UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21190
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC
(Exact name of registrant as specified in charter)
731 Lexington Avenue, 25th Floor
New York, NY 10022
(Address of principal executive offices) (Zip code)
Millie Kim, Esq.
Citigroup Alternative Investments LLC
731 Lexington Avenue, 28th Floor
New York, NY 10022
(Name and address of agent for service)
registrant's telephone number, including area code: (212) 816-4999
Date of fiscal year end: March 31
Date of reporting period: March 31, 2006
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
ANNUAL REPORT
MARCH 31, 2006
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC-
SERIES G
("MULTI-ADVISER-G" OR THE "PORTFOLIO") LETTER TO MEMBERS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMENTARY
================================================================================
Hedge fund strategies performed well in March, driven by long/short equity and
event driven strategies. Equity markets were strong globally, with Japan leading
the developed markets. Global fixed income markets sold off as the U.S. yield
curve steepened. Commodity prices advanced broadly. Global strategies were
mixed, as bond prices declined in anticipation of potential rate hikes.
Long/short equity strategies were positive due to powerful directional rallies
in industrials, materials and energy. Additionally, small-cap stocks continue to
outperform large-cap stocks. Event driven strategies were positive given the
favorable market environment for corporate activity. Distressed and performing
corporate credit strategies produced gains.
CITIGROUP ALTERNATIVE INVESTMENTS LLC
(INVESTMENT MANAGER)
- --------------------------------------------------------------------------------
PERFORMANCE
================================================================================
2006 RETURNS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YEAR
- -----------------------------------------------------------------------------------------------------------------------------
Multi-Adviser- G 2.71% 0.21% 2.06% 5.05%
HFRX Global HF Index 2.45% 0.17% 1.15% 3.80%
HFRI FOF Composite 2.89% 0.35% 1.50% 4.80%
S&P 500 2.65% 0.27% 1.25% 4.21%
Lehman Aggregate Bond 0.01% 0.33% -0.98% -0.64%
The indices are presented merely to show the general trends in the markets for
the period and are not intended to imply that the Portfolio is comparable to the
indices either in composition or element of risk. The indices do not reflect the
deductions of any fees. Index data is provided for comparison purposes only and
a variety of factors may cause an index to be an inaccurate benchmark for a
particular fund.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTORS CANNOT INVEST IN
AN INDEX.
MULTI-ADVISER- G HISTORICAL ANNUAL RETURNS*
YTD SINCE INCEPTION
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ANNUALIZED RETURN
- -----------------------------------------------------------------------------------------------------------------------------
8.26% 3.29% 5.68% 5.05% 6.88%
<FN>
* Multi-Adviser- G was launched in January 2003
</FN>
- --------------------------------------------------------------------------------
PORTFOLIO INFORMATION
================================================================================
PORTFOLIO COMPOSITION (AS OF APRIL 1, 2006)
- -------------------------------------------
AUM'S: $194 Million
NUMBER OF MANAGERS: 16
ATTRIBUTION (AS OF MARCH 31, 2006)
----------------------------------
STRATEGY MTD YTD
Global Macro GM 0.05% 0.59%
Equity Long/Short LS 1.80% 4.05%
Equity Arbitrage EA 0.25% 0.59%
Fixed Income Arbitrage FIA 0.04% 0.12%
Convertible Arbitrage CA 0.00% 0.00%
Merger Arbitrage MA 0.00% 0.00%
Distressed Debt DD 0.07% 0.10%
Multi-Strategy Event MSE 0.05% 0.11%
Credit Strategies CS 0.00% 0.00%
Event Driven Equity EDE 0.00% 0.00%
Cash and Cash Equivalents C 0.02% 0.07%
Fees and Expenses -0.22% -0.63%
- -------------------------------------------------------------
NET RETURN* 2.06% 5.05%
- -------------------------------------------------------------
LARGEST POSITION BY
STRATEGY
Manager name cannot be disclosed
North Sound Legacy Fund LLC
Ventus Fund LP
PIMCO Global Relative Value Fund
None
None
Golden Tree High Yield Fund Ltd
Canyon Value Realization Fund LP
None
None
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA FOLLOWS:
STRATEGY ALLOCATION (AS OF APRIL 1, 2006)
-----------------------------------------
LS 49%
EA 15%
GM 13%
MSE 7%
DD 5%
FIA 5%
CS 3%
C 2%
EDE 2%
* The year-to-date strategy and sub-strategy returns are based on monthly
returns that have been summed. The year-to-date net return is based on a
time-weighted rate of return using geometrically linked period returns. The net
return shown may be slightly different from the sum of the totals shown due to
rounding.
Note: Performance results are based on monthly returns, are unaudited from April
2005 to present, and are net of fees and expenses. The results shown above do
not reflect the effects of any placement fees and would be lower if they did.
Performance results prior to April 2005 have been audited. Additionally,
performance results after April 2005 are unaudited and are subject to change.
There were substantial changes in the senior management, investment personnel
and investment process of the Investment Manager during 2002 and 2005.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
[LOGO OMITTED]
CITIGROUP
ALTERNATIVE INVESTMENTS
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND
PORTFOLIOS LLC-SERIES G
("MULTI-ADVISER- G" OR THE "PORTFOLIO") LETTER TO MEMBERS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HISTORICAL MONTHLY PERFORMANCE
================================================================================
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YEAR
- -----------------------------------------------------------------------------------------------------------------
2006 2.71% 0.21% 2.06% 5.05%
2005 -0.31% 1.04% -1.01% -1.49% 0.13% 1.54% 1.86% 0.51% 1.63% -2.02% 1.72% 2.04% 5.68%
2004 1.25% 0.30% -0.01% -0.63% -0.91% 0.13% -0.34% -0.70% 0.86% 0.35% 2.12% 0.88% 3.29%
2003 0.59% 0.74% -0.26% 1.50% 2.21% 0.69% 0.37% 0.23% 0.51% 1.61% 0.66% 0.63% 8.26%
Note: Performance results are based on monthly returns, are unaudited from April
2005 to present, and are net of fees and expenses. The results shown above do
not reflect the effects of any placement fees and would be lower if they did.
Performance results prior to April 2005 have been audited. Additionally,
performance results after April 2005 are unaudited and are subject to change.
There were substantial changes in the senior management, investment personnel
and investment process of the Investment Manager during 2002 and 2005.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
- --------------------------------------------------------------------------------
PERFORMANCE STATISTICS
================================================================================
ANNUALIZED STANDARD CORRELATIONS*
RETURN* DEVIATION* -------------
MULTI-ADVISER- G S&P LABI HFRI INDEX MULTI-ADVISER- G BETA* WITH RESPECT TO:
---------------------------------------
MULTI- 6.88% 3.80% 1.00 S&P 500 0.26
ADVISER- G
S&P 500 14.65% 8.85% 0.60 1.00 LABI -0.04
LEHMAN HFRI INDEX 1.01
AGGREGATE BOND
INDEX 3.13% 4.02% -0.05 -0.04 1.00
HFRI INDEX 9.17% 3.49% 0.93 0.60 0.14 1.00
<FN>
*Based on monthly data for period 1/03 - 3/06.
</FN>
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTORS CANNOT INVEST IN
AN INDEX.
IMPORTANT INFORMATION
AS FURTHER DESCRIBED IN THE OFFERING DOCUMENTS, AN INVESTMENT IN ALTERNATIVE
INVESTMENTS CAN BE SPECULATIVE AND NOT SUITABLE FOR ALL INVESTORS. INVESTING IN
ALTERNATIVE INVESTMENTS IS ONLY INTENDED FOR EXPERIENCED AND SOPHISTICATED
INVESTORS WHO ARE WILLING TO BEAR THE HIGH ECONOMIC RISKS ASSOCIATED WITH SUCH
AN INVESTMENT. INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER POTENTIAL RISKS
BEFORE INVESTING. CERTAIN OF THESE RISKS MAY INCLUDE:
o LOSS OF ALL OR A SUBSTANTIAL PORTION OF THE INVESTMENT DUE TO LEVERAGING,
SHORT-SELLING, OR OTHER SPECULATIVE PRACTICES;
o LACK OF LIQUIDITY IN THAT THERE MAY BE NO SECONDARY MARKET FOR THE FUND AND
NONE IS EXPECTED TO DEVELOP;
o VOLATILITY OF RETURNS;
o RESTRICTIONS ON TRANSFERRING INTERESTS IN THE FUND;
o POTENTIAL LACK OF DIVERSIFICATION AND RESULTING HIGHER RISK DUE TO
CONCENTRATION OF TRADING AUTHORITY WHEN A SINGLE ADVISOR IS UTILIZED;
o ABSENCE OF INFORMATION REGARDING VALUATIONS AND PRICING;
o COMPLEX TAX STRUCTURES AND DELAYS IN TAX REPORTING;
o LESS REGULATION AND HIGHER FEES THAN MUTUAL FUNDS; AND
o ADVISOR RISK.
INDIVIDUAL FUNDS WILL HAVE SPECIFIC RISKS RELATED TO THEIR INVESTMENT PROGRAMS
THAT WILL VARY FROM FUND TO FUND.
THE OPINIONS EXPRESSED HEREIN OR IN THE FUND'S OFFERING DOCUMENTS MAY DIFFER
FROM OPINIONS EXPRESSED BY CITIGROUP OR ANY OF ITS AFFILIATES OR BUSINESSES, AND
ARE NOT INTENDED TO BE A FORECAST OF FUTURE EVENTS OR A GUARANTEE OF FUTURE
RESULTS. SEE "CERTAIN RISK FACTORS" IN THE PROSPECTUS.
SHARES OF CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND PORTFOLIOS
LLC INVOLVE SIGNIFICANT RISKS, ARE A SPECULATIVE INVESTMENT NOT SUITABLE FOR ALL
INVESTORS, SHOULD COMPRISE ONLY A PORTION OF ANY INVESTOR'S TOTAL PORTFOLIO, AND
SHOULD BE REGARDED AS A LONG-TERM INVESTMENT.
OPINIONS EXPRESSED IN THIS REPORT ARE INTENDED SOLELY AS GENERAL MARKET
COMMENTARY AND DO NOT CONSTITUTE INVESTMENT ADVICE OR A GUARANTEE OF RETURNS.
INFORMATION CONTAINED IN THIS REPORT IS SUBJECT TO CERTAIN CONFIDENTIALITY
REQUIREMENTS IMPOSED ON THE PORTFOLIO. ACCORDINGLY, EACH OF THE PORTFOLIO'S
INVESTORS MUST MAINTAIN THE CONFIDENTIALITY OF ALL INFORMATION CONTAINED HEREIN
AND MAY ONLY USE THIS REPORT IN FURTHERANCE OF THEIR INTERESTS AS AN INVESTOR IN
THE PORTFOLIO.
[LOGO OMITTED]
CITIGROUP
ALTERNATIVE INVESTMENTS
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC-
SERIES G
("MULTI-ADVISER- G" OR THE "PORTFOLIO") LETTER TO MEMBERS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
THIS DOCUMENT IS OFFERED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE
AN OFFER TO SELL ANY SECURITIES. AN OFFER OR SOLICITATION WILL BE MADE ONLY
THROUGH THE PROSPECTUS, LIMITED LIABILITY COMPANY AGREEMENT AND SUBSCRIPTION
AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY THE TERMS AND CONDITIONS CONTAINED
IN SUCH DOCUMENTS. THE PROSPECTUS CONTAINS ADDITIONAL INFORMATION NEEDED TO
EVALUATE THE INVESTMENT AND PROVIDES IMPORTANT DISCLOSURES REGARDING RISKS, FEES
AND EXPENSES. BEFORE MAKING AN INVESTMENT, POTENTIAL INVESTORS SHOULD CAREFULLY
READ THE PROSPECTUS, LIMITED LIABILITY COMPANY AGREEMENT, AND SUBSCRIPTION
AGREEMENT AND CONSULT THEIR PROFESSIONAL ADVISOR.
PLEASE NOTE THAT INVESTING IN CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER
HEDGE FUND PORTFOLIOS LLC IS NOT SUITABLE FOR ALL CLIENTS. THIS INVESTMENT IS
ILLIQUID AND IS NOT LISTED ON ANY EXCHANGE AND SHOULD BE REGARDED AS FIXED AND
LONG TERM. IT IS INTENDED FOR EXPERIENCED AND SOPHISTICATED INVESTORS WHO ARE
WILLING TO BEAR THE ECONOMIC RISKS OF THE INVESTMENT, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
CITIGROUP ALTERNATIVE INVESTMENTS LLC IS NOT ACTING AS THE ADVISOR OR AGENT FOR
CLIENTS PURCHASING SHARES, AND THUS CLIENTS CANNOT RELY ON CITIGROUP ALTERNATIVE
INVESTMENTS LLC IN CONNECTION WITH THEIR DECISION TO MAKE THIS INVESTMENT. THIS
DOCUMENT IS PRESENTED TO CLIENTS BASED ON THE UNDERSTANDING THAT EACH CLIENT HAS
SUFFICIENT KNOWLEDGE, EXPERIENCE AND PROFESSIONAL ADVICE TO MAKE ITS OWN
EVALUATION OF THE MERITS AND RISKS OF THIS INVESTMENT.
SHARES OF THE SERIES ARE BEING OFFERED IN THE U.S. BY SMITH BARNEY, WHICH IS A
DIVISION AND SERVICE MARK OF CITIGROUP GLOBAL MARKETS INC., MEMBER NASD/SIPC,
AND OTHER AUTHORIZED PLACEMENT AGENTS.
