UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the Fiscal Year Ended December 31, 2008

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

_______________________

Commission File Number: 0-16898

PROFUTURES DIVERSIFIED FUND, L.P.

(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		75-2197831 (I.R.S. Employer Identification No.)

ProFutures, Inc.

11719 Bee Cave Road

Suite 200

Austin, Texas 78738

(Address of principal executive offices)

(800) 348-3601

(Registrant’s telephone number)

__________________________

Copies to:

Nathan Ballard

Lauren Wolf

Sidley Austin LLP

One South Dearborn

Chicago, Illinois 60603

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Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

Not Applicable.

DOCUMENTS INCORPORATED BY REFERENCE

Registrant’s Financial Statements for the Years ended December 31, 2008, 2007 and 2006 with Reports of Independent Registered Public Accounting Firms, the annual report to securities holders for the fiscal year ended December 31, 2008, is incorporated by reference into Part II Item 8 and Part IV hereof and filed as an exhibit herewith. Portions of the Registrant’s Prospectus dated July 31, 1994 and Supplement dated January 31, 1995 Post-Effective Amendment No. 3 dated June 23, 1995 also are incorporated by reference in Part I, Part II, Part III and Part IV of this Form 10-K.

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PART I

Item 1. Business.

General

ProFutures Diversified Fund, L.P. (the “Partnership”) is a limited partnership organized on March 10, 1987, under the laws of the State of Delaware. The business of the Partnership is the speculative trading of futures contracts and other financial instruments. The Partnership commenced its business operation in August 1987 under the name ATA Research/ProFutures Diversified Fund, L.P. Effective June 1, 2000, the Partnership changed its name from ATA Research/ProFutures Diversified Fund, L.P. to ProFutures Diversified Fund, L.P. Effective October 1, 2000, ATA Research, Inc., the Partnership’s co-general partner, withdrew as co-general partner. ProFutures, Inc. remains as the sole General Partner. The office of the Partnership is located at 11719 Bee Cave Road, Suite 200, Austin, Texas 78738; the telephone number is (800) 348-3601.

Trading Activity

ProFutures, Inc., a Texas corporation, is the General Partner of the Partnership which administers the business and affairs of the Partnership (exclusive of its trading operations). Trading decisions are made by independent Commodity Trading Advisors (“CTAs”) chosen by the General Partner. At December 31, 2008, there were three CTAs utilized via investing in commodity pools and four CTAs: Winton Futures Fund, L.P. (US), SHK Diversified LLC, Valhalla Synergy Fund LLC, Cabana Capital Management Pty Ltd., Clarke Capital Management Inc., Haar Capital Management LLC and Paskewitz Asset Management LLC (collectively, the “Advisors”). All CTA advisory fees are paid by the Partnership, including the Partnership’s proportionate share of advisory fees to the commodity pools. Advisors may be changed from time to time by the General Partner.

ProFutures, Inc. is registered with the Commodity Futures Trading Commission (“CFTC”) as a Commodity Trading Advisor and Commodity Pool Operator and is a member of National Futures Association (“NFA”). Gary D. Halbert is the Chairman and President, and principal stockholder, of ProFutures, Inc., which was incorporated and began operation in December, 1984, and specializes in speculative managed futures accounts.

The objective of the Partnership is to achieve appreciation of its assets through speculative trading of futures contracts and interbank forward currency contracts. It ordinarily maintains open positions for a relatively short period of time. The Partnership’s ability to make a profit depends largely on the success of the Advisors in identifying market trends and price movements and buying or selling accordingly.

The Partnership’s Trading Policies are set forth on Page 59 of the Partnership’s Prospectus dated July 31, 1994, which is incorporated herein by reference.

Material changes in the Trading Policies described in the Prospectus must be approved by a vote of a majority of the outstanding units of Limited Partnership Interest (“Units”). A change in contracts traded, however, will not be deemed to be a material change in the Trading Policies.

Trading Methods and Advisors

Futures traders basically rely on either or both of two types of analysis for their trading decisions, “technical” or “fundamental.” Technical analysis uses the theory that a study of the markets will provide a means of anticipating price changes. Technical analysis generally will include a study of actual daily, weekly and monthly price fluctuations, volume variations and changes in open interest, utilizing charts and/or computers for analysis of these items. Fundamental analysis, on the other hand, relies on a study and evaluation of external factors which affect the price of a futures contract in order to predict prices. These include political and economic events, weather, supply and demand and changes in interest rates.

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The respective Advisors’ trading strategies attempt to detect trends in price movements for the commodities monitored by them. They normally seek to establish positions and maintain such positions while the particular market moves in favor of the position and to exit the particular market and/or establish reverse positions when the favorable trend either reverses or does not materialize. These trading strategies are not normally successful if a particular market is moving in an erratic and non-trending manner.

Because of the nature of the commodities markets, prices frequently appear to be trending when a particular market is, in fact, without a trend. In addition, the trading strategies may identify a particular market as trending favorably to a position even though actual market performance thereafter is the reverse of the trend identified.

None of the Advisors or their respective principals own any Units of the Partnership. The Partnership’s Advisors are independent Commodity Trading Advisors and are not affiliated with the General Partner; however, they may also be Advisors to other commodity pools with which the General Partner is currently associated and they may own an interest in those pools. Each Advisor is registered with the CFTC and is a member in such capacity with NFA. Because of their confidential nature, proprietary trading records of the Advisors and their respective principals are not available for inspection by the Limited Partners of the Partnership.

Investment in Other Commodity Pools

The Partnership has invested in other commodity pools for two reasons. The industry is trending toward the use of funds rather than individual managed accounts. Many of the top tier CTAs only offer their investment management through one of their funds (i.e., Winton Futures Fund, L.P. (US)). They do not want investors to know the specifics of their daily trading positions, so no one can duplicate their methodology.

The top tier CTAs often require at least a $10 million trading level. The Partnership net asset value is about $20 million, with a trading level as high as $28 million. The minimum trading levels for these top tier CTAs require a higher allocation than desired for diversification and management of risk to the partners. The minimum investment for the commodity pools ranges from $50,000 to $1 million. The replacement of CTA managed accounts with funds potentially allows for greater diversification, less risk and increased flexibility in managing the Partnership.

Fees, Compensation and Expenses

The Partnership pays the General Partner a monthly management fee of 1/4 of 1.0% (3.0% annually) of month-end Net Asset Value. The Partnership pays the General Partner an additional monthly management fee of 0.0625% (0.75% annually) of the Partnership’s month-end Net Asset Value for consulting services rendered to the Partnership. Management fees related to the side pocket/restricted share class (see Item 7 herein) were accrued throughout 2008, but not paid until February 2009.

The Partnership has a consulting agreement with Altegris Investments, Inc. (“Altegris”), whereby Altegris will recommend the selection and termination of the Advisors and the allocation and reallocation of the Partnership’s assets. Pursuant to this consulting agreement, Altegris receives a monthly consulting fee equal to 0.0208% (0.25% annually) of the Partnership’s month-end Net Asset Value (as defined in the consulting agreement). Effective April 1, 2007, certain net assets of the Partnership invested with managers affiliated with Altegris are excluded from the month-end Net Asset Value when computing the consulting fees due to Altegris. In addition, the net assets of the Partnership invested with a certain commodity trading advisor are excluded from the month-end Net Asset Value when computing the consulting fees due to Altegris since Altegris earns a percentage of such commodity trading advisor’s incentive fees. The consulting fee (included in management fees in the statement of operations) earned by Altegris totaled $10,683 and $21,603 for the years ended December 31, 2008 and 2007, respectively.

The current CTAs (seven CTAs with three utilized via investing in commodity pools as of December 31, 2008) receive management fees ranging from 0% to 6.0% annually of Allocated Net Asset Value (as defined in the trading advisory contracts). Each of the CTAs receives a quarterly incentive fee ranging from 20% to 25% of Trading Profits (as defined). The quarterly incentive fees are payable only on cumulative profits achieved by each CTA. For example, if one of the CTAs to the Partnership experiences a loss after an incentive fee payment is made, that CTA retains such payments but receives no further incentive fees until such CTA has recovered the loss and then generated subsequent Trading Profits since the last incentive fee was paid such CTA. An incentive fee may be paid to one CTA but the Partnership may experience no change or a decline in its Net Asset Value because of the performance of another CTA. The General Partner may allocate or reallocate the Partnership’s assets at any time among the current CTAs or any others that may be selected. Upon termination of a CTA’s contract, or at any other time in the discretion of the General Partner, the Partnership may employ other CTAs whose compensation may be calculated without regard to the losses which may be incurred by the present CTAs. Similarly, the Partnership may renew its relationship with each CTA on the same or different terms.

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Notional Funding Note: As of December 31, 2008, the Partnership has allocated notional funds to CTAs equal to approximately 36% of the Partnership’s cash and/or other margin - qualified assets. Of course, this percentage may be higher or lower at any given time. The management fees paid to a CTA, if any, are a percentage of the nominal account size of the account if an account had been notionally funded. The nominal account size is equal to a specific amount of funds initially allocated to a CTA which increases by profits and decreases by losses in the account, but not by additions to or withdrawals of actual funds from the account. Some, but not all, CTAs are expected to be allocated notional funds, and not all of the CTAs allocated notional funds are expected to be paid management fees. Further, the amount of cash and/or other margin-qualified assets in an account managed by a CTA will vary greatly at various times in the course of the Partnership’s business, depending on the General Partner’s general allocation strategy and pertinent margin requirements for the trading strategies undertaken by a CTA.

The Partnership is obligated to pay its periodic operating expenses, consisting substantially of preparation of the Limited Partners’ tax return information, filing and recording charges, legal, printing, accounting and auditing fees plus non-recurring expenses. Those periodic recurring expenses are estimated at approximately 2.2% of the Partnership’s average annual Net Asset Value. Non-recurring expenses, not included within these estimates, include expenses associated with significant litigation including, but not limited to, class action suits, suits involving the indemnification provisions of the Agreement of the Limited Partnership or any other agreement to which the Partnership is a party; by their nature, the dollar amount of non-recurring expenses cannot be estimated.

Additional descriptions and definitions are set forth in “Fees, Compensation and Expenses” on Pages 30-35 of the Partnership’s Prospectus, dated July 31, 1994, which is incorporated herein by reference.

