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)
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c/o Aetos Capital, LLC
875 Third Avenue
New York, NY 10022
(Address of principal executive offices) (Zip code)
Harold Schaaff
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
DATE OF REPORTING PERIOD: JULY 31, 2009
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 OPPORTUNITIES FUND, LLC
Financial Statements (unaudited)
July 31, 2009
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 .................................................. 10
Financial Highlights ...................................................... 11
Notes to Financial Statements ............................................. 15
Approval of Investment Advisory Agreements ................................ 27
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, 2009
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Quantitative Asset Allocation 9.53%
Convertible Arbitrage 18.05%
Fixed Income Arbitrage 26.67%
Multi-Strategy/Event Arbitrage 45.75%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ------------------- ------------ ------------ -------------
CNH CA Institutional Fund, L.P. $ 30,000,000 $ 31,847,633 7.44%
Davidson Kempner Partners 40,543,694 52,624,317 12.29
Farallon Capital Offshore Investors, Inc. 53,172,893 46,005,336 10.75
FFIP, L.P. 46,630,000 56,085,651 13.10
GMO Mean Reversion Fund 40,692,369 34,835,360 8.14
HBK Fund L.P.(2) 21,677,464 17,308,150 4.04
Ishin Fund, LLC 35,361,920 34,133,328 7.98
Oceanwood Global Opportunities Fund L.P. 55,000,000 49,571,554 11.58
Parsec Trading Corp. 54,555,466 41,403,488 9.67
Sowood Alpha Fund, L.P.(1) 3,453,269 1,687,658 0.40
------------ ------------ -----
Total $381,087,075 $365,502,475 85.39%
============ ============ =====
* Percentages are based on Members' Capital of $428,043,986.
(1) Portfolio Fund in liquidation.
(2) Portfolio Fund has established restrictions on the ability to fully receive
proceeds from redemptions through the application of a redemption
restriction or "gate."
The aggregate cost of investments for tax purposes was $372,805,210. Net
unrealized depreciation on investments for tax purposes was $7,302,735
consisting of $32,846,185 of gross unrealized appreciation and $40,148,920 of
gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 85.39% 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, 2009
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Distressed Investments 100.00%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ------------------- ------------ ------------ -------------
AG Mortgage Value Partners, L.P. $ 30,000,000 $ 30,900,000 8.98%
Anchorage Capital Partners, L.P. 60,000,000 64,870,337 18.85
Aurelius Capital Partners, L.P. 55,500,000 61,641,425 17.91
King Street Capital, L.P. 51,050,000 69,103,198 20.08
One East Partners, L.P. 9,072,554 3,829,170 1.12
Silver Point Capital Fund, L.P. 46,100,000 40,554,695 11.79
Watershed Capital Partners, L.P. 11,050,000 11,056,724 3.21
------------ ------------ -----
Total $262,772,554 $281,955,549 81.94%
============ ============ =====
* Percentages are based on Members' Capital of $344,116,227.
The aggregate cost of investments for tax purposes was $294,716,169. Net
unrealized depreciation on investments for tax purposes was $12,760,620
consisting of $6,591,448 of gross unrealized appreciation and $19,352,068 of
gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 81.94% 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, 2009
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Short Equity Investments 8.82%
Long/Short Equity Investments 91.18%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ------------------- ----------- ----------- -------------
Bay Pond Partners, L.P. $23,626,705 $56,276,019 7.99%
Bay Resource Partners, L.P. 28,094,709 42,262,000 6.00
Brookside Capital Partners Fund II, LP 65,000,000 65,477,885 9.30
Cadian Fund LP 45,000,000 49,509,157 7.03
Cadmus Capital Partners (QP), L.P.(1) 4,542,459 2,965,062 0.42
Cantillon World, L.P. 71,324,400 61,373,078 8.71
Conatus Capital Partners LP 47,500,000 47,509,102 6.74
Copper River Partners, L.P.(1) 20,268,045 9,648,312 1.37
Highside Capital Partners, L.P. 31,063,150 37,569,021 5.33
Icarus Qualified Partners, L.P. 36,000,000 49,182,427 6.98
Joho Partners, L.P. 50,000,000 52,845,030 7.50
Millgate Partners II, L.P. 37,000,000 39,459,255 5.60
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
Aetos Capital Long/Short Strategies Fund, LLC
Schedule of Investments (Unaudited) (Concluded)
July 31, 2009
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ------------------- ------------ ------------ -------------
North River Partners, L.P. $ 45,650,000 $ 60,143,085 8.54%
Viking Global Equities, L.P. 48,460,934 86,356,839 12.26
Woodbourne Daybreak Global Fund L.P.(1) 25,190,112 6,717,151 0.95
------------ ------------ -----
Total $578,720,514 $667,293,423 94.72%
============ ============ =====
* Percentages are based on Members' Capital of $704,461,882.
(1) Portfolio Fund in liquidation.
