SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Pinnacle Fund
(Name of Registrant as Specified in Its Charter)
Pinnacle Fund
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box:)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
_________________________________________________________________
2) Aggregate number of securities to which transaction
applies: _____________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined): _________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________
5) Total fee paid:________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form of
Schedule and the date of its filing.
1) Amount Previously Paid:________________________________
2) Form, Schedule or Registration Statement No.: _________
3) Filing party:__________________________________________
4) Date filed: ____________________________________________
PINNACLE FUND
36 South Pennsylvania Street, Suite 610
Indianapolis, Indiana 46204
October 14, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
Shareholders of Pinnacle Fund (the "Fund") to be held on Tuesday,
November 4, 1997 at 9:00 a.m., Indianapolis time, at the offices of
Heartland Capital Management, Inc., 36 South Pennsylvania Street,
Suite 610, Indianapolis, Indiana 46204.
On September 17, 1997, Heartland Capital Management, Inc. (the
"Adviser"), the Fund's investment adviser, and the Adviser's
shareholders entered into an Agreement and Plan of Merger with
Fifth Third Bancorp, an Ohio corporation ("Fifth Third"), pursuant
to which a wholly-owned subsidiary of Fifth Third will merge (the
"Merger") with and into the Adviser, with the result that the
Adviser will become a wholly-owned subsidiary of Fifth Third.
Fifth Third is a bank holding company with over $20 billion in
assets and headquartered in Cincinnati, Ohio. It has banking
operations in Ohio, Indiana, Kentucky and Florida. Fifth Third is
one of the largest money managers in the Midwest. Fifth Third Bank
has $110 billion in assets under care, of which Fifth Third
Investment Advisors, a division of the Bank, manages $13 billion
for personal, institutional and not for profit clients, including
the Fountain Square Funds, a family of 13 mutual funds with total
net assets of $2.9 billion.
We view this transaction as very positive for a number of reasons.
We will have access to Fifth Third's broad managerial, financial
and technological resources. Moreover, we do not anticipate any
material changes regarding the management of the Fund or the
investment strategies we employ. The full team of investment
professionals managing the Fund on your behalf will remain as it
currently exists.
Under the Investment Company Act of 1940, the Merger is considered
an assignment of the investment advisory agreement between the
Adviser and the Fund. The advisory agreement requires that we
obtain approval from shareholders of a new investment advisory
agreement for the Fund as a result of the merger. Upon completion
of the merger, the Adviser will continue to carry on its business
with its current management as a wholly owned subsidiary of Fifth
Third.
The Board of Trustees of the Fund has given full and careful
consideration to this matter and has concluded that the proposed
new investment advisory agreement is in the best interests of the
Fund and its shareholders. The Board of Trustees therefore
recommends that you vote "FOR" approval of the new investment
advisory agreement.
Regardless of the number of shares you own, it is important that
they are represented and voted. If you cannot personally attend
the special shareholders' meeting, we would appreciate your
promptly voting, signing and returning the enclosed proxy in the
postage-paid envelope provided.
Very truly yours,
/s/ Thomas F. Maurath
------------------------------
Thomas F. Maurath, President
TFM/pas
NOTICE AND PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
PINNACLE FUND
Notice of Special Meeting
To the Shareholders of Pinnacle Fund:
You are hereby notified that a Special Meeting of holders of
shares of beneficial interest of Pinnacle Fund, an Indiana business
trust (the "Fund"), will be held at the offices of Heartland
Capital Management, Inc., 36 South Pennsylvania Street, Suite 610,
Indianapolis, Indiana on Tuesday, November 4, 1997, at 9:00 a.m.
(Indianapolis time) for the following purposes:
1. To consider approval of a new investment advisory
agreement with Heartland Capital Management, Inc.
(The "Adviser") to become effective upon the
effective date of the acquisition of the Adviser by
Fifth Third Bancorp.
2. To consider approval of an amendment to Article II,
Section 1 of the Code of By-Laws of the Fund to
reduce the number of trustees of the Fund to three.
3. To transact such other business as may properly
come before the meeting.
The holders of record at the close of business on September
30, 1997 are entitled to notice of and to vote at the meeting.
PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. If you attend the
meeting, you may, if you so desire, withdraw your proxy and vote in
person.
Robert D. Markley
Secretary
Indianapolis, Indiana
October 14_, 1997
PINNACLE FUND
An Indiana Business Trust
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, NOVEMBER 4, 1997
All holders of record of shares of beneficial interest (the
"Shares") of Pinnacle Fund (the "Fund") on September 30, 1997 (the
"Shareholders") are entitled to vote at the Special Meeting of
Shareholders to be held at the offices of Heartland Capital
Management, Inc., 36 South Pennsylvania Street, Suite 610,
Indianapolis, Indiana, on Tuesday, November 4, 1997, at 9:00 a.m.
