0001144204-18-050610.txt : 20180925 0001144204-18-050610.hdr.sgml : 20180925 20180925092417 ACCESSION NUMBER: 0001144204-18-050610 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20180731 FILED AS OF DATE: 20180925 DATE AS OF CHANGE: 20180925 EFFECTIVENESS DATE: 20180925 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETOS CAPITAL LONG/SHORT STRATEGIES FUND LLC CENTRAL INDEX KEY: 0001169583 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-21058 FILM NUMBER: 181084841 BUSINESS ADDRESS: STREET 1: CLIFFORD CHANCE US LLP STREET 2: 31 WEST 52ND STREET CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-201-2500 MAIL ADDRESS: STREET 1: AETOS ALTERNATIVES MANAGEMENT, LLC STREET 2: 875 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AETOS LONG SHORT STRATEGIES FUND LLC DATE OF NAME CHANGE: 20020320 N-CSRS 1 tv503347_n-csrs.htm N-CSRS

 

 

 

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, 2018

 

 

 

 

 

 

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

 

(Delaware Limited Liability Companies)

 

Financial Statements (Unaudited)

 

July 31, 2018

 

 

 

Table of Contents

 

Schedules of Investments 1
Statements of Assets and Liabilities 8
Statements of Operations 9
Statements of Changes in Members’ Capital 10
Statements of Cash Flows 12
Financial Highlights 13
Notes to Financial Statements 14
Approval of Continuation 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, 2018

 

 

Investments  Date(s) of
Acquisition
   Cost   Fair Value   Percentage
of Members'
Capital (1)
   Liquidity 
                     
Investments in Portfolio Funds**                         
Event Driven Arbitrage (3)                         
Davidson Kempner Partners   01/01/06 - 07/01/12   $55,852,249   $92,553,061    17.83%   Semi-Annual 
Farallon Capital Offshore Investors, Inc.   02/01/07 - 04/01/12    55,034,071    90,697,487    17.47    Semi-Annual* 
Governors Lane Onshore Fund LP   08/01/15 - 08/01/16    35,000,000    38,662,466    7.45    Quarterly* 
Luxor Capital Partners Liquidating SPV, LLC   07/01/16    331,382    431,976    0.08    Liquidating 
Oceanwood Opportunities Fund L.P.   02/01/12 - 07/01/16    50,729,279    70,862,724    13.65    Quarterly 
Total Event Driven Arbitrage        196,946,981    293,207,714    56.48      

 

The accompanying notes are an integral part of the financial statements.

 

 1

 

 

Aetos Capital Multi-Strategy Arbitrage Fund, LLC

Schedule of Investments (Unaudited)

July 31, 2018

 

Investments  Date(s) of
Acquisition
   Cost   Fair Value   Percentage
of Members'
Capital (1)
   Liquidity 
                     
Fixed Income Arbitrage (4)                         
FFIP, L.P.   01/01/07 - 04/01/12    45,626,936    97,484,691    18.78    Annual* 
Parsec Onshore Partners, L.P.   12/01/05 - 04/01/12    39,431,773    57,062,319    10.99    Monthly 
Total Fixed Income Arbitrage        85,058,709    154,547,010    29.77      
                          
Long/Short Credit (5)                         
Sound Point Credit Opportunities Fund, L.P.   01/01/17    30,000,000    32,641,657    6.29    Quarterly 
Total Long/Short Credit        30,000,000    32,641,657    6.29      
                          
Total investments in Portfolio Funds        312,005,690    480,396,381    92.54      
                          
Money Market Investment                         
JPMorgan U.S. Government Money Market Fund,                         
Agency Shares, 0.01%(2) (Shares 32,608,614)        32,608,614    32,608,614    6.28      
                          
Total investments       $344,614,304   $513,004,995    98.82%     

 

* The liquidity of the Portfolio Funds may be further restricted due to withdrawal limitations.

** Non-income producing investments.

 

(1) Percentages are based on Members’ Capital of $519,106,104.

(2) Rate disclosed is the 7-day effective yield as of 07/31/18.

(3) A Portfolio Fund in this strategy invests in securities of companies involved in certain special situations, including mergers, acquisitions, asset sales, spin-offs, balance sheet restructuring, bankruptcy and other situations. These special situations constitute an “event” which the Portfolio Manager believes will trigger a change in the price of securities relative to their current price or close the gap between securities that are being arbitraged.

(4) A Portfolio Fund in this strategy looks to exploit mispricings between related fixed income instruments, including sovereign debt, corporate debt and derivative instruments such as futures, options and swaps. Exploitable opportunities may be found in closely related securities trading at different prices, in the value between fixed income instruments and related derivative instruments, in the shape of yield curves and in credit spreads. These strategies typically require leverage in order to exploit relatively small mispricings.

(5) A Portfolio Fund in this strategy invests in long and short positions in various types of credit instruments such as senior and junior securities of the same corporate issuer, securities of equivalent credit quality from different corporate issuers and different tranches in the complex capital structure of mortgage-backed securities or collateralized loan obligations. The Portfolio Fund will tend to run its investment portfolio with a variable net exposure.

 

The aggregate cost of investments for tax purposes was $488,718,688. Net unrealized appreciation on investments for tax purposes was $24,286,307 consisting of $28,425,262 of gross unrealized appreciation and $4,138,955 of gross unrealized depreciation.

 

The investments in Portfolio Funds shown above, representing 92.54% of Members’ Capital, have been fair valued using NAV as a practical expedient.

 

The accompanying notes are an integral part of the financial statements.

 

 2

 

 

Aetos Capital Distressed Investment Strategies Fund, LLC

Schedule of Investments (Unaudited)

July 31, 2018

 

 

Investments  Date(s) of
Acquisition
   Cost   Fair Value   Percentage
of Members'
Capital (1)
   Liquidity
                    
Investments in Portfolio Funds***                       
Distressed - Long Biased (3)                       
AG Mortgage Value Partners, L.P.   03/01/12 - 05/01/13   $3,598,513   $5,111,169    1.55%  Side Pockets Only
Centerbridge Credit Partners, L.P.   06/01/10 - 05/01/16    30,488,383    43,275,100    13.09   Bi-Annual**
Davidson Kempner Distressed Opportunities Fund LP   11/01/09 - 05/01/13    31,491,740    60,749,910    18.38   Annual
Marble Ridge LP   12/01/16 - 02/01/17    25,000,000    28,387,473    8.59   Quarterly*
Silver Point Capital Fund, L.P.   07/01/08    390,994    927,838    0.28   Side Pockets Only
Total Distressed - Long Biased        90,969,630    138,451,490    41.89    

 

The accompanying notes are an integral part of the financial statements.