THIS INFORMATION IS CONFIDENTIAL AND INTENDED SOLELY FOR USE BY CITIGROUP
ALTERNATIVE INVESTMENTS LLC AND ITS AFFILIATES WITH ITS CLIENTS AND THEIR
ADVISERS. IT IS NOT TO BE REPRODUCED OR DISTRIBUTED EXCEPT WITH THE PERMISSION
OF CITIGROUP ALTERNATIVE INVESTMENTS LLC.
THE THIRD PARTY INFORMATION USED IN THIS DOCUMENT HAS BEEN OBTAINED FROM VARIOUS
PUBLISHED AND UNPUBLISHED SOURCES CONSIDERED TO BE RELIABLE. HOWEVER, CITIGROUP
INC. AND ITS AFFILIATES AND SUBSIDIARIES ("CITIGROUP") CANNOT GUARANTEE ITS
ACCURACY OR COMPLETENESS AND THUS DO NOT ACCEPT LIABILITY FOR ANY DIRECT OR
CONSEQUENTIAL LOSSES ARISING FROM ITS USE. IN ADDITION, CITIGROUP CAN ACCEPT NO
RESPONSIBILITY FOR THE TAX TREATMENT OF ANY INVESTMENT PRODUCT, WHETHER OR NOT
THE INVESTMENT IS PURCHASED BY A TRUST OR COMPANY ADMINISTERED BY AN AFFILIATE
OF CITIGROUP. CITIGROUP ASSUMES THAT, BEFORE MAKING ANY COMMITMENT TO INVEST,
THE INVESTOR (AND WHERE APPLICABLE, ITS BENEFICIAL OWNERS) HAVE TAKEN WHATEVER
TAX, LEGAL OR OTHER ADVICE THE INVESTOR/BENEFICIAL OWNERS CONSIDER NECESSARY AND
HAVE ARRANGED TO ACCOUNT FOR ANY TAX LAWFULLY DUE ON THE INCOME OR GAINS ARISING
FROM ANY INVESTMENT PRODUCT PROVIDED BY CITIGROUP. AT ANY TIME, CITIGROUP OR ITS
EMPLOYEES MAY HAVE A POSITION, SUBJECT TO CHANGE, IN ANY SECURITIES OR
INSTRUMENTS REFERRED TO, OR PROVIDE SERVICES TO THE ISSUERS OF THOSE SECURITIES
OR INSTRUMENTS. CITIGROUP ALTERNATIVE INVESTMENTS LLC IS AN INDIRECTLY WHOLLY
OWNED SUBSIDIARY OF CITIGROUP, AND SOME OR ALL OF THE PLACEMENT AGENTS AND THE
ADMINISTRATOR ARE ALSO AFFILIATES OF CITIGROUP AND CITIGROUP ALTERNATIVE
INVESTMENTS LLC. IN ADDITION, AS A DIVERSIFIED GLOBAL FINANCIAL SERVICES FIRM,
CITIGROUP (INCLUDING FOR PURPOSES OF THIS DISCUSSION, ITS SUBSIDIARIES AND OTHER
AFFILIATES) ENGAGES IN A BROAD SPECTRUM OF ACTIVITIES, INCLUDING FINANCIAL
ADVISORY SERVICES, ASSET MANAGEMENT ACTIVITIES, SPONSORING AND MANAGING PRIVATE
INVESTMENT FUNDS, ENGAGING IN BROKER-DEALER TRANSACTIONS, AND OTHER ACTIVITIES.
IN THE ORDINARY COURSE OF BUSINESS, CITIGROUP ENGAGES IN ACTIVITIES IN WHICH
CITIGROUP'S INTERESTS OR THE INTEREST OF ITS CLIENTS MAY CONFLICT WITH THE
INTEREST OF THE PORTFOLIO OR A SERIES OR THE INVESTORS. SPECIFIC EXAMPLES OF
SUCH CONFLICTS INCLUDE, BUT ARE NOT LIMITED TO: COMPETITION WITH OTHER CITIGROUP
AFFILIATES AND CITIGROUP SPONSORED FUNDS FOR INVESTMENT OPPORTUNITIES, THE FACT
THAT CITIGROUP MAY RECEIVE COMPENSATION FOR PERFORMING OTHER FINANCIAL SERVICES
FOR THE UNDERLYING INVESTMENT FUNDS AND RELATED PARTIES, CITIGROUP'S EXISTING
AND POTENTIAL CLIENT RELATIONSHIPS WITH A SIGNIFICANT NUMBER OF SPONSORS AND
MANAGERS OF INVESTMENT FUNDS, CORPORATIONS AND INSTITUTIONS, AND THE FACT THAT
CITIGROUP MAY STRUCTURE ITS PRODUCTS AND INVESTMENTS IN A MANNER THAT BENEFITS
CERTAIN INVESTORS MORE THAN OTHERS. INVESTORS SHOULD CONSULT THE PROSPECTUS FOR
A MORE DETAILED DESCRIPTION OF ACTUAL AND POTENTIAL CONFLICTS. THERE ALSO MAY BE
ADDITIONAL CONFLICTS AND NO ASSURANCE CAN BE GIVEN THAT SUCH CONFLICTS OF
INTEREST WILL BE RESOLVED IN FAVOR OF THE PORTFOLIO OR A SERIES OR THE
INVESTORS. IN ACQUIRING SHARES, AN INVESTOR WILL BE DEEMED TO HAVE ACKNOWLEDGED
THE EXISTENCE OF POTENTIAL CONFLICTS OF INTEREST RELATING TO CITIGROUP AND TO
THE COMPANY'S OR SERIES' OPERATING IN THE FACE OF THOSE CONFLICTS.
NON-CONFIDENTIALITY. AN INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER
AGENT OF THE INVESTOR) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION
OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF THE PORTFOLIO AND THE
TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR TAX ANALYSES)
THAT ARE PROVIDED TO THE INVESTOR RELATING TO SUCH TAX TREATMENT AND TAX
STRUCTURE.
U.S. TAX-REPORTING. INVESTORS WHO ARE REQUIRED TO FILE A U.S. FEDERAL TAX RETURN
MAY BE REQUIRED TO FILE AN ADDITIONAL FORM WITH THEIR RETURN AND A COPY WITH THE
INTERNAL REVENUE SERVICE.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE INFORMATION
AND INVESTMENT OPPORTUNITIES CONTAINED HEREIN ARE FOR INFORMATIONAL PURPOSES AND
ARE NOT TO BE CONSTRUED AS INDICATIVE OF THE FUTURE PERFORMANCE OR INVESTMENT
STRATEGY OF
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC.
CITIGROUP ALTERNATIVE INVESTMENTS LLC IS RELYING ON COMMODITY FUTURES TRADING
COMMISSION RULE 4.5 WITH RESPECT TO ITS OPERATION OF THE INVESTMENT PROGRAM OF
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISOR HEDGE FUND PORTFOLIOS LLC AND,
ACCORDINGLY, IS NOT SUBJECT TO REGISTRATION OR REGULATION AS A COMMODITY POOL
OPERATOR WITH RESPECT TO ITS OPERATION OF SUCH INVESTMENT PROGRAM.
THE SHARES ARE OFFERED TO POTENTIAL INVESTORS ON THE BASIS OF THE INFORMATION IN
THE PROSPECTUS. NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS OR PROVIDE
ANY INFORMATION RELATING TO THE SHARES WHICH ARE INCONSISTENT WITH OR NOT
OTHERWISE CONTAINED IN THE PROSPECTUS.
- ----------------------------------------------------------------------------
INVESTMENT PRODUCTS: - NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
- ----------------------------------------------------------------------------
[LOGO OMITTED]
CITIGROUP
ALTERNATIVE INVESTMENTS
[LOGO OMITTED]
KPMG
KPMG LLP Telephone 212 758 9700
345 Park Avenue Fax 212 758 9819
New York, NY 10154 Internet www.us.kpmg.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Members and Board of Directors
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC
- -Multi-Strategy Series G
We have audited the accompanying statement of assets and liabilities of
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios
LLC-Multi-Strategy Series G, including the schedule of investments, as of March
31, 2006, and the related statement of operations for the year then ended, the
statements of changes in members' capital for each of the years in the two-year
period then ended, the statement of cash flows for the year then ended, and the
financial highlights for each of the years in the three-year period then ended
and the period from January 1, 2003 (commencement of operations) to March 31,
2003. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included verification of
investments owned as of March 31, 2006, by inspection of investment subscription
documents and confirmation with underlying investment funds. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios
LLC-Multi-Strategy Series G, as of March 31, 2006, the results of its operations
and its cash flows for the year then ended, the changes in its members' capital
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the three-year period then ended and the
period from January 1, 2003 through March 31, 2003 in conformity with U.S.
generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
May 30, 2006
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2006
- --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 711,149
Investments in investment funds, at fair value (Cost: $139,225,657) 171,578,594
Prepaid subscriptions to investment funds 19,200,000
Receivable from investment funds 10,780,202
Other assets 191,677
-------------
TOTAL ASSETS 202,461,622
-------------
LIABILITIES
Redemptions payable 7,650,797
Contributions received in advance 5,986,025
Management fee payable 267,814
Accounts payable and accrued expenses 440,626
-------------
TOTAL LIABILITIES 14,345,262
-------------
MEMBERS' CAPITAL (151,511.015 UNITS OUTSTANDING) $ 188,116,360
=============
NET ASSET VALUE PER UNIT $ 1,241.60
=============
COMPOSITION OF NET ASSETS
Paid-in Capital $ 162,538,571
Accumulated net investment income/(loss) (164,869)
Accumlated net realized gain/(loss) on investment transactions (6,610,279)
Net unrealized appreciation on investments 32,352,937
-------------
Net Assets $ 188,116,360
=============
The accompanying notes are an integral part of these financial statements.
-2-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
SCHEDULE OF INVESTMENTS
MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF MEMBERS'
COST FAIR VALUE CAPITAL
INVESTMENTS IN INVESTMENT FUNDS
FIXED INCOME ARBITRAGE
PIMCO Global Relative Value Fund, Ltd - b $ 9,778,469 $ 10,076,660 5.36%
EVENT DRIVEN
Canyon Value Realization Fund, L.P. - b $ 7,550,000 $ 9,117,606 4.85%
GoldenTree High Yield Partners, Ltd. - b 8,768,666 9,087,526 4.83%
EQUITY ARBITRAGE
CFM Ventus Fund L.P. - a $ 14,000,000 $ 12,943,701 6.88%
Frontpoint Offshore Utility & Energy Fund LP - b 9,808,522 10,186,062 5.41%
Stratus Fund Ltd - Class C - a 5,000,000 5,380,115 2.86%
DISCRETIONARY
Basswood Opportunity Partners L.P.- b $ 12,000,000 $ 13,445,895 7.15%
Chilton Small Cap Partners, L.P. Class A - c 8,720,000 12,026,527 6.39%
Delta Fund Europe L.P. - b 8,500,000 13,335,070 7.09%
Delta Institutional, L.P. - b 2,100,000 14,207,854 7.55%
North Sound Legacy Institutional, LLC. - b 11,000,000 14,261,234 7.58%
Renaissance Institutional Equities Fund L.P. - a 10,000,000 10,773,210 5.73%
Telluride Capital Fund LLC - a 18,000,000 20,469,852 10.88%
Torrey Pines Fund LLC - b 4,000,000 4,788,374 2.55%
Trellus Partners L.P.- b 10,000,000 11,478,908 6.10%
-----------------------------------------
TOTAL INVESTMENTS IN INVESTMENT FUNDS $139,225,657 $171,578,594 91.21%
OTHER ASSETS, LESS LIABILITIES $ 16,537,766 8.79%
--------------- ----------
MEMBERS' CAPITAL $188,116,360 100.00%
=============== ==========
Note: Investments in underlying Investment Funds are categorized by investment
strategy.
<FN>
a - Redemptions permitted monthly
b - Redemptions permitted quarterly
c - Redemptions permitted annually
</FN>
The accompanying notes are an integral part of these financial statements.
-3-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2006
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 484,702
-------------
TOTAL INVESTMENT INCOME 484,702
-------------
EXPENSES
OPERATING EXPENSES:
Management fees 3,438,933
Professional fees 753,471
Administration fees 581,381
Marketing fees 21,514
Directors' fees and expenses 13,778
Custodian fees 12,319
Miscellaneous expenses 191,387
-------------
TOTAL EXPENSES 5,012,783
-------------
NET INVESTMENT LOSS (4,528,081)
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 10,114,280
Net change in unrealized appreciation on investments 15,083,234
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 25,197,514
-------------
INCREASE IN MEMBERS' CAPITAL DERIVED FROM INVESTMENT ACTIVITIES $ 20,669,433
=============
The accompanying notes are an integral part of these financial statements.
-4-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEARS ENDED MARCH 31, 2006 AND 2005
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, 2006 MARCH 31, 2005
-------------- --------------
FROM INVESTMENT ACTIVITIES
Net investment loss $ (4,528,081) $ (5,428,210)
Net realized gain on investments 10,114,280 812,524
Net change in unrealized appreciation on investments 15,083,234 8,545,992
------------- -------------
INCREASE IN MEMBERS' CAPITAL
DERIVED FROM INVESTMENT ACTIVITIES 20,669,433 3,930,306
MEMBERS' CAPITAL TRANSACTIONS
Capital contributions 22,456,925 119,438,511
Capital withdrawals (60,092,662) (21,564,435)
------------- -------------
INCREASE (DECREASE) IN MEMBERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS (37,635,737) 97,874,076
MEMBERS' CAPITAL AT BEGINNING OF YEAR 205,082,664 103,278,282
------------- -------------
MEMBERS' CAPITAL AT END OF YEAR (151,511.015
AND 183,915.383 UNITS OUTSTANDING AT MARCH 31,
2006 AND 2005, RESPECTIVELY) $ 188,116,360 $ 205,082,664
============= =============
The accompanying notes are an integral part of these financial statements.