All Shareholders unable to attend such meeting who wish to vote
their shares upon the business to be transacted at such meeting are
requested to mark, sign and date the accompanying form of proxy and
return it in the addressed, postage-paid envelope enclosed for your
convenience. The proxy is revocable by you at any time before it
is voted, and the signing of such proxy will not affect your right
to vote in person if you attend the meeting. All proxies returned,
and not so revoked, will be voted in accordance with their terms.
As stated in the Notice, the matters to be considered at the
meeting are (i) the approval of a new investment advisory agreement
(the "New Agreement") between Heartland Capital Management, Inc.
(the "Adviser") and the Fund to be effective upon the effective
date of the acquisition of the Adviser, by means of a merger (the
"Merger") with a subsidiary of Fifth Third Bancorp ("Fifth Third"),
pursuant to which the Adviser will become a wholly owned subsidiary
of Fifth Third; (ii) approval of an amendment to the Code of By-Laws
of the Fund to reduce the number of trustees of the Fund to
three; and (iii) the transaction of such other business as may
properly come before the Special Meeting. Upon the completion of
the Merger, it is anticipated that the Adviser will continue to
carry on its business with its current management at its current
location. If the enclosed proxy is duly executed and received in
time for the Special Meeting and if no contrary specification is
made as provided therein, the Shares represented thereby will be
voted FOR approval of the New Agreement.
The solicitation of the accompanying form of proxy is made on
behalf of the Board of Trustees of the Fund. The expense of the
solicitation of the proxies for this meeting will be borne by the
Adviser. The solicitation will be made through the use of the
mails and by personal solicitation through officers, employees and
agents of the Fund who will not be additionally compensated
therefor.
The mailing address of the principal executive offices of the
Fund is Pinnacle Fund, 36 South Pennsylvania Street, Suite 610,
Indianapolis, Indiana 46204. This Proxy Statement and the enclosed
form of proxy were first sent or given to Shareholders on
approximately October 14, 1997.
Outstanding Shares
As of September 26, 1997, the Fund had 679,912.827 Shares
issued and outstanding. Each Shareholder is entitled to one vote
upon any proposal submitted to the meeting for each full Share
standing of record in his name on September 30, 1997, and a
fractional vote for any fractional Share held of record in his name
on September 30, 1997. As far as the Fund is advised, the
following table sets forth, as of September 26, 1997, each of the
officers of the Fund and the persons known to be beneficial owners
of more than 5% of the Fund's outstanding Shares:
Amont and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership(1) Class
- ------------------- ------------- ----------
Barry F. Ebert
36 S. Pennsylvania, Suite 610 68,814.628 10.1%
Indianapolis, Indiana Shares (2)
Robert D. Markley
36 S. Pennsylvania, Suite 610 89,736.900 13.2%
Indianapolis, Indiana Shares (3)
Thomas F. Maurath
36 S. Pennsylvania, Suite 610 6,740.299 1.0%
Indianapolis, Indiana Shares (4)
Robert L. Blackburn
36 S. Pennsylvania, Suite 610 3,169.908 0.5%
Indianapolis, Indiana Shares (5)
Thomas D. Rush
36 S. Pennsylvania, Suite 610 1,892.893 0.3%
Indianapolis, Indiana Shares
Leo G. Watson, M.D.
36 S. Pennsylvania, Suite 610 2,012.706 0.3%
Indianapolis, Indiana Shares (6)
All Trustees and Officers 114,792.873 16.9%
as a group (6 persons) Shares
Butler Fairman and Seufert, Inc. 53,148.065 7.8%
Profit Sharing and 401(k) Plan Shares
9405 Delegates Row
Indianapolis, Indiana 46250
(1) Unless otherwise indicated, the persons shown have sole voting
and investment power over the Shares listed.
(2) Includes 57,574.461 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, and 1,042.346 Shares owned by Mr. Ebert's wife and
her individual retirement account as to which Mr. Ebert
disclaims beneficial ownership.
(3) Includes 3,801.585 Shares held in Mr. Markley's individual
retirement account, 1,090.098 Shares owned by Mr. Markley's
children, and 27,270.756 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 57,574.461 Shares owned by the Heartland Capital
Management, Inc. Profit Sharing Trust Plan referred to in
footnote (2) above.
