UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM N-CSRS
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-21058
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
(Exact name of registrant as specified in charter)
--------
c/o Aetos Capital, LLC
875 Third Avenue
New York, NY 10022
(Address of principal executive offices) (Zip code)
James M. Allwin
Aetos Capital, LLC
New York, NY 10022
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-212-201-2500
DATE OF FISCAL YEAR END: JANUARY 31, 2005
DATE OF REPORTING PERIOD: JULY 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
AETOS CAPITAL MARKET NEUTRAL STRATEGIES FUND, LLC
Financial Statements
July 31, 2005
TABLE OF CONTENTS
Schedules of Investments.......................................................1
Statements of Assets and Liabilities...........................................5
Statements of Operations.......................................................6
Statements of Changes in Members' Capital......................................7
Statements of Cash Flows.......................................................9
Financial Highlights..........................................................10
Notes to Financial Statements.................................................14
Approval of Investment Advisory Agreements....................................21
The Funds file their complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q within sixty days after the end of each period. The Funds' Forms N-Q
are available on the Commission's web site at HTTP://WWW.SEC.GOV, and may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities, as well as information
relating to how the Funds voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, is available (i) without charge,
upon request, by calling 1-212-201-2500; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
Aetos Capital Multi-Strategy Arbitrage Fund, LLC
Schedule of Investments (Unaudited)
July 31, 2005
INVESTMENT OBJECTIVE AS A PERCENTAGE OF INVESTMENTS
[Pie Chart Omitted]
Plot points are as follows:
Fixed Income Arbitrage 26.46%
Fixed Income/Event Arbitrage 11.17%
Statistical Arbitrage 6.32%
Convertible Arbitrage 4.44%
Event Arbitrage 12.87%
Event Arbitrage/Distressed Investments 38.74%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- -----------------------------------------------------------------------------------------------------------------------
AQR Global Arbitrage Offshore Fund (USD), Ltd. $ 27,726,549 $ 28,858,389 10.68%
Davidson Kempner Partners 25,000,000 26,269,812 9.72
FFIP, L.P. 14,630,000 16,796,210 6.22
Ishin Fund, LLC 13,000,000 11,474,168 4.25
Pentangle Partners, L.P. 16,000,000 16,324,932 6.04
Pequot Credit Opportunities Fund, L.P. 15,000,000 15,134,555 5.60
Perry Partners, L.P. 26,600,000 33,246,461 12.31
Satellite Fund II, L.P. 25,850,000 28,674,214 10.61
South Hill Trading Corp. 15,000,000 15,785,188 5.84
Sowood Alpha Fund, L.P. 42,000,000 45,146,010 16.71
Standard Pacific Credit Opportunities Fund, L.P. 20,000,000 20,636,658 7.64
----------------------------------------------------------
Total $ 240,806,549 $ 258,346,597 95.62%
==========================================================
*Percentages are based on Members' Capital of $270,167,018.
The aggregate cost of investments for tax purposes was $240,806,549. Net
unrealized appreciation on investments for tax purposes was $17,540,048
consisting of $19,065,880 of gross unrealized appreciation and $1,525,832 of
gross unrealized depreciation.
The investments in portfolio funds shown above, representing 95.62% of Members'
Capital, have been fair valued.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
1
Aetos Capital Distressed Investment Strategies Fund, LLC
Schedule of Investments (Unaudited)
July 31, 2005
INVESTMENT OBJECTIVE AS A PERCENTAGE OF INVESTMENTS
[Pie Chart Omitted]
Plot point is as follows:
Distressed Investments 100%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ------------------------------------------------------------------------------------------------------------------------
King Street Capital, L.P. $ 7,050,000 $ 8,352,783 16.95%
Satellite Credit Opportunities Fund, Ltd. 8,750,000 10,306,635 20.92
Silver Point Capital Fund, L.P. 11,100,000 13,874,561 28.16
Watershed Capital Partners, L.P. 11,050,000 12,089,914 24.54
----------------------------------------------------------
Total $ 37,950,000 $ 44,623,893 90.57%
==========================================================
*Percentages are based on Members' Capital of $49,269,244.
The aggregate cost of investments for tax purposes was $37,950,000. Net
unrealized appreciation on investments for tax purposes was $6,673,893
consisting of $6,673,893 of gross unrealized appreciation and of $0 of gross
unrealized depreciation.
