UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21694
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MELLON OPTIMA L/S STRATEGY FUND, LLC
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(Exact name of registrant as specified in charter)
One Boston Place, 024-0242
Boston, Massachusetts 02108
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(Address of principal executive offices) (Zip code)
Christopher P. Harvey, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
-------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (877) 257-0004
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Date of fiscal year end: March 31
-----------------------------------
Date of reporting period: September 30, 2007
--------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
The Semi-Annual Report to Investors is attached herewith.
SUPPLEMENT DATED DECEMBER 4, 2007
TO THE
SEMI-ANNUAL REPORT TO INVESTORS
(UNAUDITED)
OF
MELLON OPTIMA L/S STRATEGY FUND LLC
FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
THE FOLLOWING MODIFIES THE INFORMATION ON PAGE 13 UNDER THE HEADING "NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)" IN THE ABOVE NOTED SEMI-ANNUAL REPORT AND
REPLACES ANY CONTRARY INFORMATION SET FORTH IN THE REPORT.
(9) INTEREST REPURCHASES:
Pursuant to its June 30, 2007 tender offer, it was reported that the Fund
received and accepted tender requests for Fund interests with an estimated value
of $14,988,028. Due to an administrative error, this figure was not reported
accurately and is hereby replaced with $14,988,127, the actual estimated value
of the accepted tenders.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE SEMI-ANNUAL REPORT TO
INVESTORS FOR FUTURE REFERENCE
MELLON OPTIMA L/S STRATEGY FUND, LLC
SEMI-ANNUAL REPORT TO INVESTORS
FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 2007
(unaudited)
This report and the financial statements contained herein are submitted for the
general information of the investors of Mellon Optima L/S Strategy Fund, LLC
("the Fund"). This report is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by the Fund's Confidential
Offering Memorandum (the "Offering Memorandum").
Any information in this investor report regarding market or economic trends or
the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. To
request a copy of the most recent quarterly holdings report, semi-annual report
or annual report, call 1-877-257-0004.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit the SEC's web site at http://www.sec.gov.
You may also call 1-877-257-0004 to request a free copy of the proxy voting
guidelines.
The Fund is available only to investment management clients of the Management
Group of The Bank of New York Mellon Corporation, and only if they have a net
worth of more than $1 million and meet other criteria as described in the
Offering Memorandum. Interests in the Fund are not freely transferable, however
liquidity may be available through repurchase offers made at the discretion of
the Board of Directors of the Fund.
As with any speculative investment program, it is possible to incur losses as
well as gains through an investment in the Fund. There can be no assurances that
the Fund will achieve its objective. The Offering Memorandum contains a more
complete description of the risks associates with the Fund. Under no
circumstances should a prospective investor elect to invest in the Fund without
reviewing the Offering Memorandum.
MELLON OPTIMA L/S STRATEGY FUND, LLC
PORTFOLIO SUMMARY - SEPTEMBER 30, 2007 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
INVESTMENT FUNDS COST VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
Opportunistic $ 139,612,937 $ 176,670,774 29.4%
Growth 139,610,286 175,737,416 29.2%
Value 131,413,210 166,499,435 27.7%
Global 60,000,000 72,265,224 12.0%
-------------------- --------------------- -------------------
TOTAL INVESTMENT FUNDS $ 470,636,433 $ 591,172,849 98.3%
==================== ===================== ===================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
1
MELLON OPTIMA L/S STRATEGY FUND, LLC
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2007 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
INVESTMENT FUNDS COST VALUE NET ASSETS LIQUIDITY+
- -------------------------------------------------------------------------------------------------------------------------
OPPORTUNISTIC
Hunter Global Investors Fund I L.P. $ 19,127,412 $ 25,112,463 4.2% Quarterly