-5-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 2006
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in members' capital derived from investment activities $ 20,669,433
Adjustments to reconcile net increase in members' capital derived
from investment activities to net cash provided by operating activities:
Purchases of investments in investment funds (97,761,748)
Proceeds from disposition of investments in investment funds 129,582,048
Net realized gain on investments in investment funds (15,083,234)
Net unrealized gain on investments in investment funds (10,114,280)
Changes in operating assets and liabilities:
Decrease in receivable from investment funds 11,279,988
Increase in receivable from investment funds (19,200,000)
Increase in other assets (142,568)
Decrease in management fee payable (1,697,988)
Decrease in accounts payable and accrued expenses (353,171)
--------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,178,480
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 26,102,025
Capital withdrawals (61,124,210)
--------------
NET CASH USED IN FINANCING ACTIVITIES (35,022,185)
Net decrease in cash and cash equivalents (17,843,705)
Cash and cash equivalents at beginning of year 18,554,854
--------------
Cash and cash equivalents at end of year $ 711,149
==============
Supplemental non-cash information:
Included in capital contributions and capital withdrawals on the accompanying
Statement of Changes in Members' Capital for the year ended March 31, 2006, are
changes in contributions received in advance of $3,645,100 and redemptions
payable of $1,031,548, respectively.
The accompanying notes are an integral part of these financial statements.
-6-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
JANUARY 1, 2003
(COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS)
MARCH 31, 2006 MARCH 31, 2005 MARCH 31, 2004 TO MARCH 31, 2003
NET ASSET VALUE, BEGINNING OF PERIOD: $ 1,115.09 $ 1,099.37 $ 995.86 $ 1,000.00
============== ============== ================ =============
INCOME FROM INVESTMENT OPERATIONS***:
Net investment loss (26.88) (32.25) (36.19) (12.87)
Net realized and unrealized gain on investments 153.39 47.97 139.70 8.73
-------------- -------------- ---------------- -------------
TOTAL FROM INVESTMENT OPERATIONS 126.51 15.72 103.51 (4.14)
-------------- -------------- ---------------- -------------
NET ASSET VALUE, END OF PERIOD: $ 1,241.60 $ 1,115.09 $ 1,099.37 $ 995.86
============== ============== ================ =============
TOTAL RETURN 11.35% 1.43% 10.39% (0.41%)**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $ 188,116,360 $ 205,082,664 $ 103,278,282 $ 38,426,667
============== ============== ================ =============
Portfolio turnover 57.90% 25.24% 21.29% 29.92% *
Ratio of expenses to average net assets 2.60% 3.06% 3.43% 5.28% *
Ratio of net investment loss to average net assets (2.35%) (2.95%) (3.40%) (5.22%)*
<FN>
* Annualized.
** Total return for a period of less than a full year is not annualized.
*** Per unit data for income from investment operations is computed using the
total of monthly income and expense divided by beginning of month units.
</FN>
THE ABOVE RATIOS MAY VARY FOR INDIVIDUAL INVESTORS BASED ON THE TIMING OF
CAPITAL TRANSACTIONS DURING THE PERIOD.
The accompanying notes are an integral part of these financial statements.
-7-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006
- --------------------------------------------------------------------------------
1. ORGANIZATION
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios
LLC (the "Company" or "Fund") was organized as a Delaware Limited
Liability Company on August 16, 2002. The Company is registered under
the Investment Company Act of 1940 (the "1940 Act") as amended, as a
closed-end, non-diversified management investment company. The Company
is also registered under the Securities Act of 1933 ("1933 Act"). The
Company consists of two separate series, Multi-Strategy Series M and
Multi-Strategy Series G (each a "Series"). The financial statements
included herein are for Multi-Strategy Series G. The investment
objective of Multi-Strategy Series G is to achieve capital appreciation
principally through investing in investment funds ("Investment Funds")
managed by third-party investment managers ("Investment Managers") that
employ a variety of alternative investment strategies. These investment
strategies allow Investment Managers the flexibility to use leverage or
short-side positions to take advantage of perceived inefficiencies
across the global markets, often referred to as "alternative"
strategies. Because Investment Funds following alternative investment
strategies are often described as hedge funds, the investment program
of Multi-Strategy Series G can be described as a fund of hedge funds.
Shares of Multi-Strategy Series G are sold to eligible investors
(referred to as "Members"). The minimum initial investment in
Multi-Strategy Series G from each Member is $25,000 (and was $50,000
from January 1, 2003 to November 1, 2003); the minimum additional
investment is $10,000.
Citigroup Alternative Investments LLC ("CAI" or "the "Adviser"), a
Delaware limited liability company and indirect, wholly owned
subsidiary of Citigroup Inc., serves as Multi-Strategy Series G's
investment adviser. The Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and, among other
things, is responsible for the allocation of Multi-Strategy Series G's
assets to various Investment Funds. AMACAR Partners, Inc. was the
managing member of Multi-Strategy Series G prior to the conversion to a
regulated investment company. As of October 1, 2005, under the
Multi-Strategy Series G's governing documents, the Company has
delegated substantially all authority to oversee the management of the
operations and assets of Multi-Strategy Series G to the Board of
Directors.
2. SIGNIFICANT ACCOUNTING POLICIES
Investments in Investment Funds are subject to the terms of the
respective limited partnership agreements, limited liability company
agreements and offering memoranda. Multi-Strategy Series G values these
investments at fair value based on financial data supplied by the
Investment Funds.
A. PORTFOLIO VALUATION
The net asset value of Multi-Strategy Series G is 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 of Directors.
-8-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
Multi-Strategy Series G's investments in Investment Funds are carried
at fair value as determined by Multi-Strategy Series G's pro-rata
interest in the net assets of each Investment Fund. All valuations
utilize financial information supplied by each Investment Fund and are
net of management and performance incentive fees or other allocations
payable to the Investment Funds' managers as required by the Investment
Funds' agreements. Each Investment Manager to which the Adviser
allocates assets will charge Multi-Strategy Series G, as investor in an
underlying Investment Fund, an asset-based fee, and some or all of the
Investment Managers will receive performance-based compensation in the
form of an incentive fee. The asset-based fees of the Investment
Managers are generally expected to range from 1% to 3% annually of the
net assets under their management and the incentive fee is generally
expected to range from 15% to 25% of net profits annually.
As a general matter, the fair value of Multi-Strategy Series G's
investment in an Investment Fund represents the amount that
Multi-Strategy Series G can reasonably expect to receive from an
Investment Fund if Multi-Strategy Series G's investment were redeemed
at the time of valuation, based on information available at the time.
The Investment Funds provide for periodic redemptions ranging from
monthly to annually. Investment Funds generally require advance notice
of a Member's intent to redeem its interest, and may, depending on the
Investment Funds' governing agreements, deny or delay a redemption
request. Multi-Strategy Series G does not factor into its valuation a
liquidity discount on any Investment Funds held. The underlying
investments of each Investment Fund are accounted for at fair value as
described in each Investment Fund's financial statements. The
Investment Funds may invest a portion of their assets in restricted
securities and other investments that are illiquid.
B. FUND EXPENSES
Multi-Strategy Series G bears all expenses incurred in the course of
its operations, including, but not limited to, the following: all costs
and expenses related to portfolio transactions and positions for
Multi-Strategy Series G's account; professional fees; costs of
insurance; registration expenses; and expenses of meetings of the Board
of Directors. Costs incurred in connection with the initial offering
were deferred and amortized over the first twelve months of operations;
costs incurred in connection with Multi-Strategy Series G's subsequent
registration under the 1933 Act have been deferred and were amortized
over the twelve months commencing after the effective date of such
registration statement.
C. INCOME TAXES
Multi-Strategy Series G operated as a partnership and not as an
association or publicly traded partnership taxable as a corporation for
U.S. federal income tax purposes from inception through September 30,
2005. As of September 30, 2005, Multi-Strategy Series G became a
corporation that will be taxed as a regulated investment company.
It is Multi-Strategy Series G's policy to meet the requirements of the
Internal Revenue Code
-9-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
applicable to regulated investment companies (RIC) and distribute
substantially all of its taxable net investment income and capital
gains, if any, to shareholders each year. Therefore, no federal income
or excise tax provision is typically required for Multi-Strategy Series
G's financial statements. However, during fiscal 2006, the Fund
incurred $14,590 of excise tax which is recognized as a component of
Miscellaneous expenses. This expense was attributable to the conversion
to RIC status.
D. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of monies invested in a PNC Bank,
N.A. account that earn money market rates and are accounted for at cost
plus accrued interest.
E. CONTRIBUTIONS RECEIVED IN ADVANCE
Contributions received in advance of $5,986,025 represent funds
received for subscriptions to be credited to Members' capital accounts
on April 1, 2006.
F. RECEIVABLE FROM INVESTMENT FUNDS
Receivable from investment funds of $10,780,202 represents amounts due
to Multi-Strategy Series G for sales of interests in certain investment
funds. Of this receivable, $10,724,208 is receivable from the March 31,
2006 sale of The Capital Hedge Fund Ltd., and was received by the
Company on April 19, 2006. The remaining $55,994 is receivable from the
June 30, 2005 sale of Post Opportunity Fund, L.P., and is expected to
be received by the Fund upon completion of the Post Opportunity Fund's
2005 audit.
G. USE OF ESTIMATES
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires the Adviser to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The Adviser believes that
the estimates utilized in preparing Multi-Strategy Series G's financial
statements are reasonable and prudent; however, actual results could
differ from these estimates.
3. MANAGEMENT FEE, ADMINISTRATIVE FEE, RELATED PARTY
TRANSACTIONS AND OTHER
CAI, as Adviser, provides certain management and administrative
services to Multi-Strategy Series G. CAI acts primarily to evaluate and
select Investment Managers, to allocate assets, to establish and apply
risk management procedures, and to monitor overall investment
performance. In addition, CAI also provides office space and other
support services. In consideration for such services, Multi-Strategy
Series G will pay the Adviser a monthly management fee based on end of
month Members' capital. The Adviser will pay a portion of the fee to
its affiliates.
-10-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
Effective August 1, 2005, the Board of Directors approved a reduction
in the management fee to 1.5% of net assets annually (from 2.25%
annually).
In addition, CAI allocated certain marketing fees of $21,514 to
Multi-Strategy Series G during the year ended March 31, 2006.
Placement agents may be retained by the Company to assist in the
placement of Fund Shares. A placement agent affiliated with the Adviser
will generally be entitled to receive a fee from each investor in the
Company whose shares the agent places. The specific amount of the
placement fee paid with respect to a Member is generally dependent on
the size of the investment in a Series. Placement agents may also be
reimbursed by the Company with respect to certain out-of-pocket
expenses.
Citigroup Global Markets, Inc. ("CGM"), an affiliate of CAI and a
wholly owned subsidiary of Citigroup, Inc. serves as a placement agent
of the Multi-Strategy Series G shares. For the year ended March 31,
2006, CGM earned $194,725 in placement fees on Multi-Strategy Series G
shares. Such fees are deducted from an investor's gross contribution
amount.
The Company has entered into agreements with third parties to act as
additional placement agents for Multi-Strategy Series G shares.
Placement fees may range from 0 to 3%. In addition, the Adviser, and/or
its affiliates, will pay the placement agents an annual fee, payable
monthly in arrears. The fee shall be paid from the Adviser's own
resources (or those of its affiliates).
Prior to October 1, 2005 Multi-Strategy Series G paid CAI a monthly fee
of 0.025% (0.30% on an annualized basis) for administration based
primarily upon average net assets, subject to a minimum monthly fee,
and reimbursed certain expenses. CAI, as Administrator, retained PFPC
Inc. ("PFPC"), an independent third party and wholly-owned subsidiary
of The PNC Financial Services Group, to assist in the performance of
its administrative duties. On October 1, 2005 a restructuring of this
arrangement took affect. Under the new arrangement CAI and PFPC have
separate agreements with the Company and act as co-administrators to
the Company. CAI, as co-administrator, no longer receives a monthly fee
for their administrative services to the Company. PFPC will continue to
provide certain accounting, record keeping, tax and investor related
services. Fees for their services would be charged directly to the
Company.
Each Director who is not an "interested person" of the Company, as
defined by the 1940 Act, receives an annual retainer of $10,000 plus a
fee per meeting of the Board of Directors of $1,000. Such Director fees
are allocated to each series pro-rata, based on the relative net assets
of each series. Any Director who is an "interested person" does not
receive any annual or other fee from the Company. All Directors are
reimbursed for all reasonable out of pocket expenses. Total amounts
expensed related to Directors by Multi-Strategy Series G for the year
ended March 31, 2006 were $13,778.
PFPC Trust Company (an affiliate of PFPC) serves as custodian of
Multi-Strategy Series G's assets
-11-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
and provides custodial services for Multi-Strategy Series G. Fees
payable to the custodian and reimbursement for certain expenses are
paid by Multi-Strategy Series G.
4. SECURITIES TRANSACTIONS
The following table lists the aggregate purchases and proceeds from
sales of Investment Funds for the year ended March 31, 2006, net
unrealized appreciation, gross unrealized appreciation, and gross
unrealized depreciation as of March 31, 2006.