The investments in portfolio funds shown above, representing 90.57% of Members'
Capital, have been fair valued.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
2
Aetos Capital Long/Short Strategies Fund, LLC
Schedule of Investments (Unaudited)
July 31, 2005
INVESTMENT OBJECTIVE AS A PERCENTAGE OF INVESTMENTS
[Pie Chart Omitted]
Plot points are as follows:
Short Equity Investments 2.85%
Equity Investment Market Neutral 3.72%
Long/Short Equity Investments 93.43%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- --------------------------------------------------------------------------------------------------------------
Bay Pond Partners, L.P. $ 27,000,000 $ 35,762,827 10.08%
Bay Resource Partners, L.P. 20,000,000 24,966,429 7.03
Cadmus Capital Partners (QP), L.P. 21,000,000 23,763,846 6.69
Cantillion Pacific, L.P. 10,000,000 11,499,850 3.24
Cantillion U.S. Low Volatility, L.P. 12,000,000 12,683,681 3.57
Cavalry Technology, L.P. 38,750,000 37,993,855 10.70
The Elkhorn Fund, LLC 15,000,000 16,277,457 4.59
Fine Partners I, L.P. 17,500,000 17,731,560 5.00
Hygrove Capital Fund (QP), L.P. 15,000,000 16,394,514 4.62
Icarus Qualified Partners, L.P. 10,500,000 9,701,426 2.73
JL Partners, L.P. 49,820,000 58,857,065 16.58
North River Partners, L.P. 21,650,000 23,213,683 6.54
Standard Global Equity Partners SA, L.P. 38,700,000 40,562,275 11.43
Viking Global Equities, L.P. 10,000,000 11,537,889 3.25
-------------------------------------------------------
Total $ 306,920,000 $ 340,946,357 96.05%
=======================================================
*Percentages are based on Members' Capital of $354,951,917.
The aggregate cost of investments for tax purposes was $306,920,000. Net
unrealized appreciation on investments for tax purposes was $34,026,357
consisting of $35,581,076 of gross unrealized appreciation and $1,554,719 of
gross unrealized depreciation.
The investments in portfolio funds shown above, representing 96.05% of Members'
Capital, have been fair valued.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
Aetos Capital Market Neutral Strategies Fund, LLC
Schedule of Investments (Unaudited)
July 31, 2005
INVESTMENT OBJECTIVE AS A PERCENTAGE OF INVESTMENTS
[Pie Chart Omitted]
Plot points are as follows:
Multi-Strategy Market Neutral 42.94%
Equity Investment Market Neutral 57.06%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- -------------------------------------------------------------------------------------------------------------------------
AQR Absolute Return Institutional Fund, L.P. $ 14,900,000 $ 15,574,855 17.54%
Bravura 99 Fund, L.P. 8,682,132 9,725,776 10.95
Cantillion U.S. Low Volatility, L.P. 27,500,000 28,467,142 32.06
GMO Market Neutral Fund (Onshore) 6,384,310 6,413,961 7.23
GMO Mean Reversion Fund 16,000,000 18,000,475 20.27
---------------------------------------------------------------
Total $ 73,466,442 $ 78,182,209 88.05%
===============================================================
*Percentages are based on Members' Capital of $88,795,119.
The aggregate cost of investments for tax purposes was $73,466,442. Net
unrealized appreciation on investments for tax purposes was $4,715,767
consisting of $4,715,767 of gross unrealized appreciation and $0 of gross
unrealized depreciation.
The investments in portfolio funds shown above, representing 88.05% of Members'
Capital, have been fair valued.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
Statements of Assets and Liabilities
July 31, 2005
(Unaudited)
AETOS CAPITAL AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL MARKET
MULTI-STRATEGY INVESTMENT LONG/SHORT NEUTRAL
ARBITRAGE STRATEGIES STRATEGIES STRATEGIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
----------------------------------------------------------------------
ASSETS
Investments in portfolio funds, at cost $240,806,549 $37,950,000 $306,920,000 $73,466,442
----------------------------------------------------------------------
Investments in portfolio funds, at value $258,346,597 $44,623,893 $340,946,357 $78,182,209
Cash and cash equivalents 12,162,956 4,760,001 14,456,820 10,754,284
Accrued income 32,563 12,583 38,685 28,443
Due from investment manager -- 10,980 -- 6,574
Other assets 3,125 2,963 4,391 3,152
----------------------------------------------------------------------
Total assets 270,545,241 49,410,420 355,446,253 88,974,662
----------------------------------------------------------------------
LIABILITIES
Redemptions of Interests payable 19,852 -- 43,035 --
Investment manager fees payable 172,202 31,404 226,244 56,597
Administration fees payable 44,405 8,370 58,644 14,919
Board of Managers' fees payable 6,844 6,844 6,844 6,844
Other accrued expenses 134,920 94,558 159,569 101,183
----------------------------------------------------------------------
Total liabilities 378,223 141,176 494,336 179,543
----------------------------------------------------------------------
NET MEMBERS' CAPITAL $270,167,018 $49,269,244 $354,951,917 $88,795,119
======================================================================
MEMBERS' CAPITAL
Net capital $252,626,970 $42,595,351 $320,925,560 $84,079,352
Net unrealized appreciation on investments
in portfolio funds 17,540,048 6,673,893 34,026,357 4,715,767
----------------------------------------------------------------------
Members' Capital $270,167,018 $49,269,244 $354,951,917 $88,795,119
======================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
Statements of Operations
For the six-month period ended July 31, 2005
