-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I/7yQvkrwRw2kNAlu2Y0tlJxqZqm8wgWAy7g2ZtwIP4vMfQBet56rajeLbMgOqaz I6oggl678g70Uxs+NAKOaw== 0000950123-03-002394.txt : 20030303 0000950123-03-002394.hdr.sgml : 20030303 20030303172922 ACCESSION NUMBER: 0000950123-03-002394 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030303 EFFECTIVENESS DATE: 20030303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORTRESS PINNACLE INVESTMENT FUND LLC CENTRAL INDEX KEY: 0001178845 IRS NUMBER: 300097476 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-21232 FILM NUMBER: 03590181 BUSINESS ADDRESS: STREET 1: 1251 AVENUE OF THE AMERICAS STREET 2: 16TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2127986100 MAIL ADDRESS: STREET 1: 1251 AVENUE OF THE AMERICAS STREET 2: 16TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 N-30D 1 y84075cnv30d.txt FORTRESS PINNACLE INVESTMENT FUND LLC FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) Financial Statements From November 1, 2002 (Commencement of Operations) Through December 31, 2002 and Report of Independent Auditors FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) TABLE OF CONTENTS
PAGE REPORT OF INDEPENDENT AUDITORS 1 FINANCIAL STATEMENTS: Statement of Assets and Liabilities as of December 31, 2002 2 Schedule of Investments as of December 31, 2002 3 Statement of Operations and Financial Highlights from November 1, 2002 (Commencement of Operations) through December 31, 2002 4 Statement of Cash Flows from November 1, 2002 (Commencement of Operations) through December 31, 2002 5 Statement of Changes in Net Assets from November 1, 2002 (Commencement of Operations) through December 31, 2002 6 Notes to Financial Statements 7
REPORT OF INDEPENDENT AUDITORS To the Members and Trustees of Fortress Pinnacle Investment Fund LLC We have audited the accompanying statement of assets and liabilities of Fortress Pinnacle Investment Fund LLC (the "Company"), including the schedule of investments, as of December 31, 2002, and the related statements of operations, cash flows, changes in net assets and financial highlights for the period from November 1, 2002 (Commencement of Operations) to December 31, 2002. These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. 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. 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 audit provides 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 Fortress Pinnacle Investment Fund as of December 31, 2002, the results of its operations, its cash flows, changes in its net assets and financial highlights for the period from November 1, 2002 (Commencement of Operations) to December 31, 2002, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP February 28, 2003 New York, NY FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) STATEMENT OF ASSETS AND LIABILITIES (dollar amounts in thousands)
December 31, 2002 ----------------- ASSETS Investment in affiliate, at value (cost $25,500) $ 25,500 Cash and cash equivalents 9 Other receivables 51 -------- 25,560 -------- LIABILITIES Accounts payable (14) -------- NET ASSETS $ 25,546 ======== NET ASSETS CONSISTS OF: Members' interest $ 25,500 Preferred equity 51 Accumulated net investment loss (5) -------- $ 25,546 ========
See notes to financial statements. 2 FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) SCHEDULE OF INVESTMENTS (dollar amounts in thousands)
Investment Description of Securities Cost Fair Value - ---------- ------------------------- ------- ---------- Investment in controlled affiliate (a): Fortress Pinnacle Acquisition LLC, ("FPA") (b) 21.96% of the issued common shares $25,500 $ 25,500 ======= ========
(a) The Company shares its investment advisor with Fortress Registered Investment Trust, which owns 78.04% of FPA. FPA is therefore an affiliate of the Company. These securities are restricted as to public resale. (b) FPA owns 11,474,473 of the outstanding common shares of Pinnacle Holdings, Inc., comprising 57% of its issued and outstanding equity, as its sole asset at the end of the period. Summary of Transactions with Affiliated Companies
Cost Fair Value Incurred Dividend, Interest of Total Affiliate Purchase Date This Period and Realized Gains Investment - --------- ------------- ----------- ------------------ ----------- Fortress Pinnacle Acquisition LLC November 1, 2002 $ 25,500 $ -- $ 25,500 ========== ========== =========
See notes to financial statements. 3 FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) STATEMENT OF OPERATIONS AND FINANCIAL HIGHLIGHTS (dollar amounts in thousands)
Period from November 1, 2002 (Commencement of Operations) Through December 31, 2002 ---------------------------- Income Interest $ 9 Expenses Professional fees (10) Directors fees (4) -------- (14) -------- Net investment loss (5) -------- Net decrease in net assets resulting from operations $ (5) ========
Period from November 1, 2002 FINANCIAL HIGHLIGHTS Through December 31, 2002 - -------------------- ---------------------------- Disclosure of certain ratios, annualized: Ratio of total expenses to average net assets 0.54%* Ratio of net investment loss to average net assets (0.13%)* Portfolio turnover rate 0.0%* Total Return (0.13%)
* annualized See notes to financial statements. 4 FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) STATEMENT OF CASH FLOWS (dollar amounts in thousands)
Period from November 1, 2002 (Commencement of Operations) Through December 31, 2002 ------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ (5) Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: Net unrealized gain on affiliate investment -- Change in: Other receivables (51) Accounts payable 14 -------- Net cash used in operating activities (42) -------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in affiliate (25,500) -------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital contributions 25,500 Preferred equity 51 -------- Net cash provided by financing activities 25,551 NET INCREASE IN CASH AND CASH EQUIVALENTS 9 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9 ========
