N-Q 1 dnq.htm HEARTLAND GROUP, INC. Heartland Group, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 North Water Street, Suite 500, Milwaukee, WI   53202
(Address of principal executive offices)   (Zip code)

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

(Name and address of agent for service)

Conrad Goodkind; Quarles & Brady LLP, 411 East Wisconsin Avenue, Milwaukee, WI 53202

(With a copy to:)

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

Date of fiscal year end: December 31

Date of reporting period: March 31, 2007

Item 1. Schedule of Investments.

SELECT VALUE FUND - SCHEDULE OF INVESTMENTS

March 31, 2007 (Unaudited)

 

COMMON STOCKS (95.9%)

    SHARES    VALUE

Aerospace & Defense (2.5%)

      

Goodrich Corp.

    150,000    $ 7,722,000

Airlines (1.9%)

      

Southwest Airlines Co.

    400,000      5,880,000

Beverages (1.4%)

      

Constellation Brands, Inc. (Class A)(a)

    200,000      4,236,000

Building Products (0.9%)

      

American Standard Cos., Inc.

    50,000      2,651,000

Chemicals (7.2%)

      

RPM International, Inc.

    300,000      6,930,000

Agrium, Inc. (CAD)(b)

    150,000      5,763,732

PPG Industries, Inc.

    70,000      4,921,700

Dow Chemical Co.

    100,000      4,586,000
         
        22,201,432

Commercial Banks (4.5%)

      

SunTrust Banks, Inc.

    90,000      7,473,600

Marshall & Ilsley Corp.

    135,000      6,251,850
         
        13,725,450

Communications Equipment (3.7%)

      

Mastec, Inc. (a)

    600,000      6,606,000

Motorola, Inc.

    275,000      4,859,250
         
        11,465,250

Computers & Peripherals (3.2%)

      

Hutchinson Technology, Inc. (a)

    210,000      4,903,500

Seagate Technology

    210,000      4,893,000
         
        9,796,500

Consumer Finance (2.0%)

      

SLM Corp.

    150,000      6,135,000

Diversified Consumer Services (2.7%)

      

H&R Block, Inc.

    400,000      8,416,000

Diversified Financial Services (2.2%)

      

Bank of America Corp.

    130,000      6,632,600

Electronic Equipment & Instruments (4.3%)

      

Avnet, Inc. (a)

    225,000      8,131,500

Plexus Corp. (a)

    300,000      5,145,000
         
        13,276,500

Energy Equipment & Services (4.5%)

      

ShawCor, Ltd. (CAD)(b)

    300,000      7,155,606

Grey Wolf, Inc. (a)

    1,000,000      6,700,000
         
        13,855,606

Food & Staples Retailing (2.3%)

      

Wal-Mart Stores, Inc.

    150,000      7,042,500

Food Products (2.4%)

      

Smithfield Foods, Inc. (a)

    250,000      7,487,500

Gas Utilities (2.3%)

      

UGI Corp.

    270,000      7,211,700

Health Care Equipment and Supplies (1.3%)

      

Hospira, Inc. (a)

    100,000      4,090,000

Household Durables (2.1%)

      

Toll Brothers, Inc. (a)

    130,000      3,559,400

D. R. Horton, Inc.

    135,000      2,970,000
         
        6,529,400

Industrial Conglomerates (1.2%)

      

Tyco International, Ltd.

    120,000      3,786,000

 

Insurance (5.7%)

      

The Allstate Corp.

    125,000      7,507,500

Unum Group

    300,000      6,909,000

Conseco, Inc. (a)

    175,000      3,027,500
         
        17,444,000

Machinery (7.7%)

      

Albany International Corp. (Class A)

    180,000      6,469,200

Pentair, Inc.

    200,000      6,232,000

Caterpillar, Inc.

    90,000      6,032,700

Deere & Co.

    45,000      4,888,800
         
        23,622,700

Media (2.0%)

      

CBS Corp. (Class B)

    200,000      6,118,000

Metals & Mining (2.7%)

      

Alcoa, Inc.

    250,000      8,475,000

Multi-Utilities (2.2%)

      

Integrys Energy Group, Inc.

    125,000      6,938,750

Oil, Gas & Consumable Fuels (5.7%)

      

ConocoPhillips Co.

    90,000      6,151,500

Anadarko Petroleum Corp.

    140,000      6,017,200

Cimarex Energy Co.

    150,000      5,553,000
         
        17,721,700

Paper & Forest Products (1.5%)

      

P.H. Glatfelter Co.

    300,000      4,473,000

Pharmaceuticals (3.8%)

      

Pfizer, Inc.

    270,000      6,820,200

Wyeth

    100,000      5,003,000
         
        11,823,200

Road & Rail (4.2%)

      

J.B. Hunt Transport Services, Inc.

    300,000      7,872,000

Union Pacific Corp.

    50,000      5,077,500
         
        12,949,500

Specialty Retail (2.3%)

      

Rent-A-Center, Inc. (a)

    250,000      6,995,000

Thrifts & Mortgage Finance (1.9%)

      

MGIC Investment Corp.

    100,000      5,892,000

Tobacco (3.6%)

      

Universal Corp.

    180,000      11,043,000
         

TOTAL COMMON STOCKS (Cost $257,885,366)

       $ 295,636,288

 

SHORT-TERM INVESTMENTS (4.0%)

   

PAR

AMOUNT

    VALUE

TIME DEPOSITS (4.0%) (+)

      

Brown Brothers Harriman, 4.69%

    $ 12,191,013    $ 12,191,013
         

TOTAL SHORT-TERM INVESTMENTS (Cost $12,191,013)

       $ 12,191,013
         

TOTAL INVESTMENTS (Cost $270,076,379) (99.9%)

       $ 307,827,301

Other assets and liabilities, net (0.1%)

         426,467
         

TOTAL NET ASSETS (100.0%)

       $ 308,253,768
         

 

(a) Non-income producing security.

 

(b) Foreign denominated security.

 

(+) Time deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rate listed is as of March 31, 2007.

 

(CAD) Canadian issuer.

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.

The accompanying Notes to Schedules of Investments are an integral part of this schedule.

 

1

VALUE PLUS FUND - SCHEDULE OF INVESTMENTS

March 31, 2007 (Unaudited)

 

COMMON STOCKS (96.1%)

    SHARES    VALUE

Aerospace & Defense (5.7%)

      

Cubic Corp.

    350,000    $ 7,574,000

Applied Signal Technology, Inc.

    402,000      7,207,860
         
        14,781,860

Beverages (0.8%)

      

MGP Ingredients, Inc.

    100,000      2,037,000

Building Products (2.1%)

      

Apogee Enterprises, Inc.

    275,000      5,511,000

Quixote Corp.

    3,200      64,000
         
        5,575,000

Chemicals (4.9%)

      

American Vanguard Corp.

    366,500      6,263,485

CF Industries Holdings, Inc. (d)

    85,000      3,276,750

Olin Corp.

   100,000      1,694,000

Arch Chemicals, Inc.

    50,000      1,561,000
         
        12,795,235

Commercial Banks (5.0%)

      

Chittenden Corp.

    200,000      6,038,000

The South Financial Group, Inc.

