UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31,June 30, 2011
 
OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from_____from          to           _____
Commission File Number 0-53965
 
GRAHAM ALTERNATIVE INVESTMENT FUND I LLC
(Exact name of registrant as specified in its charter)
 
Delaware20-4897069
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
c/o GRAHAM CAPITAL MANAGEMENT, L.P.
40 Highland Avenue
Rowayton, CT  06853
(Address of principal executive offices) (Zip Code)
 
Paul Sedlack
Graham Capital Management, L.P.
40 Highland Avenue
Rowayton, CT  06853
(203) 899-3400
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yeso Noo
 
Yes o  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer   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 Exchange Act).
Yeso  No x
 
As of AprilJuly 1, 2011, 605,138.134641,240.61 Units of the Systematic Strategies Portfolio were outstanding.
As of AprilJuly 1, 2011, 2,509,553.4502,611,247.32 Units of the Blended Strategies Portfolio were outstanding.
 


 
 

 
 
GRGRAHAAHAMM ALTERNATIVE INVESTMENT FUND I LLC
FORM 10-Q

 
INDEX

   
  Page
  Number
PART I - Financial Information: 
    
 Item 1.Financial Statements: 
    
  Graham Alternative Investment Fund I LLC 
    
  1
    
  2
    
  3
    
  5
    
  6
    
  Graham Alternative Investment Trading LLC 
    
  1316
    
  1417
    
  1518
    
  1619
    
  1720
    
  1821
    
  Graham Alternative Investment Trading II LLC 

  6673
    
  6774
    
  6875
    
  6976
    
 Item 2.92100
    
 Item 3.100113
    
 Item 4.101114
  
102115
  
Exhibits 
Item 1.102
Item 1A.102
Item 2.102
Item 3.102
Item 4.102
Item 5.102
Item 6.103

 EX - 31.1EX-31.1Certification
 EX -EX- 31.2Certification
EX - 32.1Certification

EX- 32. 1Certification
 
 


PART I

Item 1. Financial Statements

GrahamGraham Alternative Investment Fund I LLC

Statements of Financial Condition

 
March 31,
2011
  
December 31,
2010
 
 (Unaudited)  (Audited) 
June 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
           
Assets           
Investment in Graham Alternative Investment Trading LLC, at fair value $326,024,192  $290,023,320 $327,226,545  $290,023,320 
Investment in Graham Alternative Investment Trading II LLC, at fair value  56,235,758   48,442,149  58,563,212   48,442,149 
Redemption receivable from Graham Alternative Investment Trading LLC  2,351,929   1,296,065  637,636   1,296,065 
Redemption receivable from Graham Alternative Investment Trading II LLC  574,316   125,284  1,555,524   125,284 
Total assets $385,186,195  $339,886,818 $387,982,917  $339,886,818 
               
Liabilities and members’ capital               
Liabilities:               
Accrued redemptions $2,926,245  $1,421,349 $2,193,160  $1,421,349 
Total liabilities  2,926,245   1,421,349  2,193,160   1,421,349 
               
Members’ capital:               
Blended Strategies Portfolio:               
Class 0 Units (2,030,986.163 and 1,752,436.237 units issued and outstanding at $137.45 and $138.96, respectively)  279,163,401   243,511,752 
Class 2 Units (418,725.533 and 409,129.824 units issued and outstanding at $111.91 and $113.68, respectively)  46,860,791   46,511,568 
Class 0 Units (2,119,994.628 and 1,752,436.237 units issued and outstanding at $132.67 and $138.96, respectively) 281,267,194   243,511,752 
Class 2 Units (427,605.316 and 409,129.824 units issued and outstanding at $107.48 and $113.68, respectively) 45,959,351   46,511,568 
Total Blended Strategies Portfolio  326,024,192   290,023,320  327,226,545   290,023,320 
               
Systematic Strategies Portfolio:               
Class 0 Units (338,461.004 and 274,960.438 units issued and outstanding at $100.08 and $102.92, respectively)  33,872,160   28,297,652 
Class 2 Units (231,790.265 and 202,003.861 units issued and outstanding at $96.48 and $99.72, respectively)  22,363,598   20,144,497 
Class 0 Units (371,493.921 and 274,960.438 units issued and outstanding at $95.59 and $102.92, respectively) 35,512,953   28,297,652 
Class 2 Units (251,394.349 and 202,003.861 units issued and outstanding at $91.69 and $99.72, respectively) 23,050,259   20,144,497 
Total Systematic Strategies Portfolio  56,235,758   48,442,149  58,563,212   48,442,149 
Total members’ capital  382,259,950   338,465,469  385,789,757   338,465,469 
Total liabilities and members’ capital $385,186,195  $339,886,818 $387,982,917  $339,886,818 

See accompanying notes.

 
1


GrahamGraham Alternative Investment Fund I LLC

Statements of Operations

 
Three Months Ended
March 31,
 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
 
2011
(Unaudited)
  
2010
(Unaudited)
 
2011
(Unaudited)
  
2010
(Unaudited)
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Net loss allocated from investments in other funds:      
Net realized gain (loss) on investments $1,048,228  $(5,388,177)
Net (decrease) increase in unrealized appreciation on investments  (2,252,677)  5,122,006 
Net loss allocated from investments in other funds  (1,204,449)  (266,171)
Net (loss) gain allocated from investments in other funds:           
Net realized (loss) gain on investments$(3,486,735) $8,271,751  $(2,438,507) $2,883,574 
Net decrease in unrealized appreciation on investments (6,570,840)  (5,714,207)  (8,823,517)  (592,201)
Net (loss) gain allocated from investments in other funds (10,057,575)  2,557,544   (11,262,024)  2,291,373 
                       
Net investment loss allocated from investment in other funds:                       
Investment income:                       
Interest income  388,729   616,480  395,604   670,037   784,333   1,297,146 
                       
Expenses:                       
Brokerage fees  2,224,876   1,109,619  2,348,648   1,567,840   4,573,524   2,677,459 
Advisory fees  1,873,379   1,344,479  1,988,117   1,296,525   3,861,496   2,641,004 
Sponsor fees  936,689   554,810  994,059   648,261   1,930,748   1,203,071 
Incentive allocation  10,820   -  32,173   (542)  42,993   (542)
Interest and other  8,810   -  49,580   24,836   58,390   35,465 
Total expenses  5,054,574   3,008,908  5,412,577   3,536,920   10,467,151   6,556,457 
Net investment loss allocated from investments in other funds  (4,665,845)  (2,392,428) (5,016,973)  (2,866,883)  (9,682,818)  (5,259,311)
        
Net loss $(5,870,294) $(2,658,599)$(15,074,548) $(309,339) $(20,944,842) $(2,967,938)

See accompanyingacompanying notes.

 
2


GrahamGraham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital

For the threesix months ended March 31,June 30, 2011 (unaudited) and 2010 (unaudited)

 Blended Strategies Portfolio  Blended Strategies Portfolio 
 Class 0 Units  Class 2 Units  Total  Class 0 Units  Class 2 Units  Total 
 Units  Capital  Units  Capital  Blended Strategies Portfolio  
 
Units
  Capital  
 
Units
  Capital  
Blended
Strategies
Portfolio
 
                              
Members’ capital, December 31, 2009  1,134,943.426  $153,850,323   300,723.739  $33,900,271  $187,750,594   1,134,943.426  $153,850,323   300,723.739  $33,900,271  $187,750,594 
Subscriptions  99,991.726   13,249,791   39,174.910   4,328,559   17,578,350   368,844.744   49,644,739   77,478.752   8,602,840   58,247,579 
Redemptions  (15,238.212)  (1,995,955)  (9,891.505)  (1,074,667)  (3,070,622)  (86,730.660)  (11,680,951)  (33,428.352)  (3,698,323)  (15,379,274)
Net loss     (961,453)     (404,626)  (1,366,079)     (790,231)     (535,086)  (1,325,317)
Members’ capital, March 31, 2010  1,219,696.940  $164,142,706   330,007.144  $36,749,537  $200,892,243 
                    
 Blended Strategies Portfolio 
 Class 0 Units  Class 2 Units  Total 
 Units  Capital  Units  Capital  Blended Strategies Portfolio 
                    
                    
Members’ capital, December 31, 2010  1,752,436.237  $243,511,752   409,129.824  $46,511,568  $290,023,320 
Subscriptions  300,033.166   41,996,602   28,498.156   3,258,099   45,254,701 
Redemptions  (21,483.240)  (2,991,431)  (18,902.447)  (2,137,398)  (5,128,829)
Net loss     (3,353,522)     (771,478)  (4,125,000)
Members’ capital, March 31, 2011  2,030,986.163  $279,163,401   418,725.533  $46,860,791  $326,024,192 
Members’ capital, June 30, 2010  1,417,057.510  $191,023,880   344,774.139  $38,269,702  $229,293,582 
  Blended Strategies Portfolio 
  Class 0 Units  Class 2 Units  Total 
  
 
Units
  Capital  
 
Units
  Capital  
Blended
Strategies
Portfolio
 
                     
Members’ capital, December 31, 2010  1,752,436.237  $243,511,752   409,129.824  $46,511,568  $290,023,320 
Subscriptions  440,148.711   61,465,602   61,045.543   6,893,865   68,359,467 
Redemptions  (72,590.320)  (10,130,845)  (42,570.051)  (4,761,164)  (14,892,009)
Net loss     (13,579,315)     (2,684,918)  (16,264,233)
Members’ capital, June 30, 2011  2,119,994.628  $281,267,194   427,605.316  $45,959,351  $327,226,545 

See accompanying notes.

 
3


Graham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital (continued)

For the threesix months ended March 31,June 30, 2011 (unaudited) and 2010 (unaudited)

 Systematic Strategies Portfolio
 Class 0 Units  Class 2 Units  
  
 
Units
   Capital   Units   Capital  Total Systematic Strategies Portfolio  
Total Members’
Capital
 
                      
Members’ capital, December 31, 2009 180,564.957  $18,162,877   119,035.753  $11,790,850 $29,953,727 $217,704,321 
Subscriptions 56,189.672   5,378,002   64,039.248   6,069,792  11,447,794  69,695,373 
Redemptions (5,777.197)  (555,110)  (12,300.606)  (1,155,528) (1,710,638 (17,089,912)
Net loss    (875,530)     (767,091) (1,642,621 (2,967,938)
Members’ capital, June 30, 2010 230,977.432  $22,110,239   170,774.395  $15,938,023 $38,048,262 $267,341,844 
 
 Systematic Strategies Portfolio
 Class 0 Units  Class 2 Units    
  
 
Units
   Capital   Units   Capital  Total Systematic Strategies Portfolio  
Total Members’
Capital  
 
                      
Members’ capital, December 31, 2010 274,960.438  $28,297,652   202,003.861  $20,144,497 $48,442,149 $338,465,469 
Subscriptions 123,185.035   12,558,260   67,198.874   6,616,363  19,174,623  87,534,090 
Redemptions (26,651.552)  (2,635,677)  (17,808.386)  (1,737,274) (4,372,951 (19,264,960)
Net loss    (2,707,282)     (1,973,327) (4,680,609 (20,944,842)
Members’ capital, June 30, 2011 371,493.921  $35,512,953   251,394.349  $23,050,259 $58,563,212 $385,789,757 
  Systematic Strategies Portfolio    
  Class 0 Units  Class 2 Units       
  
 
Units
  Capital  
 
Units
  Capital  Total Systematic Strategies Portfolio  Total Members’ Capital 
                   
Members’ capital, December 31, 2009  180,564.957  $18,162,877   119,035.753  $11,790,850  $29,953,727  $217,704,321 
Subscriptions  40,153.274   3,820,000   18,175.476   1,706,003   5,526,003   23,104,353 
Redemptions  (1,000.363)  (92,619)  (2,736.955)  (248,724)  (341,343)  (3,411,965)
Net loss     (732,702)     (559,818)  (1,292,520)  (2,658,599)
Members’ capital, March 31, 2010  219,717.868  $21,157,556   134,474.274  $12,688,311  $33,845,867  $234,738,110 
  Systematic Strategies Portfolio    
  Class 0 Units  Class 2 Units       
  
 
Units
  Capital  
 
Units
  Capital  Total Systematic Strategies Portfolio  Total Members’ Capital 
                   
Members’ capital, December 31, 2010  274,960.438  $28,297,652   202,003.861  $20,144,497  $48,442,149  $338,465,469 
Subscriptions  72,055.126   7,425,002   35,664.159   3,561,663   10,986,665   56,241,366 
Redemptions  (8,554.560)  (873,244)  (5,877.755)  (574,518)  (1,447,762)  (6,576,591)
Net loss     (977,250)     (768,044)  (1,745,294)  (5,870,294)
Members’ capital, March 31, 2011  338,461.004  $33,872,160   231,790.265  $22,363,598  $56,235,758  $382,259,950 

See accompanying notes.


Graham Alternative Investment Fund I LLC

Statements of Cash Flows
 
Three Months Ended
March 31,
  
Six Months Ended
June 30,
 
 
2011
(Unaudited)
  
2010
(Unaudited)
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities            
Net loss $(5,870,294) $(2,658,599) $(20,944,842) $(2,967,938)
Adjustments to reconcile net loss to net cash used in operating activities:                
Net loss allocated from investment in Graham Alternative Investment Trading LLC  4,125,000   1,366,079   16,264,233   1,325,317 
Net loss allocated from investment in Graham Alternative Investment Trading II LLC  1,745,294   1,292,520   4,680,609   1,642,621 
Proceeds from sale of investments in Graham Alternative Investment Trading LLC  5,128,829   3,070,622   15,550,438   15,106,144 
Proceeds from sale of investments in Graham Alternative Investment Trading II LLC  1,447,762   341,343   2,942,711   1,710,638 
Investments in Graham Alternative Investment Trading LLC  (46,310,565)  (17,185,573)  (68,359,467)  (58,247,579)
Investments in Graham Alternative Investment Trading II LLC  (11,435,697)  (5,526,003)  (19,174,623)  (11,447,794)
Net cash used in operating activities  (51,169,671)  (19,299,611)  (69,040,941)  (52,878,591)
                
Cash flows provided by financing activities                
Subscriptions  56,241,366   23,104,353   87,534,090   69,695,373 
Redemptions  (5,071,695)  (3,804,742)  (18,493,149)  (16,816,782)
Net cash provided by financing activities  51,169,671   19,299,611   69,040,941   52,878,591 
                
Net change in cash and cash equivalents            
                
Cash and cash equivalents, beginning of period            
Cash and cash equivalents, end of period $  $  $  $ 

See     See accompanying notes.

 
5


Graham
Graham Alternative Investment Fund I LLC


March 31,
June 30, 2011
 
1.  Organization and Business

Graham Alternative Investment Fund I LLC (the “Fund”) was formed on May 16, 2006, commenced operations on August 1, 2006 and is organized as a Delaware Limited Liability Company (“LLC”). The Fund offers investors Class 0 and Class 2 shares of a Blended Strategies Portfolio, and Class 0 and Class 2 shares of a Systematic Strategies Portfolio.  The Fund invests all of its Blended Strategies Portfolio assets dedicated to trading in Graham Alternative Investment Trading LLC (“GAIT”), a Delaware LLC formed on May 16, 2006 and commenced operations on August 1, 2006.  The Fund invests all of its Systematic Strategies Portfolio assets dedicated to trading in Graham Alternative Investment Trading II LLC (“GAIT II”), a Delaware LLC which was formed on July 16, 2008 and commenced operations on January 4, 2009. GAIT and GAIT II (collectively “the GAIT Funds”) invest in various master trading vehicles (“Master Funds”), all of which are managed by Graham Capital Management, L.P. (the “Advisor” or “Manager”).  The Manager is the manager and the sole investment advisor of the GAIT Funds and the Fund. The Manager is registered as a Commodity Pool Operator and Commodity Trading Advisor with the Commodity Futures Trading Commission and is a member of the National Futures Association.  The Fund is registered as a reporting company under the Securities Exchange Act of 1934.

The investment objective of the Fund is to achieve long-term capital appreciation through professionally managed trading in both U.S. and foreign markets, primarily in futures contracts, forwards contracts, spot currency contracts, and associated derivative instruments such as options and swaps through its investments in the GAIT Funds which in turn invest in various Master Funds. The Master Funds seek to profit from opportunities in the global financial markets, including interest rate futures, foreign exchange, global stock indices and energy, metals and agricultural futures, as professionally managed multi-strategy investment vehicles.  Each of the investment programs consists of multiple trading strategies of the Manager, which the Manager has combined in an effort to diversify the Fund’s investment exposure and to make the Fund’s performance returns less volatile and more consistently profitable.

In addition to trading in the Interbank market for foreign exchange, the Manager currently executes orders on all the major U.S. futures exchanges and may also trade on, but is not limited to, the Bolsa de Mercadorias and Futuros (“BMF”), Borsa Italiana Idem (“IML”), the Eurex Deutschland (“EUREX”), Euronext (“EURONEXT”), the Hong Kong Exchanges and Clearing Ltd. (“HKEX”), the Intercontinental Exchange (“ICE”), the London International Financial Futures and Options Exchange Ltd. (“LIFFE”), the London Metal Exchange (“LME”), the Montreal Exchange (“ME”), the Mercado de Futuros Financieros (“MEFF”), the Osaka Securities Exchange (“OSE”), the Sydney Futures Exchange Ltd. (“SFE”), the Singapore Exchange (“SGX”), the South African Exchange (“SAFEX”), the Tokyo Financial Exchange (“TFX”), the Tokyo Commodity Exchange (“TOCOM”) and the Tokyo Stock Exchange (“TSE”).

SEI Global Services, Inc. (“SEI”) is the Fund’s independent administrator and transfer agent. SEI is responsible for certain matters pertaining to the administration of the Fund.

The Fund will terminate on December 31, 2050 or at an earlier date if certain conditions occur as outlined in the Limited Liability Company Agreement (“LLC Agreement”).

The performance of the Fund is directly affected by the performance of the GAIT Funds; therefore these financial statements should be read in conjunction with the attached financial statements of the GAIT Funds.

 
6

 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
 
1. Organization and Business (continued)

Duties of the Manager

Subject to the terms and conditions of the LLC Agreement, the Manager has complete and exclusive responsibility for managing and administering the affairs of the Fund and for directing the investment and reinvestment of the assets of the Fund and the GAIT Funds.

2. Summary of Significant Accounting Policies

These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The preparation of these financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
Amounts included in the financial statements and accompanying notes related to March 31,June 30, 2011 and 2010 and the three and six month periods then ended are unaudited.  Amounts included herein as of December 31, 2010 have been taken from the December 31, 2010 audited financial statements and accompanying notes of the Fund.
 
Investment in Graham Alternative Investment Trading LLC and Graham Alternative Investment Trading II LLC

The Fund records its investments in the GAIT Funds at fair value in accordance with U.S. GAAP. In determining its net asset value, the GAIT Funds record their investments in Master Funds at fair value based upon the GAIT Funds’ proportionate share of the Master Funds’ reported net asset value. The Fund records its proportionate share of the GAIT Funds’ investment income and loss, expenses, fees, and realized and unrealized gains and losses on a monthly basis and includes them in the statements of operations. Purchases and sales of units in the GAIT Funds are recorded on a trade date basis. The accounting policies of the GAIT Funds are described in their attached respective financial statements.

Each of the GAIT Funds charges its investors, including the Fund, an advisory fee, brokerage fee, sponsor fee and incentive allocation, all of which are described in detail in Note 4. The Fund does not charge any additional fees; however each investor in the Fund indirectly bears their portion of the advisory fee, brokerage fee, sponsor fee and incentive allocation charged by the GAIT Funds.

At March 31,June 30, 2011 and December 31, 2010, the Fund owned 65.53%65.38% and 64.92%, respectively of GAIT, and 68.40%67.78% and 69.42%, respectively of GAIT II.

Fair Value

The fair value of the assets and liabilities of the Fund, GAIT and GAIT II, which qualify as financial instruments under U.S. GAAP, approximates the carrying amounts presented in the statements of financial condition. Changes in these carrying amounts are included in the statements of operations.

The Fund follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements.  U.S. GAAP uses a three-level hierarchy for fair value measurement based on the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.

 
7

 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
 
2. Summary of Significant Accounting Policies (continued)
 
Fair Value (Continued)(continued)
 
The fair value hierarchy categorizes asset and liability positions into one of three levels, as summarized below, based on the inputs and assumptions used in deriving fair value.

 ·Level 1 inputs are unadjusted closing or settlementsettle prices for such assets or liabilities as published by the primary exchange upon which they are traded.
 ·Level 2 inputs include quoted prices for similar assets and liabilities obtained from independent brokers and/or market makers in each security. With respect to the Fund’s investments in the GAIT Funds, Level 2 inputs include the net asset value of the underlying fund in which it holds an investment.
 ·Level 3 inputs are those which are considered unobservable and are significant in arriving at fair value.

The Fund reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.  In accordance with this hierarchy, the Fund’s investments in the GAIT Funds have been classified as a Level 2 valuation.  These investments are discussed in Note 3 of the attached GAIT financial statements.  There were no Level 3 assets or liabilities held at any point during the threesix months ended March 31,June 30, 2011 or the twelve months ended December 31, 2010 by the GAIT Funds, the Master Funds, or Graham Cash Assets LLC, and there were no transfers between Level 1 and Level 2 during those periods.  Transfers between levels are recognized on the actual date of the event or change in circumstances that cause the transfer.

Cash and Cash Equivalents

The Fund considers cash and cash equivalents to include all highly liquid investments with a maturity of three months or less when acquired.

Indemnifications

In the normal course of business, the Master Funds, the GAIT Funds and the Fund enter into contracts that contain a variety of indemnifications. Such contracts include those with the Master Funds’ brokers and trading counterparties. The Fund’s maximum exposure under these arrangements is unknown; however, the Fund has not had prior claims or losses with respect to such indemnifications and considers the risk of loss to be remote.

3. Capital Accounts

The Fund offers Class 0 Units and Class 2 Units (collectively, the “Units”) in both Blended and Systematic Strategies Portfolios. The Fund may issue additional Classes in the future subject to different fees, expenses or other terms, or to invest in other investment programs or combinations of investment programs managed by the Manager.

A separate Capital Account is maintained for each Member with respect to each member’s Class of Units. The initial balance of each member’s Capital Account is equal to the initial contribution to the Fund by such Member with respect to the Class to which such Capital Account relates. Each member’s Capital Account is increased by any additional subscription, and decreased by any redemption by such member of Units of such Class to which the Capital Account relates. All income and expenses of the Fund are allocated among the members’ Capital Accounts in proportion to the balance that each Capital Account bears to the balance of all Capital Accounts as of the beginning of such fiscal period.

 
8

 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
 
3. Capital Accounts (continued)

Addition of Members and Managing Members

Units are available for subscription as of the first business day of each month upon written notice of at least three business days prior to the last business day of the preceding month.
 
Subscriptions

Units may be purchased at a price equal to the Net Asset Value per Unit of the relevant Class as of the immediately preceding Valuation Day as defined in the LLC Agreement. The minimum initial subscription from each investor in each Class is $50,000. Members may subscribe for additional Units in a minimum amount of not less than $5,000.
 
Redemption of Units

Units are not subject to any minimum holding period. Members may redeem Units at the Net Asset Value thereof as of each Valuation Day as defined in the LLC Agreement, upon not less than three business days’ prior written notice to the administrator. A partial redemption request for an amount less than $10,000 will not be accepted, nor will a redemption request be accepted to the extent that it would result in an investor owning less than $25,000. The redemption proceeds will normally be remitted within 15 days after the Valuation Day, without interest for the period from the Valuation Day to the payment date.

Redemption Fees

Class 2 Units are subject to a redemption fee equal to 2% of their Net Asset Value if redeemed within six months from their subscription date and a redemption fee equal to 1% of their Net Asset Value if redeemed more than six and less than twelve months from their subscription date. Class 0 Units are not subject to a redemption fee. Redemption fees are payable to the Manager upon redemption of Units from the proceeds of such redemption.  Redemption fees of $524$2,478 and $7,036$8,693 were paid to the Manager for the threesix months ended March 31,June 30, 2011 and 2010, respectively, and are included as redemptions in the statements of changes in members’ capital.

4. Fees

Advisory Fees

Each Class of the GAIT Funds other than Class M pays the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate equal to 2% of the Net Asset Value of such Class. The Advisory Fee is payable monthly in arrears calculated as of the last business day of each month and any other date the Manager may permit, in its sole and absolute discretion, as of which any subscription or redemption is effected with respect to Units of such Class during the month.

Sponsor Fees

Each Class of the GAIT Funds other than Class M pays the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of 1% of its Net Asset Value, payable monthly in arrears, determined in the same manner as the Advisory Fee.

 
9

 
Graham Alternative Investment Fund I LLC
 
Notes to Unaudited Financial Statements (continued)
 
4. Fees (continued)

Incentive Allocation

At the end of each calendar quarter, the Manager of the GAIT Funds will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class of the GAIT Funds, as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter.

Brokerage Fees

Each Class of the GAIT Funds other than Class M pays the Manager a brokerage fee (the “Brokerage Fee”) at the annual rate specified in the table below. This Brokerage Fee is payable monthly in arrears and calculated as of the last business day of each month in the same manner as the Advisory Fee.

ClassAnnual Rate
  
Class 02%
Class 24%

In consideration of the Brokerage Fee, the Manager bears all of the GAIT Funds’ trading commissions (including exchange, clearing and regulatory fees relating to its trades), routine legal expenses, internal and external accounting, audit and tax preparation expenses, fees and expenses of an external or internal administrator, and expenses and costs of printing and mailing reports and notices, together with the costs incurred in connection with the organization of the GAIT Funds and the Fund and the continuous offering of Units. To the extent the GAIT Funds are allocated any of these expenses from the Master Funds in which it invests, the Manager will reimburse the GAIT Funds for those amounts.  These reimbursements are included in commission reimbursements in the GAIT Funds’ statements of operations and managing member allocation.

Any portion of any of the above fees, including the Incentive Allocation, may be paid by the Manager to third parties as compensation for selling activities in connection with the Fund.

5. Income Taxes

No provision for income taxes has been made in the accompanying financial statements, as members are individually responsible for reporting income or loss based upon their respective share of the Fund’s revenues and expenses for income tax purposes.

U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. The Manager has evaluated the Fund’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement or disclosure in the financial statements. The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months. Tax years which are considered open by the relevant jurisdiction are subject to potential examination.


 
10

 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Related Party Transactions

The Manager, due to its relationship with its affiliates, may enter into certain related party transactions.

7. Financial Highlights

The following is the per Unit operating performance calculation for the three month periods ended March 31,June 30, 2011 and 2010:

  Blended Strategies Portfolio  Systematic Strategies Portfolio 
  Class 0  Class 2  Class 0  Class 2 
Per share operating performance            
Net asset value per unit, December 31, 2009 $135.56  $112.73  $100.59  $99.05 
Net loss:                
Net investment loss  (1.54)  (1.75)  (1.11)  (1.48)
Net gain (loss) on investments  0.56   0.38   (3.19)  (3.22)
Net loss  (0.98)  (1.37)  (4.30)  (4.70)
Net asset value per unit, March 31, 2010 $134.58  $111.36  $96.29  $94.35 
                 
                 
Net asset value per unit, December 31, 2010 $138.96  $113.68  $102.92  $99.72 
Net loss:                
Net investment loss  (1.27)  (1.57)  (1.05)  (1.50)
Net loss on investments  (0.24)  (0.20)  (1.79)  (1.74)
Net loss  (1.51)  (1.77)  (2.84)  (3.24)
Net asset value per unit, March 31, 2011 $137.45  $111.91  $100.08  $96.48 
The following represents ratios to average members’ capital and total return for the three months ended March 31, 2011 and 2010 for the Blended Strategies Portfolio:
 
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
 
 Class 0  Class 2  Class 0  Class 2 
Per share operating performance           
Net asset value per unit, March 31, 2010$134.58  $111.36  $96.29  $94.35 
Net gain (loss):               
Net investment loss (1.67)  (1.80)  (1.17)  (1.58)
Net gain on investments 1.89   1.44   0.60   0.56 
Net gain (loss) 0.22   (0.36)  (0.57)  (1.02)
Net asset value per unit, June 30, 2010$134.80  $111.00  $95.72  $93.33 
                
                
Net asset value per unit, March 31, 2011$137.45  $111.91  $100.08  $96.48 
Net loss:               
Net investment loss (1.55)  (1.87)  (1.26)  (1.74)
Net loss on investments (3.23)  (2.56)  (3.23)  (3.05)
Net loss (4.78)  (4.43)  (4.49)  (4.79)
Net asset value per unit, June 30, 2011$132.67  $107.48  $95.59  $91.69 

  Blended Strategies Portfolio 
  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (1.08)%  (0.72)%  (1.55)%  (1.22)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (1.09)%  (0.72)%  (1.56)%  (1.22)%
                 
Net investment loss before Incentive Allocation  (0.90)%  (0.97)%  (1.38)%  (1.49)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (0.91)%  (0.97)%  (1.39)%  (1.49)%
                 
Total expenses before Incentive Allocation  1.00%  1.25%  1.51%  1.77%
Incentive Allocation  0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  1.01%  1.25%  1.52%  1.77%

11

Graham Alternative Investment Fund I LLC
Notes to Unaudited Financial Statements (continued)
7. Financial Highlights (continued)

The following represents ratios to average members’ capital and total return for the three month periods ended March 31,June 30, 2011 and 2010 for the Blended Strategies Portfolio:
  Blended Strategies Portfolio 
  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (3.48)%  0.16%  (3.96)%  (0.31)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (3.48)%  0.16%  (3.96)%  (0.31)%
                 
Net investment loss before Incentive Allocation  (1.13)%  (1.04)%  (1.67)%  (1.55)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.13)%  (1.04)%  (1.67)%  (1.55)%
                 
Total expenses before Incentive Allocation  1.55%  1.30%  2.06%  1.81%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.55%  1.30%  2.06%  1.81%
11


Graham Alternative Investment Fund I LLC
Notes to Unaudited Financial Statements (continued)

7. Financial Highlights (continued)
The following represents ratios to average members’ capital and total return for the three month periods ended June 30, 2011 and 2010 for the Systematic Strategies Portfolio:
  Systematic Strategies Portfolio 
  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (4.49)%  (0.52)%  (4.96)%  (1.03)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (4.49)%  (0.52)%  (4.96)%  (1.03)%
                 
Net investment loss before Incentive Allocation  (1.26)%  (1.03)%  (1.80)%  (1.59)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.26)%  (1.03)%  (1.80)%  (1.59)%
                 
Total expenses before Incentive Allocation  1.46%  1.28%  1.99%  1.85%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.46%  1.28%  1.99%  1.85%
The following is the per Unit operating performance calculation for the six month periods ended June 30, 2011 and 2010:
 
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
 
 Class 0  Class 2  Class 0  Class 2 
Per share operating performance           
Net asset value per unit, December 31, 2009$135.56  $112.73  $100.59  $99.05 
Net loss:               
Net investment loss (3.21)  (3.55)  (2.28)  (3.06)
Net gain (loss) on investments 2.45   1.82   (2.59)  (2.66)
Net loss (0.76)  (1.73)  (4.87)  (5.72)
Net asset value per unit, June 30, 2010$134.80  $111.00  $95.72  $93.33 
                
                
Net asset value per unit, December 31, 2010$138.96  $113.68  $102.92  $99.72 
Net loss:               
Net investment loss (2.82)  (3.44)  (2.31)  (3.24)
Net loss on investments (3.47)  (2.76)  (5.02)  (4.79)
Net loss (6.29)  (6.20)  (7.33)  (8.03)
Net asset value per unit, June 30, 2011$132.67  $107.48  $95.59  $91.69 
12


Graham Alternative Investment Fund I LLC
Notes to Unaudited Financial Statements (continued)
7. Financial Highlights (continued)
The following represents ratios to average members’ capital and total return for the six month periods ended June 30, 2011 and 2010 for the Blended Strategies Portfolio:
  Blended Strategies Portfolio 
  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (4.52)%  (0.56)%  (5.44)%  (1.53)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (4.53)%  (0.56)%  (5.45)%  (1.53)%
                 
Net investment loss before Incentive Allocation  (2.02)%  (2.01)%  (3.02)%  (3.05)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (2.03)%  (2.01)%  (3.03)%  (3.05)%
                 
Total expenses before Incentive Allocation  2.55%  2.55%  3.57%  3.59%
Incentive Allocation  0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  2.56%  2.55%  3.58%  3.59%

  Systematic Strategies Portfolio 
  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (2.75)%  (4.32)%  (3.24)%  (4.75)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (2.76)%  (4.32)%  (3.25)%  (4.75)%
                 
Net investment loss before Incentive Allocation  (1.03)%  (0.99)%  (1.52)%  (1.48)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (1.04)%  (0.99)%  (1.53)%  (1.48)%
                 
Total expenses before Incentive Allocation  1.12%  1.26%  1.64%  1.75%
Incentive Allocation  0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  1.13%  1.26%  1.65%  1.75%
The following represents ratios to average members’ capital and total return for the six month periods ended June 30, 2011 and 2010 for the Systematic Strategies Portfolio:

  Systematic Strategies Portfolio 
  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (7.11)%  (4.84)%  (8.04)%  (5.78)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (7.12)%  (4.84)%  (8.05)%  (5.78)%
                 
Net investment loss before Incentive Allocation  (2.23)%  (2.02)%  (3.24)%  (3.08)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (2.24)%  (2.02)%  (3.25)%  (3.08)%
                 
Total expenses before Incentive Allocation  2.58%  2.55%  3.63%  3.61%
Incentive Allocation  0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  2.59%  2.55%  3.64%  3.61%
13

Graham Alternative Investment Fund I LLC
Notes to Unaudited Financial Statements (continued)
7. Financial Highlights (continued)
Total return is calculated for Class 0 and Class 2 Units taken as a whole and has not been annualized. Total return is calculated as the change in total members’ capital adjusted for subscriptions or redemptions during the year. An individual member’s return may vary from these returns based on the timing of capital transactions and the applicability of Advisory Fees, Brokerage Fees, Sponsor Fees and the Incentive Allocation. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for Class 0 and Class 2 Units taken as a whole and include amounts from the Fund and amounts allocated from the GAIT Funds. The computation of such ratios is based on the amount of net investment loss, expenses and Incentive Allocation. The net investment loss and total expense ratios are computed based upon the weighted average of members’ capital for Class 0 and Class 2 Units of the Fund for the three and six month periods ended March 31,June 30, 2011 and 2010.

8.  Subsequent Events

The Fund had subscriptions of approximately $21.5$14.1 million and redemptions of approximately $6.0$3.2 million through May 16,August 15, 2011, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.

