Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Aspen Diversified Fund LLC | Financial_Report.xls |
| EX-32 - EXHIBIT 32.1 - Aspen Diversified Fund LLC | exhibit32-1.htm |
| EX-31 - EXHIBIT 31.2 - Aspen Diversified Fund LLC | exhibit31-2.htm |
| EX-32 - EXHIBIT 32.2 - Aspen Diversified Fund LLC | exhibit32-2.htm |
| EX-31 - EXHIBIT 31.1 - Aspen Diversified Fund LLC | exhibit31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_________________________
FORM 10-K
_________________________
| S | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended: December 31, 2011 | |
| £ | 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 Number) | |||
| 4200 Northside Parkway Building 11, Suite 200 Atlanta, GA 30327 |
||||
| (Address of principal executive offices) | ||||
| (404) 879-5126 | ||||
| (Telephone Number) | ||||
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Liability Company Interest
| i |
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | |||||
| £ Yes | S No | ||||
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | |||||
| £ Yes | S No | ||||
| 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. | |||||
| S Yes | £ 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.) | |||||
| S Yes | £ No | ||||
| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | |||||
| S | |||||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | |||||
| £ Large accelerated filer | £ Accelerated filer | ||||
| £ Non-accelerated filer | S Smaller Reporting Company | ||||
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | |||||
| £ Yes | S No | ||||
As of June 30, 2011, the aggregate market value of the units of the registrant held by non-affiliates of the registrant was $87,115,742.
Documents incorporated by reference: None.
| ii |
Part I
| Item 1. | Business | 1 |
| Item 1A. | Risk Factors | 4 |
| Item 1B. | Unresolved Staff Comments | 12 |
| Item 2. | Properties | 13 |
| Item 3. | Legal Proceedings | 13 |
| Item 4. | Mine Safety Disclosures | 13 |
Part II
Part III
| iii |
Part I
· The Fund competes with other commodity pools and other investment vehicles for investors.
· The Portfolio Managers may compete with other traders in the markets in establishing or liquidating positions on behalf of the Fund.
| 1 |
| (b) | Financial Information about Segments. |
| The Fund’s business constitutes only one segment for financial reporting purposes. The Fund does not engage in sales of goods or services. Refer to Part II, Item 6 and Item 8 for financial information pertaining to the Fund. | |
| (c) | Narrative Description of Business. |
| (i) through (xii) Not applicable. Refer to Part I, Item 1(a) for more information. | |
| (xiii) The Fund has no employees. | |
| The Fund seeks to achieve capital appreciation through investments in a diversified portfolio of futures, forward and option contracts on currencies, metals, financial instruments, stock indices, energy and agricultural commodities (“Financial Instruments”). The Fund will invest its assets in Investment Funds managed or traded by independent CTAs or other Portfolio Managers. Investment Funds may trade diversified portfolios of futures in U.S. and non-U.S. markets in an effort to actively profit from anticipated trends in market prices. | |
| The Portfolio Managers trading Investment Funds of the Fund, (each, a “Portfolio Manager”, together, the “Portfolio Managers”) may rely on either technical or fundamental analysis or a combination thereof in making trading decisions and attempting to identify and exploit price trends. Portfolio Managers will attempt to structure portfolios of liquid futures contracts including but not limited to stock index, global currency, interest rate, metals, energy and agricultural futures markets. Market selection may be based on the liquidity or legal constraints, market conditions or data reliability of the market, depending on the Portfolio Manager’s internal policies. Portfolio Managers trading Investment Funds may trade either on the long or short side of the market, often on a 24-hour basis, and generally have more volatile performance than many traditional investments, such as stocks and bonds. However, managed futures investments are generally not correlated with the returns of traditional long-only equity or fixed income investments. Generally, at least 80% of the net assets of the Fund will be invested with Investment Funds that invest in futures markets, options on commodity future contracts, and forward contracts. | |
| Trading Program | |
| Forward and futures traders generally may be classified as either systematic or discretionary. A systematic trader generally will rely to some degree on judgmental decisions concerning, for example, which markets to follow and trade, when to liquidate a position in a contract that is about to expire and how heavy a weighting a particular market should have in a portfolio. However, although these judgmental decisions may have a substantial effect on a systematic trading advisor’s performance, the trader relies primarily on trading programs or models that generate trading signals. The systems used to generate trading signals themselves may be changed from time to time, but the trading instructions generated by the systems are followed without significant additional analysis or interpretation. Discretionary traders on the other hand – while they may use market charts, computer programs and compilations of quantifiable information to assist them in making trading decisions – make trading decisions on the basis of their own judgment and trading instinct, not on the basis of trading signals generated by any program or model. | |
| The Managing Member generally invests Fund assets in Investment Funds managed both by Portfolio Managers who are systematic traders and discretionary traders. | |
| In addition to being distinguished from one another on the basis of whether they are systematic or discretionary traders, Portfolio Managers also are distinguished as relying on either technical or fundamental analysis, or on a combination of the two. |
| 2 |
| Technical analysis is not based on the anticipated supply and demand of a particular commodity, currency or financial instrument. Instead, it is based on the theory that the study of the markets themselves will provide a means of anticipating the external factors that affect the supply and demand for a particular commodity, currency or financial instrument in order to predict future prices. Technical analysis operates on the theory that market prices at any given point in time reflect all known factors affecting supply and demand for a particular commodity, currency or financial instrument. | |
| Fundamental analysis, in contrast, is based on the study of factors external to the trading markets that affect the supply and demand of a particular commodity, currency or financial instrument in an attempt to predict future prices. Such factors might include the economy of a particular country, government policies, domestic and foreign political and economic events, and changing trade prospects. Fundamental analysis theorizes that by monitoring relevant supply and demand factors for a particular commodity, currency or financial instrument, a state of current or potential disequilibrium of market conditions may be identified that has yet to be reflected in the price level of that instrument. Fundamental analysis assumes that the markets are imperfect, that information is not instantaneously assimilated or disseminated and that econometric models can be constructed that generate equilibrium prices that may indicate that current prices are inconsistent with underlying economic conditions and will, accordingly, change in the future. | |
| The Managing Member invests Fund assets in Investment Funds managed both by Portfolio Managers who use technical analysis and fundamental analysis. | |
| Trend-following traders gear their trading approaches towards positioning themselves to identify and follow major price movements. In contrast, market forecasters attempt to predict future price levels without relying on such trends to point the way, scalpers attempt to make numerous small profits on short-term trades, and arbitrage traders attempt to capture temporary price imbalances between inter-related markets. Trend-following traders assume that a majority of their trades will be unprofitable. Their objective is to make a few large profits, more than offsetting their numerous but smaller losses, by successfully identifying and following major trends. Consequently, during periods in which no major price trends develop in a market, a trend-following advisor is likely to incur substantial losses. | |
| The Managing Member invests the Fund’s assets in Investment Funds managed by Portfolio Managers who are trend-following or market forecasters with a significant allocation to trend-followers. | |
| Generally, at least 90% of the net assets of the Fund will be invested with Investment Funds who invest in futures markets, options on commodity future contracts, and forward contracts. The Managing Member temporarily may invest the Fund’s available assets in U.S. government securities or “cash equivalent” financial instruments such as certificates of deposit, money market funds or other cash equivalents. | |
| The trading of futures and commodity interests is inherently leveraged. Accordingly, the Fund does not intend to borrow. Investment Funds, however, are permitted to borrow or otherwise use leverage. Nevertheless, the Managing Member does not presently intend to invest in Investment Funds that contemplate borrowing. | |
| The Fund is a speculative investment and is not intended as a complete investment program. The Fund is designed only for sophisticated persons who are able to bear the risk of an investment in the Fund. There can be no assurance that the Fund will achieve its investment objectives. | |
| (d) | Financial Information about Geographic Areas. |
| The Fund invests in Investee Pools located within the United States and abroad. Investment Funds may trade on a number of foreign commodity exchanges. The Fund does not engage in the sales of goods or services. | |
| (e) | Available Information. |
| Not applicable. |
| 3 |
| 4 |
| In respect of their forward trading, the Investment Funds will be subject to the risk of the inability or refusal to perform with respect to such contracts on the part of the principals or agents with or through which the Investment Funds trade. Any failure or refusal to discharge their contractual obligations by the counterparties with which an Investment Fund deals on the forward markets, whether due to insolvency, bankruptcy or other causes, could subject the Fund’s investment in that Investment Fund to substantial losses. The Portfolio Managers generally deal in the forward markets only with major financial institution counterparties which they consider to be creditworthy. However, defaults have occurred in the forward markets, and the risk of such defaults cannot be eliminated from the Investment Funds’ trading, impacting the Fund’s investments. | |
| Forward trading is largely unregulated. None of the CFTC, NFA, futures exchanges or banking authorities directly regulates forward trading. Because a portion of the Investment Funds’ currency trading takes place in the forward markets, prospective investors must recognize that much of the Fund’s indirect investment activity takes place in unregulated markets rather than on futures exchanges subject to the jurisdiction of the CFTC or other regulatory bodies. Investment Fund deposits with the currency forward counterparties with which the Portfolio Manager trades are not protected by the same segregation requirements imposed on CFTC regulated commodity brokers in respect of customer funds deposited with them. Although the Portfolio Managers deal only with major financial institutions as currency forward counterparties, the insolvency or bankruptcy of a currency forward counterparty could subject the Investment Fund to the loss of its entire deposit with such counterparty. Although the forward markets are well established, it is impossible to predict how, given certain unusual market scenarios, the unregulated nature of these markets might affect the Fund’s investments in Investment Funds. | |
| Over-the-Counter (“OTC”) trading involves counterparty risks that do not exist in futures trading on exchanges. Unlike futures contracts, over-the-counter “spot” and forward contracts are entered into between private parties off an exchange and are not regulated by the CFTC or by any other U.S. or foreign governmental agency. Due to the fact that such contracts are not traded on an exchange, the performance of those contracts is not guaranteed by an exchange or its clearinghouse and the Fund is at risk with respect to the ability of the counterparty to perform on the contract, including the creditworthiness of the counterparty. Trading in the over-the-counter foreign exchange markets is not regulated; therefore, there are no specific standards or regulatory supervision of trade pricing and other trading activities that occur in those markets. | |
| The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) will affect the manner in which certain OTC swap transactions are traded and the credit risk associated with such trading. Depending upon actions taken by regulatory authorities, these changes may also affect the manner of trading of OTC foreign currency transactions. Transactions that have been entered into prior to implementation of the provisions of the Dodd-Frank Act will remain in effect. Accordingly, even after the new regulatory framework is fully implemented, the risks of OTC foreign exchange transactions will continue to be considerations with respect to transactions entered into prior to the implementation of the provisions of the Dodd-Frank Act. The implementation of these provisions could adversely affect the Fund by increasing transaction and compliance costs. | |
| Trading swaps creates distinctive risks. The Fund currently does not trade in certain swaps, but may do so in the future. Currently, swaps are not traded on exchanges and are not subject to the same type of government regulation as exchange markets. As a result, many of the protections afforded to participants on organized exchanges and in a regulated environment are not available in connection with these transactions. The swap markets are “principals’ markets,” in which performance with respect to a swap is the responsibility only of the counterparty to the contract, and not of any exchange or clearinghouse. To the extent the Fund trades swaps, it will be subject to the risk of the inability or refusal to perform with respect to swaps on the part of the counterparties, and until such time as these transactions are cleared or guaranteed by an exchange, the Fund will be subject to the risk of counterparty default on its swaps. In some swap transactions the counterparty may require the Fund to deposit collateral to support the Fund’s obligations under a swap agreement. If the counterparty to such a swap defaults, the Fund would lose the net amount of payments that the Fund is contractually entitled to receive and could lose, in addition, any collateral deposits made with the counterparty. There are no limitations on daily price movements in swaps. Speculative position limits are not applicable to swaps. Participants in the swap markets are not required to make continuous markets in the swaps they trade. | |
