PROFUTURES DIVERSIFIED FUND L P - FORM 10-Q

Attached files

file	filename
EX-31.02 - PROFUTURES DIVERSIFIED FUND L P	efc9-1028_ex3102.htm
EX-31.01 - PROFUTURES DIVERSIFIED FUND L P	efc9-1028_ex3101.htm
EX-32.02 - PROFUTURES DIVERSIFIED FUND L P	efc9-1028_ex3202.htm
EX-32.01 - PROFUTURES DIVERSIFIED FUND L P	efc9-1028_ex3201.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Under Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarterly period ended September 30, 2009

Commission File Number 0-16898

PROFUTURES DIVERSIFIED FUND, L.P.

(Exact name of Partnership)

Delaware		75-2197831
(State of incorporation or organization)		(I.R.S. Employer Identification No.)

ProFutures, Inc.

11719 Bee Cave Road

Suite 200

Austin, Texas 78738

(Address of principal executive offices)

Partnership’s telephone number

(800) 348-3601

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o	Accelerated Filer o

Non-Accelerated Filer o	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

TABLE OF CONTENTS

Page

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	2 – 14
Item 1.	Notes to Financial Statements	15 – 35
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36-41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4T.	Controls and Procedures	42

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43-44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Submission of Matters to a Vote of Security Holders	44
Item 5.	Other Information	44
Item 6.	Exhibits	44
Signatures		45
Rule 13a–14(a)/15d–14(a) Certifications		46-47
Section 1350 Certifications		48-49

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF FINANCIAL CONDITION

September 30, 2009 (Unaudited) and December 31, 2008 (Audited)

_________________

	September 30, 2009		December 31, 2008
ASSETS
Equity in broker trading accounts
Cash	$	4,737,185	$	6,035,775
Unrealized gain (loss) on open contracts		257,222		289,265

Deposits with broker		4,994,407		6,325,040

Cash		7,102		3,533
Investments in other commodity pools		10,501,241		12,583,933
Redemption receivable from other commodity pool		270,000		1,315,742

Total assets	$	15,772,750	$	20,228,248

LIABILITIES
Accounts payable	$	77,020	$	40,823
Commissions and other trading fees on open contracts		1,672		1,576
Incentive fees payable		0		185,497
Management fees payable (includes $49,013 and $129,324 payable to the General Partner at September 30, 2009 and December 31, 2008, respectively)		77,485		156,423
Redemptions payable		206,518		342,900

Total liabilities		362,695		727,219

PARTNERS’ CAPITAL (Net Asset Value)
Partners’ Capital (Non-restricted units):
General Partner – 184 and 173 units outstanding at September 30, 2009 and December 31, 2008, respectively		481,239		543,779
Limited Partners – 5,699 and 5,686 units outstanding at September 30, 2009 and December 31, 2008, respectively		14,928,816		17,851,493
Partners’ Capital (Side pocket/restricted units):
General Partner – 0 and 12 units outstanding at September 30, 2009 and December 31, 2008, respectively		0		32,232
Limited Partners – 0 and 403 units outstanding at September 30, 2009 and December 31, 2008, respectively		0		1,073,525

Total partners’ capital (Net Asset Value)		15,410,055		19,501,029

	$	15,772,750	$	20,228,248

See accompanying notes.

-2-

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS

September 30, 2009 (Unaudited) and December 31, 2008 (Audited)

_________________

		September 30, 2009						December 31, 2008
		Fair Value			% of Net Asset Value			Fair Value			% of Net Asset Value
LONG FUTURES CONTRACTS(1)
	Description
	U.S. Agricultural	$	(33,217	)		(0.21	)%	$	67,037			0.34	%
	Currency		74,591			0.48	%		0			0.00	%
	Energy		(3,160	)		(0.02	)%		20,667			0.10	%
	Interest rate		24,164			0.16	%		188,883			0.97	%
	Metal		(1,560	)		(0.01	)%		0			0.00	%
	Stock index		(310	)		0.00	%		33,545			0.17	%
	Total U.S. long futures contracts	$	60,508			0.40	%	$	310,132			1.58	%

	Foreign Agricultural	$	19,958			0.13	%	$	1,226			0.01	%
	Interest rate		37,778			0.24	%		18,911			0.10	%
	Total foreign long futures contracts	$	57,736			0.37	%	$	20,137			0.11	%

SHORT FUTURES CONTRACTS(1)
	Description
	U.S. Agricultural	$	146,273			0.95	%	$	(45,260	)		(0.23	)%
	Currency		2,268			0.01	%		101			0.00	%
	Energy		(11,430	)		(0.07	)%		6,870			0.04	%
	Interest rate		0			0.00	%		20,969			0.11	%
	Stock index		1,530			0.01	%		(22,085	)		(0.12	)%
	Total U.S. short futures contracts	$	138,641			0.90	%	$	(39,405	)		(0.20	)%

	Foreign Interest rate	$	0			0.00	%	$	2,654			0.01	%
	Stock index		337			0.00	%		(4,253	)		(0.02	)%
	Total foreign short futures contracts	$	337			0.00	%	$	(1,599	)		(0.01	)%

	Total futures contracts	$	257,222			1.67	%	$	289,265			1.48	%

INVESTMENTS IN OTHER COMMODITY POOLS
	SHK Diversified LLC(2)
	Investment Objective To achieve capital appreciation by trading U.S. and Non U.S. futures and forward currency contracts	$	0			0.00	%	$	1,315,743			6.75	%
________________________
(1)	No individual futures contract position constitutes greater than 5% of the Partnership’s Net Asset Value at September 30, 2009 or December 31, 2008. Accordingly, the number of contracts and expiration dates are not presented.
(2)	As of January 31, 2008, the managing member of SHK Diversified LLC (SHK) temporarily suspended future redemptions from this fund. This action was taken by the managing member due to a decline in the liquidity of the markets traded by this fund combined with a significant number of requests for redemptions from this fund. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. Effective December 31, 2008, the managing member of SHK distributed approximately half of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, the managing member of SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009.

See accompanying notes.

-3-

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

September 30, 2009 (Unaudited) and December 31, 2008 (Audited)

_________________

		September 30, 2009					December 31, 2008
		Fair Value		% of Net Asset Value			Fair Value		% of Net Asset Value

INVESTMENTS IN OTHER COMMODITY POOLS (continued)

	Valhalla Synergy Fund LLC
	Investment Objective To achieve capital appreciation by trading U.S. and Non U.S. futures and forward currency contracts
	Redemption Provisions Quarterly, with 45 days notice	$	2,671,786		17.34	%	$	2,740,835		14.05	%

	Winton Futures Fund, L.P. (US) - Institutional Interests(1)
	Investment Objective To achieve capital appreciation by trading U.S. and Non U.S. futures contracts
	Redemption Provisions Monthly, with 15 days notice		7,829,455		50.81	%		8,527,355		43.73	%

	Total investments in other commodity pools	$	10,501,241		68.15	%	$	12,583,933		64.53	%

________________________

(1)

The General Partner of Winton Futures Fund, L.P. (US) is Altegris Portfolio Management, Inc., an affiliate of Altegris Investments, Inc.

See accompanying notes.

-4-

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

September 30, 2009 (Unaudited) and December 31, 2008 (Audited)

_________________

Proportional Share of Investments of Other Commodity Pools as of September 30, 2009(1)

Description	Investment Objective			Redemption Provisions	Fair Value	% of Net Asset Value

Valhalla Synergy Master Fund Ltd.	To achieve capital appreciation through the speculative trading of commodities, commodity futures contracts, options on futures contracts and commodities, and spot and forward contracts traded in U.S. and non-U.S. markets.			Quarterly	$ 2,627,983	17.05 %

U.S. Government Agency Bonds and Notes
Face Value		Description		Range of Maturity Dates	Fair Value	% of Net Asset Value

$1,197,403		Federal Home Loan Bank (0.24% - 2.05%)		11/2009 to 08/2011	$ 1,203,753	7.81 %
$1,337,433		Federal National Mortgage Association (1.20% - 2.00%)		07/2010 to 09/2011	$ 1,344,032	8.72 %

Open Long Futures Contracts
No. of Contracts		Description		Maturity Date	Fair Value	% of Net Asset Value

		Metals
1			Copper	12/2009	$ (52)	0.00 %

Open Long and Short Forward Contracts
No. of Contracts		Description		Range of Expiration Dates	Fair Value	% of Net Asset Value

		Long Forward Contracts
		Metals
439			Aluminum	10/2009 to 12/2012	$ (786,984)	(5.11)%
274			Copper	10/2009 to 12/2013	$ 8,078,399	52.42 %

		Short Forward Contracts
		Metals
478			Aluminum	10/2009 to 12/2013	$ 98,359	0.64 %
274			Copper	10/2009 to 12/2013	$ (7,799,620)	(50.61)%

______________________________________

(1)

Represents the Partnership’s proportional share of other commodity pools’ individual underlying investments and open futures and forward contracts which exceed 5% of the Partnership’s Net Asset Value at September 30, 2009. In certain situations open futures contracts that are less then 5% of the Partnership’s Net Asset Value are presented to better indicate the Partnership’s net exposure to a particular underlying commodity.

See accompanying notes.

-5-

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

September 30, 2009 (Unaudited) and December 31, 2008 (Audited)

_________________

Proportional Share of Investments of Other Commodity Pools as of September 30, 2009 (cont.)(1)

Purchased Options on Forward Contracts
No. of Contracts	Description		Range of Expiration Dates	Fair Value	% of Net Asset Value

	Metals
15		Aluminum	10/2009 to 12/2011	$ 59,532	0.39 %
4		Copper	10/2009 to 12/2010	$ 40,212	0.26 %

Written Options on Forward Contracts
No. of Contracts	Description		Range of Expiration Dates	Fair Value	% of Net Asset Value

	Metals
19		Aluminum	10/2009 to 12/2011	$ (29,691)	(0.19)%
3		Copper	12/2009 to 12/2010	$ (42,408)	(0.28)%

Physical Inventory
	Description			Fair Value	% of Net Asset Value

	Metals
		Aluminum		$ 510,461	3.31 %

______________________________________

(1)

See accompanying notes.

