Fortress Pinnacle Investment Fund LLC – ‘N-30D’ for 12/31/02

On:  Monday, 3/3/03, at 5:29pm ET   ·   Effective:  3/3/03   ·   For:  12/31/02   ·   Accession #:  950123-3-2394   ·   File #:  811-21232

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Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
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Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Fortress Pinnacle Investment Fund LLC                 10     33K 

N-30D
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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                            

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FORTRESS PINNACLE INVESTMENT FUND LLC                                           
(A Limited Liability Company)                                                   

TABLE OF CONTENTS                                                               

                                                        [Enlarge/Download Table]

                                                                                           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

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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                                                                    

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FORTRESS PINNACLE INVESTMENT FUND LLC                                           
(A Limited Liability Company)                                                   

STATEMENT OF ASSETS AND LIABILITIES                                             
(dollar amounts in thousands)                                                   

                                                                [Download Table]

                                                             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.                                              

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FORTRESS PINNACLE INVESTMENT FUND LLC                                           
(A Limited Liability Company)                                                   

SCHEDULE OF INVESTMENTS                                                         
(dollar amounts in thousands)                                                   

                                                        [Enlarge/Download Table]

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                               

                                                        [Enlarge/Download Table]

                                                         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.                                              

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FORTRESS PINNACLE INVESTMENT FUND LLC                                           
(A Limited Liability Company)                                                   

STATEMENT OF OPERATIONS AND FINANCIAL HIGHLIGHTS                                
(dollar amounts in thousands)                                                   

                                                                [Download Table]

                                                             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)         
                                                                ========          

                                                                [Download Table]

                                                      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 

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FORTRESS PINNACLE INVESTMENT FUND LLC                                           
(A Limited Liability Company)                                                   

STATEMENT OF CASH FLOWS                                                         
(dollar amounts in thousands)                                                   

                                                                [Download Table]

                                                                   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.                                              

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FORTRESS PINNACLE INVESTMENT FUND LLC                                           
(A Limited Liability Company)                                                   

STATEMENT OF CHANGES IN NET ASSETS                                              
(dollar amounts in thousands)                                                   

                                                                [Download Table]

                                                                     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 

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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

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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

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘N-30D’ Filing		Date		First		Last			Other Filings
Filed on / Effective on:		3/3/03							NSAR-B
		2/28/03		3
For Period End:		12/31/02		1		10			N-30D/A,  NSAR-B
		11/1/02		1		8
		7/24/02		9
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