| 5 |
| However, the regulation of swaps may be subject to substantial change under recently-enacted legislation and pending regulatory action. It is not known exactly how such changes will impact existing swaps positions. These new requirements, however, will alter the manner in which swaps will be traded. Under the Dodd-Frank Act, many commodity swaps will be required to be cleared through clearing houses and executed on designated contract markets or swap execution facilities. Security-based swaps will be subject to similar requirements as will apply to commodity swaps. Additional regulatory requirements will apply to all swaps. | |
| Options trading can be more volatile than futures trading. The Portfolio Managers have traded futures and forward options in the past and may trade such instruments in the future. Although successful options trading requires many of the same skills as successful futures and forward trading, the risks involved are somewhat different. For example, the assessment of near-term market volatility - which is directly reflected in the price of outstanding options - can be of much greater significance in trading options than it is in many long-term futures strategies. The use of options can be extremely expensive if market volatility is incorrectly predicted. | |
| Stop-Loss orders may not prevent large losses. Certain of the trading advisors may use stop-loss orders. Such stop-loss orders may not effectively prevent substantial losses, and depending on market factors at the time, may not be able to be executed at such stop-loss levels. No risk control technique can assure that large losses will be avoided. | |
| Trading on non-U.S. futures exchanges presents greater risk than trading on U.S. futures exchanges. The Investment Funds may trade on futures exchanges outside the United States. Trading on such exchanges is not regulated by any United States government agency and may involve certain risks not applicable to trading on United States exchanges. For example, some non-U.S. exchanges, in contrast to United States exchanges, are “principals’ markets” similar to the forward markets in which performance is the responsibility only of the individual exchange member with whom the Investment Fund has entered into a futures contract and not of any exchange or clearing corporation. In such cases, the Investment Fund will be subject to the risk of the inability or refusal to perform with respect to the individual exchange member with whom the Investment Fund has entered into a futures contract. Trading on foreign exchanges involves the additional risks of expropriation, burdensome or confiscatory taxation, moratoriums, exchange or investment controls and political or diplomatic disruptions, each of which might materially adversely affect an Investment Fund’s trading activities. In trading on foreign exchanges, the Investment Fund is also subject to the risk of changes in the exchange rates between the United States dollar and the currencies in which the foreign contracts are settled. | |
| The Fund will incur substantial charges which will reduce profits. The Fund is obligated to pay the Managing Member Management Fees and Administrative Fees regardless of whether the Fund is profitable. In addition, the Managing Member receives, with respect to each Unit, an Incentive Allocation equal to the applicable percentage of New Net Profits earned with respect to such Unit. Stated generally, New Net Profits are based upon the increase in value of each Unit at the end of each month including any unrealized appreciation in open futures, forward and commodity interest positions and positions in Investee Pools. Each Class is also subject to its pro rata share of the management fee, incentive fee and other fees of the Investee Pools. | |
| Forward trading is conducted in a principals’ market in which counterparties buy and sell currencies among each other, including a “bid-ask” spread in their pricing. Institutions trading in such markets do not pay brokerage commissions in addition to such spreads. It is not possible to quantify the “bid-ask” spreads paid by the Portfolio Managers in respect of its currency trading because it is not possible for the Portfolio Manager to know what, if any, profit its counterparty is making on the forward trades into which it enters. However, these spreads represent a significant direct or indirect execution cost to the Fund. | |
| Trading decisions based on technical systems rely on market movements to be effective. Allocation decisions of the Portfolio Managers may not be determined by analysis of fundamental supply and demand factors, general economic factors or anticipated world events, but by technical trading systems involving trend analysis and other factors and the money management principles developed by the Portfolio Managers and their affiliates. The profitability of any trading system involving technical trend analysis depends upon the occurrence in the future of significant sustained price moves in at least some of the markets traded. Without such sustained price moves in at least some of the markets traded, the Portfolio Managers’ trend-following systems are unlikely to produce profits and the Fund could suffer significant losses. The Managing Member believes that investors should consider the Units as a medium- to long-term investment (three years or more) to permit the trading method to function over a significant period. | |
| 6 |
| Technical trading systems may detrimentally alter historical trading patterns or affect the execution of trades. There has been, in recent years, a substantial increase in interest in technical futures trading systems, particularly trend-following systems. As the capital under the management of trading systems based on the same general principles increases, an increasing number of traders may attempt to initiate or liquidate substantial positions at or about the same time as the Investment Funds or the Fund, or otherwise alter historical trading patterns or affect the execution of trades, to the significant detriment of the Investment Funds and/or the Fund. | |
| Although the Investment Funds and the Fund are as likely to be profitable as unprofitable in up or down markets, there is some tendency for managed futures products - particularly those managed by systematic, trend-following advisors - to perform similarly during the same or approximately the same periods. Prospective investors must recognize that, irrespective of the skill and expertise of the Managing Member and the Portfolio Managers, the success of the Fund may be substantially dependent on general market conditions over which the Managing Member and the Portfolio Managers have no control. | |
| In addition, there has been an increase in the use of trading systems employing counter-trend techniques that attempt to profit from the wide use of trend following systems by running stop points or otherwise. The increased use of such techniques could alter trading patterns that the Managing Member and the Portfolio Managers attempt to exploit to the detriment of the Fund. | |
| The Investment Funds and Portfolio Managers may modify their trading methods without approval by or notice to the Managing Member. Modifications may include changes in or substitution of technical trading systems, risk control overlays, money management principles and markets traded and introduction of non-technical factors and methods of analysis and non-trend-following technical systems and methods of analysis. The trading systems to be utilized by the Investment Funds and Portfolio Managers are proprietary and confidential. | |
| There is the potential for a lack of diversification among Portfolio Managers. Although the Managing Member intends to invest the Fund’s capital with a number of Portfolio Managers, it is possible that certain or all of such Portfolio Managers may utilize similar or overlapping investment strategies. Portfolio Managers utilizing similar specialized strategies may hold identical investments. As a result, the Fund may at any time hold a few relatively large (in relation to its capital) investments with the result that a loss in any such position could have a material adverse impact on the Fund’s capital. | |
| Investors in the Fund may not be informed of changes in allocations to Investment Funds. The Managing Member expects from time to time to change the percentage of Fund assets allocated to each Investment Fund. The Fund may not be required, under certain circumstances, to notify Members of changes in allocations. In addition, the Fund will be required to change allocations if it receives additional subscriptions during periods when certain Investment Funds are no longer accepting additional funds (for example, because of capacity restrictions). In that case, the additional capital would either have to be allocated to those Investment Funds (if any) that were accepting additional funds, which would alter the respective percentages of the Fund’s assets allocated to particular Investment Funds, or the Fund would have to place some or all of the additional capital with new Investment Funds or make direct investments. Therefore, the Fund’s success may depend not only on the current Investment Funds and the Managing Member’s ability to allocate Fund assets successfully among those Investment Funds, but also the ability to identify new Portfolio Managers and Investment Funds. | |
| Investing in Investment Funds poses risks of inadequate information and limited liquidity. Although the Managing Member will attempt to monitor the performance of each Investment Fund, the Fund will not receive information regarding the actual investments made by the Investment Funds and must ultimately rely on (i) the CPO and CTA of each Investment Fund to operate in accordance with the investment strategy or the guidelines laid out by the CPO and CTA of the Investment Fund, and (ii) the accuracy of the information provided to the Fund by the CPO and CTA of the Investment Fund. If the CPO and CTA of an Investment Fund does not operate and manage such pool in accordance with the investment strategy or guidelines specified for such pool, or if the information furnished by an Investment Fund is not accurate, the Fund might sustain losses with respect to its investment in such Investment Fund despite the Managing Member’s attempts to monitor such Investment Fund. | |
| 7 |
| In addition, Investment Funds may have restrictions in their governing documents that limit the Fund’s ability to withdraw funds from or invest in the pool. The Fund’s ability to withdraw funds from or invest funds in Investment Funds with such restrictions will be limited and such restrictions will limit flexibility to reallocate such assets among Investment Funds or to honor Member redemptions. | |
| There is a lack of limited liability when investing in managed accounts. From time to time, the Fund may establish and invest in separately managed accounts managed by Portfolio Managers, as opposed to investing in Investee Pools. Separately managed accounts are typically not subject to the limitations on liability of investors generally offered by Investee Pools. Accordingly, the Fund would be subject to the risk of losses beyond its allocation of assets to such account and, potentially, could lose all of its assets as the result of its investment in such account. To minimize this risk, the Managing Member has established a number of trading companies (limited liability companies formed in Delaware) through which assets would be allocated to Managed Accounts. | |
| Incentive compensation for Portfolio Managers may result in more risky or speculative investments. The governing documents of the Investment Funds generally will provide for the Fund’s payment, as an investor in the Investment Fund, of fees or allocations of profits to the Portfolio Manager based upon appreciation, including unrealized appreciation, in the value of the Fund’s investment in the Investment Fund, but without penalties for realized losses or decreases in value of the Fund’s investment. The Portfolio Manager’s compensation or profit share may be determined separately for each quarter or each year, although losses in a quarter or year are often carried forward to subsequent quarters or years in determining the payment for such quarter or year. A Portfolio Manager’s incentive compensation arrangements may give the Portfolio Manager an incentive to make more risky or speculative investments. | |
| Incentive fees may be paid to Portfolio Managers even though the Fund sustains trading losses. The incentive fees or allocations payable in respect of each Investment Fund are assessed individually based on the performance of each respective Investment Fund, irrespective of the overall performance of the Fund. Moreover, incentive fees and allocations are generally calculated based on the Fund’s total investment in an Investment Fund, not on the basis of each separate investment by the Fund in each Investment Fund. In view of the foregoing, it is possible that the Fund may be required to pay certain Portfolio Managers incentive fees or allocations, which could be substantial, even though the Fund as a whole was not profitable. | |
| Speculative position limits may be exceeded by the Portfolio Managers. The CFTC and United States exchanges have established limits referred to as “position limits” on the maximum net long or net short speculative futures position which any person may hold or control in particular futures contracts. Generally, banks and dealers do not impose such limits with respect to forward contracts in currencies. All futures accounts managed by the Portfolio Managers and their affiliates are combined for position limit purposes. With respect to trading in futures contracts subject to position limits (for example, corn, wheat, cotton, soybeans, soybean meal and oil), the Portfolio Managers may reduce the size of the positions which would otherwise be taken for the Investment Funds or the Fund to avoid exceeding the limits. If position limits are exceeded by the Portfolio Managers in the opinion of the CFTC or any other regulatory body, exchange or board, the Portfolio Managers generally will liquidate positions in all accounts under their management, including the Investment Funds or the Fund, as nearly as possible in proportion to respective amounts of equity in each account to the extent necessary to comply with applicable position limits. | |