Cost of purchases $ 97,761,748
Proceeds from sales $ 129,582,048
Gross unrealized appreciation $ 33,409,236
Gross unrealized depreciation $ 1,056,299
---------------
Net unrealized appreciation $ 32,352,937
--------------
5. CONTRIBUTIONS, REDEMPTIONS, AND ALLOCATION OF INCOME
Generally, initial and additional subscriptions for shares may be
accepted as of the first day of each month. CAI has been authorized by
the Board of Directors of the Company to accept or reject any initial
and additional subscriptions for shares in Multi-Strategy Series G. The
Board of Directors from time to time and in its complete and exclusive
discretion, may determine to cause Multi-Strategy Series G to
repurchase shares from Members pursuant to written tenders by Members
on such terms and conditions as it may determine. CAI expects that it
typically will recommend to the Board of Directors that the Company
offer to repurchase shares from Members quarterly, on each March 31,
June 30, September 30 and December 31 (or, if any such date is not a
business day, on the immediately preceding business day).
Net profits or net losses of Multi-Strategy Series G for each month-end
will be allocated among and credited to or debited against the capital
accounts of all Members as of the last day of each month in accordance
with the Members' respective investment percentages for the month.
Transactions in units were as follows for the years ended March 31,
2006 and 2005:
2006 2005
-------------------- ---------------------
Shares outstanding, beginning of year 183,915.383 93,942.933
Shares purchased 19,167.859 109,500.270
Shares redeemed (51,572.227) (19,527.820)
-------------------- ---------------------
Shares outstanding, end of year 151,511.015 183,915.383
==================== =====================
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Investment Funds in which
Multi-Strategy Series G invests trade various financial instruments and
enter into various investment activities with off-balance
-12-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
sheet risk. These include, but are not limited to, short selling
activities, writing option contracts and entering into equity swaps.
7. INCOME TAX INFORMATION
The tax components of capital shown in the table below represent
distribution requirements the Fund must satisfy under income tax
regulations, losses the Fund may be able to offset against income and
gains realized in future years and unrealized appreciation or
depreciation of securities and other investments for federal income tax
purposes.
UNDISTRIBUTED NET UNDISTRIBUTED LONG- ACCUMULATED LOSS
INVESTMENT INCOME TERM CAPITAL GAIN CARRYFORWARD
-------------------------------------------------------------------
$- $1,130,682 $-
-------------------------------------------------------------------
Net investment income (loss) and net realized gain (loss) may differ
for financial statement and tax purposes. The character of dividends
and distributions made during the fiscal year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing
of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net
realized gain was recorded by the Fund. Accordingly, the following
amounts have been reclassified for March 31, 2006. Net assets of the
Fund were unaffected by the reclassifications.
ACCUMULATED NET
ACCUMULATED NET REALIZED GAIN (LOSS)
INVESTMENT INCOME (LOSS) ON INVESTMENTS PAID-IN CAPITAL
-------------------------------------------------------------------
$4,363,212 ($16,724,559) $12,361,347
-------------------------------------------------------------------
The primary difference between the book and tax appreciation or
depreciation of Investment Funds is attributable to adjustments to the
tax basis of Investment Funds based on allocation of income and
distributions from Investment Funds and the tax realization of
financial statement unrealized gain or loss. In addition, the cost of
Investment Funds for Federal income tax purposes is adjusted for items
of taxable income allocated to the Fund from the Investment Funds. The
allocated taxable income is reported to the Fund by each Investment
Fund on Schedule K-1. The aggregate cost on Investment Funds for
federal income tax purposes is therefore calculated and presented
annually as of March 31. The aggregate cost on Investment Funds and the
composition of unrealized appreciation and depreciation on Investment
Funds for federal income tax purposes as of March 31, 2006 as noted
below.
-13-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES G
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
Federal tax cost of Investment Funds $ 146,966,618
===================
Gross unrealized appreciation $ 24,611,976
Gross unrealized depreciation --
-------------------
Net unrealized appreciation $ 24,611,976
===================
Under provisions of the Internal Revenue Code, the fund has elected to
treat currency losses incurred during the period November 1, 2005 to
March 31, 2006 of $164,869 as having incurred in the next fiscal year.
These losses will be available to offset future realized gains, if any.
8. SUBSEQUENT EVENT
In June 2006, the Board of Directors is expected to approve a Plan of
Merger and Reorganization under which the Multi-Strategy Series M will
merge into the Multi-Strategy Series G once the approval of the Members
of Series M is obtained. Members of Series M will exchange their Series
M shares for an equivalent value of Series G shares as of the date of
the merger. The proposed merger will be accounted for as-if the
respective funds had pooled their assets and liabilities. Management
expects that should the Members of Series M approve the merger that it
will occur during the fourth quarter of 2006.
-14-
- --------------------------------------------------------------------------------
FUND MANAGEMENT
(UNAUDITED)
The Company's officers are appointed by the Directors and oversee the
management of the day-to-day operations of the Company and each Series under the
supervision of the Board of Directors. One of the Directors and all of the
officers of the Company are directors, officers or employees of the Adviser,
their subsidiaries or Citigroup. The other Directors are not affiliated with the
Adviser, their subsidiaries or Citigroup and are not "interested persons" as
defined under Section 2(a)(19) of the 1940 Act (the "Independent Directors").
The Directors and officers of the Company also may be directors and officers of
other investment companies managed, advised, administered or distributed by
Citigroup or its subsidiaries. A list of the Directors and officers of the
Company and a brief statement of their present positions and principal
occupations during the past five years are set out below. To the fullest extent
allowed by applicable law, including the 1940 Act, the Limited Liability Company
Agreement indemnifies the Directors and officers for all costs, liabilities and
expenses that they may experience as a result of their service as such.
Certain of the Directors and officers of the Company are also directors
and/or officers of other investment companies that are advised by the Adviser or
its affiliates. The address for each Director and officer in his or her capacity
as such is 731 Lexington Avenue, 25th Floor, New York, NewYork10022.
-15-
INDEPENDENT DIRECTORS
(INFORMATION UNAUDITED)
POSITION(S) HELD TERM OF OFFICE* PRINCIPAL NUMBER OF PORTFOLIOS OTHER
NAME WITH AND LENGTH OF OCCUPATION(S) DURING IN FUND COMPLEX DIRECTORSHIPS
AND AGE THE COMPANY TIME SERVED PAST 5 YEARS OVERSEEN BY DIRECTOR HELD BY DIRECTOR
------- ---------------- --------------- -------------------- -------------------- ----------------
Charles Hurty Director November 2002 Business Consultant Two (Series M and GMAM Absolute
(born 1943) to present since October 2001; Series G) Return Strategies
prior thereto, Fund, LLC; CSFB
partner with Alternative
accounting firm of Capital
KPMG, LLP. Registered Funds
(15 portfolios);
iShares Trust (24
portfolios);
iShares, Inc. (70
portfolios)
Steven Krull Director November 2002 Professor of Finance Two (Series M and None
(born 1957) to present at Hofstra Series G)
University; Business
Consultant.
<FN>
- ----------
*Term of office of each Director is indefinite.
</FN>
-16-
INTERESTED DIRECTORS
(INFORMATION UNAUDITED)
POSITION(S) HELD TERM OF OFFICE* PRINCIPAL NUMBER OF PORTFOLIOS OTHER
NAME WITH AND LENGTH OF OCCUPATION(S) DURING IN FUND COMPLEX DIRECTORSHIPS
AND AGE THE COMPANY TIME SERVED PAST 5 YEARS OVERSEEN BY DIRECTOR HELD BY DIRECTOR
------- ---------------- --------------- -------------------- -------------------- ----------------
Raymond Nolte President and September 2005 CEO, Fund of Hedge Two (Series M None
(born 1961) Director (Chair) to present Funds Group; Portfolio and Series G)
Manager to each Series
since September 2005;
Global Head and Chief
Investment Officer,
Deutsche Bank ARS Fund
of Funds business
(1996-April 2005).
<FN>
- ----------
*Term of office of each Director is indefinite.
</FN>
-17-
OFFICERS
(INFORMATION UNAUDITED)
NAME POSITION(S) HELD WITH TERM OF OFFICE* PRINCIPAL OCCUPATION(S)
AND AGE THE COMPANY AND LENGTH OF TIME SERVED DURING PAST 5 YEARS
- ----------------- --------------------- -------------------------- --------------------------------------------------
Raymond Nolte President and September 2005 to present See table for "Interested Director" above.
(born 1961) Director
Daniel McAuliffe Vice President May 2005 to present Managing Director, Citigroup Alternative
(born 1950) Investments and Citigroup Global Markets Inc.;
Chief Operating Officer, Citigroup Global Fund
of Funds; Director and Chief Financial Officer,
Citigroup Managed Futures LLC; General Partner,
Citigroup Managed Futures LLC funds; employed
by Citigroup and predecessor
firms since 1986.
Trudi Gilligan Chief Compliance December 2004 to present Director and Associate General Counsel,
(born 1967) Officer Citigroup Alternative Investments LLC (since
2004); Vice President and Associate General
Counsel, Citigroup Alternative Investments
LLC (2000-2004); Associate, law firm of
Battle Fowler LLP. (1996-2000)
Jennifer Magro Treasurer May 2005 to present Head of accounting group, Citigroup Managed
(born 1971) Futures LLC (2000-2005)
Sonia Rubinic Secretary November 2002 to present Director, Citigroup Alternative Investments LLC
(born 1965) since April 1997.
Christopher Hutt Assistant Secretary June 2004 to present Vice President, Citigroup Alternative Investments
(born 1970) LLC (2004-present)
Assistant Vice President, JPMorgan Chase & Co.,
Network Client Consulting (2000-2003)
Client Coverage Officer, Morgan Stanley &
Co./Chase Manhattan Bank N.A. (1997-2000)
Other than as described above, since January 1, 2002, none of the
Independent Directors who is a director of another investment company whose
adviser and principal underwriter is Citigroup Alternative Investments LLC has
held any other position with (i) the Company, (ii) an investment company having
the same adviser or principal underwriter as the Company or an adviser or
principal underwriter that controls, is controlled by or is under common control
with the Adviser, (iii) the Adviser or other affiliate of the Company or (iv)
any person controlling, controlled by or under common control with the Adviser.
None of the Directors currently owns Units of either Series, nor do they own
equity securities issued by other investment companies in the Fund Complex.
-18-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
ANNUAL REPORT
MARCH 31, 2006
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC-
SERIES M
("MULTI-ADVISER- M" OR THE "PORTFOLIO") LETTER TO MEMBERS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMENTARY
================================================================================
Hedge fund strategies performed well in March, driven by long/short equity and
event driven strategies. Equity markets were strong globally, with Japan leading
the developed markets. Global fixed income markets sold off as the U.S. yield
curve steepened. Commodity prices advanced broadly. Global strategies were
mixed, as bond prices declined in anticipation of potential rate hikes.
Long/short equity strategies were positive due to powerful directional rallies
in industrials, materials and energy. Additionally, small-cap stocks continue to
outperform large-cap stocks. Event driven strategies were positive given the
favorable market environment for corporate activity. Distressed and performing
corporate credit strategies produced gains.
- --------------------------------------------------------------------------------
PERFORMANCE
================================================================================
2006 RETURNS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YEAR
- -----------------------------------------------------------------------------------------------------------------------------
Multi-Adviser- M 1.88% -0.18% 1.71% 3.44%
HFRX Global HF Index 2.45% 0.17% 1.15% 3.80%
HFRI FOF Composite 2.89% 0.35% 1.50% 4.80%
S&P 500 2.65% 0.27% 1.25% 4.21%
Lehman Aggregate Bond 0.01% 0.33% -0.98% -0.64%
The indices are presented merely to show the general trends in the markets for
the period and are not intended to imply that the Portfolio is comparable to the
indices either in composition or element of risk. The indices do not reflect the
deductions of any fees. Index data is provided for comparison purposes only and
a variety of factors may cause an index to be an inaccurate benchmark for a
particular fund.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTORS CANNOT INVEST IN
AN INDEX.
MULTI-ADVISER- M HISTORICAL ANNUAL RETURNS*
YTD SINCE INCEPTION
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ANNUALIZED RETURN
- -----------------------------------------------------------------------------------------------------------------------------
5.96% 2.35% 3.51% 3.44% 4.70%
<FN>
* Multi-Adviser- M was launched in January 2003
</FN>
- --------------------------------------------------------------------------------
PORTFOLIO INFORMATION
================================================================================
PORTFOLIO COMPOSITION (AS OF APRIL 1, 2006)
- -------------------------------------------
AUM'S: $64 Million
NUMBER OF MANAGERS: 12
ATTRIBUTION (AS OF MARCH 31, 2006)
----------------------------------
STRATEGY MTD YTD
Global Macro GM 0.00% 0.00%
Equity Long/Short LS 1.51% 2.80%
Equity Arbitrage EA 0.16% 0.65%
Fixed Income Arbitrage FIA 0.18% 0.41%
Convertible Arbitrage CA 0.00% 0.00%
Merger Arbitrage MA 0.00% 0.00%
Credit Strategies CS 0.00% 0.00%
Event Driven Equity EDE 0.00% 0.00%
Distressed Debt DD 0.05% 0.09%
Multi-Strategy Event MSE 0.03% 0.07%
Cash and Cash Equivalents C 0.02% 0.05%
Fees and Expenses -0.24% -0.68%
- -------------------------------------------------------------
NET RETURN* 1.71% 3.44%
- -------------------------------------------------------------
LARGEST POSITION BY
STRATEGY
None
Renaissance Institutional Equities
Ventus Fund LP
PIMCO Global Relative Value Fund
None
None
None
None
Golden Tree High Yield Fund Ltd
Canyon Value Realization Fund LP
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA FOLLOWS:
STRATEGY ALLOCATION (AS OF APRIL 1, 2006)
-----------------------------------------
LS 49%
EA 25%
FIA 19%
DD 3%
MSE 3%
C 1%
* The year-to-date strategy and sub-strategy returns are based on monthly
returns that have been summed. The year-to-date net return is based on a
time-weighted rate of return using geometrically linked period returns. The net
return shown may be slightly different from the sum of the totals shown due to
rounding.