The aggregate cost of investments for tax purposes was $603,229,487. Net
unrealized appreciation on investments for tax purposes was $64,063,936
consisting of $108,786,695 of gross unrealized appreciation and $44,722,759 of
gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 94.72% 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, 2009
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Event-Driven 5.46%
Long/Short Equity Investments 80.53%
Real Assets 14.01%
% OF MEMBERS'
PORTFOLIO FUND NAME COST VALUE CAPITAL*
- ------------------- ------------ ------------ -------------
Davidson Kempner Healthcare Fund L.P.(1) $ 76,316 $ 11,196 0.01%
The Elkhorn Fund, LLC 20,000,000 21,091,645 16.96
GMO U.S. Tactical Opportunities Fund
(Onshore), L.P. 21,500,000 21,081,500 16.95
Joho Partners, L.P. 19,000,000 26,494,328 21.30
Samlyn Partners, L.P. 14,500,000 16,010,479 12.87
Sansar Capital, L.P. 10,315,420 7,394,775 5.94
Sansar Capital Holdings, Ltd. 499,503 709,285 0.57
Sheffield Institutional Partners, L.P. 6,408,749 6,295,779 5.06
Spindrift Partners, L.P. 18,000,000 16,137,903 12.97
------------ ------------ -----
Total $110,299,988 $115,226,890 92.63%
============ ============ =====
* Percentages are based on Members' Capital of $124,393,613.
(1) Portfolio Fund in liquidation.
The aggregate cost of investments for tax purposes was $123,378,176. Net
unrealized depreciation on investments for tax purposes was $8,151,286
consisting of $5,965,956 of gross unrealized appreciation and $14,117,242 of
gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 92.63% 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, 2009
(Unaudited)
AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL
MULTI-STRATEGY INVESTMENT LONG/SHORT AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
-------------- ------------- ------------- -------------
ASSETS
Investments in Portfolio Funds, at cost $381,087,075 $262,772,554 $578,720,514 $110,299,988
------------ ------------ ------------ ------------
Investments in Portfolio Funds, at value $365,502,475 $281,955,549 $667,293,423 $115,226,890
Cash and cash equivalents 67,869,671 62,833,846 44,541,753 11,173,039
Receivable for sale of investments 713,279 3,502,664 3,001,344 24,292
Accrued income 1,795 6,342 8,705 1,448
------------ ------------ ------------ ------------
Total assets 434,087,220 348,298,401 714,845,225 126,425,669
------------ ------------ ------------ ------------
LIABILITIES
Redemptions of Interests payable 4,643,729 3,177,955 8,506,596 1,674,468
Sales of Interests received in advance 744,563 496,375 1,116,844 124,094
Investment management fees payable 272,832 219,337 449,019 79,288
Administration fees payable 55,857 52,325 122,303 20,331
Board of Managers' fees payable 9,531 9,531 9,531 9,531
Other accrued expenses 316,722 226,651 179,050 124,344
------------ ------------ ------------ ------------
Total liabilities 6,043,234 4,182,174 10,383,343 2,032,056
------------ ------------ ------------ ------------
NET MEMBERS' CAPITAL $428,043,986 $344,116,227 $704,461,882 $124,393,613
============ ============ ============ ============
MEMBERS' CAPITAL
Net capital $443,628,586 $324,933,232 $615,888,973 $119,466,711
Net unrealized
appreciation/(depreciation) on
investments in Portfolio Funds (15,584,600) 19,182,995 88,572,909 4,926,902
------------ ------------ ------------ ------------
Members' Capital $428,043,986 $344,116,227 $704,461,882 $124,393,613
============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
Statements of Operations
For the six-month period ended July 31, 2009
(Unaudited)
AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL
MULTI-STRATEGY INVESTMENT LONG/SHORT AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
-------------- ------------- ------------- -------------
Investment income:
Interest $ 69,085 $ 147,566 $ 253,265 $ 57,432
----------- ----------- ------------ -----------
Expenses:
Investment management fees 1,407,826 1,261,796 2,997,268 493,765
Administration fees 172,069 158,797 379,746 64,705
Board of Managers' fees 19,062 19,062 19,062 19,062
Professional fees 137,078 125,728 119,937 86,408
Custodian fees 20,423 18,469 41,844 8,148
Registration fees 6,000 6,000 7,232 6,000
Printing fees 3,000 3,000 3,000 3,000
Other expenses 18,421 13,876 4,523 6,804
----------- ----------- ------------ -----------
Total expenses 1,783,879 1,606,728 3,572,612 687,892
----------- ----------- ------------ -----------
Net investment loss (1,714,794) (1,459,162) (3,319,347) (630,460)
----------- ----------- ------------ -----------
Net loss on Portfolio Funds sold (3,854,273) (3,554,476) (43,072,953) (2,360,183)
Net change in unrealized appreciation
on investments in Portfolio Funds 39,083,669 28,433,324 60,009,128 3,512,752
----------- ----------- ------------ -----------
Net increase in Members' Capital
derived from investment activities $33,514,602 $23,419,686 $ 13,616,828 $ 522,109
=========== =========== ============ ===========
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, 2009 and the year ended January 31, 2009
AETOS CAPITAL DISTRESSED
AETOS CAPITAL MULTI-STRATEGY INVESTMENT STRATEGIES
ARBITRAGE FUND, LLC FUND, LLC
---------------------------- ---------------------------
