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
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Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC
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(Exact name of registrant as specified in charter)
55 East 59th Street, 10th Floor
New York, NY 10022
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(Address of principal executive offices) (Zip code)
Millie Kim, Esq.
Citigroup Alternative Investments LLC
399 Park Avenue, 14th Floor
New York, NY 10022
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(Name and address of agent for service)
registrant's telephone number, including area code: (212) 559-4999
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Date of fiscal year end: March 31
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Date of reporting period: March 31, 2010
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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.
(KPMG LOGO)
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
ANNUAL REPORT
MARCH 31, 2010
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm 1
Statement of Assets and Liabilities 2
Schedule of Investments 3
Statement of Operations 5
Statements of Changes in Shareholders' Capital 6
Statement of Cash Flows 7
Financial Highlights 8
Notes to Financial Statements 9
Federal Tax Information (unaudited) 22
Fund Management (unaudited) 23
Independent Directors (unaudited) 24
Interested Director (unaudited) 25
Officers (unaudited) 26
(KPMG LOGO) KPMG LLP
345 Park Avenue
New York, NY 10154
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC:
We have audited the accompanying statement of assets and liabilities of
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC,
including the schedule of investments, as of March 31, 2010, and the related
statement of operations and cash flows for the year then ended, the statements
of changes in shareholders' capital for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Funds' 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 confirmation of
securities owned as of March 31, 2010, by correspondence with underlying fund
operators, the custodian and other appropriate auditing procedures. 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 as of
March 31, 2010, and the results of its operations and its cash flows for the
years then ended, the changes in its shareholders' capital for each of the years
in the two-year period then ended, and the financial highlights for each of the
years in the five-year period then ended, in conformity with U.S. generally
accepted accounting principles.
KPMG LLP
May 27, 2010
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
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2010
ASSETS
Investments in Investment Funds, at fair value (cost $555,476,176) $ 661,870,099
Cash and cash equivalents 12,060,137
Investments in Portfolio Funds paid in advance 26,000,000
Receivable from Investment Funds 18,653,625
Other assets 143,172
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TOTAL ASSETS 718,727,033
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LIABILITIES
Contributions received in advance 27,455,773
Redemptions payable 23,584,870
Management fee payable 875,527
Professional fees payable 703,292
Directors' fees payable 39,000
Accounts payable and other accrued expenses 277,245
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TOTAL LIABILITIES 52,935,707
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SHAREHOLDERS' CAPITAL (624,958.550 SHARES OUTSTANDING) $ 665,791,326
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NET ASSET VALUE PER SHARE $ 1,065.34
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COMPOSITION OF SHAREHOLDERS' CAPITAL
Paid-in capital $ 737,667,000
Accumulated net investment income 9,332,470
Accumulated net realized loss on investment transactions (187,602,067)
Accumulated net unrealized appreciation on investments 106,393,923
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SHAREHOLDERS' CAPITAL $ 665,791,326
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See accompanying notes to financial statements.
-2-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
SCHEDULE OF INVESTMENTS
MARCH 31, 2010
% OF
SHAREHOLDERS'
COST ** FAIR VALUE CAPITAL
------------ ------------ -------------
INVESTMENTS IN INVESTMENT FUNDS
DIRECTIONAL EQUITY
Artha Emerging Markets Fund LP - b $ 19,281,470 $ 20,405,580 3.06%
Artis Partners 2X Ltd. - a 16,000,000 16,705,422 2.51
Frontpoint Onshore Healthcare Fund 2X LP - b 5,011,339 6,588,559 0.99
Horseman European Select Fund - a 9,000,000 7,464,145 1.12
Meditor European Hedge Fund (B) Ltd. - a 6,000,000 7,186,894 1.08
Passport Global Strategies III LTD - f 788,445 716,554 0.11
Passport II LP - b -- 12,688,640 1.91
Sprott Offshore Fund II LTD Class B - a 12,200,000 8,890,762 1.33
Tiger Asia Overseas Fund, Ltd. Class B Offshore Fund - b 10,000,000 7,828,456 1.18
------------ ------------ -----
Total Directional Equity 78,281,254 88,475,012 13.29
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DIRECTIONAL MACRO
Asset Management Offshore LTD - a 15,000,000 14,880,675 2.23
Brevan Howard Fund Limited - a 10,933,478 11,556,169 1.73
Drawbridge Global Macro Fund Ltd - SP Reserve - f 52,619 52,674 0.01
Drawbridge Global Macro Fund Ltd Side Pocket 10 - f 6,399 4,015 0.00*
Drawbridge Global Macro Fund Ltd Side Pocket 11 - f 6,287 5,599 0.00*
Drawbridge Global Macro Fund Ltd Side Pocket 12 - f 389,436 219,846 0.03
Drawbridge Global Macro Fund Ltd Side Pocket 4 - f 82,628 61,027 0.01
Drawbridge Global Macro Fund Ltd Side Pocket 5 - f 45,977 44,606 0.01
Drawbridge Global Macro Fund Ltd Side Pocket 6 - f 25,653 34,069 0.01
Drawbridge Global Macro Fund Ltd Side Pocket 7 - f 18,929 33,302 0.01
Drawbridge Global Macro Fund Ltd SPV Assets - f -- 178,446 0.03
Drawbridge Global Macro Ltd C1 H10D SP May 9 2008 - f 23,846 17,656 0.00*
ESG Treasury Opp Portfolio LP - a 14,000,000 14,078,153 2.11
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Total Directional Macro 40,585,252 41,166,237 6.18
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EVENT DRIVEN
Alden Global Distressed Opp Fund, LP - a 41,400,000 48,142,279 7.23
Ashmore Asian Recovery Fund Limited - b 8,730,763 7,093,673 1.07
Carrington Investment Partners ( US ) LP - b 11,074,979 2,866,873 0.43
CPIM Structured Credit Fund 1000 INC - b 7,408,426 1,024,050 0.15
CPIM Structured Credit Fund 1500 INC - c 5,993,991 660,109 0.10
Harbinger Capital Partners Class L Holdings Series 2 - b 422,060 1,497,931 0.22
Harbinger Capital Partners Class PE Holdings Series 1 - f 6,898,263 6,080,882 0.91
Harbinger Capital Partners Offshore Fund I, LTD - f 15,760,206 7,968,066 1.20
Marathon Distressed Subprime Fund (Cayman) LTD Class B - b 5,000,000 5,234,324 0.79
Marathon Special Opp Fund LTD SP 2 - f 611,452 606,693 0.09
Marathon Special Opp LTD SP 4 - f 588,093 427,218 0.06
Marathon Special Opportunity Fund LTD Ser. 31 Dec 2008 - f 924,928 814,556 0.12
Marathon Special Opportunity Fund LTD SP6 - d 276,235 240,122 0.04
Marathon Structured Finance Fund LTD - d 14,907,887 9,279,654 1.39
Pardus Special Opportunities Fund I, LTD - b 15,000,000 6,096,933 0.92
Paulson Advantage Plus L.P. Gold Shares - b 23,959,187 24,734,433 3.71
Stark Investments Structured Finance Onshore Fund - d 9,442,105 8,519,018 1.28
Taconic Offshore Fund 1.5 LTD - d 10,000,000 10,768,622 1.62
Third Point Partners Qualified, LP - b 30,050,000 35,553,078 5.34
York Credit Opportunities Fund, LP - b 16,500,000 18,953,436 2.85
York Credit Opportunities Unit Trust - b 5,000,000 6,377,762 0.96
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Total Event Driven 229,948,575 202,939,712 30.48
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See accompanying notes to financial statements.