 

 3

 

 

Aetos Capital Distressed Investment Strategies Fund, LLC

Schedule of Investments (Unaudited)

July 31, 2018

 

Investments  Date(s) of
Acquisition
   Cost   Fair Value   Percentage
of Members'
Capital (1)
   Liquidity 
                     
Distressed - Variable Biased (4)                         
Anchorage Capital Partners, L.P.   09/01/08 - 07/01/16    32,213,735    59,559,080    18.02    Annual* 
Aurelius Capital Partners, LP   07/01/08 - 01/01/13    27,192,411    46,791,527    14.16    Semi-Annual* 
King Street Capital, L.P.   08/01/07 - 07/01/08    26,065,850    47,403,884    14.34    Quarterly* 
Total Distressed - Variable Biased        85,471,996    153,754,491    46.52      
                          
Distressed - Short Biased Credit (5)                         
Anchorage Short Credit Fund, L.P.   11/01/16 - 01/01/18    17,500,000    14,027,384    4.25    Monthly 
Total Distressed - Short Biased Credit        17,500,000    14,027,384    4.25      
                          
Total investments in Portfolio Funds        193,941,626    306,233,365    92.66      
                          
Money Market Investment                         
JPMorgan U.S. Government Money Market Fund, Agency Shares, 0.01%(2) (Shares 24,016,371)  
 
 
 
 
 
 
 
 
 
 
 
 
24,016,371
 
 
 
 
 
 
 
24,016,371
 
 
 
 
 
 
 
7.27
 
 
 
 
 
 
 
 
 
 
                          
Total investments       $217,957,997   $330,249,736    99.93%     

 

* The liquidity of the Portfolio Funds may be further restricted due to withdrawal limitations.

** All or a portion of the investment is subject to lock-up provision.

*** Non-income producing investments.

 

(1) Percentages are based on Members’ Capital of $330,491,385.

(2) Rate disclosed is the 7-day effective yield as of 07/31/18.

(3) A Portfolio Fund in this strategy invests in securities of companies in various levels of financial distress, including bankruptcy, exchange offers, workouts, financial reorganizations and other credit-related situations. Corporate bankruptcy or distress often causes a company’s securities to trade at a discounted value. The Portfolio Fund will tend to run its investment portfolio with a long bias net exposure.

(4) A Portfolio Fund in this strategy invests in securities of companies in various levels of financial distress, including bankruptcy, exchange offers, workouts, financial reorganizations and other credit-related situations. Corporate bankruptcy or distress often causes a company’s securities to trade at a discounted value. The Portfolio Fund will tend to run its investment portfolio with a variable net exposure.

(5) A Portfolio Fund in this strategy invests in securities of companies in various levels of financial distress, including bankruptcy, exchange offers, workouts, financial reorganizations and other credit-related situations. Corporate bankruptcy or distress often causes a company’s securities to trade at a discounted value. The Portfolio Fund will tend to run its investment portfolio with a short bias net exposure.

 

The aggregate cost of investments for tax purposes was $302,461,157. Net unrealized appreciation on investments for tax purposes was $27,788,579 consisting of $30,146,120 of gross unrealized appreciation and $2,357,541 of gross unrealized depreciation.

 

The investments in Portfolio Funds shown above, representing 92.66% of Members’ Capital, have been fair valued using NAV as a practical expedient.

 

The accompanying notes are an integral part of the financial statements.

 

 4

 

 

Aetos Capital Long/Short Strategies Fund, LLC

Schedule of Investments (Unaudited)

July 31, 2018

 

 

 

Investments  Date(s) of
Acquisition
   Cost   Fair Value   Percentage
of Members'
Capital (1)
   Liquidity
                    
Investments in Portfolio Funds***                       
Directional Equity (3)                       
Egerton Capital Partners, L.P.   05/01/11 - 05/01/15   $50,152,454   $92,082,788    9.45%  Monthly
Sachem Head LP   05/01/15 - 09/01/17    50,000,000    56,071,487    5.76   Quarterly*
Spindrift Partners, L.P.   01/01/17 - 01/01/18    3,110    4,683    0.00   Side Pockets Only
Total Directional Equity        100,155,564    148,158,958    15.21    

 

The accompanying notes are an integral part of the financial statements.

 

 5

 

 

Aetos Capital Long/Short Strategies Fund, LLC

Schedule of Investments (Unaudited)

July 31, 2018

 

Investments Date(s) of
Acquisition
Cost  Fair Value 

Percentage
of Members'

Capital (1)

  Liquidity
              
Equity Hedged - Generalist (4)                 
Eminence Partners, L.P.  01/01/14 - 01/01/17  61,000,000   76,509,343   7.86   Quarterly
Eton Park Fund, L.P.  05/01/15  619,236   789,230   0.08   Liquidating
Highfields Capital II LP  07/01/13 - 07/01/15  45,000,000   54,676,500   5.61   Semi Annual*
Lakewood Capital Partners, LP  05/01/17 - 09/01/17  65,000,000   67,365,016   6.92   Quarterly**
MW TOPS Fund  05/01/10 - 09/01/17  69,991,385   94,485,825   9.70   Monthly
Nitorum Fund, L.P.  12/01/17  35,000,000   35,304,029   3.62   Annual**
Turiya Fund LP  03/01/12 - 05/01/14  55,275,000   74,013,534   7.60   Quarterly*
Viking Global Equities LP  11/01/05 - 03/01/11  24,795,574   89,477,499   9.19   Annual
Total Equity Hedged - Generalist     356,681,195   492,620,976   50.58   
                  