-6-

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

Proportional Share of Investments of Other Commodity Pools as of December 31, 2008(1)
Description	Investment Objective				Redemption Provisions	Fair Value	% of Net Asset Value
Valhalla Synergy Master Fund Ltd.	To achieve capital appreciation through the speculative trading of commodities, commodity futures contracts, options on futures contracts and commodities, and spot and forward contracts traded in U.S. and non-U.S. markets.				Quarterly	$ 2,734,502	14.02 %
Money Market Mutual Fund Investments
Shares	Description				Cost	Fair Value	% of Net Asset Value
1,121,826	UBS Select Prime Institutional Fund				$ 1,121,826	$ 1,121,826	5.75 %

U.S. Government Agency Bonds and Notes
Face Value	Description				Range of Maturity Dates	Fair Value	% of Net Asset Value

$1,278,210	Federal Home Loan Bank (0.03% - 4.35%)				01/2009 to 12/2010	$ 1,281,568	6.57 %

Open Long and Short Futures Contracts
No. of Contracts	Description				Range of Expiration Dates	Fair Value	% of Net Asset Value
	Long Futures Contracts
		Metals
3				Copper	01/2009 to 05/2009	$ 9,130	0.05 %
519				Gold	04/2009 to 12/2010	$ 1,747,460	8.96 %
88				Silver	05/2009 to 07/2011	$ (593,490)	(3.04)%

	Short Futures Contracts
		Metals
9				Copper	02/2009 to 05/2009	$ (65,331)	(0.34)%
519				Gold	02/2009 to 06/2012	$ (2,537,283)	(13.01)%
88				Silver	03/2009 to 12/2011	$ (75,238)	(0.39)%

Open Long and Short Forward Contracts
No. of Contracts	Description				Range of Expiration Dates	Fair Value	% of Net Asset Value
	Long Forward Contracts
		Metals
394			Aluminum		01/2009 to 12/2012	$ 5,470,495	28.05 %
121			Copper		01/2009 to 12/2011	$ 4,836,078	24.80 %

	Short Forward Contracts
		Metals
349			Aluminum		01/2009 to 12/2012	$ (4,626,265)	(23.72)%
114			Copper		01/2009 to 12/2011	$ ( 4,446,044)	(22.80)%

______________________________________

(1)

Represents the Partnership’s proportional share of other commodity pools’ individual underlying investments and open futures and forward contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2008. In certain situations open futures contracts that are less then 5% of the Partnership’s Net Asset Value are presented to better indicate the Partnership’s net exposure to a particular underlying commodity.

See accompanying notes.

-7-

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

September 30, 2009 (Unaudited) and December 31, 2008 (Audited)

_________________

Proportional Share of Investments of Other Commodity Pools as of December 31, 2008 (cont.)(1)

Purchased Options on Forward Contracts

No. of Contracts	Description	Range of Expiration Dates	Fair Value	% of Net Asset Value

	Metals
14	Aluminum	01/2009 to 12/2011	$ 126,957	0.65%
14	Copper	01/2009 to 12/2010	$ 235,909	1.21%

Written Options on Forward Contracts

No. of Contracts	Description	Range of Expiration Dates	Fair Value	% of Net Asset Value

	Metals
29	Aluminum	01/2009 to 12/2011	$ (105,759)	(0.54)%
14	Copper	01/2009 to 12/2010	$ (346,786)	(1.78)%

Physical Inventory
	Description		Fair Value	% of Net Asset Value

	Metals
	Aluminum		$ 32,010	0.16%
	Copper		$ 1,639,383	8.41%

______________________________________

(1)

Represents the Partnership’s proportional share of other commodity pools’ individual underlying investments and open futures and forward contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2008. In certain situations open futures contracts that are less then 5% of the Partnership’s Net Asset Value are presented to better indicate the Partnership’s net exposure to a particular underlying commodity.

See accompanying notes.

-8-

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF OPERATIONS

For the Three Months Ended September 30, 2009 and 2008 (Unaudited)

_________________

	Three Months Ended September 30,
	2009				2008				2008				2008
	Total				Non-restricted				Side pocket/ restricted				Total

TRADING AND INVESTING GAINS (LOSSES)
Gain (loss) from futures and options on futures trading
Realized		$	(978,420	)		$	295,649			$	0			$	295,649
Change in unrealized			159,619				256,622				0				256,622
Brokerage commissions			(64,929	)			(38,518	)			0				(38,518	)

Gain (loss) from futures and options on futures trading			(883,730	)			513,753				0				513,753

Gain (loss) from investment in other commodity pools			(50,436	)			(688,358	)			125,746				(562,612	)

Total trading and investing gains (losses)			(934,166	)			(174,605	)			125,746				(48,859	)

NET INVESTMENT INCOME (LOSS)
Income
Interest income			214				21,671				0				21,671

Expenses
Incentive fees			0				168,692				0				168,692
Management fees (includes $150,745, $154,948, $25,108 and $180,056 charged by the General Partner for the three months ended September 30, 2009 and 2008, respectively)			207,212				201,152				25,108				226,260
Operating expenses			95,998				86,489				13,857				100,346

Total expenses			303,210				456,333				38,965				495,298

General Partner management fees waived			0				0				0				0

Net expenses			303,210				456,333				38,965				495,298

Net investment income (loss)			(302,996	)			(434,662	)			(38,965	)			(473,627	)

NET INCOME (LOSS)		$	(1,237,162	)		$	(609,267	)		$	86,781			$	(522,486	)

NET INCOME (LOSS) PER GENERAL AND LIMITED PARTNER UNIT (based on weighted average number of units outstanding during the period of 6,010, 5,773 and 923, respectively)		$	(205.85	)		$	(105.54	)		$	94.02			$	N/A	(1)

INCREASE (DECREASE) IN NET ASSET VALUE PER GENERAL AND LIMITED PARTNER UNIT		$	(205.44	)		$	(100.89	)		$	93.97			$	N/A	(1)

______________________________________

(1)

A total net income (loss) per general and limited partner unit and a total for the increase (decrease) in Net Asset Value per general and limited partner unit are not presented as the amounts are instead shown for each separate class of units.

See accompanying notes.

-9-

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF OPERATIONS (CONTINUED)

For the Nine Months Ended September 30, 2009 (Unaudited)

_________________

	Nine Months Ended September 30,
	2009			2009			2009
	Non-restricted			Side pocket/ restricted			Total
TRADING AND INVESTING GAINS (LOSSES)
Gain (loss) from futures and options on futures trading
Realized	$	(1,059,562	)	$	0		$	(1,059,562	)
Change in unrealized		(32,043	)		0			(32,043	)
Brokerage commissions		(160,421	)		0			(160,421	)

Gain (loss) from futures and options on futures trading		(1,252,026	)		0			(1,252,026	)

Gain (loss) from investment in other commodity pools		(796,949	)		19,515			(777,434	)

Total trading and investing gains (losses)		(2,048,975	)		19,515			(2,029,460	)

NET INVESTMENT INCOME (LOSS)
Income
Interest income		2,199			0			2,199

Expenses
Incentive fees		136,617			0			136,617
Management fees (includes $486,782, $7,714 and $494,496 charged by the General Partner for the nine months ended September 30, 2009, respectively)		654,471			7,714			662,185
Operating expenses		321,811			3,707			325,518

Total expenses		1,112,899			11,421			1,124,320

General Partner management fees waived		0			0			0

Net expenses		1,112,899			11,421			1,124,320

Net investment income (loss)		(1,110,700	)		(11,421	)		(1,122,121	)

NET INCOME (LOSS)	$	(3,159,675	)	$	8,094		$	(3,151,581	)

NET INCOME (LOSS) PER GENERAL AND LIMITED PARTNER UNIT (based on weighted average number of units outstanding during the period of 6,064 and 462, respectively)	$	(521.04	)	$	17.52		$	N/A	(1)

INCREASE (DECREASE) IN NET ASSET VALUE PER GENERAL AND LIMITED PARTNER UNIT	$	(520.40	)	$	17.54		$	N/A	(1)

______________________________________

(1)

See accompanying notes.

-10-

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF OPERATIONS (CONTINUED)

For the Nine Months Ended September 30, 2008 (Unaudited)

_________________

	Nine Months Ended September 30,
	2008			2008			2008
	Non-restricted			Side pocket/ restricted			Total
TRADING AND INVESTING GAINS (LOSSES)
Gain (loss) from futures and options on futures trading
Realized	$	(9,529	)	$	0		$	(9,529	)
Change in unrealized		321,201			0			321,201
Brokerage commissions		(83,045	)		0			(83,045	)

Gain (loss) from futures and options on futures trading		228,627			0			228,627

Gain (loss) from investment in other commodity pools		484,332			114,007			598,339

Total trading and investing gains (losses)		712,959			114,007			826,966

NET INVESTMENT INCOME (LOSS)
Income
Interest income		36,491			0			36,491

Expenses
Incentive fees		198,152			0			198,152
Management fees (includes $527,008, $50,217 and $577,225 charged by the General Partner for the nine months ended September 30, 2008, respectively)		586,615			50,217			636,832
Operating expenses		312,684			60,575			373,259

Total expenses		1,097,451			110,792			1,208,243

General Partner management fees waived		(77,739	)		0			(77,739	)

Net expenses		1,019,712			110,792			1,130,504

Net investment income (loss)		(983,221	)		(110,792	)		(1,094,013	)

NET INCOME (LOSS)	$	(270,262	)	$	3,215		$	(267,047	)

NET INCOME (LOSS) PER GENERAL AND LIMITED PARTNER UNIT (based on weighted average number of units outstanding during the period of 6,397 and 923, respectively)	$	(42.25	)	$	3.48		$	N/A	(1)

INCREASE (DECREASE) IN NET ASSET VALUE PER GENERAL AND LIMITED PARTNER UNIT	$	(53.56	)	$	3.48		$	N/A	(1)

______________________________________

(1)

See accompanying notes.

