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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR (    ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                 .

Commission File Number 000-22491

DIVERSIFIED MULTI-ADVISOR FUTURES FUND L.P. II

 

(Exact name of registrant as specified in its charter)

 

New York		13-3769020
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Ceres Managed Futures LLC

522 Fifth Avenue — 14th Floor

New York, New York 10036

 

(Address of principal executive offices) (Zip Code)

(212) 296-1999

 

(Registrant’s telephone number, including area code)

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

Yes   X     No    

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

Yes   X     No    

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

 

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

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

Yes           No  X

As of April 30, 2012, 14,194.9581 Limited Partnership Redeemable Units were outstanding.

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DIVERSIFIED MULTI-ADVISOR FUTURES FUND L.P. II

FORM 10-Q

INDEX

 

				Page Number
PART I - Financial Information:
Item 1.		Financial Statements:
		Statements of Financial Condition at March 31, 2012 (unaudited) and December 31, 2011		3
		Condensed Schedules of Investments at March 31, 2012 (unaudited) and December 31, 2011		4–5
		Statements of Income and Expenses and Changes in Partners’ Capital for the three months ended March 31, 2012 and 2011 (unaudited)		6
		Notes to Financial Statements (unaudited)		7–18
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		19–21
Item 3.		Quantitative and Qualitative Disclosures about Market Risk		22–26
Item 4.		Controls and Procedures		27
PART II - Other Information				28–31
Exhibits
Exhibit 31.1 Certification
Exhibit 31.2 Certification
Exhibit 32.1 Certification
Exhibit 32.2 Certification
101. INS XBRL Instance Document.
101. SCH XBRL Taxonomy Extension Schema Document.
101. CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101. LAB XBRL Taxonomy Extension Label Linkbase Document.
101. PRE XBRL Taxonomy Extension Presentation Linkbase Document.

 

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PART I

Item 1. Financial Statements

Diversified Multi-Advisor Futures Fund L.P. II

Statements of Financial Condition

 

		(Unaudited) March  31, 2012				December 31, 2011
Assets:
Investment in Funds, at fair value		$	14,188,015			$	14,562,030
Equity in trading account:
Cash			6,353,067				7,526,677
Cash margin			2,032,476				1,290,400
Net unrealized appreciation on open futures contracts			34,183				163,388
Net unrealized appreciation on open forward contracts			—				95,709
Total trading equity			22,607,741				23,638,204
Interest receivable			337				—
Total assets		$	22,608,078			$	23,638,204
Liabilities and Partners’ Capital:
Liabilities:
Net unrealized depreciation on open forward contracts		$	159,842			$	—
Accrued expenses:
Brokerage fees			112,241				118,192
Management fees			36,964				38,986
Other			157,222				128,648
Redemptions payable			58,878				148,394
Total liabilities			525,147				434,220
Partners’ Capital:
General Partner, 196.3844 unit equivalents at March 31, 2012 and December 31, 2011			299,033				308,746
Limited Partners, 14,306.2164 and 14,562.9818 Redeemable Units outstanding at March 31, 2012 and December 31, 2011, respectively			21,783,898				22,895,238
Total partners’ capital			22,082,931				23,203,984
Total liabilities and partners’ capital		$	22,608,078			$	23,638,204
Net asset value per unit		$	1,522.69			$	1,572.15

See accompanying notes to financial statements.

 

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Diversified Multi-Advisor Futures Fund L.P. II

Condensed Schedule of Investments

March 31, 2012

(Unaudited)

 

		Number of Contracts				Fair Value				% of  Partners’ Capital
Futures Contracts Purchased
Currencies			104			$	(73,435	)			(0.33	)%
Energy			4				(6,754	)			(0.03	)
Grains			16				16,566				0.07
Indices			107				8,342				0.04
Interest Rates Non-U.S.			375				54,578				0.25
Interest Rates U.S.			330				45,377				0.20
Metals			3				(7,210	)			(0.03	)
Softs			3				(844	)			(0.00	)*
Total futures contracts purchased							36,620				0.17
Futures Contracts Sold
Currencies			45				(24,117	)			(0.11	)
Energy			20				46,110				0.21
Grains			16				(6,342	)			(0.03	)
Indices			50				(347	)			(0.00	)*
Interest Rates Non-U.S.			29				(11,332	)			(0.05	)
Interest Rates U.S.			14				(11,094	)			(0.05	)
Livestock			5				7,210				0.03
Metals			2				(1,395	)			(0.01	)
Softs			12				(1,130	)			(0.00	)*
Total futures contracts sold							(2,437	)			(0.01	)
Unrealized Appreciation on Open Forward Contracts
Metals			392				1,248,560				5.65
Total unrealized appreciation on open forward contracts							1,248,560				5.65
Unrealized Depreciation on Open Forward Contracts
Metals			429				(1,408,402	)			(6.38	)
Total unrealized depreciation on open forward contracts							(1,408,402	)			(6.38	)
Investment in Funds
CMF Willowbridge Argo Master Fund L.P.							2,774,928				12.57
CMF Graham Capital Master Fund L.P.							3,734,737				16.91
CMF Eckhardt Master Fund L.P.							5,247,125				23.76
CMF SandRidge Master Fund L.P.							2,431,225				11.01
Total Investment in Funds							14,188,015				64.25
Net fair value						$	14,062,356				63.68	%

 

 

*	Due to rounding.

See accompanying notes to financial statements.

 

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Diversified Multi-Advisor Futures Fund L.P. II

Condensed Schedule of Investments

December 31, 2011

 

 

		Number of Contracts				Fair Value				% of Partners’ Capital
Futures Contracts Purchased
Currencies			43			$	25,870				0.11	%
Energy			10				(9,399	)			(0.04	)
Grains			16				8,627				0.04
Indices			25				24,647				0.11
Interest Rates Non-U.S.			347				72,497				0.31
Interest Rates U.S.			51				5,750				0.02
Livestock			1				(480	)			(0.00	)*
Metals			2				(1,430	)			(0.01	)
Softs			5				1,148				0.01
Total futures contracts purchased							127,230				0.55
Futures Contracts Sold
Currencies			87				71,769				0.31
Energy			1				160				0.00	*
Grains			16				(33,021	)			(0.14	)
Indices			13				66				0.00	*
Interest Rates Non-U.S.			7				(1,749	)			(0.01	)
Interest Rates U.S.			61				(4,550	)			(0.02	)
Livestock			2				(530	)			(0.00	)*
Metals			5				2,870				0.01
Softs			14				1,143				0.00	*
Total futures contracts sold							36,158				0.15
Unrealized Appreciation on Open Forward Contracts
Metals			201				653,331				2.81
Total unrealized appreciation on open forward contracts							653,331				2.81
Unrealized Depreciation on Open Forward Contracts
Metals			185				(557,622	)			(2.40	)
Total unrealized depreciation on open forward contracts							(557,622	)			(2.40	)
Investment in Funds
CMF Willowbridge Argo Master Fund L.P.							3,245,835				13.99
CMF Graham Capital Master Fund L.P.							3,731,550				16.08
CMF Eckhardt Master Fund L.P.							5,314,148				22.90
CMF SandRidge Master Fund L.P.							2,270,497				9.79
Total Investment in Funds							14,562,030				62.76
Net fair value						$	14,821,127				63.87	%

 

*	Due to rounding.

