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Case Status:    SETTLED
On or around 06/13/2006 (Date of order of final judgment)

Filing Date: November 13, 2000

The original complaint alleged that during the class period, Heartland miscalculated and misrepresented the Net Asset Value (NAV) of the two funds listed below and the true risk of investing in them. According to the complaint, on October 16, 2000, the funds' advisers blindsided investors by announcing that they were drastically writing down the NAV of the funds. Specifically, HRHYX's NAV was reduced 70% from $8.01 per share to $2.45, and HRSDX's NAV was reduced 44% from $8.70 per share to $4.87.

Funds named in the complaint:
-Heartland High-Yield Municipal Bond Fund (Nasdaq: HRHYX)
-Heartland Short Duration High-Yield Municipal Bond Fund (Nasdaq: HRSDX)

NOTE: In March of 2001, the Securities Exchange Commission seized the assets of the funds and placed them under the control of a court-appointed receiver.
On November 12 and 13, 2001, the parties attended an intensive mediation, which resulted in a partial settlement of the lawsuit. On March 15, 2002, a Stipulation of Partial Settlement was executed on behalf of the Lead Plaintiffs and the Settling Defendants.

Pursuant to the terms of the proposed Partial Settlement, a Settlement Fund in the amount of $14,000,000 has been established for the benefit of the Class. A Preliminary Approval hearing was held, and on April 4, 2002, the Honorable Judge Joseph P. Stadtmueller granted Preliminary Approval of the Settlement. For purposes of the proposed Partial Settlement only, the following Settlement Class has been conditionally certified by the Court: "All persons and entities who purchased or otherwise acquired shares of the Heartland High-Yield Municipal Bond Fund and/or the Heartland Short Duration High-Yield Municipal Fund either directly or by dividend reinvestment during the period from and including January 2, 1997 through and including October 16, 2000 and sustained a loss thereon."

A Final Approval hearing was held on July 18, 2002 to determine whether the proposed Partial Settlement is fair, reasonable, and adequate and in the best interests of the Settlement Class, Order, dated that same day, the Honorable Judge Joseph P. Stadtmueller granted final approval of the Settlement and awarded Plaintiffs' Counsel attorneys fees and expenses.

On August 1, 2003, the Settlement Fund for the above partial settlement was distributed to those shareholders who filed valid claims.

The case is continuing against remaining Defendants PricewaterhouseCoopers (PWC) and Interactive Data Corporation. On March 15, 2002, PwC filed a motion to dismiss Plaintiffs' Amended Complaint that was filed on October 30, 2001. Both parties briefed the issues and on December 10, 2002, Judge Stadtmueller issued an Order granting in part and denying in part PwC's motion to dismiss. PwC filed their answer to the Amended Complaint on January 10, 2003.

On March 10, 2003, PwC responded to Lead Plaintiffs' motion to certify the class, filed on March 22, 2002, arguing, among other things, that the class period should be modified. On July 7, 2003, Judge Stadtmueller issued an order modifying the class period of October 27, 1997 through October 16, 2000 to May 1, 1998 through October 16, 2000, for purposes of the claims against PwC.

Pursuant to na Order issued on January 15, 2004, discovery is to be completed by March 1, 2004. Plaintiffs are to disclose experts by March 26, 2004 and Defendants are to disclose experts by April 23, 2004. All expert discovery is to be completed by May 28, 2004. Dispositive motions are due by June 25, 2004.

On July 6, 2004, following a Settlement Fairness Hearing, the court entered an Order approving settlement of the Class claims against Interactive Data Corporation for $1,000,000.

In a press release dated May 16, 2005, a federal judge in Milwaukee on Wednesday denied a motion for summary judgment by PricewaterhouseCoopers LLP in an investor class-action lawsuit filed against the firm for its role as auditor of the Heartland Group Inc. high yield municipal bond mutual funds before their collapse in 2000. The lawsuit charges that PricewaterhouseCoopers' audit opinions failed to disclose the funds' violations of key internal procedures and investment restrictions, including a 15% limitation on illiquid securities. In its motion for summary judgment, the auditor claimed that plaintiffs were unable to identify any misstatements it had made or prove that it was responsible for any damages they had incurred as a result. "The court, however, finds that the plaintiffs have set forth evidence demonstrating that a genuine issue of material fact exists regarding whether the funds violated the 15% illiquidity restriction," Judge J.P. Stadtmueller, of the U.S. District Court for the Eastern District of Wisconsin, wrote in his decision. His decision was partly based on the depositions of the plaintiffs' experts who had reviewed the matter. The plaintiffs have already settled with Heartland and other related parties for a combined $ 15 million.

Jury trial began on November 28, 2005, with remaining defendant PricewaterhouseCoopers LLP.