(Unaudited)
AETOS CAPITAL AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL MARKET
MULTI-STRATEGY INVESTMENT LONG/SHORT NEUTRAL
ARBITRAGE STRATEGIES STRATEGIES STRATEGIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
------------------------------------------------------------------------
Investment income:
Interest $64,046 $47,920 $133,131 $107,042
------------------------------------------------------------------------
Expenses:
Management fees 954,664 175,130 1,265,530 319,772
Administration fees 132,121 25,380 176,003 44,877
Board of Managers' fees 13,688 13,688 13,688 13,688
Professional fees 89,950 70,450 99,550 73,550
Custodian fees 14,704 4,228 18,908 6,172
Printing fees 12,000 12,000 12,000 12,000
Registration fees 620 620 620 620
Other expenses 2,768 2,768 2,768 2,768
------------------------------------------------------------------------
Total expenses 1,220,515 304,264 1,589,067 473,447
Fund expenses reimbursed -- (70,902) -- (47,186)
------------------------------------------------------------------------
Net expenses 1,220,515 233,362 1,589,067 426,261
------------------------------------------------------------------------
Net investment loss (1,156,469) (185,442) (1,455,936) (319,219)
------------------------------------------------------------------------
Net gain on portfolio funds sold -- -- 676 --
Net change in unrealized appreciation on
investments in portfolio funds 9,666,896 1,731,616 17,916,961 1,667,907
------------------------------------------------------------------------
Net increase in Members' Capital derived
from investment activities $8,510,427 $1,546,174 $16,461,701 $1,348,688
========================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
Statements of Changes in Members' Capital
For the six-month period ended July 31, 2005 and the year ended January 31, 2005
AETOS CAPITAL DISTRESSED
AETOS CAPITAL MULTI-STRATEGY INVESTMENT STRATEGIES
ARBITRAGE FUND, LLC FUND, LLC
----------------------------- -------------------------------
2/1/05 - 2/1/04 - 2/1/05 - 2/1/04 -
7/31/05 1/31/05 7/31/05 1/31/05
(UNAUDITED) (UNAUDITED)
----------------------------- -------------------------------
From investment activities:
Net investment loss $(1,156,469) $(1,340,727) $(185,442) $(324,337)
Net gain on portfolio funds sold -- -- -- --
Net change in unrealized appreciation on
investments in portfolio funds 9,666,896 6,931,365 1,731,616 3,931,069
----------------------------- -------------------------------
Net increase in Members' Capital
derived from investment activities 8,510,427 5,590,638 1,546,174 3,606,732
----------------------------- -------------------------------
Members' Capital transactions:
Proceeds from sales of Interests 17,458,902 198,877,612 2,647,384 34,412,376
Redemptions of Interests (1,766,086) (196,464) (178,502) (163,410)
Transfers of Interests -- 6,616,600 -- (6,780,600)
----------------------------- -------------------------------
Net increase in Members' Capital derived from
capital transactions 15,692,816 205,297,748 2,468,882 27,468,366
----------------------------- -------------------------------
Net increase in Members' Capital 24,203,243 210,888,386 4,015,056 31,075,098
Members' Capital at beginning of period 245,963,775 35,075,389 45,254,188 14,179,090
----------------------------- -------------------------------
Members' Capital at end of period $270,167,018 $245,963,775 $49,269,244 $45,254,188
============================= ===============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
Statements of Changes in Members' Capital (continued)
For the six-month period ended July 31, 2005 and the year ended January 31, 2005
AETOS CAPITAL MARKET
AETOS CAPITAL LONG/SHORT NEUTRAL STRATEGIES
STRATEGIES FUND, LLC FUND, LLC
--------------------------------------------------------------
2/1/05 - 2/1/04 - 2/1/05 - 2/1/04 -
7/31/05 1/31/05 7/31/05 1/31/05
(UNAUDITED) (UNAUDITED)
------------------------------ ----------------------------
From investment activities:
Net investment loss $(1,455,936) $(1,821,116) $(319,219) $(495,128)
Net gain (loss) on portfolio funds sold 676 401,496 -- (35,660)
Net change in unrealized appreciation on
investments in portfolio funds 17,916,961 14,218,146 1,667,907 2,853,177
------------------------------ ----------------------------
Net increase in Members' Capital
derived from investment activities 16,461,701 12,798,526 1,348,688 2,322,389
------------------------------ ----------------------------
Members' Capital transactions:
Proceeds from sales of Interests 14,994,910 255,135,361 5,627,594 65,834,326
Redemptions of Interests (1,841,626) (417,274) (410,798) (58,815)
Transfers of Interests -- 152,000 -- 12,000
------------------------------ ----------------------------
Net Increase in Members' Capital derived from
capital transactions 13,153,284 254,870,087 5,216,796 65,787,511
------------------------------ ----------------------------
Net increase in Members' Capital 29,614,985 267,668,613 6,565,484 68,109,900
Members' Capital at beginning of period 325,336,932 57,668,319 82,229,635 14,119,735
------------------------------ ----------------------------
Members' Capital at end of period $354,951,917 $325,336,932 $88,795,119 $82,229,635
============================== ============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
Statements of Cash Flows
For the six-month period ended July 31, 2005
(Unaudited)
AETOS CAPITAL AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL MARKET