-11-

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)

For the Nine Months Ended September 30, 2009 and 2008

(Unaudited)

_________________

	Total
	Number of			Partners’ Capital
	Units			General			Limited			Total

Non-restricted units
Balances at December 31, 2008		5,859		$	543,779		$	17,851,493		$	18,395,272

Transfer from side pocket/restricted		361			32,444			1,078,335			1,110,779

Net income (loss) for the nine months ended September 30, 2009					(94,984	)		(3,064,691	)		(3,159,675	)

Redemptions		(337	)		0			(936,321	)		(936,321	)

Balances at September 30, 2009		5,883			481,239			14,928,816			15,410,055

Side pocket/restricted units
Balances at December 31, 2008		415		$	32,232		$	1,073,525		$	1,105,757

Transfer to non-restricted(1)		(414	)		(32,444	)		(1,078,335	)		(1,110,779	)

Net income (loss) for the nine months ended September 30, 2009					212			7,882			8,094

Redemptions(2)		(1	)		0			(3,072	)		(3,072	)

Balances at September 30, 2009		0			0			0			0

Total Partners’ Capital (Net Asset Value) at September 30, 2009				$	481,239		$	14,928,816		$	15,410,055

	Net Asset Value Per Unit
	Non-restricted units						Side pocket/restricted units
	September 30,			December 31,			September 30,			December 31,
	2009			2008			2009			2008

	$	2,619.46		$	3,139.86		$	N/A	(3)	$	2,663.73

______________________________________

(1)

Effective February 28, 2009, the managing member of SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009. As a result, the remaining units held in the side pocket/restricted units were transferred and converted to non-restricted units at the February 28, 2009 non-restricted net asset value per unit.

(2)

Represents the portion of the February 28, 2009 distribution from SHK related to partners who have completely redeemed from the Partnership and do not hold non-restricted units.

(3)

The side pocket/restricted unit class was terminated effective February 28, 2009. The side pocket/restricted net asset value per unit at February 28, 2009, prior to the termination, was $2,681.27.

See accompanying notes.

-12-

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE) (CONTINUED)

For the Nine Months Ended September 30, 2009 and 2008

(Unaudited)

_________________

	Total
	Number of			Partners’ Capital
	Units			General			Limited			Total
Non-restricted units
Balances at December 31, 2007		7,345		$	545,791		$	20,878,036		$	21,423,827

Transfer to side pocket/restricted		(923	)		(71,709	)		(2,664,700	)		(2,736,409	)

Net (loss) for the nine months ended September 30, 2008					(7,605	)		(262,657	)		(270,262	)

Redemptions		(863	)		0			(2,501,237	)		(2,501,237	)

Balances at September 30, 2008		5,559		$	466,477		$	15,449,442		$	15,915,919

Side pocket/restricted units
Balances at December 31, 2007		0		$	0		$	0		$	0

Transfer from non-restricted		923			71,709			2,664,700			2,736,409

Net income for the nine months ended September 30, 2008					85			3,130			3,215

Redemptions(1), (2)		(104	)		0			(309,529	)		(309,529	)

Balances at September 30, 2008		819		$	71,794		$	2,358,301		$	2,430,095

Total Partners’ Capital (Net Asset Value) at September 30, 2008				$	538,271		$	17,807,743		$	18,346,014

	Net Asset Value Per Unit
	Non-restricted units						Side pocket/restricted units
	September 30,			December 31,			September 30,			December 31,
	2008			2007			2008			2007

	$	2,863.22		$	2,916.78		$	2,966.57		$	N/A

______________________________________

(1)

(2)

Side pocket/restricted unit redemptions have been recorded in accordance with the Statement of Financial Accounting Standards No. 150 (ASC Topic 480). Redemptions approved by the General Partner, prior to period end, that are not effective until subsequent periods are recorded in the current period.

See accompanying notes.

-13-

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2009 and 2008

(Unaudited)

_________________

	September 30,
	2009			2008
OPERATING ACTIVITIES
Net income (loss)	$	(3,151,581	)	$	(267,047	)

Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities: (Gain) loss from investment in other commodity pools		777,434			(598,339	)
Change in operating assets and liabilities (Increase) in cash deposits with broker		1,298,590			(4,083,201	)
(Increase) in options premiums paid (received)		0			(32,775	)
(Increase) decrease in unrealized gain (loss) on open contracts		32,043			(322,926	)
Additions to investments in other commodity pools		(1,000,000	)		(10,690,000	)
Redemptions from other commodity pools		3,351,000			19,242,492
Increase (decrease) in accounts payable		36,197			(7,930	)
Increase in commissions and other trading fees on open contracts		96			1,070
(Decrease) increase in incentive fees payable		(185,497	)		168,692
(Decrease) increase in management fees payable		(78,938	)		57,007

Net cash provided by (used in) operating activities		1,079,344			3,467,043

FINANCING ACTIVITIES
Redemptions paid		(1,075,775	)		(3,467,957	)

Net cash provided by (used in) financing activities		(1,075,775	)		(3,467,957	)

Net cash increase (decrease) for the period		3,569			(914	)

Cash at beginning of the period		3,533			3,387

Cash at end of the period	$	7,102		$	2,473

See accompanying notes.

-14-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

_________________

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Description of the Partnership

ProFutures Diversified Fund, L.P. (the Partnership) is a Delaware limited partnership, which operates as a commodity investment pool. The Partnership engages in the speculative trading of futures contracts, options on futures contracts, physical commodities, interbank forward currency contracts and options on interbank forward currency contracts, directly and through its investments in other commodity pools. The Partnership closed to investors in 1995 and will terminate at the end of December 2012, at which time the remaining assets will be distributed.

As more fully described in Note 7., effective April 1, 2008, the Partnership established a “side pocket/restricted” account for each investor. The Partnership transferred its interest in SHK Diversified LLC (SHK), which had a net asset value of $2,736,409 and a per unit value of $2,963.09 as of March 31, 2008, to a side pocket/restricted unit class. Partners of record on April 1, 2008 had a proportional interest in the assets, liabilities and income or loss related to this side pocket.

Partners who had requested redemptions continued to participate in any income or loss specifically from the SHK side pocket investment until such time as the Partnership received its redemption proceeds or liquidation proceeds from SHK. The side pocket/restricted unit class also bore its proportionate share of the Partnership’s expenses, as well as all expenses directly related to this class’ establishment and existence. Effective December 31, 2008, SHK distributed approximately half ($1,315,742) of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, SHK distributed the remaining portion ($1,335,258) of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009, resulting in the termination of the side pocket/restricted unit class.

Regulation

As a registrant with the Securities and Exchange Commission (SEC), the Partnership is subject to the regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. As a commodity investment pool, the Partnership is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges and futures commission merchants through which the Partnership trades.

Method of Reporting

The Partnership’s financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which require the use of certain estimates made by the Partnership’s management.

For purposes of both financial reporting and calculation of redemption value, Net Asset Value per Unit is calculated by dividing Net Asset Value by the total number of units outstanding for each class.

-15-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Method of Reporting (continued)

Effective July 1, 2009, the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), referred to as FASB ASC or the Codification, became the single source of U.S. generally accepted accounting principles (U.S. GAAP) for interim and annual periods ending after September 15, 2009. Existing accounting standards are incorporated into the Codification and standards not incorporated into the Codification are considered nonauthoritative.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the estimates and assumptions utilized.

Fair Value of Financial Instruments

All of the Partnership’s assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under the Fair Value Measurements and Disclosures Topic of the Codification as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below:

Level 1.

Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2.

Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement.

Level 3.

Inputs are unobservable for the asset or liability.

The fair values of futures contracts are based upon exchange settlement prices. The Partnership uses futures contracts as part of its trading activities. These contracts are classified as Level 1 of the fair value hierarchy.

The fair values of Level 1 financial instruments at September 30, 2009 and December 31, 2008, consisted of the following:

	September 30, 2009		December 31, 2008
Futures contracts	$ 257,222		$ 289,265

-16-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Fair Value of Financial Instruments (continued)

The Partnership’s investments in other commodity pools are reported in the statement of financial condition at fair value. Fair value ordinarily represents the Partnership’s proportionate share of each other commodity pool’s net asset value determined for each commodity pool in accordance with such commodity pool’s valuation policies and as reported by their management at the time of the Partnership’s valuation. Generally, the fair value of the Partnership’s investment in a commodity pool represents the amount that the Partnership could reasonably expect to receive from such commodity pool if the Partnership’s investment was redeemed at the time of valuation, based on information reasonably available at the time the valuation is made and that the Partnership believes to be reliable. The Partnership records its proportionate share of other commodity pool’s income or loss in the statement of operations. This financial instrument is classified in Level 3 of the fair value hierarchy.

The fair values of Level 3 financial instruments at September 30, 2009 and December 31, 2008, consisted of the following:

	September 30, 2009		December 31, 2008
Investments in other commodity pools	$ 10,501,241		$ 12,583,933

The following table presents a reconciliation of the activity for the investments in other commodity pools:

Balance at January 1, 2008:	$	16,889,459
Gain (loss) from investments in other commodity pools		1,347,709
Additions and redemptions, net		(5,653,235	)
Transfers in and/or out of Level 3		0
Balance at December 31, 2008:		12,583,933
Gain (loss) from investments in other commodity pools		(777,434	)
Additions and redemptions, net		(1,305,258	)
Transfers in and/or out of Level 3		0
Balance at September 30, 2009:	$	10,501,241

-17-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Fair Value of Financial Instruments (continued)

The amount of income (loss) from investments in other commodity pools included in net income (loss) for the three and nine months ended September 30, 2009 and 2008 is reported as gain (loss) from investment in other commodity pools as a single amount in the statements of operations, as the Partnership accounts for its investments in other commodity pools pursuant to the equity method of accounting. A reconciliation of the beginning and ending balances of the Partnership’s investments in other commodity pools, which are measured at fair value using significant Level 3 inputs during the three and nine months ended September 30, 2009 and 2008, is provided in Note 7. to the financial statements.