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Graham Alternative Investment Trading LLC

Statements of Financial Condition

  
March 31, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
Assets      
Investments in Master Funds, at fair value $80,018,732  $43,910,786 
Investment in Graham Cash Assets LLC, at fair value  422,134,782   409,389,656 
Commission reimbursements receivable  501,077   278,469 
Total assets $502,654,591  $453,578,911 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $2,858,194  $4,817,403 
Accrued brokerage fees  983,124   894,187 
Accrued advisory fees  852,305   768,947 
Accrued sponsor fees  426,153   384,474 
Payable to Master Funds  551   61 
Total liabilities  5,120,327   6,865,072 
         
Members’ capital:        
Class 0 Units (3,065,466.192 and 2,685,172.128 units issued and outstanding at $137.45 and $138.96 per unit, respectively)  421,354,913   373,121,130 
Class 2 Units (672,805.309 and 639,582.657 units issued and outstanding at $111.91 and $113.68 per unit, respectively)  75,295,604   72,710,381 
Class M Units (4,671.470 and 4,671.470 units issued and outstanding at $189.18 and $188.88 per unit, respectively)  883,747   882,328 
Total members’ capital  497,534,264   446,713,839 
Total liabilities and members’ capital $502,654,591  $453,578,911 
See accompanying notes.

13


Graham Alternative Investment Trading LLC

Condensed Schedules of Investments
  
March 31, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
Description Fair Value  Percentage of Members’ Capital  Fair Value  Percentage of Members’ Capital 
             
Investments in Master Funds, at fair value            
Graham Commodity Strategies LLC $12,093,121   2.43% $7,603,525   1.70%
Graham Discretionary Energy Trading III LLC  3,980,505   0.80%  1,690,592   0.38%
Graham Energy Focus LLC  6,257,534   1.26%  -   0.00%
Graham Fed Policy Ltd.  7,832,977   1.57%  6,709,637   1.50%
Graham Global Monetary Policy LLC  4,369,033   0.88%  3,566,013   0.80%
Graham K4D Trading Ltd.  44,364,556   8.92%  24,030,670   5.38%
Graham Macro Directional LLC  1,121,006   0.22%  268,357   0.06%
Graham Short Term Global Macro LLC  -   0.00%  41,992   0.01%
Total investments in Master Funds $80,018,732   16.08% $43,910,786   9.83%

See accompanying notes.
 
 
14


 
Unaudited Financial Statements
Graham Alternative Investment Trading LLC
For the periods from January 1, 2011 to June 30, 2011 and
January 1, 2010 to June 30, 2010

Statements of Operations and Managing Member Allocation
  
Three Months Ended
March 31,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Net (loss) gain allocated from investments in Master Funds:      
Net realized gain (loss) on investments $3,418,594  $(5,419,425)
Net (decrease) increase in unrealized appreciation on investments  (3,764,589)  6,838,336 
Brokerage commissions and fees  (1,250,077)  (496,264)
Net (loss) gain allocated from investments in Master Funds  (1,596,072)  922,647 
         
Net investment loss allocated from investments in Master Funds  (17,371)  (11,175)
         
Investment income:        
Interest income  515,146   415,495 
         
Expenses:        
Brokerage fees  2,801,106   1,786,293 
Advisory fees  2,420,953   1,521,144 
Sponsor fees  1,210,476   760,572 
Interest and other  4,557   4,747 
Commission reimbursements  (1,250,077)  (496,264)
Total expenses  5,187,015   3,576,492 
Net investment loss of the Fund  (4,671,869)  (3,160,997)
         
Net loss  (6,285,312)  (2,249,525)
         
Incentive allocation  (10,086)  - 
         
Net loss available for pro-rata allocation to all members $(6,295,398) $(2,249,525)

See accompanying notes.

 
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GrahamGraham Alternative Investment Trading LLC


For the three months ended March 31, 2011 (unaudited) and 2010 (unaudited)
 
June 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
Assets     
Investments in Master Funds, at fair value$75,515,943  $43,910,786 
Investment in Graham Cash Assets LLC, at fair value 428,889,551   409,389,656 
Commission reimbursements receivable 533,202   278,469 
Receivable from Master Funds 63    
Total assets$504,938,759  $453,578,911 
        
Liabilities and members’ capital       
Liabilities:       
Accrued redemptions$2,259,642  $4,817,403 
Accrued brokerage fees 955,186   894,187 
Accrued advisory fees 828,548   768,947 
Accrued sponsor fees 414,274   384,474 
Payable to Master Funds    61 
Total liabilities 4,457,650   6,865,072 
        
Members’ capital:       
Class 0 Units (3,190,733.255 and 2,685,172.128 units issued and outstanding at $132.67 and $138.96 per unit, respectively) 423,325,876   373,121,130 
Class 2 Units (709,816.548 and 639,582.657 units issued and outstanding at $107.48 and $113.68 per unit, respectively) 76,291,640   72,710,381 
Class M Units (4,671.470 and 4,671.470 units issued and outstanding at $184.86 and $188.88 per unit, respectively) 863,593   882,328 
Total members’ capital 500,481,109   446,713,839 
Total liabilities and members’ capital$504,938,759  $453,578,911 
  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                      
Members’ capital, December 31, 2009  1,851,259.271  $250,952,480   462,314.824  $52,116,241   4,671.470  $813,191  $303,881,912 
Subscriptions  151,028.659   20,005,694   45,915.276   5,069,594         25,075,288 
Redemptions  (36,152.265)  (4,733,057)  (12,948.251)  (1,406,910)        (6,139,967)
Incentive allocation                     
Net (loss) income     (1,629,259)     (624,416)     4,150   (2,249,525)
Members’ capital, March 31, 2010  1,966,135.665  $264,595,858   495,281.849  $55,154,509   4,671.470  $817,341  $320,567,708 
                             
                             
  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                             
Members’ capital, December 31, 2010  2,685,172.128  $373,121,130   639,582.657  $72,710,381   4,671.470  $882,328  $446,713,839 
Subscriptions  408,198.569   57,181,643   56,759.804   6,490,664         63,672,307 
Redemptions  (27,904.505)  (3,886,994)  (23,537.152)  (2,669,490)     (10,086)  (6,566,570)
Incentive allocation     (6,683)     (3,403)     10,086    
Net (loss) income     (5,054,183)     (1,232,548)     1,419   (6,285,312)
Members’ capital, March 31, 2011  3,065,466.192  $421,354,913   672,805.309  $75,295,604   4,671.470  $883,747  $497,534,264 

See accompanying notes.

 
16


GrahamGraham Alternative Investment Trading LLC


  
Three Months Ended
March 31,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities      
Net loss $(6,285,312) $(2,249,525)
Adjustments to reconcile net loss to net cash used in operating activities:        
Net loss (income) allocated from investment in Master Funds  1,613,443   (911,472)
Net income allocated from investment in Graham Cash Assets LLC  (515,146)  (415,495)
Proceeds from sale of investments in Master Funds  191,380,309   63,389,546 
Proceeds from sale of investments in Graham Cash Assets LLC  169,852,202   62,539,001 
Investments in Master Funds  (229,101,208)  (81,902,881)
Investments in Graham Cash Assets LLC  (182,082,182)  (58,473,000)
Changes in assets and liabilities:        
Commission reimbursements receivable  (222,608)  (68,668)
Accrued brokerage fees  88,937   31,778 
Accrued advisory fees  83,358   26,922 
Accrued sponsor fees  41,679   13,461 
Net cash used in operating activities  (55,146,528)  (18,020,333)
         
Cash flows provided by financing activities        
Subscriptions  63,672,307   25,075,288 
Redemptions  (8,525,779)  (7,054,071)
Net cash provided by financing activities  55,146,528   18,021,217 
         
Net increase in cash and cash equivalents  -   884 
         
Cash and cash equivalents, beginning of period  -   49 
Cash and cash equivalents, end of period $-  $933 
 
June 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
DescriptionFair Value  
Percentage of
Members’
Capital
  Fair Value  
Percentage of
Members’
Capital
 
            
Investments in Master Funds, at fair value           
Graham Commodity Strategies LLC$12,525,822   2.50% $7,603,525   1.70%
Graham Discretionary Energy Trading III LLC 3,878,740   0.78%  1,690,592   0.38%
Graham Energy Focus LLC 5,005,105   1.00%  -   0.00%
Graham Fed Policy Ltd. 7,848,747   1.57%  6,709,637   1.50%
Graham Global Monetary Policy LLC 12,535,173   2.50%  3,566,013   0.80%
Graham K4D Trading Ltd. 32,163,149   6.43%  24,030,670   5.38%
Graham Macro Directional LLC 1,559,207   0.31%  268,357   0.06%
Graham Short Term Global Macro LLC -   0.00%  41,992   0.01%
Total investments in Master Funds$75,515,943   15.09% $43,910,786   9.83%
 
See accompanying notes.

 
17


Graham Alternative Investment Trading LLC

Statements of Operations and Managing Member Allocation

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
 
2011
(Unaudited)
  
2010
(Unaudited)
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Net (loss) gain allocated from investments in Master Funds:           
Net realized (loss) gain on investments$(4,583,377) $10,861,643  $(1,164,783) $5,442,218 
Net (decrease) increase in unrealized appreciation on investments (7,541,929)  (6,537,671)  (11,306,518)  300,665 
Brokerage commissions and fees (1,296,235)  (559,230)  (2,546,312)  (1,055,494)
Net (loss) gain allocated from investments in Master Funds (13,421,541)  3,764,742   (15,017,613)  4,687,389 
                
Net investment loss allocated from investments in Master Funds (39,216)  (18,301)  (56,587)  (29,476)
                
Investment income:               
Interest income 498,565   466,353   1,013,711   881,848 
Total investment income 498,565   466,353   1,013,711   881,848 
                
Expenses:               
Brokerage fees 2,954,528   2,017,330   5,755,634   3,803,623 
Advisory fees 2,561,166   1,728,881   4,982,119   3,250,025 
Sponsor fees 1,280,583   864,441   2,491,059   1,625,013 
Interest and other 13,947   21,525   18,504   26,272 
Commission reimbursements (1,296,235)  (559,230)  (2,546,312)  (1,055,494)
Total expenses 5,513,989   4,072,947   10,701,004   7,649,439 
Net investment loss of the Fund (5,015,424)  (3,606,594)  (9,687,293)  (6,767,591)
                
Net (loss) gain (18,476,181)  139,847   (24,761,493)  (2,109,678)
                
Incentive allocation (41,791)  (5,692)  (51,877)  (5,692)
                
Net (loss) gain available for pro-rata allocation to all members$(18,517,972) $134,155  $(24,813,370) $(2,115,370)

See accompanying notes.
 

Graham Alternative Investment Trading LLC

Statements of Changes in Members’ Capital

For the six months ended June 30, 2011 (unaudited) and 2010 (unaudited)

 Class 0  Class 2  Class M  Total 
 Units  Capital  Units  Capital  Units  Capital  Capital 
                     
Members’ capital, December 31, 2009 1,851,259.271  $250,952,480   462,314.824  $52,116,241   4,671.470  $813,191  $303,881,912 
Subscriptions 471,832.723   63,434,694   85,370.021   9,475,064         72,909,758 
Redemptions (120,387.526)  (16,140,186)  (34,035.318)  (3,760,613)     (5,692)  (19,906,491)
Incentive allocation                5,692   5,692 
Net income (loss)    (1,315,333)     (815,934)     15,897   (2,115,370)
Members’ capital, June 30, 2010 2,202,704.468  $296,931,655   513,649.527  $57,014,758   4,671.470  $829,088  $354,775,501 
 Class 0  Class 2  Class M  Total 
 Units  Capital  Units  Capital  Units  Capital  Capital 
                            
Members’ capital, December 31, 2010 2,685,172.128  $373,121,130   639,582.657  $72,710,381   4,671.470  $882,328  $446,713,839 
Subscriptions 615,242.795   85,834,953   128,144.215   14,467,508         100,302,461 
Redemptions (109,681.668)  (15,236,183)  (57,910.324)  (6,485,638)     (51,877)  (21,773,698)
Incentive allocation    (44,314)     (7,563)     51,877    
Net loss    (20,349,710)     (4,393,048)     (18,735)  (24,761,493)
Members’ capital, June 30, 2011 3,190,733.255  $423,325,876   709,816.548  $76,291,640   4,671.470  $863,593  $500,481,109 

See accompanying notes.


Graham Alternative Investment Trading LLC

Statements of Cash Flows

 
Six Months Ended
June 30,
 
 
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities     
Net loss$(24,761,493) $(2,109,678)
Adjustments to reconcile net loss to net cash used in operating activities:       
Net loss (income) allocated from investment in Master Funds 15,074,200   (4,657,913)
Net income allocated from investment in Graham Cash Assets LLC (1,013,711)  (881,848)
Proceeds from sale of investments in Master Funds 408,360,589   158,020,631 
Proceeds from sale of investments in Graham Cash Assets LLC 346,064,942   119,399,171 
Investments in Master Funds (455,040,070)  (155,786,795)
Investments in Graham Cash Assets LLC (364,551,126)  (167,298,780)
Changes in assets and liabilities:       
Commission reimbursements receivable (254,733)  (27,276)
Accrued brokerage fees 60,999   73,092 
Accrued advisory fees 59,601   67,466 
Accrued sponsor fees 29,800   33,734 
Accrued incentive allocation -   (335,900)
Net cash used in operating activities (75,971,002)  (53,504,096)
        
Cash flows provided by financing activities       
Subscriptions 100,302,461   72,909,758 
Redemptions (24,331,459)  (19,405,706)
Net cash provided by financing activities 75,971,002   53,504,052 
        
Net decrease in cash and cash equivalents -   (44)
        
Cash and cash equivalents, beginning of period -   49 
Cash and cash equivalents, end of period$-  $5 
See accompanying notes.

Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements

March 31,
June 30, 2011
 
1. Organization and Business

Graham Alternative Investment Trading LLC (“GAIT”) was formed on May 18, 2006, commenced operations on August 1, 2006 and is organized as a Delaware Limited Liability Company. Graham Capital Management, L.P. (the “Managing Member” or “Manager”) is the Managing Member and the sole investment advisor. The Managing Member is registered as a Commodity Pool Operator and Commodity Trading Advisor with the Commodity Futures Trading Commission and is a member of the National Futures Association.

The investment objective of GAIT is to achieve long-term capital appreciation through professionally managed trading through its investment in various master trading vehicles (“Master Funds”). As more fully described in Notes 2 and 3, these Master Funds invest in a broad range of currency forward and futures contracts; bond, interest rate, and index futures contracts; commodity forward and futures contracts, and swaps thereon (collectively referred to as “Derivative Positions”) traded on U.S. and foreign exchanges.

In addition to trading in the Interbank market for foreign exchange, the Manager currently executes orders on all the major U.S. futures exchanges and may also trade on, but is not limited to, the Bolsa de Mercadorias and Futuros (“BMF”), Borsa Italiana Idem (“IML”), the Eurex Deutschland (“EUREX”), Euronext (“EURONEXT”), the Hong Kong Exchanges and Clearing Ltd. (“HKEX”), the Intercontinental Exchange (“ICE”), the London International Financial Futures and Options Exchange Ltd. (“LIFFE”), the London Metal Exchange (“LME”), the Montreal Exchange (“ME”), the Mercado de Futuros Financieros (“MEFF”), the Osaka Securities Exchange (“OSE”), the Sydney Futures Exchange Ltd. (“SFE”), the Singapore Exchange (“SGX”), the South African Exchange (“SAFEX”), the Tokyo Financial Exchange (“TFX”), the Tokyo Commodity Exchange (“TOCOM”) and the Tokyo Stock Exchange (“TSE”).

SEI Global Services, Inc. (“SEI”) is GAIT’s independent administrator and transfer agent.  SEI is responsible for certain matters pertaining to the administration of GAIT.

GAIT will terminate on December 31, 2050 or at an earlier date if certain conditions occur as outlined in the Limited Liability Company Agreement (“LLC Agreement”).

Duties of the Managing Member

Subject to the terms and conditions of the LLC Agreement, the Managing Member has complete and exclusive responsibility for managing and administering the affairs of GAIT and for directing the investment and reinvestment of the assets of GAIT.

2. Summary of Significant Accounting Policies

These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The preparation of these financial statements requires the Managing Member to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
Amounts included in the financial statements and accompanying notes related to March 31,June 30, 2011 and 2010 and the three and six month periods then ended are unaudited.  Amounts included herein as of December 31, 2010 have been taken from the December 31, 2010 audited financial statements and accompanying notes of the Fund.GAIT.
 
 
1821


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
2. Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

GAIT considers cash and cash equivalents to include all highly liquid investments with a maturity of three months or less when acquired.

Investments in Master Funds

GAIT invests in various Master Funds which are managed by the Managing Member. These investments are valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon GAIT’s proportionate share of the Master Funds’ reported net asset value. Gains and losses are allocated monthly by each Master Fund to GAIT based upon GAIT’s proportionate share of the net asset value of each Master Fund and are included in the statements of operations and managing member allocation.

Fair Value

The fair value of GAIT’s assets and liabilities, which qualify as financial instruments under U.S. GAAP, approximates the carrying amounts presented in the statements of financial condition. Changes in these carrying amounts are included in the statements of operations and managing member allocation.

GAIT follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements.  U.S. GAAP uses a three-level hierarchy for fair value measurement based on the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.

The fair value hierarchy categorizes asset and liability positions into one of three levels, as summarized below, based on the inputs and assumptions used in deriving fair value.

 ·Level 1 inputs are unadjusted closing or settlement prices for such assets or liabilities as published by the primary exchange upon which they are traded.

 ·Level 2 inputs include quoted prices for similar assets and liabilities obtained from independent brokers and/or market makers in each security. With respect to GAIT’s investments in the other funds managed by the Manager, Level 2 inputs include the net asset value of the underlying fund in which it holds an investment.

 ·Level 3 inputs are those which are considered unobservable and are significant in arriving at fair value.

GAIT reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.  In accordance with this hierarchy, GAIT’s investments in Master Funds and Graham Cash Assets LLC (“GCA”) have been classified as Level 2.  These investments are discussed in Note 3.Notes 3 and 4.  There were no Level 3 assets or liabilities held at any point during the threesix months ended March 31,June 30, 2011 or the twelve months ended December 31, 2010 by the Master Funds or GCA, and there were no transfers between Level 1 and Level 2 during those periods. Transfers between levels are recognized on the actual date of the event or change in circumstances that cause the transfer.

 
1922


Graham Alternative Investment Trading LLC
 
Notes to Unaudited Financial Statements (continued)
 
2. Summary of Significant Accounting Policies (continued)

Derivative Instruments

In the normal course of business, the Master Funds utilize derivative financial instruments in connection with their trading activities. Derivative instruments derive their value from underlying assets, indices, reference rates or a combination of these factors.  Investments in derivative financial instruments are subject to additional risks that can result in a loss of all or part of an investment.  The Master Funds’ derivative financial instruments are classified by the following primary underlying risks: interest rate, credit, foreign currency exchange rate, commodity price, and equity price risks. These risks can be in excess of the amounts recognized in the statements of financial condition. In addition, the Master Funds are also subject to additional counterparty risk should their counterparties fail to meet the terms of their contracts.  Management of counterparty risk involves a number of considerations, such as the financial profile of the counterparty, specific terms and duration of the contractual agreement, and the value of collateral held, if any. The Master Funds have established initial credit approval, credit limits, and collateral requirements and may reduce their exposure to any counterparties they deem necessary.  Trading in non-U.S. dollar denominated derivative instruments may subject the value of, and gains and losses associated with, such contracts to additional risks related to adverse changes in the applicable exchange rates.

The Master Funds record all their derivative financial instruments at fair value, which is derived in accordance with U.S. GAAP.  Unrealized gains and losses from these instruments are recorded based on changes in their fair value.  Realized gains and losses are recorded when the positions are closed.  All unrealized and realized gains and losses related to derivative financial instruments are included in net gain (loss) on investments in the Master Funds’ statements of operations.

Futures Contracts

The Master Funds use futures contracts in an attempt to take advantage of changes in the value of equities, commodities, interest rates, bonds and foreign currencies.  Futures contracts are valued based upon the closing price as of the valuation date established by the primary exchange upon which they are traded.

A futures contract represents a commitment for the future purchase or sale of an asset or cash settlement based on the value of an asset on a specified date.  The purchase and sale of futures contracts are executed on an exchange which requires margin deposits with a Futures Commission Merchant (“FCM”).  Subsequent payments are made or received by the Master Funds each day, depending on the daily fluctuations in the value of the contract. These changes in valuation are recorded for financial statement purposes as unrealized gains or losses by the Master Funds.  Relative to over-the-counter derivative financial instruments, futures contracts provide reduced counterparty risk to the Master Funds since futures are exchange-traded and the exchange’s clearinghouse guarantees the futures against default. However some non-U.S. exchanges are “principals’ markets” in which no common clearing facility exists and the Master Funds may look only to the clearing broker for performance of the contract.  The U.S. Commodity Exchange Act requires an FCM to segregate all funds received from such FCM’s customers in respect of regulated futures transactions. If the FCM were not to do so to the full extent required by law, the assets of the Master Funds might not be fully protected in the event of the bankruptcy or insolvency of the FCM. In that case, the Master Funds would be limited to recovering only a pro rata share of all available funds segregated on behalf of the FCM’s combined customer accounts, even though certain property specifically traceable to the Master Funds was held by the FCM.  In addition, in the event of bankruptcy or insolvency of an exchange or an affiliated clearing house, the Master Funds might experience a loss of funds deposited through its FCM as margin with such exchange or affiliated clearing house, the loss of unrealized profits on its open positions, and the loss of funds owed to it as realized profits on closed positions.

 
2023


Graham Alternative Investment Trading LLC
 
Notes to Unaudited Financial Statements (continued)
 
2. Summary of Significant Accounting Policies (continued)

Forward Contracts

The Master Funds enter into foreign currency and commodity forward contracts in an attempt to take advantage of changes in exchange rates and commodity prices.  Forward currency and commodities transactions are contracts or agreements for delivery of specific currencies and commodities or the cash equivalent value at a specified future date and an agreed upon price.  Forward contracts are not guaranteed by an exchange or clearing house and therefore the risks include the inability of counterparties to meet their obligations under the terms of the contracts as well as the risks associated with movements in fair value.

Exchange traded forward contracts are valued based upon the settlement prices as of the valuation date, established by the primary exchange upon which they are traded.  All other forward contracts are valued based upon a forward curve constructed using independently quoted forward points.

Swap Contracts

The Master Funds may enter into various swap contracts in an attempt to take advantage of changes in interest rates and asset values.  Swap contracts are not guaranteed by an exchange or an affiliated clearing house or regulated by any U.S. or foreign government authorities.  Failure of a counterparty to meet its obligation under the terms of the swap contract could result in the loss of any unrealized gains on open positions and force the Master Fund to cover its resale commitments, if any, at the current market price.  It may not be possible to dispose of or close out a swap position without the consent of the counterparty, and the Master Fund may not be able to enter into an offsetting contract in order to cover its risk. Swaps are subject to the International Swap and Derivative Association (“ISDA”) Master Agreements which generally require among other things, that a Master Fund maintain a predetermined level of net assets, and provide limits with respect to a decline in the Master Fund’s net asset value over 1-month, 3-month and 12-month periods. If a Master Fund were to violate such provisions, the counterparty to the swaps could demand liquidation of outstanding swap positions.

A total return swap contract is an agreement that obligates two parties to exchange cash flows calculated by reference to changes in specified prices or rates for a specified notional amount of the underlying assets.  The payment flows are usually netted against each other, with the difference being paid by one party to another.

Exchange traded swaps are valued based upon the closing prices established by the primary exchange upon which they are traded.  Total return swaps are valued based upon the exchange published settlement price of the underlying.  During the term of the swaps, changes in value are recognized as unrealized gains or losses by marking the contracts to fair value.  Additionally, the Master Funds record a realized gain (loss) when a swap contract is terminated and when periodic payments are received or made at the end of each measurement period, but prior to termination.  The Master Funds determine the estimated fair value of all swaps in accordance with U.S. GAAP.

Options

The Master Funds may buy and sell covered and uncovered exchange traded and over-the-counter options on futures, foreign currencies, commodities, interest rates and equities to take advantage of the price movements of the financial instrument underlying the option or to hedge positions in the underlying assets.  Option contracts give one party the right, but not the obligation, to buy or sell within a limited time or on a specified date, a financial instrument, commodity or currency at a contracted price.  Options may also be settled in cash, based on differentials between specified indices or prices.

 
2124

 
Graham Alternative Investment Trading LLC
 
Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Options (continued)

The Master Funds are exposed to counterparty risk to the extent that a seller of an over-the-counter option does not meet its obligations under the terms of the option contract.  The maximum risk of loss to the Master Fund is the fair value of the contracts and the premiums paid to purchase its open option contracts. Relative to over-the-counter options, exchange traded options provide reduced counterparty risk to the Master Funds since the exchanges’ clearinghouse guarantees the option against default.

Exchange traded options are valued based upon the settlement prices published as of the valuation date by the principal exchange upon which they are traded.  In the absence of an exchange published settlement price, the option will be valued using the last reported sales price reported on the exchange for the valuation date.  Over-the-counter options and exchange traded options with no reported sales price on the valuation date will generally be valued at the average of last reported bid and offer quotes from independent brokers or from the exchange, respectively.

Indemnifications

In the normal course of business, the Master Funds, GCA, and GAIT enter into contracts that contain a variety of indemnifications. Such contracts include those with the Master Funds’ brokers and trading counterparties. GAIT’s maximum exposure under these arrangements is unknown; however, GAIT has not had prior claims or losses with respect to such indemnifications and considers the risk of loss to be remote.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

3. Investments in Master Funds

As of March 31,June 30, 2011 and December 31, 2010, GAIT invested in various Master Funds, all of which were managed by the Manager. GAIT’s investments in these Master Funds, as well as the investment objectives of each Master Fund, are summarized below. Master Funds in which GAIT invested 5% or more of its members’ capital are individually identified, while smaller investments are aggregated under the caption “Other Master Funds.”  The number of Master Funds included in each aggregated category is disclosed parenthetically next to each name.  All of the Master Funds and GAIT are related parties.   The Master Funds do not charge management or incentive fees and all offer monthly subscriptions and redemptions.
 
March 31, 2011 
June 30, 2011June 30, 2011 
Investment – Objective Percent of Members’ Capital  Fair Value  Net Income (three months then ended)  
Percent of
 Members’
Capital
  Fair Value  
Net Loss
(three months
then ended)
  
Net Loss
(six months
then ended)
 
                    
Graham K4D Trading Ltd. – (a)  8.92% $44,364,556  $(6,490,761) 6.43%  $32,163,149  $(10,254,289) $(16,745,050)
Other Master Funds (7) – (b) (c) (d) (e)  7.16%  35,654,176   4,877,318 
Other Master Funds (8) – (b) (c) (d) (e) 8.66      43,352,794   (3,206,468)  1,670,850 
  16.08% $80,018,732  $(1,613,443) 15.09%  $75,515,943  $(13,460,757) $(15,074,200)

December 31, 2010 December 31, 2010  December 31, 2010        
Investment – Objective Percent of Members’ Capital  Fair Value  
Net Income
(three months ended March 31, 2010)
  
Percent of
Members’
Capital
   Fair Value   
Net Income
(three months
ended June
30, 2010)
   
Net Income
(six months
 ended June
 30, 2010)
 
                        
Graham K4D Trading Ltd. – (a)  5.38% $24,030,670  $(4,673,263) 5.38%  $24,030,670  $563,414  $(4,109,849)
Other Master Funds (7) – (b) (c) (d) (e)  4.45%  19,880,116   5,584,735  4.45%   19,880,116   3,183,027   8,767,762 
  9.83% $43,910,786  $911,472  9.83%  $43,910,786  $3,746,441  $4,657,913 
 
(a) – Systematic Macro  (b) – Fixed Income (c) – Global Macro (d) – Energy Related(e) – Commodities

 
2225


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)
The following table summarizes the financial position of each Master Fund as of June 30, 2011:

 
Graham
Commodity
Strategies
LLC
(Delaware)
  
Graham
 Discretionary
 Energy Trading
III LLC
(Delaware)
  
 
 
Graham Energy
Focus LLC
(Delaware)
  
Graham
Fed Policy Ltd.
 (BVI)
  
Graham
Global Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham
 Macro
Directional
 LLC
(Delaware)
 
Assets:                    
Due from brokers$59,101,338  $28,270  $11,094,654  $22,853,905  $99,178,969  $283,838,709  $8,188,677 
Options, at fair value -   15,666,450   9,247,750   20,589,479   51,109   -   - 
Derivative financial instruments,
at fair value
 17,115,826   11,032,266   4,451,835   9,311,469   1,643,750   3,440,679   - 
Subscriptions receivable -   -   -   2   120   405   - 
Total assets 76,217,164   26,726,986   24,794,239   52,754,855   100,873,948   287,279,793   8,188,677 
                            
Liabilities:                           
Options, at fair value -   -   4,954,950   8,214,512   -   -   - 
Derivative financial instruments,
at fair value
 -   -   -   -   1,982,759   23,014,910   773,694 
Due to brokers -   5,011,839   -   27,540   609,562   546,447   294,519 
Redemptions payable -   -   -   145   -   405   - 
Total liabilities -   5,011,839   4,954,950   8,242,197   2,592,321   23,561,762   1,068,213 
Net assets$76,217,164  $21,715,147  $19,839,289  $44,512,658  $98,281,627  $263,718,031  $7,120,464 
                            
Percentage of Master Fund held
by the Fund
 16.43%  17.86%  25.23%  17.63%  12.75%  12.20%  21.90%

26

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2011.

Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC         
Long contracts         
Futures         
Brent Crude Penultimate Financial December 2011  897  $12,161,200   15.96%
Brent Crude Penultimate Financial June 2012  200   5,596,000   7.34%
Gasoline RBOB August 2011  1,509   4,541,439   5.96%
Other Gasoline RBOB October 2011 – December 2012  625   446,985   0.59%
LME Aluminum September 2011  3,897   (5,595,069)  (7.34)%
LME Copper September 2011  1,060   8,018,844   10.52%
LME Lead September 2011  2,012   5,562,176   7.30%
LME Nickel September 2011  920   5,053,380   6.63%
LME Zinc September 2011  3,816   9,549,780   12.53%
Natural Gas January 2012  2,560   (5,067,610)  (6.65)%
Other Natural Gas January 2013  125   (299,230)  (0.39)%
Wheat CBT December 2011  2,929   (23,744,813)  (31.15)%
Wheat KCB December 2011  1,184   (11,326,613)  (14.86)%
Other Wheat September 2011 – March 2012  589   (5,394,950)  (7.08)%
WTI Crude October 2011  1,385   6,108,400   8.01%
WTI Crude December 2013  1,370   4,195,600   5.50%
Other WTI Crude September 2011 – January 2014  4,212   184,490   0.24%
Other commodity      (3,731,413)  (4.90)%
Total futures      6,258,596   8.21%
             
Swaps            
Gasoline December 2011  27   6,500,250   8.53%
Total swaps      6,500,250   8.53%

27

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2011.
Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Short contracts         
Futures         
Brent Crude Penultimate Financial December 2012  (1,097) $(17,745,770)  (23.28)%
Heating Oil August 2011 – December 2011  (3,093)  (4,870,177)  (6.39)%
LME Aluminum September 2011  (4,093)  6,352,797   8.34%
LME Copper September 2011  (983)  (6,371,981)  (8.36)%
Other LME Lead September 2011  (1,685)  (3,608,573)  (4.73)%
LME Nickel September 2011  (900)  (4,755,864)  (6.24)%
LME Zinc September 2011  (3,892)  (9,297,231)  (12.20)%
Natural Gas August 2011 – October 2012  (3,161)  4,149,650   5.44%
Wheat September 2011  (2,084)  24,297,875   31.88%
Wheat July 2012  (1,859)  17,815,313   23.37%
Other Wheat March 2012  (247)  2,489,625   3.27%
WTI Crude August 2011  (1,565)  (6,124,220)  (8.04)%
WTI Crude December 2011  (2,618)  5,586,040   7.33%
WTI Crude December 2014  (1,000)  (4,210,000)  (5.52)%
Other WTI Crude March 2012 – June 2013  (1,000)  300,000   0.39%
Other commodity      6,437,996   8.45%
Total futures      10,445,480   13.71%
             
Swaps            
Gasoline June 2012  (27)  (6,088,500)  (7.99)%
Total swaps      (6,088,500)  (7.99)%
             
Total     $17,115,826   22.46%
28


Graham Alternative Investment Trading LLC
 
Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)

The following table summarizesschedules display the financial positioncondensed schedules of eachinvestments for the Master FundFunds as of March 31, 2011:June 30, 2011.

Description
Number
 of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Discretionary Energy Trading III LLC        
Long contracts        
Futures        
Gas Oil December 2011 – December 2012 500  $1,418,750   6.53%
Natural Gas November 2011 2,917   (7,441,120)  (34.27)%
Natural Gas December 2011 3,417   (8,565,570)  (39.45)%
Other Natural Gas August 2011 55   65,450   0.30%
Globex Crude Oil December 2011 500   6,105,000   28.11%
Other WTI Crude August 2011 – December 2011 1,128   1,429,640   6.59%
Other commodity     593,082   2.74%
Total futures     (6,394,768)  (29.45)%
            
Options           
Crude Oil Future August 2011, $100.00 Put 800   4,128,000   19.01%
Other Crude Oil Future August 2011 - September 2011, $100.00 - $115.00 Call 1,350   272,000   1.25%
Other Crude Oil Future August 2011, $85.00 - $90.00 Put 675   258,000   1.19%
Crude Oil Calendar Spread Option, August 2011 - March 2012 $(0.25) - $(1.00) Put 20,000   5,820,000   26.80%
Natural Gas October 2011, $4.50 Call 1,000   2,785,000   12.83%
Gasoline RBOB August 2011, $305.00 Call 750   1,581,300   7.28%
Other Gasoline RBOB August 2011, $280.00 Put 750   822,150   3.79%
Total options     15,666,450   72.15%
            
Swaps           
Natural Gas April 2012 2,600   (1,632,000)  (7.52)%
Other Natural Gas October 2011 - January 2012 3,600   (1,168,950)  (5.38)%
Total swaps     (2,800,950)  (12.90)%
 
  
Graham Commodity Strategies LLC
(Delaware)
  
Graham Discretionary Energy Trading III LLC
(Delaware)
  
 
Graham Energy Focus LLC
(Delaware)
  
Graham
Fed Policy Ltd.
(BVI)
  
Graham
Global Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham Macro Directional LLC
(Delaware)
 
Assets:                     
Due from brokers $71,788,618  $-  $17,984,242  $25,147,965  $32,252,617  $288,833,860  $4,762,663 
Options, at fair value  -   11,794,000   15,045,300   46,076,251   427,005   -   - 
Derivative financial instruments, at fair value  11,551,256   25,885,509   -   10,117,976   3,767,638   52,072,797   255,550 
Subscriptions receivable  -   -   7   -   239   405   - 
Interest receivable  -   -   -   -   3,341   20,997   109 
Total assets  83,339,874   37,679,509   33,029,549   81,342,192   36,450,840   340,928,059   5,018,322 
                             
Liabilities:                            
Options, at fair value  -   100,000   5,998,200   36,226,853   50,000   -   - 
Derivative financial instruments, at fair value  -   -   3,679,198   -   -   1,544,291   - 
Due to brokers  -   13,764,783   -   -   409,325   -   - 
Redemptions payable  -   -   7   142   120   405   - 
Total liabilities  -   13,864,783   9,677,405   36,226,995   459,445   1,544,696   - 
Net assets $83,339,874  $23,814,726  $23,352,144  $45,115,197  $35,991,395  $339,383,363  $5,018,322 
                             
Percentage of Master Fund held by the Fund  14.51%  16.71%  26.80%  17.36%  12.14%  13.07%  22.34%

 
2329


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
 3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2011.