    200,000      4,944,000

Cadence Financial Corp.

    100,000      2,000,000
         
        12,982,000

Commercial Services & Supplies (3.4%)

      

ABM Industries, Inc.

    180,000      4,750,200

Kelly Services, Inc. (Class A)

    125,000      4,025,000
         
        8,775,200

Communications Equipment (2.3%)

      

Inter-Tel, Inc.

    250,000      5,910,000

Energy Equipment & Services (4.0%)

      

Tidewater, Inc.

    110,000      6,443,800

Gulf Island Fabrication, Inc.

    150,000      4,011,000
         
        10,454,800

Health Care Equipment & Supplies (5.8%)

      

Wright Medical Group, Inc. (a)

    300,000      6,687,000

Orthovita, Inc. (a)

    1,500,000      4,380,000

STERIS Corp.

    150,000      3,984,000
         
        15,051,000

Household Durables (2.0%)

      

Ethan Allen Interiors, Inc.

    150,000      5,301,000

Insurance (5.1%)

      

Unum Group

    400,000      9,212,000

Horace Mann Educators Corp.

    200,000      4,110,000
         
        13,322,000

Internet Software & Services (1.3%)

      

Zix Corp. (a)

    1,837,500      3,325,875

IT Services (3.4%)

      

Perot Systems Corp. (Class A) (a)

    500,000      8,935,000

Leisure Equipment & Products (3.0%)

      

Nautilus, Inc.

    500,000      7,715,000

Machinery (5.4%)

      

Federal Signal Corp.

    425,000      6,596,000

American Railcar Industries, Inc.

    150,000      4,471,500

Briggs & Stratton Corp.

    100,000      3,085,000
         
        14,152,500

Marine (4.9%)

      

Genco Shipping & Trading, Ltd.

    325,000      10,328,500

Alexander & Baldwin, Inc.

    50,000      2,522,000
         
        12,850,500

Media (1.5%)

      

Regal Entertainment Group

    200,000      3,974,000

Metals & Mining (3.2%)

      

Quanex Corp.

    100,000      4,235,000

Amerigo Resources, Ltd. (CAD)(b)

    1,900,000      4,033,097
         
        8,268,097

Multiline Retail (1.7%)

      

Tuesday Morning Corp.

    300,000      4,452,000

Oil, Gas & Consumable Fuels (4.7%)

      

Cimarex Energy Co.

    175,000      6,478,500

Callon Petroleum Co. (a)

    250,000      3,392,500

Berry Petroleum Co. (Class A)

    75,000      2,299,500
         
        12,170,500

Paper & Forest Products (3.0%)

      

Wausau Paper Corp.

    550,000      7,898,000

Pharmaceuticals (3.8%)

      

Biovail Corp. (CAD)(b)

    459,330      10,048,590

Road & Rail (2.0%)

      

Arkansas Best Corp.

    150,000      5,332,500

Semiconductor (2.0%)

      

Cohu, Inc.

    275,000      5,170,000

Software (10.4%)

      

Mentor Graphics Corp. (a)

    700,000      11,438,000

Novell, Inc. (a)

    1,100,000      7,942,000

Parametric Technology Corp. (a)

    300,000      5,727,000

QAD, Inc.

    150,000      1,365,000

American Software, Inc. (Class A)

    92,400      743,820
         
        27,215,820

Specialty Retail (2.6%)

      

Stein Mart, Inc.

    410,000      6,691,200

Textiles, Apparel & Luxury Goods (2.1%)

      

Stride Rite Corp.

    350,000      5,386,500
         

TOTAL COMMON STOCKS (Cost $209,670,210)

       $ 250,571,177

WARRANTS (0.1%)

    SHARES    VALUE

Biotechnology (0.1%)

      

StemCells, Inc. (a)(c)

    575,658    $ 356,908

GTC Biotherapeutics, Inc. (a)(c)

    273,224      —  
         
        356,908

Internet Software & Services (0.0%)

      

Zix Corp. (a)(c)

    198,000      —  
         

TOTAL WARRANTS (Cost $34,153)

       $ 356,908

 

1

VALUE PLUS FUND - SCHEDULE OF INVESTMENTS (CONTINUED)

March 31, 2007 (Unaudited)

 

SHORT-TERM INVESTMENTS (4.8%)

   

PAR

AMOUNT

    VALUE  

TIME DEPOSITS (4.8%) (+)

      

Brown Brothers Harriman, 4.69%

    $ 12,435,954    $ 12,435,954  
           

TOTAL SHORT-TERM INVESTMENTS (Cost $12,435,954)

       $ 12,435,954  
           

TOTAL INVESTMENTS (Cost $222,140,317) (101.0%)

       $ 263,364,039  

Other assets and liabilities, net (-1.0%)

         (2,497,819 )
           

TOTAL NET ASSETS (100.0%)

       $ 260,866,220  
           

 

(a) Non-income producing security.

 

(b) Foreign denominated security.

 

(c) Valued at fair value using methods determined by the Board of Directors. See Note 2 (a) in Schedules of Investments

 

(d) Security pledged as collateral on written options. See Note 2(f) in Schedules of Investments.

 

(+) Time deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rate listed is as of March 31, 2007.

 

(CAD) Canadian issuer.

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.

The accompanying Notes to Schedules of Investments are integral part of this schedule.

 

2

VALUE FUND - SCHEDULE OF INVESTMENTS

March 31, 2007 (Unaudited)

 

COMMON STOCKS (97.1%)

    SHARES    VALUE

Aerospace & Defense (0.6%)

      

AAR Corp. (a)(i)

    150,000    $ 4,134,000

Ducommun, Inc. (a)

    156,977      4,039,018

Magellan Aerospace Corp. (CAD)(b)

    1,000,000      2,625,195

Allied Defense Group, Inc. (a)

    176,700      1,510,785
         
        12,308,998

Air Freight & Logistics (0.2%)

      

AirNet Systems, Inc. (a)(c)

    1,000,000      3,210,000
     

Airlines (3.1%)

      

Alaska Air Group, Inc. (a)

    800,000      30,480,000

Midwest Air Group, Inc. (a)(c)

    977,500      13,206,025

Mesa Air Group, Inc. (a)(c)

    1,700,000      12,801,000

Republic Airways Holdings, Inc. (a)

    300,000      6,888,000
         
        63,375,025

Auto Components (0.8%)

      

Hy-Drive Technologies, Ltd. (CAD)(b)

    2,475,000      6,004,159

Raser Technologies, Inc. (a)(d)(e)(f)

    1,075,269      4,752,689

Strattec Security Corp. (a)

    100,000      4,448,000

Wonder Auto Technology, Inc. (a)

    113,500      777,475
         
        15,982,323

Biotechnology (0.6%)

      

Isolagen, Inc. (a)

    1,000,000      3,930,000

Sanagamo BioSciences, Inc. (a)

    500,000      3,400,000

Discovery Laboratories, Inc. (a)

    1,000,000      2,370,000

Senesco Technologies, Inc. (a)(c)(d)

    1,614,000      1,565,580

AP Pharma, Inc. (a)

    800,000      816,000

Aphton Corp. (a)(e)(f)(h)

    375,000      —  
         
        12,081,580

Building Products (0.5%)

      

Patrick Industries, Inc. (a)(c)(d)

    293,525      3,519,365

Maezawa Kasei Industries Co., Ltd. (JPY)(b)

    200,000      3,006,281

Aaon, Inc.