Gain (loss) from investment in other commodity pools includes $(714,149) and $780,220 attributable to the change in unrealized gain (loss) on the Partnership’s investments in other commodity pools held at September 30, 2009 and December 31, 2008, respectively.

Futures Contracts

Transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts (the difference between contract trade price and quoted market price) are reflected in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Brokerage commissions on futures contracts and options on futures contracts include other trading fees and are charged to expense when contracts are opened. Fair value of exchange-traded contracts is based upon exchange settlement prices.

Income Taxes

The Partnership is not subject to federal income taxes. The Partnership prepares and files calendar year U.S. and applicable state information tax returns and reports to the partners their allocable shares of the Partnership’s income, expenses and trading and investing gains or losses. The Partnership has elected an accounting policy to classify interest and penalties, if any, as interest expense. The 2006 through 2008 tax years generally remain subject to examination by U.S. federal and most state tax authorities.

Foreign Currency Transactions

The Partnership’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in total trading and investing gains (losses) in the statements of operations.

-18-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Redemptions of Units

Redemptions payable represent redemptions approved by the General Partner prior to the period end, including those that are not effective until subsequent periods. These redemptions have been recorded as redemptions and redemptions payable, using the period end Net Asset Value per unit, in accordance with the provisions of the Equity Topic of the Codification. The change in redemptions payable from the previous reporting period due to change in net asset value is reported in net income and then allocated. Redemptions payable related to side pocket/restricted units at September 30, 2009 and December 31, 2008 are $0 and $124,216, respectively.

Derivative Instruments

The Partnership’s business is speculative trading of U.S. and foreign futures contracts, options on U.S. and foreign futures contracts and other commodity-related contracts (collectively, derivatives) pursuant to the trading and investment methodology of the General Partner. The Partnership also invests in other commodity pools and is indirectly exposed to the speculative trading of U.S. and foreign futures contracts, physical commodities and securities within those other commodity pools. The Partnership does not designate any derivative instruments as hedging instruments under the Derivative and Hedging Topic of the Codification nor are the derivative instruments used for other risk management purposes. Due to the speculative nature of the Partnership’s derivative trading activity, the Partnership is subject to the risk of substantial losses from derivatives trading.

The following tables summarize quantitative information required by the Derivative and Hedging Topic of the Codification. The fair value of derivative contracts is presented as an asset if in a gain position and a liability if in a loss position. Fair value is presented on a gross basis in the table below even though the derivative contracts qualify for net presentation in the statement of financial condition:

Derivatives not designed as hedging instruments as of September 30, 2009:
	Asset Derivatives*		Liability Derivatives*
	Fair Value		Fair Value		Net
Agricultural contracts	$	263,931	$	130,917	$	133,014
Currency contracts		81,909		5,050		76,859
Energy contracts		0		14,590		(14,590	)
Interest rate contracts		61,942		0		61,942
Metal contracts		0		1,560		(1,560	)
Stock index contracts		4,095		2,538		1,557
	$	411,877	$	154,655	$	257,222

*	The fair values of all asset and liability derivatives, including agricultural, currency, energy, interest rate and stock index contracts, are included in equity in broker trading accounts on the statement of financial condition.

-19-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Derivative Instruments (continued)

Trading Revenue For the Three and Nine Months Ended September 30, 2009							Trading Revenue For the Three and Nine Months Ended September 30, 2009
Type of Instrument	Three Months Ended September 30, 2009			Nine Months Ended September 30, 2009			Line Item in Statement of Operations	Three Months Ended September 30, 2009			Nine Months Ended September 30, 2009

Agricultural contracts	$	(64,117	)	$	(405,251	)	Realized	$	(978,420	)	$	(1,059,562	)
Currency contracts		(313,803	)		(136,645	)
Energy contracts		50,543			153,583		Change in unrealized		159,619			(32,043	)
Interest rate contracts		(172,848	)		(622,436	)
Metal contracts		(1,560	)		(100,226	)
Stock index contracts		(317,016	)		19,370

	$	(818,801	)	$	(1,091,605	)		$	(818,801	)	$	(1,091,605	)

For the three months ended September 30, 2009, the monthly average number of futures contracts bought and sold was approximately 3,900. For the nine months ended September 30, 2009, the monthly average number of futures contracts bought and sold was approximately 3,200.

Interim Financial Statements

The unaudited financial statements of ProFutures Diversified Fund, L.P., as of September 30, 2009 and for the three and nine month periods ended September 30, 2009 and 2008, have been prepared by us pursuant to the rules and regulations of the SEC. The information included reflects all adjustments (consisting only of normal recurring accruals and adjustments), which are, in the opinion of management; necessary to fairly state the operating results for the respective periods. However, these operating results are not necessarily indicative of the results expected for the full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules and regulations. The notes to the unaudited financial statements should be read in conjunction with the notes to the financial statements contained in our 2008 Annual Report on Form 10-K/A filed with the SEC on April 27, 2009.

Recent Accounting Pronouncement

In September 2009, the FASB issued Accounting Standards Update No. 2009-12, an amendment to Subtopic 820-10, Fair Value Measurements and Disclosures, which permits, as a practical expedient, a reporting entity to measure the fair value of an investment in certain entities on the basis of the net asset value per share of the investment. The update is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued. The Partnership is evaluating the impact this update will have on its financial statements.

-20-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 2. GENERAL PARTNER

The General Partner of the Partnership is ProFutures, Inc., which conducts and manages the business of the Partnership. The Agreement of Limited Partnership requires the General Partner to contribute to the Partnership an amount in the aggregate equal to at least the greater of (i) 3% of the aggregate initial capital contributions of all partners or $100,000, whichever is less, or (ii) 1% of the aggregate initial capital contributions of all partners.

The Agreement of Limited Partnership also requires that the General Partner maintain in the aggregate a net worth at least equal to (i) the lesser of $250,000 or 15% of the aggregate initial capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at less than $2,500,000; and (ii) 10% of the aggregate initial capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at greater than $2,500,000.

ProFutures, Inc. has a callable stock subscription agreement with MF Global Ltd. (MFG), the Partnership’s broker, whereby MFG has subscribed to purchase (up to $7,000,000, subject to conditions set forth in the stock subscription agreement dated October 22, 2004) the number of shares of common stock of ProFutures, Inc. necessary to maintain the General Partner’s net worth requirements.

The Partnership pays the General Partner a monthly management fee of 1/4 of 1% (3% annually) of month-end Net Asset Value. The General Partner receives an additional monthly management fee of .0625% (.75% annually) of the Partnership’s month-end Net Asset Value for consulting services rendered to the Partnership.

Total management fees earned by ProFutures, Inc. for the nine months ended September 30, 2009 and 2008 were $494,496 and $577,225, respectively. Such management fees earned for the three months ended September 30, 2009 and 2008 were $150,745 and $180,056, respectively. Management fees payable to ProFutures, Inc. as of September 30, 2009 and December 31, 2008 were $49,013 and $129,324, respectively. Management fees payable at September 30, 2009 and December 31, 2008 includes $0 and $74,672 payable to ProFutures, Inc. related to the side pocket/restricted unit class.

During the nine months ended September 30, 2009 and 2008, the General Partner waived $0 and $77,739, respectively, of its monthly management fee related to the value of the Partnership’s net assets invested in ProFutures Strategic Allocation Trust (the Trust), an affiliated fund also managed by ProFutures, Inc. The General Partner considered this waiver of management fees necessary given ProFutures, Inc. received a 2% per annum administration fee from the Trust. The Partnership fully redeemed from the Trust as of May 31, 2008.

-21-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 3.

CONSULTANTS

The Partnership maintains a consulting agreement with Altegris Investments, Inc. (the CTA Consultant) and Altegris Portfolio Management, Inc. (the CPO Consultant), collectively (the Consultants), whereby the Consultants recommend the selection and termination of the Partnership’s trading advisors and other commodity pools and the allocation and reallocation of the Partnership’s assets. The CPO Consultant is the general partner of Winton Futures Fund, L.P. (US). Pursuant to the consulting agreement, the Consultants receive a monthly consulting fee equal to .0208% (.25% annually) of the Partnership’s month-end Net Asset Value (as defined in the Consulting Agreement). Certain net assets of the Partnership invested with managers affiliated with the Consultants are excluded from the month-end Net Asset Value when computing the consulting fees due to the Consultants. In addition, the net assets of the Partnership invested with a certain commodity trading advisor are excluded from the month-end Net Asset Value when computing the consulting fees due to the Consultants since the Consultants earn a percentage of such commodity trading advisor’s incentive fee.

The consulting fee (included in management fees in the statement of operations) earned by the Consultants for the nine months ended September 30, 2009 and 2008 totaled $8,168 and $8,745, respectively, and $2,357 and $3,765 for the three months ended September 30, 2009 and 2008, respectively. The consulting fee payable (included in management fees payable in the statement of financial condition) to the Consultants as of September 30, 2009 and December 31, 2008 was $711 and $1,880, respectively. In addition to the monthly consulting fee, the Consultants earn commissions for introducing the Partnership to certain commodity trading advisors and other commodity pools based on the number of trades entered on behalf of the Partnership.

Note 4.