Brokerage Arrangements

The Partnership deposits funds with MF Global Ltd. (the “Clearing Broker”) to act as broker, subject to CFTC regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of cash with such broker. The Partnership earns interest income on its assets deposited with the broker.

Financial Information About Industry Segments

The Partnership operates in only one industry segment, that of the speculative trading of futures contracts and other financial instruments. See also “Description of Futures Trading,” pages 64-65 of the Prospectus dated July 31, 1994, which is incorporated herein by reference.

Regulation

The U.S. futures markets are regulated under the Commodity Exchange Act (“CEA”), which is administered by the CFTC, a federal agency created in 1974. The CFTC licenses and regulates commodity exchanges, commodity brokerage firms (referred to in the industry as “Futures Commission Merchants”), Commodity Pool Operators, Commodity Trading Advisors and others. The General Partner is registered with the CFTC as a Commodity Pool Operator and each Commodity Trading Advisor is registered as such.

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Futures professionals such as the General Partner and the Advisors are also regulated by NFA, a self-regulatory organization for the futures industry that supervises the dealings between futures professionals and their customers. If the pertinent CFTC registrations or NFA memberships were to lapse, be suspended or be revoked, the General Partner would be unable to act as the Partnership’s Commodity Pool Operator, and the respective Advisors as Commodity Trading Advisors, to the Partnership.

The CFTC has adopted disclosure, reporting and recordkeeping requirements for Commodity Pool Operators (such as the General Partner) and disclosure and recordkeeping requirements for Commodity Trading Advisors. The reporting rules require pool operators to furnish to the participants in their pools a monthly statement of account, showing the pool’s income or loss and change in Net Asset Value and an annual financial report, audited by an independent certified public accountant.

The CFTC and the exchanges have pervasive powers over the futures markets, including the emergency power to suspend trading and order trading for liquidation only (i.e., traders may liquidate existing positions but not establish new positions). The exercise of such powers could adversely affect the Partnership’s trading.

Competition

The Partnership may experience increased competition for the same futures or option contracts. The Advisors may recommend similar or identical trades to other accounts which they may manage; thus, the Partnership may be in competition with such accounts for the same or similar positions. Such competition may also increase due to the widespread utilization of computerized trend-based trading methods similar to the methods used by some of the Advisors. This Partnership may also compete with other funds organized by the General Partner.

Financial Information About Foreign and Domestic Operations

The Partnership does not expect to engage in any operations in foreign countries nor does it expect to earn any portion of the Partnership’s revenue from customers in foreign countries.

Available Information

The Partnership is an electronic filer with the Securities and Exchange Commission (“SEC”). The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov). The General Partner will voluntarily provide electronic or paper copies of this filing free of charge upon request.

Item 1A. Risk Factors.

The Partnership is a Smaller Reporting Company as defined by Rule 229.10(f)(1) and therefore this item is not applicable.

Item 1B. Unresolved Staff Comments.

Because the Partnership is not an accelerated filer, a large accelerated filer or a well-known seasoned issuer, as defined by Rules 240.10b-2 and 230.405, the information required by Item 1B is not applicable.

Item 2. Properties.

The Partnership does not own or lease any real property. The General Partner currently provides all necessary office space at no additional charge to the Partnership.

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Item 3. Legal Proceedings.

(a) The Partnership is not a party to any pending material legal proceedings.

(b) None.

Item 4. Submission of Matters to a Vote of Security Holders.

During the fourth quarter of the fiscal year ended December 31, 2008, no matters were submitted to a vote of the holders of Units through the solicitation of proxies or otherwise.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a) There is no established public trading market for the securities.

The Partnership has filed a registration statement with the SEC for the sale of up to $38,547,364 in Units. Such registration statement became effective as of July 31, 1994. This offering was extended on January 31, 1995 and continued through April 30, 1995. On June 23, 1995, Post-Effective Amendment No. 3 was filed to deregister $20,721,920 in Units. As of December 31, 2008, a total of 5,859 non-restricted and 415 restricted Units are outstanding and held by 523 Unit holders, including 173 non-restricted and 12 restricted Units held by the General Partner and its principals. During the calendar year 2008, a total of 943 non-restricted and 46 restricted Units were redeemed, not including any pending redemptions recorded in the Partnership’s financial statements in accordance with the provisions of Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” The Partnership has 5 non-restricted and 47 restricted Units pending redemption, which are not effective until January 31, 2009. As of February 28, 2009, a total of 6,196 non-restricted Units are outstanding and held by 455 Unit holders, including 184 Units held by the General Partner and its principals. There are no restricted Units outstanding.

The General Partner has sole discretion in determining what distributions, if any, the Partnership will make to its Unit holders. The General Partner made no distributions as of December 31, 2008, or as of the date hereof. A Limited Partner may request and receive redemption of Units subject to restrictions in the limited partnership agreement. The General Partner may suspend the determination of Net Asset Value and redemptions under certain circumstances, including the closure or suspension of trading on any relevant exchange, the suspension of redemptions by a commodity pool in which the Partnership invests or a breakdown in the means normally employed by the General Partner to value assets.

(b) There were no sales of securities by the Partnership within the past three years which were not registered under the Securities Act, thus the information required by Rule 229.701(f) is not applicable.

(c) There were no repurchases of securities by the Partnership made within the fourth quarter of the fiscal year covered by this report, thus the information required by Rule 229.703 is not applicable.

Item 6. Selected Financial Data.

The Partnership is a Smaller Reporting Company, as defined by Rule 229.10(f)(1) and therefore this item is not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Partnership commenced trading on August 3, 1987. The success of the Partnership is dependent on the ability of the Advisors to generate profits through speculative trading sufficient to produce substantial capital appreciation after payment of all fees and expenses. Future results will depend in large part upon the futures markets in general, the performance of the Advisors for the Partnership and the amount of redemptions and changes in interest rates. Due to the highly leveraged nature of futures trading, small price movements may result in substantial losses. Because of the nature of these factors and their interaction, it is impossible to predict future operating results. The Partnership's business constitutes only one segment, i.e., a speculative commodity pool.

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Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 1 to the Financial Statements.

The Partnership records all investments at fair value in its financial statements in accordance with Statement of Financial Accounting Standards No. 157, Fair Value Measurements, with changes in fair value reported as a component of realized and change in unrealized trading gain (loss) in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (e.g. swap and forward contracts which are traded in the inter-bank market).

The fair value of exchange-traded contracts is based upon exchange settlement prices. The fair value of non exchange-traded contracts is based upon third party quoted dealer values on the Interbank market. The fair value of the Partnership’s investments in other commodity pools are ordinarily determined by each commodity pool in accordance with such commodity pool’s valuation policies as reported by its management at the time of the Partnership’s valuation. Generally, the fair value of the Partnership’s investment in a commodity pool represents the amount that the Partnership could reasonably expect to receive from such commodity pool if the Partnership’s investment was redeemed at the time of valuation, based on information reasonably available at the time the valuation is made and that the partnership believes to be reliable.

(a) Liquidity. Approximately 38% of the Partnerships’ assets are held in cash or cash equivalents. There are no restrictions on the liquidity of these assets except for amounts on deposit with the broker needed to meet margin requirements on open futures contracts. The other estimated 62% is invested in other commodity pools which are subject to certain restrictions. The restrictions on withdrawals from these commodity pools typically include a 15 to 45 day written notice for withdrawals, monthly or quarterly redemptions and the commodity pools’ ability to limit or suspend redemptions.

Most United States exchanges (but generally not foreign exchanges, or banks or broker-dealer firms in the case of foreign currency forward contracts) limit by regulation the amount of fluctuation limits. The daily limits establish the maximum amount the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the trading session. Once the “daily limit” has been reached in a particular commodity, no trades may be made at a price beyond the limit. Positions in the commodity can then be taken or liquidated only if traders are willing to effect trades at or within the limit during the period for trading on such day. Because the “daily limit” rule only governs price movement for a particular trading day, it does not limit losses. The rule may, in fact, substantially increase losses because it may prevent the liquidation of unfavorable positions. Futures prices have occasionally moved the daily limit for several consecutive trading days, and thereby prevented prompt liquidation of futures positions on one side of the market, subjecting those futures traders involved to substantial losses.

Liquidity will be of concern to the Partnership primarily in that the futures markets in which the Advisors take positions may have periods in which illiquidity makes it impossible or economically undesirable to execute trades which its respective trading strategy would otherwise suggest. Other than in respect of the functioning of the markets in which it trades, liquidity will be of little relevance to the operation of the Partnership except insofar as the General Partner is relatively thinly capitalized. Nonetheless, the General Partner believes it has sufficient funding to meet both its capital contribution and net worth requirements based on capital contributions from the principals of the General Partner, or alternative funding sources, including the stock subscription from the Clearing Broker to ProFutures, Inc. The Clearing Broker has subscribed to purchase (up to $7,000,000, subject to conditions set forth in the stock subscription agreement dated October 22, 2004) the number of shares of common stock of ProFutures, Inc. necessary to maintain the General Partner’s net worth requirements.

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As of January 31, 2008, the managing member of SHK Diversified LLC (“SHK”) temporarily suspended future redemptions. SHK’s managing member indicated to investors that this action was taken due to a decline in the liquidity of the markets traded by SHK combined with a significant number of requests for redemptions. Because of the uncertainty in valuing the Partnership’s investment in SHK, the General Partner established a side pocket for the Partnership’s interest in SHK effective April 30, 2008, to continue until such time as the investment can be valued with certainty. Investor units attributed to SHK are segregated into a side pocket while units not attributed to SHK continue to be available for redemption. Redemptions are in cash for that portion of the Partnership’s assets other than those attributed to SHK while the amount attributed to SHK continues to be held in the side pocket. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. The side pocket/restricted share class will also bear its proportionate share of the Partnership’s expenses, as well as all expenses directly related to this class’ establishment and operation. Effective, December 31, 2008, SHK paid the Partnership approximately half of the Partnership’s redemption proceeds, equal to $1,315,742, which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, SHK paid the Partnership the remaining half of the Partnership’s redemption proceeds equal to $1,335,258, which was paid to the Partnership on March 16, 2009. The side pocket/restricted share class was subsequently cancelled with existing Units either redeemed or converted to non-restricted shares.