    100,000      2,613,000

Builders FirstSource, Inc. (a)

    100,000      1,607,000
         
        10,745,646

Capital Markets (1.3%)

      

eSPEED, Inc. (Class A)(a)

    987,312      9,379,464

Stifel Financial Corp. (a)

    200,000      8,860,000

FirstCity Financial Corp. (a)(c)

    811,800      8,605,080
         
        26,844,544

Chemicals (1.6%)

      

Chemtura Corp.

    1,000,000      10,930,000

Omnova Solutions, Inc. (a)

    1,750,000      9,555,000

Calgon Carbon Corp. (a)

    1,000,000      8,310,000

Quaker Chemical Corp.

    150,000      3,571,500
         
        32,366,500

Commercial Banks (4.3%)

      

Sterling Financial Corp.

    600,000      18,714,000

The South Financial Group, Inc.

    500,000      12,360,000

FNB Corp.

    200,000      7,166,000

Independent Bank Corp.

    186,500      6,143,310

AmeriServ Financial, Inc. (a)(d)

    1,129,793      5,389,112

Texas Capital Bancshares, Inc. (a)

    200,000      4,100,000

Renasant Corp.

    162,300      4,005,564

Eastern Virginia Bankshares, Inc. (d)

    175,000      3,972,500

Centennial Bank Holdings, Inc. (a)

    400,000      3,460,000

Capital Bank Corp.

    150,000      2,587,500

Simmons First National Corp. (Class A)

    75,100      2,258,257

Tennessee Commerce Bancorp, Inc. (a)

    72,000      1,936,800

Fidelity Southern Corp.

    100,000      1,904,000

BancTrust Financial Group, Inc.

    88,000      1,862,080

PAB Bankshares, Inc.

    100,000      1,776,000

WSB Financial Group, Inc. (a)

    95,000      1,710,000

Guaranty Financial Corp. (e)

    10,388      1,412,768

Southern Community Financial Corp.

    135,682      1,392,097

Merchants & Manufacturers Bancorp., Inc.

    46,095      1,292,965

Exchange National Bancshares, Inc.

    33,237      1,203,179

HF Financial Corp.

    64,947      1,185,283

Nexity Financial Services Corp. (a)

    100,000      1,170,000

Epic Bancorp.

    15,762      239,898
         
        87,241,313

Commercial Services & Supplies (7.4%)

      

Hudson Highland Group, Inc. (a)(c)

    1,930,000      30,088,700

LECG Corp. (a)(c)

    1,266,189      18,334,417

Spherion Corp. (a)

    1,500,000      13,230,000

Exponent, Inc. (a)

    600,000      11,970,000

FTI Consulting, Inc. (a)

    300,000      10,077,000

Barrett Business Services, Inc.

    400,000      9,220,000

Intersections, Inc. (a)(c)

    882,367      8,867,788

School Specialty, Inc. (a)

    200,000      7,222,000

SM&A (a)(c)

    966,300      6,860,730

TRC Cos., Inc. (a)

    669,300      6,753,237

Perma-Fix Environmental Services, Inc. (a)

    2,500,000      5,950,000

RCM Technologies, Inc. (a)(c)

    780,100      5,562,113

CompuDyne Corp. (a)(c)

    750,000      4,552,500

ABM Industries, Inc. (i)

    150,000      3,958,500

CDI Corp.

    100,000      2,892,000

Tetra Tech, Inc. (a)

    125,657      2,395,022

CNS Response, Inc. (a)(d)(e)(f)

    1,800,000      1,620,000
         
        149,554,007

Communications Equipment (9.3%)

      

InterDigital Communications Corp. (a)(c)

    2,750,000      87,092,500

Sycamore Networks, Inc. (a)

    5,000,000      18,700,000

ParkerVision, Inc. (a)(c)

    1,176,555      15,542,292

Aastra Technologies, Ltd. (CAD)(b)

    500,000      14,429,908

Avanex Corp. (a)

    7,500,000      13,425,000

Lantronix, Inc. (a)(c)(d)

    5,000,000      8,000,000

EMS Technologies, Inc. (a)

    400,000      7,708,000

Westell Technologies, Inc. (a)

    2,500,000      5,425,000

EFJ, Inc. (a)

    1,000,000      5,340,000

ParkerVision, Inc. (a)(c)(e)

    400,000      4,491,400

Extreme Networks, Inc. (a)

    1,000,000      4,230,000

CSI Wireless, Inc. (CAD)(a)(b)

    1,000,000      1,923,410

Oplink Communications, Inc. (a)

    100,000      1,797,000
         
        188,104,510

Computers & Peripherals (0.8%)

      

Gateway, Inc. (a)

    3,003,100      6,576,789

Rackable Systems, Inc. (a)

    300,000      5,091,000

STEC, Inc. (a)

    593,074      4,175,241
         
        15,843,030

Construction & Engineering (2.1%)

      

Insituform Technologies, Inc. (Class A)(a)

    1,000,000      20,790,000

URS Corp. (a)

    300,000      12,777,000

Modtech Holdings, Inc. (a)(c)

    1,400,000      4,396,000

Comfort Systems USA, Inc.

    245,300      2,938,694

Integrated Electrical Services, Inc. (a)

    100,000      2,473,000
         
        43,374,694

Containers & Packaging (0.5%)

      

Caraustar Industries, Inc. (c)

    1,500,000      9,420,000
     

Diversified Consumer Services (1.7%)

      

Regis Corp.

    400,000      16,148,000
     

 

1

VALUE FUND - SCHEDULE OF INVESTMENTS (CONTINUED)

March 31, 2007 (Unaudited)

 

COMMON STOCKS (CONTINUED)

    SHARES    VALUE

Diversified Consumer Services (CONTINUED)

      

The Princeton Review, Inc. (a)(c)

    2,000,000    $ 10,740,000

Stewart Enterprises, Inc., (Class A)

    1,000,000      8,060,000

Whitney Information Network, Inc.

    31,400      109,900
         
        35,057,900

Diversified Financial Services (0.3%)

      

Collection House, Ltd. (AUD)(b)

    4,600,000      3,460,465

Asset Acceptance Capital Corp. (a)

    136,793      2,116,188
         
        5,576,653

Electrical Equipment (1.5%)

      

Xantrex Technology, Inc. (CAD)(b)

    1,200,000      9,731,416

China BAK Battery, Inc. (a)(c)

    2,136,200      6,942,650

Magnetek, Inc. (a)

    1,373,500      6,922,440

Powell Industries, Inc. (a)

    200,000      6,400,000
         
        29,996,506

Electronic Equipment & Instruments (1.3%)

      

Wireless Ronin Technolgies, Inc. (a)(c)

    723,000      6,427,470

Napco Security Systems, Inc. (a)

    1,000,000      5,300,000

Plexus Corp. (a)

    200,000      3,430,000

O.I. Corp. (c)(d)

    245,900      2,719,654

Park Electrochemical Corp.

    100,000      2,712,000

MOCON, Inc.