Impala Fund LP 22,000,000 29,900,663 5.0% Quarterly
Karsh Capital II, LP 28,125,331 35,701,744 5.9% Quarterly
Kingdon Associates 25,283,055 33,738,583 5.6% Quarterly
Raptor Global Fund L.P. 23,077,139 25,474,419 4.2% Quarterly
Sage Opportunity Fund (QP), L.P. 22,000,000 26,742,902 4.5% Quarterly
---------------- ---------------- ------------
139,612,937 176,670,774 29.4%
---------------- ---------------- ------------
GROWTH
Alydar QP Fund, L.P. 20,570,236 25,876,577 4.3% Quarterly
Chilton QP Investment Partners, L.P. 21,000,000 24,401,531 4.1% Annually
Copper Arch Fund, L.P. 21,000,000 24,272,908 4.0% Quarterly
Highbridge Long/Short Equity Fund, L.P. 21,643,955 29,406,232 4.9% Quarterly
Intrepid Capital Fund (QP), L.P. 16,432,041 19,537,996 3.2% Quarterly
Maverick Fund USA, Ltd. 18,964,054 23,238,622 3.9% Annually
Pequot Capital 20,000,000 29,003,550 4.8% Annually
---------------- ---------------- ------------
139,610,286 175,737,416 29.2%
---------------- ---------------- ------------
VALUE
Amici Qualified Associates L.P. 25,173,447 28,550,591 4.8% Quarterly
Clovis Capital Partners Institutional, L.P. 23,247,705 29,000,178 4.8% Quarterly
Delta Institutional, L.P. 19,624,302 22,957,050 3.8% Quarterly
Kinetics Institutional Partners, L.P. 22,000,000 34,287,244 5.7% Quarterly
Shoshone Partners, L.P. 17,299,000 21,473,100 3.6% Annually
Thruway Partners, L.P. 24,068,756 30,231,272 5.0% Quarterly
---------------- ---------------- ------------
131,413,210 166,499,435 27.7%
---------------- ---------------- ------------
GLOBAL
Asian Century Quest Fund (QP), L.P. 19,000,000 24,741,814 4.1% Quarterly
Calypso Qualified Partners, L.P. 18,500,000 21,627,581 3.6% Monthly
Lansdowne European Strategic Equity Fund, L.P. 22,500,000 25,895,829 4.3% Monthly
---------------- ---------------- ------------
60,000,000 72,265,224 12.0%
---------------- ---------------- ------------
TOTAL INVESTMENT FUNDS 470,636,433 591,172,849 98.3%
---------------- ---------------- ------------
AFFILIATED INVESTMENT
Dreyfus Institutional Preferred Plus Money
Market Fund 10,902,049 10,902,049 1.8% Daily
---------------- ---------------- ------------
TOTAL INVESTMENTS $ 481,538,482 602,074,898 100.1%
================ ---------------- ------------
LIABILITIES IN EXCESS OF OTHER ASSETS (390,669) (0.1)%
---------------- ------------
TOTAL NET ASSETS $ 601,684,229 100.0%
================ ============
+ The Investment Funds provide for periodic redemptions, with lock-up provisions
up to two years from initial investment.
The liquidity provisions shown in the table apply after any applicable lock-up
provisions.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
2
MELLON OPTIMA L/S STRATEGY FUND, LLC
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2007 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in funds, at value (Cost at $470,636,433) (Note 2A) $ 591,172,849
Investments in affiliated issuers, at value (Cost at $10,902,049) (Note 2F) 10,902,049
Advance investments in funds, at value (Note 4) 7,000,000
Prepaid expenses 86,022
-----------------
Total assets 609,160,920
LIABILITIES
Proceeds from sale of interests received in advance (Note 10) $ 4,041,000
Payable for repurchase of interests (Note 9) 815,949
Accrued investment advisory fees (Note 3) 2,191,162
Accrued accounting and administration fees (Note 3) 197,588
Accrued professional fees 206,515
Accrued Directors' fees (Note 3) 15,967
Accrued Chief Compliance Officer fees (Note 3) 2,219
Accrued custody fees (Note 3) 3,129
Other accrued expenses and liabilities 3,162
---------------
Total liabilities 7,476,691
-----------------
NET ASSETS $ 601,684,229
=================
INVESTORS' CAPITAL
Net capital contributions $ 481,147,813
Net unrealized appreciation 120,536,416
-----------------
INVESTORS' CAPITAL $ 601,684,229
=================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
MELLON OPTIMA L/S STRATEGY FUND, LLC
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 2007 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income from affiliated investments (Note 2F) $ 470,264
EXPENSES
Investment advisory fee (Note 3) $ 4,341,580
Accounting, administration and investor services fees (Note 3) 291,905
Audit and tax service fees 114,150
Insurance expense 83,763
Legal fees 58,200
Directors' fees (Note 3) 28,150
Chief Compliance Officer fees (Note 3) 14,250
Custody fees (Note 3) 8,693
Miscellaneous expenses 12,050
------------------
