Registration No. 2-95077
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Post-Effective Amendment No. 12
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 13
Pinnacle Fund
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(Exact Name of Registrant as Specified in Charter)
36 South Pennsylvania Street, Suite 610, Indianapolis, Indiana 46204
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code
317/633-4080
Thomas F. Maurath, 36 South Pennsylvania Street
Suite 610, Indianapolis, Indiana 46204
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(Name and Address of Agent for Service)
It is proposed that this filing shall become effective:
X immediately upon filing pursuant to paragraph (b) of Rule 485
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The Registrant has registered an indefinite number of its shares of
beneficial interest and the Rule 24f-2 Notice for the fiscal year ended
December 31, 1996 was filed on February 27, 1997.
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PINNACLE FUND
Cross Reference Sheet Pursuant to Rule 481(a)
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Item in Part A
of Form N-1A Heading Or Location in Prospectus
Item 1 . . . . . . . . . . . . . . Cover Page
Item 2 . . . . . . . . . . . . . . "Consolidated Expense Data"
Item 3 . . . . . . . . . . . . . . "Financial Highlights"
Item 4 . . . . . . . . . . . . . . "What is the Fund", "What are the Fund's
Investment Objectives and Policies:", and
"GENERAL INFORMATION -The Fund"
Item 5 . . . . . . . . . . . . . . "Who Manages the Fund?"
Item 5A. . . . . . . . . . . . . . "1996 Review" and "Fund Performance
Graph"
Item 6 . . . . . . . . . . . . . . "How Will the Fund and its
Shareholders Be Taxed?", and "GENERAL
INFORMATION - Description of the
Shares, Shareholder Inquiries"
Item 7 . . . . . . . . . . . . . . "How to Buy Fund Shares", and "How is Net
Asset Value Determined?"
Item 8 . . . . . . . . . . . . . . "How to Redeem Fund Shares"
Item 9 . . . . . . . . . . . . . . (Not Applicable)
Item in Part Heading or Location in
of Form N-1A Statement of Additional Information
Item 10 . . . . . . . . . . . . . Cover page
Item 11 . . . . . . . . . . . . . Statement of Additional Information Table
of Contents
Item 12 . . . . . . . . . . . . . "General Information"
Item 13 . . . . . . . . . . . . . "Investment Objectives and Policies"
Item 14 . . . . . . . . . . . . . "Management of the Fund"
Item 15 . . . . . . . . . . . . . "Principal Shareholders"
Item 16 . . . . . . . . . . . . . "Investment Advisory and Other Services"
Item 17 . . . . . . . . . . . . . "Brokerage"
Item 18 . . . . . . . . . . . . . (Not Applicable)
Item 19 . . . . . . . . . . . . . "Purchase and Redemption of Fund Shares";
"Transfer of Fund Shares"; and
"Determination of Net Asset Value"
Item 20 . . . . . . . . . . . . . "Tax Status"
Item 21 . . . . . . . . . . . . . (Not Applicable)
Item 22 . . . . . . . . . . . . . (Not Applicable)
Item 23 . . . . . . . . . . . . . Independent Auditor's Report and
Financial Statements and Notes Thereto
PART A
INFORMATION REQUIRED IN PROSPECTUS
PROSPECTUS April 16, 1997
PINNACLE FUND
Indianapolis, Indiana
Pinnacle Fund (the "Fund") is a no-load, open-end, diversified
investment company seeking long-term capital growth by investing
primarily in common stocks.
You may buy or redeem shares of beneficial interest in the Fund at net
asset value without any sales charge, commission or redemption fee. The
minimum initial investment is $1,000 and the minimum amount which may be
added to an account is $100.
This prospectus contains information you should know before investing in
the Fund. Please read it and retain it for future reference. A
Statement of Additional Information has been filed with the Securities
and Exchange Commission and contains further information about the Fund.
You may obtain a copy without charge by writing the Fund at 36 South
Pennsylvania Street, Suite 610, Indianapolis, Indiana 46204. The
Statement of Additional Information is dated the same date as this
prospectus and is incorporated herein by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
CONSOLIDATED EXPENSE DATA. . . . . . . . . . . . . . . . . . . . . . .1
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . .2
1996 REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
QUESTIONS AND ANSWERS ABOUT THE FUND . . . . . . . . . . . . . . . . .4
What is the Fund? . . . . . . . . . . . . . . . . . . . . . .4
What are the Fund's Investment Objectives and Policies? . . .4
Who Manages the Fund? . . . . . . . . . . . . . . . . . . . .5
How to Buy Fund Shares. . . . . . . . . . . . . . . . . . . .6
Automatic Investment Plan . . . . . . . . . . . . . . . . . .7
How to Redeem Fund Shares . . . . . . . . . . . . . . . . . .7
How Is Net Asset Value Determined?. . . . . . . . . . . . . .8
How Will the Fund and its Shareholders be Taxed?. . . . . . .9
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .9
The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . .9
Description of the Shares . . . . . . . . . . . . . . . . . 10
Reports to Shareholders . . . . . . . . . . . . . . . . . . 10
Retirement Plans. . . . . . . . . . . . . . . . . . . . . . 10
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . 11
Custodian, Transfer and Disbursing Agent. . . . . . . . . . 11
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 11
FUND PERFORMANCE GRAPH . . . . . . . . . . . . . . . . . . . . . . . 12
CONSOLIDATED EXPENSE DATA
The following table sets forth certain information regarding the
operating expenses incurred by the Fund in 1996.
Management Fees*. . . . . . . . . . . . . . . . . . . . . . .80%
Other Expenses* . . . . . . . . . . . . . . . . . . . . . . .36%
Total Fund Operating Expenses*. . . . . . . . . . . . . . .1.16%
*Expressed as a percentage of average net assets.
Example 1 Year 3 Years 5 Years 10 Years
You would pay the
following expenses on
a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each time
period: $11.82 $36.35 $63.83 $140.90
This Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
The table set forth above is intended to assist you in understanding
the various expenses which the Shareholders of the Fund will directly or
indirectly bear. The Advisor has agreed to reimburse the Fund to the
extent the Fund's total operating expenses exceed 2% of its net assets.
See "Who Manages the Fund? above for an explanation of the investment
advisory agreement between the Fund and the Advisor.
FINANCIAL HIGHLIGHTS
<TABLE>
The following table reflects the results of the Fund's operations for a Share of the Fund outstanding January 1, 1987
through December 31, 1996. The data in the table have been derived from, and should only be read in conjunction with, the
Fund's financial statements, which for 1996 have been examined by Geo. S. Olive & Co. LLC, certified public accountants,
and are included in the Statement of Additional Information. For further information regarding the Fund's performance, see
"Fund Performance Graph."
<CAPTION>
Per Share Income and Capital Changes
(for a Share outstanding from January 1, 1987
through December 31, 1996)
(Adjusted for 2-for-1 share split effective September 8, 1989)
Year Ended December 31,
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected data for each share
outstanding throughout the
period is as follows:
Net asset value, beginning of
period $22.47 $18.83 $21.15 $21.83 $22.14 $16.87 $18.23 $14.53 $14.02 $12.85
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income .05 .11 .09 .10 .13 .25 .36 .25 .22 .18
Net gains or losses on
securities (both realized
and unrealized) 5.04 6.54 (.34) .62 (.29) 6.48 (.94) 4.25 .74 1.78
Total from investment
operations 5.09 6.65 (.25) .72 (.16) 6.73 (.58) 4.50 .96 1.96
Dividends (from net
investment income) (.05) (.11) (.09) (.10) (.13) (.25) (.35) (.25) (.22) (.23)
Distributions (from
capital gains) 3.55 (2.90) (1.98) (1.30) (.02) (1.21) (.43) (.55) (.23) (.56)
Net Asset Value, End of
Period $23.96 $22.47 $18.83 $21.15 $21.83 $22.14 $16.87 $18.23 $14.53 $14.02
Total Return 22.5% 35.4% (1.1%) 3.3% (0.7%) 39.9% (3.1%) 3l.0% 6.7% 15.2%
Ratios/Supplemental Data
(in thousands)
Net assets, end of period $16,491 $14,673 $13,014 $15,135 $14,721 $12,116 $7,338 $6,337 $4,656 $3,308
======= ======= ======= ======= ======= ======= ====== ====== ====== ======
Ratio of expenses to
average net assets 1.16% 1.14% 1.15% 1.17% 1.18% 1.27% 1.40% 1.50% 1.54% 1.63%
======= ====== ====== ====== ====== ======= ======= ========
Ratio of net income to
average net assets .18% .44% .41% .46% .67% 1.33% 2.05% 1.52% 1.61% 1.34%
======= ======= ======= ======= ====== ====== ======= ======= ====== =====
Portfolio turnover rate 44.07% 68.48% 91.01% 85.35% 33.26% 55.00% 53.15% 44.93% 43.16% 86.06%
====== ======= ======= ======= ======= ====== ======= ====== ======= ======
Average commission rate paid $ .0606 $.0590
======== ========
See notes to financial statements.
</TABLE>
1996 REVIEW
The Pinnacle Fund had another excellent year rising 22.5% in 1996.
The Fund's return easily out paced the nation's inflation rate of 3.3%
and exceeded the 19.5% gain for the average stock mutual fund as
reported by Lipper Analytical.
The strong performance was due, in part, to the returns of several
stocks that had significant gains during the year. High on the list
were Microsoft (+88%), Cardinal Health (+60%), and Monsanto (+59%).
Just as important to the Fund was maintaining a moderate risk level.
Many smaller, more volatile stocks performed very poorly during the
summer and did not recover by year end. The Fund continues to invest in
high quality companies with established market positions and strong
earnings growth. These types of companies performed well during this
uncertain market environment.
QUESTIONS AND ANSWERS ABOUT THE FUND
What is the Fund?
Pinnacle Fund is a diversified, open-end management investment company
or "mutual fund" organized as a business trust under the laws of the
State of Indiana. A mutual fund allows you to pool your money with that
of other investors in order to obtain professional management of your
investments. A diversified mutual fund also makes it possible for you
to obtain greater diversification of your investments than you might
otherwise be able to accomplish alone and to simplify your investment
recordkeeping.
