Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

10-Q 1 d552288d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

¨	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: 000-50723

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

(Exact name of registrant as specified in its charter)


Delaware		04-3638229
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

200 West Street New York, New York		10282
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 902-1000

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 þ 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 þ 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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

The Registrant’s Units of Limited Liability Company Interests are not traded on any market and, accordingly, have no aggregate market value. The Registrant had 2,514,826.50 Units of Limited Liability Company Interests outstanding as of August 13, 2013.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

QUARTERLY REPORT ON FORM 10-Q

INDEX

PART I — FINANCIAL INFORMATION


Item 1. Financial Statements

Schedule of Investments June 30, 2013 (Unaudited) and December 31, 2012 (Audited)			1
Balance Sheet June 30, 2013 (Unaudited) and December 31, 2012 (Audited)			2
Statement of Operations (Unaudited) for the three and six months ended June 30, 2013 and June 30, 2012			3
Statement of Changes in Members’ Equity for the six months ended June 30, 2013 (Unaudited) and the year ended December 31, 2012 (Audited)			4
Statement of Cash Flows (Unaudited) for the six months ended June 30, 2013 and June 30, 2012			5
Notes to Financial Statements (Unaudited) June 30, 2013			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25

Item 3. Quantitative and Qualitative Disclosures About Market Risk			43

Item 4. Controls and Procedures			46

PART II — OTHER INFORMATION

Item 1. Legal Proceedings			47

Item 1A. Risk Factors			47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47

Item 3. Defaults Upon Senior Securities			47

Item 4. Reserved			47

Item 5. Other Information			47

Item 6. Exhibits			49

SIGNATURES			50

INDEX TO EXHIBITS			51
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

Schedule of Investments

June 30, 2013 and December 31, 2012


	(Unaudited) June 30, 2013					(Audited) December 31, 2012
Affiliated Investee	Fair value		% of members’ equity⁽¹⁾			Fair value		% of members’ equity⁽¹⁾
Equity Long/Short Managers LLC	$	136,432,555		41.16	%	$	155,842,998		41.94	%
Event Driven Managers LLC		93,852,554		28.31			99,506,680		26.78	%
Event Driven Managers Asset Tr		8,905,599		2.69			10,169,426		2.74	%
Global Tactical Trading Managers LLC		107,761,754		32.51			121,112,624		32.59	%
Relative Value Managers LLC		321,271		0.10			479,148		0.13	%
HFP Opportunistic Fund LLC		—		—			350,745		0.09	%

Total investments (cost $294,058,464 and $344,832,426, respectively)	$	347,273,733		104.77	%	$	387,461,621		104.27	%

The Company’s aggregate proportionate share of the following underlying investments of the Investees represented greater than 5% of the Company’s members’ equity at June 30, 2013 and December 31, 2012.

June 30, 2013 (Unaudited)

Investee

Underlying
investment

Strategy

Proportionate
share of fair
value

% of members’
equity⁽¹⁾

Global Tactical Trading Managers LLC

Tactical Trading Managers
(Managed Futures) LLC⁽²⁾⁽³⁾

Managed Futures

19,707,332

5.95

December 31, 2012 (Audited)

Investee

Underlying
investment

Strategy

Proportionate
share of fair
value

% of members’
equity⁽¹⁾

Global Tactical Trading Managers LLC

Tactical Trading Managers
(Managed Futures) LLC⁽²⁾⁽³⁾

Managed Futures

20,242,331

5.45

(1)

Members’ equity, used in the calculation of the fair value of each of the Investees and the underlying investment as a percentage of members’ equity, is reduced for member redemptions that are paid after the balance sheet date according to Statement of Financial Accounting Standards ASC 480, “Distinguishing Liabilities from Equity.” Member redemptions are included in redemptions payable in the Balance Sheet. Excluding Redemptions payable, total investments would represent 96.54% and 95.60% of members’ equity at June 30, 2013 and December 31, 2012, respectively.

(2)	Affiliated investment fund with a monthly liquidity term.

(3)	On May 15, 2013, Commodities Managers (Managed Futures) LLC was renamed “Tactical Trading Managers (Managed Futures) LLC.”

The accompanying notes are an integral part of these financial statements.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

BALANCE SHEET

June 30, 2013 and December 31, 2012


	(Unaudited) June 30, 2013		(Audited) December 31, 2012
ASSETS
Assets:
Investments in affiliated Investees, at fair value (cost $294,058,464 and $344,832,426, respectively)	$	347,273,733	$	387,461,621
Cash and cash equivalents		15,374,725		20,212,595

Total assets	$	362,648,458	$	407,674,216

LIABILITIES AND MEMBERS’ EQUITY
Liabilities:
Redemptions payable	$	28,264,359	$	33,690,336
Management fee payable		2,324,923		1,729,340
Accrued expenses and other liabilities		589,574		658,857

Total liabilities		31,178,856		36,078,533
Members’ equity:
Members’ equity (units outstanding 2,514,826.50 and 2,930,982.83, respectively)		331,469,602		371,595,683

Total liabilities and members’ equity	$	362,648,458	$	407,674,216

Analysis of members’ equity:
Net capital contributions, accumulated net investment income/(loss) and realized gain/(loss) on investments	$	278,254,333	$	328,966,488
Accumulated net unrealized gain/(loss) on investments		53,215,269		42,629,195

Total members’ equity⁽¹⁾	$	331,469,602	$	371,595,683

(1)	Refer to Note 8 for units outstanding and NAV per unit amounts by series.

The accompanying notes are an integral part of these financial statements.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

STATEMENT OF OPERATIONS

(Unaudited)

For the three and six months ended June 30, 2013 and June 30, 2012


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Dividend income	$	351		$	3,192		$	1,301		$	5,600
Expenses:
Management fee		1,128,720			1,625,405			2,324,923			3,312,655
Professional fees		245,836			326,497			544,088			638,847
Administration fee		24,935			32,882			50,950			66,754
Miscellaneous expenses		24,121			62,636			75,884			115,540

Total expenses		1,423,612			2,047,420			2,995,845			4,133,796

Net investment income/(loss)		(1,423,261	)		(2,044,228	)		(2,994,544	)		(4,128,196	)

Realized and unrealized gain/(loss) on investments in affiliated Investees:
Net realized gain/(loss)		4,109,921			4,482,646			6,952,355			8,925,699
Net change in unrealized gain/(loss)		(2,167,845	)		(9,921,462	)		10,586,074			5,423,588

Net realized and unrealized gain/(loss)		1,942,076			(5,438,816	)		17,538,429			14,349,287

Net income/(loss)	$	518,815		$	(7,483,044	)	$	14,543,885		$	10,221,091

The accompanying notes are an integral part of these financial statements.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

STATEMENT OF CHANGES IN MEMBERS’ EQUITY

For the six months ended June 30, 2013 (Unaudited)

and the year ended December 31, 2012 (Audited)


	Managing member’s equity			Members’ equity			Total members’ equity
Members’ equity at December 31, 2011	$	—		$	522,278,771		$	522,278,771
Subscriptions		—			6,491,936			6,491,936
Redemptions		(60,416	)		(179,612,320	)		(179,672,736	)
Allocations of net income/(loss):
Incentive allocation		60,416			(60,416	)		—
Pro-rata allocation		—			22,497,712			22,497,712

Members’ equity at December 31, 2012	$	—		$	371,595,683		$	371,595,683
Subscriptions		—			1,250,000			1,250,000
Redemptions		(42,580	)		(55,877,386	)		(55,919,966	)
Allocations of net income/(loss):
Incentive allocation		618,578			(618,578	)		—
Pro-rata allocation		—			14,543,885			14,543,885

Members’ equity at June 30, 2013	$	575,998		$	330,893,604		$	331,469,602

The accompanying notes are an integral part of these financial statements.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

STATEMENT OF CASH FLOWS

(Unaudited)

For the six months ended June 30, 2013 and June 30, 2012


	2013			2012
Cash flows from operating activities
Net income/(loss)	$	14,543,885		$	10,221,091
Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities:
Purchases of investments in affiliated Investees		(1,489,321	)		—
Proceeds from sales of investments in affiliated Investees		59,215,638			39,667,667
Net realized (gain)/loss on investments in affiliated Investees		(6,952,355	)		(8,925,699	)
Net change in unrealized (gain)/loss on investments in affiliated Investees		(10,586,074	)		(5,423,588	)
Increase/(decrease) in operating liabilities:
Management fee payable		595,583			1,049,668
Accrued expenses and other liabilities		(69,283	)		(47,165	)

Net cash from operating activities		55,258,073			36,541,974


Cash flows from financing activities
Subscriptions		1,250,000			6,241,936
Redemptions		(61,345,943	)		(46,900,061	)

Net cash from financing activities		(60,095,943	)		(40,658,125	)

Net change in cash and cash equivalents		(4,837,870	)		(4,116,151	)
Cash and cash equivalents at beginning of period		20,212,595			30,701,757

Cash and cash equivalents at end of period	$	15,374,725		$	26,585,606

The accompanying notes are an integral part of these financial statements.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 1 - Organization

Hedge Fund Managers (Diversified) LLC (the “Company”), formerly Goldman Sachs Hedge Fund Partners, LLC, was organized as a limited liability company, pursuant to the laws of the State of Delaware, and commenced operations on April 1, 2002 for the principal purpose of investing in the equity long/short, event driven, relative value and tactical trading hedge fund sectors (the “Investment Sectors”). Currently, substantially all of the Company’s assets are allocated to Equity Long/Short Managers LLC (“ELSM”), Event Driven Managers LLC (“EDM”), and Global Tactical Trading Managers LLC (“GTTM”) (collectively, the “Investment Funds”). The balance of the Company’s assets are invested in Event Driven Managers Asset Tr (“EDMAT”), Relative Value Managers LLC (“RVM”) and HFP Opportunistic Fund LLC (“HFPO” and, together with EDMAT, RVM and the Investment Funds, the “Investees”). Each of these Investees invests indirectly through investment vehicles (“Advisor Funds”) managed by such trading advisors (the “Advisors”). In addition, the Company may, directly or indirectly, allocate assets to Advisors whose principal investment strategies are not within one of the Investment Sectors. Goldman Sachs Hedge Fund Strategies LLC (“HFS”), a wholly-owned subsidiary of The Goldman Sachs Group, Inc., is the managing member (the “Managing Member”) and commodity pool operator of the Company and a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended. SEI Global Services, Inc. (“SEI”) serves as administrator of the Company.

Note 2 - Significant accounting policies

Basis of presentation

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and are expressed in United States dollars.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Fair value of investments

The Company is an investment company for financial reporting purposes and accordingly carries its investments at fair value.

Realized and unrealized gain/(loss) on investments in affiliated Investees

Realized and unrealized gain/(loss) on investments in affiliated Investees includes the change in fair value of each Investee. Fair values are determined utilizing net asset value (“NAV”) information supplied by each individual Investee, which includes realized and unrealized gains/(losses) on underlying investments of the Investees as well as management fees and incentive fees charged by the Advisors, administration fees and all other income/expenses of the Investees. See “Note 3 — Investments in affiliated Investees” for further information.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 2 - Significant accounting policies

Cash and cash equivalents

Cash and cash equivalents consist of deposits held at banks or money market funds. Cash equivalents, consisting of investments in money market funds, are held at financial institutions to which the Company is exposed to credit risk. Money market funds are valued at net asset value per share.

Allocation of net income/(loss)

Net income/(loss) is allocated monthly to the capital account of each member in the ratio that the balance of each member’s capital account bears to the total balance of all members’ capital accounts. The Managing Member earns an annual incentive allocation equal to 5.0% of any new net appreciation in the NAV of each series. Any net depreciation in the NAV of a series for a fiscal year must be recouped prior to the Managing Member earning an incentive allocation in future years. The incentive allocation accrues daily and is credited to the capital account of the Managing Member as of December 31 of each year. In the event of an intra-year redemption, any related accrued incentive allocation will be credited to the Managing Member upon redemption.

Subscriptions and redemptions

Subscriptions to the Company can be made as of the first day of each calendar month or at the sole discretion of the Managing Member. Redemptions from the Company can be made at the end of each calendar quarter, upon 91 days’ prior written notice after a twelve-month holding period or at such other times as determined in the sole discretion of the Managing Member, as provided for in the Company’s limited liability company agreement.

Income taxes

The Company is taxed as a partnership for U.S. federal income tax purposes. The members include their distributive share of the Company’s taxable income or loss on their respective income tax returns. Accordingly, no U.S. federal income tax liability or expense has been recorded in the financial statements of the Company.

The Managing Member has reviewed the Company’s tax positions for the open tax years by major jurisdictions and has concluded that no provision for taxes is required in the Company’s financial statements. Such open tax years vary by jurisdiction and remain subject to examination by the foreign taxing authorities. The tax liability is also subject to ongoing interpretation of laws by taxing authorities.

Recent Accounting Pronouncements

In June 2013, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2013-08, Financial Services — Investment Companies (Topic 946), which creates a two-tiered approach to assess whether an entity is an investment company. The guidance will also require an investment company to measure noncontrolling ownership interests in other investment companies at fair value and will require additional disclosures relating to investment company status, any changes thereto and information about financial support provided or contractually required to be provided to any of the investment company’s investees. The guidance is effective for financial statements with fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years. The adoption of ASU No. 2013-08 will not materially affect the Company’s financial condition, results of operations or cash flows.

Note 3 - Investments in affiliated Investees

The Investees seek capital appreciation over time by investing primarily within one of the following Investment Sectors: the equity long/short sector, the event driven sector, the relative value sector and the tactical trading sector. The Company’s investments in affiliated Investees are subject to the terms and conditions of the operating

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 3 - Investments in affiliated Investees

agreements of the respective affiliated Investees. The investments in affiliated Investees are carried at fair value. Fair values are determined utilizing NAV information supplied by each individual affiliated Investee. HFS is the managing member of each of the affiliated Investees. HFS does not charge the Company any management fee or incentive allocation at the Investee level. Realized gains/(losses) on the redemption of investments in affiliated Investees are calculated using the specific identification cost method.

Performance of the Company in any period will be dependent upon the performance in the relevant period by the affiliated Investees and the weighted average percentage of the Company’s assets in each of the affiliated Investees during the period. In addition, performance is determined by the Investment Funds’ asset allocation with the various Advisors and the performance of each of their Advisor Funds and interests held by EDMAT, RVM and HFPO. NAVs received by the Investees from, or on behalf of, the Advisor Funds are based on the fair value of the Advisor Funds’ underlying investments in accordance with policies established by each Advisor Fund. HFS, in its capacity as managing member of the Company, performs additional procedures including Advisor due diligence reviews and analytical procedures with respect to the NAV provided by the Advisors to ensure conformity with U.S. GAAP. The Managing Member has assessed factors including, but not limited to, Advisors’ compliance with U.S. GAAP applicable to fair value measurements and disclosures, price transparency and valuation procedures in place. NAV provided by the Advisors may differ from the audited values received subsequent to the date of the Company’s NAV determination. In such cases, the Company will evaluate the materiality of any such differences.

The following table summarizes the cost of the Company’s investments in the affiliated Investees at June 30, 2013 and December 31, 2012:


Investee	June 30, 2013		December 31, 2012
ELSM	$	117,556,499	$	142,538,824
EDM		78,845,167		89,089,893
EDMAT		9,038,255		10,519,992
GTTM		88,159,719		101,372,826
RVM		458,824		601,763
HFPO		—		709,128

Total	$	294,058,464	$	344,832,426

The following table summarizes the Company’s realized and unrealized gain/(loss) on investments in affiliated Investees for the three and six months ended June 30, 2013 and June 30, 2012:


				Three Months Ended June 30,						Six Months Ended June 30,
Investee	Liquidity			2013			2012			2013			2012
ELSM		(1	)	$	(427,943	)	$	(2,806,858	)	$	7,589,558		$	8,803,011
EDM		(2	)		2,034,319			(321,211	)		6,322,618			4,796,394
EDMAT		(3	)		(178,915	)		(69,606	)		225,494			(441,691	)
GTTM		(4	)		545,378			(2,219,440	)		3,649,129			1,307,200
RVM		(5	)		(30,763	)		(11,579	)		(35,729	)		119,830
HFPO		(6	)		—			(10,122	)		(212,641	)		(235,457	)

Total				$	1,942,076		$	(5,438,816	)	$	17,538,429		$	14,349,287

(1)	Redemptions can be made quarterly with 61 days’ notice, or at the sole discretion of the Managing Member.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 3 - Investments in affiliated Investees

(2)	Redemptions can be made quarterly on or after the first anniversary of the initial purchase of the units with at least 91 days’ notice, or at the sole discretion of the Managing Member.

