Business Description and Accounting Policies

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Business Description and Account Policies

Aspen Diversified Fund LLC

Notes to Financial Statements

NOTE A – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Where deemed appropriate by the Managing Member, investments in Investment Funds or illiquid securities may be valued at cost. Cost is used only when the Managing Member determines that cost best approximates the fair value of the particular position under consideration. For example, cost may not be appropriate when the Fund is aware of similar sales to third parties at materially different prices or in other circumstances where cost may not approximate fair value (which could include situations in which there have been no sales to third parties).

Valuation of Investments in Futures Contracts: These instruments include open trade equity positions (futures contracts and currency forwards) that are actively traded on commodities exchanges with quoted pricing for corroboration. Futures contracts and currency forwards are reported at fair value using Level 1 inputs, as described in “Investment Valuations” below. Investments in Futures contracts further include open trade equity that are quoted prices for identical or similar assets that are not traded on active markets.

Investment Income: Investment income includes realized and unrealized gains and losses from the Fund’s investments in Investment Funds, managed accounts and interest income. Gains, losses, income earned and expenses incurred by the Investment Funds are allocated to the Fund based on the Fund’s percentage ownership in each respective fund. Investment transactions are recorded on the trade date.

Income Taxes: No provision for income taxes has been made in the accompanying financial statements as all items of the Fund’s income, loss, deduction and credit are passed through to, and taken into account by, the Fund’s members on their own income tax returns. The primary difference between accounting of income for financial statement purposes and accounting of income for tax purposes relates to certain gains and losses that are not immediately realized for income tax purposes for the period ended March 31, 2012. There were no material differences between the cost basis of the Fund’s assets and liabilities for financial and income tax reporting purposes.

The Fund has reviewed all open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the most recent fiscal year-end. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.

Cash and Cash Equivalents:  For purposes of reporting cash flows, the Fund considers demand deposits and all unrestricted, highly liquid investments with original maturities of three months or less, which can be readily converted to cash on demand, without penalty, to be cash equivalents. Beginning December 31, 2010 through December 31, 2012 all non-interest bearing demand deposits are fully insured by the FDIC. The Fund’s operating and cash management accounts are held at Bank of America, N.A. and PNC Bank, N.A. The Fund has established managed accounts to be traded by certain CTAs on behalf of the Fund.  Cash in managed accounts is held by Newedge USA, LLC and R.J. O’Brien & Associates, LLC to secure trading positions in currency and commodity futures. These funds are privately insured by the Securities Investor Protection Corporation (“SIPC”) as such limits may be amended from time to time.

Aspen Diversified Fund LLC

Cash Held in Excess of Federally Insured Limits

	Balance as of March 31, 2012			Balance as of December 31, 2011
Cash in bank	$	34,848,757		$	8,028,823
Cash held - managed accounts		25,434,419			56,329,538
Total bank balance		60,283,176			64,358,361
FDIC insurance		(34,848,757	)		(8,028,823	)
SIPC insurance		(500,000	)		(500,000	)
Uninsured, uncollateralized balance	$	24,934,419		$	55,829,538

Estimates: 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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investment Valuations: In accordance with GAAP, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized below.

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

Level 2 Inputs – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

Level 3 Inputs – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety. All assets and liabilities are measured at fair value on a recurring basis by level within the fair value hierarchy as reported on the Interim Statements of Assets and Liabilities.