COMMODITY TRADING ADVISORS

The Partnership has trading advisory contracts with commodity trading advisors to furnish investment management services to the Partnership. These trading advisors typically receive management fees ranging from 0% to 2% annually of Allocated Net Asset Value (as defined in each respective trading advisory agreement). In addition, the commodity trading advisors typically receive quarterly incentive fees ranging from 20% to 25% of Trading Profits (as defined). Total management fees earned by the trading advisors amounted to $159,521 and $50,862 for the nine months ended September 30, 2009 and 2008, respectively. Such management fees earned by the trading advisor for the three months ended September 30, 2009 and 2008 were $54,110 and $42,439, respectively. Total incentive fees earned by the trading advisors amounted to $136,617 and $198,152 for the nine months ended September 30, 2009 and 2008, respectively. Such incentive fees earned by the trading advisor for the three months ended September 30, 2009 and 2008 were $0 and $168,692, respectively.

-22-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 5.

SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS

Limited Partners have the right to redeem units as of any month-end upon ten (10) days’ prior written notice to the Partnership. Redemptions will be made on the last day of the month for an amount equal to the net asset value per unit, as defined, represented by the units to be redeemed. The right to obtain redemptions is also contingent upon the Partnership’s having property sufficient to discharge its liabilities on the redemption date and may be delayed if the General Partner determines that earlier liquidation of commodity interest positions to meet redemption payments would be detrimental to the Partnership or non-redeeming Limited Partners.

Under certain circumstances, including, but not limited to, the inability to liquidate commodity positions or a delay in payments due the Partnership from commodity brokers, banks, commodity pools or other persons, the Partnership may in turn delay payment to Partners requesting redemption of units. In that event, payment for redemption of such units will be made to Limited Partners as soon thereafter as is practicable. As discussed more fully in Note 7., effective April 1, 2008, the General Partner established a side pocket/restricted unit class for the Partnership’s interest in SHK. A Partner could not redeem units from the side pocket/restricted unit class until management of SHK distributed proceeds from the Partnership’s investment in SHK to the Partnership. Effective December 31, 2008, SHK distributed approximately half of the Partnership’s investment in SHK to the Partnership. As a result, half of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the December 31, 2008 non-restricted Net Asset Value per unit or were paid their pro rata share of the proceeds if they did not hold non-restricted units. Effective February 28, 2009, SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership. As a result, all of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the February 28, 2009 non-restricted Net Asset Value per unit or were paid their pro rata share of the proceeds if they did not hold non-restricted units.

Note 6. DEPOSITS WITH BROKER

The Partnership deposits funds with MFG to act as broker, subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of cash with such broker. All assets with MFG are subject to being collateralized for any amounts due to MFG and to meet margin and other broker or regulatory requirements. The Partnership earns interest income on its assets deposited with the broker.

-23-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS

The Partnership invests in other commodity pools which are subject to the terms of the respective limited partnership agreements and offering memoranda of such other commodity pools, which may, among other things, delay or suspend withdrawal rights under certain circumstances.

Summarized information for these investments is as follows:

	ProFutures Strategic Allocation Trust			SHK Diversified LLC			Valhalla Synergy Fund LLC			Winton Futures Fund, L.P. (US)			Totals
Net Asset Value December 31, 2008	$	0		$	1,315,743		$	2,740,835		$	8,527,355		$	12,583,933
Additions		0			0			0			1,000,000			1,000,000
Income (loss)		0			19,515			(69,049	)		(727,900	)		(777,434	)
Redemptions		0			(1,335,258	)		0			(970,000	)		(2,305,258	)
Net Asset Value September 30, 2009	$	0		$	0		$	2,671,786		$	7,829,455		$	10,501,241
Income (loss)
Quarter 1, 2009	$	0		$	19,515		$	31,822		$	(206,395	)	$	(155,058	)
Quarter 2, 2009		0			0			34,614			(606,554	)		(571,940	)
Quarter 3, 2009		0			0			(135,485	)		85,049			(50,436	)
Income (loss) for the nine months ended	$	0		$	19,515		$	(69,049	)	$	(727,900	)	$	(777,434	)
Net Asset Value December 31, 2007	$	5,495,004		$	3,117,286		$	4,419,668		$	3,857,501		$	16,889,459
Additions		4,500,000			0			0			5,800,000			10,300,000
Income (loss)		567,489			(166,870	)		381,646			(183,926	)		598,339
Redemptions		(10,562,493	)		(100,000	)		(2,100,000	)		(2,180,000	)		(14,942,493	)
Net Asset Value September 30, 2008	$	0		$	2,850,416		$	2,701,314		$	7,293,575		$	12,845,305
Income (loss)
Quarter 1, 2008	$	516,123		$	(280,877	)	$	454,755		$	299,673		$	989,674
Quarter 2, 2008		51,366			(11,739	)		5,734			125,916			171,277
Quarter 3, 2008		0			125,746			(78,843	)		(609,515	)		(562,612	)
Income (loss) for the nine months ended	$	567,489		$	(166,870	)	$	381,646		$	(183,926	)	$	598,339

-24-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

ProFutures Strategic Allocation Trust

The Partnership’s investment in ProFutures Strategic Allocation Trust (the Trust) is subject to an administration fee, charged by ProFutures, Inc., of 2.00% per annum of net assets, a monthly management fee, charged by the commodity trading advisor, of 2.00% per annum on allocated assets, and a quarterly incentive fee, charged by the commodity trading advisor of 20% of trading profits on allocated assets. The Partnership fully redeemed from the Trust on May 31, 2008. For the five months ended May 31, 2008, the Partnership’s proportionate share of administrative fees, management and incentive fees charged by the Trust were approximately $77,900, $42,700 and $0, respectively.

Condensed financial information for the five month period ended May 31, 2008 is as follows (the Partnership fully redeemed from the Trust as of May 31, 2008):

	Five Months Ended May 31, 2008
	(Unaudited)
Statement of Operations
Trading and investing gains (losses)
Realized	$	(101,694	)
Change in unrealized		456,850
Brokerage commissions		(12,745	)
Total trading gains		342,411
Gain from investment in other commodity pools		981,259
Total trading and investing gains		1,323,670
Net investment income (loss)
Income
Interest income		47,506
Expenses
Incentive fees		0
Management and other fees		217,083
Other expenses		63,591
Total expenses		280,674
Net investment (loss)		(233,168	)
Net income	$	1,090,502

Management of the Partnership believes the accounting principles utilized by the Trust are consistent in all material respects with those utilized by the Partnership.

The Partnership fully redeemed from the Trust effective May 31, 2008.

-25-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

SHK Diversified LLC

As of January 31, 2008, the managing member of SHK Diversified LLC (SHK) temporarily suspended future redemptions. SHK’s managing member indicated to investors that this action was taken due to a decline in the liquidity of the markets traded by SHK combined with a significant number of requests for redemptions. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. Effective December 31, 2008, SHK distributed approximately half ($1,315,742) of the Partnership’s investment in SHK to the Partnership which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, SHK distributed the remaining portion ($1,335,258) of the Partnership’s investment in SHK to the Partnership which was paid to the Partnership on March 16, 2009.

The Partnership’s investment in SHK is stated at $0 and $1,315,743 at September 30, 2009 and December 31, 2008, respectively, and its proportionate share in the earnings (losses) of this investment for the nine months ended September 30, 2009 and 2008 of $19,515 and $(166,870), respectively, is included in net income (loss) for the periods then ended. The Partnership’s proportionate share in the earnings (losses) of this investment for the three months ended September 30, 2008 is $125,746.

The General Partner established a side pocket for the Partnership’s interest in SHK effective April 1, 2008, until such time as these funds could be released and valued with a reasonable degree of certainty. Investor units attributed to SHK were segregated into a side pocket while units not attributed to SHK continued to be available for redemption. Redemptions were paid in cash for the portion of the Partnership’s net assets not attributed to SHK while the net assets attributed to SHK were held in the side pocket. The side pocket/restricted unit class also bore its proportionate share of the Partnership’s expenses, as well as all expenses directly related to this class’ establishment and operation. Effective February 28, 2009, the side pocket/restricted unit class was terminated after all proceeds were received from the Partnership’s investment in SHK.

Investors in SHK are charged management fees of 6.00% per annum (in 2008, voluntarily reduced to 3.00% per annum by the Managing Member of SHK) and a profit share of 25% of trading profits. For the nine months ended September 30, 2009, the Partnership’s proportionate share of management fees and profit share charged by SHK was approximately, $6,700 and $0, respectively. For the nine months ended September 30, 2008, the Partnership’s proportionate share of management fees and profit share charged by SHK was approximately $61,900 and $0, respectively. For the three months ended September 30, 2008, the Partnership’s proportionate share of management fees and profit share charged by SHK was approximately $21,400 and $0, respectively.

-26-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

SHK Diversified LLC (continued)

Condensed financial information as of December 31, 2008 and for the two month period ended February 28, 2009 and the three and nine month periods ended September 30, 2008 is as follows:

	December 31, 2008
	(Audited)
Statement of Financial Condition
Assets
Money market funds	$ 34,078,075
Equity in broker trading accounts
Cash (due to broker)	58,214,842
Unrealized gain (loss) on open contracts	(33,879,348)
Deposits with broker	58,413,569
Other assets	22,000
Total assets	$ 58,435,569
Liabilities
Accounts payable	$ 55,534
Commissions payable	54,229
Management fee payable	124,048
Incentive fee payable	4,686
Subscription received in advance	0
Redemptions payable	29,098,536
Total liabilities	29,337,033
Total Capital (Net Asset Value)	29,098,536
	$ 58,435,569

-27-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

SHK Diversified LLC (continued)

	Two Months Ended February 28, 2009			Three Months Ended September 30, 2008			Nine Months Ended September 30, 2008
	(Unaudited)			(Unaudited)			(Unaudited)
Statements of Operations
Trading gains (losses)
Realized	$	(10,063,882	)	$	271,325,643		$	319,459,425
Change in unrealized		10,768,533			(267,542,315	)		(319,536,117	)
Brokerage commissions		(89,581	)		(783,653	)		(3,082,170	)
Total trading gains (losses)		615,070			2,999,675			(3,158,862	)
Net investment income (loss)
Income
Interest income and dividend income		13,459			303,177			1,027,392

Expenses
Incentive fees		0			0			0
Management and other fees		126,078			402,670			1,163,458
Operating expenses		48,631			55,100			170,504
Total expenses		174,709			457,770			1,333,962
Net investment income (loss)		(161,250	)		(154,593	)		(306,570	)
Net income (loss)	$	453,820		$	2,845,082		$	(3,465,432	)

Management of the Partnership believes the accounting policies utilized by SHK are consistent in all material respects with those utilized by the Partnership.