See accompanying notes to financial statements.

 

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Diversified Multi-Advisor Futures Fund L.P. II

Statements of Income and Expenses and Changes in Partners’ Capital

(Unaudited)

 

		Three Months Ended March 31,
		2012				2011
Investment Income:
Interest income		$	736			$	1,369
Interest income from investment in Funds			1,145				3,603
Total investment income (loss)			1,881				4,972
Expenses:
Brokerage fees including clearing fees			394,138				433,320
Management fees			115,299				128,398
Other			50,313				42,993
Total expenses			559,750				604,711
Net investment income (loss)			(557,869	)			(599,739	)
Trading Results:
Net gains (losses) on trading of commodity interests and investment in Funds:
Net realized gains (losses) on closed contracts			(142,014	)			448,157
Net realized gains (losses) on investment in Funds			408,544				684,039
Change in net unrealized gains (losses) on open contracts			(384,756	)			81,465
Change in net unrealized gains (losses) on investments in Funds			(38,880	)			(499,270	)
Total trading results			(157,106	)			714,391
Net income (loss)			(714,975	)			114,652
Redemptions — Limited Partners			(406,078	)			(549,721	)
Net increase (decrease) in Partners’ Capital			(1,121,053	)			(435,069	)
Partners’ Capital, beginning of period			23,203,984				25,749,357
Partners’ Capital, end of period		$	22,082,931			$	25,314,288
Net asset value per unit (14,502.6008 and 15,885.9538 units outstanding at March 31, 2012 and 2011, respectively)		$	1,522.69			$	1,593.50
Net income (loss) per unit*		$	(49.46	)		$	7.09
Weighted average units outstanding			14,631.7375				16,135.8789

 

 

*	Based on change in net asset value per unit.

See accompanying notes to financial statements.

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

1. General:

Diversified Multi-Advisor Futures Fund L.P. II (the “Partnership”) is a limited partnership organized on May 10, 1994 under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures contracts, options, swaps and forward contracts. The sectors traded include currencies, energy, grains, indices, metals, softs, livestock, lumber and U.S. and non-U.S. interest rates. The commodity interests that are traded by the Partnership directly and through its investment in the Funds (as defined in Note 5 “Investment in Funds”) are volatile and involve a high degree of market risk. The Partnership was authorized to sell up to 100,000 redeemable units of limited partnership interest (“Redeemable Units”) during its initial offering period. The Partnership no longer offers Redeemable Units for sale.

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

As of March 31, 2012, all trading decisions are made for the Partnership by Capital Fund Management S.A. (“CFM”), Graham Capital Management L.P. (“Graham”), Willowbridge Associates Inc. (“Willowbridge”), Eckhardt Trading Company (“Eckhardt”) and SandRidge Capital L.P. (“SandRidge”) (each an “Advisor” and collectively, the “Advisors”), each of which is a registered commodity trading advisor. Each Advisor is allocated a portion of the Partnership’s assets to manage. The Partnership invests the portion of its assets allocated to CFM directly, whereas the Partnership invests the portion of its assets allocated to each of the other Advisors indirectly through investments in master funds.

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

The accompanying financial statements and accompanying notes are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at March 31, 2012 and December 31, 2011, and the results of its operations and changes in partners’ capital for the three months ended March 31, 2012 and 2011. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. You should read these financial statements together with the financial statements and notes included in the Partnership’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2011.

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

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

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

2. Financial Highlights:

Changes in the net asset value per unit for the three months ended March 31, 2012 and 2011 were as follows:

 

		Three Months Ended March 31,
		2012				2011
Net realized and unrealized gains (losses) *		$	(38.27	)		$	17.41
Interest Income			0.13				0.30
Expenses **			(11.32	)			(10.62	)
Increase (decrease) for the period			(49.46	)			7.09
Net asset value per unit, beginning of period			1,572.15				1,586.41
Net asset value per unit, end of period		$	1,522.69			$	1,593.50

 

 

*	Includes brokerage fees.

 

**	Excludes brokerage fees.

 

		Three Months Ended March 31,
		2012				2011*****
Ratios to average net assets: ***
Net investment income (loss)			(9.8	)%			(9.5	)%
Incentive fees			—	%			—	%
Net investment income (loss) before incentive fees ****			(9.8	)%			(9.5	)%
Operating expenses			9.8	%			9.6	%
Incentive fees			—	%			—	%
Total expenses			9.8	%			9.6	%
Total return:
Total return before incentive fees			(3.1	)%			0.4	%
Incentive fees			—	%			—	%
Total return after incentive fees			(3.1	)%			0.4	%

 

 

***	Annualized (other than incentive fees).

 

****	Interest income less total expenses.

 

*****

The ratios are shown net and gross of incentive fees to conform to current period presentation.

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

3. Trading Activities:

The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership’s trading activities are shown in the Statements of Income and Expenses and Changes in Partners’ Capital.

The customer agreements between the Partnership and CGM and the Funds and CGM give the Partnership and the Funds, respectively, the legal right to net unrealized gains and losses on open futures contracts, exchange-cleared swaps and open forward contracts. The Partnership and the Funds net, for financial reporting purposes, the unrealized gains and losses on open futures exchange-cleared swaps and on open forward contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification (“ASC”) 210-20, “Balance Sheet”, have been met.

All of the commodity interests owned by the Partnership are held for trading purposes. All of the commodity interests owned by the Funds are held for trading purposes. The monthly average number of futures contracts traded directly by the Partnership during the three months ended March 31, 2012 and 2011 were 1,050 and 549, respectively. The monthly average number of metals forward contracts traded directly by the Partnership during the three months ended March 31, 2012 and 2011 were 624 and 110, respectively.

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

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

The following tables indicate the gross fair values of derivative instruments of futures and forward contracts traded directly by the Partnership as separate assets and liabilities as of March 31, 2012 and December 31, 2011.

