UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM N-CSRS
----------
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-21058
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
(Exact name of registrant as specified in charter)
----------
c/o Aetos Capital, LLC
875 Third Avenue
New York, NY 10022
(Address of principal executive offices) (Zip code)
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, 2010
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, 2010
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 ................................ 28
The Funds file their complete schedule of portfolio holdings with the Securities
and Exchange Commission (the "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, 2010
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Quantitative Asset Allocation 12.61%
Convertible Arbitrage 16.89%
Fixed Income Arbitrage 22.35%
Multi-Strategy/Event Arbitrage 43.32%
Cash Equivalent 4.83%
% OF MEMBERS'
PORTFOLIO FUNDS COST VALUE CAPITAL*
- --------------- ------------ ------------ -------------
AQR RT Fund, L.P. $ 40,000,000 $ 40,948,538 7.01%
CNH CA Institutional Fund, L.P. 40,000,000 47,393,033 8.12
Davidson Kempner Partners 70,543,694 90,800,165 15.55
Farallon Capital Offshore Investors, Inc. 88,172,893 90,890,203 15.57
FFIP, L.P. 61,630,000 84,979,952 14.56
GMO Mean Reversion Fund (Onshore) 40,692,369 32,899,487 5.64
Ishin Fund LLC 45,361,920 51,522,479 8.83
Oceanwood Global Opportunities Fund LP 55,000,000 70,785,421 12.13
Parsec Trading Corp. 54,555,466 45,964,900 7.87
Sowood Alpha Fund, LP(1) 3,453,269 1,285,326 0.22
------------ ------------ ------
TOTAL PORTFOLIO FUNDS 499,409,611 557,469,504 95.50
------------ ------------ ------
CASH EQUIVALENT
SEI Daily Income Trust Government
Fund, Class A, 0.050%** (Shares 28,279,292) 28,279,292 28,279,292 4.84
------------ ------------ ------
TOTAL PORTFOLIO FUNDS AND CASH EQUIVALENT $527,688,903 $585,748,796 100.34%
============ ============ ======
* Percentages are based on Members' Capital of $583,770,127.
** Rate shown is the 7-day effective yield as of July 31, 2010.
(1) Portfolio Fund in liquidation.
The aggregate cost of investments in Portfolio Funds and cash equivalent for tax
purposes was $592,529,485. Net unrealized depreciation on investments in
Portfolio Funds and cash equivalent for tax purposes was $6,780,689 consisting
of $22,444,630 of gross unrealized appreciation and $29,225,319 of gross
unrealized depreciation.
The investments in Portfolio Funds shown above, representing 95.50% 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, 2010
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Distressed Investments 94.73%
Cash Equivalent 5.27%
% OF MEMBERS'
PORTFOLIO FUNDS COST VALUE CAPITAL*
- --------------- ------------ ------------ -------------
AG Mortgage Value Partners, L.P. $ 28,987,029 $ 38,832,664 8.46%
Anchorage Capital Partners, L.P. 60,000,000 76,287,539 16.63
Aurelius Capital Partners, LP 55,500,000 78,913,700 17.20
Centerbridge Credit Partners, L.P. 30,250,000 31,071,368 6.77
Davidson Kempner Distressed Opportunities
Fund LP 40,000,000 43,840,085 9.56
King Street Capital, L.P. 51,050,000 76,621,598 16.70
One East Partners, L.P. 6,729,253 3,473,207 0.76
Silver Point Capital Fund, L.P. 31,387,113 30,221,452 6.59
Watershed Capital Partners, L.P. 54,050,000 58,419,678 12.73
------------ ------------ ------
TOTAL PORTFOLIO FUNDS 357,953,395 437,681,291 95.40
------------ ------------ ------
CASH EQUIVALENT
SEI Daily Income Trust Government
Fund, Class A, 0.050%** (Shares 24,344,208) 24,344,208 24,344,208 5.31
------------ ------------ ------
TOTAL PORTFOLIO FUNDS AND CASH EQUIVALENT $382,297,603 $462,025,499 100.71%
============ ============ ======
* Percentages are based on Members' Capital of $458,786,030.
** Rate shown is the 7-day effective yield as of July 31, 2010.
The aggregate cost of investments in Portfolio Funds and cash equivalent for tax
purposes was $417,753,628. Net unrealized appreciation on investments in
Portfolio Funds and cash equivalent for tax purposes was $44,271,871 consisting
of $44,774,605 of gross unrealized appreciation and $502,734 of gross unrealized
depreciation.