The Fund charges no sales commissions when you purchase or redeem its
shares of beneficial interest (the "Shares") and, therefore, is called
a "no-load" fund. The Fund is called "open-end" because it continuously
sells and redeems its Shares. The Fund is "diversified" because it
invests in securities of a number of issuers. The Fund's investments
are managed by Heartland Capital Management, Inc., of Indianapolis,
Indiana (the "Advisor").
What are the Fund's Investment Objectives and Policies?
The Fund's investment objective is long-term capital appreciation.
To achieve this objective, the Fund will invest primarily in common
stocks which, in the opinion of the Advisor, offer opportunities for
long-term capital appreciation. However, during periods when market or
economic conditions dictate a temporary defensive position, the Fund may
invest in the following money market and fixed income investments: U.S.
Treasury bills, notes and bonds; U.S. agency securities; commercial
paper rated Prime-1 by Moody's Investors Services, Inc. and repurchase
agreements which are fully collateralized by a U.S. Treasury or agency
security. Subject to the investment restrictions discussed below, the
Fund may invest in common stocks and securities convertible into common
stock, such as convertible debentures and convertible preferred stock,
and may invest in exchange-listed or over-the-counter securities, in
small or large companies, and in well-established or unseasoned
companies.
No investment is suitable for all investors and all investments
involve some degree of risk. The Fund is not intended to be a current
income producing investment and will not purchase securities with a view
toward short-term profits. Although the Fund's turnover rate cannot be
predicted, it is not expected to exceed 100%. Accordingly, the Fund is
suitable for investors who can accept the fluctuations in portfolio
value and other risks associated with seeking long-term capital growth
through investments in common stocks and other equity-type securities as
discussed above. In addition, investment risks will be increased to the
extent the Fund invests in small or unseasoned companies, whose
securities tend to be more thinly traded and subject to more abrupt or
erratic price movements than larger, well-established companies.
The Fund may not, without the approval of holders of a majority of its
Shares: (1) invest more than 5% of its total net assets in securities
of companies having a record of less than three years of continuous
operations (including the record of any predecessor); (2) borrow money,
except for temporary borrowings for emergency or extraordinary purposes
(but not for the purchase of investments) which shall not in any event
exceed 5% of the lower of cost or market value of the Fund's total net
assets; (3) pledge or mortgage its assets, except for temporary or
emergency purposes not to exceed 10% of the Fund's total net assets; and
(4) enter into repurchase agreements if, as a result, more than 5% of
the Fund's total net assets at the time of the transaction would be
subject to repurchase agreements maturing in more than seven days. All
of the Fund's investment restrictions are set forth in the Statement of
Additional Information.
Who Manages the Fund?
Under an investment advisory agreement with the Fund, the Advisor,
Heartland Capital Management, Inc., 36 South Pennsylvania Street, Suite
610, Indianapolis, Indiana 46204 provides the Fund continuous investment
and management services, subject to the control and direction of the
trustees of the Fund. The Fund pays the Advisor a fee, computed daily
and paid monthly, at the annual rate of 8/10 of 1% of the Fund's average
daily net assets. This fee is higher than that paid by most investment
companies.
Pursuant to the investment advisory agreement, the Advisor, at its own
expense and without any reimbursement from the Fund, furnishes office
space, facilities and equipment; executive, administrative and clerical
personnel; and bears all sales and promotional expenses of the Fund.
The Fund will pay all of its operating expenses, including without
limitation the Advisor's fee, the costs of preparing and printing its
registration statement required by the Securities Act of 1933 and the
Investment Company Act of 1940, shareholder servicing costs, directors'
fees and expenses, legal, accounting and auditing fees, custodian fees
and expenses, taxes and registration fees.
The Advisor, a registered investment advisor, also acts as investment
advisor for institutional and individual portfolios with assets of
approximately $738 million.
The employees of the Advisor who are primarily responsible for the
day-to-day management of the Fund's portfolio are: Mr. Barry F. Ebert,
President of the Advisor; Mr. Robert D. Markley, Vice President of the
Advisor; and Mr. Thomas F. Maurath, an employee of the Advisor. Each of
Messrs. Ebert, Markley and Maurath has been primarily responsible for
the Fund since the inception of the Fund on March 6, 1985, and has held
his present position with the Advisor for more than five years.
How to Buy Fund Shares
Shares of the Fund may be purchased at the net asset value next
determined after the receipt of an order. (See "How is Net Asset Value
Determined".) There is no sales charge or front-end fees of any kind.
As set by the trustees of the Fund, the minimum initial investment in
the Fund is $1,000 and subsequent purchases must be at least $100.
To make an initial purchase of Shares, please complete and sign the
Application at the back of this prospectus and mail it to the Pinnacle
Fund, c/o Firstar Trust Company, 615 East Michigan, 3rd Floor,
Milwaukee, Wisconsin 53202 together with a check made payable to
Pinnacle Fund. You may then make subsequent investments by check
accompanied by either the order stubs attached to any Fund confirmation
you receive, or a brief note indicating the amount of the purchase, your
account number and the name in which your account is registered. Your
check must be collectible at full face value and must be drawn in U.S.
dollars on a U.S. bank. There is a $10.00 fee for processing
uncollectible funds. Subsequent investments may be made by wire
transfer by following the instructions set forth on the Application.
Investors should always call Firstar Trust Company at (414) 765-4124
before wiring funds. There is a fee of $12.00 for wired funds.
The Fund will not issue any certificates evidencing Shares unless you
specifically request them in writing and will not mail you a certificate
for Shares purchased by check until 30 days after the date of purchase.
The Fund also will not issue a certificate for a fractional Share.
All purchase orders are subject to acceptance or rejection by authorized
officers of the Fund in Indianapolis, Indiana and entry of the order on
the Fund's record of Shareholder accounts and are not binding until
accepted and entered. Once your purchase order has been accepted by the
Fund you may not cancel or revoke it, although you may redeem the Shares
at any time. The Fund reserves the right to reject any purchase order
that it determines is not in its or its Shareholders' best interests.
The Fund also reserves the right to waive or lower the investment
minimums for any reason.
Automatic Investment Plan
An Automatic Investment Plan may be established at any time. By
participating in the Automatic Investment plan, shareholders may
automatically make purchases of shares of the Fund on a regular
convenient basis ($50 minimum). Under the Automatic Investment Plan,
shareholders' banks or other financial institutions debit pre-authorized
amounts drawn on their accounts each month and apply such amounts to the
purchase of Shares of the Fund. The Automatic Investment Plan can be
implemented with any financial institution that is a member of the
Automatic Clearing House. No service fee is charged to shareholders for
participating in the Automatic Investment Plan. Shares purchased
through the Automatic Investment Plan for an IRA account may not be
applied to IRA contributions for a prior year. An application to
establish the Automatic Investment Plan may be obtained from the Fund.
The Fund reserves the right to suspend, modify or terminate the
Automatic Investment Plan, without notice.
How to Redeem Fund Shares
The Fund will redeem all or part of your Shares whenever you request.
The price at which your Shares will be redeemed is the net asset value
per Share next determined after proper redemption instructions are
received and is the same as the purchase price of Shares purchased at
that time. See "How to Buy Fund Shares". Because the redemption price
received depends upon the value of the Fund's investments at the time of
redemption, it may be more or less than the price originally paid for
the Shares and may result in a realized capital gain or loss. See "How
Is Net Asset Value Determined?"
You should follow these procedures whenever you redeem Shares in the
Fund:
Send a redemption request to Pinnacle Fund, c/o Firstar Trust Company,
615 East Michigan, 3rd Floor, Milwaukee, Wisconsin 53202, specifying the
number of Shares or dollar amount to be redeemed, your name, your
account number, and the additional requirements listed below that apply
to your particular account. (Redemption cannot be accomplished by
telephoning or telegraphing the Fund or Firstar.)
Type of Registration Requirements
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Individual, Joint Tenants, Letter of instruction signed by all
Sole Proprietorship, person(s) required to sign for the
Custodial (Uniform Gift to account exactly as it is registered
Minors Act), General Partners Signatures on redemption requests,
whether or not the shares are
represented by certificates, must be
guaranteed by a commercial bank, a
federally chartered savings and loan
association, trust company or a member
firm of a national securities exchange,
unless the redemption is for shares with
an aggregate net asset value of $5,000
or less and the proceeds are to be sent
to registered owner(s) at the current
address for such owner(s) as reflected
on the Fund's records.
Corporations, Associations Letter of instruction and a corporate
resolution, signed by person(s) required
to sign for the account, accompanied by
signature guarantee(s).
Trusts Letter of instruction signed by the
trustee(s) with a signature guarantee.
(If the trustee's name is not registered
on the account, a copy of the trust
document certified within the last 60
days is required as well.)
If you had previously requested that certificates be issued to you for
your Shares the certificates must either be properly endorsed or
accompanied by a stock assignment properly endorsed exactly as the
Shares are registered. The signatures on the certificates (or
accompanying stock assignment) must be guaranteed by a U.S. commercial
bank (not a savings bank or savings and loan association) or trust
company or by a member of a recognized stock exchange.
Shareholders who have an IRA or other retirement plan must indicate
on their redemption requests whether or not to withhold federal income
tax. Redemption requests not indicating an election not to have federal
income tax withheld will be subject to withholding.
You may not cancel or revoke your redemption request and the Fund
cannot accept redemption requests which specify a particular date for
redemption or which contain any special conditions. Please contact the
Fund's transfer agent, Firstar Trust Company (telephone number
414-765-4124, TDD (Telecommunication Device for the Deaf) telephone
number 800-684-3416), before you redeem if you have any questions.
The Fund will generally mail payment for Shares redeemed in cash
within seven days after it receives proper instructions for redemption.
There is no redemption charge of any kind. If you attempt to redeem
shares within several days after they have been purchased by check, the
Fund may delay payment of the redemption proceeds to you for up to
fifteen days until the Fund can verify that payment of the purchase
price of those Shares has been (or will be) collected. The Fund
reserves the right to require a properly completed application before it
makes payment for Shares redeemed.
The Fund reserves the right to suspend or postpone redemptions during
any period when:
(a) trading on the New York Stock Exchange is restricted, as determined
by the Securities and Exchange Commission, or that Exchange is closed
for other than customary weekend and holiday closings; (b) the
Securities and Exchange Commission has by order permitted such
suspension; or (c) an emergency, as determined by the Securities and
Exchange Commission, exists, making disposal of portfolio securities or
valuation of net assets of the Fund not reasonably practicable.
