UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSRS
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-21061
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE 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, 2007
DATE OF REPORTING PERIOD: JULY 31, 2007
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
AETOS CAPITAL OPPORTUNITIES FUND, LLC
Financial Statements (unaudited)
July 31, 2007
TABLE OF CONTENTS
Schedules of Investments .................................................. 1
Statements of Assets and Liabilities ...................................... 6
Statements of Operations .................................................. 7
Statements of Changes in Members' Capital ................................. 8
Statements of Cash Flows .................................................. 11
Financial Highlights ...................................................... 12
Notes to Financial Statements ............................................. 17
Approval of Investment Advisory Agreements ................................ 28
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, 2007
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Convertible Arbitrage 7.09%
Credit Strategies 13.06%
Fixed Income Arbitrage 22.10%
Multi-Strategy/Event Arbitrage 57.75%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ----------------------------------------------------------------------------------------------------
Davidson Kempner Partners $ 50,000,000 $ 65,609,087 12.29%
Farallon Capital Offshore Investors, Inc. 69,000,000 77,470,116 14.51
FFIP, L.P. 46,630,000 54,960,337 10.30
HBK Fund L.P. 60,000,000 61,337,000 11.49
Ishin Fund, LLC 33,000,000 37,503,016 7.03
Lazard Emerging Income, L.P. 25,000,000 27,983,230 5.24
Oceanwood Global Opportunities Fund L.P. 35,000,000 33,634,475 6.30
Parsec Trading Corp. 16,600,000 18,545,170 3.47
Pequot Credit Opportunities Fund, L.P. 35,000,000 38,320,052 7.18
Pequot Short Credit Fund, L.P. 27,000,000 30,715,457 5.75
Perry Partners, L.P. 7,045,298 8,311,513 1.56
Satellite Fund II, L.P. 25,850,000 36,127,564 6.77
South Hill Trading Corp. 12,899,450 15,374,801 2.88
Sowood Alpha Fund, L.P. 42,000,000 22,841,435 4.28
---------------------------------------------
Total $ 485,024,748 $ 528,733,253 99.05%
=============================================
* Percentages are based on Members' Capital of $533,789,137.
The aggregate cost of investments for tax purposes was $530,489,512. Net
unrealized depreciation on investments for tax purposes was $1,756,259
consisting of $34,529,335 of gross unrealized appreciation and $36,285,594 of
gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 99.05% 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, 2007
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Distressed Investments 100.00%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ----------------------------------------------------------------------------------------------------
Aurelius Capital Partners, L.P. $ 27,500,000 $ 31,256,739 21.58%
King Street Capital, L.P. 24,050,000 33,191,850 22.92
One East Partners, L.P. 27,500,000 28,715,282 19.82
Silver Point Capital Fund, L.P. 24,100,000 32,870,519 22.69
Watershed Capital Partners, L.P. 11,050,000 14,719,803 10.16
---------------------------------------------
Total $ 114,200,000 $ 140,754,193 97.17%
=============================================
* Percentages are based on Members' Capital of $144,854,375.
The aggregate cost of investments for tax purposes was $124,503,713. Net
unrealized appreciation on investments for tax purposes was $16,250,480
consisting of $16,250,480 of gross unrealized appreciation and $0 of gross
unrealized depreciation.
The investments in Portfolio Funds shown above, representing 97.17% 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, 2007
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Short Equity Investments 3.66%
Long/Short Equity Investments 96.34%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ----------------------------------------------------------------------------------------------------
Bay Pond Partners, L.P. $ 32,000,000 $ 57,814,969 6.20%
Bay Resource Partners, L.P. 35,000,000 54,159,575 5.81
Cadmus Capital Partners (QP), L.P. 64,330,248 77,863,506 8.35
Cantillon Pacific, L.P. 13,000,000 17,468,083 1.87
Cantillon U.S., L.P. 12,699,464 14,733,314 1.58
Cavalry Technology, L.P. 58,750,000 72,225,534 7.75
Copper River Partners, L.P. 10,000,000 9,896,154 1.06
The Elkhorn Fund, LLC 55,854,685 64,004,005 6.87
Highside Capital Partners, L.P. 60,000,000 83,660,663 8.98
Icarus Qualified Partners, L.P. 21,000,000 24,117,314 2.59
JL Partners, L.P. 57,820,000 83,400,663 8.95
Millgate Partners II, L.P. 22,000,000 21,562,453 2.31
North River Partners, L.P. 45,650,000 52,547,182 5.64
Standard Global Equity Partners SA, L.P. 58,700,000 76,056,924 8.16
UC Financials Fund Limited 33,000,000 32,303,532 3.46
ValueAct Capital Partners III, L.P. 75,000,000 82,109,187 8.81
Viking Global Equities, L.P. 50,000,000 71,987,532 7.72
Woodbourne Daybreak Global Fund L.P. 32,000,000 32,966,113 3.54
---------------------------------------------
Total $ 736,804,397 $ 928,876,703 99.65%
=============================================
* Percentages are based on Members' Capital of $932,105,318.
The aggregate cost of investments for tax purposes was $786,988,116. Net
unrealized appreciation on investments for tax purposes was $141,888,587
consisting of $143,126,448 of gross unrealized appreciation and $1,237,861 of
gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 99.65% 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, 2007
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Multi-Strategy 25.62%
Low Beta/Market Neutral/Long Short 56.03%
Quantitative Asset Allocation 18.35%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ----------------------------------------------------------------------------------------------------
AQR Absolute Return Institutional Fund, L.P. $ 26,187,363 $ 30,233,799 23.49%
Bravura 99 Fund, L.P. 30,682,132 34,508,124 26.80
Cantillon U.S. Low Volatility, L.P. 27,500,000 31,623,642 24.56
GMO Mean Reversion Fund 16,000,000 21,653,483 16.82
---------------------------------------------
Total $ 100,369,495 $ 118,019,048 91.67%
=============================================
* Percentages are based on Members' Capital of $128,750,270.