(3)

EDMAT does not provide investors with a voluntary redemption right. Pursuant to the terms of the trust agreement for EDMAT, distributions will be made to holders of interests in EDMAT as EDMAT receives proceeds in respect of its Advisors. The estimated remaining holding periods of its remaining underlying investments range from one to five years.

(4)	Redemptions can be made quarterly with 60 days’ notice, or at the sole discretion of the Managing Member.

(5)

RVM ceased its trading activities effective on July 1, 2009, and will dissolve at the time all assets are liquidated, liabilities are satisfied and liquidation proceeds are distributed through payment of a liquidating distribution. RVM suspended redemptions pending the completion of the liquidation proceedings. The estimated remaining holding periods of its remaining underlying investments range from one to five years.

(6)	HFPO ceased its trading activities effective December 31, 2012 and was subsequently liquidated in March 2013.

The investment strategy for each Investee is as follows:

Equity Long/Short Managers LLC

ELSM seeks risk-adjusted absolute returns with volatility lower than the broad equity markets, primarily through long and short investment opportunities in the global equity markets. Strategies generally involve making long and short equity investments, often based on the Advisor’s assessment of fundamental value compared to market price, although Advisors employ a wide range of styles. Strategies that may be utilized in the equity long/short sector include catalyst-activist, consumer, diversified, energy, growth, long-bias, real estate, multi-strategy, short-term trading and value. Other strategies may be employed as well.

Event Driven Managers LLC

EDM seeks risk-adjusted absolute returns with volatility and correlation lower than the broad equity markets by allocating assets to Advisors that operate primarily in the global event driven sector. Event driven strategies seek to identify security price changes resulting from corporate events such as restructurings, mergers, takeovers, spin-offs, and other special situations. Corporate event arbitrageurs generally choose their investments based on their perceptions of the likelihood that the event or transaction will occur, the amount of time that the process will take, and the perceived ratio of return to risk. Strategies that may be utilized in the event driven sector include catalyst-activist, merger arbitrage/special situations, credit opportunities/distressed securities and multi-strategy investing. Other strategies may be employed as well.

Event Driven Managers Asset Tr

HFS, the managing member of EDM, created EDMAT, a Delaware statutory trust, for the benefit of its investors, including the Company. Goldman Sachs Trust Company, a Delaware Corporation, is the trustee of EDMAT (the “Trustee”). The Trustee appointed HFS as the “Special Assets Direction Advisor,” responsible for, among other duties, disposition of EDMAT assets. On March 31, 2009, EDM transferred to EDMAT its interest in certain illiquid investments, including illiquid investments made by Advisor Funds, as well as liquidating vehicles that the Advisors formed as liquidity decreased for previously liquid investments, such as certain credit instruments. EDM transferred to EDMAT the economic risks and benefits of its interests in such assets. In connection with such transfer, each investor in EDM, including the Company, was issued its pro-rata share of EDMAT interests

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 3 - Investments in affiliated Investees

based on its ownership in EDM as of the transfer date. Distributions from EDMAT in respect of EDMAT interests will be made to holders of EDMAT interests, including the Company, as amounts in respect of the assets transferred to EDMAT are received from the Advisors. However, the actual timing of these distributions will be dependent on the Advisors’ ability to liquidate positions as market conditions allow, and it could be a significant period of time before such positions are realized or disposed of.

Global Tactical Trading Managers LLC

GTTM seeks long-term risk-adjusted returns by allocating its assets to Advisors that employ strategies primarily within the tactical trading sector. Tactical trading strategies are directional trading strategies that generally fall into one of the following two categories: managed futures strategies and global macro strategies. Managed futures strategies involve trading in the global futures and currencies markets, generally using systematic or discretionary approaches. Global macro strategies generally utilize analysis of macroeconomic, geopolitical and financial conditions to develop views on country, regional or broader economic themes and then seek to capitalize on such views by trading in securities, commodities, interest rates, currencies and various financial instruments.

Relative Value Managers LLC

RVM ceased its trading activities effective July 1, 2009 and will dissolve at the time all assets are liquidated, liabilities are satisfied and liquidation proceeds are distributed through payment of a liquidating distribution. Investors in RVM (including the Company) will receive proceeds from the liquidation over time as RVM receives redemption proceeds from Advisor Funds.

Management fees and incentive allocation/fees

HFS does not charge the Company any management fee or incentive allocation at the Investee level. The underlying Advisor Funds held by the Investees charge management and incentive allocation/fees to the Investees. The following table reflects the contractual weighted average Advisors’ management fee and incentive allocation/fee rates at the Investee level for the six months ended June 30, 2013 and June 30, 2012. The weighted average is based on the period-end fair values of each investment in the Advisor Fund in proportion to the Investee’s total investments. The fee rates used are the contractual rates charged by each Advisor. The Advisors’ management fee and incentive allocation/fee are not paid to the Managing Member.


	June 30, 2013						June 30, 2012
Investee	Management fees			Incentive allocation/fees			Management fees			Incentive allocation/fees
ELSM		1.42	%		17.52	%		1.59	%		19.97	%
EDM		1.66	%		18.92	%		1.69	%		19.01	%
EDMAT		1.46	%		17.79	%		1.48	%		17.98	%
GTTM		2.12	%		21.63	%		2.08	%		21.39	%
RVM		1.56	%		12.23	%		1.62	%		12.59	%
HFPO		N/A			N/A			—	%⁽¹⁾		—	%⁽¹⁾

(1)	The sole Advisor Fund within HFPO is illiquid and the Advisor has elected to forego the management and incentive fees. HFPO was liquidated in March 2013.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 4 - Fair Value Measurements

The fair value of a financial instrument is the amount 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.

The Company uses NAV as its measure of fair value for investments in Investees when (i) the fund investment does not have a readily determinable fair value and (ii) the NAV of the investment fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the underlying investments at fair value. In evaluating the level at which the fair value measurements of the Company’s investments have been classified, the Company has assessed factors including, but not limited to, price transparency, the ability to redeem at NAV at the measurement date and the existence or absence of certain restrictions at the measurement date. The three levels of the fair value hierarchy are described below:

•

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•

Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including investments in Investees that can be redeemed at the measurement date or in the near-term at NAV), either directly or indirectly; and

•

Level 3 — Prices or valuations that require significant unobservable inputs (including investments in Investees that will never have the ability to be voluntarily redeemed or are restricted from redemption for an uncertain or extended period of time from the measurement date).

The following tables set forth by level within the fair value hierarchy the Company’s assets and liabilities by investment strategy at fair value measured at June 30, 2013 and December 31, 2012:


	June 30, 2013
Assets	Level 1		Level 2		Level 3		Total
Investees by investment strategy:
Equity Long/Short	$	—	$	136,432,555	$	—	$	136,432,555
Event Driven		—		93,852,554		8,905,599		102,758,153
Tactical Trading		—		107,761,754		—		107,761,754
Relative Value		—		—		321,271		321,271
Multi-Sector		—		—		—		—

Total	$	—	$	338,046,863	$	9,226,870	$	347,273,733


	December 31, 2012
Assets	Level 1		Level 2		Level 3		Total
Investees by investment strategy:
Equity Long/Short	$	—	$	155,842,998	$	—	$	155,842,998
Event Driven		—		99,506,680		10,169,426		109,676,106
Tactical Trading		—		121,112,624		—		121,112,624
Relative Value		—		—		479,148		479,148
Multi-Sector		—		—		350,745		350,745

Total	$	—	$	376,462,302	$	10,999,319	$	387,461,621

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 4 - Fair Value Measurements

Included in cash and cash equivalents on the Balance Sheet are investments in money market funds with a fair value of $15,355,675 and $19,660,555, which were classified as Level 1 assets as of June 30, 2013 and December 31, 2012, respectively.

The following tables summarize the changes in fair value of the Company’s Level 3 investments for the quarter ended June 30, 2013 and June 30, 2012, respectively:

Investees by investment strategy


	Event Driven			Relative Value			Total
Balance as at April 1, 2013	$	10,573,835		$	352,034		$	10,925,869
Net realized gain/(loss) on investments in affiliated investees		56,961			—			56,961
Net change in unrealized gain/(loss) on investments in affiliated investees held at June 30, 2013		(235,876	)		(30,763	)		(266,639	)
Sales		(1,489,321	)		—			(1,489,321	)
Transfers out of Level 3		—			—			—

Balance at June 30, 2013	$	8,905,599		$	321,271		$	9,226,870

Investees by investment strategy


	Event Driven			Relative Value			Multi-Sector			Total
Balance as at April 1, 2012	$	12,023,615		$	1,256,576		$	466,324		$	13,746,515
Net realized gain/(loss) on investments		—			—			—			—
Net change in unrealized gain/(loss) on investments in affiliated investees held at June 30, 2012		(69,606	)		(11,579	)		(10,122	)		(91,307	)
Sales		—			—			—			—

Balance as at June 30, 2012	$	11,954,009		$	1,244,997		$	456,202		$	13,655,208

The following tables summarize the changes in fair value of the Company’s Level 3 investments for the six months ended June 30, 2013 and June 30, 2012, respectively:

Investees by investment strategy


	Event Driven			Relative Value			Multi-Sector			Total
Balance as at January 1, 2013	$	10,169,426		$	479,148		$	350,745		$	10,999,319
Net realized gain/(loss) on investments in affiliated investees		56,961			8,334			(212,641	)		(147,346	)
Net change in unrealized gain/(loss) on investments in affiliated investees held at June 30, 2013		168,533			(44,063	)		—			124,470
Sales		(1,489,321	)		(122,148	)		(138,104	)		(1,749,573	)
Transfers out of Level 3		—			—			—			—

Balance at June 30, 2013	$	8,905,599		$	321,271		$	—		$	9,226,870

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 4 - Fair Value Measurements

Investees by investment strategy


	Event Driven			Relative Value		Multi-Sector			Total
Balance as at January 1, 2012	$	13,856,921		$	1,125,167	$	691,659		$	15,673,747
Net realized gain/(loss) on investments in affiliated investees		(52,972	)		—		—			(52,972	)
Net change in unrealized gain/(loss) on investments in affiliated investees held at June 30, 2012		(388,719	)		119,830		(235,457	)		(504,346	)
Sales		(1,461,221	)		—		—			(1,461,221	)

Balance as at June 30, 2012	$	11,954,009		$	1,244,997	$	456,202		$	13,655,208

Note 5 - Fees

The Company incurs a monthly management fee paid in arrears to HFS equal to 1.25% per annum of the net assets of the Company as of each month-end.

The Company incurs a monthly administration fee payable to SEI equal to one-twelfth of 0.02% of the net assets of the Company as of each month-end which is included in administration fee in the Statement of Operations. The Company also incurs an indirect monthly administration fee to SEI at the Investee level which is included in realized and unrealized gain/(loss) on investments in affiliated Investees in the Statement of Operations. For the three months ended June 30, 2013 and June 30, 2012, the Company’s pro-rata indirect share of the administration fee charged at the Investee level totaled $42,391 and $61,136, respectively. For the six months ended June 30, 2013 and June 30, 2012, the Company’s pro-rata indirect share of the administration fee charged at the Investee level totaled $87,263 and $123,073, respectively.

Note 6 - Risk Management

The Investees’ investing activities and those of the Advisor Funds in which they invest expose the Company to various types of risks that are associated with the financial investments and markets in which the Investees and such Advisor Funds invest. In the ordinary course of business, HFS, in its capacity as Managing Member of the Company and the Investees, attempts to manage a variety of risks, including market, operational, liquidity and credit risk and attempts to identify, measure and monitor risk through various mechanisms including risk management strategies and credit policies. HFS monitors risk guidelines and diversifies exposures across a variety of instruments, markets and counterparties.

Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 provides details of these and other types of risks, some of which are additional to the information provided in these financial statements.

Asset allocation is determined by the Company’s Managing Member who manages the allocation of assets to achieve the investment objectives. Achievement of the investment objectives involves taking risks. The Managing Member exercises judgment based on analysis, research and risk management techniques when making investment decisions. Divergence from target asset allocations and the composition of the Company’s investments is monitored by the Company’s Managing Member.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 6 - Risk Management

Market risk

The potential for changes in the fair value of the Company’s investment portfolio is referred to as market risk. Commonly used categories of market risk include currency risk, interest rate risk and price risk.

(i) Currency risk

The Advisor Funds may invest in financial investments and enter into transactions denominated in currencies other than its functional currency. Consequently, the Company, its Investees and their Advisor Funds may be exposed to risks that the exchange rate of its functional currency relative to other foreign currencies may change in a manner that has an adverse effect on the value of that portion of the Company’s or Investees’ assets or liabilities denominated in currencies other than the functional currency.

(ii) Interest rate risk

The Advisor Funds may invest in fixed income securities and derivatives. Any change to market interest rates relevant for particular securities may result in the Advisors being unable to secure similar returns on the expiration of contracts or the sale of securities. In addition, changes to prevailing interest rates or changes in expectations of future rates may result in an increase or decrease in the value of the securities held. In general, if interest rates rise, the value of the fixed income securities and derivatives will decline. A decline in interest rates will in general have the opposite effect.

(iii) Price risk

Price risk is the risk that the value of the Investees’ and Advisor Funds’ financial investments will fluctuate as a result of changes in market prices, other than those arising from currency risk or interest rate risk whether caused by factors specific to an individual investment, its issuer or any factor affecting financial investments traded in the market.

As all of the Company’s investments in Investees and the Investees’ investments in Advisor Funds are carried at fair value with changes in fair value recognized in the Statement of Operations, all changes in market conditions will directly affect net assets. The Company’s maximum risk of loss is limited to the Company’s investment in the Investees. The Investees’ maximum risk of loss is limited to the Investees’ investment in the Advisor Funds.

The fair value of the Investees’ investments in the Advisor Funds is determined utilizing NAVs supplied by, or on behalf of, the Advisors of each Advisor Fund. Furthermore, NAVs received from the administrator of the Advisor Funds may be estimates and such values will be used to calculate the NAV of the Investees for purposes of determining amounts payable on redemptions and reported performance of the Investees. Such estimates provided by the administrators of the Advisor Funds may be subject to subsequent revisions which may not be reflected in the Investees’ final month-end NAV.

Operational risk

Operational risk is the potential for loss caused by a deficiency in information, communications, transaction processing and settlement and accounting systems. The Company’s service providers maintain controls and procedures for the purpose of mitigating operational risk. Reviews of the service levels of service providers are performed on a regular basis. No assurance is given that these measures will be 100% effective. Operational risk also exists at the Investee and Advisor Fund level.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 6 - Risk Management

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company provides for the subscription and redemption of units and it is therefore exposed to the liquidity risk of meeting member redemptions.

In order to meet its obligations associated with financial liabilities, the Company primarily redeems from the investments in the Investees. However, the Company’s investments in the Investees may only be redeemed on a limited basis. As detailed in “Note 3 — Investments in affiliated Investees”, neither EDMAT nor RVM provide investors with a voluntary redemption right. As a result, the Company may not be able to quickly liquidate some of its investments in order to meet liquidity requirements.

