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 SECURITIEStheSECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended JuneSeptember 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             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 xNo 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
 
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 JulyOctober 1, 2011, 641,240.61614,718.119 Units of the Systematic Strategies Portfolio were outstanding.
As of JulyOctober 1, 2011, 2,611,247.322,318,429.747 Units of the Blended Strategies Portfolio were outstanding.
 


 
 

 
 
GRAHAMGRAHAM ALTERNATIVE INVESTMENT FUND I LLC
FORM 10-Q
INDEX
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
   
  2
3
5
6
 Graham Alternative Investment Trading LLC 
   
 1615
   
 16
17
 
18
19
20
   
  18
19
20
21
 Graham Alternative Investment Trading II LLC 
  
69
70
71
72
   
 73
   
Item 2.7497
   
Item 3.75110
   
Item 4.111
  76
PART II - Other Information
Item 2.100
Item 3.113
Item 4.114112
  
115
Exhibits 

 EX-31.1EX - 31.1Certification
 EX-EX - 31.2Certification
 EX- 32. 1EX - 32.1Certification
 
 
 


PART I

Item 1. Financial Statements

GrahamGraham Alternative Investment Fund I LLC


June 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
  
September 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
           
Assets           
Investment in Graham Alternative Investment Trading LLC, at fair value$327,226,545  $290,023,320  $292,240,139  $290,023,320 
Investment in Graham Alternative Investment Trading II LLC, at fair value 58,563,212   48,442,149   53,193,470   48,442,149 
Redemption receivable from Graham Alternative Investment Trading LLC 637,636   1,296,065   39,543,301   1,296,065 
Redemption receivable from Graham Alternative Investment Trading II LLC 1,555,524   125,284   4,122,958   125,284 
Total assets$387,982,917  $339,886,818  $389,099,868  $339,886,818 
               
Liabilities and members’ capital               
Liabilities:               
Accrued redemptions$2,193,160  $1,421,349  $43,666,259  $1,421,349 
Total liabilities 2,193,160   1,421,349   43,666,259   1,421,349 
               
Members’ capital:               
Blended Strategies Portfolio:               
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 
Class 0 Units (1,871,651.406 and 1,752,436.237 units issued and outstanding at $131.58 and $138.96, respectively)  246,272,164   243,511,752 
Class 2 Units (433,429.994 and 409,129.824 units issued and outstanding at $106.06 and $113.68, respectively)  45,967,975   46,511,568 
Total Blended Strategies Portfolio 327,226,545   290,023,320   292,240,139   290,023,320 
               
Systematic Strategies Portfolio:               
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 
Class 0 Units (340,824.472 and 274,960.438 units issued and outstanding at $89.38 and $102.92, respectively)  30,463,149   28,297,652 
Class 2 Units (266,487.443 and 202,003.861 units issued and outstanding at $85.30 and $99.72, respectively)  22,730,321   20,144,497 
Total Systematic Strategies Portfolio 58,563,212   48,442,149   53,193,470   48,442,149 
Total members’ capital 385,789,757   338,465,469   345,433,609   338,465,469 
Total liabilities and members’ capital$387,982,917  $339,886,818  $389,099,868  $339,886,818 

See accompanying notes.


Graham Alternative Investment Fund I LLC


Statements of Operations
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Net (loss) gain allocated from investments in other funds:            
Net realized (loss) gain on investments $(506,903) $(2,209,180) $(2,945,410) $674,394 
Net (decrease) increase in unrealized appreciation on investments  (1,522,238)  11,411,613   (10,345,755)  10,819,412 
Net (loss) gain allocated from investments in other funds  (2,029,141)  9,202,433   (13,291,165)  11,493,806 
                 
Net investment loss allocated from investment in other funds:                
Investment income:                
Interest income  339,914   735,716   1,124,247   2,032,862 
                 
Expenses:                
Brokerage fees  2,369,990   1,737,922   6,943,514   4,650,241 
Advisory fees  2,008,742   1,446,548   5,870,238   3,852,692 
Sponsor fees  1,004,372   723,275   2,935,120   1,926,346 
Incentive allocation  -   762,334   42,993   761,792 
Interest and other  48,654   15,016   107,044   50,481 
Total expenses  5,431,758   4,685,095   15,898,909   11,241,552 
Net investment loss allocated from investments in other funds  (5,091,844)  (3,949,379)  (14,774,662)  (9,208,690)
Net (loss) income $(7,120,985) $5,253,054  $(28,065,827) $2,285,116 

 
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 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 395,604   670,037   784,333   1,297,146 
                
Expenses:               
Brokerage fees 2,348,648   1,567,840   4,573,524   2,677,459 
Advisory fees 1,988,117   1,296,525   3,861,496   2,641,004 
Sponsor fees 994,059   648,261   1,930,748   1,203,071 
Incentive allocation 32,173   (542)  42,993   (542)
Interest and other 49,580   24,836   58,390   35,465 
Total expenses 5,412,577   3,536,920   10,467,151   6,556,457 
Net investment loss allocated from investments in other funds (5,016,973)  (2,866,883)  (9,682,818)  (5,259,311)
Net loss$(15,074,548) $(309,339) $(20,944,842) $(2,967,938)

See acompanyingaccompanying notes.


Graham Alternative Investment Fund I LLC


For the sixnine months ended JuneSeptember 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  368,844.744   49,644,739   77,478.752   8,602,840   58,247,579   518,631.500   69,924,258   103,536.819   11,490,457   81,414,715 
Redemptions  (86,730.660)  (11,680,951)  (33,428.352)  (3,698,323)  (15,379,274)  (100,431.416)  (13,534,505)  (40,323.514)  (4,469,018)  (18,003,523)
Net loss     (790,231)     (535,086)  (1,325,317)
Members’ capital, June 30, 2010  1,417,057.510  $191,023,880   344,774.139  $38,269,702  $229,293,582 
Net income     2,843,427      94,185   2,937,612 
Members’ capital, September 30, 2010  1,553,143.510  $213,083,503   363,937.044  $41,015,895  $254,099,398 
 
 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, 2010  1,752,436.237  $243,511,752   409,129.824  $46,511,568  $290,023,320   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   520,007.272   72,113,602   80,016.088   8,938,865   81,052,467 
Redemptions  (72,590.320)  (10,130,845)  (42,570.051)  (4,761,164)  (14,892,009)  (400,792.103)  (53,393,928)  (55,715.918)  (6,177,414)  (59,571,342)
Net loss     (13,579,315)     (2,684,918)  (16,264,233)     (15,959,262)     (3,305,044)  (19,264,306)
Members’ capital, June 30, 2011  2,119,994.628  $281,267,194   427,605.316  $45,959,351  $327,226,545 
Members’ capital, September 30, 2011  1,871,651.406  $246,272,164   433,429.994  $45,967,975  $292,240,139 

See accompanying notes.


Graham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital (continued)

For the sixnine months ended JuneSeptember 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  81,504.222   7,825,003   81,121.636   7,669,792   15,494,795   96,909,510 
Redemptions  (8,427.480)  (813,311)  (14,726.901)  (1,385,685)  (2,198,996)  (20,202,519)
Net (loss ) income     (251,869)     (400,627)  (652,496)  2,285,116 
Members’ capital, September 30, 2010  253,641.699  $24,922,700   185,430.488  $17,674,330  $42,597,030  $296,696,428 

Systematic Strategies Portfolio Systematic Strategies Portfolio    
Class 0 Units  Class 2 Units   Class 0 Units  Class 2 Units       
 
 
Units
   Capital   Units   Capital  Total Systematic Strategies Portfolio  
Total Members’
Capital
  
 
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 
Members’ capital, December 31, 2010  274,960.438  $28,297,652   202,003.861  $20,144,497  $48,442,149  $338,465,469 
Subscriptions 56,189.672   5,378,002   64,039.248   6,069,792  11,447,794  69,695,373   139,972.911   14,166,260   90,038.065   8,714,658   22,880,918   103,933,385 
Redemptions (5,777.197)  (555,110)  (12,300.606)  (1,155,528) (1,710,638 (17,089,912)  (74,108.877)  (6,909,240)  (25,554.483)  (2,418,836)  (9,328,076)  (68,899,418)
Net loss    (875,530)     (767,091) (1,642,621 (2,967,938)     (5,091,523)     (3,709,998)  (8,801,521)  (28,065,827)
Members’ capital, June 30, 2010 230,977.432  $22,110,239   170,774.395  $15,938,023 $38,048,262 $267,341,844 
Members’ capital, September 30, 2011  340,824.472  $30,463,149   266,487.443  $22,730,321  $53,193,470  $345,433,609 
  
 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 

See accompanying notes.
 

Graham Alternative Investment Fund I LLC


 
Six Months Ended
June 30,
  
Nine Months Ended
September 30,
 
 
2011
(Unaudited)
  
2010
(Unaudited)
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities            
Net loss $(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  16,264,233   1,325,317 
Net (loss) income $(28,065,827) $2,285,116 
Adjustments to reconcile net (loss) income to net cash used in operating activities:        
Net loss (income) allocated from investment in Graham Alternative Investment Trading LLC  19,264,306   (2,937,612)
Net loss allocated from investment in Graham Alternative Investment Trading II LLC  4,680,609   1,642,621   8,801,521   652,496 
Proceeds from sale of investments in Graham Alternative Investment Trading LLC  15,550,438   15,106,144   21,324,106   17,449,101 
Proceeds from sale of investments in Graham Alternative Investment Trading II LLC  2,942,711   1,710,638   5,330,402   1,878,477 
Investments in Graham Alternative Investment Trading LLC  (68,359,467)  (58,247,579)  (81,052,467)  (81,414,715)
Investments in Graham Alternative Investment Trading II LLC  (19,174,623)  (11,447,794)  (22,880,918)  (15,494,795)
Net cash used in operating activities  (69,040,941)  (52,878,591)  (77,278,877)  (77,581,932)
                
Cash flows provided by financing activities                
Subscriptions  87,534,090   69,695,373   103,933,385   96,909,510 
Redemptions  (18,493,149)  (16,816,782)  (26,654,508)  (19,327,578)
Net cash provided by financing activities  69,040,941   52,878,591   77,278,877   77,581,932 
                
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.

 
GrahamGraham Alternative Investment Fund I LLC


JuneSeptember 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.

 
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 JuneSeptember 30, 2011 and 2010 and the three and sixnine 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 JuneSeptember 30, 2011 and December 31, 2010, the Fund owned 65.38%62.18% and 64.92%, respectively of GAIT, and 67.78%68.00% 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.

 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
 
2. Summary of Significant Accounting Policies (continued)
 
Fair Value (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 settle 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.  There were no Level 3 assets or liabilities held at any point during the sixnine months ended JuneSeptember 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.
 
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 $2,478$3,919 and $8,693$11,686 were paid to the Manager for the sixnine months ended JuneSeptember 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.
 
 
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.

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.
 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
7. Financial Highlights
 
The following is the per Unit operating performance calculation for the three month periods ended JuneSeptember 30, 2011 and 2010:
 
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
  
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
 
Class 0  Class 2  Class 0  Class 2  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 asset value per unit, June 30, 2010 $134.80  $111.00  $95.72  $93.33 
Net income:                
Net investment loss (1.67)  (1.80)  (1.17)  (1.58)  (1.33)  (1.98)  (1.24)  (1.71)
Net gain on investments 1.89   1.44   0.60   0.56   3.72   3.68   3.78   3.70 
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 income  2.39   1.70   2.54   1.99 
Net asset value per unit, September 30, 2010 $137.19  $112.70  $98.26  $95.32 
                               
                               
Net asset value per unit, March 31, 2011$137.45  $111.91  $100.08  $96.48 
Net asset value per unit, June 30, 2011 $132.67  $107.48  $95.59  $91.69 
Net loss:                               
Net investment loss (1.55)  (1.87)  (1.26)  (1.74)  (2.50)  (2.54)  (1.12)  (1.49)
Net loss on investments (3.23)  (2.56)  (3.23)  (3.05)
Net gain (loss) on investments  1.41   1.12   (5.09)  (4.90)
Net loss (4.78)  (4.43)  (4.49)  (4.79)  (1.09)  (1.42)  (6.21)  (6.39)
Net asset value per unit, June 30, 2011$132.67  $107.48  $95.59  $91.69 
Net asset value per unit, September 30, 2011 $131.58  $106.06  $89.38  $85.30 
 
The following represents ratios to average members’ capital and total return for the three month periods ended JuneSeptember 30, 2011 and 2010 for the Blended Strategies Portfolio:
 
 Blended Strategies Portfolio  Blended Strategies Portfolio 
 Class 0  Class 2  Class 0  Class 2 
 2011  2010  2011  2010  2011  2010  2011  2010 
                        
Total return before Incentive Allocation  (3.48)%  0.16%  (3.96)%  (0.31)%  (0.82)%  2.17%  (1.32)%  1.59%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   (0.41)  0.00   (0.09)
Total return after Incentive Allocation  (3.48)%  0.16%  (3.96)%  (0.31)%  (0.82)%  1.76%  (1.32)%  1.50%
                                
Net investment loss before Incentive Allocation  (1.13)%  (1.04)%  (1.67)%  (1.55)%  (1.88)%  (1.04)%  (2.36)%  (1.55)%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   (0.41)  0.00   (0.09)
Net investment loss after Incentive Allocation  (1.13)%  (1.04)%  (1.67)%  (1.55)%  (1.88)%  (1.45)%  (2.36)%  (1.64)%
                                
Total expenses before Incentive Allocation  1.55%  1.30%  2.06%  1.81%  1.32%  1.30%  1.80%  1.80%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.41   0.00   0.09 
Total expenses after Incentive Allocation  1.55%  1.30%  2.06%  1.81%  1.32%  1.71%  1.80%  1.89%
 
 
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 

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 sixthree month periods ended JuneSeptember 30, 2011 and 2010 for the BlendedSystematic Strategies Portfolio:
 
 Blended Strategies Portfolio  Systematic Strategies Portfolio 
 Class 0  Class 2  Class 0  Class 2 
 2011  2010  2011  2010  2011  2010  2011  2010 
                        
Total return before Incentive Allocation  (4.52)%  (0.56)%  (5.44)%  (1.53)%  (6.50)%  2.52%  (6.97)%  2.01%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (4.53)%  (0.56)%  (5.45)%  (1.53)%  (6.50)%  2.52%  (6.97)%  2.01%
                                
Net investment loss before Incentive Allocation  (2.02)%  (2.01)%  (3.02)%  (3.05)%  (1.17)%  (1.03)%  (1.63)%  (1.56)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (2.03)%  (2.01)%  (3.03)%  (3.05)%  (1.17)%  (1.03)%  (1.63)%  (1.56)%
                                
Total expenses before Incentive Allocation  2.55%  2.55%  3.57%  3.59%  1.35%  1.28%  1.82%  1.82%
Incentive Allocation  0.01   0.00   0.01   0.00   0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  2.56%  2.55%  3.58%  3.59%  1.35%  1.28%  1.82%  1.82%
The following is the per Unit operating performance calculation for the nine month periods ended September 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 income (loss):                
Net investment loss  (2.86)  (6.60)  (3.68)  (5.07)
Net gain on investments  4.49   6.57   1.35   1.34 
Net income (loss)  1.63   (0.03)  (2.33)  (3.73)
Net asset value per unit, September 30, 2010 $137.19  $112.70  $98.26  $95.32 
                 
                 
Net asset value per unit, December 31, 2010 $138.96  $113.68  $102.92  $99.72 
Net loss:                
Net investment loss  (5.32)  (5.98)  (3.43)  (4.73)
Net loss on investments  (2.06)  (1.64)  (10.11)  (9.69)
Net loss  (7.38)  (7.62)  (13.54)  (14.42)
Net asset value per unit, September 30, 2011 $131.58  $106.06  $89.38  $85.30 
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 sixnine month periods ended JuneSeptember 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  (5.30)%  1.61%  (6.69)%  0.06%
Incentive Allocation  (0.01)  (0.41)  (0.01)  (0.09)
Total return after Incentive Allocation  (5.31)%  1.20%  (6.70)%  (0.03)%
                 
Net investment loss before Incentive Allocation  (3.82)%  (3.05)%  (5.25)%  (4.60)%
Incentive Allocation  (0.01)  (0.41)  (0.01)  (0.09)
Net investment loss after Incentive Allocation  (3.83)%  (3.46)%  (5.26)%  (4.69)%
                 
Total expenses before Incentive Allocation  3.87%  3.85%  5.37%  5.39%
Incentive Allocation  0.01   0.41   0.01   0.09 
Total expenses after Incentive Allocation  3.88%  4.26%  5.38%  5.48%

The following represents ratios to average members’ capital and total return for the nine month periods ended September 30, 2011 and 2010 for the Systematic Strategies Portfolio:
 
 Systematic Strategies Portfolio  Systematic Strategies Portfolio 
 Class 0  Class 2  Class 0  Class 2 
 2011  2010  2011  2010  2011  2010  2011  2010 
                        
Total return before Incentive Allocation  (7.11)%  (4.84)%  (8.04)%  (5.78)%  (13.15)%  (2.32)%  (14.45)%  (3.77)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (7.12)%  (4.84)%  (8.05)%  (5.78)%  (13.16)%  (2.32)%  (14.46)%  (3.77)%
                                
Net investment loss before Incentive Allocation  (2.23)%  (2.02)%  (3.24)%  (3.08)%  (3.32)%  (3.05)%  (4.73)%  (4.64)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (2.24)%  (2.02)%  (3.25)%  (3.08)%  (3.33)%  (3.05)%  (4.74)%  (4.64)%
                                
Total expenses before Incentive Allocation  2.58%  2.55%  3.63%  3.61%  3.93%  3.83%  5.45%  5.43%
Incentive Allocation  0.01   0.00   0.01   0.00   0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  2.59%  2.55%  3.64%  3.61%  3.94%  3.83%  5.46%  5.43%

 
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.period. 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 sixnine month periods ended JuneSeptember 30, 2011 and 2010.
 
8.  Subsequent Events
 
The Fund had subscriptions of approximately $14.1$6.4 million and redemptions of approximately $3.2$5.4 million through August 15,November 14, 2011, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.
 