| The Dodd-Frank Act required the CFTC to adopt speculative position limits in certain commodities across futures markets, OTC transactions that perform a significant price discovery function and contracts traded on a foreign board of trade having direct market access from the U.S. that settle against the price of futures contracts traded on a U.S. market. The CFTC has adopted such limits with respect to certain agricultural, energy, and metal contracts. Such proposals and limits are subject to change and may adversely affect the profitability of the Fund. | |
| 8 |
| Conflicts of interest may exist with other clients of the Portfolio Managers, the Managing Member, and their affiliates. The Portfolio Managers, the Managing Member, and the Investment Committee Members manage futures and forward accounts or Investment Funds other than the Fund, including, possibly, accounts in which the Portfolio Managers, the Managing Member, and the Investment Committee Members, their principals and employees have significant investments. The Portfolio Managers, the Managing Member, and the Investment Committee Members and their affiliates may manage additional accounts in the future. It is possible that such accounts may be in competition with the Fund for the same or similar positions in the futures and forward markets. The Portfolio Managers generally will use similar trading methods for the Fund and all other systematic accounts that the Portfolio Managers and their affiliates manage. The Portfolio Managers will not knowingly or deliberately use systems for any account that are inferior to systems employed for any other account or favor any account over any other account. No assurance is given, however, that the results of the Fund’s trading will be similar to that of other accounts concurrently managed by the Portfolio Managers or their affiliates. | |
| An increase in the assets managed by the Portfolio Managers may adversely affect trading strategies and performance. The Portfolio Managers have not agreed to limit the amount of additional equity which they may manage. The rates of return achieved by investment advisors often tend to degrade as assets under management increase. There can be no assurance that the Portfolio Managers’ strategies will not be adversely affected by additional equity, including the Fund’s account, accepted by the Portfolio Managers. | |
| Portfolio Managers and the Managing Member depend on the services of key personnel. Despite the systematic methods used by many of the Portfolio Managers, the Managing Member and the Investment Committee, they are dependent on the services of a limited number of key persons. The loss of any of such persons could make it more difficult for the Portfolio Managers, the Managing Member and the Investment Committee to continue to manage Investment Funds or the Fund. | |
| Investors have limited ability to liquidate an investment in the Fund. An investment in the Fund cannot be immediately liquidated by a Member. Units may be transferred only under very limited circumstances and no market for Units will exist at any time. A Member can liquidate such Member’s investment through redemption of the Units. A Member may redeem all or a portion of such Member’s Units as of the last day of any month on ten days’ written notice to the Managing Member. Because notices of redemption must be submitted significantly in advance of the actual redemption date, the value received upon redemption may differ significantly from the value of the Units at the time a decision to redeem is made. Furthermore, because redemptions only are permitted at month-end, investors are not able to select the value, or even the approximate value, at which they will redeem their Units. | |
| The Managing Member has the authority to suspend or defer the payment of redemptions in certain extraordinary circumstances when the Managing Member believes doing so would be in the best interest of the Fund, the Members or the redeeming Members. Such circumstances may include extremely large redemption requests, a suspension or deferral of the calculation of the NAV of the Investment Funds, or an inability for the Fund to redeem its investments in the Investment Funds. | |
| Conflicts of interest are inherent in the operation of the Fund. The Fund will be subject to a number of actual and potential conflicts of interest. Such conflicts may include, among other things, the possibility of the Portfolio Managers, the Managing Member, the Investment Committee, a commodity broker for an Investment Fund or the Fund, or any of their respective affiliates favoring other customer accounts or their own proprietary trading in certain respects over that of the Fund. |
| Members will not participate in management. Purchasers of Units will not be entitled to participate in the management of the Fund or the conduct of its business. |
| The Fund is not a Registered Investment Company. The Fund is not required to register, and is not registered, as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Accordingly, investors will not have the protections afforded by the Investment Company Act (which, among other matters, requires investment companies to have a majority of disinterested directors and regulates the relationship between the advisor and the investment company). |
| 9 |
| An investment in the Fund may expose investors to complex tax considerations. An investment in the Fund may present complex tax considerations for investors. |
| Partnership treatment is not assured. There is a risk that the Fund, having more than 100 Members, may be treated as a “publicly traded partnership” taxable as a corporation for federal income tax purposes. Nevertheless, the Fund in all events will be treated as a partnership for federal income tax purpose so long as at least 90% of its annual gross income consists of “qualifying income” as defined in Section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Federal Income Tax Regulations promulgated thereunder (the “Regulations”). The Managing Member believes it is likely, but not certain, that the Fund will meet the qualifying income test. If the Fund were to be treated as a corporation instead of as a partnership for federal income tax purposes, (i) the net income of the Fund would be taxed at corporate income tax rates, thereby substantially reducing its profitability, (ii) Members would not be allowed to deduct their share of Fund losses and (iii) distributions to Members, other than liquidating distributions, would constitute dividends to the extent of the current or accumulated earnings and profits of the Fund, and would be taxable as such. |
| You may have tax liability attributable to your interest in the Fund even if you have received no distributions and redeemed no units and even if the Fund generated a loss. If the Fund has profit for a taxable year, the profit will be included in your taxable income, whether or not cash or other property is actually distributed to you by the Fund. The Managing Member presently does not intend to make any distributions from the Fund. Accordingly, it is anticipated that federal income taxes on your allocable share of the Fund’s profits will exceed the amount of distributions to you, if any, for a taxable year, so that you must be prepared to fund any tax liability from redemptions of Units or other sources. In addition, the Fund may have capital losses from trading activities that cannot be deducted against the Fund’s ordinary income (e.g., interest income, periodic net swap payments) so that you may have to pay taxes on ordinary income even if the Fund generates a net loss. |
| There is the possibility of a tax audit. The Fund’s tax returns could be audited by a taxing authority. An audit could result in adjustments to the Fund’s tax returns. If an audit results in an adjustment to the Fund’s tax returns, Members could be required to file amended returns and to pay additional taxes plus interest. |
| Tax deductions are limited. A Member’s ability to claim a current deduction for certain expenses and losses, including capital losses of the Fund, is subject to various limitations. |
| Deductibility of passive activity losses is limited. Applicable U.S. federal income tax regulations treat all Fund income, gains and losses allocable to non-corporate (and certain corporate) Members as non-passive activity income, gains and losses. Accordingly, such Members will be unable to offset their passive activity losses from other investments against their income from this investment, but Fund losses will not be subject to the limitations imposed on the deductibility of passive activity losses. |
| There is a risk of incurring unrelated business taxable income. Income derived by the Fund from “debt-financed property” will be treated as unrelated business taxable income (“UBTI”), which is taxable to a tax-exempt organization. Although not currently anticipated, it is possible that a Portfolio Manager might acquire debt-financed property. Therefore, this investment might not be suitable for certain tax-exempt investors seeking to avoid UBTI. |
| Schedules K-1 may be delayed. The Fund will attempt to, but cannot assure that it will be able to, provide a final Schedule K-1 to Members for any given calendar year by April 15 of the following year. In the event that it is not able to do so, the Fund will endeavor to provide estimates of the taxable income or loss allocated to Members on or before April 15. Accordingly, Members may be required to obtain an extension of the filing date for their income tax returns at the federal, state and local levels. |
| Tax laws are subject to change at any time, including already enacted changes scheduled to take effect in 2013. Tax laws, and court and IRS interpretations thereof, are subject to change at any time, possibly with retroactive effect. For example, various tax rate reductions for non-corporate taxpayers enacted in 2001 and 2003 are scheduled to expire for taxable years beginning after December 31, 2012. Further, the maximum ordinary income rates for non-corporate taxpayers are scheduled to increase from 35% to 39.6%, and the maximum long-term capital gains rates are scheduled to increase from 15% to 20%. Prospective investors are urged to discuss scheduled and potential tax law changes with their tax advisers. |
| 10 |
| Non-U.S. investors may face exchange rate risk and local tax consequences. Non-U.S. investors should note that Units are denominated in U.S. dollars and that changes in rates of exchange between currencies may cause the value of their investment to decrease or to increase. Non-U.S. investors should consult their own tax advisors concerning the applicable U.S. and foreign tax implications of this investment. |
| Certain Investment Funds are exempt from registration. The Fund may invest in Investment Funds which operate in a manner so as to be exempt the Portfolio Manager from registration as a commodity pool operator pursuant to CFTC Regulation 4.13(a)(4). Such exempt Investment Funds are therefore not required to deliver a disclosure document and a certified annual report to participants in the Investment Fund. Therefore, the information regarding such investment will not have the same regulatory oversight as if the Investee Pool were required to register. |
| Regulation of the Fund is limited. Although the Fund and the Managing Member are subject to regulation by the CFTC, the Fund is not registered under the Investment Company Act of 1940. Investors are, therefore, not accorded the protection provided by such legislation. |
| Future regulatory and market changes may be material and adverse to the Fund. The regulation of the United States commodities markets has undergone substantial change in recent years, a process which is expected to continue. In addition, a number of substantial regulatory changes are pending or in progress in certain foreign markets. The effect of regulatory change on the Fund is impossible to predict but could be material and adverse. |
| Some concern has been expressed by various governmental authorities that the impact of speculative pools of capital, such as the Fund, on international currency trading is making it significantly more costly and difficult for central banks and governments to influence exchange rates. This and similar concerns could lead to pressure to restrict the access of speculative capital to these markets. |
| In addition to regulatory changes, the economic features of the markets to be traded by the Fund have undergone, and are expected to continue to undergo, rapid and substantial changes as new strategies and instruments have been introduced. Furthermore, the number of participants, particularly institutional participants, in the futures and forward markets appears to have expanded substantially. There can be no assurance as to how the Managing Member will perform given the changes to, and increased competition in, the marketplace. |
| Conflicts of Interest of the Managing Member. The Managing Member has a conflict of interest in determining whether to make distributions to the Members, as the Managing Member earns fees on the Net Assets of the Fund. Due in part to the availability of periodic withdrawals, the Managing Member does not currently intend to make any distributions to Members. |
| The Managing Member’s business is sponsoring and advising managed futures accounts. The Managing Member may have an economic or other incentive to favor other of its products over the Fund. |
| The Managing Member may have a conflict of interest in rendering advice to the Fund because of other accounts managed or traded by it, including accounts owned by its principals, which may be traded differently from the Fund’s account. The Managing Member, its principals and employees are not prohibited from participating in other business ventures which may compete with the Fund, including serving in similar capacities for other investment funds. Such other activities may prevent the Managing Member, its principals and employees from devoting their full time and attention to the activities of the Fund. The Managing Member may also provide management and investment advisory services to other clients, including investment funds and managed accounts or offshore funds that follow investment programs similar to or different from that of the Fund. The Fund will have no interest in the accounts of such other clients. A number of actual and potential conflicts of interest between the Fund and these clients may exist which include, but are not limited to, those described herein. Conflicts may arise as to the allocation of investment opportunities between the Fund and other entities which the Managing Member manages or advises. Moreover, it is possible that conflicts may arise because the investment position of one investment partnership may at any time be different than that of other clients. Although other accounts may pursue investment objectives that are similar to the Fund, the portfolios of the Fund and such accounts may differ as a result of inflows and outflows of capital being made at different times and in different amounts, as well as because of different tax and regulatory considerations. |