Equity Hedged - Sector Specialist (5)                 
Cadian Fund LP  07/01/08 - 11/01/13  27,371,158   49,728,634   5.11   Quarterly*
Crescent Park Partners, L.P.  02/01/15  23,434,909   30,707,391   3.15   Semi-Annual*
Encompass Capital Fund L.P.  06/01/15 - 07/01/16  35,000,000   49,363,416   5.07   Quarterly*
Long Pond Capital QP Fund, LP  01/01/14 - 02/01/14  42,217,853   62,953,623   6.46   Quarterly*
North River Partners, L.P.  06/01/13 - 11/01/13  39,432,203   67,849,343   6.97   Quarterly
Total Equity Hedged - Sector Specialist     167,456,123   260,602,407   26.76   
                  
Short-Biased Equity (6)                 
Kriticos International Limited  01/01/12 - 12/01/17  64,007,196   34,079,485   3.50   Quarterly**
Total Short-Biased Equity     64,007,196   34,079,485   3.50   
                  
Total investments in Portfolio Funds     688,300,078   935,461,826   96.05   
                  
Money Market Investment                 
JPMorgan U.S. Government Money Market Fund,                 
Agency Shares, 0.01%(2) (Shares 39,975,818)     39,975,818   39,975,818   4.10   
                  
Total investments     $728,275,896  975,437,644   100.15%  

 

* The liquidity of the Portfolio Funds may be further restricted due to withdrawal limitations.

** All or a portion of the investment is subject to lock-up provision.

*** Non-income producing investments.

 

The accompanying notes are an integral part of the financial statements.

 

 6

 

 

Aetos Capital Long/Short Strategies Fund, LLC

Schedule of Investments (Unaudited)

July 31, 2018

 

(1) Percentages are based on Members’ Capital of $973,944,507.

(2) Rate disclosed is the 7-day effective yield as of 07/31/18.

(3) A Portfolio Fund in this strategy makes investments that combine long positions in undervalued common stocks or corporate bonds and short positions in overvalued common stocks or corporate bonds in order to focus on generating positive returns through the Portfolio Manager’s ability to select securities through fundamental analysis, while hedging out some portion of market risk. The Portfolio Fund will tend to run its investment portfolio with a relatively high or variable net exposure.

(4) A Portfolio Fund in this strategy makes investments that combine long positions in undervalued common stocks or corporate bonds and short positions in overvalued common stocks or corporate bonds in order to focus on generating positive returns through the Portfolio Manager’s ability to select securities through fundamental analysis, while hedging out some portion of market risk. The Portfolio Fund will tend to run its investment portfolio with a relatively low net exposure and will invest broadly across all market sectors.

(5) A Portfolio Fund in this strategy makes investments that combine long positions in undervalued common stocks or corporate bonds and short positions in overvalued common stocks or corporate bonds in order to focus on generating positive returns through the Portfolio Manager’s ability to select securities through fundamental analysis, while hedging out some portion of market risk. The Portfolio Fund will tend to run its investment portfolio with a relatively low net exposure and will focus on investing in specific market sectors.

(6) A Portfolio Fund in this strategy makes investments in short positions in overvalued common stocks or corporate bonds in order to focus on generating positive returns through the Portfolio Manager’s ability to select securities through fundamental analysis, while hedging out some portion of market risk. The Portfolio Fund will tend to run its investment portfolio with a permanent net short or short-only exposure.

 

The aggregate cost of investments for tax purposes was $916,883,663. Net unrealized appreciation on investments for tax purposes was $58,553,981 consisting of $103,845,000 of gross unrealized appreciation and $45,291,019 of gross unrealized depreciation.

 

The investments in Portfolio Funds shown above, representing 96.05% of Members’ Capital, have been fair valued using NAV as a practical expedient.

 

The accompanying notes are an integral part of the financial statements.

 

 7

 

 

Statements of Assets and Liabilities

 

July 31, 2018

 

(Unaudited)

 

  

Aetos Capital

Multi-Strategy

Arbitrage

Fund, LLC

  

Aetos Capital

Distressed

Investment

Strategies

Fund, LLC

  

Aetos Capital

Long/Short

Strategies

Fund, LLC

 
Assets               
Investments in Portfolio Funds and Money Market Investment, at cost  $344,614,304   $217,957,997   $728,275,897 
Investments in Portfolio Funds and Money Market Investment, at value  $513,004,995   $330,249,736   $975,437,644 
Investments in Portfolio Funds, in advance   7,500,000         
Receivable for sale of investments       1,234,761    96,218 
Accrued income   46,974    35,301    57,540 
Total assets   520,551,969    331,519,798    975,591,402 
                
Liabilities               
Redemptions of Interests payable   711,438    392,618    867,045 
Investment management fees payable   238,033    151,545    446,596 
Professional fees payable   463,097    454,583    288,353 
Board of Managers’ fees payable   19,854    19,854    19,854 
Other accrued expenses   13,443    9,813    25,047 
Total liabilities   1,445,865    1,028,413    1,646,895 
                
Net Members’ Capital  $519,106,104   $330,491,385   $973,944,507 
                
Members’ Capital               
Net capital  $350,715,413   $218,199,646   $726,782,760 
Net unrealized appreciation on investment in Portfolio Funds   168,390,691    112,291,739    247,161,747 
Members’ Capital  $519,106,104   $330,491,385   $973,944,507 

 

The accompanying notes are an integral part of the financial statements.

 

 8

 

 

 

Statements of Operations

 

For the six-month period ended July 31, 2018

 

(Unaudited)

 

   Aetos Capital
Multi-Strategy
Arbitrage
Fund, LLC
   Aetos Capital
Distressed
Investment
Strategies
Fund, LLC
   Aetos Capital
Long/Short
Strategies
Fund, LLC
 
Investment income:               
Dividends from money market funds  $230,119   $188,448   $241,463 
Total investment income   230,119    188,448    241,463 
                
Expenses:               
Investment management fees   1,408,627    896,937    2,638,356 
Administration fees   184,215    117,713    344,226 
Board of Managers’ fees   39,708    39,708    39,708 
Professional fees   243,424    231,679    199,649 
Custodian fees   33,063    24,094    56,266 
Registration fees   6,000    6,000    6,000 
Printing fees   7,500    7,500    7,500 
Other expenses   46,729    58,410    53,043 
Total expenses   1,969,266    1,382,041    3,344,748 
Net investment loss   (1,739,147)   (1,193,593)   (3,103,285)
                
Net realized gain on Portfolio Funds sold   268,160    440,368    1,737,499 
                
Net change in unrealized appreciation on investments in Portfolio Funds   6,445,432    7,146,721    (295,836)
Net increase/(decrease) in Members’ Capital derived from investment activities  $4,974,445   $6,393,496   $(1,661,622)

 

 

The accompanying notes are an integral part of the financial statements.