In a press release dated January 4, 2006, PricewaterhouseCoopers LLP has settled a class-action lawsuit over its auditing of some defunct mutual funds run by Milwaukee's Heartland Advisors Inc. The settlement is for $ 8.25 million, according to C. Oliver Burt III, attorney for investors in the two funds, the old Heartland High-Yield Municipal Bond Fund and Short Duration High-Yield Municipal Fund. The matter was the subject of a 12-day trial, which was to have gone to a jury Tuesday in the courtroom of Federal Judge J.P. Stadtmueller. Attorney's fees and costs will be deducted from the settlement before money is sent to the 10,000 to 11,000 former shareholders in the funds. Stadtmueller must approve the settlement, including the costs and fees. Earlier, Heartland settled the case for $ 14 million, and Interactive Data Corp., a company that provided prices for some of the bonds in the funds, paid $ 1 million. Shareholders also received slightly more than $ 30 million when assets of the funds were liquidated by a receiver.

According to a press release dated March 7, 2006, Lawyers for shareholders of two defunct mutual funds run by Milwaukee's Heartland Advisors Inc. want a fee of 30% of the $8.25 million settlement of a class-action lawsuit against Heartland's accounting firm and $1 million in expenses, according to papers filed Monday. PricewaterhouseCoopers LLP agreed to the settlement in January, just as the case was to go to the jury following 12 days of testimony before U.S. District Judge J.P. Stadtmueller in Milwaukee. The money will be paid to settle a claim that the accounting firm failed to properly audit the old Heartland High-Yield Municipal Bond Fund and Short Duration High-Yield Municipal Fund. The value of the two funds fell sharply in October 2000, following markdowns in the bonds they held. How much any of the 10,000 to 11,000 investors in the funds will receive depends on when they bought and sold their shares, said C. Oliver Burt III, a lawyer from West Palm Beach, Fla. Burt tried the case and filed for the 30% fee plus expenses. The payments will be made after a pair of hearings by Stadtmueller, where he will decide how much Burt should receive. Burt said he and his team incurred costs of $1,050,435 in the matter, which he asked to be awarded in addition to 30% of the settlement, which is $2,475,000. Eric Jacobson, who is following the matter for Morningstar Inc. in Chicago, said a 30% fee "doesn't sound unusual to me." Earlier, Heartland settled the case for $14 million, and Interactive Data Corp., a company that provided prices for some of the thinly traded bonds in the funds, paid $1 million. The former shareholders also received slightly more than $30 million when the assets in the funds were liquidated by a receiver. Altogether, the U.S. Securities and Exchange Commission has estimated that fund shareholders lost about $80 million.

COMPANY INFORMATION:

Sector: Financial
Industry: Other (Mutual Fund)
Headquarters: United States

SECURITIES INFORMATION:

Ticker Symbol:
Company Market:
Market Status:

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"Company" information provides the industry and sector classification and headquarters state for the primary company-defendant in the litigation. In general, "Securities" information provides the ticker symbol, market, and market status for the underlying securities at issue in the litigation.

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COURT: E.D. Wisconsin
DOCKET #: 00-CV-1388
JUDGE: Hon. J P Stadtmueller
DATE FILED: 11/13/2000
CLASS PERIOD START: 11/18/1997
CLASS PERIOD END: 10/16/2000
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Berman DeValerio Pease Tabacco Burt & Pucillo (MA)
    One Liberty Square, Berman DeValerio Pease Tabacco Burt & Pucillo (MA), MA 2109
    617.542.8300 617.230.0903 · info@bermanesq.com
  2. Milberg Weiss Bershad Hynes & Lerach LLP (New York, NY)
    One Pennsylvania Plaza, Milberg Weiss Bershad Hynes & Lerach LLP (New York, NY), NY 10119-1065
    212.594.5300 ·
  3. Murray, Frank & Sailer LLP (Milwaukee)
    3181 South 27th Street, Murray, Frank & Sailer LLP (Milwaukee), WI 53215
    866.264.3995 414.482.8001 · info@murrayfrank.com
  4. Spector Roseman & Kodroff (San Diego)
    1818 Market Street, Suite 2500, Spector Roseman & Kodroff (San Diego), PA 19103
    215.496.0300 215.496.6611 ·
  5. Wolf Haldenstein Adler Freeman & Herz LLP (New York)
    270 Madison Avenue, Wolf Haldenstein Adler Freeman & Herz LLP (New York), NY 10016
    212.545.4600 212.686.0114 · newyork@whafh.com
No Document Title Filing Date
COURT: E.D. Wisconsin
DOCKET #: 00-CV-1388
JUDGE: Hon. J P Stadtmueller
DATE FILED: 10/30/2001
CLASS PERIOD START: 10/26/1997
CLASS PERIOD END: 10/16/2000
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Burt & Pucillo LLP
    515 North Flagler Drive, Northbridge Centre, Suite 1701, Burt & Pucillo LLP, FL 33401
    800.349.4612 ·
No Document Title Filing Date