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CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2010
% OF
SHAREHOLDERS'
COST ** FAIR VALUE CAPITAL
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INVESTMENTS IN INVESTMENT FUNDS (CONTINUED)
RELATIVE VALUE
Brigade Leveraged Capital Structures LP - b $ 6,002,972 $ 7,136,889 1.07%
Gracie Credit Opportunities Fund LP - b 11,000,000 12,155,923 1.83
Nisswa Fixed Income Fund LP - b 46,500,000 59,454,281 8.93
Perella Weinberg Partners Xerion Fund LP - b 34,000,000 39,473,161 5.93
Providence MBS Fund, LP - b 22,000,000 41,894,045 6.29
Providence MBS Offshore Fund, LTD - b 2,300,000 22,293,387 3.35
SOLA 1 - a 25,518,734 19,013,778 2.85
Sola I Class L1 Master - f 9,481,266 11,952,864 1.79
Stratus Feeder Fund LTD Class C - a 11,511,640 15,039,309 2.26
Stratus Fund Ltd - Class C - a 3,300,000 9,029,240 1.36
Stratus Fund LTD Double Lev Class C Side Pocket - f 187,975 185,822 0.03
Structured Service Holdings LP - a 23,358,508 57,365,878 8.62
Structured Service Holdings LTD - a 11,500,000 34,294,561 5.15
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Total Relative Value 206,661,095 329,289,138 49.46
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TOTAL INVESTMENTS IN INVESTMENT FUNDS $555,476,176 $661,870,099 99.41
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OTHER ASSETS, LESS LIABILITIES 3,921,227 0.59
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SHAREHOLDERS' CAPITAL $665,791,326 100.00%
============ ======
Note: Investments in underlying Investment Funds are categorized by investment
strategy.
* Amounts are less than 0.005%.
** - The Company records a realized gain or loss on its investment in
Investment Funds only to the extent that the cost of such investment as
well as any Side Pocket has been fully recovered through previous
redemptions from investments in Investment Funds.
a - Redemptions permitted monthly.
b - Redemptions permitted quarterly.
c - Redemptions permitted semi annually.
d - Redemptions permitted annually.
f - Illiquid, redeemable only when underlying investment is realized or
converted to regular interest in Investment Fund.
See accompanying notes to financial statements.
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CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2010
INVESTMENT INCOME
Interest income $ 6,979
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TOTAL INVESTMENT INCOME 6,979
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EXPENSES
Management fees 8,724,788
Accounting fees 1,260,362
Risk monitoring fees 885,786
Subscription and redemption fees 328,672
Professional fees 298,157
Directors' fees and expenses 78,000
Custodian fees 21,298
Miscellaneous expenses 218,095
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TOTAL EXPENSES 11,815,158
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NET INVESTMENT LOSS (11,808,179)
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NET REALIZED GAIN/LOSS AND CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS IN INVESTMENT FUNDS
Net realized gain/(loss) on sales of investments in Investment Funds 33,123,620
Net change in unrealized appreciation/depreciation on investments in
Investment Funds 98,603,651
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS IN INVESTMENT FUNDS 131,727,271
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NET INCREASE IN SHAREHOLDERS' CAPITAL FROM OPERATIONS $119,919,092
============
See accompanying notes to financial statements.
-5-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
STATEMENTS OF CHANGES IN SHAREHOLDERS' CAPITAL
FOR THE YEARS ENDED MARCH 31, 2010 AND 2009
2010 2009
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OPERATIONS
Net investment loss $ (11,808,179) $ (17,276,345)
Net realized gain/(loss) on sales of investments in Investment Funds 33,123,620 (47,690,528)
Net change in unrealized appreciation/depreciation on investments
in Investment Funds 98,603,651 (46,582,350)
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NET INCREASE/(DECREASE) IN SHAREHOLDERS' CAPITAL FROM OPERATIONS 119,919,092 (111,549,223)
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DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income (85,488,824) (122,666)
Distributions from net realized gains -- (17,339,104)
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DECREASE IN SHAREHOLDERS' CAPITAL FROM DISTRIBUTIONS TO SHAREHOLDERS (85,488,824) (17,461,770)
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SHAREHOLDERS' CAPITAL TRANSACTIONS
Capital contributions 155,524,519 256,965,644
Reinvestment of distributions 81,914,430 15,476,284
Capital withdrawals (121,606,714) (199,611,798)
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INCREASE IN SHAREHOLDERS' CAPITAL FROM CAPITAL TRANSACTIONS 115,832,235 72,830,130
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SHAREHOLDERS' CAPITAL AT BEGINNING OF YEAR 515,528,823 571,709,686
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SHAREHOLDERS' CAPITAL AT END OF YEAR (624,958.550 AND 512,570.369
SHARES OUTSTANDING AT MARCH 31, 2010 AND 2009, RESPECTIVELY) $ 665,791,326 $ 515,528,823
============= =============
ACCUMULATED NET INVESTMENT INCOME/(LOSS) $ 9,332,470 $ (3,054,103)
============= =============
See accompanying notes to financial statements.
-6-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in shareholders' capital from operations $ 119,919,092
Adjustments to reconcile net increase in shareholders' capital from
operations to net cash used in operating activities:
Purchases of investments in Investment Funds (286,640,970)
Proceeds from disposition of investments in Investment Funds 304,558,025
Net realized (gain)/loss on sales of investments in Investment Funds (33,123,620)
Change in net unrealized appreciation on investments in Investment Funds (98,603,651)
Changes in operating assets and liabilities:
Decrease in prepaid professional fees 622,729
Decrease in other assets 24,938
Increase in management fee payable 90,562
Decrease in professional fees payable (76,292)
Decrease in directors' fees payable (39,000)
Decrease in accounts payable and other accrued expenses (185,936)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 6,545,877
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CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 177,590,292
Distributions paid in cash (3,574,394)
Payments for shares redeemed (208,563,488)
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NET CASH USED IN FINANCING ACTIVITIES (34,547,590)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (28,001,713)
Cash and cash equivalents at beginning of year 40,061,850
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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,060,137
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SUPPLEMENTAL NON-CASH INFORMATION:
Increase in contributions received in advance $ 22,065,773
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Decrease in redemptions payable $ (86,956,774)
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See accompanying notes to financial statements.
