UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to           .

Commission File Number 000-51282

FAIRFIELD FUTURES FUND L.P. II

(Exact name of registrant as specified in its charter)

 

New York		56-2421596
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

c/o Ceres Managed Futures LLC
522 Fifth Avenue — 14^th Floor
New York, New York 10036

(Address of principal executive offices) (Zip Code)

(212) 296-1999

(Registrant’s telephone number, including area code)

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  

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 the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes       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. (Check one):

Large accelerated filer		Accelerated filer		Non-accelerated filer  X		Smaller reporting company

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

Yes       No X

As of April 30, 2011, 32,962.3181 Limited Partnership Redeemable Units were outstanding.

FAIRFIELD FUTURES FUND L.P. II

FORM 10-Q

INDEX

						Page
PART I - Financial Information:						Number
		Item 1.		Financial Statements:
				Statements of Financial Condition at March 31, 2011 (unaudited) and December 31, 2010		3
				Statements of Income and Expenses and Changes in Partners’ Capital for the three months ended March 31, 2011 and 2010 (unaudited)		4
				Notes to Financial Statements, including the Financial Statements of CMF Graham Capital Master Fund L.P. (unaudited)		5–19
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		20–22
		Item 3.		Quantitative and Qualitative Disclosures about Market Risk		23–24
		Item 4.		Controls and Procedures		25
PART II - Other Information						26–30
Exhibits
31.1 Certification
31.2 Certification
32.1 Certification
32.2 Certification

PART I

Item 1. Financial Statements

Statements of Financial Condition

		(Unaudited)
		March 31,				December 31,
		2011				2010
Assets:
Investment in Master, at fair value		$	36,441,079			$	38,570,051
Cash			221,268				201,347
Total assets		$	36,662,347			$	38,771,398
Liabilities and Partners’ Capital:
Liabilities:
Accrued expenses:
Brokerage fees		$	137,484			$	145,393
Management fees			60,634				64,178
Administrative fees			15,158				16,045
Other			144,515				118,947
Redemptions payable			1,331,677				469,933
Total liabilities			1,689,468				814,496
Partners’ Capital:
General Partner, 546.3187 unit equivalents outstanding at March 31, 2011 and December 31, 2010			564,205				579,475
Special Limited Partner, 442.4015 units outstanding at March 31, 2011 and December 31, 2010			456,886				469,251
Limited Partners, 32,875.5567 and 34,796.4209 Redeemable Units outstanding at March 31, 2011 and December 31, 2010, respectively			33,951,788				36,908,176
Total partners’ capital			34,972,879				37,956,902
Total liabilities and partners’ capital		$	36,662,347			$	38,771,398
Net asset value per unit		$	1,032.74			$	1,060.69

See accompanying notes to financial statements.

Statements of Income and Expenses and Changes in Partners’ Capital
(Unaudited)

		Three Months Ended
		March 31,
		2011				2010
Investment Income:
Interest Income allocated from Master		$	7,283			$	4,827
Expenses:
Expenses allocated from Master			41,099				28,647
Brokerage fees			424,974				454,179
Management fees			187,468				200,960
Administrative fees			46,866				50,240
Other			47,279				41,886
Total expenses			747,686				775,912
Net investment income (loss)			(740,403	)			(771,085	)
Trading Results:
Net realized gains (losses) on closed contracts allocated from Master			(5,433	)			(1,774,206	)
Change in net unrealized gains (losses) on open contracts allocated from Master			(232,405	)			614,908
Total trading results allocated from Master			(237,838	)			(1,159,298	)
Net income (loss)			(978,241	)			(1,930,383	)
Subscriptions — Limited Partners			—				1,562,000
Redemptions — General Partner			—				(700,077	)
Redemptions — Limited Partners			(2,005,782	)			(1,676,619	)
Net increase (decrease) in Partners’ Capital			(2,984,023	)			(2,745,079	)
Partners’ Capital, beginning of period			37,956,902				43,365,226
Partners’ Capital, end of period		$	34,972,879			$	40,620,147
Net asset value per unit (33,864.2769 and 39,641.9234 units outstanding at March 31, 2011 and 2010, respectively)		$	1,032.74			$	1,024.68
Net income (loss) per unit*		$	(27.95	)		$	(46.93	)
Weighted average units outstanding			35,508.6293				39,926.3534

 

*Based on change in net asset value per unit.

See accompanying notes to financial statements.

Notes to Financial Statements
March 31, 2011
(Unaudited)

1.   General:

Fairfield Futures Fund L.P. II (the “Partnership”) is a limited partnership organized on December 18, 2003 under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures contracts, options, swaps and forward contracts. The sectors traded include currencies, energy, grains, indices, U.S. and non-U.S. interest rates, livestock, lumber, metals and softs. The Partnership commenced trading operations on March 15, 2004. The commodity interests that are traded by the Partnership, through its investment in the Master (as defined below), are volatile and involve a high degree of market risk.

Between January 12, 2004 (commencement of the offering period) and March 12, 2004, 28,601 redeemable units of limited partnership interest (“Redeemable Units”) and 285 General Partner unit equivalents were sold at $1,000 per unit. The proceeds of the initial offering were held in an escrow account until March 15, 2004 at which time they were remitted to the Partnership for trading. The Partnership was authorized to sell 200,000 Redeemable Units during its initial offering period. Effective January 31, 2011, the Partnership no longer offers Redeemable Units for sale.