Certain of the Company’s Investees may have liquidity exposure related to the recovery value of claims against Lehman Brothers Holdings, Inc. and certain of its subsidiaries and affiliates (“Lehman”). At the time of the Lehman insolvency, estimates of the recovery value of the Lehman assets were received from the majority, but not all, of the Advisor Funds, and the Company had no way of independently verifying or otherwise confirming the accuracy of the information provided. As a result, there can be no guarantee that such estimates were accurate. Based on the information received, the gross indirect exposure to Lehman did not materially affect the Company’s net assets at that time. There still remains significant uncertainty with respect to the ultimate outcome of the Lehman insolvency proceedings, and therefore the amounts ultimately recovered from Lehman could differ from such estimates, and such differences could be material at the Advisor Fund Level. The Company does not anticipate that the outcome of the Lehman insolvency proceedings will have a material impact on the results of its operations.

Certain of the Advisor Funds held by the Investees are subject to various lock-up provisions. Additionally, an Advisor may, at its discretion, transfer a portion of an Investee’s investment in the Advisor Fund into share classes where liquidity terms are directed by the Advisor in accordance with the Advisor’s operating agreement, commonly referred to as side pocket share classes (“side pockets”). These side pockets may have restricted liquidity and prohibit the Investees from fully liquidating their investments without delay. The managing member of the Investees attempts to determine each Advisor’s strategy on side pockets through its due diligence process prior to making an allocation to the Advisor. However, no assurance can be given on whether or not the Advisor will implement side pockets during the investment period. The Advisors may also, at their discretion, suspend redemptions or implement other restrictions on liquidity which could impact the Investees’ ability to meet redemptions submitted by the Company. As of June 30, 2013 and December 31, 2012, approximately 2% of the Company’s investments in the Investees were considered illiquid due to restrictions implemented by the Advisors of the investments held by Investees, excluding contractual restrictions imposed by the Advisors at the time of purchase, such as lock-ups. In addition, as of June 30, 2013 and December 31, 2012, approximately 3% of the Company’s members’ equity was considered illiquid due to restrictions implemented by the Investees. The sum of these amounts represents the total amount of the Company’s members’ equity which was considered illiquid as of June 30, 2013 and December 31, 2012.

To mitigate some of the liquidity risks above, the Company has the ability to suspend redemptions prior to the effectiveness of redemption requests at the Managing Member’s sole discretion should conditions warrant.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 6 - Risk Management

Credit risk

Credit risk is the risk that one party to a contract will cause a financial loss for the other party by failing to discharge an obligation.

The Managing Member has adopted procedures to reduce credit risk related to the Company’s dealings with counterparties and Advisor Funds. Before transacting with any counterparty or Advisor Fund, the Managing Member or its affiliates evaluate both creditworthiness and reputation by conducting a credit analysis of the party, their business and reputation. The credit risk of approved counterparties and Advisor Funds are then monitored on an ongoing basis, including periodic reviews of financial statements and interim financial reports as needed.

Some of the Investees’ investments in Advisor Funds may have had credit exposure related to the bankruptcy of Lehman. See “Liquidity risk” for further information related to Lehman exposure.

Investment in Investees risk

The Managing Member generally has limited access, if at all, to specific information regarding the Advisors’ portfolios held by the Investees and relies on valuations provided by, or on behalf of, the Advisors. The Company will be affected by the Advisors’ investment policies and decisions in direct proportion to the amount of the Company’s assets that are invested with each Investee. The NAV of the Advisors’ assets will fluctuate in response to, among other things, various market and economic prospects of investments that the Advisors make, and as a result, the NAV of the Investees and the Company will be impacted. Generally, the NAVs provided by, or on behalf of, the Advisors are only audited on an annual basis and are not subject to independent third party verification. Typically, audited financial statements are not received before issuance of the Company’s financial statements.

In the normal course of business, the Advisor Funds may trade various financial instruments and enter into various investment transactions with off-balance sheet risk, which include, but are not limited to, securities sold short, futures, forwards, swaps and written options. The Managing Member generally will have limited ability to monitor such investments, to obtain full and current information and to exercise control rights over such investments. This could have an adverse effect on the performance of such investments and, therefore, on the performance of the Investees and the Company. In order to manage this risk, the Managing Member performs due diligence reviews with respect to the Advisors’ valuation policies and procedures and performs certain analytical procedures with respect to the NAV information received. The review and procedures performed by the Managing Member support its ability to rely on the NAVs supplied by, or on behalf of, the Advisors.

Note 7 - Related parties

The management fee payable in the Balance Sheet represents management fees due to HFS at June 30, 2013 and December 31, 2012, respectively.

Included in the redemptions payable on the Balance Sheet at June 30, 2013 and December 31, 2012 were redemptions due to the Managing Member of $42,580 and $60,416, respectively.

For the six months ended June 30, 2013, the Company earned dividends of $1,301 from an investment in Goldman Sachs Financial Square Government Fund, a money market fund managed by Goldman Sachs Asset Management, L.P., an affiliate of HFS. For the six months ended June 30, 2012 the Company earned dividends of $5,600 from an

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 7 - Related parties

investment in Goldman Sachs Financial Square Government Fund, a money market fund managed by Goldman Sachs Asset Management, L.P., an affiliate of HFS. At June 30, 2013 and December 31, 2012, the fair values of such money market investments were $15,355,675 and $19,660,555, respectively. The Company will bear its proportionate share of all fees, including investment advisory fees, paid by the money market funds.

The Advisor Funds may have executed investment transactions with various affiliates of the Managing Member.

Directors and executive officers of the Company and the Managing Member owned less than 1% of the Company’s equity at June 30, 2013 and December 31, 2012. Employees of Goldman, Sachs & Co. owned less than 1% of the Company’s equity at June 30, 2013 and December 31, 2012.

Members’ Equity for Class A Series 1 as disclosed in “Note 8 — Members’ equity” includes equity provided by the Managing Member at June 30, 2013 and December 31, 2012, of $1,132 and $1,091, respectively.

Note 8 - Members’ equity

At June 30, 2013 and December 31, 2012, the Company had Class A units outstanding. Each series of Class A units is identical in every regard except with respect to its individualized incentive allocation base. Effective January 1, 2013, Class A Series 52, Series 91, Series 92, and Series 97 through Series 109 units were converted into Class A Series 46 units.

The Company’s unit activity for the six month period ended June 30, 2013 and the year ended December 31, 2012 is as follows:


	December 31, 2012		Unit Conversion		Subscriptions		Redemptions			June 30, 2013
Class A:		2,930,982.83		2,881.76		12,500.00		(431,538.09	)		2,514,826.50


	December 31, 2011		Unit Conversion		Subscriptions		Redemptions			December 31, 2012
Class A:		4,330,758.94		—		64,919.36		(1,464,695.47	)		2,930,982.83

At June 30, 2013 and December 31, 2012, members’ equity consisted of the following:


	December 31, 2012		Subscriptions		Redemptions			Net income/ (loss)		June 30, 2013
Managing Member	$	—	$	—	$	(42,580	)	$	618,578	$	575,998
Class A:		371,595,683		1,250,000		(55,877,386	)		13,925,307		330,893,604

Total	$	371,595,683	$	1,250,000	$	(55,919,966	)	$	14,543,885	$	331,469,602


	December 31, 2011		Subscriptions		Redemptions			Net income/ (loss)		December 31, 2012
Managing Member	$	—	$	—	$	(60,416	)	$	60,416	$	—
Class A:		522,278,771		6,491,936		(179,612,320	)		22,437,296		371,595,683

Total	$	522,278,771	$	6,491,936	$	(179,672,736	)	$	22,497,712	$	371,595,683

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 8 - Members’ equity

The following amounts represent the units outstanding and NAV per unit for each series:


	June 30, 2013				December 31, 2012
	Units outstanding		NAV per unit		Units outstanding		NAV per unit
Managing Member		—		—		—		—
Class A:
Series 1		1,280,697.52	$	157.62		1,484,075.35	$	151.91
Series 45		31,780.06		103.10		31,780.06		99.36
Series 46		832,002.54		104.82		743,756.34		101.05
Series 47		20,000.00		102.77		20,000.00		99.03
Series 49		45,522.73		103.60		61,022.73		99.87
Series 50		92,212.62		101.81		98,685.95		98.05
Series 51		51,300.00		101.75		58,800.00		98.00
Series 52		—		—		52,323.77		100.62
Series 66		15,965.80		112.82		19,601.91		108.55
Series 68		15,702.29		112.82		15,702.29		108.55
Series 69		9,881.94		112.82		9,881.94		108.55
Series 70		6,848.67		112.82		6,848.67		108.55
Series 72		6,915.70		112.82		6,915.70		108.55
Series 73		1,335.83		112.82		1,335.83		108.55
Series 82		—		—		6,147.24		104.31
Series 83		5,460.80		108.40		5,460.80		104.31
Series 91		—		—		27,500.00		100.69
Series 92		—		—		16,000.00		100.52
Series 93		16,750.00		103.27		18,250.00		99.53
Series 94		27,450.00		103.46		34,200.00		99.73
Series 95		31,500.00		102.39		40,417.34		98.64
Series 96		11,000.00		103.49		21,000.00		99.76
Series 97		—		—		17,000.00		101.19
Series 98		—		—		11,250.00		101.26
Series 99		—		—		8,500.01		103.12
Series 100		—		—		37,607.54		104.96
Series 101		—		—		9,500.00		103.82
Series 102		—		—		2,500.00		104.19
Series 103		—		—		23,243.86		104.61
Series 104		—		—		12,500.00		103.05
Series 105		—		—		7,675.50		101.86
Series 106		—		—		4,500.00		101.37
Series 107		—		—		9,000.00		101.32
Series 108		—		—		5,500.00		102.25
Series 109		—		—		2,500.00		102.76
Series 117		2,500.00		101.20		—		—
Series 120		10,000.00		98.73		—		—

Total		2,514,826.50				2,930,982.83

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 9 - Ownership in Investees

During the six months ended June 30, 2013 and the year ended December 31, 2012, the Company’s ownership percentage of certain Investees exceeded 50%. This ownership percentage will fluctuate as a result of the Company’s investment strategy and investor subscriptions and redemptions at the Company and Investee levels. The Company does not consolidate the results of the Investees in its financial statements because the Company does not invest in such Investees for purposes of exercising control; ownership in excess of 50% may be temporary; and the consolidation of these balances would not enhance the usefulness or understandability of information to the members. The Company does not exercise control over majority owned Investees. The following tables summarize the Company’s ownership in the Investees at June 30, 2013 and December 31, 2012:


	June 30, 2013
	Company investment		Investee equity⁽¹⁾		% owned by the Company⁽¹⁾
ELSM	$	136,432,555	$	372,156,630		36.66	%
EDM		93,852,554	$	286,025,183		32.81	%
EDMAT		8,905,599	$	31,692,077		28.10	%
GTTM		107,761,754	$	501,686,785		21.48	%
RVM		321,271	$	1,223,036		26.27	%

Total	$	347,273,733


	December 31, 2012
	Company investment		Investee equity⁽¹⁾		% owned by the Company⁽¹⁾
ELSM	$	155,842,998	$	379,799,470		41.03	%
EDM		99,506,680	$	285,567,970		34.85	%
EDMAT		10,169,426	$	36,189,621		28.10	%
GTTM		121,112,624	$	519,094,098		23.33	%
RVM		479,148	$	1,824,051		26.27	%
HFPO		350,745	$	590,725		59.38	%

Total	$	387,461,621

(1)	The Investees’ equity used in the calculation of the percentage owned by the Company is based on the net assets per the Investee’s Balance Sheet and in accordance with ASC 480, “Distinguishing Liabilities from Equity.”

Note 10 - Indemnifications

The Company enters into contracts that contain a variety of indemnification arrangements. The indemnification arrangements the Company has entered into with service providers include provisions for the Company to indemnify and hold harmless such service providers for certain liabilities. These indemnification arrangements typically cover liabilities incurred by service providers in connection with the services provided under the contractual arrangements with the Company and are generally entered into as part of a negotiated contractual arrangement stipulating the furnishing of the delineated services. However, under the terms of such contractual arrangements, the Company will not be required to indemnify service providers in certain situations to the extent that the liabilities incurred by the service providers were caused by the gross negligence, willful misconduct, bad

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 10 - Indemnifications

faith, reckless disregard of duties, or similar conduct on the part of the service provider. The Company’s maximum exposure under these arrangements is unknown. It is not possible to estimate the maximum potential exposure under these agreements, because the indemnification arrangements relate to unforeseeable liabilities suffered as a result of the conduct of the Company or other parties, which is presently unknown or unforeseeable. However, the Company has not had prior claims or losses pursuant to these indemnification arrangements and expects the risk of material loss to be remote.

Note 11 - Financial Highlights

Financial highlights for the Company for the three and six months ended June 30, 2013 and 2012 are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	Class A Series 1			Class A Series 1			Class A Series 1			Class A Series 1
Per unit operating performance:
Net asset value, beginning of period	$	157.40		$	149.75		$	151.91		$	144.87
Income from operations:
Net realized and unrealized gain/(loss)		0.86			(1.55	)		7.23			3.91
Net investment income/(loss)⁽¹⁾⁽²⁾		(0.64	)		(0.58	)		(1.52	)		(1.16	)

Total income/(loss) from operations		0.22			(2.13	)		5.71			2.75

Net asset value, end of period	$	157.62		$	147.62		$	157.62		$	147.62

Ratios to average members’ equity⁽³⁾
Expenses		1.59	%		1.58	%		1.63	%		1.56	%
Incentive allocation		0.01			0.00			0.17			0.00

Total expenses and incentive allocation		1.60	%		1.58	%		1.80	%		1.56	%

Net investment income/(loss)⁽²⁾		(1.59	)%		(1.58	)%		(1.79	)%		(1.56	)%

Total return (prior to incentive allocation)		0.15	%		(1.43	)%		3.93	%		1.89	%
Incentive allocation		(0.01	)		(0.00	)		(0.17	)		(0.00	)

Total return⁽⁴⁾		0.14	%		(1.43	)%		3.76	%		1.89	%

(1)	Net investment income/(loss) is calculated based on average units outstanding during the period.

(2)	Includes incentive allocation, if applicable.

(3)

The ratios of expenses and net investment income/(loss) to average members’ equity are calculated by dividing total expenses and net investment income /(loss), respectively, by the month-end average members’ equity for the period. The ratio of expenses to average members’ equity is annualized. The ratio of incentive allocation, if any, to average members’ equity is not annualized. The ratios to average members’ equity calculated above do not include the Company’s proportionate share of the net investment income and expenses of the Investees. The ratios to average members’ equity for each member may vary based on individualized incentive allocation bases and the timing of capital transactions.

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 11 - Financial Highlights

(4)

The components of total return are calculated by dividing the change in the per unit value of each component for the period by the NAV per unit at the beginning of the period. The total return for Class A Series 1 units is calculated taken as a whole and is not annualized. The total return for each member may vary based on individualized incentive allocation bases and the timing of capital transactions.

The per unit operating performance, ratios to average net assets and total return are calculated and presented for the initial series.