The aggregate cost of investments for tax purposes was $103,330,410. Net
unrealized appreciation on investments for tax purposes was $14,688,638
consisting of $14,688,638 of gross unrealized appreciation and $0 of gross
unrealized depreciation.
The investments in Portfolio Funds shown above, representing 91.67% of Members'
Capital, have been fair valued.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
Aetos Capital Opportunities Fund, LLC
Schedule of Investments (Unaudited)
July 31, 2007
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Credit Related 8.40%
Event-Driven 18.63%
Long/Short Equity Investments 58.13%
Real Assets 14.84%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ----------------------------------------------------------------------------------------------------
Davidson Kempner Healthcare Fund L.P. $ 5,000,000 $ 4,485,111 2.59%
GMO U.S. Tactical Opportunities Fund (Onshore), L.P. 14,500,000 14,109,412 8.14
Joho Partners, L.P. 19,000,000 25,761,103 14.86
Pequot Short Credit Fund, L.P. 8,000,000 8,670,109 5.00
Sansar Capital, L.P. 15,000,000 18,096,702 10.44
Saras Capital Partners, L.P. 19,000,000 22,657,133 13.07
Scopia PX, LLC 14,000,000 17,695,894 10.21
Sheffield Institutional Partners, L.P. 8,500,000 9,584,276 5.53
Spindrift Partners, L.P. 18,000,000 21,717,450 12.53
Standard Pacific Asymmetric Opportunities Fund, L.P. 3,000,000 3,630,064 2.10
---------------------------------------------
Total $ 124,000,000 $ 146,407,254 84.47%
=============================================
* Percentages are based on Members' Capital of $173,327,059.
The aggregate cost of investments for tax purposes was $125,521,509. Net
unrealized appreciation on investments for tax purposes was $20,885,745
consisting of $21,400,634 of gross unrealized appreciation and $514,889 of gross
unrealized depreciation.
The investments in Portfolio Funds shown above, representing 84.47% of Members'
Capital, have been fair valued.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
Statements of Assets and Liabilities
July 31, 2007
(Unaudited)
AETOS CAPITAL AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL MARKET
MULTI-STRATEGY INVESTMENT LONG/SHORT NEUTRAL AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC FUND, LLC
--------------------------------------------------------------------------------
ASSETS
Investments in Portfolio Funds, at cost $ 485,024,748 $ 114,200,000 $ 736,804,397 $ 100,369,495 $ 124,000,000
--------------------------------------------------------------------------------
Investments in Portfolio Funds, at value $ 528,733,253 $ 140,754,193 $ 928,876,703 $ 118,019,048 $ 146,407,254
Cash and cash equivalents 23,784,573 3,663,476 8,476,172 12,320,320 28,636,881
Prepaid investments 10,000,000 11,000,000 52,000,000 7,000,000 6,000,000
Receivable for sale of investments -- 326,152 -- -- 735,575
Accrued income 37,027 19,903 45,044 50,557 95,304
Prepaid tax withholding 27,744 425,297 90,649 71,258 5,932
--------------------------------------------------------------------------------
Total assets 562,582,597 156,189,021 989,488,568 137,461,183 181,880,946
--------------------------------------------------------------------------------
LIABILITIES
Sales of Interests received in advance 28,117,500 11,095,000 56,317,500 8,497,500 8,287,500
Investment management fees payable 340,236 92,330 594,134 82,067 110,481
Administration fees payable 198,083 52,296 317,042 47,895 59,255
Board of Managers' fees payable 6,297 6,297 6,297 6,297 6,297
Other accrued expenses 131,344 88,723 148,277 77,154 90,354
--------------------------------------------------------------------------------
Total liabilities 28,793,460 11,334,646 57,383,250 8,710,913 8,553,887
--------------------------------------------------------------------------------
NET MEMBERS' CAPITAL $ 533,789,137 $ 144,854,375 $ 932,105,318 $ 128,750,270 $ 173,327,059
================================================================================
MEMBERS' CAPITAL
Net capital $ 490,080,632 $ 118,300,182 $ 740,033,012 $ 111,100,717 $ 150,919,805
Net unrealized appreciation on
investments in Portfolio Funds 43,708,505 26,554,193 192,072,306 17,649,553 22,407,254
--------------------------------------------------------------------------------
Members' Capital $ 533,789,137 $ 144,854,375 $ 932,105,318 $ 128,750,270 $ 173,327,059
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
Statements of Operations
For the six-month period ended July 31, 2007
(Unaudited)
AETOS CAPITAL AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL MARKET
MULTI-STRATEGY INVESTMENT LONG/SHORT NEUTRAL AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC FUND, LLC
--------------------------------------------------------------------------------
Investment income:
Interest $ 663,962 $ 180,741 $ 663,938 $ 225,636 $ 278,876
--------------------------------------------------------------------------------
Expenses:
Investment management fees 1,971,759 510,582 3,225,477 463,335 594,186
Administration fees 231,971 60,956 372,749 57,292 69,950
Board of Managers' fees 13,142 13,142 13,142 13,142 13,142
Professional fees 86,508 66,308 97,333 62,433 64,550
Custodian fees 27,969 8,348 44,786 7,725 9,475
Printing fees 4,000 4,000 4,000 4,000 4,000
Registration fees 3,231 3,239 5,101 3,619 3,000
Other expenses 11,835 9,298 11,570 9,108 5,364
--------------------------------------------------------------------------------
Total expenses 2,350,415 675,873 3,774,158 620,654 763,667
Fund expenses reimbursed -- (5,547) -- (6,639) --
--------------------------------------------------------------------------------
Net expenses 2,350,415 670,326 3,774,158 614,015 763,667
--------------------------------------------------------------------------------
Net investment loss (1,686,453) (489,585) (3,110,220) (388,379) (484,791)
--------------------------------------------------------------------------------