 
14

 
Unaudited Financial Graham Alternative Investment Trading LLC


  
September 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
Assets      
Investments in Master Funds, at fair value $82,135,022  $43,910,786 
Investment in Graham Cash Assets LLC, at fair value  430,762,084   409,389,656 
Commission reimbursements receivable  496,296   278,469 
Receivable from Master Funds  4    
Total assets $513,393,406  $453,578,911 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $41,193,066  $4,817,403 
Accrued brokerage fees  969,798   894,187 
Accrued advisory fees  842,506   768,947 
Accrued sponsor fees  421,253   384,474 
Payable to Master Funds  1,591   61 
Total liabilities  43,428,214   6,865,072 
         
Members’ capital:        
Class 0 Units (2,985,148.707 and 2,685,172.128 units issued and outstanding at $131.58 and $138.96 per unit, respectively)  392,786,296   373,121,130 
Class 2 Units (719,537.996 and 639,582.657 units issued and outstanding at $106.06 and $113.68 per unit, respectively)  76,311,534   72,710,381 
Class M Units (4,671.470 and 4,671.470 units issued and outstanding at $185.67 and $188.88 per unit, respectively)  867,362   882,328 
Total members’ capital  469,965,192   446,713,839 
Total liabilities and members’ capital $513,393,406  $453,578,911 

See accompanying notes.
 
Graham Alternative Investment Trading LLC
For the periods from January 1, 2011 to June 30, 2011 and
January 1, 2010 to June 30, 2010

 
15


GrahamGraham Alternative Investment Trading LLC


 
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 
  
September 30, 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 $18,591,032  3.96% $7,603,525  1.70%
Graham Discretionary Energy Trading III LLC  981,719  0.21%  1,690,592  0.38%
Graham Energy Focus LLC  6,664,685  1.42%  -  0.00%
Graham Fed Policy Ltd.  5,726,006  1.22%  6,709,637  1.50%
Graham Global Monetary Policy LLC  12,427,431  2.64%  3,566,013  0.80%
Graham K4D Trading Ltd.  31,362,992  6.67%  24,030,670  5.38%
Graham Macro Directional LLC  6,381,157  1.36%  268,357  0.06%
Graham Short Term Global Macro LLC  -  0.00%  41,992  0.01%
Total investments in Master Funds $82,135,022  17.48% $43,910,786  9.83%

See accompanying notes.

 
16


Graham Alternative Investment Trading LLC

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Net gain (loss) allocated from investments in Master Funds:            
Net realized gain (loss) on investments $5,422,708  $(2,574,496) $4,257,925  $2,867,722 
Net (decrease) increase in unrealized appreciation on investments  (3,566,381)  15,073,125   (14,872,899)  15,373,790 
Brokerage commissions and fees  (1,320,014)  (683,647)  (3,866,326)  (1,739,141)
Net gain (loss) allocated from investments in Master Funds  536,313   11,814,982   (14,481,300)  16,502,371 
                 
Net investment loss allocated from investments in Master Funds  (62,904)  (26,684)  (119,491)  (56,160)
                 
Investment income:                
Interest income  439,886   502,343   1,453,597   1,384,191 
Total investment income  439,886   502,343   1,453,597   1,384,191 
                 
Expenses:                
Brokerage fees  3,014,313   2,227,084   8,769,947   6,030,707 
Advisory fees  2,616,830   1,922,144   7,598,949   5,172,169 
Sponsor fees  1,308,415   961,072   3,799,474   2,586,085 
Interest and other  4,970   11,550   23,474   37,822 
Commission reimbursements  (1,320,014)  (683,647)  (3,866,326)  (1,739,141)
Total expenses  5,624,514   4,438,203   16,325,518   12,087,642 
Net investment loss of the Fund  (5,184,628)  (3,935,860)  (14,871,921)  (10,703,451)
                 
Net (loss) income  (4,711,219)  7,852,438   (29,472,712)  5,742,760 
                 
Incentive allocation  -   (1,189,086)  (51,877)  (1,194,778)
                 
Net (loss) income available for pro-rata allocation to all members $(4,711,219) $6,663,352  $(29,524,589) $4,547,982 

 
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 OperationsFor the nine months ended September 30, 2011 (unaudited) and Managing Member Allocation2010 (unaudited)

 
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)
  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  727,135.959   97,996,571   127,071.006   14,095,881         112,092,452 
Redemptions  (145,564.726)  (19,555,651)  (44,923.571)  (4,975,824)     (1,194,778)  (25,726,253)
Incentive allocation     (1,143,893)     (50,885)     1,194,778    
Net income     5,522,655      175,763      44,342   5,742,760 
Members’ capital, September 30, 2010  2,432,830.504  $333,772,162   544,462.259  $61,361,176   4,671.470  $857,533  $395,990,871 
  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  763,027.691   105,586,997   159,240.404   17,823,871         123,410,868 
Redemptions  (463,051.112)  (61,843,890)  (79,285.065)  (8,791,036)     (51,877)  (70,686,803)
Incentive allocation     (44,314)     (7,563)     51,877    
Net loss     (24,033,627)     (5,424,119)     (14,966)  (29,472,712)
Members’ capital, September 30, 2011  2,985,148.707  $392,786,296   719,537.996  $76,311,534   4,671.470  $867,362  $469,965,192 

See accompanying notes.
 
 
18


Graham Alternative Investment Trading LLC



 
 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 
  
Nine Months Ended
September 30,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities      
Net (loss) income $(29,472,712) $5,742,760 
Adjustments to reconcile net (loss) income to net cash used in operating activities:        
Net loss (income) allocated from investment in Master Funds  14,600,791   (16,446,211)
Net income allocated from investment in Graham Cash Assets LLC  (1,453,597)  (1,384,191)
Proceeds from sale of investments in Master Funds  613,324,164   237,721,282 
Proceeds from sale of investments in Graham Cash Assets LLC  477,724,559   187,141,787 
Investments in Master Funds  (666,147,665)  (252,775,703)
Investments in Graham Cash Assets LLC  (497,643,390)  (248,425,825)
Changes in assets and liabilities:        
Commission reimbursements receivable  (217,827)  (135,104)
Accrued brokerage fees  75,611   150,573 
Accrued advisory fees  73,559   138,228 
Accrued sponsor fees  36,779   69,114 
Accrued incentive allocation  -   847,494 
Net cash used in operating activities  (89,099,728)  (87,355,796)
         
Cash flows provided by financing activities        
Subscriptions  123,410,868   112,092,452 
Redemptions  (34,311,140)  (24,736,705)
Net cash provided by financing activities  89,099,728   87,355,747 
         
Net decrease in cash and cash equivalents  -   (49)
         
Cash and cash equivalents, beginning of period  -   49 
Cash and cash equivalents, end of period $-  $- 

See accompanying notes.

 
19


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
 
JuneSeptember 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 JuneSeptember 30, 2011 and 2010 and the three and sixnine 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 GAIT.
 
 
2120


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 Notes 3 and 4.  There were no Level 3 assets or liabilities held at any point during the sixnine months ended JuneSeptember 30, 2011 or the twelve months ended December 31, 2010 by GAIT, 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.
 
 
2221


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.
 
 
2322


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.
 
 
2423

 
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 FundFunds 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 GCA and 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 JuneSeptember 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.
 
June 30, 2011 
September 30, 2011September 30, 2011 
Investment – Objective 
Percent of
 Members’
Capital
  Fair Value  
Net Loss
(three months
then ended)
  
Net Loss
(six months
then ended)
  Percent of Members’ Capital  Fair Value  
Net Income
(three months
then ended)
  
Net Loss
(nine months
then ended)
 
                       
Graham K4D Trading Ltd. – (a) 6.43%  $32,163,149  $(10,254,289) $(16,745,050)  6.67% $31,362,992  $(16,837,697) $(33,582,747)
Other Master Funds (8) – (b) (c) (d) (e) 8.66      43,352,794   (3,206,468)  1,670,850   10.81%  50,772,030   17,311,106   18,981,956 
 15.09%  $75,515,943  $(13,460,757) $(15,074,200)  17.48% $82,135,022  $473,409  $(14,600,791)

 
December 31, 2010December 31, 2010        December 31, 2010  September 30, 2010 
Investment – Objective
 
Percent of
Members’
Capital
   Fair Value   
Net Income
(three months
ended June
30, 2010)
   
Net Income
(six months
 ended June
 30, 2010)
  Percent of Members’ Capital  Fair Value  
Net Income
(three months
then ended)
  
Net Income
(nine months
then ended)
 
                           
Graham K4D Trading Ltd. – (a) 5.38%  $24,030,670  $563,414  $(4,109,849)  5.38% $24,030,670  $6,996,103  $2,886,254 
Other Master Funds (7) – (b) (c) (d) (e) 4.45%   19,880,116   3,183,027   8,767,762   4.45%  19,880,116   4,792,195   13,559,957 
 9.83%  $43,910,786  $3,746,441  $4,657,913   9.83% $43,910,786  $11,788,298  $16,446,211 
 
(a) – Systematic Macro(b) – Fixed Income(c) – Global Macro(d) – Energy Related(e) – Commodities
 
 
2524


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 table summarizes the financial position of each Master Fund as of September 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 $116,476,259  $6,009,491  $41,922,589  $33,135,133  $89,608,118  $240,973,205  $29,353,370 
Options, at fair value  -   -   8,310,050   7,133,628   41,384   -   - 
Derivative financial instruments, at fair value  10,561,774   -   -   3,761,409   4,911,016   14,800,706   3,635,065 
Subscriptions receivable  -   -   -   -   120   -   - 
Total assets  127,038,033   6,009,491   50,232,639   44,030,170   94,560,638   255,773,911   32,988,435 
                             
Liabilities:                            
Options, at fair value  -   -   7,277,950   9,194,301   946,482   -   - 
Derivative financial instruments, at fair value  13,077,369   -   13,351,540   -   211,184   8,525,381   - 
Due to brokers  -   -   -   -   -   2,377,906   - 
Redemptions payable  -   -   -   142   -   409,154   - 
Total liabilities  13,077,369   -   20,629,490   9,194,443   1,157,666   11,312,441   - 
Net assets $113,960,664  $6,009,491  $29,603,149  $34,835,727  $93,402,972  $244,461,470  $32,988,435 
                             
Percentage of Master Fund held by the Fund  16.31%  16.34%  22.51%  16.44%  13.31%  12.83%  19.34%

25

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 JuneSeptember 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%
Description Number of Contracts  Fair Value  Percentage of Net Assets of Master Fund 
Graham Commodity Strategies LLC         
Long contracts         
Futures         
Brent Crude November 2011  2,358  $(13,078,020)  (11.47)%
Other Brent Crude December 2011 - 2014  4,014   (9,282,820)  (8.14)%
Gasoline RBOB December 2011  750   (11,790,450)  (10.35)%
Other Gasoline RBOB March 2012  750   (1,835,400)  (1.61)%
Gas Oil October 2011  3,521   (8,844,800)  (7.76)%
Other Gas Oil December 2011 – June 2012  1,526   (5,566,700)  (4.88)%
Heating Oil January 2012  6,182   (9,636,493)  (8.46)%
LME Aluminum December 2011  4,090   (15,315,665)  (13.44)%
LME Copper December 2011  382   (7,408,787)  (6.50)%
LME Nickel December 2011  514   (6,323,118)  (5.55)%
LME Zinc December 2011  4,462   (17,646,302)  (15.48)%
Soybean November 2012  1,727   (12,206,650)  (10.71)%
Other Soybean November 2011  352   (3,341,413)  (2.93)%
Coffee May 2012  1,206   (22,731,150)  (19.95)%
Other Coffee March 2012  25   (69,281)  (0.06)%
Wheat December 2012  1,996   (21,386,438)  (18.77)%
Wheat December 2011  355   (6,801,725)  (5.97)%
Wheat July 2012  1,535   (6,533,738)  (5.73)%
Wheat March 2012  1,418   (7,676,488)  (6.74)%
Other Wheat May 2012 – December 2012  33   (13,450)  (0.01)%
WTI Crude December 2012  1,177   (8,352,770)  (7.33)%
WTI Crude December 2013  2,345   (8,235,250)  (7.23)%
WTI Crude September 2013  1,000   (14,520,000)  (12.74)%
Other WTI Crude January 2012 – January 2014  1,338   (12,327,610)  (10.82)%
Other commodity      (15,601,389)  (13.69)%
Total futures      (246,525,907)  (216.32)%
             
Swaps            
Other Gas Oil December 2011  27   4,698,000   4.12%
Other Brent Crude December 2011 – June 2012  1,097   4,112,960   3.61%
Other Wheat March 2012  768   (5,523,950)  (4.85)%
Other commodity      (1,595,810)  (1.40)%
Total swaps      1,691,200   1.48%

 
2726

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%

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        
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 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 JuneSeptember 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%
Description Number of Contracts  Fair Value  Percentage of Net Assets of Master Fund 
Graham Commodity Strategies LLC (continued)         
Short contracts         
Futures         
Brent Crude January 2012  (4,257) $24,304,470   21.33%
Brent Crude December 2012  (575)  7,463,500   6.55%
Other Brent Crude February 2012 – December 2013  (2,825)  8,104,850   7.11%
Heating Oil December 2011  (4,120)  6,570,173   5.76%
Other Heating Oil November 2011  (1,768)  1,545,281   1.36%
LME Aluminum December 2011  (4,708)  16,610,061   14.58%
LME Copper December 2011  (499)  10,881,100   9.55%
Other Copper December 2011  (323)  3,359,575   2.95%
LME Nickel December 2011  (654)  7,109,568   6.24%
LME Zinc December 2011  (4,711)  18,305,924   16.06%
Coffee December 2011  (1,419)  10,108,463   8.87%
Corn December 2012  (3,375)  9,884,325   8.67%
Other Corn December 2011  (1,003)  3,955,587   3.47%
Gas Oil November 2011  (5,212)  17,577,775   15.42%
Other Gas Oil December 2012  (50)  726,600   0.64%
Natural Gas December 2011 – October 2012  (2,414)  6,125,390   5.38%
Wheat December 2012  (449)  5,892,913   5.17%
Wheat March 2012  (1,214)  8,984,775   7.88%
Wheat July 2012  (3,537)  29,605,887   25.98%
WTI Crude June 2013  (2,424)  19,512,270   17.12%
Other WTI Crude November 2011 – December 2014  (3,239)  9,049,360   7.94%
Other commodity      3,957,121   3.47%
Total futures      229,634,968   201.50%
             
Swaps            
Wheat December 2011  (2,479)  15,526,464   13.62%
Other Gas Oil June 2012  (27)  (3,476,250)  (3.05)%
Other Brent Crude December 2012  (1,097)  (1,521,140)  (1.33)%
Other commodity      2,155,070   1.89%
Total swaps      12,684,144   11.13%
             
Total     $(2,515,595)  (2.21)%
 
 
3027


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 September 30, 2011.

Description 
Number of
Contracts
  Fair Value  Percentage of Net Assets of Master Fund 
Graham Energy Focus LLC         
Long contracts         
Futures         
Natural Gas October 2012  2,813  $(8,639,150)  (29.18)%
Other Natural Gas December 2011 – April 2013  1,240   (857,220)  (2.90)%
Other commodity      (1,186,290)  (4.01)%
Total futures      (10,682,660)  (36.09)%
             
Options            
Natural Gas November 2011 – October 2012, $4.50 - $4.90 Put  1,050   8,009,250   27.05%
Other Natural Gas December 2011 – March 2012, $4.70 - $4.90 Call  600   300,800   1.02%
Total options      8,310,050   28.07%
             
Swaps            
Natural Gas November 2011  1,800   (3,281,475)  (11.07)%
Natural Gas December 2011  1,393   (2,940,060)  (9.93)%
Natural Gas January 2012  8,539   (17,227,582)  (58.20)%
Natural Gas February 2012  1,682   (2,828,805)  (9.56)%
Natural Gas March 2012  5,240   (2,457,203)  (8.30)%
Natural Gas October 2011 – December 2014  8,257   (4,826,745)  (16.31)%
Total swaps      (33,561,870)  (113.37)%

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 September 30, 2011.

Description 
Number of
Contracts
  Fair Value  Percentage of Net Assets of Master Fund 
Graham Energy Focus LLC (continued)         
Short contracts         
Futures         
Natural Gas January 2012  (2,737) $4,835,660   16.33%
Natural Gas February 2012  (1,523)  3,749,320   12.67%
Natural Gas April 2012  (4,062)  10,163,190   34.33%
Other Natural Gas November 2011  (811)  650,940   2.20%
Other commodity      629,790   2.13%
Total futures      20,028,900   67.66%
             
Options            
Natural Gas November 2011, $4.00 Put  (650)  (2,369,250)  (8.00)%
Natural Gas November 2011 – October 2012, $5.50 - $6.50 Call  (1,650)  (183,950)  (0.62)%
Natural Gas November 2011 – October 2012, $4.00 - $4.05 Put  (1,050)  (2,722,250)  (9.20)%
Crude Oil December 2011, $82.00 - $95.00 Call  (300)  (655,000)  (2.21)%
Crude Oil December 2011, $70.00 Put  (550)  (1,347,500)  (4.56)%
Total options      (7,277,950)  (24.59)%
             
Swaps            
Natural Gas December 2011  (2,431)  6,101,545   20.61%
Natural Gas November 2011 – December 2013  (8,733)  4,762,545   16.09%
Total swaps      10,864,090   36.70%
             
Total     $(12,319,440)  (41.62)%

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 JuneSeptember 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%
Description 
Number of
Contracts
  Fair Value  Percentage of Net Assets of Master Fund 
Graham Fed Policy Ltd.         
Long contracts         
Futures         
30 Day Fed Fund June 2012  4,579  $1,925,800   5.53%
Other 30 Day Fed Fund October 2011 – March 2012  21,640   1,835,609   5.27%
Total futures      3,761,409   10.80%
             
Options            
Fed Fund Futures December 2011, $99.81 Call  4,500   2,015,786   5.78%
Fed Fund Futures October 2011 – November 2011, $99.81 Call  6,075   2,643,180   7.59%
Fed Fund Futures October 2011 – June 2012, $99.81 - $99.94 Put  27,756   2,155,912   6.19%
Other futures      318,750   0.92%
Total options      7,133,628   20.48%
             
Short contracts            
Options            
Fed Fund Futures December 2011, $99.88 Call  (9,700)  (2,223,095)  (6.38)%
Fed Fund Futures October 2011 – June 2012, $99.88 - $100.00 Call  (37,475)  (3,959,171)  (11.37)%
Fed Fund Futures October 2011 – June 2012, $99.25 - $99.88 Put  (73,037)  (2,787,035)  (8.00)%
Other futures      (225,000)  (0.65)%
Total options      (9,194,301)  (26.40)%
             
Total     $1,700,736   4.88%

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 September 30, 2011.
DescriptionNotional Amount Fair Value  Percentage of Net Assets of Master Fund 
Graham Global Monetary Policy LLC       
Long contracts       
Futures       
Commodity  $26,060   0.02%
Foreign bond   (403,065)  (0.43)%
U.S. bond   678,031   0.73%
Total futures   301,026   0.32%
          
Options         
Foreign currency   41,384   0.04%
Total options   41,384   0.04%
          
Forwards         
Australian dollar / U.S. dollar 10/04/11AUD         696,767,414  (7,518,013)  (8.05)%
Other Australian dollar / U.S. dollar 10/05/11AUD         470,187,888  (2,181,909)  (2.33)%
Brazilian Real / U.S. dollar 10/04/11BRL          123,780,000  (5,040,902)  (5.40)%
Other Brazilian Real / U.S. dollar 11/03/11BRL            18,690,000  (167,175)  (0.18)%
Korean Won / U.S. dollar 10/19/11KRW 116,823,100,000  (6,802,928)  (7.28)%
Other Korean Won / U.S. dollar 10/06/11 – 11/04/11KRW 216,524,757,500  (7,079,816)  (7.58)%
Other foreign currency   (3,529,526)  (3.78)%
Total forwards   (32,320,269)  (34.60)%
 
31

 
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 September 30, 2011.