| 11 |
| 12 |
Part II
| 13 |
| Date of Sale | Class of Units | Subscription Amount | Number of Units | Price per Unit | ||||||||||||
| 10/01/2011 | Class B | $ | 1,208,368 | 9,768.17 | $ | 123.70 | ||||||||||
| 10/01/2011 | Class C | 925,000 | 9,544.26 | $ | 96.92 | |||||||||||
| 11/01/2011 | Class B | 3,008,957 | 25,240.41 | $ | 119.21 | |||||||||||
| 11/01/2011 | Class C | 776,000 | 8,304.91 | $ | 93.44 | |||||||||||
| 12/01/2011 | Class A | 65,497 | 650.56 | $ | 100.68 | |||||||||||
| 12/01/2011 | Class B | 202,113 | 1,730.44 | $ | 116.80 | |||||||||||
| 12/01/2011 | Class C | 125,000 | 1,364.82 | $ | 91.59 | |||||||||||
| 12/01/2011 | Class E | 6,600 | 51.66 | $ | 127.75 | |||||||||||
| $ | 6,317,535 | 56,655.23 | ||||||||||||||
| 14 |
Statements of Operations Data
| For the year ended December 31, 2011 | For the year ended December 31, 2010 | For the year ended December 31, 2009 | For the year ended December 31, 2008 | For the year ended December 31, 2007 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Investment income (loss) | ||||||||||||||||||||
| Realized and unrealized gains (losses) on investments | ||||||||||||||||||||
| Realized gains (losses) on investments | $ | (3,294,790 | ) | $ | 8,488,214 | $ | 7,972,332 | $ | 5,288,165 | $ | 45,519 | |||||||||
| Unrealized gains (losses) on investments | (4,270,563 | ) | 2,228,689 | (15,075,898 | ) | 7,627,149 | 8,110,883 | |||||||||||||
| Net realized and unrealized gains (losses) on investments | (7,565,353 | ) | 10,716,903 | (7,103,566 | ) | 12,915,314 | 8,156,402 | |||||||||||||
| Interest Income | -0- | -0- | 653 | 33,398 | 43,719 | |||||||||||||||
| Total investment income (loss) | (7,565,353 | ) | 10,716,903 | (7,102,913 | ) | 12,948,712 | 8,200,121 | |||||||||||||
| Operating expenses | ||||||||||||||||||||
| Management and incentive fees | 875,935 | 916,185 | 914,851 | 1,722,143 | 1,052,688 | |||||||||||||||
| Administrative expenses | 328,178 | 360,425 | 503,901 | 657,763 | 465,944 | |||||||||||||||
| Managed account fees | 1,791,002 | 1,146,510 | 492,194 | 73,446 | -0- | |||||||||||||||
| Miscellaneous operating expenses | 256,184 | 201,068 | 122,029 | 7,627 | 6,119 | |||||||||||||||
| Tailing commissions | 286,491 | 265,655 | 155,936 | 111,976 | 55,952 | |||||||||||||||
| Total operating expenses | 3,537,790 | 2,889,843 | 2,188,911 | 2,572,955 | 1,580,703 | |||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (11,103,143 | ) | $ | 7,827,060 | $ | (9,291,824 | ) | $ | 10,375,757 | $ | 6,619,418 | ||||||||
| Net increase(decrease) in net assets per unit: | ||||||||||||||||||||
| Class A | $ | (15.81 | ) | $ | 8.07 | $ | (12.28 | ) | $ | 11.16 | $ | 9.25 | ||||||||
| Class B | $ | (14.24 | ) | $ | 9.11 | $ | (10.97 | ) | $ | 12.98 | $ | 11.02 | ||||||||
| Class C | $ | (28.31 | ) | $ | 12.64 | $ | (13.03 | ) | $ | 5.81 | N/A | |||||||||
| Class D | $ | (12.57 | ) | $ | 10.20 | $ | (10.19 | ) | $ | 16.41 | $ | 12.07 | ||||||||
| The above figures are based upon a weighted average number of units. | ||||||||||||||||||||
Statements of Assets and Liabilities Data
| December 31, 2011 | December 31, 2010 | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||
| Members’ capital | $ | 83,713,162 | $ | 99,674,394 | $ | 100,342,985 | $ | 115,876,755 | $ | 85,973,252 | ||||||||||
| Net asset value per unit: | ||||||||||||||||||||
| Class A | $ | 100.61 | $ | 115.78 | $ | 109.66 | $ | 121.94 | $ | 112.32 | ||||||||||
| Class B | $ | 116.92 | $ | 131.86 | $ | 122.50 | $ | 133.53 | $ | 120.70 | ||||||||||
| Class C | $ | 91.72 | $ | 102.89 | $ | 95.03 | $ | 102.93 | $ | -0- | ||||||||||
| Class E | $ | 127.99 | $ | 142.91 | $ | 131.49 | $ | 141.90 | $ | 125.61 | ||||||||||
| 15 |
| Overall Pool | Class A Units | Class B Units | Class C Units* | Class E Units | ||||||||||||||||
| 2011 Performance | (11.52% | ) | (13.10% | ) | (11.34% | ) | (10.86% | ) | (10.44% | ) | ||||||||||
| 2010 Performance | 7.51% | 5.58% | 7.64% | 8.28% | 8.69% | |||||||||||||||
| 2009 Performance | (8.31% | ) | (10.07% | ) | (8.26% | ) | (7.69% | ) | (7.34% | ) | ||||||||||
| 2008 Performance | 8.78% | 8.56% | 10.63% | 2.94% | 12.97% | |||||||||||||||
| 2007 Performance | 8.62% | 6.76% | 8.69% | N/A | 10.78% | |||||||||||||||
| *Class C Units were first issued April 1, 2008. | ||||||||||||||||||||
| 16 |
| 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 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” for a discussion of trading and non-trading risk factors applicable to the Fund and Investment Funds. |
| 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. The following quantitative disclosures 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. |
| Year Ended December 31, 2011 | ||||||||
| Fair Value of Market Risk Sensitive Instruments | Fair Value | % of Total | ||||||
| ADF Trading Company I, LLC* (Portfolio Manager: Welton Investment Corporation) | $ | 6,874,978 | 7.64% | |||||
| ADF Trading Company IV, LLC* (Portfolio Manager: Blackwater Capital Management LLC) | 8,467,650 | 9.42% | ||||||
| ADF Trading Company VI, LLC* (Portfolio Manager: Abraham Trading Company) | 8,925,149 | 9.93% | ||||||
| ADF Trading Company VII, LLC* (Portfolio Manager: Aspen Partners Ltd.) | 7,703,633 | 8.57% | ||||||
| ADF Trading Company VIII, LLC* (Portfolio Manager: LBR Group, Inc.) | 4,478,895 | 4.98% | ||||||
| ADF Trading Company IX, LLC* (Portfolio Manager: Eckhardt Trading Company) | 7,543,937 | 8.39% | ||||||
| ADF Trading Company X, LLC* (Portfolio Manager: Saxon Investment Corporation) | 7,741,269 | 8.61% | ||||||
| ADF Trading Company XI, LLC* (Portfolio Manager: Rotella Investment Corporation) | 8,100,845 | 9.00% | ||||||
| ADF Trading Company XII, LLC* (Portfolio Manager: Tactical Investment Management Corp.) | 5,601,176 | 6.23% | ||||||
| Aspen Commodity Long/Short Fund LLC | 16,722,737 | 18.60% | ||||||
| Crabel Fund LP | 7,756,541 | 8.63% | ||||||
| TOTAL | $ | 89,916,810 | 100.00% | |||||
| * ADF Trading Company I, LLC, ADF Trading Company IV, LLC, ADF Trading Company VI LLC, ADF Trading Company VII, LLC, ADF Trading Company VIII, LLC, ADF Trading Company IX, LLC, ADF Trading Company X, LLC, ADF Trading Company XI, LLC and ADF Trading Company XII, 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. | ||||||||
| 17 |
| Each Investment Fund establishes restrictions regarding when the Fund may withdraw its interests in the Investee Pool. A summary of the frequency of withdrawal opportunities is set forth below: |
| Withdrawal Opportunities of Investee Fund | Withdrawals Permitted | |||
| ADF Trading Company I, LLC (Welton Investment Corporation) | Daily | |||
| ADF Trading Company IV, LLC (Blackwater Capital Management LLC) | Daily | |||
| ADF Trading Company VI, LLC (Abraham Trading Company) | Daily | |||
| ADF Trading Company VII, LLC (Aspen Partners, Ltd.) | Daily | |||
| ADF Trading Company VIII, LLC (LBR Group, Inc.) | Daily | |||
| ADF Trading Company IX, LLC (Eckhardt Trading Company) | Daily | |||
| ADF Trading Company X, LLC (Saxon Investment Corporation) | Daily | |||
| ADF Trading Company XI, LLC (Rotella Investment Corporation) | Daily | |||
| ADF Trading Company XII, LLC (Tactical Investment Management Corp.) | Daily | |||
| Aspen Commodity Long/Short Fund LLC | Monthly | |||
| Crabel Fund LP | Monthly |
| 18 |
FINANCIAL STATEMENTS
(With Report of Independent Registered Public Accounting Firm Thereon)
_______________________
| Report of Independent Registered Public Accounting Firm | F-1 |
| Statements of Assets and Liabilities | F-2 |
| Statements of Operations | F-3 |
| Statements of Changes in Net Assets | F-4 |
| Statements of Cash Flows | F-5 |
| Notes to Financial Statements | F-7 |
PMB Helin Donovan
Consultants & Certified Public Accountants
_______________________
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of
Aspen Diversified Fund LLC:
We have audited the accompanying statements of assets and liabilities of Aspen Diversified Fund LLC as of December 31, 2011 and 2010, and the related statements of operations, changes in net assets, cash flows for the years ended December 31, 2011, 2010 and 2009. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aspen Diversified Fund LLC as of December 31, 2011 and 2010, the results of its operations, and cash flows, for the years ended December 31, 2011, 2010 and 2009 in conformity with accounting principles generally accepted in the United States of America.
PMB Helin Donovan, LLP
Austin, Texas
March 26, 2012
| F-1 |
Statements of Assets and Liabilities
| December 31, 2011 | December 31, 2010 | |||||||
| ASSETS | ||||||||
| Investments: | ||||||||
| Investments in investment funds – at fair value – Note B | ||||||||
| (cost: $24,538,203 and $28,822,465 at December 31, 2011 and 2010, respectively) | $ | 24,479,278 | $ | 32,048,275 | ||||
| Unrealized gain on futures contracts– at fair value – Note B | 2,478,526 | 2,928,061 | ||||||
| Total investments | 26,957,804 | 34,976,336 | ||||||
| Cash and cash equivalents | 64,356,685 | 23,358,269 | ||||||
| Interest and other receivables | 208,440 | 208,691 | ||||||
| Investment fund redemption receivable | -0- | 29,645,432 | ||||||
| Investments in transit | -0- | 16,600,000 | ||||||
| TOTAL ASSETS | $ | 91,522,929 | $ | 104,788,728 | ||||
| LIABILITIES AND NET ASSETS | ||||||||
| LIABILITIES: | ||||||||
| Unrealized loss on futures contracts – at fair value – Note B | $ | 1,870,531 | $ | 1,334,237 | ||||
| Trailing commissions payable | 16,990 | 23,802 | ||||||
| Management, incentive and administrative fees payable – Note D | 89,082 | 102,221 | ||||||
| Accounts payable | 73,007 | 51,300 | ||||||
| Managed accounts fees payable | 177,888 | 400,108 | ||||||
| Membership redemptions payable | 2,418,269 | 2,681,275 | ||||||
| Capital contributions received in advance of admission date | 3,164,000 | 521,391 | ||||||
| TOTAL LIABILITIES | 7,809,767 | 5,114,334 | ||||||
| NET ASSETS – Note C | 83,713,162 | 99,674,394 | ||||||
| TOTAL LIABILITIES AND NET ASSETS | $ | 91,522,929 | $ | 104,788,728 | ||||
| See notes to financial statements | ||||||||
| F-2 |
Statements of Operations
| Year Ended December 31, 2011 | Year Ended December 31, 2010 | Year Ended December 31, 2009 | ||||||||||
| Investment income (loss) | ||||||||||||
| Realized and unrealized gains (losses) on investments – Note B | ||||||||||||
| Realized gains (losses) on investments | $ | (3,294,790 | ) | $ | 8,488,214 | $ | 7,972,332 | |||||
| Unrealized gains (losses) on investments | (4,270,563 | ) | 2,228,689 | (15,075,898 | ) | |||||||
| Net realized and unrealized gains (losses) on investments | (7,565,353 | ) | 10,716,903 | (7,103,566 | ) | |||||||
| Interest income | -0- | -0- | 653 | |||||||||
| TOTAL INVESTMENT INCOME (LOSS) | (7,565,353 | ) | 10,716,903 | (7,102,913 | ) | |||||||
| Operating expenses – Note D | ||||||||||||
| Management and incentive fees | 875,935 | 916,185 | 914,851 | |||||||||
| Administrative expenses | 328,178 | 360,425 | 503,901 | |||||||||
| Managed account fees | 1,791,002 | 1,146,510 | 492,194 | |||||||||
| Miscellaneous operating expenses | 256,184 | 201,068 | 118,840 | |||||||||
| Trailing commissions | 286,491 | 265,655 | 155,936 | |||||||||
| TOTAL OPERATING EXPENSES | 3,537,790 | 2,889,843 | 2,188,911 | |||||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (11,103,143 | ) | $ | 7,827,060 | $ | (9,291,824 | ) | ||||
| See notes to financial statements | ||||||||||||
| F-3 |
Statements of Changes in Net Assets
| Year Ended December 31, 2011 | Year Ended December 31, 2010 | Year Ended December 31, 2009 | ||||||||||
| Net assets at beginning of year | $ | 99,674,394 | $ | 100,342,985 | $ | 115,876,755 | ||||||
| Capital contributions | 23,413,500 | 26,946,853 | 22,468,676 | |||||||||
| Redemptions | (28,271,589 | ) | (35,442,504 | ) | (28,710,622 | ) | ||||||
| Net increase (decrease) from operations | (11,103,143 | ) | 7,827,060 | (9,291,824 | ) | |||||||
| NET ASSETS AT END OF YEAR | $ | 83,713,162 | $ | 99,674,394 | $ | 100,342,985 | ||||||
| See notes to financial statements | ||||||||||||
| F-4 |
Aspen Diversified Fund LLC
Statements of Cash Flows
| Year Ended December 31, 2011 | Year Ended December 31, 2010 | Year Ended December 31, 2009 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | (11,103,143 | ) | $ | 7,827,060 | $ | (9,291,824 | ) | ||||
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to cash provided by operating activities: | ||||||||||||
| Purchase of investments, net | (8,500,000 | ) | (26,302,167 | ) | (40,106,347 | ) | ||||||
| Proceeds from disposition of investments | 9,489,473 | 78,753,576 | 53,042,150 | |||||||||
| Realized losses (gains) on investments | 3,294,790 | (8,488,214 | ) | (7,972,332 | ) | |||||||
| Unrealized losses (gains) on investments | 4,270,563 | (2,228,689 | ) | 15,075,898 | ||||||||
| Decrease (increase) in interest and other receivables | 251 | (208,691 | ) | 793 | ||||||||
| Decrease (increase) in investment fund redemptions receivable | 29,645,432 | (28,145,432 | ) | (1,500,000 | ) | |||||||
| Decrease (increase) in investments in transit | 16,600,000 | (15,600,000 | ) | (400,000 | ) | |||||||
| (Decrease) increase in trailing commissions payable | (6,812 | ) | 10,490 | 528 | ||||||||
| Increase (decrease) in accounts payable | 21,707 | (3,223 | ) | 54,523 | ||||||||
| (Decrease) increase in managed accounts fees payable | (222,219 | ) | 333,118 | (6,456 | ) | |||||||
| Decrease in management, incentive, and administrative fees payable | (13,139 | ) | (4,014 | ) | (37,820 | ) | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 43,476,903 | 5,943,814 | 8,859,113 | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Capital contributions received from members | 26,056,109 | 26,384,864 | 21,768,956 | |||||||||
| Membership redemptions | (28,534,596 | ) | (35,008,570 | ) | (27,451,648 | ) | ||||||
| NET CASH USED IN FINANCING ACTIVITIES | (2,478,487 | ) | (8,623,706 | ) | (5,682,692 | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 40,998,416 | (2,679,892 | ) | 3,176,421 | ||||||||
| Cash and cash equivalents at beginning of year | 23,358,269 | 26,038,161 | 22,861,740 | |||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 64,356,685 | $ | 23,358,269 | $ | 26,038,161 | ||||||
| Cash paid for interest | $ | -0- | $ | -0- | $ | -0- | ||||||
| Cash paid for income taxes | $ | -0- | $ | -0- | $ | -0- | ||||||
| F-5 |
Statements of Cash Flows (Continued)
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
| At December 31, 2011, 2010, and 2009, the Company had membership redemptions payable of $2,418,269 , $2,681,275, and $2,247,341, respectively. |
| At December 31, 2011, 2010, and 2009 the Company had capital contributions received from members in advance of admission date of $3,164,000, $521,391, and $1,083,380, respectively. |
| See notes to financial statements. |
| F-6 |
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 organized under the laws of Delaware in April 2005. The Fund began investment operations on July 1, 2005.