Total expenses 4,952,741
----------------
Net investment loss (4,482,477)
REALIZED AND UNREALIZED GAIN
Net change in unrealized appreciation
on investments in portfolio funds 43,900,055
------------------
Net realized and unrealized gain 43,900,055
----------------
NET INCREASE IN INVESTORS' CAPITAL DERIVED FROM INVESTMENT OPERATIONS $ 39,417,578
================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
MELLON OPTIMA L/S STRATEGY FUND, LLC
STATEMENTS OF CHANGES IN INVESTORS' CAPITAL
- -------------------------------------------------------------------------------------------------------------------------
FOR THE
SIX MONTH FOR THE
PERIOD ENDED YEAR ENDED
9/30/2007 (UNAUDITED) MARCH 31, 2007
------------------------ --------------------
INCREASE IN INVESTORS' CAPITAL FROM
INVESTMENT OPERATIONS
Net investment loss $ (4,482,477) $ (7,469,697)
Net realized loss on portfolio funds sold -- (394,450)
Net change in unrealized appreciation
on investments in portfolio funds 43,900,055 40,347,273
------------------------ --------------------
Net Increase in Investors' Capital Derived
from Operations 39,417,578 32,483,126
------------------------ --------------------
CAPITAL TRANSACTIONS
Proceeds from sale of interests 42,749,662 219,625,250
Repurchase of interests (18,353,356) (17,399,792)
------------------------ --------------------
Net Increase in Investors' Capital Derived from
Capital Transactions 24,396,306 202,225,458
------------------------ --------------------
TOTAL INCREASE IN INVESTORS' CAPITAL 63,813,884 234,708,584
INVESTORS' CAPITAL
At beginning of period 537,870,345 303,161,761
------------------------ --------------------
At end of period $ 601,684,229 $ 537,870,345
======================== ====================
Amount designated as "-" is $0 or has been rounded to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
MELLON OPTIMA L/S STRATEGY FUND, LLC
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------
FOR THE
SIX MONTH FOR THE
PERIOD ENDED YEAR ENDED
9/30/2007 (UNAUDITED) MARCH 31, 2007
----------------------- ----------------------
TOTAL RETURN 7.10% (1) 5.96%
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.73% (2)(3) 1.74% (2)
Net Investment loss (1.57%)(3) (1.63%)
PORTFOLIO TURNOVER RATE 0% (4) 2%
NET ASSETS, END OF PERIOD (000'S OMITTED) $601,684 $537,870
<FN>
(1) Total return is for the period indicated and has not been annualized.
(2) Expense ratios of the underlying funds are not included in the expense ratio.
(3) Annualized.
(4) Not annualized.
</FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
MELLON OPTIMA L/S STRATEGY FUND, LLC
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 2007 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in investors' capital resulting from operations $ 39,417,578
Adjustments to reconcile net increase in investors' capital
from operations to net cash used in operating activities:
Purchases of long-term investments (22,000,000)
Purchases of short-term investments (27,803,289)
Proceeds from sale of short-term investments 31,151,241
Net change in unrealized appreciation on investments (43,900,055)
Decrease in advance investments in funds 1,000,000
Decrease in receivable for investments sold 699,230
Decrease in prepaid expenses 83,763
Increase in accrued investment advisor fees 859,763
Decrease in accrued professional fees (47,045)
Increase in accrued accounting and administrative fees 59,024
Increase in accrued Directors' fees 4,150
Decrease in accrued Chief Compliance Officer fees (343)
Increase in accrued custody fees 1,716
Decrease in other accrued expense and liabilities (2,264)
-----------------
Net cash used in operating activities (20,476,531)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of interests 38,886,661
Repurchase of interests (18,410,130)
-----------------
Net cash provided by financing activities 20,476,531
-----------------
Net change in cash --
-----------------
Cash at beginning of year --
-----------------
Cash at end of year $ --
=================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
MELLON OPTIMA L/S STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION:
Mellon Optima L/S Strategy Fund, LLC (the "Fund") was organized as a limited
liability company under the laws of Delaware on December 14, 2004 and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a closed-end, non-diversified, management investment company. The Fund
commenced operations on May 2, 2005.
