Aspen Diversified Fund LLC - FORM 10-Q - May 14, 2010

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
_______________________
 
FORM 10-Q
_______________________
 
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended: March 31, 2010
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period _________________________ to _________________________
 
 
Commission file number: 000-52544
 
 
Aspen Diversified Fund LLC
(Exact name of registrant as specified in its charter)
 
 
     
Delaware
  
32-0145465
(State or other jurisdiction
of incorporation or organization)
  
(IRS Employer
Identification No.)
 
     
 
1230 Peachtree Street, N.E.
Suite 1750
Atlanta, Georgia 30309
  
 
(Address of principal executive offices) (Zip Code)
  
 
 
 
(404) 879-5126
  
 
(Registrant's telephone number, including area code)
  
 
 
 
Not Applicable
  
 
(Former name, former address and former fiscal year, if changed since last report)
  
 
 
 
 
       
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.
 
 
ý Yes     o No
 
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
 
o Yes     o No
 
 
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.
 
 
o Large accelerated filer
  
o Accelerated filer
 
o Non-accelerated filer
  
ý Smaller reporting company
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 
 
o Yes     ý No
 
 
-ii-
 
     
 
PART I – FINANCIAL INFORMATION
 
Page No.
 
1
 
 
1
 
 
2
 
 
3
 
 
4
 
 
5
 
13
 
14
 
15
 
 
PART II – OTHER INFORMATION
 
Page No.
 
16
 
16
 
16
 
17
 
17
 
17
 
17
 
 
-iii-
 
PART I – FINANCIAL INFORMATION
 
 
Interim Statements of Assets and Liabilities
 
        Unaudited
March 31, 2010		       December 31, 2009  
ASSETS
 
Investments in investment funds–at fair value–Note B
  (cost: $76,712,438 and $72,407,389 at March 31, 2010 and December 31, 2009, respectively)   $ 80,081,542     $ 75,324,716  
Unrealized gain on futures contracts–at fair value–Note B     3,078,205       2,300,141  
Total investments     83,159,747       77,624,857  
Cash and cash equivalents     21,558,600       26,038,161  
Investments in transit     4,200,000       1,500,000  
Investment Funds redemptions receivable     1,050,000       1,000,000  
 
TOTAL ASSETS   $ 109,968,347     $ 106,163,018  
 
LIABILITIES AND NET ASSETS
 
LIABILITIES
 
  Unrealized loss on futures contracts–at fair value–Note B   $ 2,719,299     $ 2,248,251  
  Commissions payable     30,091       13,313  
  Management, incentive and administrative fees payable–Note D     104,026       106,235  
  Managed accounts fees payable     59,929       66,990  
  Accrued operating expenses     53,943       54,523  
  Membership redemptions payable     2,231,321       2,247,341  
  Capital contributions received in advance of admission date     1,410,312       1,083,380  
 
TOTAL LIABILITIES     6,608,921       5,820,033  
 
NET ASSETS–Note C     103,359,426       100,342,985  
 
TOTAL LIABILITIES AND NET ASSETS   $ 109,968,347     $ 106,163,018  
 
See notes to financial statements.
 
 
 
 
 
-1-
 
Interim Statements of Operations
(Unaudited)
 
        For the three
months ended
March 31, 2010		       For the three
months ended
March 31, 2009		  
INVESTMENT INCOME (LOSS)
 
Realized and unrealized gain (loss) on investments–Note B
  Realized gain on investments   $ 131,757     $ 3,187,811  
  Unrealized gain (loss) on investments     758,709       (7,228,217 )
Net realized and unrealized gain (loss) on investments     890,466       (4,040,406 )
Interest income     -0-       497  
 
TOTAL INVESTMENT INCOME (LOSS)     890,466       (4,039,909 )
 
OPERATING EXPENSES–Note D
 
  Management and incentive fees     223,290       234,625  
  Administrative fees     88,741       177,637  
  Managed account fees     125,123       70,178  
  Miscellaneous operating expenses     40,442       2,167  
  Commissions expense     55,297       39,912  
 
TOTAL OPERATING EXPENSES     532,893       524,519  
 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS   $ 357,573     $ (4,564,428 )
 
See notes to financial statements.
 
 
 
 
 
-2-
 
Interim Statements of Changes in Net Assets
(Unaudited)
 
        For the three
months ended
March 31, 2010		       For the three
months ended
March 31, 2009		  
 
Net assets at beginning of period   $ 100,342,985     $ 115,876,755  
 
Capital contributions     9,715,813       6,815,240  
 
Redemptions     (7,056,945 )     (11,410,652 )
 
Net increase (decrease) from operations     357,573       (4,564,428 )
 
NET ASSETS AT END OF PERIOD   $ 103,359,426     $ 106,716,915  
 
See notes to financial statements.
 