-7-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
2010 2009 2008 2007 2006
------------ ------------ ------------ ------------ ------------
Net Asset Value, beginning of year: $ 1,005.77 $ 1,216.46 $ 1,207.54 $ 1,241.60 $ 1,115.09
Income (loss) from investment operations:*
Net investment loss (22.13) (29.47) (34.29) (28.26) (26.88)
Net realized and unrealized gain/(loss) on
investments 247.91 (153.56) 133.84 108.05 153.39
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TOTAL FROM INVESTMENT OPERATIONS 225.78 (183.03) 99.55 79.79 126.51
------------ ------------ ------------ ------------ ------------
Distributions from net investment income (166.21) -- -- (47.12) --
Distributions from net realized gains -- (27.66) (90.63) (66.73) --
------------ ------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS (166.21) (27.66) -- -- --
------------ ------------ ------------ ------------ ------------
Net Asset Value, end of year: $ 1,065.34 $ 1,005.77 $ 1,216.46 $ 1,207.54 $ 1,241.60
============ ============ ============ ============ ============
TOTAL RETURN 23.21% (15.05%) 8.24% 6.43% 11.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $665,791,326 $515,528,823 $571,709,686 $327,210,824 $188,116,360
============ ============ ============ ============ ============
Portfolio turnover 38.58% 41.45% 30.05% 69.45% 57.90%
Ratio of expenses to average net assets**, *** 2.04% 2.63% 2.90% 2.51% 2.60%
Ratio of net investment loss to average net
assets**, *** (2.04%) (2.62%) (2.87%) (2.37%) (2.35%)
The above ratios may vary for individual investors based on the timing of
capital transactions during the period.
* Per share data for income (loss) from investment operations is computed
using the total of monthly income and expense divided by beginning of month
shares.
** The ratios of total expenses and net investment loss to average members'
capital does not include the impact of expenses and incentive allocations
or incentive fees related to the underlying Investment Funds or the impact
of any placement fees paid by the Company.
*** As noted in Note 9 of the accompanying notes, the ratios above include
subscription and redemption fees of $328,672. Had the Fund not incurred
these fees, the ratio of expenses to average net assets and the ratio of
net investment loss to average net assets would have been 1.99% and
(1.98%), respectively. Furthermore, for the prior years ended March 31,
2009 and 2008, the Company incurred redemption fees of $2,199,068 and
$2,151,669, respectively. Had the Fund not incurred these fees, the ratio
of expenses to average net assets and the ratio of net investment loss to
average net assets would have been 2.30% and (2.29%) for the year end March
31, 2009 and 2.40% and (2.37)% for the year ended March 31, 2008,
respectively. There were no subscription or redemption fees for the years
ended March 31, 2007 or 2006.
See accompanying notes to financial statements.
-8-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010
1. ORGANIZATION
Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC
(the "Company") 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 investment objective of the Company 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 the Company can be
described as a fund of hedge funds.
Shares of the Company ("Shares") are sold to eligible investors (referred
to as "Shareholders"). The minimum initial investment in the Company from
each Shareholder is $25,000; the minimum additional investment is $10,000.
Citigroup Alternative Investments LLC ("CAI" or the "Adviser"), a Delaware
limited liability company and an indirect, wholly owned subsidiary of
Citigroup Inc., serves as the Company'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 the Company's assets to various Investment Funds. Under the
Company's governing documents, the Company has delegated substantially all
authority to oversee the management of the operations and assets of the
Company to the Board of Directors.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
are expressed in United States dollars. The following is a summary of
significant accounting and reporting policies used in preparing the
financial statements.
A. PORTFOLIO VALUATION
Investments in Investment Funds are subject to the terms of the respective
limited partnership agreements, limited liability company agreements,
offering memoranda and such negotiated "side letter" or similar
arrangements as the Adviser may have entered into with the Investment Fund
on behalf of the Company. The Company's investments in Investment Funds are
carried at fair value as determined by the Company's pro-rata interest in
the net assets of each Investment Fund.
-9-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
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 the Company, as an 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 4% 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. These management and incentive fees are
accounted for in the valuations of the Investment Funds and are not
included in the management fees reflected in the Statement of Operations.
The Company may invest in Investment Funds that may designate certain
investments within those Investment Funds, typically those that are
especially illiquid and/or hard to value, as "special situation" (often
called "Side-Pocket") investments with additional redemption limitations.
Such a Side-Pocket is, in effect, similar to a private equity fund that
requires its investors to remain invested for the duration of the fund and
distributes returns on the investment only when liquid assets are generated
within the fund, typically through the sale of the fund's illiquid assets
in exchange for cash.
As a general matter, the fair value of the Company's investment in an
Investment Fund represents the amount that the Company can reasonably
expect to receive if the Company's investment was sold in an orderly
transaction at the time of valuation. The Investment Funds provide for
periodic redemptions ranging from monthly to annually. Investment Funds
generally require advance notice of a shareholder's intent to redeem its
interest, and may, depending on the Investment Funds' governing agreements,
deny or delay a redemption request. The Company considers if a liquidity
discount on any Investment Fund should be taken due to redemption
restrictions or suspensions by the Investment Fund. However, the effects of
any discounts related to redemption restrictions or lock-up periods were
determined by the Adviser to be insignificant at March 31, 2010, and
therefore, no discounts were applied to the fair value of the Investment
Funds. 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. NET ASSET VALUE DETERMINATION
The net asset value of the Company 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.
Retroactive adjustments to the Company's net asset value might be made
after the valuation date which could impact the net asset value per share
at which Shareholders purchase or sell Company Shares. The valuations
reported by the Investment Funds, upon which the Company calculates its
month end net asset value may be subject to adjustment subsequent to the
valuation date, based on information which becomes available after that
valuation date. For example, fiscal year-end net
-10-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
asset values of an Investment Fund may be revised as a result of a year-end
audit performed by the independent auditors of that Investment Fund. Other
adjustments to the Company's net asset value may also occur from time to
time, such as from the misapplication by the Company or its agents of the
valuation policies described in the Company's valuation procedures.
