UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2012March 31, 2013
 
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)
 
Delaware 20-4897069
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
 
c/o GRAHAM CAPITAL MANAGEMENT, L.P.
40 Highland Avenue
Rowayton, CT  06853
(Address of principal executive offices) (Zip Code)
 
Paul Sedlack
Graham Capital Management, L.P.
40 Highland Avenue
Rowayton, CT  06853
(203) 899-3400
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes x  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes x  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer ­o
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).
 
Yes o  No x
 
As of OctoberApril 1, 2012, 396,015.0592013, 227,995.810 Units of the Systematic Strategies Portfolio were outstanding.
As of OctoberApril 1, 2012, 1,798,048.5612013, 1,290,464.187 Units of the Blended Strategies Portfolio were outstanding.



 
 

 
GRAHAM ALTERNATIVE INVESTMENT FUND I LLC
FORM 10-Q
 
INDEXINDEX
 
  Page
  Number
    
PART I - Financial Information: 
    
 Item 1.Financial Statements: 
    
  Graham Alternative Investment Fund I LLC 
    
  1
    
  2
    
  3
    
  5
    
  6
    
  Graham Alternative Investment Trading LLC 
    
  1613
    
  1714
    
  1815
    
  1916
    
  2017
    
  2118
    
  Graham Alternative Investment Trading II LLC 
    
  6457
 
 
 

 
  6558
    
  6659
    
  6760
    
  6861
    
 Item 2.9184
    
 Item 3.10392
    
 Item 4.10493
  
PART II - Other Information10594
  
 

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

 
 


PART I

Item 1. Financial Statements

Graham Alternative Investment Fund I LLC

StatementsStatements of FinancialFinancial Condition

 
September 30, 2012
(Unaudited)
  
December 31, 2011
(Audited)
  
March 31, 2013
(Unaudited)
  
December 31, 2012
(Audited)
 
            
Assets            
Investment in Graham Alternative Investment Trading LLC, at fair value $201,253,658  $263,929,118  $149,768,564  $167,871,994 
Investment in Graham Alternative Investment Trading II LLC, at fair value  29,805,907   45,955,612   17,566,697   18,488,309 
Redemption receivable from Graham Alternative Investment Trading LLC  13,824,992   8,563,194   10,606,614   14,897,527 
Redemption receivable from Graham Alternative Investment Trading II LLC  6,875,155   2,164,043   634,879   6,924,115 
Total assets $251,759,712  $320,611,967  $178,576,754  $208,181,945 
                
Liabilities and members’ capital                
Liabilities:                
Accrued redemptions $20,700,147  $10,727,237  $11,241,493  $21,821,642 
Total liabilities  20,700,147   10,727,237   11,241,493   21,821,642 
                
Members’ capital:                
Blended Strategies Portfolio:                
Class 0 Units (1,460,395.038 and 1,814,039.586 units issued and outstanding at $116.90 and $123.17, respectively)  170,725,531   223,427,719 
Class 2 Units (330,568.757 and 410,047.431 units issued and outstanding at $92.35 and $98.77, respectively)  30,528,127   40,501,399 
Class 0 Units (1,018,552.830 and 1,241,639.087 units issued and outstanding at $122.47 and $114.88, respectively)  124,737,215   142,637,622 
Class 2 Units (261,296.090 and 279,471.807 units issued and outstanding at $95.80 and $90.29, respectively)  25,031,349   25,234,372 
Total Blended Strategies Portfolio  201,253,658   263,929,118   149,768,564   167,871,994 
                
Systematic Strategies Portfolio:                
Class 0 Units (187,087.600 and 322,756.427 units issued and outstanding at $77.99 and $81.35, respectively)  14,590,957   26,254,798 
Class 2 Units (208,584.729 and 255,073.907 units issued and outstanding at $72.94 and $77.24, respectively)  15,214,950   19,700,814 
Class 0 Units (91,232.079 and 101,445.837 units issued and outstanding at $80.62 and $73.46, respectively)  7,355,130   7,452,523 
Class 2 Units (136,763.731 and 161,427.944 units issued and outstanding at $74.67 and $68.36, respectively)  10,211,567   11,035,786 
Total Systematic Strategies Portfolio  29,805,907   45,955,612   17,566,697   18,488,309 
Total members’ capital  231,059,565   309,884,730   167,335,261   186,360,303 
Total liabilities and members’ capital $251,759,712  $320,611,967  $178,576,754  $208,181,945 

See accompanying notes.

 
1

 
Graham Alternative Investment Fund I LLC

StatStatementsements of Operations

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 
2012
(Unaudited)
  
2011
(Unaudited)
  
2012
(Unaudited)
  
2011
(Unaudited)
  
2013
(Unaudited)
  
2012
(Unaudited)
 
Net gain (loss) allocated from investments in other funds:            
Net realized gain (loss) on investments $2,303,408  $(506,903) $7,748,714  $(2,945,410)
Net gain allocated from investments in other funds:      
Net realized gain on investments $14,459,775  $14,524,317 
Net decrease in unrealized appreciation on investments  (2,263,461)  (1,522,238)  (10,423,487)  (10,345,755)  (384,761)  (3,944,968)
Net gain (loss) allocated from investments in other funds  39,947   (2,029,141)  (2,674,773)  (13,291,165)
Brokerage commissions and fees  (309,040)   
Net gain allocated from investments in other funds  13,765,974   10,579,349 
                        
Net investment loss allocated from investments in other funds:                
Net investment loss allocated from investment in other funds:        
Investment income:                        
Interest income  136,648   339,914   443,289   1,124,247   86,819   161,855 
                        
Expenses:                        
Brokerage fees  1,587,246   2,369,990   5,127,313   6,943,514 
Advisory fees  1,338,009   2,008,742   4,321,594   5,870,238   777,573   1,548,070 
Sponsor fees  669,003   1,004,372   2,160,796   2,935,120   509,793   774,035 
Incentive allocation  -   -   -   42,993 
Interest and other  29,289   48,654   66,237   107,044 
Brokerage fees     1,840,110 
Professional fees and other  294,044   29,961 
Administrator’s fees  57,849    
Total expenses  3,623,547   5,431,758   11,675,940   15,898,909   1,639,259   4,192,176 
Net investment loss allocated from investments in other funds  (3,486,899)  (5,091,844)  (11,232,651)  (14,774,662)  (1,552,440)  (4,030,321)
Net loss $(3,446,952) $(7,120,985) $(13,907,424) $(28,065,827)
        
Net income $12,213,534  $6,549,028 

See accompanying notes.
 