DescriptionNotional Amount Fair Value  Percentage of Net Assets of Master Fund 
Graham Global Monetary Policy LLC (continued)       
Short contracts       
Futures       
Commodity   447,318   0.48%
Foreign bond   (110,692)  (0.12)%
Foreign index   293,907   0.31%
Interest rate   (52,304)  (0.06)%
U.S. index   303,693   0.33%
Total futures   881,922   0.94%
          
Options         
Foreign currency   (946,482)  (1.01)%
Total options   (946,482)  (1.01)%
          
Forwards         
Australian dollar / U.S. dollar 10/04/11AUD         (746,000,000) 8,425,346   9.02%
Other Australian dollar / U.S. dollar 10/05/11AUD         (540,000,000 2,471,900   2.65%
Brazilian Real / U.S. dollar 10/04/11 - 11/03/11BRL           (179,065,000 5,090,794   5.45%
Korean Won / U.S. dollar 10/19/11KRW (116,823,100,000 5,904,927   6.32%
Other Korean Won / U.S. dollar 10/06/11 – 11/04/11KRW (216,604,942,500) 7,978,561   8.54%
Other foreign currency   5,965,625   6.39%
Total forwards   35,837,153   38.37%
          
Total  $3,794,734   4.06%

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 JuneSeptember 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%
Description 
Number of
Contracts / Notional
Amount
  Fair Value  Percentage of Net Assets of Master Fund 
Graham K4D Trading Ltd.         
Long contracts         
Futures         
U.S. bond    $(3,113,222)  (1.27)%
Foreign bond     (4,802,162)  (1.96)%
U.S. index     (10,286,975)  (4.21)%
Foreign index     345,239   0.14%
Soybean November 2011  1,389   (13,188,220)  (5.40)%
Other Soybean March 2012  1   (316)  (0.00)%
Other commodity      (65,379,418)  (26.74)%
Interest rate      (4,000,731)  (1.64)%
Currency      (1,578,712)  (0.65)%
Total futures      (102,004,517)  (41.73)%
             
Swaps            
Soybean November 2011  56   (555,901)  (0.23)%
Other commodity      (1,310)  (0.00)%
Total swaps      (557,211)  (0.23)%
             
Forwards            
Australian dollar / U.S. dollar 10/19/11 AUD        739,945,082   (29,884,516)  (12.22)%
Other Australian dollar / U.S. dollar 10/04/11 – 10/05/11 AUD        209,551,333   (833,817)  (0.34)%
Brazilian Real / U.S. dollar 10/04/11 BRL         840,781,555   (66,064,753)  (27.02)%
Other Brazilian Real / U.S. dollar 11/03/11 BRL           32,424,127   (188,743)  (0.08)%
Canadian dollar / U.S. dollar 10/19/11 CAD     1,380,588,086   (51,748,332)  (21.17)%
Euro / U.S. dollar 10/19/11 EUR         690,395,122   (13,381,484)  (5.47)%
Japanese Yen / U.S. dollar 10/19/11 JPY   230,430,610,022   (20,135,020)  (8.24)%
New Zealand dollar / U.S. dollar 10/19/11 NZD        385,115,861   (14,950,625)  (6.12)%
Other foreign currency      (75,275,971)  (30.79)%
Total forwards      (272,463,261)  (111.45)%
 
32


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)%
 
33

 
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 JuneSeptember 30, 2011.
 
Description
Principal
 Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
  
Number of
Contracts / Notional Amount
  Fair Value  Percentage of Net Assets of Master Fund 
Graham K4D Trading Ltd. (continued)                
Short contracts                
Futures                
U.S. bond    $(1,563,681)  (0.64)%
Foreign bond  $(239,058)  (0.09)%     (1,116,469)  (0.46)%
U.S. index     9,639,394   3.94%
Foreign index   (5,079,843)  (1.93)%     (2,872,584)  (1.17)%
Commodity   (7,688,784)  (2.91)%
LME Copper December 2011  (675)  21,600,866   8.84%
Other Copper December 2011 – March 2012  (522)  5,336,696   2.18%
Crude Oil November 2011  (2,293)  14,219,715   5.82%
Other Crude Oil December 2011  (1)  543   0.00%
Other commodity      61,634,892   25.21%
Interest rate   (3,830,906)  (1.45)%      1,412,266   0.58%
Currency   (742,175)  (0.28)%      4,703,191   1.92%
Total futures   (17,580,766)  (6.66)%      112,994,829   46.22%
                     
Swaps            
Commodity      4,367,607   1.79%
Total swaps      4,367,607   1.79%
            
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%
Australian dollar / U.S. dollar 10/19/11 AUD           (843,989,06)  22,541,833   9.22%
Other Australian dollar / U.S. dollar 10/04/11 – 10/05/11 AUD           (204,384,28)  821,742   0.34%
Brazilian Real / U.S. dollar 10/04/11 BRL          (840,781,555)  59,414,523   24.30%
Other Brazilian Real / U.S. dollar 11/03/11 BRL            (47,520,411)  457,669   0.19%
Canadian dollar / U.S. dollar 10/19/11 CAD      (1,586,777,537)  48,314,863   19.76%
Euro / U.S. dollar 10/19/11 EUR          (960,417,966)  22,934,898   9.38%
Japanese Yen / U.S. dollar 10/19/11 JPY    (222,034,528,765)  20,011,367   8.19%
Other foreign currency   (42,110,665)  (15.97)%      89,440,983   36.59%
Total forwards   (114,131,784)  (43.28)%      263,937,878   107.97%
                     
Total  $(19,574,231)  (7.42)%     $6,275,325   2.57%
 
 
3534

 
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 JuneSeptember 30, 2011.
 
Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 Notional Amount 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%  $(575,072)  (1.74)%
Total forwards      29,294   0.41%   (575,072)  (1.74)%
                     
Short contracts                     
Futures         
U.S. Index   923,688   2.80%
Total futures   923,688   2.80%
         
Forwards                     
Foreign currency      (73,482)  (1.03)%
Australian dollar / U.S. dollar 10/04/11AUD      (275,000,000) 2,799,943   8.49%
Other Australian dollar / U.S. dollar 10/05/11AUD      (285,000,000) 486,506   1.47%
Total forwards      (73,482)  (1.03)%   3,286,449   9.96%
                     
Total     $(773,694)  (10.87)%  $3,635,065   11.02%

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 September 30, 2011:
  
Graham
Commodity
Strategies 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 $-  $-  $-  $678,031  $(3,113,222) $- 
Foreign bond futures  -   -   -   (403,065)  (4,802,162)  - 
U.S. index futures  -   -   -   -   (10,286,975)  - 
Foreign index futures  -   -   -   -   345,239   - 
Commodity futures  (246,525,907)  (10,682,660)  -   26,060   (78,567,954)  - 
Commodity futures options  -   8,310,050   -   -   -   - 
Commodity swaps  1,691,200   (33,561,870)  -   -   (557,211)  - 
Interest rate futures  -   -   3,761,409   -   (4,000,731)  - 
Interest rate futures options  -   -   7,133,628   -   -   - 
Currency futures  -   -   -   -   (1,578,712)  - 
Total Level 1  (244,834,707)  (35,934,480)  10,895,037   301,026   (102,561,728)  - 
                         
Level 2:                        
Foreign currency forwards  -   -   -   (32,320,269)  (272,463,261)  (575,072)
Foreign currency options  -   -   -   41,384   -   - 
Total Level 2  -   -   -   (32,278,885)  (272,463,261)  (575,072)
Total long contracts $(244,834,707) $(35,934,480) $10,895,037  $(31,977,859) $(375,024,989) $(575,072)
                         
Short Contracts                        
Level 1:                        
U.S. bond futures $-  $-  $-  $-  $(1,563,681) $- 
Foreign bond futures  -   -   -   (110,692)  (1,116,469)  - 
Foreign index futures  -   -   -   293,907   (2,872,584)  - 
U.S. index futures  -   -   -   303,693   9,639,394   923,688 
Commodity futures  229,634,968   20,028,900   -   447,318   102,792,712   - 
Commodity futures options  -   (7,277,950)  -   -   -   - 
Commodity swaps  12,684,144   10,864,090   -   -   4,367,607   - 
Interest rate futures  -   -   -   (52,304)  1,412,266   - 
Interest rate futures options  -   -   (9,194,301)  -   -   - 
Currency futures  -   -   -   -   4,703,191   - 
Total Level 1  242,319,112   23,615,040   (9,194,301)  881,922   117,362,436   923,688 
                         
Level 2:                        
Foreign currency forwards  -   -   -   35,837,153   263,937,878   3,286,449 
Foreign currency options  -   -   -   (946,482)  -   - 
Total Level 2  -   -   -   34,890,671   263,937,878   3,286,449 
Total short contracts $242,319,112  $23,615,040  $(9,194,301) $35,772,593  $381,300,314  $4,210,137 
 
 
36

 
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 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 
Long Contracts                     
Level 1:                     
U.S. bond futures $-  $-  $-  $-  $(374,234) $(11,253,047) $- 
Foreign bond futures  -   -   -   -   -   (8,536,516)  (729,506)
U.S. index futures  -   -   -   -   -   10,415,895   - 
Foreign index futures  -   -   -   -   -   5,025,773   - 
Commodity futures  6,258,596   (6,832,218)  (1,005,298)  -   (1,798,730)  (1,129,857)  - 
Commodity futures options  -   15,666,450   9,247,750   -   -   -   - 
Commodity swaps  6,500,250   (2,363,500)  (5,604,470)  -   -   -   - 
Interest rate futures  -   -   -   9,340,992   2,631,128   (1,020,274)  - 
Interest rate futures options  -   -   -   20,589,479   -   -   - 
Currency futures  -   -   -   -   -   1,073,226   - 
Total Level 1  12,758,846   6,470,732   2,637,982   29,930,471   458,164   (5,424,800)  (729,506)
                             
Level 2:                            
Foreign currency forwards  -   -   -   -   1,008,468   117,563,119   29,294 
Foreign currency options  -   -   -   -   51,109   -   - 
Total Level 2  -   -   -   -   1,059,577   117,563,119   29,294 
Total long contracts $12,758,846  $6,470,732  $2,637,982  $29,930,471  $1,517,741  $112,138,319  $(700,212)
                             
Short Contracts                            
Level 1:                            
Foreign bond futures $-  $-  $-  $-  $1,128,704  $(239,058) $- 
Foreign index futures  -   -   -   -   -   (5,079,843)  - 
Commodity futures  10,445,480   17,815,764   9,715,295   -   1,715,360   (7,688,784)  - 
Commodity futures options  -   -   (4,954,950)  -   -   -   - 
Commodity swaps  (6,088,500)  2,412,220   1,346,308   -   -   -   - 
Interest rate futures  -   -   -   (29,523)  (3,522,264)  (3,830,906)  - 
Interest rate futures options  -   -   -   (8,214,512)  -   -   - 
Currency futures  -   -   -   -   -   (742,175)  - 
Total Level 1  4,356,980   20,227,984   6,106,653   (8,244,035)  (678,200)  (17,580,766)  - 
                             
Level 2:                            
Foreign currency forwards  -   -   -   -   (1,127,441)  (114,131,784)  (73,482)
Total Level 2  -   -   -   -   (1,127,441)  (114,131,784)  (73,482)
Total short contracts $4,356,980  $20,227,984  $6,106,653  $(8,244,035) $(1,805,641) $(131,712,550) $(73,482)

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 JuneSeptember 30, 2011 categorized by primary underlying risk.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative assetsasset 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.condition.
 
  Graham Commodity Strategies LLC  Graham Energy Focus 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 $3,750,771,496   50,784  $(3,994,915,685)  (57,924) $236,260,233  $(253,151,172) $199,632,400   4,358  $(435,843,310)  (9,786) $20,028,900  $(10,682,660)
Swaps  176,649,860   2,482   (227,159,118)  (4,327)  26,492,494   (12,117,150)  280,826,958   26,911   (118,413,305)  (11,164)  11,021,243   (33,719,023)
   3,927,421,356   53,266   (4,222,074,803)  (62,251)  262,752,727   (265,268,322)  480,459,358   31,269   (554,256,615)  (20,950)  31,050,143   (44,401,683)
                                                 
Equity price                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
   -   -   -   -   -   -   -   -   -   -   -   - 
                                                 
Foreign currency exchange rate                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   -   -   -   -   -   - 
   -   -   -   -   -   -   -   -   -   -   -   - 
                                                 
Interest rate                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
   -   -   -   -   -   -   -   -   -   -   -   - 
Total $3,927,421,356   53,266  $(4,222,074,803)  (62,251) $262,752,727  $(265,268,322) $480,459,358   31,269  $(554,256,615)  (20,950) $31,050,143  $(44,401,683)
                                                 
Collateral balances supporting all derivative positions                     $116,476,259                      $41,922,589 
  Graham Commodity Strategies LLC  Graham Discretionary Energy Trading III 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 $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  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)
   3,155,359,577   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 $3,155,359,577   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 positions  $59,101,338                      $(4,983,569)

 
3837

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 JuneSeptember 30, 2011 categorized by primary underlying risk.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative assetsasset 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.condition.
 
 Graham Energy Focus LLC  Graham Fed Policy Ltd.  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 $131,417,718   3,454  $(267,852,450)  (6,117) $12,455,625  $(3,745,628) $-   -  $-   -  $-  $-  $-   -  $-   -  $-  $-  $30,823,700   190  $(33,570,000)  (350) $473,378  $- 
Swaps  260,296,748   21,961   (106,125,213)  (9,068)  3,084,846   (7,343,008)  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
  391,714,466   25,415   (373,977,663)  (15,185)  15,540,471   (11,088,636)  -   -   -   -   -   -   -   -   -   -   -   -   30,823,700   190   (33,570,000)  (350)  473,378   - 
                                                                                                
Equity price                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (33,801,254)  (550)  597,600   - 
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (33,801,254)  (550)  597,600   - 
                                                                                                
Foreign currency exchange rate                                                                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   7,153,566   -   (5,247,507)  -   8,883,942   (5,367,058)
  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   7,153,566   -   (5,247,507)  -   8,883,942   (5,367,058)
                                                                                                
Interest rate                                                                                                
Futures  -   -   -   -   -   -   11,222,846,646   26,972   (901,209,799)  (2,170)  9,340,992   (29,523)  10,914,786,242   26,219   -   -   3,965,071   (203,662)  585,349,102   5,350   (3,113,355,666)  (8,774)  1,862,367   (1,750,397)
  -   -   -   -   -   -   11,222,846,646   26,972   (901,209,799)  (2,170)  9,340,992   (29,523)  10,914,786,242   26,219   -   -   3,965,071   (203,662)  585,349,102   5,350   (3,113,355,666)  (8,774)  1,862,367   (1,750,397)
Total $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) $10,914,786,242   26,219  $-   -  $3,965,071  $(203,662) $623,326,368   5,540  $(3,185,974,427)  (9,674) $11,817,287  $(7,117,455)
                                                                                     
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions  $11,094,654                      $22,826,365                      $33,135,133                      $89,608,118 

 
3938

 
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 JuneSeptember 30, 2011 categorized by primary underlying risk.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative assetsasset 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.condition.
 