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is wholly owned by Morgan Stanley Smith Barney Holdings LLC (“MSSB Holdings”). Morgan Stanley, indirectly through various subsidiaries, owns a majority equity interest in MSSB Holdings. Citigroup Global Markets Inc. (“CGM”), the commodity broker and a selling agent for the Partnership, owns a minority equity interest in MSSB Holdings. Citigroup Inc. (“Citigroup”), indirectly through various subsidiaries, wholly owns CGM. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner, the General Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned subsidiary of Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup. As of March 31, 2011, all trading decisions for the Partnership are made by the Advisor (defined below).

On June 1, 2006, the Partnership allocated substantially all of its capital to the CMF Graham Capital Master Fund L.P. (the “Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 74,569.3761 units of the Master with cash equal to $75,688,021. The Master was formed in order to permit accounts managed by Graham Capital Management, L.P. (“Graham” or the “Advisor”) using the K4D-15V Program, the Advisor’s proprietary, systematic trading program, to invest together in one trading vehicle. The General Partner is also the general partner of the Master. In addition, the Advisor is a special limited partner (the “Special Limited Partner”) of the Partnership. The Master’s commodity broker is CGM. Individual and pooled accounts currently managed by the Advisor, including the Partnership, are permitted to be limited partners of the Master. The General Partner and the Advisor believe that trading through this master-feeder structure promotes efficiency and economy in the trading process. Expenses to investors as a result of the investment in the Master are approximately the same and redemption rights are not affected.

The General Partner is not aware of any material changes to the trading program discussed above during the fiscal quarter ended March 31, 2011.

At March 31, 2011, the Partnership owned approximately 23.0% of the Master. At December 31, 2010, the Partnership owned approximately 22.8% of the Master. It is the Partnership’s intention to continue to invest substantially all of its assets in the Master. The performance of the Partnership is directly affected by the performance of the Master. The Master’s trading of futures, forwards, swaps and options contracts, if applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. It engages in such trading through a commodity brokerage account maintained with CGM. The Master’s Statements of Financial Condition, Condensed Schedules of Investments and Statements of Income and Expenses and Changes in Partner’s Capital are included herein.

The General Partner and each limited partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, in proportion to the amount of Partnership interest owned by each except that no limited partner shall be liable for obligations of the Partnership in excess of their capital contribution and profits, if any, net of distributions.

The accompanying financial statements and accompanying notes are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at March 31, 2011 and December 31, 2010, and the results of its operations and changes in partners’ capital for the three months ended March 31, 2011 and

2010. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read together with the financial statements and notes included in the Partnership’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2010.

The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.

Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.

Fairfield Futures Fund L.P. II
Notes to Financial Statements
March 31, 2011
(Unaudited)

The Master’s Statements of Financial Condition and Condensed Schedules of Investments as of March 31, 2011 and December 31, 2010 and Statements of Income and Expenses and Changes in Partners’ Capital for the three months ended March 31, 2011 and 2010 are presented below:

CMF Graham Capital Master Fund L.P.
Statements of Financial Condition

		(Unaudited)
		March 31,				December 31,
		2011				2010
Assets:
Equity in trading account:
Cash		$	134,428,781			$	151,476,359
Cash margin			21,613,395				14,248,524
Net unrealized appreciation on open futures contracts			2,500,328				1,429,574
Net unrealized appreciation on open forward contracts			—				1,819,046
Total assets		$	158,542,504			$	168,973,503
Liabilities and Partners’ Capital:
Liabilities:
Net unrealized depreciation on open forward contracts		$	274,210			$	—
Accrued expenses:
Professional fees			61,464				48,832
Total liabilities			335,674				48,832
Partners’ Capital:
General Partner, 0.0000 unit equivalents at March 31, 2011 and December 31, 2010			—				—
Limited Partners, 90,873.9466 and 96,248.2420 units outstanding at March 31, 2011 and December 31, 2010, respectively			158,206,830				168,924,671
Total liabilities and partners’ capital		$	158,542,504			$	168,973,503
Net asset value per unit		$	1,740.95			$	1,755.09

Fairfield Futures Fund L.P. II
Notes to Financial Statements
March 31, 2011
(Unaudited)

CMF Graham Capital Master Fund L.P.
Condensed Schedule of Investments
March 31, 2011

(Unaudited)

		Notional ($)/
		Number of								% of Partners’
		Contracts				Fair Value				Capital
Futures Contracts Purchased
Currencies			166			$	211,647				0.13	%
Energy			291				552,163				0.35
Grains			245				261,726				0.17
Indices			721				431,307				0.27
Interest Rates U.S.			1,373				(224,399	)			(0.14	)
Interest Rates Non-U.S.			238				(175,378	)			(0.11	)
Livestock			53				123,655				0.08
Metals			96				511,509				0.32
Softs			92				(219,017	)			(0.14	)
Total futures contracts purchased							1,473,213				0.93
Futures Contracts Sold
Currencies			164				132,923				0.08
Energy			71				(55,448	)			(0.03	)
Grains			76				(124,775	)			(0.08	)
Indices			104				(313,055	)			(0.20	)
Interest Rates U.S.			491				94,574				0.06
Interest Rates Non-U.S.			2,450				1,263,035				0.80
Softs			24				29,861				0.02
Total futures contracts sold							1,027,115				0.65
Unrealized Appreciation on Open Forward Contracts
Currencies		$	791,015,926				9,388,021				5.93
Metals			115				355,428				0.23
Total unrealized appreciation on open forward contracts							9,743,449				6.16
Unrealized Depreciation on Open Forward Contracts
Currencies		$	781,603,579				(9,708,776	)			(6.13	)
Metals			112				(308,883	)			(0.20	)
Total unrealized depreciation on open forward contracts							(10,017,659	)			(6.33	)
Net fair value						$	2,226,118				1.41	%

Fairfield Futures Fund L.P. II
Notes to Financial Statements
March 31, 2011
(Unaudited)

CMF Graham Capital Master Fund L.P.
Condensed Schedule of Investments
December 31, 2010

 

*

Due to rounding.