The investments in Portfolio Funds shown above, representing 95.40% 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, 2010
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Long/Short Equity Investments 85.00%
Short Equity Investments 4.16%
Cash Equivalent 10.84%
% OF MEMBERS'
PORTFOLIO FUNDS COST VALUE CAPITAL*
- --------------- ----------- ----------- -------------
Bay Pond Partners, L.P. $18,970,904 $49,753,519 5.70%
Brookside Capital Partners Fund II, L.P. 65,000,000 65,548,693 7.50
Cadian Fund LP 50,000,000 58,130,177 6.65
Cadmus Capital Partners (QP), LP(1) 1,816,984 1,316,587 0.15
CamCap Energy, L.P. 45,000,000 47,902,341 5.48
Conatus Capital Partners LP 65,500,000 68,709,392 7.87
Copper River Partners, L.P.(1) 2,710,246 966,816 0.11
Highside Capital Partners, L.P. 31,063,150 38,285,268 4.38
Icarus Qualified Partners, L.P. 36,000,000 35,483,807 4.06
Joho Partners, L.P. 50,000,000 61,652,807 7.06
MW European TOPS Fund 80,000,000 77,475,416 8.87
Millgate Partners II, L.P. 77,000,000 70,592,047 8.08
North River Partners, L.P. 46,783,623 57,975,280 6.64
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, 2010
% OF MEMBERS'
PORTFOLIO FUNDS (CONTINUED) COST VALUE CAPITAL*
- --------------------------- ------------ ------------ -------------
Tiger Consumer Partners, L.P. $ 55,000,000 $ 55,775,093 6.39%
Viking Global Equities LP 48,460,934 90,272,626 10.33
Woodbourne Daybreak Global Fund, L.P.(1) 6,968,833 878,963 0.10
------------ ------------ ------
TOTAL PORTFOLIO FUNDS 680,274,674 780,718,832 89.37
------------ ------------ ------
CASH EQUIVALENT
SEI Daily Income Trust Government
Fund, Class A, 0.050%** (Shares 94,879,323) 94,879,323 94,879,323 10.86
------------ ------------ ------
TOTAL PORTFOLIO FUNDS AND CASH EQUIVALENT $775,153,997 $875,598,155 100.23%
============ ============ ======
* Percentages are based on Members' Capital of $873,620,916.
** Rate shown is the 7-day effective yield as of July 31, 2010.
(1) Portfolio Fund in liquidation.
The aggregate cost of investments in Portfolio Funds and cash equivalent for tax
purposes was $840,967,697. Net unrealized appreciation on investments in
Portfolio Funds and cash equivalent for tax purposes was $34,630,458 consisting
of $61,182,233 of gross unrealized appreciation and $26,551,775 of gross
unrealized depreciation.
The investments in Portfolio Funds shown above, representing 89.37% 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, 2010
INVESTMENT STRATEGY AS A PERCENTAGE OF INVESTMENTS
(PIE CHART)
Event-Driven 0.67%
Cash Equivalent 20.41%
Long/Short Equity Investments 66.34%
Real Assets 12.58%
% OF MEMBERS'
PORTFOLIO FUNDS COST VALUE CAPITAL*
- --------------- ------------ ------------ -------------
GMO Tactical Opportunities Fund (Onshore) $ 21,500,000 $ 15,138,753 10.14%
Joho Partners, L.P. 19,000,000 31,459,402 21.06
Samlyn Onshore Fund, LP 21,500,000 22,628,949 15.15
Sansar Capital, L.P. 2,554,147 1,824,932 1.22
Sansar Capital Holdings, Ltd. 289,082 401,755 0.27
Sheffield Institutional Partners, L.P. 915,748 1,008,097 0.67
Spindrift Partners, L.P. 18,000,000 18,826,687 12.60
The Elkhorn Fund, LLC 25,000,000 27,881,466 18.67
------------ ------------ ------
TOTAL PORTFOLIO FUNDS 108,758,977 119,170,041 79.78
------------ ------------ ------
CASH EQUIVALENT
SEI Daily Income Trust Government
Fund, Class A, 0.050%** (Shares 30,558,783) 30,558,783 30,558,783 20.46
------------ ------------ ------
TOTAL PORTFOLIO FUNDS AND CASH EQUIVALENT $139,317,760 $149,728,824 100.24%
============ ============ ======
* Percentages are based on Members' Capital of $149,367,590.
** Rate shown is the 7-day effective yield as of July 31, 2010.
The aggregate cost of investments in Portfolio Funds and cash equivalent for tax
purposes was $147,360,605. Net unrealized appreciation on investments in
Portfolio Funds and cash equivalent for tax purposes was $2,368,219 consisting
of $13,890,598 of gross unrealized appreciation and $11,522,379 of gross
unrealized depreciation.
The investments in Portfolio Funds shown above, representing 79.78% 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, 2010
(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 and cash
equivalent, at cost $527,688,903 $382,297,603 $775,153,997 $139,317,760
------------ ------------ ------------ ------------
Investments in Portfolio Funds and cash
equivalent, at value $585,748,796 $462,025,499 $875,598,155 $149,728,824
Accrued income 1,211 1,063 4,171 1,309
Receivable for sale of investments -- 238,483 -- --
------------ ------------ ------------ ------------
Total assets 585,750,007 462,265,045 875,602,326 149,730,133
------------ ------------ ------------ ------------
LIABILITIES
Redemptions of Interests payable 1,062,858 2,682,596 988,949 38,544
Investment management fees payable 372,091 292,427 556,839 95,206
Administration fees payable 141,247 110,373 212,862 37,909
Board of Managers' fees payable 10,094 10,094 10,094 10,094
Other accrued expenses 393,590 383,525 212,666 180,790
------------ ------------ ------------ ------------
Total liabilities 1,979,880 3,479,015 1,981,410 362,543
------------ ------------ ------------ ------------
NET MEMBERS' CAPITAL $583,770,127 $458,786,030 $873,620,916 $149,367,590
============ ============ ============ ============
MEMBERS' CAPITAL
Net capital $525,710,234 $379,058,134 $773,176,758 $138,956,526
Net unrealized appreciation on
investments in Portfolio
Funds and cash equivalent 58,059,893 79,727,896 100,444,158 10,411,064
------------ ------------ ------------ ------------
Members' Capital $583,770,127 $458,786,030 $873,620,916 $149,367,590
============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
Statements of Operations
For the six-month period ended July 31, 2010