Net gain on Portfolio Funds sold 7,972,902 -- -- -- 214,449
Net change in unrealized
appreciation/(depreciation) on
investments in Portfolio Funds (19,990,365) 7,187,722 70,237,569 5,860,564 13,733,557
--------------------------------------------------------------------------------
Net increase/(decrease) in Members'
Capital derived from
investment activities $ (13,703,916) $ 6,698,137 $ 67,127,349 $ 5,472,185 $ 13,463,215
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
Statements of Changes in Members' Capital
For the six-month period ended July 31, 2007 and the year ended January 31, 2007
AETOS CAPITAL DISTRESSED
AETOS CAPITAL MULTI-STRATEGY INVESTMENT STRATEGIES
ARBITRAGE FUND, LLC FUND, LLC
------------------------------ ------------------------------
2/1/07 - 2/1/07 -
7/31/07 2/1/06 - 7/31/07 2/1/06 -
(UNAUDITED) 1/31/07 (UNAUDITED) 1/31/07
------------------------------ ------------------------------
From investment activities:
Net investment loss $ (1,686,453) $ (2,877,831) $ (489,585) $ (599,072)
Net gain on Portfolio Funds sold 7,972,902 5,872,811 -- 2,284,426
Net change in unrealized
appreciation/(depreciation) on
investments in Portfolio Funds (19,990,365) 35,987,994 7,187,722 9,650,831
------------------------------ ------------------------------
Net increase/(decrease) in Members' Capital
derived from investment activities (13,703,916) 38,982,974 6,698,137 11,336,185
------------------------------ ------------------------------
Distributions:
Tax withholding on behalf of foreign investors -- (148,370) -- 25,426
------------------------------ ------------------------------
Total distributions -- (148,370) -- 25,426
------------------------------ ------------------------------
Members' Capital transactions:
Proceeds from sales of Interests 132,326,407 98,597,798 43,589,401 39,449,483
Redemptions of Interests (48,130,643) (14,826,540) (21,255,760) (7,788,545)
Transfers of Interests 15,665,220 4,759,000 5,855,692 436,000
------------------------------ ------------------------------
Net increase in Members' Capital derived from
capital transactions 99,860,984 88,530,258 28,189,333 32,096,938
------------------------------ ------------------------------
Net increase in Members' Capital 86,157,068 127,364,862 34,887,470 43,458,549
Members' Capital at beginning of period 447,632,069 320,267,207 109,966,905 66,508,356
------------------------------ ------------------------------
Members' Capital at end of period $ 533,789,137 $ 447,632,069 $ 144,854,375 $ 109,966,905
============================== ==============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
Statements of Changes in Members' Capital (continued)
For the six-month period ended July 31, 2007 and the year ended January 31, 2007
AETOS CAPITAL
AETOS CAPITAL LONG/SHORT MARKET NEUTRAL
STRATEGIES FUND, LLC STRATEGIES FUND, LLC
------------------------------ ------------------------------
2/1/07 - 2/1/07 -
7/31/07 2/1/06 - 7/31/07 2/1/06 -
(UNAUDITED) 1/31/07 (UNAUDITED) 1/31/07
------------------------------ ------------------------------
From investment activities:
Net investment loss $ (3,110,220) $ (3,946,968) $ (388,379) $ (744,903)
Net gain on Portfolio Funds sold -- 3,884,397 -- 251,096
Net change in unrealized appreciation on
investments in Portfolio funds 70,237,569 60,092,379 5,860,564 4,492,304
------------------------------ ------------------------------
Net increase in Members' Capital
derived from investment activities 67,127,349 60,029,808 5,472,185 3,998,497
------------------------------ ------------------------------
Distributions:
Tax withholding on behalf of foreign investors -- (170,544) -- (95,949)
------------------------------ ------------------------------
Total distributions -- (170,544) -- (95,949)
------------------------------ ------------------------------
Members' Capital transactions:
Proceeds from sales of Interests 239,937,828 232,971,335 33,318,810 23,497,767
Redemptions of Interests (108,311,413) (24,776,905) (7,915,113) (4,890,124)
Transfers of Interests (4,858,400) (1,659,000) (16,662,512) (3,558,000)
------------------------------ ------------------------------
Net increase in Members' Capital derived from
capital transactions 126,768,015 206,535,430 8,741,185 15,049,643
------------------------------ ------------------------------
Net increase in Members' Capital 193,895,364 266,394,694 14,213,370 18,952,191
Members' Capital at beginning of period 738,209,954 471,815,260 114,536,900 95,584,709
------------------------------ ------------------------------
Members' Capital at end of period $ 932,105,318 $ 738,209,954 $ 128,750,270 $ 114,536,900
============================== ==============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
Statement of Changes in Members' Capital (concluded)
For the six-month period ended July 31, 2007 and the year ended January 31, 2007
AETOS CAPITAL
OPPORTUNITIES FUND, LLC
-----------------------------
2/1/07 -
7/31/07 2/1/06 -
(UNAUDITED) 1/31/07
-----------------------------
From investment activities:
Net investment loss $ (484,791) $ (622,061)
Net gain/(loss) on Portfolio Funds sold 214,449 (1,948,906)
Net change in unrealized appreciation
on investments in Portfolio Funds 13,733,557 6,112,694
-----------------------------
Net increase in Members' Capital
derived from investment activities 13,463,215 3,541,727
-----------------------------
Distributions:
Tax withholding on behalf of foreign investors -- (21,233)
-----------------------------
Total distributions -- (21,233)
-----------------------------
Members' Capital transactions:
Proceeds from sales of Interests 46,641,234 65,538,828
Redemptions of Interests (26,685,919) (2,028,981)
Transfers of Interests -- 22,000
-----------------------------
Net increase in Members' Capital derived from
capital transactions 19,955,315 63,531,847
-----------------------------
Net increase in Members' Capital 33,418,530 67,052,341