MULTI-STRATEGY INVESTMENT LONG/SHORT NEUTRAL
ARBITRAGE STRATEGIES STRATEGIES STRATEGIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
--------------------------------------------------------------------
CASH FLOWS USED IN OPERATING ACTIVITIES
Purchases of Portfolio Funds $(9,500,000) $ -- $(6,900,000) $ --
Sales of Portfolio Funds -- -- 676 --
Net investment loss (1,156,469) (185,442) (1,455,936) (319,219)
Adjustments to reconcile net investment loss to net
cash used in operating activities:
Increase in accrued income (20,346) (8,255) (23,005) (18,094)
Decrease in prepaid investments 7,000,000 -- -- --
Decrease in receivable for sale of investments -- -- 360,158 --
Increase in due from investment manager -- (7,890) -- (6,574)
Increase in other assets (3,125) (2,963) (4,391) (3,152)
Increase in administration fees payable 10,363 2,135 12,790 3,169
Increase in investment manager fees payable 42,330 31,404 51,788 33,156
Increase in Board of Managers' fees payable 3,094 3,094 3,094 3,094
Increase in other accrued expenses 18,494 15,353 21,150 17,138
--------------------------------------------------------------------
Net cash used in operating activities (3,605,659) (152,564) (7,933,676) (290,482)
--------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in sales of Interests received in advance (204,971) -- (197,894) --
Increase in redemptions of Interests payable 19,852 -- 43,035 --
Sales of Interests 17,458,902 2,647,384 14,994,910 5,627,594
Redemptions of Interests (1,766,086) (178,502) (1,841,626) (410,798)
Transfers of Interests -- -- -- --
--------------------------------------------------------------------
Net cash provided by financing activities 15,507,697 2,468,882 12,998,425 5,216,796
--------------------------------------------------------------------
Net increase in cash and cash equivalents 11,902,038 2,316,318 5,064,749 4,926,314
Cash and cash equivalents, beginning of period 260,918 2,443,683 9,392,071 5,827,970
--------------------------------------------------------------------
Cash and cash equivalents, end of period $12,162,956 $4,760,001 $14,456,820 $10,754,284
====================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
Financial Highlights
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
------------------------------------------------------------
2/1/05 -
7/31/05 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/05 1/31/04 1/31/03
------------------------------------------------------------
Total return 3.33%(1) 2.98% 13.17% 4.44%(1)
Net assets, end of period (000's) $ 270,167 $ 245,964 $ 35,075 $ 1,092
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.96%(3) 1.07% 5.04% 43.96%(3)
Expenses, net of waivers and
reimbursements (2)(4) 0.96%(3) 1.00% 1.13% 1.25%(3)
Net investment loss, before waivers
and reimbursements (0.91)%(3) (0.96)% (4.87)% (43.95)%(3)
Net investment loss, net of waivers
and reimbursements (0.91)%(3) (0.89)% (0.96)% (1.24)%(3)
Portfolio turnover rate (5) 0.00% 0.00% 0.00% 0.00%
* Commencement of operations.
(1) Total return is for the period indicated and has not been annualized.
(2) Expense ratios of underlying funds are not included in the expense ratio.
(3) Annualized.
(4) The expense ratios do not include the Program fees charged separately to
investors as described in Note 3 in the Notes to Financial Statements.
(5) Not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
Financial Highlights (continued)
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
-----------------------------------------------------------------------
2/1/05 -
7/31/05 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/05 1/31/04 1/31/03
-----------------------------------------------------------------------
Total return 3.31%(1) 10.24% 22.13% 5.38%(1)
Net assets, end of period (000's) $ 49,269 $ 45,254 $ 14,179 $ 2,355
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 1.30%(3) 1.55% 7.72% 22.93%(3)
Expenses, net of waivers and
reimbursements (2)(4) 1.00%(3) 1.00% 1.18% 1.25%(3)
Net investment loss, before waivers
and reimbursements (1.10)%(3) (1.50)% (7.65)% (22.92)%(3)
Net investment loss, net of waivers
and reimbursements (0.80)%(3) (0.95)% (1.11)% (1.24)%(3)
Portfolio turnover rate (5) 0.00% 0.00% 16.94% 0.00%
* Commencement of operations.
(1) Total return is for the period indicated and has not been annualized.
(2) Expense ratios of underlying funds are not included in the expense ratio.
(3) Annualized.
(4) The expense ratios do not include the Program fees charged separately to
investors as described in Note 3 in the Notes to Financial Statements.
(5) Not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
Financial Highlights (continued)
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
----------------------------------------------------------------------
2/1/05 -
7/31/05 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/05 1/31/04 1/31/03
----------------------------------------------------------------------
Total return 4.97%(1) 3.90% 12.88% (0.89)%(1)
Net assets, end of period (000's) $ 354,952 $ 325,337 $ 57,668 $ 3,562
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.95%(3) 1.05% 4.09% 18.87%(3)
Expenses, net of waivers and
reimbursements (2)(4) 0.95%(3) 1.00% 1.14% 1.25%(3)
Net investment loss, before waivers
and reimbursements (0.87)%(3) (0.95)% (3.96)% (18.86)%(3)
Net investment loss, net of waivers
and reimbursements (0.87)%(3) (0.90)% (1.01)% (1.24)%(3)
Portfolio turnover rate (5) 0.00% 4.06% 0.00% 20.87%
* Commencement of operations.