 

		March 31, 2012
Assets
Futures Contracts
Currencies		$	3,475
Energy			46,110
Grains			20,049
Indices			34,234
Interest Rates U.S.			48,863
Interest Rates Non-U.S.			64,391
Livestock			7,210
Softs			2,604
Total unrealized appreciation on open futures contracts		$	226,936
Liabilities
Futures Contracts
Currencies		$	(101,027	)
Energy			(6,754	)
Grains			(9,825	)
Indices			(26,239	)
Interest Rates U.S.			(14,580	)
Interest Rates Non-U.S.			(21,145	)
Metals			(8,605	)
Softs			(4,578	)
Total unrealized depreciation on open futures contracts		$	(192,753	)
Net unrealized appreciation on open futures contracts		$	34,183	*
Assets
Forward Contracts
Metals			1,248,560
Total unrealized appreciation on open forward contracts		$	1,248,560
Liabilities
Forward Contracts
Metals			(1,408,402	)
Total unrealized depreciation on open forward contracts		$	(1,408,402	)
Net unrealized depreciation on open forward contracts		$	(159,842	)**

 

 

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

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

 

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		December 31, 2011
Assets
Futures Contracts
Currencies		$	102,414
Energy			3,746
Grains			10,099
Indices			26,205
Interest Rates U.S.			8,484
Interest Rates Non-U.S.			94,587
Metals			4,658
Softs			9,138
Total unrealized appreciation on open futures contracts		$	259,331
Liabilities
Futures Contracts
Currencies		$	(4,775	)
Energy			(12,985	)
Grains			(34,493	)
Indices			(1,492	)
Interest Rates U.S.			(7,284	)
Interest Rates Non-U.S.			(23,839	)
Livestock			(1,010	)
Metals			(3,218	)
Softs			(6,847	)
Total unrealized depreciation on open futures contracts		$	(95,943	)
Net unrealized appreciation on open futures contracts		$	163,388	*
Assets
Forward Contracts
Metals			653,331
Total unrealized appreciation on open forward contracts		$	653,331
Liabilities
Forward Contracts
Metals			(557,622	)
Total unrealized depreciation on open forward contracts		$	(557,622	)
Net unrealized appreciation on open forward contracts		$	95,709	**

 

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

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

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

The following tables indicate the trading gains and losses, by market sector, on derivative instruments traded directly by the Partnership for the three months ended March 31, 2012 and 2011.

 

Sector		Three Months Ended March 31, 2012 Gain (loss) from trading				Three Months Ended March 31, 2011 Gain (loss) from trading
Currencies		$	(108,027	)		$	295,759
Energy			175,794				29,245
Grains			(130,585	)			12,061
Indices			199,491				255,466
Interest Rates U.S.			(84,484	)			109,295
Interest Rates Non-U.S.			(292,264	)			(253,036	)
Livestock			2,657				(3,700	)
Softs			(20,829	)			(17,962	)
Metals			(268,523	)			102,494
Total		$	(526,770	)***		$	529,622	***

 

 

***	This amount is in “Total trading results” on the Statements of Income and Expenses and Changes in Partners’ Capital.

4. Fair Value Measurements:

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

Partnership’s and the Funds’ Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Partnership’s and the Funds’ Level 1 assets and liabilities are actively traded.

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

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

Effective January 1, 2012, the Partnership adopted Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards” (“IFRS”). The amendments within this ASU change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between GAAP and IFRS. However, some of the amendments clarify FASB’s intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This new guidance did not have a significant impact on the Partnership’s financial statements.

The Partnership and the Funds consider prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets and liabilities from observable inputs (Level 2). Investments in Funds (other commodity pools) where there are with no rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value (Level 2). The value of the Partnership’s investments in the Funds reflects its proportional interest in the Funds. As of and for the periods ended March 31, 2012 and December 31, 2011, the Partnership and the Funds did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). There were no transfers of assets and liabilities between Level 1 and Level 2 during the quarter ended March 31, 2012.

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

		March 31, 2012				Quoted Prices in Active  Markets for Identical sets (Level 1)				Significant Other Observable  Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets
Investment in Funds		$	14,188,015			$	—			$	14,188,015			$	—
Futures			226,936				226,936				—				—
Forwards			1,248,560				1,248,560				—				—
Total assets			15,663,511				1,475,496				14,188,015				—
Liabilities
Futures		$	192,753			$	192,753			$	—			$	—
Forwards			1,408,402				1,408,402				—				—
Total liabilities			1,601,155				1,601,155				—				—
Net fair value		$	14,062,356			$	(125,659	)		$	14,188,015			$	—

 

		December 31, 2011				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets
Investment in Funds		$	14,562,030			$	—			$	14,562,030			$	—
Futures			259,331				259,331				—				—
Forwards			653,331				653,331				—				—
Total assets			15,474,692				912,662				14,562,030				—
Liabilities
Futures		$	95,943			$	95,943			$	—			$	—
Forwards			557,622				557,622				—				—
Total liabilities			653,565				653,565				—				—
Net fair value		$	14,821,127			$	259,097			$	14,562,030			$	—

5. Investment in Funds:

The assets allocated to CFM for trading are invested directly pursuant to CFM’s Discus (1.5x Leverage) Program, a proprietary, systematic trading system.

On July 1, 2005, the assets allocated to Willowbridge for trading were invested in CMF Willowbridge Argo Master Fund L.P. (“Willowbridge Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 10,980.9796 units of Willowbridge Master with cash equal to $9,895,326 and a contribution of open commodity futures and forward positions with a fair value of $1,085,654. Willowbridge Master was formed in order to permit commodity pools managed now or in the future by Willowbridge using its Argo Trading System, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Willowbridge Master. Individual and pooled accounts currently managed by Willowbridge, including the Partnership, are permitted to be limited partners of Willowbridge Master. The General Partner and Willowbridge believe that trading through this structure should promote efficiency and economy in the trading process.

On April 1, 2006, the assets allocated to Graham for trading were invested in CMF Graham Capital Master Fund L.P. (“Graham Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 11,192.9908 units of Graham Master with cash equal to $11,192,991. Graham Master was formed in order to permit commodity pools managed now or in the future by Graham using its K4D-15V Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Graham Master. Individual and pooled accounts currently managed by Graham, including the Partnership, are permitted to be limited partners of Graham Master. The General Partner and Graham believe that trading through this structure should promote efficiency and economy in the trading process.

On April 1, 2008, the assets allocated to Eckhardt for trading were invested in CMF Eckhardt Master Fund L.P. (“Eckhardt Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 7,000.0000 units of Eckhardt Master with cash equal to $7,000,000. Eckhardt Master was formed in order to permit commodity pools managed now or in the future by Eckhardt using its Standard Program-Higher Leveraged, a proprietary, systematic trading system, to invest together in one

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

trading vehicle. The General Partner is also the general partner of Eckhardt Master. Individual and pooled accounts currently managed by Eckhardt, including the Partnership, are permitted to be limited partners of Eckhardt Master. The General Partner and Eckhardt believe that trading through this structure should promote efficiency and economy in the trading process.