The Partnership’s investment in SHK represents approximately 0% and 4.5% of the investee fund’s net asset value as of September 30, 2009 and December 31, 2008, respectively.

Valhalla Synergy Fund LLC

Valhalla Synergy Fund LLC invests substantially all of its assets through a “master-feeder” structure into Valhalla Synergy Master Fund Ltd. (the Master Fund), a Cayman Islands exempted company. Valhalla Synergy Fund LLC pays to the manager of the Master Fund a management fee of 2.00% per annum and an annual profit participation allocation of 20% of trading profits. For the nine months ended September 30, 2009, the Partnership’s proportionate share of management fees and profit participation allocation charged by the Master Fund were approximately $41,700 and $0, respectively. For the three months ended September 30, 2009, the Partnership’s proportionate share of management fees and profit participation allocation charged by the Master Fund were approximately $13,900 and $(16,600), respectively. For the nine months ended September 30, 2008, the Partnership’s proportionate share of management fees and profit participation allocation charged by the Master Fund were approximately $56,400 and $53,000, respectively. For the three months ended September 30, 2008, the Partnership’s proportionate share of management fees and profit participation allocation charged by the Master Fund were approximately $14,500 and $(38,000), respectively.

-28-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

Valhalla Synergy Fund LLC (continued)

Valhalla Synergy Fund LLC condensed financial information primarily consists of its investment in the Master Fund and income or loss is allocated from the Master Fund to Valhalla Synergy Fund LLC.

Valhalla Synergy Fund LLC net assets at September 30, 2009 and December 31, 2008 are $41,881,145 and $48,707,147, respectively. Total net income for the nine months ended September 30, 2009 and 2008 is $(1,022,131) and $4,462,393, respectively. Total net income for the three months ended September 30, 2009 and 2008 is $(2,167,204) and $(1,622,957), respectively.

The Partnership’s investment in Valhalla Synergy Fund LLC represents approximately 6.38% and 5.63% of the investee fund’s net asset value as of September 30, 2009 and December 31, 2008, respectively. In September 2009, the Partnership requested a redemption of $500,000 from Valhalla Synergy Fund LLC effective December 31, 2009.

Management of the Partnership believes the accounting principles utilized by Valhalla Synergy Fund LLC are consistent in all material respects with those utilized by the Partnership.

Winton Futures Fund, L.P. (US) – Institutional Interests

Institutional Interests of Winton Futures Fund, L.P. (US) (formerly Class B Interests through May 2008) are charged management fees of 1.75% annually and incentive fees of 20% of trading profits. For the nine months ended September 30, 2009, the Partnership’s proportionate share of management fees and incentive fees charged by Winton Futures Fund, L.P. (US) were approximately $113,000 and $0, respectively. For the three months ended September 30, 2009, the Partnership’s proportionate share of management fees and incentive fees charged by Winton Futures Fund, L.P. (US) were approximately $35,000 and $0, respectively. For the nine months ended September 30, 2008, the Partnership’s proportionate share of management fees and incentive fees charged by Winton Futures Fund, L.P. (US) were approximately $55,000 and $103,000, respectively. For the three months ended September 30, 2008, the Partnership’s proportionate share of management fees and incentive fees charged by Winton Futures Fund, L.P. (US) were approximately $33,000 and $0, respectively.

The CPO Consultant is the General Partner of Winton Futures Fund, L.P. (US).

-29-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

Winton Futures Fund, L.P. (US) – Institutional Interests (continued)

Condensed financial information as of September 30, 2009 and December 31, 2008 and for the three and nine month periods ended September 30, 2009 and 2008 is as follows:

	September 30, 2009		December 31, 2008
	(Unaudited)		(Audited)
Statements of Financial Condition
Assets
Equity in Newedge USA, LLC account
Cash	$	39,742,269	$	154,396,738
Unrealized gain on open commodity futures contracts		15,248,892		4,174,311
Long options (cost – $23,605 and $0)		15,253		0
Deposits with broker		55,006,414		158,571,049
Cash and cash equivalents		19,449,065		3,384,626
Investment securities at value
(cost – $419,001,661 and $132,744,996)		419,996,260		132,860,018
Other assets		681,100		175,971
Total assets	$	495,132,839	$	294,991,664
Liabilities
Short options (proceeds – $54,120 and $0)	$	44,065	$	0
Payable for securities purchased		0		5,000,000
Accounts payable		221,026		176,744
Commissions payable		118,705		30,216
Management fee payable		694,164		314,556
Administrative fee payable		61,957		16,198
Service fees payable		373,428		229,428
Incentive fee payable		292,980		3,053,989
Redemptions payable		3,218,104		4,043,596
Subscriptions received in advance		19,322,230		23,079,459
Total liabilities		24,346,659		35,944,186
Total Capital (Net Asset Value)		470,786,180		259,047,478
	$	495,132,839	$	294,991,664

-30-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7. INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

Winton Futures Fund, L.P. (US) – Institutional Interests (continued)

	Three Months Ended						Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Statements of Operations
Trading gains (losses)
Gain (loss) on trading of commodity futures and options contracts
Realized	$	(6,676,953	)	$	(8,183,891	)	$	(32,901,444	)	$	13,598,216
Change in unrealized		14,560,617			(7,827,198	)		11,076,284			(1,270,058	)
Brokerage commissions		(1,709,663	)		(141,601	)		(3,732,248	)		(396,715	)
Gain (loss) from trading futures		6,174,001			(16,152,690	)		(25,557,408	)		11,931,443
Gain (loss) on trading of securities
Realized		0			162			(3,188	)		162
Change in unrealized		327,321			(278,747	)		869,577			(278,747	)
Gain (loss) from trading securities		327,321			(278,585	)		866,389			(278,585	)
Foreign currency translation gains (losses)		428,566			(466,259	)		(322,976	)		(146,434	)
Total trading gains (losses)		6,929,888			(16,431,275	)		(25,013,995	)		11,652,858
Net investment income (loss)
Income
Interest income		913,735			1,120,176			2,124,189			3,053,004
Expenses
Incentive fees		292,980			14,473			297,698			5,631,196
Management and other fees		3,272,870			1,258,548			8,187,345			2,873,143
Operating expenses		335,387			136,704			883,509			221,317
Total expenses		3,901,237			1,409,725			9,368,552			8,725,656
Net investment income (loss)		(2,987,502	)		(289,549	)		(7,244,363	)		(5,672,652	)
Net income (loss)	$	3,942,386		$	(16,720,824	)	$	(32,258,358	)	$	5,980,206

-31-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

Winton Futures Fund, L.P. (US) – Institutional Interests (continued)

Management of the Partnership believes the accounting principles utilized by Winton Futures Fund, L.P. (US) are consistent in all material respects with those utilized by the Partnership.

The Partnership’s investment in Winton Futures Fund, L.P. (US) represents approximately 1.66% and 3.29% of the investee fund’s net asset value as of September 30, 2009 and December 31, 2008, respectively.

As of June 1, 2008, the Partnership’s “Class B Interest” in Winton Futures Fund, L.P. (US) was reclassified as an “Institutional Interest” in Winton Futures Fund, L.P. (US). This is a reclassification for Winton Futures Fund, L.P. (US) administrative purposes only. There was no change to the management and incentive fees charged the Partnership, or the Partnership’s rights as a limited partner of Winton Futures Fund, L.P. (US).

Note 8.

TRADING AND INVESTING ACTIVITIES AND RELATED RISKS

The Partnership, directly and through its investment in other commodity pools, engages in the speculative trading of U.S. and foreign futures contracts, options on U.S. and foreign futures contracts, physical commodities, forward currency contracts and options on forward currency contracts (collectively, derivatives). The Partnership is exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.

As the Partnership deposits all of its equity in broker trading accounts with MFG, the Partnership has a concentration of credit risk with MFG. The following details both (i) the maximum amount of loss the Partnership would incur due to the complete failure by MFG to perform according to the terms of the applicable contractual agreements, with such maximum amount of loss being based on the gross fair values of the financial instruments held by MFG, and; (ii) the maximum risk of loss of other assets (excluding financial instruments) held by MFG:

	Maximum Risk of Loss
Broker	Financial Instruments		Other Assets		Total
MFG	$	257,222	$	4,737,185	$	4,994,407

The above maximum amount of risk of loss of financial instruments does not take into account unlimited liability on contracts sold short and adverse market movements subsequent to September 30, 2009. Accordingly, the maximum amount of risk of loss could be materially greater.

Purchase and sale of futures and options on futures contracts requires margin deposits with the broker. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker’s segregation requirements. In the event of a broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited.

-32-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 8.

TRADING AND INVESTING ACTIVITIES AND RELATED RISKS (CONTINUED)

For derivatives, risks arise from changes in the fair value of the contracts. Theoretically, the Partnership is exposed to a market risk equal to the notional contract value of futures contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability, and purchased options expose the Partnership to a risk of loss limited to the premiums paid. The Partnership is also indirectly exposed to market risk on physical commodities equal to the market value of physical commodities owned.

The Partnership has a portion of its assets on deposit with a financial institution in connection with its cash management activities. In the event of a financial institution’s insolvency, recovery of Partnership assets on deposit may be limited to account insurance or other protection afforded such deposits.