    200,000      2,572,000

Innovative Card Technologies, Inc. (a)

    500,000      2,240,000

Optimal Group, Inc. (a)

    100,000      839,000
         
        26,240,124

Energy Equipment & Services (4.4%)

      

Newpark Resources, Inc. (a)(c)

    4,500,000      31,725,000

Input/Output, Inc. (a)(i)

    1,500,000      20,670,000

Gulf Island Fabrication, Inc.

    500,000      13,370,000

FuelCell Energy, Inc. (a)

    1,700,000      13,362,000

Bristow Group, Inc. (a)

    300,000      10,935,000
         
        90,062,000

Food Products (2.3%)

      

Origin Agritech, Ltd. (a)(c)

    1,500,000      13,350,000

Riken Vitamin Co., Ltd. (JPY)(b)(d)

    400,000      12,018,333

The Inventure Group, Inc. (a)(c)(d)

    1,900,622      5,416,773

Hanover Foods Corp. (Class A)(d)(e)

    49,250      5,368,250

Tasty Baking Co. (c)

    500,000      4,365,000

John B. Sanfilippo & Son, Inc. (a)

    300,000      3,999,000

Monterey Gourmet Foods, Inc. (a)

    547,257      2,342,260
         
        46,859,616

Health Care Equipment & Supplies (3.9%)

      

Analogic Corp.

    199,063      12,517,081

STAAR Surgical Co. (a)(c)

    2,000,000      11,020,000

Fukuda Denshi Co., Ltd. (JPY)(b)

    300,000      10,566,967

Osteotech, Inc. (a)(c)(i)

    1,240,000      9,473,600

Nissui Pharmaceutical Co., Ltd. (JPY)(b)(d)

    938,000      7,531,387

Trinity Biotech (ADR)(a)

    600,000      5,448,000

CONMED Corp. (a)

    150,000      4,384,500

Invacare Corp.

    250,000      4,360,000

Synovis Life Technologies, Inc. (a)(i)

    300,400      4,061,408

STERIS Corp.

    150,000      3,984,000

Criticare Systems, Inc. (a)(c)(d)

    865,000      3,338,900

Digirad Corp. (a)

    468,700      2,160,707
         
        78,846,550
     

Health Care Providers & Services (2.9%)

      

Hooper Holmes, Inc. (a)

    3,000,000      13,410,000

PDI, Inc. (a)(c)

    1,000,000      9,520,000

VistaCare, Inc. (Class A)(a)(c)

    1,000,000      8,700,000

America Service Group, Inc. (a)

    436,628      7,278,589

BioScrip, Inc. (a)(c)

    2,000,000      6,260,000

National Home Health Care Corp. (c)(d)

    506,502      5,956,463

Medical Staffing Network Holdings, Inc. (a)(d)

    758,600      4,817,110

SRI/Surgical Express, Inc. (a)(c)(d)

    500,000      2,520,000
         
        58,462,162

Hotels, Restaurants & Leisure (0.4%)

      

Buca, Inc. (a)(c)

    1,200,000      6,600,000

Champps Entertainment, Inc. (a)

    470,246      2,661,592
         
        9,261,592

Household Durables (0.3%)

      

Helen of Troy, Ltd. (a)

    200,000      4,542,000

Flexsteel Industries, Inc.

    75,767      1,162,266
         
        5,704,266

Household Products (0.5%)

      

Oil-Dri Corp. of America (c)(d)

    562,500      9,393,750
     

Insurance (3.0%)

      

Presidential Life Corp.

    1,000,000      19,720,000

PMA Capital Corp. (Class A)(a)

    1,000,000      9,390,000

Assured Guaranty, Ltd.

    300,000      8,196,000

SCPIE Holdings, Inc. (a)

    358,000      8,126,600

KMG America Corp. (a)(c)

    1,500,000      6,945,000

Meadowbrook Insurance Group, Inc. (a)

    400,000      4,396,000

Specialty Underwriters’ Alliance, Inc. (a)

    525,000      4,058,250

Financial Industries Corp. (a)(e)

    154,031      1,001,201
         
        61,833,051

Internet Software & Services (0.5%)

      

Jupitermedia Corp. (a)

    1,200,000      7,944,000

iPass, Inc. (a)

    500,000      2,515,000
         
        10,459,000

IT Services (2.8%)

      

TechTeam Global, Inc. (a)(c)(d)

    975,000      12,187,500

First Consulting Group, Inc. (a)

    1,250,000      11,375,000

MAXIMUS, Inc.

    250,000      8,620,000

Dynamics Research Corp. (a)(c)

    750,000      8,550,000

Tier Technologies, Inc. (Class B)(a)(c)(e)

    950,000      8,360,000

Analysts International Corp. (a)(c)(d)

    2,139,735      4,172,483

Computer Task Group, Inc. (a)

    632,515      2,852,643
         
        56,117,626

Leisure Equipment & Products (0.4%)

      

K2, Inc.

    700,000      8,463,000

Corgi International, Ltd. (ADR)(a)(c)

    160,571      786,798
         
        9,249,798

Life Science, Tools & Services (3.2%)

      

Nektar Therapeutics (a)

    2,421,300      31,622,178

Cambrex Corp.

    500,000      12,300,000

Third Wave Technologies, Inc. (a)

    1,500,000      7,650,000

PAREXEL International Corp. (a)(i)

    200,000      7,194,000

MEDTOX Scientific, Inc. (a)(c)

    362,250      6,665,400
         
        65,431,578

Machinery (4.5%)

      

Federal Signal Corp.

    1,250,000      19,400,000

Badger Meter, Inc.

    550,000      14,602,500

Mueller Water Products, Inc. (Class A)

    1,000,000      13,810,000

Mueller Industries, Inc.

    300,000      9,030,000

Portec Rail Products, Inc. (c)

    700,000      7,112,000

MFRI, Inc. (a)(c)

    350,000      6,489,000

Flanders Corp. (a)

    814,500      5,905,125

 

2

VALUE FUND - SCHEDULE OF INVESTMENTS (CONTINUED)

March 31, 2007 (Unaudited)

 

COMMON STOCKS (CONTINUED)

    SHARES    VALUE

Machinery (CONTINUED)

      

Met-Pro Corp.

    400,000    $ 5,812,000

Basin Water, Inc. (a)

    750,000      5,152,500

Alamo Group, Inc.

    150,600      3,495,426
         
        90,808,551

Marine (1.0%)

      

Quintana Maritime, Ltd.

    1,500,000      20,655,000
     

Media (3.0%)

      

Lions Gate Entertainment Corp. (a)

    1,200,000      13,704,000

ProQuest Co. (a)(c)(e)

    1,500,000      13,500,000

Horipro, Inc. (JPY)(b)

    700,000      7,551,350

Journal Register Co.