On June 1, 2009, the assets allocated to SandRidge for trading were invested in the CMF SandRidge Master Fund L.P. (“SandRidge Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 2,086.0213 units of SandRidge Master with cash equal to $4,288,986. SandRidge Master was formed in order to permit commodity pools managed now or in the future by SandRidge using its Energy Program, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the general partner of SandRidge Master. Individual and pooled accounts currently managed by SandRidge, including the Partnership, are permitted to be limited partners of SandRidge Master. The General Partner and SandRidge believe that trading through this structure should promote efficiency and economy in the trading process.

The General Partner is not aware of any material changes to the trading programs discussed above during the fiscal quarter ended March 31, 2012.

Willowbridge Master’s, Graham Master’s, Eckhardt Master’s and SandRidge Master’s (collectively, the “Funds”) and the Partnership’s trading of futures, forwards, swaps and options contracts, if applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. The Funds and the Partnership engage in such trading through commodity brokerage accounts maintained with CGM.

A limited partner of the Funds may withdraw all or part of their capital contribution and undistributed profits, if any, from the Funds in multiples of the net asset value per Redeemable Unit as of the end of any day (the “Redemption Date”) after a request for redemption has been made to the general partner of the Funds at least 3 days in advance of the Redemption Date. The units are classified as a liability when the limited partner elects to redeem and informs the Funds.

Management and incentive fees are charged at the Partnership level. All exchange, clearing, user, give-up, floor brokerage and National Futures Association fees (collectively the “clearing fees”) are borne by the Partnership directly and through its investment in the Funds. All other fees including CGM’s direct brokerage fees are charged at the Partnership level.

As of March 31, 2012, the Partnership owned approximately 6.9%, 3.0%, 26.1% and 0.7%, of Willowbridge Master, Graham Master, Eckhardt Master and SandRidge Master, respectively. As of December 31, 2011, the Partnership owned approximately 5.5%, 2.9%, 25.9% and 0.8%, of Willowbridge Master, Graham Master, Eckhardt Master and SandRidge Master, respectively. It is the Partnership’s intention to continue to invest in the Funds. The performance of the Partnership is directly affected by the performance of the Funds. Expenses to investors as a result of the investment in the Funds are approximately the same and redemption rights are not affected.

Summarized information reflecting the total assets, liabilities and capital of the Funds is shown in the following tables.

 

		March 31, 2012
		Total Assets				Total Liabilities				Total Capital
Willowbridge Master		$	40,497,338			$	58,093			$	40,439,245
Graham Master			126,414,592				815,596				125,598,996
Eckhardt Master			20,210,407				108,458				20,101,949
SandRidge Master			336,627,273				114,501				336,512,772
Total		$	523,749,610			$	1,096,648			$	522,652,962

 

		December 31, 2011
		Total Assets				Total Liabilities				Total Capital
Willowbridge Master		$	58,685,838			$	62,005			$	58,623,833
Graham Master			127,567,600				44,426				127,523,174
Eckhardt Master			20,578,273				71,694				20,506,579
SandRidge Master			303,638,504				7,192,752				296,445,752
Total		$	510,470,215			$	7,370,877			$	503,099,338

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

Summarized information reflecting the net investment income (loss), total trading results and net income (loss) for the Funds is shown in the following tables.

 

		For the three months ended March 31, 2012
		Net Investment Income (Loss)				Total  Trading Results				Net Income (Loss)
Willowbridge Master		$	(24,293	)		$	(2,080,068	)		$	(2,104,361	)
Graham Master			(154,873	)			3,061,669				2,906,796
Eckhardt Master			(50,920	)			245,610				194,690
SandRidge Master			(232,244	)			49,569,214				49,336,970
Total		$	(462,330	)		$	50,796,425			$	50,334,095
		For the three months ended March 31, 2011
		Net Investment Income (Loss)				Total Trading Results				Net Income (Loss)
Willowbridge Master		$	(25,559	)		$	6,874,935			$	6,849,376
Graham Master			(146,256	)			(1,070,720	)			(1,216,976	)
Eckhardt Master			(54,656	)			(273,717	)			(328,373	)
SandRidge Master			(250,105	)			15,043,073				14,792,968
Total		$	(476,576	)		$	20,573,571			$	20,096,995

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

Summarized information reflecting the Partnership’s investment in, and the operations of, the Funds is shown in the following tables.

 

		March 31, 2012								For the three months ended March 31, 2012
		% of Partnership’s				Fair				Income				Expenses								Net Income				Investment		Redemptions
Funds		Net Assets				Value				(Loss)				Brokerage Fees				Other				(Loss)				Objective		Permitted
Willowbridge Master			12.57	%		$	2,774,928			$	(139,997	)		$	649			$	1,172			$	(141,818	)		Commodity Portfolio		Monthly
Graham Master			16.91	%			3,734,737				89,843				4,430				446				84,967			Commodity Portfolio		Monthly
Eckhardt Master			23.76	%			5,247,125				62,774				8,997				4,663				49,114			Commodity Portfolio		Monthly
SandRidge Master			11.01	%			2,431,225				358,189				1,290				560				356,339			Energy Portfolio		Monthly
Total						$	14,188,015			$	370,809			$	15,366			$	6,841			$	348,602
		December 31, 2011								For the three months ended March 31, 2011
		% of Partnership’s				Fair				Income				Expenses								Net Income				Investment		Redemptions
Funds		Net Assets				Value				(Loss)				Brokerage Fees				Other				(Loss)				Objective		Permitted
Willowbridge Master			13.99	%		$	3,245,835			$	150,565			$	842			$	650			$	149,073			Commodity Portfolio		Monthly
Graham Master			16.08	%			3,731,550				(31,601	)			4,659				678				(36,938	)		Commodity Portfolio		Monthly
Eckhardt Master			22.90	%			5,314,148				(61,869	)			10,875				4,477				(77,221	)		Commodity Portfolio		Monthly
SandRidge Master			9.79	%			2,270,497				131,277				1,908				643				128,726			Energy Portfolio		Monthly
Total						$	14,562,030			$	188,372			$	18,284			$	6,448			$	163,640

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

6. Financial Instrument Risks:

In the normal course of business, the Partnership and the Funds are parties to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter (“OTC”). Exchange-traded instruments are standardized and include futures and certain forwards and option contracts. OTC contracts are negotiated between contracting parties and include forwards, swaps and certain option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer or seller of an option has unlimited risk. Each of these instruments is subject to various risks similar to those relating to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates that at any given time approximately 2.0% to 4.8% of the Partnership’s/Master’s contracts are traded OTC.

The risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.

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

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

As both a buyer and seller of options, the Funds pay or receive a premium at the outset and then bear the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Funds to potentially unlimited liability; for purchased options, the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Funds do not consider these contracts to be guarantees.

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

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

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

7. Critical Accounting Policies:

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

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

Partnership’s and the Funds’ Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Partnership’s and the Funds’ Level 1 assets and liabilities are actively traded.

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

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

The Partnership and the Funds consider prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets and liabilities from observable inputs (Level 2). Investments in funds (other commodity pools) where there are no other rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value (Level 2). The value of the Partnership’s investments in the Funds reflects its proportional interest in the Funds. As of and for the periods ended March 31, 2012 and December 31, 2011, the Partnership and the Funds did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

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

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

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

 

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Diversified Multi-Advisor Futures Fund L.P. II

Notes to Financial Statements

March 31, 2012

(Unaudited)

 

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

Options. The Funds may purchase and write (sell) both exchange listed and OTC options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Funds write an option, the premium received is recorded as a liability in the Statements of Financial Condition and marked to market daily. When the Funds purchase an option, the premium paid is recorded as an asset in the Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes in net unrealized gains (losses) on options contracts are included in the Statements of Income and Expenses and Changes in Partners’ Capital.

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

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

The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2008 through 2011 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.

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

Recent Accounting Pronouncements. In October 2011, FASB issued a proposed ASU intended to improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company. Under longstanding GAAP, investment companies carry all of their investments at fair value, even if they hold a controlling interest in another company. The primary changes being proposed by FASB relate to which entities would be considered investment companies as well as certain disclosure and presentation requirements. In addition to the changes to the criteria for determining whether an entity is an investment company, FASB also proposes that an investment company consolidate another investment company if it holds a controlling financial interest in the entity. The Partnership will evaluate the impact that this proposed update would have on the financial statements once the pronouncement is issued.

In December 2011, FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities,” which creates a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangements associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparisons between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of IFRS. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Partnership should also provide the disclosures retrospectively for all comparative periods presented. The Partnership is currently evaluating the impact that the pronouncement would have on the financial statements.

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

 

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

Liquidity and Capital Resources

The Partnership does not engage in sales of goods or services. The Partnership’s assets are its (i) investment in Funds, (ii) equity in its trading account, consisting of cash and cash equivalents, net unrealized appreciation on open futures contracts and open forward contracts, and (iii) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the first quarter of 2012.

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

For the three months ended March 31, 2012, Partnership capital decreased 4.8% from $23,203,984 to $22,082,931. This decrease was attributable to the redemptions of 256.7654 Redeemable Units resulting in an outflow of $406,078, coupled with a net loss from operations of $714,975. Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 7 of the Financial Statements.

The Partnership and the Funds record all investments at fair value in their financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners’ Capital.

 

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Results of Operations

During the Partnership’s first quarter of 2012, the net asset value per unit decreased 3.1% from $1,572.15 to $1,522.69 as compared to an increase of 0.4% in the first quarter of 2011. The Partnership experienced a net trading loss (comprised of net realized gains (losses) on closed positions and investment in Funds and change in net unrealized gains (losses) on open positions and investment in Funds) before brokerage fees and related fees in the first quarter of 2012 of $157,106. Losses were primarily attributable to the Partnership’s and the Funds’ trading of commodity futures in currencies, grains, metals, softs, U.S. and non-U.S. interest rates and were partially offset by gains in energy, indices and livestock. The Partnership experienced a net trading gain before brokerage fees and related fees in the first quarter of 2011 of $714,391. Gains were primarily attributable to the Partnership’s and the Funds’ trading of commodity futures in currencies, energy, metals, softs and indices and were partially offset by losses in grains, livestock, non-U.S. and U.S. interest rates.

The most significant losses were recorded within the global interest rate sector during February and March from long positions in U.S., European, Japanese, and Australian fixed-income futures. During February, prices fell amid optimism that Greece would receive a second bailout, thereby diminishing demand for the relative “safety” of government bonds. Meanwhile, prices fell further during March after the U.S. Federal Reserve upwardly revised their U.S. economic outlook. Losses were experienced within the currency markets throughout the majority of the quarter. In January, short positions in the British pound, euro, and Swiss franc versus the U.S. dollar resulted in losses as the value of these currencies reversed higher against the U.S. dollar. During March, long positions in the Canadian dollar and Mexican peso versus the U.S. dollar resulted in losses as the value of these commodity-linked currencies fell against the U.S. dollar after concern over earnings in China reduced demand for higher-yielding currency assets. Within the metals markets, losses were recorded throughout the majority of the quarter from short positions aluminum and zinc futures as prices advanced on speculation metals demand will be supported by economic expansion in the U.S. and an easing credit policy in China. Elsewhere, losses were experienced from long positions in silver futures as prices declined on speculation that the U.S. Federal Reserve will refrain from offering additional stimulus as the economy recovers, eroding demand for the precious metal. Additional losses were incurred within the agricultural complex, primarily during January, from short positions in cocoa futures as prices advanced on concern supplies from the Ivory Coast may weaken. Meanwhile, losses were incurred from long positions in corn futures as prices declined on speculation that rising U.S. ethanol stockpiles will slow demand for the grain, boosting supply.

A portion of the Partnership’s losses for the quarter was offset by gains experienced within the energy sector from short positions in natural gas futures as prices dropped throughout the majority of the quarter amid ample inventories and mild weather across the U.S. Additional gains were experienced during February from long futures positions in RBOB (unleaded) gasoline and Brent crude as prices increased on concerns over inventory levels and rising tensions in the Middle East. Within the global stock index sector, gains were achieved throughout the majority of the quarter from long positions in U.S., European, and Pacific Rim equity index futures as prices were buoyed higher by better-than-expected economic reports in these regions. Prices also rose after China cut banks’ reserve requirements to fuel lending and the U.S. Federal Reserve Board raised its assessment of the U.S. economy.

 

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

Interest income on 80% of the Partnership’s daily average equity maintained in cash in it’s (or the Partnerships allocable portion of a fund’s) account during each month at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days. Interest income for the three months ended March 31, 2012 decreased by $3,091, as compared to the corresponding period in 2011. The decrease in interest income is due to lower average daily equity and lower U.S. Treasury bill rates during the three months ended March 31, 2012 as compared to the corresponding period in 2011. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership’s/Funds’ accounts and upon interest rates over which neither the Partnership nor CGM has control.