(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:
Dividends from money market funds $ 6,218 $ 7,648 $ 20,685 $ 6,898
------------ ------------ ----------- -----------
Expenses:
Investment management fees 2,042,789 1,654,638 3,111,234 539,978
Administration fees 257,789 212,333 391,580 70,898
Board of Managers' fees 19,625 19,625 19,625 19,625
Professional fees 193,863 188,023 140,568 111,938
Custodian fees 28,932 23,730 43,289 8,755
Registration fees 6,000 6,000 6,000 6,000
Printing fees 3,000 3,000 3,000 3,000
Other expenses 11,247 10,273 10,621 9,342
------------ ------------ ----------- -----------
Total expenses 2,563,245 2,117,622 3,725,917 769,536
------------ ------------ ----------- -----------
Net investment loss (2,557,027) (2,109,974) (3,705,232) (762,638)
------------ ------------ ----------- -----------
Net gain/(loss) on Portfolio Funds sold 568 3,192,471 (3,605,468) (1,682,384)
Net change in unrealized appreciation
on investments in Portfolio Funds
and cash equivalent 18,731,397 11,753,804 2,443,775 2,604,359
------------ ------------ ----------- -----------
Net increase/(decrease) in Members'
Capital derived from
investment activities $ 16,174,938 $ 12,836,301 $(4,866,925) $ 159,337
============ ============ =========== ===========
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, 2010 and the year ended January 31, 2010
AETOS AETOS CAPITAL DISTRESSED
CAPITAL MULTI-STRATEGY INVESTMENT STRATEGIES
ARBITRAGE FUND, LLC FUND, LLC
--------------------------- ---------------------------
2/1/10 - 2/1/10 -
7/31/10 2/1/09 - 7/31/10 2/1/09 -
(UNAUDITED) 1/31/10 (UNAUDITED) 1/31/10
------------ ------------ ------------ ------------
From investment activities:
Net investment loss $ (2,557,027) $ (4,016,264) $ (2,109,974) $ (3,437,365)
Net gain/(loss) on Portfolio Funds sold 568 (8,683,817) 3,192,471 (1,889,144)
Net change in unrealized appreciation on
investments in Portfolio Funds
and cash equivalent 18,731,397 93,996,765 11,753,804 77,224,421
------------ ------------ ------------ ------------
Net increase in Members' Capital
derived from investment activities 16,174,938 81,296,684 12,836,301 71,897,912
------------ ------------ ------------ ------------
Distributions:
Tax withholding on behalf of foreign
investors (62,679) (661,087) (18,828) (844,815)
------------ ------------ ------------ ------------
Total distributions (62,679) (661,087) (18,828) (844,815)
------------ ------------ ------------ ------------
Members' Capital transactions:
Proceeds from sales of Interests 73,206,774 47,497,205 48,590,989 52,930,465
Redemptions of Interests (11,423,683) (70,770,292) (27,392,457) (55,446,922)
Transfers of Interests -- 59,829,647 -- 2,559,325
------------ ------------ ------------ ------------
Net increase in Members' Capital derived
from capital transactions 61,783,091 36,556,560 21,198,532 42,868
------------ ------------ ------------ ------------
Net increase in Members' Capital 77,895,350 117,192,157 34,016,005 71,095,965
Members' Capital at beginning of period 505,874,777 388,682,620 424,770,025 353,674,060
------------ ------------ ------------ ------------
Members' Capital at end of period $583,770,127 $505,874,777 $458,786,030 $424,770,025
============ ============ ============ ============
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, 2010 and the year ended January 31, 2010
AETOS CAPITAL LONG/SHORT AETOS CAPITAL
STRATEGIES FUND, LLC OPPORTUNITIES FUND, LLC
---------------------------- ---------------------------
2/1/10 - 2/1/10 -
7/31/10 2/1/09 - 7/31/10 2/1/09 -
(UNAUDITED) 1/31/10 (UNAUDITED) 1/31/10
------------ ------------- ------------ ------------
From investment activities:
Net investment loss $ (3,705,232) $ (6,703,288) $ (762,638) $ (1,408,994)
Net loss on Portfolio Funds sold (3,605,468) (39,566,144) (1,682,384) (2,083,718)
Net change in unrealized appreciation on
investments in Portfolio funds
and cash equivalent 2,443,775 69,436,602 2,604,359 6,392,555
------------ ------------- ------------ ------------
Net increase/(decrease) in Members'
Capital derived from investment
activities (4,866,925) 23,167,170 159,337 2,899,843
------------ ------------- ------------ ------------
Distributions:
Tax withholding on behalf of foreign
investors (598,693) (2,413,742) (406,087) (454,264)
------------ ------------- ------------ ------------
Total distributions (598,693) (2,413,742) (406,087) (454,264)
------------ ------------- ------------ ------------
Members' Capital transactions:
Proceeds from sales of Interests 110,602,934 109,450,677 12,222,287 21,441,584
Redemptions of Interests (12,457,344) (169,491,276) (672,160) (34,732,394)
Transfers of Interests -- (63,545,672) -- 1,156,700
------------ ------------- ------------ ------------
Net increase/(decrease) in Members' Capital
derived from capital transactions 98,145,590 (123,586,271) 11,550,127 (12,134,110)
------------ ------------- ------------ ------------
Net increase/(decrease) in Members' Capital 92,679,972 (102,832,843) 11,303,377 (9,688,531)
Members' Capital at beginning of period 780,940,944 883,773,787 138,064,213 147,752,744
------------ ------------- ------------ ------------
Members' Capital at end of period $873,620,916 $ 780,940,944 $149,367,590 $138,064,213
============ ============= ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
Statements of Cash Flows
For the six-month period ended July 31, 2010
(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
Net increase/(decrease) in Members' Capital
derived from investment activities $ 16,174,938 $ 12,836,301 $ (4,866,925) $ 159,337
Adjustments to reconcile net
increase/(decrease) in Members' Capital
from investment activities to net cash