Fairfield Futures Fund L.P. II
Notes to Financial Statements
March 31, 2011
(Unaudited)

CMF Graham Capital Master Fund L.P.
Statements of Income and Expenses and Changes in Partners’ Capital
(Unaudited)

 

		Three Months Ended
		March 31,
		2011				2010
Investment Income:
Interest income		$	31,454			$	20,418
Expenses:
Clearing fees			155,078				103,022
Professional fees			22,632				16,712
Total expenses			177,710				119,734
Net investment income (loss)			(146,256	)			(99,316	)
Trading Results:
Net gains (losses) on trading of commodity interests:
Net realized gains (losses) on closed contracts			(48,218	)			(7,243,824	)
Change in net unrealized gains (losses) on open contracts			(1,022,502	)			3,300,638
Total trading results			(1,070,720	)			(3,943,186	)
Net income (loss)			(1,216,976	)			(4,042,502	)
Subscriptions — Limited Partners			—				27,645,697
Redemptions — Limited Partners			(9,469,411	)			(21,264,114	)
Distribution of interest income to feeder funds			(31,454	)			(20,418	)
Net increase (decrease) in Partners’ Capital			(10,717,841	)			2,318,663
Partners’ Capital, beginning of period			168,924,671				171,212,260
Partners’ Capital, end of period		$	158,206,830			$	173,530,923
Net asset value per unit (90,873.9466 and 108,613.7805 units outstanding at March 31, 2011 and 2010, respectively)		$	1,740.95			$	1,597.69
Net income (loss) per unit*		$	(13.80	)		$	(42.53	)
Weighted average units outstanding			93,736.6352				112,101.8549

 

*Based on change in net asset value per unit.

Fairfield Futures Fund L.P. II
Notes to Financial Statements
March 31, 2011
(Unaudited)

2.   Financial Highlights:

Changes in the net asset value per unit for the three months ended March 31, 2011 and 2010 were as follows:

		Three Months Ended
		March 31,
		2011				2010
Net realized and unrealized gains (losses) *		$	(20.08	)		$	(39.62	)
Interest income			0.20				0.12
Expenses **			(8.07	)			(7.43	)
Increase (decrease) for the period			(27.95	)			(46.93	)
Net asset value per unit, beginning of period			1,060.69				1,071.61
Net asset value per unit, end of period		$	1,032.74			$	1,024.68

*		Includes Partnership brokerage fees and clearing fees allocated from the Master.
**		Excludes Partnership brokerage fees and clearing fees allocated from the Master.

		Three Months Ended
		March 31,
		2011				2010
Ratios to average net assets:***
Net investment income (loss) before allocation to Special Limited Partner****			(8.1	)%			(7.8	)%
Operating expenses			8.2	%			7.8	%
Allocation to Special Limited Partner			—	%			—	%
Total expenses			8.2	%			7.8	%
Total return:
Total return before allocation to Special Limited Partner			(2.6	)%			(4.4	)%
Allocation to Special Limited Partner			—	%			—	%
Total return after allocation to Special Limited Partner			(2.6	)%			(4.4	)%

***		Annualized (except for allocation to Special Limited Partner, if applicable).
****		Interest income allocated from the Master less total expenses.

The above ratios may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners’ share of income, expenses and average net assets.

Financial Highlights of the Master:

		Three Months Ended
		March 31,
		2011				2010
Net realized and unrealized gains (losses) *		$	(13.90	)		$	(42.57	)
Interest income			0.34				0.19
Expenses **			(0.24	)			(0.15	)
Increase (decrease) for the period			(13.80	)			(42.53	)
Distribution of interest income to feeder funds			(0.34	)			(0.19	)
Net asset value per unit, beginning of period			1,755.09				1,640.41
Net asset value per unit, end of period		$	1,740.95			$	1,597.69

*		Includes clearing fees.
**		Excludes clearing fees.

		Three Months Ended
		March 31,
		2011				2010
Ratios to average net assets:***
Net investment income (loss)****			(0.4	)%			(0.2	)%
Operating expenses			0.4	%			0.3	%
Total return			(0.8	)%			(2.6	)%

***		Annualized.
****		Interest income less total expenses.

The above ratios may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners’ share of income, expenses and average net assets.

3.   Trading Activities:

The Partnership’s pro-rata share of the results of the Master’s trading activities are shown in the Statements of Income and Expenses and Changes in Partners’ Capital.

The customer agreements between the Partnership and CGM and the Master and CGM give the Partnership and the Master, respectively, the legal right to net unrealized gains and losses on open futures and forward contracts. The Master nets, for financial reporting purposes, the unrealized gains and losses on open futures and on open forward contracts on the Statements of Financial Condition.

Brokerage fees are calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions.

All of the commodity interests owned by the Master are held for trading purposes. The monthly average number of futures contracts traded during the three months ended March 31, 2011 and 2010 were 7,656 and 7,499, respectively. The monthly average number of metals forward contracts traded during the three months ended March 31, 2011 and 2010 were 269 and 398, respectively. The monthly average notional values of currency forward contracts during the three months ended March 31, 2011 and 2010 were $1,313,684,022 and $948,091,563 respectively. The following tables indicate the gross fair values of derivative instruments of futures and forward contracts as separate assets and liabilities as of March 31, 2011 and December 31, 2010.