Note 12 - Significant Investees

The following is a summary of financial information for Investees that represented more than 20% of the Company’s total assets and/or income as of and/or for the six months ended June 30, 2013 (the “Significant Investees”):

Balance Sheet

The balance sheets as of June 30, 2013 and December 31, 2012, are summarized as follows:


	June 30, 2013
	ELSM		EDM		GTTM
Assets
Investments in Investees, at fair value	$	306,616,476	$	249,582,579	$	313,319,016
Investments in affiliated Investees, at fair value		38,289,436		24,744,881		197,232,752
Cash and cash equivalents		497,090		11,556,258		12,956,770
Other assets		54,376,325		12,817,868		14,784,753

Total assets	$	399,779,327	$	298,701,586	$	538,293,291

Liabilities and Net Assets
Liabilities
Redemptions payable	$	22,084,129	$	12,024,500	$	34,044,063
Loan payable		5,000,000		—		—
Accrued expenses and other liabilities		538,568		651,903		2,562,443

Total liabilities		27,622,697		12,676,403		36,606,506
Net assets		372,156,630		286,025,183		501,686,785

Total liabilities and net assets	$	399,779,327	$	298,701,586	$	538,293,291

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 12 - Significant Investees


	December 31, 2012
	ELSM		EDM		GTTM
Assets
Investments in Investees, at fair value	$	379,593,219	$	249,255,409	$	328,713,522
Investments in affiliated Investees, at fair value		—		24,152,692		201,813,152
Cash and cash equivalents		1,876,062		24,595,019		1,635,585
Other assets		18,541,017		3,414,541		14,000,000

Total assets	$	400,010,298	$	301,417,661	$	546,162,259

Liabilities and Net Assets
Liabilities
Redemptions payable	$	19,735,371	$	15,277,149	$	13,395,455
Loan payable		—		—		12,000,000
Accrued expenses and other liabilities		475,457		572,542		1,672,706

Total liabilities		20,210,828		15,849,691		27,068,161
Net assets		379,799,470		285,567,970		519,094,098

Total liabilities and net assets	$	400,010,298	$	301,417,661	$	546,162,259

Statement of Operations

For the three months ended June 30, 2013 and June 30, 2012, the statements of operations are summarized as follows:


	June 30, 2013
Income/(Loss)	ELSM			EDM			GTTM
Net realized gain/(loss) on Investees	$	11,731,477		$	10,704,376		$	3,155,975
Net change in unrealized gain/(loss) on Investees		(12,686,028	)		(3,976,523	)		(349,009	)
Investment income		174			294			382
Expenses		(408,423	)		(409,611	)		(1,448,728	)

Net income/(loss) from operations	$	(1,362,800	)	$	6,318,536		$	1,358,620


	June 30, 2012
Income/(Loss)	ELSM			EDM			GTTM
Net realized gain/(loss) on Investees	$	3,759,762		$	5,570,926		$	50,358
Net change in unrealized gain/(loss) on Investees		(9,752,553	)		(6,213,429	)		(7,787,311	)
Investment income		206			1,727			1,605
Expenses		(440,696	)		(469,803	)		(1,335,352	)

Net income/(loss) from operations	$	(6,433,281	)	$	(1,110,579	)	$	(9,070,700	)

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 12 - Significant Investees

For the six months ended June 30, 2013 and June 30, 2012, the statements of operations are summarized as follows:


	June 30, 2013
Income/(Loss)	ELSM			EDM			GTTM
Net realized gain/(loss) on Investees	$	16,143,080		$	12,995,213		$	6,009,864
Net change in unrealized gain/(loss) on Investees		5,387,141			7,254,899			11,617,372
Investment income		443			1,123			1,056
Expenses		(812,006	)		(814,426	)		(2,939,376	)

Net income/(loss) from operations	$	20,718,658		$	19,436,809		$	14,688,916


	June 30, 2012
Income/(Loss)	ELSM			EDM			GTTM
Net realized gain/(loss) on Investees	$	8,786,805		$	9,620,926		$	5,386,853
Net change in unrealized gain/(loss) on Investees		11,273,542			3,777,581			(1,661,020	)
Investment income		491			3,022			2,426
Expenses		(931,287	)		(977,380	)		(2,639,599	)

Net income/(loss) from operations	$	19,129,551		$	12,424,149		$	1,088,660

Statement of Cash Flows

For the six months ended June 30, 2013 and June 30, 2012, the statements of cash flows are summarized as follows:


	June 30, 2013
	ELSM			EDM			GTTM
Cash flows from operating activities
Net income/(loss) from operations	$	20,718,658		$	19,436,809		$	14,688,916
Net change in investments in Investees and affiliated Investees		34,687,307			(919,359	)		19,974,906
Net change in operating assets and liabilities		(35,772,197	)		(9,323,966	)		104,984

Net cash provided by/(used in) operating activities		19,633,768			9,193,484			34,768,806

Cash flows from financing activities
Net subscriptions/(redemptions)		(26,012,740	)		(22,232,245	)		(11,447,621	)
Proceeds/(repayments) from loan		5,000,000			—			(12,000,000	)

Net cash provided by/(used in) financing activities		(21,012,740	)		(22,232,245	)		(23,447,621	)

Net change in cash and cash equivalents		(1,378,972	)		(13,038,761	)		11,321,185
Cash and cash equivalents at beginning of period		1,876,062			24,595,019			1,635,585

Cash and cash equivalents at end of period	$	497,090		$	11,556,258		$	12,956,770

HEDGE FUND MANAGERS (DIVERSIFIED) LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2013

Note 12 - Significant Investees


	June 30, 2012
	ELSM			EDM			GTTM
Cash flows from operating activities
Net income/(loss) from operations	$	19,129,551		$	12,424,149		$	1,088,660
Net change in investments in Investees and affiliated Investees		11,238,279			9,497,998			(50,660,944	)
Net change in operating assets and liabilities		17,194,286			9,523,426			(5,855,179	)

Net cash provided by/(used in) operating activities		47,562,116			31,445,573			(55,427,463	)

Cash flows from financing activities
Net subscriptions/(redemptions)		(30,916,967	)		(23,155,000	)		54,621,874
Proceeds/(repayments) from loan		(15,650,000	)		—			—

Net cash provided by/(used in) financing activities		(46,566,967	)		(23,155,000	)		54,621,874

Net change in cash and cash equivalents		995,149			8,290,573			(805,589	)
Cash and cash equivalents at beginning of period		2,383,725			11,003,284			11,203,993

Cash and cash equivalents at end of period	$	3,378,874		$	19,293,857		$	10,398,404

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following discussion should be read in conjunction with the financial statements of Hedge Fund Managers (Diversified) LLC (the “Company”) and the related notes thereto.

The Company is a Delaware limited liability company organized in March 2002 to operate as an investment fund. It commenced operations on April 1, 2002. HFS, a Delaware limited liability company, serves as the Company’s managing member (the “Managing Member”). Effective May 1, 2013, Goldman Sachs Hedge Fund Partners, LLC was renamed “Hedge Fund Managers (Diversified) LLC.”

As of June 30, 2013, the Company had total assets of $362,648,458 compared with total assets of $407,674,216 as of December 31, 2012. Total liabilities of the Company were $31,178,856 as of June 30, 2013 compared with $36,078,533 as of December 31, 2012. Members’ equity of the Company was $331,469,602 as of June 30, 2013 compared with $371,595,683 as of December 31, 2012.

The Company’s investment objective is to target attractive long-term risk-adjusted returns across a variety of market environments with volatility and correlation that are lower than those of the broad equity markets. To achieve this objective, the Company allocates all or substantially all of its assets among investment funds managed by the Managing Member (such funds and any successor funds thereto, individually, an “Investment Fund” and collectively the “Investment Funds”), each of which (directly or through other entities) allocates its assets to, or invests in entities (“Advisor Funds”) managed by, independent investment managers (collectively, the “Advisors”) that employ a broad range of investment strategies primarily within one or more of the following hedge fund sectors (each, an “Investment Sector” and, collectively, the “Investment Sectors”): the tactical trading sector, the equity long/short sector, the event driven sector and the relative value sector. Currently, substantially all of the Company’s assets are invested in three Investment Funds, each of which is managed by the Managing Member. The current Investment Funds are Global Tactical Trading Managers LLC (“GTTM”), which employs investment strategies in the tactical trading sector; Equity Long/Short Managers LLC (“ELSM”), which employs investment strategies within the equity long/short sector; and Event Driven Managers LLC (“EDM”), which employs investment strategies within the event driven sector. The balance of the Company’s assets are invested in Event Driven Managers Asset Tr (“EDMAT”), which is a trust containing certain interests in illiquid assets transferred by EDM and Relative Value Managers LLC (“RVM” and together with EDMAT and the Investment Funds, the “Investees”) which, along with EDMAT, is in the process of liquidation. In addition, the Company may, directly or indirectly, allocate assets to Advisors whose principal investment strategies are not within one of the Investment Sectors referenced herein.

Performance of the Company in any period will be dependent upon the performance in the relevant period by the Investees and the weighted average percentage of the Company’s assets in each of the Investees during the period. In addition, performance is determined by the allocation by the Investment Funds of their assets with the various Advisors and the performance of each of those Advisors.

While the Managing Member currently expects to allocate assets to all the Investment Sectors through allocations to the Investment Funds, the Managing Member has no constraints with respect to the percentage of the Company’s assets to be allocated, directly or indirectly, to any single Advisor, group of Advisors, Investment Fund, or Investment Sector, or with respect to the number of Investment Funds and Advisors to which, directly or indirectly, assets of the Company are allocated at any time. The percentage of the Company’s assets to be allocated to any single Advisor, group of Advisors, Investment Fund or Investment Sector, and the number of Investment Funds and Advisors to which the Company allocates assets from time to time will be determined by the Managing Member in its sole discretion, based on factors deemed relevant by the Managing Member at the time of such allocation, which may include the amount of the Company’s assets under management, constraints on the capital capacity of the Investment Funds and Advisors, the availability of attractive opportunities, and other portfolio construction and portfolio management considerations.

The managing member of EDM created EDMAT, a Delaware statutory trust, for the benefit of its investors, including the Company. On March 31, 2009, EDM transferred to EDMAT its interest in certain illiquid investments, including illiquid investments made by Advisor Funds, as well as liquidating vehicles that Advisors formed as liquidity decreased for previously liquid investments, such as certain credit instruments. See “—Liquidity and Capital Resources” for a further discussion of EDMAT.

RVM ceased trading activities effective July 1, 2009 and will dissolve at the time all assets are liquidated, liabilities are satisfied and liquidation proceeds are distributed through payment of a liquidating distribution. Investors in RVM (including the Company) will receive proceeds from the liquidation over time as RVM receives redemption proceeds from Advisors. See “— Liquidity and Capital Resources” and Item 3. “Quantitative and Qualitative Disclosures About Market Risk — Risk Management.”

The Company’s results depend on the Managing Member, including in its capacity as managing member of each of the Investment Funds, and the ability of the Managing Member to recognize and capitalize on trends and other profit and investment opportunities within the Investment Sectors. Unlike many operating businesses, general economic or seasonal conditions may not have any direct effect on the profit potential of the Company due to the uncertain nature of the Company’s investments and since the Company’s investments in the Investment Funds are managed to seek to eliminate or reduce the impact of general economic or seasonal conditions. In addition, the Company’s past performance is not necessarily indicative of future results. Each Investment Fund allocates assets to Advisors that invest in various markets at different times and prior activity in a particular market does not mean that such market will be invested in by the Advisors or will be profitable in the future.

Results of Operations for the Three and Six Months Ended June 30, 2013 and June 30, 2012

The following presents a summary of the operations for the three and six months ended June 30, 2013 and June 30, 2012 and a general discussion of each material Investee’s performance during those periods. The Investees’ dealing net asset value (“NAV”) and reported performance are prepared using the latest information available from the Advisor Funds at the time of such valuation in accordance with their LLC Agreement. The Investees’ investments in the Advisor Funds are determined utilizing NAVs supplied by, or on behalf of, the Advisors of each Advisor Fund. Furthermore, NAVs received from the administrator of the Advisor Funds may be estimates and such values will be used to calculate the NAV of the Investees for purposes of determining amounts payable on redemptions and reported performance of the Investees. Such estimates provided by the administrators of the Advisor Funds may be subject to subsequent revisions which may not be reflected in the Investees’ final month-end dealing NAV. The annual audited financial statements may reflect adjustments for such subsequent revisions which may result in a variance between the Investees’ total return reported in their audited financial statements and the reported performance based on the month-end dealing NAV.

Performance for the Three and Six Months Ended June 30, 2013

The Company’s net realized and unrealized gain/(loss) for the three and six months ended June 30, 2013 was $1,942,076 and $17,538,429, respectively, compared to the Company’s net realized and unrealized gain/(loss) for the three and six months ended June 30, 2012 of $(5,438,816) and $14,349,287, respectively.

Overview

The Company is designed to be broadly exposed to the hedge fund market by allocating its assets to the Investment Funds in the Investment Sectors. As further described under Item 3. “Quantitative and Qualitative Disclosures About Market Risk — Risk Management,” quantitative analysis is combined with judgment to determine weightings, strategic return, risk and correlation estimates to inform the quantitative analysis. Judgment is applied to both estimates and weights in an attempt to achieve exposure to hedge funds while targeting attractive risk adjusted returns.

April brought weaker economic data early in the month, making the direction of fiscal and monetary policy somewhat more difficult to forecast. This was not the case in Japan, where the Bank of Japan’s announcement of expanded asset purchases confirmed policymakers’ dovish intent, weakening the yen further and extending the rally in Japanese equities. Gold prices experienced a sharp mid-month decline, partially driven by uncertainty over central bank policy in the U.S., while underwhelming growth data out of emerging markets underscored a weakening demand outlook for commodities more broadly. Higher levels of intra-month volatility were reflective of investors’ struggle to discern between a temporary pause in data and a more lasting downturn. Despite aggregate quarterly earnings and sales growth that were also characteristic of a low-growth macro environment, positive momentum and bullish sentiment ultimately prevailed, with most equity markets finishing higher at month-end. However, the consistent improvement in economic data, which fueled the upward momentum early in the year, gave way to mixed messages in May. Optimism from better U.S. payrolls and strong Japanese growth data was tempered by weaker U.S. manufacturing, tepid Chinese activity data and persistent sluggishness in Europe. Concerns were initially shrugged off as markets marched higher, but this shifted when policy uncertainty resurfaced with Federal Reserve Chairman Ben Bernanke’s suggestion that quantitative easing could be tapered “in the next few meetings” if data continues to improve. This coincided with a sharp rise in yields as investors repriced fixed income assets. While some had expected Bernanke to qualify his initial comments on tapering in subsequent statements, he reinforced that tapering would likely begin “later this year” following the Federal Open Market Committee’s June meeting. Monetary policy also influenced markets elsewhere, with the European Central Bank and Bank of England remaining on hold despite challenging economic conditions, while the Bank of Japan’s aggressive program of quantitative easing continued to be a key driver of Japanese asset price performances. The potential shift in monetary policy has had global implications, with emerging market assets and other carry-oriented investments coming under pressure. Market volatility has increased alongside a shift in cross-asset correlations, with investors acutely focused on digesting macro data releases and their impact on central banks’ reaction function.

Equity market momentum slowed notably over the quarter, but the MSCI World still ended with a positive return of 0.7% after strong gains throughout the first half of the quarter were not fully offset by losses starting in the second half of May. The small positive performance overall came with notable regional dispersion. Japan was among the strongest markets over the quarter with the Topix index (Total Return, in JPY) up 9.7%. The S&P 500 in the U.S. gained 2.9% over the quarter while the DJ Stoxx 600 in Europe declined by 3.0%. Emerging markets continued to struggle over the second quarter and especially in June with the MSCI Emerging Markets losing 8.0% over the quarter. High yield bonds, as measured by the Credit Suisse High Yield Index, lost around 1.4% over the quarter as both rising rates and declining risk sentiment in June hurt performance.

As mentioned above, central bank activity and especially the Federal Reserve’s comments on potential tapering of its quantitative easing program led to rising yields in most major developed markets. The increases were most pronounced in the U.S. and the UK, where 10-year yields increased by 64 bps and 68 bps respectively, but also Europe (10-year yields +44 bps) and Japan (10-year yields +30 bps) saw increasing yields. In foreign exchange, the U.S. dollar weakened slightly against the euro and the British pound, but strengthened against most other currencies, especially from emerging market or commodity-related economies, including 12.3% against the Australian dollar, 9.4% against the Brazilian real and 8.7% against the Indian rupee. The Japanese yen continued to weaken over the quarter, despite a short bout of yen strength in May, as monetary and fiscal easing continued in Japan. Commodity markets were generally negative over the quarter; the S&P GSCI Total Return Index lost 5.9%. Losses were most pronounced in precious metals as gold was down more than 20% and silver more than 30%.

The Company cannot predict which Investment Sector and accordingly which Investee will perform best in the future. The table below illustrates the portfolio weighting of each material Investee as of June 30, 2013, as well as each material Investee’s net return for the three and six months ended June 30, 2013.