 

 9

 

 

Statements of Changes in Members’ Capital

 

For the six-month period ended July 31, 2018 and the year ended January 31, 2018

(Unaudited)

 

   Aetos Capital Multi-Strategy
Arbitrage Fund, LLC
   Aetos Capital Distressed
Investment Strategies Fund, LLC
 
   2/1/18 –   2/1/17 –   2/1/18 –   2/1/17 – 
   7/31/18   1/31/18   7/31/18   1/31/18 
From investment activities:                    
Net investment loss  $(1,739,147)  $(4,714,157)  $(1,193,593)  $(3,323,382)
Net realized gain on Portfolio Funds sold   268,160    33,717,876    440,368    43,612,369 
Net change in unrealized appreciation on investments in Portfolio Funds   6,445,432    7,901,434    7,146,721    (27,952,473)
Net increase in Members’ Capital derived from investment activities   4,974,445    36,905,153    6,393,496    12,336,514 
                     
Distributions:                    
Tax withholding on behalf of foreign investors   (95,301)   (338,129)   (89,911)   (893,332)
Refund of tax withholding on behalf of foreign investors   753    112,246    2,285    184,834 
Total distributions   (94,548)   (225,883)   (87,626)   (708,498)
                     
Members’ Capital transactions:                    
Proceeds from sales of Interests(1)   11,176,950    18,996,084    6,919,950    11,979,051 
Repurchase of Interests   (8,389,554)   (78,449,693)   (4,629,368)   (111,038,081)
Net increase/(decrease) in Members’ Capital derived from                    
capital transactions   2,787,396    (59,453,609)   2,290,582    (99,059,030)
Net increase/(decrease) in Members’ Capital   7,667,293    (22,774,339)   8,596,452    (87,431,014)
Members’ Capital at beginning of period   511,438,811    534,213,150    321,894,933    409,325,947 
Members’ Capital at end of period  $519,106,104   $511,438,811   $330,491,385   $321,894,933 

 

(1) Proceeds from sales of Interests during the period 2/1/18 - 7/31/18 include transfers amongst the Funds.

 

The accompanying notes are an integral part of the financial statements.

 

 10

 

 

Statements of Changes in Members’ Capital (Concluded)

 

For the six-month period ended July 31, 2018 and year ended January 31, 2018

 

(Unaudited)

 

   Aetos Capital Long/Short
Strategies Fund, LLC
 
   2/1/18 –   2/1/17 – 
   7/31/18   1/31/18 
From investment activities:          
Net investment loss  $(3,103,285)  $(7,926,157)
Net realized gain on Portfolio Funds sold   1,737,499    43,953,627 
Net change in unrealized appreciation on investments in Portfolio Funds   (295,836)   46,501,531 
Net increase/(decrease) in Members’ Capital derived from investment activities   (1,661,622)   82,529,001 
           
Distributions:          
Tax withholding on behalf of foreign investors   (199,365)   (1,225,452)
Refund of tax withholding on behalf of foreign investors   328    31,055 
Total distributions   (199,037)   (1,194,397)
           
Members’ Capital transactions:          
Proceeds from sales of Interests   16,719,150    29,122,586 
Repurchase of Interests(1)   (10,022,471)   (58,516,006)
Net increase/(decrease) in Members’ Capital derived from capital transactions   6,696,679    (29,393,420)
Net increase in Members’ Capital   4,836,020    51,941,184 
Members’ Capital at beginning of period   969,108,487    917,167,303 
Members’ Capital at end of period  $973,944,507   $969,108,487 

 

(1) Repurchases of Interests during the period 2/1/18 - 7/31/18 include transfers amongst the Funds.

 

The accompanying notes are an integral part of the financial statements.

 

 11

 

 

Statements of Cash Flows

 

For the six-month period ended July 31, 2018

 

   Aetos Capital
Multi-Strategy
Arbitrage Fund,
LLC
  

Aetos Capital

Distressed
Investment
Strategies Fund,
LLC

  

Aetos Capital
Long/Short

Strategies Fund,
LLC

 
Cash flows from operating activities               
Net increase/(decrease) in Members’ Capital derived from investment activities  $4,974,445   $6,393,496   $(1,661,622)
Adjustments to reconcile net increase/(decrease) in Members’ Capital derived from investment activities to net cash provided by/(used in) operating activities               
Purchases of Portfolio Funds   (7,500,000)       (765)
Net (Purchases)/Sales of Money Market Investments   9,660,930    4,982,555    (11,111,729)
Sales of Portfolio Funds   3,570,521    4,400,743    12,190,208 
Net realized gain on Portfolio Funds sold   (268,160)   (440,368)   (1,737,499)
Net change in unrealized appreciation on Investments in Portfolio Funds   (6,445,432)   (7,146,721)   295,836 
Increase in accrued income   (8,277)   (17,733)   (34,595)
Increase in investment management fees payable   3,516    3,942    2,217 
Increase in professional fees payable and other accrued expenses   100,786    106,084    23,354 
Increase in Board of Managers’ fees payable   771    771    771 
Net cash provided by/(used in) operating activities   4,089,100    8,282,769    (2,033,824)
                
Cash flows from financing activities               
Tax withholding on behalf of foreign investors   (95,301)   (89,911)   (199,365)
Refund of tax withholding on behalf of foreign investors   753    2,285    328 
Proceeds from sales of Interests   11,176,950    6,919,950    16,719,150 
Repurchases of Interests   (15,171,502)   (15,115,093)   (14,486,289)
Net cash provided by/(used in) financing activities   (4,089,100)   (8,282,769)   2,033,824 
                
Net change in cash            
Cash, beginning of period            
Cash, end of period            

 

The accompanying notes are an integral part of the financial statements.