 
 
 
 
-3-
 
Interim Statements of Cash Flows
(Unaudited)
 
          For the three
months ended
March 31, 2010		       For the three
months ended
March 31, 2009		  
CASH FLOWS FROM OPERATING ACTIVITIES
 
  Net increase (decrease) in net assets resulting from operations   $ 357,5732     $ (4,564,428 )
 
  Adjustments to reconcile net increase (decrease) in net assets resulting from operations to cash used in operating activities:  
    Increase in investments in investment funds     (9,000,000 )     (1,000,000 )
    Redemptions from investments in investment funds     4,826,624       20,053,613  
    Realized gain     (131,757 )     (3,187,811 )
    Unrealized (gain) loss     (758,709 )     7,228,217  
    Decrease (increase) in investment fund redemptions receivable     450,000       (14,655,260 )
    Decrease in interest income receivable     -0-       609  
    Increase in investments in transit     (3,200,000 )     (6,222,000 )
    Increase in commissions payable     16,779       974  
    Decrease in accrued operating expenses     (580 )     -0-  
    Decrease in managed accounts fees payable     (7,061 )     -0-  
    Decrease in management, incentive and administrative fees payable     (2,209 )     (36,840 )
 
NET CASH USED IN OPERATING ACTIVITIES     (7,449,340 )     (2,382,926 )
 
CASH FLOWS FROM FINANCING ACTIVITIES  
 
  Capital contributions received from members     10,042,744       8,104,620  
  Membership redemptions     (7,072,965 )     (10,889,320 )
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES     2,969,779       (2,784,700 )
 
NET DECREASE IN CASH AND CASH EQUIVALENTS     (4,479,561 )     (5,167,626 )
 
Cash and cash equivalents at beginning of period     26,038,161       22,861,740  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 21,558,600     $ 17,694,114  
 
Cash paid for interest   $ -0-     $ -0-  
 
Cash paid for taxes   $ -0-     $ -0-  
 
See notes to financial statements.
 
 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 
At March 31, 2010 and 2009, the Fund had membership redemptions payable of $2,231,321 and $1,509,698, and contributions received in advance of admission date of $1,410,312 and $3,072,480, respectively.
 
 
 
 
 
-4-
 
Notes to Financial Statements
 
NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Aspen Diversified Fund LLC (the “Fund”) is a Delaware limited liability company that seeks to provide its investors with a rate of return not generally correlated with traditional investments. The Fund offers units in multiple classes (Class A, B, C, D, and E). As of March 31, 2010, no Class D units were outstanding. The Fund is a speculative commodity pool and is a “fund-of- funds” which invests in other commodity pools known as “Investee Pools” as well as separately managed accounts (together with Investee Pools, “Investment Funds”) managed by independent commodity trading advisors (“CTAs”), or other portfolio managers (together “Portfolio Managers”).
 
The following accounting policies are presented to assist the reader in understanding the Fund’s financial statements:
 
The accompanying unaudited financial statements of the Fund have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the financial condition and operations of the Fund for the period presented have been included. The following is a description of the more significant of those policies that the Fund follows in preparing its financial statements.
 
Valuation of Investments in Investment Funds:  The Fund values investments in investment funds for which there is no ready market at fair value as determined by Aspen Partners, Ltd. (the “Managing Member”).
 
The valuation of Investment Funds purchased or held by the Fund ordinarily are based on the value provided most recently to the Managing Member by each Investment Fund, which the Managing Member believes to be reliable and which reflects the amount that the Fund might reasonably expect to receive for the position if the Fund’s interest were redeemed at the time of valuation. The Managing Member’s reliance on or consideration of the values of Investment Funds will be based on: (i) due diligence performed prior to making an investment in an Investment Fund; (ii) ongoing due diligence and monitoring; (iii) periodic variation analysis and review by the Fund and/or the Fund’s auditors; and (iv) any other information reasonably available from the market or other third parties.
 
In certain circumstances, the Managing Member may determine that the value provided by an Investment Fund does not represent the fair value of the Fund’s interests in the Investment Fund. This determination may be based upon, among other things: (i) the absence of transaction activity in interests in a particular Investment Fund; (ii) the imposition by an Investment Fund of extraordinary restrictions on redemptions, including limitations on the percentage of Investment Fund assets that may be redeemed during a certain time period; (iii) a determination by the Managing Member that it would be impracticable to liquidate the Fund’s holdings in a particular Investment Fund; (iv) a conclusion that the Investment Fund’s valuation was based on valuation procedures that do not provide for valuation of underlying securities at market value or fair value as appropriate; (v) actual knowledge (if any) of the value of underlying portfolio holdings; (vi) ongoing due diligence and monitoring that indicates that the valuation provided by the Investment Fund is not reliable, such as significant variations between estimates and final values provided by an Investment Fund or lesser variations that occur on a regular basis with respect to a specific Investment Fund; or (vii) available market data or other relevant circumstances, including unusual or extraordinary circumstances.
 
 
 
 
 
-5-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
 
In the event that an Investment Fund does not report a month-end value to the Fund on a timely basis, the fair value of the Investment Fund will be based on the most recent value reported by the Investment Fund, as well as any other relevant information available at the time the Fund values its portfolio. In this unusual event, it may be appropriate to consider the factors set forth herein, provided, however, that the Managing Member may not find such factors useful if, among other things, the Investment Fund in question is intended to have low correlation with the overall markets or a particular market (in which case the Managing Member may not have information necessary to determine whether a discount or premium would best reflect such significant events).
 
