NOTES TO FINANCIAL STATEMENTS . June 30, 1997 (Unaudited)
The Heartland Group, Inc. (the "Corporation") is registered as a diversified open-end management company
under the Investment Company Act of 1940. The Short Duration High-Yield Municipal Fund and the High-Yield
Municipal Bond Fund (the "Funds") are two of the nine series of funds issued by the Corporation at June 30,
(2) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of the
(a) Debt securities are stated at fair value as furnished by independent pricing services 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 are 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 which are applicable to
regulated investment companies and to distribute substantially all of their taxable income to their shareholders.
The Fund accordingly paid no Federal income taxes, and no Federal income tax provision is required.
(c) Net investment income is distributed to each shareholder as a dividend. Dividends are declared daily and
distributed monthly and are recorded by the Funds on the ex-dividend date. Net realized gains on investments, if
any, are distributed annually.
(d) The Funds record security and shareholder transactions no later than the first business day after the trade
date. Net realized gains and losses on investments are computed on the identified cost basis. Interest income is
recognized on an accrual basis. The Funds amortize premium and accrete original issue discou