Retroactive adjustments to the Company's net asset value, which are caused
by adjustments to the Investment Funds values or by a misapplication of the
Company's valuation policies, that are able to be made within 90 days of
the valuation date(s) to which the adjustment would apply will be made
automatically unless determined to be de minimis. Other potential
retroactive adjustments, regardless of whether their impact increases or
decreases the Company's net asset value, will be made only if they both (i)
are caused by a misapplication of the Company's valuation policies and (ii)
deemed to be material. All retroactive adjustments are reported to the
Company's Valuation Committee and to affected shareholders.
Effective June 30, 2009, the Company adopted a policy which permits
revisions to the number of Shares purchased or sold by Shareholders due to
retroactive adjustments made under the circumstances described above which
occur within 90 days of the valuation date. Prior to June 30, 2009, that
automatic 90-day adjustment period was not in effect and retroactive
valuation or share adjustments were not made.
In circumstances where a retroactive adjustment is not made under the
circumstances described above, then Shares purchased or sold by
Shareholders will not be adjusted. As a result, to the extent that the
subsequent impact of the event which was not adjusted adversely affects the
Company's net asset value, the outstanding Shares of the Company will be
adversely affected by prior repurchases made at a net asset value per Share
higher than the adjusted value. Conversely, any increases in net asset
value per Share resulting from such subsequent impact will be to the
benefit of the holders of the outstanding Shares of the Company and to the
detriment of Shareholders who previously had their Shares repurchased at a
net asset value per Share lower than the post-impact value. New
Shareholders may be affected in a similar way, because the same principles
apply to the purchase of Shares.
C. INCOME RECOGNITION AND EXPENSES
Interest income is recognized on an accrual basis as earned. Expenses are
recognized as incurred. Income, expenses and realized and unrealized gains
and losses are recorded monthly.
The change in an Investment Fund's net asset value is included in net
change in unrealized appreciation on investments in Investment Funds on the
Statement of Operations. The Company records a realized gain or loss on its
investment in Investment Funds only to the extent that the cost of such
investment as well as any Side Pocket has been fully recovered through
previous redemptions from investment in Investment Funds.
The Company 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 the
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CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
Company's account; professional fees; costs of insurance; registration
expenses; and expenses of meetings of the Board of Directors.
D. INCOME TAXES
The Company became a corporation that is taxed as a regulated investment
company as of October 1, 2005. The Company operated as a partnership from
inception through September 30, 2005.
It is the Company's intention to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies ("RICs") 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 required for the Company's financial
statements. While the Company intends to distribute substantially all of
its taxable net investment income and capital gains, in the manner
necessary to avoid imposition of the 4% excise tax as described above, it
is possible that some excise tax will be incurred. In such event, the
Company will be liable for the tax only on the amount by which it does not
meet the foregoing distribution requirements.
The Company has analyzed tax positions taken or expected to be taken in the
course of preparing the Company's tax return for all open tax years and has
concluded, as of March 31, 2010, no provision for income tax would be
required in the Company's financial statements. The Company's federal and
state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of
revenue.
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit and monies invested in
money market deposit accounts that are accounted for at amortized cost,
which approximates fair value. Such cash, at times, may exceed federally
insured limits. The Company has not experienced any losses in such accounts
and does not believe it is exposed to any significant credit risk on such
bank deposits.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management of the Company to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes.
Changes in the economic environment, financial markets, and any other
parameters used in determining these estimates could cause actual results
to differ materially.
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CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
G. NEW ACCOUNTING PRONOUNCEMENTS
On July 1, 2009, the FASB issued Accounting Standards Codification Topic
105, GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("ASC 105") (formerly known
as Financial Accounting Standards No. 168, the FASB ACCOUNTING STANDARDS
CODIFICATION AND HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES: A
REPLACEMENT OF FASB STATEMENT NO. 162), as the single source of
authoritative U.S. GAAP for nongovernmental entities. ASC 105 is effective
for interim and annual periods ending after September 15, 2009. All
existing accounting standards documents are superseded as described in ASC
105, and all other accounting literature not included in ASC 105 is
nonauthoritative. ASC 105 will amend the Company's disclosure for
references to accounting guidance to include reference to the applicable
section of ASC 105.
In September 2009, the FASB issued Accounting Standards Update ("ASU") No.
2009-12 ("ASU 2009-12"), INVESTMENTS IN CERTAIN ENTITIES THAT CALCULATE NET
ASSET VALUE PER SHARE (OR ITS EQUIVALENT), which includes guidance on fair
value measurements and disclosures relating to investments in certain
entities that calculate net asset value ("NAV") per share (or its
equivalent). The guidance permits, as a practical expedient, an entity
holding investments in certain entities that calculate NAV per share or its
equivalent for which the fair value is not readily determinable, to measure
the fair value of such investments on the basis of that NAV per share, or
its equivalent, without adjustment. The guidance also requires disclosure
of the attributes of investments within the scope of the guidance by major
category of investment. Such disclosures include the nature of any
restrictions on an investor's ability to redeem its investments at the
measurement date, any unfunded commitments and the investment strategies of
the investee. The guidance permits investments to be characterized as Level
2 investments if the entity holding the investment has the ability to
redeem its investment with the investee at net asset value per share at the
measurement date, on at least a quarterly basis. The guidance is effective
for interim and annual periods ending after December 15, 2009. The Company
has adopted this disclosure effective with the issuance of its March 31,
2010 financial statements, which has caused many of the Company's
investments to be classified as Level 2 as compared to the prior
classification as Level 3.
In January 2010, the FASB issued ASU No 2010-06 ("ASU 2010-06"), IMPROVING
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS, which requires new disclosures
and provides amendments to ASC Subtopic 820-10 clarifying existing
disclosures. The new disclosures relate to transfers in and out of Level 1
and 2 investments, and disclosures about purchases, sales, issuances, and
settlements of Level 3 investments on a gross basis. The guidance also
clarifies existing disclosures regarding the level of disaggregation and
disclosures about inputs and valuation techniques. The disclosures
regarding transfers in and out of Level 1 and 2 investments, and
clarifications to existing disclosures are effective for interim and annual
periods beginning after December 15, 2009. The disclosures regarding
disclosures of Level 3 investment rollforward of activity on a gross basis
are effective for fiscal years beginning after December 15, 2010. The
Company is currently evaluating the impact of these disclosures on its
financial statements.