Brokerage fees are calculated as a percentage of the Partnership’s net asset value as of the last day of each month and are affected by trading performance and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Brokerage fees for the three months ended March 31, 2012 decreased by $39,182, as compared to the corresponding period in 2011. The decrease in brokerage fees is due to lower average net assets during the three months ended March 31, 2012, as compared to the corresponding period in 2011.

Management fees are calculated on the portion of the Partnership’s net asset value allocated to each Advisor at the end of the month and are affected by trading performance and redemptions. Management fees for the three months ended March 31, 2012 decreased by $13,099, as compared to the corresponding period in 2011. The decrease in management fees is due to lower average net assets during the three months ended March 31, 2012, as compared to the corresponding period in 2011.

Incentive fees are based on the new trading profits generated by each Advisor as defined in the advisory agreements among the Partnership, the General Partner and each Advisor. There were no incentive fees for the three months ended March 31, 2012 and 2011, respectively. The Advisor will not be paid incentive fees until the Advisor recovers the net loss incurred by the Advisor and earns additional new trading profits for the Partnership.

In allocating the assets of the Partnership among the Advisors, the General Partner considers each Advisor’s past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets among the Advisors and may allocate assets to additional advisors at any time.

As of March 31, 2012 and December 31, 2011, the Partnership’s assets were allocated among the trading Advisors in the following approximate percentages:

 

Advisor		March 31, 2012				December 31, 2011
Graham Capital Management, L.P.			17	%			16	%
Capital Fund Management SA			36	%			38	%
Willowbridge Associates, Inc.			12	%			14	%
Eckhardt Trading Company			24	%			23	%
SandRidge Capital, L.P.			11	%			9	%

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

The limited partners will not be liable for losses exceeding the current net asset value of their investment.

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

The Partnership and the 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 Partnership’s and the Funds’ past performance is not necessarily indicative of their future results.

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

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

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. With the exception of CFM, the Advisors currently trade the Partnership’s assets indirectly in master fund managed accounts over which they have been granted limited authority to make trading decisions. CFM directly trades a managed account in the Partnership’s name. The first two trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly and through its investment in the Funds as of March 31, 2012 and December 31, 2011. The remaining trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly (i.e., in the managed account in the Partnership’s name traded by CFM) and indirectly by each Fund separately. There have been no material changes in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

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The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of March 31, 2012 and December 31, 2011. As of March 31, 2012, the Partnership’s total capitalization was $22,082,931.

 

Market Sector		Value at Risk				% of  Total Capitalization
Currencies		$	560,248				2.54	%
Energy			343,844				1.55	%
Grains			99,756				0.45	%
Indices			381,937				1.73	%
Interest Rates U.S.			526,853				2.39	%
Interest Rates Non-U.S.			465,422				2.11	%
Livestock			393,390				1.78	%
Metals			98,008				0.44	%
Softs			290,640				1.32	%
Total		$	3,160,098				14.31	%
As of December 31, 2011, the Partnership’s total capitalization was $23,203,984.   December 31, 2011
Market Sector		Value at Risk				% of  Total Capitalization
Currencies		$	677,467				2.92%
Energy			197,094				0.85%
Grains			107,413				0.46%
Indices			188,001				0.81%
Interest Rates U.S.			320,082				1.38%
Interest Rates Non-U.S.			334,486				1.44%
Livestock			468,606				2.02%
Metals			138,132				0.59%
Softs			182,559				0.79%
Total		$	2,613,840				11.26%

The following tables indicate the trading Value at Risk associated with the Partnership’s direct investments and indirect investments in the Funds by market category as of March 31, 2012 and December 31, 2011 and the highest and lowest value at any point and the average value during the three months ended March 31, 2012 and for the twelve months ended December 31, 2011. All open position trading risk exposures of the Partnership/Funds have been included in calculating the figures set forth below.

As of March 31, 2012, the Partnership’s total capitalization was $22,082,931. The Partnership’s Value at Risk for the portion of its assets that are traded directly by CFM using its Discus 1.5x Leverage Program was as follows:

March 31, 2012

 

										Three months ended March 31, 2012
Market Sector		Value at Risk				% of Total Capitalization				High Value at  Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	301,102				1.36	%		$	724,212			$	56,937			$	393,128
Energy			56,000				0.26	%			131,074				3,750				58,931
Grains			29,200				0.13	%			73,206				4,500				40,743
Indices			478,300				2.17	%			808,004				32,135				456,640
Interest Rates U.S.			139,386				0.63	%			248,775				9,041				184,370
Interest Rates Non -U.S.			391,435				1.77	%			564,387				32,678				381,899
Livestock			6,100				0.03	%			6,200				600				4,092
Metals			224,998				1.02	%			362,542				11,076				244,479
Softs			33,342				0.15	%			56,556				1,350				32,435
Total		$	1,659,863				7.52	%

 

 

*	Average of month-end Values at Risk.

As of December 31, 2011, the Partnership’s total capitalization was $23,203,984. The Partnership’s Value at Risk for the portion of its assets that are traded directly by CFM using its Discus 1.5x Leverage Program was as follows:

December 31, 2011

 

										Twelve months ended December 31, 2011
Market Sector		Value at Risk				% of Total Capitalization				High Value at  Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	254,220				1.10	%		$	466,000			$	56,937			$	210,969
Energy			41,050				0.18	%			184,704				3,750				43,309
Grains			35,462				0.15	%			97,179				4,500				32,161
Indices			151,831				0.65	%			699,165				32,135				276,814
Interest Rates U.S.			84,161				0.36	%			527,400				4,025				188,478
Interest Rates Non -U.S.			468,293				2.02	%			588,449				32,678				290,335
Livestock			2,475				0.01	%			11,050				450				3,438
Metals			116,672				0.50	%			320,124				11,076				121,162
Softs			44,249				0.19	%			73,672				1,350				22,661
Total		$	1,198,413				5.16	%

 

 

*	Annual average based on month-end Value at Risk.

 

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As of March 31, 2012, Willowbridge Master’s total capitalization was $40,439,245. The Partnership owned approximately 6.9% of Willowbridge Master. As of March 31, 2012, Willowbridge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Willowbridge for trading) was as follows:

March 31, 2012

 

										Three months ended March 31, 2012
Market Sector		Value at Risk				% of Total Capitalization				High Value at  Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	212,979				0.53	%		$	3,114,825			$	212,979			$	543,573
Energy			187,480				0.46	%			3,518,500				187,480				414,493
Grains			204,250				0.51	%			2,109,250				49,500				158,833
Interest Rates U.S.			31,875				0.08	%			1,213,250				31,875				193,892
Livestock			25,200				0.06	%			76,000				13,200				17,200
Softs			215,000				0.53	%			2,629,700				37,700				177,433
Total		$	876,784				2.17	%

 

 

*	Average of month-end Values at Risk.