See notes to financial statements. 5 FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) STATEMENT OF CHANGES IN NET ASSETS (dollar amounts in thousands)
Period from November 1, 2002 (Commencement of Operations) Through December 31, 2002 ------------------- Increase (decrease) in net assets resulting from operations Net investment loss $ (5) Net unrealized gain on affiliate investment -- -------- Net increase (decrease) in net assets resulting from operations (5) Capital contributions 25,500 Issuance of preferred equity 51 Preferred dividends paid -- -------- Net increase in net assets 25,546 Net assets, beginning of period -- -------- Net assets, end of period $ 25,546 ========
See notes to financial statements. 6 FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 1. ORGANIZATION Fortress Pinnacle Investment Fund LLC (the "Company") was formed on July 24, 2002 as a Delaware limited liability company and operates as a closed-end, non-diversified management registered investment company ("RIC") under the Investment Company Act of 1940 (the "Act"). The Company was formed primarily to invest in limited liability interests in Fortress Pinnacle Acquisitions LLC ("FPA"). FPA owns 56% of the issued and outstanding common stock of Pinnacle Holdings Inc., a cell tower company. The members of the Company include Weyerhauser Company Master Retirement Trust ("Weyeryauser"), Aurora Cayman Limited ("Aurora"), Morgan Stanley Private Markets Fund I ("Morgan Stanley"), Howard Hughes Medical Institute ("HHMI") and FIG Advisors LLC ("FIG" and together with Weyerhauser, Aurora, Morgan Stanley and HHMI, the "Members"), with FIG acting as Advisory Member. The liability of each member is limited to the amount of capital contributions required to be made by such member in accordance with the provisions of the Company's operating agreement, as amended. The operating agreement provides that, unless terminated earlier, the Company will terminate on the first anniversary of the termination of FPA. FIG is also the advisor of Fortress Registered Investment Trust, which holds 78.04% of FPA. As the Company and FPA share the same advisor, they are affiliates. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING - The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States. The Company reports its assets and liabilities at fair value on the reporting date, including its investment in FPA. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RISKS AND UNCERTAINTIES - In the normal course of business, the Company encounters market risk. Market risk reflects changes in the value of investments in securities due to changes in interest rates or other market factors, including the valuation of equity securities held by the Company. VALUATION OF ASSETS AND LIABILITIES - The Company's investment in affiliate is accounted for under the Act. The valuation of investments is initially based upon initial cost and is updated periodically by estimates as determined in accordance with the Company's valuation policies as approved by the Company's board of managers. 7 FORTRESS PINNACLE INVESTMENT FUND LLC (A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 Events that could change the reported amount include: further financing by the investee company, pending disposition by the Company of its investment, obtaining a third party estimate of the value of its investment, significant changes in the financial position or operating results of the investee company, and sales in recent public or private transactions of the same or similar securities, among others. Due to the inherent uncertainty of valuations of investments without a public market, the estimates of value may differ from the values that are ultimately realized by the Company, and such differences could be material. All other assets and liabilities are stated at cost, which approximates fair value. FEDERAL INCOME TAXES - No income taxes have been provided for in these financial statements as each Member is individually responsible for reporting income or loss based upon their respective share of the Company's income and expenses as reported for income tax purposes. DISTRIBUTIONS TO MEMBERS - Distributions to members are recorded on the ex-dividend date. The character of distributions made during the reporting period from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes due to book/tax differences in the character of income and expense recognition. No distributions have been made through December 31, 2002. SECURITY TRANSACTIONS AND REVENUE RECOGNITION - The Company follows industry practice and records security transactions on the trade date. Dividend income is recognized on the ex-dividend date. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents. Certain amounts on deposit with major financial institutions may, from time to time, exceed insured limits. 3. ALLOCATIONS TO MEMBERS Net Profits, as defined, are first allocated to FIG in an amount equal to a cumulative return of 1.5% per annum on all Capital Contributions. Remaining Net Profits are then allocated to holders of the preferred equity interest in accordance with its terms, then to the Members other than FIG. Net Losses, as defined, are first allocated to the Members other than FIG or holders of the preferred equity interest until their capital accounts have a zero balance. Remaining Net Losses, are then allocated to holders of the preferred equity interest until their capital accounts have a zero balance then to the Members other than FIG or holders of the preferred equity interest. 4. PREFERRED EQUITY INTERESTS The Company has issued preferred equity interests in the aggregate amount of $50,500 to 101 qualified investors. Such securities receive a 10% return, payable out of the Company's Net Profits. 8 -----END PRIVACY-ENHANCED MESSAGE-----