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CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
In February 2010, the FASB issued ASU No. 2010-09 ("ASU 2010-09"),
SUBSEQUENT EVENTS: AMENDMENTS TO CERTAIN RECOGNITION AND DISCLOSURE
REQUIREMENTS, which amends ASC Subtopic 855-10. ASU 2010-09 describes
amendments which clarify which entities are required to evaluate subsequent
events through the date the financial statements are issued and the scope
of the disclosure requirements related to subsequent events, and is
effective upon issuance. The adoption of this guidance has no material
impact on the Company's financial statement disclosures.
3. FAIR VALUE DISCLOSURES
In accordance with the authoritative guidance on fair value measurements
and disclosures under GAAP, the Company discloses the fair value of its
investments in a hierarchy that prioritizes the inputs to valuation
techniques used to measure the fair value. The hierarchy gives the highest
priority to valuations based upon unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the
lowest priority to valuations based upon unobservable inputs that are
significant to the valuation (level 3 measurement). The guidance
establishes three levels of fair value as listed below.
Level 1- Inputs that reflect unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to access
at the measurement date;
Level 2- Inputs other than quoted prices that are observable for the asset
or liability either directly or indirectly, including inputs in markets
that are not considered to be active;
Level 3- Inputs that are unobservable.
The notion of unobservable inputs is intended to allow for situations in
which there is little, if any, market activity for the asset or liability
at the measurement date. Under Level 3, the owner of an asset must
determine valuation based on its own assumptions about what market
participants would take into account in determining the fair value of the
asset, using the best information available.
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
The following is a summary of the investment strategies, their liquidity
and redemption notice periods and any restrictions on the liquidity
provisions of the investments in Portfolio Funds held in the Company as of
March 31, 2010. Portfolio Funds with no current redemption restrictions may
be subject to future gates, lock-up provisions or other restrictions, in
accordance with their offering documents which, in accordance with ASU
2009-12, would affect its disclosure. The Company had no unfunded capital
commitments as of March 31, 2010.
Directional equity funds take long and short stock positions. The manager
may attempt to profit from both long and short stock positions
independently, or profit from the relative outperformance of long positions
against short positions. The stock picking and portfolio construction
process is usually based on bottom-up fundamental stock analysis, but may
also include top-down macro-based views, market trends and sentiment
factors. Directional equity managers may specialize by region
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CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
(e.g., global, U.S., Europe or Japan) or by sector. No assurance can be
given that the managers will be able to correctly locate profitable trading
opportunities, and such opportunities may be adversely affected by
unforeseen events. In addition, short selling creates the risk of loss if
the security that has been sold short appreciates in value. The Investment
Funds within this strategy have monthly to quarterly liquidity, and are
generally subject to a 30 to 90 day notice period. One Investment Fund in
this strategy, representing approximately 1 percent in this strategy, is an
illiquid side pocket investment, and has suspended redemptions. The
remaining approximately 99 percent of the Investment Funds in this strategy
can be redeemed with no restrictions as of the measurement date, and so,
are classified as Level 2 investments in Investment Funds.
Directional macro strategies require well developed risk management
procedures due to the frequent employment of leverage. Investment managers
may trade futures, options on future contracts and foreign exchange
contracts and may trade in diversified markets or focus on one market
sector. Two types of strategies employed by directional macro managers are
DISCRETIONARY and SYSTEMATIC trading. Discretionary trading strategies seek
to dynamically allocate capital to relatively short-term trading
opportunities around the world. Directional strategies (seeking to
participate in rising and declining when the trend appears strong and
justified by fundamentals) and relative value approaches (establishing long
positions in undervalued instruments and short positions in related
instruments believed to be over valued) or in "spread" positions in an
attempt to capture changes in the relationships between instruments.
Systematic trading strategies generally rely on computerized trading
systems or models to identify and capitalize on trends in financial and
commodity markets. This systematic approach allows investment managers to
seek to take advantage of price patterns in very large number of markets.
The trading models may be focused on technical or fundamental factors or
combination of factors. Generally, the Investment Funds within this
strategy have monthly liquidity, subject to a 5 to 90 day notice period.
Investment Funds in this strategy, representing approximately 1 percent,
are illiquid side pocket investments with suspended redemptions. The
remaining approximately 99 percent of the Investment Funds in this strategy
can be redeemed with no restrictions as of the measurement date, and so,
are classified as Level 2 investments in Investment Funds.
Event driven strategies involve investing in opportunities created by
significant transactional events such as spin-offs, mergers and
acquisitions, bankruptcies, recapitalizations and share buybacks. Event
driven strategies include "merger arbitrage" and "distressed securities".
Generally, the Investment Funds within this strategy have monthly to annual
liquidity, subject to a 30 to 180 day notice period. Investment Funds in
this strategy, representing approximately 16 percent, are illiquid side
pocket investments with suspended redemptions. In addition, approximately
17 percent of the Investment Funds in this strategy have gated redemptions,
which are expected to be lifted within 12 months. The remaining
approximately 67 percent of the Investment Funds in this strategy can be
redeemed with no restrictions as of the measurement date, and so, are
classified as Level 2 investments in Investment Funds.
Relative value arbitrage strategies seek to take advantage of specific
pricing anomalies, while also seeking to maintain minimal exposure to
systematic market risk. This may be achieved by purchasing one security
previously believed to be undervalued, while selling short another security
-15-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
perceived to be overvalued. Relative value arbitrage strategies include
equity market neutral, statistical arbitrage, convertible arbitrage, and
fixed income arbitrage. Some investment managers classified as
multi-strategy relative value arbitrage use a combination of these
substrategies. Generally, the Investment Funds within this strategy have
monthly to quarterly liquidity, subject to a 30 to 90 day notice period.
Investment Funds in this strategy, representing approximately 4 percent,
are illiquid side pocket investments with suspended redemptions. The
remaining approximately 96 percent of the Investment Funds in this strategy
can be redeemed with no restrictions as of the measurement date, and so,
are classified as Level 2 investments in Investment Funds.
The Company follows the authoritative guidance under GAAP on determining
fair value when the volume and level of activity for the asset or liability
have significantly decreased and identifying transactions that are not
orderly. Accordingly, if the Company determines that either the volume
and/or level of activity for an asset or liability has significantly
decreased (from normal conditions for that asset or liability) or price
quotations or observable inputs are not associated with orderly
transactions, increased analysis and management judgment will be required
to estimate fair value. Valuation techniques such as an income approach
might be appropriate to supplement or replace a market approach in those
circumstances.
The guidance also provides a list of factors to determine whether there has
been a significant decrease in relation to normal market activity.
Regardless, however, of the valuation technique and inputs used, the
objective for the fair value measurement in those circumstances is
unchanged from what it would be if markets were operating at normal
activity levels and/or transactions were orderly; that is, to determine the
current exit price.