As of December 31, 2011, Willowbridge Master’s total capitalization was $58,623,833. The Partnership owned approximately 5.5% of Willowbridge Master. As of December 31, 2011, Willowbridge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Willowbridge for trading) was as follows:

December 31, 2011

 

										Twelve months ended December 31, 2011
Market Sector		Value at Risk				% of Total Capitalization				High Value at  Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	1,519,874				2.60	%		$	3,114,825			$	191,750			$	1,146,326
Energy			283,500				0.48	%			4,681,000				144,000				1,513,100
Interest Rates U.S.			285,900				0.49	%			1,654,100				108,350				417,625
Interest Rates Non-U.S.			813,981				1.39	%			2,784,138				382,835				972,513
Metals			1,350,000				2.30	%			4,137,702				272,000				1,716,030
Softs			481,250				0.82	%			3,503,200				112,000				1,050,396
Total		$	4,734,505				8.08	%

 

 

*	Annual average based on month-end Value at Risk.

As of March 31, 2012, Graham Master’s total capitalization was $125,598,996. The Partnership owned approximately 3.0% of Graham Master. As of March 31, 2012, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:

March 31, 2012

 

										Three months ended March 31, 2012
Market Sector		Value at Risk				% of Total Capitalization				High Value at  Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	2,932,243				2.33	%		$	14,645,028			$	2,932,243			$	4,034,576
Energy			3,313,986				2.64	%			3,576,694				430,473				2,846,436
Grains			808,031				0.65	%			1,548,650				436,750				904,239
Indices			7,212,315				5.74	%			11,180,261				3,276,704				7,274,223
Interest Rates U.S.			190,045				0.15	%			2,390,488				91,689				1,243,390
Interest Rates Non-U.S.			5,163,732				4.11	%			6,411,562				813,077				5,317,338
Livestock			7,200				0.01	%			63,600				1,200				10,400
Metals			1,595,641				1.27	%			2,278,016				616,825				1,259,297
Softs			946,658				0.75	%			999,000				241,774				739,956
Total		$	22,169,851				17.65	%

 

 

*	Average of month-end Values at Risk.

 

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As of December 31, 2011, Graham Master’s total capitalization was $127,523,174. The Partnership owned approximately 2.9% of Graham Master. As of December 31, 2011, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:

December 31, 2011

 

										Twelve months ended December 31, 2011
Market Sector		Value at Risk				% of Total Capitalization				High Value at Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	5,181,686				4.06	%		$	14,715,746			$	1,934,690			$	8,500,010
Energy			2,114,289				1.66	%			2,114,289				430,473				1,224,336
Grains			1,611,500				1.27	%			1,783,300				325,891				633,165
Indices			4,513,393				3.54	%			11,180,261				924,448				3,873,039
Interest Rates U.S.			1,636,222				1.28	%			4,564,925				91,689				1,397,376
Interest Rates Non-U.S.			5,486,252				4.30	%			5,647,770				813,077				2,296,485
Livestock			10,800				0.01	%			127,950				2,400				35,984
Metals			2,117,496				1.66	%			2,219,604				616,825				1,237,109
Softs			987,729				0.77	%			987,729				161,005				421,227
Total		$	23,659,367				18.55	%

 

 

*	Annual average based on month-end Value at Risk.

As of March 31, 2012, Eckhardt Master’s total capitalization was $20,101,949. The Partnership owned approximately 26.1% of Eckhardt Master. As of March 31, 2012, Eckhardt Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Eckhardt for trading) was as follows:

March 31, 2012

 

										Three months ended March 31, 2012
Market Sector		Value at Risk				% of Total Capitalization				High Value at  Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	599,552				2.98	%		$	1,671,011			$	345,179			$	672,001
Energy			383,400				1.91	%			7,866,490				191,724				341,000
Grains			123,453				0.61	%			528,082				5,000				123,971
Indices			506,610				2.52	%			889,841				49,718				380,514
Interest Rates U.S.			155,755				0.78	%			553,700				3,900				260,213
Interest Rates Non-U.S.			655,646				3.26	%			655,646				21,132				436,580
Metals			168,732				0.84	%			618,550				101,978				155,403
Softs			85,850				0.43	%			124,357				29,700				66,283
Total		$	2,678,998				13.33	%

 

•	Average of month-end Values at Risk.

As of December 31, 2011, Eckhardt Master’s total capitalization was $20,506,579. The Partnership owned approximately 25.9% of Eckhardt Master. As of December 31, 2011, Eckhardt Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Eckhardt for trading) was as follows:

December 31, 2011

 

										Twelve months ended December 31, 2011
Market Sector		Value at Risk				% of Total Capitalization				High Value at  Risk				Low Value at  Risk				Average Value at  Risk*
Currencies		$	731,217				3.57	%		$	1,678,029			$	27,951			$	834,998
Energy			223,190				1.10	%			886,666				6,000				412,832
Grains			97,363				0.47	%			528,082				3,500				144,509
Indices			49,666				0.24	%			1,132,389				5,600				466,488
Interest Rates U.S.			405,700				1.98	%			1,698,650				3,900				330,777
Interest Rates Non-U.S.			179,363				0.87	%			1,114,087				9,616				264,205
Softs			41,600				0.20	%			131,208				10,463				66,776
Total		$	1,728,099				8.43	%

 

 

*	Annual average based on month-end Value at Risk.

 

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As of March 31, 2012, SandRidge Master’s total capitalization was $336,512,772. The Partnership owned approximately 0.7% of SandRidge Master. As of March 31, 2012, SandRidge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to SandRidge for trading) was as follows:

March 31, 2012

 

										Three months ended March 31, 2012
Market Sector		Value at Risk				% of Total Capitalization				High Value at Risk				Low Value at  Risk				Average Value at  Risk*
Energy		$	10,774,354				3.20	%		$	61,733,650			$	2,425,471			$	14,120,025
Total		$	10,774,354				3.20	%

 

 

*	Average of month-end Values at Risk.

As of December 31, 2011, SandRidge Master’s total capitalization was $296,445,752. The Partnership owned approximately 0.8% of SandRidge Master. As of December 31, 2011, SandRidge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to SandRidge for trading) was as follows:

December 31, 2011

 

										Twelve months ended December 31, 2011
Market Sector		Value at Risk				% of Total Capitalization				High Value at Risk				Low Value at Risk				Average Value at  Risk*
Energy		$	2,666,386				0.90	%		$	61,733,650			$	1,015,817			$	20,188,738
Total		$	2,666,386				0.90	%

 

 

*	Annual average based on month-end Value at Risk.