(4) Includes 3,376.839 Shares held in Mr. Maurath's individual
retirement account, 1,809.024 Shares held in the individual
retirement account of Mr. Maurath's wife, and 1,554.436 Shares
owned by Mr. Maurath's children.
(5) Represents 3,169.908 Shares owned by a partnership between Mr.
Blackburn and Lynne B. Weir.
(6) Represents 2,012.706 Shares owned by Dr. Watson's wife.
Fund Custodian and Transfer Agent
The Fund's custodian, transfer agent and disbursing agent is
Firstar Trust Company, 615 East Michigan, 3rd Floor, Milwaukee,
Wisconsin 53202.
Fund Reports
A copy of the Fund's annual report for the year ended December
31, 1996, and semi-annual report for the period ending June 30,
1997 may be obtained without charge by writing to the Fund c/o
Heartland Capital Management, Inc., 36 South Pennsylvania Street,
Suite 610, Indianapolis, Indiana 46204, or calling (317) 633-4080.
Voting Requirements
The favorable vote of a majority of the outstanding shares of
the Fund is required for approval of each of the proposals
described below. Accordingly, abstentions and "broker non-votes"
will have the effect of a vote against the proposals. Abstentions
and "broker non-votes" are counted for purposes of determining
whether a quorum is present. "Broker non-votes" are shares held by
a broker or nominee for which an executed proxy is received by the
Fund, but are not voted because instructions have not been received
from the beneficial owners or persons entitled to vote and the
broker or nominee does not have discretionary voting power.
If the meeting is called to order but a quorum (more than 50%
of the outstanding shares of the Fund) is not represented at the
meeting, the persons named as proxies may vote those proxies which
have been received to adjourn the meeting to a later date. If a
quorum is present at the meeting but sufficient votes to approve
the proposals described herein are not received, the persons named
as proxies may propose one or more adjournments of the meeting to
permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares
represented at the meeting in person or by proxy. The persons
named as proxies will vote those proxies received which voted in
favor of a proposal in favor of such an adjournment and will vote
those proxies received which voted against a proposal against any
such adjournment. A shareholder vote may be taken on one or more
of the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received and it is
otherwise appropriate.
The trustees of the Fund intend to vote all of their shares in
favor of the approval of each of the proposals.
I. APPROVAL OF NEW AGREEMENT
Terms of the Merger
Pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") dated September 17, 1997, among the Adviser, Fifth
Third and Fifth Third A Corp., an Indiana corporation ("Sub"), Sub
will merge into the Adviser (the "Merger"). As a result of the
Merger, the Adviser will become a wholly-owned subsidiary of Fifth
Third. The outstanding common shares of the Adviser will be
converted into the right to receive common shares of Fifth Third.
A currently indeterminate number of Fifth Third shares having a
value of $15.4 million will be delivered to the shareholders of the
Adviser at closing, subject to decrease or increase based on the
percentage of the Adviser's revenue base (computed as of a date
preceding the Merger Agreement) retained at consummation of the
Merger. An additional number of Fifth Third common shares may be
paid and delivered over a three-year period provided they are
earned pursuant to an earnout formula set forth in the Merger
Agreement. The amount able to be earned pursuant to such formula
is not presently determinable but is currently estimated at $6.6
million.
The consummation of the Merger is subject to the satisfaction
of various conditions precedent to closing, including, but not
limited to: (i) the approval of the New Agreement by the
shareholders of the Fund; (ii) obtaining consent to the assignment
of investment advisory contracts of the Adviser's clients other
than the Fund whose contracts provide for payment of fees
constituting at least 80% of the annualized investment advisory
fees of the Adviser; (iii) any further consents and regulatory
approvals required to consummate the merger; (iv) receipt by the
parties of certain legal opinions; (v) the absence of any court or
other administrative order restraining or prohibiting the Merger of
which would limit or otherwise affect the Merger or Fifth Third's
ownership of the Adviser, and the absence of any legal proceeding
which challenges the validity or legality, or seeks to restrain the
consummation of the Merger or which seeks to limit or otherwise
affect the Merger or Fifth Third's ownership of the Adviser;
(vi) the Adviser having a tangible net worth and working capital
equal to at least $500,000, and delivering a balance sheet showing
a tangible net worth and working capital equal to at least
$500,000; and (vii) certain other customary conditions. The Merger
will become effective upon satisfaction or waiver of such
conditions and the filing of Articles of Merger with the Secretary
of State of Indiana, presently anticipated to occur on or about
November 14, 1997 (the "Effective Time of the Merger).