Description
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Discretionary Energy Trading III LLC (continued)        
Short contracts        
Futures        
Gas Oil June 2011 (500) $(1,437,500)  (6.62)%
Natural Gas October 2011 (2,655)  7,093,790   32.67%
Natural Gas January 2012 (3,560)  9,075,100   41.79%
Other Natural Gas April 2012 (300)  652,050   3.00%
WTI Crude ICE December 2011 (750)  4,948,560   22.79%
Other WTI Crude ICE August 2011 – June 2012 (100)  (1,659,530)  (7.64)%
Other commodity     (1,076,706)  (4.96)%
Total futures     17,595,764   81.03%
            
Swaps           
Natural Gas October 2011 (4,476)  2,632,220   11.11%
Natural Gas April 2012 (1,400)  220,000   1.01%
Total swaps     2,632,220   12.12%
            
Total    $26,698,716   122.95%

 Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2011.

Description 
Number
 of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Energy Focus LLC         
Long contracts         
Futures         
Natural Gas November 2011 260  $(1,070,540)  (5.40)%
Other Natural Gas April 2012 941   (739,680)  (3.73)%
Other commodity     804,922   4.06%
Total futures     (1,005,298)  (5.07)%
            
Options           
Natural Gas October 2011, $4.50 Call 400   1,114,000   5.61%
Natural Gas November 2011 - March 2012, $4.70 - $4.80 Call 700   2,650,300   13.36%
Natural Gas August 2011 - October 2012, $4.50 - $4.90 Put 1,200   4,687,450   23.63%
Other commodity     796,000   4.01%
Total options     9,247,750   46.61%
            
Swaps           
Natural Gas November 2011 1,860   (1,223,250)  (6.16)%
Natural Gas January 2012 7,454   (3,441,370)  (17.35)%
Other Natural Gas August 2011 – December 2013 12,647   (939,850)  (4.74)%
Total swaps     (5,604,470)  (28.25)%
            
Short contracts           
Futures           
Natural Gas October 2011 (1,055  4,123,630   20.78%
Natural Gas December 2011 (2,240  6,364,690   32.08%
Other Natural Gas August 2011 – March 2012 (1,204  272,940   1.38%
Other commodity     (1,045,965)  (5.27)%
Total futures     9,715,295   48.97%
            
Options           
Natural Gas August 2011 - October 2012, $4.15 - $6.50 Call (3,150  (2,379,550)  (11.99)%
Natural Gas October 2011 - March 2012, $4.00 - $4.25 Call (1,650  (2,100,800)  (10.59)%
Other commodity     (474,600)  (2.39)%
Total options     (4,954,950)  (24.97)%
            
Swaps           
Natural Gas December 2011 (2,431  1,379,328   6.95%
Other Natural Gas August 2011 – December 2012 (6,637  (33,020)  (0.16)%
Total swaps     1,346,308   6.79%
            
Total    $8,744,635   44.08%

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2011.

Description 
Number
of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Fed Policy Ltd.         
Long contracts         
Futures         
30 Day Fed Fund July 2011  7,641  $3,162,024   7.10%
30 Day Fed Fund August 2011  8,213   4,263,966   9.58%
Other 30 Day Fed Fund June 2011 – June 2012  11,118   1,915,002   4.30%
Total futures      9,340,992   20.98%
             
Options            
Eurodollar September 2011, $99.63 Call  15,000   3,375,000   7.58%
Eurodollar March 2012, $99.63 Call  17,250   3,018,750   6.78%
Fed Fund futures July 2011, $99.81 Call  6,750   2,531,453   5.69%
Fed Fund futures August 2011, $99.81 Call  8,967   2,615,584   5.88%
Fed Fund futures September 2011, $99.81 Call  14,380   3,145,877   7.07%
Fed Fund futures July 2011 - December 2011, $99.75 - $99.88 Put  41,800   3,725,558   8.37%
Other Fed Fund futures August 2011 – December 2011, $99.75 -$99.88 Call  11,625   2,177,257   4.89%
Total options      20,589,479   46.26%
             
Short contracts            
Futures            
Interest rate      (29,523)  (0.07)%
Total futures      (29,523)  (0.07)%
             
Options            
Fed Fund futures July 2011 - December 2011, $99.88 Call  (76,616)  (4,683,354)  (10.52)%
Fed Fund futures July 2011 - January 2012, $99.75 - $99.81 Put  (78,925)  (2,106,158)  (4.73)%
Other interest rate futures      (1,425,000)  (3.20)%
Total options      (8,214,512)  (18.45)%
             
Total     $21,686,436   48.72%

Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
 3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2011.

Description Fair Value  
Percentage of
 Net Assets of
Master Fund
 
Graham Global Monetary Policy LLC      
Long contracts      
Futures      
Commodity $(1,798,730)  (1.83)%
Interest rate  2,631,128   2.68%
U.S. bond  (374,234)  (0.38)%
Total futures  458,164   0.47%
         
Options        
Foreign currency  51,109   0.05%
Total options  51,109   0.05%
         
Forwards        
Foreign currency  1,008,468   1.03%
Total forwards  1,008,468   1.03%
         
Short contracts        
Futures        
Commodity  1,715,360   1.74%
Foreign bond  1,128,704   1.15%
Interest rate  (3,522,264)  (3.58)%
Total futures  (678,200)  (0.69)%
         
Forwards        
Foreign currency  (1,127,441)  (1.15)%
Total forwards  (1,127,441)  (1.15)%
         
Total $(287,900)  (0.29)%
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2011.
Description
Principal
Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.       
Long contracts       
Futures       
U.S. bond  $(11,253,047)  (4.27)%
Foreign bond   (8,536,516)  (3.24)%
U.S. index   10,415,895   3.95%
Foreign index   5,025,773   1.91%
Commodity   (1,129,857)  (0.43)%
Interest rate   (1,020,274)  (0.39)%
Currency   1,073,226   0.41%
Total futures   (5,424,800)  (2.06)%
          
Forwards         
Australian dollar / U.S. dollar 07/20/11
AUD    1,432,785,322
  22,045,147   8.36%
Canadian dollar / U.S. dollar 07/20/11
CAD    2,209,264,516
  36,133,104   13.70%
Euro / British Pound 07/20/11
EUR        593,576,554
  16,041,091   6.08%
Euro / U.S. dollar 07/20/11
EUR     1,461,054,451
  24,106,386   9.14%
British Pound / U.S. dollar 07/20/11
GBP     1,359,056,576
  (17,816,018)  (6.75)%
Other foreign currency   37,053,409   14.05%
Total forwards   117,563,119   44.58%

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
 
The following schedules display the condensed schedules of investments for the Master Funds as of March 31,June 30, 2011.
 
Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Commodity Strategies LLC         
Long contracts         
Futures         
Brent Crude Penultimate Financial December 2011  897  $14,556,190   17.47%
Brent Crude Penultimate Financial June 2012  200   5,788,000   6.95%
Brent Crude June 2012  850   5,968,500   7.16%
Other Brent Crude May 2011 - December 2011  1,676   2,629,740   3.16%
Heating Oil November 2011  1,000   9,021,600   10.82%
Heating Oil January 2012  1,000   8,748,600   10.50%
LME Aluminum May 2011  40   135,000   0.16%
LME Aluminum June 2011  6,920   11,234,456   13.48%
Wheat July 2011  914   6,952,850   8.34%
Other Wheat May 2011 - December 2011  2,517   3,200,275   3.84%
WTI Crude June 2011  2,757   7,153,420   8.58%
WTI Crude July 2011  951   4,741,680   5.69%
WTI Crude December 2012  2,225   7,651,870   9.18%
WTI Crude December 2013  300   400,250   0.48%
Other commodity      15,148,941   18.18%
Total futures      103,331,372   123.99%
             
Swaps            
Gasoline December 2011  27   7,917,750   9.50%
Total swaps      7,917,750   9.50%
Description
Principal
 Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd. (continued)       
Short contracts       
Futures       
Foreign bond  $(239,058)  (0.09)%
Foreign index   (5,079,843)  (1.93)%
Commodity   (7,688,784)  (2.91)%
Interest rate   (3,830,906)  (1.45)%
Currency   (742,175)  (0.28)%
Total futures   (17,580,766)  (6.66)%
          
Forwards         
Australian dollar / U.S. dollar 07/20/11
AUD    (1,125,059,422)
  (16,044,568)  (6.08)%
Canadian dollar / U.S. dollar 07/20/11
CAD    (1,981,126,320)
  (31,811,387)  (12.06)%
Euro / British Pound 07/20/11
EUR        (558,464,789)
  (14,336,007)  (5.44)%
Euro / U.S. dollar 07/20/11
EUR     (1,431,692,261)
  (23,528,161)  (8.92)%
British Pound / U.S. dollar 07/20/11
GBP     (1,374,602,354)
  13,699,004   5.19%
Other foreign currency   (42,110,665)  (15.97)%
Total forwards   (114,131,784)  (43.28)%
          
Total  $(19,574,231)  (7.42)%
 
 
24


Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.

Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Short contracts         
Futures         
Brent Crude Penultimate Financial December 2012  (1,097) $(16,933,990)  (20.32)%
Brent Crude Penultimate Financial June 2011  (3)  (115,320)  (0.14)%
Brent Crude Oil June 2011  (847)  (6,031,620)  (7.24)%
Other Brent Crude Oil December 2012 - December 2013  (1,413)  (1,964,360)  (2.36)%
Gas Oil June 2012  (1,140)  (7,275,650)  (8.73)%
Gas Oil December 2011  (220)  (267,850)  (0.32)%
Heating Oil December 2011  (2,000)  (17,728,200)  (21.28)%
Other Heating Oil May 2011 - June 2011  (553)  (89,002)  (0.11)%
LME Aluminum May 2011  (40)  (133,000)  (0.16)%
LME Aluminum June 2011  (6,884)  (13,336,656)  (16.00)%
WTI Crude May 2011  (3,449)  (8,891,490)  (10.67)%
WTI Crude December 2011  (1,955)  (6,916,940)  (8.30)%
Other commodity      (12,892,538)  (15.46)%
Total futures      (92,576,616)  (111.09)%
             
Swaps            
Gasoline June 2012  (27)  (7,121,250)  (8.54)%
Total swaps      (7,121,250)  (8.54)%
             
Total     $11,551,256   13.86%

2535

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.
Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Discretionary Energy Trading III LLC         
Long contracts         
Futures         
Brent Crude May 2011 - June 2012  2,453  $2,973,070   12.48%
Globex Crude Oil June 2011  75   1,743,000   7.32%
Globex Crude Oil December 2011  500   11,505,000   48.31%
Globex RBOB Gasoline June 2011  675   12,729,150   53.46%
Heating Oil May 2011  600   5,061,706   21.25%
Heating Oil July 2011  500   7,610,459   31.96%
Heating Oil December 2012  801   1,665,917   7.00%
Heating Oil June 2011  504   586,496   2.46%
WTI Crude July 2011  500   3,960,000   16.63%
WTI Crude December 2011  250   1,737,100   7.29%
WTI Crude June 2011  1,202   3,692,180   15.51%
Other commodity      (298,939)  (1.26)%
Total futures      52,965,139   222.41%
             
Options            
Crude Oil Future May 2011, $106.50 Put  500   1,245,000   5.23%
Crude Oil Future May 2011, $95.00 Put  1,800   270,000   1.13%
Crude Oil Future May 2011, $110.00 Call  500   690,000   2.90%
Crude Oil Future Calendar Spread, July 2011 – December 2011, $0.10 - $1.00 Put  24,000   6,350,000   26.66%
Natural Gas October 2011, $4.50 Call  500   2,641,000   11.09%
Natural Gas May 2011, $4.50 Call  500   598,000   2.51%
Total options      11,794,000   49.52%
             
Swaps            
Natural Gas April 2012  8,800   1,700,000   7.14%
Other Natural Gas November 2011 – January 2012  2,572 �� 398,430   1.67%
Total swaps      2,098,430   8.81%


Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.
Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Discretionary Energy Trading III LLC (continued)         
Short contracts         
Futures         
Brent Crude September 2011  (1,000) $(2,187,980)  (9.19)%
Brent Crude December 2011  (1,277)  (3,481,320)  (14.62)%
Globex Heating Oil June 2011  (750)  (12,058,200)  (50.63)%
Heating Oil June 2012  (801)  (1,663,733)  (6.99)%
Other Heating Oil November 2011 - January 2012  (800)  (2,264,220)  (9.51)%
WTI Crude ICE December 2011  (250)  (2,037,500)  (8.55)%
WTI Crude ICE May 2011 – December 2012  (731)  (1,542,200)  (6.48)%
Other commodity      (353,677)  (1.48)%
Total futures      (25,588,830)  (107.45)%
             
Options            
Commodity      (100,000)  (0.42)%
Total options      (100,000)  (0.42)%
             
Swaps            
Natural Gas October 2011  (11,048)  (3,589,230)  (15.07)%
Total swaps      (3,589,230)  (15.07)%
             
Total     $37,579,509   157.80%
Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.
Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Energy Focus LLC         
Long contracts         
Futures         
Natural Gas October 2011 - April 2013  1,861  $1,520,340   6.51%
WTI Crude ICE May 2011 - December 2012  272   2,285,020   9.79%
Other commodity      750,202   3.21%
Total futures      4,555,562   19.51%
             
Options            
Natural Gas October 2011, $4.50 Call  400   2,112,800   9.05%
Natural Gas May 2011 - March 2012, $3.95 - $4.80 Call  1,400   6,822,100   29.21%
Natural May 2011 - October 2012, $3.50  - $4.80 Put  2,650   6,110,400   26.17%
Total options      15,045,300   64.43%
             
Swaps            
Natural Gas October 2011  3,445   1,237,600   5.30%
Natural Gas January 2012  7,454   1,636,500   7.01%
Natural Gas February 2012  1,740   1,199,585   5.14%
Other Natural Gas May 2011 - December 2013  8,791   3,350,173   14.34%
Total swaps      7,423,858   31.79%
             
Short contracts            
Futures            
Natural Gas July 2011  (1,868)  (2,175,170)  (9.31)%
Natural Gas January 2012  (2,629)  (6,252,790)  (26.78)%
Other Natural Gas May 2011 - December 2012  (932)  (2,678,220)  (11.46)%
Other commodity      (1,792,483)  (7.68)%
Total futures      (12,898,663)  (55.23)%
             
Options            
Natural Gas May 2011 - October 2011, $4.15 - $5.50 Call  (3,500)  (4,287,050)  (18.36)%
Natural Gas May 2011 - March 2012, $4.00 - $4.25 Call  (1,350)  (1,681,150)  (7.20)%
Other commodity      (30,000)  (0.13)%
Total options      (5,998,200)  (25.69)%
             
Swaps            
Natural Gas November 2011  (2,030)  (1,968,250)  (8.43)%
Other Natural Gas May 2011 – December 2013  (7,308)  (791,705)  (3.39)%
Total swaps      (2,759,955)  (11.82)%
             
Total     $5,367,902   22.99%
28

Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.
Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Fed Policy Ltd.         
Long contracts         
Futures         
30 Day Fed Fund August 2011  7,848  $2,528,619   5.61%
Other 30 Day Fed Fund April 2011 - June 2012  26,317   7,071,462   15.67%
Total futures      9,600,081   21.28%
             
Options            
Eurodollar futures March 2012, $98.63 Put  20,000   6,875,000   15.24%
Eurodollar futures March 2012, $99.38 Put  20,000   18,625,000   41.29%
30 Day Fed Fund futures June 2011, $99.81 Call  9,188   2,297,182   5.09%
30 Day Fed Fund futures April 2011 - December 2011, $99.75 - $99.81 Call  57,419   11,396,904   25.26%
30 Day Fed Fund futures September 2011, $99.88 Put  12,100   3,781,552   8.38%
30 Day Fed Fund futures April 2011 - October 2011, $99.75 - $99.88 Put  26,335   3,100,613   6.87%
Total options      46,076,251   102.13%
             
Short contracts            
Futures            
Interest rate      517,895   1.15%
Total futures      517,895   1.15%
             
Options            
Eurodollar futures March 2012, $98.75 Put  (20,000)  (8,125,000)  (18.01)%
Eurodollar futures March 2012, $99.25 Put  (20,000)  (15,875,000)  (35.19)%
30 Day Fed Fund futures September 2011, $99.81 Put  (24,200)  (4,033,655)  (8.94)%
30 Day Fed Fund futures April 2011 - December 2011, $99.88 - $99.94 Call  (139,812)  (4,831,992)  (10.71)%
30 Day Fed Fund futures July 2011 - December 2011, $99.75 - $99.81 Put  (27,650)  (3,361,206)  (7.45)%
Total options      (36,226,853)  (80.30)%
             
Total     $19,967,374   44.26%

Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31,June 30, 2011.

DescriptionPrincipal Amount Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Global Monetary Policy LLC       
Long contracts       
Futures       
Commodity  $1,613,130   4.48%
Interest rate   1,172,679   3.26%
Total futures   2,785,809   7.74%
          
Options         
Commodity   345,000   0.96%
Foreign currency   82,005   0.23%
Total options   427,005   1.19%
          
Forwards         
Chinese Yuan / U.S. Dollar 06/17/2011CNY       338,000,000  1,870,722   5.20%
Korean Won / U.S. Dollar 04/18/2011KRW  85,155,500,000  2,164,219   6.01%
Other foreign currency   1,641,681   4.56%
Total forwards   5,676,622   15.77%
          
Short contracts         
Futures         
U.S. bond   (323,187)  (0.90)%
Foreign bond   128,741   0.36%
Commodity   (551,860)  (1.53)%
Interest rate   (7,374)  (0.02)%
Total futures   (753,680)  (2.09)%
          
Options         
Commodity   (50,000)  (0.14)%
Total options   (50,000)  (0.14)%
          
Forwards         
Foreign currency   (3,941,113)  (10.95)%
Total forwards   (3,941,113)  (10.95)%
          
Total  $4,144,643   11.52%
Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Macro Directional LLC         
Long contracts         
Futures         
Australian 3 Year Bond September 2011  4,950  $515,627   7.24%
Euro Bund September 2011  750   (1,245,133)  (17.49)%
Total futures      (729,506)  (10.25)%
             
Forwards            
Foreign currency      29,294   0.41%
Total forwards      29,294   0.41%
             
Short contracts            
Forwards            
Foreign currency      (73,482)  (1.03)%
Total forwards      (73,482)  (1.03)%
             
Total     $(773,694)  (10.87)%
 
 
3036

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3.      Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.

DescriptionPrincipal Amount Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham K4D Trading Ltd.       
Long contracts       
Futures       
U.S. bond  $(1,693,870)  (0.50)%
Foreign bond   1,076,899   0.32%
U.S. index   8,356,229   2.46%
Foreign index   6,955,415   2.05%
Commodity   25,056,183   7.38%
Interest rate   (958,759)  (0.28)%
Currency   4,703,445   1.39%
Total futures   43,495,452   12.82%
          
Forwards         
Australian Dollar / U.S. Dollar 04/20/11AUD       2,270,409,210  69,879,791   20.59%
Canadian Dollar / U.S. Dollar 04/20/11CAD       2,993,928,486  26,032,783   7.67%
Euro / Japanese Yen 04/20/11EUR          722,878,081  31,067,277   9.15%
Euro / U.S. Dollar 04/20/11EUR       2,425,359,120  44,098,568   12.99%
Japanese Yen / U.S. Dollar 04/20/11JPY   265,224,580,054  (56,456,018)  (16.63)%
New Zealand Dollar / U.S. Dollar 04/20/11NZD          848,309,198  21,101,112   6.22%
Other foreign currency   82,745,920   24.38%
Total forwards   218,469,433   64.37%

Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.
DescriptionPrincipal Amount Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham K4D Trading Ltd. (continued)       
Short contracts       
Futures       
U.S. bond  $393,672   0.12%
Foreign bond   12,829,370   3.77%
Foreign index   (6,392,370)  (1.88)%
Commodity   (4,114,279)  (1.21)%
Interest rate   5,053,667   1.49%
Currency   807,195   0.24%
Total futures   8,577,255   2.53%
          
Forwards         
Australian Dollar / U.S. Dollar 04/20/11AUD       (1,943,684,931)  (62,352,863)  (18.37)%
Canadian Dollar / U.S. Dollar 04/20/11CAD       (2,566,882,066)  (33,800,932)  (9.96)%
Euro / Japanese Yen 04/20/11EUR          (644,173,895)  (29,021,433)  (8.55)%
Euro / U.S. Dollar 04/20/11EUR       (2,227,734,366)  (44,146,754)  (13.01)%
Japanese Yen / U.S. Dollar 04/20/11JPY   (255,219,960,505)  54,118,737   15.95%
New Zealand Dollar / U.S. Dollar 04/20/11NZD          (896,997,648)  (24,523,202)  (7.23)%
Other foreign currency   (80,287,277)  (23.66)%
Total forwards   (220,013,724)  (64.83)%
          
Total  $50,528,506   14.89%
Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2011.
Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Macro Directional LLC         
Long contracts         
Futures         
Gold June 2011  150  $293,050   5.84%
U.S. index      (37,500)  (0.75)%
Total futures      255,550   5.09%
             
Total     $255,550   5.09%

Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following table shows the fair value classification of each investment type by Master Fund as of March 31,June 30, 2011:
 
 Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC  Graham Energy Focus LLC  Graham Fed Policy Ltd.  Graham Global Monetary Policy LLC  Graham K4D Trading Ltd.  Graham Macro Directional LLC  Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC  Graham Energy Focus LLC  Graham Fed Policy Ltd.  Graham Global Monetary Policy LLC  Graham K4D Trading Ltd.  Graham Macro Directional LLC 
Long Contracts                                          
Level 1:                                          
U.S. bond futures $-  $-  $-  $-  $-  $(1,693,870) $-  $-  $-  $-  $-  $(374,234) $(11,253,047) $- 
Foreign bond futures  -   -   -   -   -   1,076,899   -   -   -   -   -   -   (8,536,516)  (729,506)
U.S. index futures  -   -   -   -   -   8,356,229   (37,500)  -   -   -   -   -   10,415,895   - 
Foreign index futures  -   -   -   -   -   6,955,415   -   -   -   -   -   -   5,025,773   - 
Commodity futures  103,331,372   52,965,139   4,555,562   -   1,613,130   25,056,183   293,050   6,258,596   (6,832,218)  (1,005,298)  -   (1,798,730)  (1,129,857)  - 
Commodity futures options  -   11,794,000   15,045,300   -   345,000   -   -   -   15,666,450   9,247,750   -   -   -   - 
Commodity swaps  7,917,750   2,098,430   7,423,858   -   -   -   -   6,500,250   (2,363,500)  (5,604,470)  -   -   -   - 
Interest rate futures  -   -   -   9,600,081   1,172,679   (958,759)  -   -   -   -   9,340,992   2,631,128   (1,020,274)  - 
Interest rate futures options  -   -   -   46,076,251   -   -   -   -   -   -   20,589,479   -   -   - 
Currency futures  -   -   -   -   -   4,703,445   -   -   -   -   -   -   1,073,226   - 
Total Level 1  111,249,122   66,857,569   27,024,720   55,676,332   3,130,809   43,495,542   255,550   12,758,846   6,470,732   2,637,982   29,930,471   458,164   (5,424,800)  (729,506)
                                                        
Level 2:                                                        
Foreign currency forwards  -   -   -   -   5,676,622   218,469,433   -   -   -   -   -   1,008,468   117,563,119   29,294 
Foreign currency forwards options  -   -   -   -   82,005   -   - 
Foreign currency options  -   -   -   -   51,109   -   - 
Total Level 2  -   -   -   -   5,758,627   218,469,433   -   -   -   -   -   1,059,577   117,563,119   29,294 
Total long contracts $111,249,122  $66,857,569  $27,024,720  $55,676,332  $8,889,436  $261,964,975  $255,550  $12,758,846  $6,470,732  $2,637,982  $29,930,471  $1,517,741  $112,138,319  $(700,212)
                                                        
Short Contracts   ��                                                    
Level 1:                                                        
U.S. bond futures $-  $-  $-  $-  $(323,187) $393,672  $- 
Foreign bond futures  -   -   -   -   128,741   12,829,370   -  $-  $-  $-  $-  $1,128,704  $(239,058) $- 
Foreign index futures  -   -   -   -   -   (6,392,370)  -   -   -   -   -   -   (5,079,843)  - 
Commodity futures  (92,576,616)  (25,588,830)  (12,898,663)  -   (551,860)  (4,114,279)  -   10,445,480   17,815,764   9,715,295   -   1,715,360   (7,688,784)  - 
Commodity futures options  -   (100,000)  (5,998,200)  -   (50,000)  -   -   -   -   (4,954,950)  -   -   -   - 
Commodity swaps  (7,121,250)  (3,589,230)  (2,759,955)  -   -   -   -   (6,088,500)  2,412,220   1,346,308   -   -   -   - 
Interest rate futures  -   -   -   517,895   (7,374)  5,053,667   -   -   -   -   (29,523)  (3,522,264)  (3,830,906)  - 
Interest rate futures options  -   -   -   (36,226,853)  -   -   -   -   -   -   (8,214,512)  -   -   - 
Currency futures  -   -   -   -   -   807,195   -   -   -   -   -   -   (742,175)  - 
Total Level 1  (99,697,866)  (29,278,060)  (21,656,818)  (35,708,958)  (803,680)  8,577,255   -   4,356,980   20,227,984   6,106,653   (8,244,035)  (678,200)  (17,580,766)  - 
                                                        
Level 2:                                                        
Foreign currency forwards  -   -   -   -   (3,941,113)  (220,013,724)  -   -   -   -   -   (1,127,441)  (114,131,784)  (73,482)
Total Level 2  -   -   -   -   (3,941,113)  (220,013,724)  -   -   -   -   -   (1,127,441)  (114,131,784)  (73,482)
Total short contracts $(99,697,866) $(29,278,060) $(21,656,818) $(35,708,958) $(4,744,793) $(211,436,469) $-  $4,356,980  $20,227,984  $6,106,653  $(8,244,035) $(1,805,641) $(131,712,550) $(73,482)

 
3437


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at March 31,June 30, 2011 categorized by primary underlying risk.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting.  Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC  Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC 
 Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure    
 Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities 
                                                                        
Commodity price                                                                        
Futures $3,125,470,679   39,677  $(2,776,326,546)  (37,009) $112,336,594  $(101,581,838) $1,095,037,792   37,955  $(931,009,729)  (9,460) $56,270,758  $(28,894,449) $3,129,999,827   38,933  $(3,067,357,829)  (40,036) $140,494,929  $(123,790,853) $584,755,077   10,454  $(533,743,744)  (10,864) $31,608,843  $(20,625,297)
Swaps  26,777,250   27   (26,514,000)  (27)  7,917,750   (7,121,250)  138,594,740   11,372   (127,521,540)  (11,048)  2,300,000   (3,790,800)  25,359,750   27   (25,481,250)  (27)  6,500,250   (6,088,500)  55,587,500   4,800   (49,594,080)  (4,476)  2,412,220   (2,363,500)
  3,152,247,929   39,704   (2,802,840,546)  (37,036)  120,254,344   (108,703,088)  1,233,632,532   49,327   (1,058,531,269)  (20,508)  58,570,758   (32,685,249)  3,155,359,577   38,960   (3,092,839,079)  (40,063)  146,995,179   (129,879,353)  640,342,577   15,254   (583,337,824)  (15,340)  34,021,063   (22,988,797)
                                                                                                
Equity price                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
                                                                                                
Foreign currency exchange rate                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
                                                                                                
Interest rate                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
Total $3,152,247,929   39,704  $(2,802,840,546)  (37,036) $120,254,344  $(108,703,088) $1,233,632,532   49,327  $(1,058,531,269)  (20,508) $58,570,758  $(32,685,249) $3,155,359,577   38,960  $(3,092,839,079)  (40,063) $146,995,179  $(129,879,353) $640,342,577   15,254  $(583,337,824)  (15,340) $34,021,063  $(22,988,797)
                                                                                                
                                                
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $71,788,618                      $(13,764,783)Collateral balances supporting all derivative positions  $59,101,338                      $(4,983,569)

 
3538

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at March 31,June 30, 2011 categorized by primary underlying risk.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham Energy Focus LLC  Graham Fed Policy Ltd.  Graham Energy Focus LLC  Graham Fed Policy Ltd. 
 Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure       
 Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts�� Derivative Assets  Derivative Liabilities  Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities 
                                                                        
Commodity price                                                                        
Futures $186,982,608   10,116  $(333,793,798)  (11,913) $4,893,505  $(13,236,606) $-   -  $-   -  $-  $-  $131,417,718   3,454  $(267,852,450)  (6,117) $12,455,625  $(3,745,628) $-   -  $-   -  $-  $- 
Swaps  263,191,915   21,430   (114,490,450)  (9,338)  7,936,763   (3,272,860)  -   -   -   -   -   -   260,296,748   21,961   (106,125,213)  (9,068)  3,084,846   (7,343,008)  -   -   -   -   -   - 
  450,174,523   31,546   (448,284,248)  (21,251)  12,830,268   (16,509,466)  -   -   -   -   -   -   391,714,466   25,415   (373,977,663)  (15,185)  15,540,471   (11,088,636)  -   -   -   -   -   - 
                                                                                                
Equity price                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
                                                                                                
Foreign currency exchange rate                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
                                                                                                
Interest rate                                                                                                
Futures  -   -   -   -   -   -   14,213,286,597   34,165   (713,690,966)  (1,722)  10,466,254   (348,278)  -   -   -   -   -   -   11,222,846,646   26,972   (901,209,799)  (2,170)  9,340,992   (29,523)
  -   -   -   -   -   -   14,213,286,597   34,165   (713,690,966)  (1,722)  10,466,254   (348,278)  -   -   -   -   -   -   11,222,846,646   26,972   (901,209,799)  (2,170)  9,340,992   (29,523)
Total $450,174,523   31,546  $(448,284,248)  (21,251) $12,830,268  $(16,509,466) $14,213,286,597   34,165  $(713,690,966)  (1,722) $10,466,254  $(348,278) $391,714,466   25,415  $(373,977,663)  (15,185) $15,540,471  $(11,088,636) $11,222,846,646   26,972  $(901,209,799)  (2,170) $9,340,992  $(29,523)
                                                                           
                                     
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $17,984,242                      $25,147,965 Collateral balances supporting all derivative positions  $11,094,654                      $22,826,365 

 
3639

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at March 31,June 30, 2011 categorized by primary underlying risk.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham Global Monetary Policy LLC  Graham K4D Trading Ltd.  Graham Global Monetary Policy LLC  Graham K4D Trading Ltd. 
 Long exposure  Short exposure        Long exposure  Short exposure        Long exposure Short exposure       Long exposure  Short exposure       
 
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities  
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities  
Notional
amounts
  
Number
of
contracts
 
Notional
amounts
  
Number
of
contracts
 Derivative Assets  Derivative Liabilities  
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  Derivative Assets  Derivative Liabilities 
                                                                      
Commodity price                                                                      
Futures $103,187,500   1,700  $(54,108,000)  (1,450) $1,761,270  $(700,000) $1,216,608,649   14,239  $(237,850,835)  (3,751) $33,002,810  $(12,060,906) $46,492,000   650 $(23,695,000)  (500) $1,715,360  $(1,798,730) $1,345,596,497   15,854  $(758,255,780)  (12,860) $28,003,129  $(36,821,770)
  103,187,500   1,700   (54,108,000)  (1,450)  1,761,270   (700,000)  1,216,608,649   14,239   (237,850,835)  (3,751)  33,002,810   (12,060,906)  46,492,000   650  (23,695,000)  (500)  1,715,360   (1,798,730)  1,345,596,497   15,854   (758,255,780)  (12,860)  28,003,129   (36,821,770)
                                                                                              
Equity price  ��                                                                                           
Futures  -   -   -   -   -   -   780,831,862   11,792   (174,585,658)  (1,691)  17,713,871   (8,794,597)  -   -  -   -  -   -   476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
  -   -   -   -   -   -   780,831,862   11,792   (174,585,658)  (1,691)  17,713,871   (8,794,597)  -   -  -   -  -   -   476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
                                                                                              
Foreign currency exchange rate                                                                           ��                  
Futures  -   -   -   -   -   -   305,790,215   2,727   (221,066,583)  (2,632)  6,391,645   (881,005)  -   -  -   -  -   -   445,249,816   2,709   (275,073,860)  (2,797)  1,326,426   (995,375)
Forwards  1,931,095   -   (1,679,020)  -   2,199,243   (463,734)  64,401,562   -   (62,576,740)  -   61,240,470   (62,784,761)  2,684,470   -  (3,371,806)  -  2,646,610   (2,765,583)  31,171,994   -   (18,184,872)  -   21,904,835   (18,473,500)
  1,931,095   -   (1,679,020)  -   2,199,243   (463,734)  370,191,777   2,727   (283,643,323)  (2,632)  67,632,115   (63,665,766)  2,684,470   -  (3,371,806)  -  2,646,610   (2,765,583)  476,421,810   2,709   (293,258,732)  (2,797)  23,231,261   (19,468,875)
                                                                                              
Interest rate                                                                                              
Futures  1,246,474,710   3,000   (2,054,868,630)  (9,804)  1,692,294   (721,435)  6,684,174,178   25,793   (12,480,888,254)  (48,233)  23,293,117   (6,592,138)  1,247,933,160   3,000  (11,437,252,636)  (34,190)  3,863,605   (4,000,271)  11,774,187,855   45,104   (2,692,780,158)  (8,420)  3,205,822   (28,085,623)
  1,246,474,710   3,000   (2,054,868,630)  (9,804)  1,692,294   (721,435)  6,684,174,178   25,793   (12,480,888,254)  (48,233)  23,293,117   (6,592,138)  1,247,933,160   3,000  (11,437,252,636)  (34,190)  3,863,605   (4,000,271)  11,774,187,855   45,104   (2,692,780,158)  (8,420)  3,205,822   (28,085,623)
Total $1,351,593,305   4,700  $(2,110,655,650)  (11,254) $5,652,807  $(1,885,169) $9,051,806,466   54,551  $(13,176,968,070)  (56,307) $141,641,913  $(91,113,407) $1,297,109,630   3,650 $(11,464,319,442)  (34,690) $8,225,575  $(8,564,584) $14,073,083,415   70,486  $(4,007,343,092)  (28,824) $69,881,880  $(89,456,111)
                                                                          
                                     
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $31,843,292                      $288,833,860 Collateral balances supporting all derivative positions  $98,569,407                      $283,292,262 

 
3740


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at March 31,June 30, 2011 categorized by primary underlying risk.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham Macro Directional LLC  Graham Macro Directional LLC 
 Long exposure  Short exposure        Long exposure  Short exposure       
 
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities  
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
 