 

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Item 4. Controls and Procedures

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

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

The General Partner’s CEO and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2012 and, based on that evaluation, the General Partner’s CEO and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.

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

 

•

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

 

•

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

 

•

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

There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended March 31, 2012 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The following information supplements and amends the discussion set forth under Part I, Item 3. “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. There are no material legal proceedings pending against the Partnership and the General Partner.

Subprime Mortgage-Related Litigation and Other Matters

On March 15, 2012, the United States Court of Appeals for the Second Circuit granted a stay of the district court proceedings pending resolution of the appeals in SEC v. CGMI. Additional information relating to this matter is publicly available in court filings under docket numbers 11 Civ. 7387 (S.D.N.Y.) (Rakoff, J.) and 11-5227 (2d Cir.).

 

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Item 1A. Risk Factors

There have been no material changes to the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

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

The Partnership no longer offers Redeemable Units for sale.

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

 

Period		(a) Total Number of Shares (or Units) Purchased*				(b) Average Price Paid per Share (or Unit)**				(c) Total Number     of Shares (or Units)     Purchased as Part of Publicly Announced Plans or Programs				(d) Maximum Number     (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1, 2012 –     January 31, 2012			164.7881			$	1,585.75				N/A				N/A
February 1, 2012 –     February 29, 2012			53.3100			$	1,611.09				N/A				N/A
March 1, 2012 –     March 31, 2012			38.6673			$	1,522.69				N/A				N/A
			256.7654			$	1,581.51

 

 

*

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

 

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

Item 3. Defaults Upon Senior Securities — None.

Item 4. Mine Safety Disclosures — None.

Item 5. Other Information — None.

 

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Item 6. Exhibits

Exhibit

 

3.1(a)		Certificate of Limited Partnership dated May 10, 1994 (filed as Exhibit 3.1(a) to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
(b)		Certificate of Amendment of the Certificate of Limited Partnership dated July 31, 1995 (filed as Exhibit 3.1(b) to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
(c)		Certificate of Amendment of the Certificate of Limited Partnership dated October 1, 1999 (filed as Exhibit 3.1(c) to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
(d)		Certificate of Change of the Certificate of Limited Partnership effective January 31, 2000 (filed as Exhibit 3.1(d) to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
(e)		Certificate of Amendment of the Certificate of Limited Partnership dated May 21, 2003 (filed as Exhibit 3.1(e) to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
(f)		Certificate of Amendment of the Certificate of Limited Partnership dated September 21, 2005 (filed as Exhibit 3.1(f) to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
(g)		Certificate of Amendment of the Certificate of Limited Partnership dated September 19, 2008 (filed as Exhibit 3.1(g) to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
(h)		Certificate of Amendment of the Certificate of Limited Partnership dated September 28, 2009 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 30, 2009 and incorporated herein by reference).
(i)		Certificate of Amendment of the Certificate of Limited Partnership dated April 12, 2010 (filed as Exhibit 3.1(i) to the Form 8-K/A filed on April 14, 2010 and incorporated herein by reference).
(j)		Certificate of Amendment of the Certificate of Limited Partnership dated June 30, 2010 (filed as Exhibit 3.1 to the Current Report on form 8-K filed on July 2, 2010 and incorporated herein by reference).
(k)		Certificate of Amendment of the Certificate of Limited Partnership dated September 2, 2011 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).
3.2		Limited Partnership Agreement (attached as Exhibit A to the Registration Statement on Form S-1 filed on May 29, 1996 and incorporated herein by reference).
10.1		Customer Agreement between the Partnership and Smith Barney (filed as Exhibit 10.1 to the Registration Statement on Form S-1 filed on May 29, 1996 and incorporated herein by reference).
10.2		Form of Subscription Agreement (attached as Exhibit B to the Registration Statement on Form S-1 filed on May 29, 1996 and incorporated herein by reference).
10.3		Form of Escrow Agreement (filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed on November 16, 2009 and incorporated herein by reference).
10.4(a)		Management Agreement among the Partnership, the General Partner and Willowbridge (filed as Exhibit 10.7 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 filed on March 30, 1998 and incorporated herein by reference).

 

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(b)		Letter extending Management Agreement with Willowbridge for 2011 (filed as Exhibit 10.4(b) to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 30, 2012 and incorporated herein by reference).
10.6(a)		Management Agreement among the Partnership, the General Partner and Graham (filed as Exhibit 10.21 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2000 filed on March 29, 2001 and incorporated herein by reference).
(b)		Letter extending Management Agreement with Graham for 2011 (filed as Exhibit 10.6(b) to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 30, 2012 and incorporated herein by reference).
10.7(a)		Amended and Restated Management Agreement among the Partnership, the General Partner and CFM (filed as Exhibit 10.7A to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 30, 2012 and incorporated herein by reference).
(b)		Letter extending Management Agreement with CFM for 2011 (filed as Exhibit 10.7(b) to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 30, 2012 and incorporated herein by reference).
10.8(a)		Management Agreement among the Partnership, the General Partner and Eckhardt (filed as Exhibit 10 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008 filed on August 14, 2008 and incorporated herein by reference).
(b)		Letter extending Management Agreement with Eckhardt Trading Company for 2011 (filed as Exhibit 10.8(b) to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 30, 2012 and incorporated herein by reference).
10.9(a)		Management Agreement among the Partnership, the General Partner and SandRidge (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 2, 2009 and incorporated herein by reference).
(b)		Letter extending Management Agreement with SandRidge for 2011 (filed as Exhibit 10.9(b) to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 30, 2012 and incorporated herein by reference).
10.10		Joinder Agreement among the Partnership, the General Partner, CGM and Morgan Stanley Smith Barney LLC (filed as Exhibit 10 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 filed August 14, 2009 and incorporated herein by reference).
31.1		Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director).
31.2		Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer).
32.1		Section 1350 Certification (Certification of President and Director).
32.2		Section 1350 Certification (Certification of Chief Financial Officer).
101. INS		XBRL Instance Document.
101. SCH		XBRL Taxonomy Extension Schema Document.
101. CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101. LAB		XBRL Taxonomy Extension Label Linkbase Document.
101. PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

 

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SIGNATURES

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

Diversified Multi-Advisor Futures Fund L.P. II

 

By:		Ceres Managed Futures LLC
		(General Partner)
By:		/s/ Walter Davis
		Walter Davis
		President and Director
Date: May 15, 2012
By:		/s/ Brian Centner
		Brian Centner
		Chief Financial Officer
		(Principal Accounting Officer)
Date: May 15, 2012