) received from borrowers are used to invest in money market funds. Under the Securities Lending Agreement, the borrowers may pay the Funds negotiated lender fees and the Funds receive cash collateral in an amount equal to not less than 102% of the market value of loaned securities. The borrower pays fees at the Funds’ direction to the Lending Agent. Although the risk of lending is generally mitigated by the collateral, the Funds could experience a delay in recovering securities and a possible loss of income or value if the borrower fails to return them.

 

As of March 31, 2015, the Select Value Fund and Value Fund had securities on loan valued at $4,306,500 and $17,891,011, respectively, and received cash collateral with a value of $4,500,000 and $18,469,590, respectively. Securities on loan are footnoted in the Schedules of Investments. The Mid Cap Value, Value Plus, and International Value Funds did not engage in securities lending during the reporting period.

 

(6)INVESTMENT TRANSACTIONS

 

During the three months ended March 31, 2015, the cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition), are noted below. During the same period, there were no purchases or sales of long-term U.S. Government obligations.

 

FUND   COST OF PURCHASES   PROCEEDS FROM SALES
Select Value Fund $ 51,990,658 $ 202,904,316
Mid Cap Value Fund   1,583,845   850,702
Value Plus Fund   179,767,668   812,614,844
Value Fund   106,239,604   219,880,200
International Value Fund   856,428   1,727,625

 

(7)FEDERAL INCOME TAX INFORMATION

 

The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for Federal income tax purposes as of March 31, 2015 are noted below.

 

               NET APPRECIATION    NET TAX UNREALIZED 
               (DEPRECIATION) OF   APPRECIATION 
   TAX COST OF   GROSS UNREALIZED   GROSS UNREALIZED   FOREIGN CURRENCY   (DEPRECIATION) 
FUND  INVESTMENTS   APPRECIATION   DEPRECIATION   AND DERIVATIVES   ON INVESTMENTS 
Select Value Fund  $340,505,038   $100,838,780   $(15,329,225)  $   $85,509,555 
Mid Cap Value Fund   4,238,716    292,314    (129,129)       163,185 
Value Plus Fund   2,019,038,563    350,099,607    (160,587,266)       189,512,341 
Value Fund   957,094,981    293,029,644    (104,360,462)   (400)   188,668,782 
International Value Fund   28,983,378    3,023,074    (3,766,476)   166,720   (576,682)

 

(8)TRANSACTIONS WITH AFFILIATES

 

The following investments are in companies deemed “affiliated” (as defined in Section 2(a)(3) of the Investment Company Act of 1940) with the Value Plus and Value Funds; that is, the respective Fund held 5% or more of their outstanding voting securities during the three months ended March 31, 2015. The Select Value, Mid Cap Value, and International Value Funds had no transactions with affiliates during the same period.

 

VALUE PLUS FUND                        
   SHARE BALANCE AT           SHARE BALANCE AT       REALIZED GAINS 
SECURITY NAME  JANUARY 1, 2015   PURCHASES   SALES   MARCH 31, 2015   DIVIDENDS   (LOSSES) 
Black Box Corp.   1,084,336        331,059    753,277   $77,818   $(4,160,197)
Brady Corp. (Class A)   2,700,000        700,000    2,000,000    540,000    (5,161,366)
Briggs & Stratton Corp.   2,700,000        1,550,000    1,150,000    225,000    (125,323)
CDI Corp.   1,800,000        142,917    1,657,083    215,889    (1,351,162)
Comstock Resources, Inc.   3,400,000        3,400,000            (38,144,972)
CTS Corp.   2,125,000        237,200    1,887,800    79,000    1,501,738 
Dynamic Materials Corp.   1,175,000        328,684    846,316    33,853    (2,299,821)
Encore Wire Corp.   1,325,000    32,000    75,000    1,282,000    25,640    181,730 
ESCO Technologies, Inc.   1,400,000        675,000    725,000    60,331    3,637,108 
Federal Signal Corp.   4,950,000        1,823,798    3,126,202    219,000    16,309,554 
Fred's, Inc. (Class A)   2,875,000        142,527    2,732,473    165,136    603,917 
FreightCar America, Inc.   1,150,000        175,000    975,000    103,500    (1,040,876)
Granite Construction, Inc.   2,300,000    25,000    600,000    1,725,000    232,986    3,575,347 
Gulf Island Fabrication, Inc.   1,350,000        225,000    1,125,000    135,000    (4,258,558)
Harte-Hanks, Inc.   4,250,000        128,200    4,121,800    361,250    (671,277)
Heidrick & Struggles International, Inc.   1,775,000            1,775,000    230,750     