used in operating activities:
Purchases of Portfolio Funds (50,000,000) (30,250,000) (60,000,000) (7,184,460)
Purchases of cash equivalent (28,279,292) (24,344,208) (94,879,323) (30,558,783)
Sales of Portfolio Funds 568 9,100,024 768,871 6,153,409
Net (gain)/loss on Portfolio Funds sold (568) (3,192,471) 3,605,468 1,682,384
Net change in unrealized appreciation on
investments in Portfolio Funds and
cash equivalent (18,731,397) (11,753,804) (2,443,775) (2,604,359)
Decrease/(increase) in accrued income (234) 113 (2,020) (354)
Decrease in receivable for sale of
investments 668,520 750,580 2,496,743 123,243
Increase in investment management fees
payable 49,650 21,682 59,073 7,205
Increase in administration fees payable 68,415 49,341 97,915 16,283
Increase in Board of Managers' fees
payable 563 563 563 563
Increase/(decrease) in other accrued
expenses 41,500 50,927 (45,050) 948
------------ ------------ ------------- ------------
Net cash used in operating activities (80,007,337) (46,730,952) (155,208,460) (32,204,584)
------------ ------------ ------------- ------------
DISTRIBUTIONS
Tax withholding on behalf of foreign
investors (62,679) (18,828) (598,693) (406,087)
------------ ------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sales of Interests 72,510,294 48,264,169 109,858,214 12,168,707
Redemptions of Interests (15,440,674) (28,302,236) (21,983,290) (2,991,312)
------------ ------------ ------------- ------------
Net cash provided by financing activities 57,069,620 19,961,933 87,874,924 9,177,395
------------ ------------ ------------- ------------
Net decrease in cash and cash equivalents (23,000,396) (26,787,847) (67,932,229) (23,433,276)
Cash and cash equivalents, beginning of
period 23,000,396 26,787,847 67,932,229 23,433,276
------------ ------------ ------------- ------------
Cash, end of period $ -- $ -- $ -- $ --
============ ============ ============= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
Financial Highlights
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
-----------------------------------------------------------------------
2/1/10 -
7/31/10 2/1/09 - 2/1/08 - 2/1/07 - 2/1/06 - 2/1/05 -
(UNAUDITED) 1/31/10 1/31/09 1/31/08 1/31/07 1/31/06
----------- -------- -------- -------- -------- --------
Total return(1) 3.28% 21.29% (20.29)% (1.76)% 10.36% 6.48%
Net assets, end of period (000's) $583,770 $505,875 $388,683 $574,125 $447,632 $320,267
Ratios to average net assets:
Expenses (2)(4) 0.95%(3) 0.98% 0.96% 0.90% 0.95% 0.95%
Net investment loss (0.95)%(3) (0.96)% (0.80)% (0.62)% (0.75)% (0.77)%
Portfolio turnover rate (5) 0.00% 11.01% 5.35% 14.01% 16.80% 6.24%
(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
-----------------------------------------------------------------------
2/1/10 -
7/31/10 2/1/09 - 2/1/08 - 2/1/07 - 2/1/06 - 2/1/05 -
(UNAUDITED) 1/31/10 1/31/09 1/31/08 1/31/07 1/31/06
----------- -------- -------- -------- -------- --------
Total return(1) 3.16% 22.03% (8.57)% 4.32% 12.95% 8.46%
Net assets, end of period (000's) $458,786 $424,770 $353,674 $168,426 $109,967 $66,508
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 0.97%(3) 1.00% 1.02% 1.03% 1.08% 1.24%
Expenses, net of waivers and
reimbursements (2)(4) 0.97%(3) 1.00% 1.01% 0.99% 1.00% 1.00%
Net investment loss, before waivers
and reimbursements (0.96)%(3) (0.95)% (0.30)% (0.69)% (0.76)% (0.88)%
Net investment loss, net of waivers
and reimbursements (0.96)%(3) (0.95)% (0.29)% (0.65)% (0.68)% (0.64)%
Portfolio turnover rate (5) 2.19% 6.74% 12.51% 0.00% 13.69% 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
--------------------------------------------------------------------------
2/1/10 -
7/31/10 2/1/09 - 2/1/08 - 2/1/07 - 2/1/06 - 2/1/05 -
(UNAUDITED) 1/31/10 1/31/09 1/31/08 1/31/07 1/31/06
----------- -------- -------- ---------- -------- --------
Total return(1) (0.28)% 3.57% (9.33)% 7.04% 9.61% 11.66%
Net assets, end of period (000's) $873,621 $780,941 $883,774 $1,043,373 $738,210 $471,815
Ratios to average net assets:
Expenses (2)(4) 0.91%(3) 0.89% 0.88% 0.88% 0.92% 0.94%
Net investment loss (0.90)%(3) (0.86)% (0.63)% (0.66)% (0.65)% (0.78)%
Portfolio turnover rate (5) 0.10% 42.29% 12.24% 20.12% 6.13% 9.65%
(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
-------------------------------------------------------------------------
2/1/10 -
7/31/10 2/1/09 - 2/1/08 - 2/1/07 - 2/1/06 - 5/27/05* -
(UNAUDITED) 1/31/10 1/31/09 1/31/08 1/31/07 1/31/06
----------- -------- -------- -------- -------- ----------
Total return(1) 0.25% 2.64% (9.03)% 7.24% 2.41% 4.94%
Net assets, end of period (000's) $149,368 $138,064 $147,753 $186,823 $139,909 $72,856
Ratios to average net assets:
Expenses, before waivers and
reimbursements (2)(4) 1.08%(3) 1.11% 0.99% 0.97% 1.05% 1.44%(3)
Expenses, net of waivers and
reimbursements (2)(4) 1.08%(3) 1.11% 0.99% 0.97% 1.04% 1.07%(3)
Net investment loss, before waivers
and reimbursements (1.07)%(3) (1.06)% (0.46)% (0.37)% (0.57)% (1.11)%(3)
Net investment loss, net of waivers
and reimbursements (1.07)%(3) (1.06)% (0.46)% (0.37)% (0.56)% (0.74)%(3)
Portfolio turnover rate (5) 5.25% 11.83% 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, 2010
(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, 2010
the Feeder Funds' beneficial ownership of their corresponding Master Funds'
members' capital are 81.51%, 84.54%, 84.93%, and 91.13% 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, and 1%, 1%, 1%, and less
than 1% for the Aetos Capital Multi-Strategy Arbitrage Cayman II Fund, Aetos
Capital Distressed Investment Strategies Cayman II Fund, Aetos Capital
Long/Short Strategies Cayman II Fund and Aetos Capital Opportunities Cayman II
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.