Members' Capital at beginning of period 139,908,529 72,856,188
-----------------------------
Members' Capital at end of period $ 173,327,059 $ 139,908,529
=============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
Statements of Cash Flows
For the six-month period ended July 31, 2007
(Unaudited)
AETOS CAPITAL AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL MARKET
MULTI-STRATEGY INVESTMENT LONG/SHORT NEUTRAL AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC FUND, LLC
---------------------------------------------------------------------------
CASH FLOWS USED IN OPERATING ACTIVITIES
Purchases of Portfolio Funds $ (186,500,000) $ (31,000,000) $(126,000,000) $ -- $ (22,000,000)
Sales of Portfolio Funds 29,896,598 -- -- -- 14,714,449
Net investment loss (1,686,453) (489,585) (3,110,220) (388,379) (484,791)
Adjustments to reconcile net investment loss to net
cash used in operating activities:
Decrease/(increase) in prepaid investments 50,000,000 (4,000,000) (42,000,000) (7,000,000) 7,000,000
Decrease/(increase) in accrued income 128,239 10,586 (2,444) (39,091) (62,232)
Increase in prepaid tax withholding (27,744) (420,091) (90,649) (71,258) (5,932)
Decrease in receivable for sale of investments 5,331,897 -- -- -- 722,436
Decrease in due from investment manager -- 489 -- -- --
Increase in investment management fees payable 54,916 22,237 123,588 9,060 21,301
Increase in administration fees payable 132,324 35,747 210,258 29,763 39,044
Increase in Board of Managers' fees payable 822 822 822 822 822
Increase/(decrease) in other accrued expenses 2,046 8,070 (1,675) 599 11,744
---------------------------------------------------------------------------
Net cash used in operating activities (102,667,355) (35,831,725) (170,870,320) (7,458,484) (43,159)
---------------------------------------------------------------------------
DISTRIBUTIONS
Tax withholding on behalf of foreign investors (4,272) -- (26,587) (3,347) (3,792)
---------------------------------------------------------------------------
Total distributions (4,272) -- (26,587) (3,347) (3,792)
---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in sales of Interests received in advance 24,067,805 10,389,595 50,656,265 7,742,460 8,183,775
Proceeds from sales of Interests 132,326,407 43,589,401 239,937,828 33,318,810 46,641,234
Redemptions of Interests (48,130,643) (21,255,760) (108,311,413) (7,915,113) (26,685,919)
Transfers of Interests 15,665,220 5,855,692 (4,858,400) (16,662,512) --
---------------------------------------------------------------------------
Net cash provided by financing activities 123,928,789 38,578,928 177,424,280 16,483,645 28,139,090
---------------------------------------------------------------------------
Net increase in cash and cash equivalents 21,257,162 2,747,203 6,527,373 9,021,814 28,092,139
Cash and cash equivalents, beginning of period 2,527,411 916,273 1,948,799 3,298,506 544,742
---------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 23,784,573 $ 3,663,476 $ 8,476,172 $ 12,320,320 $ 28,636,881
===========================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
Financial Highlights
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
--------------------------------------------------------------------------------------
2/1/07 -
7/31/07 2/1/06 - 2/1/05 - 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/07 1/31/06 1/31/05 1/31/04 1/31/03
--------------------------------------------------------------------------------------
Total return(1) (2.32)% 10.36% 6.48% 2.98% 13.17% 4.44%
Net assets, end of period (000's) $ 533,789 $ 447,632 $ 320,267 $ 245,964 $ 35,075 $ 1,092
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.89% (3) 0.95% 0.95% 1.07% 5.04% 43.96% (3)
Expenses, net of waivers and
reimbursements (2)(4) 0.89% (3) 0.95% 0.95% 1.00% 1.13% 1.25% (3)
Net investment loss, before waivers
and reimbursements (0.64)% (3) (0.75)% (0.77)% (0.96)% (4.87)% (43.95)% (3)
Net investment loss, net of waivers
and reimbursements (0.64)% (3) (0.75)% (0.77)% (0.89)% (0.96)% (1.24)% (3)
Portfolio turnover rate (5) 6.15% 16.80% 6.24% 0.00% 0.00% 0.00%
* Commencement of operations.
(1) Total return for periods less than one year have not been annualized. Tax
withholding on behalf of certain investors is treated as a reinvested
distribution.
(2) Expense ratios do not reflect the Fund's proportionate share of expenses
of the Portfolio Funds.
(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) Portfolio turnover rate for periods less than one year have not been
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
Financial Highlights (continued)
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
--------------------------------------------------------------------------------------
2/1/07 -
7/31/07 2/1/06 - 2/1/05 - 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/07 1/31/06 1/31/05 1/31/04 1/31/03
--------------------------------------------------------------------------------------
Total return(1) 5.25% 12.95% 8.46% 10.24% 22.13% 5.38%
Net assets, end of period (000's) $ 144,854 $ 109,967 $ 66,508 $ 45,254 $ 14,179 $ 2,355
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 1.00% (3) 1.08% 1.24% 1.55% 7.72% 22.93% (3)
Expenses, net of waivers and
reimbursements (2)(4) 0.99% (3) 1.00% 1.00% 1.00% 1.18% 1.25% (3)
Net investment loss, before waivers
and reimbursements (0.73)% (3) (0.76)% (0.88)% (1.50)% (7.65)% (22.92)% (3)
Net investment loss, net of waivers
and reimbursements (0.72)% (3) (0.68)% (0.64)% (0.95)% (1.11)% (1.24)% (3)
Portfolio turnover rate (5) 0.00% 13.69% 0.00% 0.00% 16.94% 0.00%
* Commencement of operations.
(1) Total return for periods less than one year have not been annualized. Tax
withholding on behalf of certain investors is treated as a reinvested
distribution.
(2) Expense ratios do not reflect the Fund's proportionate share of expenses
of the Portfolio Funds.