		March 31, 2011
Assets
Futures Contracts
Currencies		$	351,018
Energy			564,902
Grains			333,408
Indices			531,433
Interest Rates U.S.			228,642
Interest Rates Non-U.S.			1,356,610
Livestock			123,655
Metals			598,896
Softs			36,700
Total unrealized appreciation on open futures contracts		$	4,125,264
Liabilities
Futures Contracts
Currencies		$	(6,448	)
Energy			(68,187	)
Grains			(196,457	)
Indices			(413,181	)
Interest Rates U.S.			(358,467	)
Interest Rates Non-U.S.			(268,953	)
Metals			(87,387	)
Softs			(225,856	)
Total unrealized depreciation on open futures contracts		$	(1,624,936	)
Net unrealized appreciation on open futures contracts		$	2,500,328	*
Assets
Forward Contracts
Currencies		$	9,388,021
Metals			355,428
Total unrealized appreciation on open forward contracts		$	9,743,449
Liabilities
Forward Contracts
Currencies		$	(9,708,776	)
Metals			(308,883	)
Total unrealized depreciation on open forward contracts		$	(10,017,659	)
Net unrealized depreciation on open forward contracts		$	(274,210)	**

*		This amount is in “Net unrealized appreciation on open futures contracts” on the Master’s Statements of Financial Condition.
**		This amount is in “Net unrealized depreciation on open forward contracts” on the Master’s Statements of Financial Condition.

The following tables indicate the trading gains and losses, by market sector, on derivative instruments for the three months ended March 31, 2011 and 2010.

		Three Months Ended March 31,
Sector		2011				2010
Currencies		$	(1,718,471	)		$	134,058
Energy			1,146,153				(9,678	)
Grains			(109,559	)			241,683
Indices			(1,267,640	)			(3,173,756	)
Interest Rates U.S.			(1,337,400	)			(871,170	)
Interest Rates Non-U.S.			269,082				2,225,302
Livestock			132,388				237,965
Metals			870,154				(865,965	)
Softs			944,573				(1,861,625	)
Total		$	(1,070,720)	***		$	(3,943,186)	***

4.   Fair Value Measurement:

Partnership’s Investments. The Partnership values its investment in the Master at its net asset value per unit as calculated by the Master. The Master values its investments as described in note 2 of the Master’s notes to the annual financial statements as of December 31, 2010.

Partnership’s Fair Value Measurements.  Fair value is defined as 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 under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety.

GAAP also requires the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s Level 2 assets.

The Partnership will separately present purchases, sales, issuances, and settlements in its reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.

The Partnership values its investment in the Master where there are no other rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnership’s investment in the Master reflects its proportional interest in the Master. As of and for the periods ended March 31, 2011 and December 31, 2010, the Partnership did not hold any derivative instruments that are based on unadjusted quoted prices in active markets for identical assets (Level 1) or priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

						Quoted Prices in								Significant
						Active Markets				Significant Other				Unobservable
						for Identical				Observable Inputs				Inputs
		March 31, 2011				Assets (Level 1)				(Level 2)				(Level 3)
Assets
Investment in Master
Net fair value		$	36,441,079			$	—			$	36,441,079			$	—
		$	36,441,079			$	—			$	36,441,079			$	—
						Quoted Prices in
						Active Markets				Significant Other				Significant
						for Identical				Observable Inputs				Unobservable
		December 31, 2010				Assets (Level 1)				(Level 2)				Inputs (Level 3)
Assets
Investment in Master		$	38,570,051			$	—			$	38,570,051			$	—
Net fair value		$	38,570,051			$	—			$	38,570,051			$	—

Master’s Investments. All commodity interests of the Master (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Income and Expenses and Changes in Partners’ Capital.

Master’s Fair Value Measurements.  Fair value is defined as 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 under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Master’s Level 1 assets and liabilities are actively traded.

GAAP also requires the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Master’s Level 2 assets and liabilities.

The Master will separately present purchases, sales, issuances, and settlements in its reconciliation of Level 3 fair value measurements (i.e.,  to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.

The Master considers prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets from observable inputs (Level 2). As of and for the periods ended March 31, 2011 and December 31, 2010, the Master did not hold any derivative instruments that are priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

						Quoted Prices in
						Active Markets				Significant Other				Significant
						for Identical				Observable Inputs				Unobservable
		March 31, 2011				Assets (Level 1)				(Level 2)				Inputs (Level 3)
Assets
Futures		$	4,125,264			$	4,125,264			$	—			$	—
Forwards			9,743,449				355,428				9,388,021				—
Total assets			13,868,713				4,480,692				9,388,021				—
Liabilities
Futures		$	1,624,936			$	1,624,936			$	—			$	—
Forwards			10,017,659				308,883				9,708,776				—
Total liabilities			11,642,595				1,933,819				9,708,776				—
Net fair value		$	2,226,118			$	2,546,873			$	(320,755	)		$	—

						Quoted Prices in
						Active Markets				Significant Other				Significant
						for Identical				Observable Inputs				Unobservable
		December 31, 2010*				Assets (Level 1)				(Level 2)				Inputs (Level 3)
Assets
Futures		$	2,788,002			$	2,788,002			$	—			$	—
Forwards			7,559,452				653,412				6,906,040				—
Total assets			10,347,454				3,441,414				6,906,040				—
Liabilities
Futures		$	1,358,428			$	1,358,428			$	—			$	—
Forwards			5,740,406				149,021				5,591,385				—
Total liabilities			7,098,834				1,507,449				5,591,385				—
Net fair value		$	3,248,620			$	1,933,965			$	1,314,655			$	—

In the normal course of business, the Partnership, through its investment in the Master, is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter (“OTC”). Exchange-traded instruments are standardized and include futures and certain forwards and option contracts. OTC contracts are negotiated between contracting parties and include certain forwards and option contracts. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract.