2/1/09 - 2/1/09 -
7/31/09 2/1/08 - 7/31/09 2/1/08 -
(UNAUDITED) 1/31/09 (UNAUDITED) 1/31/09
------------ ------------- ------------ ------------
From investment activities:
Net investment loss $ (1,714,794) $ (3,859,773) $ (1,459,162) $ (819,591)
Net gain/(loss) on Portfolio Funds sold (3,854,273) 17,381,577 (3,554,476) 3,374,415
Net change in unrealized
appreciation/(depreciation) on
investments in Portfolio Funds 39,083,669 (112,321,272) 28,433,324 (35,597,793)
------------ ------------- ------------ ------------
Net increase/(decrease) in Members' Capital
derived from investment activities 33,514,602 (98,799,468) 23,419,686 (33,042,969)
------------ ------------- ------------ ------------
Distributions:
Tax withholding on behalf of foreign investors (150,259) (1,253,004) (512,069) (1,096,210)
------------ ------------- ------------ ------------
Total distributions (150,259) (1,253,004) (512,069) (1,096,210)
------------ ------------- ------------ ------------
Members' Capital transactions:
Proceeds from transfer of assets* -- 46,535,603 -- --
Proceeds from sales of Interests 2,102,826 67,981,151 8,272,811 93,747,605
Redemptions of Interests (55,823,650) (143,399,567) (43,270,686) (23,401,469)
Transfers of Interests 59,717,847 (56,506,622) 2,532,425 149,040,607
------------ ------------- ------------ ------------
Net increase/(decrease) in Members' Capital
derived from capital transactions 5,997,023 (85,389,435) (32,465,450) 219,386,743
------------ ------------- ------------ ------------
Net increase/(decrease) in Members' Capital 39,361,366 (185,441,907) (9,557,833) 185,247,564
Members' Capital at beginning of period 388,682,620 574,124,527 353,674,060 168,426,496
------------ ------------- ------------ ------------
Members' Capital at end of period $428,043,986 $ 388,682,620 $344,116,227 $353,674,060
============ ============= ============ ============
* See Note 5 in Notes to Financial Statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
Statements of Changes in Members' Capital (concluded)
For the six-month period ended July 31, 2009 and the year ended January 31, 2009
AETOS CAPITAL LONG/SHORT AETOS CAPITAL
STRATEGIES FUND, LLC OPPORTUNITIES FUND, LLC
------------------------------ ---------------------------
2/1/09 - 2/1/09 -
7/31/09 2/1/08 - 7/31/09 2/1/08 -
(UNAUDITED) 1/31/09 (UNAUDITED) 1/31/09
------------- -------------- ------------ ------------
From investment activities:
Net investment loss $ (3,319,347) $ (6,235,720) $ (630,460) $ (808,257)
Net gain/(loss) on Portfolio Funds sold (43,072,953) 27,893,467 (2,360,183) (356,519)
Net change in unrealized
appreciation/(depreciation) on
investments in Portfolio funds 60,009,128 (117,075,472) 3,512,752 (14,392,498)
------------- -------------- ------------ ------------
Net increase/(decrease) in Members' Capital
derived from investment activities 13,616,828 (95,417,725) 522,109 (15,557,274)
------------- -------------- ------------ ------------
Distributions:
Tax withholding on behalf of foreign investors (1,098,335) (2,555,363) (259,246) (560,463)
------------- -------------- ------------ ------------
Total distributions (1,098,335) (2,555,363) (259,246) (560,463)
------------- -------------- ------------ ------------
Members' Capital transactions:
Proceeds from sales of Interests 3,136,611 131,535,348 479,226 22,928,303
Redemptions of Interests (131,424,137) (194,799,810) (25,393,820) (27,369,517)
Transfers of Interests (63,542,872) 1,638,741 1,292,600 (18,511,397)
------------- -------------- ------------ ------------
Net decrease in Members' Capital derived from
capital transactions (191,830,398) (61,625,721) (23,621,994) (22,952,611)
------------- -------------- ------------ ------------
Net decrease in Members' Capital (179,311,905) (159,598,809) (23,359,131) (39,070,348)
Members' Capital at beginning of period 883,773,787 1,043,372,596 147,752,744 186,823,092
------------- -------------- ------------ ------------
Members' Capital at end of period $ 704,461,882 $ 883,773,787 $124,393,613 $147,752,744
============= ============== ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
Statements of Cash Flows
For the six-month period ended July 31, 2009
(Unaudited)
AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL
MULTI-STRATEGY INVESTMENT LONG/SHORT AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
-------------- ------------- ------------- -------------
CASH FLOWS USED IN OPERATING ACTIVITIES
Purchases of Portfolio Funds $(42,000,000) $(60,000,000) $(160,000,000) $(27,993,318)
Sales of Portfolio Funds 23,138,540 4,494,603 129,036,579 6,026,877
Net investment loss (1,714,794) (1,459,162) (3,319,347) (630,460)
Adjustments to reconcile net investment loss to
net cash used in operating activities:
Decrease in accrued income 45,133 103,697 190,106 40,912
Decrease in prepaid tax withholding -- -- -- 918
Decrease/(increase) in receivable for sale of
investments 3,811,311 (1,966,575) 3,640,436 (24,292)
Increase/(decrease) in redemptions of
Interests payable (2,463,313) 2,096,446 (2,632,983) 723,930
Increase/(decrease) in investment management
fees payable 25,766 (5,476) (112,752) (14,631)
Decrease in administration fees payable (76,421) (55,124) (151,440) (30,269)