(1) Total return is for the period indicated and has not been annualized.
(2) Expense ratios of underlying funds are not included in the expense ratio.
(3) Annualized.
(4) The expense ratios do not include the Program fees charged separately to
investors as described in Note 3 in the Notes to Financial Statements.
(5) Not annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
Financial Highlights (concluded)
AETOS CAPITAL MARKET NEUTRAL STRATEGIES FUND, LLC
--------------------------------------------------------------------
2/1/05 -
7/31/05 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/05 1/31/04 1/31/03
--------------------------------------------------------------------
Total return 1.66%(1) 1.84% 2.81% 0.13%(1)
Net assets, end of period (000's) $ 88,795 $ 82,230 $ 14,120 $ 1,526
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 1.11%(3) 1.33% 8.79% 31.67%(3)
Expenses, net of waivers and
reimbursements (2)(4) 1.00%(3) 1.00% 1.15% 1.25%(3)
Net investment loss, before waivers
and reimbursements (0.86)%(3) (1.28)% (8.69)% (31.65)%(3)
Net investment loss, net of waivers
and reimbursements (0.75)%(3) (0.95)% (1.05)% (1.23)%(3)
Portfolio turnover rate (5) 0.00% 45.70% 0.00% 0.00%
* Commencement of operations.
(1) Total return is for the period indicated and has not been annualized.
(2) Expense ratios of underlying funds are not included in the expense ratio.
(3) Annualized.
(4) The expense ratios do not include the Program fees charged separately to
investors as described in Note 3 in the Notes to Financial Statements.
(5) Not annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
Notes to Financial Statements
July 31, 2005
(Unaudited)
1. ORGANIZATION
The Aetos Capital Multi-Strategy Arbitrage Fund, LLC, the Aetos Capital
Distressed Investment Strategies Fund, LLC, the Aetos Capital Long/Short
Strategies Fund, LLC and the Aetos Capital Market Neutral Strategies Fund, LLC
(collectively the "Funds" and individually a "Fund") were formed in the state of
Delaware as limited liability companies. The Funds are registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as closed-end,
non-diversified, management investment companies. Each of the Funds is a
fund-of-funds. The Funds seek capital appreciation by allocating their assets
among a select group of private investment funds (commonly known as hedge funds)
("Portfolio Funds") that utilize a variety of alternative investment strategies
specific for each Fund to produce an attractive absolute return on invested
capital, largely independent of the various benchmarks associated with
traditional asset classes. Aetos Alternatives Management, LLC serves as the
Investment Manager to the Funds.
The principal investment objective of each Fund is as follows:
Aetos Capital Multi-Strategy Arbitrage Fund, LLC seeks to produce an attractive
absolute return on invested capital, largely independent of the various
benchmarks associated with traditional asset classes, by allocating its assets
among a select group of portfolio managers that utilize a variety of arbitrage
strategies.
Aetos Capital Distressed Investment Strategies Fund, LLC seeks to produce an
attractive absolute return on invested capital, largely independent of the
various benchmarks associated with traditional asset classes, by allocating its
assets among a select group of portfolio managers across a variety of distressed
investment strategies.
Aetos Capital Long/Short Strategies Fund, LLC seeks to produce an attractive
absolute return on invested capital, largely independent of the various
benchmarks associated with traditional asset classes, by allocating its assets
among a select group of portfolio managers across a variety of long/short
strategies.
Aetos Capital Market Neutral Strategies Fund, LLC seeks to produce an attractive
absolute return on invested capital, largely independent of the various
benchmarks associated with traditional asset classes, by allocating its assets
among a select group of portfolio managers across a variety of market neutral
strategies.
The Funds may offer, from time to time, to repurchase outstanding members'
interests ("Interests") pursuant to written tenders by Members. Repurchase
offers will be made at such times and on such terms as may be determined by the
Funds' Board of Managers (the "Board") in its sole discretion. The Funds may
offer to repurchase Interests four times each year, as of the last business day
of March, June, September and December.
14
Notes to Financial Statements (continued) (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America. The following is
a summary of the significant accounting policies followed by the Funds:
A. Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Investment
Manager to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from these estimates.
B. Portfolio Valuation
The net asset values of the Funds are determined as of the close of business at
the end of each month in accordance with the valuation principles set forth
below or as may be determined from time to time pursuant to policies established
by the Board.
Investments in Portfolio Funds are presented in the accompanying financial
statements at fair value, as determined by the Funds' Investment Manager under
the general supervision of the Board. Such fair value generally represents a
Fund's pro-rata interest in the net assets of a Portfolio Fund as provided by
the Portfolio Funds. The Investment Manager considers information provided by
the Portfolio Funds regarding the methods they use to value underlying
investments in the Portfolio Funds in determining fair value.