Investee	Portfolio Weight as a % of Members’ Equity⁽¹⁾			Three Months Ended June 30, 2013 Net Return⁽²⁾			Six Months Ended June 30, 2013 Net Return⁽²⁾
ELSM		41.16	%		(0.31	)%		5.36	%
EDM		28.31	%		2.24	%		7.00	%
GTTM		32.51	%		0.51	%		3.25	%

(1)

Members’ equity, used in the calculation of the fair value of the Investees as a percentage of members’ equity, is reduced for member redemptions that are paid after the balance sheet date according to ASC 480, “Distinguishing Liabilities from Equity.” Members redemptions are included in redemptions payable in the Balance Sheet of the financial statements.

(2)

These returns are based on the performance of Class C Series 1 units for ELSM, EDM and GTTM. The returns include administration fees. No management fee or incentive allocation was charged by the managing member of the Investment Funds with respect to the Company’s investment in any of the Investment Funds. Past performance is not indicative of future results, which may vary.

For the three and six months ended June 30, 2013, the Company’s Class A Series 1 units returned 0.14% and 3.76%, respectively net of fees and incentive allocation.

The Investees

The material Investees’ performance during the three and six months ended June 30, 2013 is described in the following.

Equity Long/Short Managers LLC

As of June 30, 2013, ELSM represented approximately 41% of the Company’s members’ equity. ELSM returned (0.31)% and 5.36%, respectively, for Class C Series 1 units for the three and six months ended June 30, 2013.

For the Three Months Ended June 30, 2013

ELSM Advisors generated negative performance in the second quarter. In April, ELSM Advisors generated negative absolute performance, although there was some dispersion. Top performing ELSM Advisors benefited from idiosyncratic stock gains and long exposure to more defensive sectors such as telecom, healthcare, and consumer staples. ELSM Advisors with greater net exposure to cyclical sectors and greater exposure to small market capitalization companies tended to underperform. In May, ELSM Advisors generated positive absolute performance, with most Advisors finishing the month in positive territory. Top performing ELSM Advisors benefited from idiosyncratic stock gains, greater exposure to the U.S. and Europe, and long exposure to more cyclical sectors such as financials, industrials and technology. Underperforming ELSM Advisors suffered losses from long exposure to emerging markets and more defensive sectors, while short exposure broadly detracted across sectors. In June, ELSM Advisors generated negative absolute performance, although there was fairly high dispersion across Advisors. Performance of the sector in aggregate was generally in line with ELSM Advisors’ net exposure given the moderate decline of global equities. Top performing ELSM Advisors benefited from long exposure to the U.S. and to more defensive sectors including telecommunications and consumer staples, in addition to consumer discretionary. Given the weakness in emerging markets and Europe, underperforming ELSM Advisors lagged from exposure to those markets. ELSM Advisors with greater long exposure to more cyclical sectors, such as information technology, energy, and materials, also lagged peers.

For the Six Months Ended June 30, 2013

ELSM Advisors generated positive performance in the first half of 2013 as gains in the first quarter were not fully offset by losses in the second quarter.

While rising equity markets provided a tail wind for ELSM Advisors in the first quarter, idiosyncratic performance from stock picking was also strong and ELSM Advisors generated positive performance in every month. In January, top performing ELSM Advisors benefited from idiosyncratic stock gains and long exposure to the financials, healthcare, energy and consumer sectors. Underperforming ELSM Advisors were generally more defensively positioned with lower overall net exposure, while short exposure broadly detracted across sectors given equity market strength. In February, top performing ELSM Advisors benefited from idiosyncratic stock gains and long exposure to the consumer staples, industrials, and healthcare sectors. Given weakness in emerging markets, underperforming ELSM Advisors suffered losses from those markets as well as from exposure to the energy and materials sectors. In March, top performing ELSM Advisors benefited from idiosyncratic stock gains and long exposure to more defensive sectors such as healthcare, consumer staples, and telecom. Given the continued weakness in emerging markets, ELSM Advisors again lagged from exposure to those markets. Short exposure broadly detracted across ELSM Advisors given the positive market conditions in March.

Performance was more mixed during the second quarter of the year with losses in April and June not offset by gains in May. In April, top performing ELSM Advisors benefited from idiosyncratic stock gains and long exposure to more defensive sectors such as telecom, healthcare, and consumer staples. ELSM Advisors with greater net exposure to cyclical sectors and greater exposure to small market capitalization companies tended to underperform. In May, top performing ELSM Advisors benefited from idiosyncratic stock gains, greater exposure to the U.S. and Europe, and long exposure to more cyclical sectors such as financials, industrials, and technology. Underperforming ELSM Advisors suffered losses from long exposure to emerging markets and more defensive sectors, while short exposure broadly detracted across sectors. In June, top performing ELSM Advisors benefited from long exposure to the U.S. and to more defensive sectors including telecommunications and consumer staples, in addition to consumer discretionary. Given the weakness in emerging markets and Europe, underperforming ELSM Advisors lagged from exposure to those markets. ELSM Advisors with greater long exposure to more cyclical sectors such as information technology, energy, and materials, also lagged peers.

Event Driven Managers LLC

As of June 30, 2013, EDM represented approximately 28% of the Company’s members’ equity. EDM returned 2.24% and 7.00%, respectively, for Class C Series 1 units for the three and six months ended June 30, 2013.

For the Three Months Ended June 30, 2013

Performance of EDM Advisors in the second quarter was modestly positive, with gains generated during April and May, followed by losses in June. Most sub-strategies employed by EDM Advisors (e.g. special situations equities, merger arbitrage, various distressed situations and structured credit) generated positive performance during April and May, but suffered in June as macroeconomic concerns, most notably investor sensitivity around Federal Reserve tightening, led to broad losses across risk assets. Across strategies, EDM Advisors with greater net long exposures and/or portfolios with higher degrees of underlying risk generally performed best given the positive trend, although these EDM Advisors tended to perform worse in June as risk assets broadly declined. As expected, EDM Advisors with more balanced and/or net short exposures experienced more muted performance during the quarter. Event driven equities generally performed well during the second quarter, with a strong market backdrop in April and May, along with outperformance from some common holdings that experienced idiosyncratic events during the quarter. Merger arbitrage performance was also generally positive, although it represented somewhat limited exposure for many EDM Advisors. Corporate credit performed well in April and May, supported by low Treasury yields and positive equity market performance during the first two months of the quarter. While the upside in credit has been somewhat capped by already rich valuations, credit continued to rally throughout most of April and May with yields on performing credit hovering near record lows.

Additionally, a number of commonly held stressed, distressed and liquidation investments contributed positively to performance during the quarter for EDM Advisors in aggregate. Structured credit exposure was also a contributor, with price appreciation seen across most portfolios invested in RMBS, CMBS and structured corporate credit. Portfolio hedges detracted over the quarter given the broad appreciation across most risk assets, however, they were one of the few areas that generated positive performance across portfolios in June.

For the Six Months Ended June 30, 2013

EDM Advisors generated positive performance in the first half of 2013 as performance was positive in every month except for June. The drivers of performance were largely consistent throughout the first six months, with the majority of sub-strategies employed by EDM Advisors generating positive performance through May, but suffering in June.

Event driven equities generally performed well, with a strong market backdrop for much of the semester and outperformance from some common holdings. Merger arbitrage performance was also generally positive, although it represented somewhat limited exposure for many EDM Advisors. Fixed income performed well, supported by low Treasury yields and positive equity market performance for most of the first half of the year. While the upside in credit has been somewhat capped by already rich valuations, credit continued to rally throughout much of the period with yields on performing credit hovering near record lows by the end of the second quarter. Additionally, a number of commonly held stressed, distressed and liquidation investments contributed positive performance for many EDM Advisors. Structured credit exposure was also a notable contributor, with price appreciation across RMBS, CMBS and structured corporate credit. Portfolio hedges served as detractors through May given the broad appreciation across most risk assets and the continuation of muted and downward trending volatility. However, hedges were one of the few areas that generated positive performance across portfolios during June.

Global Tactical Trading Managers LLC

As of June 30, 2013, GTTM represented approximately 33% of the Company’s members’ equity. GTTM returned 0.51% and 3.25%, respectively, for Class C Series 1 units for the three and six months ended June 30, 2013.

For the Three Months Ended June 30, 2013

GTTM Advisors realized positive performance in the second quarter, as gains in April and May were not fully offset by losses in June. Gains in April were realized by both Managed Futures and Macro GTTM Advisors. Macro GTTM Advisors benefited from foreign exchange trading, most notably from short exposure to the Japanese yen. Trading in fixed income was mixed overall. Managed Futures GTTM Advisors generated gains from long positions across global equity indices, particularly in the U.S. and Japan. Fixed income trading also contributed positively. Trading in commodities was mixed, but broadly negative for Managed Futures GTTM Advisors with long energy positions and positive for those with short precious metals exposure. In May, gains were realized by Macro GTTM Advisors but were partially offset by losses generated by Managed Futures GTTM Advisors. Macro GTTM Advisors mostly generated positive performance in fixed income, driven by short exposure in the U.S., as well as in foreign exchange trading due to short yen exposure. Trading in equities was more mixed due to regional dispersion, while commodities trading generated losses due to a broad sell-off across the complex. Managed Futures GTTM Advisors experienced notable losses as long bond positions suffered as yields increased across the curve, most notably in the U.S. trading in currencies also generated losses, with Advisors with long positions in emerging market currencies suffering. Trading in commodities was more mixed, while trading in equities partially offset losses as long positions across global indices appreciated in the month. In June, losses were realized by both Macro and Managed Futures GTTM Advisors, but with a large degree of dispersion. Most Managed Futures GTTM Advisors realized moderate losses, but a number of funds were notable outliers to the downside. Long positions in global equities were the largest detractor in most cases. Residual long positions in fixed income detracted for most managers, although these were largely liquidated, or

even reversed, by month-end. Within commodities, short positions in precious metals and long positions in crude oil helped to offset losses elsewhere. Macro GTTM Advisors experienced wide performance dispersion given the intra-month reversals in several markets. Attribution from currencies was varied but likely negative in aggregate, as a pullback in the trend of a stronger U.S. dollar resulted in losses for many Advisors. Trading in fixed income was mixed, while long positions in U.S. and Japanese equities resulted in modest losses.

For the Six Months Ended June 30, 2013

GTTM Advisors contributed positive performance in the first half of the year as GTTM Advisors in aggregate generated positive returns in every month except for June.

For Macro GTTM Advisors, equity and FX positions were the primary driver of positive performance in January and March, while trading in commodities and fixed income was more mixed in these months. In February, positive performance was generally driven by long positions in fixed income, U.S. equities and credit. While performance in foreign exchange was mixed, depending on U.S. dollar positions, long commodity exposure generally contributed losses. Managed Futures GTTM Advisors also generated positive performance in January and March with largely similar attribution. Equity and foreign exchange positions contributed positively while especially in January fixed income positions were a notable detractor and commodities trading was largely mixed in both months. Performance was more mixed in February when fixed income was the most notable contributor to performance, as long positioning across the curve benefited as yields decreased in the second half of the month. Trading in equities also contributed positively as long positions generated gains despite giving back some performance near month-end. Commodities trading was a significant detractor as long energies positions suffered, while trading in foreign exchange also detracted.

Macro GTTM Advisors also generated positive performance during the second quarter. In April, positive performance was primarily driven by foreign exchange trading while fixed income trading was more mixed. Currency positions continued to contribute positively in May and performance contribution from fixed income turned largely positive, driven by short positions. Long equity positions still contributed positively in April but were more mixed in May. There was notable performance dispersion across Macro GTTM Advisors in June, as many markets experienced notable reversals. Attribution from currencies was varied but likely negative in aggregate, as a pullback in the trend of a stronger U.S. dollar resulted in losses for many Advisors. Trading in fixed income was mixed, while long positions in U.S. and Japanese equities resulted in modest losses and short positions in gold or other precious metals were profitable for some Advisors. Managed Futures GTTM Advisors in aggregate contributed losses over the quarter as gains in April were more than offset by losses in May and June. Gains in April were largely driven by long positions in global equities and long positions in fixed income, while commodities trading was more negative. In May, the main detractor were long positions in fixed income that were negatively impacted in the rising yield environment. Trading in currencies also contributed losses while commodities were more mixed and equities generally contributed positively. May’s trend reversed in June, when equity trading was the main detractor for Managed Futures GTTM Advisors. Foreign exchange and fixed income performance was more mixed but detracted for a number of managers while short positions in precious metals and long positions in crude oil helped offset some of the losses.

Performance for the Three and Six Months Ended June 30, 2012

The Company’s net realized and unrealized gain/(loss) for the three and six months ended June 30, 2012 was $(5,438,816) and $14,349,287, respectively, compared to the Company’s net trading gain/(loss) for the three and six months ended June 30, 2011 of $(7,236,940) and $1,249,716, respectively.

Overview

After a very benign start to the year, the second quarter of 2012 proved to be more challenging for markets. Volatility increased notably over the quarter and most risk assets suffered a significant decline, giving back a large part of the gains made during the first quarter. Most risk assets started into the quarter with an early sell-off,

following a weaker U.S. payrolls report, but after a recovery over the second half of April, performance was largely flat over the month as a whole. That changed notably in May, when bearishness dominated market sentiment. Risk assets sold off steadily throughout the month as markets were confronted with a steady stream of negative data points and headlines, including European sovereign debt concerns and disappointing economic data releases in the U.S. and China. Markets remained choppy in June as a continued deterioration in economic data was balanced against a more proactive stance from policymakers. The month was characterized by high volatility and choppiness with some of the year’s largest one-day moves in the S&P 500 realized in June. An easing of near-term concerns in Europe spurred a rally into month-end as the outcome of the widely anticipated Greek elections was more benign than some had feared and a new agreement on European bank recapitalizations suggested the potential for eliminating the circular funding link between financials and sovereigns. Over the quarter as a whole, global equity markets (proxied by the MSCI World Index) were down 5.1%. While performance was generally negative across regions there was notable dispersion with emerging markets (proxied by the MSCI Emerging Markets Index) down 10.0% whereas U.S. equities (proxied by the S&P 500) only lost 2.8%. Commodities also reflected the deteriorating global growth picture with the S&P GSCI Total Return Index losing 12.4% over the quarter, driven by losses in energy, industrial metals and precious metals, whereas agriculturals continued to perform positively. In foreign exchange markets, investors’ more cautious attitude to risk assets was reflected in a broadly stronger U.S. dollar. The U.S. dollar rallied primarily against emerging market currencies, including the Brazilian Real, the Indian Rupee and the Russian Ruble, but also the Euro depreciated 5.1% against the U.S. dollar, reflecting the market’s concerns around the sovereign debt situation. In fixed income, yields in major developed markets returned to their declining trend after having increased during the first quarter of the year. This move was most pronounced at the back end of the U.S. government bond curve, where 30-year yields declined by 58 bps and 10-year yields by 56 bps. 10-year U.K. Gilt yields declined by 47 bps and 10-year German Bund yields fell by 21 bps. Performance in credit was positive over the month as the negative performance impact from a widening in credit spreads (for example, the spread on the Credit Suisse High Yield Index increased by 41 bps) was offset by the positive performance impact from lower yields, as mentioned above. Overall, the Credit Suisse High Yield Index generated a positive return of 1.56% over the quarter.

The table below illustrates the portfolio weighting of each material Investee as of June 30, 2012, as well as each material Investee’s net return for the three and six months ended June 30, 2012.


Investee	Portfolio Weight as a % of Members’ Equity⁽¹⁾			Three Months Ended June 30, 2012 Net Return⁽²⁾			Six Months Ended June 30, 2012 Net Return⁽²⁾
ELSM		45.32	%		(1.38	)%		4.34	%
EDM		27.23	%		(0.26	)%		3.90	%
GTTM		35.38	%		(1.39	)%		0.78	%

(1)	Members’ equity, used in the calculation of the fair value of the Investees as a percentage of members’ equity, is based on the members’ equity per the Balance Sheet and in accordance with ASC 480, “Distinguishing Liabilities from Equity.”