Note: Performance results are based on monthly returns, are unaudited from April
2005 to present, and are net of fees and expenses. The results shown above do
not reflect the effects of any placement fees and would be lower if they did.
Performance results prior to April 2005 have been audited. Additionally,
performance results after April 2005 are unaudited and are subject to change.
There were substantial changes in the senior management, investment personnel
and investment process of the Investment Manager during 2002 and 2005.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
[LOGO OMITTED]
CITIGROUP
ALTERNATIVE INVESTMENTS
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND
PORTFOLIOS LLC-SERIES M
("MULTI-ADVISER- M" OR THE "PORTFOLIO") LETTER TO MEMBERS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HISTORICAL MONTHLY PERFORMANCE
================================================================================
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YEAR
- -----------------------------------------------------------------------------------------------------------------
2006 1.88% -0.18% 1.71% 3.44%
2005 -0.20% 1.13% -0.74% -1.09% 0.43% 1.55% 1.16% 0.59% 0.67% -1.73% 0.91% 0.82% 3.51%
2004 1.06% 0.22% -0.04% -0.56% -0.59% -0.01% -0.28% -0.69% 0.65% 0.30% 1.61% 0.68% 2.35%
2003 0.71% -0.83% -0.55% 1.10% 1.86% 0.55% 0.31% 0.22% 0.29% 1.15% 0.59% 0.43% 5.96%
Note: Performance results are based on monthly returns, are unaudited from April
2005 to present, and are net of fees and expenses. The results shown above do
not reflect the effects of any placement fees and would be lower if they did.
Performance results prior to April 2005 have been audited. Additionally,
performance results after April 2005 are unaudited and are subject to change.
There were substantial changes in the senior management, investment personnel
and investment process of the Investment Manager during 2002 and 2005.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
- --------------------------------------------------------------------------------
PERFORMANCE STATISTICS
================================================================================
ANNUALIZED STANDARD CORRELATIONS*
RETURN* DEVIATION* -------------
MULTI-ADVISER- M S&P LABI HFRI INDEX MULTI-ADVISER- M BETA* WITH RESPECT TO:
---------------------------------------
MULTI- 4.70% 2.95% 1.00 S&P 500 0.20
ADVISER- M
S&P 500 14.65% 8.85% 0.60 1.00 LABI -0.02
LEHMAN HFRI INDEX 0.76
AGGREGATE BOND
INDEX 3.13% 4.02% -0.03 -0.04 1.00
HFRI INDEX 9.17% 3.49% 0.90 0.60 0.14 1.00
<FN>
*Based on monthly data for period 1/03 - 3/06.
</FN>
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTORS CANNOT INVEST IN
AN INDEX.
IMPORTANT INFORMATION
AS FURTHER DESCRIBED IN THE OFFERING DOCUMENTS, AN INVESTMENT IN ALTERNATIVE
INVESTMENTS CAN BE SPECULATIVE AND NOT SUITABLE FOR ALL INVESTORS. INVESTING IN
ALTERNATIVE INVESTMENTS IS ONLY INTENDED FOR EXPERIENCED AND SOPHISTICATED
INVESTORS WHO ARE WILLING TO BEAR THE HIGH ECONOMIC RISKS ASSOCIATED WITH SUCH
AN INVESTMENT. INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER POTENTIAL RISKS
BEFORE INVESTING. CERTAIN OF THESE RISKS MAY INCLUDE:
o LOSS OF ALL OR A SUBSTANTIAL PORTION OF THE INVESTMENT DUE TO LEVERAGING,
SHORT-SELLING, OR OTHER SPECULATIVE PRACTICES;
o LACK OF LIQUIDITY IN THAT THERE MAY BE NO SECONDARY MARKET FOR THE FUND AND
NONE IS EXPECTED TO DEVELOP;
o VOLATILITY OF RETURNS;
o RESTRICTIONS ON TRANSFERRING INTERESTS IN THE FUND;
o POTENTIAL LACK OF DIVERSIFICATION AND RESULTING HIGHER RISK DUE TO
CONCENTRATION OF TRADING AUTHORITY WHEN A SINGLE ADVISOR IS UTILIZED;
o ABSENCE OF INFORMATION REGARDING VALUATIONS AND PRICING;
o COMPLEX TAX STRUCTURES AND DELAYS IN TAX REPORTING;
o LESS REGULATION AND HIGHER FEES THAN MUTUAL FUNDS; AND
o ADVISOR RISK.
INDIVIDUAL FUNDS WILL HAVE SPECIFIC RISKS RELATED TO THEIR INVESTMENT PROGRAMS
THAT WILL VARY FROM FUND TO FUND.
THE OPINIONS EXPRESSED HEREIN OR IN THE FUND'S OFFERING DOCUMENTS MAY DIFFER
FROM OPINIONS EXPRESSED BY CITIGROUP OR ANY OF ITS AFFILIATES OR BUSINESSES, AND
ARE NOT INTENDED TO BE A FORECAST OF FUTURE EVENTS OR A GUARANTEE OF FUTURE
RESULTS. SEE "CERTAIN RISK FACTORS" IN THE PROSPECTUS.
SHARES OF CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND PORTFOLIOS
LLC INVOLVE SIGNIFICANT RISKS, ARE A SPECULATIVE INVESTMENT NOT SUITABLE FOR ALL
INVESTORS, SHOULD COMPRISE ONLY A PORTION OF ANY INVESTOR'S TOTAL PORTFOLIO, AND
SHOULD BE REGARDED AS A LONG-TERM INVESTMENT.
OPINIONS EXPRESSED IN THIS REPORT ARE INTENDED SOLELY AS GENERAL MARKET
COMMENTARY AND DO NOT CONSTITUTE INVESTMENT ADVICE OR A GUARANTEE OF RETURNS.
INFORMATION CONTAINED IN THIS REPORT IS SUBJECT TO CERTAIN CONFIDENTIALITY
REQUIREMENTS IMPOSED ON THE PORTFOLIO. ACCORDINGLY, EACH OF THE PORTFOLIO'S
INVESTORS MUST MAINTAIN THE CONFIDENTIALITY OF ALL INFORMATION CONTAINED HEREIN
AND MAY ONLY USE THIS REPORT IN FURTHERANCE OF THEIR INTERESTS AS AN INVESTOR IN
THE PORTFOLIO.
[LOGO OMITTED]
CITIGROUP
ALTERNATIVE INVESTMENTS
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC-
SERIES M
("MULTI-ADVISER- M" OR THE "PORTFOLIO") LETTER TO MEMBERS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
THIS DOCUMENT IS OFFERED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE
AN OFFER TO SELL ANY SECURITIES. AN OFFER OR SOLICITATION WILL BE MADE ONLY
THROUGH THE PROSPECTUS, LIMITED LIABILITY COMPANY AGREEMENT AND SUBSCRIPTION
AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY THE TERMS AND CONDITIONS CONTAINED
IN SUCH DOCUMENTS. THE PROSPECTUS CONTAINS ADDITIONAL INFORMATION NEEDED TO
EVALUATE THE INVESTMENT AND PROVIDES IMPORTANT DISCLOSURES REGARDING RISKS, FEES
AND EXPENSES. BEFORE MAKING AN INVESTMENT, POTENTIAL INVESTORS SHOULD CAREFULLY
READ THE PROSPECTUS, LIMITED LIABILITY COMPANY AGREEMENT, AND SUBSCRIPTION
AGREEMENT AND CONSULT THEIR PROFESSIONAL ADVISOR.
PLEASE NOTE THAT INVESTING IN CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER
HEDGE FUND PORTFOLIOS LLC IS NOT SUITABLE FOR ALL CLIENTS. THIS INVESTMENT IS
ILLIQUID AND IS NOT LISTED ON ANY EXCHANGE AND SHOULD BE REGARDED AS FIXED AND
LONG TERM. IT IS INTENDED FOR EXPERIENCED AND SOPHISTICATED INVESTORS WHO ARE
WILLING TO BEAR THE ECONOMIC RISKS OF THE INVESTMENT, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
CITIGROUP ALTERNATIVE INVESTMENTS LLC IS NOT ACTING AS THE ADVISOR OR AGENT FOR
CLIENTS PURCHASING SHARES, AND THUS CLIENTS CANNOT RELY ON CITIGROUP ALTERNATIVE
INVESTMENTS LLC IN CONNECTION WITH THEIR DECISION TO MAKE THIS INVESTMENT. THIS
DOCUMENT IS PRESENTED TO CLIENTS BASED ON THE UNDERSTANDING THAT EACH CLIENT HAS
SUFFICIENT KNOWLEDGE, EXPERIENCE AND PROFESSIONAL ADVICE TO MAKE ITS OWN
EVALUATION OF THE MERITS AND RISKS OF THIS INVESTMENT.
SHARES OF THE SERIES ARE BEING OFFERED IN THE U.S. BY SMITH BARNEY, WHICH IS A
DIVISION AND SERVICE MARK OF CITIGROUP GLOBAL MARKETS INC., MEMBER NASD/SIPC,
AND OTHER AUTHORIZED PLACEMENT AGENTS.
THIS INFORMATION IS CONFIDENTIAL AND INTENDED SOLELY FOR USE BY CITIGROUP
ALTERNATIVE INVESTMENTS LLC AND ITS AFFILIATES WITH ITS CLIENTS AND THEIR
ADVISERS. IT IS NOT TO BE REPRODUCED OR DISTRIBUTED EXCEPT WITH THE PERMISSION
OF CITIGROUP ALTERNATIVE INVESTMENTS LLC.
THE THIRD PARTY INFORMATION USED IN THIS DOCUMENT HAS BEEN OBTAINED FROM VARIOUS
PUBLISHED AND UNPUBLISHED SOURCES CONSIDERED TO BE RELIABLE. HOWEVER, CITIGROUP
INC. AND ITS AFFILIATES AND SUBSIDIARIES (OCITIGROUPO) CANNOT GUARANTEE ITS
ACCURACY OR COMPLETENESS AND THUS DO NOT ACCEPT LIABILITY FOR ANY DIRECT OR
CONSEQUENTIAL LOSSES ARISING FROM ITS USE. IN ADDITION, CITIGROUP CAN ACCEPT NO
RESPONSIBILITY FOR THE TAX TREATMENT OF ANY INVESTMENT PRODUCT, WHETHER OR NOT
THE INVESTMENT IS PURCHASED BY A TRUST OR COMPANY ADMINISTERED BY AN AFFILIATE
OF CITIGROUP. CITIGROUP ASSUMES THAT, BEFORE MAKING ANY COMMITMENT TO INVEST,
THE INVESTOR (AND WHERE APPLICABLE, ITS BENEFICIAL OWNERS) HAVE TAKEN WHATEVER
TAX, LEGAL OR OTHER ADVICE THE INVESTOR/BENEFICIAL OWNERS CONSIDER NECESSARY AND
HAVE ARRANGED TO ACCOUNT FOR ANY TAX LAWFULLY DUE ON THE INCOME OR GAINS ARISING
FROM ANY INVESTMENT PRODUCT PROVIDED BY CITIGROUP. AT ANY TIME, CITIGROUP OR ITS
EMPLOYEES MAY HAVE A POSITION, SUBJECT TO CHANGE, IN ANY SECURITIES OR
INSTRUMENTS REFERRED TO, OR PROVIDE SERVICES TO THE ISSUERS OF THOSE SECURITIES
OR INSTRUMENTS. CITIGROUP ALTERNATIVE INVESTMENTS LLC IS AN INDIRECTLY WHOLLY
OWNED SUBSIDIARY OF CITIGROUP, AND SOME OR ALL OF THE PLACEMENT AGENTS AND THE
ADMINISTRATOR ARE ALSO AFFILIATES OF CITIGROUP AND CITIGROUP ALTERNATIVE
INVESTMENTS LLC. IN ADDITION, AS A DIVERSIFIED GLOBAL FINANCIAL SERVICES FIRM,
CITIGROUP (INCLUDING FOR PURPOSES OF THIS DISCUSSION, ITS SUBSIDIARIES AND OTHER
AFFILIATES) ENGAGES IN A BROAD SPECTRUM OF ACTIVITIES, INCLUDING FINANCIAL
ADVISORY SERVICES, ASSET MANAGEMENT ACTIVITIES, SPONSORING AND MANAGING PRIVATE
INVESTMENT FUNDS, ENGAGING IN BROKER-DEALER TRANSACTIONS, AND OTHER ACTIVITIES.
IN THE ORDINARY COURSE OF BUSINESS, CITIGROUP ENGAGES IN ACTIVITIES IN WHICH
CITIGROUP'S INTERESTS OR THE INTEREST OF ITS CLIENTS MAY CONFLICT WITH THE
INTEREST OF THE PORTFOLIO OR A SERIES OR THE INVESTORS. SPECIFIC EXAMPLES OF
SUCH CONFLICTS INCLUDE, BUT ARE NOT LIMITED TO: COMPETITION WITH OTHER CITIGROUP
AFFILIATES AND CITIGROUP SPONSORED FUNDS FOR INVESTMENT OPPORTUNITIES, THE FACT
THAT CITIGROUP MAY RECEIVE COMPENSATION FOR PERFORMING OTHER FINANCIAL SERVICES
FOR THE UNDERLYING INVESTMENT FUNDS AND RELATED PARTIES, CITIGROUP'S EXISTING
AND POTENTIAL CLIENT RELATIONSHIPS WITH A SIGNIFICANT NUMBER OF SPONSORS AND
MANAGERS OF INVESTMENT FUNDS, CORPORATIONS AND INSTITUTIONS, AND THE FACT THAT
CITIGROUP MAY STRUCTURE ITS PRODUCTS AND INVESTMENTS IN A MANNER THAT BENEFITS
CERTAIN INVESTORS MORE THAN OTHERS. INVESTORS SHOULD CONSULT THE PROSPECTUS FOR
A MORE DETAILED DESCRIPTION OF ACTUAL AND POTENTIAL CONFLICTS. THERE ALSO MAY BE
ADDITIONAL CONFLICTS AND NO ASSURANCE CAN BE GIVEN THAT SUCH CONFLICTS OF
INTEREST WILL BE RESOLVED IN FAVOR OF THE PORTFOLIO OR A SERIES OR THE
INVESTORS. IN ACQUIRING SHARES, AN INVESTOR WILL BE DEEMED TO HAVE ACKNOWLEDGED
THE EXISTENCE OF POTENTIAL CONFLICTS OF INTEREST RELATING TO CITIGROUP AND TO
THE COMPANY'S OR SERIES' OPERATING IN THE FACE OF THOSE CONFLICTS.