The Fund’s business is trading a diversified portfolio of futures, forward and option contracts on currencies, metals, financial instruments, stock indices, energy and agricultural commodities. The Fund is organized as a “multi-advisor” commodity pool and invests its assets in other pooled investment vehicles (“Investee Pools”) as well as separately managed accounts (together with Investee Pools, “Investment Funds”) managed or traded by independent Commodity Trading Advisors (“CTAs”), or other portfolio managers (together “Portfolio Managers”).
Investment Funds may trade diversified portfolios of futures in U.S. and non-U.S. markets in an effort to actively profit from anticipated trends in market prices. Portfolio Managers may rely on either technical or fundamental analysis or a combination thereof in making trading decisions and attempting to identify and exploit price trends. Portfolio Managers will attempt to structure portfolios of liquid futures contracts including but not limited to stock index, global currency, interest rate, metals, energy and agricultural futures markets.
Aspen Partners, Ltd. (the “Managing Member”), acts as the managing member, commodity pool operator, and trading adviser of the Fund. As of December 31, 2011, the Managing Member had approximately $150.6 million of assets under management, including assets of the Fund. The Managing Member is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is a registered Introducing Broker (“IB”) and Commodity Pool Operator (“CPO”) with the Commodity Futures Trading Commission (the “CFTC”) and a member of the National Futures Association (the “NFA”).
The Managing Member is responsible for recommending the selection of, investment in and withdrawal from Investment Funds, to the Investment Committee of the Fund (the “Investment Committee”), which consists of principals of the Managing Member. The Managing Member generally will, in its sole discretion, implement the decisions made by the Investment Committee, although it is not required to do so.
Interests in the Fund are marketed through Frontier Solutions, LLC (the “Broker/Dealer”), a Georgia limited liability company. The Broker/Dealer is a wholly-owned subsidiary of the Managing Member and is a registered Broker/Dealer with the Financial Industry Regulatory Authority (“FINRA”).
Aspen Partners, Ltd. is responsible for the daily operations of the Fund, as well as facilitating instructions of the Investment Committee. Interests in the Fund are marketed through the Managing Member’s wholly-owned broker/dealer subsidiary, Frontier Solutions, LLC. Aspen Partners, Ltd. participates in the investment decisions of the Fund via the Fund’s Investment Committee.
In 2010, the Fund transferred assets into a new fund called Aspen Commodity Long/Short Fund LLC (“ACLS”) in exchange for units in that fund. The purpose of this transfer was to provide investors with the opportunity to invest in commodities, separate from other investments that are included in the Fund, such as currencies, financials instruments, and stock indices. The Fund continues to invest in Aspen Commodity Long/Short Fund LLC.
The following accounting policies are presented to assist the reader in understanding the Fund’s 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 the Managing Member.
| F-7 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
The valuation of Investment Funds purchased or held by the Fund ordinarily will be 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.
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 will be 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 public markets with quoted pricing for corroboration. Futures Contracts and Currency Forwards are reported at fair value using Level 1 inputs. Investments in Future Contracts further include Open Trade Equity that are quoted prices for identical or similar assets that are not traded on active markets.
| F-8 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
Investment Income: Investment income includes realized and unrealized gains and losses from the Fund’s investments in investment funds and interest income. Income earned and expenses incurred by the investment funds are passed through to the Fund based on its 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. 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 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 year-end December 31, 2011. 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.
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. Beginning December 31, 2010 through December 31, 2012 all non-interest bearing demand deposits are fully insured by the FDIC. The Fund has established managed accounts to be traded by certain foreign exchange and commodity trading advisors 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 privately insured to the Securities Investor Protection Corporation (“SIPC”) limits as such limits may be amended from time to time.
Aspen Diversified Fund LLC
Cash Held in Excess of Federally Insured Limits
| Balance as of December 31, 2011 | Balance as of December 31, 2010 | |||||||
| Cash in bank | $ | 8,028,823 | $ | 2,003,293 | ||||
| Cash held in managed accounts | 56,329,538 | 21,354,976 | ||||||
| Total bank balance | $ | 64,358,361 | $ | 23,358,269 | ||||
| FDIC insurance limit | (8,028,823 | ) | (2,003,293 | ) | ||||
| SIPC insurance limit | (500,000 | ) | (500,000 | ) | ||||
| Uninsured, uncollateralized balance | $ | 55,829,538 | $ | 20,854,976 | ||||
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.
| F-9 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
Investment Valuations: In accordance with generally accepted accounting principles in the USA (“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.
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. All assets and liabilities are measured at fair value on a recurring basis by level within the fair value hierarchy as reported on the Statement of Assets and Liabilities.
Subsequent events: Subsequent events are defined as events or transactions that occur after the balance sheet date, but before the financial statements are issued. There are two types of subsequent events: recognized subsequent events, which provide additional evidence about conditions which existed at the balance sheet date, and non-recognized subsequent events, which provide evidence about conditions which did not exist at the balance sheet date, but arose before the financial statements were issued. Recognized subsequent events are required to be recognized in the financial statements, and non-recognized subsequent events are required to be disclosed.
| F-10 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS
At December 31, 2011 and year then ended, investments and net realized and unrealized gains (losses) on Investment Funds and futures contracts consisted of the following:
| Investment Funds & Futures Contracts | Net Gains/ (Losses) | Cost Basis | Fair Value | % of Funds Net Assets | ||||||||||||
| Aspen Commodity Long Short Fund, LLC | $ | (1,194,333 | ) | $ | 16,538,203 | $ | 16,722,737 | 19.98% | ||||||||
| Boronia Diversified Fund (U.S.), LP† | 3,801 | -0- | -0- | 0.00% | ||||||||||||
| Crabel Fund, LP | (243,459 | ) | 8,000,000 | 7,756,541 | 9.26% | |||||||||||
| Discus Feeder Ltd.† | 2,723 | -0- | -0- | 0.00% | ||||||||||||
| Graham Global Investments Fund Ltd.† | 22,283 | -0- | -0- | 0.00% | ||||||||||||
| Man-AHL Diversified II LP† | (198 | ) | -0- | -0- | 0.00% | |||||||||||
| Robeco Transtrend Diversified Fund LLC‡ | (583,140 | ) | -0- | -0- | 0.00% | |||||||||||
| Total investment funds | (1,992,323 | ) | 24,538,203 | 24,479,278 | 29.24% | |||||||||||
| Futures contracts, net | (5,573,030 | ) | -0- | 607,995 | 0.73% | |||||||||||
| Total | $ | (7,565,353 | ) | $ | 24,538,203 | 25,087,273 | 29.97% | |||||||||
| Other assets, less liabilities | 58,625,889 | 70.03% | ||||||||||||||
| Net assets | $ | 83,713,162 | 100.00% | |||||||||||||
† Fund shares fully disposed of in 2010 based on estimates. Amounts represent adjustments to actual.
‡ Fund shares were fully disposed as of December 31, 2011.
At December 31, 2011, the fair value measurements were as follows:
| Fair Value Measurement | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
| Investments in investment funds | $ | -0- | $ | 24,479,278 | $ | -0- | ||||||
| Unrealized gains on futures contracts, net | 607,995 | -0- | -0- | |||||||||
| Total | $ | 607,995 | $ | 24,479,278 | $ | -0- | ||||||
At December 31, 2011, and during the year then ended, the Fund’s investments in futures contracts and net unrealized gains (losses) by type, were as follows:
| Futures Contract Type | Net Unrealized Gains/(Losses) | |||
| Foreign exchange contracts | $ | (42,477 | ) | |
| Commodity futures contracts | 650,472 | |||
| Total | $ | 607,995 | ||
| F-11 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
As of December 31, 2011, the aggregate unrealized appreciation and depreciation of investment funds was as follows:
| Description | ||||
| Unrealized appreciation | $ | 184,534 | ||
| Unrealized depreciation | 243,459 | |||
| Total | $ | 58,925 | ||
At December 31, 2011, and during the year then ended, the Fund’s investments in investment funds and net gains (losses) by investment objective, as a percentage of total, investments were as follows:
| Investment Strategy | Net Losses | Cost Basis | Fair Value | % of Total | ||||||||||||
| Systematic Trend Followers | $ | (4,377,067 | ) | $ | -0- | $ | 615,716 | 2.45% | ||||||||
| Systematic Short Term Trend Followers | (1,208,198 | ) | 8,000,000 | 7,756,541 | 30.92% | |||||||||||
| Discretionary Short Term Traders | (785,755 | ) | -0- | (7,721 | ) | (0.03% | ) | |||||||||
| Commodity Specialists | (1,194,333 | ) | 16,538,203 | 16,722,737 | 66.66% | |||||||||||
| Total | $ | (7,565,353 | ) | $ | 24,538,203 | $ | 25,087,273 | 100.00% | ||||||||
At December 31, 2011, and during the year then ended, the Fund’s investments in investment funds and net gains by geographic region, as a percentage of total investments, were as follows:
| Geographic Region | Net Gains (Losses) | Cost Basis | Fair Value | % of Total | ||||||||||||
| United States | $ | (7,590,359 | ) | $ | 24,538,203 | $ | 25,087,273 | 100.00% | ||||||||
| Caribbean (Bermuda, Bahamas, and Cayman Islands) | 25,006 | -0- | -0- | 0.00% | ||||||||||||
| Total | $ | (7,565,353 | ) | $ | 24,538,203 | $ | 25,087,273 | 100.00% | ||||||||
| F-12 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
At December 31, 2010 and during the year then ended, the Fund’s investments and net realized and unrealized gains (losses) on investment funds and futures contracts consisted of the following:
| Investment Funds & Futures Contracts | Net Gains/ (Losses) | Cost Basis | Fair Value | % of Funds Net Assets | ||||||||||||
| Abraham Commodity Fund LP‡ | $ | (189,827 | ) | $ | -0- | $ | -0- | 0.00% | ||||||||
| AlphaMosaic (US) LLC (Altis–Cell No. 151)‡ | (55,977 | ) | -0- | -0- | 0.00% | |||||||||||
| AlphaMosaic (US) LLC (Krom River–Cell No. 42)‡ | 53,450 | -0- | -0- | 0.00% | ||||||||||||
| APM Hedged Global Commodity Fund, LDC‡ | (116,186 | ) | -0- | -0- | 0.00% | |||||||||||
| Aspen Commodity Long Short Fund, LLC | 2,391,194 | 20,275,790 | 21,964,936 | 22.04% | ||||||||||||
| Boronia Diversified Fund (U.S.), LP† | 571,247 | -0- | -0- | 0.00% | ||||||||||||
| Coolmore Partners LP‡ | (29,505 | ) | -0- | -0- | 0.00% | |||||||||||
| Discus Feeder Ltd.† | (382,904 | ) | -0- | -0- | 0.00% | |||||||||||
| Galena Fund Limited‡ | 70,538 | -0- | -0- | 0.00% | ||||||||||||
| Global Commodity Systematic LP‡ | (59,413 | ) | -0- | -0- | 0.00% | |||||||||||
| Graham Global Investments Fund Ltd.† | 1,317,207 | -0- | -0- | 0.00% | ||||||||||||
| LD Commodities Alpha Fund LP‡ | 11,554 | -0- | -0- | 0.00% | ||||||||||||
| Man-AHL Diversified II LP† | 1,046,991 | -0- | -0- | 0.00% | ||||||||||||
| Millburn Commodity Fund LP‡ | 71,837 | -0- | -0- | 0.00% | ||||||||||||
| MMT Energy Fund‡ | (93,718 | ) | -0- | -0- | 0.00% | |||||||||||
| Robeco Transtrend Diversified Fund LLC | 1,848,098 | 8,546,675 | 10,083,339 | 10.12% | ||||||||||||
| Sparta Commodities US Feeder Fund LLC‡ | (299,680 | ) | -0- | -0- | 0.00% | |||||||||||
| Winton Futures Fund† | 489,615 | -0- | -0- | 0.00% | ||||||||||||
| Total investment funds | 6,644,521 | 28,822,465 | 32,048,275 | 32.15% | ||||||||||||
| Futures contracts, net | 4,072,382 | -0- | 1,593,824 | 1.60% | ||||||||||||
| Total | $ | 10,716,903 | $ | 28,822,465 | 33,642,099 | 33.75% | ||||||||||
| Other assets, less liabilities | 66,032,295 | 66.25% | ||||||||||||||
| Net assets | $ | 99,674,394 | 100.00% | |||||||||||||
† Fund shares were fully disposed of during 2010.