A financial instrument's level within the fair value hierarchy is based
upon the lowest level of any input that is significant to the fair value
measurement. However, the determination of what constitutes "observable"
requires significant judgment by the Adviser. The Adviser considers
observable data to be market data which is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary, and
provided by independent sources that are actively involved in the relevant
market.
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of March 31, 2010, in
valuing the Company's assets and liabilities carried at fair value:
Level 2 Level 3
Total Fair Value at Level 1 Significant Significant
Description March 31, 2010 Quoted Prices Observable Inputs Unobservable Inputs
- ----------- ------------------- ------------- ----------------- -------------------
Investments in Investment Funds
Directional Equity $ 88,475,012 $-- $ 87,758,458 $ 716,554
Directional Macro 41,166,237 -- 40,514,997 651,240
Event Driven 202,939,712 -- 146,963,378 55,976,334
Relative Value 329,289,138 -- 277,677,291 51,611,847
------------ --- ------------ ------------
Total Investments in Investment Funds $661,870,099 $-- $552,914,124 $108,955,975
============ === ============ ============
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CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
The following is a reconciliation of assets for which significant
unobservable inputs (Level 3) were used in determining fair value:
CHANGE IN
UNREALIZED TRANSFERS IN
BALANCE AS OF REALIZED GAIN / APPRECIATION / NET PURCHASES / AND/OR OUT OF BALANCE AS OF
DESCRIPTION MARCH 31, 2009 (LOSS) * DEPRECIATION (SALES) LEVEL 3 RECLASSIFICATIONS** MARCH 31, 2010
- ----------- -------------- --------------- -------------- --------------- --------------- ------------------- --------------
Directional Equity $ 91,241,879 $(2,173,321) $ 1,087,374 $ (8,541,772) $ 6,860,852*** $ (87,758,458) $ 716,554
Directional Macro 11,588,192 174,103 525,671 28,878,271 -- (40,514,997) 651,240
Event Driven 130,143,879 21,555,431 9,226,817 42,013,585 -- (146,963,378) 55,976,334
Relative Value 253,673,730 13,540,223 87,763,789 (18,827,752) (6,860,852)*** (277,677,291) 51,611,847
------------ ----------- ----------- ------------ ----------- ------------- ------------
Total $486,647,680 $33,096,436 $98,603,651 $ 43,522,332 $ -- $(552,914,124) $108,955,975
============ =========== =========== ============ =========== ============= ============
Net change in unrealized appreciation/depreciation on Level 3 assets still
held as of March 31, 2010 is $16,383,713.
* The realized gain/(loss) in the above rollforward excludes holdback
realized gain/(loss) of $27,184 received by the Fund during the year ended
March 31, 2010 relating to March 31, 2009 redemptions. Such amount is
included in the total realized gain/(loss) on the Statement of Operations.
** Reclassifications represent investments in Investment Funds that were
previously categorized as Level 3 investments for the year ended March 31,
2009. In accordance with recently issued authoritative guidance, these
investments are being reclassified as Level 2 investments as of March 31,
2010.
*** Transfer relates to a change in investment strategy from the relative value
to directional equity strategy during the year ended March 31, 2010.
All net unrealized gains/(losses) in the table above are reflected in the
accompanying Statement of Operations.
4. MANAGEMENT FEE, ADMINISTRATIVE FEE, RELATED PARTY TRANSACTIONS AND OTHER
The Adviser provides certain management and administrative services to the
Company. The Adviser 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, the
Adviser also provides office space and other support services. In
consideration for such services, the Company will pay the Adviser a monthly
management fee of 0.125% (1.5% annually) based on end of month
Shareholders' capital.
Placement agents may be retained by the Company to assist in the placement
of the Company's Shares. A placement agent 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
Shareholder is generally dependent on the size of the investment in the
Company.
Citigroup Global Markets, Inc. ("CGM"), an affiliate of CAI and a wholly
owned subsidiary of Citigroup, Inc. serves as a placement agent of the
Company's Shares. For the year ended March 31, 2010, the Company paid
$1,217,956 in placement fees to CGM on the Company's Shares. Such fees are
deducted from an investor's gross contribution amount.
-17-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
The Company has entered into agreements with third parties to act as
additional placement agents for the Company's Shares. Placement fees may
range from 0 to 3%. In addition to the placement fee paid by Shareholders,
the Adviser and/or its affiliates will pay placement agents an annual fee.
The annual fee is paid from the Adviser's own resources (or those of its
affiliates).
CAI and PNC Global Investment Servicing Inc. ("PNCGIS"), an independent
third party and wholly-owned subsidiary of The PNC Financial Services
Group, have separate agreements with the Company and act as
co-administrators to the Company. CAI, as co-administrator, receives no
fees for providing administrative services to the Company. PNCGIS provides
certain accounting, recordkeeping, tax and investor related services.
PNCGIS charges fees for their services based on a rate applied to the
average net assets and are charged directly to the Company.
Effective January 1, 2008, each Director who is not an "interested person"
of the Company, as defined by the 1940 Act, receives an annual retainer of
$20,000 plus a Board of Directors meeting fee of $1,000 and a telephone
meeting fee of $500. The Chairman of the Audit Committee receives an
additional fee of $3,000 per year. 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 the Company for the year
ended March 31, 2010 were $78,000.
PFPC Trust Company (an affiliate of PNCGIS) serves as custodian of the
Company's assets and provides custodial services for the Company. Fees
payable to the custodian and reimbursement for certain expenses are paid by
the Company. Total amounts expensed related to custodian fees by the
Company for the year ended March 31, 2010 were $21,298.
5. SECURITIES TRANSACTIONS
The following table lists the aggregate purchases and proceeds from sales
of Investment Funds for the year ended March 31, 2010, net unrealized
appreciation, gross unrealized appreciation, and gross unrealized
depreciation from inception to March 31, 2010.
Cost of purchases * $333,274,042
============
Proceeds from sales * $289,778,894
============
Gross unrealized appreciation $166,250,190
Gross unrealized depreciation (59,856,267)
------------
Net unrealized appreciation $106,393,923
============
* Cost of purchases and proceeds from sales include non-cash transfers of
$72,633,072 for the year ended March 31, 2010.
-18-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
6. 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 the Company. The Board of Directors from time
to time and in its complete and exclusive discretion, may determine to
cause the Company to repurchase Shares from Shareholders pursuant to
written tenders by Shareholders 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 Shareholders
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).