 
2

 
Graham Alternative Investment Fund I LLC

StatementsStatements of Changes in Members’ Capital

For the ninethree months ended September 30, 2012March 31, 2013 (unaudited) and 20112012 (unaudited)

  Blended Strategies Portfolio 
  Class 0 Units  Class 2 Units  
Total Blended
 
  
 
Units
  Capital  
 
Units
  Capital  
Strategies
Portfolio
 
                
Members’ capital, December 31, 2010  1,752,436.237  $243,511,752   409,129.824  $46,511,568  $290,023,320 
Subscriptions  520,007.272   72,113,602   80,016.088   8,938,865   81,052,467 
Redemptions  (400,792.103)  (53,393,928)  (55,715.918)  (6,177,414)  (59,571,342)
Net loss     (15,959,262)     (3,305,044)  (19,264,306)
Members’ capital, September 30, 2011  1,871,651.406  $246,272,164   433,429.994  $45,967,975  $292,240,139 
  Blended Strategies Portfolio 
  Class 0 Units  Class 2 Units  Total 
  
 
Units
  Capital  
 
Units
  Capital  
Blended
Strategies
Portfolio
 
                
Members’ capital, December 31, 2011  1,814,039.586  $223,427,719   410,047.431  $40,501,399  $263,929,118 
Subscriptions  7,911.977   980,000   6,612.488   656,540   1,636,540 
Redemptions  (100,499.651)  (12,617,330)  (52,837.961)  (5,277,179)  (17,894,509)
Net income     5,350,966      738,687   6,089,653 
Members’ capital, March 31, 2012  1,721,451.912  $217,141,355   363,821.958  $36,619,447  $253,760,802 
                     
  Blended Strategies Portfolio 
  Class 0 Units  Class 2 Units  Total 
  
 
Units
  Capital  
 
Units
  Capital  
Blended
Strategies
Portfolio
 
                     
Members’ capital, December 31, 2012  1,241,639.087  $142,637,622   279,471.807  $25,234,372  $167,871,994 
Subscriptions  16,433.844   1,945,000   3,741.593   351,886   2,296,886 
Redemptions  (239,520.101)  (28,917,423)  (21,917.310)  (2,069,889)  (30,987,312)
Net income     9,072,016      1,514,980   10,586,996 
Members’ capital, March 31, 2013  1,018,552.830  $124,737,215   261,296.090  $25,031,349  $149,768,564 
  Blended Strategies Portfolio 
  Class 0 Units  Class 2 Units  
Total Blended
 
              Strategies 
  Units  Capital  Units  Capital  Portfolio 
                
Members’ capital, December 31, 2011  1,814,039.586  $223,427,719   410,047.431  $40,501,399  $263,929,118 
Subscriptions  48,855.838   6,045,929   28,300.003   2,758,540   8,804,469 
Redemptions  (402,500.386)  (48,798,913)  (107,778.677)  (10,558,791)  (59,357,704)
Net loss     (9,949,204)     (2,173,021)  (12,122,225)
Members’ capital, September 30, 2012  1,460,395.038  $170,725,531   330,568.757  $30,528,127  $201,253,658 

See accompanying notes.
 
 
3


Graham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital (continued)

For the ninethree months ended September 30,March 31, 2013 (unaudited) and 2012 (unaudited) and 2011 (unaudited)

  Systematic Strategies Portfolio    
  Class 0 Units  Class 2 Units  Total    
  Units  Capital  Units  Capital  
Systematic
Strategies
Portfolio
  
Total Members’
Capital
 
                   
Members’ capital, December 31, 2011  322,756.427  $26,254,798   255,073.907  $19,700,814  $45,955,612  $309,884,730 
Subscriptions  2,177.678   178,000         178,000   1,814,540 
Redemptions  (21,990.662)  (1,821,776)  (21,224.864)  (1,647,009)  (3,468,785)  (21,363,294)
Net income     326,795      132,580   459,375   6,549,028 
Members’ capital, March 31, 2012  302,943.443  $24,937,817   233,849.043  $18,186,385  $43,124,202  $296,885,004 
        
  Systematic Strategies Portfolio     
  Class 0 Units  Class 2 Units  Total     
  Units  Capital  Units  Capital  
Systematic
Strategies
Portfolio
  
Total Members’
Capital
 
                         
Members’ capital, December 31, 2012  101,445.837  $7,452,523   161,427.944  $11,035,786  $18,488,309  $186,360,303 
Subscriptions                 2,296,886 
Redemptions  (10,213.758)  (767,533)  (24,664.213)  (1,780,617)  (2,548,150)  (33,535,462)
Net income     670,140      956,398   1,626,538   12,213,534 
Members’ capital, March 31, 2013  91,232.079  $7,355,130   136,763.731  $10,211,567  $17,566,697  $167,335,261 
  Systematic Strategies Portfolio       
  Class 0 Units  Class 2 Units  Total Systematic    
              Strategies  Total Members’ 
  Units  Capital  Units  Capital  Portfolio  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  139,972.911   14,166,260   90,038.065   8,714,658   22,880,918   103,933,385 
Redemptions  (74,108.877)  (6,909,240)  (25,554.483)  (2,418,836)  (9,328,076)  (68,899,418)
Net loss     (5,091,523)     (3,709,998)  (8,801,521)  (28,065,827)
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  Total Systematic    
              Strategies  Total Members’ 
  Units  Capital  Units  Capital  Portfolio  Capital 
                   
Members’ capital, December 31, 2011  322,756.427  $26,254,798   255,073.907  $19,700,814  $45,955,612  $309,884,730 
Subscriptions  6,404.671   528,000   1,066.718   80,000   608,000   9,412,469 
Redemptions  (142,073.498)  (11,308,825)  (47,555.896)  (3,663,681)  (14,972,506)  (74,330,210)
Net loss     (883,016)     (902,183)  (1,785,199)  (13,907,424)
Members’ capital, September 30, 2012  187,087.600  $14,590,957   208,584.729  $15,214,950  $29,805,907  $231,059,565 

See accompanying notes.
 
 
4

 
Graham Alternative Investment Fund I LLC

Statements Statementsof Cash Flows

 
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 
2012
(Unaudited)
  
2011
(Unaudited)
  
2013
(Unaudited)
  
2012
(Unaudited)
 
Cash flows provided by (used in) operating activities      
Net loss $(13,907,424) $(28,065,827)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Net loss allocated from investment in Graham Alternative Investment Trading LLC  12,122,225   19,264,306 
Net loss allocated from investment in Graham Alternative Investment Trading II LLC  1,785,199   8,801,521 
Cash flows provided by operating activities      
Net income $12,213,534  $6,549,028 
Adjustments to reconcile net income to net cash provided by operating activities:        
Net income allocated from investment in Graham Alternative Investment Trading LLC  (10,586,996)  (6,089,653)
Net income allocated from investment in Graham Alternative Investment Trading II LLC  (1,626,538)  (459,375)
Proceeds from sale of investments in Graham Alternative Investment Trading LLC  54,095,906   21,324,106   35,278,225   17,544,593 
Proceeds from sale of investments in Graham Alternative Investment Trading II LLC  10,261,394   5,330,402   8,837,386   2,836,889 
Investments in Graham Alternative Investment Trading LLC  (8,804,469)  (81,052,467)  (2,296,886)  (1,636,540)
Investments in Graham Alternative Investment Trading II LLC  (608,000)  (22,880,918)     (178,000)
Net cash provided by (used in) operating activities  54,944,831   (77,278,877)
Net cash provided by operating activities  41,818,725   18,566,942 
                
Cash flows (used in) provided by financing activities        
Cash flows used in financing activities        
Subscriptions  9,412,469   103,933,385   2,296,886   1,814,540 
Redemptions  (64,357,300)  (26,654,508)  (44,115,611)  (20,381,482)
Net cash (used in) provided by financing activities  (54,944,831)  77,278,877 
Net cash used in financing activities  (41,818,725)  (18,566,942)
                
Net change in cash and cash equivalents            
                
Cash and cash equivalents, beginning of period            
Cash and cash equivalents, end of period $  $  $  $ 

See accompanying notes.