‡ Fund shares were transferred to Aspen Commodity Long/Short Fund, LLC as of May 1, 2010.
| F-13 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
At December 31, 2010, the fair value measurements were as follows:
| Fair Value Measurement | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
| Investments in investment funds | $ | -0- | $ | 32,048,275 | $ | -0- | ||||||
| Unrealized gains on futures contracts, net | 1,593,824 | -0- | -0- | |||||||||
| Total | $ | 1,593,824 | $ | 32,048,275 | $ | -0- | ||||||
At December 31, 2010, and during the year then ended, the Fund’s investments in futures contracts and net unrealized gains (losses) by type, were as follows:
| Futures Contract Type | Net Unrealized Gains | |||
| Foreign exchange contracts | $ | 407,568 | ||
| Commodity futures contracts | 1,186,256 | |||
| Total | $ | 1,593,824 | ||
As of December 31, 2010, the aggregate unrealized appreciation and depreciation of investment funds was as follows:
| Description | ||||
| Unrealized appreciation | $ | 3,225,810 | ||
| Unrealized depreciation | -0- | |||
| Total | $ | 3,225,810 | ||
At December 31, 2010, and during the year then ended, the Fund’s investments in investment funds and net gains (losses) by investment objective, as a percentage of total, investments were as follows:
| Investment Strategy | Net Gains/ (Losses) | Cost Basis | Fair Value | % of Total | ||||||||||||
| Systematic Trend Followers | $ | 8,593,322 | $ | 8,546,675 | $ | 11,677,471 | 34.71% | |||||||||
| Systematic Short Term Trend Followers | 358,529 | -0- | -0- | 0.00% | ||||||||||||
| Systematic Hybrid Trend Followers | (116,186 | ) | -0- | -0- | 0.00% | |||||||||||
| Commodity Specialists | 1,881,238 | 20,275,790 | 21,964,936 | 65.29% | ||||||||||||
| Total | $ | 10,716,903 | $ | 28,822,465 | $ | 33,642,099 | 100.00% | |||||||||
At December 31, 2010, and during the year then ended, the Fund’s investments in investment funds and net gains by geographic region, as a percentage of total investments, were as follows:
| Geographic Region | Net Gains | Cost Basis | Fair Value | % of Total | ||||||||||||
| United States | $ | 9,921,967 | $ | 28,822,465 | $ | 33,642,099 | 100.00% | |||||||||
| Caribbean (Bermuda, Bahamas, and Cayman Islands) | 794,936 | -0- | -0- | 0.00% | ||||||||||||
| Total | $ | 10,716,903 | $ | 28,822,465 | $ | 33,642,099 | 100.00% | |||||||||
| F-14 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
During the year ended December 31, 2009, the Fund’s net realized and unrealized gains (losses) on investment funds and futures contracts consisted of the following:
| Investment Funds & Futures Contracts | Net Gains/ (Losses) |
|||
| Abraham Commodity Fund LP | $ | (227,778 | ) | |
| AlphaMosaic (US) LLC (Altis - Cell No. 151) | (225,772 | ) | ||
| AlphaMosaic (US) LLC (Krom River - Cell No. 42) | (68,192 | ) | ||
| APM Hedged Global Commodity Fund, LDC | (573,295 | ) | ||
| Boronia Diversified Fund (U.S.), LP | (931,965 | ) | ||
| Discus Fund Ltd. | 243,054 | |||
| Discus Feeder Ltd. | 18,221 | |||
| Galena Fund Ltd. | (3,043 | ) | ||
| Global Commodity Systematic LP | 144,947 | |||
| HFR MF Diversified Select Master Trust | (1,122,923 | ) | ||
| Man-AHL Diversified II LP | (2,677,670 | ) | ||
| Millburn Commodity Fund LP | (152,545 | ) | ||
| MMT Energy Fund | (212,084 | ) | ||
| Robeco Transtrend Diversified Fund LLC | (1,367,183 | ) | ||
| Sparta Commodities US Feeder Fund LLC | 147,988 | |||
| Winton Futures Fund | (12,885 | ) | ||
| Total investment funds | (7,021,125 | ) | ||
| Futures contracts, net | (82,441 | ) | ||
| Total | $ | (7,103,566 | ) | |
At December 31, 2009, and during the year then ended, the Fund’s investments in investment funds and net losses by investment objective, as a percentage of total investments were as follows:
| Investment Strategy | Net Losses | |||
| Diversified Long-Term Trend Followers | $ | (4,387,022 | ) | |
| Diversified Medium-Term Trend Followers | $ | (1,367,184 | ) | |
| Diversified Short-Term Trend Followers | $ | (137,259 | ) | |
| Commodity Specialists | (1,212,101 | ) | ||
| Total | $ | (7,103,566 | ) | |
During the year ended December 31, 2009 the Fund’s net losses by geographic region, as a percentage of total investments, were as follows:
| Geographic Region | Net Losses | |||
| United States | $ | (5,453,496 | ) | |
| Caribbean (Bermuda, Bahamas, and Cayman Islands) | (1,650,070 | ) | ||
| Total | $ | (7,103,566 | ) | |
| F-15 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE B – INVESTMENTS IN INVESTMENT FUNDS & FUTURES CONTRACTS – Continued
The investment objectives and redemptions permitted for the investment funds in which the Fund had invested as of December 31, 2011 were as follows:
| Investment Funds & Managed Accounts | Investment Objective | Withdrawals Permitted | ||
| ADF Trading Company I, LLC (Welton Investment Corporation) | Systematic Trend Follower | Daily | ||
| ADF Trading Company IV, LLC (Blackwater Capital Management LLC) | Systematic Trend Follower | Daily | ||
| ADF Trading Company VI, LLC (Abraham Trading Company) | Systematic Trend Follower | Daily | ||
| ADF Trading Company VII, LLC (Aspen Partners, Ltd.) | Systematic Trend Follower | Daily | ||
| ADF Trading Company VIII, LLC (LBR Group, Inc.) | Discretionary Short-Term Trader | Daily | ||
| ADF Trading Company IX, LLC (Eckhardt Trading Company) | Systematic Trend Follower | Daily | ||
| ADF Trading Company X, LLC (Saxon Investment Company) | Systematic Trend Follower | Daily | ||
| ADF Trading Company XI, LLC (Rotella Investment Corporation) | Systematic Trend Follower | Daily | ||
| ADF Trading Company XII, LLC (Tactical Investment Management Corp.) | Systematic Trend Follower | Daily | ||
| Aspen Commodity Long/Short Fund LLC | Commodity Specialist | Monthly | ||
| Crabel Fund LP | Systematic Trend Follower | Monthly |
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. Information is not available to determine if an individual investment held by any of these investment funds exceeded 5% of the Fund’s capital at December 31, 2011 and 2010.
At December 31, 2011 and 2010, the Fund had remitted $-0- and $16,600,000, respectively, to the investment funds and managed accounts that would not be credited to its respective capital accounts until the first day of the following month. These amounts were recorded as investments in transit.
The Fund maintains separate capital accounts for its members. Net profits, net losses, and expenses attributable to each class are allocated to the members holding units of each class in proportion to their respective unit ownership percentages.
Each member may withdraw all or any portion of his/her capital account as of the end of each calendar month, provided that the withdrawing member gives at least 10 days prior written notice.
The Fund admits members only on the first day of each month. At December 31, 2011 and 2010, the Fund had received capital contributions of $3,164,000 and $521,391, respectively that were credited to the member’s 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.
| F-16 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE C – NET ASSETS – Continued
During the years ended December 31, 2009, 2010 and 2011, net assets changed as follows:
| Class A | Class B | Class C | Class E | Total | ||||||||||||||||
| Net asset value at December 31, 2008 | $ | 7,656,205 | $ | 84,376,645 | $ | 6,063,330 | $ | 17,780,575 | $ | 115,876,755 | ||||||||||
| Issuance of units | 2,650,160 | 19,198,544 | 400,000 | 219,972 | 22,468,676 | |||||||||||||||
| Redemption of units | (1,904,431 | ) | (19,157,755 | ) | (4,252,747 | ) | (3,395,689 | ) | (28,710,622 | ) | ||||||||||
| Net decrease from operations | (820,757 | ) | (6,842,014 | ) | (379,933 | ) | (1,249,120 | ) | (9,291,824 | ) | ||||||||||
| Net asset value at December 31, 2009 | $ | 7,581,177 | $ | 77,575,420 | $ | 1,830,650 | $ | 13,355,738 | $ | 100,342,985 | ||||||||||
| Issuance of units | 7,269,842 | 19,482,471 | 1,000 | 193,540 | 26,946,853 | |||||||||||||||
| Redemption of units | (1,030,323 | ) | (27,435,632 | ) | (1,940,936 | ) | (5,035,613 | ) | (35,442,504 | ) | ||||||||||
| Net decrease from operations | 941,859 | 5,779,914 | 110,341 | 994,946 | 7,827,060 | |||||||||||||||
| Net asset value at December 31, 2010 | $ | 14,762,555 | $ | 75,402,173 | $ | 1,055 | $ | 9,508,611 | $ | 99,674,394 | ||||||||||
| Issuance of units | 1,964,268 | 15,597,632 | 5,521,000 | 330,600 | 23,413,500 | |||||||||||||||
| Redemption of units | (5,977,113 | ) | (19,852,268 | ) | (70,876 | ) | (2,371,332 | ) | (28,271,589 | ) | ||||||||||
| Net decrease from operations | (2,068,771 | ) | (7,942,526 | ) | (314,158 | ) | (777,688 | ) | (11,103,143 | ) | ||||||||||
| Net asset value at December 31, 2011 | $ | 8,680,939 | $ | 63,205,011 | $ | 5,137,021 | $ | 6,690,191 | $ | 83,713,162 | ||||||||||
Unit transactions for the year ended December 31, 2009, 2010 and 2011 were as follows:
| Class A | Class B | Class C | Class E | Total | ||||||||||||||||
| Units outstanding at December 31, 2008 | 62,787 | 631,907 | 58,904 | 125,305 | 878,903 | |||||||||||||||
| Units issued | 23,042 | 150,104 | 4,133 | 1,612 | 178,891 | |||||||||||||||
| Units redeemed | (16,697 | ) | (148,754 | ) | (43,771 | ) | (25,341 | ) | (234,563 | ) | ||||||||||
| Units outstanding at December 31, 2009 | 69,132 | 633,257 | 19,266 | 101,576 | 823,231 | |||||||||||||||
| Net asset value per unit at December 31, 2009 | $ | 109.66 | $ | 122.50 | $ | 95.03 | $ | 131.49 | ||||||||||||
| Units outstanding at December 31, 2009 | 69,132 | 633,257 | 19,266 | 101,576 | 823,231 | |||||||||||||||
| Units issued | 67,795 | 157,755 | 10 | 1,477 | 227,037 | |||||||||||||||
| Units redeemed | (9,418 | ) | (219,198 | ) | (19,266 | ) | (36,516 | ) | (284,398 | ) | ||||||||||
| Units outstanding at December 31, 2010 | 127,509 | 571,814 | 10 | 66,537 | 765,870 | |||||||||||||||
| Net asset value per unit at December 31, 2010 | $ | 115.78 | $ | 131.86 | $ | 102.89 | $ | 142.91 | ||||||||||||
| Units outstanding at December 31, 2010 | 127,509 | 571,814 | 10 | 66,537 | 765,870 | |||||||||||||||
| Units issued | 16,999 | 123,970 | 56,773 | 2,377 | 200,119 | |||||||||||||||
| Units redeemed | (58,226 | ) | (155,178 | ) | (774 | ) | (16,641 | ) | (230,819 | ) | ||||||||||
| Units outstanding at December 31, 2011 | 86,282 | 540,606 | 56,009 | 52,273 | 735,170 | |||||||||||||||
| Net asset value per unit at December 31, 2011 | $ | 100.61 | $ | 116.92 | $ | 91.72 | $ | 127.99 | ||||||||||||
| F-17 |
Aspen Diversified Fund LLC
Notes to Financial Statements
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 | Class B | Class C | Class D | Class E | ||||||||||||||||
| 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% | 0.10% | 0.70% | 0.35% | |||||||||||||||
As of June 1, 2009, the administrative fees 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. On December 1, 2010 the administrative fee for Class C increased from .05% to .10%. In addition the Fund pays 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.