(b) Capital Resources. The Partnership’s initial offering and sale of Units commenced on May 27, 1987 and ended on July 31, 1987 after having sold $6,130,568 of Units at the initial offering price of $1,000. The Partnership commenced trading August 3, 1987. The Partnership continued offering Units through February 29, 1988. Thereafter additional offerings of the Partnership’s Units occurred on April 15, 1988, August 24, 1991, May 14, 1992, November 30, 1992, August 30, 1993 and July 31, 1994. The offering effective July 31, 1994 was extended on January 31, 1995 and continued through April 30, 1995. In June 1995, Post-Effective Amendment No. 3 was filed to deregister the Partnership’s remaining $20,721,920 of Units.

Since the Partnership’s business is the purchase and sale of various commodity interests, it will make few, if any, capital expenditures.

(c) Results of Operations. Due to the speculative nature of trading commodity interests, the Partnership’s income or loss from operations may vary widely from period to period. Management cannot predict whether the Partnership’s future Net Asset Value per Unit will increase or experience a decline.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Year-Ended December 31, 2008

The year 2008 had a net gain of $995,237 or $223.08 per non-restricted unit and a loss of $299.36 per side pocket/restricted unit. At December 31, 2008, partners’ capital totaled $19,501,029, versus $21,423,827 for December 31, 2007, including capital redemptions of $2,671,425 from non-restricted Units and $246,610 from restricted Units. The aggregate Net Asset Value includes the non-restricted Net Asset Value of $18,395,272 ($3,139.86 per non-restricted Unit) and the restricted Units Net Asset Value of $1,105,757 ($2,663.73 per restricted Unit). In comparison, the Net Asset Value per unit at December 31, 2007 amounted to $2,916.78 with no restricted Units. The Partnership ended the year with a gain of 5.31%.

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Fourth Quarter 2008

The fourth quarter saw large gains in interest rates and the stock indexes followed by gains in currencies, energy and certain agricultural commodities; losses were in metals.

The Partnership had a gain of 2.25% in October. The Partnership had gains in currencies, interest rates, stock indexes, certain agricultural commodities and energy; losses were in metals.

The Partnership had a gain of 2.49% in November. The Partnership had gains in interest rates, stock indexes and metals; losses were in certain agricultural commodities, energy and currencies.

The Partnership had a gain of 1.88% in December. The Partnership had large gains in interest rates, stock indexes, energy and metals; losses were in certain agricultural commodities and currencies.

The Partnership ended the quarter with a gain of 6.76%.

Third Quarter 2008

The third quarter saw volatility in the stock indexes, energy and commodities. The Partnership had losses in energy, certain agricultural commodities, metals and currencies; gains were in the stock indexes.

The Partnership had a loss of 3.45% in July. The Partnership had large losses in certain agricultural commodities, followed by losses in energy, metals currencies; gains were in the stock indexes and interest rates.

The Partnership had a loss of 1.13% in August. The Partnership had losses in metals, energy and certain agricultural commodities; gains were in interest rates, stock indexes and currencies.

The Partnership had a gain of 2.11% in September. The Partnership had losses in interest rates currencies and energy; gains were in the stock indexes, certain agricultural commodities and metals.

The Partnership ended the quarter with a loss of 2.54%.

Second Quarter 2008

The second quarter saw volatility in the energy and interest rate sectors. The Partnership had large gains in energy, with smaller gains in metals and certain agricultural commodities; large losses were in interest rates, with small losses in the stock indexes.

The Partnership had a loss of 1.55% in April. The Partnership had large losses in interest rates, followed by smaller losses in stock indexes; gains were in energy, metals, certain agricultural commodities and currencies.

The Partnership had a gain of 0.85% in May. The Partnership had large gains in energy again this month, followed by small gains in metals, currencies and certain agricultural commodities; large losses were in interest rates with smaller losses in stock indexes.

The Partnership had a gain of 0.35% in June. The Partnership had gains in certain agricultural commodities, energy and stock indexes; losses were in metals, interest rates and currencies.

The Partnership ended the quarter with a loss of 0.36%.

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First Quarter 2008

The Partnership had large gains in interest rates, caused by the drop in interest rates by the Federal Reserve throughout the quarter. Small gains were also made in energy, currencies and certain agricultural commodities. The Partnership saw large losses in metals followed by small losses in the equity indexes.

The Partnership had a loss of 0.51% in January. The Partnership had large losses in metals and stock indexes; losses were mostly offset by large gains in interest rates with smaller gains in certain agricultural commodities and currencies.

The Partnership had a gain of 3.27% in February. The Partnership had large gains in interest rates, followed by gains in certain agricultural commodities, energy and currencies; losses were in metals and the stock indexes.

The Partnership had a loss of 1.13% in March. The Partnership had gains in energy, currencies, interest rates and metals; losses were in stock indexes and certain agricultural commodities.

The Partnership ended the quarter with a gain of 1.59%.

Year-Ended December 31, 2007

The year 2007 had a net loss of $2,082,419 or $248.97 per unit. At December 31, 2007, partners’ capital totaled $21,423,827, versus $28,174,112 for December 31, 2006, including capital redemptions of $4,584,701. Net Asset Value per unit at December 31, 2007 amounted to $2,916.78, as compared to $3,164.35 at December 31, 2006. The Partnership ended the year with a loss of 7.82%.

Fourth Quarter 2007

The fourth quarter saw high volatility in interest rates and equities. The Partnership had large gains in currencies, with smaller gains in certain agricultural commodities and energy; losses were in stock indices and metals.

The Partnership had a gain of 1.53% in October. The Partnership had large gains in currencies and stock indices, with smaller gains in energy; losses were in interest rates, metals and certain agricultural commodities.

The Partnership had a gain of 0.09% in November. The Partnership had large gains in interest rates, with smaller gains in certain agricultural commodities, metals and energy; losses were in stock indices and currencies.

The Partnership had a loss of 0.86% in December. The Partnership had large losses in currencies, with small losses in interest rates and metals; gains were in certain agricultural commodities, energy and stock indices.

The Partnership ended the quarter with a gain of 0.74%.

Third Quarter 2007

The third quarter saw high volatility in equities, currencies and metals. The Partnership had large losses in stock indices, currencies, metals, certain agricultural commodities and energy; gains were limited to certain agricultural commodities.

The Partnership had a loss of 6.32% in July. The Partnership had large losses in certain agricultural commodities, stock indices, currencies and interest rates; with only small gains in energy and base metals.

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The Partnership had a loss of 4.97% in August. The Partnership had large losses in currencies, stock indices, metals and energy, with small gains in interest rates and certain agricultural commodities.

The Partnership had a gain of 2.39% in September. The Partnership had large gains in currencies and certain agricultural commodities, followed by gains in stock indices and energy; losses were in metals and interest rates.

The Partnership ended the quarter with a loss of 8.84%.

Second Quarter 2007

The second quarter saw volatility in equities, interest rates and currencies. The Partnership had large gains in currencies, interest rates and stock indices, with smaller gains in certain agricultural commodities and metals; losses were in certain agricultural commodities and energy.

The Partnership had a gain of 2.37% in April. The Partnership had very large gains in stock indexes, with smaller gains in metals, currencies, energy and interest rates; losses were small in certain agricultural commodities.

The Partnership had a gain of 4.09% in May. The Partnership had large gains in interest rates and stock indexes, with smaller gains in currencies and certain agricultural commodities; losses were in energy and certain other agricultural commodities.

The Partnership had a gain of 0.34% in June. The Partnership had large gains in currencies and interest rates with smaller gains in metals; losses were in certain agricultural commodities, energy and stock indices.

The Partnership ended the quarter with a gain of 6.91%.

First Quarter 2007

The first quarter saw volatility in equities and currencies. The Partnership had large losses primarily in currencies, caused by a large spike in the Yen against the U.S. Dollar and several world currencies in the last couple days of February, which then carried over into March. The Partnership also saw losses in certain agricultural commodities, energy and interest rates; gains were generally in stock indices and base metals.

The Partnership had a gain of 3.27% in January. The Partnership had gains in stock indices, with smaller gains in energy and metals; losses were in foreign currencies, interest rates and certain agricultural commodities.

The Partnership had a loss of 4.81% in February. The Partnership had large losses in currencies, with additional losses in energy and interest rates; gains were generally in stock indexes and certain agricultural commodities.

The Partnership had a loss of 4.50% in March. The Partnership had large losses in grains and currencies, with smaller loses in interest rates, stock indices and energy; gains were limited to base metals and certain agricultural commodities.

The Partnership ended the quarter with a loss of 6.12%.

(d) Off-Balance Sheet Arrangements. Off-balance sheet risk refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Partnership trades in futures and other commodity interest contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts, the Partnership faces the market risk that these contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the commodity interest positions of the Partnership at the same time, and if the Partnership were unable to offset positions, the Partnership could lose all of its assets and the limited partners would realize a 100% loss. The Partnership minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 25%. All positions of the Partnership are valued each day on a mark-to-market basis.

Page 12

In addition to market risk, in entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Partnership. The counterparty for futures and options on futures contracts traded in the United States and on most non-U.S. futures exchanges is the clearing organization associated with such exchange. In general, clearing organizations are backed by the corporate members of the clearing organization who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk.

In cases where the clearing organization is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.

In the case of forward contracts, over-the-counter options contracts or swap contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a central clearing organization backed by a group of financial institutions. As a result, there likely will be greater counterparty credit risk in these transactions. The Partnership trades only with those counterparties that it believes to be creditworthy. Nonetheless, the clearing member, clearing organization or other counterparty to these transactions may not be able to meet its obligations to the Partnership, in which case the Partnership could suffer significant losses on these contracts.

In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.

(e) Contractual Obligations. None.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Partnership is a Smaller Reporting Company as defined by Rule 229.10(f)(1) and therefore this item is not applicable.

Item 8. Financial Statements and Supplementary Data.

Financial statements meeting the requirements of Regulation S-X are listed following this report.

Because the Partnership is a Smaller Reporting Company, as defined by Rule 229.10(f)(1), the supplementary financial information required by Item 302 of Regulation S-K is not applicable.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Page 13

Item 9A. Controls and Procedures.