NON-CONFIDENTIALITY. AN INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER
AGENT OF THE INVESTOR) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION
OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF THE PORTFOLIO AND THE
TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR TAX ANALYSES)
THAT ARE PROVIDED TO THE INVESTOR RELATING TO SUCH TAX TREATMENT AND TAX
STRUCTURE.
U.S. TAX-REPORTING. INVESTORS WHO ARE REQUIRED TO FILE A U.S. FEDERAL TAX RETURN
MAY BE REQUIRED TO FILE AN ADDITIONAL FORM WITH THEIR RETURN AND A COPY WITH THE
INTERNAL REVENUE SERVICE.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE INFORMATION
AND INVESTMENT OPPORTUNITIES CONTAINED HEREIN ARE FOR INFORMATIONAL PURPOSES AND
ARE NOT TO BE CONSTRUED AS INDICATIVE OF THE FUTURE PERFORMANCE OR INVESTMENT
STRATEGY OF CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISER HEDGE FUND
PORTFOLIOS LLC.
CITIGROUP ALTERNATIVE INVESTMENTS LLC IS RELYING ON COMMODITY FUTURES TRADING
COMMISSION RULE 4.5 WITH RESPECT TO ITS OPERATION OF THE INVESTMENT PROGRAM OF
CITIGROUP ALTERNATIVE INVESTMENTS MULTI-ADVISOR HEDGE FUND PORTFOLIOS LLC AND,
ACCORDINGLY, IS NOT SUBJECT TO REGISTRATION OR REGULATION AS A COMMODITY POOL
OPERATOR WITH RESPECT TO ITS OPERATION OF SUCH INVESTMENT PROGRAM.
THE SHARES ARE OFFERED TO POTENTIAL INVESTORS ON THE BASIS OF THE INFORMATION IN
THE PROSPECTUS. NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS OR PROVIDE
ANY INFORMATION RELATING TO THE SHARES WHICH ARE INCONSISTENT WITH OR NOT
OTHERWISE CONTAINED IN THE PROSPECTUS.
- ----------------------------------------------------------------------------
INVESTMENT PRODUCTS: - NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
- ----------------------------------------------------------------------------
[LOGO OMITTED]
CITIGROUP
ALTERNATIVE INVESTMENTS
[LOGO OMITTED]
KPMG
KPMG LLP Telephone 212 758 9700
345 Park Avenue Fax 212 758 9819
New York, NY 10154 Internet www.us.kpmg.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
The Members and Board of Directors
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC
- -Multi-Strategy Series M
We have audited the accompanying statement of assets and liabilities of
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios
LLC-Multi-Strategy Series M, including the schedule of investments, as of March
31, 2006, and the related statement of operations for the year then ended, the
statements of changes in members' capital for each of the years in the two-year
period then ended, the statement of cash flows for the year then ended, and the
financial highlights for each of the years in the three-year period then ended
and the period from January 1, 2003 (commencement of operations) to March 31,
2003. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included verification of
investments owned as of March 31, 2006, by inspection of investment subscription
documents and confirmation with underlying investment funds. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios
LLC-Multi-Strategy Series M as of March 31, 2006, the results of its operations
and its cash flows for the year then ended, the changes in its members' capital
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the three-year period then ended and the
period from January 1, 2003 (commencement of operations) through March 31, 2003
in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
May 30, 2006
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2006
- --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 2,958,723
Investments in investment funds, at fair value (Cost: $55,183,601) 63,943,078
Receivable from investment funds 35,972
Other assets 92,806
--------------
TOTAL ASSETS 67,030,579
--------------
LIABILITIES
Redemptions payable 1,883,371
Management fee payable 88,989
Accounts payable and accrued expenses 244,397
--------------
TOTAL LIABILITIES 2,216,757
--------------
MEMBERS' CAPITAL (55,804.124 UNITS OUTSTANDING) $ 64,813,822
==============
NET ASSET VALUE PER UNIT $ 1,161.45
==============
COMPOSITION OF NET ASSETS
Paid-in Capital $ 58,282,942
Accumulated net investment income/(loss) -
Accumlated net realized gain/(loss) on investment transactions (2,228,597)
Net unrealized appreciation on investments 8,759,477
--------------
Net Assets $ 64,813,822
==============
The accompanying notes are an integral part of these financial statements.
-2-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
SCHEDULE OF INVESTMENTS
MARCH 31, 2006
- --------------------------------------------------------------------------------
COST FAIR VALUE % OF MEMBERS'
CAPITAL
INVESTMENTS IN INVESTMENT FUNDS
FIXED INCOME ARBITRAGE
Concordia Capital, Ltd. - a $ 3,300,000 $ 3,477,262 5.37%
PIMCO Global Relative Value Fund, Ltd - b 4,288,687 4,419,469 6.82%
Highland Opportunity Fund LP. - b 4,000,000 4,233,238 6.53%
EVENT DRIVEN
Canyon Value Realization Fund, L.P. - b $ 1,300,000 $ 1,839,247 2.84%
GoldenTree High Yield Partners, Ltd - b 2,088,926 2,222,432 3.43%
EQUITY ARBITRAGE
Frontpoint Offshore Utility & Energy, L.P. - b $ 6,295,988 $ 6,538,327 10.09%
CFM Ventus Fund LP - a 10,000,000 9,580,979 14.78%
DISCRETIONARY
Basswood Opportunity Partners L.P.- b $ 3,500,000 $ 3,908,669 6.03%
Chilton Small Cap Partners, L.P. Class A - c 3,620,000 5,320,743 8.21%
Delta Institutional, L.P. - b 2,290,000 5,841,945 9.01%
North Sound Legacy Institutional Fund, LLC. - b 4,500,000 5,787,557 8.93%
Renaissance Institutional Equities Fund LP - a 10,000,000 10,773,210 16.62%
-----------------------------------------------------
TOTAL INVESTMENTS IN INVESTMENT FUNDS $ 55,183,601 $ 63,943,078 98.66%
OTHER ASSETS, LESS LIABILITIES $ 870,744 1.34%
------------------ -----------------
MEMBERS' CAPITAL $ 64,813,822 100.00%
================== =================
<FN>
Note: Investments in underlying Investment Funds are categorized by investment strategy.
a - Redemptions permitted monthly
b - Redemptions permitted quarterly
c - Redemptions permitted annually
</FN>
The accompanying notes are an integral part of these financial statements.
-3-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2006
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 173,921
---------------
TOTAL INVESTMENT INCOME 173,921
---------------
EXPENSES
Management fees 1,192,173
Professional fees 354,839
Administration fees 211,891
Custodian fees 11,751
Marketing fees 7,926
Directors' fees and expenses 5,087
Miscellaneous expenses 100,000
---------------
TOTAL EXPENSES 1,883,667
---------------
NET INVESTMENT LOSS (1,709,746)
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 5,542,353
Net change in unrealized appreciation on investments 839,191
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 6,381,544
---------------
INCREASE IN MEMBERS' CAPITAL DERIVED FROM INVESTMENT ACTIVITIES $ 4,671,798
===============
The accompanying notes are an integral part of these financial statements.
-4-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEARS ENDED MARCH 31, 2006 AND 2005
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, 2006 MARCH 31, 2005
FROM INVESTMENT ACTIVITIES
Net investment loss $ (1,709,746) $ (2,184,117)
Net realized gain on investments 5,542,353 686,342
Net change in unrealized appreciation on investments 839,191 2,702,892
--------------- ---------------
INCREASE IN MEMBERS' CAPITAL
DERIVED FROM INVESTMENT ACTIVITIES 4,671,798 1,205,117
MEMBERS' CAPITAL TRANSACTIONS
Capital contributions 2,515,400 25,895,081
Capital withdrawals (20,374,924) (7,714,817)
--------------- ---------------
Increase (Decrease) in members' capital
derived from capital transactions (17,859,524) 18,180,264
MEMBERS' CAPITAL AT BEGINNING OF YEAR 78,001,548 58,616,167
--------------- ---------------
MEMBERS' CAPITAL AT END OF YEAR (55,804.124
AND 71,765.186 UNITS OUTSTANDING AT MARCH 31, 2006
AND 2005, RESPECTIVELY) $ 64,813,822 $ 78,001,548
=============== ===============
The accompanying notes are an integral part of these financial statements.
-5-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 2006
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in members' capital derived from investment activities $ 4,671,798
Adjustments to reconcile net increase in members' capital derived
from investment activities to net cash provided by operating activities:
Purchases of investments in investment funds (51,014,005)
Proceeds from disposition of investments in investment funds 61,320,305
Net realized gain on investments in investment funds (839,191)
Net unrealized gain on investments in investment funds (5,542,353)
Changes in operating assets and liabilities:
Decrease in receivable from investment funds 8,356,089
Increase in other assets (73,320)
Decrease in management fee payable (577,839)
Decrease in accounts payable and accrued expenses (164,465)
----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,137,019
Cash flows from financing activities
Capital contributions 2,113,700
Capital withdrawals (20,436,238)
----------------
NET CASH USED IN FINANCING ACTIVITIES (18,322,538)
Net decrease in cash and cash equivalents (2,185,519)
Cash and cash equivalents at beginning of year 5,144,242
----------------
Cash and cash equivalents at end of year $ 2,958,723
================
Supplemental non-cash information:
Included in capital contributions and capital withdrawals on the accompanying
Statement of Changes in Members' Capital for the year ended March 31, 2006, are
changes in contributions received in advance of $401,700 and redemptions payable
of $61,314, respectively.
The accompanying notes are an integral part of these financial statements.
-6-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A UNIT OUTSTANDING THROUGHOUT THE PERIOD JANUARY 1, 2003
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT
MARCH 31, 2006 MARCH 31, 2005 MARCH 31, 2004 OF OPERATIONS)
TO MARCH 31, 2003
NET ASSET VALUE, BEGINNING OF PERIOD: $ 1,086.90 $ 1,073.22 $ 993.27 $ 1,000.00
================= ================ ================== ===================
INCOME FROM INVESTMENT OPERATIONS***:
Net investment loss (26.96) (31.02) (34.35) (13.23)
Net realized and unrealized gain on
investments 101.51 44.70 114.30 6.50
----------------- ---------------- ------------------ -------------------
TOTAL FROM INVESTMENT OPERATIONS 74.55 13.68 79.95 (6.73)
----------------- ---------------- ------------------ -------------------
NET ASSET VALUE, END OF PERIOD: $ 1,161.45 1,086.90 $ 1,073.22 $ 993.27
================= ================ ================== ===================
TOTAL RETURN 6.86% 1.27% 8.05% (0.67%)**
Ratios/Supplemental Data:
Net assets, end of period $ 64,813,822 $ 78,001,548 $ 58,616,167 $ 27,852,030
================= ================ ================== ===================
Portfolio turnover 84.97% 31.84% 22.76% 25.96% *
Ratio of expenses to average net assets 2.68% 3.02% 3.31% 5.44% *
Ratio of net investment loss to average net assets (2.43%) (2.91%) (3.28%) (5.39%)*
<FN>
* Annualized.
** Total return for a period of less than a full year is not annualized.
*** Per unit data for income from investment operations is computed using
the total of monthly income and expense divided by beginning of month
units.
</FN>
THE ABOVE RATIOS MAY VARY FOR INDIVIDUAL INVESTORS BASED ON THE TIMING OF
CAPITAL TRANSACTIONS DURING THE PERIOD.
The accompanying notes are an integral part of these financial statements.
-7-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006
- --------------------------------------------------------------------------------
1. ORGANIZATION
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios
LLC (the "Company" or "Fund") was organized as a Delaware Limited
Liability Company on August 16, 2002. The Company is registered under
the Investment Company Act of 1940 (the "1940 Act") as amended, as a
closed-end, non-diversified management investment company. The Company
is also registered under the Securities Act of 1933 ("1933 Act"). The
Company consists of two separate series, Multi-Strategy Series M and
Multi-Strategy Series G (each a "Series"). The financial statements
included herein are for Multi-Strategy Series M. The investment
objective of Multi-Strategy Series M is to achieve capital appreciation
principally through investing in investment funds ("Investment Funds")
managed by third-party investment managers ("Investment Managers") that
employ a variety of alternative investment strategies. These investment
strategies allow Investment Managers the flexibility to use leverage or
short-side positions to take advantage of perceived inefficiencies
across the global markets, often referred to as "alternative"
strategies. Because Investment Funds following alternative investment
strategies are often described as hedge funds, the investment program
of Multi-Strategy Series M can be described as a fund of hedge funds.
Shares of Multi-Strategy Series M are sold to eligible investors
(referred to as "Members"). The minimum initial investment in
Multi-Strategy Series M from each Member is $25,000 (and was $50,000
from January 1, 2003 to November 1, 2003); the minimum additional
investment is $10,000.