 

 
 

  

VALUE PLUS FUND (CONTINUED)                
  SHARE BALANCE AT     SHARE BALANCE AT       REALIZED GAINS
SECURITY NAME JANUARY 1, 2015 PURCHASES SALES MARCH 31, 2015   DIVIDENDS   (LOSSES)
Intrepid Potash, Inc. 5,393,101 1,506,101 3,887,000   $   $ (13,962,901)
Invacare Corp. 2,955,000 217,587 2,737,413   34,463   (1,791,920)
ManTech International Corp. (Class A) 1,500,000 250,000 1,250,000   262,500   1,114,148
Materion Corp. 1,564,060 364,060 1,200,000   114,750   3,641,150
Park Electrochemical Corp. 1,925,000 25,000 50,000 1,900,000   3,077,500   (499,228)
Quanex Building Products Corp. 3,175,000 25,000 3,150,000   126,000   (28,933)
Regis Corp. 4,600,000 300,000 126,233 4,773,767     (271,247)
Resources Connection, Inc. 3,100,000 655,854 2,444,146   210,000   2,713,938
Twin Disc, Inc. 575,000 97,025 477,975   45,000   (1,006,345)
Universal Forest Products, Inc. 1,150,000 243,759 906,241     2,858,098
Zep, Inc. 2,200,000 2,200,000   132,000  
            $ 6,707,366   $ (38,637,398)
                 
VALUE FUND                
  SHARE BALANCE AT     SHARE BALANCE AT       REALIZED GAINS
SECURITY NAME JANUARY 1, 2015 PURCHASES SALES MARCH 31, 2015   DIVIDENDS   (LOSSES)
AgJunction, Inc. 5,571,500 5,571,500   $   $
Barrett Business Services, Inc. 500,000 500,000   110,000  
Bravo Brio Restaurant Group, Inc. 400,000 600,000 1,000,000    
CyberOptics Corp. 600,000 600,000    
Digirad Corp. 1,614,800 92,611 1,522,189   80,740   72,656
Hooper Holmes, Inc. 6,242,700 6,242,700    
Hudson Global, Inc. 3,232,412 17,588 3,250,000    
Hudson Technologies, Inc 2,500,000 2,500,000    
Jason Industries Inc. 1,000,000 200,000 1,200,000    
Lincoln Educational Services Corp. 2,385,469 2,385,469    
Magnetek, Inc. 299,999 299,999    
NCI, Inc. (Class A) 294,885 181,545 476,430   48,000  
PDI, Inc. 1,490,000 1,490,000    
Perma-Fix Environmental Services, Inc. 800,000 21,400 821,400    
Pioneer Power Solutions, Inc. 500,000 500,000    
RCM Technologies, Inc. 1,100,000 1,100,000    
Signal Genetics, Inc. 191,700 8,300 200,000    
StarTek, Inc. 1,400,000 1,400,000    
Sterling Construction Co., Inc. 1,000,000 1,000,000     (7,238,627)
Supreme Industries, Inc. (Class A) 1,450,000 700,000 750,000   18,750   1,096,348
Transcat, Inc. 507,151 600 507,751    
TRC Cos., Inc. 2,200,000 2,200,000    
Westell Technologies, Inc. (Class A) 3,000,000 135,614 2,864,386     120,130
            $ 257,490   $ (5,949,493)
 
 

 

Item 2. Controls and Procedures.

 

(a)The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-Q is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

(b)There were no changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

 

Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940 are filed herewith.

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

HEARTLAND GROUP, INC.

 

 

By:   /s/ William R. Nasgovitz  
    William R. Nasgovitz  
    Chief Executive Officer  
       
Date:   May 1, 2015  
       

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

By:   /s/ William R. Nasgovitz  
    William R. Nasgovitz  
    Chief Executive Officer  
       
Date:   May 1, 2015  
       
       
By:   /s/ Nicole J. Best  
    Nicole J. Best  
    Treasurer & Principal Accounting Officer  
       
Date:   May 1, 2015