    1,250,000      7,450,000

Spanish Broadcasting System, Inc. (Class A)(a)

    1,500,000      6,000,000

Lakes Entertainment, Inc. (a)

    500,000      5,575,000

Saga Communications, Inc. (a)

    400,000      3,892,000

SPAR Group, Inc. (a)(c)(d)

    1,228,000      1,301,680

Emak Worldwide, Inc. (a)(d)

    250,083      1,205,400

PRIMEDIA, Inc. (a)

    2,500      6,650
         
        60,186,080

Metals & Mining (2.9%)

      

High River Gold Mines, Ltd. (CAD)(a)(b)

    10,000,000      18,627,621

Northwest Pipe Co. (a)

    250,000      9,957,500

Canam Group, Inc. (CAD)(b)

    750,000      6,601,975

PolyMet Mining Corp. (CAD)(a)(b)

    2,000,000      5,891,527

North American Tungsten Corp., Ltd. (CAD)(a)(b)

    5,050,700      5,601,192

First Majestic Silver Corp. (CAD)(a)(b)

    1,000,000      4,323,341

Constellation Copper Corp. (CAD)(a)(b)

    3,000,000      3,690,868

Northern Star Mining Corp. (CAD)(a)(b)

    3,000,000      2,781,147

Pan-Nevada Gold Corp. (CAD)(a)(b)(c)

    2,500,000      1,841,102
         
        59,316,273

Multiline Retail (1.7%)

      

Duckwall-ALCO Stores, Inc. (a)(c)

    380,400      15,615,420

Fred’s, Inc.

    1,000,000      14,700,000

Tuesday Morning Corp.

    300,000      4,452,000
         
        34,767,420

Oil, Gas & Consumable Fuels (6.5%)

      

Sherritt International Corp. (CAD)(b)

    2,744,200      39,562,890

Forest Oil Corp. (a)

    600,000      20,022,000

Clayton Williams Energy, Inc. (a)(c)

    548,760      15,568,321

Plains Exploration & Production Co. (a)

    300,000      13,542,000

Brigham Exploration Co. (a)

    1,500,000      9,330,000

Quest Resource Corp. (a)

    1,000,000      9,170,000

Rosetta Resources, Inc. (a)

    400,000      8,216,000

Massey Energy Co.

    300,000      7,197,000

Far East Energy Corp. (a)(c)

    7,500,000      6,075,000

James River Coal Co. (a)

    500,000      3,735,000
         
        132,418,211

Paper & Forest Products (0.5%)

      

Pope & Talbot, Inc. (c)

    1,000,000      6,750,000

Buckeye Technologies, Inc. (a)

    252,000      3,270,960
         
        10,020,960

Personal Products (0.7%)

      

NutraCea (a)

    2,000,000      6,020,000

Nature’s Sunshine Products, Inc. (e)

    500,000      5,880,000

Natrol, Inc. (a)(c)

    1,000,000      2,900,000
         
        14,800,000

Pharmaceuticals (2.2%)

      

Biovail Corp. (CAD)(b)

    1,250,000      27,345,781

Fuji Pharmaceutical Co., Ltd. (JPY)(b)

    499,000      6,607,028

Caraco Pharmaceutical Laboratories, Ltd. (a)

    500,000      6,090,000

ASKA Pharmaceutical Co., Ltd. (JPY)(b)

    500,000      3,997,623
         
        44,040,432

Real Estate (1.4%)

      

Medical Properties Trust, Inc.

    822,000      12,075,180

Government Properties Trust, Inc.

    750,000      8,025,000

Capital Lease Funding, Inc.

    700,000      7,497,000
         
        27,597,180

Road & Rail (1.2%)

      

Marten Transport, Ltd. (a)

    700,000      11,116,000

Saia, Inc. (a)

    300,000      7,125,000

Covenant Transport, Inc. (Class A)(a)

    500,000      5,510,000
         
        23,751,000

Semiconductors (3.2%)

      

Axcelis Technologies, Inc. (a)

    2,000,000      15,280,000

TriQuint Semiconductor, Inc. (a)

    2,500,000      12,500,000

Skyworks Solutions, Inc. (a)

    2,000,000      11,500,000

hi/fn, inc. (a)(c)(d)

    1,300,000      7,891,000

Lattice Semiconductor Corp. (a)

    1,000,000      5,850,000

FSI International, Inc. (a)

    1,000,000      4,470,000

Exar Corp. (a)

    300,000      3,972,000

Micrel, Inc. (a)

    350,000      3,857,000
         
        65,320,000

Software (3.0%)

      

Actuate Corp. (a)(c)

    4,000,000      20,880,000

Quovadx, Inc. (a)(c)

    3,700,000      9,435,000

Mobius Management Systems, Inc.(a)(c)

    1,000,000      7,370,000

Agile Software Corp. (a)

    1,000,000      6,950,000

PLATO Learning, Inc. (a)(c)

    1,599,883      6,719,509

ePlus, Inc. (a)

    400,000      4,260,000

Catapult Communications Corp. (a)

    304,300      2,963,882

OPNET Technologies, Inc. (a)

    200,000      2,702,000

Callidus Software, Inc. (a)

    98,300      737,250
         
        62,017,641

Specialty Retail (0.5%)

      

Rent-A-Center, Inc. (a)

    200,000      5,596,000

Hot Topic, Inc. (a)

    500,000      5,550,000
         
        11,146,000

Textiles, Apparel & Luxury Goods (1.2%)

      

Hampshire Group, Ltd. (a)(c)

    465,540      7,495,194

Ashworth, Inc. (a)

    750,000      5,677,500

Lakeland Industries, Inc. (a)(c)

    354,080      4,957,120

Phoenix Footwear Group, Inc. (a)(c)(d)

    790,000      3,594,500

LaCrosse Footwear, Inc.

    137,990      2,125,046
         
        23,849,360

Thrifts & Mortgage Finance (0.6%)

      

B of I Holding, Inc. (a)

    400,000      2,808,000

Riverview Bancorp, Inc.

    172,000      2,741,680

Pacific Premier Bancorp, Inc. (a)

    240,700      2,599,560

Franklin Bank Corp. (a)

    100,000      1,787,000

 

3

VALUE FUND - SCHEDULE OF INVESTMENTS (CONTINUED)

March 31, 2007 (Unaudited)

 

COMMON STOCKS (CONTINUED)

    SHARES    VALUE  

Thrifts & Mortgage Finance (CONTINUED)

      

Timberland Bancorp, Inc.

      50,000    $ 1,762,500  
           
        11,698,740  

Trading Companies & Distributors (0.5%)

      

Industrial Distribution Group, Inc. (a)

      400,000      4,996,000  

Beacon Roofing Supply, Inc. (a)

      200,000      3,236,000  

Aceto Corp.