Increase in Board of Managers' fees payable 975 975 975 975
Increase/(decrease) in other accrued expenses (152,994) 52,539 (22,255) 20,162
------------ ------------ ------------- ------------
Net cash used in operating activities (19,385,797) (56,738,077) (33,370,681) (21,879,196)
------------ ------------ ------------- ------------
DISTRIBUTIONS
Tax withholding on behalf of foreign investors (150,259) (512,069) (1,098,335) (259,246)
------------ ------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in sales of Interests received in
advance 744,563 496,375 1,116,844 124,094
Proceeds from sales of Interests 2,102,826 8,272,811 3,136,611 479,226
Redemptions of Interests (55,823,650) (43,270,686) (131,424,137) (25,393,820)
Transfers of Interests 59,717,847 2,532,425 (63,542,872) 1,292,600
------------ ------------ ------------- ------------
Net cash provided by/(used in) financing
activities 6,741,586 (31,969,075) (190,713,554) (23,497,900)
------------ ------------ ------------- ------------
Net decrease in cash and cash equivalents (12,794,470) (89,219,221) (225,182,570) (45,636,342)
Cash and cash equivalents, beginning of period 80,664,141 152,053,067 269,724,323 56,809,381
------------ ------------ ------------- ------------
Cash and cash equivalents, end of period $ 67,869,671 $ 62,833,846 $ 44,541,753 $ 11,173,039
============ ============ ============= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
Financial Highlights
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
------------------------------------------------------------------
2/1/09 -
7/31/09 2/1/08 - 2/1/07 - 2/1/06 - 2/1/05 - 2/1/04 -
(UNAUDITED) 1/31/09 1/31/08 1/31/07 1/31/06 1/31/05
----------- -------- -------- -------- -------- --------
Total return(1) 9.31% (20.29)% (1.76)% 10.36% 6.48% 2.98%
Net assets, end of period (000's) $428,044 $388,683 $574,125 $447,632 $320,267 $245,964
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.95%(3) 0.96% 0.90% 0.95% 0.95% 1.07%
Expenses, net of waivers and
reimbursements (2)(4) 0.95%(3) 0.96% 0.90% 0.95% 0.95% 1.00%
Net investment loss, before waivers and
reimbursements (0.91)%(3) (0.80)% (0.62)% (0.75)% (0.77)% (0.96)%
Net investment loss, net of waivers and
reimbursements (0.91)%(3) (0.80)% (0.62)% (0.75)% (0.77)% (0.89)%
Portfolio turnover rate (5) 7.17% 5.35% 14.01% 16.80% 6.24% 0.00%
(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.
11
Financial Highlights (continued)
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
------------------------------------------------------------------
2/1/09 -
7/31/09 2/1/08 - 2/1/07 - 2/1/06 - 2/1/05 - 2/1/04 -
(UNAUDITED) 1/31/09 1/31/08 1/31/07 1/31/06 1/31/05
----------- -------- -------- -------- -------- --------
Total return(1) 7.37% (8.57)% 4.32% 12.95% 8.46% 10.24%
Net assets, end of period (000's) $344,116 $353,674 $168,426 $109,967 $ 66,508 $45,254
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.95%(3) 1.02% 1.03% 1.08% 1.24% 1.55%
Expenses, net of waivers and
reimbursements (2)(4) 0.95%(3) 1.01% 0.99% 1.00% 1.00% 1.00%
Net investment loss, before waivers and
reimbursements (0.86)%(3) (0.30)% (0.69)% (0.76)% (0.88)% (1.50)%
Net investment loss, net of waivers and
reimbursements (0.86)%(3) (0.29)% (0.65)% (0.68)% (0.64)% (0.95)%
Portfolio turnover rate (5) 2.71% 12.51% 0.00% 13.69% 0.00% 0.00%
(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 LONG/SHORT STRATEGIES FUND, LLC
--------------------------------------------------------------------
2/1/09 -
7/31/09 2/1/08 - 2/1/07 - 2/1/06 - 2/1/05 - 2/1/04 -
(UNAUDITED) 1/31/09 1/31/08 1/31/07 1/31/06 1/31/05
----------- -------- ---------- -------- -------- --------
Total return(1) 2.01% (9.33)% 7.04% 9.61% 11.66% 3.90%
Net assets, end of period (000's) $704,462 $883,774 $1,043,373 $738,210 $471,815 $325,337
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.88%(3) 0.88% 0.88% 0.92% 0.94% 1.05%
Expenses, net of waivers and
reimbursements (2)(4) 0.88%(3) 0.88% 0.88% 0.92% 0.94% 1.00%
Net investment loss, before waivers and
reimbursements (0.82)%(3) (0.63)% (0.66)% (0.65)% (0.78)% (0.95)%
Net investment loss, net of waivers and
reimbursements (0.82)%(3) (0.63)% (0.66)% (0.65)% (0.78)% (0.90)%
Portfolio turnover rate (5) 20.39% 12.24% 20.12% 6.13% 9.65% 4.06%
(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 (concluded)
AETOS CAPITAL OPPORTUNITIES FUND, LLC
---------------------------------------------------------
2/1/09 -
7/31/09 2/1/08 - 2/1/07 - 2/1/06 - 5/27/05* -
(UNAUDITED) 1/31/09 1/31/08 1/31/07 1/31/06
----------- -------- -------- -------- ----------
Total return(1) 0.41% (9.03)% 7.24% 2.41% 4.94%
Net assets, end of period (000's) $124,394 $147,753 $186,823 $139,909 $72,856
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 1.03%(3) 0.99% 0.97% 1.05% 1.44%(3)
Expenses, net of waivers and
reimbursements (2)(4) 1.03%(3) 0.99% 0.97% 1.04% 1.07%(3)
Net investment loss, before waivers and
reimbursements (0.94)%(3) (0.46)% (0.37)% (0.57)% (1.11)%(3)
Net investment loss, net of waivers and
reimbursements (0.94)%(3) (0.46)% (0.37)% (0.56)% (0.74)%(3)
Portfolio turnover rate (5) 6.52% 5.54% 24.25% 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.