Where deemed appropriate by the Managing Member, investments in Investment Funds or illiquid securities may be valued at cost. Cost is used only when the Managing Member determines that cost best approximates the fair value of the particular position under consideration. For example, cost may not be appropriate when the Fund is aware of similar sales to third parties at materially different prices or in other circumstances where cost may not approximate fair value (which could include situations in which there are no sales to third parties).
 
Valuation of Investments in Futures Contracts:  These instruments include Open Trade Equity Positions (Futures Contracts and Currency Forwards) that are actively traded on commodities exchanges with quoted pricing for corroboration. Futures Contracts and Currency Forwards are reported at fair value using Level 1 inputs. Investments in Futures Contracts further include Open Trade Equity that are quoted prices for identical or similar assets that are not traded on active markets.
 
Investment Income:  Investment income includes realized and unrealized gains and losses from the Fund’s investments in Investment Funds, managed accounts, and interest income. Gains, losses, income earned and expenses incurred by the Investment Funds are allocated to the Fund based on the Fund’s percentage ownership in each respective fund. Investment transactions are recorded on the trade date.
 
Income Taxes:  No provision for income taxes has been made in the accompanying financial statements as all items of the Fund’s income, loss, deduction, and credit are passed through to, and taken into account by, the Fund’s members on their own income tax returns. The primary difference between financial statement income and taxable income relates to certain gains and losses that are not immediately realized for income tax purposes for the period ended March 31, 2010. There were no material differences between the cost basis of the Fund’s assets and liabilities for financial and income tax reporting purposes.
 
The Fund has reviewed all open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the most recent fiscal year-end. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
 
 
 
 
 
-6-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
 
Cash and Cash Equivalents:  For purposes of reporting cash flows, the Fund considers demand deposits and all unrestricted, highly liquid investments with original maturities of three months or less, which can be readily converted to cash on demand, without penalty, to be cash equivalents. Non-interest bearing demand deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The amount of the coverage currently is expected to decrease to $100,000 as of January 1, 2013. The Fund has established managed accounts to be traded by certain foreign exchange and CTAs on behalf of the Fund. Cash in managed accounts is held by Newedge USA, LLC to secure trading positions in currency and commodity futures. These funds are insured to the Securities Investor Protection Corporation (SIPC) limits as may be amended from time to time.
 
Aspen Diversified Fund LLC
Cash Held in Excess of Federally Insured Limits
                   
Description     Balance as of
March 31, 2010		       Balance as of
March 31, 2009		  
Cash in bank   $ 890,129     $ 967,947  
Cash held in managed accounts     20,744,695       25,100,256  
Total bank balance     21,634,824       26,068,203  
FDIC insurance limit     (250,000 )     (967,947 )
SIPC insurance limit     (500,000 )     (500,000 )
Uninsured, uncollateralized balance   $ 20,884,824       24,600,256  
 
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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Investment Valuations:  In accordance with generally accepted accounting principals in the United States (“GAAP”), fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation.
 
The three-tier hierarchy of inputs is summarized below.
 
Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
 
Level 2 Inputs – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
 
Level 3 Inputs – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
 
 
 
 
 
-7-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
 
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
 
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS
 
At March 31, 2010 and during the three months then ended investments in Investment Funds and net realized and unrealized gains (losses) on Investment Funds and futures contracts consisted of the following:
 
    Gains/(Losses)
for the three months
ended March 31, 2010		       Cost Basis
as of March 31, 2010		       Fair Value
as of March 31, 2010		       % of Fund’s
Net Assets		  
Investment Funds:                              
Abraham Commodity Fund LP $ (105,742 )   $ 2,983,000     $ 2,649,480       2.56%  
AlphaMosaic (US) LLC (Altis – Cell No. 151)   (64,727 )     3,094,000       2,803,501       2.71%  
AlphaMosaic (US) LLC (Krom River – Cell No. 42)   (26,900 )     3,597,622       3,518,9080       3.41%  
APM Hedged Global Commodity Fund, LDC   (120,553 )     2,617,335       2,862,249       2.77%  
Boronia Diversified Fund (U.S.), LP   2,492       9,416,325       10,289,372       9.96%  
Coolmore Partners LP   41,767       1,750,000       1,791,767       1.73%  
Discus Feeder Ltd.   103,770       5,986,347       6,108,338       5.91%  
Galena Fund Ltd.   19,771       2,300,000       2,316,728       2.24%  
Global Commodity Systematic LP   (77,088 )     3,686,932       4,336,873       4.20%  
Graham Global Investments Fund Ltd.   311,211       5,000,000       5,311,211       5.14%  
LD Commodities Alpha Fund LP   2,425       2,250,000       2,252,425       2.18%  
Man-AHL Diversified II LP   446,289       11,202,305       12,831,865       12.42%  
Millburn Commodity Fund LP   54,533       2,621,103       2,534,988       2.45%  
MMT Energy Fund   (32,436 )     1,580,000       1,335,480       1.29%  
Robeco Transtrend Diversified Fund LLC   209,185       9,600,000       9,844,425       9.52%  
Sparta Commodities US Feeder Fund LLC   (226,151 )     2,216,000       2,137,837       2.07%  
Winton Futures Fund   268,980       6,811,469       7,156,095       6.92%  
 