 
5


Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements

September 30, 2012March 31, 2013
 
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 which was 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“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 (the “CFTC”) and is a member of the National Futures Association. The Manager is also registered as a Registered Investment Advisor with the Securities and Exchange Commission. The Fund is registered as a reporting company under the Securities Exchange Act of 1934.
1934, as amended, (the “Exchange Act”) and qualifies as a smaller reporting company under the Exchange Act. Effective March 28, 2013 the Manager filed an amendment to the Certificate of Formation of the Fund to designate the interests of unitholders of the Fund as series under the Delaware Limited Liability Company Act.  This amendment allows unitholders of the Fund to benefit from limitation of liability protection afforded to each series.
 
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 Exchange (“Eurex”), the Hong Kong Exchanges and Clearing Ltd. (“HKEX”), the Intercontinental Exchange (“ICE”), the London Metal Exchange (“LME”), the Montreal Exchange (“ME”), the Mercado de Futuros Financieros (“MEFF”), the NYSE Euronext (“Euronext”), the Osaka Securities Exchange (“OSE”), the Singapore Exchange (“SGX”), the South African Exchange (“SAFEX”), the Sydney Futures Exchange Ltd. (“SFE”), the Tokyo Commodity Exchange (“TOCOM”), the Tokyo Financial Exchange (“TFX”), and the Tokyo Stock Exchange (“TSE”).
SEI Global Services, Inc. (“SEI”) is the Fund’s independent administrator and transfer agent. SEI is responsible for certain matters pertaining to the administration of the Fund.
 
The Fund will terminate on December 31, 2050 or at an earlier date if certain conditions occur as outlined in the Limited Liability Company Agreement (“LLC Agreement”).
 
The performance of the Fund is directly affected by the performance of the GAIT Funds; therefore these financial statements should be read in conjunction with the attached financial statements of the GAIT Funds.
 
6

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

1. Organization and Business (continued)
Duties of the Manager
 
Subject to the terms and conditions of the LLC Agreement, the Manager has complete and exclusive responsibility for managing and administering the affairs of the Fund and for directing the investment and reinvestment of the assets of the Fund and the GAIT Funds.
6


Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

 
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.
 
Investments 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 based upon the Fund’s proportionate share of the GAIT Funds’ reported net asset 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 September 30, 2012March 31, 2013 and December 31, 2011,2012, the Fund owned 62.80%61.03% and 63.27%, respectively of GAIT, and 62.74%58.82% and 66.27%56.47%, respectively of GAIT II.

Fair Value
 
The fair value of the assets and liabilities of the Fund and the GAIT Funds, 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. The Fund reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. U.S. GAAP uses a three-level hierarchy for fair value measurement based on the activeness of the market and the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.
7


Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Fair Value (continued)
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 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
7


Graham Alternative Investment Fund reports the fair valueI LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.  Significant Accounting Policies (continued)
Fair Value (continued)
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 ninethree months ended September 30, 2012March 31, 2013 or the year ended December 31, 20112012 by the Fund, the GAIT Funds, or the Master Funds, and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized on the actual date of the event or change in circumstances that cause the transfer.
 
Indemnifications
 
In the normal course of business, the Master Funds, the GAIT Funds, Graham Cash Assets LLC (“GCA”Cash Assets”), and the Fund enter into contracts that contain a variety of indemnifications. Such contracts may include those by GCACash Assets and the Master Funds with their 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 two classes (each a “Class”) in different series (each a “Series” or “Portfolio”) of Units (collectively the “Units”), being Class 0 Units and Class 2 Units (collectively the “Units”) in both Blended and Systematic Strategies Portfolios. The Fund may issue additional Classes or Series 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 and Series 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 and Series to which the Capital Account relates. All income and expenses of the Fund are allocated among the Members’ Capital Accounts [in respect of a Series] in proportion to the balance that each Capital Account bears to the balance of all Capital Accounts [of that Series] as of the beginning of such fiscal period.
8

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
3. Capital Accounts (continued)
 
Subscriptions
 
Units may be purchased at a price equal to the Net Asset Value per Unit of the relevant Class and Series 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.
 
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.
 
8

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

3. Capital Accounts (continued)

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 $7,041$0 and $3,919$3,885 were paid to the Manager for the ninethree months ended September 30,March 31, 2013 and 2012, and 2011, respectively, and are included as redemptions in the statements of changes in members’ capital.
 
4. Fees and Related Party Transactions
 
Advisory Fees
 
EachFor the three months ended March 31, 2013 and 2012, 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 1.75% and 2%, respectively, 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
 
EachFor the three months ended March 31, 2013 and 2012, 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,specified in the table below. This Sponsor Fee was payable monthly in arrears determinedcalculated as of the last business day of the month in the same manner as the Advisory Fee. For the three months ended March 31, 2013 the Sponsor Fee listed below for Class 2 included a selling agent fee (the “Selling Agent Fee”) of 2%. The Selling Agent Fee represented a fee for initial and on-going service fees to the Fund’s selling agents.
Class2013 Annual Rate2012 Annual Rate
Class 00.75%1.00%
Class 22.75%1.00%
 
9

IndexIncentive Allocation
 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
4. Fees and Related Party Transactions (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. Additionally, any loss carryforward attributable to any class of the GAIT Funds shall be proportionately reduced, effective as of the date of any redemption of any Units of such class, by multiplying the loss carryforward by the ratio that the amount of assets redeemed from such class bears to the net assets of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made to the Manager.Manager
9

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
4. Fees and Related Party Transactions (continued)
 
Brokerage Fees
 
EachFor the three months ended March 31, 2012, each Class of the GAIT Funds other than Class M payspaid the Manager a brokerage fee (the “Brokerage Fee”) at thean annual rate specified in the table below. This Brokerage Fee iswas 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 bearsassumed 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 arewere allocated any of these expenses from the Master Funds in which they invest,invested, the Manager will reimbursereimbursed the GAIT Funds for those amounts. These reimbursements are included in commission reimbursements in the GAIT Funds’ statements of operations and managing member allocation. As a result, there is no impact to the Fund’s statement of operations.
 
As of January 1, 2013 the GAIT Funds eliminated the Brokerage Fee and the GAIT Funds incurred directly all costs previously covered by the Brokerage Fee.
Administrator’s Fee
For the three month period ended March 31, 2013, the GAIT Funds paid SEI a monthly administrator’s fee based on each GAIT Funds net asset value, calculated as of the last business day of each month. In addition, the GAIT Funds reimbursed SEI for reasonable out-of-pocket expenses incurred on behalf of the GAIT Funds. The total administrator’s fees allocated to the Fund by the GAIT Funds for the three month periods ended March 31, 2013 and 2012 were $57,849 and $0, respectively.
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.
10

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
5. 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 the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. The Manager has evaluated the Fund’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement or disclosure in the financial statements. The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months. Tax years which are considered open by the relevant jurisdiction are subject to potential examination.