14
Notes to Financial Statements
July 31, 2009
(Unaudited)
1. ORGANIZATION
The Aetos Capital Multi-Strategy Arbitrage Fund, LLC, the Aetos Capital
Distressed Investment Strategies Fund, LLC, the Aetos Capital Long/Short
Strategies Fund, LLC, and the Aetos Capital 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, 2009
the Feeder Funds' beneficial ownership of their corresponding Master Funds'
members' capital are 78%, 82%, 81%, and 89% for the Aetos Capital Multi-Strategy
Arbitrage Cayman Fund, Aetos Capital Distressed Investment Strategies Cayman
Fund, Aetos Capital Long/Short 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 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.
15
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
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 and any restrictions on or illiquidity of the
interests in the Portfolio Funds, in determining fair value.
Considerable judgment is required to interpret the factors used to develop
estimates of fair value. Accordingly, the estimates may not be indicative of the
amounts the Fund could realize in a current market exchange and the differences
could be material to the financial statements. The use of different factors or
estimation methodologies could have a significant effect on the estimated fair
value.
16
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Portfolio Valuation and Security Transactions (continued)
Statement of Financial Accounting Standards No. 157 "Fair Value Measurements"
("FAS 157") establishes a fair value hierarchy and specifies that a valuation
technique used to measure fair value shall maximize the use of observable inputs
and minimize the use of unobservable inputs. The objective of a fair value
measurement is to determine the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date (an exit price). Accordingly, the fair
value hierarchy gives the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy under FAS 157 are as follows:
- Level 1 -- Inputs that reflect unadjusted quoted prices in active
markets for identical, unrestricted assets or liabilities that the
Funds have the ability to access at the measurement date;
- Level 2 -- Inputs other than quoted prices that are observable for the
asset or liability either directly or indirectly, including inputs in
markets that are not considered to be active;
- Level 3 -- Inputs that are unobservable.
Inputs broadly refer to the assumptions that market participants use to make
valuation decisions, including assumptions about risk. The Investment Manager
generally uses the capital balance reported by a Portfolio Fund as the primary
input to its valuation; however adjustments to the reported capital balance may
be made based on various factors, including, but not limited to, the attributes
of the interest in the Portfolio Fund held, including the rights and
obligations, and any restrictions on or illiquidity of such interests, and the
fair value of such Portfolio Fund's investment portfolio or other assets and
liabilities.
An individual Portfolio Fund's level within the fair value hierarchy is based on
the lowest level of any input that is significant to the fair value measurement.
Portfolio Funds classified within Level 3 consider several inputs and may
include Level 1 or Level 2 inputs as components of the overall fair value
measurement.
All of the Funds' investments in Portfolio Funds have been classified within
Level 3, and the Funds generally do not hold any investments that could be
classified as Level 1 or Level 2, as observable prices for investments in
Portfolio Funds are typically not available.