Total Investment Funds $ 806,826     $ 76,712,438     $ 80,081,542       77.48%  
 
Futures contracts, net   83,640       -0-       358,906       0.35%  
 
Total $ 890,466       76,712,438     $ 80,440,448       77.83%  
 
Other assets, less liabilities                   22,918,978       22.17%  
 
Net assets                 $ 103,359,426       100.00%  
 
At March 31, 2010 the fair value measurements were as follows:
 
    Quoted Prices in
Active Markets
(Level 1)		       Significant Other
Observable Inputs
(Level 2)		       Significant
Unobservable Inputs
(Level 3)		  
Investments in investment funds $ -0-     $ 80,081,542     $ -0-  
Unrealized gain on futures contracts, net   358,906     $ -0-     $ -0-  
Total $ 358,906     $ 80,081,542     $ -0-  
 
 
 
 
 
-8-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
 
At March 31, 2010, and during the three months then ended, the Fund’s investments in futures contracts and net unrealized gains by type, were as follows:
 
Futures Contract Type     Net Unrealized Gains  
Foreign exchange contracts   $ 98,655  
Commodity futures contracts     260,251  
Total   $ 358,906  
 
At December 31, 2009 and during the three months ended March 31, 2009, investments in Investment Funds and net realized and unrealized gains (losses) on Investment Funds and futures contracts consisted of the following:
 
    Gains/(Losses)
for the three months
ended March 31, 2009		       Cost Basis
as of
December 31, 2009		       Fair Value
as of
December 31, 2009		       % of Fund’s
Net Assets		  
Investment Funds:  
Abraham Commodity Fund LP $ -0-     $ 2,983,000     $ 2,755,222       2.75%  
AlphaMosaic (US) LLC (Altis – Cell No. 151)   -0-       3,094,000       2,868,228       2.86%  
AlphaMosaic (US) LLC (Krom River – Cell No. 42)   -0-       4,314,000       4,245,808       4.23%  
APM Hedged Global Commodity Fund, LDC   (636,933 )     2,617,335       2,982,802       2.97%  
Boronia Diversified Fund (U.S.), LP   (858,667 )     13,033,000       14,286,880       14.24%  
Discus Fund Ltd. *   243,054       -0-       -0-       0.00%  
Discus Feeder Ltd.   (7,548 )     5,986,348       6,004,568       5.98%  
Galena Fund Ltd.   -0-       2,300,000       2,296,957       2.29%  
Global Commodity Systematic LP   (262,528 )     3,686,932       4,413,960       4.40%  
HFR MF Diversified Select Master Trust *   (193,281 )     -0-       -0-       0.00%  
Man-AHL Diversified II LP   (1,229,796 )     11,202,305       12,385,576       12.34%  
Millburn Commodity Fund LP   -0-       2,983,000       2,830,455       2.82%  
MMT Energy Fund   -0-       1,580,000       1,367,916       1.36%  
Robeco Transtrend Diversified Fund LLC   (352,319 )     9,600,000       9,635,241       9.60%  
Sparta Commodities US Feeder Fund LLC   -0-       2,216,000       2,363,988       2.36%  
Winton Futures Fund   -0-       6,811,469       6,887,115       6.87%  
 
Total Investment Funds   (3,298,018 )     72,407,389       75,324,716       75.07%  
 
Futures contracts, net   (742,388 )     -0-       51,890       0.05%  
 
TOTAL $ (4,040,406 )   $ 72,407,389       75,376,606       75.12%  
 
Other assets, less liabilities                   24,966,379       24.88%  
 
Net assets                 $ 100,342,985       100.00%  
 
* Fund shares were fully disposed of during 2009.
 
 
 
 
 
-9-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
 
At December 31, 2009 the fair value measurements were as follows:
 
    Quoted Prices in
Active Markets
(Level 1)		       Significant Other
Observable Inputs
(Level 2)		       Significant
Unobservable Inputs
(Level 3)		  
Investments in investment funds $ -0-     $ 75,324,716     $ -0-  
Unrealized gain on futures contracts, net   51,890     $ -0-     $ -0-  
Total $ 51,890     $ 75,324,716     $ -0-  
 
The investment objectives and redemption policies for the Investment Funds and managed accounts in which the Fund was invested as of March 31, 2010 were as follows:
 