The Merger Agreement contemplates that certain key personnel
of the Adviser will enter into long-term employment and non-competition
agreements with the Adviser, which is intended to
assure that the Adviser will continue to operate with its same
investment personnel and officers. Upon completion of the Merger,
the Adviser expects to retain the services of all of its current
management personnel, including Mr. Robert D. Markley, Mr. Thomas
F. Maurath, and Mr. Barry F. Ebert. Furthermore, no changes in the
Adviser's method of operation, or the location where it conducts
its business, are contemplated.
Under the Investment Company Act of 1940 (the "1940 Act"), a
transaction which results in a change of control or management of
an investment adviser may be deemed an "assignment." The 1940 Act
further provides that an investment advisory agreement will
automatically terminate in the event of its assignment. The Merger
constitutes a "change in control" of the Adviser for purposes of
the 1940 Act and will cause the "assignment" and resulting
termination of the present investment advisory agreement.
Accordingly, the Board of Trustees recommends that the New
Agreement be approved by shareholders of the Fund.
Section 15(f) of the 1940 Act provides that when a change in
the control of an investment adviser occurs, the investment adviser
or any of its affiliated persons may receive any amount or benefit
in connection therewith as long as two conditions are satisfied.
First, an "unfair burden" must not be imposed on the investment
company as a result of the transaction relating to the change of
control, or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden"
includes any arrangement during the two-year period after the
change in control whereby the investment adviser (or predecessor or
successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or
sale of securities or other property to, from, or on behalf of the
investment company (other than fees for bona fide principal
underwriting services). No such compensation arrangements are
contemplated as a result of the Acquisition.
The second condition is that, during the three-year period
immediately following consummation of the transaction, at least 75%
of the Fund's Board of Trustees must not be "interested persons" of
the investment adviser or predecessor investment adviser within the
meaning of the 1940 Act. No interested person of the Adviser
within the meaning of the 1940 Act will serve on the Board of
Trustees of the Trust during such period if such service would
cause this condition to be violated.
The Present Investment Advisory Agreement
The Adviser serves as manager of the Fund pursuant to the
Investment Advisory Agreement (the "Present Agreement") between the
Fund and the Adviser dated December 19, 1984. Pursuant to the
Present Agreement, the Fund pays the Adviser an annual fee, payable
monthly, of 8/10 of 1% of the Fund's average daily net assets, as
determined by valuations made at the close of each business day.
For the fiscal year ended December 31, 1996, the Fund paid the
Adviser management fees pursuant to the Agreement in the aggregate
amount of $126,100.23.
Under the Present Agreement, the Adviser is primarily
responsible for investment decisions affecting the Fund's
portfolio. Also, the Adviser, 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
pays all operating expenses of the Fund, including the costs of
various reports to Shareholders, interest charges, taxes, legal
expenses, fees of Trustees who are not interested persons of the
Adviser, 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 Present Agreement obligates the Adviser to reimburse the
Fund to the extent that the Fund's aggregate annual 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 Adviser is required, on a quarterly
basis, to reimburse the Fund by offsetting against its monthly fee
all expenses in excess of such sum, prorated on an annual basis.
The Present Agreement is not assignable and may be terminated
by either party, without penalty, on sixty days' notice. Unless
sooner terminated, the Present Agreement will continue in effect as
long as it is approved annually by (a) the Trustees or by a vote of
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
interested persons of the Adviser, cast in person at a meeting
called for the purpose of voting for such approval. The Present
Agreement provides that the Adviser is not liable for any error of
judgment or of law or of loss in connection with the Present
Agreement except as to those resulting from willful misfeasance,
bad faith or gross negligence.
The Present Agreement was last submitted to a vote of the
Shareholders at the Fund's last Annual Meeting held on March 18,
1997.
The members of the Board of Directors of the Adviser are Barry
F. Ebert, who serves as a Trustee of the Fund and as President of
the Adviser, Robert D. Markley, who serves as Secretary/Treasurer
and a Trustee of the Fund and as Vice President of the Adviser and
Thomas F. Maurath, who serves as President and a Trustee of the
Fund. Mr. Ebert owns 55.2%, Mr. Markley owns 36.8%, and Mr.
Maurath owns 8%, of the outstanding common shares of the Adviser.
The New Agreement
The terms and conditions of the New Agreement are
substantially identical in all material respects to the Present
Agreement. One outdated provision relating to reimbursement of the
Adviser by the Fund of the Fund's organizational expenses advanced
by the Adviser will be removed.
If the New Agreement is approved by the shareholders of the
Fund, it will become effective at the effective date of the Merger.