                                    
Commodity price                                    
Futures $21,598,500   150  $-   -  $293,050  $-  $-   -  $-   -  $-  $- 
  21,598,500   150   -   -   293,050   -   -   -   -   -   -   - 
                                                
Equity price                                                
Futures  19,815,000   300   -   -   -   (37,500)  -   -   -   -   -   - 
  19,815,000   300   -   -   -   (37,500)  -   -   -   -   -   - 
                                                
Foreign currency exchange rate                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   -   -   (42,608)  -   -   (44,188)
  -   -   -   -   -   -   -   -   (42,608)  -   -   (44,188)
                                                
Interest rate                                                
Futures  -   -   -   -   -   -   685,724,754   5,700   -   -   515,627   (1,245,133)
  -   -   -   -   -   -   685,724,754   5,700   -   -   515,627   (1,245,133)
Total $41,413,500   450  $-   -  $293,050  $(37,500) $685,724,754   5,700  $(42,608)  -  $515,627  $(1,289,321)
                           
                           
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $4,762,663 Collateral balances supporting all derivative positions          $7,894,158 

 
3841

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following table summarizes the results of operations of each Master Fund for the three monthsand six month periods ended March 31,June 30, 2011:
 
  
Graham
Commodity
Strategies
LLC
(Delaware)
  
Graham
Discretionary
 Energy Trading
III LLC
(Delaware)
  
 
Graham
Energy Focus
LLC
(Delaware)
  
Graham
Fed Policy
Ltd.
(BVI)
  
Graham
Global
Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham
Macro
Directional
LLC
(Delaware)
  
Graham Short
Term Global
Macro LLC
(Delaware)
 
                         
   Three Months Ended June 30, 2011 
Net investment loss $(4,386) $(21,842) $(6,663) $(2,910) $(38,503) $(206,478) $(7,866) $- 
                                 
Net realized gain (loss) on investments  6,750,578   (16,112,867)  (2,018,687)  6,717,130   (9,593,084)  (21,262,016)  (1,633,982)  - 
Net increase (decrease) in unrealized appreciation on investments  5,564,570   (12,797,859)  7,684,531   2,089,673   (2,852,943)  (70,349,041)  (1,329,149)  - 
Brokerage commissions and fees  (1,639,470)  (752,389)  (255,097)  (715,972)  (660,192)  (3,638,222)  (701,773)  - 
Net gain (loss) on investments  10,675,678   (29,663,115)  5,410,747   8,090,831   (13,106,219)  (95,249,279)  (3,664,904)  - 
Net income (loss) $10,671,292  $(29,684,957) $5,404,084  $8,087,921  $(13,144,722) $(95,455,757) $(3,672,770) $- 
  Graham Commodity Strategies LLC (Delaware)  Graham Discretionary Energy Trading III LLC (Delaware)  Graham Energy Focus LLC (Delaware)  Graham Fed Policy Ltd. (BVI)  Graham Global Monetary Policy LLC (Delaware)  Graham K4D Trading Ltd. (BVI)  Graham Macro Directional LLC (Delaware)  Graham Short Term Global Macro LLC (Delaware) 
                         
Net investment income (loss) $(4,480) $968  $(8,821) $(1,120) $(28,130) $(83,866) $(557) $1,186 
                                 
Net realized gain (loss) on investments  70,342,613   561,787   (3,932,204)  15,588,830   20,968,150   (47,163,832)  (21,781,890)  3,960,455 
Net increase (decrease) in appreciation on investments  (25,420,622)  3,834,874   (2,102,378)  (1,353,759)  3,743,874   5,253,462   279,691   (1,898,136)
Brokerage commissions and fees  (1,833,702)  (850,714)  (386,480)  (584,561)  (713,576)  (3,291,928)  (318,998)  (548,562)
Net gain (loss) on investments  43,088,289   3,545,947   (6,421,062)  13,650,510   23,998,448   (45,202,298)  (21,821,197)  1,513,757 
Net income (loss) $43,083,809  $3,546,915  $(6,429,883) $13,649,390  $23,970,318  $(45,286,164) $(21,821,754) $1,514,943 
  Six Months Ended June 30, 2011 
Net investment income (loss) $(8,866) $(20,874) $(15,484) $(4,030) $(66,633) $(290,344) $(8,423) $1,186 
                                 
Net realized gain (loss) on investments  77,093,191   (15,551,080)  (5,950,891)  22,305,960   11,375,066   (68,425,848)  (23,415,872)  3,960,455 
Net increase (decrease) in unrealized appreciation on investments  (19,856,052)  (8,962,985)  5,582,153   735,914   890,931   (65,095,579)  (1,049,458)  (1,898,136)
Brokerage commissions and fees  (3,473,172)  (1,603,103)  (641,577)  (1,300,533)  (1,373,768)  (6,930,150)  (1,020,771)  (548,562)
Net gain (loss) on investments  53,763,967   (26,117,168)  (1,010,315)  21,741,341   10,892,229   (140,451,577)  (25,486,101)  1,513,757 
Net income (loss) $53,755,101  $(26,138,042) $(1,025,799) $21,737,311  $10,825,596  $(140,741,921) $(25,494,524) $1,514,943 
 
 
3942


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following table shows the gains and losses on all financial instruments held by the Master Funds reported in net gain (loss) on investments in their statements of operations segregated by primary underlying risk and contract type for the three months ended June 30, 2011:
  
Graham
Commodity
Strategies
LLC
  
Graham
Discretionary
Energy Trading
III LLC
  
Graham
Energy Focus
LLC
  
Graham Fed
Policy Ltd.
  
Graham
Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
  
Graham
Short Term
Global Macro
LLC
 
Commodity price                        
Futures $12,699,898  $(27,398,379) $13,273,438  $-  $2,837,354  $(87,798,352) $(96,992) $- 
Options  -   (1,337,727)  (303,114)  -   (295,000)  -   -   - 
Swaps  (384,750)  (174,620)  (7,304,480)  -   -   -   -   - 
   12,315,148   (28,910,726)  5,665,844   -   2,542,354   (87,798,352)  (96,992)  - 
Equity price                                
Futures  -   -   -   -   (538,540)  (28,028,918)  (4,385,320)  - 
Options  -   -   -   -   -   -   -   - 
   -   -   -   -   (538,540)  (28,028,918)  (4,385,320)  - 
Foreign currency exchange rate                                
Futures  -   -   -   -   -   (4,534,058)  -   - 
Forwards  -   -   -   -   2,968,389   5,477,710   (16,428,584)  - 
Options  -   -   -   -   (8,260,446)  -   -   - 
   -   -   -   -   (5,292,057)  943,652   (16,428,584)  - 
Interest rate                                
Futures  -   -   -   11,348,100   (8,895,284)  23,272,561   17,947,765   - 
Options  -   -   -   (2,541,297)  (262,500)  -   -   - 
   -   -   -   8,806,803   (9,157,784)  23,272,561   17,947,765   - 
Total $12,315,148  $(28,910,726) $5,665,844  $8,806,803  $(12,446,027) $(91,611,057) $(2,963,131) $- 

43

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)
 
The following table shows the gains and losses on all financial instruments held by the Master Funds reported in net gain (loss) on investments in their statements of operations segregated by primary underlying risk and contract type for the threesix months ended March 31,June 30, 2011:
 
 
Graham Commodity Strategies LLC
  Graham Discretionary Energy Trading III LLC  Graham Energy Focus LLC  Graham Fed Policy Ltd.  Graham Global Monetary Policy LLC  Graham K4D Trading Ltd.  Graham Macro Directional LLC  Graham Short Term Global Macro LLC  
Graham
Commodity
Strategies
LLC
  
Graham
Discretionary
Energy Trading
III LLC
  
Graham
Energy Focus
LLC
  
Graham Fed
Policy Ltd.
  
Graham
Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
  
Graham
Short Term
Global Macro
LLC
 
Commodity price                                                
Futures $44,631,741  $7,266,514  $(11,350,526) $9,566,143  $5,797,601  $44,811,512  $(634,480) $3,852,769  $57,331,639  $(20,131,865) $1,922,912  $-  $8,634,955  $(42,986,840) $(731,472) $3,852,769 
Options  -   (3,803,688)  3,005,179   -   207,880   -   -   (223,490)  -   (5,141,415)  2,702,065   -   (87,120)  -   -   (223,490)
Swaps  290,250   933,835   2,310,765   -   -   -   -   -   (94,500)  759,215   (4,993,715)  -   -   -   -   - 
  44,921,991   4,396,661   (6,034,582)  9,566,143   6,005,481   44,811,512   (634,480)  3,629,279   57,237,139   (24,514,065)  (368,738)  -   8,547,835   (42,986,840)  (731,472)  3,629,279 
Equity price                                                                
Futures  -   -   -   -   (4,947,186)  (40,301,211)  (301,661)  1,134,945   -   -   -   -   (5,485,726)  (68,330,129)  (4,686,981)  1,134,945 
Options  -   -   -   -   -   -   -   (427,187)  -   -   -   -   -   -   -   (427,187)
  -   -   -   -   (4,947,186)  (40,301,211)  (301,661)  707,758   -   -   -   -   (5,485,726)  (68,330,129)  (4,686,981)  707,758 
Foreign currency exchange rate                                                                
Futures  -   -   -   -   -   (5,461,945)  -   -   -   -   -   -   -   (9,996,003)  -   - 
Forwards  -   -   -   -   41,508,124   (24,055,983)  (12,277,803)  5,706,028   -   -   -   -   44,476,513   (18,578,273)  (28,706,387)  5,706,028 
Options  -   -   -   -   (12,578,583)  -   -   (7,400,670)  -   -   -   -   (20,839,029)  -   -   (7,400,670)
  -   -   -   -   28,929,541   (29,517,928)  (12,277,803)  (1,694,642)  -   -   -   -   23,637,484   (28,574,276)  (28,706,387)  (1,694,642)
Interest rate                                                                
Bonds  -   -   -   -   -   -   -   - 
Futures  -   -   -   7,646,707   (4,830,499)  (16,902,743)  (8,288,255)  (580,076)  -   -   -   28,560,950   (13,725,783)  6,369,818   9,659,510   (580,076)
Options  -   -   -   (2,977,779)  (445,313)  -   -   -   -   -   -   (5,519,076)  (707,813)  -   -   - 
  -   -   -   4,668,928   (5,275,812)  (16,902,743)  (8,288,255)  (580,076)  -   -   -   23,041,874   (14,433,596)  6,369,818   9,659,510   (580,076)
Total $44,921,991  $4,396,661  $(6,034,582) $14,235,071  $24,712,024  $(41,910,370) $(21,502,199) $2,062,319  $57,237,139  $(24,514,065) $(368,738) $23,041,874  $12,265,997  $(133,521,427) $(24,465,330) $2,062,319 

 
4044


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


3. Investments in Master Funds (continued)
 
The following table summarizes the financial position of each Master Fund as of December 31, 2010:
  
Graham
Commodity
Strategies
LLC
(Delaware)
  
Graham
Discretionary
Energy Trading
III LLC
(Delaware)
  
Graham
Fed Policy Ltd.
(BVI)
  
Graham
Global
Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham
Macro
Directional LLC
(Delaware)
  
Graham
Short Term
Global
Macro LLC
(Delaware)
 
Assets:                     
Due from brokers $14,527,187  $-  $23,563,039  $42,869,239  $135,887,098  $1,286,040  $246,023 
Options, at fair value  -   2,165,000   15,955,481   603,151   -   -   47,256 
Derivative financial instruments, at fair value  36,971,878   16,379,776   11,613,647   -   45,743,328   173,923   - 
Subscriptions receivable  -   -   1,739   340   -   -   - 
Interest receivable  -   -   -   3,056   9,100   113   - 
Total assets  51,499,065   18,544,776   51,133,906   43,475,786   181,639,526   1,460,076   293,279 
                             
Liabilities:                            
Options, at fair value  -   182,500   3,958,218   -   -   -   - 
Derivative financial instruments, at fair value  -   -   -   3,185,389   -   -   105,751 
Due to brokers  -   6,241,250   -   530,100   -   -   41,070 
Redemptions payable  -   -   -   220   -   -   - 
Total liabilities  -   6,423,750   3,958,218   3,715,709   -   -   146,821 
Net assets $51,499,065  $12,121,026  $47,175,688  $39,760,077  $181,639,526  $1,460,076  $146,458 
                             
Percentage of Master Fund held by the Fund  14.76%  13.95%  14.22%  8.97%  13.23%  18.38%  28.67%

  Graham Commodity Strategies LLC (Delaware)  
Graham Discretionary Energy Trading III LLC
(Delaware)
  
Graham
Fed Policy Ltd. (BVI)
  
Graham
Global Monetary
Policy LLC (Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham Macro Directional LLC
(Delaware)
  
Graham Short Term Global Macro LLC
(Delaware)
 
Assets:                     
Due from brokers 14,527,187  -  23,563,039  42,869,239  135,887,098  1,286,040  246,023 
Options, at fair value  -   2,165,000   15,955,481   603,151   -   -   47,256 
Derivative financial instruments, at fair value  36,971,878   16,379,776   11,613,647   -   45,743,328   173,923   - 
Subscriptions receivable  -   -   1,739   340   -   -   - 
Interest receivable  -   -   -   3,056   9,100   113   - 
Total assets  51,499,065   18,544,776   51,133,906   43,475,786   181,639,526   1,460,076   293,279 
                             
Liabilities:                            
Options, at fair value  -   182,500   3,958,218   -   -   -   - 
Derivative financial instruments, at fair value  -   -   -   3,185,389   -   -   105,751 
Due to brokers  -   6,241,250   -   530,100   -   -   41,070 
Redemptions payable  -   -   -   220   -   -   - 
Total liabilities  -   6,423,750   3,958,218   3,715,709   -   -   146,821 
Net assets $51,499,065  $12,121,026  $47,175,688  $39,760,077  $181,639,526  $1,460,076  $146,458 
                             
Percentage of Master Fund held by the Fund  14.76%  13.95%  14.22%  8.97%  13.23%  18.38%  28.67%

 
4145


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


3. Investments in Master Funds (continued)
 
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
  
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC                  
Long contracts                  
Futures                  
Brent Crude Penultimate Financial December 2011  1,095  $14,633,650   28.42%  1,095  $14,633,650   28.42%
Brent Crude Penultimate Financial June 2012  200   2,036,000   3.95%  200   2,036,000   3.95%
Other Brent Crude December 2011 - June 2011  1,277   3,601,460   6.99%  1,277   3,601,460   6.99%
Coffee March 2011  396   4,360,950   8.47%  396   4,360,950   8.47%
Corn July 2011  3,991   18,055,400   35.06%  3,991   18,055,400   35.06%
Corn December 2011  48   153,788   0.30%  48   153,788   0.30%
Heating Oil March 2011  527   5,647,421   10.97%  527   5,647,421   10.97%
Other Heating Oil February 2011 - June 2011  397   264,810   0.51%  397   264,810   0.51%
LME Aluminum March 2011  1,590   2,988,131   5.80%  1,590   2,988,131   5.80%
LME Aluminum January 2011  723   2,143,550   4.16%  723   2,143,550   4.16%
LME Copper January 2011  172   2,952,825   5.73%  172   2,952,825   5.73%
LME Copper March 2011  359   2,598,425   5.05%  359   2,598,425   5.05%
LME Lead January 2011  511   3,757,844   7.30%  511   3,757,844   7.30%
LME Lead March 2011  315   641,800   1.25%  315   641,800   1.25%
LME Zinc March 2011  1,566   4,704,131   9.13%  1,566   4,704,131   9.13%
LME Zinc January 2011  633   2,228,906   4.33%  633   2,228,906   4.33%
Soybean July 2011  613   4,537,487   8.81%  613   4,537,487   8.81%
Soybean November 2011  102   280,350   0.54%  102   280,350   0.54%
Wheat July 2011  1,414   7,393,413   14.36%  1,414   7,393,413   14.36%
Wheat March 2011  1,044   5,075,512   9.86%  1,044   5,075,512   9.86%
Other Wheat May 2011 - December 2011  1,676   4,151,525   8.06%  1,676   4,151,525   8.06%
WTI Crude April 2011  2,180   4,866,480   9.45%  2,180   4,866,480   9.45%
WTI Crude December 2012  2,529   18,709,570   36.33%  2,529   18,709,570   36.33%
Other commodity      10,047,962   19.51%      10,047,962   19.51%
Total futures      125,831,390   244.34%      125,831,390   244.34%

 
4246

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.
 
Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
  
Number of
Contracts
  Fair Value  
Percentage of
 Net Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)                  
Short contracts                  
Futures                  
Brent Crude Penultimate Financial December 2012  (1,295) $(13,292,950)  (25.81)%  (1,295) $(13,292,950)  (25.81)%
Brent Crude Penultimate Financial June 2011  (3)  (49,020)  (0.10)%  (3)  (49,020)  (0.10)%
Brent Crude December 2012  (1,143)  (5,592,330)  (10.86)%  (1,143)  (5,592,330)  (10.86)%
Coffee May 2011  (338)  (4,695,019)  (9.12)%  (338)  (4,695,019)  (9.12)%
Corn March 2011  (3,625)  (9,012,475)  (17.50)%  (3,625)  (9,012,475)  (17.50)%
Gas Oil March 2011  (646)  (3,626,950)  (7.04)%  (646)  (3,626,950)  (7.04)%
Gas Oil January 2011 - June 2012  (53)  (108,375)  (0.22)%  (53)  (108,375)  (0.22)%
LME Aluminum January 2011 - March 2011  (2,207)  (3,806,831)  (7.39)%  (2,207)  (3,806,831)  (7.39)%
LME Copper January 2011  (173)  (2,962,525)  (5.75)%  (173)  (2,962,525)  (5.75)%
LME Copper March 2011  (327)  (2,328,450)  (4.52)%  (327)  (2,328,450)  (4.52)%
LME Lead January 2011 - March 2011  (826)  (3,205,319)  (6.22)%  (826)  (3,205,319)  (6.22)%
LME Zinc January 2011  (634)  (4,078,794)  (7.92)%  (634)  (4,078,794)  (7.92)%
LME Zinc March 2011  (1,494)  (5,237,125)  (10.17)%  (1,494)  (5,237,125)  (10.17)%
Wheat July 2011  (2,459)  (5,308,537)  (10.31)%  (2,459)  (5,308,537)  (10.31)%
Wheat March 2011  (688)  (4,981,550)  (9.67)%  (688)  (4,981,550)  (9.67)%
Wheat May 2011  (795)  (849,025)  (1.65)%  (795)  (849,025)  (1.65)%
WTI Crude February 2011  (2,758)  (5,155,560)  (10.01)%  (2,758)  (5,155,560)  (10.01)%
WTI Crude December 2011  (1,829)  (7,981,680)  (15.50)%  (1,829)  (7,981,680)  (15.50)%
Other commodity      (6,586,997)  (12.79)%      (6,586,997)  (12.79)%
Total futures      (88,859,512)  (172.55)%      (88,859,512)  (172.55)%
                        
            
Total     $36,971,878   71.79%     $36,971,878   71.79%

 
4347


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
  
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Discretionary Energy Trading III LLC                  
Long contracts                  
Futures                  
Brent Crude February 2011  330  $977,500   8.07%  330  $977,500   8.07%
Brent Crude April 2011  330   974,400   8.04%  330   974,400   8.04%
Gasoline RBOB February 2011 – June 2011  1,025   7,896,193   65.14%  1,025   7,896,193   65.14%
Globex RBOB Gasoline June 2011  475   2,643,060   21.81%  475   2,643,060   21.81%
Globex Crude Oil June 2011  75   733,500   6.05%  75   733,500   6.05%
Globex Crude Oil December 2011  500   4,600,000   37.95%  500   4,600,000   37.95%
Heating Oil December 2011  1,650   14,407,478   118.86%  1,650   14,407,478   118.86%
Heating Oil August 2011  500   412,012   3.40%  500   412,012   3.40%
Natural Gas October 2011  721   1,138,980   9.40%  721   1,138,980   9.40%
Other commodity      594,381   4.90%      594,381   4.90%
Total futures      34,377,504   283.62%      34,377,504   283.62%
                        
Options                        
Crude Oil Future April 2011, $100.00 Call  500   1,010,000   8.33%  500   1,010,000   8.33%
Crude Oil Future, February 2011 - March 2011 $(0.50) - $85.00 Put  3,450   1,155,000   9.53%  3,450   1,155,000   9.53%
Total options      2,165,000   17.86%      2,165,000   17.86%
                        
Swaps                        
Natural Gas Swap April 2011  4,540   1,872,750   15.45%  4,540   1,872,750   15.45%
Natural Gas Swap October 2011  2,124   933,360   7.70%  2,124   933,360   7.70%
Natural Gas Swap November 2011  2,000   950,000   7.84%  2,000   950,000   7.84%
Total swaps      3,756,110   30.99%      3,756,110   30.99%

 
44


Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description 
Number of
Contracts
  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Discretionary Energy Trading III LLC (continued)         
Short contracts         
Futures         
Brent Crude March 2011  (660) $(1,900,100)  (15.68)%
Globex Heat Oil June 2011  (550)  (2,936,850)  (24.23)%
Heating Oil June 2011  (1,325)  (5,756,297)  (47.49)%
Heating Oil July 2011  (1,000)  (836,611)  (6.90)%
Heating Oil June 2012  (75)  (239,350)  (1.97)%
Natural Gas April 2011  (1,135)  (1,872,750)  (15.45)%
Natural Gas November 2011  (500)  (840,220)  (6.93)%
Natural Gas January 2012 - April 2012  (302)  (314,660)  (2.60)%
WTI Crude June 2011  (775)  (4,299,500)  (35.47)%
WTI Crude December 2011  (500)  (976,750)  (8.06)%
WTI Crude April 2011  (125)  (363,750)  (3.00)%
Total futures      (20,336,838)  (167.78)%
             
Options            
Commodity      (182,500)  (1.51)%
Total options      (182,500)  (1.51)%
             
Swaps            
Natural Gas Swap January 2012  (1,800)  (837,000)  (6.91)%
Natural Gas Swap April 2012  (2,000)  (580,000)  (4.78)%
Total swaps      (1,417,000)  (11.69)%
             
Total     $18,362,276   151.49%

4548

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description Number of Contracts  Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Fed Policy Ltd.         
Long contracts         
Futures         
30 Day Fed Fund February 2011  4,831  $2,646,031   5.61%
Other 30 Day Fed Fund January 2011 - June 2012  50,026   8,927,649   18.92%
Total futures      11,573,680   24.53%
             
Options            
30 Day Fed Fund futures February 2011, $99.75 Call  11,350   3,310,682   7.02%
Other 30 Day Fed Fund futures January 2011 - December 2011, $99.69 - $99.81 Call  74,106   11,797,652   25.01%
30 Day Fed Fund futures January 2011 - February 2011, $99.63 - $99.75 Put  30,823   409,647   0.87%
Other interest rate futures      437,500   0.93%
Total options      15,955,481   33.83%
             
Short contracts            
Futures            
30 Day Fed Fund December 2010 - July 2012  (2,849)  39,967   0.08%
Total futures      39,967   0.08%
             
Options            
30 Day Fed Fund futures January 2011 - December 2011, $99.81 - $99.94 Call  (178,751)  (3,833,213)  (8.13)%
30 Day Fed Fund futures January 2011, $99.69 Put  (6,000)  (62,505)  (0.13)%
Other interest rate futures      (62,500)  (0.13)%
Total options      (3,958,218)  (8.39)%
             
Total     $23,610,910   50.05%
Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Discretionary Energy Trading III LLC (continued)         
Short contracts         
Futures         
Brent Crude March 2011  (660) $(1,900,100)  (15.68)%
Globex Heat Oil June 2011  (550)  (2,936,850)  (24.23)%
Heating Oil June 2011  (1,325)  (5,756,297)  (47.49)%
Heating Oil July 2011  (1,000)  (836,611)  (6.90)%
Heating Oil June 2012  (75)  (239,350)  (1.97)%
Natural Gas April 2011  (1,135)  (1,872,750)  (15.45)%
Natural Gas November 2011  (500)  (840,220)  (6.93)%
Natural Gas January 2012 - April 2012  (302)  (314,660)  (2.60)%
WTI Crude June 2011  (775)  (4,299,500)  (35.47)%
WTI Crude December 2011  (500)  (976,750)  (8.06)%
WTI Crude April 2011  (125)  (363,750)  (3.00)%
Total futures      (20,336,838)  (167.78)%
             
Options            
Commodity      (182,500)  (1.51)%
Total options      (182,500)  (1.51)%
             
Swaps            
Natural Gas Swap January 2012  (1,800)  (837,000)  (6.91)%
Natural Gas Swap April 2012  (2,000)  (580,000)  (4.78)%
Total swaps      (1,417,000)  (11.69)%
             
Total     $18,362,276   151.49%

 
4649

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description
Number of
Contracts / Principal
 Amount
 Fair Value  
Percentage of Net
Assets of
Master Fund
 
Graham Global Monetary Policy LLC       
Long contracts       
Futures       
Commodity  $833,980   2.10%
Interest rate   1,570,955   3.95%
Total futures   2,404,935   6.05%
          
Options         
Foreign currency   603,151   1.52%
Total options   603,151   1.52%
          
Forwards         
Japanese Yen / U.S. Dollar 01/04/11JPY    35,703,594,900  2,677,452   6.73%
Japanese Yen / U.S. Dollar 01/05/11JPY    34,708,122,000  2,429,135   6.11%
Chinese Yuan / U.S. Dollar 06/17/11 - 06/27/11CNY        471,400,000  2,318,175   5.83%
Australian Dollar / U.S. Dollar 01/04/11 - 01/05/11AUD        550,000,000  3,850,775   9.68%
Other foreign currency   (474,653)  (1.19)%
Total forwards   10,800,884   27.16%
          
Short contracts         
Futures         
Euroswiss March 2011(7,500)  (2,070,419)  (5.21)%
Other interest rate   (1,009,594)  (2.53)%
U.S. bond   (37,016)  (0.09)%
Foreign bond   641,195   1.61%
Commodity   (770,200)  (1.94)%
Total futures   (3,246,034)  (8.16)%
          
Forwards         
Australian Dollar / U.S. Dollar  01/04/11AUD       (450,000,000)  (3,909,044)  (9.83)%
Other Australian Dollar / U.S. Dollar  01/05/11AUD       (115,000,000)  (192,228)  (0.48)%
Japanese Yen / U.S. Dollar 01/04/11JPY   (35,868,141,100)  (4,709,285)  (11.84)%
Other Japanese Yen / U.S. Dollar 01/05/11JPY   (40,735,192,000)  (1,652,261)  (4.16)%
Other foreign currency   (2,682,356)  (6.75)%
Total forwards   (13,145,174)  (33.06)%
          
Total  $(2,582,238)  (6.49)%
Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Fed Policy Ltd.         
Long contracts         
Futures         
30 Day Fed Fund February 2011  4,831  $2,646,031   5.61%
Other 30 Day Fed Fund January 2011 - June 2012  50,026   8,927,649   18.92%
Total futures      11,573,680   24.53%
             
Options            
30 Day Fed Fund futures February 2011, $99.75 Call  11,350   3,310,682   7.02%
Other 30 Day Fed Fund futures January 2011 - December 2011, $99.69 - $99.81 Call  74,106   11,797,652   25.01%
30 Day Fed Fund futures January 2011 - February 2011, $99.63 - $99.75 Put  30,823   409,647   0.87%
Other interest rate futures      437,500   0.93%
Total options      15,955,481   33.83%
             
Short contracts            
Futures            
30 Day Fed Fund December 2010 - July 2012  (2,849)  39,967   0.08%
Total futures      39,967   0.08%
             
Options            
30 Day Fed Fund futures January 2011 - December 2011, $99.81 - $99.94 Call  (178,751)  (3,833,213)  (8.13)%
30 Day Fed Fund futures January 2011, $99.69 Put  (6,000)  (62,505)  (0.13)%
Other interest rate futures      (62,500)  (0.13)%
Total options      (3,958,218)  (8.39)%
             
Total     $23,610,910   50.05%

 
4750

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description 
Number of Contracts /
Principal Amount
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Global Monetary Policy LLC         
Long contracts         
Futures         
Commodity    $833,980   2.10%
Interest rate     1,570,955   3.95%
Total futures     2,404,935   6.05%
            
Options           
Foreign currency     603,151   1.52%
Total options     603,151   1.52%
            
Forwards           
Japanese Yen / U.S. Dollar 01/04/11 JPY  35,703,594,900   2,677,452   6.73%
Japanese Yen / U.S. Dollar 01/05/11 JPY  34,708,122,000   2,429,135   6.11%
Chinese Yuan / U.S. Dollar 06/17/11 - 06/27/11 CNY     471,400,000   2,318,175   5.83%
Australian Dollar / U.S. Dollar 01/04/11 - 01/05/11 AUD    550,000,000   3,850,775   9.68%
Other foreign currency     (474,653)  (1.19)%
Total forwards     10,800,884   27.16%
            
Short contracts           
Futures           
Euroswiss March 2011 (7,500)  (2,070,419)  (5.21)%
Other interest rate     (1,009,594)  (2.53)%
U.S. bond     (37,016)  (0.09)%
Foreign bond     641,195   1.61%
Commodity     (770,200)  (1.94)%
Total futures     (3,246,034)  (8.16)%
            
Forwards           
Australian dollar / U.S. dollar  01/04/11 AUD    (450,000,000)   (3,909,044)  (9.83)%
Other Australian dollar / U.S. dollar  01/05/11 AUD    (115,000,000)   (192,228)  (0.48)%
Japanese Yen / U.S. dollar 01/04/11 JPY  (35,868,141,100)   (4,709,285)  (11.84)%
Other Japanese Yen / U.S. dollar 01/05/11 JPY  (40,735,192,000)   (1,652,261)  (4.16)%
Other foreign currency     (2,682,356)  (6.75)%
Total forwards     (13,145,174)  (33.06)%
            
Total    $(2,582,238)  (6.49)%
51

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.
 
Description
Principal
 Amount
 Fair Value  
Percentage of Net
Assets of
Master Fund
 
Principal
Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.              
Long contracts              
Futures              
U.S. bond  $237,741   0.13%  $237,741   0.13%
Foreign bond   1,053,653   0.58%   1,053,653   0.58%
U.S. index   3,010,100   1.66%   3,010,100   1.66%
Foreign index   (3,683,508)  (2.03)%   (3,683,508)  (2.03)%
Commodity   31,911,445   17.57%   31,911,445   17.57%
Interest rate   325,182   0.18%   325,182   0.18%
Currency   4,536,916   2.50%   4,536,916   2.50%
Total futures   37,391,529   20.59%   37,391,529   20.59%
                  
Forwards                  
Japanese Yen / U.S. Dollar 01/19/11JPY   43,988,617,100  11,186,032   6.16%
Other Japanese Yen / U.S. Dollar 1/04/11 - 1/05/11JPY   14,270,122,339  796,715   0.44%
Swiss Franc / U.S. Dollar 01/19/11CHF        491,922,158  17,376,713   9.57%
Japanese Yen / U.S. dollar 01/19/11JPY   43,988,617,100  11,186,032   6.16%
Other Japanese Yen / U.S. dollar 1/04/11 - 1/05/11JPY   14,270,122,339  796,715   0.44%
Swiss Franc / U.S. dollar 01/19/11CHF       491,922,158  17,376,713   9.57%
Other foreign currency   28,092,524   15.46%   28,092,524   15.46%
Total forwards   57,451,984   31.63%   57,451,984   31.63%

 
4852


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description
Principal
 Amount
 Fair Value  
Percentage of Net
Assets of
Master Fund
 
Principal
 Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd. (continued)              
Short contracts              
Futures              
U.S. bond  $(1,546,794)  (0.85)%  $(1,546,794)  (0.85)%
Foreign bond   (540,937)  (0.30)%   (540,937)  (0.30)%
Foreign index   (142,959)  (0.08)%   (142,959)  (0.08)%
Commodity   (4,754,965)  (2.62)%   (4,754,965)  (2.62)%
Interest rate   (3,790,967)  (2.09)%   (3,790,967)  (2.09)%
Currency   739,824   0.41%   739,824   0.41%
Total futures   (10,036,798)  (5.53)%   (10,036,798)  (5.53)%
                  
Forwards                  
Japanese Yen / U.S. Dollar 01/19/11JPY   (36,043,608,800)  (12,993,436)  (7.15)%
Other Japanese Yen / U.S. Dollar 1/04/11 - 1/05/11JPY   (14,111,800,669)  (834,965)  (0.46)%
Swiss Franc / U.S. Dollar 01/19/11CHF        (431,464,200)  (17,247,454)  (9.50)%
Japanese Yen / U.S. dollar 01/19/11JPY   (36,043,608,800)  (12,993,436)  (7.15)%
Other Japanese Yen / U.S. dollar 1/04/11 - 1/05/11JPY   (14,111,800,669)  (834,965)  (0.46)%
Swiss Franc / U.S. dollar 01/19/11CHF       (431,464,200)  (17,247,454)  (9.50)%
Other foreign currency   (7,987,532)  (4.40)%   (7,987,532)  (4.40)%
Total forwards   (39,063,387)  (21.51)%   (39,063,387)  (21.51)%
                  
Total  $45,743,328   25.18%  $45,743,328   25.18%

 
4953

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description
Principal
Amount
 Fair Value  
Percentage of Net
Assets of
Master Fund
 
Principal
Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Macro Directional LLC              
Long contracts              
Futures              
Commodity  $66,430   4.55%  $66,430   4.55%
Total futures   66,430   4.55% 
 
 66,430   4.55%
                  
Forwards                  
Canadian Dollar / U.S. Dollar 01/04/11CAD     20,003,980  87,433   5.99%
Canadian dollar / U.S. dollar 01/04/11CAD     20,003,980  87,433   5.99%
Total forwards   87,433   5.99%   87,433   5.99%
                  
Short Contracts                  
Futures                  
Foreign bond   20,060   1.37%   20,060   1.37%
Total futures   20,060   1.37%   20,060   1.37%
                  
Total  $173,923   11.91%  $173,923   11.91%

 
5054

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2010.

Description
Principal
 Amount / Number of Contracts
 Fair Value  
Percentage of Net
Assets of
Master Fund
  
Principal 
Amount / Number
of Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Short Term Global Macro LLC                
Long contracts                
Futures                
S&P 500 E-Mini March 2011 225 $(16,875)  (11.52)% 225  $(16,875)  (11.52)%
Total futures   (16,875)  (11.52)%     (16,875)  (11.52)%
                    
Options                    
British Pound Put / Swiss Franc Call, $1.47CHF        10,000,000  47,256   32.27% CHF 10,000,000   47,256   32.27%
Total options   47,256   32.27%     47,256   32.27%
                    
Forwards                    
Chinese Yuan / U.S. Dollar 08/19/11CNY      334,143,000  1,385,221   945.81%
Chinese Yuan / U.S. dollar 08/19/11 CNY 334,143,000   1,385,221   945.81%
Total forwards   1,385,221   945.81%     1,385,221   945.81%
                    
Short Contracts                    
Forwards                    
Swiss Franc / British Pound 01/05/11CHF       (7,292,955)  (15,162)  (10.35)% CHF (7,292,955)   (15,162)  (10.35)%
Chinese Yuan / U.S. Dollar 08/19/11CNY   (334,143,000)  (1,458,935)  (996.15)%
Chinese Yuan / U.S. dollar 08/19/11 CNY (334,143,000)   (1,458,935)  (996.15)%
Total forwards   (1,474,097)  (1,006.50)%     (1,474,097)  (1,006.50)%
                    
Total  $(58,495)  (39.94)%    $(58,495)  (39.94)%

 
5155

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table shows the fair value classification of each investment type by Master Fund as of December 31, 2010:
 
 Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC  Graham Fed Policy Ltd.  Graham Global Monetary Policy LLC  Graham K4D Trading Ltd.  Graham Macro Directional LLC  Graham Short Term Global Macro LLC  
Graham
Commodity
Strategies
 LLC
  
Graham
Discretionary
Energy Trading
III LLC
  
Graham Fed
Policy Ltd.
  