(2)

For the three and six months ended June 30, 2012, the Company’s Class A Series 1 units returned (1.43)% and 1.89%, respectively net of fees and incentive allocation.

The Investees

The material Investees’ performance during the three and six months ended June 30, 2012 is described in the following.

Equity Long/Short Managers LLC

As of June 30, 2012, ELSM represented approximately 45% of the Company’s members’ equity. ELSM returned (1.38)% and 4.34%, respectively, for Class C Series 1 units for the three and six months ended June 30, 2012.

For the Three Months Ended June 30, 2012

ELSM Advisors generated negative performance in the second quarter of 2012 as volatile markets and macroeconomic concerns created a challenging environment for stock picking.

In April, ELSM Advisors generally realized flat performance, although there was some dispersion of performance. Alpha generation during the month was strong in some cases with a number of ELSM Advisors generating flat to positive performance despite losses across most developed equity markets. Top performing ELSM Advisors benefited from long exposure to consumer discretionary and consumer staples, as well as from idiosyncratic stock gains. Underperforming ELSM Advisors realized losses from long exposure to financials, information technology, and to a lesser extent, energy & materials. In May, ELSM Advisors generally realized losses, although many outperformed relative to global equity markets. Most ELSM Advisors performed relatively well through the first half of May, and while some managers realized more significant losses as the sell-off accelerated in the month’s third week, in the aggregate, managers still outperformed their level of net exposure, albeit with wide dispersion across the strategy. Given the significant directional move in markets, ELSM Advisors with higher net exposure struggled, while ELSM Advisors with lower net exposure realized more modest losses and a small number of ELSM Advisors produced positive performance. From a sector perspective, ELSM Advisors with long exposure concentrated in financials or cyclical sectors underperformed, while losses were more limited for ELSM Advisors with long exposure concentrated in defensive sectors. In June, ELSM Advisors realized a mix of positive and negative performance with low dispersion, as macroeconomic issues such as political developments, policy announcements, and shifting investor sentiment created a risk-on/risk-off environment. Most ELSM Advisors entered the month with relatively low levels of net exposure. Following the sharp sell-off in equities at the beginning of the month, ELSM Advisors that further reduced risk in response missed the ensuing market rally. In response to economic stimulus and the U.S. Supreme Court’s ruling related to healthcare legislation, ELSM Advisors with long positions focused in the financials and health care sectors generally outperformed, while ELSM Advisors with exposure to the technology and consumer sectors generally lagged. Short exposures broadly detracted or were flat across sectors.

For the Six Months Ended June 30, 2012

ELSM Advisors finished the first six months of 2012 with positive performance as gains generated during the first quarter were not fully offset by losses in May.

ELSM Advisors generated broadly positive performance throughout the first quarter of 2012. In January, ELSM Advisors’ performance benefited from an aggressive broad sector rotation effect that caused the weakest sectors of 2011 to rally significantly and outperform the markets during the month, including financials, materials, industrials, consumer discretionary and technology. In February, most ELSM Advisors finished in positive territory as well. In general, many of the same trends that had characterized January continued into February. Cyclical sectors, such as technology, financials, consumer discretionary and energy continued to lead the rally during the month. In March, ELSM Advisors generally realized modest positive performance, producing returns that were generally in line with that of global equity markets in aggregate, although there was some dispersion of performance across the sector.

Performance turned negative over the second quarter, primarily driven by losses in May. In April, ELSM Advisors generally realized flat performance. Alpha generation during the month was strong in some cases with a number of ELSM Advisors generating flat to positive performance despite losses across most developed equity markets. Top performing ELSM Advisors benefited from long exposure to consumer discretionary and consumer staples. Underperforming ELSM Advisors realized losses from long exposure to financials, information technology, and, to a lesser extent, energy & materials. In May, ELSM Advisors generally realized losses, although many outperformed relative to global equity markets. Given the significant directional move in markets, ELSM Advisors with higher net exposure struggled, while ELSM Advisors with lower net exposure realized more modest losses and a small number of ELSM Advisors produced positive performance. Performance turned largely flat again in June as macroeconomic issues such as political developments, policy announcements, and shifting investor sentiment created a risk-on/risk-off environment. Most ELSM Advisors entered the month with relatively low levels of net exposure. In response to economic stimulus and notable healthcare legislation, ELSM Advisors with long positions focused in the financials and health care sectors generally outperformed, while ELSM Advisors with exposure to the technology and consumer sectors generally lagged.

Event Driven Managers LLC

As of June 30, 2012, EDM represented approximately 27% of the Company’s members’ equity. EDM returned (0.26)% and 3.90%, respectively, for Class C Series 1 units for the three and six months ended June 30, 2012.

For the Three Months Ended June 30, 2012

EDM Advisors generally generated mixed performance during the second quarter of 2012 as market volatility rose sharply following a benign first quarter.

In April, EDM Advisors collectively realized muted performance. Corporate credit exposure generally contributed positive returns, particularly in financial liquidation positions, while structured credit generally retraced some gains from the previous months. Performance for special situations equity and merger arbitrage positions was mixed following positive performance during the first quarter of 2012. Attribution from hedges was somewhat flat, although short European sovereign exposure was generally beneficial to performance. During May, EDM Advisors collectively realized negative performance as concerns around the macro environment returned. Equity exposure was broadly a source of negative performance, with losses from special situations equity, although there were a few merger arbitrage positions which contributed positively over the month. Corporate credit markets were relatively resilient through early May, but sold off sharply into month-end as risk sentiment deteriorated on an increase in negative economic news. Structured credit also detracted from performance. Offsetting some losses, EDM Advisors generally benefited from portfolio hedges in May. Market declines during May continued into early June, but eventually reversed course before month-end. Consequently, EDM Advisors collectively generated muted performance during June. Equity exposure was a source of mixed returns as equity special situations generally contributed positively during the second half of the month alongside a slight improvement in risk sentiment, although core merger arbitrage positions experienced mixed performance. Despite a weak start in June, leveraged credit markets performed well during the month with high-yield bonds and loans each posting strong positive returns. Similarly, structured credit valuations rebounded as the overall market sentiment for risk assets improved and as capital continued to flow into the structured credit opportunity. Performance of hedges and macro-oriented positions was mixed during June, but largely detracted from performance.

For the Six Months Ended June 30, 2012

EDM Advisors generally produced positive returns during the first half of 2012, as positive performance over the first quarter outweighed negative performance in the second quarter.

In January and February, EDM Advisors generally benefited from “risk on” sentiment, with long positions in both equities and credit contributing to performance. While positioning was still relatively balanced in January

after the 2011 volatility and EDM Advisors did not fully participate in the rally, positioning was more bullish in February, resulting in more positive performance. Positive sentiment from January and February largely carried through the month of March as well, albeit with some reversals throughout the month. Equity exposure, including special situations equity and merger arbitrage positions, generally contributed positive returns in March. Credit performance was more muted, due partly to rising rates as well as widening credit spreads in some instances. Through most of the first quarter of 2012, hedges and short exposure typically detracted from performance as prices of risk assets generally rose.

Performance was more mixed during the second quarter of 2012 as market volatility started to pick up again. Performance was generally muted in April and June. Corporate credit positions generally contributed positively while structured credit positions detracted in April but were more positive in June. Equity special situations and merger arbitrage performance was mixed during both months. However, this muted performance was offset by losses in May when EDM Advisors collectively realized negative performance as concerns around the macro environment returned. Equity exposure was broadly a source of negative performance, with losses from special situations equity, although there were a few positive idiosyncratic drivers from merger arbitrage investments. Corporate credit markets were relatively resilient through early May, but sold off sharply into month-end as risk sentiment deteriorated on an increase in negative economic news. Structured credit also detracted from performance. EDM Advisors generally benefited from portfolio hedges in May, which offset some losses.

Global Tactical Trading Managers LLC

As of June 30, 2012, GTTM represented approximately 35% of the Company’s members’ equity. GTTM returned (1.39)% and 0.78%, respectively, for Class C Series 1 units for the three and six months ended June 30, 2012.

For the Three Months Ended June 30, 2012

Tactical trading strategies generated negative performance in the second quarter of 2012. Both macro GTTM Advisors and managed futures GTTM Advisors exhibited fairly high dispersion throughout the quarter, but overall generated negative returns in the aggregate.

In both April and May, managed futures GTTM Advisors experienced strong gains while macro GTTM Advisors experienced broadly flat performance. Managed futures GTTM Advisors benefitted from long positions in fixed income, most notably in Europe and the United States, as yields decreased. Fixed income positioning was more mixed for macro GTTM Advisors, which resulted in a larger dispersion of returns. Performance was mixed in currency trading as macro GTTM Advisors had mixed positioning in both the U.S. dollar and the Euro, leading only some macro GTTM Advisors to profit from the general depreciation of both currencies in April and the Euro in May. Both macro and managed futures GTTM Advisors experienced losses in equity trading, as GTTM Advisors tended to be long in both developed and emerging market indices, both of which suffered as concerns over global economic growth worsened in the quarter. Both macro and managed futures GTTM Advisors had mixed positioning in commodities throughout the quarter, which led to dispersed returns across the asset class. In June, GTTM Advisors experienced losses across asset classes as many GTTM Advisors maintained a more bearish view on global growth, which hurt performance. Managed futures GTTM Advisors were the primary driver of losses for the sector, while macro GTTM Advisors experienced more moderate losses. Fixed income trading was a significant detractor in June as long positions suffered as price action reversed from the prior month with yields increasing month-on-month. Conversely, some select macro GTTM Advisors profited from short fixed income positioning. Equities trading was a detractor for both macro and managed futures GTTM Advisors in June, as most GTTM Advisors were bearishly positioned throughout the quarter, which led to losses in June. Trading in currencies also detracted as many GTTM Advisors had long positions in the U.S. dollar, which depreciated against most currencies in June. Some macro GTTM Advisors partially offset these losses with long emerging market currency positions, which realized positive performance in June. Trading in commodities led to mixed performance in June due to limited consensus in positioning.

For the Six Months Ended June 30, 2012

Tactical trading strategies generated positive performance in the first six months of 2012 as both macro and managed futures GTTM Advisors overall generated gains in the first quarter and negative performance in the second quarter.

In both January and February, macro GTTM Advisors and managed futures GTTM Advisors experienced gains as healthy economic data and an improving investor risk sentiment benefited tactical trading strategies. Macro GTTM Advisors and managed futures GTTM Advisors broadly benefited from gains in long-biased commodities trading and performance was mixed in currency trading. Macro GTTM Advisors generally profited from trading in fixed income and had mixed performance in equities, while managed futures GTTM Advisors inversely experienced gains in long developed and emerging market equity positioning and realized mixed performance in fixed income. March was characterized by mixed economic data, which cast uncertainty over recently improved investor risk sentiment. In aggregate, tactical trading strategies experienced negative performance. Managed futures GTTM Advisors were the primary driver of losses for the sector, while macro GTTM Advisors realized modest losses in aggregate with fairly high dispersion. Trading in fixed income generally contributed positively for macro GTTM Advisors while trading in currencies and commodities generally detracted. Losses for managed futures GTTM Advisors occurred primarily in fixed income, as long positions suffered, most notably in U.K. and U.S. government bonds. Managed futures GTTM Advisors also had limited success trading in both currencies and commodities, both of which detracted in March.

In both April and May, managed futures GTTM Advisors experienced strong gains while macro GTTM Advisors experienced broadly flat performance. Managed futures GTTM Advisors benefitted from long positions in fixed income but as fixed income positioning was more mixed for macro GTTM Advisors, there was greater dispersion of returns for macro GTTM Advisors. Performance was mixed in currency trading and both macro and managed futures GTTM Advisors experienced losses in equity trading. Both macro and managed futures GTTM Advisors had mixed positioning in commodities throughout the quarter, which led to dispersed returns across the asset class. In June, GTTM Advisors experienced losses across asset classes as many GTTM Advisors maintained a more bearish view on global growth, which hurt performance. Managed futures GTTM Advisors were the primary driver of losses for the sector, while macro GTTM Advisors experienced more moderate losses. Fixed income trading was a significant detractor in June as long positions suffered as price action reversed from the prior month. Conversely some select macro GTTM Advisors profited from short fixed income positioning. Equities trading was a detractor for both macro and managed futures GTTM Advisors in June. Trading in currencies also detracted as GTTM Advisors had uniform long positioning in the U.S. dollar which depreciated against most currencies in June. Some macro GTTM Advisors partially offset these losses with long emerging market currency positions. Trading in commodities led to mixed performance in June due to limited consensus in positioning.

Comparison of Selected Financial Information for the Three and Six Months ended June 30, 2013 and June 30, 2012

Dividend Income

Dividend income for the three and six months ended June 30, 2013 was $351 and $1,301, respectively, compared to dividend income for the three and six months ended June 30, 2012 of $3,192 and $5,600, respectively. The Company’s dividend income fluctuates with the level of cash available to invest.

Expenses

The management fee for the three and six months ended June 30, 2013 was $1,128,720 and $2,324,923, respectively, compared to the management fee for the three and six months ended June 30, 2012 of $1,625,405 and $3,312,655, respectively. Because the management fee is calculated as a percentage of the Company’s net assets as of each month end (equal to one-twelfth of 1.25% of the net assets of the Company of the applicable month), the changes in the expense were due to fluctuations in the Company’s net assets for the period ended June 30, 2013 compared to the same period in 2012.

Professional fees for the three and six months ended June 30, 2013 were $245,836 and $544,088, respectively, compared to professional fees for the three and six months ended June 30, 2012 of $326,497 and $638,847, respectively. The decrease in professional fees for the period ended June 30, 2013 was primarily due to decreased costs related to reduced agreed-upon procedures for regulatory filing requirements for Extensible Business Reporting Language (“XBRL”).

The Company incurs a monthly administration fee payable to SEI equal to one-twelfth of 0.02% of the net assets of the Company as of each month end. For the three and six months ended June 30, 2013, the Company incurred an administration fee of $24,935 and $50,950, respectively, compared to the administration fee for the three and six months ended June 30, 2012 of $32,882 and $66,754, respectively. Through its investments in the Investment Funds, the Company continues to bear a pro-rata portion of the administration fee paid to the administrator of the Investment Funds for services provided to the Investment Funds. For the three and six months ended June 30, 2013, the Company’s pro-rata indirect share of the administration fee charged at the Investee level totaled $42,391 and $87,263, respectively, compared to the Company’s pro-rata indirect share of the administration fee charged at the Investee level for the three and six months ended June 30, 2012 of $61,136 and $123,073, respectively. SEI is the administrator of each Investment Fund.

Miscellaneous expenses for the three and six months ended June 30, 2013 were $24,121 and $75,884, respectively, compared to miscellaneous expenses for the three and six months ended June 30, 2012 of $62,636 and $115,540, respectively.

Incentive Allocation

The Incentive Allocation for the three and six months ended June 30, 2013 was $25,971 and $618,578, respectively, compared to the three and six months ended June 30, 2012 of $(7,464) and $7,119, respectively. Because the incentive allocation is calculated as a percentage of any new net appreciation in the net asset value attributable to each series, the changes in the incentive allocation were due to fluctuations in net income from operations for the period resulting in certain series of Class A Shares moving above or below their high watermark.

Other than the management fee, professional fees, administration fees, miscellaneous expenses and incentive allocation, there are no other fees directly borne by the Company.