How Is Net Asset Value Determined?
The net asset value of a Share of the Fund is determined as of the
close of trading on the New York Stock Exchange and on any other day in
which a significant degree of trading in the Fund's portfolio securities
materially affects the net asset value of a Share of the Fund. The net
asset value of each Share is computed by dividing the difference between
the value of the Fund's assets and liabilities by the number of Shares
outstanding. Each security traded on a national stock exchange is
valued on the basis of its last sale price on the date of valuation or,
if there are no sales that day, at the closing bid quotation. All other
securities for which reliable quotations are available are valued at the
latest bid quotation. Other assets and securities are valued at a fair
value determined in good faith by the trustees of the Fund.
How Will the Fund and its Shareholders be Taxed?
The Fund intends to distribute to its Shareholders substantially all
of its net income and realized capital gains. As a result, the Fund
intends to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code. Such qualification generally relieves
the Fund of any liability for federal income taxes to the extent its
earnings are timely distributed to its Shareholders in accordance with
certain provisions of the Internal Revenue Code. Such distributions may
either be paid in cash or reinvested in additional Shares at net asset
value. Whether received in cash or reinvested in additional Shares,
distributed net investment income and net short-term capital gains are
taxable as ordinary income to the Shareholder. Such distributions may
be eligible in whole or in part for the corporate dividends received
deduction, which in this case is generally 70%. Distributed long-term
capital gains designated as capital gain dividends are taxable as
long-term capital gains to the Shareholder, whether received in cash or
reinvested in additional Shares, and regardless of the period of time
Shares have been held by the Shareholder. Distributions designated by
the Fund as capital gains dividends are not eligible for the dividends
received deduction.
Distributions of the Fund's net investment income will normally be
made by the end of January. Capital gains distributions, if any, will
ordinarily also be made by the end of January. It is possible that the
Fund will declare a dividend in October, November or December payable to
Shareholders as of a specified date in such months, and will actually
pay the dividend in January of the following year. In that case,
Shareholders will be required to report the amount of the dividend as
income in the year in which the dividend is declared even though the
dividend is not received until the following January. The Fund will
inform each Shareholder in writing of the tax status of such
distributions. You may choose the manner in which you desire to receive
such distributions by checking the appropriate box on the application.
Changes in these instructions may be made by writing the Fund and will
apply to the next record date.
GENERAL INFORMATION
The Fund
The Fund was established under Indiana law as a business trust by a
Declaration of Trust dated December 19, 1984. The Declaration of Trust
provides that no trustee, officer, employee or agent of the Fund is
liable to the Fund or to any Shareholder, nor is any trustee, officer,
employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his own bad
faith, willful misfeasance, gross negligence or reckless disregard of
his duties. It also provides that all third persons shall look solely
to the Fund property for satisfaction of claims arising in connection
with the affairs of the Fund. with the exceptions stated above, the
Declaration of Trust provides that the trustees, officers, and employees
are entitled to be indemnified against all liability in connection with
the affairs of the Fund.
Description of the Shares
The Declaration of Trust permits the Trustees to issue an unlimited
number of Shares. Each Share represents an equal proportionate
beneficial interest in the Fund with each other Share. Upon any
liquidation of the Fund, Shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to Shareholders.
Shares are fully paid and non-assessable by the Fund and have no
pre-emptive or conversion rights.
Shareholders are entitled to one vote for each full Share held and
fractional votes for fractional Shares held and are entitled to cast
their votes in the election of trustees and on other matters submitted
to the vote of Shareholders at annual Shareholders' meetings. Voting
rights are not cumulative. The Fund may not change its investment
objective or other fundamental policy without the affirmative vote of
the holders of a majority of the outstanding voting Shares.
Reports to Shareholders
Each Shareholder will receive a confirmation statement reflecting each
purchase and redemption of Shares which the Shareholder makes as well as
periodic statements detailing distributions made by the Fund. In
addition, each Shareholder will receive an annual report containing
audited financial statements and a semi-annual report containing
unaudited financial statements.
Retirement Plans
The Fund offers an IRA and Rollover IRA plan to provide investors the
opportunity for tax sheltered retirement savings. The money you deposit
into your IRA with the Fund is invested in Shares of the Fund with all
dividends and capital gains distributions automatically reinvested.
Purchases and redemptions of Shares of the Fund in IRA accounts are
treated as any other account. The initial contribution must be $1,000
or more, but subsequent payments may be as little as $100.
Firstar Trust Company will serve as Custodian as set forth in the
Individual Retirement Custodial Account Agreement (Form 5305A) and the
Individual Retirement Account Disclosure Brochure, which sets out all
applicable fees. These documents are available by contacting the Fund
and should be read carefully. The Fund recommends consultation with an
attorney or tax advisor regarding any IRA plan.
Shareholder Inquiries
Shareholders who wish information concerning the Fund's investments
should contact Pinnacle Fund, 36 South Pennsylvania, Suite 610,
Indianapolis, Indiana 46204; telephone number (317) 633-4080.
Share applications, redemption letters, inquiries, or notifications
concerning a Shareholder's account should be directed to the Fund, c/o
Firstar Trust Company, 615 East Michigan, 3rd Floor, Milwaukee,
Wisconsin 53202; telephone number (414) 765-4124; TDD (Telecommunication
Device for the Deaf) telephone number (800) 684-3416.
Custodian, Transfer and Disbursing Agent
Firstar Trust Company of Milwaukee, Wisconsin, a bank incorporated
under the laws of the State of Wisconsin, acts as custodian for the
Fund's assets and the transfer and disbursing agent for the Fund.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its total return. Total
return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and
capital gains distributions. It is calculated by dividing that change
by the initial investment and is expressed as a percentage.
FUND PERFORMANCE GRAPH
The graph below compares the performance of the Fund from January 1,
1986 to December 31, 1996 to the performance of the Standard & Poor's
500 Index, the Barra S&P 500 Growth Index and the Consumer Price Index
(CPI).
<TABLE>
<CAPTION>
Pinnacle S&P 500 Barra Growth CPI
<S> <C> <C> <C> <C>
12/31/85 10,000.00 10,000.00 10,000.00 10,000.00
12/31/86 11,742.75 11,850.00 11,450.00 10,070.00
12/31/87 13,532.27 12,466.20 12,194.25 10,523.15
12/31/88 14,444.35 14,560.52 13,651.46 10,986.17
12/31/89 18,918.15 19,147.08 18,620.60 11,480.55
12/31/90 18,323.95 18,534.38 18,657.84 12,180.86
12/31/91 25,629.28 24,205.90 25,816.84 12,521.92
12/31/92 25,443.05 26,069.76 27,123.18 12,885.06
12/31/93 26,285.84 28,650.66 27,554.44 13,232.95
12/31/94 25,993.07 29,023.12 28,409.63 13,590.25
12/31/95 35,195.32 39,790.69 39,240.84 13,943.59
12/31/96 43,079.07 48,942.55 48,658.64 14,403.73
</TABLE>
PINNACLE
FUND
PROSPECTUS
_______________________________________________________________________
Investment Advisor
HEARTLAND CAPITAL MANAGEMENT, INC.
Indianapolis 317/633-4080
Custodian, Transfer Agent and
Disbursing Agent
FIRSTAR TRUST COMPANY
Milwaukee 414/765-4124
Auditors
GEO. S. OLIVE & CO. LLC
Indianapolis
Counsel
SOMMER & BARNARD, PC
Indianapolis
PINNACLE FUND
_______________________________________
STATEMENT OF ADDITIONAL
INFORMATION
April 16, 1997
___________________________________________
This Statement of Additional Information is not a prospectus and
investors should read the Prospectus dated April 16, 1997 in conjunction
with this Statement of Additional Information. Investors may obtain a
Prospectus, without charge, from the Fund's main office listed below.
____________________________________________
36 South Pennsylvania Street, Suite 610
Indianapolis, Indiana 46204
Pinnacle Fund
Statement of Additional Information
Table of Contents
Page
General Information. . . . . . . . . . . . . . . . . . . . . . . . . .1
Investment Objectives and Policies . . . . . . . . . . . . . . . . . .1
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . .4
Trustee and Executive Officer Compensation . . . . . . . . . . . . . .5
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . .6
Investment Advisory and Other Services . . . . . . . . . . . . . . . .7
Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Purchase and Redemption of Fund Shares . . . . . . . . . . . . . . . .9
Transfer of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . 11
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . 11
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Calculation of Performance Data. . . . . . . . . . . . . . . . . . . 13
Report of Independent Public Accountants
Financial Statements and Notes Thereto
General Information
Pinnacle Fund (the "Fund") was formed as a business trust under the
laws of the State of Indiana on December 19, 1984. The Fund operates as
an investment company and does not intend to engage in any other
business. The Fund's investments are managed by Heartland Capital
Management, Inc., Indianapolis, Indiana (the "Advisor").
The Fund is designed to provide investors with a diversified
professionally managed portfolio. For as little as $1,000, investors
may purchase shares of beneficial interest (the "Shares") of the Fund,
which invests the Shareholders' pooled monies in securities. The Fund's
objective is to provide a long-term growth component to an investor's
holdings; it is not intended to be an entire investment program.
Investment Objectives and Policies
As explained in the Prospectus, the investment objective of the Fund
is long-term capital appreciation. This objective is a matter of
fundamental policy and cannot be changed without the approval of the
holders of a majority of its Shares.
To achieve this objective, the Fund will invest primarily in common
stocks which appear to offer opportunities for long-term capital
appreciation. However, the Fund may lessen its commitment to common
stocks from time to time by adopting a temporary defensive position
whenever the Advisor believes stock market risks are high and common
stock prices may decline. At such times, the Fund may invest
substantial portions of its assets in the following money market and
fixed income investments: U.S. Treasury bills, notes, and bonds; U.S.
agency securities; commercial paper rated prime-1 by Moody's Investors
Services, Inc. and repurchase agreements which are fully collateralized
by a U.S. Treasury or agency security. Repurchase agreements may be
entered into with a member bank of the Federal Reserve System or primary
dealer in U.S. Government securities under which the bank or dealer
agrees to repurchase the security from the Fund at an agreed upon time
and price, thereby determining the yield during the term of the
agreement. This results in a fixed rate of return insulated from market
fluctuations during such periods. Although the underlying obligation is
a U.S. Government security, the obligation of the seller to repurchase
the security is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the security. In the event
of default by the seller under a repurchase agreement, the Fund may
suffer time delays and incur costs or losses in connection with the
disposition of the collateral. The Fund will require the seller to
provide additional collateral if the market value of the securities
falls below the repurchase price at any time during the term of the
repurchase agreement.