The Fund's investment objective is to seek capital appreciation over the long
term by attempting to maximize risk-adjusted returns while minimizing volatility
and maintaining a low correlation to the S&P 500 Index. The Fund is a fund of
hedge funds that seeks to achieve its objective by deploying its assets
primarily among a select group of portfolio managers who over time have produced
attractive returns principally in the U.S. equity markets by employing an
investing style known as "long/short." This style combines long investments with
short sales in the pursuit of opportunities in rising or declining markets.
Generally, such portfolio managers conduct their investment programs through
unregistered investment vehicles and in other registered investment companies
(collectively, the "Investment Funds"), in which the Fund invests as a limited
partner, member or shareholder along with other investors.
The Fund's Board of Directors (the "Directors") has overall responsibility to
manage and control the business affairs of the Fund, including the exclusive
authority to oversee and to establish policies regarding the management, conduct
and operation of the Fund's business. The Directors have engaged Mellon Hedge
Advisors LLC (the "Adviser"), a Delaware limited liability company, to provide
investment advice regarding the selection of Investment Funds and to be
responsible for the day-to-day management of the Fund. The Adviser is an
indirect wholly owned subsidiary of The Bank of New York Mellon Corporation
("BNY Mellon"), and is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"). The Adviser has engaged
Optima Fund Management LLC (the "Sub-Investment Adviser"), a registered
investment adviser under the Advisers Act, to assist it in performing certain of
its duties.
Interests are offered solely to eligible investment management clients of the
Wealth Management Group of BNY Mellon ("Investors") in private placement
transactions exempt from registration under the Securities Act of 1933, as
amended (the "1933 Act"). Initial and additional applications for interests in
the Fund by Investors may be accepted at such times as the Fund may determine
and are generally accepted monthly. The Fund reserves the right to reject any
application for interests in the Fund.
Interests of the Fund are not redeemable. The Fund from time to time may offer
to repurchase interests pursuant to written tenders. These repurchases will be
made at such times and on such terms as may be determined by the Directors, in
their complete and exclusive discretion. The Adviser expects that it will
recommend to the Directors that the Fund offer to repurchase interests from
Investors twice each calendar year, near mid-year and year-end. Investors can
transfer or assign their membership interests only (i) by operation of law
pursuant to the death, bankruptcy, insolvency or dissolution of an Investor, or
(ii) with the written consent of the Adviser, which may be withheld in its sole
and absolute discretion.
(2) SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
8
A. VALUATION OF THE FUND AND ITS INVESTMENTS
Net asset value of the Fund will be determined by or at the direction of the
Adviser as of the close of business at the end of each calendar month and on any
other date the Directors may designate in accordance with the valuation
principles set forth below or as may be determined from time to time pursuant to
policies established by the Directors.
The Directors have approved procedures pursuant to which the Fund will value its
investments in Investment Funds at fair value. In accordance with these
procedures, fair value as of the end of each calendar month and on any other
date the Directors may designate and ordinarily will be the value determined as
of such period for each Investment Fund in accordance with the Investment Fund's
valuation policies and reported at the time of the Fund's valuation. As a
general matter, the fair value of the Fund's interest in an Investment Fund will
represent the amount that the Fund could reasonably expect to receive from an
Investment Fund if the Fund's interest were redeemed at the time of valuation,
based on information reasonably available at the time the valuation is made and
that the Fund believes to be reliable. All valuations utilize financial
information supplied by each Investment Fund and are net of management fees and
performance incentive fees or allocations payable to the Investment Funds'
managers or pursuant to the Investment Funds' agreements. In the event that an
Investment Fund does not report a value to the Fund on a timely basis at the end
of each calendar month, the Fund would determine the fair value of such
Investment Fund based on the most recent value reported by the Investment Fund,
as well any other relevant information available at the time the Fund values its
portfolio.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Fund acquires
a short-term instrument with more than sixty days remaining to its maturity, it
is valued at current market value until the sixtieth day prior to maturity and
will then be valued at amortized cost upon the value on such date unless the
Board determines during such sixty-day period that amortized cost does not
represent fair value.