17
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Portfolio Valuation and Security Transactions (continued)
The following table presents information about the level within the fair
valuation hierarchy at which the Funds' investments are measured as of July 31,
2009:
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------- ------- ------------ ------------
Investments in Portfolio Funds $-- $-- $365,502,475 $365,502,475
=== === ============ ============
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------- ------- ------------ ------------
Investments in Portfolio Funds $-- $-- $281,955,549 $281,955,549
=== === ============ ============
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------- ------- ------------ ------------
Investments in Portfolio Funds $-- $-- $667,293,423 $667,293,423
=== === ============ ============
AETOS CAPITAL OPPORTUNITIES FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------- ------- ------------ ------------
Investments in Portfolio Funds $-- $-- $115,226,890 $115,226,890
=== === ============ ============
The following is a reconciliation of the investments in which significant
unobservable inputs (Level 3) were used in determining value:
AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL
MULTI-STRATEGY INVESTMENT LONG/SHORT AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
-------------- ------------- ------------- -------------
Beginning Balance as of 1/31/09 $311,411,619 $201,571,304 $619,393,827 $ 92,107,880
Realized gain/(loss) (3,854,273) (3,554,476) (43,072,953) (2,360,183)
Change in unrealized
appreciation/(depreciation) 39,083,669 28,433,324 60,009,128 3,512,752
Net purchase/sales 18,861,460 55,505,397 30,963,421 21,966,441
Net transfers in and/or out of Level 3 -- -- -- --
------------ ------------ ------------ ------------
Ending Balance as of 7/31/09 $365,502,475 $281,955,549 $667,293,423 $115,226,890
============ ============ ============ ============
18
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Portfolio Valuation and Security Transactions (continued)
All net realized gains and losses and changes in unrealized appreciation and
depreciation in the preceding table are included in the Statements of
Operations. The changes in net unrealized depreciation of investments in
Portfolio Funds still held by the Funds at July 31, 2009 were as follows:
AETOS CAPITAL
AETOS CAPITAL DISTRESSED AETOS CAPITAL
MULTI-STRATEGY INVESTMENT LONG/SHORT AETOS CAPITAL
ARBITRAGE STRATEGIES STRATEGIES OPPORTUNITIES
FUND, LLC FUND, LLC FUND, LLC FUND, LLC
-------------- ------------- ------------- -------------
Change in unrealized
appreciation/ (depreciation) $34,946,538 $25,732,135 $18,265,894 $810,072
=========== =========== =========== ========
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.
19
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Income Taxes (continued)
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.
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
Cash and cash equivalents is defined as cash on deposit at financial
institutions, investments in money market funds, and highly liquid investments
with original maturities of three months or less. Each Fund invests its cash in
the SEI Daily Income Trust Government Fund, a money market fund managed by an
affiliate of the Administrator. These holdings are included in the cash and cash
equivalents balance on the Statements of Assets and Liabilities. The cost of the
money market funds held at July 31, 2009 equals fair value.
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. Effective
June 1, 2008, the expense limitation for the Funds has been terminated.
20
Notes to Financial Statements (continued)
3. INVESTMENT MANAGER FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
The Investment Manager may also be paid a Program fee outside of the Funds for
services rendered to investors. The Program fee is paid directly by the
investors at an annual rate of up to 0.50% of an investor's assets in the Funds.
The Investment Manager may also be paid an annual performance-based incentive
fee outside of the Funds based on the return of an investor's account with the
Investment Manager.
SEI Investments Global Funds Services (the "Administrator") provides certain
administration, accounting and investor services for the Funds. In consideration
for such services, each Fund pays the Administrator a monthly fee based on
month-end net assets at an annual rate of 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.
Each Member of the Board who is not an "interested person" of the Funds as
defined by the 1940 Act received 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 received 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.
21
Notes to Financial Statements (continued)
5. FUND MERGER
On November 1, 2008, Aetos Capital Market Neutral Strategies Fund, LLC was
reorganized into Aetos Capital Multi-Strategy Arbitrage Fund, LLC. The value of
the Aetos Capital Market Neutral Fund, LLC on November 1, 2008 was $46,535,603,
which was comprised of $40,692,369 of an investment in a Portfolio Fund,
$5,952,897 of cash, $682,234 of receivable for sale of investments, $9,688 of
interest receivable, $546,873 of redemptions of interests payable, and $254,712
of expenses payable.
6. RISK FACTORS
Limitations on the Funds' ability to withdraw their assets from Portfolio Funds
may limit the Funds' ability to repurchase their Interests. For example, many
Portfolio Funds impose lock-up periods prior to allowing withdrawals, which can
be two years or longer. After expiration of the lock-up period, withdrawals
typically are permitted only on a limited basis, such as monthly, quarterly,
semi-annually or annually. In instances where the primary source of funds to
repurchase Interests will be withdrawals from Portfolio Funds, the application
of these lock-ups and withdrawal limitations may significantly limit the Funds'
ability to repurchase their Interests.
The Fund invests 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 that may
involve significant risks. Such risks include those related to the volatility of
the equity, credit, and currency markets, the use of leverage associated with
certain fixed income strategies, derivative contracts and in connection with
short positions, the potential illiquidity of certain instruments and
counterparty and broker arrangements.
The Portfolio Funds may invest a higher 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
Fund's net asset value.
The Portfolio Funds may invest in securities of foreign companies that involve
special risks and considerations not typically associated with investments in
the United States of America, due to concentrated investments in a limited
number of countries or regions, which may vary throughout the year depending on
the Portfolio Fund. Such concentrations may subject the Portfolio Funds to
additional risks resulting from political or economic conditions in such
countries or regions and the possible imposition of adverse governmental laws or
currency exchange restrictions could cause the securities and their markets to
be less liquid and their prices to be more volatile than those of comparable
U.S. securities.
22
Notes to Financial Statements (continued)
6. RISK FACTORS (CONTINUED)
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
Fund, risks relating to compensation arrangements and risks related to limited
liquidity of the Interests.
In the normal course of business, the Funds enter into contracts that contain a
variety of representations which provide general indemnifications. Each Fund's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against each Fund that have not yet occurred.
However, based on experience, the Funds expect the risk of loss to be remote.