The risk to the limited partners that have purchased interests in the Partnership is limited to the amount of their capital contributions to the Partnership and their share of the Partnership’s assets and undistributed profits. This limited liability is a consequence of the organization of the Partnership as a limited partnership under applicable law.

Market risk is the potential for changes in the value of the financial instruments traded by the Partnership/Master due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership/Master is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnership’s/Master’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s/Master’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Master have credit risk and concentration risk as the sole counterparty or broker with respect to the Partnership’s/Master’s assets is CGM or a CGM affiliate. Credit risk with respect to exchange-traded instruments is reduced to the extent that through CGM, the Partnership’s/Master’s counterparty is an exchange or clearing organization.

The General Partner monitors and attempts to control the Partnership’s/Master’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership/Master may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forwards and options positions by sector, margin requirements, gain and loss transactions and collateral positions.

The majority of these instruments mature within one year of the inception date. However, due to the nature of the Partnership’s/Master’s business, these instruments may not be held to maturity.

Fairfield Futures Fund L.P. II
Notes to Financial Statements
March 31, 2011
(Unaudited)

6.    Critical Accounting Policies

Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.

Partnership’s Investments. The Partnership values its investment in the Master at its net asset value per unit as calculated by the Master. The Master values its investments as described in note 2 of the Master’s notes to the annual financial statements as of December 31, 2010.

     Partnership’s and Master’s Fair Value Measurements. Fair value is defined as 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 under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Master’s Level 1 assets and liabilities are actively traded.

     GAAP also requires the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s and the Master’s Level 2 assets and liabilities.

     The Partnership will separately present purchases, sales, issuances, and settlements in their reconciliation of Level 3 fair value measurements (i.e. to present such items on a gross basis rather than on a net basis), and makes disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.

The Partnership values investments in the Master where there are no other rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnership’s investment in the Master reflects its proportional interest in the Master. As of and for the periods ended March 31, 2011 and December 31, 2010, the Partnership did not hold any derivative instruments that are based on unadjusted quoted prices in active markets for identical assets (Level 1) or priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

The Master considers prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets from observable inputs (Level 2). As of and for the periods ended March 31, 2011 and December 31, 2010, the Master did not hold any derivative instruments that are priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

Futures Contracts. The Master trades futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. When the contract is closed, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Statements of Income and Expenses and Changes in Partners’ Capital.

Forward Foreign Currency Contracts. Foreign currency contracts are those contracts where the Master agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Foreign currency contracts are valued daily, and the Master’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition. Net realized gains (losses) and changes in net unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Statements of Income and Expenses and Changes in Partners’ Capital.

The Master does not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in net gain (loss) on investments in the Statements of Income and Expenses and Changes in Partners’ Capital.

London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by the Master are cash settled based on prompt dates published by the LME. Payments (“variation margin”) may be made or received by the Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Net realized gains (losses) and changes in net unrealized gains (losses) on metal contracts are included in the Statements of Income and Expenses and Changes in Partners’ Capital.

Income Taxes. Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses.

GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. The General Partner concluded that no provision for income tax is required in the Partnership’s financial statements.

The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. Generally, the 2007 through 2010 tax years remain subject to examination by U.S. federal and most state tax authorities. Management does not believe that there are any uncertain tax positions that require recognition of a tax liability.

Subsequent Events.  Management of the Partnership evaluates events that occur after the balance sheet date but before financial statements are filed. Management has assessed the subsequent events through the date of filing and has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.

Net Income (Loss) per unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 2, “Financial Highlights”.

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity and Capital Resources

The Partnership does not engage in sales of goods or services. Its only assets are its investment in the Master and cash. The Master does not engage in sales of goods or services. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Master. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the first quarter of 2011.

The Partnership’s capital consists of capital contributions of the partners, as increased or decreased by gains or losses allocated from the Master on trading and by expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

For the three months ended March 31, 2011, Partnership capital decreased 7.9% from $37,956,902 to $34,972,879. This decrease was attributable to a net loss from operations of $978,241 coupled with redemptions of 1,920.8642 Redeemable Units totaling $2,005,782. Future redemptions can impact the amount of funds available for investment in the Master in subsequent periods.

The Master’s capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by expenses, interest income, redemptions of units and distribution of profits, if any.

For the three months ended March 31, 2011, the Master’s capital decreased 6.3% from $168,924,671 to $158,206,830. This decrease was attributable to a net loss from operations of $1,216,976 coupled with redemptions of 5,374.2954 units totaling $9,469,411 and distribution of interest income to feeder funds totaling $31,454. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP 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. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 6 of the Financial Statements.

The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized and change in net unrealized trading gain (loss) in the Statements of Income and Expenses and Changes in Partners’ Capital.