Considerable judgment is required to interpret the factors used to develop
estimates of fair value. Accordingly, the estimates may not be indicative of the
amounts the Fund could realize in a current market exchange and the differences
could be material to the financial statements. The use of different factors or
estimation methodologies could have a significant effect on the estimated fair
value.
C. Fund Expenses
Each Fund bears its own expenses including, but not limited to: any taxes;
organizational expenses; offering costs; investment-related expenses incurred by
the Funds (e.g., fees and expenses charged by the Portfolio Managers and
Portfolio Funds, placement fees, professional fees, custody and administrative
fees). Most expenses of the Funds can be directly attributed to a particular
Fund. Expenses which cannot be directly attributed are apportioned among the
Funds based upon relative net assets or on another reasonable basis.
15
Notes to Financial Statements (continued) (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Income Taxes
Each Fund intends to be treated as a partnership for Federal income tax
purposes. Each Member is responsible for the tax liability or benefit relating
to the Member's distributive share of taxable income or loss. Accordingly, no
provision for Federal income taxes is reflected in the accompanying financial
statements.
E. Distribution Policy
Each Fund has no present intention of making periodic distributions of its net
investment income or capital gains, if any, to Members. The amount and frequency
of distributions, if any, will be determined in the sole discretion of the
Board.
F. Distributions from Portfolio Funds
Distributions from Portfolio Funds will be classified as investment income or
realized gains in the Statements of Operations, or alternatively, as a decrease
to the cost of the investments based on the U.S. income tax characteristics of
the distribution if such information is available. In cases where the tax
characteristics are not available, such distribution will be classified as
investment income.
G. Cash and Cash Equivalents
The Funds treat all highly liquid financial instruments that mature within three
months as cash equivalents.
3. INVESTMENT MANAGER FEE, RELATED PARTY TRANSACTIONS AND OTHER
The Funds pay the Investment Manager a monthly management fee (the "Management
Fee") at the annual rate of 0.75% of the net asset value of each Fund as of the
last day of the month (before any repurchases of Interests). The Investment
Manager is responsible for providing day-to-day investment management services
to the Funds, and for providing various administrative services to the Funds.
The Investment Manager contractually agreed to reimburse the Funds in order to
limit the Funds' other expenses (defined as total operating expenses excluding
the Management Fee) at 0.50% of each Fund's average monthly net assets, through
December 31, 2003. Effective January 1, 2004, the Investment Manager has
contractually agreed to reimburse the Funds in order to limit the Funds' other
expenses at 0.25% of each Fund's average monthly net assets, at least until May
31, 2006.
16
Notes to Financial Statements (continued) (unaudited)
3. INVESTMENT MANAGER FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
The Investment Manager may also be paid a Program fee outside of the Funds for
services rendered to investors. The Program fee is paid directly by the
investors at an annual rate of up to 0.50% of an investor's assets in the Funds.
The Investment Manager may also be paid an annual performance-based incentive
fee outside of the Funds based on the return of an investor's account with the
Investment Manager.
SEI Investments Global Funds Services (the "Administrator") provides certain
administration, accounting and investor services for the Funds. In consideration
for such services, each Fund pays the Administrator a monthly fee based on
month-end net assets at an annual rate of up to 0.12%, subject to certain fee
minimums, and will reimburse the Administrator for certain out-of-pocket
expenses.
SEI Private Trust Company acts as custodian (the "Custodian") for the Funds'
assets. In consideration for such services, each Fund pays the Custodian, a
monthly fee, based on month-end net assets, at an annual rate of up to 0.01%.
Each Member of the Board who is not an "interested person" of the Funds as
defined by the 1940 Act receives an annual retainer of $25,000 and regular
quarterly meeting fees of $2,500 per meeting (additional meeting fees are $500
per meeting). The Chairman of the audit committee receives an additional annual
retainer of $1,500. Any Manager who is an "interested person" does not receive
any annual or other fee from the Funds. All Managers are reimbursed by the Funds
for reasonable out-of-pocket expenses.
Net profits or net losses of the Funds for each fiscal period are allocated
among and credited to or debited against the capital accounts of Members as of
the last day of each fiscal period in accordance with each Member's respective
investment percentage for each Fund. Net profits or net losses are measured as
the net change in the value of the net assets of a Fund during a fiscal period,
before giving effect to any repurchases of Interest in the Fund, and excluding
the amount of any items to be allocated among the capital accounts of the
Members of the Fund, other than in accordance with the Members' respective
investment percentages.
4. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Portfolio Funds in which the Funds invest
trade various financial instruments and enter into various investment activities
with off-balance sheet risk. These include, but are not limited to, short
selling activities, writing option contracts, and equity swaps. The Funds' risk
of loss in these Portfolio Funds is limited to the value of these investments
reported by the Portfolio Funds.