      300,000      2,370,000  
           
        10,602,000  
           

TOTAL COMMON STOCKS (Cost $1,510,255,174)

       $ 1,971,999,190  

CONVERTIBLE PREFERRED STOCKS (0.0%)

    SHARES    VALUE  

Biotechnology (0.0%)

      

Aphton Corp. 0.00%, (a)(e)(f)(h)

      2,500    $ —    

Household Durables (0.0%)

      

Ronco Corp. 5.00%, (a)(c)(d)(e)(f)(g)

      1,841,275      —    
           

TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $5,655,000)

       $ —    

WARRANTS (0.1%)

    SHARES    VALUE  

Auto Components (0.0%)

      

Raser Technologies, Inc. (a)(d)(e)(f)

      367,344    $ —    

Biotechnology (0.0%)

      

Senesco Technologies, Inc. (a)(c)(e)

      50,000      —    

Commercial Services & Supplies (0.0%)

      

CNS Response, Inc. (a)(d)(e)(f)

      540,000      —    

Waste Services, Inc.(a)(e)

      25,000      —    
           
        —    

Communications Equipment (0.1%)

      

ParkerVision, Inc. (a)(c)(e)

      375,000      1,766,250  

Diversified Consumer Services (0.0%)

      

Whitney Information Network, Inc. (a)(e)

      300,000      —    

Electrical Equipment (0.0%)

      

Composite Technology Corp. (a)(d)(e)(f)

      1,201,923      —    

Health Care Equipment and Supplies (0.0%)

      

Medwave, Inc. (a)(e)

      37,250      —    

Software (0.0%)

      

VocalTec Communication, Ltd. (a)(e)

      222,500      —    
           

TOTAL WARRANTS (Cost $0)

       $ 1,766,250  

CONVERTIBLE CORPORATE BOND (0.1%)

    PAR AMOUNT    VALUE  

Electrical Equipment (0.1%)

      

Composite Technology Corp. 8.00%; 1/31/10 (d)(e)(f)

    $ 2,500,000    $ 2,331,731  
           

TOTAL CONVERTIBLE CORPORATE BOND (Cost $2,500,000)

       $ 2,331,731  

SHORT-TERM INVESTMENTS (3.6%)

    PAR AMOUNT    VALUE  

U.S GOVERNMENT AND AGENCY SECURITIES (2.2%)

      

U.S. Treasury Bills, 5/17/07, 4.95% (*)

    $ 45,000,000    $ 44,719,850  

TIME DEPOSITS (1.4%) (+)

      

Brown Brothers Harriman, 4.69%

      28,361,748      28,361,748  
           

TOTAL SHORT-TERM INVESTMENTS (Cost $73,082,874)

       $ 73,081,598  
           

TOTAL INVESTMENTS (Cost $1,591,493,048) (100.9%)

       $ 2,049,178,769  

Other assets and liabilities, net (-0.9%)

         (18,008,823 )
           

TOTAL NET ASSETS (100.0%)

       $ 2,031,169,946  
           

 

(a) Non-income producing security.

 

(b) Foreign denominated security.

 

(c) Affiliated company. See Note 5 in Notes to Schedules of Investments.

 

(d) Illiquid security, pursuant to guidelines established by the Board of Directors. See Note 2(g) in Notes to Schedules of Investments.

 

(e) Valued at fair value using methods determined by the Board of Directors. See Note 2 (a) in Notes to Schedules of Investments.

 

(f) Restricted Security. See Note 2(h) in Notes to Schedules of Investments.

 

(g) Currently in default of the penalty payment due in cash to the preferred stockholders for the delay in the effective date of the registration statement. The registration statement covers the common stock into which the convertible preferred stock held are convertible.

 

(h) Filed for bankruptcy.

 

(i) Security pledged as collateral on written options. See Note 2(f) in Notes to Schedules of Investments.

 

(+) Time deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rate listed is as of March 31, 2007.

 

(*) The rate denoted is the effective yield as of March 31, 2007.

 

(ADR) American Depositary Receipt.

 

(AUD) Australian issuer.

 

(CAD) Canadian issuer.

 

(JPY) Japanese issuer.

 

  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.

The accompanying Notes to Schedules of Investments are an integral part of this schedule.

 

4

NOTES TO SCHEDULES OF INVESTMENTS

March 31, 2007 (Unaudited)

 

(1) Organization

Heartland Group, Inc. (the “Corporation”) is registered as an open-end management (investment) company under the Investment Company Act of 1940. The capital shares of the Select Value Fund, Value Plus Fund and Value Fund (the “Funds”), each of which is a diversified fund, are issued by the Corporation.

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:

 

  (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, lacking any sales, at the latest bid price. 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. Debt securities are stated at fair value as furnished by an independent pricing service based primarily upon information concerning market transactions and dealer quotations for similar securities, or by dealers who make markets in such securities. Debt securities having maturities of 60 days or less may be valued at acquisition cost, plus or minus any amortized discount or premium. Securities and other assets for which quotations are not readily available or deemed unreliable are valued at their fair value using methods established by the Board of Directors. 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 of Directors 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. At March 31, 2007, 0.1% and 2.9% of the Value Plus and Value Funds’ net assets, respectively, were valued at their fair value using methods determined by the Board of Directors.

 

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

 

  (c) The Funds record security transactions no later than one business day after trade date. 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.

 

  (d) Each Fund may enter into futures contracts for hedging purposes, such as to protect against anticipated declines in the market value of its portfolio securities or to manage exposure to changing interest rates. 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 realized 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 use of futures contracts involves, to varying degrees, elements of market risk. 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 were no open future contracts at March 31, 2007.

  (e) A short sale is a transaction in which a Fund sells a security it does not own (but has borrowed) in anticipation of a decline in the market value of that security. To complete a short sale, a Fund must borrow the security to deliver to the buyer. A Fund then is obligated to replace the security borrowed by purchasing it in the open market at a later date. A Fund could incur a loss, which could be substantial and potentially unlimited, if the market price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. A Fund will realize a gain if the security declines in value between those dates. A Fund must pay any dividends or interest payable to the lender of the security. All short sales must be collateralized in accordance with the applicable exchange or broker requirements. A Fund maintains the collateral in a segregated account with its custodian or broker, consisting of cash, obligations of the U.S. Government, its agencies or instrumentalities, or equity securities sufficient to collateralize its obligation on the short positions. There were no short positions held during the three-month period ended March 31, 2007.

 

  (f) The Funds may write covered call options for which premiums received 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 Funds may enter into options transactions for hedging purposes and will not use these instruments for speculation. The Value Plus and Value Funds had the following transactions in written covered call options during the three-month period ended March 31, 2007:

 

     VALUE FUND     VALUE PLUS FUND  
     NUMBER OF
CONTRACTS		     PREMIUM     NUMBER OF
CONTRACTS		     PREMIUM  

Balance at December 31, 2006

    4,000     $ 884,088     —       $ —    

Options written

    18,670       2,187,960     1,500       256,494  

Options expired

    (5,250 )     (583,130 )   —         —    

Options closed

    —         —       —         —    

Options exercised

    —         —       (650 )     (80,547 )
                            

Balance at March 31, 2007

    17,420     $ 2,488,918     850     $ 175,947  
                            

 

VALUE FUND

    NUMBER OF
CONTRACTS		    VALUE

AAR Corp., $35.00, 8/18/07

    1,500    $ 45,000

ABM Industries, Inc. , $30.00, 10/20/07

    1,500      97,500

Input/Output, Inc., $15.00, 11/17/07

    10,000      1,200,000

Osteotech, Inc., $10.00, 11/17/07

    2,400      96,000

PAREXEL International Corp., $40.00, 9/22/07

    2,000      290,000

Synovis Life Technologies, Inc. $15.00, 10/20/07

    20      1,000
           
   17,420    $ 1,729,500
           

VALUE PLUS FUND

    NUMBER OF
CONTRACTS		    VALUE

CF Industries Holdings, Inc., $40.00, 5/19/07

    850    $ 140,250
           
   850    $ 140,250
           

 

  (g) At March 31, 2007, 5.9% of the Value Fund’s net assets were illiquid as defined pursuant to guidelines established by the Board of Directors of the Corporation.