(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) Portfolio turnover rate for periods less than one year have not been
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
Financial Highlights (continued)
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
--------------------------------------------------------------------------------------
2/1/07 -
7/31/07 2/1/06 - 2/1/05 - 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/07 1/31/06 1/31/05 1/31/04 1/31/03
--------------------------------------------------------------------------------------
Total return(1) 8.04% 9.61% 11.66% 3.90% 12.88% (0.89)%
Net assets, end of period (000's) $ 932,105 $ 738,210 $ 471,815 $ 325,337 $ 57,668 $ 3,562
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.88% (3) 0.92% 0.94% 1.05% 4.09% 18.87% (3)
Expenses, net of waivers and
reimbursements (2)(4) 0.88% (3) 0.92% 0.94% 1.00% 1.14% 1.25% (3)
Net investment loss, before waivers
and reimbursements (0.73)% (3) (0.65)% (0.78)% (0.95)% (3.96)% (18.86)% (3)
Net investment loss, net of waivers
and reimbursements (0.73)% (3) (0.65)% (0.78)% (0.90)% (1.01)% (1.24)% (3)
Portfolio turnover rate (5) 0.00% 6.13% 9.65% 4.06% 0.00% 20.87%
* Commencement of operations.
(1) Total return for periods less than one year have not been annualized. Tax
withholding on behalf of certain investors is treated as a reinvested
distribution.
(2) Expense ratios do not reflect the Fund's proportionate share of expenses
of the Portfolio Funds.
(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) Portfolio turnover rate for periods less than one year have not been
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
Financial Highlights (continued)
AETOS CAPITAL MARKET NEUTRAL STRATEGIES FUND, LLC
--------------------------------------------------------------------------------------
2/1/07 -
7/31/07 2/1/06 - 2/1/05 - 2/1/04 - 2/1/03 - 8/21/02* -
(UNAUDITED) 1/31/07 1/31/06 1/31/05 1/31/04 1/31/03
--------------------------------------------------------------------------------------
Total return(1) 4.57% 3.68% 4.19% 1.84% 2.81% 0.13%
Net assets, end of period (000's) $ 128,750 $ 114,537 $ 95,585 $ 82,230 $ 14,120 $ 1,526
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 1.01% (3) 1.02% 1.09% 1.33% 8.79% 31.67% (3)
Expenses, net of waivers and
reimbursements (2)(4) 1.00% (3) 1.00% 1.00% 1.00% 1.15% 1.25% (3)
Net investment loss, before waivers
and reimbursements (0.64)% (3) (0.71)% (0.74)% (1.28)% (8.69)% (31.65)% (3)
Net investment loss, net of waivers
and reimbursements (0.63)% (3) (0.69)% (0.65)% (0.95)% (1.05)% (1.23)% (3)
Portfolio turnover rate (5) 0.00% 10.29% 0.00% 45.70% 0.00% 0.00%
* Commencement of operations.
(1) Total return for periods less than one year have not been annualized. Tax
withholding on behalf of certain investors is treated as a reinvested
distribution.
(2) Expense ratios do not reflect the Fund's proportionate share of expenses
of the Portfolio Funds.
(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) Portfolio turnover rate for periods less than one year have not been
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
Financial Highlights (concluded)
AETOS CAPITAL OPPORTUNITIES FUND, LLC
----------------------------------------------
2/1/07 -
7/31/07 2/1/06 - 5/27/05* -
(UNAUDITED) 1/31/07 1/31/06
----------------------------------------------
Total return(1) 8.85% 2.41% 4.94%
Net assets, end of period (000's) $ 173,327 $ 139,909 $ 72,856
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.97% (3) 1.05% 1.44% (3)
Expenses, net of waivers and
reimbursements (2)(4) 0.97% (3) 1.04% 1.07% (3)
Net investment loss, before waivers
and reimbursements (0.62)% (3) (0.57)% (1.11)% (3)
Net investment loss, net of waivers
and reimbursements (0.62)% (3) (0.56)% (0.74)% (3)
Portfolio turnover rate (5) 10.16% 24.26% 0.00%
* Commencement of operations.
(1) Total return for periods less than one year have not been annualized. Tax
withholding on behalf of certain investors is treated as a reinvested
distribution.
(2) Expense ratios do not reflect the Fund's proportionate share of expenses
of the Portfolio Funds.
(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) Portfolio turnover rate for periods less than one year have not been
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
Notes to Financial Statements
July 31, 2007
(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, the Aetos Capital Market Neutral Strategies Fund, LLC and
the Aetos Capital Opportunities 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 Funds operate under a master fund/feeder fund structure. Feeder Funds invest
substantially all of their investable assets in the Funds. As of July 31, 2007
the Feeder Funds' beneficial ownership of their corresponding Master Funds'
members' capital are 67%, 61%, 67%, 72% and 76% for the Aetos Capital
Multi-Strategy Arbitrage Cayman Fund, Aetos Capital Distressed Investment
Strategies Cayman Fund, Aetos Capital Long/Short Strategies Cayman Fund, Aetos
Capital Market Neutral Strategies Cayman Fund and Aetos Capital Opportunities
Cayman Fund, respectively.
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.
17
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
Aetos Capital Opportunities Fund, LLC (the "Opportunities Fund") seeks capital
appreciation by investing its assets among a select group of alternative asset
managers employing different absolute return investment strategies in pursuit of
attractive risk-adjusted returns consistent with the preservation of capital.
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.
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 and Security Transactions
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
18
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Portfolio Valuation and Security Transactions (continued)
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.
Realized gains and losses from Portfolio Fund transactions are calculated on the
identified cost basis. Investments are recorded on the effective date of the
subscription in the Portfolio Fund.
C. Fund Income and 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.
Interest income is recorded on an accrual basis and consists of interest earned
on cash and cash equivalents.
D. Income Taxes
Each Fund intends to continue 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. The Funds withhold and pay taxes on U.S.
source income and U.S. effectively connected income, if any, allocated from
Portfolio Funds to the extent such income is not exempted from withholding under
the Internal Revenue Code and Regulations thereunder. The actual amount of such
taxes is not known until all Form K-1s from Portfolio Funds are received,
usually in the following tax year. Prior to the final determination the amount
of tax is estimated based on information available. The final tax could be
different from the estimated tax and the difference could be significant. Such
withholdings are listed as distributions in the Statements of Changes in
Members' Capital, and are allocated to the individual Members' Capital accounts
to which they apply.