Citigroup Alternative Investments LLC ("CAI", or the "Adviser"), a
Delaware limited liability company and indirect, wholly owned
subsidiary of Citigroup Inc., serves as Multi-Strategy Series M's
investment adviser. The Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and, among other
things, is responsible for the allocation of Multi-Strategy Series M's
assets to various Investment Funds. AMACAR Partners, Inc. was the
managing member of Multi-Strategy Series M prior to the conversion to a
regulated investment company. As of October 1, 2005, under the
Multi-Strategy Series M's governing documents, the Company has
delegated substantially all authority to oversee the management of the
operations and assets of Multi-Strategy Series M to the Board of
Directors.
2. SIGNIFICANT ACCOUNTING POLICIES
Investments in Investment Funds are subject to the terms of the
respective limited partnership agreements, limited liability company
agreements and offering memoranda. Multi-Strategy Series M values these
investments at fair value based on financial data supplied by the
Investment Funds.
A. PORTFOLIO VALUATION
The net asset value of Multi-Strategy Series M is 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 of Directors.
-8-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
Multi-Strategy Series M's investments in Investment Funds are carried
at fair value as determined by Multi-Strategy Series M's pro-rata
interest in the net assets of each Investment Fund. All valuations
utilize financial information supplied by each Investment Fund and are
net of management and performance incentive fees or other allocations
payable to the Investment Funds' managers as required by the Investment
Funds' agreements. Each Investment Manager to which the Adviser
allocates assets will charge Multi-Strategy Series M, as investor in an
underlying Investment Fund, an asset-based fee, and some or all of the
Investment Managers will receive performance-based compensation in the
form of an incentive fee. The asset-based fees of the Investment
Managers are generally expected to range from 1% to 3% annually of the
net assets under their management and the incentive fee is generally
expected to range from 15% to 25% of net profits annually.
As a general matter, the fair value of Multi-Strategy Series M's
investment in an Investment Fund represents the amount that
Multi-Strategy Series M can reasonably expect to receive from an
Investment Fund if Multi-Strategy Series M's investment were redeemed
at the time of valuation, based on information available at the time.
The Investment Funds provide for periodic redemptions ranging from
monthly to annually. Investment Funds generally require advance notice
of a Member's intent to redeem its interest, and may, depending on the
Investment Funds' governing agreements, deny or delay a redemption
request. Multi-Strategy Series M does not factor into its valuation a
liquidity discount on any Investment Funds held. The underlying
investments of each Investment Fund are accounted for at fair value as
described in each Investment Fund's financial statements. The
Investment Funds may invest a portion of their assets in restricted
securities and other investments that are illiquid.
B. FUND EXPENSES
Multi-Strategy Series M bears all expenses incurred in the course of
its operations, including, but not limited to, the following: all costs
and expenses related to portfolio transactions and positions for
Multi-Strategy Series M's account; professional fees; costs of
insurance; registration expenses; and expenses of meetings of the Board
of Directors. Costs incurred in connection with the initial offering
were deferred and amortized over the first twelve months of operations;
costs incurred in connection with Multi-Strategy Series M's subsequent
registration under the 1933 Act have been deferred and were amortized
over the twelve months commencing after the effective date of such
registration statement.
C. INCOME TAXES
Multi-Strategy Series M operated as a partnership and not as an
association or publicly traded partnership taxable as a corporation for
U.S. federal income tax purposes from inception through September 30,
2005. As of September 30, 2005, Multi-Strategy Series M became a
corporation that will be taxed as a regulated investment company.
It is Multi-Strategy Series M's policy to meet the requirements of the
Internal Revenue Code
-9-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
applicable to regulated investment companies (RIC) and distribute
substantially all of its taxable net investment income and capital
gains, if any, to shareholders each year. Therefore, no federal income
or excise tax provision is typically required for Multi-Strategy Series
M's financial statements. However, during fiscal 2006, the Fund
incurred $1,714 of excise tax which is recognized as a component of
Miscellaneous expenses. This expense was attributable to the conversion
to RIC status.
D. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of monies invested in a PNC Bank,
N.A. account that earn money market rates and are accounted for at cost
plus accrued interest.
E. RECEIVABLE FROM INVESTMENT FUNDS
Receivable from investment funds of $35,972 represents amounts due to
Multi-Strategy Series M for sales of its interests in Post Opportunity
Fund, L.P., and is expected to be received by the Fund upon completion
of the Post Opportunity Fund's 2005 audit.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires the Adviser to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The Adviser believes that
the estimates utilized in preparing Multi-Strategy Series M's financial
statements are reasonable and prudent; however, actual results could
differ from these estimates.
3. MANAGEMENT FEE, ADMINISTRATIVE FEE, RELATED PARTY TRANSACTIONS AND
OTHER
CAI, as Adviser, provides certain management and administrative
services to Multi-Strategy Series M. CAI acts primarily to evaluate and
select Investment Managers, to allocate assets, to establish and apply
risk management procedures, and to monitor overall investment
performance. In addition, CAI also provides office space and other
support services. In consideration for such services, Multi-Strategy
Series M will pay the Adviser a monthly management fee based on end of
month Members' capital. The Adviser will pay a portion of the fee to
its affiliates.
Effective August 1, 2005, the Board of Directors approved a reduction
in the management fee to 1.5% of net assets annually (from 2.00%
annually).
In addition, CAI allocated certain marketing fees of $7,926 to
Multi-Strategy Series M during the year ended March 31, 2006.
Placement agents may be retained by the Company to assist in the
placement of Fund shares. A placement agent affiliated with the
Adviser, will generally be entitled to receive a fee from each
-10-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
investor in the Company whose shares the agent places. The specific
amount of the placement fee paid with respect to a Member is generally
dependent on the size of the investment in a Series. Placement agents
may also be reimbursed by the Company with respect to certain
out-of-pocket expenses.
Citigroup Global Markets, Inc. ("CGM"), an affiliate of CAI and a
wholly owned subsidiary of Citigroup, Inc. serves as a placement agent
of the Multi-Strategy Series M shares. For the year ended March 31,
2006, CGM earned $46,100 in placement fees on Multi-Strategy Series M
shares. Such fees are deducted from an investor's gross contribution
amount.
The Company has entered into agreements with third parties to act as
additional placement agents for Multi-Strategy Series M shares.
Placement fees may range from 0 to 3%. In addition, the Adviser, and/or
its affiliates, will pay the placement agents an annual fee, payable
monthly in arrears. The fee shall be paid from the Adviser's own
resources (or those of its affiliates).
Prior to October 1, 2005 Multi-Strategy Series M paid CAI a monthly fee
of 0.025% (0.30% on an annualized basis) for administration based
primarily upon average net assets, subject to a minimum monthly fee,
and reimbursed certain expenses. CAI, as Administrator, retained PFPC
Inc. ("PFPC"), an independent third party and wholly-owned subsidiary
of The PNC Financial Services Group, to assist in the performance of
its administrative duties. On October 1, 2005 a restructuring of this
arrangement took affect. Under the new arrangement CAI and PFPC have
separate agreements with the Company and act as co-administrators to
the Company. CAI, as co-administrator, no longer receives a monthly fee
for their administrative services to the Company. PFPC will continue to
provide certain accounting, record keeping, tax and investor related
services. Fees for their services would be charged directly to the
Company.
Each Director who is not an "interested person" of the Company, as
defined by the 1940 Act, receives an annual retainer of $10,000 plus a
fee per meeting of the Board of Directors of $1,000. Such Director fees
are allocated to each series pro-rata, based on the relative net assets
of each series. Any Director who is an "interested person" does not
receive any annual or other fee from the Company. All Directors are
reimbursed for all reasonable out of pocket expenses. Total amounts
expensed related to Directors by Multi-Strategy Series M for the year
ended March 31, 2006 were $5,087.
PFPC Trust Company (an affiliate of PFPC) serves as custodian of
Multi-Strategy Series M's assets and provides custodial services for
Multi-Strategy Series M. Fees payable to the custodian and
reimbursement for certain expenses are paid by Multi-Strategy Series M.
4. SECURITIES TRANSACTIONS
The following table lists the aggregate purchases and proceeds from
sales of Investment Funds for the year ended March 31, 2006, and net
unrealized appreciation, gross unrealized appreciation, and gross
unrealized depreciation as of March 31, 2006.
-11-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
Cost of purchases $ 51,014,005
Proceeds from sales $ 61,320,305
Gross unrealized appreciation $ 9,178,498
Gross unrealized depreciation $ 419,021
------------
Net unrealized appreciation $ 8,759,477
------------
5. CONTRIBUTIONS, REDEMPTIONS, AND ALLOCATION OF INCOME
Generally, initial and additional subscriptions for shares may be
accepted as of the first day of each month. CAI has been authorized by
the Board of Directors of the Company to accept or reject any initial
and additional subscriptions for shares in Multi-Strategy Series M. The
Board of Directors from time to time and in its complete and exclusive
discretion may determine to cause Multi-Strategy Series M to repurchase
shares from Members pursuant to written tenders by Members on such
terms and conditions as it may determine. CAI expects that it typically
will recommend to the Board of Directors that the Company offer to
repurchase shares from Members quarterly, on each March 31, June 30,
September 30 and December 31 (or, if any such date is not a business
day, on the immediately preceding business day).
Net profits or net losses of Multi-Strategy Series M for each month-end
will be allocated among and credited to or debited against the capital
accounts of all Members as of the last day of each month in accordance
with the Members' respective investment percentages for the month.
Transactions in units were as follows for the years ended March 31,
2006 and 2005:
2006 2005
-------------- --------------
Shares outstanding, beginning of year 71,765.186 54,616.964
Shares purchased 2,274.891 24,309.752
Shares redeemed (18,235.953) (7,161.530)
-------------- --------------
Shares outstanding, end of year 55,804.124 71,765.186
============== ==============
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Investment Funds in which
Multi-Strategy Series M invests trade various financial instruments and
enter into various investment activities with off-balance sheet risk.
These include, but are not limited to, short selling activities,
writing option contracts and entering into equity swaps.
7. INCOME TAX INFORMATION
The tax components of capital shown in the table below represent
distribution requirements the Fund must satisfy under income tax
regulations, losses the Fund may be able to offset against income and
gains realized in future years and unrealized appreciation or
depreciation of securities and other investments for federal income tax
purposes.
-12-
- --------------------------------------------------------------------------------
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC - MULTI-STRATEGY SERIES M
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2006 (CONTINUED)
- --------------------------------------------------------------------------------
UNDISTRIBUTED NET UNDISTRIBUTED LONG- ACCUMULATED LOSS
INVESTMENT INCOME TERM CAPITAL GAIN CARRYFORWARD
================================================================
$- $354,199 $-
----------------------------------------------------------------
Net investment income (loss) and net realized gain (loss) may differ
for financial statement and tax purposes. The character of dividends
and distributions made during the fiscal year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing
of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net
realized gain was recorded by the Fund. Accordingly, the following
amounts have been reclassified for March 31, 2006. Net assets of the
Fund were unaffected by the reclassifications.
ACCUMULATED NET
ACCUMULATED NET REALIZED GAIN (LOSS)
INVESTMENT INCOME(LOSS) ON INVESTMENTS PAID-IN CAPITAL
================================================================
$1,709,746 ($7,770,950) $6,061,204
----------------------------------------------------------------
The primary difference between the book and tax appreciation or
depreciation of Investment Funds is attributable to adjustments to the
tax basis of Investment Funds based on allocation of income and
distributions from Investment Funds and the tax realization of
financial statement unrealized gain or loss. In addition, the cost of
Investment Funds for Federal income tax purposes is adjusted for items
of taxable income allocated to the Fund from the Investment Funds. The
allocated taxable income is reported to the Fund by each Investment
Fund on Schedule K-1. The aggregate cost on Investment Funds for
federal income tax purposes is therefore calculated and presented
annually as of March 31. The aggregate cost on Investment Funds and the
composition of unrealized appreciation and depreciation on Investment
Funds for federal income tax purposes as of March 31, 2006 as noted
below.
Federal tax cost of Investment Funds $ 57,766,397
================
Gross unrealized appreciation $ 6,176,681
Gross unrealized depreciation -
----------------
Net unrealized appreciation $ 6,176,681
================
8. SUBSEQUENT EVENT
In June 2006, the Board of Directors is expected to approve a Plan of
Merger and Reorganization under which the Multi-Strategy Series M will
merge into the Multi-Strategy Series G once the approval of the Members
of Series M is obtained. Members of Series M will exchange their Series
M shares for an equivalent value of Series G shares as of the date of
the merger. The proposed merger will be accounted for as-if the
respective funds had pooled their assets and liabilities. Management
expects that should the Members of Series M approve the merger that it
will occur during the fourth quarter of 2006.
-13-
- --------------------------------------------------------------------------------
FUND MANAGEMENT
(UNAUDITED)
The Company's officers are appointed by the Directors and oversee the
management of the day-to-day operations of the Company and each Series under the
supervision of the Board of Directors. One of the Directors and all of the
officers of the Company are directors, officers or employees of the Adviser,
their subsidiaries or Citigroup. The other Directors are not affiliated with the
Adviser, their subsidiaries or Citigroup and are not "interested persons" as
defined under Section 2(a)(19) of the 1940 Act (the "Independent Directors").
The Directors and officers of the Company also may be directors and officers of
other investment companies managed, advised, administered or distributed by
Citigroup or its subsidiaries. A list of the Directors and officers of the
Company and a brief statement of their present positions and principal
occupations during the past five years are set out below. To the fullest extent
allowed by applicable law, including the 1940 Act, the Limited Liability Company
Agreement indemnifies the Directors and officers for all costs, liabilities and
expenses that they may experience as a result of their service as such.
