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SIGNATURE THOMAS F. MAURATH
TITLE PRESIDENT
<TABLE> <S> <C>
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GSO
Geo. S. Olive & Co. LLC
Independent Auditor's Report
Board of Trustees
Pinnacle Fund
In planning and performing our audit of the financial statements of
Pinnacle Fund as of and for the year ended December 31, 1997, we
considered its internal control structure, including procedures for
safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the
financial statements, to comply with the requirements of Form N-SAR
and not to provide assurance on the internal control structure.
The management of Pinnacle Fund is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgements by management are required
to assess the expected benefits and related costs of internal
control structure polices and procedures. Two of the objectives of
an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded
against loss for unauthorized use or disposition and transactions
are executed in accordance with management's authorization and
recorded properly to permit the preparation of financial statements
in conformity with generally accepted accounting principles.
Because of inherent limitations in any internal control structure,
error or irregularities may occur and not be detected. Also,
projection of any evaluation of the structure to future periods is
subject to the risk that it may become inadequate because of
changes in conditions or that the effectiveness of the design and
operation of the structure may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure
that might be material weaknesses under standards established by
the American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of the
specific internal control structure elements does not reduce to a
relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the
internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined
above as of December 31, 1997.
This report is intended solely for the information and use of the
Board of Trustees, management, and the Securities and Exchange
Commission.
/s/ Geo. S. Olive & Co. LLC
Indianapolis, Indiana
January 27, 1998
A member of Moores Rowland International
An association of independent accounting firms throughout the
world.
700 Capital Center South, 201 North Illinois Street
Indianapolis, Indiana 46204-1904
(317) 383-4000 Fax: (317) 383-4200
Offices Located in Indiana, Illinois and Ohio
Exhibit 99.2
ATTACHMENTS 77B AND 77H
On November 24, 1997, Heartland Capital Management, Inc.
("Heartland"), the Registrant's investment adviser, was acquired
by Fifth Third Bancorp.
At a special meeting of shareholders of the Registrant on
November 4, 1997, the shareholders approved, in connection with the
proposed acquisition, a new investment advisory agreement between
the Registrant and Heartland. There were 391,932.798 votes in favor
of approval of the new agreement and 5,125.627 votes against.
Exhibit 99.3
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 24th day of November, 1997, between
PINNACLE FUND, an Indiana business trust (the "Fund") and Heartland
Capital Management, Inc. (the "Adviser").
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,
l 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. This agreement shall be submitted for
approval by a vote of a majority of the shareholders within 180
days of the date of effective registration of the Fund with the
Securities and Exchange Commission.
PINNACLE FUND
By: /s/Thomas F. Maurath
------------------------
Thomas F. Maurath, President
HEARTLAND CAPITAL MANAGEMENT, INC.
By: /s/Robert D. Markley
------------------------
Robert D. Markley, Vice
President