10


Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
6. Financial Highlights
 
The following is the per Unit operating performance calculation for the three month periods ended September 30, 2012March 31, 2013 and 2011:2012:
 
  
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
 
  Class 0  Class 2  Class 0  Class 2 
Per unit operating performance            
Net asset value per unit, June 30, 2011 $132.67  $107.48  $95.59  $91.69 
Net loss:                
Net investment loss  (2.50)  (2.54)  (1.12)  (1.49)
Net gain (loss) on investments  1.41   1.12   (5.09)  (4.90)
Net loss  (1.09)  (1.42)  (6.21)  (6.39)
Net asset value per unit, September 30, 2011 $131.58  $106.06  $89.38  $85.30 
                 
Net asset value per unit, June 30, 2012 $118.77  $94.30  $78.23  $73.54 
Net loss:                
Net investment loss  (1.27)  (1.49)  (1.04)  (1.31)
Net gain (loss) on investments  (0.60)  (0.46)  0.80   0.71 
Net loss  (1.87)  (1.95)  (0.24)  (0.60)
Net asset value per unit, September 30, 2012 $116.90  $92.35  $77.99  $72.94 
  
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
 
  Class 0  Class 2  Class 0  Class 2 
Per unit operating performance            
Net asset value per unit, December 31, 2011 $123.17  $98.77  $81.35  $77.24 
Net gain:                
Net investment loss  (1.20)  (1.48)  (0.92)  (1.27)
Net gain on investments  4.17   3.36   1.89   1.80 
Net gain  2.97   1.88   0.97   0.53 
Net asset value per unit, March 31, 2012 $126.14  $100.65  $82.32  $77.77 
                 
                 
Net asset value per unit, December 31, 2012 $114.88  $90.29  $73.46  $68.36 
Net gain:                
Net investment loss  (0.88)  (1.14)  (0.65)  (0.93)
Net gain on investments  8.47   6.65   7.81   7.24 
Net gain  7.59   5.51   7.16   6.31 
Net asset value per unit, March 31, 2013 $122.47  $95.80  $80.62  $74.67 
The following represents ratios to average members’ capital and total return for the three month periods ended March 31, 2013 and 2012 for the Blended Strategies Portfolio:
  Blended Strategies Portfolio 
  Class 0  Class 2 
  2013  2012  2013  2012 
             
Total return before Incentive Allocation  6.61%  2.41%  6.10%  1.90%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  6.61%  2.41%  6.10%  1.90%
                 
Net investment loss before Incentive Allocation  (0.77)%  (0.97)%  (1.22)%  (1.50)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (0.77)%  (0.97)%  (1.22)%  (1.50)%
                 
Total expenses before Incentive Allocation  0.79%  1.27%  1.27%  1.79%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  0.79%  1.27%  1.27%  1.79%

 
11

 
Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
 
6. Financial Highlights (continued)
The following represents ratios to average members’ capital and total return for the three month periods ended September 30, 2012 and 2011 for the Blended Strategies Portfolio:
  Blended Strategies Portfolio
  Class 0 Class 2
  2012 2011 2012 2011
             
Total return before Incentive Allocation  (1.57)%  (0.82)%  (2.07)%  (1.32)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (1.57)%  (0.82)%  (2.07)%  (1.32)%
                 
Net investment loss before Incentive Allocation  (1.06)%  (1.88)%  (1.57)%  (2.36)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.06)%  (1.88)%  (1.57)%  (2.36)%
                 
Total expenses before Incentive Allocation  1.31%  1.32%  1.81%  1.80%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.31%*  1.32%*  1.81%*  1.80%*
*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.20% of average members’ capital for 2012 and 0.20% of average members’ capital for 2011.
 
The following represents ratios to average members’ capital and total return for the three month periods ended September 30,March 31, 2013 and 2012 and 2011 for the Systematic Strategies Portfolio:
 
  Systematic Strategies Portfolio
  Class 0 Class 2
  2012 2011 2012 2011
             
Total return before Incentive Allocation  (0.31)%  (6.50)%  (0.82)%  (6.97)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (0.31)%  (6.50)%  (0.82)%  (6.97)%
                 
Net investment loss before Incentive Allocation  (1.29)%  (1.17)%  (1.74)%  (1.63)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.29)%  (1.17)%  (1.74)%  (1.63)%
                 
Total expenses before Incentive Allocation  1.37%  1.35%  1.81%  1.82%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.37%*  1.35%*  1.81%*  1.82%*
*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.05% of average members’ capital for 2012 and 0.12% of average members’ capital for 2011.
12


Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
6. Financial Highlights (continued)
The following is the per Unit operating performance calculation for the nine month periods ended September 30, 2012 and 2011:
  
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
 
  Class 0  Class 2  Class 0  Class 2 
Per unit operating performance            
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 
                 
Net asset value per unit, December 31, 2011 $123.17  $98.77  $81.35  $77.24 
Net loss:                
Net investment loss  (3.68)  (4.43)  (2.89)  (3.83)
Net loss on investments  (2.59)  (1.99)  (0.47)  (0.47)
Net loss  (6.27)  (6.42)  (3.36)  (4.30)
Net asset value per unit, September 30, 2012 $116.90  $92.35  $77.99  $72.94 

13

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
6. Financial Highlights (continued)
The following represents ratios to average members’ capital and total return for the nine month periods ended September 30, 2012 and 2011 for the Blended Strategies Portfolio:
  Blended Strategies Portfolio
  Class 0 Class 2
  2012 2011 2012 2011
             
Total return before Incentive Allocation  (5.09)%  (5.30)%  (6.50)%  (6.69)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Total return after Incentive Allocation  (5.09)%  (5.31)%  (6.50)%  (6.70)%
                 
Net investment loss before Incentive Allocation  (2.99)%  (3.82)%  (4.52)%  (5.25)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Net investment loss after Incentive Allocation  (2.99)%  (3.83)%  (4.52)%  (5.26)%
                 
Total expenses before Incentive Allocation  3.83%  3.87%  5.36%  5.37%
Incentive Allocation  0.00   0.01   0.00   0.01 
Total expenses after Incentive Allocation  3.83%*  3.88%*  5.36%*  5.38%*
*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.70% of average members’ capital for 2012 and 0.79% of average members’ capital for 2011.
The following represents ratios to average members’ capital and total return for the nine month periods ended September 30, 2012 and 2011 for the Systematic Strategies Portfolio:
  Systematic Strategies Portfolio
  Class 0 Class 2
  2012 2011 2012 2011
             
Total return before Incentive Allocation  (4.13)%  (13.15)%  (5.57)%  (14.45)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Total return after Incentive Allocation  (4.13)%  (13.16)%  (5.57)%  (14.46)%
                 
Net investment loss before Incentive Allocation  (3.53)%  (3.32)%  (4.98)%  (4.73)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Net investment loss after Incentive Allocation  (3.53)%  (3.33)%  (4.98)%  (4.74)%
                 
Total expenses before Incentive Allocation  3.89%  3.93%  5.33%  5.45%
Incentive Allocation  0.00   0.01   0.00   0.01 
Total expenses after Incentive Allocation  3.89%*  3.94%*  5.33%*  5.46%*
*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.25% of average members’ capital for 2012 and 0.48% of average members’ capital for 2011.
14

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)
6. Financial Highlights (continued)
  Systematic Strategies Portfolio 
  Class 0  Class 2 
  2013  2012  2013  2012 
             
Total return before Incentive Allocation  9.75%  1.19%  9.23%  0.69%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  9.75%  1.19%  9.23%  0.69%
                 
Net investment loss before Incentive Allocation  (0.88)%  (1.13)%  (1.36)%  (1.64)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (0.88)%  (1.13)%  (1.36)%  (1.64)%
                 
Total expenses before Incentive Allocation  0.90%  1.27%  1.40%  1.78%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  0.90%  1.27%  1.40%  1.78%
 
Total return is calculated for Class 0 and Class 2 Units taken as a whole and has not been annualized.whole. Total return is calculated as the change in total members’ capital adjusted for subscriptions or redemptions during the period.period and have not been annualized. 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 net amounts allocated from the GAIT Funds. These ratios have not been annualized. 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 for Class 0 and Class 2 Units of the Fund for the three and nine month periods ended September 30, 2012March 31, 2013 and 2011.2012.
 