 

  (h) 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 of Directors. Not all restricted securities are considered to be illiquid. At March 31, 2007, the Value Fund held restricted securities representing 0.4% of net assets. The restricted securities held as of March 31, 2007 are identified below:

 

SECURITY

    ACQUISITION
DATE		    ACQUISITION
COST		    SHARES    FAIR
VALUE

Value Fund

            

Aphton Corp. (Common Stock)

    11/9/2005    $ 128,625    375,000    $ —  

Aphton Corp. (Convertible Preferred Stock)

    11/9/2005      —      2,500      —  

CNS Response, Inc. (Common Stock)

    3/2/2007      2,160,000    1,800,000      1,620,000

CNS Response, Inc. (Warrants)

    3/2/2007      —      540,000      —  

Composite Technology Corp. (Warrants)

    2/26/2007      —      1,201,923      —  

Composite Technology Corp. (Convertible Corporate Bond)

    2/26/2007      2,500,000    2,500,000      2,331,731

Ronco Corp. (Convertible Preferred Stock)

    6/24/2005      5,655,000    1,841,275      —  

Raser Technologies, Inc. (Common Stock)

    3/30/2007      5,000,000    1,075,269      4,752,689

Raser Technologies, Inc. (Warrants)

    3/30/2007      —      376,344      —  

 

  (i)

The Funds invest in foreign equity securities, whose values are subject to change in market conditions, as well as changes in political and regulatory environments. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. The Funds may utilize forward currency exchange contracts for the purpose of hedging foreign currency risk. Under these contracts, the Funds are obligated to exchange currencies

 

at specific future dates. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movements in currency values. The Funds did not hold any forward currency exchange contracts during the three-month period ended or at March 31, 2007.

 

  (j) Each Fund may purchase securities on a when-issued basis. Payment and interest terms of these securities are set out at the time a Fund enters into the commitment to purchase, but generally the securities are not issued, and delivery and payment for such obligations does not occur until a future date that may be a month or more after the purchase date. Obligations purchased on a when-issued basis involve a risk of loss if the value of the security purchased declines prior to the settlement date, and may increase fluctuation in a Fund’s net asset value. On the date a Fund enters into an agreement to purchase securities on a when-issued basis, it will record the transaction and reflect the value of the obligation in determining its net asset value. In addition, the respective Fund will segregate cash, obligations of the U.S. Government, its agencies or instrumentalities, or equity securities having a value at least equal to the Fund’s obligation under the position. There were no when-issued securities held during the three-month period ended or at March 31, 2007.

 

  (k) Each Fund may own shares of real estate investment trusts (“REITS”) which report information on the source of their distributions annually. Certain distributions from REITS during the year, which are known to be a return of capital, are recorded as a reduction to the cost of the individual REIT.

 

  (l) The preparation of the Schedules of Investments in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts at the date of the Schedules of Investments. Actual results could differ from those estimates.

 

(3) Investment Transactions and Income Tax Basis Information

During the three-month period ended March 31, 2007, 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 securities.

 

FUND

    COST OF
PURCHASES		    PROCEEDS
FROM SALES

Select Value Fund

    $ 37,590,027    $ 43,101,874

Value Plus Fund

      68,533,702      55,868,688

Value Fund

      481,470,951      364,003,631

 

FUND

    TAX COST OF
INVESTMENTS		    GROSS UNREALIZED
APPRECIATION		    GROSS UNREALIZED
DEPRECIATION		     NET UNREALIZED
APPRECIATION
ON INVESTMENTS

Select Value Fund

    $ 270,076,379    $ 41,729,383    $ (3,978,461 )   $ 37,750,922

Value Plus Fund

      222,140,317      44,415,837      (3,192,115 )     41,223,722

Value Fund

      1,593,376,943      520,364,181      (64,562,355 )     455,801,826

 

(4) Litigation

On July 18, 2002, pursuant to a stipulation and following a fairness hearing, the U.S. District Court for the Eastern District of Wisconsin approved a settlement of a consolidated class action brought by shareholders of the Heartland High-Yield Municipal Bond Fund and the Short Duration High-Yield Municipal Fund (together, the “High-Yield Funds”), in which the Corporation, the Advisor, the High-Yield Funds and certain other parties were named as defendants. The litigation arose out of a repricing of the securities in the High-Yield Funds in October 2000. Under the terms of the settlement, the Corporation, the Advisor, the High-Yield Funds and certain related parties were dismissed and released from all claims in the class action upon establishment of a settlement fund for the benefit of the class plaintiffs. Neither the Corporation nor any of its separate funds, directors, or officers were required to contribute to the settlement fund (although an affiliate of the Advisor did make a substantial contribution to facilitate settlement). Subsequently, all other suits filed by persons who opted out of the class action settlement were also settled without any contribution from the Corporation, its Funds, directors or officers. The High-Yield Funds, which had been in receivership since March 2001, were liquidated in December 2004.

On December 11, 2003, the SEC filed a civil complaint in United States District Court for the Eastern District of Wisconsin (Civil Action No. 03C1427) relating to the High-Yield Funds against the Advisor; William J. Nasgovitz, President of the Advisor, President and a director of the Corporation and member of the Heartland Value Fund portfolio management team; Paul T. Beste, Chief Operating Officer of the Advisor, Vice President and Secretary of the Corporation; Kevin D. Clark, an officer of the Advisor; Hugh Denison, a former director of the Corporation who presently serves as Senior Vice President of the Advisor and as a member of the portfolio management team for the Heartland Select Value Fund and Heartland Value Fund; certain former officers of the Advisor; and others.

The SEC alleges various violations of the federal securities laws with respect to the pricing of securities owned by the High Yield Funds and the related calculation of the High-Yield Funds’ net asset value per share from March 2000 to March 2001;

disclosures in the prospectus, other SEC filings and promotional materials for the High-Yield Funds relating to risk management, credit quality, liquidity and pricing; breach of fiduciary duty; the sale in September and October 2000 by certain individual defendants of shares of the High-Yield Funds while in possession of material, non-public information about those funds; and the disclosure of material, non-public information to persons who effected such sales. The SEC seeks civil penalties and disgorgement of all gains received by the defendants as a result of the conduct alleged in the complaint, a permanent injunction against the defendants from further violations of the applicable federal securities laws, and such other relief as the court deems appropriate.

In February 2004, the Advisor, and Messrs. Nasgovitz, Beste, Denison, and Clark filed their answers to the SEC’s complaint, denying the allegations and claims made therein and raising affirmative defenses.

The complaint does not involve the Corporation, the Heartland Select Value, Value Plus or Value Funds, any portfolio manager of the Funds (other than Mr. Nasgovitz and Mr. Denison) or any of the current independent directors of the Corporation. However, an adverse outcome for the Advisor and/or its officers named in the complaint could result in an injunction that would bar the Advisor from serving as investment advisor to the Funds or bar such officers from continuing to serve in their official capacities for the Advisor. The Advisor has advised the Funds that, if these results occur, the Advisor will seek exemptive relief from the SEC to permit it to continue serving as investment advisor to the Funds. There is no assurance that the SEC will grant such exemptive relief.