E. Distribution Policy
The Funds have no present intention of making periodic distributions of their
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.
19
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 0.25% (0.35% in the case of the Opportunities Fund) of
each Fund's average monthly net assets, at least until May 31, 2008.
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 0.12% on the first $250 million of net
assets, 0.10% on net assets between $250 million and $500 million and 0.08% on
net assets over $500 million, 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 Fund also pays the Custodian $3,000 annually to act as qualified Custodian
for its Cayman feeder fund.
20
Notes to Financial Statements (continued)
3. INVESTMENT MANAGER FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
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 $32,000 and regular
quarterly meeting fees of $3,250 per meeting (additional meeting fees are $500
per meeting). The Chairman of the audit committee receives an additional annual
retainer of $1,900. 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 Interests 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.
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
21
Notes to Financial Statements (continued)
5. CONCENTRATION OF RISK (CONTINUED)
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, 2007, purchases and sales of investments
were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $186,500,000 $29,896,598
Aetos Capital Distressed Investment Strategies Fund, LLC 31,000,000 --
Aetos Capital Long/Short Strategies Fund, LLC 126,000,000 --
Aetos Capital Market Neutral Strategies Fund, LLC -- --
Aetos Capital Opportunities Fund, LLC 22,000,000 14,714,449
7. INVESTMENTS
As of July 31, 2007, collectively the Funds had investments in fifty Portfolio
Funds, none of which were related parties. The following table lists the Funds'
investments in Portfolio Funds as of July 31, 2007. 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 3 years from initial investment. The
liquidity provisions shown in the table apply after any applicable lock-up
provisions.
22
Notes to Financial Statements (continued)
7. INVESTMENTS (CONTINUED)
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2007 CAPITAL LIQUIDITY*
- ----------------------------------------------------------------------------------------------------------------------------
Davidson Kempner Partners Multi-Strategy/Event Arbitrage $ 65,609,087 12.29% Quarterly
Farallon Capital Offshore Investors, Inc. Multi-Strategy/Event Arbitrage 77,470,116 14.51 Annual
FFIP, L.P. Fixed Income Arbitrage 54,960,337 10.30 Annual
HBK Fund L.P. Multi-Strategy/Event Arbitrage 61,337,000 11.49 Quarterly
Ishin Fund, LLC Convertible Arbitrage 37,503,016 7.03 Annual
Lazard Emerging Income, L.P. Fixed Income Arbitrage 27,983,230 5.24 Monthly
Oceanwood Global
Opportunities Fund L.P. Multi-Strategy/Event Arbitrage 33,634,475 6.30 Annual
Parsec Trading Corp. Fixed Income Arbitrage 18,545,170 3.47 Monthly
Pequot Credit Opportunities Fund, L.P. Credit Strategies 38,320,052 7.18 Annual
Pequot Short Credit Fund, L.P. Credit Strategies 30,715,457 5.75 Quarterly
Perry Partners, L.P. Multi-Strategy/Event Arbitrage 8,311,513 1.56 Annual
Satellite Fund II, L.P. Multi-Strategy/Event Arbitrage 36,127,564 6.77 Annual
South Hill Trading Corp. Fixed Income Arbitrage 15,374,801 2.88 Monthly
Sowood Alpha Fund, L.P. Multi-Strategy/Event Arbitrage 22,841,435 4.28 Annual
----------------------------
$528,733,253 99.05%
----------------------------
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2007 CAPITAL LIQUIDITY*
- ----------------------------------------------------------------------------------------------------------------------------
Aurelius Capital Partners, L.P. Distressed Investments $ 31,256,739 21.58% Semi-Annual
King Street Capital, L.P. Distressed Investments 33,191,850 22.92 Quarterly
One East Partners, L.P. Distressed Investments 28,715,282 19.82 Quarterly
Silver Point Capital Fund, L.P. Distressed Investments 32,870,519 22.69 Annual
Watershed Capital Partners, L.P. Distressed Investments 14,719,803 10.16 Quarterly
----------------------------
$140,754,193 97.17%
----------------------------
* The liquidity of the Portfolio Funds may be further restricted due to
withdrawal limitations.
23
Notes to Financial Statements (continued)
7. INVESTMENTS (CONTINUED)
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2007 CAPITAL LIQUIDITY*
- ----------------------------------------------------------------------------------------------------------------------------
Bay Pond Partners, L.P. Long/Short Equity Investments $ 57,814,969 6.20% Semi-Annual
Bay Resource Partners, L.P. Long/Short Equity Investments 54,159,575 5.81 Annual
Cadmus Capital Partners (QP), L.P. Long/Short Equity Investments 77,863,506 8.35 Quarterly
Cantillon Pacific, L.P. Long/Short Equity Investments 17,468,083 1.87 Quarterly
Cantillon U.S., L.P. Long/Short Equity Investments 14,733,314 1.58 Quarterly
Cavalry Technology, L.P. Long/Short Equity Investments 72,225,534 7.75 Annual
Copper River Partners, L.P. Short Equity Investments 9,896,154 1.06 Annual
The Elkhorn Fund, LLC Long/Short Equity Investments 64,004,005 6.87 Quarterly
Highside Capital Partners, L.P. Long/Short Equity Investments 83,660,663 8.98 Annual
Icarus Qualified Partners, L.P. Short Equity Investments 24,117,314 2.59 Annual
JL Partners, L.P. Long/Short Equity Investments 83,400,663 8.95 Quarterly
Millgate Partners II, L.P. Long/Short Equity Investments 21,562,453 2.31 Quarterly
North River Partners, L.P. Long/Short Equity Investments 52,547,182 5.64 Quarterly
Standard Global Equity Partners SA, L.P. Long/Short Equity Investments 76,056,924 8.16 Annual
UC Financials Fund Limited Long/Short Equity Investments 32,303,532 3.46 Monthly
ValueAct Capital Partners III, L.P. Long/Short Equity Investments 82,109,187 8.81 Annual
Viking Global Equities, L.P. Long/Short Equity Investments 71,987,532 7.72 Annual
Woodbourne Daybreak Global Fund L.P. Long/Short Equity Investments 32,966,113 3.54 Quarterly
----------------------------
$928,876,703 99.65%
----------------------------
AETOS CAPITAL MARKET NEUTRAL STRATEGIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2007 CAPITAL LIQUIDITY*
- ----------------------------------------------------------------------------------------------------------------------------
AQR Absolute Return
Institutional Fund, L.P. Multi-Strategy $ 30,233,799 23.49% Quarterly
Bravura 99 Fund, L.P. Low Beta/Market Neutral/Long Short 34,508,124 26.80 Quarterly
Cantillon U.S. Low Volatility L.P. Low Beta/Market Neutral/Long Short 31,623,642 24.56 Quarterly
GMO Mean Reversion Fund Quantitative Asset Allocation 21,653,483 16.82 Quarterly
----------------------------
$118,019,048 91.67%
----------------------------
* The liquidity of the Portfolio Funds may be further restricted due to
withdrawal limitations.