The incentive fees are equal to the applicable percentage of the new investment profits earned monthly by class over the high water mark, as defined. During the years ended December 31, 2011, 2010 and 2009, the Fund recognized management and incentive fee expenses of $875,935, $916,185, and $914,851 respectively. An incentive of $11,167 was paid during 2011. There were no incentive fees paid during the year ended December 31, 2010 and 2009.
At December 31, 2011, 2010 and 2009, the Fund recognized expenses of $328,178, $360,425, and $503,901, respectively related to certain accounting and administrative services provided by the managing member.
At December 31, 2011 and 2010 accounts payable consisted of $89,082 and $102,221, respectively, related to management fees, incentive fees and administrative fees.
Interests in the Fund are marketed through Frontier Solutions, LLC, a registered Broker/Dealer. As of December 31, 2011, there were no fees paid to Frontier Solutions by the Fund.
| F-18 |
Aspen Diversified Fund LLC
Notes to Financial Statements
Financial highlights for the Fund are shown below. All income and expense percentages are based on total income or expense for the year for each class and are calculated using the weighted average invested capital by class of unit. Ratios for Class E units reflect the fact that Class E units incur no management or incentive fees. An individual investor’s ratios may vary from these ratios due to the timing of investments and withdrawals and market volatility.
Financial highlights were as follows for the year ended December 31, 2011:
| Per Unit Activity | Class A | Class B | Class C | Class E | ||||||||||||
| Beginning net unit value at December 31, 2010 | $ | 115.78 | $ | 131.86 | $ | 102.89 | $ | 142.91 | ||||||||
| Net realized and unrealized loss on investments | (9.14 | ) | (10.54 | ) | (8.25 | ) | (11.52 | ) | ||||||||
| Interest income | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
| Total investment loss | (9.14 | ) | (10.54 | ) | (8.25 | ) | (11.52 | ) | ||||||||
| Management and incentive fees | (1.11 | ) | (1.28 | ) | (0.75 | ) | -0- | |||||||||
| Administrative and other expenses | (4.92 | ) | (3.12 | ) | (2.16 | ) | (3.40 | ) | ||||||||
| Total operating expenses | (6.03 | ) | (4.40 | ) | (2.91 | ) | (3.40 | ) | ||||||||
| Ending unit value December 31, 2011 | $ | 100.61 | $ | 116.92 | $ | 91.73 | $ | 127.99 | ||||||||
| Class A | Class B | Class C | Class E | |||||||||||||
| Net investment loss | (8.78% | ) | (7.53% | ) | (23.98% | ) | (6.48% | ) | ||||||||
| Operating expenses, before incentive fees | (5.23% | ) | (3.46% | ) | (4.98% | ) | (2.40% | ) | ||||||||
| Operating expenses, after incentive fees | (5.23% | ) | (3.46% | ) | (4.98% | ) | (2.40% | ) | ||||||||
| Decrease in net assets | (14.01% | ) | (10.98% | ) | (28.96% | ) | (8.89% | ) | ||||||||
| Total return | (13.10% | ) | (11.34% | ) | (10.85% | ) | (10.44% | ) | ||||||||
| Earnings per unit | $ | (15.81 | ) | $ | (14.24 | ) | $ | (28.31 | ) | $ | (12.57 | ) | ||||
The portfolio turnover rate for the year ended December 31, 2011 was 34.98%.
| F-19 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE E – FINANCIAL HIGHLIGHTS – Continued
Financial highlights were as follows for the year ended December 31, 2010:
| Per Unit Activity | Class A | Class B | Class C | Class E | ||||||||||||
| Beginning net unit value at December 31, 2009 | $ | 109.66 | $ | 122.50 | $ | 95.03 | $ | 131.49 | ||||||||
| Net realized and unrealized gain on investments | 11.14 | 12.64 | 9.85 | 13.67 | ||||||||||||
| Interest income | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
| Total investment gain | 11.14 | 12.64 | 9.85 | 13.67 | ||||||||||||
| Management and incentive fees | (1.09 | ) | (1.23 | ) | (0.72 | ) | -0- | |||||||||
| Administrative and other expenses | (3.93 | ) | (2.05 | ) | (1.27 | ) | (2.25 | ) | ||||||||
| Total operating expenses | (5.02 | ) | (3.28 | ) | (1.99 | ) | (2.25 | ) | ||||||||
| Ending unit value December 31, 2010 | $ | 115.78 | $ | 131.86 | $ | 102.89 | $ | 142.91 | ||||||||
| Class A | Class B | Class C | Class E | |||||||||||||
| Net investment income | 12.33% | 10.12% | 9.42% | 9.32% | ||||||||||||
| Operating expenses, before incentive fees | (4.89% | ) | (2.64% | ) | (2.04% | ) | (1.55% | ) | ||||||||
| Operating expenses, after incentive fees | (4.89% | ) | (2.64% | ) | (2.04% | ) | (1.55% | ) | ||||||||
| Increase in net assets | 7.44% | 7.47% | 7.39% | 7.77% | ||||||||||||
| Total return | 5.58% | 7.64% | 8.27% | 8.69% | ||||||||||||
| Earnings per unit | $ | 8.07 | $ | 9.11 | $ | 12.64 | $ | 10.20 | ||||||||
The portfolio turnover rate for the year ended December 31, 2010 was 72.75%.
| F-20 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE E – FINANCIAL HIGHLIGHTS – Continued
Financial highlights were as follows for the year ended December 31, 2009:
| Per Unit Activity | Class A | Class B | Class C | Class E | ||||||||||||
| Beginning net unit value at December 31, 2008 | $ | 121.94 | $ | 133.53 | $ | 102.93 | $ | 141.90 | ||||||||
| Net realized and unrealized loss on investments | (7.64 | ) | (8.42 | ) | (6.51 | ) | (8.98 | ) | ||||||||
| Interest income | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
| Total investment loss | (7.64 | ) | (8.42 | ) | (6.51 | ) | (8.98 | ) | ||||||||
| Management and incentive fees | (1.15 | ) | (1.27 | ) | (0.74 | ) | -0- | |||||||||
| Administrative and other expenses | (3.49 | ) | (1.34 | ) | (0.65 | ) | (1.43 | ) | ||||||||
| Total operating expenses | (4.64 | ) | (2.61 | ) | (1.39 | ) | (1.43 | ) | ||||||||
| Ending unit value December 31, 2009 | $ | 109.66 | $ | 122.50 | $ | 95.03 | $ | 131.49 | ||||||||
| Class A | Class B | Class C | Class E | |||||||||||||
| Net investment loss | (6.55% | ) | (6.53% | ) | (5.88% | ) | (6.44% | ) | ||||||||
| Operating expenses, before incentive fees | (4.05% | ) | (2.06% | ) | (1.21% | ) | (1.02% | ) | ||||||||
| Operating expenses, after incentive fees | (4.05% | ) | (2.06% | ) | (1.21% | ) | (1.02% | ) | ||||||||
| Decrease in net assets | (10.60% | ) | (8.58% | ) | (7.10% | ) | (7.46% | ) | ||||||||
| Total return | (10.07% | ) | (8.26% | ) | (7.68% | ) | (7.34% | ) | ||||||||
| Losses per unit | $ | (12.28 | ) | $ | (10.97 | ) | $ | (13.03 | ) | $ | (10.19 | ) | ||||
The portfolio turnover rate for the year ended December 31, 2009 was 39.56%.
NOTE F – INVESTMENTS IN DERIVATIVES CONTRACTS
Investments in derivative contracts are subject to additional risks that can result in a loss of the investment. The Fund’s activities and exposure are classified by the following underlying risks: interest rate, credit foreign currency exchange rate, commodity price, and equity price risks. In addition, the Fund is also subject to counterparty risk should its counterparties fail to meet the terms of their contracts.
The Fund’s derivative activity is stated at fair value. Changes in unrealized appreciation or depreciation of the investments are recognized as unrealized gains and losses in the statement of operations.
Forward Contracts: Forward currency and commodities transactions are contracts for delayed delivery of specific currencies and commodities in which the seller agrees to make delivery at a specified date. The Fund enters into these contracts to hedge itself against foreign currency exchange rate risk for its foreign currency dominated assets and liabilities. Risks associated with foreign currency and commodities contracts include the inability of counterparties to meet the terms of their contracts as well as movements in fair value and exchange rates. Changes in unrealized appreciation or depreciation of the investments are recognized as unrealized gains and losses in the statement of operations.
Futures Contracts: A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. The fund may use futures contracts to gain exposure to, or hedge against, changes in the value of equities and commodities, interest rates or foreign currencies.
| F-21 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE F – INVESTMENTS IN DERIVATIVES CONTRACTS - Continued
Futures contracts provide reduced counterparty risk to the Fund since futures are exchange-traded. The purchase and sale of futures contracts requires margin deposits with a Futures Commission Merchant. (“FCM”) Payments are made or received by the Fund each day, depending on the fluctuations in the contract value, and are recorded as unrealized gains or losses on the Fund’s financial statements.
The volume of the Fund’s derivative activities based on their notional amounts and number of contracts as of December 31, 2011 and 2010:
| December 31, 2011 | Long Exposure | Short Exposure | ||||||||||||||
| Primary Underlying Risk | Notional Amounts | Number of Contracts | Notional Amounts | Number of Contracts | ||||||||||||
| Foreign currency exchange rate | ||||||||||||||||
| Forward contracts | $ | 4,013,000 | 4,042,940 | $ | 5,320,000 | 5,307,817 | ||||||||||
| Commodity price | ||||||||||||||||
| Futures contracts | 188,425,000 | 1,105 | 111,445,000 | 1,179 | ||||||||||||
| Total | $ | 192,438,000 | 4,044,045 | $ | 116,765,000 | 5,308,996 | ||||||||||
| December 31, 2010 | Long Exposure | Short Exposure | ||||||||||||||
| Primary Underlying Risk | Notional Amounts | Number of Contracts | Notional Amounts | Number of Contracts | ||||||||||||
| Foreign currency exchange rate | ||||||||||||||||
| Forward contracts | $ | 8,594,000 | 8,487,381 | $ | 8,722,000 | 8,604,344 | ||||||||||
| Commodity price | ||||||||||||||||
| Futures contracts | 155,475,000 | 1,347 | 43,533,000 | 345 | ||||||||||||
| Total | $ | 164,069,000 | 8,488,728 | $ | 52,255,000 | 8,604,689 | ||||||||||
The fair value amounts of derivative instruments in the statement of financial condition as derivative contracts, categorized by primary underlying risk for the year ended December 31, 2011 and 2010:
| December 31, 2011 | December 31, 2010 | |||||||||||||||
| Primary underlying risk | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | ||||||||||||
| Foreign currency exchange rate | ||||||||||||||||
| Forward contracts | $ | 33,269 | $ | 75,746 | $ | 125,219 | $ | 136,162 | ||||||||
| Commodity price | ||||||||||||||||
| Futures contracts | 2,445,257 | 1,794,785 | 2,802,842 | 1,198,075 | ||||||||||||
| Gross derivative assets and liabilities | 2,478,526 | 1,870,531 | 2,928,061 | 1,334,237 | ||||||||||||
| Less: Master netting arrangements | -0- | -0- | -0- | -0- | ||||||||||||
| Less: Cash collateral applied | -0- | -0- | -0- | -0- | ||||||||||||
| Net derivative assets and liabilities | $ | 2,478,526 | $ | 1,870,531 | $ | 2,928,061 | $ | 1,334,237 | ||||||||
| F-22 |
Aspen Diversified Fund LLC
Notes to Financial Statements
NOTE F – INVESTMENTS IN DERIVATIVES CONTRACTS - Continued
The net gain and loss amounts included in the statement of operations as net gain from derivative contracts, categorized by underlying risk for the year ended December 31, 2011 and 2010:
| December 31, 2011 | December 31, 2010 | |||||||
| Primary underlying risk | Amount of Loss | Amount of Gain | ||||||
| Foreign currency exchange rate | ||||||||
| Forward contracts | $ | (526,124 | ) | $ | 178,435 | |||
| Commodity price | ||||||||
| Futures contracts | (4,628,874 | ) | 4,130,863 | |||||
| Total | $ | (5,154,998 | ) | $ | 4,309,298 |
For the years ended December 31, 2011 and 2010, futures contracts per Note B are presented net of interest income and expense, and commission expense for a net decrease of $418,032 and $236,916 respectively.