Transactions in Shares were as follows for the years ended March 31, 2010
and 2009:
March 31, 2010 March 31, 2009
-------------- --------------
Shares outstanding, beginning of year 512,570.369 469,978.204
Shares purchased 146,054.199 217,973.542
Shares issued for reinvestment of distributions 80,411.975 15,907.561
Shares redeemed (114,077.993) (191,288.938)
------------ ------------
Shares outstanding, end of year 624,958.550 512,570.369
============ ============
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Investment Funds in which the Company
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. The Company's risk of loss in these Investment
Funds is limited to the value of it's investment in the respective
Investment Funds.
8. INCOME TAXES
The tax basis of distributable earnings shown in the table below represent
distribution requirements the Company must satisfy under the income tax
regulations, losses the Company 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 Capital loss Post-October capital Net unrealized
ordinary income carryforward loss depreciation
- --------------- ------------- -------------------- --------------
$10,131,922 $(54,139,447) $(2,061,929) $(25,806,220)
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
-19-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
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 the Company from the Investment Funds. The allocated
taxable income is reported to the Company 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 is noted below.
Federal tax cost of Investment Funds $687,676,319
============
Gross unrealized appreciation $ 0
Gross unrealized depreciation (25,806,220)
------------
Net unrealized depreciation $(25,806,220)
============
Net investment income (loss) and net realized gain (loss) 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 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 differ from the fiscal
year in which the income or net realized gain was recorded by the Company.
Accordingly, the following amounts have been reclassified for March 31,
2010, and are primarily due to the different book to tax treatment for the
distributive share of partnership items and different book to tax treatment
for gains realized on the sale of Investment Funds classified as passive
foreign investment companies.
Net assets of the Company were unaffected by the reclassifications.
Accumulated net Accumulated net realized
investment income (loss) loss on investments Paid-in capital
- ------------------------ ------------------------ ---------------
$109,683,576 $(105,859,556) $(3,824,020)
For the year ended March 31, 2010, the tax character of distributions paid
by the Company was $85,488,824 ordinary income. For the year ended March
31, 2009, the tax character of distributions paid by the Company was
$6,403,370 ordinary income and $11,058,400 of long term capital gains.
Distributions from net investment income and short-term capital gains are
treated as ordinary income for federal income tax purposes.
As of March 31, 2010, the Company has a capital loss carryforward of
$54,139,447, which is available to offset future capital gains. If not
utilized against capital gains, this capital loss carryforward will expire
on March 31, 2018.
-20-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2010 (CONTINUED)
As permitted by federal tax rules, the Company intends to treat capital
losses of $2,061,929 incurred between November 1, 2009 and March 31, 2010
as being incurred during the tax year ending on March 31, 2011. These
losses are available to offset future capital gains, if any.
9. REDEMPTION PENALTY
During the year ended March 31, 2010, the Company paid redemption penalties
totaling $328,672. The redemption penalties were charged to the Company for
redeeming its interests of certain Investment Funds prior to the expiration
of applicable lock-up periods. The payment of these penalties released the
Company from any further liability for its investments in the applicable
Investment Funds and is recorded as an operating expense in the Statement
of Operations.
10. SUBSEQUENT EVENTS
On April 14, 2010, a transaction was announced in which SkyBridge Capital
("SkyBridge") will acquire certain businesses of Citigroup Alternative
Investments LLC, the Company's investment adviser. SkyBridge is a global
alternative investment firm registered as an investment adviser with the
Securities and Exchange Commission and having approximately $1.4 billion
under management.
Mr. Raymond Nolte, currently CEO of Citigroup Alternative Investments LLC's
Fund of Hedge Funds Group and a Director, President and Portfolio Manager
of the Company, will join SkyBridge as a Managing Partner and Chief
Investment Officer. All investment professionals of the Adviser that
currently have significant involvement in the Company's operations are
expected to join SkyBridge as well.
On May 4th, 2010, the Company's Board of Directors met to consider the
planned transition of the Company's investment advisory services and
determined that concurrent with the consummation of the transaction, the
appointment of SkyBridge as the Company's investment adviser is in the best
interests of the Company and its shareholders. In accordance with
applicable Securities and Exchange Commission rules, a special meeting of
shareholders will be scheduled and proxy materials will be distributed for
shareholders to vote on a new advisory contract with SkyBridge. Management
has evaluated the impact of all subsequent events on the Company through
the date the financial statements were issued, and has determined that
there were no additional subsequent events requiring recognition or
disclosure in the financial statements.
Management has evaluated the impact of all subsequent events on the Company
through the date the financial statements were issued, and has determined
that there were no additional subsequent events requiring recognition or
disclosure in the financial statements.
-21-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
FEDERAL TAX INFORMATION (UNAUDITED)
For individual shareholders, 0.98% of the ordinary income dividends paid during
the year ended March 31, 2010 have been designated as qualified dividend income.
For corporate shareholders, 0.52% of the ordinary income dividends paid during
the year ended March 31, 2010 have been designated as being eligible for the
corporate dividends received deduction.
-22-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
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 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 55 East 59th Street, 10th Floor, New York, New
York 10022.
-23-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
INDEPENDENT DIRECTORS
(INFORMATION UNAUDITED)
NUMBER OF
POSITION(S) TERM OF PRINCIPAL PORTFOLIOS IN
HELD WITH OFFICE* AND OCCUPATION(S) FUND COMPLEX
NAME THE LENGTH OF DURING OVERSEEN BY OTHER DIRECTORSHIPS
AND AGE COMPANY TIME SERVED PAST 5 YEARS DIRECTOR HELD BY DIRECTOR
------- ----------- ------------------ ---------------------- ------------- ------------------------------
Charles Hurty Director November 2002 Business Consultant One Promark Global Advisors; CS
(born 1943) to present since October 2001; Alternative Capital Registered
prior thereto, partner Funds (6 portfolios); iShares
with accounting firm Trust and iShares, Inc. (186
of KPMG LLP. portfolios)
Steven Krull Director November 2002 Professor of Finance One Cadogan Opportunistic
(born 1957) to present at Hofstra University; Alternatives Fund, LLC
Business Consultant.
Josh Weinreich Director December 2006 to Retired since 2004. One Smart Pros Inc. (a distance
(born 1960) present (served as 1985 to 2004 held learning company that provides
an Advisory various executive content for continuing
Director from positions at Bankers education);
January 2006 to Trust/Deutsche Bank. Endowment Hedge
November 2006) Fund
Subcommittee of Cornell
University
In addition to their roles as Independent Directors of the Company, each of
Steven Krull and Josh Weinreich serve on special independent committees
representing other clients of the Adviser. The committee engagements and related
compensation are described below. These matters have been reviewed by the
Company's Board of Directors, which determined that the engagements are
appropriate for Independent Directors of the Company.