24
Notes to Financial Statements (continued)
7. INVESTMENTS (CONTINUED)
AETOS CAPITAL OPPORTUNITIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2007 CAPITAL LIQUIDITY*
- ----------------------------------------------------------------------------------------------------------------------------
Davidson Kempner Healthcare Fund L.P. Long/Short Equity Investments $ 4,485,111 2.59% Semi-Annual
GMO U.S. Tactical Opportunities
Fund (Onshore), L.P. Long/Short Equity Investments 14,109,412 8.14 Monthly
Joho Partners, L.P. Long/Short Equity Investments 25,761,103 14.86 Semi-Annual
Pequot Short Credit Fund, L.P. Credit Related 8,670,109 5.00 Quarterly
Sansar Capital, L.P. Long/Short Equity Investments 18,096,702 10.44 Quarterly
Saras Capital Partners, L.P. Long/Short Equity Investments 22,657,133 13.07 Annual
Scopia PX, LLC Event-Driven 17,695,894 10.21 Quarterly
Sheffield Institutional Partners, L.P. Event-Driven 9,584,276 5.53 Annual
Spindrift Partners, L.P. Real Assets 21,717,450 12.53 Semi-Annual
Standard Pacific Asymmetric
Opportunities Fund, L.P. Credit Related 3,630,064 2.10 Annual
----------------------------
$146,407,254 84.47%
----------------------------
* The liquidity of the Portfolio Funds may be further restricted due to
withdrawal limitations.
8. SUBSEQUENT EVENTS
Through September 1, 2007, the Funds received the following contributions:
FUND AMOUNT
- --------------------------------------------------------------------------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $30,261,595
Aetos Capital Distressed Investment Strategies Fund, LLC 11,836,595
Aetos Capital Long/Short Strategies Fund, LLC 61,349,095
Aetos Capital Market Neutral Strategies Fund, LLC 9,215,845
Aetos Capital Opportunities Fund, LLC 8,732,845
recorded the following transfers:
FUND AMOUNT
- --------------------------------------------------------------------------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $ (73,000)
Aetos Capital Distressed Investment Strategies Fund, LLC 99,900
Aetos Capital Long/Short Strategies Fund, LLC 176,603
Aetos Capital Market Neutral Strategies Fund, LLC (150,403)
Aetos Capital Opportunities Fund, LLC (53,100)
and paid no redemptions.
25
Notes to Financial Statements (continued)
9. RECENT ACCOUNTING PRONOUNCEMENTS
The Funds adopted Financial Accounting Standards Board ("FASB") Interpretation
No. 48 "ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES, AN INTERPRETATION OF FASB
STATEMENT NO. 109" ("FIN 48"), as required, on February 1, 2007. FIN 48 requires
the Investment Manager to determine whether a tax position of a Fund is more
likely than not to be sustained upon examination by the applicable taxing
authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized
is measured as the largest amount of benefit that is greater than fifty percent
likely of being realized upon ultimate settlement which could result in the Fund
recording a tax liability that would reduce net assets. FIN 48 must be applied
to all existing tax positions upon initial adoption and the cumulative effect,
if any, is to be reported as an adjustment to net assets as of February 1, 2007.
Based on its analysis, the Investment Manager has determined that the adoption
of FIN 48 did not have a material impact on the Funds' financial statements upon
adoption. However, the Investment Manager's conclusions regarding FIN 48 may be
subject to review and adjustment at a later date based on factors including, but
not limited to, further implementation guidance expected from the FASB, and
on-going analyses of tax laws, regulations and interpretations thereof.
In September 2006, the FASB issued Statement on Financial Accounting Standards
("SFAS") No. 157, "FAIR VALUE MEASUREMENTS." This standard establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. The changes to current generally accepted accounting
principles from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. Management is currently evaluating the impact the
adoption of SFAS No. 157 will have on the Funds' financial statement
disclosures.