ProFutures, Inc., as General Partner of ProFutures Diversified Fund, L.P., with the participation of the General Partner’s President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Partnership as of the end of the period covered by this annual report. Based on their evaluation, the President and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in the General Partner’s internal control over financial reporting applicable to the Partnership identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting applicable to the Partnership.

Item 9A(T). Controls and Procedures.

The General Partner, with the participation of the General Partner’s President and Chief Financial Officer has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the fiscal year for which this Annual Report on Form 10-K is being filed, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no significant changes in the General Partner’s internal controls with respect to the Partnership or in other factors applicable to the Partnership that could materially affect these controls subsequent to the date of their evaluation.

Changes in Internal Control over Financial Reporting

Section 404 of the Sarbanes-Oxley Act of 2002 requires the General Partner to evaluate annually the effectiveness of its internal controls over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of its internal control over financial reporting in all annual reports.

There were no changes in the General Partner’s internal control over financial reporting during the period ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

The General Partner is responsible for establishing and maintaining adequate internal control over the financial reporting of the Partnership. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The General Partner’s internal control over financial reporting includes those policies and procedures that:

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

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements of the Partnership in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the General Partner; and

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

Page 14

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The management of the General Partner assessed the effectiveness of its internal control over financial reporting with respect to the Partnership as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on its assessment, management has concluded that, as of December 31, 2008, the General Partner’s internal control over financial reporting with respect to the Partnership is effective based on those criteria.

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The Partnership is a limited partnership and therefore does not have any directors or executive officers. The Partnership’s General Partner, ProFutures, Inc., administers and manages the affairs of the Partnership.

ProFutures, Inc. has adopted a code of ethics that applies to the Partnership and its affiliates as well as the executive officers of the General Partner. A copy of the code of ethics may be obtained at no charge by written request to the corporate secretary of ProFutures, Inc., 11719 Bee Cave Road, Suite 200, Austin, Texas 78738.

The Board of Directors of ProFutures, Inc., in its capacity as the audit committee for the Partnership, has determined that Debi B. Halbert qualifies as an “audit committee financial expert” in accordance with the applicable rules and regulations of the Securities and Exchange Commission. She is not independent of management.

Item 11. Executive Compensation.

As discussed above, the Partnership does not have any officers, directors or employees. The General Partner received monthly management fees which aggregated $683,889 for 2008.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(a) As of December 31, 2008, a total of 5,859 non-restricted and 415 restricted Units were issued and outstanding, representing 1 General Partner and 522 Limited Partners, of which 11 non-restricted and 0 restricted Units were redeemed in January 2009. As of February 28, 2009, a total of 6,196 non-restricted Units were issued and outstanding, representing 1 General Partner and 454 Limited Partners, of which approximately 62 Units are to be redeemed in March 2009. The Partnership knows of no one person who owns beneficially more than 5% of the Units of Limited Partnership Interest.

Page 15

(b) The General Partner and its principals owned 173 non-restricted and 12 restricted Units as of December 31, 2008, having an aggregate value of $576,011, which is approximately 3.0% of the Net Asset Value of the Partnership. The General Partner and its principals owned 184 Units as of February 28, 2009, having an aggregate value of $566,008, which is approximately 3% of the Net Asset Value of the Partnership. There are no restricted Units outstanding.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The Partnership’s Prospectus, dated July 31, 1994, Pages 16-18, which is incorporated herein by reference, contains information concerning the relationships and transactions between the General Partner, the Clearing Broker and the Partnership.

Item 14. Principal Accounting Fees and Services.

McGladrey & Pullen, LLP, as principal accountant for the years 2008 and 2007, billed the Partnership aggregate fees for services rendered to the Partnership for the last two years as follows:

	2008			2007

Audit Fees		$	63,500		$	85,900
All Other Fees			-			21,283

Audit fees relate to the annual audit, quarterly reviews, and assistance with and review of documents filed with the SEC.

Audit-Related Fees. McGladrey & Pullen, LLP did not have any audit-related fees in 2008 or 2007.

Tax Fees. McGladrey & Pullen, LLP did not have any fees related to tax compliance, tax advice, and tax planning services for the Partnership in 2008 or in 2007.

All Other Fees consist of consulting fees paid.

The Board of Directors of ProFutures, Inc., in its capacity as the audit committee for the Partnership, approved all of the services described above. The audit committee has determined that the payments made to its independent accountant for non-audit services are compatible with maintaining such auditor’s independence.

The audit committee explicitly pre-approves all audit and non-audit services and all engagement fees and terms, except as otherwise permitted by regulation.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

Financial Statements.

The following financial statements of the Partnership are included with the 2008 Report of Independent Registered Public Accounting Firm.

Report of Independent Registered Public Accounting Firm

Statements of Financial Condition

Condensed Schedules of Investments

Statements of Operations

Statements of Changes in Partners’ Capital

Statements of Cash Flows

Notes to Financial Statements

Page 16

Pursuant to Rule 3-09 of Regulation S-X, the following financial statements for Winton Futures Fund, L.P. (US) and ProFutures Strategic Allocation Trust are included herewith along with their respective 2008 Reports of Independent Registered Public Accounting Firms.

Winton Futures Fund L.P. (US)

Report of Independent Registered Public Accounting Firm

Statements of Financial Condition

Condensed Schedules of Investments

Statements of Operations

Statements of Changes in Partners’ Capital

Notes to Financial Statements

ProFutures Strategic Allocation Trust

Report of Independent Registered Public Accounting Firm

Statements of Financial Condition

Condensed Schedules of Investments

Statements of Operations

Statements of Changes in Partners’ Capital

Notes to Financial Statements

The audited financial statements of two unaffiliated commodity funds in which the Partnership has underlying investments, SHK Diversified LLC and Valhalla Synergy Fund LLC (together, the “Commodity Funds”), are not included herewith. Although the Partnership is required to include the financial statements of the Commodity Funds in this Annual Report on Form 10-K pursuant to Rule 3-09 of Regulation S-X, the Commodity Funds are not willing to provide their audited financial statements to the Partnership, and, accordingly, the Partnership is unable to include them herein. The Partnership has no independent access to or control over the dissemination of the audited financial statements of these unaffiliated Commodity Funds. As of March 16, 2009, the Partnership no longer has any amounts invested in SHK Diversified LLC.

(b)

Exhibits.

*1.1	Form of Selling Agreement between the Partnership and ProFutures Financial Group, Inc.

*1.2	Form of Additional Selling Agents Agreement between ProFutures Financial Group, Inc. and certain Additional Selling Agents.

*3.1	Agreement of Limited Partnership (attached to the Prospectus as Exhibit A).

*3.2	Subscription Agreement and Power of Attorney (attached to the Prospectus as Exhibit B).

*3.3	Request for Redemption Form (attached to the Prospectus as Exhibit C).

*5.1	Opinion of Counsel as to the legality of the Units.

*8.1	Tax Opinion of Counsel.

*10.4	Form of Consulting Agreement between the Registrant and Kenmar Global Strategies Inc.

Page 17

*10.6	Form of Amended and Restated Stock Subscription Agreement by and between ABN AMRO Incorporated and ProFutures, Inc.

31.01	Certification of Gary D. Halbert, President, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.02	Certification of Debi B. Halbert, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

32.01	Certification of Gary D. Halbert, President, pursuant to 18 U.S.C. Section 1350 as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.

32.02	Certification of Debi B. Halbert, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.

(c)

Financial Statement Schedules.

Not applicable or information included in the financial statements.

The foregoing forms of exhibits were filed in the April 6, 1987 Registration Statement No. 33-13008 and/or Post-Effective Amendment No. 1 thereto filed March 11, 1988, and/or the June 5, 1991 Registration Statement No. 33-41073, and/or Pre-Effective Amendment No. 1 thereto filed August 8, 1991, and/or Post-Effective Amendment No. 1 thereto filed March 26, 1992; and/or the October 14, 1992 Registration Statement No. 33-53324, and/or the November 17, 1992 Pre-effective Amendment No. 1 thereto and/or the July 2, 1993 Registration Statement No. 33-65596, and/or the Pre-Effective Amendment No. 1 thereto filed August 16, 1993, and Supplement dated December 3, 1993, Post-Effective Amendment No. 2 thereto filed June 30, 1994 and Supplement dated January 31, 1995, and/or Post-Effective Amendment No. 3 dated June 23 1995; and/or Form 10-K for the year ended 2001; and/or Form 10-Q for the quarter ended June 30, 2002. Accordingly, such exhibits are incorporated herein by reference and notified herewith.

Page 18

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	PROFUTURES DIVERSIFIED FUND, L.P.
	(Partnership)



April 15, 2009	By	/s/ GARY D. HALBERT
Date		Gary D. Halbert, President and Director
		ProFutures, Inc.
		General Partner



April 15, 2009	By	/s/ DEBI B. HALBERT
Date		Debi B. Halbert, Chief Financial Officer,
		Treasurer and Director
		ProFutures, Inc.
		General Partner

Page 19

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

April 15, 2009	By	/s/ GARY D. HALBERT
Date		Gary D. Halbert, President and Director
		ProFutures, Inc.
		General Partner



April 15, 2009	By	/s/ DEBI B. HALBERT
Date		Debi B. Halbert, Chief Financial Officer,
		Treasurer and Director
		ProFutures, Inc.
		General Partner

Page 20

PROFUTURES DIVERSIFIED FUND, L.P.

ANNUAL REPORT

December 31, 2008

PROFUTURES DIVERSIFIED FUND, L.P.

______________________

TABLE OF CONTENTS

______________________

	PAGES

Report of Independent Registered Public Accounting Firm	F-2

Financial Statements

Statements of Financial Condition	F-3

Condensed Schedules of Investments	F-4 – F-8

Statements of Operations	F-9

Statements of Changes in Partners’ Capital (Net Asset Value)	F-10

Statements of Cash Flows	F-11

Notes to Financial Statements	F-12 – F-27

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the General Partner

ProFutures Diversified Fund, L.P.

We have audited the statements of financial condition, including the condensed schedules of investments, of ProFutures Diversified Fund, L.P. (the Partnership) as of December 31, 2008 and 2007 and the related statements of operations, changes in partners’ capital (net asset value) and of cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ProFutures Diversified Fund, L.P. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2008 in conformity with U.S. generally accepted accounting principles.