 

 12

 

 

Financial Highlights 

 

   Aetos Capital Multi-Strategy Arbitrage Fund, LLC 
   2/1/18 -
7/31/18
   2/1/17 -
1/31/18
   2/1/16 -
1/31/17
   2/1/15 -
1/31/16
   2/1/14 -
1/31/15
   2/1/13 -
1/31/14
 
   (Unaudited)                     
Total return(1)   0.97%   7.35%   7.08%   (3.21)%   1.16%   7.30%
Net assets, end of period (000's)  $519,106   $511,439   $534,213   $640,726   $733,314   $752,547 
Ratios to average net assets:                              
Expenses(2)(3)   0.78%(4)   0.94%   0.95%   0.89%   0.89%   0.88%
Net investment loss   (0.69)%(4)   (0.90)%   (0.94)%   (0.89)%   (0.89)%   (0.88)%
Portfolio turnover rate(5)   0.00%   0.00%   14.96%   2.85%   0.00%   0.00%

 

   Aetos Capital Distressed Investment Strategies Fund, LLC 
   2/1/18 -
7/31/18
   2/1/17 -
1/31/18
   2/1/16 -
1/31/17
   2/1/15 -
1/31/16
   2/1/14 -
1/31/15
   2/1/13 -
1/31/14
 
   (Unaudited)                     
Total return(1)   1.98%   3.66%   10.98%   (4.30)%   3.06%   11.66%
Net assets, end of period (000's)  $330,491   $321,895   $409,326   $437,174   $501,507   $510,864 
Ratios to average net assets:                              
Expenses(2)(3)   0.86%(4)   0.98%   0.97%   0.94%   0.95%   0.94%
Net investment income/(loss)   (0.74)%(4)   (0.93)%   (0.37)%   (0.28)%   (0.40)%   0.19%
Portfolio turnover rate(5)   0.00%   5.88%   7.30%   0.37%   0.00%   2.46%

 

   Aetos Capital Long/Short Strategies Fund, LLC 
   2/1/18 -
7/31/18
   2/1/17 -
1/31/18
   2/1/16 -
1/31/17
   2/1/15 -
1/31/16
   2/1/14 -
1/31/15
   2/1/13 -
1/31/14
 
   (Unaudited)                     
Total return(1)   (0.17)%   9.17%   3.77%   0.90%   9.18%   10.86%
Net assets, end of period (000's)  $973,945   $969,108   $917,167   $1,052,009   $1,152,928   $1,096,591 
Ratios to average net assets:                              
Expenses(2)(3)   0.70%(4)   0.87%   0.88%   0.87%   0.87%   0.89%
Net investment loss   (0.65)%(4)   (0.84)%   (0.87)%   (0.87)%   (0.87)%   (0.89)%
Portfolio turnover rate(5)   0.00%   14.10%   4.83%   13.87%   14.44%   17.93%

 

(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)The expense ratios do not include the Program Fees charged separately to investors as described in Note 3 in the Notes to Financial Statements.
(4)Annualized.
(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

 

 

Notes to Financial Statements

 

July 31, 2018

 

(Unaudited)

 

1. Organization

 

The Aetos Capital Multi-Strategy Arbitrage Fund, LLC, the Aetos Capital Distressed Investment Strategies Fund, LLC, and the Aetos Capital Long/Short Strategies Fund, LLC (collectively the “Funds” and individually a “Fund”) were formed in the state of Delaware as limited liability companies. The Funds are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end, non-diversified, management investment companies. The Funds are investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 - Investment Companies, which is part of U.S. generally accepted accounting principles (“GAAP”). 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 that seek 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, 2018 the Feeder Funds’ beneficial ownership of their corresponding Master Funds’ members’ capital are 85%, 87%, 91%, 2%, 2% and 1%, for the Aetos Capital Multi-Strategy Arbitrage Cayman Fund, Aetos Capital Distressed Investment Strategies Cayman Fund, Aetos Capital Long/Short Strategies Cayman Fund, Aetos Capital Multi-Strategy Arbitrage Cayman Fund II, Aetos Capital Distressed Investment Strategies Cayman Fund II and Aetos Capital Long/Short Strategies Cayman Fund II respectively. The Investment Manager may receive an additional management fee and/or an incentive fee at the feeder fund level.

 

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.

 

 14

 

 

Notes to Financial Statements (Unaudited)(continued)

 

1. Organization (continued)

 

Interests may be purchased on the first business day of each calendar month or at such other times as may be determined by the Board.

 

The Funds may offer, from time to time, to repurchase outstanding members’ interests (“Interests”) pursuant to written tenders by members. The Funds may offer to repurchase Interests four times each year, as of the last business day of March, June, Septemer and December. However , repurchase offers will only 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 following table presents the repurchase offers that occurred during the period ended July 31, 2018:

 

Aetos Capital Multi-Strategy Arbitrage Fund, LLC

 

   Repurchase Offer #1   Repurchase Offer #2 
Commencement Date  March 1, 2018   June 1, 2018 
Repurchase Request Deadline  March 30, 2018   June 29, 2018 
Repurchase Pricing Date  March 30, 2018   June 29, 2018 
Amount Repurchased  $6,527,063   $1,862,491 

 

Aetos Capital Distressed Investment Strategies Fund, LLC

 

   Repurchase Offer #1   Repurchase Offer #2 
Commencement Date  March 1, 2018   June 1, 2018 
Repurchase Request Deadline  March 30, 2018   June 29, 2018 
Repurchase Pricing Date  March 30, 2018   June 29, 2018 
Amount Repurchased  $3,410,557   $1,218,811 

 

Aetos Capital Long/Short Strategies Fund, LLC

 

   Repurchase Offer #1   Repurchase Offer #2 
Commencement Date  March 1, 2018   June 1, 2018 
Repurchase Request Deadline  March 30, 2018   June 29, 2018 
Repurchase Pricing Date  March 30, 2018   June 29, 2018 
Amount Repurchased  $7,256,386   $2,743,285 

 

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:

 

 15

 

 

Notes to Financial Statements (Unaudited)(continued)

 

2. Significant Accounting Policies (continued)

 

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, and such differences could be material.