7. Subsequent Events
 
The Fund had subscriptions of approximately $1.4$2.7 million and redemptions of approximately $8.1$4.2 million through November 14, 2012,May 15, 2013, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.
 
 
12

Graham Alternative Investment Trading LLC

Statements of Financial Condition

  
March 31, 2013
(Unaudited)
  
December 31, 2012
(Audited)
 
Assets      
Investments in Master Funds, at fair value $49,660,422  $47,870,899 
Investment in Graham Cash Assets LLC, at fair value  208,557,050   241,839,538 
Accrued commission reimbursements     165,510 
Receivable from Master Funds  2,853   1,856 
Other receivable  218,078    
Total assets $258,438,403  $289,877,803 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $12,079,330  $23,262,309 
Accrued advisory fees  345,676   489,673 
Accrued sponsor fees  216,714   244,837 
Accrued brokerage fees     568,525 
Accrued professional fees  362,895    
Accrued administrator's fees  25,799    
Payable to Master Funds  6,543   6,476 
Total liabilities  13,036,957   24,571,820 
         
Members’ capital:        
Class 0 Units (1,639,090.018 and 1,922,696.211 units issued and outstanding at $122.47 and $114.88 per unit, respectively)  200,731,401   220,876,439 
Class 2 Units (457,262.490 and 483,129.319 units issued and outstanding at $95.80 and $90.29 per unit, respectively)  43,804,327   43,623,249 
Class M Units (4,671.470 and 4,671.470 units issued and outstanding at $185.32 and $172.60 per unit, respectively)  865,718   806,295 
Total members’ capital  245,401,446   265,305,983 
Total liabilities and members’ capital $258,438,403  $289,877,803 

See accompanying notes.
13

Graham Alternative Investment Trading LLC

Condensed Schedules of Investments

  
March 31, 2013
(Unaudited)
  
December 31, 2012
(Audited)
 
Description Fair Value  
Percentage of
Members’
Capital
  Fair Value  
Percentage of
Members’
Capital
 
             
Investments in Master Funds, at fair value            
Graham Commodity Strategies LLC $12,122,243   4.94% $16,324,504   6.15%
Graham Global Monetary Policy LLC  12,160,765   4.96%  7,258,710   2.74%
Graham K4D Trading Ltd.  25,377,414   10.34%  24,287,685   9.15%
Total investments in Master Funds $49,660,422   20.24% $47,870,899   18.04%

See accompanying notes.
14

Graham Alternative Investment Trading LLC

Statements of Operations and Managing Member Allocation

  
Three Months Ended
March 31,
 
  
2013
(Unaudited)
  
2012
(Unaudited)
 
Net gain allocated from investments in Master Funds:      
Net realized gain on investments $20,273,648  $20,614,297 
Net decrease in unrealized appreciation on investments  (860,950)  (5,597,814)
Brokerage commissions and fees  (477,561)  (1,091,330)
Net gain allocated from investments in Master Funds  18,935,137   13,925,153 
         
Net investment loss allocated from investments in Master Funds  (5,957)  (35,948)
         
Investment income:        
Interest income  124,162   217,632 
         
Expenses:        
Advisory fees  1,109,892   2,089,945 
Sponsor fees  690,123   1,044,972 
Brokerage fees     2,423,310 
Administrator’s fees  82,841    
Professional fees and other  389,274   3,320 
Commission reimbursements     (1,091,329)
Total expenses  2,272,130   4,470,218 
Net investment loss of the Fund  (2,147,968)  (4,252,586)
         
Net income  16,781,212   9,636,619 
         
Incentive allocation      
         
Net income available for pro-rata allocation to all members $16,781,212  $9,636,619 

See accompanying notes.
15

 
Graham Alternative Investment Trading LLC

StaStatements tements of Financial ConditionChanges in Members’ Capital

  
September 30, 2012
(Unaudited)
  
December 31, 2011
(Audited)
 
Assets      
Investments in Master Funds, at fair value $61,293,129  $87,903,988 
Investment in Graham Cash Assets LLC, at fair value  285,289,620   344,807,748 
Accrued commission reimbursements  223,322   331,720 
Receivable from Master Funds  5,875   18,287 
Total assets $346,811,946  $433,061,743 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $24,824,231  $13,947,652 
Accrued brokerage fees  653,432   852,551 
Accrued advisory fees  567,211   734,211 
Accrued sponsor fees  283,606   367,106 
Payable to Master Funds  2,512   2,155 
Total liabilities  26,330,992   15,903,675 
         
Members’ capital:        
Class 0 Units (2,297,034.613 and 2,827,795.124 units issued and outstanding at $116.90 and $123.17 per unit, respectively)  268,531,769   348,287,779 
Class 2 Units (553,749.493 and 688,937.679 units issued and outstanding at $92.35 and $98.77 per unit, respectively)  51,138,946   68,048,075 
Class M Units (4,671.470 and 4,671.470 units issued and outstanding at $173.44 and $176.01 per unit, respectively)  810,239   822,214 
Total members’ capital  320,480,954   417,158,068 
Total liabilities and members’ capital $346,811,946  $433,061,743 
For the three months ended March 31, 2013 (unaudited) and 2012 (unaudited)

  Class 0  Class 2  Class M Total 
  Units Capital  Units Capital  Units Capital Capital 
                  
Members’ capital, December 31, 2011  2,827,795.124  $348,287,779   688,937.679  $68,048,075   4,671.470  $822,214  $417,158,068 
Subscriptions  31,134.715   3,853,255   13,203.211   1,312,894         5,166,149 
Redemptions  (151,186.869)  (18,947,613)  (72,757.539)  (7,261,223)        (26,208,836)
Incentive allocation                     
Net income     8,357,220      1,248,999      30,400   9,636,619 
Members’ capital, March 31, 2012  2,707,742.970  $341,550,641   629,383.351  $63,348,745   4,671.470  $852,614  $405,752,000 
                             
  Class 0  Class 2  Class M Total 
  Units Capital  Units Capital  Units Capital Capital 
                             
Members’ capital, December 31, 2012  1,922,696.211  $220,876,439   483,129.319  $43,623,249   4,671.470  $806,295  $265,305,983 
Subscriptions  24,271.848   2,870,000   9,833.882   926,793         3,796,793 
Redemptions  (307,878.041)  (37,111,245)  (35,700.711)  (3,371,297)        (40,482,542)
Incentive allocation                     
Net income     14,096,207      2,625,582      59,423   16,781,212 
Members’ capital, March 31, 2013  1,639,090.018  $200,731,401   457,262.490  $43,804,327   4,671.470  $865,718  $245,401,446 

See accompanying notes.
 