15
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
Aetos Capital Opportunities Fund, LLC seeks capital appreciation by investing
its assets among a select group of alternative asset managers employing
different absolute return investment strategies in pursuit of attractive
risk-adjusted returns consistent with the preservation of capital.
The Funds may offer, from time to time, to repurchase outstanding members'
interests ("Interests") pursuant to written tenders by members. Repurchase
offers will be made at such times and on such terms as may be determined by the
Funds' Board of Managers (the "Board") in its sole discretion. The Funds may
offer to repurchase Interests four times each year, as of the last business day
of March, June, September and December.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America. The following is
a summary of the significant accounting policies followed by the Funds:
A. Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Investment
Manager to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from these estimates.
B. Portfolio Valuation and Security Transactions
The net asset values of the Funds are determined as of the close of business at
the end of each month in accordance with the valuation principles set forth
below or as may be determined from time to time pursuant to policies established
by the Board.
Investments in Portfolio Funds are presented in the accompanying financial
statements at fair value, as determined by the Funds' Investment Manager under
the general supervision of the Board. Such fair value generally represents a
Fund's pro-rata interest in the net assets of a Portfolio Fund as provided by
the Portfolio Funds. The Investment Manager considers information provided by
the Portfolio Funds regarding the methods they use to value underlying
investments in the Portfolio Funds and any restrictions on or illiquidity of the
interests in the Portfolio Funds, in determining fair value.
16
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Portfolio Valuation and Security Transactions (continued)
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.
The Financial Accounting Standards Board ("FASB") issued ASC Topic 820, FAIR
VALUE MEASUREMENTS AND DISCLOSURES, which 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 valuations
based upon unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to valuations based upon
unobservable inputs that are significant to the valuation (Level 3). The levels
of the fair value hierarchy under FASB ASC Topic 820-10-35-39 to 55 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 assumptions that market participants use to make
valuation decisions, including assumptions about risk. ASC Topic 820-10-35-59
permits the Investment Manager to estimate the fair value of the investments in
the Portfolio Funds at the net asset value reported by the Portfolio Funds if
the net asset value is calculated in a manner consistent with the measurement
principles of ASC Topic 946, FINANCIAL SERVICES - INVESTMENT COMPANIES. The
Investment Manager evaluates each Portfolio Fund individually to determine that
its net asset value is calculated in a manner consistent with ASC 946. The
Investment Manager also considers whether an adjustment to the net asset value
reported by the Portfolio Fund is necessary based upon 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. The Investment Manager
also considers such factors in determining whether a Portfolio Fund should be
classified as Level 2 or Level 3 within the fair value hierarchy.
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 value
hierarchy at which the Funds' investments are measured as of July 31, 2010:
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
----------- ------------ ------------ ------------
Investments in Portfolio Funds $ -- $171,335,404 $386,134,100 $557,469,504
Cash equivalent 28,279,292 -- -- 28,279,292
----------- ------------ ------------ ------------
TOTAL $28,279,292 $171,335,404 $386,134,100 $585,748,796
=========== ============ ============ ============
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
----------- ------- ------------ ------------
Investments in Portfolio Funds $ -- $-- $437,681,291 $437,681,291
Cash equivalent 24,344,208 -- -- 24,344,208
----------- --- ------------ ------------
TOTAL $24,344,208 $-- $437,681,291 $462,025,499
=========== === ============ ============
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
----------- ------------ ------------ ------------
Investments in Portfolio Funds $ -- $256,929,379 $523,789,453 $780,718,832
Cash equivalent 94,879,323 -- -- 94,879,323
----------- ------------ ------------ ------------
TOTAL $94,879,323 $256,929,379 $523,789,453 $875,598,155
=========== ============ ============ ============
AETOS CAPITAL OPPORTUNITIES FUND, LLC
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
----------- ----------- ----------- ------------
Investments in Portfolio Funds $ -- $43,020,219 $76,149,822 $119,170,041
Cash equivalent 30,558,783 -- -- 30,558,783
----------- ----------- ----------- ------------
TOTAL $30,558,783 $43,020,219 $76,149,822 $149,728,824
=========== =========== =========== ============
18
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Portfolio Valuation and Security Transactions (continued)
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 1/31/10 $382,299,856 $401,585,040 $513,443,349 $76,403,140
Realized gain/(loss) -- 3,192,471 (3,605,467) (1,682,384)
Change in unrealized appreciation 18,568,287 11,753,804 572,604 5,398,015
Net purchase/sales 30,000,000 21,149,976 24,231,128 (3,968,949)
Net transfers in and/or out of
Level 3 (44,734,043) -- (10,852,161) --
------------ ------------ ------------ -----------
Ending Balance as of 7/31/10 $386,134,100 $437,681,291 $523,789,453 $76,149,822
============ ============ ============ ===========
All net realized gains and losses and changes in unrealized appreciation in the
preceding table are included in the Statements of Operations. The changes in net
unrealized appreciation/(depreciation) of investments in Portfolio Funds still
held by the Funds at July 31, 2010 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) $18,568,287 $11,517,686 $(2,984,878) $3,422,872
=========== =========== =========== ==========
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.