Graham
Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
  
Graham
Short Term
Global Macro
LLC
 
Long Contracts                                          
Level 1:                                          
U.S. bond futures $-  $-  $-  $-  $237,741  $-  $-  $-  $-  $-  $-  $237,741  $-  $- 
Foreign bond futures  -   -   -   -   1,053,653   -   -   -   -   -   -   1,053,653   -   - 
U.S. index futures  -   -   -   -   3,010,100   -   (16,875)  -   -   -   -   3,010,100   -   (16,875)
Foreign index futures  -   -   -   -   (3,683,508)  -   -   -   -   -   -   (3,683,508)  -   - 
Commodity futures  125,831,390   34,377,504   -   833,980   31,911,445   66,430   -   125,831,390   34,377,504   -   833,980   31,911,445   66,430   - 
Commodity futures options  -   2,165,000   -   -   -   -   -   -   2,165,000   -   -   -   -   - 
Commodity swaps  -   3,756,110   -   -   -   -   -   -   3,756,110   -   -   -   -   - 
Interest rate futures  -   -   11,573,680   1,570,955   325,182   -   -   -   -   11,573,680   1,570,955   325,182   -   - 
Interest rate futures options  -   -   15,955,481   -   -   -   -   -   -   15,955,481   -   -   -   - 
Currency futures  -   -   -   -   4,536,916   -   -   -   -   -   -   4,536,916   -   - 
Total Level 1  125,831,390   40,298,614   27,529,161   2,404,935   37,391,529   66,430   (16,875)  125,831,390   40,298,614   27,529,161   2,404,935   37,391,529   66,430   (16,875)
                                                        
Level 2:                                                        
Foreign currency forwards  -   -   -   10,800,884   57,451,984   87,433   1,385,221   -   -   -   10,800,884   57,451,984   87,433   1,385,221 
Foreign currency forwards options  -   -   -   603,151   -   -   47,256   -   -   -   603,151   -   -   47,256 
Total Level 2  -   -   -   11,404,035   57,451,984   87,433   1,432,477   -   -   -   11,404,035   57,451,984   87,433   1,432,477 
Total long contracts $125,831,390  $40,298,614  $27,529,161  $13,808,970  $94,843,513  $153,863  $1,415,602  $125,831,390  $40,298,614  $27,529,161  $13,808,970  $94,843,513  $153,863  $1,415,602 
                                                        
Short Contracts                                                        
Level 1:                                                        
U.S. bond futures  -   -   -   (37,016)  (1,546,794)  -   -   -   -   -   (37,016)  (1,546,794)  -   - 
Foreign bond futures  -   -   -   641,195   (540,937)  20,060   -   -   -   -   641,195   (540,937)  20,060   - 
Foreign index futures  -   -   -   -   (142,959)  -   -   -   -   -   -   (142,959)  -   - 
Commodity futures  (88,859,512)  (20,336,838)  -   (770,200)  (4,754,965)  -   -   (88,859,512)  (20,336,838)  -   (770,200)  (4,754,965)  -   - 
Commodity futures options  -   (182,500)  -   -   -   -   -   -   (182,500)  -   -   -   -   - 
Commodity swaps  -   (1,417,000)  -   -   -   -   -   -   (1,417,000)  -   -   -   -   - 
Interest rate futures  -   -   39,967   (3,080,013)  (3,790,967)  -   -   -   -   39,967   (3,080,013)  (3,790,967)  -   - 
Interest rate futures options  -   -   (3,958,218)  -   -   -   -   -   -   (3,958,218)  -   -   -   - 
Currency futures  -   -   -   -   739,824   -   -   -   -   -   -   739,824   -   - 
Total Level 1  (88,859,512)  (21,936,338)  (3,918,251)  (3,246,034)  (10,036,798)  20,060   -   (88,859,512)  (21,936,338)  (3,918,251)  (3,246,034)  (10,036,798)  20,060   - 
                                                        
Level 2:                                                        
Foreign currency forwards  -   -   -   (13,145,174)  (39,063,387)  -   (1,474,097)  -   -   -   (13,145,174)  (39,063,387)  -   (1,474,097)
Total Level 2  -   -   -   (13,145,174)  (39,063,387)  -   (1,474,097)  -   -   -   (13,145,174)  (39,063,387)  -   (1,474,097)
Total short contracts $(88,859,512) $(21,936,338) $(3,918,251) $(16,391,208) $(49,100,185) $20,060  $(1,474,097) $(88,859,512) $(21,936,338) $(3,918,251) $(16,391,208) $(49,100,185) $20,060  $(1,474,097)

 
5256

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2010 categorized by primary underlying risk.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC  Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC 
 Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure       
 Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  
Number
of
contracts
  Notional amounts  
Number
of
contracts
  Derivative Assets  Derivative Liabilities  Notional amounts  
Number
of
contracts
  Notional amounts  
Number
 of
contracts
  Derivative Assets  Derivative Liabilities 
                                                                        
Commodity price                                                                        
Futures $2,051,527,235   30,976  $(1,894,621,560)  (29,206) $126,128,889  $(89,157,011) $670,612,370   6,981  $(598,798,245)  (6,947) $34,377,504  $(20,336,838) $2,051,527,235   30,976  $(1,894,621,560)  (29,206) $126,128,889  $(89,157,011) $670,612,370   6,981  $(598,798,245)  (6,947) $34,377,504  $(20,336,838)
Swaps  -   -   -   -   -   -   98,880,020   8,664   (48,003,000)  (3,800)  3,756,110   (1,417,000)  -   -   -   -   -   -   98,880,020   8,664   (48,003,000)  (3,800)  3,756,110   (1,417,000)
  2,051,527,235   30,976   (1,894,621,560)  (29,206)  126,128,889   (89,157,011)  769,492,390   15,645   (646,801,245)  (10,747)  38,133,614   (21,753,838)  2,051,527,235   30,976   (1,894,621,560)  (29,206)  126,128,889   (89,157,011)  769,492,390   15,645   (646,801,245)  (10,747)  38,133,614   (21,753,838)
                                                                                                
Equity price                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
                                                                                                
Foreign currency exchange rate                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
                                                                                                
Interest rate                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
Total $2,051,527,235   30,976  $(1,894,621,560)  (29,206) $126,128,889  $(89,157,011) $769,492,390   15,645  $(646,801,245)  (10,747) $38,133,614  $(21,753,838) $2,051,527,235   30,976  $(1,894,621,560)  (29,206) $126,128,889  $(89,157,011) $769,492,390   15,645  $(646,801,245)  (10,747) $38,133,614  $(21,753,838)
                                                                                                
                                                                                                
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions      $14,527,187                      $(6,241,250)Collateral balances supporting all derivative positions              $14,527,187                      $(6,241,250)

 
5357

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2010 categorized by primary underlying risk.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham Fed Policy Ltd.  Graham Global Monetary Policy LLC  Graham Fed Policy Ltd.  Graham Global Monetary Policy LLC 
 Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure       
 Notional amounts  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities  Notional amounts  
Number
of
contracts
  Notional amounts  
Number
of
contracts
  Derivative Assets  Derivative Liabilities  Notional amounts  
Number
 of
contracts
  
Notional
amounts
  
Number
 of
contracts
  Derivative Assets  Derivative Liabilities 
                                                                        
Commodity price                                                                        
Futures $-   -  $-   -  $-  $-  $38,619,000   600  $(24,200,000)  (500) $833,980  $(770,200) $-   -  $-   -  $-  $-  $38,619,000   600  $(24,200,000)  (500) $833,980  $(770,200)
  -   -   -   -   -   -   38,619,000   600   (24,200,000)  (500)  833,980   (770,200)  -   -   -   -   -   -   38,619,000   600   (24,200,000)  (500)  833,980   (770,200)
                                                                                                
Equity price                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
                                                                                                
Foreign currency exchange rate                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   56,025,637,522   -   (46,698,002,524)  -   15,230,468   (17,574,758)  -   -   -   -   -   -   56,025,637,522   -   (46,698,002,524)  -   15,230,468   (17,574,758)
  -   -   -   -   -   -   56,025,637,522   -   (46,698,002,524)  -   15,230,468   (17,574,758)  -   -   -   -   -   -   56,025,637,522   -   (46,698,002,524)  -   15,230,468   (17,574,758)
                                                                                                
Interest rate                                                                                                
Futures  22,811,918,666   54,857   (1,184,445,024)  (2,849)  12,217,514   (603,867)  1,740,487,175   5,000   (2,788,603,000)  (14,950)  2,212,150   (3,117,029)  22,811,918,666   54,857   (1,184,445,024)  (2,849)  12,217,514   (603,867)  1,740,487,175   5,000   (2,788,603,000)  (14,950)  2,212,150   (3,117,029)
  22,811,918,666   54,857   (1,184,445,024)  (2,849)  12,217,514   (603,867)  1,740,487,175   5,000   (2,788,603,000)  (14,950)  2,212,150   (3,117,029)  22,811,918,666   54,857   (1,184,445,024)  (2,849)  12,217,514   (603,867)  1,740,487,175   5,000   (2,788,603,000)  (14,950)  2,212,150   (3,117,029)
Total $22,811,918,666   54,857  $(1,184,445,024)  (2,849) $12,217,514  $(603,867) $57,804,743,697   5,600  $(49,510,805,524)  (15,450) $18,276,598  $(21,461,987) $22,811,918,666   54,857  $(1,184,445,024)  (2,849) $12,217,514  $(603,867) $57,804,743,697   5,600  $(49,510,805,524)  (15,450) $18,276,598  $(21,461,987)
                                                                           
                                                                           
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $23,563,039                      $42,339,139 Collateral balances supporting all derivative positions          $23,563,039                      $42,339,139 

 
5458


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2010 categorized by primary underlying risk.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham K4D Trading Ltd.  Graham Macro Directional LLC  Graham K4D Trading Ltd.  Graham Macro Directional LLC 
 Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure        Long exposure  Short exposure       
 
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities  
Notional
amounts
  Number of contracts  Notional amounts  Number of contracts  Derivative Assets  Derivative Liabilities  
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  Derivative Assets  Derivative Liabilities  
Notional
amounts
  
Number
of
contracts
  Notional amounts  
Number
of
contracts
  Derivative Assets  Derivative Liabilities 
                                                                        
Commodity price                                                                        
Futures $810,106,878   10,782  $(53,034,444)  (926) $32,742,543  $(5,586,063) $10,660,500   75  $-   -  $66,430  $-  $810,106,878   10,782  $(53,034,444)  (926) $32,742,543  $(5,586,063) $10,660,500   75  $-   -  $66,430  $- 
  810,106,878   10,782   (53,034,444)  (926)  32,742,543   (5,586,063)  10,660,500   75   -   -   66,430   -   810,106,878   10,782   (53,034,444)  (926)  32,742,543   (5,586,063)  10,660,500   75   -   -   66,430   - 
                                                                                                
Equity price                                                                                                
Futures  16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)  -   -   -   -   -   -   16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)  -   -   -   -   -   - 
  16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)  -   -   -   -   -   -   16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)  -   -   -   -   -   - 
                                                                                                
Foreign currency exchange rate                                                                                                
Futures  340,454,690   2,852   (86,152,236)  (957)  5,633,114   (356,374)  -   -   -   -   -   -   340,454,690   2,852   (86,152,236)  (957)  5,633,114   (356,374)  -   -   -   -   -   - 
Forwards  90,870,643,000   -   (87,109,470,216)  -   78,339,927   (59,951,330)  19,920,873   -   -   -   87,433   -   90,870,643,000   -   (87,109,470,216)  -   78,339,927   (59,951,330)  19,920,873   -   -   -   87,433   - 
  91,211,097,690   2,852   (87,195,622,452)  (957)  83,973,041   (60,307,704)  19,920,873   -   -   -   87,433   -   91,211,097,690   2,852   (87,195,622,452)  (957)  83,973,041   (60,307,704)  19,920,873   -   -   -   87,433   - 
                                                                                                
Interest rate                                                                                                
Futures  2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)  -   -   (12,531,000)  (100)  20,060   -   2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)  -   -   (12,531,000)  (100)  20,060   - 
  2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)  -   -   (12,531,000)  (100)  20,060   -   2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)  -   -   (12,531,000)  (100)  20,060   - 
Total $110,073,800,001   37,391  $(151,478,743,535)  (25,649) $124,380,771  $(78,637,443) $30,581,373   75  $(12,531,000)  (100) $173,923  $-  $110,073,800,001   37,391  $(151,478,743,535)  (25,649) $124,380,771  $(78,637,443) $30,581,373   75  $(12,531,000)  (100) $173,923  $- 
                                                                           
                                                                           
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $135,887,098                      $1,286,040 Collateral balances supporting all derivative positions          $135,887,098                      $1,286,040 

 
5559

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2010 categorized by primary underlying risk.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on the respective Master Fund’s statement of financial position.
 
 Graham Short Term Global Macro LLC  Graham Short Term Global Macro LLC 
 Long exposure  Short exposure        Long exposure  Short exposure       
 
Notional
amounts
  
Number
of contracts
  
Notional
amounts
  
Number
 of contracts
  
Derivative
Assets
  
Derivative
Liabilities
  
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  Derivative Assets  Derivative Liabilities 
                                    
Commodity price                                    
Futures $-   -  $-   -  $-  $-  $-   -  $-   -  $-  $- 
  -   -   -   -   -   -   -   -   -   -   -   - 
                                                
Equity price                                                
Futures  14,096,250   225   -   -   -   (16,875)  14,096,250   225   -   -   -   (16,875)
  14,096,250   225   -   -   -   (16,875)  14,096,250   225   -   -   -   (16,875)
                                                
Foreign currency exchange rate                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  51,458,935   -   (56,468,659)  -   1,385,221   (1,474,097)  51,458,935   -   (56,468,659)  -   1,385,221   (1,474,097)
  51,458,935   -   (56,468,659)  -   1,385,221   (1,474,097)  51,458,935   -   (56,468,659)  -   1,385,221   (1,474,097)
                                                
Interest rate                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
  -   -   -   -   -   -   -   -   -   -   -   - 
Total $65,555,185   225  $(56,468,659)  -  $1,385,221  $(1,490,972) $65,555,185   225  $(56,468,659)  -  $1,385,221  $(1,490,972)
                           
                           
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $204,953 Collateral balances supporting all derivative positions          $204,953 


 
5660

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table summarizes the results of operations of each Master Fund for the three monthsand six month periods ended March 31,June 30, 2010:
 
  
Graham
Commodity
Strategies
LLC
(Delaware)
  
Graham
Discretionary
Energy Trading
III LLC
(Delaware)
  
Graham
Fed Policy
Ltd. (BVI)
  
Graham
Global
Monetary
Policy LLC
(Delaware)
  
Graham
GMP
Securities
LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham
Macro
Directional
LLC
(Delaware)
  
Graham
Short Term
Global Macro
LLC
(Delaware)
 
                         
  Three Months Ended June 30, 2010 
Net investment income (loss) $(4,508) $(22,984) $(1,753) $(12,553) $(520) $(33,308) $(61,298) $18 
                                 
Net realized gain (loss) on investments  2,372,172   9,884,709   (13,603,324)  55,329,331   (2,138,488)  56,094,201   7,367,577   (2,040,999)
Net increase (decrease) in unrealized appreciation on investments  (15,559,427)  (13,196,466)  19,206,804   2,248,080   11,757   (49,262,278)  983,584   831,036 
Brokerage commissions and fees  (1,190,667)  (240,745)  (1,207,556)  (557,874)  -   (1,525,901)  (184,244)  (94,104)
Net gain (loss) on investments  (14,377,922)  (3,552,502)  4,395,924   57,019,537   (2,126,731)  5,306,022   8,166,917   (1,304,067)
Net income (loss) $(14,382,430) $(3,575,486) $4,394,171  $57,006,984  $(2,127,251) $5,272,714  $8,105,619  $(1,304,049)
 Graham Commodity Strategies LLC (Delaware)  
Graham Discretionary Energy Trading III LLC
(Delaware)
  
Graham
Fed Policy Ltd. (BVI)
  
Graham
Global Monetary
Policy LLC (Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham Macro Directional LLC
(Delaware)
  
Graham Short Term Global Macro LLC
(Delaware)
 
                      Six Months Ended June 30, 2010 
Net investment income (loss) $(3,636) $(5,702) $(1,232) $(6,153) $(68,408) $(11,143) $171  $(8,144) $(31,238) $(2,985) $(18,706) $(25,701) $(101,716) $(99,109) $189 
                                                            
Net realized gain (loss) on investments  1,059,499   (1,108,471)  5,663,643   37,085,598   (77,892,271)  7,549,544   (3,124,378)  3,431,671   8,776,238   (7,939,681)  92,414,929   (4,026,599)  (21,798,070)  14,917,121   (5,165,377)
Net increase (decrease) in appreciation on investments  7,026,115   8,918,128   3,402,087   427,683   34,667,568   (108,934)  1,095,590 
Net increase (decrease) in unrealized appreciation on investments  (8,533,312)  (4,278,338)  22,608,891   2,675,763   1,854,505   (14,594,710)  874,650   1,926,626 
Brokerage commissions and fees  (1,002,423)  (276,911)  (1,134,151)  (597,494)  (1,480,295)  (146,619)  (38,204)  (2,193,090)  (515,104)  (2,341,707)  (1,155,368)  (1,157)  (3,006,196)  (304,195)  (132,308)
Net gain (loss) on investments  7,083,191   7,532,746   7,931,579   36,915,787   (44,704,998)  7,293,991   (2,066,992)  (7,294,731)  3,982,796   12,327,503   93,935,324   (2,173,251)  (39,398,976)  15,487,576   (3,371,059)
Net income (loss) $7,079,555  $7,527,044  $7,930,347  $36,909,634  $(44,773,406) $7,282,848  $(2,066,821) $(7,302,875) $3,951,558  $12,324,518  $93,916,618  $(2,198,952) $(39,500,692) $15,388,467  $(3,370,870)

 
5761

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table shows the realized and unrealized gains and losses on all financial instruments held by the Master Funds reported in net gain on investments in their statements of operations segregated by primary underlying risk and contract type for the three months ended March 31,June 30, 2010:
 
  Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III LLC  Graham Fed Policy Ltd.  Graham Global Monetary Policy LLC  Graham K4D Trading Ltd.  Graham Macro Directional LLC  Graham Short Term Global Macro LLC 
Commodity price                     
Futures $8,085,614  $8,524,507  $-  $2,178,297  $(23,768,545) $(758,020) $(792,850)
Options  -   (714,850)  -   -   -   -   - 
   8,085,614   7,809,657   -   2,178,297   (23,768,545)  (758,020)  (792,850)
Equity price                            
Futures  -   -   -   1,126,108   (32,614,364)  (211,949)  (175,975)
   -   -   -   1,126,108   (32,614,364)  (211,949)  (175,975)
Foreign currency exchange rate                            
Futures  -   -   3,056,080   -   712,311   -   - 
Forwards  -   -   -   37,702,416   (80,875)  9,180,238   1,552,433 
Options  -   -   6,009,650   (3,520,011)  -   -   (2,525,849)
   -   -   9,065,730   34,182,405   631,436   9,180,238   (973,416)
Interest rate                            
Futures  -   -   -   441,971   12,526,770   (769,659)  (86,547)
Interest rate swaps  -   -   -   (403,000)  -   -   - 
Options  -   -   -   (12,500)  -   -   - 
   -   -   -   26,471   12,526,770   (769,659)  (86,547)
Total $8,085,614  $7,809,657  $9,065,730  $37,513,281  $(43,224,703) $7,440,610  $(2,028,788)

  
Graham
Commodity
Strategies
LLC
  
Graham
Discretionary
Energy Trading
III LLC
  
Graham Fed
Policy Ltd.
  
Graham
Global
Monetary
Policy LLC
  
Graham
GMP
Securities
LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
  
Graham Short
 Term Global
Macro LLC
 
Commodity price                        
Futures $(13,187,255) $(5,186,347) $3,979,881  $2,862,473  $-  $(50,167,010) $(603,690) $(221,336)
Options  -   1,874,590   -   -   -   -   -   - 
   (13,187,255)  (3,311,757)  3,979,881   2,862,473   -   (50,167,010)  (603,690)  (221,336)
Equity price                                
Futures  -   -   -   2,212,502   -   (29,055,274)  2,484,139   334,113 
   -   -   -   2,212,502   -   (29,055,274)  2,484,139   334,113 
Foreign currency exchange rate                                
Futures  -   -   -   -   -   2,398,505   -   - 
Forwards  -   -   -   46,487,972   20,691   (9,137,401)  4,509,743   395,464 
Options  -   -   -   202,284   -   -   -   (2,679,231)
   -   -   -   46,690,256   20,691   (6,738,896)  4,509,743   (2,283,767)
Interest rate                                
Bonds  -   -   -   -   -   -   769,659   86,547 
Futures  -   -   (2,197,604)  5,812,180   -   92,793,103   1,191,310   874,480 
Interest rate swaps  -   -   3,821,203   -   (2,147,422)  -   -   - 
Options  -   -   -   -   -   -   -   - 
   -   -   1,623,599   5,812,180   (2,147,422)  92,793,103   1,960,969   961,027 
Total $(13,187,255) $(3,311,757) $5,603,480  $57,577,411  $(2,126,731) $6,831,923  $8,351,161  $(1,209,963)
 
5862

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


3. Investments in Master Funds (continued)
The following table shows the realized and unrealized gains and losses on all financial instruments held by the Master Funds reported in net gain on investments in their statements of operations segregated by primary underlying risk and contract type for the six months ended June 30, 2010:
  
Graham
Commodity
Strategies
LLC
  
Graham
Discretionary
Energy Trading
III LLC
  
Graham Fed
Policy Ltd.
  
Graham Global
Monetary
Policy LLC
  
Graham
GMP
Securities
LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
  
Graham Short
Term Global
Macro LLC
 
Commodity price                        
Futures $(5,101,641) $3,340,660  $3,979,882  $5,040,770  $-  $(73,935,555) $(1,361,710) $(1,014,186)
Options  -   1,157,240   -   -   -   -   -   - 
   (5,101,641)  4,497,900   3,979,882   5,040,770   -   (73,935,555)  (1,361,710)  (1,014,186)
Equity price                                
Futures  -   -   -   3,338,610   -   (61,669,638)  2,272,190   158,138 
   -   -   -   3,338,610   -   (61,669,638)  2,272,190   158,138 
Foreign currency exchange rate                                
Futures  -   -   -   -   -   3,110,816   -   - 
Forwards  -   -   -   84,190,388   20,691   (9,218,276)  13,689,981   1,947,897 
Options  -   -   -   (3,317,727)  -   -   -   (5,205,080)
   -   -   -   80,872,661   20,691   (6,107,460)  13,689,981   (3,257,183)
Interest rate                                
Bonds  -   -   -   -   (45,362)  -   -   - 
Futures  -   -   858,476   6,254,151   -   105,319,873   1,191,310   874,480 
Interest rate swaps  -   -   9,830,852   (403,000)  (2,147,423)  -   -   - 
Options  -   -   -   (12,500)  -   -   -   - 
   -   -   10,689,328   5,838,651   (2,192,785)  105,319,873   1,191,310   874,480 
Total $(5,101,641) $4,497,900  $14,669,210  $95,090,692  $(2,172,094) $(36,392,780) $15,791,771  $(3,238,751)
63

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


4. Graham Cash Assets LLC

GAIT invests a portion of its excess liquidity in GCA, an entity for which the Manager is also the sole investment advisor. GCA commenced operations on June 22, 2005, and was formed as a Delaware Limited Liability Company for the purpose of consolidating investment activity of multiple funds managed by the Manager. Its objective is to preserve capital while enhancing return on cash balances and providing daily liquidity. It invests in debt obligations guaranteed by the U.S. federal government which range in maturity from three to thirty months. GCA also maintains cash and cash equivalents on deposit with major U.S. institutions. GCA values all fixed income securities at amortized cost to the extent it approximates fair value.  GAIT’s investment in GCA is valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon the Fund’sGAIT’s proportionate share of GCA’s reported net asset value. GAIT records its proportionate share of GCA’s investment income and expenses on a monthly basis. For the three months ended March 31,June 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $515,146.$498,565.  For the six months ended June 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $1,013,711.  For the three months ended March 31,June 30, 2010, the total amount recognized by GAIT with respect to its investment in GCA was $415,495.$466,353.  For the six months ended June 30, 2010, the total amount recognized by GAIT with respect to its investment in GCA was $881,848.  These amounts are included in interest income in the statements of operations and managing member allocation.  At March 31,June 30, 2011 and December 31, 2010, GAIT owned approximately 13.92%12.88% and 13.77%, respectively, of GCA.  The following table summarizes the financial position of GCA as of March 31,June 30, 2011 and December 31, 2010:

 March 31, 2011  December 31, 2010  June 30, 2011  December 31, 2010 
Assets:            
Cash and cash equivalents $657,076,450  $750,098,151  $799,619,853  $750,098,151 
Investments in fixed income securities (cost $2,367,048,721 and $2,215,622,512, respectively)  2,367,048,721   2,215,622,512 
Investments in fixed income securities (cost $2,523,700,111 and $2,215,622,512, respectively)  2,523,700,111   2,215,622,512 
Accrued interest income  8,384,794   6,547,074   6,546,459   6,547,074 
Total assets  3,032,509,965   2,972,267,737   3,329,866,423   2,972,267,737 
                
Liabilities:                
Other liabilities  20,000   20,000   20,000   20,000 
Total liabilities  20,000   20,000   20,000   20,000 
Net assets $3,032,489,965  $2,972,247,737  $3,329,846,423  $2,972,247,737 
        

The following table summarizes the results of operations of GCA for the three monthsand six month periods ended March 31,June 30, 2011 and 2010:

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
 2011  2010  2011  2010  2011  2010 
Investment income                  
Interest income $3,860,502  $2,623,273  $3,850,625  $3,188,049  $7,711,127  $5,904,213 
Total investment income  3,860,502   2,623,273   3,850,625   3,188,049   7,711,127   5,904,213 
                        
Expenses:                        
Bank fee expense  133,584   -   126,225   151,611   259,809   244,502 
Total expenses  133,584   -   126,225   151,611   259,809   244,502 
Net investment income  3,726,918   2,623,273   3,724,400   3,036,438   7,451,318   5,659,711 
Net income $3,726,918  $2,623,273  $3,724,400  $3,036,438  $7,451,318  $5,659,711 

 
5964

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)


4. Graham Cash Assets LLC (continued)

The following schedule displays the condensed schedule of investments for GCA as of March 31,June 30, 2011.
 
Description Principal Amount  Fair Value  Percentage of Members’ Capital  
 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Graham Cash Assets LLC                  
Investments in Fixed Income Securities (cost $2,367,048,721)         
Investments in Fixed Income Securities (cost $2,523,700,111)         
United States                  
FDIC Guaranteed Bonds (cost $1,179,021,270)         
Citibank 1.25% - 1.88% due 07/12/11 – 12/28/12 $375,000,000  $377,224,782   12.44%
Citigroup Funding Inc. 1.38% - 1.88% due 05/05/11 – 11/15/12  175,000,000   176,506,228   5.82%
FDIC Guaranteed Bonds (cost $1,160,361,420)         
Citibank 1.25% - 1.75% due 07/12/11 - 12/28/12 $275,000,000  $275,912,810   8.29%
Other FDIC guaranteed bonds      625,290,260   20.62%      884,448,610   26.56%
Total FDIC Guaranteed Bonds      1,179,021,270   38.88%      1,160,361,420   34.85%
                        
Government Bonds (cost $1,188,027,451)            
U.S. Treasury 0.38% - 1.13% due 04/30/11 – 11/30/12  1,185,000,000   1,188,027,451   39.18%
Government Bonds (cost $1,363,338,691)            
U.S. Treasury 0.38% - 1.38% due 08/31/11 - 03/31/12  1,360,000,000   1,363,338,691   40.94%
Total Government Bonds      1,188,027,451   39.18%      1,363,338,691   40.94%
                        
Total Investments in Fixed Income Securities     $2,367,048,721   78.06%     $2,523,700,111   75.79%
 
The following schedule displays the condensed schedule of investments for GCA as of December 31, 2010.
 
Description
 Principal Amount  Fair Value  Percentage of Members’ Capital  
 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Graham Cash Assets LLC                  
Investments in Fixed Income Securities (cost $2,215,622,512)                  
United States                  
FDIC Guaranteed Bonds (cost $1,101,463,404)                  
Citibank 1.25% – 1.88% due 03/30/11 – 05/07/12 $350,000,000  $351,915,163   11.84% $350,000,000  $351,915,163   11.84%
Other FDIC guaranteed bonds      749,548,241   25.22%      749,548,241   25.22%
Total FDIC Guaranteed Bonds      1,101,463,404   37.06%      1,101,463,404   37.06%
                        
Government Bonds (cost $1,114,159,108)                        
U.S. Treasury 0.88% due 04/30/11  150,000,000   150,213,724   5.05%  150,000,000   150,213,724   5.05%
Other U.S. Treasury 0.75% – 1.13% due 01/31/11 – 04/30/12      963,945,384   32.43%      963,945,384   32.43%
Total Government Bonds      1,114,159,108   37.48%      1,114,159,108   37.48%
                        
Total Investments in Fixed Income Securities     $2,215,622,512   74.54%     $2,215,622,512   74.54%

 
6065


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

GCA reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.  The following table shows the fair value classification of each investment type held by GCA as of March 31,June 30, 2011 and December 31, 2010:
 
   
 
March 31,
2011
  
December 31,
2010
  June 30, 2011  December 31, 2010 
Long positions            
Level 2:            
Fixed income securities            
FDIC Guaranteed Bonds $1,179,021,270  $1,101,463,404  $1,160,361,420  $1,101,463,404 
Government Bonds  1,188,027,451   1,114,159,108   1,363,338,691   1,114,159,108 
Total fixed income securities  2,367,048,721   2,215,622,512   2,523,700,111   2,215,622,512 
Total Level 2  2,367,048,721   2,215,622,512   2,523,700,111   2,215,622,512 
Total long positions $2,367,048,721  $2,215,622,512  $2,523,700,111  $2,215,622,512 

5. Capital Accounts

GAIT offers Class 0 Units and Class 2 Units (collectively, the “Units”). GAIT may issue additional classes in the future subject to different fees, expenses or other terms, or to invest in other investment programs or combinations of investment programs managed by the Manager. GAIT also has Management Units (“Class M units”) which are solely for the investment of the Manager.

A separate Capital Account is maintained for each member with respect to each Class of Units held by such member. The initial balance of each members’ Capital Account is equal to the initial contribution to GAIT with respect to the Class to which such Capital Account relates. Each member’s Capital Account is increased by any additional subscription, and decreased by any redemption by such member of Units of such Class to which the Capital Account relates. All income and expenses of GAIT are allocated among the Capital Accounts of the members in proportion to the balance that each Capital Account bears to the balance of all Capital Accounts as of the beginning of such fiscal period.

Addition of Members and Managing Members

Units are available for subscription as of the first business day of each month upon written notice of at least three business days prior to the last business day of the preceding month.

Subscriptions

Units may be purchased at a price equal to the Net Asset Value per Unit of the relevant Class as of the immediately preceding Valuation Day, as defined in the LLC Agreement. There is no minimum subscription amount.

Redemptions

Units are not subject to any minimum holding period. Members may redeem Units at the Net Asset Value thereof as of the last business day of each month upon not less than three business days’ prior written notice to the administrator.

 
6166

 
Graham Alternative Investment Trading LLC
 
Notes to Unaudited Financial Statements (continued)

6. Fees

Advisory Fees

Each Class of GAIT other than Class M pays the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate equal to 2% of the Net Asset Value of such Class. The Advisory Fee is payable monthly in arrears calculated as of the last business day of each month and any other date the Manager may permit, in its sole and absolute discretion, as of which any subscription or redemption is effected with respect to Units of such Class during the month.

Sponsor Fees

Each Class of GAIT other than Class M pays the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of 1% of its Net Asset Value, payable monthly in arrears, determined in the same manner as the Advisory Fee.

Incentive Allocation

At the end of each calendar quarter, the Manager will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter.

Brokerage Fees

Each Class of GAIT other than Class M pays the Manager a brokerage fee (the “Brokerage Fee”) at the annual rate specified in the table below. This Brokerage Fee is payable monthly in arrears calculated as of the last business day of each month in the same manner as the Advisory Fee.

ClassAnnual Rate
  
Class 02%
Class 24%

In consideration of the Brokerage Fee, the Manager bears all of GAIT’s trading commissions (including exchange, clearing and regulatory fees relating to its trades), routine legal expenses, internal and external accounting, audit and tax preparation expenses, fees and expenses of an external or internal administrator, and expenses and costs of printing and mailing reports and notices, together with the costs incurred in connection with the organization of GAIT and the continuous offering of Units. To the extent GAIT is allocated any of these expenses from the Master Funds in which it invests, the Manager will reimburse GAIT for those amounts.  These reimbursements are included in commission reimbursements in the statements of operations and managing member allocation.

Any portion of any of the above fees, including the Incentive Allocation, may be paid by the Manager to third parties as compensation for selling activities in connection with GAIT.

7. Income Taxes

No provision for income taxes has been made in the accompanying financial statements, as members are individually responsible for reporting income or loss based upon their respective share of GAIT’s revenues and expenses for income tax purposes.

 
6267

 
Graham Alternative Investment Trading LLC
 
Notes to Unaudited Financial Statements (continued)

7. Income Taxes (continued)

U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing GAIT’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. The Manager has evaluated GAIT’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement or disclosure in the financial statements. The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months. Tax years which are considered open by the relevant jurisdiction are subject to potential examination.

8. Related Party Transactions

The Manager, due to its relationship with its affiliates, may enter into certain related party transactions.