 
16

 
Graham Alternative Investment Trading LLC

Condensed SchedulesStatements of InvestmentsCash Flows

  
September 30, 2012
(Unaudited)
  
December 31, 2011
(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 $17,490,643   5.46% $19,823,897   4.75%
Graham Energy Focus LLC  -   0.00%  4,391,910   1.05%
Graham Fed Policy Ltd.  -   0.00%  5,956,632   1.43%
Graham Global Monetary Policy LLC  9,631,317   3.01%  10,693,175   2.56%
Graham K4D Trading Ltd.  34,171,169   10.66%  45,101,309   10.82%
Graham Macro Directional LLC  -   0.00%  1,937,065   0.46%
Total investments in Master Funds $61,293,129   19.13% $87,903,988   21.07%
  
Three Months Ended
March 31,
 
  
2013
(Unaudited)
  
2012
(Unaudited)
 
Cash flows provided by operating activities      
Net income $16,781,212  $9,636,619 
Adjustments to reconcile net income to net cash provided by operating activities:        
Net income allocated from investments in Master Funds  (18,929,180)  (13,889,205)
Net income allocated from investment in Graham Cash Assets LLC  (124,162)  (217,632)
Proceeds from sale of investments in Master Funds  81,395,633   188,533,634 
Proceeds from sale of investments in Graham Cash Assets LLC  95,351,740   164,479,188 
Investments in Master Funds  (64,256,906)  (182,364,309)
Investments in Graham Cash Assets LLC  (61,945,090)  (141,756,832)
Changes in assets and liabilities:        
Accrued commission reimbursements  165,510   (7,878)
Other receivable  (218,078)  - 
Accrued advisory fees  (143,997)  (27,090)
Accrued sponsor fees  (28,123)  (13,545)
Accrued brokerage fees  (568,525)  (35,730)
Accrued professional fees  362,895   - 
Accrued administrator's fees  25,799   - 
Net cash provided by operating activities  47,868,728   24,337,220 
         
Cash flows used in financing activities        
Subscriptions  3,796,793   5,166,149 
Redemptions  (51,665,521)  (29,503,369)
Net cash used in financing activities  (47,868,728)  (24,337,220)
         
Net change in cash and cash equivalents  -   - 
         
Cash and cash equivalents, beginning of period  -   - 
Cash and cash equivalents, end of period $-  $- 

See accompanying notes.
 
 
17

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements of Operations and Managing Member Allocation

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  
2012
(Unaudited)
  
2011
(Unaudited)
  
2012
(Unaudited)
  
2011
(Unaudited)
 
Net gain (loss) allocated from investments in Master Funds:            
Net realized gain on investments $1,038,332  $5,422,708  $9,935,223  $4,257,925 
Net decrease in unrealized appreciation on investments  (2,020,366)  (3,566,381)  (14,232,046)  (14,872,899)
Brokerage commissions and fees  (693,076)  (1,320,014)  (2,684,268)  (3,866,326)
Net gain (loss) allocated from investments in Master Funds  (1,675,110)  536,313   (6,981,091)  (14,481,300)
                 
Net investment loss allocated from investments in Master Funds  (8,036)  (62,904)  (45,702)  (119,491)
                 
Investment income:                
Interest income  185,718   439,886   598,677   1,453,597 
Total investment income  185,718   439,886   598,677   1,453,597 
                 
Expenses:                
Brokerage fees  2,090,971   3,014,313   6,762,197   8,769,947 
Advisory fees  1,813,258   2,616,830   5,847,390   7,598,949 
Sponsor fees  906,629   1,308,415   2,923,695   3,799,474 
Interest and other  19,923   4,970   27,488   23,474 
Commission reimbursements  (693,076)  (1,320,014)  (2,684,268)  (3,866,326)
Total expenses  4,137,705   5,624,514   12,876,502   16,325,518 
Net investment loss of the Fund  (3,951,987)  (5,184,628)  (12,277,825)  (14,871,921)
                 
Net loss  (5,635,133)  (4,711,219)  (19,304,618)  (29,472,712)
                 
Incentive allocation  -   -   -   (51,877)
                 
Net loss available for pro-rata allocation to all members $(5,635,133) $(4,711,219) $(19,304,618) $(29,524,589)

See accompanying notes.
18

Graham Alternative Investment Trading LLC

Statements of Changes in Members’ Capital

For the nine months ended September 30, 2012 (unaudited) and 2011 (unaudited)

  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 
  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                             
Members’ capital, December 31, 2011  2,827,795.124  $348,287,779   688,937.679  $68,048,075   4,671.470  $822,214  $417,158,068 
Subscriptions  145,451.826   17,940,683   47,476.248   4,649,394         22,590,077 
Redemptions  (676,212.337)  (82,069,164)  (182,664.434)  (17,893,409)        (99,962,573)
Incentive allocation                     
Net loss     (15,627,529)     (3,665,114)     (11,975)  (19,304,618)
Members’ capital, September 30, 2012  2,297,034.613  $268,531,769   553,749.493  $51,138,946   4,671.470  $810,239  $320,480,954 

See accompanying notes.
19

Graham Alternative Investment Trading LLC

Statements of Cash Flows

  
Nine Months Ended
September 30,
 
  
2012
(Unaudited)
  
2011
(Unaudited)
 
Cash flows provided by (used in) operating activities      
Net loss $(19,304,618) $(29,472,712)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Net loss allocated from investments in Master Funds  7,026,793   14,600,791 
Net income allocated from investment in Graham Cash Assets LLC  (598,677)  (1,453,597)
Proceeds from sale of investments in Master Funds  476,843,495   613,324,164 
Proceeds from sale of investments in Graham Cash Assets LLC  442,227,109   477,724,559 
Investments in Master Funds  (457,246,660)  (666,147,665)
Investments in Graham Cash Assets LLC  (382,110,304)  (497,643,390)
Changes in assets and liabilities:        
Accrued commission reimbursements  108,398   (217,827)
Accrued brokerage fees  (199,119)  75,611 
Accrued advisory fees  (167,000)  73,559 
Accrued sponsor fees  (83,500)  36,779 
Net cash provided by (used in) operating activities  66,495,917   (89,099,728)
         
Cash flows (used in) provided by financing activities        
Subscriptions  22,590,077   123,410,868 
Redemptions  (89,085,994)  (34,311,140)
Net cash (used in) provided by financing activities  (66,495,917)  89,099,728 
         
Net change in cash and cash equivalents  -   - 
         
Cash and cash equivalents, beginning of period  -   - 
Cash and cash equivalents, end of period $-   - 
Supplemental non cash operating activities
Investments and proceeds related to investments in Master Funds consolidated into Graham Commodity Strategies LLC not included above:  $1,362,929 (See Note 2)
See accompanying notes.
20

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements

September 30, 2012March 31, 2013
 
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 Managing Member is also registered as a Registered Investment Advisor with the Securities and Exchange Commission.
 
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 derivative instruments such as currency forward and futures contracts; bond, interest rate, and index futures contracts; commodity forward and futures contracts, and options and swaps thereon traded on U.S. and foreign exchanges, as well as over-the-counter.
 
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 Exchange (“Eurex”), the Hong Kong Exchanges and Clearing Ltd. (“HKEX”), the Intercontinental Exchange (“ICE”), the London Metal Exchange (“LME”), the Montreal Exchange (“ME”), the Mercado de Futuros Financieros (“MEFF”), the NYSE Euronext (“Euronext”), the Osaka Securities Exchange (“OSE”), the Singapore Exchange (“SGX”), the South African Exchange (“SAFEX”), the Sydney Futures Exchange Ltd. (“SFE”), the Tokyo Commodity Exchange (“TOCOM”), the Tokyo Financial Exchange (“TFX”), and the Tokyo Stock Exchange (“TSE”).
Graham Alternative Investment Fund I LLC, Graham Alternative Investment Fund II LLC, and Graham Alternative Investment III Ltd. (collectively the Feeder Funds) are the primary investors of GAIT.
 