The New Agreement will remain in effect from year to year provided
that is approved annually by (a) the Board of Trustees, or (b) a
vote of a majority of the outstanding shares of the Fund; provided
that, in either case continuance is also approved by a majority of
the Trustees who are not interested persons (as defined in the 1940
Act) ("Independent Trustees") of the Adviser, in person at a
meeting called for the purpose of such approval. The New Agreement
may be terminated at any time on 60 days' written notice, without
the payment of any penalty, by the trustees of the Fund or by a
vote of the majority of the outstanding shares of the Fund. The
New Agreement will automatically terminate in the event of its
assignment as defined in the 1940 Act and the rules thereunder.
The New Agreement provides that the Adviser is not liable for
any error of judgment or of law or of loss in connection with the
New Agreement, except for those resulting from willful misfeasance,
bad faith or gross negligence.
The form of the New Agreement is attached hereto as Exhibit A.
The description set forth herein is qualified in its entirety by
reference to Exhibit A.
In the event the shareholders of the Fund do not approve the
New Agreement, and the Merger is consummated, the Board of Trustees
will promptly seek to obtain interim advisory services, either from
the Adviser or another investment adviser. Thereafter, the Board
of Trustees would either negotiate a new investment advisory
agreement with an investment adviser selected by the Board or make
other appropriate arrangements, in either case subject to approval
by the shareholders of the Fund. In the event the Merger is not
consummated for any reason, the Adviser will continue to serve as
the investment adviser of the Fund pursuant to the terms of the
Present Agreement.
Information Concerning Fifth Third
Fifth Third is a bank holding company headquartered in
Cincinnati, Ohio and a corporation organized under the laws of the
State of Ohio with over $20 billion in assets. Fifth Third Bank,
a wholly-owned subsidiary of Fifth Third, has $110 billion in
assets under care, of which Fifth Third Investment Advisors, a
division of the Bank, manages $13 billion for personal, institution
and not for profit clients. This includes the Fountain Square
Funds, a family of 13 mutual funds with net assets of $2.9 billion.
Recommendation of Board of Trustees
On September 30, 1997, the Board of Trustees, including a
majority of the Independent Trustees, by vote cast in person,
unanimously approved, subject to the required shareholder approval
described herein, the New Management Agreements. Prior to such
approval, the Independent Trustees met separately with their
counsel, which did not represent either the Adviser or Fifth Third,
for the purpose of assisting them in reaching a determination with
respect to the New Agreement.
In considering approval of the New Agreement, the Board of
Trustees carefully evaluated information they deemed necessary to
enable them to determine whether the New Agreement will be in the
best interests of the Fund and its shareholders. In making this
recommendation, the Trustees evaluated the experience of the
Adviser's key personnel in investing, the quality of services the
Adviser is expected to provide to the Fund and the compensation
proposed to be paid to the Adviser. The Trustees have given careful
consideration to all factors deemed to be relevant to the Fund,
including, but not limited to: (1) the fees and expense ratios of
comparable mutual funds; (2) the performance of the Fund as
compared to similar mutual funds; (3) the nature and quality of the
services expected to be rendered to the Fund by the Adviser; (4)
the investment objective and policies of the Fund; (5) the research
services received by the Adviser from brokers as a result of
placement of the Funds' brokerage, which may benefit the Fund; (6)
that the compensation payable to the Adviser under the New
Agreement will be at the same rate as the compensation now payable
to the Adviser under the Present Agreement; (7) that the terms of
the New Agreement are substantially identical in all material
respects as the terms of the Present Agreements except for
different effective and termination dates and the removal of a
non-material provision; (8) the history, reputation, qualification
and background of the Adviser and Fifth Third and their respective
financial conditions, as well as the qualifications of their
personnel; (9) the commitment of the Adviser to pay or reimburse
the Fund for the expenses incurred in connection with the Merger;
and (10) the substantial benefits expected to be realized as a
result of the Adviser's ownership by Fifth Third, such as the
potential for increasing Fund assets and the opportunity to gain
access to Fifth Third's managerial and technological resources.