  Graham Global Monetary Policy LLC  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 $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)
   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  -   -   -   -   -   -   476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
   -   -   -   -   -   -   476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
                                                 
Foreign currency exchange rate                             ��                  
Futures  -   -   -   -   -   -   445,249,816   2,709   (275,073,860)  (2,797)  1,326,426   (995,375)
Forwards  2,684,470   -   (3,371,806)  -   2,646,610   (2,765,583)  31,171,994   -   (18,184,872)  -   21,904,835   (18,473,500)
   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  1,247,933,160   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)
   1,247,933,160   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 $1,297,109,630   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 positions  $98,569,407                      $283,292,262 

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 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 K4D Trading Ltd.  Graham Macro Directional LLC 
 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
 
                                                      
Commodity price                                                      
Futures $-   -  $-   -  $-  $-  $522,389,303   7,428  $(991,669,996)  (20,375) $91,265,305  $(67,040,547) $-   -  $-   -  $-  $- 
Swaps  3,301,200   56   (58,949,530)  (1,932)  4,366,271   (555,875)  -   -   -   -   -   - 
  -   -   -   -   -   -   525,690,503   7,484   (1,050,619,526)  (22,307)  95,631,576   (67,596,422)  -   -   -   -   -   - 
                                                                        
Equity price                                                                        
Futures  -   -   -   -   -   -   199,800,119   4,254   (410,064,495)  (7,452)  7,562,237   (10,737,163)  -   -   (50,670,000)  (900)  923,688   - 
  -   -   -   -   -   -   199,800,119   4,254   (410,064,495)  (7,452)  7,562,237   (10,737,163)  -   -   (50,670,000)  (900)  923,688   - 
                                                                        
Foreign currency exchange rate                                                                        
Futures  -   -   -   -   -   -   122,402,981   1,486   (231,243,788)  (1,733)  3,284,664   (160,185)                        
Forwards  -   -   (42,608)  -   -   (44,188)  27,912,352   -   (37,186,219)  -   28,309,734   (36,835,117)  2,504,000   -   ,   ,   2,711,377   - 
  -   -   (42,608)  -   -   (44,188)  150,315,333   1,486   (268,430,007)  (1,733)  31,594,398   (36,995,302)  2,504,000   -   ,   ,   2,711,377   - 
                                                                        
Interest rate                                                                        
Futures  685,724,754   5,700   -   -   515,627   (1,245,133)  9,559,805,314   35,995   (1,169,408,767)  (5,589)  2,688,188   (15,872,187)  -   -   ,   ,   -   - 
  685,724,754   5,700   -   -   515,627   (1,245,133)  9,559,805,314   35,995   (1,169,408,767)  (5,589)  2,688,188   (15,872,187)  -   -   ,   ,   -   - 
Total $685,724,754   5,700  $(42,608)  -  $515,627  $(1,289,321) $10,435,611,269   49,219  $(2,898,522,795)  (37,081) $137,476,399  $(131,201,074) $2,504,000   -  $(50,670,000)  (900) $3,635,065  $- 
             
             
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $7,894,158                      $238,595,299                      $29,353,370 
 
 
4139

 
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 and sixnine month periods ended JuneSeptember 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 September 30, 2011 
Net investment loss $(6,206) $(55,848) $(2,697) $(1,155) $(193,112) $(169,883) $(25,923) $- 
                                 
Net realized gain (loss) on investments  30,418,977   3,615,278   17,235,451   13,785,707   15,742,755   (161,048,924)  59,995,650   - 
Net increase (decrease) in unrealized appreciation on investments  (19,631,421)  (7,651,291)  (19,062,821)  (6,309,319)  7,460,723   26,144,203   7,067,429   - 
Brokerage commissions and fees  (2,014,171)  (584,559)  (279,564)  (660,278)  (1,568,140)  (3,638,203)  (307,298)  - 
Net gain (loss) on investments  8,773,385   (4,620,572)  (2,106,934)  6,816,110   21,635,338   (138,542,924)  66,755,781   - 
Net income (loss) $8,767,179  $(4,676,420) $(2,109,631) $6,814,955  $21,442,226  $(138,712,807) $66,729,858  $- 
    
  Nine Months Ended September 30, 2011 
Net investment income (loss) $(15,072) $(76,722) $(18,181) $(5,185) $(259,745) $(460,227) $(34,346) $1,186 
                                 
Net realized gain (loss) on investments  107,512,168   (11,935,802)  11,284,560   36,091,667   27,117,821   (229,474,772)  36,579,778   3,960,455 
Net increase (decrease) in unrealized appreciation on investments  (39,487,473)  (16,614,276)  (13,480,668)  (5,573,405)  8,351,654   (38,951,376)  6,017,971   (1,898,136)
Brokerage commissions and fees  (5,487,343)  (2,187,662)  (921,141)  (1,960,811)  (2,941,908)  (10,568,353)  (1,328,069)  (548,562)
Net gain (loss) on investments  62,537,352   (30,737,740)  (3,117,249)  28,557,451   32,527,567   (278,994,501)  41,269,680   1,513,757 
Net income (loss) $62,522,280  $(30,814,462) $(3,135,430) $28,552,266  $32,267,822  $(279,454,728) $41,235,334  $1,514,943 
  
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) $- 
  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 
 
 
4240

 
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) $- 

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 sixthree months ended JuneSeptember 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 $57,331,639  $(20,131,865) $1,922,912  $-  $8,634,955  $(42,986,840) $(731,472) $3,852,769  $(2,162,171) $8,177,697  $23,788,172  $-  $20,206,590  $(5,164,850) $2,146,040  $- 
Options  -   (5,141,415)  2,702,065   -   (87,120)  -   -   (223,490)  -   (13,924,790)  321,900   -   -   -   -   - 
Swaps  (94,500)  759,215   (4,993,715)  -   -   -   -   -   12,949,727   1,711,080   (25,927,942)  -   -   2,104,346   -   - 
  57,237,139   (24,514,065)  (368,738)  -   8,547,835   (42,986,840)  (731,472)  3,629,279   10,787,556   (4,036,013)  (1,817,870)  -   20,206,590   (3,060,504)  2,146,040   - 
Equity price                                                                
Futures  -   -   -   -   (5,485,726)  (68,330,129)  (4,686,981)  1,134,945   -   -   (9,500)  -   12,459,295   (134,617,931)  9,331,261   - 
Options  -   -   -   -   -   -   -   (427,187)  -   -   -   -   (1,416,863)  -   -   - 
  -   -   -   -   (5,485,726)  (68,330,129)  (4,686,981)  707,758   -   -   (9,500)  -   11,042,432   (134,617,931)  9,331,261   - 
Foreign currency exchange rate                                                                
Futures  -   -   -   -   -   (9,996,003)  -   -   -   -   -   -   -   10,223,770   -   - 
Forwards  -   -   -   -   44,476,513   (18,578,273)  (28,706,387)  5,706,028   -   -   -   -   (14,623,359)  (94,513,839)  30,284,014   - 
Options  -   -   -   -   (20,839,029)  -   -   (7,400,670)  -   -   -   -   (5,309,085)  -   -   - 
  -   -   -   -   23,637,484   (28,574,276)  (28,706,387)  (1,694,642)  -   -   -   -   (19,932,444)  (84,290,069)  30,284,014   - 
Interest rate                                                                
Futures  -   -   -   28,560,950   (13,725,783)  6,369,818   9,659,510   (580,076)  -   -   -   15,147,183   11,886,900   87,063,783   24,433,838   - 
Options  -   -   -   (5,519,076)  (707,813)  -   -   -   -   -   -   (7,670,795)  -   -   867,926   - 
  -   -   -   23,041,874   (14,433,596)  6,369,818   9,659,510   (580,076)  -   -   -   7,476,388   11,886,900   87,063,783   25,301,764   - 
Total $57,237,139  $(24,514,065) $(368,738) $23,041,874  $12,265,997  $(133,521,427) $(24,465,330) $2,062,319  $10,787,556  $(4,036,013) $(1,827,370) $7,476,388  $23,203,478  $(134,904,721) $67,063,079  $- 

 
4441

 
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 nine months ended September 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 $55,169,468  $(11,954,168) $25,711,084  $-  $28,841,545  $(48,151,690) $1,414,568  $3,852,769 
Options  -   (19,066,205)  3,023,965   -   (87,120)  -   -   (223,490)
Swaps  12,855,227   2,470,295   (30,921,657)  -   -   2,104,346   -   - 
   68,024,695   (28,550,078)  (2,186,608)  -   28,754,425   (46,047,344)  1,414,568   3,629,279 
Equity price                                
Futures  -   -   (9,500)  -   6,973,569   (202,948,060)  4,644,280   1,134,945 
Options  -   -   -   -   (1,416,863)  -   -   (427,187)
   -   -   (9,500)  -   5,556,706   (203,948,060)  4,644,280   707,758 
Foreign currency exchange rate                                
Futures  -   -   -   -   -   227,767   -   - 
Forwards  -   -   -   -   29,853,154   (113,092,112)  1,577,627   5,706,028 
Options  -   -   -   -   (26,148,114)  -   -   (7,400,670)
   -   -   -   -   3,705,040   (112,864,345)  1,577,627   (1,694,642)
Interest rate                                
Futures  -   -   -   43,708,133   (1,838,883)  93,433,601   34,093,348   (580,076)
Options  -   -   -   (13,189,871)  (707,813)  -   867,926   - 
   -   -   -   30,518,262   (2,546,696)  93,433,601   34,961,274   (580,076)
Total $68,024,695  $(28,550,078) $(2,196,108) $30,518,262  $35,469,475  $(268,426,148) $42,597,749  $2,062,319 
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)
  
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  $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   -   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   -   36,971,878   16,379,776   11,613,647   -   45,743,328   173,923   - 
Subscriptions receivable  -   -   1,739   340   -   -   -   -   -   1,739   340   -   -   - 
Interest receivable  -   -   -   3,056   9,100   113   -   -   -   -   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   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   -   -   -   -   -   182,500   3,958,218   -   -   -   - 
Derivative financial instruments, at fair value  -   -   -   3,185,389   -   -   105,751   -   -   -   3,185,389   -   -   105,751 
Due to brokers  -   6,241,250   -   530,100   -   -   41,070   -   6,241,250   -   530,100   -   -   41,070 
Redemptions payable  -   -   -   220   -   -   -   -   -   -   220   -   -   - 
Total liabilities  -   6,423,750   3,958,218   3,715,709   -   -   146,821   -   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  $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%  14.76%  13.95%  14.22%  8.97%  13.23%  18.38%  28.67%


 
4543

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

 
4644

 
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%
 
 
4745

 
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%

 
4846

 
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%

 
4947

 
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 Fed Policy Ltd.                  
Long contracts                  
Futures                  
30 Day Fed Fund February 2011  4,831  $2,646,031   5.61%  4,831  $2,646,031   5.61%
Other 30 Day Fed Fund January 2011 - June 2012  50,026   8,927,649   18.92%  50,026   8,927,649   18.92%
Total futures      11,573,680   24.53%      11,573,680   24.53%
                        
Options                        
30 Day Fed Fund futures February 2011, $99.75 Call  11,350   3,310,682   7.02%  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%  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%  30,823   409,647   0.87%
Other interest rate futures      437,500   0.93%      437,500   0.93%
Total options      15,955,481   33.83%      15,955,481   33.83%
                        
Short contracts                        
Futures                        
30 Day Fed Fund December 2010 - July 2012  (2,849)  39,967   0.08%  (2,849)  39,967   0.08%
Total futures      39,967   0.08%      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)%  (178,751)  (3,833,213)  (8.13)%
30 Day Fed Fund futures January 2011, $99.69 Put  (6,000)  (62,505)  (0.13)%  (6,000)  (62,505)  (0.13)%
Other interest rate futures      (62,500)  (0.13)%      (62,500)  (0.13)%
Total options      (3,958,218)  (8.39)%      (3,958,218)  (8.39)%
                        
Total     $23,610,910   50.05%     $23,610,910   50.05%
 
 
5048

 
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
  
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%    $833,980   2.10%
Interest rate     1,570,955   3.95%     1,570,955   3.95%
Total futures     2,404,935   6.05%     2,404,935   6.05%
                      
Options                      
Foreign currency     603,151   1.52%     603,151   1.52%
Total options     603,151   1.52%     603,151   1.52%
                      
Forwards                      
Japanese Yen / U.S. Dollar 01/04/11 JPY  35,703,594,900   2,677,452   6.73% 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% 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% 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% AUD   550,000,000   3,850,775   9.68%
Other foreign currency     (474,653)  (1.19)%     (474,653)  (1.19)%
Total forwards     10,800,884   27.16%     10,800,884   27.16%
                      
Short contracts                      
Futures                      
Euroswiss March 2011 (7,500)  (2,070,419)  (5.21)%  (7,500)  (2,070,419)  (5.21)%
Other interest rate     (1,009,594)  (2.53)%      (1,009,594)  (2.53)%
U.S. bond     (37,016)  (0.09)%      (37,016)  (0.09)%
Foreign bond     641,195   1.61%      641,195   1.61%
Commodity     (770,200)  (1.94)%      (770,200)  (1.94)%
Total futures     (3,246,034)  (8.16)%      (3,246,034)  (8.16)%
                       
Forwards                       
Australian dollar / U.S. dollar 01/04/11 AUD    (450,000,000)   (3,909,044)  (9.83)% 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)% 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)% 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)% JPY (40,735,192,000)   (1,652,261)  (4.16)%
Other foreign currency     (2,682,356)  (6.75)%      (2,682,356)  (6.75)%
Total forwards     (13,145,174)  (33.06)%      (13,145,174)  (33.06)%
                       
Total    $(2,582,238)  (6.49)%     $(2,582,238)  (6.49)%

 
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
 
Graham K4D Trading Ltd.       
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%
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 
Graham K4D Trading Ltd. (continued)       
Short contracts       
Futures       
U.S. bond  $(1,546,794)  (0.85)%
Foreign bond   (540,937)  (0.30)%
Foreign index   (142,959)  (0.08)%
Commodity   (4,754,965)  (2.62)%
Interest rate   (3,790,967)  (2.09)%
Currency   739,824   0.41%
Total futures   (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)%
Other foreign currency   (7,987,532)  (4.40)%
Total forwards   (39,063,387)  (21.51)%
          
Total  $45,743,328   25.18%

 
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
 
Graham K4D Trading Ltd.       
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
Master Fund
 
Graham Macro Directional LLC       
Long contracts       
Futures       
Commodity  $66,430   4.55%
Total futures   66,430   4.55%
          
Forwards         
Canadian dollar / U.S. dollar 01/04/11CAD     20,003,980  87,433   5.99%
Total forwards   87,433   5.99%
          
Short Contracts         
Futures         
Foreign bond   20,060   1.37%
Total futures   20,060   1.37%
          
Total  $173,923   11.91%

 
52

 
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
 
Graham K4D Trading Ltd. (continued)       
Short contracts       
Futures       
U.S. bond  $(1,546,794)  (0.85)%
Foreign bond   (540,937)  (0.30)%
Foreign index   (142,959)  (0.08)%
Commodity   (4,754,965)  (2.62)%
Interest rate   (3,790,967)  (2.09)%
Currency   739,824   0.41%
Total futures   (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)%
Other foreign currency   (7,987,532)  (4.40)%
Total forwards   (39,063,387)  (21.51)%
          
Total  $45,743,328   25.18%
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
 
Graham Macro Directional LLC       
Long contracts       
Futures       
Commodity  $66,430   4.55%
Total futures 
 
 66,430   4.55%
          
Forwards         
Canadian dollar / U.S. dollar 01/04/11CAD     20,003,980  87,433   5.99%
Total forwards   87,433   5.99%
          
Short Contracts         
Futures         
Foreign bond   20,060   1.37%
Total futures   20,060   1.37%
          
Total  $173,923   11.91%
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, $1.47 CHF 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 08/19/11 CNY 334,143,000   1,385,221   945.81% CNY    34,143,000   1,385,221   945.81%
Total forwards     1,385,221   945.81%      1,385,221   945.81%
                       
Short Contracts                       
Forwards                       
Swiss Franc / British Pound 01/05/11 CHF (7,292,955)   (15,162)  (10.35)% CHF    (7,292,955)   (15,162)  (10.35)%
Chinese Yuan / U.S. dollar 08/19/11 CNY (334,143,000)   (1,458,935)  (996.15)% 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)%

 
5553

 
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)

 
5654

 
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 
  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 $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)
   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)
                                                 
                                                 
Collateral balances supporting all derivative positions              $14,527,187                      $(6,241,250)

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 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 $-   -  $-   -  $-  $-  $38,619,000   600  $(24,200,000)  (500) $833,980  $(770,200) $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)
  -   -   -   -   -   -   38,619,000   600   (24,200,000)  (500)  833,980   (770,200)  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  -   -   -   -   -   -   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)  -   -   -   -   -   -   -   -   -   -   -  - 
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) $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          $23,563,039                      $42,339,139                      $14,527,187                     $(6,241,250)

 
5855

 
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 
  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) $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)  -   -   -   -   -   - 
                                                 
Foreign currency exchange rate                                                
Futures  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   - 
   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   - 
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  $- 
                                      
                                      
Collateral balances supporting all derivative positions          $135,887,098                      $1,286,040 

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 Fed Policy Ltd.  Graham Global Monetary Policy LLC 
 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
 
                                                      
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)
                                                                        
Equity price                                                                        
Futures  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)  -   -   -   -   -   -   56,025,637,522   -   (46,698,002,524)  -   15,230,468   (17,574,758)
  51,458,935   -   (56,468,659)  -   1,385,221   (1,474,097)  -   -   -   -   -   -   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)
Total $65,555,185   225  $(56,468,659)  -  $1,385,221  $(1,490,972) $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          $204,953                      $23,563,039                      $42,339,139  


 
6056

 
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 
  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) $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)  -   -   -   -   -   - 
                                                 
Foreign currency exchange rate                                                
Futures  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   - 
   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   - 
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  $- 
                                                 
Collateral balances supporting all derivative positions                     $135,887,098                      $1,286,040 
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 
  Long exposure  Short exposure       
  
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)
                         
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)
                         
Interest rate                        
Futures  -   -   -   -   -   - 
   -   -   -   -   -   - 
Total $65,555,185   225  $(56,468,659)  -  $1,385,221  $(1,490,972)
                         
Collateral balances supporting all derivative positions                     $204,953 

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 and six month periodsnine months ended JuneSeptember 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 September 30, 2010 
Net investment income (loss) $(1,462) $(63,926) $(3,721) $(28,436) $486  $(25,302) $62,423  $723 
                                 
Net realized gain (loss)on investments  (30,632,779)  (8,157,907)  20,771,895   2,888,717   (716,813)  (9,520,923)  2,616,752   1,479,222 
Net increase (decrease) in appreciation on investments  31,565,216   13,651,897   3,687,486   2,868,043   (529,824)  68,863,324   (2,464,404)  15,070 
Brokerage commissions and fees  (1,347,849)  (551,867)  (544,081)  (462,964)  (538)  (1,766,962)  (361,528)  (153,017)
Net gain (loss) on investments  (415,412)  4,942,123   23,915,300   5,293,796   (1,247,175)  57,575,439   (209,180)  1,341,275 
Net income (loss) $(416,874) $4,878,197  $23,911,579  $5,265,360  $(1,246,689) $57,550,137  $(146,757) $1,341,998 
 
 
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  Nine Months Ended September 30, 2010 
Net investment income (loss) $(4,508) $(22,984) $(1,753) $(12,553) $(520) $(33,308) $(61,298) $18  $(9,606) $(95,164) $(6,706) $(47,142) $(25,215) $(127,018) $(36,686) $912 
                                                                
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)  (27,201,108)  618,331   12,832,214   95,303,646   (4,743,412)  (31,318,993)  17,533,873   (3,686,155)
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 
Net increase (decrease) in appreciation on investments  23,031,904   9,373,559   26,296,377   5,543,806   1,324,681   54,268,614   (1,589,754)  1,941,696 
Brokerage commissions and fees  (1,190,667)  (240,745)  (1,207,556)  (557,874)  -   (1,525,901)  (184,244)  (94,104)  (3,540,939)  (1,066,971)  (2,885,788)  (1,618,332)  (1,695)  (4,773,158)  (665,723)  (285,325)
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)  (7,710,143)  8,924,919   36,242,803   99,229,120   (3,420,426)  18,176,463   15,278,396   (2,029,784)
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) $(7,719,749) $8,829,755  $36,236,097  $99,181,978  $(3,445,641) $18,049,445  $15,241,710  $(2,028,872)
 
  Six Months Ended June 30, 2010 
Net investment income (loss) $(8,144) $(31,238) $(2,985) $(18,706) $(25,701) $(101,716) $(99,109) $189 
                                 
Net realized gain (loss) on investments  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 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  (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  (7,294,731)  3,982,796   12,327,503   93,935,324   (2,173,251)  (39,398,976)  15,487,576   (3,371,059)
Net income (loss) $(7,302,875) $3,951,558  $12,324,518  $93,916,618  $(2,198,952) $(39,500,692) $15,388,467  $(3,370,870)

 
6159


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 JuneSeptember 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
  