 

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.

 

The Investment Manager has established a Valuation Committee that has oversight responsibility for the valuation of each of the Funds’ investments in Portfolio Funds. Members of the Valuation Committee include key members of the Investment Manager’s Senior Management, Compliance, Due Diligence and Risk Management teams.

 

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. As a general matter, the fair value of the Funds’ interests in Portfolio Funds will represent the amount that the Funds could reasonably expect to receive from the Portfolio Funds if the Funds’ interests were redeemed at the time of the valuation, based on information reasonably available at the time the valuation is determined and that the Funds believe to be reliable.

 

B. Portfolio Valuation and Security Transactions

 

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 a 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.

 

Investments in open-end registered investment companies are valued at net asset value (“NAV”).

 16

 

 

Notes to Financial Statements (Unaudited)(continued)

 

2. Significant Accounting Policies (continued)

 

B. Portfolio Valuation and Security Transactions (continued)

 

The 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 and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation. 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 net asset value reported by the Portfolio Funds may be based upon unobservable inputs and a significant change in those unobservable inputs could result in a significantly lower or higher reported net asset value reported for such Portfolio Funds.

 

Valuations reflected in this report are as of the report date. As a result, changes in the valuation due to market events and/or issuer related events after the report date and prior to the issuance of the report are not reflected herein.

 

 17

 

 

Notes to Financial Statements (Unaudited)(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, 2018:

 

Aetos Capital Multi-Strategy Arbitrage Fund, LLC
Strategy

  Level 1   Level 2   Level 3   Total 
Investments in Portfolio Funds (1)  $   $   $   $480,396,381 
Money Market Investment   32,608,614            32,608,614 
Total Investments  $32,608,614   $   $   $513,004,995 

 

Aetos Capital Distressed Investment Strategies Fund, LLC
Strategy

  Level 1   Level 2   Level 3   Total 
Investments in Portfolio Funds (1)  $   $   $   $306,233,365 
Money Market Investment   24,016,371            24,016,371 
Total Investments  $24,016,371   $   $   $330,249,736 

 

Aetos Capital Long/Short Strategies Fund, LLC
Strategy

  Level 1   Level 2   Level 3   Total 
Investments in Portfolio Funds (1)  $   $   $   $935,461,826 
Money Market Investment   39,975,818            39,975,818 
Total Investments  $39,975,818   $   $   $975,437,644 

 

(1) In accordance with ASU 2015-07 investments in Portfolio Funds that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statements of Assets and Liabilities.

 

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

 

Expenses are recorded on an accrual basis. Each Fund bears its own expenses including, but not limited to, any taxes and investment-related expenses incurred by the Funds (e.g., fees and expenses charged by the Portfolio Managers and Portfolio Funds, 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.

 

Dividend income is recorded on the ex-dividend date.

 

 18

 

 

Notes to Financial Statements (Unaudited)(continued)

 

2. Significant Accounting Policies (continued)

 

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 foreign Members’ share of 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 recorded as distributions in the Statements of Changes in Members’ Capital, and are allocated to the individual Members’ Capital accounts to which they apply and are not an expense of the Funds.

 

The Investment Manager applies the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Investment Manager to determine whether a tax position of the Funds is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. However, the Investment Manager's conclusions regarding Accounting for Uncertainty in Income Taxes may be subject to review and adjustment at a later date based on on-going analyses of tax laws, regulations and interpretations thereof and other factors. Each of the Fund's federal, state and local tax returns for all open tax years remains subject to examination by the Internal Revenue Service and local tax authorities.

 

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 distributions are generally classified as investment income.

 

G. Cash

 

Cash is defined as cash on deposit at financial institutions.

 

 19

 

 

Notes to Financial Statements (Unaudited)(continued)

 

2. Significant Accounting Policies (continued)

 

H. New Accounting Pronouncements

 

In November 2016 the FASB issued Accounting Standards Update (“ASU”) 2016-18, Restricted Cash. This update requires the Statements of Cash Flows to explain the change during the period in total cash, cash equivalents and amounts generally described as restricted cash. As a result, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning and ending total amounts shown on the Statements of Cash Flows. The update is effective for fiscal years beginning after December 15, 2018. Management does not expect the adoption of this guidance to have a material effect on the financial statements.

 

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 0.55% 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 0.60% 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.

 

HedgeServ (Cayman) Ltd., a limited company incorporated in the Cayman Islands, (the “Administrator”) provides administration, accounting and investor services to the Funds. In consideration for such services, the Funds pay the Administrator a monthly fee based on their combined prior 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, 0.07% on net assets between $500 million and $750 million and 0.06% on net assets over $750 million, and will reimburse the Administrator for certain out-of-pocket expenses. Each Fund is allocated its pro-rata share of the monthly fee based upon its prior month-end members capital adjusted for capital activity.

 

JPMorgan Chase Bank, N.A. acts as the custodian (the “Custodian”) for the Funds’ assets. In consideration for such services, each Fund pays the Custodian a monthly fee, based on month-end assets under management, at an annual rate of up to 0.01%. Each Fund also pays the Custodian an annual fee of $7,500 per Cayman Feeder Fund to act as qualified Custodian for each Cayman feeder fund.

 

 20

 

 

Notes to Financial Statements (Unaudited)(continued)

 

3. Investment Manager Fee, Related Party Transactions and Other (continued)

 

Each Member of the Board who is not an “interested person” of the Funds as defined by the 1940 Act receives an annual retainer of $58,000 and regular quarterly meeting fees of $5,000 per meeting (additional meeting fees are $500 per meeting). The chairman of the audit committee receives an additional annual retainer of $4,250. Any Member of the Board of Managers who is an “interested person” does not receive any annual or other fee from the Funds. All Members of the Board of 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, use of leverage and swap contracts. The Funds’ risk of loss in these Portfolio Funds is limited to the value of their investments in 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, annually or biannually. 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 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.