In making the determination to recommend approval of the New
Agreement to shareholders of the Fund, the Board of Trustees gave
substantial weight to the Adviser's representations that (i) the
Merger should benefit the Adviser and the Fund by preserving the
Adviser's independent management structure and portfolio management
style, while providing more attractive financial incentives to the
Adviser's employees and increased resources for the Adviser's
operations; (ii) the Merger will not materially affect the advisory
operations of the Adviser or the level or quality of advisory
services provided to the Fund; (iii) the same personnel of the
Adviser who currently provide services to the Fund will continue to
do so after the Merger; (iv) the Fund will not be subject to any
unfair burden as a result of the Merger; (v) that following the
Merger, the Adviser will continue to operate generally autonomously
of the other business of Fifth Third; and (vi) access to Fifth
Third's broad managerial, financial and technological resources
should allow the Adviser to increase the range and quality of
services provided to the Fund. In considering approval of the New
Agreement, the Board of Trustees reviewed the most recent audited
financial statements of the Adviser and of Fifth Third. The Board
of Trustees believes that the Merger should benefit the Adviser and
the Fund and that the Fund should receive investment advisory
services under the New Agreement equal or superior to those
currently received under the Present Agreement, at the same fee
levels. The Board of Trustees therefore unanimously recommends
approval of the New Agreement by shareholders of the Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE
NEW AGREEMENT.
Other Considerations
Currently, the Fund distributes its shares directly to the
public and not through a distributor. Certain federal banking laws
prohibit banks, such as Fifth Third Bank, from sponsoring or
distributing mutual funds, such as the Fund. In light of Fifth
Third's relationship to the Fund following the Merger and in order
to avoid any inference that Fifth Third Bank is the sponsor or
distributor of the Fund, Fifth Third has requested that the Board
of Trustees of the Fund adopt a Distribution Agreement, to take
effect at the Effective Time of the Merger, with BISYS Fund
Services Limited Partnership, an Ohio limited partnership that is
not an affiliate of Fifth Third ("BISYS").
Pursuant to the proposed Distribution Agreement, BISYS,
located at 3435 Stelzer Road, Columbus, Ohio 43219, would have the
exclusive right to enter into dealer agreements with securities
dealers who sell shares of the Fund and with financial
institutions, including affiliates of Fifth Third, that may furnish
services to shareholders on behalf of the Fund. BISYS may make
payments to securities dealers and financial institutions out of
its past profits or from any other source available to BISYS.
BISYS will not be compensated for its services under the
Distribution Agreement, and, therefore, its appointment as
distributor of the Fund will not affect the Fund's expenses.
Shareholder approval of the proposed Distribution Agreement is
not required and is not being sought in this Proxy Statement.
The Trustees of the Fund currently anticipate that the Fund
will enter into an agreement with the Fountain Square Funds (Fifth
Third's proprietary mutual funds) providing for a tax free
reorganization through which the Fund would become a series
portfolio of the Fountain Square Funds (the "Fund Reorganization").
The Adviser would continue to manage the assets of the Fund
following the Fund Reorganization, but the Fund would be governed
by the Board of Trustees of the Fountain Square Funds rather than
the Fund's current Board of Trustees. The Fund Reorganization will
not be pursued if the Merger is not consummated. The Fund
Reorganization will require approval by an additional vote of the
fund's shareholders at a meeting separate from the Special Meeting
to which this Proxy Statement relates. Shareholders will receive
a separate prospectus/proxy statement relating to the Fund
Reorganization.
It is expected that, as part of the Fund Reorganization, the
ratio of expenses to net assets of the fund would increase, at
least initially, as a result of compensation that would be paid by
the Fund for new and additional services, including services to
current shareholders. These new and additional services will be
services deemed by the Trustees as necessary or desirable for the
Fund's successful operations. This should, in turn, result in an
increase in the Fund's total net assets over the longer term and a
corresponding decrease in the Fund's expense ratio. This matter
will be discussed in more detail in the prospectus/proxy statement
for the Fund Reorganization.
II. REDUCTION IN NUMBER OF TRUSTEES
Due to the provisions of Section 15(f) of the 1940 Act
discussed above, and certain federal banking laws and regulations,
it is anticipated that Messrs. Ebert, Markley and Maurath will
resign as trustees of the Fund effective as of the Effective Time
of the Merger. Because the Code of By-Laws of the Fund provides
for seven trustees and for a quorum of the trustees to be a
majority of the whole number of trustees, the three remaining
trustees now in office (who are the Independent Trustees of the Furnd)
would be unable to conduct any business due to the lack of a quorum.
Accordingly, the Board of Trustees has approved an amendment
to Article II, Section 1 of the Code of By-Laws of the Fund (the
"By-Law Amendment") reducing the number of trustees to three,
conditioned upon the consummation of the Merger and to be effective
as of the Effective Time of the Merger. Pursuant to the Code of
By-Laws of the Fund, that amendment may take effect only if it is
approved by holders of a majority of the outstanding shares of the
Fund.
Messrs. Ebert, Markley and Maurath are expected to continue to
serve as trustees if the Merger is not consummated for any reason.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE
BY-LAW AMENDMENT.