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) $932,437  $(2,918,560) $(3,979,882) $3,669,261  $-  $23,090,803  $664,110  $(316,538)
Options  -   1,874,590   -   -   -   -   -   -   -   8,412,550   -   -   -   -   -   - 
  (13,187,255)  (3,311,757)  3,979,881   2,862,473   -   (50,167,010)  (603,690)  (221,336)  932,437   5,493,990   (3,979,882)  3,669,261   -   23,090,803   664,110   (316,538)
Equity price                                                                
Futures  -   -   -   2,212,502   -   (29,055,274)  2,484,139   334,113   -   -   -   (2,451,692)  -   (31,259,994)  (1,845,278)  (62,758)
  -   -   -   2,212,502   -   (29,055,274)  2,484,139   334,113   -   -   -   (2,451,692)  -   (31,259,994)  (1,845,278)  (62,758)
Foreign currency exchange rate                                                                
Futures  -   -   -   -   -   2,398,505   -   -   -   -   -   -   -   979,360   -   - 
Forwards  -   -   -   46,487,972   20,691   (9,137,401)  4,509,743   395,464   -   -   -   (575,427)  5,011   22,931,616   (625,639)  9,008,929 
Options  -   -   -   202,284   -   -   -   (2,679,231)  -   -   -   3,317,727   -   -   -   (7,025,943)
  -   -   -   46,690,256   20,691   (6,738,896)  4,509,743   (2,283,767)  -   -   -   2,742,300   5,011   23,910,976   (625,639)  1,982,986 
Interest rate                                                                
Bonds  -   -   -   -   -   -   769,659   86,547   -   -   -   -   -   -   -   - 
Futures  -   -   (2,197,604)  5,812,180   -   92,793,103   1,191,310   874,480   -   -   61,850,906   3,256,027   -   43,600,616   1,959,155   (109,398)
Interest rate swaps  -   -   3,821,203   -   (2,147,422)  -   -   -   -   -   -   -   (1,251,648)  -   -   - 
Options  -   -   -   -   -   -   -   -   -   -   (33,411,643)  (1,459,136)  -   -   -   - 
  -   -   1,623,599   5,812,180   (2,147,422)  92,793,103   1,960,969   961,027   -   -   28,439,263   1,796,891   (1,251,648)  43,600,616   1,959,155   (109,398)
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) $932,437  $5,493,990  $24,459,381  $5,756,760  $(1,246,637) $59,342,401  $152,348  $1,494,292 
 
 
6260

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 sixnine months ended JuneSeptember 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
  
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) $(4,169,204) $422,100  $-  $8,710,031  $-  $(50,844,752) $(697,600) $(1,330,724)
Options  -   1,157,240   -   -   -   -   -   -   -   9,569,790   -   -   -   -   -   - 
  (5,101,641)  4,497,900   3,979,882   5,040,770   -   (73,935,555)  (1,361,710)  (1,014,186)  (4,169,204)  9,991,890   -   8,710,031   -   (50,844,752)  (697,600)  (1,330,724)
Equity price                                                                
Futures  -   -   -   3,338,610   -   (61,669,638)  2,272,190   158,138   -   -   -   886,918   -   (92,929,632)  426,912   95,380 
  -   -   -   3,338,610   -   (61,669,638)  2,272,190   158,138   -   -   -   886,918   -   (92,929,632)  426,912   95,380 
Foreign currency exchange rate                                                                
Futures  -   -   -   -   -   3,110,816   -   -   -   -   -   -   -   4,090,176   -   - 
Forwards  -   -   -   84,190,388   20,691   (9,218,276)  13,689,981   1,947,897   -   -   -   83,614,961   25,702   13,713,340   13,064,342   10,956,826 
Options  -   -   -   (3,317,727)  -   -   -   (5,205,080)  -   -   -   -   -   -   -   (12,231,023)
  -   -   -   80,872,661   20,691   (6,107,460)  13,689,981   (3,257,183)  -   -   -   83,614,961   25,702   17,803,516   13,064,342   (1,274,197)
Interest rate                                                                
Bonds  -   -   -   -   (45,362)  -   -   -   -   -   -   -   (45,362)  -   -   - 
Futures  -   -   858,476   6,254,151   -   105,319,873   1,191,310   874,480   -   -   62,709,382   9,510,178   -   148,920,489   3,150,465   765,082 
Interest rate swaps  -   -   9,830,852   (403,000)  (2,147,423)  -   -   -   -   -   -   (403,000)  (3,399,071)  -   -   - 
Options  -   -   -   (12,500)  -   -   -   -   -   -   (23,580,791)  (1,471,636)  -   -   -   - 
  -   -   10,689,328   5,838,651   (2,192,785)  105,319,873   1,191,310   874,480   -   -   39,128,591   7,635,542   (3,444,433)  148,920,489   3,150,465   765,082 
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) $(4,169,204) $9,991,890  $39,128,591  $100,847,452  $(3,418,731) $22,949,621  $15,944,119  $(1,744,459)
 
 
6361

 
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 GAIT’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 JuneSeptember 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $498,565.$439,886.  For the sixnine months ended JuneSeptember 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $1,013,711.$1,453,597.  For the three months ended June
September 30, 2010, the total amount recognized by GAIT with respect to its investment in GCA was $466,353.$502,343.  For the sixnine months ended JuneSeptember 30, 2010, the total amount recognized by GAIT with respect to its investment in GCA was $881,848.$1,384,191.  These amounts are included in interest income in the statements of operations and managing member allocation.  At JuneSeptember 30, 2011 and December 31, 2010, GAIT owned approximately 12.88%12.81% and 13.77%, respectively, of GCA.  The following table summarizes the financial position of GCA as of JuneSeptember 30, 2011 and December 31, 2010:
 
   
 June 30, 2011  December 31, 2010  September 30, 2011  December 31, 2010 
Assets:            
Cash and cash equivalents $799,619,853  $750,098,151  $935,478,058  $750,098,151 
Investments in fixed income securities (cost $2,523,700,111 and $2,215,622,512, respectively)  2,523,700,111   2,215,622,512 
Investments in fixed income securities (cost $2,418,350,430 and $2,215,622,512 respectively)  2,418,350,430   2,215,622,512 
Accrued interest income  6,546,459   6,547,074   8,640,660   6,547,074 
Total assets  3,329,866,423   2,972,267,737   3,362,469,148   2,972,267,737 
                
Liabilities:                
Other liabilities  20,000   20,000   30,000   20,000 
Total liabilities  20,000   20,000   30,000   20,000 
Net assets $3,329,846,423  $2,972,247,737  $3,362,439,148  $2,972,247,737 
        
 
The following table summarizes the results of operations of GCA for the three and sixnine month periods ended JuneSeptember 30, 2011 and 2010:
 
 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2011  2010  2011  2010  2011  2010  2011  2010 
Investment income                        
Interest income $3,850,625  $3,188,049  $7,711,127  $5,904,213  $3,492,406  $3,607,698  $11,203,532  $9,511,911 
Total investment income  3,850,625   3,188,049   7,711,127   5,904,213   3,492,406   3,607,698   11,203,532   9,511,911 
                                
Expenses:                                
Bank fee expense  126,225   151,611   259,809   244,502   127,380   99,802   386,034   344,304 
Total expenses  126,225   151,611   259,809   244,502   127,380   99,802   386,034   344,304 
Net investment income  3,724,400   3,036,438   7,451,318   5,659,711   3,365,026   3,507,896   10,817,498   9,167,607 
Net income $3,724,400  $3,036,438  $7,451,318  $5,659,711  $3,365,026  $3,507,896  $10,817,498  $9,167,607 

 
6462

 
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 JuneSeptember 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 $2,523,700,111)         
Investments in Fixed Income Securities (cost $2,418,350,430)         
United States                  
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%
FDIC Guaranteed Bonds (cost $979,935,736)         
Citigroup Funding Inc. 1.88% - 2.25% due 07/12/12 - 12/10/12 $259,364,000  $263,526,288   7.84%
Other FDIC guaranteed bonds      884,448,610   26.56%      716,409,448   21.30%
Total FDIC Guaranteed Bonds      1,160,361,420   34.85%      979,935,736   29.14%
                        
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%
Government Bonds (cost $1,438,414,694)            
U.S. Treasury 0.38% - 1.38% due 10/31/11 – 06/30/13  1,435,000,000   1,438,414,694   42.78%
Total Government Bonds      1,363,338,691   40.94%      1,438,414,694   42.78%
                        
Total Investments in Fixed Income Securities     $2,523,700,111   75.79%     $2,418,350,430   71.92%
 
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
 
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%
Other FDIC guaranteed bonds      749,548,241   25.22%
Total FDIC Guaranteed Bonds      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%
Other U.S. Treasury 0.75% –  1.13% due 01/31/11 – 04/30/12      963,945,384   32.43%
Total Government Bonds      1,114,159,108   37.48%
             
Total Investments in Fixed Income Securities     $2,215,622,512   74.54%

 
6563

 
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 JuneSeptember 30, 2011 and December 31, 2010:
 
   
 June 30, 2011  December 31, 2010  September 30, 2011  December 31, 2010 
Long positions            
Level 2:            
Fixed income securities            
FDIC Guaranteed Bonds $1,160,361,420  $1,101,463,404  $979,935,736  $1,101,463,404 
Government Bonds  1,363,338,691   1,114,159,108   1,438,414,694   1,114,159,108 
Total fixed income securities  2,523,700,111   2,215,622,512   2,418,350,430   2,215,622,512 
Total Level 2  2,523,700,111   2,215,622,512   2,418,350,430   2,215,622,512 
Total long positions $2,523,700,111  $2,215,622,512  $2,418,350,430  $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.
 
 
6664

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.
 
Graham Alternative Investment Trading 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’s revenues and expenses for income tax purposes.
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 JuneSeptember 30, 2011 and 2010:
  Class 0  Class 2 
Per unit operating performance:      
Net asset value per unit, June 30, 2010 $134.80  $111.00 
Net income:        
Net investment loss  (0.02)  (1.25)
Net gain on investments  2.41   2.95 
Net income  2.39   1.70 
Net asset value per unit, September 30, 2010 $137.19  $112.70 
         
Net asset value per unit, June 30, 2011 $132.67  $107.48 
Net loss:        
Net investment loss  (2.50)  (2.54)
Net gain on investments  1.41   1.12 
Net loss  (1.09)  (1.42)
Net asset value per unit, September 30, 2011 $131.58  $106.06 
 
  Class 0  Class 2 
Per unit operating performance:      
Net asset value per unit, March 31, 2010 $134.58  $111.36 
Net gain (loss):        
Net investment loss  (2.17)  (1.81)
Net gain on investments  2.39   1.45 
Net gain (loss)  0.22   (0.36)
Net asset value per unit, June 30, 2010 $134.80  $111.00 
         
Net asset value per unit, March 31, 2011 $137.45  $111.91 
Net loss:        
Net investment loss  (1.55)  (1.87)
Net loss on investments  (3.23)  (2.56)
Net loss  (4.78)  (4.43)
Net asset value per unit, June 30, 2011 $132.67  $107.48 

 
6866

 
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 JuneSeptember 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  (3.48)%  0.16%  (3.96)%  (0.31)%  (0.82)%  2.17%  (1.32)%  1.59%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   (0.41)  0.00   (0.09)
Total return after Incentive Allocation  (3.48)%  0.16%  (3.96)%  (0.31)%  (0.82)%  1.76%  (1.32)%  1.50%
                                
Net investment loss before Incentive Allocation  (1.13)%  (1.20)%  (1.67)%  (1.24)%  (1.88)%  (0.82)%  (2.36)%  (2.25)%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   (0.41)  0.00   (0.09)
Net investment loss after Incentive Allocation  (1.13)%  (1.20)%  (1.67)%  (1.24)%  (1.88)%  (1.23)%  (2.36)%  (2.34)%
                                
Total expenses before Incentive Allocation  1.55%  1.29%  2.06%  1.81%  1.32%  1.29%  1.80%  1.80%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.41   0.00   0.09 
Total expenses after Incentive Allocation  1.55%  1.29%  2.06%  1.81%  1.32%  1.70%  1.80%  1.89%

 
The following is the per unit operating performance calculation for the sixnine month periods ended JuneSeptember 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  $135.56  $112.73 
Net loss:        
Net income (loss):        
Net investment loss  (4.11)  (3.89)  (3.80)  (5.35)
Net gain on investments  3.35   2.16   5.43   5.32 
Net loss  (0.76)  (1.73)
Net asset value per unit, June 30, 2010 $134.80  $111.00 
Net income (loss)  1.63   (0.03)
Net asset value per unit, September 30, 2010 $137.19  $112.70 
                
Net asset value per unit, December 31, 2010 $138.96  $113.68  $138.96  $113.68 
Net loss:                
Net investment loss  (2.82)  (3.44)  (5.32)  (5.98)
Net loss on investments  (3.47)  (2.76)  (2.06)  (1.64)
Net loss  (6.29)  (6.20)  (7.38)  (7.62)
Net asset value per unit, June 30, 2011 $132.67  $107.48 
Net asset value per unit, September 30, 2011 $131.58  $106.06 

 
6967


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 sixnine month periods ended JuneSeptember 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  (4.52)%  (0.56)%  (5.44)%  (1.53)%  (5.30)%  1.61%  (6.69)%  0.06%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  (0.41)  (0.01)  (0.09)
Total return after Incentive Allocation  (4.53)%  (0.56)%  (5.45)%  (1.53)%  (5.31)%  1.20%  (6.70)%  (0.03)%
                                
Net investment loss before Incentive Allocation  (2.02)%  (2.02)%  (3.02)%  (2.62)%  (3.82)%  (2.84)%  (5.25)%  (4.87)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  (0.41)  (0.01)  (0.09)
Net investment loss after Incentive Allocation  (2.03)%  (2.02)%  (3.03)%  (2.62)%  (3.83)%  (3.25)%  (5.26)%  (4.96)%
                                
Total expenses before Incentive Allocation  2.55%  2.55%  3.57%  3.57%  3.87%  3.84%  5.37%  5.37%
Incentive Allocation  0.01   0.00   0.01   0.00   0.01   0.41   0.01   0.09 
Total expenses after Incentive Allocation  2.56%  2.55%  3.58%  3.57%  3.88%  4.25%  5.38%  5.46%
 
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.period. 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 sixnine month periods ended JuneSeptember 30, 2011 and 2010.
 
10.  Subsequent Events
 
GAIT had subscriptions of approximately $19.3$8.0 million and redemptions of approximately $3.9$6.0 million through August 15,November 14, 2011, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.
 
 
7068

Graham Alternative Investment Trading II LLC


Assets 
September 30, 2011
(Unaudited)
  
December 31, 2010
(Audited)
 
Investment in Graham K4D Trading Ltd., at fair value $9,449,880  $7,411,468 
Investment in Graham Cash Assets LLC, at fair value  77,985,718   64,089,936 
Commission reimbursements receivable  51,140   28,795 
Total assets $87,486,738  $71,530,199 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $8,835,002  $1,393,281 
Accrued brokerage fees  207,210   170,942 
Accrued advisory fees  143,732   121,404 
Accrued sponsor fees  71,866   60,702 
Total liabilities  9,257,810   1,746,329 
         
Members’ capital:        
Class 0 Units (448,827.682 and 397,859.944 units issued and outstanding at $89.38 and $102.92 per unit, respectively)  40,116,552   40,945,899 
Class 2 Units (446,245.807 and 288,630.496 units issued and outstanding  at $85.30 and $99.72 per unit, respectively)  38,062,997   28,783,191 
Class M Units (500.000 and 500.000 units issued and outstanding   at $98.76 and $109.56 per unit, respectively)  49,379   54,780 
Total members’ capital  78,228,928   69,783,870 
Total liabilities and members’ capital $87,486,738  $71,530,199 

See accompanying notes.
 
Graham Alternative Investment Trading II LLC


  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Net (loss) gain allocated from investment in Graham K4D Trading Ltd.:            
Net realized loss on investments $(6,145,327) $(323,278) $(8,597,423) $(461,871)
Net increase (decrease) in unrealized appreciation on investments  1,135,707   2,521,920   (1,007,154)  1,960,470 
Brokerage commissions and fees  (136,481)  (66,281)  (401,873)  (166,821)
Net (loss) gain allocated from investment  in Graham K4D Trading Ltd.  (5,146,101)  2,132,361   (10,006,450)  1,331,778 
                 
Net investment loss allocated from investment in Graham K4D Trading Ltd.  (6,382)  (952)  (17,280)  (4,212)
                 
Investment income:                
Interest income  81,771   74,832   255,251   195,949 
Total investment income  81,771   74,832   255,251   195,949 
                 
Expenses:                
Brokerage fees  656,221   404,584   1,860,993   1,033,726 
Advisory fees  455,698   290,137   1,305,702   747,087 
Sponsor fees  227,850   145,069   652,851   373,544 
Interest and other  1,438   2,321   13,283   7,231 
Commission reimbursements  (136,481)  (66,281)  (401,873)  (166,821)
Total expenses  1,204,726   775,830   3,430,956   1,994,767 
Net investment loss of the Fund  (1,122,955)  (700,998)  (3,175,705)  (1,798,818)
                 
Net (loss) income  (6,275,438)  1,430,411   (13,199,435)  (471,252)
                 
Incentive allocation  -   -   (8,810)  - 
                 
Net (loss) income available for pro-rata allocation to all members $(6,275,438) $1,430,411  $(13,208,245) $(471,252)

See accompanying notes.
Graham Alternative Investment Trading II LLC

Statements of Changes in Members’ Capital

January 1, 2010 to June 30, 2010
  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  162,400.604   15,431,662   116,148.901   10,952,416   500.000   50,000   26,434,078 
Redemptions  (10,113.780)  (976,087)  (11,401.482)  (1,065,628)        (2,041,715)
Net loss
     (10,139)     (462,280)     1,167   (471,252)
Members’ capital, September 30, 2010  374,714.036  $36,819,202   254,430.549  $24,251,074   500.000  $51,167  $61,121,443 

   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  183,283.943   18,535,267   196,372.704   18,976,245         37,511,512 
Redemptions  (132,316.205)  (12,190,510)  (38,757.393)  (3,667,699)     (8,810)  (15,867,019)
Incentive allocation     (4,821)     (3,989)     8,810    
Net loss
     (7,169,283)     (6,024,751)     (5,401)  (13,199,435)
Members’ capital, September 30, 2011  448,827.682  $40,116,552   446,245.807  $38,062,997   500.000  $49,379  $78,228,928 
See accompanying notes.
 