We were previously unable to complete audit procedures on the valuation of the Partnership’s investment in SHK Diversified LLC and, as a result, issued a qualified opinion on May 15, 2008 on the Partnership’s financial statements as of and for the year ended December 31, 2007. As described in Note 7 to the financial statements, the Partnership received all of the proceeds from its investment in SHK Diversified LLC as of March 16, 2009. As a result, we are now issuing an unqualified opinion on the Partnerships’ financial statements for the year ended December 31, 2007 which is different than the opinion we originally issued on May 15, 2008.

We were not engaged to examine management’s assessment of the effectiveness of ProFutures Diversified Fund’s internal control over financial reporting as of December 31, 2008, included in the accompanying management’s annual report on internal controls over financial reporting and, accordingly, we do not express an opinion thereon.

/s/McGladrey & Pullen, LLP

Chicago, Illinois

April 15, 2009

F-2

PROFUTURES DIVERSIFIED FUND, L.P. STATEMENTS OF FINANCIAL CONDITION December 31, 2008 and 2007 _______________

	2008		2007
ASSETS
Equity in broker trading accounts
Cash	$	6,035,775	$	1,433,626
Options on futures contracts, at fair value (premiums received - $0 and $34,500, respectively)		0		(32,775	)
Unrealized gain (loss) on open contracts		289,265		4,010

Deposits with broker		6,325,040		1,404,861

Cash		3,533		3,387
Investments in other commodity pools		12,583,933		16,889,459
Redemption receivable from other commodity pool		1,315,742		4,500,000

Total assets	$	20,228,248	$	22,797,707

LIABILITIES
Accounts payable	$	40,823	$	97,542
Commissions and other trading fees payable on open contracts		1,576		266
Incentive fees payable		185,497		0
Management fees payable (includes $129,324 and $61,761 payable to the General Partner at December 31, 2008 and 2007, respectively)		156,423		70,758
Redemptions payable		342,900		1,205,314

Total liabilities		727,219		1,373,880

PARTNERS’ CAPITAL (Net Asset Value)
Partners’ Capital (Non-restricted units):
General Partner – 173 and 187 units outstanding at December 31, 2008 and 2007, respectively		543,779		545,791
Limited Partners – 5,686 and 7,158 units outstanding at December 31, 2008 and 2007, respectively		17,851,493		20,878,036
Partners’ Capital (Side pocket/restricted units):
General Partner – 12 and 0 units outstanding at December 31, 2008 and 2007, respectively		32,232		0
Limited Partners – 403 and 0 units outstanding at and December 31, 2008 and 2007, respectively		1,073,525		0

Total partners’ capital (net asset value)		19,501,029		21,423,827

	$	20,228,248	$	22,797,707

See accompanying notes.

F-3

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS

December 31, 2008 and 2007

_______________

	2008						2007
	Fair Value			% of Net Asset Value			Fair Value			% of Net Asset Value
LONG FUTURES CONTRACTS(1)
Description

U.S.
Agricultural	$	67,037			0.34	%	$	0			0.00	%
Energy		20,667			0.10	%		0			0.00	%
Interest rate		188,883			0.97	%		0			0.00	%
Stock index		33,545			0.17	%		0			0.00	%
Total U.S. long futures contracts	$	310,132			1.58	%	$	0			0.00	%

Foreign
Agriculture	$	1,226			0.01	%	$	0			0.00	%
Interest rate		18,911			0.10	%		0			0.00	%
Total foreign long futures contracts	$	20,137			0.11	%	$	0			0.00	%

SHORT FUTURES CONTRACTS(1)

Description

U.S.
Agricultural	$	(45,260	)		(0.23	)%	$	0			0.00	%
Currency		101			0.00	%		0			0.00	%
Energy		6,870			0.04	%		0			0.00	%
Interest rate		20,969			0.11	%		0			0.00	%
Stock index		(22,085	)		(0.12	)%		4,010			0.02	%
Total U.S. short futures contracts	$	(39,405	)		(0.20	)%	$	4,010			0.02	%

Foreign
Interest rate	$	2,654			0.01	%	$	0			0.00	%
Stock index		(4,253	)		(0.02	)%		0			0.00	%
Total foreign short futures contracts	$	(1,599	)		(0.01	)%	$	0			0.00	%

Total futures contracts	$	289,265			1.48	%	$	4,010			0.02	%

WRITTEN OPTIONS ON FUTURES CONTRACTS(1)

Stock index	$	0			0.00	%	$	(32,775	)		(0.15	)%

Total written options on futures contracts (premiums received – $0 and $34,500, respectively)	$	0			0.00	%	$	(32,775	)		(0.15	)%

_______________

(1)	No individual futures or options on futures contract positions constitutes greater than 5% of the Partnership’s Net Asset Value at December 31, 2008 or 2007. Accordingly, the number of contracts and expiration dates are not presented.

See accompanying notes.

F-4

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

December 31, 2008 and 2007

_______________

	2008					2007
	Fair Value		% of Net Asset Value			Fair Value		% of Net Asset Value
INVESTMENTS IN OTHER COMMODITY POOLS
ProFutures Strategic Allocation Trust(1)
Investment Objective
To achieve capital appreciation by trading U.S. and Non U.S. futures and forward currency contracts
Redemption Provisions
Monthly, with 10 days notice	$	0		0.00	%	$	5,495,004		25.65	%
SHK Diversified LLC(2)
Investment Objective
To achieve capital appreciation by trading U.S. and Non U.S. futures and forward currency contracts		1,315,743		6.75	%		3,117,286		14.55	%
Valhalla Synergy Fund LLC
Investment Objective
To achieve capital appreciation by trading U.S. and Non U.S. futures and forward currency contracts
Redemption Provisions
Quarterly, with 30 days notice		2,740,835		14.05	%		4,419,668		20.63	%
Winton Futures Fund, L.P. (US) – Institutional Interests(3)
Investment Objective
To achieve capital appreciation by trading U.S. and Non U.S. futures contracts
Redemption Provisions
Monthly, with 15 days notice		8,527,355		43.73	%		3,857,501		18.01	%
Total investments in other commodity pools	$	12,583,933		64.53	%	$	16,889,459		78.44	%

_______________

(1)	The Managing Owner of ProFutures Strategic Allocation Trust is ProFutures, Inc., the Partnership’s General Partner.

(2)

As of January 31, 2008, the managing member of SHK Diversified LLC (SHK) temporarily suspended future redemptions from this fund. This action was taken by the managing member due to a decline in the liquidity of the markets traded by this fund combined with a significant number of requests for redemptions from this fund. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. Effective December 31, 2008, the managing member of SHK distributed approximately half of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, the managing member of SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009.

(3)	The General Partner of Winton Futures Fund, L.P. (US) is Altegris Portfolio Management, Inc., an affiliate of Altegris Investments, Inc.

See accompanying notes.

F-5

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

December 31, 2008 and 2007

_______________

Proportional Share of Investments of Other Commodity Pools as of December 31, 2008(1)

Description	Investment Objective	Redemption Provisions	Fair Value			% of Net Asset Value

Valhalla Synergy Master Fund Ltd.	To achieve capital appreciation through the speculative trading of commodities, commodity futures contracts, options on futures contracts and commodities, and spot and forward contracts traded in U.S. and non-U.S. markets.	Monthly – with 30 days written notice	$	2,734,502			14.02	%

Money Market Mutual Fund Investments

Shares	Description	Cost	Fair Value			% of Net Asset Value

1,121,826	UBS Select Prime Institutional Fund	$ 1,121,826	$	1,121,826			5.75	%

U.S. Government Agency Bonds and Notes
Face Value	Description	Range of Maturity Dates	Fair Value			% of Net Asset Value

$1,278,210	Federal Home Loan Bank (0.03 – 4.35%)	01/2009 to 12/2010	$	1,281,568			6.57	%

Open Long and Short Futures Contracts

No. of Contracts	Description	Range of Expiration Dates	Fair Value			% of Net Asset Value

	Long Futures Contracts
	Metals
3	Copper	01/2009 to 05/2009	$	9,130			0.05	%
519	Gold	04/2009 to 12/2010	$	1,747,460			8.96	%
88	Silver	05/2009 to 07/2011	$	(593,490	)		(3.04	)%

	Short Futures Contracts
	Metals
9	Copper	02/2009 to 05/2009	$	(65,331	)		(0.34	)%
519	Gold	02/2009 to 06/2012	$	(2,537,283	)		(13.01	)%
88	Silver	03/2009 to 12/2011	$	(75,238	)		(0.39	)%

Open Long and Short Forward Contracts

No. of Contracts	Description	Range of Expiration Dates	Value			% of Net Asset Value

	Long Forward Contracts
	Metals
394	Aluminum	01/2009 to 12/2012	$	5,470,495			28.05	%
121	Copper	01/2009 to 12/2011	$	4,836,078			24.80	%

	Short Forward Contracts
	Metals
349	Aluminum	01/2009 to 12/2012	$	(4,626,265	)		(23.72	)%
114	Copper	01/2009 to 12/2011	$	(4,446,044	)		(22.80	)%

_______________

(1)

Represents the Partnership’s proportional share of other commodity pool’s individual underlying investments and open futures contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2008. In certain situations, open futures contracts that are less than 5% of the Partnership’s Net Asset Value at December 31, 2008 may be presented to better indicate the Partnership’s net exposure to a particular underlying commodity.

See accompanying notes.

F-6

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

December 31, 2008 and 2007

_______________

Proportional Share of Investments of Other Commodity Pools as of December 31, 2008 (continued)(1)

Description	Investment Objective	Redemption Provisions	Fair Value	% of Net Asset Value
Valhalla Synergy Master Fund Ltd.	To achieve capital appreciation through the speculative trading of commodities, commodity futures contracts, options on futures contracts and commodities, and spot and forward contracts traded in U.S. and non-U.S. markets.	Monthly – with 30 days written notice	$4,297,429	20.06 %

Purchased Options on Futures Contracts

No. of Contracts	Description	Range of Expiration Dates	Fair Value	% of Net Asset Value
	Metals
14	Aluminum	01/2009 to 12/2011	$126,957	0.65 %
14	Copper	01/2009 to 12/2010	$235,909	1.21 %

Written Options on Futures Contracts

No. of Contracts	Description	Range of Expiration Dates	Fair Value	% of Net Asset Value
	Metals
29	Aluminum	01/2009 to 12/2011	$(105,759)	0.54 %
14	Copper	01/2009 to 12/2010	$(346,786)	1.78 %

Physical Inventory
	Description		Fair Value	% of Net Asset Value
	Metals
	Aluminum		$ 32,010	0.16 %
	Copper		$1,639,383	8.41 %

_______________

(1)

See accompanying notes.