The Fund has adopted the following restrictions which are matters of
fundamental policy and cannot be changed without the approval of the
holders of a majority of its outstanding Shares:
1. The Fund will not purchase any security on margin, except such
short term credits as are necessary for the clearance of
transactions, participate in a joint trading account, sell
securities short or act as an underwriter in the distribution of
any securities other than Shares in the Fund.
2. The Fund will not lend money to any person, except that the Fund
may purchase a portion of publicly distributed bonds, debentures
or other debt securities, prime quality commercial paper,
certificates of deposit, or United States Treasury securities.
3. The Fund will not purchase or sell real estate or interests in
real estate or commodities futures; provided, however, that the
Fund may purchase publicly traded securities of companies
engaged in such activities and investments.
4. The Fund will not borrow money except for temporary purposes,
provided, however, that such temporary borrowings shall not
exceed 5% of the lower of cost or market value of the Fund's
total net assets, shall only be for emergency or extraordinary
purposes and shall not be for the purchase of investment
securities.
5. The Fund will not pledge, mortgage, or hypothecate its assets
except for temporary or emergency purposes and then not to an
extent greater than 10% of its total net assets at that time.
6. Securities of other investment companies will not be purchased.
7. The Fund will not invest for the purpose of exercising control
or management of any company or purchase securities of any
issuer if, as a result of such purchase, the Trust would hold
more than 10% of the voting securities of such issuer or more
than 10% of all or any class of securities of such issuer.
8. Not more than 5% of the total net assets of the Fund, taken at
market value, will be invested in the securities of any one
issuer, not including U.S. Government securities.
9. Not more than 25% of the Fund's total net assets will be
invested in companies of any one industry or group of related
industries.
10. The Fund will not acquire or retain any security issued by a
company, an officer or director of which is an officer or
Trustee of the Fund, or any officer, director, shareholder or
other affiliated person of the Advisor.
11. The Fund will not acquire or retain any security issued by a
company if one or more officers, directors, shareholders or
other affiliated persons of the Advisor beneficially own more
than one half of one percent (0.5%) of such company's
outstanding stock or other securities, and all the foregoing
persons owning more than 1/2 of 1% (0.5%) together own more than
5% of such stock or securities.
12. The Fund will not purchase securities of any company which
together with predecessors has a record of less than three years
of continuous operations if such purchase would cause the value
of the Fund's investments in all such securities or companies to
exceed 5% of the Fund's total net assets.
13. The Fund will not invest in puts, calls, straddles, spreads or
any combination thereof.
14. The Fund will not invest in oil, gas, or other mineral
exploration or development programs; provided, however, that the
Fund is not prohibited from purchasing publicly traded
securities of companies engaging in whole or in part in such
activities.
15. The Fund will not purchase securities from or sell securities to
any of its officers, Trustees or employees, except with respect
to Shares in the Fund.
16. The Fund will not invest in restricted securities and other
securities not readily marketable and will not invest more than
5% of its total assets in repurchase agreements maturing in more
than seven days.
17. The Fund will not purchase or issue any warrants.
18. The Fund will not issue any class of securities senior to the
Shares. Borrowings in accordance with 4. above is not
considered the issuance of senior securities for purposes of
this investment restriction.
In addition to the above restrictions, the Fund will not purchase
securities with a view to rapid turnover, although it is expected that
short-term capital gains may be realized occasionally from the sale of
assets held less than six months. Securities will be sold if the Fund's
management believes that the potential for capital appreciation has been
achieved or is no longer probable or if the risk of a decline in the
market price is too great. The Fund's portfolio turnover rate was
68.48% and 44.07% for the fiscal years ended December 31, 1995 and 1996,
respectively. Although the Fund's portfolio turnover rate cannot be
predicted, it is expected to be less than 100% for the current fiscal
year. The portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the
monthly average of the value of the portfolio securities owned by the
Fund during the fiscal year.
Management of the Fund
The overall operations of the Fund are conducted by the officers under
the control and direction of the Trustees. The following table sets
forth the pertinent information about the Fund's officers and Trustees:
Position(s) Held Principal Occupation
Name and Address With Fund During Past 5 Years
----------------- --------------- ------------------------
Thomas F. Maurath* President and President of the Fund since
36 South Pennsylvania Trustee February, 1995; Investment
Suite 610 officer With Heartland Capital
Indianapolis, IN 46204 Management Inc. since
February 1984. From June
1982 until he joined
Heartland Capital
Management, Inc. in 1984,
Mr. Maurath was an
investment officer at
Merchants Investment
Counseling, Inc. Prior to
joining Merchants Investment
Counseling, Inc. Mr. Maurath
was engaged in obtaining his
MBA at Indiana University
School of Business.
Barry F. Ebert* Trustee President of the Fund from
36 South Pennsylvania December, 1984 to February,
Suite 610 1995; President and Director
Indianapolis, IN 46204 of Heartland Capital
Management, Inc., the
Advisor to the Fund, since
January 1984. For more than
five years prior to forming
Heartland Capital
Management, Inc. on January
26, 1984, Mr. Ebert was
President of Merchants
Investment Counseling, Inc.
where his primary
responsibilities included
investment management.
Robert D. Markley* Secretary, Secretary/Treasurer of the
36 South Pennsylvania Treasurer, and Fund since December 1984;
Indianapolis, IN 46204 Trustee Vice President, Secretary/
Treasurer and Director of
Heartland Capital
Management, Inc. since
January 1984. For more than
five years prior to forming
Heartland Capital
Management, Inc. in January
1984, Mr. Markley was Vice
President of Merchants
Investment Counseling, Inc.,
where his primary
responsibilities included
investment management.
Leo G. Watson Trustee Dr. Watson has engaged in the
3433 S. LaFountain St. private practice of ophthal-
Kokomo, IN 46902 mology in Kokomo, Indiana
for more than five years.
Robert L. Blackburn
1505 National Road
Columbus, IN 47203 Trustee Mr. Blackburn has been
President of Columbus
Automotive Group, a
Columbus, Indiana automobile
dealership, for more than
five years.
Thomas D. Rush Trustee Mr Rush has been President and
12734 Hamilton Crossing Blvd. CEO of Trinity Homes, Inc.,
Carmel, IN 46032 an Indiana builder of
single family homes, since
May, 1991. From 1973 to
1991, Mr. Rush was President
and CEO of the Jonathan
Group, a single family home
builder in Indianapolis.
* Messrs. Ebert, Markley and Maurath are "interested persons" in the
Advisor, as that term is defined in the Investment Company Act of
1940. Messrs. Maurath and Markley are the only executive officers of
the Fund.
Trustee and Executive Officer Compensation
Executive officers of the Fund receive no compensation from the Fund.
The following table shows the compensation paid to the Fund's trustees
in 1996:
COMPENSATION TABLE
Name of Person, Aggregate Compensation
Position from Fund
----------------- ----------------------
Leo G. Watson, Trustee $200
Robert L. Blackburn, Trustee $100
Thomas D. Rush, Trustee $100
Principal Shareholders
As of February 6, 1997, the Fund had 688,312.518 Shares issued and
outstanding. As far as the Fund is advised, the following table sets
forth, as of February 6, 1997, the persons known to be beneficial owners
of more than 5% of the Fund's outstanding Shares and the Shares owned by
all officers and Trustees of the Fund as a group.
Amount and
Name and Nature of
Address of Beneficial Percent
Beneficial Owner Ownership (1) of Class
------------------ ------------- -----------
Barry F. Ebert
36 S. Pennsylvania, Suite 610
Indianapolis, Indiana 46204 72,067.996 10.4%
Shares (2)
Robert D. Markley
36 S. Pennsylvania, Suite 610
Indianapolis, Indiana 46204 92,990.670 13.5%
Shares (3)
Butler Fairman and Seufert, Inc.
Profit Sharing and 401(k) Plan
9405 Delegates Row
Indianapolis, Indiana 46250 43,273.457 6.3%
Shares
All Trustees and officers as
a group (6 persons) 118,980.449 17.3%
Shares
(1) unless otherwise indicated, the persons shown have sole voting and
investment power over the Shares listed.
(2) Includes 60,827.427 Shares owned by the Heartland Capital Management, Inc.
Profit Sharing Trust plan, as to which Shares Messrs. Ebert and Markley, as
co-trustees, have voting control. Also includes 1,042.748 Shares owned by
Mr. Ebert's wife and her IRA. Mr. Ebert disclaims beneficial ownership of
Shares owned by his wife.
(3) Includes 3,801.897 Shares held in Mr. Markley's individual retirement
account, 1,090.098 Shares owned by Mr. Markley's children, and 27,271.158
Shares owned by Mr. Markley's wife and her individual retirement account.
Mr. Markley disclaims beneficial ownership of the Shares owned by his wife.
Also includes the 60,827.427 Shares owned by the Heartland Capital
Management, Inc. Profit Sharing Trust plan referred to in footnote
(2) above.
Investment Advisory and Other Services
Under an Investment Advisory Agreement (the "Agreement") with the
Fund, Heartland Capital Management, Inc., 36 South Pennsylvania,
Indianapolis, Indiana 46204, furnishes continuous investment service and
management to the Fund, for which it receives an annual fee, payable
monthly, based on the average net asset value of the Fund, as determined
by valuations made at the close of each business day. The annual fee is
8/10 of 1% of the Fund's average daily net assets. This fee is higher
than that paid by most investment companies. For fiscal years 1994,
1995 and 1996 the Fund paid the Advisor pursuant to the Agreement in the
aggregate amounts of $114,123, $110,245 and $126,100, respectively.
Personnel of the Advisor are primarily responsible for investment
decisions affecting the Fund's portfolio.