III. OTHER MATTERS
The Special Meeting is called for the purposes set forth in
the "Notice of Special Meeting." The Board of Trustees has not
been informed of any matters other than those stated in the Notice
which are to be presented at the meeting. If any other business is
brought before the Special Meeting, the persons named in the
attached proxy will vote according to their discretion.
Shareholder Proposals
October 27, 1997 is the date by which shareholder proposals
intended to be presented at the 1998 Annual Meeting of Shareholders
must be received by the Fund to be considered for inclusion in the
proxy materials relating to that meeting.
BY ORDER OF THE BOARD OF TRUSTEES.
Date: October 14, 1997 /s/ Robert D. Markley
---------------------- ------------------------------
Robert D. Markley
Secretary
IMPORTANT:
Please immediately mark, sign, date and return your Proxy in
the enclosed stamped, addressed envelope. If you attend the
meeting and if you so desire, you may withdraw your proxy and vote
in person. THANK YOU FOR ACTING PROMPTLY.
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this _____ day of ________________, 1997,
between PINNACLE FUND, an Indiana business trust (the "Fund") and
Heartland Capital Management, Inc. (the "Adviser"), a wholly owned
subsidiary of Fifth Third Bancorp, an Ohio corporation.
1. The Fund hereby employs the Adviser to manage the
investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in the Agreement. The Adviser
hereby accepts such employment for the compensation herein provided
and agrees to render the services and to assume the obligations
herein set forth. The Adviser is engaged principally in the
business of rendering investment supervisory services and is so
registered under the Investment Advisers Act of 1940. The Adviser
shall continuously provide such complete investment Advisory,
statistical and research facilities as the Fund may require.
2. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the Fund.
However, one or more shareholders, officers, directors or employees
of the Adviser may serve as trustees and/or officers of the Fund,
but without compensation or reimbursement of expenses for such
services from the Fund. Nothing herein contained shall be deemed
to require the Fund to take any action contrary to its declaration
of Trust or any applicable statute or regulation, or to relieve or
deprive the trustees of the Fund of its responsibility for and
control of the conduct of the affairs of the Fund.
3. The Adviser, at its own expense and without reimbursement
from the Fund, shall furnish office space, office facilities, and
executive officers and executive expenses for managing the assets
of the Fund. The Adviser shall also bear all sales and promotional
expenses of the Fund. The Adviser shall not bear expenses incurred
in complying with the laws regulating the issue or sale of
securities. However, fees paid for attendance at meetings of the
Fund's trustees to trustees of the Fund who are not interested
persons of the Adviser, as defined in the Investment Company Act of
1940, as amended, or officers or employees of the Fund, shall be
borne by the Fund. The Fund shall bear all other expenses of its
operations, or shall reimburse the Adviser for such other expenses
initially incurred by it, provided that the total expenses borne by
the Fund, including the Adviser's fee but excluding all Federal,
State and local taxes, interest and brokerage charges shall not in
any year exceed 2% of the first $10,000,000 of average net assets,
1 1/2% of the next $20,000,000 of average net assets and 1% of average
net assets in excess of $30,000,000 of the Fund for such year, as
determined by appraisals made as of the close of each business day
of the year. The Adviser shall, on a quarterly basis, reimburse
the Fund by offsetting against its monthly fee all expenses in
excess of these amounts as prorated on an annual basis. The
expenses of the Fund's operation borne by the Fund include, but are
not limited to, the costs of preparing and printing its
registration statements required under the Securities Act of 1933
and the Investment Company Act of 1940 (and amendments thereto),
the expenses of registering its shares with the Securities and
Exchange Commission and in the various states, the cost of
prospectuses other than those given to prospective investors, the
cost of stock certificates, reports to shareholders, interest
charges, taxes, legal expenses, noninterested trustees' fees,
salaries of administrative and clerical personnel, auditing and
accounting services, fees and expenses of the custodian of the
Fund's assets, printing and mailing expenses, postage, charges and
expenses of dividend disbursing agents, registrars and stock
transfer agents and cost of keeping all necessary shareholder
records and accounts.
The Fund shall monitor its expense ratio on a regular basis.
At such times as it appears that the expenses of the Fund will
exceed the expense limitation established herein, the Fund shall
create an account receivable from the Adviser for the amount of
such excess. The Adviser is deemed indebted to the Fund as of the
last day of each of the Fund's fiscal quarters and shall pay to the
Fund the amount shown on such account receivable as provided above
but not later than the last day of the first month following the
end of the Fund's fiscal quarter.