71


Graham Alternative Investment Trading II LLC


Statements of Financial Condition
  
Nine Months Ended
September 30,
 
  
2011
(Unaudited)
  
2010
(Unaudited)
 
Cash flows used in operating activities      
Net loss $(13,199,435) $(471,252)
Adjustments to reconcile net loss to net cash used in operating activities:        
Net loss (income) allocated from investment in Graham K4D Trading Ltd.  10,023,730   (1,327,566)
Net income allocated from investment in Graham Cash Assets LLC  (255,251)  (195,949)
Proceeds from sale of investments in Graham K4D Trading Ltd.  78,991,608   30,922,054 
Proceeds from sale of investments in Graham Cash Assets LLC  99,937,666   39,547,824 
Investments in Graham K4D Trading Ltd.  (91,053,750)  (34,607,498)
Investments in Graham Cash Assets LLC  (113,578,197)  (58,678,694)
Changes in assets and liabilities:        
Commission reimbursements receivable  (22,345)  (11,842)
Accrued brokerage fees  36,268   52,904 
Accrued advisory fees  22,328   37,897 
Accrued sponsor fees  11,164   18,949 
Accrued incentive allocation  -   (479)
Net cash used in operating activities  (29,086,214)  (24,713,652)
         
Cash flows provided by financing activities        
Subscriptions  37,511,512   26,434,078 
Redemptions  (8,425,298)  (1,721,196)
Net cash provided by financing activities  29,086,214   24,712,882 
         
Net decrease in cash and cash equivalents     (770)
         
Cash and cash equivalents, beginning of period     770 
Cash and cash equivalents, end of period $  $ 

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.
 
 
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.

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.

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.

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements

JuneSeptember 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 JuneSeptember 30, 2011 and 2010 and the three and sixnine 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 GAIT II.
 

 
7673

 
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 settle 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. There were no Level 3 assets or liabilities held at any point during the sixnine month period ended JuneSeptember 30, 2011 or the twelve months ended December 31, 2010 by GAIT II, 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.

 
7774

 
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 gainloss and net increasedecrease 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.

 
7875

 
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 settle 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 settle 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.

 
7976


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 settle prices published as of the valuation date, by the principal exchange upon which they are traded.  In the absence of an exchange published settle 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 and GCA’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 JuneSeptember 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.
 
June 30, 2011 
September 30, 2011September 30, 2011 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Loss
(three months
then ended)
  
Net Loss
(six months
then ended)
  
Percent of
Members’
Capital
  Fair Value  
Net Loss
(three months
then ended)
  
Net Loss
(nine months
then ended)
 
                        
Graham K4D Trading Ltd. (a)  11.31% $9,772,362  $(3,283,145) $(4,871,247)  12.08% $9,449,880  $(5,152,483) $(10,023,730)
  11.31% $9,772,362  $(3,283,145) $(4,871,247)  12.08% $9,449,880  $(5,152,483) $(10,023,730)
                
December 31, 2010       
Investment – Objective 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  $154,968  $(803,843)
  10.62% $7,411,468  $154,968  $(803,843)
 
(a) – Systematic macro
December 31, 2010  September 30, 2010 
Investment – Objective Percent of Members’ Capital  Fair Value  
Net Income
(three months
then ended)
  
Net Income
(nine months
then ended)
 
                 
Graham K4D Trading Ltd. (a)  10.62% $7,411,468  $2,131,409  $1,327,566 
   10.62% $7,411,468  $2,131,409  $1,327,566 
(a) – Systematic macro                

 
8077

 
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 JuneSeptember 30, 2011.
 

Assets:      
Due from brokers $283,838,709  $240,973,205 
Derivative financial instruments, at fair value  3,440,679   14,800,706 
Subscriptions receivable  405 
Total assets  287,279,793   255,773,911 
        
Liabilities:        
Derivative financial instruments, at fair value  23,014,910   8,525,381 
Due to brokers  546,447   2,377,906 
Redemptions payable  405   409,154 
Total liabilities  23,561,762   11,312,441 
Net assets $263,718,031  $244,461,470 
        
Percentage of Master Fund held by the Fund  3.71%
Percentage of K4D Trading held by the Fund  3.87%

 
8178

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. InvestmentInvestments in Graham K4D Trading Ltd. (continued)
 
The following schedule displays the condensed schedule of investments for the K4D Trading as of JuneSeptember 30, 2011.
Description
Principal
Amount
 Fair Value  
Percentage of
Net Assets of
K4D Trading
 
Number of
Contracts / Notional
 Amount
  Fair Value  
Percentage of
Net Assets of
K4D Trading
 
Graham K4D Trading Ltd.        
Long contracts               
Futures               
U.S. bond  $(11,253,047)  (4.27)%   $(3,113,222)  (1.27)%
Foreign bond   (8,536,516)  (3.24)%    (4,802,162)  (1.96)%
U.S. index   10,415,895   3.95%    (10,286,975)  (4.21)%
Foreign index   5,025,773   1.91%    345,239   0.14%
Commodity   (1,129,857)  (0.43)%
Soybean November 20111,389   (13,188,220)  (5.40)%
Other Soybean March 20121   (316)  (0.00)%
Other commodity    (65,379,418)  (26.74)%
Interest rate   (1,020,274)  (0.39)%    (4,000,731)  (1.64)%
Currency   1,073,226   0.41%    (1,578,712)  (0.65)%
Total futures   (5,424,800)  (2.06)%    (102,004,517)  (41.73)%
                   
Swaps          
Soybean November 201156   (555,901)  (0.23)%
Other commodity    (1,310)  (0.00)%
Total swaps    (557,211)  (0.23)%
          
Forwards                   
Australian dollar / U.S. dollar 07/20/11
AUD   1,432,785,322
  22,045,147   8.36%
Canadian dollar / U.S. dollar 07/20/11CAD           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)%
Australian dollar / U.S. dollar 10/19/11AUD        739,945,082   (29,884,516)  (12.22)%
Other Australian dollar / U.S. dollar 10/04/11 – 10/05/11AUD        209,551,333   (833,817)  (0.34)%
Brazilian Real / U.S. dollar 10/04/11BRL         840,781,555   (66,064,753)  (27.02)%
Other Brazilian Real / U.S. dollar 11/03/11BRL           32,424,127   (188,743)  (0.08)%
Canadian dollar / U.S. dollar 10/19/11CAD     1,380,588,086   (51,748,332)  (21.17)%
Euro / U.S. dollar 10/19/11EUR         690,395,122   (13,381,484)  (5.47)%
Japanese Yen / U.S. dollar 10/19/11JPY   230,430,610,022   (20,135,020)  (8.24)%
New Zealand dollar / U.S. dollar 10/19/11NZD        385,115,861   (14,950,625)  (6.12)%
Other foreign currency   37,053,409   14.05%    (75,275,971)  (30.79)%
Total forwards   117,563,119   44.58%    (272,463,261)  (111.45)%

 
8279

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)


3. InvestmentInvestments in Graham K4D Trading Ltd. (continued)
 
The following schedule displays the condensed schedule of investments for the K4D Trading as of JuneSeptember 30, 2011.
 
Description
Principal
 Amount
 Fair Value  
Percentage of
Net Assets of
K4D Trading
 
Number of
Contracts / Notional
 Amount
  Fair Value  Percentage of Net Assets of K4D Trading 
Short contracts               
Futures               
U.S. bond   $(1,563,681)  (0.64)%
Foreign bond  $(239,058)  (0.09)%    (1,116,469)  (0.46)%
U.S. index    9,639,394   3.94%
Foreign index   (5,079,843)  (1.93)%    (2,872,584)  (1.17)%
Commodity   (7,688,784)  (2.91)%
LME Copper December 2011(675)  21,600,866   8.84%
Other Copper December 2011 – March 2012(522)  5,336,696   2.18%
Crude Oil November 2011(2,293)  14,219,715   5.82%
Other Crude Oil December 2011(1)  543   0.00%
Other commodity    61,634,892   25.21%
Interest rate   (3,830,906)  (1.45)%    1,412,266   0.58%
Currency   (742,175)  (0.28)%    4,703,191   1.92%
Total futures   (17,580,766)  (6.66)%    112,994,829   46.22%
                   
Swaps          
Commodity    4,367,607   1.79%
Total swaps    4,367,607   1.79%
          
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%
Australian dollar / U.S. dollar 10/19/11AUD          (843,989,063)  22,541,833   9.22%
Other Australian dollar / U.S. dollar 10/04/11 – 10/05/11AUD          (204,384,287)  821,742   0.34%
Brazilian Real / U.S. dollar 10/04/11BRL           (840,781,555)  59,414,523   24.30%
Other Brazilian Real / U.S. dollar 11/03/11BRL             (47,520,411)  457,669   0.19%
Canadian dollar / U.S. dollar 10/19/11CAD       (1,586,777,537)  48,314,863   19.76%
Euro / U.S. dollar 10/19/11EUR          (960,417,966)  22,934,898   9.38%
Japanese Yen / U.S. dollar 10/19/11JPY     (222,034,528,765)  20,011,367   8.19%
Other foreign currency   (42,110,665)  (15.97)%    89,440,983   36.59%
Total forwards   (114,131,784)  (43.28)%    263,937,878   107.97%
                   
Total  $(19,574,231)  (7.42)%   $6,275,325   2.57%

 
8380

 
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 JuneSeptember 30, 2011.
 
Long Contracts      
Level 1:      
U.S. bond futures $(11,253,047) $(3,113,222)
Foreign bond futures  (8,536,516)  (4,802,162)
U.S. index futures  10,415,895   (10,286,975)
Foreign index futures  5,025,773   345,239 
Commodity futures  (1,129,857)  (78,567,954)
Commodity swaps  (557,211)
Interest rate futures  (1,020,274)  (4,000,731)
Currency futures  1,073,226   (1,578,712)
Total Level 1  (5,424,800)  (102,561,728)
        
Level 2:        
Foreign currency forwards  117,563,119   (272,463,261)
Total Level 2  117,563,119   (272,463,261)
Total long contracts $112,138,319  $(375,024,989)
        
Short Contracts        
Level 1:        
U.S. bond futures $(1,563,681)
Foreign bond futures $(239,058)  (1,116,469)
U.S. index futures  9,639,394 
Foreign index futures  (5,079,843)  (2,872,584)
Commodity futures  (7,688,784)  102,792,712 
Commodity swaps  4,367,607 
Interest rate futures  (3,830,906)  1,412,266 
Currency futures  (742,175)  4,703,191 
Total Level 1  (17,580,766)  117,362,436 
        
Level 2:        
Foreign currency forwards  (114,131,784)  263,937,878 
Total Level 2  (114,131,784)  263,937,878 
Total short contracts $(131,712,550) $381,300,314 

 
8481

 
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 Fund at JuneSeptember 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’s statement of financial position.
  Graham K4D Trading Ltd. 
  Long exposure  Short exposure       
  
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities 
                   
Commodity price                  
Futures $1,345,596,497   15,854  $(758,255,780)  (12,860) $28,003,129  $(36,821,770)
   1,345,596,497   15,854   (758,255,780)  (12,860)  28,003,129   (36,821,770)
                         
Equity price                        
Futures  476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
   476,877,253   6,819   (263,048,422)  (4,747)  15,441,668   (5,079,843)
                         
Foreign currency exchange rate                        
Futures  445,249,816   2,709   (275,073,860)  (2,797)  1,326,426   (995,375)
Forwards  31,171,994   -   (18,184,872)  -   21,904,835   (18,473,500)
   476,421,810   2,709   (293,258,732)  (2,797)  23,231,261   (19,468,875)
                         
Interest rate                        
Futures  11,774,187,855   45,104   (2,692,780,158)  (8,420)  3,205,822   (28,085,623)
   11,774,187,855   45,104   (2,692,780,158)  (8,420)  3,205,822   (28,085,623)
Total $14,073,083,415   70,486  $(4,007,343,092)  (28,824) $69,881,880  $(89,456,111)
              
              
Collateral balances supporting all derivative positions          $283,292,262 

 
  Graham K4D Trading Ltd. 
  Long exposure  Short exposure       
  
Notional
amounts
  Number of contracts  
Notional
amounts
  Number of contracts  Derivative Assets  Derivative Liabilities 
                   
Commodity price                  
Futures $522,389,303   7,428  $(991,669,996)  (20,375) $91,265,305  $(67,040,547)
Swaps  3,301,200   56   (58,949,530)  (1,932)  4,366,271   (555,875)
   525,690,503   7,484   (1,050,619,526)  (22,307)  95,631,576   (67,596,422)
                         
Equity price                        
Futures  199,800,119   4,254   (410,064,495)  (7,452)  7,562,237   (10,737,163)
   199,800,119   4,254   (410,064,495)  (7,452)  7,562,237   (10,737,163)
                         
Foreign currency exchange rate                        
Futures  122,402,981   1,486   (231,243,788)  (1,733)  3,284,664   (160,185)
Forwards  27,912,352   -   (37,186,219)  -   28,309,734   (36,835,117)
   150,315,333   1,486   (268,430,007)  (1,733)  31,594,398   (36,995,302)
                         
Interest rate                        
Futures  9,559,805,314   35,995   (1,169,408,767)  (5,589)  2,688,188   (15,872,187)
   9,559,805,314   35,995   (1,169,408,767)  (5,589)  2,688,188   (15,872,187)
Total $10,435,611,269   49,219  $(2,898,522,795)  (37,081) $137,476,399  $(131,201,074)
                         
Collateral balances supporting all derivative positions                     $238,595,299 

 
8582

 
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 and sixnine month periods ended JuneSeptember 30, 2011.
 
 
Three Months Ended
June 30, 2011
  
Six Months Ended
June 30, 2011
  
Three Months Ended
September 30, 2011
  
Nine Months Ended
September 30, 2011
 
            
Net investment loss $(206,478) $(290,344) $(169,883) $(460,227)
                
Net realized loss on investments  (21,262,016)  (68,425,848)  (161,048,924)  (229,474,772)
Net decrease in unrealized appreciation on investments  (70,349,041)  (65,095,579)
Net increase (decrease) in unrealized appreciation on investments  26,144,203   (38,951,376)
Brokerage commissions and fees  (3,638,222)  (6,930,150)  (3,638,203)  (10,568,353)
Net loss on investments  (95,249,279)  (140,451,577)  (138,542,924)  (278,994,501)
Net loss $(95,455,757) $(140,741,921) $(138,712,807) $(279,454,728)
 
The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net realized gainloss and net increase (decrease) in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three and sixnine month periods ended JuneSeptember 30, 2011:
 
  
Three Months Ended
September 30, 2011
  
Nine Months Ended
September 30, 2011
 
       
Commodity price      
Futures $(5,164,850) $(48,151,690)
Swaps  2,104,346   2,104,346 
   (3,060,504)  (46,047,344)
         
Equity price        
Futures  (134,617,931)  (202,948,060)
   (134,617,931)  (202,948,060)
         
Foreign currency exchange rate        
Futures  10,223,770   227,767 
Forwards  (94,513,839)  (113,092,112)
   (84,290,069)  (112,864,345)
         
Interest rate        
Futures  87,063,783   93,433,601 
   87,063,783   93,433,601 
Total $(134,904,721) $(268,426,148)
  
Three Months Ended
June 30, 2011
  
Six Months Ended
June 30, 2011
 
       
Commodity price      
Futures $(87,798,352) $(42,986,840)
   (87,798,352)  (42,986,840)
         
Equity price        
Futures  (28,028,918)  (68,330,129)
   (28,028,918)  (68,330,129)
         
Foreign currency exchange rate        
Futures  (4,534,058)  (9,996,003)
Forwards  5,477,710   (18,578,273)
   943,652   (28,574,276)
         
Interest rate        
Futures  23,272,561   6,369,818 
   23,272,561   6,369,818 
Total $(91,611,057) $(133,521,427)


 
8683

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

 
8784

 
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 
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%JPY   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%JPY   14,270,122,339  796,715   0.44%
Swiss Franc / U.S. dollar 01/19/11CHF                 491,922,158  17,376,713   9.57%CHF       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%

 
8885


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)%JPY   (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)%JPY   (14,111,800,669) (834,965)  (0.46)%
Swiss Franc / U.S. dollar 01/19/11CHF              (431,464,200)  (17,247,454)  (9.50)%CHF       (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%

 
8986

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

 
9087

 
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 Fund 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’s statement of financial position.
 
  Graham K4D Trading Ltd. 
  Long exposure  Short exposure       
  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)
                         
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)
                         
Foreign currency exchange rate                        
Futures  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)
   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)
Total $110,073,800,001   37,391  $(151,478,743,535)  (25,649) $124,380,771  $(78,637,443)
                         
Collateral balances supporting all derivative positions                     $135,887,098 

 
9188

 
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 and sixnine month periods ended JuneSeptember 30, 2010.
 
  
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)

  
Three Months Ended
September 30, 2010
  
Nine Months Ended
September 30, 2010
 
       
Net investment loss $(25,302) $(127,018)
         
Net realized loss on investments  (9,520,923)  (31,318,993)
Net increase in unrealized appreciation on investments  68,863,324   54,268,614 
Brokerage commissions and fees  (1,766,962)  (4,773,158)
Net gain on investments  57,575,439   18,176,463 
Net income $57,550,137  $18,049,445 
 
The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net realized gainloss and net increase in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three and sixnine month periods ended JuneSeptember 30, 2010.
 