During the period from January 1, 2012 through March 22, 2012, the Fund received additional capital contributions of $4,031,073 and members requested redemptions of $6,588,890.
NOTE H – SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following represents unaudited quarterly financial information for the eight quarters through December 31, 2010.
| 4th Qtr. 2011 | 3rd Qtr. 2011 | 2nd Qtr. 2011 | 1st Qtr. 2011 | 4th Qtr. 2010 | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | |||||||||||||||||||||||||
| Total investment income (loss) | $ | (4,638,727 | ) | $ | 303,818 | $ | (4,057,197 | ) | $ | 826,754 | $ | 6,663,808 | $ | 4,542,532 | $ | (1,379,903 | ) | $ | 890,466 | |||||||||||||
| Total expenses | 658,035 | 961,426 | 881,047 | 1,037,282 | 1,019,398 | 759,763 | 577,789 | 532,893 | ||||||||||||||||||||||||
| Net increase (decrease) in net assets | $ | (5,296,762 | ) | $ | (657,608 | ) | $ | (4,938,244 | ) | $ | (210,528 | ) | $ | 5,644,410 | $ | 3,782,769 | $ | (1,957,692 | ) | $ | 357,573 | |||||||||||
Net increase (decrease) in net assets per weighted average unit:
| 4th Qtr. 2011 | 3rd Qtr. 2011 | 2nd Qtr. 2011 | 1st Qtr. 2011 | 4th Qtr. 2010 | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | |||||||||||||||||||||||||
| Class A | $ | (6.72 | ) | $ | (1.26 | ) | $ | (7.21 | ) | $ | (0.75 | ) | $ | 5.35 | $ | 3.44 | ) | $ | (2.56 | ) | $ | 1.33 | ||||||||||
| Class B | $ | (6.80 | ) | $ | (0.86 | ) | $ | (6.39 | ) | $ | (0.21 | ) | $ | 6.68 | $ | 4.41 | $ | (2.24 | ) | $ | 0.27 | |||||||||||
| Class C | $ | (5.05 | ) | $ | (1.01 | ) | $ | (5.42 | ) | $ | (0.87 | ) | $ | 5.40 | $ | 3.64 | $ | (1.59 | ) | $ | (0.15 | ) | ||||||||||
| Class E | $ | (7.09 | ) | $ | (0.49 | ) | $ | (6.19 | ) | $ | 0.16 | $ | 7.90 | $ | 5.08 | $ | (2.08 | ) | $ | 0.63 | ||||||||||||
| F-23 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. The principal executive officer and the principal financial officer of the 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 December 31, 2011, the Fund’s disclosure controls are effective.
Management’s Report on Internal Control over Financial Reporting. The Managing Member of the Fund is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Managing Member has assessed the effectiveness of the Fund’s internal control over financial reporting as of December 31, 2011. In making this assessment, the Managing Member used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, in Internal Control-Integrated Framework. The Managing Member has concluded that, as of December 31, 2011, the Fund’s internal control over financial reporting is effective based on these criteria. This report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. This annual report does not include an attestation report of the Fund’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Fund’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Fund to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting. There have been no changes in the Fund’s internal control over financial reporting in the twelve months ended December 31, 2011 that have materially affected or are reasonably likely to materially affect the Fund’s internal control over financial reporting.
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.
Not applicable.
Part III
| 19 |
| Mr. Banwart began his career in 1966 after graduating with a Bachelor of Business Administration degree in Accounting from Wichita State University. From 1966 to 1969 he was with Ernst & Young LLP (formerly Arthur Young & Company) on the audit and tax staff specializing in the securities industry. During this period he became a Certified Public Accountant and was a member of the National Association of CPAs, the Texas Society of CPAs, and the National Association of Accountants. | |
| From 1969 to 1978 he was Director of the Tax Incentive Investment Department specializing in the selection and marketing of alternative investments for Rauscher Pierce Refsnes, Inc., a regional NYSE Member Firm with offices throughout the Southwest. In this position he was responsible for forming and heading the group in the selection, due diligence and marketing of investments in real estate, oil and gas, equipment leasing and agriculture. | |
| Since 1979, Mr. Banwart primarily has run his own businesses involved in the selection and marketing of alternative investments including commercial real estate development, oil and gas exploration, cattle feeding and managed futures funds. During his business career, he has held a wide range of Board and management positions including the following: | |
| · Co-Chairman of the Board - Red River Feed Yards, Inc. An integrated agriculture company including a 100,000 feedlot. | |
| · Executive Vice President - Robert Stanger & Co. A recognized authority in alternative investments with various books, publications and consulting services. | |
| · Executive Vice President - Boston Bay Capital, Inc. A firm specializing in the acquisition, renovation and management of certified historic properties. | |
| · Founder and President - Summit Capital A firm specializing in the funding of multi-family properties being acquired from the Resolution Trust Corporation (RTC) or bank foreclosure. | |
| William Ware Bush, born in 1953, has twenty-six years of experience in the financial services industry. He joined the Managing Member in 1998. He is primarily responsible for client relationships in the Southern and Western Regions of the United States. | |
| In his career he has served in a variety of roles at investment banks and management firms. He started his investment career as an Institutional Salesman for E. F. Hutton & Company and was a Vice President at Donaldson, Lufkin & Jenrette. He has been a senior marketer for two institutional investment advisory organizations. He has been with Aspen Partners since 1998 and has helped design, structure, and promote investment programs in Managed Futures and Hedge Funds. |
| He often speaks on the area of Managed Futures at conferences and meetings of consultants and financial advisors. | |
| Mr. Bush received an undergraduate degree in history and international political science from Vanderbilt University and an MBA in International Business from Georgia State University in Atlanta. | |
| Bryan Fisher, born in 1973, joined the Managing Member in 2000 and became a Partner in the company in 2007. Mr. Fisher is primarily responsible for client relationships in the Mid-Atlantic and Northeast Regions of the United States. | |
| Prior to joining the Managing Member, Mr. Fisher previously worked for First Union Securities’ (now Wells Fargo Securities) Alternative Investment Group where he was responsible for national sales and marketing of seven (7) broad product groups: managed futures, private real estate, oil and gas LPs, exchange funds, hedge funds of funds, private equity/venture capital, and institutional money market funds. | |
| Prior to joining First Union, Mr. Fisher was Vice President of Sales and Marketing for National Holdcasting Corp., a telecommunications firm located in Richmond, VA. Mr. Fisher holds a Bachelor of Arts Degree from Virginia Polytechnic Institute and State University. |
| 20 |
| Adam Langley, born in 1967, oversees all aspects related to regulatory, legal and compliance matters of the Fund, the Managing Member and all related entities as Chief Compliance Officer. He joined the Managing Member in 2004 and has been responsible for various accounting and operational functions. | |
| He was appointed Chief Compliance officer in 2005 and was instrumental in establishing Frontier Solutions, LLC, a registered broker-dealer and a wholly owned subsidiary of Aspen Partners. Mr. Langley has been integral to the launch and growth of each of Aspen’s proprietary investment products, and has extensive experience navigating the regulatory landscape of complex investment vehicles and other business structures. | |
| Prior to joining the Managing Member, Mr. Langley served as Executive Director of a non-profit organization where he oversaw risk management, real estate, legal matters, and government relations among other duties. Previously he worked for Delta Air Lines in sales and was a part of the company’s disaster response team. | |
| Mr. Langley holds the Certified Regulatory and Compliance Professional (“CRCP”) designation granted by the Financial Industry Regulatory Authority (FINRA). He earned his B.B.A. in Management from the University of West Georgia. | |
| Deborah Terry, born in 1952, is the Chief Financial Officer of the Managing Member. Ms. Terry joined Aspen Partners in 2007. She is responsible for all aspects of the accounting, financial reporting and internal controls of the firm. | |
| Ms. Terry has over twenty years of accounting experience in both private industry and public accounting. She has provided accounting and advisory services to businesses in a variety of industries including: financial services, construction, land development, real estate sales and rental, manufacturing, retail, and service industries. | |
| Ms. Terry is a CPA licensed in the state of Georgia and a member of the Georgia Society of CPAs and the American Institute of Certified Public Accountants. She received her Bachelor of Science degree in Accounting from Boston University and her MBA in Finance from Kennesaw State University. | |
| Paul Morin, born in 1965, began his career in the managed futures industry in 1989. As Co-Chief Investment Officer he is responsible for sourcing Aspen’s managed futures managers, performing & overseeing the due diligence process as well as managing the firm’s multi-manager funds. |
| Prior to joining Aspen, Mr. Morin was Co-Chair of the Investment Committee and Director of Research at 6800 Capital, LLC, an investment manager specializing in managed futures and hedge fund of funds products. Mr. Morin also held executive level asset management and research positions with Unigestion US, Ltd, one of Europe’s leading Alternative Investments asset management firms, Refco Inc., formerly a leading futures firm, and Commodities Corporation USA (now Goldman Sachs) an industry pioneer in the managed futures industry. In all, Mr. Morin has over 20 years experience evaluating and selecting Managed Futures managers for multi-advisor fund portfolios. | |
| Mr. Morin earned a B.S. in Finance from Fairleigh Dickinson University and a M.B.A. from Rider University for which he was awarded membership into the Beta Gamma Sigma Honor Society. | |
| (c) | Identification of Certain Significant Employees. |
| The registrant has no employees. | |
| (d) | Family Relationships. |
| None. | |
| (e) | Business Experience. |
| See Item 5 (a) and (b) above. |
| 21 |
| Class | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||||||||
| Class C | Aspen Partners, Ltd. † | 10.26 Units | 0.02% | |||||||||
| Class E | Aspen Partners, Ltd. † | 1,831.90 Units | 3.50% | |||||||||
| Class E | Kenneth E. Banwart | 493.68 Units | 0.94% | |||||||||
| Class E | Bryan R. Fisher | 235.20 Units | 0.45% | |||||||||
† Kenneth E. Banwart, William Ware Bush, Bryan R. Fisher, and Paul Morin control the voting and dispositive powers over the Units held by Aspen Partners, Ltd.
| 22 |
| 23 |
| (d) | All Other Fees. |
| There were no fees billed to the Fund by Williams Benator & Libby LLP or PMB Helin Donovan LLP for products and services other than as set forth above for the years 2011 and 2010. | |
| (e) | Engagement of the Independent Registered Public Accounting Firm. |
| The Managing Member was responsible for engaging PMB Helin Donovan LLP to audit the Fund’s financial statements for 2009, 2010 and 2011. The Managing Member considered provisions of the independence rules for both audit and non-audit services when the services of PMB Helin Donovan LLP were contracted. | |
Item 15. Exhibits, Financial Statement Schedules.
The following Exhibits are included as a part of this Form 10-K:
| 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. |
| 10.1 | Form Selling Agent Agreement, incorporated by reference herein, previously filed as an exhibit to the registrant’s Form 10-K filed on April 17, 2008. |
| 10.2 | Managed Account Agreement between Tactical Investment Management Corporation and ADF Trading Company XII, LLC dated January 24, 2011, incorporated by reference herein, previously filed as an exhibit to the registrant’s Form 10-Q filed on May 16, 2011. * |
| 10.3 | Sub-Manager Agreement between Rotella Capital Management, Inc. and ADF Trading Company XI, LLC dated June 21, 2011, incorporated by reference herein, previously filed as an exhibit to the registrant’s Form 10-Q filed on August 12, 2011. * |
| 14 | Code of Ethics of the Managing Member, incorporated by reference herein, previously filed as an exhibit to the registrant’s Form 10-K filed on April 16, 2009. |
| 31.1 | Certification of the Managing Partner of the Managing Member Pursuant to Rule 13A-14(a) and Rule 15D-14(a), of the Securities Exchange Act, as amended, dated March 31, 2011. |
| 31.2 | Certification of the Chief Financial Officer of the Managing Member Pursuant to Rule13A-14(a) and Rule 15D-14(a), of the Securities Exchange Act, as amended, dated March 31, 2011. |
| 32.1 | Certification of the Managing Partner of the Managing Member Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated March 31, 2011. |
| 32.2 | Certification of the Chief Financial Officer of the Managing Member Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated March 31, 2011. |
| 101 | The following financial information for Aspen Diversified Fund LLC formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders' Equity and Comprehensive Loss (Income), (iv) Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements. |
* Certain information in this exhibit has been redacted and filed separately with the Securities & Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: March 27, 2012 | |
| Aspen Diversified Fund LLC | |
| By: Aspen Partners, Ltd., Managing Member | |
| /s/ Kenneth E. Banwart | |
| Kenneth E. Banwart | |
| Managing Partner | |
| /s/ Deborah Terry | |
| Deborah Terry | |
| Chief Financial Officer |
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