F-7

PROFUTURES DIVERSIFIED FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

December 31, 2008 and 2007

_______________

Proportional Share of Investments of Other Commodity Pools as of December 31, 2007(1)

Money Market Mutual Fund Investments

Shares	Description		Cost	Fair Value	% of Net Asset Value

2,603,841	UBS Select Prime Institutional Fund		$2,603,841	$2,603,841	12.15%

Open Long and Short Futures Contracts

No. of Contracts	Description	Range of Expiration Dates		Fair Value	% of Net Asset Value

	Long Futures Contracts
	Metals
2,939	Gold	04/2008 to 12/2010		$15,781,819	73.66%
661	Silver	05/2008 to 07/2010		$2,095,969	9.78%

	Short Futures Contracts
	Metals
2,964	Gold	02/2008 to 06/2012		$(10,928,866)	(51.01)%
668	Silver	03/2008 to 12/2010		$(950,826)	(4.44)%

Open Long and Short Forward Contracts

No. of Contracts	Description	Range of Expiration Dates	Fair Value	% of Net Asset Value

	Long Forward Contracts
	Metals
313	Copper	01/2008 to 12/2011	$9,141,316	42.67%
336	Aluminum	01/2008 to 12/2011	$2,107,432	9.84%

	Short Forward Contracts
	Metals
314	Copper	01/2008 to 12/2011	$(8,743,537)	(40.81)%
341	Aluminum	01/2008 to 12/2011	$(2,249,393)	(10.50)%

_______________

(1)

Represents the Partnership’s proportional share of other commodity pool’s individual underlying investments and open futures and forward contracts which exceed 5% of the Partnership’s Net Asset Value at December 31, 2007. In certain situations open futures contracts that are less than 5% of the Partnership’s Net Asset Value may be presented to indicate the Partnership’s net exposure to a particular underlying commodity.

See accompanying notes.

F-8

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2008 and 2007

_______________

	2008 Non-restricted			2008 Side pocket/ restricted			2008 Total			2007 Total
TRADING AND INVESTING GAINS (LOSSES)
Gain (loss) from futures and options on futures trading
Realized	$	1,061,006		$	0		$	1,061,006		$	(596,059	)
Change in unrealized		283,530			0			283,530			(478,142	)
Brokerage commissions		(116,150	)		0			(116,150	)		(281,061	)

Gain (loss) from futures and options on futures trading		1,228,386			0			1,228,386			(1,355,262	)
Gain (loss) from trading of forward currency contracts and options on forward currency contracts
Realized		0			0			0			467,487
Change in unrealized		0			0			0			(371,164	)

Gain (loss) from trading of forward currency contracts and options on forward currency contracts		0			0			0			96,323
Income (loss) from investments in other commodity pools, net		1,452,633			(104,924	)		1,347,709			492,472

Total trading and investing gains (losses)		2,681,019			(104,924	)		2,576,095			(766,467	)

NET INVESTMENT INCOME (LOSS)
Income
Interest income		37,120			0			37,120			182,150

Expenses
Incentive fees		383,650			0			383,650			69,916
Management fees (includes $683,889 and $951,279 charged by the General Partner for the years ended December 31, 2008 and 2007, respectively)		796,035			74,671			870,706			1,112,227
Operating expenses		344,501			96,860			441,361			430,033

Total expenses		1,524,186			171,531			1,695,717			1,612,176

General Partner management fees waived		(77,739	)		0			(77,739	)		(114,074	)

Net expenses		1,446,447			171,531			1,617,978			1,498,102

Net investment income (loss)		(1,409,327	)		(171,531	)		(1,580,858	)		(1,315,952	)

NET INCOME (LOSS)	$	1,271,692		$	(276,455	)	$	995,237		$	(2,082,419	)

NET INCOME (LOSS) PER GENERAL AND LIMITED PARTNER UNIT
(based on weighted average number of units outstanding during the year of 6,189,924 and 8,364, respectively)	$	205.48		$	(299.19	)		(1)		$	(248.97	)

INCREASE (DECREASE) IN NET ASSET VALUE PER GENERAL AND LIMITED PARTNER UNIT	$	223.08		$	(299.36	)		(1)		$	(247.57	)

_______________

(1)	A total net income (loss) per general and limited partnership Unit and a total for the increase (decrease) in Net Asset Value per general and limited partnership Unit are not presented as the amounts are instead shown for each separate class of Units.

See accompanying notes.

F-9

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)

For the Years Ended December 31, 2008 and 2007

_______________

	Total Number of			Partners’ Capital
	Units			General			Limited			Total
Non-restricted units

Balances at December 31, 2006		8,903			592,117			27,581,995			28,174,112

Net (loss) for the year ended December 31, 2007					(46,326	)		(2,036,093	)		(2,082,419	)

Redemptions		(1,558	)		0			(4,667,866	)		(4,667,866	)

Balances at December 31, 2007		7,345			545,791			20,878,036			21,423,827

Transfer to side pocket/restricted		(923	)		(71,709	)		(2,664,700	)		(2,736,409	)

Net income for the year ended December 31, 2008					37,465			1,234,227			1,271,692

Redemptions		(916	)		0			(2,671,425	)		(2,671,425	)

Transfer from side pocket/restricted(2)		353			32,232			1,075,355			1,107,587

Balances at December 31, 2008		5,859		$	543,779		$	17,851,493		$	18,395,272

Side pocket/restricted units

Balances at December 31, 2007		0		$	0		$	0		$	0

Transfer from non-restricted		923			71,709			2,664,700			2,736,409

Net (loss) for the year ended December 31, 2008					(7,245	)		(269,210	)		(276,455	)

Redemptions(1)		(92	)		0			(246,610	)		(246,610	)

Transfer to non-restricted(2)		(416	)		(32,232	)		(1,075,355	)		(1,107,587	)

Balances at December 31, 2008		415		$	32,232		$	1,073,525		$	1,105,757

Total Partners’ Capital (Net Asset Value) at December 31, 2006				$	592,117		$	27,581,995		$	28,174,112

Total Partners’ Capital (Net Asset Value) at December 31, 2007				$	545,791		$	20,878,036		$	21,423,827

Total Partners’ Capital (Net Asset Value) at December 31, 2008				$	576,011		$	18,925,018		$	19,501,029

Net Asset Value Per Unit
Non-restricted						Side pocket/restricted
December 31,						December 31,
2008		2007		2006		2008		2007
$	3,139.86	$	2,916.78	$	3,164.35	$	2,663.73	$	N/A

_______________

(1)

Side pocket/restricted unit redemptions have been recorded in accordance with the Statement of Financial Accounting Standards No. 150. Redemptions approved by the General Partner, prior to the period end, that are not effective until subsequent periods are recorded in the current period. Also includes the portion of the December 31, 2008 distribution from SHK related to partners who have completely redeemed from the Partnership and do not hold non-restricted units. Effective February 28, 2009, all partners who have completely redeemed from the Partnership and do not hold non-restricted units will be paid their final redemption in March 2009.

(2)

The Partnership recorded a receivable in the statement of financial condition for proceeds received in January 2009 from its investment in SHK that is held in side pocket/restricted units. As a result, half of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the December 31, 2008 non-restricted net asset value per unit.

See accompanying notes.

F-10

PROFUTURES DIVERSIFIED FUND, L.P.

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2008 and 2007

_______________

	2008			2007
OPERATING ACTIVITIES
Net income (loss)	$	995,237		$	(2,082,419	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Income) from investments in other commodity pools, net		(1,347,709	)		(492,472	)
Change in operating assets and liabilities
(Increase) decrease in cash deposits with broker		(4,602,149	)		11,891,969
(Increase) decrease in option premiums paid (received)		(34,500	)		(28,625	)
(Increase) decrease in unrealized gain (loss) on open contracts		(283,530	)		478,142
(Increase) decrease in cash deposits in forward trading
collateral accounts		0			5,412,319
(Increase) decrease in net premiums paid on options on
forward currency contracts		0			3,294
(Increase) decrease in unrealized gain (loss) on open
forward currency contracts and options on
forward currency contracts		0			371,164
Additions to investments in other commodity pools		(10,690,000	)		(15,803,865	)
Redemptions from other commodity pools		19,527,493			4,245,000
(Decrease) increase in accounts payable		(56,719	)		43,536
(Decrease) increase in commissions and other
trading fees on open contracts		1,310			(5,685	)
(Decrease) increase in incentive fees payable		185,497			(62,651	)
(Decrease) increase in management fees payable		85,665			(168,219	)

Net cash provided by (used in) Operating Activities		3,780,595			3,801,488

FINANCING ACTIVITIES
Redemptions paid		(3,780,449	)		(3,801,305	)

Net cash provided by (used in) Financing Activities		(3,780,449	)		(3,801,305	)

Net cash increase (decrease) for the year		146			183

Cash at beginning of year		3,387			3,204

Cash at end of year	$	3,533		$	3,387

See accompanying notes.

F-11

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Description of the Partnership

ProFutures Diversified Fund, L.P. (the Partnership) is a Delaware limited partnership, which operates as a commodity investment pool. The Partnership engages in the speculative trading of futures contracts, options on futures contracts, physical commodities, interbank forward currency contracts and options on interbank forward currency contracts, directly and through its investments in other commodity pools. The Partnership closed to investors in 1995 and will terminate at the end of December 2012, at which time the remaining assets will be distributed.

As more fully described in Note 7., effective April 1, 2008, the Partnership established a “side pocket/restricted” account for each investor. The Partnership transferred its interest in SHK Diversified LLC (SHK), which had a net asset value of $2,736,409 and a per unit value of $2,963.09 as of March 31, 2008, to a side pocket/restricted share class. Partners of record on April 1, 2008 have a proportional interest in the assets, liabilities and income or loss related to this side pocket.