17
Notes to Financial Statements (continued) (unaudited)
5. CONCENTRATION OF RISK
The Funds invest primarily in Portfolio Funds that are not registered under the
1940 Act and invest in and actively trade securities and other financial
instruments using different strategies and investment techniques, including
leverage, that may involve significant risks. These Portfolio Funds may invest a
high percentage of their assets in specific sectors of the market in order to
achieve a potentially greater investment return. As a result, the Portfolio
Funds may be more susceptible to economic, political, and regulatory
developments in a particular sector of the market, positive or negative, and may
experience increased volatility of the Portfolio Funds' net asset value. The
Funds invest in a limited number of Portfolio Funds. Such concentration may
result in additional risk.
Various risks are also associated with an investment in the Funds, including
risks relating to the multi-manager structure of the Funds, risks relating to
compensation arrangements and risks relating to the limited liquidity of
Interests.
In the normal course of business, the Funds enter into contracts that contain a
variety of representations which provide general indemnifications. Each Fund's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against each Fund that have not yet occurred.
However, based on experience, the Funds expect the risk of loss to be remote.
6. INVESTMENT TRANSACTIONS
For the six-month period ended July 31, 2005, purchases and sales of investments
were as follows:
FUND PURCHASES SALES
----------------------------------------------------------------------------------------------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $9,500,000 $--
Aetos Capital Distressed Investment Strategies Fund, LLC -- --
Aetos Capital Long/Short Strategies Fund, LLC 6,900,000 --
Aetos Capital Market Neutral Strategies Fund, LLC -- --
7. INVESTMENTS
As of July 31, 2005, the Funds had investments in thirty-three Portfolio Funds,
none of which were related parties. The following table lists the Funds'
investments in Portfolio Funds as of July 31, 2005. The agreements related to
investments in Portfolio Funds provide for compensation to the general
partners/managers in the form of management fees of 1.0% to 2.0% (per annum) of
the net assets and incentive fees or allocations of 10% to 20% of net profits
earned. The Portfolio Funds provide for periodic redemptions, with lock-up
provisions ranging from 3 months to 2 years from initial investment. The
liquidity provisions shown in the table apply after the lock-up provisions.
18
Notes to Financial Statements (continued) (unaudited)
7. INVESTMENTS (CONTINUED)
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
INVESTMENT FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME OBJECTIVE 7/31/2005 CAPITAL LIQUIDITY
- ----------------------------------------------------------------------------------------------------------------------------------
AQR Global Arbitrage Offshore Fund (USD), Ltd. Fixed Income/Event Arbitrage $ 28,858,389 10.68 % Quarterly
Davidson Kempner Partners Event Arbitrage/Distressed Investments 26,269,812 9.72 Quarterly
FFIP, L.P. Fixed Income Arbitrage 16,796,210 6.22 Annual
Ishin Fund, LLC Convertible Arbitrage 11,474,168 4.25 Annual
Pentangle Partners, L.P. Statistical Arbitrage 16,324,932 6.04 Monthly
Pequot Credit Opportunities Fund, L.P. Fixed Income Arbitrage 15,134,555 5.60 Annual
Perry Partners, L.P. Event Arbitrage 33,246,461 12.31 Annual
Satellite Fund II, L.P. Event Arbitrage/Distressed Investments 28,674,214 10.61 Annual
South Hill Trading Corp. Fixed Income Arbitrage 15,785,188 5.84 Monthly
Sowood Alpha Fund, L.P. Event Arbitrage/Distressed Investments 45,146,010 16.71 Annual
Standard Pacific Credit Opportunities Fund, L.P. Fixed Income Arbitrage 20,636,658 7.64 Annual
------------------------
$258,346,597 95.62%
------------------------
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
INVESTMENT FAIR VALUE
PORTFOLIO FUND NAME OBJECTIVE 7/31/05 % OF NET ASSETS LIQUIDITY
- -----------------------------------------------------------------------------------------------------------------------------------
King Street Capital, L.P. Distressed Investments $ 8,352,783 16.95% Quarterly
Satellite Credit Opportunities Fund, Ltd. Distressed Investments 10,306,635 20.92 Annual
Silver Point Capital Fund, L.P. Distressed Investments 13,874,561 28.16 Annual
Watershed Capital Partners, L.P. Distressed Investments 12,089,914 24.54 Quarterly
------------------------
$ 44,623,893 90.57%
------------------------
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
INVESTMENT FAIR VALUE
PORTFOLIO FUND NAME OBJECTIVE 7/31/2005 % OF NET ASSETS LIQUIDITY
- ------------------------------------------------------------------------------------------------------------------------------------
Bay Pond Partners, L.P. Long/Short Equity Investments $ 35,762,827 10.08% Semi-Annual
Bay Resource Partners, L.P. Long/Short Equity Investments 24,966,429 7.03 Annual
Cadmus Capital Partners (QP), L.P. Long/Short Equity Investments 23,763,846 6.69 Quarterly
Cantillion Pacific, L.P. Long/Short Equity Investments 11,499,850 3.24 Quarterly
Cantillion U.S. Low Volatility, L.P. Equity Investment Market Neutral 12,683,681 3.57 Quarterly
Cavalry Technology, L.P. Long/Short Equity Investments 37,993,855 10.70 Annual