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.
 
21

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
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 values. 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.
 
18

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Investments in Master Funds (continued)
During the periodyear ended September 30,December 31, 2012 certain Master Funds in which GAIT invested consolidated their assets under Graham Commodity Strategies LLC, and then ceased operations.operations and were dissolved. The amount of assets that were transferred in-kind in connection with this consolidation totals $1,362,929. The dates of the consolidationconsolidations and dissolutions were as follows:
 
Master FundConsolidation DateDissolution Date
Graham Fed Policy Ltd.May 29, 2012  October 23, 2012
Graham Energy Fundamental LLCMay 29, 2012October 1, 2012
Graham Macro Directional LLCMay 30, 2012October 1, 2012
Graham Macro Technical Ltd.May 30, 2012
Graham Macro Data Driven LLCMay 31,  October 23, 2012
 
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. GAIT reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. U.S. GAAP uses a three-level hierarchy for fair value measurement based on the activeness of the market and 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.

22

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Fair Value (continued)
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”Cash Assets”) have been classified as Level 2. These investments are discussed in Notes 3 and 4. The Master Funds record all of their derivative financial instruments at fair value, which is derived in accordance with U.S. GAAP. There were no Level 3 assets or liabilities held at any point during the ninethree months ended September 30, 2012March 31, 2013 or the twelve months ended December 31, 20112012 by GAIT, the Master Funds, or GCA,Cash Assets, and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized on the actual date of the event or change in circumstances that cause the transfer.
19

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, 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.
 
Unrealized gains and losses from derivative financial 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.

23

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Futures Contracts (continued)
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 exchanges’ clearing house 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.
20


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
Derivative Instruments (continued)
 
Forward Contracts
 
The Master Funds enter into foreign currency forward contracts in an attempt to take advantage of changes in exchange rates. Forward currency transactions are contracts or agreements for delivery of specific currencies 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. Changes in fair value of each forward contract are recognized as unrealized gains or losses.
 
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. 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 any 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.

24

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Swap Contracts (continued)
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 reference instrument. Changes in fair value of each swap are recognized as unrealized gains or losses. The Master Funds record realized gains or losses when a swap contract is terminated. Interest is calculated and accrued throughout the life of each swap. Payments received at the end of each reset period are recorded against such accruals.

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.
21

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Derivative Instruments (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 Funds is the unrealized gains 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.
 
Recent Accounting Pronouncements

In December 2011, the FASB issued Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU No. 2011-11”). The amendments in ASU No. 2011-11 affect all entities that have financial instruments that are either offset or are subject to an enforceable master netting arrangement or similar agreement in accordance with authoritative guidance under U.S. GAAP. Entities will be required to disclose both gross information and net information about instruments and transactions eligible for offsetting or subject to an agreement similar to a master netting arrangement in the statement of financial position, to enable users of its financial statements to understand the effect of those arrangements on its financial position. The disclosure is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Manager of the Fund is evaluating the impact that the adoption of ASU No. 2011-11 will have on the Fund’s financial statements.
25

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
Indemnifications
 
In the normal course of business, the Master Funds, GCA,Cash Assets, and GAIT enter into contracts that contain a variety of indemnifications. Such contracts may include those by GCACash Assets and the Master Funds with their 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.
 
22

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds
 
As of September 30, 2012March 31, 2013 and December 31, 2011,2012, 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 MasterGlobal Macro Funds.” The number of Master Funds included for the period 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.
 
September 30, 2012 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Loss
 (three months
then ended)
  
Net Loss
 (nine months
then ended)
 
             
Graham K4D Trading Ltd. –  (a)  10.66% $34,171,169  $2,483,427  $(603,781)
Graham Commodity Strategies LLC – (c)  5.46%  17,490,643   (5,745,948)  (12,934,428)
Other Master Funds (6) –  (b) (c) (d)  3.01%  9,631,317   1,579,375   6,511,416 
   19.13% $61,293,129  $(1,683,146) $(7,026,793)
                 
December 31, 2011       
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Gain
(three months ended
September 30, 2011)
  
Net Loss (nine
months ended
September 30, 2011)
 
                 
Graham K4D Trading Ltd. –  (a)  10.82% $45,101,309  $(16,837,697) $(33,582,747)
Other Master Funds (8) –  (b) (c) (d) (e)  10.25%  42,802,679   17,311,106   18,981,956 
   21.07% $87,903,988  $473,409  $(14,600,791)
March 31, 2013 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Income
 (three months
then ended)
 
          
Systematic Macro Funds         
Graham K4D Trading Ltd. 10.34%  $25,377,414  $13,334,035 
            
Global Macro Funds           
Other Global Macro Funds (2)   9.90%   24,283,008   5,595,145 
  20.24%  $49,660,422  $18,929,180 


December 31, 2012    
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Income
(three months ended
March 31, 2012)
 
          
Systematic Macro Funds         
Graham K4D Trading Ltd.   9.15%  $24,287,685  $5,591,898 
            
Global Macro Funds           
Graham Commodity Strategies LLC   6.15%   16,324,504   9,902,476 
Other Global Macro Funds (6)   2.74%   7,258,710   (1,605,169)
  18.04%  $47,870,899  $13,889,205 
(a) – Systematic Macro(b) – Fixed Income(c) – Global Macro(d) – Energy Related(e) – Commodities

 
2623


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, 2012:March 31, 2013:
 
 
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham
Global Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham
Global Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
 
Assets:                  
Due from brokers $337,885,653  $96,842,950  $299,033,271  $93,430,570  $174,649,891  $45,625,595 
Options, at fair value  4,742,335   -   - 
Fixed income securities, at fair value  49,994,385   -   124,985,964 
Derivative financial instruments, at fair value  3,792,869   11,949,850   -   22,809,550   -   41,487,936 
CME Membership, at fair value  2,296,500   -   865,729 
Subscriptions receivable  13,318   119   5,647 
CME membership, at fair value  2,365,700   -   855,250 
Dividends receivable  13,500   -   - 
Other assets  -   118   - 
Total assets  348,730,675   108,792,919   299,904,647   168,613,705   174,650,009   212,954,745 
                        
Liabilities:                        
Derivative financial instruments, at fair value  61,439,760   251,642   44,441,143   8,713,867   8,259,984   11,277,718 
Due to brokers  124,555,444   426,560   -   3,095,181   -   - 
Options, at fair value  -   9,997,110   - 
Redemptions payable  13,318   -   4,218 
Total liabilities  186,008,522   10,675,312   44,445,361   11,809,048   8,259,984   11,277,718 
Net assets $162,722,153  $98,117,607  $255,459,286  $156,804,657  $166,390,025  $201,677,027 
                        
Percentage of Master Fund held by GAIT  10.75%  9.82%  13.38%  7.73%  7.31%  12.58%
 
When multiple derivative contracts are held with the same counterparty, the Master Funds will net the contracts in an asset position with the contracts in a liability position when covered by a master netting agreement or similar arrangements, for presentation in the statements of financial condition. The table below displays the amounts by which the fair values of both derivative assets and derivative liabilities were reduced within the Master Funds’ statements of financial condition as a result of this netting. Collateral pledged represents the further amounts by which derivative assets and liabilities could have been reduced on the statements of financial condition. The Master Funds elect to display the amounts in due from (to) brokers on the statements of financial condition.
Description 
Gross
Amount
  