The Partnership’s investments in other commodity pools are subject to the market and credit risks of futures contracts, forward currency contracts and other derivative contracts held or sold short by these commodity pools. The Partnership bears the risk of loss only to the extent of the market value of its respective investment and, in certain specific circumstances, distributions and redemptions received. The General Partner has established risk management procedures to monitor investments in other commodity pools and seeks to minimize risk primarily by investing in commodity pools, which the General Partner and the CPO Consultant believe are reliable and creditworthy. However, there can be no assurance that any commodity pool invested in will be able to meet its obligations to the Partnership.

The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The General Partner’s basic market risk control procedures consist of continuously monitoring the trading activity of the various commodity trading advisors, with the actual market risk controls being applied by the CTA Consultant and the advisors themselves. The General Partner seeks to minimize credit risk primarily by depositing and maintaining the Partnership’s assets at financial institutions and brokers, which the General Partner believes to be creditworthy.

The Limited Partners bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received.

Note 9.

INDEMNIFICATIONS

In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.

Note 10.

SUBSEQUENT EVENTS

The General Partner has evaluated subsequent events through November 13, 2009, the date these financial statements were issued. There are no subsequent events to disclose.

-33-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 10. FINANCIAL HIGHLIGHTS

The following information presents non-restricted per unit operating performance data and other supplemental financial data for the three months and nine months ended September 30, 2009 and 2008. This information has been derived from information presented in the financial statements.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Per Unit Performance - Non-restricted units (for a unit outstanding throughout the entire period)
Net asset value per unit at beginning of period	$	2,824.90		$	2,964.11		$	3,139.86		$	2,916.78
Income (loss) from operations:
Total trading and investing gains (losses)(1)		(155.02	)		(25.60	)		(337.24	)		100.13
Net investment income (loss)(1)		(50.42	)		(75.29	)		(183.16	)		(153.69	)
Total income (loss) from operations		(205.44	)		(100.89	)		(520.40	)		(53.56	)
Net asset value per unit at end of period	$	2,619.46		$	2,863.22		$	2,619.46		$	2,863.22
Total Return(4)		(7.27	)%		(3.40	)%		(16.57	)%		(1.84	)%
Ratios to average net asset value:(2), (5)
Expenses prior to incentive fees(3), (7)		7.39	%		6.96	%		7.36	%		5.87	%
Incentive fees(4)		0.00	%		1.02	%		0.77	%		1.06	%
Total expenses		7.39	%		7.98	%		8.13	%		6.93	%
Net investment income (loss)(3), (6), (7)		(7.38	)%		(6.44	)%		(7.34	)%		(5.61	)%

Total returns are calculated based on the change in value of a unit during the period. An individual partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of redemptions.

______________________________________

(1)

The net investment income (loss) per unit is calculated by dividing the net investment income (loss) by the average number of units outstanding during the period. Total trading and investing gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. Such balancing amount may differ from the calculation of total trading and investing gains (losses) per unit due to the timing of trading and investing gains and losses during the period relative to the number of units outstanding.

(2)	Excludes the Partnership’s proportionate share of expenses and net investment income (loss) from investments in other commodity pools.
(3)	Annualized.
	Not annualized.
(5)	Ratios for the three and nine months ended September 30, 2008 are after the waiver of management fees by the General Partner, equal to 0.00% and 0.56%, respectively, of average net asset value.
(6)	Excludes incentive fees.
(7)	Excludes brokerage commissions.

-34-

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

_________________

Note 11. FINANCIAL HIGHLIGHTS (CONTINUED)

The following information presents side pocket/restricted per unit operating performance data and other supplemental financial data for the two months ended February 28, 2009, the three months ended September 30, 2008 and for the period April 1, 2008 (inception of side pocket/restricted units) to September 30, 2008. This information has been derived from information presented in the financial statements.

	Two Months Ended February 28, 2009			Three Months Ended September 30, 2008			Six Months Ended September 30, 2008
	(Unaudited)			(Unaudited)			(Unaudited)
Per Unit Performance – Side Pocket/Restricted units (for a unit outstanding throughout the entire period)
Net asset value per unit at beginning of period	$	2,663.73		$	2,872.60		$	2,963.09
Income (loss) from operations:
Total trading and investing gains (losses)(1)		42.27			136.16			123.45
Net investment income (loss)(1)		(24.73	)		(42.19	)		(119.97	)
Total income (loss) from operations		17.54			93.97			3.48
Net asset value per unit at end of period	$	2,681.27		$	2,966.57		$	2,966.57
Total Return(4)		0.66	%		3.27	%		0.12	%
Supplemental Data
Ratios to average net asset value:(2)
Expenses prior to incentive fees(3), (7)		5.53	%		5.73	%		8.17	%
Incentive fees(4)		0.00	%		0.00	%		0.00	%
Total expenses		5.53	%		5.73	%		8.17	%
Net investment income (loss)(3), (5), (7)		(5.53	)%		(5.73	)%		(8.17	)%

______________________________________

(1)

(2)	Excludes the Partnership’s proportionate share of expenses and net investment income (loss) from investments in other commodity pools.
(3)	Annualized.
	Not annualized.
(5)	Excludes incentive fees.
(6)	Prior to termination of the side pocket/restricted unit class effective February 28, 2009.
(7)	Excludes brokerage commissions.

-35-

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Reference is made to Item 1, “Financial Statements.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.
	The Partnership commenced trading on August 3, 1987. The success of the Partnership is dependent on the ability of independent Commodity Trading Advisors (“CTAs”) and commodity trading advisors that are utilized via investing in commodity pools (collectively, the “Advisors”) to generate profits through speculative trading sufficient to produce substantial capital appreciation after payment of all fees and expenses. Future results will depend in large part upon the futures markets in general, the performance of the Advisors for the Partnership and the amount of redemptions and changes in interest rates. Due to the highly leveraged nature of futures trading, small price movements may result in substantial losses. Because of the nature of these factors and their interaction, it is impossible to predict future operating results.
	Critical Accounting Policies
	The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 1 to the Financial Statements.
	The Partnership records all investments at fair value in its financial statements in accordance with Statement of Financial Accounting Standard No. 157, Fair Value Measurements, with changes in fair value reported as a component of realized and change in unrealized trading gain (loss) and gain (loss) from investments in other commodity pools in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (e.g., swap and forward contracts which are traded in the inter-bank market).
	The fair value of exchange-traded contracts is based upon exchange settlement prices. The fair value of non-exchange traded contract is based on third party quoted dealer values on the Interbank market. The fair value of the Partnership’s investments in other commodity pools are ordinarily determined by each commodity pool in accordance with such commodity pool’s valuation policies and as reported by their management at the time of the Partnership’s valuation. Generally, the fair value of the Partnership’s investment in a commodity pool represents the amount that the Partnership could reasonably expect to receive from such commodity pool if the Partnership’s investment was redeemed at the time of valuation, based on information reasonably available at the time the valuation is made and that the Partnership believes to be reliable.

	A. LIQUIDITY: Approximately 32% of the Partnership’s assets are highly liquid, such as cash and open futures contracts. It is possible that extreme market conditions or daily price fluctuation limits at certain exchanges could adversely affect the liquidity of open futures contracts. There are no restrictions on the liquidity of these assets except for amounts on deposit with the brokers needed to meet margin requirements on open futures contracts. The other estimated 68% of the Partnership’s assets is invested in other commodity pools which are subject to certain restrictions. The restrictions on withdrawals from these commodity pools typically include a 15 to 45 day written notice for withdrawals, monthly or quarterly redemptions and the commodity pools’ ability to limit or suspend redemptions.
	As of January 31, 2008, the managing member of SHK Diversified LLC (“SHK”) temporarily suspended future redemptions resulting in the General Partner’s decision to establish a side pocket, effective April 1, 2008, for the Partnership’s interest in SHK. Investor units attributed to SHK were segregated into and continued to be held in a side pocket (“Restricted”) while units not attributed to SHK continued to be available for redemption in cash (“Non-Restricted”). Effective December 31, 2008, SHK paid the Partnership approximately half of the Partnership’s redemption proceeds, equal to $1,315,742, and effective February 28, 2009, SHK paid the Partnership the remaining half of the Partnership’s redemption proceeds equal to $1,335,258. The side pocket/Restricted share class was subsequently cancelled with existing Units either redeemed or converted to Non-Restricted shares.
	B. CAPITAL RESOURCES: Since the Partnership’s business is the purchase and sale of various commodity interests, it will make few, if any, capital expenditures.
	The Partnership’s offering of Units of Limited Partnership Interest terminated in 1995.
	C. RESULTS OF OPERATIONS: The Partnership’s net income (loss) for the three and nine months ended September 30, 2009 and 2008 is as follows:

	2009			2008
Three months ended September 30,	$	(1,237,162	)	$	(522,486	)
Non-Restricted		(1,237,162	)		(609,267	)
Restricted		0			86,781

Nine months ended September 30,	$	(3,151,581	)	$	(267,047	)
Non-Restricted		(3,159,675	)		(270,262	)
Restricted		8,094			3,215

As of September 30, 2009, 5,883 Units are outstanding, including 184 General Partner Units, with an aggregate Net Asset Value of $15,410,055 ($2,619.46 per Unit). This represents a decrease in Net Asset Value of ($4,090,974) compared with December 31, 2008. The decrease was caused by a combination of partner redemptions and trading losses for the period. Effective December 31, 2008, one-half of the 878 Restricted Units from a side pocket were either converted to Non-Restricted Units or redeemed. Effective February 28, 2009, the second half of the Restricted Units were either converted to Non-