The Elkhorn Fund, LLC Long/Short Equity Investments 16,277,457 4.59 Quarterly
Fine Partners I, L.P. Long/Short Equity Investments 17,731,560 5.00 Annual
Hygrove Capital Fund (QP), L.P. Long/Short Equity Investments 16,394,514 4.62 Quarterly
Icarus Qualified Partners, L.P. Short Equity Investments 9,701,426 2.73 Annual
JL Partners, L.P. Long/Short Equity Investments 58,857,065 16.58 Quarterly
North River Partners, L.P. Long/Short Equity Investments 23,213,683 6.54 Quarterly
Standard Global Equity Partners SA, L.P. Long/Short Equity Investments 40,562,275 11.43 Annual
Viking Global Equities, L.P. Long/Short Equity Investments 11,537,889 3.25 Annual
------------------------
$340,946,357 96.05%
------------------------
19
Notes to Financial Statements (continued) (unaudited)
7. INVESTMENTS (CONTINUED)
AETOS CAPITAL MARKET NEUTRAL STRATEGIES FUND, LLC
INVESTMENT FAIR VALUE
PORTFOLIO FUND NAME OBJECTIVE 7/31/05 % OF NET ASSETS LIQUIDITY
- --------------------------------------------------------------------------------------------------------------------------------
<c>
AQR Absolute Return Institutional Fund, L.P. Multi-Strategy Market Neutral $ 15,574,855 17.55% Quarterly
Bravura 99 Fund, L.P. Equity Investment Market Neutral 9,725,776 10.95 Quarterly
Cantillion U.S. Low Volatility L.P. Equity Investment Market Neutral 28,467,142 32.06 Quarterly
GMO Market Neutral Fund (Onshore) Equity Investment Market Neutral 6,413,961 7.22 Quarterly
GMO Mean Reversion Fund Multi-Strategy Market Neutral 18,000,475 20.27 Quarterly
---------------------------
$ 78,182,209 88.05%
---------------------------
8. SUBSEQUENT EVENTS
Through September 1, 2005, the Funds received the following contributions:
FUND AMOUNT
------------------------------------------------------------------------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $2,903,250
Aetos Capital Distressed Investment Strategies Fund, LLC 384,250
Aetos Capital Long/Short Strategies Fund, LLC 6,985,250
Aetos Capital Market Neutral Strategies Fund, LLC 5,683,250
and paid the following redemptions:
FUND AMOUNT
------------------------------------------------------------------------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $4,711,000
Aetos Capital Distressed Investment Strategies Fund, LLC --
Aetos Capital Long/Short Strategies Fund, LLC 15,001,000
Aetos Capital Market Neutral Strategies Fund, LLC 7,485,722
20
Approval of Investment Advisory Agreements (unaudited)
The Board of each Fund unanimously approved the continuance of each Fund's
Advisory Agreement between the Fund and the Investment Manager at a meeting held
in person on July 13, 2005.
In approving each Advisory Agreement each Fund's Board of Managers, including
the Independent Board Members, considered the nature, quality and scope of the
services provided by the Investment Manager, the performance, fees and expenses
of each Fund compared to other similar investment companies, the Investment
Manager's expenses in providing the services, the profitability of the
Investment Manager and its affiliated companies and other benefits they derive
from their relationship with each Fund and the extent to which economies of
scale are shared with each Fund. The Independent Board Members reviewed reports
from third parties and management about the foregoing factors and changes, if
any, in such items since the Board Members' deliberations in connection with the
initial approval of each Advisory Agreement. In particular, the Independent
Board Members noted that the proposed Management Fee was lower than the
management fee for most investment companies similar to the Funds.
The Independent Board Members noted their confidence in the capability and
integrity of the senior management and staff of the Investment Manager and the
financial strength of the Investment Manager. The Independent Board Members
weighed the foregoing factors in light of the advice given to them by legal
counsel to the Fund as to the law applicable to the review of investment
advisory contracts. Based upon its review, each Fund's Board of Managers,
including all of the Independent Board Members, determined, in the exercise of
its business judgment, that approval of the Advisory Agreement with respect to
each Fund was in the best interests of each Fund and its Members.
21
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual report.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included as part of the report to shareholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable. Effective for closed-end management investment companies filing
an annual report on this Form for fiscal years ending on or after December 31,
2005.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable as Interests of the Fund are not registered pursuant to Section
12 of the Exchange Act.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Not applicable for semi-annual report.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Aetos Capital Long/Short Strategies Fund, LLC
By (Signature and Title)* /s/ Michael F. Klein
--------------------
Michael F. Klein, President
Date: 09/28/05
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Michael F. Klein
--------------------
Michael F. Klein, President
Date: 09/28/05
By (Signature and Title)* /s/ Scott D. Sawyer
-------------------
Scott D. Sawyer, Treasurer
Date: 09/28/05
* Print the name and title of each signing officer under his or her signature.