In January 2010, the FASB issued Accounting Standards Update ("ASU") No. 2010-6,
FAIR VALUE MEASUREMENTS AND DISCLOSURES (TOPIC 820): IMPROVING DISCLOSURES ABOUT
FAIR VALUE MEASUREMENTS. ASU No. 2010-6 enhances and clarifies existing fair
value measurement disclosure requirements and is effective for interim and
annual periods beginning after December 15, 2009. The Funds adopted ASU 2010-6
on February 1, 2010. The adoption of ASU No. 2010-6 did not have any impact on
the Funds' financial statements.
19
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Fund Income and Expenses
Each Fund bears its own expenses including, but not limited to: any taxes;
organizational expenses; offering costs; investment-related expenses incurred by
the Funds (e.g., fees and expenses charged by the Portfolio Managers and
Portfolio Funds, placement fees, professional fees, custody and administrative
fees). Most expenses of the Funds can be directly attributed to a particular
Fund. Expenses which cannot be directly attributed are apportioned among the
Funds based upon relative net assets or on another reasonable basis.
Interest income is recorded on an accrual basis and consists of interest earned
on cash and cash equivalents.
D. Income Taxes
Each Fund intends to continue to be treated as a partnership for Federal income
tax purposes. Each Member is responsible for the tax liability or benefit
relating to the Member's distributive share of taxable income or loss.
Accordingly, no provision for Federal income taxes is reflected in the
accompanying financial statements. The Funds withhold and pay taxes on U.S.
source income and U.S. effectively connected income, if any, allocated from
Portfolio Funds to the extent such income is not exempted from withholding under
the Internal Revenue Code and Regulations thereunder. The actual amount of such
taxes is not known until all Form K-1s from Portfolio Funds are received,
usually in the following tax year. Prior to the final determination the amount
of tax is estimated based on information available. The final tax could be
different from the estimated tax and the difference could be significant. Such
withholdings are listed as distributions in the Statements of Changes in
Members' Capital, and are allocated to the individual Members' Capital accounts
to which they apply.
E. Distribution Policy
The Funds have no present intention of making periodic distributions of their
net investment income or capital gains, if any, to Members. The amount and
frequency of distributions, if any, will be determined in the sole discretion of
the Board.
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.
20
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 investments
in Portfolio Funds and cash equivalent balance on the Statements of Assets and
Liabilities. The cost of the money market funds held at July 31, 2010 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 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 Program fee may also include 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 each 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 $35,500 and regular
quarterly meeting fees of $3,625 per meeting (additional meeting fees are $500
per meeting). The Chairman of the audit committee received an additional annual
retainer of $2,500. Any Manager who is an "interested person" does not receive
any annual or other fee from the Funds. All Managers are reimbursed by the Funds
for reasonable out-of-pocket expenses.
21
Notes to Financial Statements (continued)
3. INVESTMENT MANAGER FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
Net profits or net losses of the Funds for each fiscal period are allocated
among and credited to or debited against the capital accounts of Members as of
the last day of each fiscal period in accordance with each Member's respective
investment percentage for each Fund. Net profits or net losses are measured as
the net change in the value of the net assets of a Fund during a fiscal period,
before giving effect to any repurchases of Interests in the Fund, and excluding
the amount of any items to be allocated among the capital accounts of the
Members of the Fund, other than in accordance with the Members' respective
investment percentages.
4. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Portfolio Funds in which the Funds invest
trade various financial instruments and enter into various investment activities
with off-balance sheet risk. These include, but are not limited to, short
selling activities, writing option contracts, and equity swaps. The Funds' risk
of loss in these Portfolio Funds is limited to the value of these investments
reported by the Portfolio Funds.
5. 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. Many Portfolio Funds may also indefinitely suspend
redemptions or establish restrictions on the ability to fully receive proceeds
from redemptions through the application of a redemption restriction or "gate."
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 Funds invest primarily in Portfolio Funds that are not registered under the
1940 Act and invest in and actively trade securities and other financial
instruments using different strategies and investment techniques 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.
22
Notes to Financial Statements (continued)
5. RISK FACTORS (CONTINUED)
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.
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.