Under the Agreement, the Advisor, at its own expense and without
reimbursement from the Fund, furnishes office space, office facilities,
equipment, executive officers and executive expenses, and bears all
sales and promotional expenses of the Fund. The Fund will pay all
operating expenses including but not limited to the costs of preparing
and printing its Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 and any amendments thereto, the
expense of registering its Shares with the Securities and Exchange
Commission and in the various states, the cost of prospectuses sent to
current shareholders, Share certificates and reports to shareholders,
interest charges, taxes, and legal expenses. Also included are fees of
Trustees who are not interested persons of the Advisor or officers or
employees of the Fund, salaries of administrative or clerical personnel,
auditing and accounting services, fees and expenses of any custodian,
printing and mailing expenses, postage, and charges and expenses of the
disbursing agents, registrar and transfer agent, including the cost of
keeping all necessary Shareholder records and accounts and handling.
The Advisor has agreed to reimburse the Fund to the extent that the
Fund's aggregate annual operating expenses, including the investment
advisory fee but excluding interest, taxes, and brokerage commissions,
exceed the sum of (i) 2% of the first $10,000,000 of the Fund's average
net assets, (ii) 1-1/2% of the next $20,000,000 of the Fund's average
net assets and (iii) 1% of the Fund's average net assets in excess of
$30,000,000 for each year, as determined by valuations made as of the
close of each business day of the year. The Advisor shall, on a monthly
basis, reimburse the Fund by offsetting against its monthly fee all
expenses in excess of such sum, prorated on an annual basis.
The Agreement is not assignable and may be terminated by either party,
without penalty, on sixty (60) days notice. Unless sooner terminated,
the Agreement will continue in effect as long as it is approved annually
by (a) the Trustees or by a vote for a majority of the outstanding
Shares of the Fund and (b) in either case, by the affirmative vote of a
majority of Trustees, who are not parties to the Agreement or
"interested persons" of the Advisor, as defined in the Investment
Company Act of 1940, as amended, cast in person at a meeting called for
the purpose of voting for such approval.
The Advisor may act as an investment advisor to other persons, firms,
or corporations including investment companies. Heartland Capital
Management, Inc. is a registered investment advisor and has numerous
advisory clients of its own, none of which, however, is a registered
investment company, The Advisor was founded in January, 1984, and has
never been controlled by or affiliated with any other business entity or
person. On December 31, 1996, the Advisor had approximately $738
million of assets under management, but has not managed any registered
investment companies other than the Fund.
The members of the Board of Directors of the Advisor are Barry F.
Ebert, who serves as a Trustee of the Fund and as President of the
Advisor, and Robert D. Markley, who serves as Secretary/Treasurer and a
Trustee of the Fund and as Vice President of the Advisor. Thomas F.
Maurath, the President and a Trustee of the Fund, is also an employee of
the Advisor. Messrs. Ebert and Markley each own more than 10% of the
outstanding securities of the Advisor and collectively Messrs. Ebert,
Markley and Maurath own 100% of such securities. Messrs. Ebert, Markley
and Maurath are the only individuals with responsibility for making
portfolio investment determinations or recommendations for the Fund.
Each of the individuals mentioned above is involved in performing
investment research for the Fund. The Advisor relies upon information
supplied by the analytical staffs of various brokerage firms as well as
other publications and research services. A discussion of how the
Advisor allocates investment opportunities among clients and how
portfolio transactions are allocated among brokers is found under
"Brokerage".
Geo. S. Olive & Co. LLC, as independent certified public accountants
and auditors to the Fund, examined the financial statements of the Fund
for all fiscal years beginning after December 31, 1986 including the
fiscal year ended December 31, 1996 and will examine the financial
statements of the Fund for the current fiscal year ending December 31,
1997.
The custodian for the Fund's assets and the transfer and disbursing
agent for the Fund is Firstar Trust Company, P. O. Box 701, Milwaukee,
Wisconsin 53201.
Brokerage
Portfolio brokerage transactions of the Fund are placed with those
securities brokers which the Advisor believes will provide the best
value in brokerage and research services for the Fund. Although some
transactions involve only brokerage services, many involve research
services as well.
In valuing brokerage services, the Advisor makes a judgment as to
which brokers are capable of providing a favorable net price (not
necessarily the lowest commission considered alone) and a reasonable
execution in a particular transaction. Reasonable execution connotes
not only general competence and reliability, but specific expertise and
effort of a broker in overcoming the anticipated difficulties in
fulfilling the requirements of particular transactions.
In valuing research services, the Advisor makes a judgment of the
usefulness of research and other information provided by a broker to the
Advisor in managing the Fund's investment portfolio. In some cases, the
information relates to the specific transaction placed with the broker,
but for the greater part the research consists of a wide variety of
information concerning companies, industries, investment strategy and
economic, financial and political conditions and prospects, all of which
is useful to the Advisor in advising the Fund and other clients of the
Advisor.
In compensating brokers for their services, the Advisor takes into
account the value of the information received for use in advising the
Fund. It is understood by the Fund that other clients of the Advisor
might also benefit from the information obtained. where the Fund and
one or more other clients of the Advisor are simultaneously engaged in
the purchase or sale of the same security, the transactions will, to the
extent possible, be averaged as to price and allocated equitably. In
most cases, coordination and the ability to participate in volume
transactions will be to the benefit of the Fund. The aggregate amount
of commissions paid by the Fund for the fiscal years 1994, 1995 and 1996
were $46,931, $28,279 and $17,410, respectively.
The Fund may not allocate brokerage solely on the basis of a
recommendation to purchase securities. When feasible and practical,
over-the-counter purchases and sales are transacted directly with
principal market makers. Principal market makers are not paid a direct
commission. They receive in payment the difference between the bid and
asked prices for a particular security.
Purchase and Redemption of Fund Shares
As discussed in the Prospectus, application for the purchase of Shares
is made to Pinnacle Fund, c/o Firstar Trust Company, P. O. Box 701,
Milwaukee, Wisconsin 53201. The price per Share will be the net asset
value computed after the time the application is received. (See
"Determination of Net Asset Value" below.) The net asset value for a
particular day is applicable to all applications for the purchase of
Shares as well as all requests for the redemption of Shares received at
or before that day's close of trading on the New York Stock Exchange
(the "Exchange"). The Exchange usually closes at 4:00 p.m. New York
time. Applications for purchase of Shares and requests for redemption
of Shares received after the close of trading on the Exchange will be
based on the net asset value as determined as of the close of trading on
the next day the Exchange is open.
All applications to purchase Shares are subject to acceptance or
rejection by authorized officers of the Fund and are not binding until
accepted. Applications will not be accepted unless they are accompanied
by payment. However, minor differences between amounts submitted and
actual cost of Shares will be refunded or billed. It is the policy of
the Fund not to accept applications under circumstances or in amounts
considered disadvantageous to existing Shareholders.
The Trustees of the Fund are authorized from time to time to fix upper
and lower limits on the number of Shares which may be purchased.
Pursuant to this authority, the Trustees have established $1,000 as the
minimum initial purchase and $100 as the minimum for any subsequent
purchase, except through dividend or capital gain reinvestment.
Purchases of Shares will be made in full and fractional shares,
computed to three decimal places, unless the investor specifies full
shares only.
Certificates representing Shares purchased will not be issued unless
the Shareholder specifically requests certificates in a separate signed
written request. In no instance will certificates be issued for
fractional Shares. When certificates are not requested, the Fund's
transfer agent, Firstar Trust Company will credit the Shareholder's
account with the number of Shares purchased. The Fund offers this
service to relieve Shareholders of responsibility for safekeeping
certificates and to eliminate the need for delivery of certificates in
the event of redemption. Written confirmations are issued for all
purchases of Shares.
A Shareholder may require the Fund at any time to redeem his Shares
in whole or in part. If Shares are represented by certificates,
redemption is accomplished by delivering to the Fund's transfer agent,
Firstar Trust Company, the certificate for the full Shares to be
redeemed. The certificate must be properly endorsed or accompanied by
instrument of transfer, in either case with signatures guaranteed by a
bank or by a member firm of the Exchange. A notary public or a savings
and loan association is not an acceptable guarantor. If certificates
have not been issued, redemption is accomplished by delivering a signed
written request for redemption. If the account is owned jointly, both
owners must sign. Redemption cannot be accomplished by telephoning or
telegraphing the Fund. The redemption price is the net asset value next
computed after the time of the receipt of the certificates or written
request in the proper form set out above.
If there is doubt as to what is necessary in order to redeem Shares,
please write or call the Fund's transfer agent, Firstar Trust Company
(P. O. Box 701, Milwaukee, Wisconsin 53201; telephone number
414-765-4124) prior to submitting the redemption request. No redemption
request will become effective until all documents have been received in
proper form by the transfer agent.
All redemptions will be processed immediately upon receipt and the
Fund will return redemption requests that contain restrictions as to the
time or date redemptions are to be effected. The redemption price will
depend on the market value of the investments in the Fund's portfolio at
the time of redemption (see "Determination of Net Asset Value" below)
and may be more or less than the cost of Shares redeemed. Payment for
Shares redeemed will be made within seven (7) days after redemption and
will be made in cash only. There is no redemption charge.
The right of redemption may be suspended for any period during which
the Exchange is closed other than customary weekend and holiday
closings, and may be suspended for any period during which trading on
the Exchange is restricted as determined by the Securities and Exchange
Commission, or the Commission has by order permitted such suspension, or
the Commission has determined that an emergency exists and, therefore,
it is not reasonably practical for the Fund to dispose of its securities
nor to fairly determine the value of its net assets.
Transfer of Fund Shares
Shares of the Fund may be transferred in much the same manner as they
are redeemed. If Shares are represented by certificates, the
certificates representing the Shares to be transferred must be delivered
to the Fund, c/o Firstar Trust Company, P.0. Box 701, Milwaukee,
Wisconsin 53201. The Fund is not bound to record any transfer on the
transfer books maintained by Firstar Trust Company until all required
documents have been received by it.
Determination of Net Asset Value
The net asset value of a Share of the Fund is determined by dividing
the total value of the net assets of the Fund by the total number of
full and fractional Shares outstanding at that time. Net assets of the
Fund are determined by deducting the liabilities of the Fund from the
total assets of the Fund. The net asset value is determined as of the
close of trading on the Exchange on each day the Exchange is open for
trading and on any other day in which a significant degree of trading in
the Fund's portfolio securities materially affects the net asset value
of a Share of the Fund.