Investment Funds and Managed Accounts   Investment Objective   Redemptions Permitted  
Abraham Commodity Fund LP   Commodity Specialist   Monthly  
ADF Trading Company I, LLC (Welton Investment Corporation)   Long-Term Trend Follower   Daily  
ADF Trading Company II, LLC (Systematic Alpha Management LLC)   Short-Term Trend Follower   Daily  
ADF Trading Company III, LLC (Rosetta Capital Management, Inc.)   Commodity Specialist   Daily  
AlphaMosaic (US) LLC (Altis – Cell No. 151)   Commodity Specialist   Bi-Monthly  
AlphaMosaic (US) LLC (Krom River – Cell No. 42)   Commodity Specialist   Bi-Monthly  
APM Hedged Global Commodity Fund, LDC   Commodity Specialist   Quarterly  
Boronia Diversified Fund (U.S.), LP   Short-Term Trend Follower   Monthly  
Coolmore Partners LP   Commodity Specialist   Monthly  
Discus Feeder Ltd.   Short-Term Trend Follower   Monthly  
Galena Fund Ltd.   Commodity Specialist   Monthly  
Global Commodity Systematic LP   Commodity Specialist   Annually  
Graham Global Investment Fund   Long-Term Trend Follower   Monthly  
LD Commodities Alpha Fund LP   Commodity Specialist   Monthly  
Man-AHL Diversified II LP   Long-Term Trend Follower   Monthly  
Millburn Commodity Fund LP   Commodity Specialist   Monthly  
MMT Energy Fund   Commodity Specialist   Monthly  
Robeco Transtrend Diversified Fund LLC   Medium-Term Trend Follower   Monthly  
Sparta Commodities US Feeder Fund LLC   Commodity Specialist   Monthly  
Winton Futures Fund   Long-Term Trend Follower   Monthly  
 
 
 
 
 
-10-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
 
These Investment Funds engage primarily in speculative trading of U.S. and foreign futures contracts and options on U.S. and foreign futures contracts, and foreign currency transactions. The funds are exposed to both market risks – 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. Furthermore, certain of the Investment Funds include restrictions as to the minimum amount of time that an investor must remain invested in the Investment Fund.
 
Management is required to disclose any investments that exceed 5% of the Fund’s net assets at year end.  Information is not available to determine if an individual investment held by any of the Investment Funds exceeded 5% of the Fund’s net assets at March 31, 2010 and December 31, 2009.
 
At March 31, 2010 and December 31, 2009, the Fund had remitted $1,050,000 and $1,000,000, respectively, to Investment Funds that will not be credited to its respective capital accounts until the first day of the following month. These amounts have been recorded as investments in transit.
 
NOTE C – NET ASSETS
 
The Fund maintains separate capital accounts for its members. Net profits and net losses, and expenses attributable to each class are allocated to the members holding units of each class in proportion to their respective capital accounts.
 
Each member may withdraw all or any portion of his capital account as of the end of each calendar month, provided that the withdrawing member gives at least ten days prior written notice.
 
The Fund admits members only on the first day of each month. At March 31, 2010 and December 31, 2009, the Fund had received capital contributions of $1,410,312 and $1,083,380, respectively, that were credited to the members’ capital accounts on the first day of the following month or in a future admission period. These amounts have been recorded as capital contributions received in advance of admission date.
 
The Fund may be dissolved at any time by the determination of the managing member to dissolve and liquidate the Fund.
 
NOTE D – RELATED PARTY TRANSACTIONS
 
The Fund pays various monthly fees to the managing member, Aspen Partners, Ltd., which vary depending upon the unit class.  The annual fee percentages by unit class are as follows:
 
      Class A Units       Class B Units       Class C Units       Class D Units       Class E Units  
Management fees     1.00%       1.00%       0.75%       1.00%       0.00%  
Incentive fees     10.00%       10.00%       7.50%       10.00%       0.00%  
Administrative fees     0.35%       0.35%       0.05%       0.70%       0.35%  
 
As of June 1, 2009, the administrative fee of the Fund decreased from 0.65% to 0.35% for Class A, Class B and Class E units, from 0.25% to 0.05% for Class C units, and from 1.65% to 0.70% for Class D units. In addition, the Fund will pay its operating expenses and custody fees. The operating expenses will be allocated pro-rata to each Class of Units. The custody fees will be paid by each Class as incurred.
 
 
 
 
 
-11-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE D – RELATED PARTY TRANSACTIONS – Continued
 
The incentive fees are equal to the applicable percentage of the new investment profits earned monthly by class over the high water mark. During the three months ended March 31, 2010 and 2009, the Fund recognized management and incentive fee expenses of $223,290 and $243,625, respectively. There were no incentive fees incurred during the quarter ended March 31, 2010.
 
During the three months ended March 31, 2010 and 2009, the Fund recognized administrative fee expenses of $88,741 and $177,637, respectively.
 
At March 31, 2010 and December 31, 2009, accounts payable consisted of $104,026 and $106,235, respectively, related to management fees, incentive fees and administrative fees.
 