	Restricted Units or redeemed. As of February 28, 2009 we no longer have Restricted Units or a side-pocket.
	As of September 30, 2008, 6,378 Units were outstanding, including 187 General Partner Units and 819 Restricted Units, with an aggregate Net Asset Value of $18,346,014. The aggregate Net Asset Value includes the Non-Restricted Net Asset Value of $15,915,919 ($2,863.22 per Non-Restricted Unit) and the Restricted Units Net Asset Value of $2,430,095 ($2,966.57 per Restricted Unit). This represents a decrease in the aggregate Net Asset Value of $(3,077,813) compared with December 31, 2007. The decrease was caused by redemptions of limited partner units in addition to a loss of 1.36% in net income for the nine months ended September 30, 2008.
	Third Quarter 2009
	The Partnership had losses for the quarter in certain agricultural commodities, currencies, interest rates, and in stock indexes; gains were in certain agricultural commodities, metals and energy.
	The Partnership had a loss of 3.98% in July. The Partnership had losses in the stock indexes, certain agricultural commodities, interest rates, metals currencies and energy; with no gains for the month.
	The Partnership had a loss of 1.96% in August. The Partnership had losses in currencies and interest rates; gains were in energy, stock indexes and certain agricultural commodities.
	The Partnership had a loss of 1.50% in September. The Partnership had losses in energy, stock indexes and certain agricultural commodities; gains were in interest rates, currencies and metals.
	The Partnership ended the quarter with a loss of 7.27%.
	Second Quarter 2009
	The Partnership had losses for the quarter in interest rates, metals and certain agricultural commodities; gains were in stock indexes, certain agricultural commodities and energy.
	The Partnership had a loss of 3.16% in April. The Partnership had losses in interest rates, energy, currencies, certain agricultural commodities and metals; gains were in certain agricultural commodities and stock indexes.
	The Partnership had a gain of 2.92% in May. The Partnership had gains in currencies, certain agricultural commodities, energy, stock indexes and interest rates; losses were limited to metals and certain agricultural commodities.

	The Partnership had a loss of 3.43% in June. The Partnership had losses in certain agricultural commodities, interest rates, metals and currencies; gains were in certain agricultural commodities, energy and stock indexes.
	The Partnership ended the quarter with a loss of 3.75%.
	First Quarter 2009
	The Partnership had losses for the quarter in interest rates, currencies, certain agricultural commodities, metals and energy; gains were limited to the stock indexes.
	The Partnership had a loss of 0.23% in January. The Partnership had losses in interest rates and certain agricultural commodities; gains were in stock indexes, currencies, energy and metals.
	The Partnership had a loss of 1.65% in February. The Partnership had losses in currencies, interest rates, energy, metals, stock indexes and certain agricultural commodities; gains were in certain agricultural commodities.
	The Partnership had a loss of 4.74% in March. The Partnership had losses in every sector traded, in currencies, certain agricultural commodities, interest rates, stock indexes, metals and energy.
	The Partnership ended the quarter with a loss of 6.53%.
	Third Quarter 2008
	The third quarter saw volatility in the stock indexes, energy and commodities. The Partnership had losses in energy, certain agricultural commodities, metals and currencies; gains were in the stock indexes.
	The Partnership had a loss of 3.45% in July. The Partnership had large losses in certain agricultural commodities, followed by losses in energy, metals currencies; gains were in the stock indexes and interest rates.
	The Partnership had a loss of 1.13% in August. The Partnership had losses in metals, energy and certain agricultural commodities; gains were in interest rates, stock indexes and currencies.
	The Partnership had a gain of 2.11% in September. The Partnership had losses in interest rates currencies and energy; gains were in the stock indexes, certain agricultural commodities and metals.
	The Partnership ended the quarter with a loss of 2.54%.

	Second Quarter 2008
	The second quarter saw volatility in the energy and interest rate sectors. The Partnership had large gains in energy, with smaller gains in metals and certain agricultural commodities; large losses were in interest rates, with small losses in the stock indexes.
	The Partnership had a loss of 1.55% in April. The Partnership had large losses in interest rates, followed by smaller losses in stock indexes; gains were in energy, metals, certain agricultural commodities and currencies.
	The Partnership had a gain of 0.85% in May. The Partnership had large gains in energy again this month, followed by small gains in metals, currencies and certain agricultural commodities; large losses were in interest rates with smaller losses in stock indexes.
	The Partnership had a gain of 0.35% in June. The Partnership had gains in certain agricultural commodities, energy and stock indexes; losses were in metals, interest rates and currencies.
	The Partnership ended the quarter with a loss of 0.36%.
	First Quarter 2008
	The Partnership had large gains in interest rates, caused by the drop in interest rates by the Federal Reserve throughout the quarter. Small gains were also made in energy, currencies and certain agricultural commodities. The Partnership saw large losses in metals followed by small losses in the equity indexes.
	The Partnership had a loss of 0.51% in January. The Partnership had large losses in metals and stock indexes; losses were mostly offset by large gains in interest rates with smaller gains in certain agricultural commodities and currencies.
	The Partnership had a gain of 3.27% in February. The Partnership had large gains in interest rates, followed by gains in certain agricultural commodities, energy and currencies; losses were in metals and the stock indexes.
	The Partnership had a loss of 1.13% in March. The Partnership had gains in energy, currencies, interest rates and metals; losses were in stock indexes and certain agricultural commodities.
	The Partnership ended the quarter with a gain of 1.59%.
	D. OFF-BALANCE SHEET ARRANGEMENTS: Off-balance sheet risk refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Partnership trades in futures and other commodity interest contracts and is therefore a party to financial instruments with

	elements of off-balance sheet market and credit risk. In entering into these contracts, the Partnership faces the market risk that these contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the commodity interest positions of the Partnership at the same time, and if the Partnership were unable to offset positions, the Partnership could lose all of its assets and the limited partners would realize a 100% loss. The Partnership minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 25%. All positions of the Partnership are valued each day on a mark-to-market basis.
	In addition to market risk, in entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Partnership. The counterparty for futures and options on futures contracts traded in the United States and on most non-U.S. futures exchanges is the clearing organization associated with such exchange. In general, clearing organizations are backed by the corporate members of the clearing organization who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk.
	In cases where the clearing organization is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.
	In the case of forward contracts, over-the-counter options contracts or swap contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a central clearing organization backed by a group of financial institutions. As a result, there likely will be greater counterparty credit risk in these transactions. The Partnership trades only with those counterparties that it believes to be creditworthy. Nonetheless, the clearing member, clearing organization or other counterparty to these transactions may not be able to meet its obligations to the Partnership, in which case the Partnership could suffer significant losses on these contracts.
	In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.
	E. CONTRACTUAL OBLIGATIONS: None.
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.
	The Partnership is a Smaller Reporting Company as defined by Rule 229.10(f)(1) and therefore this item is not required.

Item 4T.	Controls and Procedures.
	ProFutures, Inc., as General Partner of ProFutures Diversified Fund, L.P., with the participation of the General Partner’s President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Partnership as of the end of the period covered by this quarterly report. Based on their evaluation, the President and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
	Changes in Internal Control over Financial Reporting:
	There were no changes in the General Partner’s internal control over financial reporting applicable to the Partnership identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting applicable to the Partnership.

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.
	None.
Item 1A.	Risk Factors.
	The Partnership is a Smaller Reporting Company as defined by Rule 229.10(f)(1) and therefore this item is not required.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.
	(a) None.
	(b) Not applicable.
	(c) Effective April 1, 2008, investor units attributed to the investment in SHK were segregated into and held in a side pocket due to SHK’s temporary suspension of redemptions, while units not attributed to SHK continued to be available for redemption in cash. Effective February 28, 2009, SHK paid the Partnership the balance of the Partnership’s redemption proceeds. The side pocket/Restricted share class was subsequently cancelled with existing Units either redeemed or converted to Non-Restricted shares.
	Pursuant to the Partnership’s Limited Partnership Agreement, partners may redeem their Limited Partnership Units at the end of each calendar month at the then current Net Asset Value per Unit. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed.
	The right to obtain redemption is contingent upon the Partnership’s having property sufficient to discharge its liabilities on the redemption date and may be delayed if the General partner determines that early liquidation of the commodity interest positions to meet redemption payments would be detrimental to the Partnership or non-redeeming Limited Partners.
	Under certain circumstances, including but not limited to, the inability to liquidate commodity positions or a delay in payment due the Partnership from commodity brokers, banks, commodity pools or other persons, the Partnership may in turn delay payment to Partners requesting redemption units. In that event, payment for redemption of such units will be made to Limited Partners as soon as thereafter is practicable.
	The following table summarizes the redemptions, excluding those that are not effective until subsequent periods, by partners during the three months ended September 30, 2009 for Non-Restricted Units:

MONTH	UNITS REDEEMED	NAV PER UNIT
July 31, 2009	14	2,712.53
August 31, 2009	65	2,659.30
September 30, 2009	78	2,619.46
TOTAL	157

Item 3.	Defaults Upon Senior Securities.
	None.
Item 4.	Submission of Matters to a Vote of Security Holders.
	None.
Item 5.	Other Information.
	None.
Item 6.	Exhibits.
	Exhibits filed herewith:
	31.01	Certification of Gary D. Halbert, President, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
	31.02	Certification of Debi B. Halbert, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
	32.01	Certification of Gary D. Halbert, President, pursuant to 18 U.S.C. Section 1350 as enacted by Section 906 of The Sarbanes- Oxley Act of 2002.
	32.02	Certification of Debi B. Halbert, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PROFUTURES DIVERSIFIED FUND, L.P. (Registrant)
November 13, 2009	By /s/ GARY D. HALBERT
Date	Gary D. Halbert, President and Director ProFutures, Inc. General Partner

November 13, 2009	By /s/ DEBI B. HALBERT
Date	Debi B. Halbert, Chief Financial Officer, Treasurer and Director ProFutures, Inc. General Partner

PROFUTURES DIVERSIFIED FUND L P - FORM 10-Q - November 13, 2009

Attached files

PROFUTURES DIVERSIFIED FUND L P Reports