Securities traded on a stock exchange will ordinarily be valued on the
basis of the last sale price on the date of valuation, or in the absence
of any sale on that day, the closing bid price. Other securities will
be valued at the closing bid price. Any securities for which there are
not readily available market quotations will be valued at fair value, as
determined in good faith by the Trustees. Short-term securities with
over 60 days to maturity are valued at market value, those under 60 days
to maturity are valued at amortized cost. Odd lot differentials and
brokerage commissions will be excluded in calculating values. All
assets other than securities will be valued at their then current fair
value as determined in good faith by the Trustees.
Tax Status
During the current taxable year and in future years, the Fund intends
to qualify under the provisions of Subchapter M of the Internal Revenue
Code which is applicable to investment companies.
Upon qualifying under the federal tax laws related to investment
companies, the Fund will not be subject to federal taxes on income or
capital gains distributed to the Shareholders. Upon so qualifying,
distributions designated as "capital gain distributions" (meaning the
excess of net long-term capital gains over net short-term capital
losses) will be taxable to Shareholders as long-term capital gains,
regardless of the length of time shares of the Fund have been held.
Distributions of the excess of net short-term gains over the net
long-term capital losses and distributions from net investment income
will be taxable as ordinary income to Shareholders. The federal tax
treatment will be the same whether distributions are made in cash or
reinvested in additional Shares of the Fund. If the Fund does not
qualify for such preferential tax treatment in any fiscal year, it will
be taxed as an ordinary corporation with the result that net asset value
per Share may be adversely affected.
Distributions of the Fund's net investment income will normally be
made by the end of January. Capital gains distributions, if any, will
ordinarily also be made by the end of January. It is possible that the
Fund will declare a dividend in October, November or December payable to
Shareholders as of a specified date in such months, and will actually
pay the dividend in January of the following year. In that case,
Shareholders will be required to report the amount of the dividend as
income in the year in which the dividend was declared even though the
dividend is not received until the following January.
Since at the time of purchase of Shares the Fund may have
undistributed income or capital gains included in the computation of the
net asset value per share, a dividend or capital gains distribution
received shortly after such purchase by a Shareholder may be taxable to
the Shareholder, although it is, in whole or in part, a return of
capital and may have the effect of reducing the net asset value per
Share.
Distributions from net investment income are taxable as ordinary
income to Shareholders and are eligible in whole or in part for the 70%
inter-corporate "dividends received" deduction. Shareholders will be
advised as to any distributions not so eligible for the "dividends
received" deduction. Distributions may be also subject to state and/or
local income tax in states having such taxes.
IT IS RECOMMENDED THAT INVESTORS CONSULT WITH THEIR PERSONAL TAX
ADVISOR IN EVALUATING THEIR INDIVIDUAL TAX SITUATION.
The Fund is required to deduct and withhold income tax from a
distribution payment at a 31 percent rate if:
(1) The Shareholder fails to furnish his/her taxpayer
identification number to the Fund;
(2) The IRS notifies the Fund that the taxpayer identification
number furnished by the Shareholder is incorrect;
(3) The IRS notifies the Fund that the backup withholding should
be commenced because the Shareholder has failed to properly report
interest or dividend income; or
(4) When required to do so, the Shareholder fails to certify,
under penalties of perjury, that he/she is not subject to backup
withholding.
Calculation of Performance Data
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of the investment. The ending
redeemable value is computed by multiplying the number of shares owned
at the end of the period by the net asset value at the end of the
period. The number of shares owned at the end of the period is based on
the number of shares purchased at the beginning of the period with
$1,000, adjusted for stock splits, and assuming the reinvestment of all
dividends and distributions. The Fund's average annual total returns
for the periods ended December 31, 1996, are as follows:
One Year Five Years Ten Years
22.5% 10.9% 13.9%
Independent Auditor's Report
To the Board of Trustees
and Shareholders of
Pinnacle Fund
We have audited the accompanying statement of assets and liabilities of
Pinnacle Fund, including the schedule of portfolio investments, as of
December 31, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by
correspondence with the custodian and a broker. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Pinnacle Fund as of December 31, 1996, the results
of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
February 5, 1997
PINNACLE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C> <C>
Assets
Investments at value:
Common stock (cost $10,918,785) . . . $15,784,038
Short-term notes (cost $727,525). . . 727,525
-----------
$16,511,563
Dividends and interest receivable . . . 20,406
-----------
TOTAL ASSETS 16,531,969
LIABILITIES
Payables:
Investment advisory fee . . . . . . . . 11,250
Custodian fee . . . . . . . . . . . . . 3,512
Accrued expenses. . . . . . . . . . . . 25,666
Other payable . . . . . . . . . . . . . 600
---------
TOTAL LIABILITIES 41,028
---------
NET ASSETS equivalent to $23.96 per share
for 688,312.518 shares outstanding
unlimited authorization, no par value;
offering price equal to net asset value
per share). . . . . . . . . . . . . . $16,490,941
==========
See notes to financial statements.
</TABLE>
PINNACLE FUND
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income
Dividends . . . . . . . . . . . . . . $ 162,871
Interest. . . . . . . . . . . . . . . 46,978
-----------
Total income. . . . . . . . . . . $ 209,849
Expenses:
Investment advisory fee . . . . . . . . 126,100
Custodian fees. . . . . . . . . . . . . 24,645
Legal and audit . . . . . . . . . . . . 19,143
Trustees' fees. . . . . . . . . . . . . 400
Printing and postage. . . . . . . . . . 1,465
Gross income taxes. . . . . . . . . . . 2,492
Other . . . . . . . . . . . . . . . . . 7,158
-----------
Total expenses. . . . . . . . . . . 181,403
-------------
Net investment income . . . . . . . 28,446
-------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain from security transactions
(excluding short-term notes):
Proceeds from sales . . . . . . . . 8,333,536
Cost of securities sold . . . . . . 6,191,944
------------
Net realized gain from security
transactions. . . . . . . . . . . 2,141,592
------------
Unrealized appreciation of investments:
End of year . . . . . . . . . . . . 4,865,253
Beginning of year . . . . . . . . . 3,896,257
------------
Change in unrealized appreciation of
investments . . . . . . . . . 968,996
------------
Net gain on investments . . . . 3,110,588
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . $3,139,034
============
See notes to financial statements.
</TABLE>
PINNACLE FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
Year Ended December 31
1996 1995
----------- -----------
<S> <C> <C>
Operations:
Net investment income . . . . . . . $ 28,446 $ 61,362
Net realized gain from security
transactions. . . . . . . . . . . 2,141,590 1,685,959
Change in unrealized appreciation
of investments. . . . . . . . . . 968,996 2,467,377
----------- ----------
Increase in net assets from
operations. . . . . . . . . . . 3,139,034 4,214,698
----------- ----------
Distributions to Shareholders From:
Net investment income . . . . . . . (30,714) (62,118)
Net realized gains from security
transactions. . . . . . . . . . . (2,139,158) (1,684,738)
----------- ----------
Decrease in net assets from distr-
ibutions to shareholders. . . . (2,169,872) (1,746,856)
----------- ----------
Capital Share Transactions:
Proceeds from sales of shares . . . 1,009,745 960,552
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions . . . 2,075,804 1,628,635
Cost of shares redeemed . . . . . . (2,236,681) (3,398,320)
----------- ----------
Increase (decrease) in net assets
from capital share transactions 848,868 (809,133)
----------- ----------
Total increase in net assets . . 1,818,030 1,658,709
Net Assets, Beginning of Year . . . . 14,672,911 13,014,202
----------- ----------
Net Assets, End of Year including
(excess of distributions over) net
investment income of $(2,549) and
$(281), respectively) . . . . . . . $16,490,941 $14,672,911
=========== ===========
See notes to financial statements.
</TABLE>
PINNACLE FUND
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Shares Market Value
COMMON STOCKS --------- --------------
<S> <C> <C>
BANKS & FINANCE (8.30%)
Bankamerica Corporation. . . . . . . . 3,650 364,087
Chase Manhattan Corporation. . . . . . 3,900 348,075
Federal National Mortgage Association 12,000 447,000
Heritage Financial Services, Inc.. . . 10,000 212,500
---------
1,371,662
---------
BUSINESS SERVICES (8.73%)
Ceridian Corporation. . . . . . . . . . 8,200 332,100
Electronic Data Systems Corporation . . 6,800 294,100
First Data Corporation. . . . . . . . . 12,000 438,000
GTE Corporation 8,300 377,650
---------
1,441,850
---------
CAPITAL GOODS (13.63%)
Allied Signal, Inc. . . . . . . . . . . 5,300 355,100
Emerson Electric Company. . . . . . . . 4,800 464,400
General Electric Company. . . . . . . . 5,700 563,588
Ingersoll Rand Company. . . . . . . . . 7,600 338,200
Tyco International Ltd. . . . . . . . . 10,000 528,750
---------
2,250,038
---------
CHEMICALS (5.22%)
Dupont E I DeNemours & Company. . . . . 3,500 330,313
Monsanto Company. . . . . . . . . . . . 13,675 531,615
---------
861,928
---------
COMMUNICATIONS (2.81%)
* Worldcom, Inc. . . . . . . . . . . . 17,800 463,913
---------
COMPUTER SYSTEMS & SOFTWARE (14.34%)
* Cisco Systems, Inc.. . . . . . . . . 6,900 439,013
Intel Corporation . . . . . . . . . 2,600 340,438
* Microsoft Corporation. . . . . . . . 8,000 661,000
* Oracle Corporation . . . . . . . . . 7,900 329,824
* Sterling Commerce, Inc.. . . . . . . 10,829 381,722
* Sterling Software, Inc.. . . . . . . 6,800 215,050
---------
2,367,047
---------
CONSUMER SERVICES (5.03%)
* CUC International, Inc.. . . . . . . 15,985 379,644
Service Corporation International 16,100 450,800
---------
830,444
---------
CONSUMER STAPLES (2.42%)
Coca-Cola Company . . . . . . . . . . . 7,600 399,950
---------
ENERGY (5.30%)
Mobil Corporation . . . . . . . . . . . 3,400 415,650
Schlumberger Ltd. . . . . . . . . . . . 4,600 459,425
---------
875,075
---------
HEALTH CARE (18.76%)
* Amgen, Inc.. . . . . . . . . . . . . 8,000 435,000
* Boston Scientific Corporation. . . . 7,700 462,000
Cardinal Health, Inc. . . . . . . . 9,150 532,987
* Medpartners, Inc.. . . . . . . . . . 13,189 276,969
Merck & Company, Inc. . . . . . . . 6,800 538,900
Pfizer, Inc.. . . . . . . . . . . . 6,300 522,113
Warner Lambert Company. . . . . . . 4,400 330,000
---------
3,097,969
---------
INSURANCE (8.98%)
American International Group, Inc.. . . 4,650 503,362
Conseco, Inc. . . . . . . . . . . . . . 6,900 439,875
MGIC Investment Corporation
Wisconsin . . . . . . . . . . . . . . 7,100 539,600
---------
1,482,837
---------
RETAIL (2.07%)
Sears Roebuck & Company . . . . . . . . 7,400 341,325
---------
TOTAL COMMON STOCKS (95.59%). . . . . . . 15,784,038
---------
SHORT-TERM NOTES (4.41%)
Johnson Controls, Inc. (5.80%). . . . . 432,886 432,886
Wisconsin Electric Power Corp. (5.78%) 294,639 294,639
---------
TOTAL SHORT-TERM NOTES. . . . . . . . . . 727,525
---------
TOTAL INVESTMENTS . . . . . . . . . . . . $16,511,563
==========
</TABLE>
* Non-income producing security.