 

 21

 

 

Notes to Financial Statements (Unaudited)(continued)

 

5. Risk Factors (continued)

 

Some of the Portfolio Funds in which the Funds invest may invest all or a portion of their assets in securities which are illiquid or, are subject to an anticipated event. These Portfolio Funds may create "side pockets" in which to hold these securities. Side pockets are series or classes of shares which are not redeemable by the investors but which are automatically redeemed or converted back into the Portfolio Fund’s regular series or classes of shares upon the realization of those securities or the happening of some other liquidity event with respect to those securities.

 

These “side pockets” can often be held for long periods before they are realized, and may therefore be much less liquid than the general liquidity offered on the Portfolio Fund’s regular series or classes of shares. Should the Funds seek to liquidate their investment in a Portfolio Fund that maintains investments in a side pocket arrangement or that holds a substantial portion of its assets in illiquid securities, the Funds might not be able to fully liquidate their investments without delay, which could be considerable. In such cases, during the period until the Funds are permitted to fully liquidate the investment in the Portfolio Fund, the value of the investment could fluctuate.

 

The Portfolio Funds may utilize leverage in pursuit of achieving a potentially greater investment return. The use of leverage exposes a Portfolio Fund to additional risk including (i) greater losses from investments than would otherwise have been the case had the Portfolio Fund not used leverage to make the investments; (ii) margin calls or interim margin requirements may force premature liquidations of investment positions; and (iii) losses on investments where the investment fails to earn a return that equals or exceeds the Portfolio Fund’s cost of leverage related to such investment. In the event of a sudden, precipitous drop in the value of a Portfolio Fund’s assets, the Portfolio Fund might not be able to liquidate assets quickly enough to repay its borrowings, further magnifying the losses incurred by the Portfolio Fund.

 

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 (Unaudited)(continued)

 

5. Risk Factors (continued)

 

The Funds invest in a limited number of Portfolio Funds and such concentrations 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.

 

The Funds and Portfolio Funds are also subject to the risk of losses arising in connection with cybersecurity incidents.

 

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 period ended July 31, 2018, purchases and sales of Portfolio Funds were as follows:

 

Fund  Purchases   Sales 
Aetos Capital Multi-Strategy Arbitrage Fund, LLC  $   $1,463,109 
Aetos Capital Distressed Investment Strategies Fund, LLC       1,178,538 
Aetos Capital Long/Short Strategies Fund, LLC   765    10,061,822 

 

7. Investments

 

As of July 31, 2018, collectively the Funds had investments in thirty-four 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 0.5% 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 generally provide for periodic redemptions, with lock-up provisions ranging up to 3 years from initial investment.

 

 23

 

 

Notes to Financial Statements (Unaudited)(continued)

 

7. Investments (continued)

 

The liquidity provisions shown in the following tables apply after any applicable lock-up provisions. Further liquidity detail is also provided in the Schedule of Investments.

 

     Number of
Portfolio
Funds
  

% of Total
Portfolio

Funds

 
Aetos Capital Multi-Strategy Arbitrage Fund, LLC          
Funds allowing monthly withdrawals (notice period of 30 days)   1    11.88%
Funds allowing quarterly withdrawals (notice periods ranging from 60 to 90 days)   3    29.59%
Funds allowing semi-annual withdrawals (notice periods ranging from 60 to 65 days)   2    38.15%
Funds allowing annual withdrawals (notice period of 60 days)   1    20.29%
Funds in liquidation   1    0.09%

 

  

 

Number of
Portfolio

Funds

   % of Total
Portfolio
Funds
 
Aetos Capital Distressed Investment Strategies Fund, LLC          
Funds allowing monthly withdrawals (notice period of 45 days)   1    4.58%
Funds allowing quarterly withdrawals (notice period of 65 days)   2    24.75%
Funds allowing semi-annual withdrawals (notice period of 65 days)   1    15.28%
Funds allowing annual withdrawals (notice periods ranging from 65 to 90 days)   2    39.29%
Funds allowing bi-annual withdrawals (notice period of 90 days)   1    14.13%
Funds fully comprised of side-pocket investments   2    1.97%

 

     Number of
Portfolio
Funds
   % of Total
Portfolio
Funds
 
Aetos Capital Long/Short Strategies Fund, LLC          
Funds allowing monthly withdrawals (notice period of 30 days)   2    19.94%
Funds allowing quarterly withdrawals (notice periods ranging from 30 to 65 days)   9    57.51%
Funds allowing semi-annual withdrawals (notice period of 60 days)   2    9.13%
Funds allowing annual withdrawals (notice periods ranging from 30 to 45 days)   2    13.34%
Funds fully comprised of side-pocket investments   1    0.00%
Funds in liquidation   1    0.08%

 

 24

 

 

Notes to Financial Statements (Unaudited)(continued)

 

8. Commitments

 

At July 31, the Funds had made the following commitments to purchase Portfolio Funds and made the following redemption requests from underlying Portfolio Funds.

 

Fund       Purchases    Amount 
     
Aetos Capital Multi-Strategy Arbitrage Fund, LLC       
GSA Trend Fund LP    $7,500,000 

 

Fund       Redemptions   Amount 
     
Aetos Capital Long/Short Strategies Fund, LLC      
Eton Park Fund, L.P.   $507,774 
MW TOPS Fund    30,000,000 
North River Partners, L.P.    5,000,000 
    $35,507,774 
       
Aetos Capital Multi-Strategy Arbitrage Fund, LLC      
Oceanwood Opportunities Fund L.P.   $10,000,000 
Parsec Onshore Partners, L.P.    7,500,000 
    $17,500,000 
       
Aetos Capital Distressed Investment Strategies Fund, LLC      
Anchorage Capital Partners, L.P.   $5,000,000 

 

9. Subsequent Events

 

Through September 1, 2018, the Funds made no repurchases of Interests and received the following contributions:

 

Fund  Amount 
Aetos Capital Multi-Strategy Arbitrage Fund, LLC  $388,900 
Aetos Capital Distressed Investment Strategies Fund, LLC   251,100 
Aetos Capital Long/Short Strategies Fund, LLC   629,500 

 

 25

 

 

Notes to Financial Statements (Unaudited)(continued)

 

9. Subsequent Events (continued)

 

The following table summarizes the repurchase requests received by the Funds subsequent to July 31, 2018, all of which are effective from September 30, 2018 to December 31, 2018:

 

Fund  Number of
Investors
   Estimated Redemption
Amount Subsequent to
7/31/18
   % of
Members’
Capital
 
Aetos Capital Multi-Strategy Arbitrage Fund, LLC   9   $51,113,564    9.85%
Aetos Capital Distressed Investment Strategies Fund, LLC   9   $26,481,854    8.01%
Aetos Capital Long/Short Strategies Fund, LLC   12   $75,588,019    7.76%

 

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, 2018.

