Citadel Back Above High Water Mark: Full Shareholder Letter

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Dear Investor,We are pleased to report that Citadel Wellington LLC (“Wellington”) and Citadel KensingtonGlobal Strategies Fund Ltd. (“Kensington”) have generated net returns in excess of 20 percent

 for 2011. The solid performance of the funds was driven by the strength and breadth of ourinvestment team and reflects the valuable lessons we have learned during prior periods of marketturmoil.Our profitability continues to be driven by three key strengths: an unparalleled emphasis ontalent, a commitment to doing work that makes a difference, and a relentless focus on monetizingour ideas. We believe the competitive advantages created by these attributes are not easilyreplicated, and will stand the test of time.
An Unparalleled Emphasis on Talent
I am often asked what makes Citadel different from other investment firms. My answer is alwaysthe same: it is our people. The tremendous capability of this team is grounded in our absolutecommitment to recruiting and developing exceptional individuals.The mission of our business development and recruiting teams is to identify and recruit theleaders and future leaders of our industry. Over the past two decades, we have built a recruitingcapability that is unmatched in the industry. We actively follow the careers of countlessindividuals across the competitive landscape in the interest of finding people who will strengthenour team and enhance our performance. Our talent database contains over 150,000 resumes, of which approximately 25,000 were added in the past twelve months. When recruiting for a givenposition, we often construct our short list from a pool of more than 100 highly qualifiedcandidates. The decision making process for new hires often extends beyond the traditionalinterviews and reference checks, as we diligently seek to identify those individuals who haveattributes that will position them for success. We strongly believe that the hiring decisions wemake today will drive our performance for years to come.Our commitment to talent begins, but certainly does not end, with recruiting. It is universallyknown that we set a high bar for excellence at Citadel, and we do so in the pursuit of bringing outthe best in our team members. We believe that leaders across all fields of expertise are cultivatedin an environment that is rich in demanding, challenging and ultimately rewarding work.Developing the next generation of Citadel leaders is the responsibility of every one of ourmanagers. The results speak for themselves. Today, more than sixty of our senior-most businessleaders and portfolio managers are individuals promoted from within our ranks.
Work that Makes a Difference
 Constant idea generation fuels the success of our diversified investment portfolios. We believethat much of our competitive advantage in security selection is driven by a sophisticatedunderstanding of the factors that move price. Our research efforts focus on understanding whattruly matters in a data-rich world – and we do it better and more quickly than the competition.For example, in 2011, our Global Equities team secured its 10th consecutive year of profitability.The investment success of this team is driven by understanding the nuances between the market’sperception of a company’s prospects and our well-researched opinion of that company’sprospects. Consider these statistics: in 2011, the Global Equities team traveled more than 3,500days, on more than 1,600 trips, conducting 9,000 meetings with 2,000 different companies. Thiscommitment to the “nuts and bolts” of investment research was rewardedin 2011, as the teamgenerated more than $1.7 billion in net investment revenues across all funds.
Monetizing our Ideas
“Until you have a position, all you’ve got is an opinion.” Author Unknown
 In managing our investment business, we constantly emphasize the need to aggressively andflawlessly monetize the value of our research efforts. Without execution, even the best ideasquickly dissipate in value. We endeavor to have our portfolio positioning immediately reflect thefruits of our research and modeling efforts.Our U.S. natural gas supply models, for example, incorporate a vast array of information. Ourshort and long-term supply estimates are built on production forecasts for all the main andemerging production regions. On a daily basis, we monitor production from more than 20 basinsand incorporate information embedded in the 30,000 nominations that take place on the interstatepipeline systems. Any deviation in supply from a major producing region quickly feeds back intoour projections, and may immediately impact how our portfolio managers aggressively positionthemselves in the market.Our portfolio managers have tremendous confidence in, and understanding of, the models theyuse, as they are regularly involved in the ongoing development and refinement of such models incollaboration with our research teams. Superior analytics and information allow us to react morequickly and more decisively to significant events. Because of these tools, our Energy team wasable to respond rapidly to numerous global events in 2011 – from the Libyan revolution to theGerman moratorium on nuclear power generation.Good ideas not put to use are worthless. We continually examine, question, and refine all of ourexecution processes in a relentless drive to generate the maximum value from every investmentidea we develop.
Thank You
I consider myself extremely fortunate to be able to dedicate myself to work that I truly love.Being surrounded by colleagues who share a similar passion is a great privilege. Each and everyone of us at Citadel comes to work every day to win: to beat the competition and to deliver strongreturns.As Jim Collins writes in his new book, Great by Choice , a truly great organization “deliverssuperior results, makes a distinctive impact, and achieves lasting endurance.” This is my hope forCitadel.
On behalf of the entire Citadel team, I am deeply grateful for your confidence in us.Sincerely,Kenneth C. Griffin

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