7. INVESTMENT TRANSACTIONS
For the six-month period ended July 31, 2009, purchases and sales of investments
were as follows:
FUND PURCHASES SALES
- ---- ------------ ------------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $ 42,000,000 $ 23,138,540
Aetos Capital Distressed Investment Strategies Fund, LLC 60,000,000 4,494,603
Aetos Capital Long/Short Strategies Fund, LLC 160,000,000 129,036,579
Aetos Capital Opportunities Fund, LLC 27,993,318 6,026,877
8. INVESTMENTS
As of July 31, 2009, collectively the Funds had investments in forty Portfolio
Funds, none of which were related parties. The following table lists the Funds'
investments in Portfolio Funds as of July 31, 2009. 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.
23
Notes to Financial Statements (continued)
8. INVESTMENTS (CONTINUED)
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2009 CAPITAL LIQUIDITY*
- ------------------- ------------------------------ ------------ ------------- -----------
CNH CA Institutional Fund, L.P. Convertible Arbitrage $ 31,847,633 7.44% Quarterly
Davidson Kempner Partners Multi-Strategy/Event Arbitrage 52,624,317 12.29 Annual
Farallon Capital Offshore Investors, Inc. Multi-Strategy/Event Arbitrage 46,005,336 10.75 Annual
FFIP, L.P. Fixed Income Arbitrage 56,085,651 13.10 Annual
GMO Mean Reversion Fund Quantitative Asset Allocation 34,835,360 8.14 Monthly
HBK Fund L.P. Multi-Strategy/Event Arbitrage 17,308,150 4.04 Quarterly**
Ishin Fund, LLC Convertible Arbitrage 34,133,328 7.98 Quarterly
Oceanwood Global
Opportunities Fund L.P. Multi-Strategy/Event Arbitrage 49,571,554 11.58 Annual
Parsec Trading Corp. Fixed Income Arbitrage 41,403,488 9.67 Monthly
Sowood Alpha Fund, L.P. Multi-Strategy/Event Arbitrage 1,687,658 0.40 Annual
------------ -----
$365,502,475 85.39%
------------ -----
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2009 CAPITAL LIQUIDITY*
- ------------------- ---------------------- ------------ ------------- ----------
AG Mortgage Value Partners, L.P. Distressed Investments $ 30,900,000 8.98% Annual
Anchorage Capital Partners, L.P. Distressed Investments 64,870,337 18.85 Annual
Aurelius Capital Partners, L.P. Distressed Investments 61,641,425 17.91 Semi-Annual
King Street Capital, L.P. Distressed Investments 69,103,198 20.08 Quarterly
One East Partners, L.P. Distressed Investments 3,829,170 1.12 Quarterly
Silver Point Capital Fund, L.P. Distressed Investments 40,554,695 11.79 Annual
Watershed Capital Partners, L.P. Distressed Investments 11,056,724 3.21 Quarterly
------------ -----
$281,955,549 81.94%
------------ -----
* The liquidity of the Portfolio Funds may be further restricted due to
withdrawal limitations.
** Portfolio Fund has established restrictions on the ability to fully receive
proceeds from redemptions through the application of a redemption
restriction or "gate."
24
Notes to Financial Statements (continued)
8. INVESTMENTS (CONTINUED)
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2009 CAPITAL LIQUIDITY*
- ------------------- ----------------------------- ------------ ------------- -----------
Bay Pond Partners, L.P. Long/Short Equity Investments $ 56,276,019 7.99% Semi-Annual
Bay Resource Partners, L.P. Long/Short Equity Investments 42,262,000 6.00 Annual
Brookside Capital Partners Fund II, LP Long/Short Equity Investments 65,477,885 9.30 Quarterly
Cadian Fund LP Long/Short Equity Investments 49,509,157 7.03 Quarterly
Cadmus Capital Partners (QP), L.P. Long/Short Equity Investments 2,965,062 0.42 Quarterly
Cantillon World, L.P. Long/Short Equity Investments 61,373,078 8.71 Quarterly
Conatus Capital Partners LP Long/Short Equity Investments 47,509,102 6.74 Quarterly
Copper River Partners, L.P. Short Equity Investments 9,648,312 1.37 Annual
Highside Capital Partners, L.P. Long/Short Equity Investments 37,569,021 5.33 Annual
Icarus Qualified Partners, L.P. Short Equity Investments 49,182,427 6.98 Annual
Joho Partners, L.P. Long/Short Equity Investments 52,845,030 7.50 Semi-Annual
Millgate Partners II, L.P. Long/Short Equity Investments 39,459,255 5.60 Quarterly
North River Partners, L.P. Long/Short Equity Investments 60,143,085 8.54 Quarterly
Viking Global Equities, L.P. Long/Short Equity Investments 86,356,839 12.26 Annual
Woodbourne Daybreak Global Fund L.P. Long/Short Equity Investments 6,717,151 0.95 Quarterly
------------ -----
$667,293,423 94.72%
------------ -----
AETOS CAPITAL OPPORTUNITIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2009 CAPITAL LIQUIDITY*
- ------------------- ----------------------------- ------------ ------------- -----------
Davidson Kempner Healthcare Fund L.P. Long/Short Equity Investments $ 11,196 0.01% Semi-Annual
The Elkhorn Fund, LLC Long/Short Equity Investments 21,091,645 16.96 Monthly
GMO U.S. Tactical Opportunities
Fund (Onshore), L.P. Long/Short Equity Investments 21,081,500 16.95 Monthly
Joho Partners, L.P. Long/Short Equity Investments 26,494,328 21.30 Semi-Annual
Samlyn Partners, L.P. Long/Short Equity Investments 16,010,479 12.87 Semi-Annual
Sansar Capital, L.P. Long/Short Equity Investments 7,394,775 5.94 Quarterly
Sansar Capital Holdings, Ltd. Long/Short Equity Investments 709,285 0.57 Annual
Sheffield Institutional Partners, L.P. Event-Driven 6,295,779 5.06 Annual
Spindrift Partners, L.P. Real Assets 16,137,903 12.97 Semi-Annual
------------ -----
$115,226,890 92.63%
------------ -----
* The liquidity of the Portfolio Funds may be further restricted due to
withdrawal limitations.