 

 26

 

 

Approval of Continuation of Investment Advisory Agreements

 

July 31, 2018

 

(Unaudited)

 

At a meeting held in person on July 11, 2018, the Board of Managers of each Fund (the “Boards”), including the board members who are not "interested persons" of the Funds, as such term is defined in Section 2(a)(19) of the 1940 Act (the "Independent Board Members"), 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 continuation of the Investment Advisory Agreement for each Fund for an additional one-year term, 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 relevant Investment Advisory Agreement, including the selection of underlying hedge funds (“Portfolio Funds”), allocation of each Fund’s assets among, and monitoring performance of, Portfolio Funds, evaluation of risk exposure of Portfolio Funds and reputation, experience and training of Portfolio Funds’ investment managers (“Portfolio Managers”), management of short-term cash and operations of each Portfolio Fund, and day-to-day portfolio management and general due diligence examination of Portfolio Funds before and after committing assets of each Fund for investment. The Boards also reviewed and considered the nature and extent of the non-advisory, administrative services provided by 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 to each Fund 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 and its average return for its most recent three- and five-year periods as compared to the return of other comparable registered funds-of-hedge-funds for their most recent fiscal years and their average returns for their most recent three- and five-year periods. The Boards considered each Fund’s performance since inception and the relative lack of correlation of such performance to fixed income or equity indices generally. The Boards concluded that each Fund’s performance was satisfactory.

 

 27

 

 

Approval of Continuation of Investment Advisory Agreements (Unaudited)(continued)

 

Fees and Expense Ratios Relative to Comparable Funds Managed by Other Advisers

 

The Boards reviewed the management fee rate of 0.55% annually of the net asset value of each Fund (the “Management Fee”) and total expense ratio of each Fund. The Boards also reviewed the annual separate program fee (the "Program Fee") of up to 0.60% annually of an investor's assets in the investment program managed by the Investment Manager (the "Program") and the performance fee of up to 10% annually of aggregate Program net profits above the return of the 90 day Treasury Bill (the “Incentive Fee”) payable to the Investment Manager by Program 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 generally lower (and sometimes significantly lower) than or comparable to the fees payable to the advisers of most comparable registered funds-of-hedge-funds. The Boards concluded that each Fund’s Management Fee, the Program fee, the Incentive Fee and the Fund's 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 0.55% annually 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 the Investment Manager 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 also considered and reviewed information concerning the costs incurred and profits realized by the Investment Manager and its affiliates during the previous year. The Boards noted that the Funds’ investor base consists of sophisticated, mostly institutional 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 and, in fact, had experienced a decline over the last several years. 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.

 

 28

 

 

Approval of Continuation of Investment Advisory Agreements (Unaudited)(continued)

 

Other Benefits to the Investment Manager

 

The Boards considered other benefits received by the Investment Manager and its affiliates as a result of their relationships with the Funds and did not regard such benefits as excessive.

 

General Conclusion

 

After considering and weighing all of the above factors, the Board of each Fund, including the Independent Board Members, unanimously concluded that it would be in the best interest of such Fund and its Members to continue the Investment Advisory Agreements for an additional one-year term. No single factor reviewed by the Boards was identified by the Boards as the principal factor in determining whether to approve the continuation of each Investment Advisory Agreement, and each Board member attributed different weights to the various factors. Prior to voting, the Independent Board Members also discussed the proposed continuation of each Investment Advisory Agreement in private sessions with legal counsel for the Funds at which no representatives of the Investment Manager were present.

 

 

 

 

 

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.Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

Not applicable as the Fund does not engage in securities lending activities.

 

Items 13.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: 9/21/18    
     
     
     
     
     
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: 9/21/18    
     
     
By (Signature and Title)*   /s/ Scott D. Sawyer
    Scott D. Sawyer, Treasurer
     
Date: 9/21/18    
     
*     Print the name and title of each signing officer under his or her signature.
     
     

 

 

 

EX-99.CERT 2 tv503347_ex99-cert.htm CERTIFICATIONS

 

Exhibit 99.CERT

 

CERTIFICATION

Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

 

I, Michael F. Klein, certify that:

 

1. I have reviewed this report on Form N-CSR of Aetos Capital Long/Short Strategies Fund, LLC;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: September 21, 2018

 

/s/ Michael F. Klein      

Michael F. Klein
President

 

 

 

 

 

 

CERTIFICATION

Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

 

I, Scott D. Sawyer, certify that:

 

1. I have reviewed this report on Form N-CSR of Aetos Capital Long/Short Strategies Fund, LLC;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: September 21, 2018

 

/s/ Scott D. Sawyer     
Scott D. Sawyer
Treasurer

 

 

 

EX-99.906CERT 3 tv503347_ex99-906cert.htm CERTIFICATIONS

 

Exhibit 99.906CERT

 

 

CERTIFICATION

Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

 

 

The undersigned, the President of Aetos Capital Long/Short Strategies Fund, LLC (the "Fund"), with respect to the Fund’s Form N-CSR for the period ended July 31, 2018 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

1.        such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.        the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund.

 

 

Dated: September 21, 2018

 

 

/s/ Michael F. Klein      

Michael F. Klein

 

 

 

 

 

 

 

 

 

 

CERTIFICATION

Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

 

 

The undersigned, the Treasurer of Aetos Capital Long/Short Strategies Fund, LLC (the "Fund"), with respect to the Fund’s Form N-CSR for the period ended July 31, 2018 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

1.        such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.        the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund.

 

 

Dated: September 21, 2018

 

 

/s/ Scott D. Sawyer     

Scott D. Sawyer

 

 

 

 

 

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