  
Three Months Ended
September 30, 2010
  
Nine Months Ended
September 30, 2010
 
       
Commodity price      
Futures $23,090,803  $(50,844,752)
   23,090,803   (50,844,752)
         
Equity price        
Futures  (31,259,994)  (92,929,632)
   (31,259,994)  (92,929,632)
         
Foreign currency exchange rate        
Futures  979,360   4,090,176 
Forwards  22,931,616   13,713,340 
   23,910,976   17,803,516 
         
Interest rate        
Futures  43,600,616   148,920,489 
   43,600,616   148,920,489 
Total $59,342,401  $22,949,621 
  
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)

 
9289

 
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 GAIT 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 JuneSeptember 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $88,652.$81,771. For the sixnine months ended JuneSeptember 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $173,480.$255,251.  For the three months ended JuneSeptember 30, 2010, the total amount recognized by GAIT II with respect to its investment in GCA was $67,524.$74,832. For the sixnine months ended JuneSeptember 30, 2010, the total amount recognized by GAIT II with respect to its investment in GCA was $121,117.$195,949. These amounts are included in interest income in the statements of operations and managing member allocation. At JuneSeptember 30, 2011 and December 31, 2010, GAIT II owned approximately 2.36%2.32% and 2.16%, respectively, of GCA. The following table summarizes the financial position of GCA as of JuneSeptember 30, 2011 and December 31, 2010:
 
 June 30, 2011  December 31, 2010  September 30, 2011  December 31, 2010 
Assets:            
Cash and cash equivalents $799,619,853  $750,098,151  $935,478,058  $750,098,151 
Investments in fixed income securities (cost $2,523,700,111 and $2,215,622,512, respectively)  2,523,700,111   2,215,622,512 
Investments in fixed income securities (cost $2,418,350,430 and $2,215,622,512, respectively)  2,418,350,430   2,215,622,512 
Accrued interest income  6,546,459   6,547,074   8,640,660   6,547,074 
Total assets  3,329,866,423   2,972,267,737   3,362,469,148   2,972,267,737 
                
Liabilities:                
Other liabilities  20,000   20,000   30,000   20,000 
Total liabilities  20,000   20,000   30,000   20,000 
Net assets $3,329,846,423  $2,972,247,737  $3,362,439,148  $2,972,247,737 
 
The following table summarizes the results of operations of GCA for the three and sixnine month periods ended JuneSeptember 30, 2011 and 2010:
 
 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2011  2010  2011  2010  2011  2010  2011  2010 
Investment income                        
Interest income $3,850,625  $3,188,049  $7,711,127  $5,904,213  $3,492,406  $3,607,698  $11,203,532  $9,511,911 
Total investment income  3,850,625   3,188,049   7,711,127   5,904,213   3,492,406   3,607,698   11,203,532   9,511,911 
                                
Expenses:                                
Bank fee expense  126,225   151,611   259,809   244,502   127,380   99,802   386,034   344,304 
Total expenses  126,225   151,611   259,809   244,502   127,380   99,802   386,034   344,304 
Net investment income  3,724,400   3,036,438   7,451,318   5,659,711   3,365,026   3,507,896   10,817,498   9,167,607 
Net income $3,724,400  $3,036,438  $7,451,318  $5,659,711  $3,365,026  $3,507,896  $10,817,498  $9,167,607 

 
9390

 
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 JuneSeptember 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 $2,523,700,111)         
Investments in Fixed Income Securities (cost $2,418,350,430)         
United States                  
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%
FDIC Guaranteed Bonds (cost $979,935,736)         
Citigroup Funding Inc. 1.88% - 2.25% due 07/12/12 - 12/10/12 $259,364,000  $263,526,288   7.84%
Other FDIC guaranteed bonds      884,448,610   26.56%      716,409,448   21.30%
Total FDIC Guaranteed Bonds      1,160,361,420   34.85%      979,935,736   29.14%
                        
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%
Government Bonds (cost $1,438,414,694)            
U.S. Treasury 0.38% - 1.38% due 10/31/11 – 06/30/13  1,435,000,000   1,438,414,694   42.78%
Total Government Bonds      1,363,338,691   40.94%      1,438,414,694   42.78%
                        
Total Investments in Fixed Income Securities     $2,523,700,111   75.79%     $2,418,350,430   71.92%

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%
 
 
9491


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 JuneSeptember 30, 2011 and December 31, 2010:
 
 June 30, 2011  December 31, 2010  September 30, 2011  December 31, 2010 
Long positions            
Level 2:            
Fixed income securities            
FDIC Guaranteed Bonds $1,160,361,420  $1,101,463,404  $979,935,736  $1,101,463,404 
Government Bonds  1,363,338,691   1,114,159,108   1,438,414,694   1,114,159,108 
Total fixed income securities  2,523,700,111   2,215,622,512   2,418,350,430   2,215,622,512 
Total Level 2  2,523,700,111   2,215,622,512   2,418,350,430   2,215,622,512 
Total long positions $2,523,700,111  $2,215,622,512  $2,418,350,430  $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.
 
 
9592

 
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.

 
9693

 
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 JuneSeptember 30, 2011 and 2010:

 Class 0  Class 2  Class 0  Class 2 
Per unit operating performance:            
Net asset value per unit, March 31, 2010 $96.29  $94.35 
Net loss:        
Net asset value per unit, June 30, 2010 $95.72  $93.33 
Net income:        
Net investment loss  (1.66)  (1.77)  (1.14)  (0.25)
Net gain on investments  1.09   0.75   3.68   2.24 
Net loss  (0.57)  (1.02)
Net asset value per unit, June 30, 2010 $95.72  $93.33 
Net income  2.54   1.99 
Net asset value per unit, September 30, 2010 $98.26  $95.32 
                
Net asset value per unit, March 31, 2011 $100.08  $96.48 
Net asset value per unit, June 30, 2011 $95.59  $91.69 
Net loss:                
Net investment loss  (1.26)  (1.74)  (1.12)  (1.49)
Net loss on investments  (3.23)  (3.05)  (5.09)  (4.90)
Net loss  (4.49)  (4.79)  (6.21)  (6.39)
Net asset value per unit, June 30, 2011 $95.59  $91.69 
Net asset value per unit, September 30, 2011 $89.38  $85.30 

 
9794

 
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 JuneSeptember 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  (4.49)%  (0.57)%  (4.96)%  (1.03)%  (6.50)%  2.52%  (6.97)%  2.00%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (4.49)%  (0.57)%  (4.96)%  (1.03)%  (6.50)%  2.52%  (6.97)%  2.00%
                                
Net investment loss before Incentive Allocation  (1.26)%  (1.61)%  (1.80)%  (1.70)%  (1.17)%  (1.18)%  (1.63)%  (1.72)%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.26)%  (1.61)%  (1.80)%  (1.70)%  (1.17)%  (1.18)%  (1.63)%  (1.72)%
                                
Total expenses before Incentive Allocation  1.46%  1.30%  1.99%  (3.51)%  1.35%  1.30%  1.82%  1.82%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.46%  1.30%  1.99%  (3.51)%  1.35%  1.30%  1.82%  1.82%
 
The following is the per unit operating performance calculation for the sixnine month periods ended JuneSeptember 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  $100.59  $99.05 
Net loss:                
Net investment loss  (3.50)  (3.50)  (3.41)  (4.77)
Net loss on investments  (1.37)  (2.22)
Net gain on investments  1.08   1.04 
Net loss  (4.87)  (5.72)  (2.33)  (3.73)
Net asset value per unit, June 30, 2010 $95.72  $93.33 
Net asset value per unit, September 30, 2010 $98.26  $95.32 
                
Net asset value per unit, December 31, 2010 $102.92  $99.72  $102.92  $99.72 
Net loss:                
Net investment loss  (2.31)  (3.24)  (3.43)  (4.73)
Net loss on investments  (5.02)  (4.79)  (10.11)  (9.69)
Net loss  (7.33)  (8.03)  (13.54)  (14.42)
Net asset value per unit, June 30, 2011 $95.59  $91.69 
Net asset value per unit, September 30, 2011 $89.38  $85.30 
 
 
9895

 
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 sixnine month periods ended JuneSeptember 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  (7.11)%  (4.84)%  (8.04)%  (5.77)%  (13.15)%  (2.32)%  (14.45)%  (3.77)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  0.00   (0.01)  0.00 
Total return after Incentive Allocation  (7.12)%  (4.84)%  (8.05)%  (5.77)%  (13.16)%  (2.32)%  (14.46)%  (3.77)%
                                
Net investment loss before Incentive Allocation  (2.23)%  (2.37)%  (3.24)%  (3.39)%  (3.32)%  (3.55)%  (4.73)%  (5.11)%
Incentive Allocation  (0.01)  0.00   (0.01)  0.00   (0.01)  0.00   (0.01)  0.00 
Net investment loss after Incentive Allocation  (2.24)%  (2.37)%  (3.25)%  (3.39)%  (3.33)%  (3.55)%  (4.74)%  (5.11)%
                                
Total expenses before Incentive Allocation  2.58%  2.58%  3.63%  3.61%  3.93%  3.88%  5.45%  5.43%
Incentive Allocation  0.01   0.00   0.01   0.00   0.01   0.00   0.01   0.00 
Total expenses after Incentive Allocation  2.59%  2.58%  3.64%  3.61%  3.94%  3.88%  5.46%  5.43%
 
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.period. 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 sixnine month periods ended JuneSeptember 30, 2011 and 2010.
 
10. Subsequent Events
 
GAIT II had subscriptions of approximately $6.5$2.3 million and redemptions of approximately $0.6$1.3 million through August 15,November 14, 2011, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.

 
9996


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 JuneSeptember 30, 2011 the Fund’s net asset value decreased by $40,356,148 or -10.5%.  This decrease was attributable to a $34,986,406 or -9.1% net decrease in the Blended Strategies Portfolio and a $5,369,742 or -1.4% net decrease in the Systematic Strategies Portfolio.  The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $12,693,000 or 3.3% offset by redemptions totaling $44,679,333 or -11.6% and net a loss of $3,000,073 or -0.8%, for the period.  The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptions of $3,706,295 or 1.0% offset by redemptions totaling $4,955,125 or -1.3% and a net loss of $4,120,912 or -1.1%, for the period.

For the nine months ended September 30, 2011 the Fund’s net asset value increased by $3,529,807$6,968,140 or 0.9%2.1%.  This increase was attributable to a $1,202,353$2,216,819 or 0.3%0.7% net increase in the Blended Strategies Portfolio and a $2,327,454$4,751,321 or 0.6%1.4% net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $23,104,766$81,052,467 or 6.0%24.0% partially offset by redemptions totaling $9,763,180$59,571,342 or -2.5%-17.6% and net a loss of $12,139,233$19,264,306 or -3.2%-5.7%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $8,187,958$22,880,918 or 2.2%6.8% partially offset by redemptions totaling $2,925,189$9,328,076 or -0.8%-2.8% and a net loss of $2,935,315$8,801,521 or -0.8%-2.6%, for the period.

For the sixthree months ended JuneSeptember 30, 20112010 the Fund’s net asset value increased by $47,324,288$29,354,584 or 14.0%11.0%.  This increase was attributable to a $37,203,225$24,805,816 or 11.0%9.3% net increase in the Blended Strategies Portfolio and a $10,121,063$4,548,768 or 3.0%1.7% net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $68,359,467$23,167,136 or 20.2%8.7% and net income of $4,262,929 or 1.6% partially offset by redemptions totaling $14,892,009$2,624,249 or -4.4% and net a loss of $16,264,233 or -4.8%-1.0%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $19,174,623$4,047,001 or 5.7%1.5% and net income of $990,125 or 0.4% partially offset by redemptions totaling $4,372,951$488,358 or -1.3% and a net loss of $4,680,609 or -1.4%-0.2%, for the period.

For the threenine months ended JuneSeptember 30, 2010 the Fund’s net asset value increased by $32,603,734, a 13.9% net increase.$78,992,107 or 36.3%.  This increase was attributable to a $28,401,339,$66,348,804 or 12.1%,30.5% net increase in the Blended Strategies Portfolio and a $4,202,395,$12,643,303 or 1.8%,5.8% net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $40,669,229,$81,414,715 or 17.3%,37.4% and net income of $40,762$2,937,612 or less than 0.1%1.4% partially offset by redemptions totaling $12,308,652,$18,003,523 or -5.2%-8.3%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $5,921,791,$15,494,795 or 2.5%,7.1% partially offset by redemptions totaling $1,369,295,$2,198,996 or -0.6%,-1.0% and a net loss of $350,101,$652,496 or -0.1%-0.3%, 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 $11,447,794, or 5.3%, partially offset by redemptions totaling $1,710,638, or -0.8%, and a net loss of $1,642,621, or -0.8%, for the period.

(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.

 
10097

 
Blended Strategies Portfolio

2011 Summary

Three Months Ended JuneSeptember 30, 2011

For the three months ended JuneSeptember 30, 2011, the portfolioBlended Strategies Portfolio experienced net trading lossesgains of $7,964,381$1,265,419 attributable to the following sectors:
 
   
Agriculture $(919,456) $(9,041,984)
Energy  (6,012,015)  (7,954,835)
Foreign exchange  (1,988,409)  (18,456,489)
Interest rates  3,933,290   48,768,020 
Metals  1,111,580   28,358,328 
Softs  (1,449,973)  (4,313,985)
Stock index  (2,639,398)  (36,093,636)
 $(7,964,381) $1,265,419 
 
The portfolio recognized the most significant trading gains in interest rates amidst increased safe haven demand during the period.  Gains were recorded a net loss for the period with the energy sector contributing most significantly.  Gainsin metals as gold and silver reached record highs before falling off in the energy sector during the early portionlater part of the quarter due to an upward movementperiod.  The portfolio recorded losses in stock indices as prices were offset when prices reversed and continued sharply downward in reaction to the announced release of strategic oil reserves in June.fell on a retreating appetite for risk among investors.  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 sector posted losses for the quarter.  Early gainstrading as the U.S. dollar fell to multi-year lowsstrengthened against most major globalemerging market and commodity currencies were offset as the risk aversion led to a safe haven demand resulting in 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 led by gains in the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets.  Gains were recognized in metals as prices moved sharply up in the beginningmiddle of the quarter which outpacedperiod. Smaller losses laterwere recorded in the quarteragriculture, softs and energy on dramatic price moves in corn and soybeans as well as plummeting prices reversed.in energy products.

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 JuneSeptember 30, 2011, Brokerage Fees increased by $621,790$500,563 or 47.8%34.6%, Advisory Fees increased by $574,387$465,372 or 51.8%37.5% and Sponsor Fees increased by $287,195$232,686 or 51.8%37.5% 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 $241,540$346,239 or -42.0%-54.8%.  Interest was earned on free cash at an average annualized yield of 0.47%0.42% for the three months ended JuneSeptember 30, 2011 compared to 0.61%0.60% 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 JuneSeptember 30, 2011 thethere was no Incentive Allocation increased by $23,901compared to $762,334 for the corresponding period in 2010 due to the portfolio’s lack of year to date profitability 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.2010.

 
10198

 
SixNine Months Ended JuneSeptember 30, 2011

For the sixnine months ended JuneSeptember 30, 2011, the portfolioBlended Strategies Portfolio experienced net trading losses of $8,182,436$6,917,017 attributable to the following sectors:
 
   
Agriculture $112,080  $(1,455,644)
Energy  (2,354,187)  (3,419,259)
Foreign exchange  (3,847,059)  (6,525,053)
Interest rates  2,253,817   10,343,249 
Metals  1,883,879   6,514,409 
Softs  (317,616)  (1,018,057)
Stock index  (5,913,350)  (11,356,662)
 $(8,182,436) $(6,917,017)
 

The portfolio recorded a net loss for the period in the equity sector.  Gainsstock indices as gains in the early portion of the first quarter on the heels of improved investor confidence were offset in March when the earthquake and tsunami in Japan generated risk aversion and marketaversion. Market reversals resulting ingenerated significant losses with the largest losses stemming from theparticularly in European stock indices. Losses were also recognized in the second quarter as gainsadvances early in the quarter on encouraging earnings data and continued low interest rates fueled hopehopes of a global economic recovery were reversed whencausing prices declinedto fall in a sharp reduction of risk inacross various markets.  The foreignThis pattern continued in the third quarter and the portfolio recorded losses as stock prices fell due to a retreating appetite for risk. Foreign exchange sector posted losses early in the period from trading in Asian currencies in March and later in the period as risk aversion led to a safe haven demand resulting in a strongergains recognized when the U.S. dollar offsetting previous gains from the U.S. dollar’s declinefell to multi-year lows against most major global currencies was offset as the risk aversion led to a stronger U.S. dollar versus most emerging markets and commodity currencies.  The portfolio recorded a net loss for the period in the energy sector as gains infrom the first quarter from increasingon rising oil prices amid risingincreasing political tensions in the Middle East and Libya were overshadowed by losses in the second quarter as prices reversed and continuedmoved sharply downward in reaction to the announced release of strategic oil reserves in June. The portfolio generated gains in the interest rate sectorrates led by gains in the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets.assets and increased safe haven demand.  Gains were recognized in the metals sector as prices moved sharply uprose in the beginning of the second quarter which outpaced losses laterand continued into the third quarter with gold and silver reaching record highs before falling off in the quarter as prices reversed.latter part of the third quarter. The portfolio also recognized small gains in the agriculture sector, partially offset by losses in agriculture and 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 sixnine months ended JuneSeptember 30, 2011, Brokerage Fees increased by $1,501,572$1,826,817 or 66.6%47.1%, Advisory Fees increased by $1,038,537$1,679,227 or 46.4%50.8% and Sponsor Fees increased by $606,929$839,615 or 58.9%50.8% 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 $451,068$797,307 or -40.4%-45.6%.  Interest was earned on free cash at an average annualized yield of 0.48%0.46% for the sixnine months ended JuneSeptember 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 sixnine months ended JuneSeptember 30, 2011, the Incentive Allocation increaseddecreased by $31,714$730,620 when compared to the corresponding period of 2010 relateddue to shares redeemedthe portfolio’s lack of year to date profitability when compared to the portfolio was in acorresponding period of New High Net Trading Profits.2010.
 
 
10299


The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of JuneSeptember 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  8.0(35.9%)
Energy  2.956.8%
Foreign exchange  (5.716.9%)
Interest rates  75.9(73.6%)
Metals  41.068.2%
Softs  (1.3116.5%)
Stock index  (20.815.1)%)
   100.0%
 
2010 Summary

Three Months Ended JuneSeptember 30, 2010

For the three months ended JuneSeptember 30, 2010, the Blended Strategies Portfolio experienced net trading gains of $2,452,115$7,715,839 attributable to the following sectors:

Agriculture $(485,548) $(551,207)
Energy  (3,245,806)  (197,988)
Foreign exchange  1,496,681   2,701,778 
Interest rates  8,004,083   5,452,796 
Metals  (1,098,109)  2,618,043 
Softs  (302,980)  616,722 
Stock index  (1,916,206)  (2,924,305)
 $2,452,115  $7,715,839 
 
The Blended Strategies Portfolio recorded a gain during April primarily attributableU.S. dollar’s continued depreciation on the back of growing expectations for quantitative easing and the appreciation of commodity currencies especially those with ties to positions in the fixed income markets, which benefited from rising prices in Europe. Additional gains stemmed from lower equity prices in Europegold, notably Australian dollar, Canadian dollar 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 netSouth African rand, contributed to significant gains in the monthforeign currency trading.  The expectation 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.
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.

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 currenciesquantitative easing and the Australian dollar.  Additional gains stemmed from positions in the European fixed incomeFederal Reserve’s anticipated, 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.

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 notablyconfirmed, accommodative monetary policy stance led to gains in gold.   Lossesshort term interest rate trading.   Gains were also recognized in European interest rates as a weakened global growth outlook drove investors to flock to the agriculture and softs sectors.safety of government securities during the quarter lowering yields which benefitted the portfolio.  The portfolio was able to generate profitsbenefit from the rise in the interest rates sectorprices in global metals driven by both economic growth concerns, especially in gold which crept closer to its all time high prices, as well as in base metals where a favorable outlook in industrial activity and increased demand from China led by gainsto gains.  Trading results in the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets in the beginning ofcommodities were mixed throughout the quarter offset by losses as risk appetite returned later intrends coming into 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.
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 $159,018 or 59.8%, Advisory Fees increased by $117,205 or 62.4% and Sponsor Fees increased by $58,603 or 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 $32,893 or -34.6%.  Interest was earned on free cash at an average annualized yield of 0.47% for the three 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 three months ended June 30, 2011 Incentive Allocation increased by 8,814, 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.