Certain of the Directors and officers of the Company are also directors
and/or officers of other investment companies that are advised by the Adviser or
its affiliates. The address for each Director and officer in his or her capacity
as such is 731 Lexington Avenue, 25th Floor, New York, NewYork10022.
-14-
INDEPENDENT DIRECTORS
(INFORMATION UNAUDITED)
POSITION(S) HELD TERM OF OFFICE* PRINCIPAL NUMBER OF PORTFOLIOS OTHER
NAME WITH AND LENGTH OF OCCUPATION(S) DURING IN FUND COMPLEX DIRECTORSHIPS
AND AGE THE COMPANY TIME SERVED PAST 5 YEARS OVERSEEN BY DIRECTOR HELD BY DIRECTOR
------- ---------------- --------------- -------------------- -------------------- ----------------
Charles Hurty Director November 2002 Business Consultant Two (Series M and GMAM Absolute
(born 1943) to present since October 2001; Series G) Return Strategies
prior thereto, Fund, LLC; CSFB
partner with Alternative
accounting firm of Capital
KPMG, LLP. Registered Funds
(15 portfolios);
iShares Trust (24
portfolios);
iShares, Inc. (70
portfolios)
Steven Krull Director November 2002 Professor of Finance Two (Series M and None
(born 1957) to present at Hofstra Series G)
University; Business
Consultant.
<FN>
- ----------
*Term of office of each Director is indefinite.
</FN>
-15-
INTERESTED DIRECTORS
(INFORMATION UNAUDITED)
POSITION(S) HELD TERM OF OFFICE* PRINCIPAL NUMBER OF PORTFOLIOS OTHER
NAME WITH AND LENGTH OF OCCUPATION(S) DURING IN FUND COMPLEX DIRECTORSHIPS
AND AGE THE COMPANY TIME SERVED PAST 5 YEARS OVERSEEN BY DIRECTOR HELD BY DIRECTOR
------- ---------------- --------------- -------------------- -------------------- ----------------
Raymond Nolte President and September 2005 CEO, Fund of Hedge Funds Two (Series M None
(born 1961) Director (Chair) to present Group; Portfolio Manager and Series G)
to each Series since
September 2005; Global
Head and Chief
Investment Officer,
Deutsche Bank ARS Fund
of Funds business (1996-
April 2005).
<FN>
- ----------
*Term of office of each Director is indefinite.
</FN>
-16-
OFFICERS
(INFORMATION UNAUDITED)
NAME POSITION(S) HELD WITH TERM OF OFFICE* PRINCIPAL OCCUPATION(S)
AND AGE THE COMPANY AND LENGTH OF TIME SERVED DURING PAST 5 YEARS
- ----------------- --------------------- -------------------------- --------------------------------------------------
Raymond Nolte President and September 2005 to present See table for "Interested Director" above.
(born 1961) Director
Daniel McAuliffe Vice President May 2005 to present Managing Director, Citigroup Alternative
(born 1950) Investments and Citigroup Global Markets Inc.;
Chief Operating Officer, Citigroup Global Fund
of Funds; Director and Chief Financial Officer,
Citigroup Managed Futures LLC; General
Partner, Citigroup Managed Futures LLC
funds; employed by Citigroup and predecessor
firms since 1986.
Trudi Gilligan Chief Compliance December 2004 to present Director and Associate General Counsel,
(born 1967) Officer Citigroup Alternative Investments LLC (since
2004); Vice President and Associate General
Counsel, Citigroup Alternative Investments
LLC (2000-2004); Associate, law firm of
Battle Fowler LLP. (1996-2000)
Jennifer Magro Treasurer May 2005 to present Head of accounting group, Citigroup Managed
(born 1971) Futures LLC (2000-2005)
Sonia Rubinic Secretary November 2002 to present Director, Citigroup Alternative Investments
(born 1965) LLC since April 1997.
Christopher Hutt Assistant Secretary June 2004 to present Vice President, Citigroup Alternative
(born 1970) Investments LLC (2004-present)
Assistant Vice President, JPMorgan Chase &
Co., Network
Client Consulting (2000-2003)
Client Coverage Officer, Morgan Stanley &
Co./Chase Manhattan Bank N.A. (1997-2000)
Other than as described above, since January 1, 2002, none of the
Independent Directors who is a director of another investment company whose
adviser and principal underwriter is Citigroup Alternative Investments LLC has
held any other position with (i) the Company, (ii) an investment company having
the same adviser or principal underwriter as the Company or an adviser or
principal underwriter that controls, is controlled by or is under common control
with the Adviser, (iii) the Adviser or other affiliate of the Company or (iv)
any person controlling, controlled by or under common control with the Adviser.
None of the Directors currently owns Units of either Series, nor do they own
equity securities issued by other investment companies in the Fund Complex.
-17-
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, and
that relates to any element of the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, that
relates to one or more of the items set forth in paragraph (b) of
this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that Charles Hurty is qualified to serve as an audit
committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services
that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal
years are $96,000 for 2005, $108,200 for 2006
Audit-Related Fees
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under
paragraph (a) of this Item are $0 for 2005 and $ 0 for 2006.
Tax Fees
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $141,000 for 2005 and
$141,000 for 2006. This fee relates to the preparation of the
registrant's tax return and for the investors' K-1.
All Other Fees
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other
than the services reported in paragraphs (a) through (c) of this
Item are $15,000 for 2005 and $14,000 for 2006. This fee relates to
the N-2 fee filing.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Audit Committee will approve in advance any audit and non-audit
services to be provided by the audit firm to (i) the Fund; (ii) the
Fund's investment adviser (non-audit services only); or (iii) any
affiliates of such investment adviser (non-audit services only) that
provide ongoing services to the Fund if the engagement relates
directly to the Fund's operations and financial reporting; provided,
that any single member of the Committee may approve such services on
behalf of the Committee if payments for such services are reasonably
estimated at less than $10,000 and such approval is reported to the
Committee at it next regular meeting; and provided further, that no
such non-audit service may be approved if prohibited by applicable
rules of the Securities and Exchange Commission.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
are as follows:
(b) N/A
(c) 100%
(d) 100%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the
most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that
provides ongoing services to the registrant for each of the last two
fiscal years of the registrant was $0 for 2005 and $0 for 2006.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen
by another investment adviser), and any entity controlling,
controlled by, or under common control with the investment adviser
that provides ongoing services to the registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is 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.
The Proxy Voting Policies are attached herewith.
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC.
Proxy Voting Procedures
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC (the
"Fund"), a "series" investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), has adopted these proxy voting
procedures (the "Procedures") in accordance with, and for the purpose of
complying with, rules related to proxy voting promulgated by the Securities and
Exchange Commission ("SEC") under the 1940 Act and the Investment Advisers Act
of 1940, as amended (the "Advisers Act").
Delegation of Proxy Voting. The Fund has delegated the responsibility for voting
proxies of its underlying portfolio funds (or other underlying securities) to
its investment adviser, an adviser registered with the SEC pursuant to the
Advisers Act. The investment adviser, Citigroup Alternative Investments LLC
("CAI"), has adopted proxy-voting procedures, including those designed to
address any material conflicts of interests between CAI and its clients
("Adviser Procedures"), which have been reviewed and approved by the Board of
Directors of the Fund and are attached hereto.
Annual Review. The Board of Directors of the Fund will review the Procedures and
the Adviser Procedures annually to ensure the procedures are reasonably designed
to ensure compliance with all relevant proxy-voting rules that are applicable to
the Funds.
Form N-PX. Commencing in 2004, the Fund will cause Form N-PX to be filed by
August 31 each year and will include proxy-voting information for the one-year
period ending that June 30. Form N-PX is an annual filing of the Fund's complete
proxy voting record which requires information disclosing: (1) each proxy
proposal subject matter; (2) if the proxy proposal was proposed by the issuer or
a shareholder; (3) how the Fund cast its votes; and (4) if the vote cast was for
or against management.
NOTE: BY AUGUST 31, 2004, THE FUND WILL BE REQUIRED TO FILE FORM N-PX FOR THE
PERIOD JULY 1, 2003 TO JUNE 30, 2004.
Disclosure of Proxy Procedures. Commencing in 2003, the Fund will ensure that a
description of its (and CAI's) proxy-voting procedures, including procedures
related to proxy-voting conflicts of interest, are disclosed in its Offering
Memorandum (the Statement of Additional Information portion, if applicable) and
shareholder reports.
NOTE: REQUIRED WITH THE NEXT SUCH DOCUMENT FILED WITH THE SEC.
Availability of Proxy Voting Procedures and Voting Record. Commencing in 2004,
the Fund will state in its Offering Memorandum (the Statement of Additional
Information portion, if applicable) and shareholder reports that its proxy
voting procedures and voting records are available free of charge directly from
the Fund (or its designee) as well as from the SEC website. The Fund will make
its proxy voting records available on either a Fund or CAI website or upon
request by calling a toll-free or collect telephone number.
NOTE: REQUIRED WITH THE NEXT SUCH DOCUMENT FILED WITH THE SEC ON OR AFTER AUGUST
31, 2004.
Adopted: September 18, 2003
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(A)(1) IDENTIFICATION OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
Raymond Nolte is currently the sole portfolio manager of the registrant's
portfolio and as such has primary responsibility for the day-to-day
management of the Company. In that capacity he receives significant input
and support from a team of analysts also employed by the Adviser. Mr.
Nolte's professional background is described above in the table below.
POSITION(S) TERM OF OFFICE* AND PRINCIPAL OCCUPATION(S)
NAME HELD WITH LENGTH OF TIME DURING
AND AGE THE COMPANY SERVED PAST 5 YEARS
------------- ------------------- ------------------------- -------------------------------
Raymond Nolte Portfolio Manager, September 2005 to present CEO, Fund of Hedge Funds
(born 1961) Director, President Group; Portfolio Manager to the
Company since September 2005;
Global Head and Chief
Investment Officer, Deutsche
Bank ARS Fund of Funds
business (1996-April 2005)
(A)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
AND POTENTIAL CONFLICTS OF INTEREST
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
-----------------------------------------------------------------------------------------------------------
Total Assets
in Accounts
Name of No. of Accounts where
Portfolio Total where Advisory Advisory Fee
Manager or Type of No. of Accounts Total Fee is Based on is Based on
Team Member Accounts Managed Assets Performance Performance
----------- -------- ------- ------ ----------- -----------
-----------------------------------------------------------------------------------------------------------
Raymond Nolte Registered 2 $236m 0 0
Investment
Companies:
-----------------------------------------------------------------------------------------------------------
Raymond Nolte Other Pooled 35 $1.642b 3 $541m
Investment
Vehicles:
-----------------------------------------------------------------------------------------------------------
Raymond Nolte Other Accounts: 2 $226m 1 $62
-----------------------------------------------------------------------------------------------------------
POTENTIAL CONFLICTS OF INTERESTS
As shown in the table above, Mr. Nolte is responsible for managing other
accounts ("Other Accounts") in addition to the Series. In certain
instances, conflicts may arise in his management of the Series and such
Other Accounts.
One situation where a conflict may arise between the Series and an Other
Account is in the allocation of investment opportunities among the Series
and the Other Account. For example, the Adviser may determine that there
is an opportunity that is suitable for the Series as well as for Other
Accounts of the Adviser, which have a similar investment objective. As a
related matter, a particular Investment Fund interest or other security
may be bought for one or more clients when one or more other clients are
selling that same security, which may adversely affect the Series. The
Company and the Adviser have adopted policies and procedures regarding
the allocation of investment opportunities, which generally require that
investment opportunities be allocated among the Series and Other Accounts
in a manner that is fair, equitable and consistent with their fiduciary
obligations to each.
Mr. Nolte's management of the Series and Other Accounts may result in his
devoting a disproportionate amount of time and attention to the
management of a particular account as against another. This particularly
may be the case when accounts have different objectives, benchmarks, time
horizons, asset levels and fees.
The management of personal accounts by Mr. Nolte may give rise to
potential conflicts of interest. While the Adviser's code of ethics will
impose limits on the ability of Mr. Nolte to trade for his personal
account, there is no assurance that the Adviser's code of ethics will
eliminate such conflicts.
Other than the conflicts described above, the Company is not aware of any
material conflicts that may arise in connection with the Adviser's
management of the Series' investments and such Other Accounts.
(A)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
Mr. Nolte's compensation is a combination of salary, discretionary bonus,
deferred compensation, retirement plans and automatic participation in a
company-funded retirement bonus. The discretionary bonus is based upon
the financial results and profitability of Citigroup as a whole, that of
CAI as a whole, and that of CAI's Global Fund of Funds business unit, for
which Mr. Nolte serves as chief executive. The discretionary bonus is not
linked to the performance of any specific benchmark or that of any CAI
investment fund or account; nor are specific asset size targets
considered.
(A)(4) DISCLOSURE OF SECURITIES OWNERSHIP
Dollar ($) Range
Name of Portfolio of Fund Shares
Manager or Beneficially
Team Member Owned
----------- -----
Raymond Nolte $0
(B) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded
that the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of
a date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph, based on their evaluation
of these controls and procedures required by Rule 30a-3(b) under the
1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b)
under the Securities Exchange Act of 1934, as amended (17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Not applicable.
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) Citigroup Alternative Investments Multi-Adviser Hedge Fund
Portfolios LLC
-------------------------------------------------------------------
By (Signature and Title)* /s/ Raymond Nolte
-------------------------------------------------------
Raymond Nolte, President
(principal executive officer)
Date June 9, 2006
----------------------------------------------------------------------------
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/ Raymond Nolte
-------------------------------------------------------
Raymond Nolte, President
(principal executive officer)
Date June 9, 2006
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Jennifer Magro
-------------------------------------------------------
Jennifer Magro, Treasurer
(principal financial officer)
Date June 9, 2006
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.