During the Partnership’s first quarter of 2011, the net asset value per unit decreased 2.6% from $1,060.69 to $1,032.74 as compared to a decrease of 4.4% in the first quarter of 2010. The Partnership, through its investment in the Master, experienced a net trading loss before brokerage fees and related fees in the first quarter of 2011 of $237,838. Losses were primarily attributable to the Master’s trading of commodity futures in currencies, grains, indices and U.S. interest rates and were partially offset by gains in energy, non-U.S. interest rates, livestock, metals and softs. The Partnership, through its investment in the Master, experienced a net trading loss before brokerage fees and related fees in the first quarter of 2010 of $1,159,298. Losses were primarily attributable to the trading of commodity futures in energy, indices, U.S. interest rates, metals and softs and were partially offset by gains in currencies, non-U.S. interest rates and livestock.

The most significant losses were incurred within the currency markets, primarily during January, from long futures positions in the Japanese yen, Australian dollar, South African rand, and Canadian dollar versus the U.S. dollar as the value of these currencies declined against the U.S. dollar following the release of minutes from the latest U.S. Federal Reserve meeting that showed optimism about the U.S. economy and boosted demand for the U.S. currency. Further losses were recorded within this sector during March from long positions in the Canadian dollar versus the U.S. dollar as “commodity currencies” such as the Canadian dollar weakened as a result of the “flight to quality” following the natural disaster in Japan. Within the global stock index markets, losses were experienced primarily during March from long positions in European, U.S., and Pacific Rim equity index futures as prices moved sharply lower after the disaster in Japan spurred concern about global economic growth. Within the global interest rate sector, losses were incurred primarily during February from short positions in U.S. and European fixed-income futures as prices increased amid a “flight-to-safety” spurred by geopolitical concerns in the Middle East and North Africa.

A portion of the Partnership’s losses for the quarter was offset by gains achieved within the energy markets, primarily during February and March, from long futures positions in crude oil and its related products as prices rose after political tension in Egypt stoked worries that protests may spread to crude-producing parts of the Middle East. Further gains were recorded after futures prices of crude oil and its related products continued to increase as geopolitical tensions extended to Libya. Within the agricultural complex, gains were experienced primarily during January and February due to long futures positions in cotton as prices increased on signs that global output may fail to keep pace with rising demand in China, the world’s biggest buyer of the fiber. Gains were recorded within the metals markets, primarily during February, from long positions in silver futures as prices extended a rally to a 30-year high after mounting unrest in the Middle East spurred demand for silver as a “safe haven.”

Commodity futures markets are highly volatile. The potential for broad and rapid price fluctuations increases the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Partnership (and the Master) depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Partnership/Master expects to increase capital through operations.

Interest income on 80% of the Partnership’s daily average equity allocated to it by the Master, was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days. Interest income allocated from the Master for the three months ended March 31, 2011 increased by $2,456, as compared to the corresponding period in 2010. The increase in interest income is primarily due to higher U.S. Treasury bill rates during the three months ended March 31, 2011 as compared to the corresponding period in 2010. Interest earned by the Partnership will increase the net asset value of the Partnership.

Brokerage fees are calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Brokerage fees for the three months ended March 31, 2011 decreased by $29,205, as compared to the corresponding period in 2010. The decrease in brokerage fees is due to lower average net assets during the three months ended March 31, 2011 as compared to the corresponding period in 2010.

Management fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance and redemptions. Management fees for the three months ended March 31, 2011 decreased by $13,492, as compared to the corresponding period in 2010. The decrease in management fees is due to lower average net assets during the three months ended March 31, 2011 as compared to the corresponding period in 2010.

Administrative fees are paid to the General Partner for administering the business and affairs of the Partnership. These fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance and redemptions. Administrative fees for the three months ended March 31, 2011 decreased by $3,374, as compared to the corresponding period in 2010. The decrease in administrative fees is due to lower average net assets during the three months ended March 31, 2011 as compared to the corresponding period in 2010.

Special Limited Partner profit share allocations are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the management agreement among the Partnership, the General Partner and the Advisor. There were no profit share allocations earned for the three months ended March 31, 2011 and 2010. The Advisor will not be allocated a profit share until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.

In allocating substantially all of the assets of the Partnership to the Master, the General Partner considers the Advisor’s past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.

Item 3.	Quantitative and Qualitative Disclosures about Market Risk

All of the Partnership’s assets are subject to the risk of trading loss through its investment in the Master. The Master is a speculative commodity pool. The market sensitive instruments held by the Master are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are subject to the risk of trading loss through its investment in the Master. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Master’s and the Partnership’s main line of business.

The risk to the limited partners that have purchased interests in the Partnership is limited to the amount of their capital contributions to the Partnership and their share of the Partnership’s assets and undistributed profits. This limited liability is a consequence of the organization of the Partnership as a limited partnership under applicable law.

Market movements result in frequent changes in the fair market value of the Master’s open positions and, consequently, its earnings and cash balances. The Master’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Master’s open positions and the liquidity of the markets in which it trades.

The Master rapidly acquires and liquidates 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 Master’s past performance is not necessarily indicative of its future results.

“Value at Risk” is a measure of the maximum amount which the Master could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Master’s speculative trading and the recurrence in the markets traded by the Master of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Master’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Master’s losses in any market sector will be limited to Value at Risk or by the Master’s attempts to manage its market risk.

Exchange maintenance margin requirements have been used by the Master as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The following tables indicate the trading Value at Risk associated with the Master’s open positions by market category as of March 31, 2011 and December 31, 2010, and the highest, lowest and average values during the three months ended March 31, 2011 and the twelve months ended December 31, 2010. All open position trading risk exposures of the Master have been included in calculating the figures set forth below. There has been no material change in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010.