NOTE E – FINANCIAL HIGHLIGHTS
 
Financial highlights were as follows for the three months ended March 31, 2010
 
Per unit activity:     Class A Units       Class B Units       Class C Units       Class D Units†       Class E Units  
Beginning net unit value at December 31, 2009   $ 109.66     $ 122.50     $ 95.02       N/A     $ 131.49  
 
Net gain from investments in investment funds     0.84       0.95       0.74       N/A       1.03  
Interest income     0.00       0.00       0.00       N/A       0.00  
Total investment gain     0.84       0.95       0.74       N/A       1.03  
 
Management & incentive fees     (0.27 )     (0.30 )     (0.18 )     N/A       0.00  
Administrative fees     (0.09 )     (0.11 )     (0.01 )     N/A       (0.11 )
Other expenses     (0.69 )     (0.19 )     (0.13 )     N/A       (0.23 )
Total operating expenses     (1.05 )     (0.60 )     (0.32 )     N/A       (0.34 )
 
Ending unit value at March 31, 2010   $ 109.45     $ 122.85     $ 95.44       N/A     $ 132.18  
 
† Class D units had not yet been issued as of March 31, 2010.
 
These amounts were calculated based on the weighted average of monthly units outstanding by class.
 
      Class A Units       Class B Units       Class C Units       Class D Units       Class E Units  
Net investment income     2.32%       0.72%       0.18%       N/A       0.74%  
Operating expenses     (1.08% )     (0.50% )     (0.33% )     N/A       (0.26% )
Net income (loss)     1.24%       0.22%       (0.15% )     N/A      0.48%  
Total return     (0.20% )     0.29%       0.44%       N/A      0.53%  
 
The portfolio turnover rate for the quarter ended March 31, 2010 was 5.33%.
 
 
 
 
 
-12-
 
Aspen Diversified Fund LLC
Notes to Financial Statements
 
NOTE E – FINANCIAL HIGHLIGHTS – Continued
 
Financial highlights were as follows for the three months ended March 31, 2009:
 
Per unit activity:     Class A Units       Class B Units       Class C Units       Class D Units†       Class E Units  
Beginning net unit value at December 31, 2008   $ 121.94     $ 133.53     $ 102.93       N/A     $ 141.90  
 
Net loss from investments in investment funds     (4.34 )     (4.78 )     (3.69 )     N/A       (5.09 )
Interest income     0.00       0.00       0.00       N/A       0.00  
Total investment loss     (4.34 )     (4.78 )     (3.69 )     N/A       (5.09 )
 
Management & incentive fees     (0.30 )     (0.33 )     (0.19 )     N/A       0.00  
Administrative fees     (0.20 )     (0.22 )     (0.06 )     N/A       (0.23 )
Other expenses     (0.68 )     (0.09 )     0.00       N/A       0.00  
Total operating expenses     (1.18 )     (0.64 )     (0.25 )     N/A       (0.23 )
 
Ending unit value at March 31, 2009   $ 116.41     $ 128.11     $ 98.92       N/A     $ 136.49  
 
† Class D Units had not yet been issued as of March 31, 2009.
 
These amounts were calculated based on the weighted average of monthly units outstanding by class.
 
      Class A Units       Class B Units       Class C Units       Class D Units       Class E Units  
Net investment income     (3.65% )     (3.55% )     (3.63% )     N/A       (3.63% )
Operating expenses     (0.99% )     (0.48% )     (0.32% )     N/A       (0.23% )
Net loss     (4.64% )     (4.03% )     (3.95% )     N/A      (3.86% )
Total return     (4.54% )     (4.05% )     (3.89% )     N/A      (3.81% )
 
The portfolio turnover rate for the quarter ended March 31, 2009 was 1.77%.
 
 
Liquidity.   There are no known demands, commitments, events or uncertainties that will result in or are reasonably likely to result in the Fund’s liquidity increasing or decreasing in any material way. The Investment Funds in which the Fund invests have varying liquidity opportunities ranging from daily to annually. The Fund maintains a limited cash position, but sufficient to cover current and anticipated liabilities including withdrawal requests by members. Redemption requests could be delayed due to liquidity constraints of Investee Pools. Additionally, no material deficiencies in liquidity were identified and there were no material unused sources of liquid assets.
 
Capital Resources.   There are no commitments for capital expenditures as of the end of the latest fiscal period.  Capital invested in the Fund has increased as investors continue to purchase interests in the Fund. The Fund anticipates offering interests on a continuing basis, increasing the total capital available for investment. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Fund’s capital resource arrangements at the present time.
 
 
 
 
 
-13-
 
Results of Operations.   The Fund is a collective investment pool. The net assets of the pool continue to increase as new interests are issued. Performance of the Fund may vary considerably from one period to the next. Results may also vary considerably when compared to results from the same period in previous years.
 
The collective performance results of the Investment Funds were positive during the three months ended March 31, 2010. The Fund’s performance coupled with ongoing operating expenses resulted in a total positive 0.27% return for the overall Fund for the three months ended March 31, 2010. The returns per class were as follows: (0.20%) for Class A units; 0.29% for Class B units; 0.44% for Class C units; and 0.53% for Class E units. Comparative performance for the three months ended December 31, 2009 resulted in negative returns per class of (3.04%) for Class A units, (2.56%) for Class B units, (2.41%) for Class C units; and (2.32%) for Class E units. Comparative performance for the three months ended March 31, 2009 resulted in negative returns of (4.54%) for Class A Units, (4.05%) for Class B Units, (3.89%) for Class C Units, and (3.81%) for Class E Units. Class A units were first issued August 1, 2006; Class B units were first issued August 1, 2005; Class C units were first issued on April 1, 2008; and Class E units were first issued July 1, 2005. Differences in these results may be attributable to general market conditions and the differences in fee structures by class.
 