PINNACLE FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Selected data for each share outstanding
throughout the period is as follows:
Net asset value, beginning of period $22.47 $18.83 $21.15 $21.83 $22.14
------- ------ ------ ------ ------
Income from Investment Operations
Net investment income .05 .11 .09 .10 .13
Net gains or losses on securities
(both realized and unrealized) 5.04 6.54 (.34) .62 (.29)
------- ------ ------ ------ ------
Total from investment operations 5.09 6.65 (.25) .72 (.16)
------- ------ ------ ------ ------
Dividends (from net investment income) (.05) (.11) (.09) (.10) (.13)
------- ------ ------ ------ ------
Distributions (from capital gains) (3.55) (2.90) (1.98) (1.30) (.02)
------- ------ ------ ------ ------
Net Asset Value, End of Period $23.96 $22.47 $18.83 $21.15 $21.83
======= ======= ======= ======= =======
Total Return 22.5% 35.4% (1.1)% 3.3% (.7)%
======= ======= ======= ======= =======
Ratios/Supplemental Data (in thousands)
Net assets, end of period $16,491 $14,673 $13,014 $15,135 $14,721
======= ======= ======= ======= =======
Ratio of expenses to average net
assets 1.16% 1.14% 1.15% 1.17% 1.18%
======= ======= ======= ======= =======
Ratio of net income to average net
assets .18% .44% .41% .46% .67%
======= ======= ======= ======= =======
Portfolio turnover rate 44.07% 68.48% 91.01% 85.35% 33.26%
======= ======= ======= ======= =======
Average commission rate paid $.0606 $.0590
======= =======
See notes to financial statements.
</TABLE>
PINNACLE FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization Pinnacle Fund (the "Fund") was formed as a business trust
under the laws of the state of Indiana on December 19, 1984, and is
registered under the Investment Company Act of 1940 as an open-end
diversified investment company. The Fund invests primarily in common
stocks as well as some money market and fixed income investments. The
Fund is licensed to sell shares in Indiana, Ohio and Michigan. The
following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles 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
financial statements and the reported amounts of the revenues, expenses,
gains, losses and other changes in net assets during the reporting period.
Actual results could differ from those estimates.
Investment Valuation Securities traded on a national exchange are valued
at their last reported sales price on the primary exchange on which they
are traded. Securities traded in the over-the-counter market, and listed
securities for which no sale was reported on that date, are valued at the
last reported bid price. Securities for which there are no readily
available market quotations are valued at their fair value as determined
in good faith by the Board of Trustees.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days
or less are valued at amortized cost, which approximates current market
value. The cost of investments is the same for financial reporting and
federal income tax purposes.
Securities transactions are recorded on the trade date. Realized gains
and losses on sales of investments are determined on the
specific-identification method for financial reporting and federal income
tax purposes. Dividends from equity securities are recorded as income on
the ex-dividend date. Interest income from debt securities is accrued on
a daily basis.
Federal Income Taxes It is the Fund's policy to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income to its shareholders. On such
basis, the Fund has not incurred and, under present law, will not incur
any liabilities for income taxes on such income.
Distributions to Shareholders Distributions in cash or shares of the Fund
are recorded on the ex-dividend date. Distributions payable in shares of
the Fund are made at net asset value on the ex-dividend date.
PINNACLE FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - INVESTMENT ADVISORY AND TRANSACTIONS WITH AFFILIATES:
Under an investment advisory agreement with the Fund, Heartland Capital
Management, Inc. ("Advisor") provides investment advisory services and
certain other services and facilities required by the Fund to conduct its
business. For such services, the Fund pays an annual investment advisory
fee equal to .80% of the average daily net assets of the Fund. The fee
is computed daily and payable monthly. For the year ended December 31,
1996, the Fund incurred investment advisory fees of $126,100.
The Advisor has agreed to reimburse the Fund to the extent annual
operating expenses, including the investment advisory fee but excluding
interest, taxes, and brokerage commissions, exceed the sum of (i) 2% of
the first $10 million of the Fund's average net assets, (ii) 1 1/2% of the
next $20 million of such assets, and (iii) 1% of any excess over $30
million. Reimbursement was not required for the year ended December 31,
1996.
Three officers/trustees of the Fund are also officers, directors, and
principal shareholders of the Advisor. The Advisor's profit sharing trust
is a shareholder of the Fund.
NOTE 3 - PURCHASE OF SECURITIES
For the year ended December 31, 1996, the aggregate cost of securities
purchased, exclusive of short-term notes, amounted to $6,539,055.
NOTE 4 - SHARE AND OTHER CAPITAL TRANSACTIONS
At December 31, 1996, paid-in capital aggregated $11,639,596.
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
Shares Amount
-------------- -------------
1996 1955 1996 1995
------- ------- -------- -------
<S> <C> <C> <C> <C>
Shares sold 40,025.901 46,067.691 $1,009,745 $960,552
Shares issued in reinvest-
ment of dividends and
distributions 85,424.031 72,902.202 2,075,804 1,628,635
---------- ---------- --------- ---------
125,449.932 118,969.893 3,085,549 2,589,187
Shares redeemed 90,239.226 157,063.618 2,236,681 3,398,320
---------- ---------- --------- ---------
Net increase (decrease) 35,210.706(38,093.725) $ 848,868 $(809,133)
========= ========== ========= =========
</TABLE>
On December 27, 1996, the Board of Trustees declared a dividend from net
investment income and a distribution of net realized gains from security
transactions. The dividend of $.051 and the distribution of $3.552 were
paid December 30, 1996 to each shareholder of record on December 27, 1996.
PINNACLE
FUND
______________________________________________________________________
STATEMENT OF
ADDITIONAL INFORMATION
Investment Advisor
HEARTLAND CAPITAL MANAGEMENT, INC.
Indianapolis 317/633-4080
Custodian, Transfer Agent and
Disbursing Agent
FIRSTAR TRUST COMPANY
Milwaukee 414/765-4124
Auditors
GEO. S. OLIVE & CO. LLC
Indianapolis
Counsel
SOMMER & BARNARD, PC
Indianapolis
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
The Registrant has included in Part B of this Registration
Statement the following financial statements examined by Geo. S.
Olive & Co. LLC, independent public accountants:
1. Independent Auditor's Report.
2. Statement of Assets and Liabilities as of December 31,
1996.
3. Statement of Operations for the Year Ended December
31, 1996.
4. Statement of Changes in Net Assets for the Years Ended
December 31, 1996 and 1995.
5. Schedule of Investments as of December 31, 1996.
6. Selected Per Share Data and Ratios.
7. Notes to Financial Statements.
(b) Exhibits.
(1) Agreement and Declaration of Trust of Pinnacle Fund
dated December 19, 1984 is incorporated by reference
to Exhibit 1 of the Registration Statement on Form
N-1A filed on March 6, 1985.
(2) Code of By-laws of Pinnacle Fund is incorporated by
reference to Exhibit 2 of the Post-Effective Amendment
No. 2 to Registration Statement on Form N-1A filed on
March 24, 1987.
(4) Certificate of Share of Beneficial Interest of
Pinnacle Fund is incorporated by reference to Exhibit
4 of the Post-Effective Amendment No. 2 to
Registration Statement on Form N-1A filed on March 24,
1987.
(5) Investment Advisory Agreement by and between Pinnacle
Fund and Heartland Capital Management, Inc. is
incorporated by reference to Exhibit 5 of the
Registration Statement on Form N-1A filed on March 6,
1985.
(8) Custodian Agreement by and between First Wisconsin
Trust Company and Pinnacle Fund is incorporated by
reference to Exhibit 8 of the Registration Statement
on Form N-1A filed on March 6, 1985.
(10)* Opinion of Sommer & Barnard, PC.
(11)* Consent of Geo. S. Olive & Co. LLC, Independent Public
Accountants.
(13) Initial Subscription to Shares of Beneficial Interest
in Pinnacle Fund is incorporated by reference to
Exhibit 13 of the Registration Statement on Form N-1A
filed on March 6, 1985.
(14) The Individual Retirement Account plan made available
by Registrant is incorporated by reference to Exhibit
14 of the Registration Statement on Form N-1A filed on
March 6, 1985.
(16)* Schedule for Computation of Performance Quotations.
(17)* Financial Data Schedule.
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control With
Registrant.
As of February 6, 1997, the Fund had 688,312.518 Shares issued and
outstanding. As far as the Fund is advised, the following table sets
forth, as of February 6, 1997, the persons known to be beneficial owners
of more than 5% of the Fund's outstanding shares and the Shares owned by
all officers and Trustees of the Fund as a group.
Amount and
Name and Nature
Address of Nature of Percent
Beneficial Owner Ownership (1) of Class
------------------ ---------------- ------------
Barry F. Ebert
36 S. Pennsylvania, Suite 610
Indianapolis, Indiana 46204 72,067.996 Shares(2) 10.4%
Robert D. Markley
36 S. Pennsylvania, Suite 610
Indianapolis, Indiana 46204 92,990.670 Shares(3) 13.5%
Butler Fairman and Seufert, Inc.
Profit Sharing and 401(k) Plan
9405 Delegates Row
Indianapolis, Indiana 46250 43,273.457 Shares 6.3%
All Trustees and officers as
a group (6 persons) 118,980.449 Shares 17.3%
(1) unless otherwise indicated, the persons shown have sole voting and
investment power over the Shares listed.