6. INVESTMENT TRANSACTIONS
For the six-month period ended July 31, 2010, purchases and sales of investments
in Portfolio Funds were as follows:
FUND PURCHASES SALES
- ---- ----------- ----------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $50,000,000 $ 568
Aetos Capital Distressed Investment Strategies Fund, LLC 30,250,000 9,100,024
Aetos Capital Long/Short Strategies Fund, LLC 60,000,000 768,871
Aetos Capital Opportunities Fund, LLC 7,184,460 6,153,409
7. INVESTMENTS
As of July 31, 2010, collectively the Funds had investments in forty-two
Portfolio Funds, none of which were related parties. 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.
23
Notes to Financial Statements (continued)
7. INVESTMENTS (CONTINUED)
The liquidity provisions shown in the following tables apply after any
applicable lock-up provisions.
NUMBER
OF % OF TOTAL
PORTFOLIO PORTFOLIO
FUNDS FUNDS
--------- ----------
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
Funds allowing monthly withdrawals (notice period of 30 days) 2 15.60%
Funds allowing quarterly withdrawals (notice periods ranging from 14 to 60 days) 3 23.64%
Funds allowing annual withdrawals (notice periods ranging from 45 to 90 days) 4 60.53%
Funds in liquidation 1 0.23%
NUMBER
OF % OF TOTAL
PORTFOLIO PORTFOLIO
FUNDS FUNDS
--------- ----------
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
Funds allowing quarterly withdrawals (notice periods ranging from 60 to 90 days) 3 31.65%
Funds allowing semi-annual withdrawals (notice period of 65 days) 1 18.03%
Funds allowing annual withdrawals (notice periods ranging from 60 to 90 days) 4 43.22%
Funds allowing bi-annual withdrawals (notice period of 90 days) 1 7.10%
NUMBER
OF % OF TOTAL
PORTFOLIO PORTFOLIO
FUNDS FUNDS
--------- ----------
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
Funds allowing monthly withdrawals (notice period of 30 days) 1 9.92%
Funds allowing quarterly withdrawals (notice periods ranging from 45 to 90 days) 7 54.40%
Funds allowing semi-annual withdrawals (notice periods ranging from 30 to 45 days) 2 14.27%
Funds allowing annual withdrawals (notice periods ranging from 30 to 45 days) 3 21.01%
Funds in liquidation 3 0.40%
NUMBER
OF % OF TOTAL
PORTFOLIO PORTFOLIO
FUNDS FUNDS
--------- ----------
AETOS CAPITAL OPPORTUNITIES FUND, LLC
Funds allowing monthly withdrawals (notice periods ranging from 5 to 30days) 2 36.10%
Funds allowing quarterly withdrawals (notice period of 45 days) 1 1.53%
Funds allowing semi-annual withdrawals (notice periods ranging from 30 to 65 days) 3 61.18%
Funds allowing annual withdrawals (notice periods ranging from 45 to 90 days) 2 1.19%
24
Notes to Financial Statements (continued)
7. INVESTMENTS (CONTINUED)
The following tables list the Funds' investments in Portfolio Funds as of July
31, 2010.
AETOS CAPITAL MULTI-STRATEGY ARBITRAGE FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2010 CAPITAL LIQUIDITY*
- ------------------- ------------------------------ ------------ ------------- -----------
AQR RT Fund, L.P. Quantitative Asset Allocation $ 40,948,538 7.01% Monthly
CNH CA Institutional Fund, L.P. Convertible Arbitrage 47,393,033 8.12 Quarterly
Davidson Kempner Partners Multi-Strategy/Event Arbitrage 90,800,165 15.55 Annual
Farallon Capital Offshore Investors, Inc. Multi-Strategy/Event Arbitrage 90,890,203 15.57 Annual
FFIP, L.P. Fixed Income Arbitrage 84,979,952 14.56 Annual
GMO Mean Reversion Fund (Onshore) Quantitative Asset Allocation 32,899,487 5.64 Quarterly
Ishin Fund LLC Convertible Arbitrage 51,522,479 8.83 Quarterly
Oceanwood Global
Opportunities Fund LP Multi-Strategy/Event Arbitrage 70,785,421 12.13 Annual
Parsec Trading Corp. Fixed Income Arbitrage 45,964,900 7.87 Monthly
Sowood Alpha Fund, LP Multi-Strategy/Event Arbitrage 1,285,326 0.22 Annual
------------ -----
$557,469,504 95.50%
------------ -----
AETOS CAPITAL DISTRESSED INVESTMENT STRATEGIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2010 CAPITAL LIQUIDITY*
- ------------------- ------------------------------ ------------ ------------- -----------
AG Mortgage Value Partners, L.P. Distressed Investments $ 38,832,664 8.46% Annual
Anchorage Capital Partners, L.P. Distressed Investments 76,287,539 16.63 Annual
Aurelius Capital Partners, LP Distressed Investments 78,913,700 17.20 Semi-Annual
Centerbridge Credit Partners, L.P. Distressed Investments 31,071,368 6.77 Bi-Annual
Davidson Kempner Distressed
Opportunites Fund LP Distressed Investments 43,840,085 9.56 Annual
King Street Capital, L.P. Distressed Investments 76,621,598 16.70 Quarterly
One East Partners, L.P. Distressed Investments 3,473,207 0.76 Quarterly
Silver Point Capital Fund, L.P. Distressed Investments 30,221,452 6.59 Annual
Watershed Capital Partners, L.P. Distressed Investments 58,419,678 12.73 Quarterly
------------ -----
$437,681,291 95.40%
------------ -----
* The liquidity of the Portfolio Funds may be further restricted due to
withdrawal limitations.