Partners who have requested redemptions will continue to participate in any income or loss specifically from the SHK side pocket investment until such time as the Partnership receives its redemption proceeds or liquidation proceeds from SHK. The side pocket/restricted share class will also bear its proportionate share of the Partnership’s expenses, as well as all expenses directly related to this class’ establishment and existence. Effective December 31, 2008, SHK distributed approximately half ($1,315,742) of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, SHK distributed the remaining portion ($1,335,258) of the Partnership’s investment in SHK to the Partnership, which was paid to the Partnership on March 16, 2009.

Regulation

As a registrant with the Securities and Exchange Commission, the Partnership is subject to the regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. As a commodity investment pool, the Partnership is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges, futures commission merchants, and interbank market makers through which the Partnership trades.

Method of Reporting

The Partnership’s financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which require the use of certain estimates made by the Partnership’s management.

For purposes of both financial reporting and calculation of redemption value, Net Asset Value per Unit is calculated by dividing Net Asset Value by the total number of units outstanding.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the estimates and assumptions utilized.

F-12

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

All of the Partnership’s investment assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.

On January 1, 2008, the Partnership adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157). The adoption of SFAS No. 157 did not have a material impact on the Partnership’s financial position, results of operations or cash flows.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under SFAS No. 157 as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under SFAS No. 157 are described below:

Level 1.

Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2.

Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement.

Level 3.

Inputs are unobservable for the asset or liability.

The fair values of futures contracts are based upon exchange settlement prices. The Partnership uses futures contracts as part of its trading activities. These contracts are classified as Level 1 of the fair value hierarchy.

The fair values of Level 1 financial instruments at December 31, 2008, consisted of the following:

Futures contracts

289,265

The Partnership’s investments in other commodity pools are reported in the statement of financial condition at fair value. Fair value ordinarily represents the Partnership’s proportionate share of each other commodity pool’s net asset value determined for each commodity pool in accordance with such commodity pool’s valuation policies and as reported by their management at the time of the Partnership’s valuation. Generally, the fair value of the Partnership’s investment in a commodity pool represents the amount that the Partnership could reasonably expect to receive from such commodity pool if the Partnership’s investment was redeemed at the time of valuation, based on information reasonably available at the time the valuation is made and that the Partnership believes to be reliable. The Partnership records its proportionate share of other commodity pools’ income or loss in the statement of operations. This financial instrument is classified in Level 3 of the fair value hierarchy.

F-13

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments (Continued)

The fair values of Level 3 financial instruments at December 31, 2008, consisted of the following:

Investments in other commodity pools

12,583,933

The following table presents a reconciliation of the activity for the investments in other commodity pools:

Balance at January 1, 2008:

16,889,459

Income (loss) from investments in other commodity pools, net

1,347,709

Additions and redemptions, net

(5,653,235)

Transfers in and/or out of Level 3

Balance at December 31, 2008:

12,583,933

Income (loss) from investments in other commodity pools, net includes $780,220 attributable to the change in unrealized gain (loss) on the Partnership’s investments in other commodity pools held at December 31, 2008.

Futures and Forward Currency Contracts

Transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts (the difference between contract trade price and market price) are reflected in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 39 – Offsetting of Amounts Related to Certain Contracts. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Brokerage commissions on futures contracts include other trading fees and are charged to expense when contracts are opened. Fair value of exchange-traded contracts is based upon exchange settlement prices. Fair value of non-exchange-traded contracts is based on third party quoted dealer values on the interbank market.

On January 1, 2008, the Partnership adopted FASB Interpretation No. 39-1, Amendment of FASB Interpretation No. 39 (FIN 39-1). FIN 39-1 defines “right of setoff” and specifies what conditions must be met for a derivative contract to qualify for this right of setoff. It also addresses the applicability of a right of setoff to derivative instruments and clarifies the circumstances in which it is appropriate to offset amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments. The adoption of FIN 39-1 did not have a material impact on the Partnership’s financial statements.

F-14

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 1.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

The Partnership is not subject to federal income taxes. The Partnership prepares calendar year U.S. and applicable state information tax returns and reports to the partners their allocable shares of the Partnership’s income, expenses and trading and investing gains or losses.

The Partnership has continued to evaluate the application of FASB Interpretation No. 48 (FIN 48) entitled Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, and has determined that FIN 48 does not have a material impact on the Partnership’s financial statements. In connection with the application of FIN 48, the Partnership has elected an accounting policy to classify interest and penalties, if any, as interest expense. The Partnership files U.S. federal and state tax returns. The 2005 through 2008 tax years generally remain subject to examination by U.S. federal and most state tax authorities.

Foreign Currency Transactions

The Partnership’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in trading and investing in gains (losses) in the statements of operations.

Redemptions of Units

Redemptions payable represent redemptions approved by the General Partner prior to the period end, including those that are not effective until subsequent periods. These redemptions have been recorded as redemptions and redemptions payable, using the period end Net Asset Value per unit, in accordance with the provisions of Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The change in redemptions payable from the previous reporting period due to change in Net Asset Value is reported in net income and then allocated. Redemptions payable related to side pocketed/restricted Units at December 31, 2008 and December 31, 2007 are $124,216 and $0, respectively.

Recently Issued Accounting Pronouncement

In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS No. 161 applies to all derivative instruments within the scope of SFAS No. 133. It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under SFAS No. 133. SFAS No. 161 amends the current qualitative and quantitative disclosure requirements for derivative instruments and hedging activities set forth in SFAS No. 133 and generally increases the level of disaggregation that will be required in an entity’s financial statements. SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements. SFAS No. 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As this pronouncement is disclosure related only, adoption is not expected to have a material impact on the Partnership’s financial statements.

F-15

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 2.

GENERAL PARTNER

The General Partner of the Partnership is ProFutures, Inc., which conducts and manages the business of the Partnership. The Agreement of Limited Partnership requires the General Partner to contribute to the Partnership an amount in the aggregate equal to at least the greater of (i) 3% of the aggregate initial capital contributions of all partners or $100,000, whichever is less, or (ii) 1% of the aggregate initial capital contributions of all partners.

The Agreement of Limited Partnership also requires that the General Partner maintain in the aggregate a net worth at least equal to (i) the lesser of $250,000 or 15% of the aggregate initial capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at less than $2,500,000; and (ii) 10% of the aggregate initial capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at greater than $2,500,000.

ProFutures, Inc. has a callable stock subscription agreement with MF Global Ltd. (MFG), the Partnership’s broker, whereby MFG has subscribed to purchase (up to $7,000,000, subject to conditions set forth in the stock subscription agreement dated October 22, 2004) the number of shares of common stock of ProFutures, Inc. necessary to maintain the General Partner’s net worth requirements.

The Partnership pays the General Partner a monthly management fee of 1/4 of 1% (3% annually) of month-end Net Asset Value. The General Partner receives an additional monthly management fee of .0625% (.75% annually) of the Partnership’s month-end Net Asset Value for consulting services rendered to the Partnership.

Total management fees earned by ProFutures, Inc. for the years ended December 31, 2008 and 2007 were $683,889 and $951,279, respectively. Management fees payable to ProFutures, Inc. as of December 31, 2008 and 2007 were $129,324 and $61,761, respectively. Management fees payable at December 31, 2008 includes $74,672 payable to ProFutures, Inc. related to the side pocket/restricted share class. This amount was accrued throughout 2008 and was paid in February 2009. During the years ended December 31, 2008 and 2007, the General Partner waived $77,739 and $114,074, respectively, of its monthly management fee related to the value of the Partnership's net assets invested in ProFutures Strategic Allocation Trust, an affiliated fund also managed by ProFutures, Inc. The General Partner considers this waiver of management fees necessary for the period February 1, 2007 to May 31, 2008 (the period the Partnership was invested in ProFutures Strategic Allocation Trust) given ProFutures, Inc. receives a 2% per annum administration fee from ProFutures Strategic Allocation Trust.

Note 3.

CONSULTANTS

The Partnership maintains a consulting agreement with Altegris Investments, Inc. (the CTA Consultant) and Altegris Portfolio Management, Inc. (the CPO Consultant), collectively (the Consultants), whereby the Consultants recommend the selection and termination of the Partnership’s trading advisors and other commodity pools and the allocation and reallocation of the Partnership’s assets. The CPO Consultant is the general partner of Winton Futures Fund, L.P. (US). Pursuant to the consulting agreement, the Consultants receive a monthly consulting fee equal to .0208% (.25% annually) of the Partnership’s month-end Net Asset Value (as defined in the Consulting Agreement). Effective April 1, 2007, certain net assets of the Partnership invested with managers affiliated with the Consultants are excluded from the month-end Net Asset Value when computing the consulting fees due to the Consultants. In addition, the net assets of the Partnership invested with a certain commodity trading advisor are excluded from the month-end Net Asset Value when computing the consulting fees due to the Consultants since the Consultants earn a percentage of such commodity trading advisor’s incentive fee.

F-16

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 3.

CONSULTANTS (CONTINUED)

The consulting fee (included in management fees in the statement of operations) earned by the Consultants for the years ended December 31, 2008 and 2007 totaled $10,683 and $21,603, respectively. The consulting fee payable (included in management fees payable in the statement of financial condition) to the Consultants as of December 31, 2008 and 2007 was $1,880 and $272, respectively. In addition to the monthly consulting fee, the Consultants earn commissions for introducing the Partnership to certain commodity trading advisors and other commodity pools based on the number of trades entered on behalf of the Partnership.

Note 4.

COMMODITY TRADING ADVISORS

The Partnership has trading advisory contracts with commodity trading advisors to furnish investment management services to the Partnership. These trading advisors typically receive management fees ranging from 0% to 2% annually of Allocated Net Asset Value (as defined in each respective trading advisory agreement). In addition, the commodity trading advisors typically receive quarterly incentive fees ranging from 20% to 25% of Trading Profits (as defined). Total management fees earned by the trading advisors amounted to $98,395 and $139,345 for the years ended December 31, 2008 and 2007, respectively. Total incentive fees earned by the trading advisors amounted to $383,650 and $69,916 for the years ended December 31, 2008 and 2007, respectively.

Note 5.

SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS

Limited Partners have the right to redeem units as of any month-end upon ten (10) days' prior written notice to the Partnership. Redemptions will be made on the last day of the month for an amount equal to the net asset value per unit, as defined, represented by the units to be redeemed. The right to obtain redemptions is also contingent upon the Partnership's having property sufficient to discharge its liabilities on the redemption date and may be delayed if the General Partner determines that earlier liquidation of commodity interest positions to meet redemption payments would be detrimental to the Partnership or non-redeeming Limited Partners.

Under certain circumstances, including, but not limited to, the inability to liquidate commodity positions or a delay in payments due the Partnership from commodity brokers, banks, commodity pools or other persons, the Partnership may in turn delay payment to Partners requesting redemption of units. In that event, payment for redemption of such units will be made to Limited Partners as soon thereafter as is practicable. As discussed more fully in Note 7, effective April 1, 2008, the General Partner established a side pocket/restricted share class for the Partnership’s interest in SHK. A Partner may not redeem units from the side pocket/restricted share class until management of SHK distributes proceeds from the Partnership’s investment in SHK to the Partnership. Effective December 31, 2008, SHK distributed half of the Partnership’s investment in SHK to the Partnership. As a result, half of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the December 31, 2008 non-restricted Net Asset Value per unit or were paid their pro rata share of the proceeds if they did not hold non-restricted units. Effective February 28, 2009, SHK distributed the remaining portion of the Partnership’s investment in SHK to the Partnership. As a result, all of the units held in the side pocket/restricted units were transferred and converted to non-restricted units at the February 28, 2009 non-restricted Net Asset Value per unit or were paid their pro rata share of the proceeds if they did not hold non-restricted units.

F-17

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 6.

DEPOSITS WITH BROKER

The Partnership deposits funds with MFG to act as broker, subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of cash with such broker. All assets with MFG are subject to being collateralized for any amounts due to MFG to meet margin and other broker or regulatory requirements. The Partnership earns interest income on cash deposited with the broker.

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS

The Partnership invests in other commodity pools, which are subject to the terms of the respective limited partnership agreements and offering memoranda of such other commodity pools, which may, among other things, delay or suspend withdrawal rights under certain circumstances.

Summarized information for these investments is as follows:

	ProFutures Strategic Allocation Trust			SHK Diversified LLC			Valhalla Synergy Fund LLC			Winton Futures Fund, L.P. (US)			Totals
Net Asset Value
December 31, 2006	$	0		$	0		$	0		$	9,338,122		$	9,338,122

Additions		7,364,000			3,500,000			4,439,865			500,000			15,803,865

Income (loss)		(886,996	)		(102,714	)		229,803			1,252,379			492,472

Redemptions		(982,000	)		(280,000	)		(250,000	)		(7,233,000	)		(8,745,000	)

Net Asset Value
December 31, 2007		5,495,004			3,117,286			4,419,668			3,857,501			16,889,459

Additions		4,500,000			0			0			6,190,000			10,690,000

Income (loss)		567,489			(385,801	)		421,167			744,854			1,347,709

Redemptions		(10,562,493	)		(1,415,742	)		(2,100,000	)		(2,265,000	)		(16,343,235	)

Net Asset Value
December 31, 2008	$	0		$	1,315,743		$	2,740,835		$	8,527,355		$	12,583,933

ProFutures Strategic Allocation Trust

The Partnership’s investment in ProFutures Strategic Allocation Trust (the Trust) is subject to an administration fee, charged by ProFutures, Inc., of 2.00% per annum, monthly management fees, charged by the commodity trading advisors, of 2.00% per annum, and quarterly incentive fees, charged by the commodity trading advisors, of 20% of trading profits. The Partnership fully redeemed from the Trust on May 31, 2008. For the year ended December 31, 2008, the Partnership’s proportionate share of administration fees, management fees and incentive fees charged by the Trust were approximately $77,900, $42,700 and $0, respectively. For the year ended December 31, 2007, the Partnership’s proportionate share of administration fees, management fees and incentive fees charged by the Trust were approximately $107,000, $116,000 and $32,000, respectively.

F-18

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 7.

INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

ProFutures Strategic Allocation Trust (Continued)

Condensed financial information as of December 31, 2007 and for the year then ended and for the five month period ended May 31, 2008 is as follows (the Partnership fully redeemed from the Trust as of May 31, 2008):

Statement of Financial Condition	December 31, 2007
Assets
Equity in broker trading accounts
Cash	$	3,876,110
Unrealized gain on open contracts		66,075

Deposits with broker		3,942,185

Cash and cash equivalents		2,493,158
Investment in Winton Futures Fund, L.P. (US) paid in advance		7,000,000
Net premiums paid on options on forward currency contracts		11,338
Unrealized (loss) on open forward currency contracts and options on forward currency contracts		(251,518	)
Other assets		1,250

Total assets	$	13,196,413
Liabilities
Accounts payable	$	25,665
Commissions payable		1,982
Management fee payable		69,326
Incentive fee payable		0
Other payables		21,869
Redemptions payable		340,686

Total liabilities		459,528

Total Capital (Net Asset Value)		12,736,885
	$	13,196,413

	Five Months Ended				For the Year Ended
Statements of Operations		May 31, 2008				December 31, 2007
Trading and investing gains (losses)
Realized		$	(101,694	)		$	(983,178	)
Change in unrealized			456,850				(814,024	)
Brokerage commissions			(12,745	)			(77,794	)

Total trading gains (losses)			342,411				(1,874,996	)

Income from investment in Winton Futures Fund, L.P. (US)			981,259				0

Total trading and investing gains (losses)			1,323,670				(1,874,996	)

Net investment income (loss)
Interest income			47,506				583,254

Expenses
Incentive fees			0				73,475
Management and other fees			217,083				583,881
Operating expenses			63,591				116,273

Total expenses			280,674				773,629

Net investment (loss)			(233,168	)			(190,375	)

Net income (loss)		$	1,090,502			$	(2,065,371	)

F-19

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 7. INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

ProFutures Strategic Allocation Trust (Continued)

The accounting principles utilized by ProFutures Strategic Allocation Trust are consistent in all material respects with those utilized by the Partnership.

The Partnership’s investment in ProFutures Strategic Allocation Trust represents approximately 0% and 43.1% of the investee fund’s net asset value as of December 31, 2008 and 2007, respectively.

SHK Diversified LLC

As of January 31, 2008, the managing member of SHK Diversified LLC (SHK) temporarily suspended future redemptions. SHK’s managing member indicated to investors that this action was taken due to a decline in the liquidity of the markets traded by SHK combined with a significant number of requests for redemptions. On April 28, 2008, the Partnership submitted a request for full redemption from SHK. Effective December 31, 2008, SHK distributed approximately half ($1,315,742) of the Partnership’s investment in SHK to the Partnership which was paid to the Partnership on January 15, 2009. Effective February 28, 2009, SHK distributed the remaining portion ($1,335,258) of the Partnership’s investment in SHK to the Partnership which was paid to the Partnership on March 16, 2009.

The Partnership’s investment in SHK is stated at $1,315,743 and $3,117,286 at December 31, 2008 and 2007, respectively, and its proportionate share in the earnings (losses) of this investment for the years then ended of $(385,801) and $(102,714), respectively, is included in net income (loss) for the years then ended.

The General Partner established a side pocket/restricted share class for the Partnership’s interest in SHK effective April 1, 2008, until such time as these funds are released and can be valued with a reasonable degree of certainty. Investor units attributed to SHK were segregated into the side pocket while units not attributed to SHK continued to be available for redemption. Redemptions were paid in cash for the portion of the Partnership’s net assets not attributed to SHK while the net assets attributed to SHK were held in the side pocket. The side pocket/restricted share class also bore its proportionate share of the Partnership’s expenses, as well as all expenses directly related to this class’ establishment and operation. Effective February 28, 2009, the side pocket/restricted share class was terminated after all proceeds were received from the Partnership’s investment in SHK.

Investors in SHK are charged management fees of 6.00% per annum (in 2008, voluntarily reduced to 3.00% per annum by the Managing Member of SHK) and a profit share of 25% of trading profits. For the year ended December 31, 2008, the Partnership’s proportionate share of management fees and profit share charged by SHK were approximately $81,000 and $0, respectively. For the year ended December 31, 2007, the Partnership’s proportionate share of management fees and profit share charged by SHK were approximately $186,000 and $0, respectively.

F-20

PROFUTURES DIVERSIFIED FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Note 7. INVESTMENTS IN OTHER COMMODITY POOLS (CONTINUED)

SHK Diversified LLC (Continued)

Condensed financial information as of December 31, 2008 and 2007 and for the years then ended is as follows:

	December 31,			December 31,
Statements of Financial Condition	2008			2007
Assets
Money market funds	$	34,078,075		$	57,268,220
Equity in broker trading accounts
Cash (due to broker)		58,214,842			(114,907,191	)
Unrealized gain (loss) on open contracts		(33,879,348	)		128,343,818

Deposits with broker		58,413,569			13,436,627

Other assets		22,000			28,495

Total assets	$	58,435,569		$	70,733,342
Liabilities
Accounts payable	$	55,534		$	133,065
Commissions payable		54,229			161,822
Management fee payable		124,048			303,133
Incentive fee payable		4,686			4,686
Subscription received in advance		0			75,000
Redemptions payable		29,098,536			3,757,503

Total liabilities		29,337,033			4,435,209

Total Capital (Net Asset Value)		29,098,536			66,298,133
	$	58,435,569		$	70,733,342

	For the Year Ended				For the Year Ended
		December 31,				December 31,
Statements of Operations		2008				2007

Trading gains (losses)
Realized		$	158,094,631			$	(112,834,755	)
Change in unrealized			(162,223,165	)			113,795613
Brokerage commissions			(3,565,740	)			(1,935,994	)

Total trading (losses)			(7,694,274	)			(975,136	)

Net investment income (loss)
Interest and dividend income			1,206,272				3,809,087

Expenses
Incentive fees			0				29,702
Management and other fees			1,531,615				3,951.943
Operating expenses			217,444				256,804

Total expenses			1,749,059				4,238,449

Net investment (loss)			(542,787	)			(429,362	)


Net (loss)		$	(8,237,061	)		$	(1,404,498	)

Filing Compare · PROFUTURES DIVERSIFIED FUND L P