26
Notes to Financial Statements (concluded)
10. COMMITMENTS
At July 31, 2007, the Funds had made commitments to purchase underlying funds as
follows:
FUND AMOUNT
- --------------------------------------------------------------------------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC
Ishin Fund, LLC $ 5,000,000
Pequot Short Credit Fund, L.P. 5,000,000
-------------
10,000,000
-------------
Aetos Capital Distressed Investment Strategies Fund, LLC
Aurelius Capital Partners, L.P. 3,000,000
King Street Capital, L.P. 2,000,000
One East Partners, L.P. 4,000,000
Silver Point Capital Fund, L.P. 2,000,000
-------------
11,000,000
-------------
Aetos Capital Long/Short Strategies Fund, LLC
Cantillon U.S., L.P. 10,000,000
Copper River Partners, L.P. 5,000,000
The Elkhorn Fund, LLC 7,000,000
UC Financials Fund Limited 10,000,000
Woodbourne Daybreak Global Fund L.P. 20,000,000
-------------
52,000,000
-------------
Aetos Capital Market Neutral Strategies Fund, LLC
GMO Mean Reversion Fund 7,000,000
-------------
7,000,000
-------------
Aetos Capital Opportunities Fund, LLC
Pequot Short Credit Fund, L.P. 6,000,000
-------------
6,000,000
-------------
27
Approval of Investment Advisory Agreements (unaudited)
At a meeting held in person on July 12, 2007, the Board of Managers of each
Fund, including the independent board members (the "Boards"), discussed the
materials previously provided to them and reviewed the nature, quality and scope
of the services provided to the Funds by Aetos. The Boards also considered the
proposed fees to be charged under the advisory agreements, as well as each
Fund's performance, and reviewed the comparative fee and performance data
previously provided by Aetos. The Independent Board Members reviewed reports
from third parties and management about the foregoing factors. The Board members
gave particular consideration to the following factors:
NATURE, EXTENT AND QUALITY OF SERVICES
The Boards reviewed and considered the nature and extent of the investment
advisory services provided by Aetos to each Fund under the Investment Advisory
Agreements (the "Advisory Agreement"), including the selection of underlying
hedge funds ("Portfolio Funds"), allocation of each Fund's assets among, and
monitoring performance of, Portfolio Funds, evaluation of risk exposure of
Portfolio Funds and reputation, experience and training of Portfolio Funds'
investment managers ("Portfolio Managers"), management of short-term cash and
operations of each Portfolio Fund, and day-to-day portfolio management and
general due diligence examination of Portfolio Funds before and after committing
assets of each Fund for investment. The Boards also reviewed and considered the
nature and extent of the non-advisory, administrative services provided by Aetos
under the Advisory Agreement, including, among other things, providing to each
Fund office facilities, equipment, and personnel. The Boards also reviewed and
considered the qualifications of the portfolio managers, the senior
administrative managers and other key personnel of Aetos who provide the
investment advisory and administrative services to each Fund. The Boards
determined that Aetos' portfolio managers and key personnel are well qualified
by education and/or training and experience to perform the services in an
efficient and professional manner. The Boards concluded that the overall quality
of the advisory and administrative services was satisfactory.
PERFORMANCE RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS
The Boards reviewed the performance of each Fund based on information provided
by Aetos that showed (i) each Fund's historical performance as of May 2007
compared to various diversified hedge fund indices, and (ii) each Fund's return
for its most recent fiscal year as compared to the return of other comparable
registered funds-of-hedge-funds for their most recent fiscal years. The Boards
considered each Fund's positive performance since inception and the relative
lack of correlation of such performance to fixed income or equity indices
generally or to any one Portfolio Fund, and the relatively low level of
performance volatility of the Funds. The Boards concluded that each Fund's
performance was satisfactory.
28
Approval of Investment Advisory Agreements (continued) (unaudited)
FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS
The Boards reviewed the advisory fee rate and total expense ratio of each Fund.
The Boards also reviewed the annual 0.50% separate program (the "Program") fee
and the performance fee of 10% of aggregate Program net profits (the "Incentive
Fee") payable to Aetos by investors in the Funds. The Boards noted that Aetos
had contractually agreed to cap "other expenses," other than extraordinary or
non-recurring expenses, at 0.25% (0.35% with respect to the Aetos Capital
Opportunities Fund) at least until May 31, 2008, so that the net expenses
(excluding the Incentive Fee) do not exceed (a) 1.50% (1.60% with respect to an
investor in the Aetos Capital Opportunities Fund) of an investor's average
monthly Program assets (assuming that the maximum Program fee applies), with
respect to investors participating in the Program or (b) 1.00% (1.10% with
respect to an investor in the Aetos Capital Opportunities Fund) of an investor's
average monthly Fund assets, with respect to investors investing directly in the
Funds. The Boards also reviewed a report prepared by Aetos comparing the fees
payable by each Fund to those payable by other comparable registered
funds-of-hedge-funds. The Boards noted that the fees payable to Aetos, including
the Program fee and the Incentive Fee, were lower than or comparable to the fees
payable to the advisers of most comparable registered funds-of-hedge-funds. The
Board concluded that each Fund's advisory fee, Program fee, Incentive Fee and
total expense ratio were reasonable and satisfactory in light of the services
provided.
BREAKPOINTS AND ECONOMIES OF SCALE
The Boards reviewed the structure of each Fund's management fee schedule under
the Advisory Agreement and noted that it does not include any breakpoints. The
Boards considered that each Fund's advisory fee was 0.75% and concluded that the
fee was sufficiently low that the Boards did not need to consider adding
breakpoints at this time. The Boards also determined that, given the relative
size of each Fund, economies of scale were not a factor that needed to be
considered at this time.
PROFITABILITY OF ADVISER AND AFFILIATES
The Boards considered and reviewed information concerning the costs incurred and
profits realized by Aetos and its affiliates during the previous year from
Aetos' relationship with each Fund. The Boards noted that the Funds' investor
base consists of sophisticated investors that are capable of evaluating whether
the fees charged and the services provided by Aetos are appropriate. The Boards
noted that Aetos had only become profitable in 2005, and that its profit margins
had not been substantial since that time. Based on their review of the
information they received, the Boards concluded that the profits earned by Aetos
and its affiliates were not excessive in light of the advisory, administrative
and other services provided to each Fund.
GENERAL CONCLUSION
After considering and weighing all of the above factors, the Boards concluded it
would be in the best interest of each Fund and its members to approve renewal of
the Advisory Agreement for an additional annual term.
29
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 for semi-annual report.
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.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors since the registrant's
last proxy solicitation.
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 have materially affected, or are reasonably likely to materially affect,
the registrant's 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 Multi-Strategy Arbitrage Fund, LLC
By (Signature and Title)* /s/ Michael F. Klein
-----------------------------------
Michael F. Klein, President
Date: 10/4/07
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: 10/4/07
By (Signature and Title)* /s/ Scott D. Sawyer
-----------------------------------
Scott D. Sawyer, Treasurer
Date: 10/4/07
* Print the name and title of each signing officer under his or her signature.