 

(5) 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 Fund; that is, the Fund held 5% or more of their outstanding voting securities at anytime during the three-month period ended March 31, 2007:

VALUE FUND

 

SECURITY NAME

    SHARE
BALANCE AT
JANUARY 1, 2007		    PURCHASES    SALES    SHARE
BALANCE AT
MARCH 31, 2007		    DIVIDENDS    REALIZED
GAINS
(LOSSES)		  

Actuate Corp.

    4,000,000    —      —      4,000,000    $ —      $ —    

AirNet Systems, Inc.

    1,000,000    —      —      1,000,000      —        —    

Analysts International Corp.

    1,600,000    539,735    —      2,139,735      —        —    

BioScrip, Inc.

    2,000,000    —      —      2,000,000      —        —    

Buca, Inc.

    1,200,000    —      —      1,200,000      —        —    

Caraustar Industries, Inc.

    500,000    1,000,000    —      1,500,000      —        —    

China BAK Battery, Inc.

    1,104,000    1,396,000    363,800    2,136,200      —        (1,141,070 )

Clayton Williams Energy, Inc.

    548,760    —      —      548,760      —        —    

CompuDyne Corp.

    750,000    —      —      750,000      —        —    

Corgi International, Ltd. (ADR)

    160,571    —      —      160,571      —        —    

Criticare Systems, Inc.

    678,000    187,000    —      865,000      —        —    

Duckwall-ALCO Stores, Inc.

    380,400    —      —      380,400      —        —    

Dynamics Research Corp.

    750,000    —      —      750,000      —        —    

Far East Energy Corp.

    7,500,000    —      —      7,500,000      —        —    

FirstCity Financial Corp.

    811,800    —      —      811,800      —        —    

Hampshire Group, Ltd.

    465,540    —      —      465,540      —        —    

hi/fn, inc.

    1,287,104    12,896    —      1,300,000      —        —    

Hudson Highland Group, Inc.

    1,930,000    —      —      1,930,000      —        —    

InterDigital Communications Corp.

    2,750,000    —      —      2,750,000      —        —    

Intersections, Inc.

    630,000    252,367    —      882,367      —        —    

KMG America Corp.

    500,000    1,000,000    —      1,500,000      —        —    

Lakeland Industries, Inc.

    250,000    104,080    —      354,080      —        —    

Lantronix, Inc.

    5,000,000    —      —      5,000,000      —        —    

LECG Corp.

    300,000    966,189    —      1,266,189      —        —    

MEDTOX Scientific, Inc.

    508,750    —      146,500    362,250      —        1,608,132  

Mesa Air Group, Inc.

    1,000,000    700,000    —      1,700,000      —        —    

MFRI, Inc.

    350,000    —      —      350,000      —        —    

Midwest Air Group, Inc.

    1,200,000    —      222,500    977,500      —        1,995,958  

Mobius Management Systems, Inc.

    250,000    750,000    —      1,000,000      —        —    

Modtech Holdings, Inc.

    1,400,000    —      —      1,400,000      —        —    

National Home Health Care Corp.

    441,000    65,502    —      506,502      36,075      —    

Natrol, Inc.

    500,000    500,000    —      1,000,000      —        —    

Newpark Resources, Inc.

    4,500,000    —      —      4,500,000      —        —    

O.I. Corp.

    245,900    —      —      245,900      12,295      —    

Oil-Dri Corp. of America

    562,500    —      —      562,500      67,500      —    

Origin Agritech, Ltd.

    778,302    721,698    —      1,500,000      —        —    

Osteotech, Inc.

    1,240,000    —      —      1,240,000      —        —    

Pan Nevada Gold Corp.

    125,500    2,374,500    —      2,500,000      —        —    

ParkerVision, Inc.

    1,322,300    —      145,745    1,176,555      —        563,832  

ParkerVision, Inc. (warrants)

    375,000    —      —      375,000      —        —    

ParkerVision, Inc.

    —      400,000    —      400,000      —        —    

Patrick Industries, Inc.

    293,525    —      —      293,525      —        —    

PDI, Inc.

    1,270,000    —      270,000    1,000,000      —        (892,372 )

Phoenix Footwear Group, Inc.

    763,900    26,100    —      790,000      —        —    

PLATO Learning, Inc.

    750,000    849,883    —      1,599,883      —        —    

Pope & Talbot, Inc.

    —      1,000,000       1,000,000      —        —    

Portec Rail Products, Inc.

    538,400    161,600    —      700,000      33,546      —    

ProQuest Co.

    1,500,000    —      —      1,500,000      —        —    

Quovadx, Inc.

    3,700,000    —      —      3,700,000      —        —    

RCM Technologies, Inc.

    780,100    —      —      780,100      —        —    

Ronco Corp. (convertible preferred stock)

    1,841,275    —      —      1,841,275      —        —    

Senesco Technologies, Inc.

    1,279,925    334,075    —      1,614,000      —        —    

Senesco Technologies, Inc. (warrants)

    50,000    —      —      50,000      —        —    

Sirna Therapeutics, Inc.

    6,440,000    —      6,440,000    —        —        71,452,496  

SM&A

    965,900    400    —      966,300      —        —    

Smith & Wollensky Restaurant Group, Inc.

    574,400    —      574,400    —        —        1,491,768  

SPAR Group, Inc.

    1,228,000    —      —      1,228,000      —        —    

SRI/Surgical Express, Inc.

    500,000    —      —      500,000      —        —    

STAAR Surgical Co.

    2,000,000    —      —      2,000,000      —        —    

Tasty Baking Co.

    500,000    —      —      500,000      25,000      —    

TechTeam Global, Inc.

    975,000    —      —      975,000      —        —    

The Inventure Group, Inc.

    1,900,622    —      —      1,900,622      —        —    

The Princeton Review, Inc.

    2,000,000    —      —      2,000,000      —        —    

Tier Technologies, Inc. (Class B)

    1,800,000    —      850,000    950,000      —        (818,952 )

VistaCare, Inc., (Class A)

    500,000    500,000    —      1,000,000      —        —    

Wireless Ronin Technologies, Inc.

    723,000    —      —      723,000      —        —    
                           
               $ 174,416    $ 74,259,792  
                           

Item 2. Controls and Procedures.

(a) The registrant’s management, with the participation of its principal executive officer and principal financial officer has evaluated effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940), within 90 days of the filing date of this report. Based on such evaluation, the registrant’s principal executive and financial officers have concluded that the design and operation of the registrant’s disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed on Form N-Q is recorded, processed, summarized and reported within the applicable time periods.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) 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 pursuant to Rule 30a-2(a) are attached hereto.

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.

(Registrant)     Heartland Group, Inc.

 

By (Signature and Title)*   /s/ David C. Fondrie
  David C. Fondrie, Chief Executive Officer

Date May 9, 2007

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 (Signature and Title)*   /s/ David C. Fondrie
  David C. Fondrie, Chief Executive Officer

Date May 9, 2007

 

By (Signature and Title)*   /s/ Christine A. Roberts
  Christine A. Roberts, Treasurer and Principal Accounting Officer

Date May 9, 2007

 

* Print the name and title of each signing officer under his or her signature.