9. Financial Highlights

The following is the per unit operating performance calculation for the three month periods ended March 31,June 30, 2011 and 2010:
 
 Class 0  Class 2  Class 0  Class 2 
Per unit operating performance:            
Net asset value per unit, December 31, 2009 $135.56  $112.73 
Net loss:        
Net asset value per unit, March 31, 2010 $134.58  $111.36 
Net gain (loss):        
Net investment loss  (1.94)  (2.08)  (2.17)  (1.81)
Net gain on investments  0.96   0.71   2.39   1.45 
Net loss  (0.98)  (1.37)
Net asset value per unit, March 31, 2010 $134.58  $111.36 
Net gain (loss)  0.22   (0.36)
Net asset value per unit, June 30, 2010 $134.80  $111.00 
                
Net asset value per unit, December 31, 2010 $138.96  $113.68 
Net asset value per unit, March 31, 2011 $137.45  $111.91 
Net loss:                
Net investment loss  (1.27)  (1.57)  (1.55)  (1.87)
Net loss on investments  (0.24)  (0.20)  (3.23)  (2.56)
Net loss  (1.51)  (1.77)  (4.78)  (4.43)
Net asset value per unit, March 31, 2011 $137.45  $111.91 
Net asset value per unit, June 30, 2011 $132.67  $107.48 

 
6368

 
Graham Alternative Investment Trading LLC
 
Notes to Unaudited Financial Statements (continued)

9. Financial Highlights (continued)
The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the three month periods ended June 30, 2011 and 2010:
  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (3.48)%  0.16%  (3.96)%  (0.31)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (3.48)%  0.16%  (3.96)%  (0.31)%
                 
Net investment loss before Incentive Allocation  (1.13)%  (1.20)%  (1.67)%  (1.24)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.13)%  (1.20)%  (1.67)%  (1.24)%
                 
Total expenses before Incentive Allocation  1.55%  1.29%  2.06%  1.81%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.55%  1.29%  2.06%  1.81%
The following is the per unit operating performance calculation for the six month periods ended June 30, 2011 and 2010:

  Class 0  Class 2 
Per unit operating performance:      
Net asset value per unit, December 31, 2009 $135.56  $112.73 
Net loss:        
Net investment loss  (4.11)  (3.89)
Net gain on investments  3.35   2.16 
Net loss  (0.76)  (1.73)
Net asset value per unit, June 30, 2010 $134.80  $111.00 
         
Net asset value per unit, December 31, 2010 $138.96  $113.68 
Net loss:        
Net investment loss  (2.82)  (3.44)
Net loss on investments  (3.47)  (2.76)
Net loss  (6.29)  (6.20)
Net asset value per unit, June 30, 2011 $132.67  $107.48 

69

Graham Alternative Investment Trading LLC
Notes to Unaudited Financial Statements (continued)
9. Financial Highlights (continued)

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the threesix month periods ended March 31,June 30, 2011 and 2010:

 Class 0  Class 2  Class 0  Class 2 
 2011  2010  2011  2010  2011  2010  2011  2010 
                        
Total return before Incentive Allocation  (1.08)%  (0.72)%  (1.55)%  (1.22)%  (4.52)%  (0.56)%  (5.44)%  (1.53)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (1.09)%  (0.72)%  (1.56)%  (1.22)%  (4.53)%  (0.56)%  (5.45)%  (1.53)%
                                
Net investment loss before Incentive Allocation  (0.90)%  (0.81)%  (1.38)%  (1.38)%  (2.02)%  (2.02)%  (3.02)%  (2.62)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (0.91)%  (0.81)%  (1.39)%  (1.38)%  (2.03)%  (2.02)%  (3.03)%  (2.62)%
                                
Total expenses before Incentive Allocation  1.00%  1.25%  1.51%  1.76%  2.55%  2.55%  3.57%  3.57%
Incentive Allocation  0.01   0.00   0.01   0.00   0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  1.01%  1.25%  1.52%  1.76%  2.56%  2.55%  3.58%  3.57%

Total return is calculated for Class 0 and Class 2 units taken as a whole and has not been annualized. Total return is calculated as the change in total members’ capital, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the year. An individual member’s return may vary from these returns based on the timing of capital transactions and the applicability of Advisory Fees, Brokerage Fees, Sponsor Fees and the Incentive Allocation. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for the Class 0 and Class 2 units taken as a whole and include amounts from GAIT and amounts allocated from Master Funds. The computation of such ratios is based on the amount of net investment loss, total expenses and Incentive Allocation.  Net investment loss and total expense ratios are computed based upon the weighted average of members’ capital of GAIT, excluding that of the Managing Member, for the three and six month periods ended March 31,June 30, 2011 and 2010.

10.  Subsequent Events

The FundGAIT had subscriptions of approximately $22.2$19.3 million and redemptions of approximately $7.2$3.9 million through May 16, 2011.August 15, 2011, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.
70


Unaudited Financial Statements
Graham Alternative Investment Trading II LLC
For the periods from January 1, 2011 to June 30, 2011 and
January 1, 2010 to June 30, 2010

 
6471


GrahamGraham Alternative Investment Trading II LLC

Statements of Financial Condition

Assets 
June 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
Investment in Graham K4D Trading Ltd., at fair value $9,772,362  $7,411,468 
Investment in Graham Cash Assets LLC, at fair value  78,690,319   64,089,936 
Commission reimbursements receivable  49,922   28,795 
Total assets $88,512,603  $71,530,199 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $1,681,085  $1,393,281 
Accrued brokerage fees  206,488   170,942 
Accrued advisory fees  145,404   121,404 
Accrued sponsor fees  72,702   60,702 
Total liabilities  2,105,679   1,746,329 
         
Members’ capital:        
Class 0 Units (519,470.239 and 397,859.944 units issued and outstanding at $95.59 and $102.92 per unit, respectively)  49,658,741   40,945,899 
Class 2 Units (400,220.039 and 288,630.496 units issued and outstanding at $91.69 and $99.72 per unit, respectively)  36,696,031   28,783,191 
Class M Units (500.000 and 500.000 units issued and outstanding at $104.30 and $109.56 per unit, respectively)  52,152   54,780 
Total members’ capital  86,406,924   69,783,870 
Total liabilities and members’ capital $88,512,603  $71,530,199 

See accompanying notes.
 
Assets 
March 31, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
Investment in Graham K4D Trading Ltd., at fair value $12,743,402  $7,411,468 
Investment in Graham Cash Assets LLC, at fair value  70,456,667   64,089,936 
Commission reimbursements receivable  52,836   28,795 
Total assets $83,252,905  $71,530,199 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $628,193  $1,393,281 
Accrued brokerage fees  201,023   170,942 
Accrued advisory fees  141,321   121,404 
Accrued sponsor fees  70,660   60,702 
Payable to Graham K4D Trading Ltd.  15   - 
Total liabilities  1,041,212   1,746,329 
         
Members’ capital:        
Class 0 Units (475,482.461 and 397,859.944 units issued and outstanding at $100.08 and $102.92 per unit, respectively)  47,584,852   40,945,899 
Class 2 Units (358,335.198 and 288,630.496 units issued and outstanding at $96.48 and $99.72 per unit, respectively)  34,572,911   28,783,191 
Class M Units (500.000 and 500.000 units issued and outstanding at $107.86 and $109.56 per unit, respectively)  53,930   54,780 
Total members’ capital  82,211,693   69,783,870 
Total liabilities and members’ capital $83,252,905  $71,530,199 
72


Graham Alternative Investment Trading II LLC

Statements of Operations and Managing Member Allocation

  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
2011
(Unaudited)
  
2010
(Unaudited)
  
  2011
(Unaudited)
 
2010
(Unaudited)
 
Net (loss) gain allocated from investment in Graham K4D Trading Ltd.:         
Net realized (loss) gain on investments $(696,018) $1,981,644  $(2,452,096) $(138,593)
Net decrease in unrealized appreciation on investments  (2,444,950)  (1,771,166)  (2,142,861)  (561,450)
Brokerage commissions and fees  (134,536)  (54,578)  (265,392)  (100,540)
Net (loss) gain allocated from investment  in Graham K4D Trading Ltd.  (3,275,504)  155,900   (4,860,349)  (800,583)
                 
Net investment loss allocated from investment in Graham K4D Trading Ltd.  (7,641)  (1,202)  (10,898)  (3,260)
                 
Investment income:                
Interest income  88,652   67,524   173,480   121,117 
Total investment income  88,652   67,524   173,480   121,117 
                 
Expenses:                
Brokerage fees  634,470   353,595   1,204,772   629,142 
Advisory fees  446,361   256,548   850,004   456,950 
Sponsor fees  223,180   128,274   425,001   228,475 
Interest and other  10,526   3,714   11,845   4,910 
Commission reimbursements  (134,536)  (54,578)  (265,392)  (100,540)
Total expenses  1,180,001   687,553   2,226,230   1,218,937 
Net investment loss of the Fund  (1,091,349)  (620,029)  (2,052,750)  (1,097,820)
                 
Net loss  (4,374,494)  (465,331)  (6,923,997)  (1,901,663)
                 
Incentive allocation  (6,623)  -   (8,810)  - 
                 
Net loss available for pro-rata allocation to all members $(4,381,117) $(465,331) $(6,932,807) $(1,901,663)

See accompanying notes.
73


Graham Alternative Investment Trading II LLC

Statements of Changes in Members’ Capital

For the six months ended June 30, 2011(unaudited) and 2010 (unaudited)

  Class 0  Class 2  Class M Total  
  Units  Capital  Units  Capital  Units  Capital  Capital 
                     
Members’ capital, December 31, 2009  222,427.212  $22,373,766   149,683.130  $14,826,566     $  $37,200,332 
Subscriptions  119,836.004   11,326,000   70,361.090   6,673,010   500.000   50,000   18,049,010 
Redemptions  (5,927.342)  (569,567)  (8,435.463)  (784,243)        (1,353,810)
Net loss
     (934,561)     (966,323)     (779)  (1,901,663)
Members’ capital, June 30, 2010  336,335.874  $32,195,638   211,608.757  $19,749,010   500.000  $49,221  $51,993,869 
  Class 0  Class 2  Class M Total  
  Units  Capital  Units  Capital  Units  Capital  Capital 
                     
Members’ capital, December 31, 2010  397,859.944  $40,945,899   288,630.496  $28,783,191   500.000  $54,780  $69,783,870 
Subscriptions  154,152.633   15,741,470   138,074.621   13,630,873         29,372,343 
Redemptions  (32,542.338)  (3,240,853)  (26,485.078)  (2,575,629)     (8,810)  (5,825,292)
Incentive allocation     (4,821)     (3,989)     8,810    
Net loss
     (3,782,954)     (3,138,415)     (2,628)  (6,923,997)
Members’ capital, June 30, 2011  519,470.239  $49,658,741   400,220.039  $36,696,031   500.000  $52,152  $86,406,924 
See accompanying notes.
74


Graham Alternative Investment Trading II LLC

Statements of Cash Flows

  
Six Months Ended
June 30,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities      
Net loss $(6,923,997) $(1,901,663)
Adjustments to reconcile net loss to net cash used in operating activities:        
Net loss allocated from investment in Graham K4D Trading Ltd.  4,871,247   803,843 
Net income allocated from investment in Graham Cash Assets LLC  (173,480)  (121,117)
Proceeds from sale of investments in Graham K4D Trading Ltd.  55,865,805   22,879,428 
Proceeds from sale of investments in Graham Cash Assets LLC  69,988,773   24,766,140 
Investments in Graham K4D Trading Ltd.  (63,097,946)  (23,076,345)
Investments in Graham Cash Assets LLC  (84,415,676)  (40,495,430)
Changes in assets and liabilities:        
Commission reimbursements receivable  (21,127)  (1,591)
Accrued brokerage fees  35,546   30,778 
Accrued advisory fees  24,000   22,931 
Accrued sponsor fees  12,000   11,465 
Accrued incentive allocation  -   (479)
Net cash used in operating activities  (23,834,855)  (17,082,040)
         
Cash flows provided by financing activities        
Subscriptions  29,372,343   18,049,010 
 Redemptions  (5,537,488)  (967,734)
Net cash provided by financing activities  23,834,855   17,081,276 
         
Net decrease in cash and cash equivalents  -   (764)
         
Cash and cash equivalents, beginning of period  -   770 
Cash and cash equivalents, end of period $-  $6 
 
See accompanying notes.

 
65


Graham Alternative Investment Trading II LLC

Statements of Operations and Managing Member Allocation
  
Three Months Ended
March 31,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Net loss allocated from investment in Graham K4D Trading Ltd.:      
Net realized loss on investments $(1,756,078) $(2,120,237)
Net increase in unrealized appreciation on investments  302,089   1,209,716 
Brokerage commissions and fees  (130,856)  (45,962)
Net loss allocated from investment  in Graham K4D Trading Ltd.  (1,584,845)  (956,483)
         
Net investment loss allocated from investment in Graham K4D Trading Ltd.  (3,257)  (2,058)
         
Investment income:        
Interest income  84,828   53,593 
         
Expenses:        
Brokerage fees  570,302   275,547 
Advisory fees  403,643   200,402 
Sponsor fees  201,821   100,201 
Interest and other  1,319   1,196 
Commission reimbursements  (130,856)  (45,962)
Total expenses  1,046,229   531,384 
Net investment loss of the Fund  (961,401)  (477,791)
         
Net loss  (2,549,503)  (1,436,332)
         
Incentive allocation  (2,187)  - 
         
Net loss available for pro-rata allocation to all members $(2,551,690) $(1,436,332)
See accompanying notes.
66


Graham Alternative Investment Trading II LLC

Statements of Changes in Members’ Capital

For the three months ended March 31, 2011(unaudited) and 2010 (unaudited)
  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                      
Members’ capital, December 31, 2009  222,427.212  $22,373,766   149,683.130  $14,826,566     $  $37,200,332 
Subscriptions  94,438.818   8,858,000   22,555.298   2,128,500         10,986,500 
Redemptions  (1,000.365)  (92,619)  (2,790.935)  (253,629)        (346,248)
Incentive allocation                     
Net loss
     (723,100)     (713,232)        (1,436,332)
Members’ capital, March 31, 2010  315,865.665  $30,416,047   169,447.493  $15,988,205     $  $46,404,252 

  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                      
Members’ capital, December 31, 2010  397,859.944  $40,945,899   288,630.496  $28,783,191   500.000  $54,780  $69,783,870 
Subscriptions  88,740.714   9,146,533   78,173.657   7,805,177         16,951,710 
Redemptions  (11,118.197)  (1,139,685)  (8,468.955)  (832,512)     (2,187)  (1,974,384)
Incentive allocation     (1,538)     (649)     2,187    
Net loss
     (1,366,357)     (1,182,296)     (850)  (2,549,503)
Members’ capital, March 31, 2011  475,482.461  $47,584,852   358,335.198  $34,572,911   500.000  $53,930  $82,211,693 
See accompanying notes.

67

Graham Alternative Investment Trading II LLC

Statements of Cash Flows
  
Three Months Ended
March 31,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities      
Net loss $(2,549,503) $(1,436,332)
Adjustments to reconcile net loss to net cash used in operating activities:        
Net loss allocated from investment in Graham K4D Trading Ltd.  1,588,102   958,541 
Net income allocated from investment in Graham Cash Assets LLC  (84,828)  (53,593)
Proceeds from sale of investments in Graham K4D Trading Ltd.  24,007,476   6,806,772 
Proceeds from sale of investments in Graham Cash Assets LLC  34,237,936   12,046,000 
Investments in Graham K4D Trading Ltd.  (30,927,497)  (11,466,911)
Investments in Graham Cash Assets LLC  (40,519,839)  (17,531,000)
Changes in assets and liabilities:        
Commission reimbursements receivable  (24,041)  (5,179)
Accrued brokerage fees  30,081   17,689 
Accrued advisory fees  19,917   15,704 
Accrued sponsor fees  9,958   7,852 
Net cash used in operating activities  (14,212,238)  (10,640,457)
         
Cash flows provided by financing activities        
Subscriptions  16,951,710   10,986,500 
Redemptions  (2,739,472)  (346,727)
Net cash provided by financing activities  14,212,238   10,639,773 
         
Net decrease in cash and cash equivalents  -   (684)
         
Cash and cash equivalents, beginning of period  -   770 
Cash and cash equivalents, end of period $-  $86 
See accompanying notes.
6875

 
GrahamGraham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements

 
March 31,June 30, 2011

1. Organization and Business

Graham Alternative Investment Trading II LLC (“GAIT II”) was formed on July 16, 2008, commenced operations on January 4, 2009 and is organized as a Delaware Limited Liability Company. Graham Capital Management, L.P. (the “Managing Member” or “Manager”) is the managing member and the sole investment advisor. The Managing Member is registered as a Commodity Pool Operator and Commodity Trading Advisor with the Commodity Futures Trading Commission and is a member of the National Futures Association.

The investment objective of GAIT II is to achieve long-term capital appreciation through professionally managed trading through its investment in Graham K4D Trading Ltd. (the “Master Fund” or “K4D Trading”), a master trading vehicle.  K4D Trading commenced operations on January 1, 1999 and is organized as a British Virgin Islands business company.  As more fully described in Notes 2 and 3, this Master Fund invests in a broad range of currency forward and futures contracts; bond, interest rate, and index futures contracts; commodity forward and futures contracts, and swaps thereon (collectively referred to as “Derivative Positions”) traded on U.S. and foreign exchanges.

In addition to trading in the Interbank market for foreign exchange, the Manager currently executes orders on all the major U.S. futures exchanges and may also trade on, but is not limited to, the Bolsa de Mercadorias and Futuros (“BMF”), Borsa Italiana Idem (“IML”), the Eurex Deutschland (“EUREX”), Euronext (“EURONEXT”), the Hong Kong Exchanges and Clearing Ltd. (“HKEX”), the Intercontinental Exchange (“ICE”), the London International Financial Futures and Options Exchange Ltd. (“LIFFE”), the London Metal Exchange (“LME”), the Montreal Exchange (“ME”), the Mercado de Futuros Financieros (“MEFF”), the Osaka Securities Exchange (“OSE”), the Sydney Futures Exchange Ltd. (“SFE”), the Singapore Exchange (“SGX”), the South African Exchange (“SAFEX”), the Tokyo Financial Exchange (“TFX”), the Tokyo Commodity Exchange (“TOCOM”) and the Tokyo Stock Exchange (“TSE”).

SEI Global Services, Inc. (“SEI”) is GAIT II’s independent administrator and transfer agent.  SEI is responsible for certain matters pertaining to the administration of GAIT II.

GAIT II will terminate on December 31, 2050 or at an earlier date if certain conditions occur as outlined in the Limited Liability Company Agreement (“LLC Agreement”).

Duties of the Managing Member

Subject to the terms and conditions of the LLC Agreement, the Managing Member has complete and exclusive responsibility for managing and administering the affairs of GAIT II and for directing the investment and reinvestment of the assets of GAIT II.

2. Summary of Significant Accounting Policies

These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The preparation of these financial statements requires the Managing Member to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
Amounts included in the financial statements and accompanying notes related to March 31,June 30, 2011 and 2010 and the three and six month periods then ended are unaudited.  Amounts included herein as of December 31, 2010 have been taken from the December 31, 2010 audited financial statements and accompanying notes of the Fund.GAIT II.
 

 
6976

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

GAIT II considers cash and cash equivalents to include all highly liquid investments with a maturity of three months or less when acquired.

Investment in Graham K4D Trading Ltd.

GAIT II invests in K4D Trading which is managed by the Managing Member. This investment is valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon GAIT II’s proportionate share of the K4D Trading’s reported net asset value. Gains and losses are allocated monthly by K4D Trading to GAIT II based upon GAIT II’s proportionate share of the net asset value of K4D Trading and are included in the accompanying statements of operations and managing member allocation.

Fair Value

The fair value of GAIT II’s assets and liabilities, which qualify as financial instruments under U.S. GAAP, approximates the carrying amounts presented in the statements of financial condition. Changes in these carrying amounts are included in the statements of operations and managing member allocation.

GAIT II follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements.  U.S. GAAP uses a three-level hierarchy for fair value measurement based on the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.

The fair value hierarchy categorizes asset and liability positions into one of three levels, as summarized below, based on the inputs and assumptions used in deriving fair value.

 ·Level 1 inputs are unadjusted closing or settlementsettle prices for such assets or liabilities as published by the primary exchange upon which they are traded.

 ·Level 2 inputs include quoted prices for similar assets and liabilities obtained from independent brokers and/or market makers in each security. With respect to GAIT II’s investments in other funds managed by the Manager, Level 2 inputs include the net asset value of the underlying fund in which it holds an investment.

 ·Level 3 inputs are those which are considered unobservable and are significant in arriving at fair value.

GAIT II reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.  In accordance with this hierarchy, GAIT II’s investments in K4D Trading and Graham Cash Assets LLC (“GCA”) have been classified as Level 2 valuations. These investments are discussed in Note 3. There were no Level 3 assets or liabilities held at any point during the three monthssix month period ended March 31,June 30, 2011 or the twelve months ended December 31, 2010 by K4D Trading or GCA, and there were no transfers between Level 1 and Level 2 during those periods. Transfers between levels are recognized on the actual date of the event or change in circumstances that cause the transfer.

 
7077

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Derivative Instruments

In the normal course of business, the Master Fund utilizes derivative financial instruments in connection with its trading activities. Derivative instruments derive their value from underlying assets, indices, reference rates or a combination of these factors.  Investments in derivative financial instruments are subject to additional risks that can result in a loss of all or part of an investment.  The Master Fund’s derivative financial instruments are classified by the following primary underlying risks: interest rate, credit, foreign currency exchange rate, commodity price, and equity price risks. These risks can be in excess of the amounts recognized in the statements of financial condition. In addition, the Master Fund is also subject to additional counterparty risk should its counterparties fail to meet the terms of their contracts.  Management of counterparty risk involves a number of considerations, such as the financial profile of the counterparty, specific terms and duration of the contractual agreement, and the value of collateral held, if any. The Master Fund has established initial credit approval, credit limits, and collateral requirements and may reduce its exposure to any counterparties it deems necessary.  Trading in non-U.S. dollar denominated derivative instruments may subject the value of, and gains and losses associated with, such contracts to additional risks related to adverse changes in the applicable exchange rates.

The Master Fund records all its derivative financial instruments at fair value, which is derived in accordance with U.S. GAAP.  Unrealized gains and losses from these instruments are recorded based on changes in their fair value.  Realized gains and losses are recorded when the positions are closed.  All unrealized and realized gains and losses related to derivative financial instruments are included in net realized gain and net increase in appreciation on investments in the Master Fund’s statements of operations.

Futures Contracts

The Master Fund uses futures contracts in an attempt to take advantage of changes in the value of equities, commodities, interest rates, bonds and foreign currencies.  Futures contracts are valued based upon the closing price as of the valuation date, established by the primary exchange upon which they are traded.

A futures contract represents a commitment for the future purchase or sale of an asset or cash settlement based on the value of an asset on a specified date.  The purchase and sale of futures contracts are executed on an exchange which requires margin deposits with a Futures Commission Merchant (“FCM”).  Subsequent payments are made or received by the Master Fund each day, depending on the daily fluctuations in the value of the contract. These changes in valuation are recorded for financial statement purposes as unrealized gains or losses by the Master Fund.  Relative to over-the-counter derivative financial instruments, futures contracts provide reduced counterparty risk to the Master Fund since futures are exchange-traded and the exchange’s clearinghouse guarantees the futures against default. However some non-U.S. exchanges are “principals’ markets” in which no common clearing facility exists and the Master Fund may look only to the clearing broker for performance of the contract.  The U.S. Commodity Exchange Act requires an FCM to segregate all funds received from such FCM’s customers in respect of regulated futures transactions. If the FCM were not to do so to the full extent required by law, the assets of the Master Fund might not be fully protected in the event of the bankruptcy or insolvency of the FCM. In that case, the Master Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the FCM’s combined customer accounts, even though certain property specifically traceable to the Master Fund was held by the FCM.  In addition, in the event of bankruptcy or insolvency of an exchange or an affiliated clearing house, the Master Fund might experience a loss of funds deposited through its FCM as margin with such exchange or affiliated clearing house, the loss of unrealized profits on its open positions, and the loss of funds owed to it as realized profits on closed positions.

 
7178

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Forward Contracts

The Master Fund enters into foreign currency and commodity forward contracts in an attempt to take advantage of changes in exchange rates and commodity prices.  Forward currency and commodities transactions are contracts or agreements for delivery of specific currencies and commodities or the cash equivalent value at a specified future date and an agreed upon price.  Forward contracts are not guaranteed by an exchange or clearing house and therefore the risks include the inability of counterparties to meet their obligations under the terms of the contracts as well as the risks associated with movements in fair value.

Exchange traded forward contracts are valued based upon the settlementsettle prices as of the valuation date, established by the primary exchange upon which they are traded.  All other forward contracts are valued based upon a forward curve constructed using independently quoted forward points.

Swap Contracts

The Master Fund may enter into various swap contracts.  Swap contracts are not guaranteed by an exchange or an affiliated clearing house or regulated by any U.S. or foreign government authorities.  Failure of a counterparty to meet its obligation under the terms of the swap contract could result in the loss of any unrealized gains on open positions and force the Master Fund to cover its resale commitments, if any, at the current market price.  It may not be possible to dispose of or close out a swap position without the consent of the counterparty, and the Master Fund may not be able to enter into an offsetting contract in order to cover its risk. Swaps are subject to the International Swap and Derivative Association (“ISDA”) Master Agreements which generally require among other things, that a Master Fund maintain a predetermined level of net assets, and provide limits with respect to a decline in the Master Fund’s net asset value over 1-month, 3-month and 12-month periods. If a Master Fund were to violate such provisions, the counterparty to the swaps could demand liquidation of outstanding swap positions.

A total return swap contract is an agreement that obligates two parties to exchange cash flows calculated by reference to changes in specified prices or rates for a specified notional amount of the underlying assets.  The payment flows are usually netted against each other, with the difference being paid by one party to another.

Exchange traded swaps are valued based upon the closing prices established by the primary exchange upon which they are traded.  Total return swaps are valued based upon the exchange published settlementsettle price of the underlying.  During the term of the swaps, changes in value are recognized as unrealized gains or losses by marking the contracts to fair value.  Additionally, the Master Fund records a realized gain (loss) when a swap contract is terminated and when periodic payments are received or made at the end of each measurement period, but prior to termination.  The Master Fund determines the estimated fair value of all swaps in accordance with U.S. GAAP.

Options

The Master Fund may buy and sell covered and uncovered exchange traded and over-the-counter options on futures, foreign currencies, commodities, interest rates and equities to take advantage of the price movements of the financial instrument underlying the option or to hedge positions in the underlying assets.  Option contracts give one party the right, but not the obligation, to buy or sell within a limited time or on a specified date, a financial instrument, commodity or currency at a contracted price.  Options may also be settled in cash, based on differentials between specified indices or prices.

 
7279


Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
2. Summary of Significant Accounting Policies (continued)

Options (continued)

The Master Fund is exposed to counterparty risk to the extent that a seller of an over-the-counter option does not meet its obligations under the terms of the option contract.  The maximum risk of loss to the Master Fund is the fair value of the contracts and the premiums paid to purchase its open option contracts. Relative to over-the-counter options, exchange traded options provide reduced counterparty risk to the Master Fund since the exchanges’ clearinghouse guarantees the option against default.

Exchange traded options are valued based upon the settlementsettle prices published as of the valuation date, by the principal exchange upon which they are traded.  In the absence of an exchange published settlementsettle price, the option will be valued using the last reported sales price reported on the exchange for the valuation date.  Over-the-counter options and exchange traded options with no reported sales price on the valuation date will generally be valued at the average of last reported bid and offer quotes from independent brokers or from the exchange, respectively.

Indemnifications

In the normal course of business, the Master Fund, GCA, and GAIT II enter into contracts that contain a variety of indemnifications. Such contracts include those with the Master Fund’s brokers and trading counterparties. GAIT II’s maximum exposure under these arrangements is unknown; however, GAIT II has not had prior claims or losses with respect to such indemnifications and considers the risk of loss to be remote.

3. Investment in Graham K4D Trading Ltd.

As of March 31,June 30, 2011 and December 31, 2010, GAIT II invested in K4D Trading, a master trading vehicle also managed by the Managing Manager. GAIT II’s investment in K4D Trading, as well as its investment objective, is summarized below.  K4D Trading and GAIT II are related parties.   K4D Trading does not charge any management or incentive fees, and offers monthly subscriptions and redemptions.

March 31, 2011 
Investment – Objective Percent of Members’ Capital  Fair Value  
Net Income
(three months then ended)
 
          
Graham K4D Trading Ltd. (a)  15.50% $12,743,402  $(1,588,102)
   15.50% $12,743,402  $(1,588,102)


June 30, 2011June 30, 2011 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Loss
(three months
then ended)
  
Net Loss
(six months
then ended)
 
            
Graham K4D Trading Ltd. (a)  11.31% $9,772,362  $(3,283,145) $(4,871,247)
  11.31% $9,772,362  $(3,283,145) $(4,871,247)
                
December 31, 2010 December 31, 2010  December 31, 2010       
Investment – Objective Percent of Members’ Capital  Fair Value  
Net Income
(three months ended March 31, 2010)
  Percent of Members’ Capital  Fair Value  
Net Income
(three months ended
June 30, 2010)
  
Net Loss
(six months ended
June 30, 2010)
 
                         
Graham K4D Trading Ltd. (a)  10.62% $7,411,468  $(958,541)  10.62% $7,411,468  $154,968  $(803,843)
  10.62% $7,411,468  $(958,541)  10.62% $7,411,468  $154,968  $(803,843)
 
(a) – Systematic macro

 
73


Graham Alternative Investment Trading II LLC
Notes to Unaudited Financial Statements (continued)
3. Investment in Graham K4D Trading Ltd. (continued)

The following table summarizes the financial position of K4D Trading as of March 31, 2011.
Assets:   
Due from brokers $288,833,860 
Derivative financial instruments, at fair value  52,072,797 
Subscriptions receivable  405 
Interest receivable  20,997 
Total assets  340,928,059 
     
Liabilities:    
Derivative financial instruments, at fair value  1,544,291 
Redemptions payable  405 
Total liabilities  1,544,696 
Net assets $339,383,363 
     
Percentage of Master Fund held by the Fund  3.75%

7480

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd. (continued)
 
The following table summarizes the financial position of K4D Trading as of June 30, 2011.
Assets:   
Due from brokers $283,838,709 
Derivative financial instruments, at fair value  3,440,679 
Subscriptions receivable  405 
Total assets  287,279,793 
     
Liabilities:    
Derivative financial instruments, at fair value  23,014,910 
Due to brokers  546,447 
Redemptions payable  405 
Total liabilities  23,561,762 
Net assets $263,718,031 
     
Percentage of Master Fund held by the Fund  3.71%

81

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd. (continued)

The following schedules displayschedule displays the condensed schedulesschedule of investments for K4D Trading as of March 31,June 30, 2011.

Description
Principal
Amount
 Fair Value  Percentage of Net Assets of K4D Trading 
Principal
Amount
 Fair Value  
Percentage of
Net Assets of
K4D Trading
 
Long contracts              
Futures              
U.S. bond  $(1,693,870)  (0.50)%  $(11,253,047)  (4.27)%
Foreign bond   1,076,899   0.32%   (8,536,516)  (3.24)%
U.S. index   8,356,229   2.46%   10,415,895   3.95%
Foreign index   6,955,415   2.05%   5,025,773   1.91%
Commodity   25,056,183   7.38%   (1,129,857)  (0.43)%
Interest rate   (958,759)  (0.28)%   (1,020,274)  (0.39)%
Currency   4,703,445   1.39%   1,073,226   0.41%
Total futures   43,495,542   12.82%   (5,424,800)  (2.06)%
                  
Forwards                  
Australian Dollar / U.S. Dollar 04/20/11AUD      2,270,409,210  69,879,791   20.59%
Canadian Dollar / U.S. Dollar 04/20/11CAD      2,993,928,486  26,032,783   7.67%
Euro / Japanese Yen 04/20/11EUR         722,878,081  31,067,277   9.15%
Euro / U.S. Dollar 04/20/11EUR      2,425,359,120  44,098,568   12.99%
Japanese Yen / U.S. Dollar 04/20/11JPY  265,224,580,054  (56,456,018)  (16.63)%
New Zealand Dollar / U.S. Dollar 04/20/11NZD         848,309,198  21,101,112   6.22%
Australian dollar / U.S. dollar 07/20/11
AUD   1,432,785,322
  22,045,147   8.36%
Canadian dollar / U.S. dollar 07/20/11CAD           2,209,264,516  36,133,104   13.70%
Euro / British Pound 07/20/11EUR               593,576,554  16,041,091   6.08%
Euro / U.S. dollar 07/20/11EUR            1,461,054,451  24,106,386   9.14%
British Pound / U.S. dollar 07/20/11GBP            1,359,056,576  (17,816,018)  (6.75)%
Other foreign currency   82,745,920   24.38%   37,053,409   14.05%
Total forwards   218,469,433   64.37%   117,563,119   44.58%

 
7582

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)


3. Investment in Graham K4D Trading Ltd. (continued)
 
The following schedule displays the condensed schedule of investments for K4D Trading as of June 30, 2011.
Description
Principal
 Amount
 Fair Value  
Percentage of
Net Assets of
K4D Trading
 
Short contracts       
Futures       
Foreign bond  $(239,058)  (0.09)%
Foreign index   (5,079,843)  (1.93)%
Commodity   (7,688,784)  (2.91)%
Interest rate   (3,830,906)  (1.45)%
Currency   (742,175)  (0.28)%
Total futures   (17,580,766)  (6.66)%
          
Forwards         
Australian dollar / U.S. dollar 07/20/11
AUD    (1,125,059,422)
  (16,044,568)  (6.08)%
Canadian dollar / U.S. dollar 07/20/11
CAD    (1,981,126,320)
  (31,811,387)  (12.06)%
Euro / British Pound 07/20/11
EUR        (558,464,789)
  (14,336,007)  (5.44)%
Euro / U.S. dollar 07/20/11
EUR     (1,431,692,261)
  (23,528,161)  (8.92)%
British Pound / U.S. dollar 07/20/11
GBP     (1,374,602,354)
  13,699,004   5.19%
Other foreign currency   (42,110,665)  (15.97)%
Total forwards   (114,131,784)  (43.28)%
          
Total  $(19,574,231)  (7.42)%
83

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd. (continued)

The following schedules display the condensed schedules of investments for K4D Trading as of March 31, 2011.
Description
Principal
 Amount
 Fair Value  Percentage of Net Assets of K4D Trading 
Short contracts       
Futures       
U.S. bond  $393,672   0.12%
Foreign bond   12,829,370   3.77%
Foreign index   (6,392,370)  (1.88)%
Commodity   (4,114,279)  (1.21)%
Interest rate   5,053,667   1.49%
Currency   807,195   0.24%
Total futures   8,577,255   2.53%
          
Forwards         
Australian Dollar / U.S. Dollar 04/20/11AUD      (1,943,684,931)  (62,352,863)  (18.37)%
Canadian Dollar / U.S. Dollar 04/20/11CAD      (2,566,882,066)  (33,800,932)  (9.96)%
Euro / Japanese Yen 04/20/11EUR         (644,173,895)  (29,021,433)  (8.55)%
Euro / U.S. Dollar 04/20/11EUR      (2,227,734,366)  (44,146,754)  (13.01)%
Japanese Yen / U.S. Dollar 04/20/11JPY  (255,219,960,505)  54,118,737   15.95%
New Zealand Dollar / U.S. Dollar 04/20/11NZD         (896,997,648)  (24,523,202)  (7.23)%
Other foreign currency   (80,287,277)  (23.66)%
Total forwards   (220,013,724)  (64.83)%
          
Total  $50,528,506   14.89%

76

Graham Alternative Investment Trading II LLC
Notes to Unaudited Financial Statements (continued)
3. Investment in Graham K4D Trading Ltd. (continued)

The following table shows the fair value classification of each investment type for K4D Trading as of March 31,June 30, 2011.