Liquidity and Capital Resources

The Company’s liquidity requirements consist of cash needed to fund investments in the Investment Funds in accordance with the Company’s investment strategy, to fund quarterly redemptions and to pay costs and expenses. The Company periodically re-allocates its investments in the Investment Funds based on the performance of the Investment Funds and other factors. Redemptions are permitted on a quarterly basis and written notices of redemption must be delivered to the Company at least 91 days prior to the applicable valuation date, which is the day immediately preceding the applicable redemption date. Accordingly, the Company cannot predict the level of redemptions in the Company for any quarterly period until 91 days prior to the redemption date. The Company endeavors to pay redemption proceeds within 45 days following the redemption date, without interest. If the Company faces a liquidity problem, the redemptions may be limited or postponed under certain limited circumstances. The Managing Member’s ability to limit or postpone redemptions in the Company enables the Company to control and to some extent avoid a liquidity problem. However, substantial redemptions of units in the Company could require the Company to liquidate certain of its investments in the Investment Funds in order to raise cash to fund the redemptions, which could have a material adverse effect on the NAV of the units and the performance of the Company.

The Company can fund its liquidity requirements by liquidation (through redemptions, or as otherwise permitted in the LLC Agreements of the Investment Funds) of its investments in the Investment Funds and from new investments from existing and new investors. Neither EDMAT nor RVM provide investors with a

voluntary redemption right. Redemptions can be made quarterly, subject to certain limitations. During certain historic periods, the Company only took in investments from existing investors and limited subscriptions from new qualified investors; however, the Company has been accepting additional amounts of new subscriptions throughout the second quarter of 2013. The Company may close again and stop accepting subscriptions at any time without notice at the sole discretion of the Managing Member. The acceptance of future subscriptions in the Company will be determined by the Managing Member in its sole discretion. Although the Managing Member has been receiving new subscriptions, any liquidity requirements in the near term may need to be funded through the redemption of existing investments in the Investment Funds to the extent new investments are not received in sufficient amounts to cover redemptions. If the Company seeks to redeem all or a portion of its investment positions in any of the Investment Funds, the Investment Fund, to the extent it does not have cash on hand to fund such redemption, will need to liquidate some of its investments. Substantial redemptions of membership units in an Investment Fund, including by the Company, could require the Investment Fund to liquidate certain of its investments more rapidly than otherwise desirable in order to raise cash to fund the redemptions and achieve a market position appropriately reflecting a smaller asset base. This could have a material adverse effect on the value of the membership units redeemed and the membership units that remain outstanding and on the performance of the Investment Fund. Under certain exceptional circumstances, such as force majeure, the managing member of an Investment Fund (currently, the Managing Member) may find it necessary (a) to postpone redemptions if it determines that the liquidation of investments in the Investment Fund to fund redemptions would adversely affect the NAV per membership unit of the Investment Fund or (b) to set up a reserve for undetermined or contingent liabilities and withhold a certain portion of redemption proceeds. In such circumstances, the Investment Fund would likely postpone any redemptions.

Certain investment positions in which the Investment Funds have a direct or indirect interest are illiquid. The Advisors may invest in restricted or non-publicly traded securities, securities on foreign exchanges and futures. These positions may be illiquid because certain exchanges limit fluctuations in certain securities and futures contract prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits”. Under such daily limits, during a single trading day no trades may be executed at prices beyond the daily limits. Once the price of a particular security or futures contract has increased or decreased by an amount equal to the daily limit, positions in that security or contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit.

In addition, certain of the investments held by the Investment Funds are subject to various lock-up provisions. Additionally, the Advisors of the investments held by the Investment Funds may, at their discretion, transfer a portion of the Investment Funds’ investment into share classes where liquidity terms are directed by the Advisor in accordance with the respective investment’s private placement memorandum, commonly referred to as side pocket share classes (“side pockets”). These side pockets may have restricted liquidity and prohibit the Investment Funds from fully liquidating their investments without delay. The managing member of each Investment Fund attempts to determine each Advisor’s strategy on side pockets through its due diligence process prior to making an allocation to the investment managed by the Advisor. However, no assurance can be given on whether or not the Advisor will implement side pockets during the investment period. The Advisors of the investments held by the Investment Funds may also, at their discretion, suspend redemptions or implement other restrictions on liquidity which could impact the Investment Funds’ ability to meet redemptions submitted by the Company. As of June 30, 2013, approximately 2% of the Company’s investments in the Investees were considered illiquid due to restrictions implemented by the Advisors of the investments held by Investees, excluding contractual restrictions imposed by the Advisors at the time of purchase, such as lock-ups. In addition, as of June 30, 2013, approximately 3% of the Company’s members’ equity was considered illiquid due to restrictions implemented by the Investees. The sum of these amounts represents the total amount of the Company’s members’ equity which was considered illiquid as of June 30, 2013.

HFS, the managing member of EDM, created EDMAT for the benefit of its investors, including the Company. Goldman Sachs Trust Company, a Delaware Corporation, is the trustee of EDMAT (the “Trustee”). The Trustee appointed HFS as the “Special Assets Direction Advisor”, responsible for, among other things, disposition of

EDMAT assets. On March 31, 2009, EDM transferred to EDMAT its interest in certain illiquid investments, including illiquid investments made by Advisor Funds, as well as liquidating vehicles that the Advisors formed as liquidity decreased for previously liquid investments, such as certain credit instruments. EDM transferred to EDMAT the economic risks and benefits of its interests in the assets. In connection with such transfer, each investor in EDM, including the Company, was issued its pro-rata share of EDMAT interests based on its ownership in EDM as of the transfer date. Distributions from EDMAT in respect of EDMAT interests will be made to holders of EDMAT interests, including the Company, as amounts in respect of the assets transferred to EDMAT are received from the Advisors. However, the actual timing of these distributions will be dependent on the Advisors’ ability to liquidate positions as market conditions allow, and it could be a significant period of time before such positions are realized or disposed of.

The Company received subscriptions from new and existing investors of $1,000,000 and $1,250,000, respectively, during the three and six months ended June 30, 2013 and of $1,900,000 and $6,241,936, respectively, during the three and six months ended June 30, 2012.

Demand from new and existing investors varies from period to period based upon market conditions, the Company’s returns and other alternative investments available to investors. The Company believes that in more recent periods investors’ interest has decreased from earlier periods as investors have sought to reduce overall portfolio exposure.

The Company paid out redemptions in the amount of $27,716,023 and $61,345,943, respectively, during the three and six months ended June 30, 2013 and $21,983,874 and $46,900,061, respectively, during the three and six months ended June 30, 2012. The Company had redemptions payable in the amount of $28,264,359 at June 30, 2013 and $33,690,336 at December 31, 2012. The Company funded the redemptions made in 2012 and in January, April, and July 2013 by making redemptions from the Investment Funds in proportion to the then current weightings and through the use of uninvested cash on hand. The Managing Member expects the Company to fund future redemptions in a similar manner and does not believe that the redemptions payable in July 2013 had a material adverse effect on the value of the units or the performance of the Company.

Demand for redemptions varies from period to period based upon market conditions, the Company’s returns and other alternative investments available to investors.

Subject to applicable law, the Company and each Investment Fund may, but are not required to, borrow from (including through direct borrowings, borrowings through derivative instruments, or otherwise) The Goldman Sachs Group, Inc. or its affiliates, including Goldman, Sachs & Co. (collectively referred to herein, together with their affiliates, directors, partners, trustees, managers, members, officers and employees, as the “GS Group”), or other parties, when deemed appropriate by its managing member, including to make investments and distributions in respect of redemptions of membership units, to pay expenses or for other purposes.

As of June 30, 2013, the Company had cash and cash equivalents on hand of $15,374,725. As of December 31, 2012, the Company had cash and cash equivalents on hand of $20,212,595.

Investments as of June 30, 2013 were $347,273,733 as compared to $387,461,621 as of December 31, 2012. The decrease was primarily due to net redemptions made by the Company from the Investment Funds, partially offset by net realized and unrealized gains during the six months ended June 30, 2013.

Management fee payable represents the management fees due to the Managing Member. Management fee payable as of June 30, 2013 was $2,324,923 as compared to $1,729,340 as of December 31, 2012. Because the management fee is calculated as a percentage of the Company’s net assets as of each month end, the liability related to management fees will fluctuate based on the fluctuation of the month end NAV of the Company. The increase in Management fee payable is due to the amount and timing of the payment of the monthly management fee to the Managing Member and fluctuations in the NAV.

The Company generally expects that its cash flows from liquidating its investment positions in the Investment Funds to the extent necessary, and from new subscriptions into the Company, are adequate to fund its operations and liquidity requirements.

The value of the Company’s directly held cash and financial instruments is not expected to be materially affected by inflation. At the Investee level, given that EDM’s Advisors seek to profit from price movements and can take both positive and negative views on the drivers of such movements, their outlooks may include a view on the direction of inflation, with the outcome of their trades derived, at least in part, from the accuracy of such a view. No first-order endemic effects from inflation, as may exist in long-only bond portfolios, are expected. Further, extended changes in inflation may be associated with strong up or down trends in interest rates, creating a favorable environment for GTTM’s Advisors, and therefore contributing to the Company’s profit potential. However, unexpected changes in inflation can also give rise to rapid reversals in interest rate markets, creating an environment in which such Advisors, and the Company, potentially may suffer losses. The impact of changes in inflation on equity long/short strategies used by ELSM’s Advisors is difficult to predict and depends upon how large the change is in both absolute terms and relative to expectations. A sharp increase in inflation could hurt certain sectors, such as regional banks, homebuilders, and autos, while sharp downward moves could be beneficial for equities. If a downward move were too large, however, it could give rise to concerns about deflation. In all cases, however, the Company endeavors to take inflation, and its possible effects on each of the Investment Funds, into account when it develops its investment strategies.

Recent Accounting Pronouncements

Critical Accounting Policies and Estimates

Use of estimates

The discussion and analysis of the Company’s financial condition and results of operations are based on the Company’s financial statements, which are expressed in U.S. dollars and have been prepared in accordance with U.S. GAAP. Preparation of the Company’s financial statements requires the Managing Member to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions are based on the best available information, but actual results may differ from those estimates. A summary of the Company’s significant accounting policies is set forth in Note 2 to the Company’s financial statements. The measurement of fair value, as set forth below, is the Company’s most significant accounting policy.

Fair value of investments

The Company’s investments in Investees are subject to the terms and conditions of the operating agreements of the respective Investees. These investments are carried at fair value, which is based on the Company’s attributable share of the net assets of the respective Investee. The fair value of a financial instrument is the amount 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.

U.S. GAAP has a three-level fair value hierarchy for disclosure of fair value measurements. The fair value hierarchy prioritizes inputs to the valuation techniques used to measure fair value, giving the highest priority to Level 1 inputs and the lowest to Level 3 inputs. A financial instrument’s level in the fair value hierarchy is based on the lowest level of any input that is significant to its fair value measurement.

The Company uses NAV as its measure of fair value for investments in Investees. In evaluating the level at which the fair value measurements of the Company’s investments have been classified, the Company has assessed factors including, but not limited to, price transparency, the ability to redeem at NAV at the measurement date and the existence or absence of certain restrictions at the measurement date. See Note 2 and Note 3 to the Company’s financial statements.

For the six months ended June 30, 2013 and the fiscal year ended December 31, 2012, approximately 100% of the fair value of the Company’s pro-rata share of investments in the Investees was determined predominantly from utilizing NAVs provided by external advisors. At June 30, 2013 and December 31, 2012, investments valued using quoted market prices represented 0% of the fair value of the Company’s pro-rata share of investments in the Investees.

Valuations generally are made based on information the Company or the Investees, as applicable, receive from the Advisors. This information is generally not audited, except at year-end, and could prove to be inaccurate due to inadvertent mistakes, negligence, recklessness or fraud by the Advisors. The Company receives preliminary and final NAVs from each of the Investees on a monthly basis. Historically, the Company has not experienced any material variance between the preliminary and final NAVs, which would have required adjustment to the Company’s financial statements. If the Managing Member determines that any such valuation may be inaccurate or incomplete, the Managing Member may determine the fair value of the asset based on information available to, and factors deemed relevant by, the Managing Member at the time of such valuation. Generally, however, neither the Company nor the Investees will receive independent valuations with respect to the assets managed by Advisors and will not in many cases be able to conduct any independent valuations on their own or to cause any third parties to undertake such valuations. In addition, valuations of illiquid securities and other investments are inherently uncertain and may prove to be inaccurate in hindsight. These risks are more fully described in the Company’s Form 10-K for the year ended December 31, 2012 (the “Form 10-K”).

The valuation provisions of the Company’s LLC Agreement and the LLC Agreements of the Investment Funds provide the Managing Member with greater flexibility to more accurately value the Company’s assets (for purposes of subscriptions, redemptions and fees) in circumstances where the Managing Member has information available to it indicating that a valuation may be inaccurate or incomplete, although generally, as described above, the Managing Member will not have access to independent valuations and will rely on valuations provided by the Advisors. Valuations are performed in a substantially similar manner for EDMAT. Accordingly, to the extent that the Managing Member determines that a valuation provided by an Advisor may be inaccurate or incomplete, the additional flexibility on the Company’s valuation practices is designed to make the Company’s valuations more accurate. For example, to the extent an Advisor has allocated assets to an Advisor Fund that has provided the Company with a valuation report indicating a positive valuation, but the Managing Member is aware that the Advisor Fund has filed for bankruptcy, the Managing Member will be able to take the bankruptcy into account to attempt to more accurately determine the fair value of such assets.

There has been no situation during the periods contained in this Quarterly Report on Form 10-Q where the Managing Member has determined that the valuation provided by an Advisor or independent investment manager in which one of the Investment Funds had invested was not complete or was inaccurate.

Off-Balance Sheet Risk

In the normal course of business, the Advisors of the Advisor Funds may trade various financial instruments and enter into various investment transactions with off-balance sheet risk, which includes, but are not limited, to securities sold short, futures, forwards, swaps and written options. There are no off-balance sheet or material contingent liabilities at the Company or Investee levels.

Contractual Obligations

The Company does not have any long-term debt obligations, capital or operational lease obligations or other long-term debt liabilities.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The following table lists the significant market risk sensitive instruments held by the Company, through the Investees, as of June 30, 2013 and as of December 31, 2012, as indicated by the Fair Value/Value at Risk column and the Net Realized and Unrealized Gain/(Loss) column from January 1, 2013 to June 30, 2013 and from January 1, 2012 to December 31, 2012. Because of the uncertain nature of the investments that the Company engages in through the Investees, the Managing Member believes the entire portfolio value of the Company is at risk. The Managing Member is unable to track the impact of market volatility, credit and interest rate risk on the units because in many cases it does not receive information on individual investments made by Advisors or their aggregate holdings and so is not in a position to track such risks on an aggregate basis.


	Six Months Ended June 30, 2013
Investee	% of Members’ Equity⁽¹⁾			Fair Value/Value at Risk		Net Realized and Unrealized Gain/(Loss) (In millions)			Liquidity
ELSM		41.16	%	$	136,432,555	$	7.6			(2	)
EDM		28.31			93,852,554		6.3			(3	)
EDMAT		2.69			8,905,599		0.2			(4	)
GTTM		32.51			107,761,754		3.6			(5	)
RVM		0.10			321,271		(0.0	)		(6	)
HFPO		—			—		(0.2	)		(7	)

Total		104.77	%⁽⁸⁾	$	347,273,733	$	17.5


	Year Ended December 31, 2012
Investee	% of Members’ Equity⁽¹⁾			Fair Value/Value at Risk		Net Realized and Unrealized Gain/(Loss) (In millions)			Liquidity
ELSM		41.94	%	$	155,842,998	$	14.3			(2	)
EDM		26.78			99,506,680		9.3			(3	)
EDMAT		2.74			10,169,426		(0.6	)		(4	)
GTTM		32.59			121,112,624		7.3			(5	)
RVM		0.13			479,148		0.1			(6	)
HFPO		0.09			350,745		(0.3	)		(7	)

Total		104.27	%⁽⁸⁾	$	387,461,621	$	30.1

(1)	Members’ equity, used in the calculation of the investments as a percentage of members’ equity, based on the members’ equity per the Balance Sheet and in accordance with ASC 480, “Distinguishing Liabilities from Equity.”

(2)	Redemptions can be made quarterly with 61 days’ notice, or at the sole discretion of the Managing Member.