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 gainsreversed in the early part of the year amid rising equityquarter as projections for harvests in some of the staple crops turned below initial expectations and prices drivenwere additionally affected by improved global economic outputgrowth sentiment while other markets continued to follow trends leading to overall gains in softs and improved investor optimism.  Significant losses in agriculture.  Trading in energy was mixed as gains in calendar spread positions in crude oil and heating oil generated profits which were offset by losses on outright positions, most notably in European indices, were recognized in Marchnatural gas as the earthquake and tsunamienergy markets exhibited volatile price swings throughout the period.  Trading 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 sectorstock indices 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 amidmarkets exhibited significant volatility predominantly in theseU.S. and European markets with a sharp rally in July followed by a sell off in August on the back of economic growth concerns reversing again in September, 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 diminishingan 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.reappeared.
 
 
106100

 
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 sixthree months ended JuneSeptember 30, 2010, Brokerage Fees increased by $398,138 or 38.0%, Advisory Fees increased by $344,820 or 38.5% and Sponsor Fees increased by $172,410 or 38.5% 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 and a net gain for the period partially offset by redemptions. During the same period interest income increased by $287,096 or 83.2% predominantly due to the increase in net assets discussed above.  Interest was earned on free cash at an average annualized yield of 0.61% for the three months ended September 30, 2010 compared to 0.62% for the same period in 2009.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio.  For the three months ended September 30, 2010, the Incentive Allocation decreased by $79,178, or -9.4%, when compared to the same period of 2009.  This was the result of a lower net gain before incentive allocation for the three months ended September 30, 2010 when compared to 2009.  In addition, the portfolio had a loss carryforward at the beginning of the quarter in 2010, which further contributed to the decrease in incentive allocation over the same period in 2009.

Nine Months Ended September 30, 2010

For the nine months ended September 30, 2010, the Blended Strategies Portfolio experienced net trading gains of $10,829,799 attributable to the following sectors:

Agriculture $(700,485)
Energy  (2,979,619)
Foreign exchange  6,611,730 
Interest rates  14,895,930 
Metals  997,110 
Softs  (757,694)
Stock index  (7,237,173)
  $10,829,799 
The portfolio experienced overall gains this year as economic concerns ebbed and flowed creating significant volatility in most markets.  Consistent gains were posted in interest rates as beginning of the year concerns about Greece and the European Union as well as the efforts of the U.S. Federal Reserve to be accommodative and stimulate growth, led to a general trend towards flatter yield curves throughout the year in the U.S. and Europe.  The portfolio was able to generate gains in foreign currency during high volatility as early year concerns about Greece, Portugal, Ireland and Spain led to declines in the Euro versus the U.S. dollar in the early part of the year only to reverse more recently as the Federal Reserve’s continued efforts to stimulate growth coupled with a more stable outlook for Europe has driven a devaluation of the dollar versus the Euro and Japanese yen.  The portfolio was able to generate gains in trading in many of the major commodity currencies such as Australian dollar and Canadian dollar as these strengthened  against the U.S. dollar on the heels of the increase in value of gold throughout the year.  Trading in commodities generated mixed results for the year, as many commodities alternated between trading highly correlated to the U.S. dollar to trading on fundamental news creating several instances of abrupt price reversals throughout the year leading to overall losses with one standout being gains in gold which crept towards all time price highs in the third quarter.  Trading in energy generated losses as dramatic price movements predominantly in the second quarter moved against the portfolio’s positions notably in crude and natural gas as the uneasiness in the markets about the global growth potential, exacerbated by the May “flash crash” in U.S. stock markets, triggered a flight to quality and adverse price moves for the portfolio.  Losses in energies were partially offset by gains in calendar spread positions in crude oil and heating oil.  Trading in stock indices generated losses during the year as the gyrations in economic sentiment resulted in, at times, abrupt volatility in the major European and U.S. stock markets highlighted by the May “flash crash”.
For the nine months ended September 30, 2010, Brokerage Fees increased by $997,718 or 34.6%, Advisory Fees increased by $806,821 or 32.3% and Sponsor Fees increased by $403,410 or 32.3% 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 and a net gain for the period, partially offset by redemptions. During the same period interest income increased by $892,615 or 104.4% predominantly due to the increase in net assets discussed above.  Interest was earned on free cash at an average annualized yield of 0.61% for the nine months ended September 30, 2010 compared to 0.60% for the same period in 2009.

For the nine months ended September 30, 2010, the Incentive Allocation decreased by $94,344 or -11.0%, in the portfolio over the corresponding period of the preceding year due to lower net gain before incentive allocation partially offset by an increase in interest income.

The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of September 30, 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.

Agriculture7.6%
Energy11.7%
Foreign exchange81.9%
Interest rates47.3%
Metals(48.7%)
Softs1.8%
Stock index(1.6%)
100.0%

Systematic Strategies Portfolio

2011 Summary

Three Months Ended September 30, 2011

For the three months ended September 30, 2011, the Systematic Strategies Portfolio experienced net trading losses of $3,294,560 attributable to the following sectors:

Agriculture $(352,974)
Energy  (651,639)
Foreign exchange  (1,982,099)
Interest rates  2,017,773 
Metals  1,131,082 
Softs  (263,707)
Stock index  (3,192,996)
  $(3,294,560)
The portfolio recognized significant losses in stock indices as the magnitude of declines in global stock indexes in reaction to the S&P downgrade of the U.S. debt heightened concern both in U.S. and European markets.  Losses were recorded in foreign exchange as early gains were erased mid quarter when entrenched, long-term market trends reversed and investors sold commodity currencies aggressively in favor of the U.S. dollar.  While positions in the Swiss franc provided some safe haven for the portfolio in the early part of the period, those gains were reversed amid speculation the Swiss National Bank would and later did seek to limit the strength of the currency relative to the euro.  Losses were recognized in energy, agriculture, and softs as the lack of sustained direction in these markets provided a difficult trading environment for the portfolio.  The portfolio posted gains in U.S. and European interest rate trading as prices rallied when investors sought safe haven investments as well as price appreciation on the heels of the U.S. Federal Reserve’s “operation twist”.  Gains were recognized in metals as gold and silver reached new highs by the middle of the quarter.  A portion of these gains were reversed later in the period as prices retreated, but the portfolio still posted an overall gain.

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 September 30, 2011, Brokerage Fees increased by $394,493$131,505 or 93.5%45.2%, Advisory Fees increased by $181,955$96,822 or 45.1%47.3% and Sponsor Fees increased by $120,748$48,411 or 70.2%47.3% 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$49,563 or -34.1%-47.8%.  Interest was earned on free cash at an average annualized yield of 0.48%0.42% for the sixthree months ended JuneSeptember 30, 2011 compared to 0.60% 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 September 30, 2011 and 2010 there was no Incentive Allocation due to the portfolios lack of profitability.

Nine Months Ended September 30, 2011

For the nine months ended September 30, 2011, the Systematic Strategies Portfolio experienced net trading losses of $6,374,148 attributable to the following sectors:

Agriculture $(683,373)
Energy  (1,271,682)
Foreign exchange  (2,643,544)
Interest rates  2,030,777 
Metals  1,238,774 
Softs  (351,655)
Stock index  (4,693,445)
  $(6,374,148)
Stock indices generated overall losses for the period despite recognizing gains early in 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.  Stock indices also generated losses as advances early in the second quarter on encouraging earnings data fueled hope of a global economic recovery were reversed causing prices to fall in a sharp reduction of risk across various markets.  The portfolio recognized significant losses in the third quarter as the magnitude of declines in global stock indices in reaction to the S&P downgrade of the U.S. debt heightened concern both in the U.S. and European markets. Foreign exchange 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.  The 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 despite significant volatility during the quarter 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.  Losses were recorded in the third quarter as early gains were erased mid quarter when entrenched, long-term market trends reversed and investors sold commodity currencies aggressively in favor of the U.S. dollar.  While positions in the Swiss franc provided some safe haven for the portfolio in the early part of the period, gains were reversed amid speculation the Swiss National Bank would and later did seek to limit the strength of the currency relative to the euro.  The portfolio was able to generate profits in energy 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 moved sharply downward in reaction to the announced release of strategic oil reserves in June.  Losses were recognized in the third quarter as well as the lack of sustained direction in the energy sector provided a difficult trading environment for the portfolio. 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 amid steep demand on tight supply levels during the first quarter.  These gains were mitigated by losses in the second quarter as prices reversed, notably in gold, late in the quarter when investors unloaded safe haven assets in favor of risker ones.  Gains were generated in the third quarter as gold and silver reached new highs by the middle of the quarter on investor concerns over sovereign debt and global economic growth.  A portion of these gains were reversed later in the period as prices retreated but the portfolio posted an overall gain for the quarter.  The portfolio was able to generate profits in the fixed income sector led by gains in the U.S. interest rates markets in the second quarter as prices climbed amid the diminishing appetite for risk assets in the beginning of the quarter offset by losses later in the quarter as the appetite for risk returned. The portfolio was able to post some gains in the European fixed income markets despite the sharp market reversals at the end of the quarter.  The portfolio also posted gains in the third quarter in the U.S. and European interest rates sectors as prices rallied when investors sought safe haven investments and price appreciation on the heels of the U.S. Federal Reserve’s “operation twist”.
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 nine months ended September 30, 2011, Brokerage Fees increased by $466,456 or 60.4%, Advisory Fees increased by $338,319 or 61.6% and Sponsor Fees increased by $169,159 or 61.6% 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 $111,308 or -39.1%.  Interest was earned on free cash at an average annualized yield of 0.46% for the nine months ended September 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 sixnine months ended JuneSeptember 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 JuneSeptember 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.

Agriculture3.0%55.3%
Energy5.5%125.9%
Foreign exchange(1.6%(86.1%)
Interest rates117.7%(210.1%)
Metals28.5%259.3%
Softs(4.1%)6.3%
Stock index(49.0%(50.6%)
 100.0%100.0%


2010 Summary

Three Months Ended JuneSeptember 30, 2010

For the three months ended JuneSeptember 30, 2010, the Systematic Strategies Portfolio experienced net trading gains of $105,429$1,486,594 attributable to the following sectors:

Agriculture $(208,487) $(44,736)
Energy  (753,146)  (164,282)
Foreign exchange  (177,170)  704,551 
Interest rates  2,178,397   1,001,399 
Metals  (174,814)  605,029 
Softs  (49,642)  186,340 
Stock index  (709,709)  (801,707)
 $105,429  $1,486,594 
The U.S. dollar’s continued depreciation on the back of growing expectations for quantitative easing contributed to significant gains in foreign currency trading.  The expectation of quantitative easing coupled with a weakened global growth outlook, which drove investors toward the safety of government securities during the quarter, also generated gains in interest rate trading.  The portfolio postedwas able to benefit from the rise in prices in global metals driven by both economic growth concerns especially in gold which crept closer to its all time high prices as well as in base metals where a solid gainfavorable outlook in April. Profitsindustrial activity and increased demand from China led to gains.  Trading results in commodities were largelymixed throughout the result of positionsquarter as trends coming into the quarter reversed in the fixed incomeearly part of the quarter as projections for harvests in some of the staple crops turned below initial expectations and prices were additionally affected by economic growth sentiment while other markets continued to follow trends leading to overall gains in softs and losses in agriculture and energies.  Trading in stock indices generated losses during the period as investors bought bondsthe markets exhibited significant volatility predominantly in U.S. and European markets with a sharp rally in July followed by a sell off in August on the back of economic growth concerns reversing again in September, as an appetite for risk reappeared.

Brokerage, Advisory and Sponsor Fees are calculated as a safe haven. In foreign exchange, the portfolio took advantagepercentage of the euro's decline against virtually all currencies, while positions inFund’s net asset value as of the Australianend of each month and Canadian dollars benefitedare affected by trading performance, interest income, subscriptions into and redemptions out of the portfolio earlier inFund.  Accordingly, the month. Positions in the energy and soft markets also resulted in gains as crude oil and cotton prices rose. Gainsfluctuations 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 ledamounts are directly correlated to the majority of the portfolio’s losses. Tradingchanges in commodities also resultednet asset value, which are discussed 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.  detail herein.

For the three months ended JuneSeptember 30, 2010, Brokerage Fees increased by $227,523,$201,423 or 594.5%224.2%, Advisory Fees increased by $164,367,$150,743 or 696.4%,278.6% and Sponsor Fees increased by $82,182,$75,372 or 696.4%,278.6% in the portfolioBlended 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 and a net gain for the period, partially offset by redemptions and aredemptions. During the same period interest income increased by $84,694 or 445.1% predominantly due to the increase in net lossassets discussed above.  Interest was earned on free cash at an average annualized yield of 0.61% for the period.three months ended September 30, 2010 compared to 0.62% for the same period in 2009.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the three months ended JuneSeptember 30, 2010 there was no Incentive Allocation earned despite the portfolio’s profitability, due to the portfolio experiencing a net loss forcarryforward at the period.beginning of the quarter.

Six
106


Nine Months Ended JuneSeptember 30, 2010

For the sixnine months ended JuneSeptember 30, 2010, the Systematic Strategies Portfolio experienced net trading lossesgains of $822,587$664,007 attributable to the following sectors:

Agriculture $(123,226) $(89,841)
Energy  (1,125,595)  (647,672)
Foreign exchange  (163,262)  421,668 
Interest rates  3,745,063   2,476,875 
Metals  (522,253)  181,743 
Softs  (686,979)  (192,407)
Stock index  (1,946,335)  (1,486,359)
 $(822,587) $664,007 

The portfolio experienced overall gains this year as economic concerns ebbed and flowed creating significant volatility in most markets.  Consistent gains were posted a solid gain in April. Profits were largelyinterest rates as beginning of the resultyear concerns about Greece and the European Union as well as the efforts of positionsthe U.S. Federal Reserve to be accommodative and stimulate growth, led to general trend in lower yields throughout the year in both the U.S. and Europe.  The portfolio was able to generate gains in foreign currency during high volatility as early year concerns about Greece, Portugal, Ireland and Spain led to declines in the fixed income marketsEuro against the U.S. dollar early in the year.  This trend later reversed as investors bought bondsthe Federal Reserve’s continued efforts to stimulate growth, coupled with a more stable outlook for Europe, has driven a devaluation of the U.S. dollar versus the Euro and Japanese yen as a safe haven. In foreign exchange,well as several other more commodity linked currencies such as the Australian dollar.  Trading in commodities generated mixed results for the year as many commodities alternated between trading highly correlated to the U.S. dollar and trading on fundamental news creating several instances of abrupt price reversals throughout the year leading to overall losses, with one exception being gold which crept towards all time price highs in the third quarter.  Trading in energy generated losses as dramatic price movements predominantly in the second quarter moved against the portfolio took advantage ofpositions notably in crude and natural gas as the euro's decline against virtually all currencies, while positionsuneasiness in the Australian and Canadian dollars benefitedmarkets about the portfolio earlierglobal growth potential exacerbated by the May “flash crash” in the month. Positions in the energy and softU.S. stock 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 intriggered a flight to safety.  Additional profits stemmed from positionsquality and adverse price moves for the portfolio.  Trading in stock indices generated losses during the year as the gyrations in economic sentiment resulted in, at times, abrupt volatility in the foreign exchangemajor European and U.S. stock markets as our models benefitted fromhighlighted by 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.  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.May “flash crash”.

For the sixnine months ended JuneSeptember 30, 2010, Brokerage Fees increased by $372,286,$633,251 or 751.8%454.4%, Advisory Fees increased by $373,066,$464,267 or 1,225.1%,549.1% and Sponsor Fees increased by $156,761,$232,133 or 1,029.6%,549.1% in the portfolioSystematic 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 and a net gain for the period, partially offset by redemptions and aredemptions. During the same period interest income increased by $259,787 or 1,033.3% predominantly due to the increase in net lossassets discussed above.  Interest was earned on free cash at an average annualized yield of 0.61% for the period.nine months ended September 30, 2010 compared to 0.60% for the same period in 2009.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the sixnine months ended JuneSeptember 30, 2010, there was no Incentive Allocation earnedincentive allocation due to the portfolio experiencing a net loss for the period.   portfolio’s lack of year to date profitability.
The following table illustrates the sector distribution of the Systematic Strategies Portfolio’s investments in Master Funds as of December 31,September 30, 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%4.0%
Energy14.1%7.5%
Foreign exchange19.3%43.5%
Interest rates(15.6%)21.4%
Metals56.3%25.1%
Softs7.6%0.8%
Stock index(3.0%(2.3%)
 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.


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 on 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)            Liquidity
(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
June 30, 201116.04% 11.18%
December 31, 2010  7.57%   7.73%
June 30, 2010  5.37%   5.50%
  
Blended Strategies
Portfolio
 
Systematic Strategies
Portfolio
September 30, 2011 14.98% 9.42%
December 31, 2010 7.57% 7.73%
September 30, 2010 11.53% 13.70%

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 JuneSeptember 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) Capital Resources
 
The Fund raises additional capital 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) 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.
 
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) Off-Balance Sheet Arrangements

The Fund does not engage in off-balance sheet arrangements with other entities.
 
 
112110


Item 3. Quantitative and Qualitative Disclosures about Market Risk
          Not Required.
 
 
113111


Item 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 JuneSeptember 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 JuneSeptember 30, 2011.
 
There were no changes to the Fund’s internal controls over financial reporting during the secondthird quarter of 2011 that have materially affected, or are reasonably likely to materially affect, the Fund’s internal controls over financial reporting.
 
 
114112


PART II. OTHER INFORMATION
None

Not Required

For the three months ended JuneSeptember 30, 2011, the Fund issued 172,662.93298,829.107 Units in exchange for $23,104,766$12,693,000 with respect to the Blended Strategies Portfolio and 82,664.62439,627.068 Units in exchange for $8,187,958$3,706,295 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 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
 
Blended Strategies Portfolio
Total Number of
Units Purchased
Systematic Strategies Portfolio
Total Number of
Units Purchased
Period (as of)  
July 1, 201163,647.374 18,352.341
August 1, 201117,875.999 12,270.952
September 1, 201117,305.734   9,003.775
 


 
 
115113



* 3.1Certificate of Formation of Graham Alternative Investment Fund I LLC
* 4.1Amended 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
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
 
 
116114


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:  August 15,November 14, 2011
GRAHAM ALTERNATIVE INVESTMENT FUND I LLC
  
 
By: 
GRAHAM CAPITAL MANAGEMENT, L.P.
its Manager
   
  By:  /s/ /s/Paul Sedlack
   Paul Sedlack, Chief Executive Officer
   
  By:  /s//s/ Jeff Baisley
   Jeff Baisley, Chief Financial Officer
 
 
 117115