Distributions received or withdrawals from Investment Funds, whether in the form
of cash or securities, are first applied as a reduction of the investment's
cost.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income is
recorded on the accrual basis. Realized gains and losses from Investment Fund
transactions are calculated on the identified cost basis. The Investment Funds
in which the Fund invests do not regularly distribute income and realized gains
from their underlying investment activity. Such undistributed amounts are
captured in the value of the Investment Funds in the form of unrealized
appreciation.
C. FUND COSTS
The Adviser bore the non-recurring initial offering and organizational costs of
the Fund. The Fund bears all expenses incurred in the ongoing business of the
Fund including, but not limited to, the following: all costs and expenses
related to portfolio transactions and positions for the Fund's account; legal
fees; accounting fees; costs of computing the Fund's net asset value, including
valuation services provided by third parties; costs of insurance; a portion, as
determined by the Board, of the compensation payable to the Fund's Chief
Compliance Officer; certain printing costs; and expenses of meetings of the
Board and Investors.
9
MELLON OPTIMA L/S STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
D. INCOME TAXES
The Fund is treated as a partnership for Federal income tax purposes.
Accordingly, no provision is made by the Fund for Federal or state income taxes.
For income tax purposes, each Investor will be treated as a partner of the Fund
and, as such, will be taxed upon its distributive share of each item of the
Fund's income, gain, loss and deductions allocated to the Fund (including from
investments in other partnerships) for each taxable year of the Fund ending with
or within the Investor's taxable year. Each item will have the same character to
an Investor, and will generally have the same source (either United States or
foreign), as though the Investor realized the item directly. Investors must
report these items regardless of the extent to which, or whether, the Fund or
Investors receive cash distributions for such taxable year, and thus may incur
income tax liabilities unrelated to any distributions to or from the Fund.
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes -
an Interpretation of FASB Statement No. 109" (the "Interpretation"). The
Interpretation establishes for all entities, including pass-through entities
such as the Fund, a minimum threshold for financial statement recognition of the
benefit of positions taken in filing tax returns (including whether an entity is
taxable in a particular jurisdiction), and requires certain expanded tax
disclosures. Adoption of FIN 48 is required for fiscal years beginning after
December 15, 2006 and is to be applied to all open tax years as of the effective
date. Management has evaluated the implications of FIN 48 and determined that it
will not have any impact on the financial statements.
The cost of investments for Federal income tax purposes is adjusted for items of
accumulated taxable income allocated to the Fund from the Investment Funds. The
allocated taxable income is reported to the Fund by the Investment Funds on each
calendar year Schedules K-1. The aggregate cost of Investment Funds and the
gross unrealized appreciation and depreciation on Investment Funds for federal
income tax purposes as of September 30, 2007 are noted below.
Federal tax cost of investment funds $ 481,538,482
----------------
Gross unrealized appreciation 120,536,416
Gross unrealized depreciation --
----------------
Net unrealized appreciation $ 120,536,416
================
E. USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires the Fund to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. The Fund believes that the estimates utilized in preparing
the Fund's financial statements are reasonable and prudent; however, actual
results could differ from these estimates.
F. SHORT-TERM INVESTMENTS
Short-term investments consist of liquid investments with maturities of less
than 90 days. The Fund had $10,902,049 invested in Dreyfus Institutional
Preferred Plus Money Market Fund, an affiliated institutional money market fund,
including $750,428 of segregated assets, which represents 5% of the estimated
value of the June 30, 2007 tender offer. See note 9.
10
MELLON OPTIMA L/S STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(3) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The Adviser provides investment advisory services to the Fund pursuant to an
Investment Advisory Agreement. Pursuant to that agreement, the Fund pays the
Adviser a monthly fee (the "Investment Advisory Fee") at the annual rate of
1.50% of the Fund's net assets. Pursuant to this agreement the Fund was charged
$4,341,580 for the six months ended September 30, 2007.