25
Notes to Financial Statements (continued)
7. INVESTMENTS (CONTINUED)
AETOS CAPITAL LONG/SHORT STRATEGIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2010 CAPITAL LIQUIDITY*
- ------------------- ------------------------------ ------------ ------------- -----------
Bay Pond Partners, L.P. Long/Short Equity Investments $ 49,753,519 5.70% Semi-Annual
Brookside Capital Partners Fund II, L.P. Long/Short Equity Investments 65,548,693 7.50 Quarterly
Cadian Fund LP Long/Short Equity Investments 58,130,177 6.65 Quarterly
Cadmus Capital Partners (QP), LP Long/Short Equity Investments 1,316,587 0.15 Quarterly
CamCap Energy, L.P. Long/Short Equity Investments 47,902,341 5.48 Quarterly
Conatus Capital Partners LP Long/Short Equity Investments 68,709,392 7.87 Quarterly
Copper River Partners, L.P. Short Equity Investments 966,816 0.11 Annual
Highside Capital Partners, L.P. Long/Short Equity Investments 38,285,268 4.38 Annual
Icarus Qualified Partners, L.P. Short Equity Investments 35,483,807 4.06 Annual
Joho Partners, L.P. Long/Short Equity Investments 61,652,807 7.06 Semi-Annual
MW European TOPS Fund Long/Short Equity Investments 77,475,416 8.87 Monthly
Millgate Partners II, L.P. Long/Short Equity Investments 70,592,047 8.08 Quarterly
North River Partners, L.P. Long/Short Equity Investments 57,975,280 6.64 Quarterly
Tiger Consumer Partners, L.P. Long/Short Equity Investments 55,775,093 6.39 Quarterly
Viking Global Equities LP Long/Short Equity Investments 90,272,626 10.33 Annual
Woodbourne Daybreak Global Fund, L.P. Long/Short Equity Investments 878,963 0.10 Quarterly
------------ -----
$780,718,832 89.37%
------------ -----
AETOS CAPITAL OPPORTUNITIES FUND, LLC
FAIR VALUE % OF MEMBERS'
PORTFOLIO FUND NAME STRATEGY 7/31/2010 CAPITAL LIQUIDITY*
- ------------------- ------------------------------ ------------ ------------- -----------
GMO Tactical Opportunities Fund (Onshore) Long/Short Equity Investments $ 15,138,753 10.14% Monthly
Joho Partners, L.P. Long/Short Equity Investments 31,459,402 21.06 Semi-Annual
Samlyn Onshore Fund, LP Long/Short Equity Investments 22,628,949 15.15 Semi-Annual
Sansar Capital, L.P. Long/Short Equity Investments 1,824,932 1.22 Quarterly
Sansar Capital Holdings, Ltd. Long/Short Equity Investments 401,755 0.27 Annual
Sheffield Institutional Partners, L.P. Event-Driven 1,008,097 0.67 Annual
Spindrift Partners, L.P. Real Assets 18,826,687 12.60 Semi-Annual
The Elkhorn Fund, LLC Long/Short Equity Investments 27,881,466 18.67 Monthly
------------ -----
$119,170,041 79.78%
------------ -----
* The liquidity of the Portfolio Funds may be further restricted due to
withdrawal limitations.
26
Notes to Financial Statements (concluded)
8. COMMITMENTS
At July 31, 2010, the Funds had made no commitments to purchase Portfolio Funds
and had submitted no redemption requests from the Portfolio Funds.
9. SUBSEQUENT EVENTS
Through September 1, 2010, the Funds paid no redemptions and received the
following contributions:
FUND AMOUNT
- ---- ----------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC $3,093,969
Aetos Capital Distressed Investment Strategies Fund, LLC 1,548,281
Aetos Capital Long/Short Strategies Fund, LLC 3,098,281
Aetos Capital Opportunities Fund, LLC 13,968
The following table summarizes the redemption requests received by the Funds
subsequent to July 31, 2010:
ESTIMATED REDEMPTION % OF
NUMBER OF AMOUNT SUBSEQUENT MEMBERS'
FUND INVESTORS TO 7/31/10 CAPITAL
- ---- --------- -------------------- --------
Aetos Capital Multi-Strategy Arbitrage Fund, LLC 32 $15,434,989 2.64%
Aetos Capital Distressed Investment Strategies Fund, LLC 32 14,886,132 3.24%
Aetos Capital Long/Short Strategies Fund, LLC 33 53,033,147 6.07%
Aetos Capital Opportunities Fund, LLC 27 13,018,813 8.72%
The Funds have evaluated the need for additional disclosures and/or adjustments
resulting from subsequent events through the date the financial statements were
issued. Based on this evaluation, no additional disclosures or adjustments were
required to the financial statements as of July 31, 2010.
27
Approval of Investment Advisory Agreements
July 31, 2010
(Unaudited)
At a meeting held in person on July 20, 2010, 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 non-advisory, 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.
28
Approval of Investment Advisory Agreements (concluded)
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.
29
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual report.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included as part of the report to shareholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual report.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable as Interests of the Fund are not registered pursuant to Section
12 of the Exchange Act.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's board of directors since the Registrant's
last proxy solicitation.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that have materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Not applicable for semi-annual report.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Aetos Capital Long/Short Strategies
Fund, LLC
By (Signature and Title)* /s/ Michael F. Klein
----------------------------------------
Michael F. Klein, President
Date: 10/1/10
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: 10/1/10
By (Signature and Title)* /s/ Scott D. Sawyer
----------------------------------------
Scott D. Sawyer, Treasurer
Date: 10/1/10
* Print the name and title of each signing officer under his or her
signature.