Off-Balance Sheet Arrangements.   The Fund does not have any off-balance-sheet arrangements (as defined in Regulation S-K 303(a)(4)(ii)) that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
 
Tabular Disclosure of Contractual Obligations.   Not applicable.
 
 
The Fund is a speculative commodity pool and is a “fund-of- funds” which invests in other commodity pools known as Investee Pools as well as separately managed accounts (together with Investee Pools, “Investment Funds”) managed by independent commodity trading advisors (“CTAs”), or other portfolio managers (together “Portfolio Managers”).  The market sensitive instruments held by the Fund are acquired for speculative trading purposes, and all or a substantial amount of the Fund’s assets are subject to the risk of trading loss.  Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund’s main line of business.
 
Market movements result in frequent changes in the fair market value of the Fund’s holdings and, consequently, in its earnings and cash flow.  The Fund’s market risk is directly influenced by the market risk inherent in the trading of market sensitive instruments traded by Investment Funds.  Holdings by Investment Funds are influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Investment Funds’ open positions and the liquidity of the markets in which they trade.
 
Investment Funds in which the Fund invests rapidly acquire and liquidate both long and short positions in a wide range of different markets.  Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund’s past performance is not indicative of its future results.  See “Item 1A.  Risk Factors” of the Fund’s Form 10-K, filed on March 31, 2010, for a discussion of trading and non-trading risk factors applicable to the Fund and Investee Pools.
 
“Value at Risk” is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector.  The exposure by Investment Funds to various market sectors is not transparent to the Fund and therefore, it is not possible to calculate the Value at Risk in any particular market sector.  The Value at Risk exposure of the Fund with any given Investment Fund is the amount of capital invested with that Investment Fund, as set forth below.
 
 
 
 
 
-14-
 
Fair Value of Market Risk Sensitive Instruments     Fair Value
as of March 31, 2010		       % of Total  
Abraham Commodity Fund LP   $ 2,649,479       2.55%  
ADF Trading Company I, LLC (Welton Investment Corporation)†     12,860,112       12.36%  
ADF Trading Company II, LLC (Systematic Alpha Management, LLC)†     10,623,041       10.21%  
ADF Trading Company III, LLC (Rosetta Capital Management, Inc.)†     470,450       0.45%  
AlphaMosaic (US) LLC (Altis – Cell No. 151)     2,803,501       2.69%  
AlphaMosaic (US) LLC (Krom River – Cell No. 42)     3,518,908       3.38%  
APM Hedged Global Commodity Fund, LDC     2,862,249       2.75%  
Boronia Diversified Fund (U.S.), LP     10,289,372       9.89%  
Coolmore Partners LP     1,791,767       1.72%  
Discus Feeder Ltd.     6,108,338       5.87%  
Galena Fund Ltd.     2,316,728       2.23%  
Global Commodity Systematic LP     4,336,873       4.17%  
Graham Global Investment Fund Ltd.     5,311,211       5.11%  
LD Commodities Alpha Fund LP     2,252,425       2.17%  
Man-AHL Diversified II LP     12,831,865       12.33%  
Millburn Commodity Fund LP     2,534,988       2.44%  
MMT Energy Fund     1,335,480       1.28%  
Robeco Transtrend Diversified Fund LLC     9,844,425       9.46%  
Sparta Commodities US Feeder Fund LLC     2,137,837       2.06%  
Winton Futures Fund     7,156,095       6.88%  
TOTAL   $ 104,035,144       100.00%  
 
† ADF Trading Company I, LLC, ADF Trading Company II, LLC, and ADF Trading Company III, LLC (each a “Trading Company” and together “Trading Companies”) are limited liability companies established by the Fund’s managing member through which assets are allocated to managed accounts traded by Portfolio Managers as indicated. The fair value of these accounts includes cash on deposit with the Fund’s clearing broker and the fair value of futures contracts held in each Trading Company’s trading account.
 
 
The quantitative disclosures above regarding the Fund’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
 
 
Evaluation of Disclosure Controls and Procedures.   The Senior Vice President (principal executive officer) and the Chief Financial Officer (principal financial officer) of the Fund’s managing member have evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures. These controls and procedures are designed to ensure that the Fund records, processes, and summarizes the information required to be disclosed in the reports submitted to the Securities and Exchange Commission in a timely and effective manner. Based upon this evaluation they concluded that, as of March 31, 2010, the Fund’s disclosure controls were effective.
 
Changes in Internal Control over Financial Reporting.   There have been no significant changes in the Fund's internal control over financial reporting in the three months ended March 31, 2010 that have materially affected or are reasonably likely to materially affect the Fund's internal control over financial reporting.
 