Long Contracts      
Level 1:      
U.S. bond futures $(1,693,870) $(11,253,047)
Foreign bond futures  1,076,899   (8,536,516)
U.S. index futures  8,356,229   10,415,895 
Foreign index futures  6,955,415   5,025,773 
Commodity futures  25,056,183   (1,129,857)
Interest rate futures  (958,759)  (1,020,274)
Currency futures  4,703,445   1,073,226 
Total Level 1  43,495,542   (5,424,800)
        
Level 2:        
Foreign currency forwards  218,469,433   117,563,119 
Total Level 2  218,469,433   117,563,119 
Total long contracts $261,964,975  $112,138,319 
        
Short Contracts        
Level 1:        
U.S. bond futures $393,672 
Foreign bond futures  12,829,370  $(239,058)
Foreign index futures  (6,392,370)  (5,079,843)
Commodity futures  (4,114,279)  (7,688,784)
Interest rate futures  5,053,667   (3,830,906)
Currency futures  807,195   (742,175)
Total Level 1  8,577,255   (17,580,766)
        
Level 2:        
Foreign currency forwards  (220,013,724)  (114,131,784)
Total Level 2  (220,013,724)  (114,131,784)
Total short contracts $(211,436,469) $(131,712,550)

 
7784


Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd. (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master FundsFund at March 31,June 30, 2011 categorized by primary underlying risk.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on K4D Trading'sTrading’s statement of financial condition.position.
 
 Graham K4D Trading Ltd.  Graham K4D Trading Ltd. 
 Long exposure  Short exposure        Long exposure  Short exposure       
 
Notional
amounts
  
Number of
contracts
  Notional amounts  
Number of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
  
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities 
                                    
Commodity price                                    
Futures $1,216,608,649   14,239  $(237,850,835)  (3,751) $33,002,810  $(12,060,906) $1,345,596,497   15,854  $(758,255,780)  (12,860) $28,003,129  $(36,821,770)
  1,216,608,649   14,239   (237,850,835)  (3,751)  33,002,810   (12,060,906)  1,345,596,497   15,854   (758,255,780)  (12,860)  28,003,129   (36,821,770)
                                                
Equity price                                                
Futures  780,831,862   11,792   (174,585,658)  (1,691)  17,713,871   (8,794,597)  476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
  780,831,862   11,792   (174,585,658)  (1,691)  17,713,871   (8,794,597)  476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
                                                
Foreign currency exchange rate                                                
Futures  305,790,215   2,727   (221,066,583)  (2,632)  6,391,645   (881,005)  445,249,816   2,709   (275,073,860)  (2,797)  1,326,426   (995,375)
Forwards  64,401,562   -   (62,576,740)  -   61,240,470   (62,784,761)  31,171,994   -   (18,184,872)  -   21,904,835   (18,473,500)
  370,191,777   2,727   (283,643,323)  (2,632)  67,632,115   (63,665,766)  476,421,810   2,709   (293,258,732)  (2,797)  23,231,261   (19,468,875)
                                                
Interest rate                                                
Futures  6,684,174,178   25,793   (12,480,888,254)  (48,233)  23,293,117   (6,592,138)  11,774,187,855   45,104   (2,692,780,158)  (8,420)  3,205,822   (28,085,623)
  6,684,174,178   25,793   (12,480,888,254)  (48,233)  23,293,117   (6,592,138)  11,774,187,855   45,104   (2,692,780,158)  (8,420)  3,205,822   (28,085,623)
Total $9,051,806,466   54,551  $(13,176,968,070)  (56,307) $141,641,913  $(91,113,407) $14,073,083,415   70,486  $(4,007,343,092)  (28,824) $69,881,880  $(89,456,111)
                           
                           
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $288,833,860 Collateral balances supporting all derivative positions          $283,292,262 

 
7885

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)


3. Investment in Graham K4D Trading Ltd. (continued)

The following table summarizes the results of operations of K4D Trading for the three monthsand six month periods ended March 31,June 30, 2011.
 
 
Three Months Ended
June 30, 2011
  
Six Months Ended
June 30, 2011
 
         
Net investment loss $(83,866) $(206,478) $(290,344)
            
Net realized loss on investments  (47,163,832)  (21,262,016)  (68,425,848)
Net increase in appreciation on investments  5,253,462 
Net decrease in unrealized appreciation on investments  (70,349,041)  (65,095,579)
Brokerage commissions and fees  (3,291,928)  (3,638,222)  (6,930,150)
Net loss on investments  (45,202,298)  (95,249,279)  (140,451,577)
Net loss $(45,286,164) $(95,455,757) $(140,741,921)


The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net realized gain and net increase in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three monthsand six month periods ended March 31,June 30, 2011:

 
Three Months Ended
June 30, 2011
  
Six Months Ended
June 30, 2011
 
      
Commodity price         
Futures $44,811,512  $(87,798,352) $(42,986,840)
  44,811,512   (87,798,352)  (42,986,840)
            
Equity price            
Futures  (40,301,211)  (28,028,918)  (68,330,129)
  (40,301,211)  (28,028,918)  (68,330,129)
            
Foreign currency exchange rate            
Futures  (5,461,945)  (4,534,058)  (9,996,003)
Forwards  (24,055,983)  5,477,710   (18,578,273)
  (29,517,928)  943,652   (28,574,276)
            
Interest rate            
Futures  (16,902,743)  23,272,561   6,369,818 
  (16,902,743)  23,272,561   6,369,818 
Total $(41,910,370) $(91,611,057) $(133,521,427)

 
7986

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investment in Graham K4D Trading Ltd. (continued)

The following table summarizes the financial position of K4D Trading as of December 31, 2010.


Assets:   
Due from brokers $135,887,098 
Derivative financial instruments, at fair value  45,743,328 
Subscriptions receivable  - 
Interest receivable  9,100 
Total assets  181,639,526 
     
Liabilities:    
Derivative financial instruments, at fair value  - 
Redemptions payable  - 
Total liabilities  - 
Net assets $181,639,526 
     
Percentage of Master Fund held by the Fund  4.08%

 
8087

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)


3. Investment in Graham K4D Trading Ltd. (continued)

The following schedule displays the condensed schedule of investments of K4D Trading as of December 31, 2010.
 
Description
Principal
Amount
 Fair Value  Percentage of Net Assets of K4D Trading 
Long contracts       
Futures       
U.S. bond  $237,741   0.13%
Foreign bond   1,053,653   0.58%
U.S. index   3,010,100   1.66%
Foreign index   (3,683,508)  (2.03)%
Commodity   31,911,445   17.57%
Interest rate   325,182   0.18%
Currency   4,536,916   2.50%
Total futures   37,391,529   20.59%
          
Forwards         
Japanese Yen / U.S. Dollar 01/19/11JPY   43,988,617,100  11,186,032   6.16%
Other Japanese Yen / U.S. Dollar 1/04/11 - 1/05/11JPY   14,270,122,339  796,715   0.44%
Swiss Franc / U.S. Dollar  01/19/11CHF       491,922,158  17,376,713   9.57%
Other foreign currency   28,092,524   15.46%
Total forwards   57,451,984   31.63%
Description
Principal
Amount
 Fair Value  
Percentage of
Net Assets of
K4D Trading
 
Long contracts       
Futures       
U.S. bond  $237,741   0.13%
Foreign bond   1,053,653   0.58%
U.S. index   3,010,100   1.66%
Foreign index   (3,683,508)  (2.03)%
Commodity   31,911,445   17.57%
Interest rate   325,182   0.18%
Currency   4,536,916   2.50%
Total futures   37,391,529   20.59%
          
Forwards         
Japanese Yen / U.S. dollar 01/19/11JPY             43,988,617,100  11,186,032   6.16%
Other Japanese Yen / U.S. dollar 1/04/11 - 1/05/11JPY             14,270,122,339  796,715   0.44%
Swiss Franc / U.S. dollar  01/19/11CHF                 491,922,158  17,376,713   9.57%
Other foreign currency   28,092,524   15.46%
Total forwards   57,451,984   31.63%

 
8188


Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investment in Graham K4D Trading Ltd. (continued)

The following schedule displays the condensed schedule of investments of K4D Trading as of December 31, 2010.
 
Description
Principal
 Amount
 Fair Value  Percentage of Net Assets of K4D Trading 
Principal
 Amount
 Fair Value  
Percentage of
Net Assets of
K4D Trading
 
Short contracts              
Futures              
U.S. bond  $(1,546,794)  (0.85)%  $(1,546,794)  (0.85)%
Foreign bond   (540,937)  (0.30)%   (540,937)  (0.30)%
Foreign index   (142,959)  (0.08)%   (142,959)  (0.08)%
Commodity   (4,754,965)  (2.62)%   (4,754,965)  (2.62)%
Interest rate   (3,790,967)  (2.09)%   (3,790,967)  (2.09)%
Currency   739,824   0.41%   739,824   0.41%
Total futures   (10,036,798)  (5.53)%   (10,036,798)  (5.53)%
                  
Forwards                  
Japanese Yen / U.S. Dollar 01/19/11JPY   (36,043,608,800)  (12,993,436)  (7.15)%
Other Japanese Yen / U.S. Dollar 1/04/11 - 1/05/11JPY   (14,111,800,669)  (834,965)  (0.46)%
Swiss Franc / U.S. Dollar 01/19/11CHF       (431,464,200)  (17,247,454)  (9.50)%
Japanese Yen / U.S. dollar 01/19/11JPY          (36,043,608,800)  (12,993,436)  (7.15)%
Other Japanese Yen / U.S. dollar 1/04/11 - 1/05/11JPY          (14,111,800,669)  (834,965)  (0.46)%
Swiss Franc / U.S. dollar 01/19/11CHF              (431,464,200)  (17,247,454)  (9.50)%
Other foreign currency   (7,987,532)  (4.40)%   (7,987,532)  (4.40)%
Total forwards   (39,063,387)  (21.51)%   (39,063,387)  (21.51)%
                  
Total  $45,743,328   25.18%  $45,743,328   25.18%

 
8289

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd. (continued)

The following table shows the fair value classification of each investment type for K4D Trading as of December 31, 2010.

Long Contracts      
Level 1:      
U.S. bond futures $237,741  $237,741 
Foreign bond futures  1,053,653   1,053,653 
U.S. index futures  3,010,100   3,010,100 
Foreign index futures  3,683,508   (3,683,508)
Commodity futures  31,911,445   31,911,445 
Interest rate futures  325,182   325,182 
Currency futures  4,536,916   4,536,916 
Total Level 1  37,391,529   37,391,529 
        
Level 2:        
Foreign currency forwards  57,451,984   57,451,984 
Total Level 2  57,451,984   57,451,984 
Total long contracts $94,843,513  $94,843,513 
        
Short Contracts        
Level 1:        
U.S. bond futures $(1,546,794) $(1,546,794)
Foreign bond futures  (540,937)  (540,937)
Foreign index futures  (142,959)  (142,959)
Commodity futures  (4,754,965)  (4,754,965)
Interest rate futures  (3,790,967)  (3,790,967)
Currency futures  739,824   739,824 
Total Level 1  (10,036,798)  (10,036,798)
        
Level 2:        
Foreign currency forwards  (39,063,387)  (39,063,387)
Total Level 2  (39,063,387)  (39,063,387)
Total short contracts $(49,100,185) $(49,100,185)

 
8390


Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd. (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master FundsFund at December 31, 2010 categorized by primary underlying risk.  Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from / (to) brokers on K4D Trading'sTrading’s statement of financial condition.position.
 
 Graham K4D Trading Ltd.  Graham K4D Trading Ltd. 
 Long exposure  Short exposure        Long exposure  Short exposure       
 
Notional
amounts
  
Number of
contracts
  
Notional
amounts
  
Number of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
  Notional amounts  
Number of
contracts
  Notional amounts  
Number of
contracts
  Derivative Assets  
Derivative
Liabilities
 
                                    
Commodity price                                    
Futures $810,106,878   10,782  $(53,034,444)  (926) $32,742,543  $(5,586,063) $810,106,878   10,782  $(53,034,444)  (926) $32,742,543  $(5,586,063)
  810,106,878   10,782   (53,034,444)  (926)  32,742,543   (5,586,063)  810,106,878   10,782   (53,034,444)  (926)  32,742,543   (5,586,063)
                                                
Equity price                                                
Futures  16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)  16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)
  16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)  16,008,395,340   15,303   (968,631,180)  (671)  4,935,403   (5,751,770)
                                                
Foreign currency exchange rate                                                
Futures  340,454,690   2,852   (86,152,236)  (957)  5,633,114   (356,374)  340,454,690   2,852   (86,152,236)  (957)  5,633,114   (356,374)
Forwards  90,870,643,000   -   (87,109,470,216)  -   78,339,927   (59,951,330)  90,870,643,000   -   (87,109,470,216)  -   78,339,927   (59,951,330)
  91,211,097,690   2,852   (87,195,622,452)  (957)  83,973,041   (60,307,704)  91,211,097,690   2,852   (87,195,622,452)  (957)  83,973,041   (60,307,704)
                                                
Interest rate                                                
Futures  2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)  2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)
  2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)  2,044,200,093   8,454   (63,261,455,459)  (23,095)  2,729,784   (6,991,906)
Total $110,073,800,001   37,391  $(151,478,743,535)  (25,649) $124,380,771  $(78,637,443) $110,073,800,001   37,391  $(151,478,743,535)  (25,649) $124,380,771  $(78,637,443)
                           
                           
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $135,887,098 Collateral balances supporting all derivative positions          $135,887,098 

 
8491

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investment in Graham K4D Trading Ltd. (continued)

The following table summarizes the results of operations of K4D Trading for the three monthsand six month periods ended March 31,June 30, 2010.
 
Net investment loss $(68,408)
     
Net realized loss on investments  (77,892,271)
Net increase in appreciation on investments  34,667,568 
Brokerage commissions and fees  (1,480,295)
Net loss on investments  (44,704,998)
Net loss $(44,773,406)
  
Three Months Ended
June 30, 2010
  
Six Months Ended
June 30, 2010
 
       
Net investment loss $(33,308) $(101,716)
         
Net realized gain (loss) on investments  56,094,201   (21,798,070)
Net decrease in unrealized appreciation on investments  (49,262,278)  (14,594,710)
Brokerage commissions and fees  (1,525,901)  (3,006,196)
Net gain (loss) on investments  5,306,022   (39,398,976)
Net gain (loss) $5,272,714  $(39,500,692)

The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net realized gain and net increase in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three monthsand six month periods ended March 31,June 30, 2010.

Commodity price   
Futures $(23,768,545)
   (23,768,545)
     
Equity price    
Futures  (32,614,364)
   (32,614,364)
     
Foreign currency exchange rate    
Futures  712,311 
Forwards  (80,875)
   631,436 
     
Interest rate    
Futures  12,526,770 
   12,526,770 
Total $(43,224,703)

  
Three Months Ended
June 30, 2010
  
Six Months Ended
June 30, 2010
 
       
Commodity price      
Futures $(50,167,010) $(73,935,555)
   (50,167,010)  (73,935,555)
         
Equity price        
Futures  (29,055,274)  (61,669,638)
   (29,055,274)  (61,669,638)
         
Foreign currency exchange rate        
Futures  2,398,505   3,110,816 
Forwards  (9,137,401)  (9,218,276)
   (6,738,896)  (6,107,460)
         
Interest rate        
Futures  92,793,103   105,319,873 
   92,793,103   105,319,873 
Total $6,831,923  $(36,392,780)
 
8592

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC

GAIT II invests a portion of its excess liquidity in GCA, an entity for which the Manager is also the sole investment advisor. GCA commenced operations on June 22, 2005 and was formed as a Delaware Limited Liability Company for the purpose of consolidating investment activity of multiple funds managed by the Manager. Its objective is to preserve capital while enhancing return on cash balances and providing daily liquidity. It invests in debt obligations guaranteed by the U.S. federal government, which range in maturity from three to thirty months. GCA also maintains cash and cash equivalents on deposit with major U.S. institutions. GCA values all fixed income securities at amortized cost to the extent it approximates fair value.  GAIT II’s investment in GCA is valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon the Fund’sGAIT II’s proportionate share of GCA’s reported net asset value. GAIT II records its proportionate share of GCA’s investment income and expenses on a monthly basis.  For the three months ended March 31,June 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $84,828.$88,652. For the six months ended June 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $173,480.  For the three months ended March 31,June 30, 2010, the total amount recognized by GAIT II with respect to its investment in GCA was $53,593.$67,524. For the six months ended June 30, 2010, the total amount recognized by GAIT II with respect to its investment in GCA was $121,117. These amounts are included in interest income in the statements of operations and managing member allocation. At March 31,June 30, 2011 and December 31, 2010, GAIT II owned approximately 2.32%2.36% and 2.16%, respectively, of GCA. The following table summarizes the financial position of GCA as of March 31,June 30, 2011 and December 31, 2010:

 March 31, 2011  December 31, 2010  June 30, 2011  December 31, 2010 
Assets:            
Cash and cash equivalents $657,076,450  $750,098,151  $799,619,853  $750,098,151 
Investments in fixed income securities (cost $2,367,048,721 and $2,215,622,512, respectively)  2,367,048,721   2,215,622,512 
Investments in fixed income securities (cost $2,523,700,111 and $2,215,622,512, respectively)  2,523,700,111   2,215,622,512 
Accrued interest income  8,384,794   6,547,074   6,546,459   6,547,074 
Total assets  3,032,509,965   2,972,267,737   3,329,866,423   2,972,267,737 
                
Liabilities:                
Other liabilities  20,000   20,000   20,000   20,000 
Total liabilities  20,000   20,000   20,000   20,000 
Net assets $3,032,489,965  $2,972,247,737  $3,329,846,423  $2,972,247,737 


The following table summarizes the results of operations of GCA for the three monthsand six month periods ended March 31,June 30, 2011 and 2010:

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
 2011  2010  2011  2010  2011  2010 
Investment income                  
Interest income $3,860,502  $2,623,273  $3,850,625  $3,188,049  $7,711,127  $5,904,213 
Total investment income  3,860,502   2,623,273   3,850,625   3,188,049   7,711,127   5,904,213 
                        
Expenses:                        
Bank fee expense  133,584   -   126,225   151,611   259,809   244,502 
Total expenses  133,584   -   126,225   151,611   259,809   244,502 
Net investment income  3,726,918   2,623,273   3,724,400   3,036,438   7,451,318   5,659,711 
Net income $3,726,918  $2,623,273  $3,724,400  $3,036,438  $7,451,318  $5,659,711 

 
8693

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

The following schedule displays the condensed schedule of investments for GCA as of March 31,June 30, 2011.

Description Principal Amount  Fair Value  Percentage of Members’ Capital  
 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Graham Cash Assets LLC                  
Investments in Fixed Income Securities (cost $2,367,048,721)         
Investments in Fixed Income Securities (cost $2,523,700,111)         
United States                  
FDIC Guaranteed Bonds (cost $1,179,021,270)         
Citibank 1.25% - 1.88% due 07/12/11 – 12/28/12 $375,000,000  $377,224,782   12.44%
Citigroup Funding Inc. 1.38% - 1.88% due 05/05/11 – 11/15/12  175,000,000   176,506,228   5.82%
FDIC Guaranteed Bonds (cost $1,160,361,420)         
Citibank 1.25% - 1.75% due 07/12/11 - 12/28/12 $275,000,000  $275,912,810   8.29%
Other FDIC guaranteed bonds      625,290,260   20.62%      884,448,610   26.56%
Total FDIC Guaranteed Bonds      1,179,021,270   38.88%      1,160,361,420   34.85%
                        
Government Bonds (cost $1,188,027,451)            
U.S. Treasury 0.38% - 1.13% due 04/30/11 – 11/30/12  1,185,000,000   1,188,027,451   39.18%
Government Bonds (cost $1,363,338,691)            
U.S. Treasury 0.38% - 1.38% due 08/31/11 - 03/31/12  1,360,000,000   1,363,338,691   40.94%
Total Government Bonds      1,188,027,451   39.18%      1,363,338,691   40.94%
                        
Total Investments in Fixed Income Securities     $2,367,048,721   78.06%     $2,523,700,111   75.79%

 
The following schedule displays the condensed schedule of investments for GCA as of December 31, 2010.

Description Principal Amount  Fair Value  Percentage of Members’ Capital  
 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Graham Cash Assets LLC                  
Investments in Fixed Income Securities (cost $2,215,622,512)                  
United States                  
FDIC Guaranteed Bonds (cost $1,101,463,404)                  
Citibank 1.25% – 1.88% due 03/30/11 – 05/07/12 $350,000,000  $351,915,163   11.84% $350,000,000  $351,915,163   11.84%
Other FDIC guaranteed bonds      749,548,241   25.22%      749,548,241   25.22%
Total FDIC Guaranteed Bonds      1,101,463,404   37.06%      1,101,463,404   37.06%
                        
Government Bonds (cost $1,114,159,108)                        
U.S. Treasury 0.88% due 04/30/11  150,000,000   150,213,724   5.05%  150,000,000   150,213,724   5.05%
Other U.S. Treasury 0.75% – 1.13% due 01/31/11 – 04/30/12      963,945,384   32.43%      963,945,384   32.43%
Total Government Bonds      1,114,159,108   37.48%      1,114,159,108   37.48%
                        
Total Investments in Fixed Income Securities     $2,215,622,512   74.54%     $2,215,622,512   74.54%

 
8794

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
4. Graham Cash Assets LLC (continued)

GCA reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.  The following table shows the fair value classification of each investment type held by GCA as of March 31,June 30, 2011 and December 31, 2010:

 March 31, 2011  December 31, 2010  June 30, 2011  December 31, 2010 
Long positions            
Level 2:            
Fixed income securities            
FDIC Guaranteed Bonds $1,179,021,270  $1,101,463,404  $1,160,361,420  $1,101,463,404 
Government Bonds  1,188,027,451   1,114,159,108   1,363,338,691   1,114,159,108 
Fixed income securities  2,367,048,721   2,215,622,512 
Total fixed income securities  2,523,700,111   2,215,622,512 
Total Level 2  2,367,048,721   2,215,622,512   2,523,700,111   2,215,622,512 
Total long positions $2,367,048,721  $2,215,622,512  $2,523,700,111  $2,215,622,512 

5. Capital Accounts

GAIT II offers Class 0 Units and Class 2 Units (collectively, the “Units”). GAIT II may issue additional classes in the future subject to different fees, expenses or other terms, or to invest in other investment programs or combinations of investment programs managed by the Manager. GAIT II also has Management Units (“Class M units”) which are solely for the investment of the Manager.

A separate Capital Account is maintained for each member with respect to each Class of Units held by such member. The initial balance of each members’ Capital Account is equal to the initial contribution to GAIT II with respect to the Class to which such Capital Account relates. Each member’s Capital Account is increased by any additional subscription, and decreased by any redemption by such member of Units of such Class to which the Capital Account relates. All income and expenses of GAIT II are allocated among the members’ Capital Accounts in proportion to the balance that each Capital Account bears to the balance of all Capital Accounts as of the beginning of such fiscal period.

Addition of Members and Managing Members

Units are available for subscription as of the first business day of each month upon written notice of at least three business days prior to the last business day of the preceding month.

Subscriptions

Units may be purchased at a price equal to the Net Asset Value per Unit of the relevant Class as of the immediately preceding Valuation Day, as defined in the LLC Agreement. There is no minimum subscription amount.

Redemptions

Units are not subject to any minimum holding period. Members may redeem Units at the Net Asset Value thereof as of the last business day of each month upon not less than three business days’ prior written notice to the administrator.

 
8895

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
6. Fees

Advisory Fees

Each Class of GAIT II other than Class M pays the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate equal to 2% of the Net Asset Value of such Class. The Advisory Fee is payable monthly in arrears calculated as of the last business day of each month and any other date the Manager may permit, in its sole and absolute discretion, as of which any subscription or redemption is effected with respect to Units of such Class during the month.

Sponsor Fees

Each Class of GAIT II other than Class M pays the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of 1% of its Net Asset Value, payable monthly in arrears, determined in the same manner as the Advisory Fee.

Incentive Allocation

At the end of each calendar quarter, the Manager will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter.

Brokerage Fees

Each Class of GAIT II other than Class M pays the Manager a brokerage fee (the “Brokerage Fee”) at the annual rate specified in the table below. This Brokerage Fee is payable monthly in arrears calculated as of the last business day of each month in the same manner as the Advisory Fee.

ClassAnnual Rate
  
Class 02%
Class 24%

In consideration of the Brokerage Fee, the Manager bears all of GAIT II’s trading commissions (including exchange, clearing and regulatory fees relating to its trades), routine legal expenses, internal and external accounting, audit and tax preparation expenses, fees and expenses of an external or internal administrator, and expenses and costs of printing and mailing reports and notices, together with the costs incurred in connection with the organization of GAIT II and GAIT II’s continuous offering of Units. To the extent GAIT II is allocated any of these expenses from the Master Fund, the Manager will reimburse GAIT II for those amounts.  This reimbursement is included in commission reimbursements in the statements of operations and managing member allocation.

Any portion of any of the above fees, including the Incentive Allocation, may be paid by the Manager to third parties as compensation for selling activities in connection with GAIT II.

 
8996

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

7. Income Taxes

No provision for income taxes has been made in the accompanying financial statements, as members are individually responsible for reporting income or loss based upon their respective share of GAIT II’s revenues and expenses for income tax purposes.

U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing GAIT II’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. The Manager has evaluated GAIT II’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement or disclosure in the financial statements. The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months.  Tax years which are considered open by the relevant jurisdiction are subject to potential examination.

8. Related Party Transactions

The Manager, due to its relationship with its affiliates, may enter into certain related party transactions.

9. Financial Highlights

The following is the per unit operating performance calculation for the three month periods ended March 31,June 30, 2011 and 2010:

 Class 0  Class 2  Class 0  Class 2 
Per unit operating performance:            
Net asset value per unit, December 31, 2009 $100.59  $99.05 
Net asset value per unit, March 31, 2010 $96.29  $94.35 
Net loss:        
Net investment loss  (1.66)  (1.77)
Net gain on investments  1.09   0.75 
Net loss  (0.57)  (1.02)
Net asset value per unit, June 30, 2010 $95.72  $93.33 
        
Net asset value per unit, March 31, 2011 $100.08  $96.48 
Net loss:                
Net investment loss  (1.84)  (1.73)  (1.26)  (1.74)
Net loss on investments  (2.46)  (2.97)  (3.23)  (3.05)
Net loss  (4.30)  (4.70)  (4.49)  (4.79)
Net asset value per unit, March 31, 2010 $96.29  $94.35 
        
Net asset value per unit, December 31, 2010 $102.92  $99.72 
Net loss:        
Net investment loss  (1.05)  (1.50)
Net loss on investments  (1.79)  (1.74)
Net loss  (2.84)  (3.24)
Net asset value per unit, March 31, 2011 $100.08  $96.48 
Net asset value per unit, June 30, 2011 $95.59  $91.69 

 
9097

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

9. Financial Highlights (continued)

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the three month periods ended March 31,June 30, 2011 and 2010:

 Class 0  Class 2  Class 0  Class 2 
 2011  2010  2011  2010  2011  2010  2011  2010 
                        
Total return before Incentive Allocation  (2.75)%  (4.27)%  (3.24)%  (4.75)%  (4.49)%  (0.57)%  (4.96)%  (1.03)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (2.76)%  (4.27)%  (3.25)%  (4.75)%  (4.49)%  (0.57)%  (4.96)%  (1.03)%
                                
Net investment loss before Incentive Allocation  (1.03)%  (1.21)%  (1.52)%  (1.69)%  (1.26)%  (1.61)%  (1.80)%  (1.70)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.04)%  (1.21)%  (1.53)%  (1.69)%  (1.26)%  (1.61)%  (1.80)%  (1.70)%
                                
Total expenses before Incentive Allocation  1.12%  1.28%  1.64%  7.11%  1.46%  1.30%  1.99%  (3.51)%
Incentive Allocation  0.01   0.00   0.01   0.00   0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.13%  1.28%  1.65%  7.11%  1.46%  1.30%  1.99%  (3.51)%
The following is the per unit operating performance calculation for the six month periods ended June 30, 2011 and 2010:

  Class 0  Class 2 
Per unit operating performance:      
Net asset value per unit, December 31, 2009 $100.59  $99.05 
Net loss:        
Net investment loss  (3.50)  (3.50)
Net loss on investments  (1.37)  (2.22)
Net loss  (4.87)  (5.72)
Net asset value per unit, June 30, 2010 $95.72  $93.33 
         
Net asset value per unit, December 31, 2010 $102.92  $99.72 
Net loss:        
Net investment loss  (2.31)  (3.24)
Net loss on investments  (5.02)  (4.79)
Net loss  (7.33)  (8.03)
Net asset value per unit, June 30, 2011 $95.59  $91.69 
98

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

9. Financial Highlights (continued)
The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the six month periods ended June 30, 2011 and 2010:

  Class 0  Class 2 
  2011  2010  2011  2010 
             
Total return before Incentive Allocation  (7.11)%  (4.84)%  (8.04)%  (5.77)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (7.12)%  (4.84)%  (8.05)%  (5.77)%
                 
Net investment loss before Incentive Allocation  (2.23)%  (2.37)%  (3.24)%  (3.39)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (2.24)%  (2.37)%  (3.25)%  (3.39)%
                 
Total expenses before Incentive Allocation  2.58%  2.58%  3.63%  3.61%
Incentive Allocation  0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  2.59%  2.58%  3.64%  3.61%

Total return is calculated for Class 0 and Class 2 units taken as a whole. Total return is calculated as the change in total members’ capital, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the year. An individual member’s return may vary from these returns based on the timing of capital transactions and the applicability of Advisory Fees, Brokerage Fees, Sponsor Fees, and the Incentive Allocation. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for the Class 0 and Class 2 units taken as a whole and include amounts from GAIT II and amounts allocated from the Master Fund. The computation of such ratios is based on the amount of net investment loss, expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of members’ capital of GAIT II, excluding that of the Managing Member, for the three and six month periods ended March 31,June 30, 2011 and 2010.

10. Subsequent Events

The FundGAIT II had subscriptions of approximately $7.8$6.5 million and redemptions of approximately $1.2$0.6 million through May 16, 2011.August 15, 2011, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.

 
9199

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

(a)Management’s Discussion and Analysis of Financial Condition and Results of Operations

Reference is made to “Item 1: Financial Statements”.  The information contained therein is essential to, and should be read in conjunction with, the following analysis.  The Fund does not engage in the sale of goods or services.  The Fund’s capital consists of capital contributions of the members, as increased or decreased by gains and losses from its investments in the Master Funds, interest, expenses and redemptions.  Its only assets are its investments in the Master Funds.  The Master Funds do not engage in the sale of goods or services.  Their assets are comprised of the equity in their accounts with clearing brokers and OTC counterparties, in each case consisting of cash, open trade equity on derivatives and the net option premium paid or received. In the case of Graham Cash Assets LLC, the assets consist of investments in debt obligations guaranteed by the U.S. federal government, as well as cash and cash equivalents.

For the three months ended March 31,June 30, 2011 the Fund’s net asset value increased by $43,794,481$3,529,807 or 12.9%0.9%.  This increase was attributable to a $36,000,872$1,202,353 or 10.6%0.3% net increase in the Blended Strategies Portfolio and a $7,793,609$2,327,454 or 2.3%0.6% net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $45,254,701$23,104,766 or 13.3%6.0% partially offset by redemptions totaling $5,128,829$9,763,180 or -1.5%-2.5% and net a loss of $4,125,000$12,139,233 or -1.2%-3.2%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $10,986,665$8,187,958 or 3.2%2.2% partially offset by redemptions totaling $1,447,762$2,925,189 or -0.4%-0.8% and a net loss of $1,745,294$2,935,315 or -0.5%-0.8%, for the period.

For the threesix months ended March 31, 2010June 30, 2011 the Fund’s net asset value increased by $17,033,789$47,324,288 or 7.8%14.0%.  This increase was attributable to a $13,141,649$37,203,225 or 6.0%11.0% net increase in the Blended Strategies Portfolio and a $3,892,140$10,121,063 or 1.8%3.0% net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $17,578,350$68,359,467 or 8.0%20.2% partially offset by redemptions totaling $3,070,622$14,892,009 or -1.4%-4.4% and net a loss of $16,264,233 or -4.8%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $19,174,623 or 5.7% partially offset by redemptions totaling $4,372,951 or -1.3% and a net loss of $1,366,079$4,680,609 or -1.4%, for the period.

For the three months ended June 30, 2010 the Fund’s net asset value increased by $32,603,734, a 13.9% net increase.  This increase was attributable to a $28,401,339, or 12.1%, net increase in the Blended Strategies Portfolio and a $4,202,395, or 1.8%, net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $40,669,229, or 17.3%, and net income of $40,762 or less than 0.1% partially offset by redemptions totaling $12,308,652, or -5.2%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $5,921,791, or 2.5%, partially offset by redemptions totaling $1,369,295, or -0.6%, and a net loss of $350,101, or -0.1%, for the period.

For the six months ended June 30, 2010 the Fund’s net asset value increased by $49,637,523, or 22.8%.  This increase was attributable to a $41,542,988, or 19.1%, net increase in the Blended Strategies Portfolio and an $8,094,535, or 3.7%, net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $58,247,579, or 26.8%, partially offset by redemptions totaling $15,379,274, or -7.1%, and a net loss of $1,325,317, or -0.6%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $5,526,003$11,447,794, or 2.6%5.3%, partially offset by redemptions totaling $341,343$1,710,638, or -0.2%-0.8%, and a net loss of $1,292,520$1,642,621, or -0.6%-0.8%, for the period.

(i)(i)          Results of Operations

The Fund’s success depends primarily upon the Manager’s ability to recognize and capitalize on market trends in the different and varied sectors of the global financial markets in which it trades.