As of March 31, 2011, the Master’s total capitalization was $158,206,830 and the Partnership owned approximately 23.0% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value at Risk as of March 31, 2011 was as follows:

										Three Months Ended March 31, 2011
						% of Total				High				Low				Average
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk*
Currencies		$	10,526,667				6.65	%		$	14,645,028			$	5,042,022			$	9,712,741
Energy			1,121,320				0.71	%			1,221,130				430,473				715,112
Grains			478,650				0.30	%			624,700				436,750				497,655
Indices			4,094,626				2.59	%			11,180,261				3,276,704				6,785,775
Interest Rates U.S.			829,155				0.52	%			1,205,145				545,675				851,529
Interest Rates Non-U.S.			2,782,686				1.76	%			3,022,899				1,439,332				2,717,692
Livestock			63,600				0.04	%			63,600				38,000				42,867
Metals			1,048,048				0.66	%			1,637,443				616,825				1,030,163
Softs			375,073				0.24	%			491,327				241,774				354,051
Total		$	21,319,825				13.47	%

     As of December 31, 2010, the Master’s total capitalization was $168,924,671 and the Partnership owned approximately 22.8% of the Master. The Partnership invests substantially all of its assets in the Master. The Master’s Value at Risk as of December 31, 2010 was as follows:

December 31, 2010

										Twelve Months Ended December 31, 2010
						% of Total				High				Low				Average*
Market Sector		Value at Risk				Capitalization				Value at Risk				Value at Risk				Value at Risk
Currencies		$	6,192,975				3.67	%		$	11,364,239			$	996,231			$	5,226,199
Energy			1,048,521				0.62	%			1,989,347				236,269				1,000,222
Grains			448,450				0.26	%			964,687				124,875				411,118
Indices			5,301,813				3.14	%			13,726,706				1,137,775				5,507,221
Interest Rates U.S.			161,600				0.10	%			2,021,410				68,806				1,014,515
Interest Rates Non-U.S.			1,209,918				0.72	%			4,305,447				749,055				2,006,426
Livestock			40,000				0.02	%			106,400				800				50,304
Metals			1,012,127				0.60	%			1,771,142				494,357				993,963
Softs			258,565				0.15	%			1,144,148				85,988				385,351
Total		$	15,673,969				9.28	%

Item 4.	Controls and Procedures

The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

Management is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.

The General Partner’s CEO and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2011 and, based on that evaluation, the General Partner’s CEO and CFO have concluded that at that date the Partnership’s disclosure controls and procedures were effective.

The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:

•

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;

•

provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.

There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended March 31, 2011 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings

This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which CGM is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.

CGM is a New York corporation with its principal place of business at 388 Greenwich St., New York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant (“FCM”), and provides futures brokerage and clearing services for institutional and retail participants in the futures markets. CGM and its affiliates also provide investment banking and other financial services for clients worldwide.

There have been no material administrative, civil or criminal actions within the past five years against CGM (formerly known as Salomon Smith Barney) or any of its individual principals and no such actions are currently pending, except as follows.

Mutual Funds

Several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. Citigroup has received subpoenas and other requests for information from various government regulators regarding market timing, financing, fees, sales practices and other mutual fund issues in connection with various investigations. Citigroup is cooperating with all such reviews. Additionally, CGM has entered into a settlement agreement with the SEC with respect to revenue sharing and sales of classes of funds.

On May 31, 2005, Citigroup announced that Smith Barney Fund Management LLC and CGM completed a settlement with the SEC resolving an investigation by the SEC into matters relating to arrangements between certain Smith Barney mutual funds, an affiliated transfer agent and an unaffiliated sub-transfer agent. Under the terms of the settlement, Citigroup agreed to pay fines totaling $208.1 million. The settlement, in which Citigroup neither admitted nor denied any wrongdoing or liability, includes allegations of willful misconduct by Smith Barney Fund Management LLC and CGM in failing to disclose aspects of the transfer agent arrangements to certain mutual fund investors.

In May 2007, CGM finalized its settlement agreement with the NYSE and the New Jersey Bureau of Securities on the matter related to its market-timing practices prior to September 2003.

FINRA Settlement

On October 12, 2009, FINRA announced its acceptance of an Award Waiver and Consent (“AWC”) in which CGM, without admitting or denying the findings, consented to the entry of the AWC and a fine and censure of $600,000. The AWC includes findings that CGM failed to adequately supervise the activities of its equities trading desk in connection with swap and related hedge trades in U.S. and Italian equities that were designed to provide certain perceived tax advantages. CGM was charged with failing to provide for effective written procedures with respect to the implementation of the trades, failing to monitor Bloomberg messages and failing to properly report certain of the trades to the NASDAQ.

Auction Rate Securities

On May 31, 2006, the SEC instituted and simultaneously settled proceedings against CGM and 14 other broker-dealers regarding practices in the auction rate securities market. The SEC alleged that the broker-dealers violated Section 17(a)(2) of the Securities Act of 1933, as amended. The broker-dealers, without admitting or denying liability, consented to the entry of an SEC cease-and-desist order providing for censures, undertakings and penalties. CGM paid a penalty of $1.5 million.

On August 7, 2008, Citigroup reached a settlement with the New York Attorney General, the SEC, and other state regulatory agencies, pursuant to which Citigroup agreed to offer to purchase at par auction rate securities from all Citigroup individual investors, small institutions (as defined by the terms of the settlement), and charities that purchased auction rate securities from Citigroup prior to February 11, 2008. In addition, Citigroup agreed to pay a $50 million fine to the State of New York and a $50 million fine to the other state regulatory agencies.