 
 
 
 
 
-15-
 
Limitations on the Effectiveness of Controls.   Any control system, no matter how well designed and operated, can provide reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
 
 
PART II – OTHER INFORMATION
 
 
The Fund’s Managing Member is not aware of any material legal proceedings threatened or pending to which the Fund is a party or of which any of the Fund’s property is subject.
 
 
There have been no material changes from the risk factors previously disclosed in response to Item 1A to Part 1 of the Fund’s Form 10-K for the year ended December 31, 2009.
 
 
From January 1, 2010 through March 31, 2010, a total of 87,042 units were sold for the aggregate net subscription amount of $9,722,813. All sales were made only to “accredited investors” and to a limited number of investors who do not qualify as “accredited investors” in accordance with Rule 506 under Regulation D of the Securities Act of 1933 (the “Securities Act”). Details of the sale of the interests are as follows:
 
  Date of Sale       Class of Units       Subscription Amount       Number of Units       Price Per Unit  
  01/01/2010       Class A     $ 50,000       455.94       $109.66  
  01/01/2010       Class B       1,381,794       11,279.74       $122.50  
  02/01/2010       Class A       4,849,000       45,334.68       $106.96  
  02/01/2010       Class B       881,034       7,361.43       $119.68  
  03/01/2010       Class A       1,208,000       11,338.07       $106.54  
  03/01/2010       Class B       1,345,985       11,271.81       $119.41  
                $ 9,715,813       87,041.67          
 
(b) Underwriters and Other Purchasers.
 
  The units were not publicly offered. Units were sold only to “accredited investors” and to a limited number of investors who do not qualify as “accredited investors” in accordance with Rule 506 under Regulation D of the Securities Act.
 
(c) Consideration.
 
 
All units of the Fund were sold for cash as indicated by the Subscription Amount in the table above.
 
(d) Exemption from Registration Claimed.
 
 
The units were sold pursuant to Rule 506 of Regulation D and the sales were exempt from registration under the Securities Act.
 
(e) Terms of Conversion or Exercise.
 
  Not applicable.
 
 
 
 
 
 
-16-
 
(f) Use of Proceeds.
 
 
The proceeds from the sale of interests will be utilized by the Fund to invest in Investee Pools which engage in trading of futures, forward contracts, commodity interests and option contracts on the foregoing. The Fund’s Investee Pools and Portfolio Managers may trade in as many as thirty to over fifty markets in the six following sectors: currencies, precious and industrial metals, debt instruments, stock indices, agricultural commodities, and energy.
 
 
The Fund’s managing member estimates that 90% or more of the Fund’s assets with Investee Pools or Portfolio Managers, including the assets used to satisfy margin and collateral requirements, indirectly will be invested in U.S. Treasury bills or notes or other CFTC-authorized investments or held in bank or bank money market accounts. All interest earned on Fund assets directly invested in interest bearing investments will accrue to the Fund. The balance of the Fund’s assets will be held in cash in the Fund’s bank account and will be used to maintain liquidity to pay Fund expenses. The Fund will make no loans, whether by direct loan, commercial paper purchase or other form of loan, to its managing member, any affiliate or employee of its managing member or any other party, and will not invest in equity securities without prior notice to members. The Fund’s managing member will not commingle the property of the Fund with the property of any other person or entity.
 
 
None.
 
 
 
None.
 
 
3.1
   Certificate of Formation of Aspen Diversified Fund LLC, dated April 7, 2005, incorporated by reference herein, previously filed as an exhibit to the registrant’s Form 10-K filed on April 17, 2008.
 
3.2
   Limited Liability Company Agreement of Aspen Diversified Fund LLC, incorporated by reference herein, previously filed as an exhibit to the registrant’s Form 10 filed on August 6, 2007.
 
  Certification of the Managing Partner of the Fund’s managing member pursuant to Rule 13A-14(a) and Rule 15D-14(a), of the Securities Exchange Act, as amended.
 
  Certification of the Senior Vice President of the Fund’s managing member pursuant to Rule 13A-14(a) and Rule 15D-14(a), of the Securities Exchange Act, as amended.
 
  Certification of the Chief Financial Officer of the Fund’s managing member pursuant to Rule 13A-14(a) and Rule 15D-14(a), of the Securities Exchange Act, as amended.
 
  Certification of the Managing Partner of the Fund’s managing member pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
  Certification of the Senior Vice President of the Fund’s managing member pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
  Certification of the Chief Financial Officer of the Fund’s managing member pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
-17-
 
 
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.
 
Dated:  May 14, 2010      
  Aspen Diversified Fund LLC  
 
  By: Aspen Partners, Ltd., Managing Member  
 
 
    /s/ Kenneth E. Banwart  
  Kenneth E. Banwart  
  Managing Partner  
 
 
    /s/ Adam Langley  
  Adam Langley  
  Senior Vice President  
 
 
    /s/ Deborah Terry  
  Deborah Terry  
  Chief Financial Officer  
 
 
 
 
 
-18-
 

Aspen Diversified Fund LLC Reports