(3)	Redemptions can be made quarterly on or after the first anniversary of the initial purchase of the units with at least 91 days’ notice, or at the sole discretion of the Managing Member.

(4)

EDMAT does not provide investors with a voluntary redemption right. Pursuant to the terms of the trust agreement for EDMAT, distributions will be made to holders of interests in EDMAT as EDMAT receives proceeds in respect of its Advisors. The estimated remaining holding period of its remaining underlying investments range from one to five years.

(5)	Redemptions can be made quarterly with 60 days’ notice, or at the sole discretion of the Managing Member.

(6)

RVM ceased its trading activities effective on July 1, 2009, and will dissolve at the time all assets are liquidated, liabilities are satisfied and liquidation proceeds are distributed through payment of a liquidating distribution. RVM suspended redemptions pending the completion of the liquidation proceedings. The estimated remaining holding period of its remaining underlying investments range from one to five years.

(7)	HFPO ceased its trading activities effective December 31, 2012 and was subsequently liquidated in March 2013.

(8)	The total value of the Company’s investment in the Investees exceeded 100% of members’ equity because members’ equity reflected certain accrued liabilities of the Company, including fees and expenses, and also reflected redemptions payable on the balance sheet date.

Risk Management

In the ordinary course of business, the Managing Member, including in its capacity as managing member of the Investment Funds, attempts to manage a variety of risks, including market, credit and operational risk. The Managing Member, including in its capacity as managing member of the Investment Funds, attempts to identify, measure and monitor risk through various mechanisms including risk management strategies and credit policies. These include monitoring risk guidelines and diversifying exposures across a variety of instruments, markets and counterparties.

Market risk is the risk of potential significant adverse changes to the value of financial instruments because of changes in market conditions such as interest rates, foreign exchange rates, equity prices, credit spreads, liquidity and volatility in commodity or security prices. The Managing Member, including in its capacity as managing member of the Investment Funds, monitors its exposure to market risk at both the Advisor and portfolio level through various analytical techniques. At the Advisor level, market risk is monitored on a regular basis. Full position level transparency refers to Advisors currently subscribing to RiskMetrics HedgePlatform.

The Managing Member leverages RiskMetrics HedgePlatform, a leading hedge fund transparency service provider, for collecting, modeling and aggregating holdings data from underlying Advisors as well as for computing multiple risk analytics, including Value-at-Risk (“VaR”), for both the underlying Advisor as well as the Company. Where position level detail is available, the Managing Member, including in its capacity as managing member of the Investment Funds, monitors its exposure to market risk through a variety of analytical techniques, including VaR and scenario analysis (stress testing). The Managing Member looks at VaR over a one-day horizon at the 95% and 99% confidence intervals. As of June 30, 2013, the Managing Member had full position level transparency for approximately 76% (as a percentage of fair value investments) of the Advisors in which the Company invests through the Investment Funds. Based on the June 30, 2013 Investment Fund allocation to Advisors and the underlying holdings of these Advisors, the 95% and 99% daily VaR of the Company is 48 bps and 68 bps, respectively. Holdings-based VaR is calculated using Monte Carlo simulations with a three year look back period and is based on actual holdings of Advisors for which position level detail is available; for Advisors where position level detail is not available, realized return history of the Advisor is utilized. The Managing Member believes that the holdings-based VaR assumptions it utilizes are reasonable, given that VaR is only one determinant in the Managing Member’s overall risk management. However, holdings-based VaR has its own limitations. It is effective for risk estimation at short horizons and has limited utility for medium or long horizon risk estimation, since it is computed for a static portfolio and does not account for the dynamic trading behavior of underlying Advisors. Further, its computation can be inaccurate due to mapping and modeling limitations associated with complex portfolios of underlying Advisors and the simplifying assumptions used to account for Advisors who do not provide position level details. Therefore, the Managing Member supplements the holdings-based VaR with a historical VaR metric. This historical VaR metric is calculated using a rolling 36 month historical covariance matrix of underlying Advisors and the June 30, 2013 allocations to underlying Advisors. As of June 30, 2013, the historical 95% and 99% daily VaR of the Company is 36 bps and 51 bps, respectively. Where position level detail is unavailable, an Investment Fund relies on risk reports provided by the Advisors as well as through open communication channels with Advisors, which generally includes site visits and monthly conference calls. The Company’s maximum risk of loss is limited to the Company’s investment in the Investment Funds. The risks involved are more fully described in the Company’s Form 10-K.

The managing member of the Investment Funds monitors Advisors to prevent style drift. “Style drift” is defined as Advisors changing their investment style from the Investment Fund’s expectations. Where position level detail is available, the managing member of the Investment Funds monitors leverage against predetermined limits.

Position sizing limits are also monitored to ensure Advisors are properly diversified and risk normally is not concentrated in one or relatively few positions. In some cases, the managing member of the Investment Funds also has the ability to monitor approved trading instruments to ensure Advisors are not trading securities outside their mandate. Where position level detail is not available, the managing member of the Investment Funds relies on both written and oral Advisor communications. The risks involved are more fully described in the Company’s Form 10-K.

At the Company’s portfolio level, the Company’s portfolio construction process is designed to provide for adequate diversification. Each Investment Fund is a portfolio of approximately 10-30 underlying Advisors and the managing member of each of the Investment Funds regularly reviews portfolio statistics, such as relative contribution to risk, to confirm that risk is not concentrated in any single Advisor. The managing member of the Investment Funds, in its sole discretion, may determine from time to time the number of Advisors with which the Investment Funds invest based on factors such as the amount of assets under management of the Investment Funds, the availability of attractive opportunities, and other portfolio construction considerations. Any such greater concentration with any single Advisor or in any single investment strategy may entail additional risks. The risks involved are more fully described in the Company’s Form 10-K.

Quantitative analysis is combined with judgment to determine weightings, strategic return, risk and correlation estimates to inform the quantitative analysis. Judgment is applied to both estimates and weights in an attempt to achieve exposure to hedge funds while delivering attractive risk-adjusted returns. The approximate weights of the material Investees were 41% ELSM, 28% EDM and 33% GTTM as of June 30, 2013 as a percentage of members’ equity. The approximate weights of the material Investees were 42% ELSM, 27% EDM and 33% GTTM as of December 31, 2012 as a percentage of members’ equity. This portfolio construction process is designed to create a diversified hedge fund portfolio with attractive return and risk characteristics.

The Managing Member may, from time to time, vary or change materially the actual allocation of assets made by the Company, as it deems appropriate in its sole discretion, including without limitation by way of allocation of Company assets to any new Investment Fund or Advisor, complete or partial withdrawal of an allocation from any existing Investment Fund or Advisor, a reallocation of assets among existing Investment Funds or Advisors, or any combination of the foregoing. In carrying out any reallocation of Company assets, the Managing Member will have the sole discretion to determine the manner of such reallocation, including from which Investment Funds or Advisors to withdraw assets and to which Investment Funds or Advisors to allocate assets. Any reallocation of Company assets, for purposes of diversification, attempts to meet target allocations or otherwise, may take a significant period of time to implement due to the liquidity provisions and restrictions of the Investment Funds and the Advisors and for other reasons. There can be no assurance that market or other events will not have an adverse impact on the strategies employed by multiple Investment Funds and Advisors. Investment Funds and Advisors may at certain times hold large positions in a relatively limited number of investments. The Company could be subject to significant losses if an Investment Fund or an Advisor holds a large position in a particular investment that declines in value that cannot be liquidated without adverse market reaction or is otherwise adversely affected by changes in market conditions or circumstances. While the Managing Member currently expects to allocate assets to all the Investment Sectors (other than relative value) through allocations to the Investment Funds, the Managing Member has no constraints with respect to the percentage of the Company’s assets to be allocated, directly or indirectly, to any single Advisor, group of Advisors, Investment Fund, or Investment Sector, or with respect to the number of Investment Funds and Advisors to which, directly or indirectly, assets of the Company are allocated at any time. The percentage of the Company’s assets to be allocated to any single Advisor, group of Advisors, Investment Fund or Investment Sector, and the number of Investment Funds and Advisors to which the Company allocates assets from time to time will be determined by the Managing Member in its sole discretion, based on factors deemed relevant by the Managing Member at the time of such allocation, which may include the amount of the Company’s assets under management, constraints on the capital capacity of the Investment Funds and Advisors, the availability of attractive opportunities, and other portfolio construction and portfolio management considerations.

The Company invests in the Investment Funds, and may from time to time redeem its membership units of the Investment Funds. Neither EDMAT, RVM, nor HFPO provide investors with a voluntary redemption right. The Investment Funds, in turn, maintain relationships with counterparties that include the Advisors. These relationships could result in concentrations of credit risk. Credit risk arises from the potential inability of counterparties to perform their obligations under the terms of the contract, including, in the case of the Company’s investments in the Investment Funds, the potential inability of an Investment Fund to satisfy its redemption obligations. The managing member of the Investment Funds (currently, the Managing Member) has formal credit-review policies to monitor counterparty risk.

In addition to market risk and credit risk, the Managing Member, including in its capacity as managing member of the Investment Funds, allocates resources to mitigate operational risk. Operational risk is the potential for loss caused by a deficiency in information, communication, transaction processing, settlement and accounting systems. The Managing Member, including in its capacity as managing member of the Investment Funds, maintains controls and procedures for the purpose of mitigating its own operational risk but it does not have control over the systems of the Advisors. In addition, the Managing Member, including in its capacity as managing member of the Investment Funds, deploys resources to assess control systems, legal risk, compliance risk, operations and treasury risk, credit risk, accounting risk and reputational risk.

Fraud and other business risks cannot be eliminated; however, the Managing Member, including in its capacity as managing member of the Investment Funds, seeks to significantly reduce such risks. The portfolio risk management process includes an effort to monitor and manage risk, but should not be confused with and does not imply low risk. There can be no assurance that the Managing Member, including in its capacity as managing member of the Investment Funds, will be able to implement its risk guidelines or that its risk monitoring strategies will be successful.

Item 4.

Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out by the Managing Member’s management, with the participation of its principal executive officer and principal financial officer (or persons performing similar functions), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Company’s principal executive officer and principal financial officer (or persons performing similar functions) concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

There are no material pending legal proceedings to which the Company or the Managing Member is a party or to which any of their assets are subject.

Item 1A.

Risk Factors

None.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

From January 1, 2013 to June 30, 2013, aggregate subscriptions totaled $1,250,000. Details of the sale of the series of units are as follows:


Date of Sale	Class and Series of Units		Number of Units Sold		Number of Investors		Total Subscription Amount
March 1, 2013		Class A Series 117		2,500.00		1		250,000
June 1, 2013		Class A Series 120		10,000.00		1		1,000,000

Total				12,500.00		2	$	1,250,000

The units were sold at $100.00 per unit. The sale was not subject to any underwriting discount or commission. The units were privately offered and sold to accredited investors pursuant to Rule 506 of Regulation D and the sales were exempt from registration under the Securities Act of 1933.

Pursuant to the Company’s limited liability company agreement, holders of units may redeem their units upon 91 days’ prior written notice to the Managing Member (unless such notice is waived by the Managing Member in its sole discretion), on each January 1, April 1, July 1 or October 1 occurring on or after the first anniversary of the purchase of such units by the holder (each a “Redemption Date”). Units of a particular series will be redeemed at a per unit price based upon the NAV of such series as of the close of business on the day immediately preceding the Redemption Date (taking into account the allocation of any net appreciation or depreciation in the net assets of the Company for the accounting period then ending), after reduction for any management fee and incentive fee and other liabilities to the extent accrued or otherwise attributable to the units being redeemed. The Company paid out redemptions of $27,716,023 during the three months ended June 30, 2013.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Reserved

Item 5.

Other Information

Forward-Looking Statements

This Form 10-Q contains certain “forward-looking statements” regarding the operation of the Company and the Company’s investment objective, including, among other things:

•

investment strategies and allocations of assets;

•

future performance; and

•

trends in the Investment Sectors.

Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology. These statements are only predictions and are not historical facts. Actual events or results may differ materially.

The forward-looking statements included herein are based on the Managing Member of the Company’s current expectations, plans, estimates and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business strategies and decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. Any of the assumptions underlying the forward-looking statements contained herein could be inaccurate and, therefore, the Managing Member of the Company cannot assure Members that the forward-looking statements included in this Form 10-Q will prove to be accurate.

In light of the significant uncertainties inherent in the forward-looking statements included in this Form 10-Q, the inclusion of such information should not be regarded as a representation by the Company or the Managing Member that the investment objective set forth in this Form 10-Q will be achieved. The Company cautions Members that forward-looking statements are not guarantees and that the actual results could differ materially from those expressed or implied in the forward-looking statements.

Risk Factors

In addition to the risks identified in our Form 10-K, which is incorporated herein by reference, the following list indicates some of the risks that could impact the likelihood that any forward-looking statements will come true:

•

The Company relies on the Managing Member and the Advisors and there can be no assurance that the allocation and investment decisions made by the Managing Member and the Advisors will be successful;

•

Changes to the Investment Strategies by the Managing Member may not be successful and may have an adverse effect on the Company;

•

Redemptions of Units are subject to a substantial waiting period and potentially outdated information;

•

Certain Advisors impose restrictions on redemptions and may impose redemption fees under certain circumstances; an Investment Fund’s inability to redeem its interests may have a material adverse effect on the Investment Funds’ and the Company’s investment program and investment objective;

•

Substantial redemptions could have a material adverse effect on the Company;

•

Valuation of the Company’s Investments;

•

The Company’s NAV estimates are, and in the future will ultimately be, based on estimates of valuations provided by third party Advisors which may not be accurate or may need to be adjusted in the future;

•

The Managing Member of the Investment Funds may make investment decisions based on limited or incomplete information;

•

The Company faces legal, tax and regulatory risks that may adversely affect the Company;

•

Advisors’ activities may be limited due to investment by the Company; Advisors may limit investment by the Company;

•

Performance of the Company, the Investment Funds, the offshore fund, affiliated funds and Advisors is not indicative of future results;

•

A Member’s investment in the Company will be affected by the investment policies and decisions of Advisors which are outside the Company’s control;

•

Investment Fund allocations to Advisor Funds are difficult to monitor and control;

•

The Investment Funds’ and the Advisors’ investments may not be diversified and there can be no assurance that the Company’s allocation methodologies will achieve the Company’s allocation goals;

•

Members are subject to multiple levels of fees and expenses because of the Company’s structure and the fee structure of the Company may create incentives for Advisors to make risky investments;

•

Advisors invest independently and may hold economically offsetting positions;

•

Indemnification of Advisors may create costs for the Company and the Investment Funds;

•

An Investment Fund may not be able to vote or may limit its voting abilities;

•

Transactions between and among Investment Funds may be undervalued and negatively affect the Company’s performance;

•

Frequent trading and turnover typically result in high transaction costs and the Investment Funds have no control over this turnover;

•

Non-U.S. investments involve special risks not usually associated with investments in U.S. securities;

•

Equity securities and equity-related instruments may be subject to various types of risk, including market risk, liquidity risk, counterparty credit risk, legal and settlement risk; and

•

The issuers of securities acquired by Advisors will sometimes face a high degree of business and financial risk.

The foregoing list of factors is not exhaustive. Investors should carefully consider the foregoing factors and the other uncertainties and potential events described in the Form 10-K. The Company or the Managing Member does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the Managing Member of the Company or the Company or on their behalf.

References to market or composite indices, benchmarks or other measures of relative market performance are provided for Investor’s information only. Reference to an index does not imply that the portfolio will achieve results similar (or dissimilar) to that index.

Item 6.

Exhibits


Number		Description

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Signatures

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


HEDGE FUND MANAGERS (DIVERSIFIED) LLC (Registrant)

BY:		Goldman Sachs Hedge Fund Strategies, LLC
		Managing Member

BY:		/s/ HELEN A. CROWLEY
		Name: Helen A. Crowley Title: Chief Financial Officer, Managing Director

Date: August 13, 2013

Index to Exhibits


Number		Description

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002