(2) Includes 60,827.427 Shares owned by the Heartland Capital Management,
Inc. Profit Sharing Trust plan, as to which Shares Messrs. Ebert and
Markley, as co-trustees, have voting control. Also includes 1,042.748
Shares owned by Mr. Ebert's wife and her IRA. Mr. Ebert disclaims
beneficial ownership of Shares owned by his wife.
(3) Includes 3,801.897 Shares held in Mr. Markley's individual retirement
account, 1,090.098 Shares owned by Mr. Markley's children, and
27,271.158 Shares owned by Mr. Markley's wife and her individual
retirement account. Mr. Markley disclaims beneficial ownership of the
Shares owned by his wife. Also includes the 60,827.427 Shares owned
by the Heartland Capital Management, Inc. Profit Sharing Trust plan
referred to in footnote (2) above.
Item 26. Number of Holders of Securities.
As of February 6, 1997, there were the following number of record
holders of Shares
in the Fund:
Title of Class Number of Record Holders
-------------- ------------------------
Shares of Beneficial Interest 366
Item 27. Indemnification.
Section 5.3 of Article V of the Declaration and Agreement of Trust
of Pinnacle Fund dated December 19, 1984, and Section 6 of Article VII of
the Fund's Code of By-laws, provides as follows:
"Indemnification. Any person (and his heirs, executors
and administrators) shall be indemnified by the Pinnacle Fund
("Trust") against reasonable costs and expenses (including
judgments, amounts paid in settlement and fees and expenses of
counsel and experts) incurred by him in connection with any
action, suit or proceeding to which he may be made a party by
reason of his being, or having been a Trustee, Officer or
employee of the Trust, or of another Person if the Trust
requested him to serve as such, except in relation to any
actions, suits or proceedings in which he has been adjudged
liable because of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office. In the absence of an adjudication which
expressly absolves such person of liability to the Trust or its
Shareholders for willful misfeasance, bad faith, gross
negligence and reckless disregard of the duties involved in the
conduct of his office, or in the event of a settlement, each
such person (and his heirs, executors and administrators) shall
be indemnified by the Trust against payments made, including
reasonable costs and expenses, provided that such indemnity
shall be conditioned upon the prior determination made by a
written opinion of independent counsel that such person was not
guilty of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office. Amounts paid in settlement shall not exceed costs,
fees and expenses which would have been reasonably incurred if
the action, suit or proceeding had been litigated to a
conclusion. Such a determination by independent counsel and
the payments of amounts by the Trust on the basis thereof shall
not prevent a Shareholder from challenging such indemnification
by appropriate legal proceedings on the grounds that the person
indemnified was liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office. The foregoing rights and indemnification shall not be
exclusive of any other rights to which such persons may be
entitled according to law."
Item 28. Business and Other Connections of Investment Advisor.
Heartland Capital Management, Inc. (the "Advisor") serves as the
investment advisor to the Registrant. Organized in January 1984, the
Advisor is a registered investment advisor and acts as investment advisor
to numerous persons and corporations. As of December 31, 1996, the
Advisor managed approximately $738 million of assets.
Item 29. Principal Underwriters. None.
Item 30. Location of Accounts and Records.
The accounts, books and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 (the "1940 Act") will be
maintained at the offices of Heartland Capital Management, Inc., 36 South
Pennsylvania, Suite 610, Indianapolis, Indiana 46204, and Firstar Trust
Company, P. O. Box 701, Milwaukee, Wisconsin 53201.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to
trustees, officers and controlling persons of the Registrant pursuant to
the provisions set forth in response to Item 27 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Post-Effective Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of
Indianapolis, and State of Indiana on the 7th day of April, 1997, and
hereby certifies that it meets all of the requirements for effectiveness
of this Post-Effective Amendment to Registration Statement pursuant to
Rule 485(b) promulgated under the Securities Act of 1933.
Pinnacle Fund
--------------------------
Registrant
By: /s/ Thomas F. Maurath
------------------------------
Thomas F. Maurath, President
and Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement
has been signed below by the following persons in the capacities indicated
on April 7, 1997.
Signature Title
- --------- ------
____________________________________ President, Trustee
Thomas F. Maurath (Principal Executive Officer)
____________________________________ Secretary, Treasurer and
Robert D. Markley Trustee (Principal Financial
and Accounting Officer)
____________________________________ Trustee
Barry F. Ebert
____________________________________ Trustee
Leo G. Watson
___________________________________ Trustee
Robert L. Blackburn
____________________________________ Trustee
Thomas D. Rush
EXHIBIT INDEX
Page No.
in Manually
Exhibit Signed Copy
------- ------------
(1) Agreement and Declaration of Trust of Pinnacle Fund
dated December 19, 1984 is incorporated by reference
to Exhibit 1 of the Registration Statement on Form
N-1A filed on March 6, 1985.
(2) Code of By-laws of Pinnacle Fund is incorporated by
reference to Exhibit 2 of the Post-Effective
Amendment No. 2 to Registration Statement on Form
N-1A filed on March 24, 1987.
(4) Certificate of Share of Beneficial Interest of
Pinnacle Fund is incorporated by reference to Exhibit
4 of the Post-Effective Amendment No. 2 to
Registration Statement on Form NlA filed on March 24,
1987.
(5) Investment Advisory Agreement by and between Pinnacle
Fund and Heartland Capital Management, Inc. is
incorporated by reference to Exhibit 5 of the
Registration Statement on Form N-1A filed on March 6,
1985.
(8) Custodian Agreement by and between First Wisconsin
Trust Company and Pinnacle Fund is incorporated by
reference to Exhibit 8 of the Registration Statement
on Form N-1A filed on March 6, 1985.
(10)* Opinion and Consent of Sommer & Barnard, PC. _______
(11)* Consent of Geo. S. Olive & Co. LLC, Independent
Public Accountants. _______
(13) Initial Subscription to Shares of Beneficial Interest
in Pinnacle Fund is incorporated by reference to
Exhibit 13 of the Registration Statement on Form
N-1A filed on March 6, 1985.
(14) The Individual Retirement Account plan made available
by Registrant is incorporated by reference to Exhibit
14 of the Registration Statement on Form N-1A filed
on March 6, 1985.
(16)* Schedule for Computation of Performance Quotations _______
(17)* Financial Data Schedule _______
* Filed herewith.
April 15, 1997
Board of Trustees
Pinnacle Fund
36 S. Pennsylvania Street, Suite 610
Indianapolis, Indiana 46204
Re: Registration Statement on Form N-1A
of Pinnacle Fund
Registration No. 2-95077
Gentlemen:
We have acted as counsel to Pinnacle Fund (the "Fund") in
connection with the preparation and filing with the Securities and
Exchange Commission of the registration statement of the Fund on Form N-1A,
Registration No. 2-95077, as amended by post-effective amendments
numbers 1 through 12 under the Securities Act of 1933 and amendments
numbers 1 through 13 under the Investment Company Act of 1940 (such
registration statements as so amended being hereafter referred to as the
"Registration Statement"). The Registration Statement covers the
registration under the Securities Act of 1933 of an unlimited number of
shares of beneficial interest in the Fund (the "Registered Shares") to
be offered for sale by the Fund.
In that capacity, and for purposes of giving the opinion set forth
in this letter, we have examined and reviewed the following documents
and materials:
1. A copy of the Fund's Agreement and Declaration of Trust dated
December 19, 1984;
2. A copy of the By-Laws of the Fund;
3. The Registration Statement, as amended, together with all
exhibits thereto; and
4. Minutes of the meetings of the Board of Trustees of the Fund.
In rendering the opinion set forth below, we have not passed upon
and do not purport to pass upon any "doing business", "blue sky" or
securities laws of any jurisdiction. Nor do we express any opinion
regarding law other than the corporate law of the State of Indiana and
the federal law of the United States.
Based on the documents and materials described above, and such
other matters as we deem appropriate, we hereby advise you that we are
of the opinion that the Registered Shares will be, when sold pursuant to
and as described in the Registration Statement and upon receipt by the
Fund of the consideration for such shares as described in the
Registration Statement, duly authorized, legally issued, fully paid and
non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent we do not thereby admit
that we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or under the rules and
regulations of the Securities and Exchange Commission relating thereto.
Very truly yours,
/s/ Sommer & Barnard, PC
SOMMER & BARNARD, PC
GSO
Geo. S. Olive & Co. LLC
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report, dated February 5, 1997, on the
financial statements of Pinnacle Fund, and to the references to our Firm
under the heading "Financial Highlights" in the Prospectus and the
heading "Investment Advisory and Other Services" and in Item 24 of Part
C in the Statement of Additional Information included in Post-Effective
Amendment No. 12 to Registration Statement on Form N-1A filed by
Pinnacle Fund with the Securities and Exchange Commission.
/s/ Geo S. Olive & Co. LLC
Indianapolis, Indiana
April 11, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 11,646,310
<INVESTMENTS-AT-VALUE> 16,511,563
<RECEIVABLES> 20,406
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,531,969
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,028
<TOTAL-LIABILITIES> 41,028
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,639,596
<SHARES-COMMON-STOCK> 688,313
<SHARES-COMMON-PRIOR> 653,101
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,549
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,865,253
<NET-ASSETS> 16,490,941
<DIVIDEND-INCOME> 162,871
<INTEREST-INCOME> 46,978
<OTHER-INCOME> 0
<EXPENSES-NET> 181,403
<NET-INVESTMENT-INCOME> 28,446
<REALIZED-GAINS-CURRENT> 2,141,592
<APPREC-INCREASE-CURRENT> 968,996
<NET-CHANGE-FROM-OPS> 3,139,034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 30,714
<DISTRIBUTIONS-OF-GAINS> 2,139,158
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,026
<NUMBER-OF-SHARES-REDEEMED> 90,239
<SHARES-REINVESTED> 85,424
<NET-CHANGE-IN-ASSETS> 35,211
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 22
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 5
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 4
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE CALCULATIONS
Cumulative total returns and their income and capital components
are described in the Fund's Statement of Additional Information, and are
based on the net asset values income and capital gain distributions and
reinvestment prices of the historical period covered.
Average annual returns are calculated according to the following
formula:
Average annual return - (1 + Cumulative Return) 1/n -1
where n = the number of years in the base period.