25
Notes to Financial Statements (concluded)
9. SUBSEQUENT EVENTS
Through September 1, 2009, the Funds received the following contributions:
FUND AMOUNT
- ---- ----------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $ 997,431
Aetos Capital Distressed Investment Strategies Fund, LLC 734,156
Aetos Capital Long/Short Strategies Fund, LLC 1,752,725
Aetos Capital Opportunities Fund, LLC 232,063
and paid no redemptions.
The following table summarizes the redemption requests received by the Funds as
of July 31, 2009:
% OF
NUMBER OF ESTIMATED REDEMPTION MEMBERS'
FUND INVESTORS AMOUNT AS OF 7/31/09 CAPITAL
- ---- --------- -------------------- --------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC 15 $ 9,837,010 2.30%
Aetos Capital Distressed Investment Strategies Fund, LLC 15 5,332,342 1.55%
Aetos Capital Long/Short Strategies Fund, LLC 17 23,669,069 3.36%
Aetos Capital Opportunities Fund, LLC 10 4,900,212 3.94%
10. COMMITMENTS
At July 31, 2009, the Funds had made no commitments to purchase underlying
funds.
At July 31, 2009, the Funds had submitted redemption requests from the
underlying funds as follows:
FUND AMOUNT
- ---- -----------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC --
Aetos Capital Distressed Investment Strategies Fund, LLC
Silver Point Capital Fund, L.P. $40,554,695
-----------
Aetos Capital Long/Short Strategies Fund, LLC --
Aetos Capital Opportunities Fund, LLC
Sheffield Institutional Partners, L.P. $ 3,266,681
-----------
26
Approval of Investment Advisory Agreements
July 31, 2009
(Unaudited)
At a meeting held in person on July 24, 2009, 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 the Investment Manager. The Boards also
considered the proposed fees to be charged under the Investment Advisory
Agreements, as well as each Fund's performance, and reviewed the comparative fee
and performance data previously provided by the Investment Manager. They also
considered the information provided by the Investment Manager regarding the
Investment Manager's financial performance and profitability. In considering the
approval of the Advisory Agreement for each Fund, the Board members gave
particular consideration to the following factors:
NATURE, EXTENT AND QUALITY OF SERVICES
The Board of each Fund reviewed and considered the nature and extent of the
investment advisory services provided by the Investment Manager to the Funds
under the Investment Advisory Agreements, 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 nonadvisory, administrative services provided by the
Investment Manager under the Investment Advisory Agreements, 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 the
Investment Manager who provide the investment advisory and administrative
services to each Fund. The Boards determined that the Investment Manager's
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 the Investment Manager that showed 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 performance since inception, the relative lack of correlation of
such performance to fixed income or equity indices generally, and the
performance of each Fund over the prior year during a period of extreme market
stress. The Boards concluded that each Fund's performance was satisfactory.
27
Approval of Investment Advisory Agreements (continued)
FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS
The Boards reviewed the management fee rate (the "Management Fee") and total
expense ratio of each Fund. The Boards also reviewed the annual separate program
(the "Program") fee of up to 0.50% and the performance fee of up to 10% of
aggregate Program net profits above the return of the 90 day Treasury Bill (the
"Incentive Fee") payable to the Investment Manager by investors in the Funds.
The Boards also reviewed a report prepared by the Investment Manager 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 the Investment
Manager, 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 Management 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 Investment Advisory Agreements and noted that it does not include any
breakpoints. The Boards considered that each Fund's Management 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 the Investment Manager and its affiliates during the
previous year from the Investment Manager's 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 the Investment Manager are appropriate. The Boards noted that the
Investment Manager had first become profitable in 2005, and that its profit
margins had not substantially increased since that time. Based on their review
of the information they received, the Boards concluded that the profits earned
by the Investment Manager 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 Board of each Fund
concluded it would be in the best interest of the Funds and its Members to
approve the Investment Advisory Agreements.
28
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: 10/5/09
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: 10/5/09
By (Signature and Title)* /s/ Scott D. Sawyer
----------------------------------------
Scott D. Sawyer, Treasurer
Date: 10/5/09
* Print the name and title of each signing officer under his or her
signature.