The Fund compensates Mellon Trust of New England, N.A. ("MTNE"), a wholly-owned
direct subsidiary of BNY Mellon, under a Custody Agreement to provide custody
services for the Fund. In consideration for these services, MTNE earns interest
on balances, including disbursement balances and balances arising from purchase
and sale transactions, and the Fund reimburses certain of MTNE's expenses.
Pursuant to this agreement, the Fund was charged $8,693 for the six months ended
September 30, 2007.
The Fund has contracted with Mellon Investor Services LLC, a wholly owned
subsidiary of BNY Mellon, to provide printing and fulfillment services for the
Fund. Pursuant to this agreement, the Fund was charged $8,501 for the six months
ended September 30, 2007, which is included in miscellaneous expenses on the
Statement of Operations.
The Fund reimburses BNY Mellon for a portion of the salary of the Fund's Chief
Compliance Officer. Pursuant to this arrangement, the Fund was charged $14,250
for the six months ended September 30, 2007. No other director, officer or
employee of Mellon Hedge Advisors, LLC or its affiliates receives any
compensation from the Fund for serving as an officer or Director of the Fund.
The Fund pays each Director who is not a director, officer or employee of the
Adviser or its affiliates (an "Independent Director") an annual retainer and per
meeting fees. The Fund also reimburses the Independent Directors for their
reasonable out-of-pocket expenses. In addition, the Fund pays the legal fees for
the independent counsel of the Independent Directors. The Directors do not
receive any pension or retirement benefits from the Fund.
(4) INVESTMENT TRANSACTIONS:
During the six months ended September 30, 2007, the Fund had aggregate purchases
and proceeds from sales of Investment Funds of $22,000,000 and $0, respectively.
At September 30, 2007, the Fund had made advance investments of $3,500,000 in
Intrepid Capital Fund (QP) and $3,500,000 in Maverick Fund USA, Ltd
(5) INDEMNIFICATION:
In the ordinary course of business, the Fund may enter into contracts or
agreements that contain indemnifications or warranties. Future events could
occur that lead to the execution of these provisions against the Fund. Based on
its history and experience, management feels that the likelihood of such an
event is remote.
11
MELLON OPTIMA L/S STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
In the normal course of business, the Investment Funds in which the Fund invests
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, contracts for differences, and
equity swaps. The Fund's risk of loss in these Investment Funds is limited to
the value of these investments as reported by the Fund.
(7) RISK FACTORS:
An investment in the Fund involves a high degree of risk, including the risk
that the entire amount invested may be lost. The Fund allocates assets to a
select group of portfolio managers and invests in Investment Funds that invest
in and actively trade securities and other financial instruments using a variety
of strategies and investment techniques with significant risk characteristics,
including the risks arising from the volatility of the equity, fixed income,
commodity and currency markets, the risks of borrowings and short sales, the
risks arising from leverage associated with trading in the equities, currencies
and over-the-counter derivatives markets, the illiquidity of derivative
instruments and the risk of loss from counter-party defaults. No guarantee or
representation is made that the investment program will be successful.
So as to satisfy certain prohibitions on affiliated transactions imposed by the
1940 Act, the Fund may limit its investment position in any one Investment Fund
to less than 5% of the Investment Fund's outstanding voting securities.
Alternatively, to facilitate investments in Investment Funds deemed attractive
by the Adviser, the Fund may purchase non-voting securities of, or waive its
right to vote some or all securities in, certain Investment Funds. In cases
where the Fund purchases non-voting securities of, or waives its right to vote
securities in, an Investment Fund, the Fund will not be able to vote on matters
that required the approval of security holders of the Investment Fund, including
matters that may be adverse to the Fund's and its Investors' interests.
(8) NEW ACCOUNTING REQUIREMENTS:
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. As of September 30, 2007, the Fund does not
believe the adoption of SFAS No. 157 will impact the amounts reported in the
financial statements, however, additional disclosures may be required about the
inputs used to develop the measurements and the effect of certain measurements
reported in the financial statements for a fiscal period.