4. For the services to be rendered and the charges and
expenses to be assumed by the Adviser hereunder, the Fund shall pay
to the Adviser a monthly fee based on the average net asset value
of the Fund, as determined by appraisals made as of the close of
each business day. On an annual basis, the fee shall be .8 of one
percent (1%) on the daily net assets of the Fund.
5. The Adviser shall not take, and shall not permit any of
its shareholders, officers, directors or employees to take long or
short positions in the shares of the Fund, except for the purchase
of shares of the Fund for investment purposes at the same price as
that available to the public at the time of purchase, or in
connection with the original capitalization of the Fund. In
connection with purchases or sales of portfolio securities for the
account of the Fund neither the Adviser nor any officer, director
or employee of the Adviser shall act as a principal or receive any
commission other than its compensation provided for in paragraph 3
above.
6. The services of the Adviser to the Fund hereunder are not
to be deemed exclusive and the Adviser shall be free to furnish
similar services to others so long as the services hereunder are
not impaired thereby.
7. The Adviser is not liable for any error of judgement or
of law or of loss in connection with this agreement except to those
resulting from willful misfeasance, bad faith or gross negligence.
8. This Agreement may not be amended without the approval of
the trustees of the Fund in the manner required by the Investment
Company Act of 1940, and by the vote of a majority of the
outstanding voting securities of the Fund, as defined in the
Investment Company Act of 1940.
9. If a portion of this contract is deemed invalid by law,
all other contents of the contract shall remain valid.
10. This Agreement may be terminated at any time without the
payment of any penalty, by the trustees of the Fund or by a vote of
the majority of the outstanding voting securities of the Fund, as
defined in the Investment Company Act of 1940, upon giving sixty
(60) days' written notice to the Adviser. The Adviser is still
entitled to fees for services rendered while the contract was in
force. This Agreement may be terminated by the Adviser at any time
upon the giving of-sixty (60) days' written notice to the Fund.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the Investment Company Act of 1940).
Until terminated as hereinbefore provided, this Agreement shall
continue in effect so long as such continuance is specifically
approved annually by (i) the trustees of the Fund or by a vote of
a majority of the outstanding securities of the Fund, as defined in
the Investment Company Act of 1940, and (ii) the trustees of the
Fund in the manner required by the Investment Company Act of 1940,
provided that any such approval may be made effective not more than
sixty (60) days thereafter.
PINNACLE FUND
By: _______________________________
President
HEARTLAND CAPITAL MANAGEMENT, INC.
By: _______________________________
President
PROXY PINNACLE FUND
SPECIAL MEETING OF SHAREHOLDERS
November 4, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby constitutes and appoints Thomas F.
Maurath and Robert D. Markley, and each of them, proxies with full
power of substitution to vote for the undersigned all shares of
beneficial interest of Pinnacle Fund, an Indiana business trust
(the "Fund"), which the undersigned would be entitled to vote if
personally present at the special meeting of shareholders to be
held on November 4, 1997, at 9:00 a.m. (Indianapolis time), and at
any adjournment thereof, upon the matters described in the
accompanying Proxy Statement and upon any other business that may
properly come before the meeting or any adjournment thereof. Said
proxies are directed to vote or to refrain from voting as checked
below upon the following matters, and otherwise in their discre-
tion:
The Board of Trustees recommends a vote FOR the following:
1. Approval of a new investment advisory agreement with Heartland
Capital Management, Inc. (the "Adviser") to be effective upon
the effective date of the proposed acquisition of the Adviser
by Fifth Third Bancorp.
( ) FOR ( ) AGAINST ( ) ABSTAIN
2. Approval of an amendment to Article II, Section 1 of the Code
of By-Laws of the Fund to reduce the number of trustees of the
Fund to three.
( ) FOR ( ) AGAINST ( ) ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED OR IF NO DIRECTION IS
INDICATED, WILL BE VOTED "FOR" THE APPROVAL OF PROPOSALS ONE AND
TWO.
The undersigned acknowledges receipt with this Proxy of a copy
of the Notice of Special Meeting and Proxy Statement dated October
14, 1997. The undersigned hereby revokes any proxy or proxies
heretofore given.
DATED: ____________
Number of Shares of
Beneficial Interest
of the Fund owned on
September 30, 1997:
Signature of Shareholder or Shareholders
________________________________________
_______________________________________
_________________________________________
IMPORTANT: Please date this Proxy and
sign exactly as your name or names appear
hereon. If shares of beneficial interest
of the Fund are held jointly, signature
should include both names. Executors,
administrators, trustees, guardians and
others signing in a representative
capacity, please give full titles.