Subprime Mortgage-Related Actions

The SEC, among other regulators, is investigating Citigroup’s subprime and other mortgage-related conduct and business activities, as well as other business activities affected by the credit crisis, including an ongoing inquiry into Citigroup’s structuring and sale of collateralized debt obligations. Citigroup is cooperating fully with the SEC’s inquiries.

On July 29, 2010, the SEC announced the settlement of an investigation into certain of Citigroup’s 2007 disclosures concerning its subprime-related business activities. On October 19, 2010, the United States District Court for the District of Columbia entered a final judgment approving the settlement, pursuant to which Citigroup agreed to pay a $75 million civil penalty and to maintain certain disclosure policies, practices and procedures for a three-year period. Additional information relating to this action is publicly available in court filings under the docket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).

The Federal Reserve Bank, the OCC and the FDIC, among other federal and state authorities, are investigating issues related to the conduct of certain mortgage servicing companies, including Citigroup affiliates, in connection with mortgage foreclosures. Citigroup is cooperating fully with these inquiries.

Credit Crisis Related Matters

Beginning in the fourth quarter of 2007, certain of Citigroup’s, and CGM’ regulators and other state and federal government agencies commenced formal and informal investigations and inquiries, and issued subpoenas and requested information, concerning Citigroup’s subprime mortgage-related conduct and business activities. Citigroup and certain of its affiliates, including CGM, are involved in discussions with certain of its regulators to resolve certain of these matters.

Certain of these regulatory matters assert claims for substantial or indeterminate damages. Some of these matters already have been resolved, either through settlements or court proceedings, including the complete dismissal of certain complaints or the rejection of certain claims following hearings.

In the course of its business, CGM, as a major futures commission merchant and broker-dealer, is a party to various civil actions, claims and routine regulatory investigations and proceedings that the general partner believes do not have a material effect on the business of CGM.

Item 1A.	Risk Factors

          There have been no material changes to the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

The Partnership no longer offers Redeemable Units for sale.

The following chart sets forth the purchases of Redeemable Units by the Partnership.

(d) Maximum Number

(or Approximate

(c) Total Number

Dollar Value) of

(b) Average

of Redeemable Units

Redeemable Units that

(a) Total Number

Price Paid

Purchased as Part

May Yet Be

of Redeemable

per Redeemable

of Publicly Announced

Purchased Under the

Period

Units Purchased*

Unit**

Plans or Programs

Plans or Programs

January 1, 2011 – January 31, 2011

198.1316

$

1,054.46

N/A

N/A

February 1, 2011 – February 28, 2011

433.2721

$

1,073.65

N/A

N/A

March 1, 2011 – March 31, 2011

1,289.4605

$

1,032.74

N/A

N/A

1,920.8642

$

1,044.21

N/A

N/A

* Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners.

** Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day.

Item 3.	Defaults Upon Senior Securities – None.

Item 4.	[Removed and Reserved]

Item 5.	Other Information – None.

Item 6.	Exhibits

	3.1		Limited Partnership Agreement (filed as Exhibit 3.1 to the Registration Statement on Form 10 filed on April 29, 2005 and incorporated herein by reference).
	3.2		Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York (filed as Exhibit 3.1 to the Registration Statement on Form 10 filed on April 29, 2005 and incorporated herein by reference).

	(a)		Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated September 21, 2005 (filed as Exhibit 3.2A to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
	(b)		Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated September 19, 2008 (filed as Exhibit 3.2B to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
	(c)		Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated September 28, 2009 (filed as Exhibit 99.1 to the Form 8-K filed on September 30, 2009 and incorporated herein by reference).
	(d)		Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of New York, dated June 29, 2010 (filed as Exhibit 3.2(d) to the Form 8-K filed on July 2, 2010 and incorporated herein by reference).

	10.1		Customer Agreement between the Partnership and CGM (filed as Exhibit 10.2 to the Registration Statement on Form 10 filed on April 29, 2005 and incorporated herein by reference).
	10.2		Form of Subscription Agreement (filed as Exhibit 10.4 to the Partnership’s Form 10 filed on April 29, 2005 and incorporated herein by reference).
	10.3		Escrow Instructions relating to escrow of subscription funds (filed as Exhibit 10.3 to the Registration Statement on Form 10 filed on April 29, 2005 and incorporated herein by reference).
	10.4		Agency Agreement among the Partnership, the General Partner and CGM (filed as Exhibit 10.3 to the Registration Statement on Form 10 filed on April 29, 2005 and incorporated herein by reference).

(a)

Joinder Agreement among the Partnership, the General Partner, CGM and Morgan Stanley Smith Barney LLC, dated June 1, 2009 (filed as Exhibit 10 to the Form 10-Q filed on August 14, 2009 and incorporated herein by reference).

10.5

Management Agreement among the Partnership, the General Partner and Graham (filed as Exhibit 10.1 to the Registration Statement on Form 10 filed on April 29, 2005 and incorporated herein by reference).

(a)

Letter extending the Management Agreement between the General Partner and Graham for 2010 (filed as Exhibit 10.4(a) to the Form 10-K filed March 31, 2011 and incorporated herein by reference).

Exhibit 31.1 — Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director)

Exhibit 31.2 — Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director)

Exhibit 32.1 — Section 1350 Certification (Certification of President and Director)

Exhibit 32.2 — Section 1350 Certification (Certification of Chief Financial Officer and Director)

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.

 

FAIRFIELD FUTURES FUND L.P. II

 

 

Date: May 16, 2011

 

 

Date: May 16, 2011