12
MELLON OPTIMA L/S STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(9) INTEREST REPURCHASES:
On March 20, 2007, the Fund offered to repurchase up to $30,000,000 in interests
in the Fund from Investors at their estimated net asset value as of June 30,
2007. The offer expired by its terms on April 17, 2007. The Fund received and
accepted pursuant to this offer tender requests for Fund interests with an
estimated value of $14,988,028. The Fund initially paid out 95% of the estimated
value of the repurchased interests. The remaining will be paid out promptly
after completion of the Fund's 2008 fiscal year-end audit.
On October 3, 2007, the Fund offered to repurchase up to $30,000,000 in
interests in the Fund from Investors at their estimated net asset value as of
December 31, 2007. The offer expired by its terms on November 1, 2007. The Fund
received and accepted pursuant to this offer tender requests for Fund interests
with an estimated value of $17,238,355. The Fund initially will pay out 95% of
the estimated value of the repurchased interests. The remaining amount will be
paid out promptly after completion of the Fund's 2008 fiscal year-end audit.
(10) SUBSEQUENT EVENT:
As of September 30, 2007, the Fund had received in advance proceeds from the
sale of interests of $4,041,000, which was credited to Investor's Capital as of
October 1, 2007. From October 1, 2007 through November 19, 2007, the Fund
received additional contributions from Investors of $4,151,000.
13
DIRECTORS AND OFFICERS (UNAUDITED)
The following table lists the Fund's directors and officers; their ages,
addresses and dates of birth; their position(s) with the Fund; the length of
time holding such position(s) with the Fund; their principal occupation(s)
during the past five years; the number of portfolios in the fund complex they
oversee; other directorships they hold in companies subject to registration or
reporting requirements of the Securities Exchange Act of 1934 (generally called
"public companies") or in registered investment companies; and total
remuneration paid as of the period ended September 30, 2007. The Fund's
Confidential Offering Memorandum includes additional information about the
Fund's Directors and is available, without charge to qualified clients of BNY
Mellon Wealth Management, upon request by writing Mellon Optima L/S Strategy
Fund, LLC at One Boston Place, Suite 024-0071, Boston, MA 02108 or calling toll
free 1-877-257-0004.
INDEPENDENT DIRECTORS
NUMBER OF OTHER
PORTFOLIOS DIRECTORSHIPS DIRECTOR
TERM OF IN FUND HELD BY REMUNERATION
POSITION (S) OFFICE AND COMPLEX DIRECTOR (PERIOD ENDED
NAME (AGE), ADDRESS AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OUTSIDE FUND SEPTEMBER 30,
DATE OF BIRTH FUND TIME SERVED DURING PAST 5 YEARS BY DIRECTOR COMPLEX 2007)
- ----------------------------- -------------- ------------ --------------------------- ------------ ---------------- ----------------
Samuel C. Fleming (67) Director Term - Chairman Emeritus, 25 None $5,750
61 Meadowbrook Road Indefinite Decision Resources, Inc.
Weston, MA 02493 Length - ("DRI") (biotechnology
9/30/40 Since research and consulting
Inception firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Director Term - William Joseph Maier 25 None $5,750
c/o Harvard University Indefinite Professor of Political
Littauer Center 127 Length - Economy, Harvard
Cambridge, MA 02138 Since University
8/5/44 Inception
Director Term - Trustee, Mertens House, 25 None $5,750
John H. Hewitt (72) Indefinite Inc., (hospice)
P.O. Box 2333 Length -
New London, NH 03257 Since
4/11/35 Inception
Caleb Loring III (64) Director Term - Trustee, Essex Street 25 None $6,750
c/o Essex Street Associates Indefinite Associates, (family
P.O. Box 5600 Length - investment trust office)
Beverly, MA 01915 Since
11/14/43 Inception
INTERESTED DIRECTOR
None*
*Effective October 30, 2007, J. David Officer was elected as a Director of the
Trust.