100

Blended Strategies Portfolio

2011 Summary

Three Months Ended June 30, 2011

For the three months ended March 31,June 30, 2011, the portfolio experienced net trading losses of $218,055$7,964,381 attributable to the following sectors:
 
   
Agriculture $236,882  $(919,456)
Energy  783,331   (6,012,015)
Foreign exchange  (501,870)  (1,988,409)
Interest rates  (335,514)  3,933,290 
Metals  214,411   1,111,580 
Softs  250,962   (1,449,973)
Stock index  (866,257)  (2,639,398)
 $(218,055) $(7,964,381)
 
92


The portfolio recorded a net loss for the period led by stock indices.  The stock indexwith the energy sector generated large losses for the period despite recognizing gainscontributing most significantly.  Gains in the energy sector during the early partportion of the quarter amid rising equitydue to an upward movement in prices, driven by improved global economic outputwere offset when prices reversed and investor optimism.  Significant losses, notablycontinued sharply downward in European indices, were recognizedreaction to the announced release of strategic oil reserves in March as the earthquake and tsunami in Japan generated dramatic market reversals.June.  Losses were also recognized in the equity sector as gains early in the quarter on encouraging earnings data and continued low interest rate fueled hope of a global economic recovery, were reversed when prices declined in a sharp reduction of risk in various markets.  The foreign exchange duringsector posted losses for the period with tradingquarter.  Early gains as the U.S. dollar fell to multi-year lows against most major global currencies were offset as the risk aversion led to a safe haven demand resulting in Asian currencies during March contributing most significantly.a stronger U.S. dollar, generating losses for the portfolio.  The portfolio also incurred losses in the agriculture and softs sectors.  The portfolio generated gains in the interest rates sector posted a loss forled by gains in the period predominantly from trading in U.S. and European fixed income markets.  The portfolio was able to generate profitsmarkets as prices climbed amid the diminishing appetite for risk assets.  Gains were recognized in metals as prices moved sharply up in the energy sector led by crude and heating oil as continued tensionsbeginning of the quarter which outpaced losses later in the Middle East drove energyquarter as prices higher.  Trading in commodities (agriculture, metals and softs) were also profitable as the portfolio took advantage of rising prices in these markets notably in agricultural commodities.reversed.

Brokerage, Advisory and Sponsor Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund.  Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.

For the three months ended March 31,June 30, 2011, Brokerage Fees increased by $879,782$621,790 or 92.3%47.8%, Advisory Fees increased by $464,150$574,387 or 41.1%51.8% and Sponsor Fees increased by $319,734$287,195 or 67.1%51.8% in the Blended Strategies Portfolio over the corresponding period of the preceding year.   These increases are all attributable to higher net assets of the portfolio resulting from subscriptions partially offset by redemptions and a net loss for the period. During the same period interest income decreased by $199,990$241,540 or -37.6%-42.0%.  Interest was earned on free cash at an average annualized yield of 0.49%0.47% for the three months ended March 31,June 30, 2011 compared to 0.61% for the same period in 2010.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio.  For the three months ended March 31,June 30, 2011, the Incentive Allocation increased by $7,813,$23,901 when compared to zero, for the corresponding period of 2010 as a result of incentive allocations made mid-quarter related to shares redeemed when the portfolio was in a period of New High Net Trading Profits.

101

Six Months Ended June 30, 2011

For the six months ended June 30, 2011, the portfolio experienced net trading losses of $8,182,436 attributable to the following sectors:
    
Agriculture $112,080 
Energy  (2,354,187)
Foreign exchange  (3,847,059)
Interest rates  2,253,817 
Metals  1,883,879 
Softs  (317,616)
Stock index  (5,913,350)
  $(8,182,436)
The portfolio recorded a net loss for the period in the equity sector.  Gains in the early portion of the first quarter were offset in March when the earthquake and tsunami in Japan generated risk aversion and market reversals resulting in significant losses with the largest losses stemming from the European stock indices. Losses were recognized in the second quarter as gains early in the quarter on encouraging earnings data and continued low interest rates fueled hope of a global economic recovery were reversed when prices declined in a sharp reduction of risk in various markets.  The foreign exchange sector posted losses in Asian currencies in March and later in the period as risk aversion led to a safe haven demand resulting in a stronger U.S. dollar offsetting previous gains from the U.S. dollar’s decline to multi-year lows against most major global currencies.  The portfolio recorded a net loss for the period in the energy sector as gains in the first quarter from increasing oil prices amid rising political tensions in the Middle East and Libya were overshadowed by losses in the second quarter as prices reversed and continued sharply downward in reaction to the announced release of strategic oil reserves in June. The portfolio generated gains in the interest rate sector led by the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets. Gains were recognized in the metals sector as prices moved sharply up in the beginning of the second quarter which outpaced losses later in the quarter as prices reversed. The portfolio also recognized small gains in the agriculture sector, partially offset by losses in soft commodities.

Brokerage, Advisory and Sponsor Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund.  Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.

For the six months ended June 30, 2011, Brokerage Fees increased by $1,501,572 or 66.6%, Advisory Fees increased by $1,038,537 or 46.4% and Sponsor Fees increased by $606,929 or 58.9% in the Blended Strategies Portfolio over the corresponding period of the preceding year.   These increases are all attributable to higher net assets of the portfolio resulting from subscriptions partially offset by redemptions and a net loss for the period. During the same period interest income decreased by $451,068 or -40.4%.  Interest was earned on free cash at an average annualized yield of 0.48% for the six months ended June 30, 2011 compared to 0.61% for the same period in 2010.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio.  For the six months ended June 30, 2011, the Incentive Allocation increased by $31,714 when compared to the corresponding period of 2010 related to shares redeemed when the portfolio was in a period of New High Net Trading Profits.
102


The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of March 31,June 30, 2011 based on the fair value of the underlying assets and liabilities in each master fund including both long and short positions.  Positive percentages represent net assets whereas negative percentages represent a net liability.

Agriculture  23.48.0%
Energy  35.22.9%
Foreign exchange  6.1(5.7%)
Interest rates  29.875.9%
Metals  0.341.0%
Softs  (4.11.3%)
Stock index  9.3%
100.0%

93


2010 Summary

For the three months ended March 31, 2010, the Blended Strategies Portfolio experienced net trading gains of $661,845 attributable to the following sectors:

Agriculture $368,180 
Energy  524,280 
Foreign exchange  2,577,495 
Interest rates  1,469,154 
Metals  (566,789)
Softs  (1,154,853)
Stock index  (2,555,622)
  $661,845 

The Blended Strategies Portfolio recorded a net loss during January due primarily to sharp reversals in global equity indices, foreign exchange and commodities.  These losses were partially offset by gains in the interest rate sector from both the discretionary and systematic portion of the portfolio.  The discretionary portion of the portfolio also contributed gains in currencies, which were generated by short positions in the euro as well as short crosses in the Swiss franc and Australian and New Zealand dollars.  During February, the portfolio was profitable in both systematic and discretionary trading in foreign exchange, including positions in European currencies and the Australian dollar.  Additional gains stemmed from positions in the European fixed income and industrial metals markets.  Smaller losses, from trading in global stock indices and commodities offset a portion of the month’s gains.  For the month of March, trading gains were recorded in global stock indices as equities rallied, and in energy amid falling natural gas prices. The portfolio also generated profits in foreign exchange, agriculturals and industrial metals.  Losses in the U.S. fixed income markets detracted from the portfolio's overall profits.

The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of December 31, 2010 based on the fair value of the underlying assets and liabilities in each master fund including both long and short positions.  Positive percentages represent net assets whereas negative percentages represent a net liability.
Agriculture20.7%
Energy19.7%
Foreign exchange4.4%
Interest rates21.7%
Metals30.7%
Softs4.3%
Stock index(1.520.8%)
   100.0%

 
94


Systematic Strategies Portfolio2010 Summary

2011 SummaryThree Months Ended June 30, 2010

For the three months ended March 31, 2011,June 30, 2010, the SystematicBlended Strategies Portfolio experienced net trading lossesgains of $986,394$2,452,115 attributable to the following sectors:

Agriculture $1,626  $(485,548)
Energy  416,891   (3,245,806)
Foreign exchange  (762,592)  1,496,681 
Interest rates  (468,594)  8,004,083 
Metals  332,942   (1,098,109)
Softs  329,739   (302,980)
Stock index  (836,406)  (1,916,206)
 $(986,394) $2,452,115 

The foreign exchange sector generated lossesBlended Strategies Portfolio recorded a gain during the period as the U.S. dollar abruptly reversed its declining trend earlyApril primarily attributable to positions in the quarterfixed income markets, which benefited from rising prices in Europe. Additional gains stemmed from lower equity prices in Europe and strengthened followingrising crude oil prices. In the release of favorable employment data.commodity markets, trading in metals produced relatively flat results, while positions in the grains markets, specifically corn and wheat, resulted in minor losses.  The losses were slightly offset as trading for the remainder of quarter generated modest gains notably in commodity currencies such as the Canadian and Australian dollars.  The stock index sector also generated losses for the period despite recognizingportfolio had net gains in the early partmonth of May.  Profits were primarily attributable to positions in the quarterfixed income and currency markets, with the portfolio benefitting as investors sought a safe haven and purchased global bonds, while the euro weakened.  The portfolio’s overall gain was partially offset by losses that resulted from price declines in crude oil, global equity indices, and industrial metals.  The portfolio recorded a modest loss during June.  The majority of these losses resulted from trading in currencies amid rising equity prices driven by improvedgeneral U.S. dollar weakness and in the energy markets from trading in natural gas and crude oil.  The portfolio experienced smaller losses in base metals, soft commodities and global economic output and investor optimism.  Significant losses, notably in European indices, were recognized in March as the earthquake and tsunami in Japan generated dramatic market reversals.  Net losses werestock index futures.   Gains recorded in the interest rates sector predominantly from U.S. and European fixed income markets.  The portfolio was able to generate profits in the energy sector led by crude and heating oil as continued tensions in the Middle East drove energy prices higheryields fell sharply during the period.  Gains were recognized in metals benefiting frommonth offset a majority of the rising price of silver, which rose on steep demand and tight supply levels.  Gains were also recognized in other commodities (agriculture and softs) on the heels of rising prices in sugar, corn and cotton.month’s losses.

Brokerage, Advisory and Sponsor Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund.  Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.

For the three months ended June 30, 2010, Brokerage Fees increased by $353,737, or 37.3%, Advisory Fees increased by $286,938, or 34.9%, and Sponsor Fees increased by $143,468, or 34.9%, in the portfolio over the corresponding period of the preceding year. These increases are all attributable to higher net assets of the portfolio resulting from subscriptions and a net gain for the period partially offset by redemptions.
The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the three months ended June 30, 2010, the Incentive Allocation decreased by $9,963, or 105.8%, in the portfolio over the corresponding period of the preceding year due to lower trading profits.

103

Six Months Ended June 30, 2010

For the six months ended June 30, 2010, the Blended Strategies Portfolio experienced net trading gains of $3,113,960 attributable to the following sectors:

Agriculture $(148,538)
Energy  (2,808,958)
Foreign exchange  3,938,470 
Interest rates  9,516,391 
Metals  (1,648,015)
Softs  (1,390,835)
Stock index  (4,344,555)
  $3,113,960 

The Blended Strategies Portfolio recorded a gain during April. The majority of the portfolio’s profits were attributable to positions in the fixed income markets, which benefited from rising prices in Europe. Additional gains also stemmed from lower equity prices in Europe and rising crude oil prices. In the commodity markets, trading in metals produced relatively flat results, while positions in the grains markets, specifically corn and wheat, resulted in minor losses.  The portfolio had net gains in the month of May.  Profits were primarily attributable to positions in the fixed income and currency markets, with the portfolio benefitting as investors sought a safe haven and purchased global bonds, while the euro weakened.  The portfolio’s overall gain was partially offset by losses that resulted from price declines in crude oil, global equity indices, and industrial metals.  The portfolio recorded a modest loss during June.  The majority of these losses resulted from trading in currencies amid general U.S. dollar weakness and in the energy markets from trading in natural gas and crude oil.  The portfolio experienced smaller losses in base metals, soft commodities and global stock index futures.   Gains recorded in the fixed income sector as yields fell sharply during the month offset a majority of the month’s losses.  For the month of March, trading gains were recorded in global stock indices as equities rallied, and in energy amid falling natural gas prices. The portfolio also generated profits in currencies, agriculturals and industrial metals.  Losses in the U.S. fixed income markets detracted from the portfolio's overall profits. During February, the portfolio was profitable in both systematic and discretionary trading in foreign exchange, including positions in European currencies and the Australian dollar.  Additional gains stemmed from positions in the European fixed income and industrial metals markets.  Smaller losses, from trading in global stock indices and commodities offset a portion of the month’s gains.  The portfolio recorded a net loss during January due primarily to sharp reversals in global equity indices, currencies and commodities.  These losses were partially offset by gains in the fixed income sector from both the discretionary and systematic portion of the portfolio.  The discretionary portion of the portfolio also contributed gains in currencies, which were generated by short positions in the euro as well as short crosses in the Swiss franc and Australian and New Zealand dollars.

 Brokerage, Advisory and Sponsor Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund.  Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.

For the six months ended June 30, 2010, Brokerage Fees increased by $424,262, or 23.2%, Advisory Fees increased by $637,319, or 39.8%, and Sponsor Fees increased by $231,000, or 28.9%, in the portfolio over the corresponding period of the preceding year. These increases are all attributable to higher net assets of the portfolio resulting from subscriptions partially offset by redemptions and a net loss for the period.

104

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the six months ended June 30, 2010, the Incentive Allocation decreased by $15,166, or -103.7%, in the portfolio over the corresponding period of the preceding year due to lower trading profits.

The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of December 31, 2010 based on the fair value of the underlying assets and liabilities in each master fund including both long and short positions.  Positive percentages represent net assets whereas negative percentages represent a net liability.

Agriculture20.7%
Energy19.7%
Foreign exchange4.4%
Interest rates21.7%
Metals30.7%
Softs4.3%
Stock index(1.5%)
100.0%

Systematic Strategies Portfolio

2011 Summary

Three Months Ended June 30, 2011

For the three months ended June 30, 2011, the Systematic Strategies Portfolio experienced net trading losses of $2,093,194 attributable to the following sectors:

Agriculture $(334,742)
Energy  (1,052,444)
Foreign exchange  108,104 
Interest rates  504,536 
Metals  (227,238)
Softs  (427,673)
Stock index  (663,737)
  $(2,093,194)

The energy sector generated the largest losses during the period when gains from the early portion of the quarter as prices moved higher were offset when prices reversed and continued sharply downward in reaction to the announced release of strategic oil reserves in June.  The equity sector also generated losses. Gains early in the quarter on encouraging earnings data while continued low interest rates fueled hope of a global economic recovery.  However, losses incurred as prices reversed in a sharp reduction of risk in various markets outweighed earlier gains.  Losses were recognized in the metals sector despite gains in the beginning of the quarter as prices moved sharply up which were offset by losses later in the quarter as prices reversed most notably in gold.   Losses were also recognized in the agriculture and softs sectors.  The portfolio was able to generate profits in the interest rates sector led by gains in the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets in the beginning of the quarter offset by losses as risk appetite returned later in the quarter resulting in lower prices.  The portfolio was able to post gains in the European fixed income markets despite the sharp market reversals at the end of the quarter.  Gains were recognized in foreign exchange amid significant volatility as the U.S. dollar fell then rose sharply against European and commodity currencies as the oscillating outlook for the eurozone debt crisis and conflicting economic reports drove the markets.

105

Brokerage, Advisory and Sponsor Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund.  Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value, which are discussed in detail herein.

For the three months ended June 30, 2011, Brokerage Fees increased by $235,475$159,018 or 150.9%59.8%, Advisory Fees increased by $64,750$117,205 or 30.0%62.4% and Sponsor Fees increased by $62,145$58,603 or 79.7%62.4% in the Systematic Strategies Portfolio over the corresponding period of the preceding year.   These increases are all attributable to higher net assets of the portfolio resulting from subscriptions, partially offset by redemptions and a net loss for the period. During the same period interest income decreased by $27,761$32,893 or -32.6%-34.6%.  Interest was earned on free cash at an average annualized yield of 0.49%0.47% for the three months ended March 31,June 30, 2011 compared to 0.61% for the same period in 2010.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the three months ended March 31,June 30, 2011 Incentive Allocation increased by $3,007,8,814, compared to zero, for the corresponding period of 2010 as a result of incentive allocations made mid-quarter related to shares redeemed when the portfolio was in a period of New High Net Trading Profits.

Six Months Ended June 30, 2011

For the six months ended June 30, 2011, the Systematic Strategies Portfolio experienced net trading losses of $3,079,588 attributable to the following sectors:

Agriculture $(330,397)
Energy  (619,979)
Foreign exchange  (668,369)
Interest rates  23,891 
Metals  113,211 
Softs  (88,870)
Stock index  (1,509,075)
  $(3,079,588)

The equity sector generated losses for the period despite recognizing gains in the early part of the year amid rising equity prices driven by improved global economic output and improved investor optimism.  Significant losses, notably in European indices, were recognized in March as the earthquake and tsunami in Japan generated dramatic market reversals.  The equity sector also generated losses as advances early in the second quarter on encouraging earnings data and continued low interest rates fueled hope of a global economic recovery were reversed as prices declined in a sharp reduction of risk in various markets.  The foreign exchange sector generated losses during the period as the U.S. dollar abruptly reversed its declining trend early in the first quarter and strengthened following the release of favorable employment data.  These losses were slightly offset as trading for the remainder of the quarter generated modest gains notably in commodity currencies such as the Canadian and Australian dollars.  Gains were recognized in foreign exchange in the second quarter amid significant volatility in these as the U.S. dollar fell then rose sharply against European and commodity currencies as the oscillating outlook for the eurozone debt crisis and conflicting economic reports drove the markets which partially offset first quarter losses. The portfolio generated profits in the energy sector in the first quarter notably in crude and heating oil as continued tensions in the Middle East drove energy price higher.  These profits were offset by larger losses generated in the second quarter as prices reversed in the middle of the quarter and continued sharply downward in reaction to the announced release of strategic oil reserves in June. Losses were also recognized in the agriculture and softs sectors during the period.  The portfolio was able to post gains in the metals sector benefiting from the rising price of silver which rose on steep demand on tight supply levels during the first quarter which was mitigated by losses in the second quarter as prices reversed, notably in gold as investors unloaded safe haven assets in favor of risk assets.  The portfolio was able to generate profits in the interest rates sector led by gains in the U.S. fixed income markets in the second quarter as prices climbed amid the diminishing appetite for risk assets in the beginning of the quarter offset by losses as risk appetite returned later in the quarter resulting in lower prices.  The portfolio was able to post gains in the European fixed income markets despite the sharp market reversals at the end of the quarter.
 
95106

 
Brokerage, Advisory and Sponsor Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund.  Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value, which are discussed in detail herein.

For the six months ended June 30, 2011, Brokerage Fees increased by $394,493 or 93.5%, Advisory Fees increased by $181,955 or 45.1% and Sponsor Fees increased by $120,748 or 70.2% in the Systematic Strategies Portfolio over the corresponding period of the preceding year.   These increases are all attributable to higher net assets of the portfolio resulting from subscriptions, partially offset by redemptions and a net loss for the period. During the same period interest income decreased by $61,745 or -34.1%.  Interest was earned on free cash at an average annualized yield of 0.48% for the six months ended June 30, 2011 compared to 0.61% for the same period in 2010.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the six months ended June 30, 2011 Incentive Allocation increased by $11,821, compared to zero, for the corresponding period of 2010 related to shares redeemed when the portfolio was in a period of New High Net Trading Profits.


The following table illustrates the sector distribution of the Systematic Strategies Portfolio’s investments in Master Funds as of March 31,June 30, 2011 based on the fair value of the underlying assets and liabilities in each master fund including both long and short positions.  Positive percentages represent net assets whereas negative percentages represent a net liability.

Agriculture5.8%3.0%
Energy22.1%5.5%
Foreign exchange10.6%(1.6%)
Interest rates32.1%117.7%
Metals17.0%28.5%
Softs(4.7%(4.1%)
Stock index17.1%(49.0%)
 100.0%100.0%

2010 Summary

Three Months Ended June 30, 2010

For the three months ended March 31,June 30, 2010, the Systematic Strategies Portfolio experienced net trading gains of $105,429 attributable to the following sectors:

Agriculture $(208,487)
Energy  (753,146)
Foreign exchange  (177,170)
Interest rates  2,178,397 
Metals  (174,814)
Softs  (49,642)
Stock index  (709,709)
  $105,429 

107

The portfolio posted a solid gain in April. Profits were largely the result of positions in the fixed income markets as investors bought bonds as a safe haven. In foreign exchange, the portfolio took advantage of the euro's decline against virtually all currencies, while positions in the Australian and Canadian dollars benefited the portfolio earlier in the month. Positions in the energy and soft markets also resulted in gains as crude oil and cotton prices rose. Gains in these commodity markets partially mitigated negative results from the metals and agricultural markets, as falling base metals prices and rising wheat prices generated losses.  The portfolio recorded a modest loss in May.  Losses were incurred amid volatile conditions in global equity indices and crude oil, as prices fell sharply.  Similarly, steep declines in industrial metals resulted in modest losses.  However, the portfolio recorded offsetting gains in the fixed income markets as investors bought bonds in a flight to safety.  Additional profits stemmed from positions in the foreign exchange markets as our models benefitted from the euro’s decline against other major currencies.  The portfolio recorded a loss in June.  Global markets witnessed multiple price reversals during the month.  Strengthening European currencies versus the U.S. dollar, predominately the Swiss franc, and choppiness in global stock indices led to the majority of the portfolio’s losses. Trading in commodities also resulted in losses as prices moved in a choppy range for most of the month.  The portfolio captured offsetting profits from trading in fixed income, as benchmark yields continued to decline in the U.S., Europe and Asia, with the most significant gains coming from U.S. instruments.  

For the three months ended June 30, 2010, Brokerage Fees increased by $227,523, or 594.5%, Advisory Fees increased by $164,367, or 696.4%, and Sponsor Fees increased by $82,182, or 696.4%, in the portfolio over the corresponding period of the preceding year.  These increases are all attributable to higher net assets of the portfolio resulting from subscriptions partially offset by redemptions and a net loss for the period.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the three months ended June 30, 2010, there was no Incentive Allocation earned due to the portfolio experiencing a net loss for the period.

Six Months Ended June 30, 2010

For the six months ended June 30, 2010, the Systematic Strategies Portfolio experienced net trading losses of $928,016$822,587 attributable to the following sectors:

Agriculture $192,135  $(123,226)
Energy  55,186   (1,125,595)
Foreign exchange  108,305   (163,262)
Interest rates  299,889   3,745,063 
Metals  (232,240)  (522,253)
Softs  (571,725)  (686,979)
Stock index  (779,566)  (1,946,335)
 $(928,016) $(822,587)

The portfolio posted a solid gain in April. Profits were largely the result of positions in the fixed income markets as investors bought bonds as a safe haven. In foreign exchange, the portfolio took advantage of the euro's decline against virtually all currencies, while positions in the Australian and Canadian dollars benefited the portfolio earlier in the month. Positions in the energy and soft markets also resulted in gains as crude oil and cotton prices rose. Gains in these commodity markets partially mitigated negative results from the metals and agricultural markets, as falling base metals prices and rising wheat prices generated losses.  The portfolio recorded a modest loss in May.  Losses were incurred amid volatile conditions in global equity indices and crude oil, as prices fell sharply.  Similarly, steep declines in industrial metals resulted in modest losses.  However, the portfolio recorded offsetting gains in the fixed income markets as investors bought bonds in a flight to safety.  Additional profits stemmed from positions in the foreign exchange markets as our models benefitted from the euro’s decline against other major currencies.  The portfolio recorded a loss in June.  Global markets witnessed multiple price reversals during January due primarily to sharp price trend reversals across virtually all macro sectors.  Specifically, losses occurred as the month.  Strengthening European equity index markets declined, whilecurrencies versus the U.S. dollar, rallied againstpredominately the Swiss franc, Australian and New Zealand dollars andchoppiness in global stock indices led to the euro.  Inmajority of the commodity sector,portfolio’s losses. Trading in commodities also resulted in losses resulted as prices declinedmoved in industrial metals, crude oil and soybeans.  Smaller gainsa choppy range for most of the month.  The portfolio captured offsetting profits from trading in fixed income, as benchmark yields continued to decline in the interest rate sector offset a portion ofU.S., Europe and Asia, with the month’s losses. The portfolio experiencedmost significant gains in February as trends emerged in currencies and the fixed income markets.  The portfolio generated profits in foreign exchange, particularlycoming from trading the Australian dollar, euro, yen and British pound. Similarly, a rally in the fixed income markets resulted in gains for the portfolio in European interest rates, particularly from positions in Euribor and German bond futures. The portfolio incurred smaller losses for the month from trading commodities, including sugar, corn, wheat and crude oil.U.S. instruments.  During the month of March, profits were recorded in U.S. equity indices, as well as across Asian and European equity indices.  The portfolio also experienced gains in foreign exchange, with notable profits from long positions in the Canadian and Australian dollars.  Smaller gains were recorded in commodities trading.  Losses in the U.S. and Asian fixed income markets offset a portion of the portfolio’s overall gain for the month. The portfolio experienced gains in February as trends emerged in currencies and the fixed income markets.  The portfolio generated profits in foreign exchange, particularly from trading the Australian dollar, euro, yen and British pound. Similarly, a rally in the fixed income markets resulted in gains for the portfolio in European fixed income, particularly from positions in Euribor and BOBL. The portfolio incurred smaller losses for the month from trading commodities, including sugar, corn, wheat and crude oil.  The portfolio recorded a loss during January due primarily to sharp price trend reversals across virtually all macro sectors.  Specifically, losses occurred as the European equity index markets declined, while the U.S. dollar rallied against the Swiss franc, Australian and New Zealand dollars and the euro.  In the commodity sector, losses resulted as prices declined in industrial metals, crude oil and soybeans.  Smaller gains in the fixed income sector offset a portion of the month’s losses.

 
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For the six months ended June 30, 2010, Brokerage Fees increased by $372,286, or 751.8%, Advisory Fees increased by $373,066, or 1,225.1%, and Sponsor Fees increased by $156,761, or 1,029.6%, in the portfolio over the corresponding period of the preceding year.  These increases are all attributable to higher net assets of the portfolio resulting from subscriptions partially offset by redemptions and a net loss for the period.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the six months ended June 30, 2010 there was no Incentive Allocation earned due to the portfolio experiencing a net loss for the period.   

The following table illustrates the sector distribution of the Systematic Strategies Portfolio’s investments in Master Funds as of December 31, 2010 based on the fair value of the underlying assets and liabilities in each master fund including both long and short positions.  Positive percentages represent net assets whereas negative percentages represent a net liability.

Agriculture21.3%21.3%
Energy14.1%14.1%
Foreign exchange19.3%19.3%
Interest rates(15.6%(15.6%)
Metals56.3%56.3%
Softs7.6%7.6%
Stock index(3.0%(3.0%)
 100.0%100.0%
 
Variables Affecting Performance

The Fund’s performance is affected by net profitability resulting from the trading operations of the Master Funds, the fees charged by the Fund, and interest income earned on cash and cash equivalents.   The Master Funds acquire and liquidate long and short positions in futures contracts, forwards contracts, spot currency contracts and associated derivative instruments such as options and swaps.  These instruments are carried at fair value, which is heavily influenced by a wide variety of factors including but not limited to, the level and volatility of exchange rates, interest rates, equity prices, and commodity prices as well as global macro political events.  These factors generate market movements affecting the fair value of these instruments and in turn the net gains and losses allocated from the Master Funds.
109


Brokerage, Advisory and Sponsor Fees are calculated based on a percentage of the Fund’s net asset value.  Changes in the net assets of the Fund resulting from subscriptions, redemptions, interest and trading profits allocated from the Master Funds can therefore have a material impact inon the fee expense of the Fund.

A portion of the assets of the Fund is held in cash and cash equivalents.  Changes in the net assets of the Fund as well as changes in the interest rates earned on these investments can have a material impact on interest income earned.

(ii)(ii)            Liquidity
 
A portion of the Fund’s assets is generally held as cash or cash equivalents, which are used to margin the Fund’s investments.  It is expected that the average margin the Fund will be required to post to support the Fund’s trading may range between 10% and 30% of the Fund’s total assets, which will be segregated or secured by the futures brokers in accordance with the CEA and with CFTC regulations or be maintained on deposit with over-the-counter counterparties.  In exceptional market conditions, this amount could increase.  The Master Funds are subject to margin calls on a constant daily and intra-day basis, whether in connection with initiating new investment positions or as a result of changes in the value of current investment positions.  These margin requirements are met through the posting of additional margin with the applicable futures or OTC clearing broker.  The Manager generally expresses its margin requirements for the portfolios in terms of the aggregate of the margin requirements plus the net option premium costs for the underlying strategies as a percentage of net assets.  The following table shows these amounts as of the date indicated:

  Blended Strategies Portfolio  Systematic Strategies Portfolio 
March 31, 2011  11.74%  14.45%
December 31, 2010  7.57%  7.73%
March 31, 2010  12.42%  17.40%
 
Blended
Strategies
 Portfolio
 
Systematic
Strategies
Portfolio
June 30, 201116.04% 11.18%
December 31, 2010  7.57%   7.73%
June 30, 2010  5.37%   5.50%

97


Other than any potential market-imposed limitations on liquidity, the Fund’s assets are highly liquid and are expected to remain so.  Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Fund’s futures trading.  Through March 31,June 30, 2011, the Fund experienced no meaningful periods of illiquidity in any of the markets traded by the Manager on behalf of the Fund.

(iii)(iii)           Capital Resources

The Fund raises additional capital only through the sale of Units and capital is increased through trading profits (if any) and interest income.  The Fund may borrow money from brokers or their affiliates and other lenders. Units may be offered for sale as of the beginning, and may be redeemed as of the end, of each month.  The amount of capital raised for the Fund should not have a significant impact on its operations, as the Fund has no significant capital expenditure or working capital requirements other than for monies to pay trading losses, brokerage commissions and expenses.

The Fund participates in the speculative trading of commodity futures contracts, substantially all of which are subject to margin requirements.  The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges.  Further, the Fund’s brokers may require margin in excess of minimum exchange requirements.  The Fund bears the risk of financial failure of the brokers through which it clears trades and maintains margin in respect of any such trades and of its counterparties for its foreign exchange and swap trades with whom it also maintains margin.

(iv)
110

(iv)           Critical Accounting Policies

Use of Estimates – The Fund’s financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The preparation of the financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  The Fund’s significant accounting policies are described in detail in Note 2 of the financial statements.

Fair Value Measurement - The Fund follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value and requires certain disclosures about fair value measurements.  U.S. GAAP uses a three-level hierarchy for fair value measurement based on the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.  The Fund reports the fair value of its investment-related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.

The Fund records its investments in the GAIT Funds at fair value in accordance with U.S. GAAP.  In determining its net asset value, each GAIT Fund records its investments in Master Funds at fair value in accordance with U.S. GAAP.  The Fund records its proportionate share of the GAIT Funds’ investment income and loss, expenses, fees, and realized and unrealized gains and losses on a monthly basis.  Purchases and sales of units in the GAIT Funds are recorded on a trade date basis.  The accounting policies of the GAIT Funds are described in their attached respective financial statements.

The Master Funds record all their financial instruments at fair value, which is derived in accordance with U.S. GAAP.  Unrealized gains and losses from these instruments are recorded based on changes in their fair value.  Realized gains and losses are recorded when the positions are closed.  All unrealized and realized gains and losses related to derivative financial instruments are included in net gain (loss) on investments in the Master Funds’ statements of operations.

 
98


Cash Assets - The GAIT Funds invest a portion of their excess liquidity in Cash Assets, an entity for which the Manager is also the sole investment advisor.  The financial information of Cash Assets is included in the notes to the Financial Statements of the GAIT Funds.

Statement of Operations - As discussed under Item 1, the Fund offers Class 0 and Class 2 units of the Blended Strategies Portfolio and the Systematic Strategies Portfolio.  Class 0 and Class 2 units within each portfolio differ only with respect to their fees.  The Blended Strategies and Systematic Strategies Portfolios differ with respect to the underlying funds in which they invest. All items of gain, loss, income and expense of the Fund are specifically and directly allocated to each portfolio from the underlying Master Funds.  The Fund presents a combined statement of operations which encompasses the amounts applicable to the Blended and Systematic Strategies Portfolios.

Income Taxes - No provision for income taxes has been made in the Fund’s financial statements, as each member is responsible for reporting income or loss based upon the member’s respective share of the Fund’s revenues and expenses for income tax purposes.

U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority.  Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year.  The Manager has evaluated the Fund’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement or disclosure in the financial statements.  The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months.

(v)(v)           Off-Balance Sheet Arrangements

The Fund does not engage in off-balance sheet arrangements with other entities.

 
99112


Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Not Required.

 
100113


ItemItem 4.  Controls and Procedures

The Advisor’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of March 31,June 30, 2011.   Based on that evaluation, the Advisor’s Chief Executive Officer and Chief Financial Officer concluded that the Fund’s disclosure controls and procedures were effective as of March 31,June 30, 2011.

There were no changes to the Fund’s internal controls over financial reporting during the firstsecond quarter of 2011 that have materially affected, or are reasonably likely to materially affect, the Fund’s internal controls over financial reporting.

 
101114


PARTPART II. OTHER INFORMATION


None


Not Required


For the three months ended March 31,June 30, 2011, the Fund issued 328,531.322172,662.932 Units in exchange for $45,254,701$23,104,766 with respect to the Blended Strategies Portfolio and 107,719.28582,664.624 Units in exchange for $10,986,665$8,187,958 with respect to the Systematic Strategies Portfolio, in each case in a transaction that was not registered under the Securities Act of 1933, as amended (the “Act”).  The Units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Act and Section 506 of Regulation D promulgated thereunder.

The following chart sets forth the purchases of Units of the Fund.

  
Blended Strategies Portfolio
Total Number of
Units Purchased
  
Systematic Strategies Portfolio
Total Number of
Units Purchased
 
Period (as of)      
January 1, 2011  142,576.705   71,893.007 
February 1, 2011  78,277.646   15,159.142 
March 1, 2011  107,676.971   20,667.136 
 Blended Strategies PortfolioSystematic Strategies Portfolio
 
Total Number of Units Purchased
Total Number of Units Purchased
Period (as of)  
April 1, 201159,841.75534,886.866
May 1, 201161,766.50714,573.048
June 1, 201151,054.67033,204.710



 
 
102115



* 3.1
Certificate of Formation of Graham Alternative Investment Fund I LLC
* 4.1
Amended and Restated Limited Liability Company Agreement of Graham Alternative Investment Fund I LLC
* 10.1Form of Subscription Agreement
* 10.2Form of Placement Agreement

*  Incorporated by reference to the Fund’s Form 10 previously filed on April 30, 2010

The exhibits required to be filed by Item 601 of regulation S-K are incorporated herein by reference
Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Executive Officer)
Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer)
Section 1350 Certification (Certification of Chief Executive Officer and Chief Financial Officer)
101.INSXBRL Instance Document
101.SCHXBRL Schema Document
101.CALXBRL Calculation Linkbase Document
101.LABXBRL Label Linkbase Document
101.PREXBRL Presentation Linkbase Document
101.DEFXBRL Definition Linkbase Document
 
31.1 — Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Executive Officer)
31.2 — Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer)
32.1 Section 1350 Certification (Certification of Chief Executive Officer and Chief Financial Officer)
 
103116


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

Dated:  May 16,August 15, 2011
GRAHAM ALTERNATIVE INVESTMENT FUND I LLC
  
By:  GRAHAM CAPITAL MANAGEMENT, L.P.
its Manager
   
  By:GRAHAM CAPITAL MANAGEMENT, L.P.  /s/ Paul Sedlack
          its Manager
By:/s/ Paul Sedlack                                                           
Paul Sedlack, Chief Executive Officer
   
  By:  /s/ Jeff Baisley
          By:/s/ Jeff Baisley                                                       
Jeff Baisley, Chief Financial Officer
 
 
104 117