Mr. Krull serves on the Advisory Committee for the Adviser's HedgeForum
business. HedgeForum is a program under which third-party private investment
funds are diligenced by the Adviser and then made available for direct
investment by sophisticated investors. Mr. Krull is one of three members of the
HedgeForum Advisory Committee (all committee members are unaffiliated with the
Adviser) and receives for his services an annual retainer of $12,000 plus
certain meeting fees and reimbursements for out of pocket expenses. For the year
ended March 31, 2009, Mr. Krull received $12,000 in connection with this
engagement. All such costs are borne by the third-party investment funds
participating in the HedgeForum offering.
Mr. Weinreich serves on the Conflicts Committee for the Adviser. That committee
is charged primarily with reviewing conflict-of-interest transactions initiated
by the Adviser that require client consent and has been authorized in most
instances to provide the needed consent on behalf of the client. Mr. Weinreich
is one of two members of the Adviser's Conflicts Committee (all committee
members are unaffiliated with the Adviser) and receives for his services an
annual retainer of $12,000 plus certain meeting fees and reimbursements for out
of pocket expenses. For the year ended March 31, 2009, Mr. Weinreich received
$12,000 in connection with this engagement. All such costs are borne by the
clients whose interests are represented by the Conflicts Committee.
As an Advisory Director, Mr. Weinreich participated in Board meetings in the
same manner as a full Director, except that he was ineligible to cast a vote on
any matter, as his appointment to the Board as an Independent Director had not
yet been ratified by Shareholders.
* Term of office of each Director is indefinite.
-24-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
INTERESTED DIRECTOR
(INFORMATION UNAUDITED)
NUMBER OF
POSITION(S) TERM OF PRINCIPAL PORTFOLIOS IN
HELD WITH OFFICE* AND OCCUPATION(S) FUND COMPLEX
NAME THE LENGTH OF DURING OVERSEEN BY OTHER DIRECTORSHIPS
AND AGE COMPANY TIME SERVED PAST 5 YEARS DIRECTOR HELD BY DIRECTOR
------- ----------- ------------------ ---------------------- ------------- ------------------------------
Raymond Nolte President September 2005 CEO, Fund of Hedge One None
(born 1961) and to present Funds Group; Portfolio
Director Manager to The
(Chair) Company since
September 2005; Global
Head and Chief
Investment Officer,
Deutsche Bank ARS
Fund of Funds business
(1996-April 2005).
* Term of office of each Director is indefinite.
-25-
CITIGROUP ALTERNATIVE INVESTMENTS
MULTI-ADVISER HEDGE FUND PORTFOLIOS LLC
OFFICERS
(INFORMATION UNAUDITED)
POSITION(S) TERM OF OFFICE*
NAME HELD WITH AND LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND AGE THE COMPANY SERVED DURING PAST 5 YEARS
------- ------------- ------------------------- -----------------------------------------------
Raymond Nolte President and September 2005 to present See table for "Interested Director" above.
(born 1961) Director
Trudi Gilligan Chief December 2004 to present Director and Associate General Counsel,
(born 1967) Compliance Citigroup Alternative Investments LLC (since
Officer 2004); Vice President and Associate General
Counsel, Citigroup Alternative Investments
LLC (2000-2004); Associate, law firm of
Battle Fowler LLP. (1996-2000)
King Chan Treasurer, December 2009 to present Vice President, Citigroup Alternative
(born 1976) Principal Investments LLC (2005-present)
Financial
Officer
Christopher Hutt Secretary March 2008 to present Director, Citigroup Alternative Investments
(born 1970) LLC (January 2008-present); Vice President,
Citigroup Alternative Investments LLC (2004-
2008)
Brahm Pillai Assistant March 2008 to present Assistant Vice President, Citigroup Alternative
(born 1979) Secretary Investments LLC (2007-present); Associate,
Citigroup Alternative Investments LLC (2005-
2006)
* Term of office of each officer is indefinite.
-26-
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
$110,000 for 2009 and $115,000 for 2010.
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 2009 and $0 for 2010.
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 $66,000 for 2009 and
$69,900 for 2010. 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
$0 for 2009 and $6,500 for 2010. This fee relates to the auditors 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) NA
(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 0%.
(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 2009 and $0 for 2010.
(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. INVESTMENTS.
(a) 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.
(b) Not applicable.
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, 2010, THE FUND WILL BE REQUIRED TO FILE FORM N-PX FOR THE
PERIOD JULY 1, 2009 TO JUNE 30, 2010.
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, 2010.
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.
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
NAME AND AGE POSITION(S) HELD WITH COMPANY TERM OF OFFICE* AND LENGTH OF PRINCIPAL OCCUPATION(S)
TIME SERVED DURING THE PAST 5 YEARS
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Raymond Nolte Portfolio Manager, Director, September 2005 to present CEO, Fund of Hedge Funds
(born 1961) 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
-- AS OF MARCH 31, 2010
- ------------------------------------------------------------------------------------------------------------------------------------
Name of No. of Total Assets
Portfolio Accounts in Accounts
Manager or Total where where
Team No. of Advisory Fee Advisory Fee
---- Type of Accounts Total is Based on is Based on
Member Accounts Managed Assets Performance Performance
------ -------- ------- ------ ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond Nolte Registered 1 $690 n/a n/a
Investment million
Companies:
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond Nolte Other Pooled 7 $882 5 $861
Investment million million
Vehicles:
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond Nolte Other Accounts: 2 $169 n/a n/a
million
- ------------------------------------------------------------------------------------------------------------------------------------
POTENTIAL CONFLICTS OF INTERESTS
As shown in the table above, Mr. Nolte is responsible for managing other
accounts ("Other Accounts") in addition to the Fund. In certain
instances, conflicts may arise in his management of the Fund and such
other Accounts.
One situation where a conflict may arise between the Fund and an Other
Account is in the allocation of investment opportunities among the Fund
and the Other Account. For example, the Adviser may determine that there
is an opportunity that is suitable for the Fund 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 Fund. 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 Fund and Other Accounts
in a manner that is fair, equitable and consistent with their fiduciary
obligations to each.
Mr. Nolte's management of the Fund 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 Fund's investments and such Other Accounts.
(A)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM
MEMBERS -- AS OF MARCH 31, 2010
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 - AS OF MARCH 31, 2010
Dollar ($) Range
Name of Portfolio of Fund Shares
Manager or Beneficially
Team Member Owned
----------- -----
Raymond Nolte Not applicable
(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 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) 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) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
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 4, 2010
----------------------------------------------------------------------------
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 4, 2010
----------------------------------------------------------------------------
By (Signature and Title)* /s/ King Chan
-------------------------------------------------------
King Chan, Treasurer
(principal financial officer)
Date June 4, 2010
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.