14
PRINCIPAL OFFICERS WHO ARE NOT DIRECTORS
NAME (AGE), ADDRESS AND POSITION(S) TERM OF OFFICE AND PRINCIPAL OCCUPATION(S)
DATE OF BIRTH HELD WITH FUND LENGTH OF TIME SERVED DURING PAST 5 YEARS
- -------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann (46)* President, Chief Term - Indefinite Senior Vice President and Head of
BNY Mellon Asset Management Executive Officer Length - Since Operations, BNY Mellon Asset
One Boston Place and Secretary Inception Management ("MAM"); formerly First
Boston, MA 02108 Vice President, MAM and Mellon Global
2/20/61 Investments.
Steven M. Anderson (42) Vice President, Term - Indefinite Vice President and Mutual Funds
BNY Mellon Asset Management Treasurer and Length - Since Controller, BNY Mellon Asset
One Boston Place Chief Financial Inception Management; formerly Assistant Vice
Boston, MA 02108 Officer President and Mutual Funds Controller,
7/14/65 Standish Mellon Asset Management
Company, LLC
Jessica A. Drislane (35) Vice President Term - Indefinite First Vice President, Director of
BNY Mellon Wealth Management Length - Since Hedge Fund Strategies, BNY Mellon
One Boston Place June 2005 Wealth Management and Vice President,
Boston, MA 02108 Mellon Hedge Advisors, LLC; formerly,
4/30/72 Founder and Chief Investment Officer,
Hub Capital Management and Principal,
Capital Resource Partners, LLC
Ridgway H. Powell (44) Vice President Term - Indefinite First Vice President of BNY Mellon
BNY Mellon Wealth Management Length - Since Wealth Management and Vice President
One Boston Place June 2005 of Mellon Hedge Advisors, LLC;
Boston, MA 02108 formerly Head of Taxable Fixed Income
11/5/63 Desk, BNY Mellon Wealth Management.
Denise B. Kneeland (56)** Assistant Vice Term - Indefinite First Vice President and Manager,
BNY Mellon Asset Management President Length - Since Mutual Funds Operations, BNY Mellon
One Boston Place Inception Asset Management; formerly Vice
Boston, MA 02108 President and Manager, Mutual Fund
8/19/51 Operations, Standish Mellon Asset
Management Company, LLC
Mary T. Lomasney (50) Chief Compliance Term - Indefinite First Vice President, BNY Mellon Asset
BNY Mellon Asset Management Officer Length - Since Management and Chief Compliance
One Boston Place Inception Officer, Mellon Institutional Funds;
Boston, MA 02108 formerly Director, Blackrock, Inc.,
4/8/57 Senior Vice President, State Street
Research & Management Company ("SSRM")
and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive
Officer and Secretary of the Fund, and J. David Officer was elected as President
and Chief Executive Officer of the Fund.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Fund.
15
ITEM 2. CODE OF ETHICS.
Not applicable to this semi-annual filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this semi-annual filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this semi-annual filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
Included as part of the Semi-Annual Report to Investors filed under
Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this semi-annual filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's Principal Executive Officer and Principal
Financial Officer concluded that the Registrant's disclosure
controls and procedures are effective based on their
evaluation of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing
date of this report (the "Evaluation Date" as defined in Rule
30a-3(c) under the Investment Company Act of 1940).
(b) There were no changes in the Registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under
the Investment Company Act of 1940 that occurred during the
Registrant's second fiscal half-year that has materially
affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable to this semi-annual filing.
(a)(2) Certifications of the Principal Executive Officer and
Principal Financial Officer of the Registrant as required by
Rule 30a-2(a) under the Investment Company Act of 1940 are
attached hereto as Exhibit 99CERT.302
(b) Certifications as required by Rule 30a-2(b) under the
Investment Company Act of 1940 and pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit
99CERT.906.
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) Mellon Optima L/S Strategy Fund, LLC
By (Signature and Title): /s/ DENISE B. KNEELAND
----------------------------------------------------
Denise B. Kneeland, Assistant Vice President and Secretary
Date: December 7, 2007
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/ J. DAVID OFFICER
-------------------------------------------------------
J. David Officer, President and Chief Executive Officer
Date: December 7, 2007
By (Signature and Title): /s/ STEVEN M. ANDERSON
--------------------------------------------------------------------------
Steven M. Anderson, Vice President, Treasurer, and Chief Financial Officer
Date: December 7, 2007