Gross Amount
Offset in the
Statements of
Financial Condition
  
Net Amount
Presented in the
Statements of
Financial Condition
  
Collateral
Pledged
  Net Amount 
                
Graham Commodity Strategies LLC               
Derivative assets $220,490,352  $(197,680,802) $22,809,550  $(3,095,181) $19,714,369 
Derivative liabilities  (206,394,669)  197,680,802   (8,713,867)  8,713,867    
  $14,095,683  $  $14,095,683  $5,618,686  $19,714,369 
                     
Graham Global Monetary Policy LLC                    
Derivative assets $41,388,389  $(41,388,389) $  $  $ 
Derivative liabilities  (49,648,373)  41,388,389   (8,259,984)  8,259,984    
  $(8,259,984) $  $(8,259,984) $8,259,984  $ 
                     
Graham K4D Trading Ltd.                    
Derivative assets $73,562,576  $(32,074,640) $41,487,936  $  $41,487,936 
Derivative liabilities  (43,352,358)  32,074,640   (11,277,718)  11,277,718    
  $30,210,218  $  $30,210,218  $11,277,718  $41,487,936 

 
2724

 
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, 2012.

Description 
Principal Amount /
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC         
Long contracts         
Bonds         
United States         
Treasury bill 12/06/12 $75,000,000  $74,990,031   46.08%
Total United States      74,990,031   46.08%
Total bonds *      74,990,031   46.08%
             
Futures            
Brent Crude November 2012 - March 2013  1,867   (564,860)  (0.35)%
Coffee December 2012  3,146   12,609,863   7.75%
Gasoil November 2012 - December 2012  2,635   2,494,950   1.53%
Heating Oil March 2013  1,456   (3,147,808)  (1.93)%
Natural Gas May 2013  3,137   12,081,900   7.42%
Natural Gas November 2012 - January 2014  16,130   39,625,520   24.35%
Nickel December 2012  3,741   16,777,014   10.31%
Wheat December 2013  3,491   9,119,988   5.60%
Wheat December 2012 - July 2013  7,277   8,341,788   5.13%
WTI Crude November 2013  2,000   (12,188,000)  (7.49)%
WTI Crude January 2014  2,000   (11,606,000)  (7.13)%
WTI Crude June 2014  4,000   (15,901,970)  (9.77)%
WTI Crude November 2012 - December 2012  19,589   3,323,770   2.04%
WTI Crude January 2013 - December 2014  2,073   (4,323,760)  (2.66)%
Zinc December 2012  160,068   11,849,545   7.28%
Other commodity      15,646,236   9.62%
Interest Rate      45,425   0.03%
U.S. Bond      407,427   0.25%
Foreign bond      1,912,266   1.18%
U.S. index      324,500   0.20%
Foreign index      (483,851)  (0.30)%
Total futures      86,343,943   53.06%
             
Swaps            
Natural Gas November 2012  30   33,150   0.02%
Other commodity      65,000   0.04%
Total swaps      98,150   0.06%
March 31, 2013:
 
*- The position is posted as collateral and is included in Due from broker on the Master Fund’s Statement of Financial Condition
Description 
Principal Amount /
Number of Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC         
Fixed income securities         
Bonds (cost $49,989,257)         
United States         
U.S. Treasury bill 0.00% due 06/13/2013 $50,000,000  $49,994,385   31.88%
Total United States      49,994,385   31.88%
Total bonds      49,994,385   31.88%
Total fixed income securities     $49,994,385   31.88%
             
Derivative financial instruments            
Long contracts            
Futures            
Copper May 2013  86  $(75,450)  (0.05)%
Copper June 2013  3,280   (10,337,104)  (6.59)%
Corn May 2013 – December 2013  8,051   (10,040,838)  (6.40)%
Lead June 2013  7,160   (11,378,133)  (7.26)%
Natural Gas May 2013 – April 2014  8,071   13,174,030   8.40%
Wheat July 2013  534   55,300   0.04%
Wheat December 2013  4,246   (19,394,100)  (12.37)%
Other Wheat May 2013 – December 2013  3,394   (6,423,388)  (4.10)%
WTI Crude May 2013 – December 2016  12,862   25,927,810   16.53%
Zinc June 2013  7,986   (8,244,293)  (5.26)%
Other commodity      (9,841,320)  (6.28)%
Foreign bond      1,716,916   1.09%
Foreign index      (458,335)  (0.29)%
Interest rate      541,433   0.35%
U.S. bond      590,999   0.38%
U.S. index      605,580   0.39%
Total futures      (33,580,893)  (21.42)%
             
Swaps            
Commodity      (317,650)  (0.20)%
Total swaps      (317,650)  (0.20)%
             
Forwards            
Foreign currency      1,132,921   0.72%
Total forwards      1,132,921   0.72%

 
2825

 
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, 2012.March 31, 2013:

Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Long contracts (continued)         
Forwards         
Foreign currency    $(6,047,681)  (3.72)%
Total forwards     (6,047,681)  (3.72)%
            
Options           
Natural Gas Futures Options January 2013-January 2015 Call $4.00 - $5.00  600   1,236,800   0.76%
Natural Gas Futures Options December 2012 Put $3.00  1,000   281,000   0.17%
Other commodity      1,576,000   0.97%
Interest Rate Futures      1,134,303   0.70%
Currency      2,327,184   1.42%
U.S. Bond      468,750   0.29%
Foreign Bond      64,255   0.04%
U.S. Index      2,612,500   1.61%
Total options      9,700,792   5.96%
Description 
Number of
Contracts
  Fair Value  
Percentage
of Net Assets
of Master
Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Long contracts (continued)         
Options (cost $91,615,243)         
U.S. dollar / Japanese Yen May 2013 Call $85.00  2  $14,576,964   9.30%
U.S. dollar / Japanese Yen May 2013 Call $87.00  1   11,525,668   7.35%
U.S. dollar / Japanese Yen May 2013 Call $89.00  1   8,623,775   5.50%
U.S. dollar / Japanese Yen May 2013 Call $94.00  2   9,940,786   6.34%
Other U.S. dollar / Japanese Yen April 2013 - August 2013 Call $90.00 - $100.00  15   23,809,825   15.18%
Other U.S. dollar / Japanese Yen March 2013 - April 2013 Put $93.75 - $94.00  2   1,535,276   0.98%
Other currency      18,457,243   11.77%
Commodity      311,000   0.20%
Interest rate      3,705,889   2.36%
U.S. bond      1,859,375   1.19%
U.S. index      750,000   0.48%
Total options      95,095,801   60.65%
             
Short contracts            
Futures            
Copper May 2013  (586)  524,688   0.33%
Copper June 2013  (3,205)  8,984,375   5.73%
Lead June 2013  (6,542)  11,078,565   7.07%
Natural Gas May 2013 – March 2014  (7,447)  (8,457,350)  (5.39)%
Wheat July 2013  (5,241)  22,688,913   14.46%
Other Wheat May 2013 – December 2013  (2,555)  2,976,575   1.90%
WTI Crude July 2013  (2,119)  (9,338,550)  (5.96)%
Other WTI Crude May 2013 – December 2015  (10,441)  (21,203,260)  (13.52)%
Zinc June 2013  (8,925)  9,735,976   6.21%
Other commodity      11,118,961   7.09%
Currency      (259,388)  (0.17)%
Foreign bond      (22,997)  (0.01)%
Foreign index      71,924   0.05%
Interest rate      (920,250)  (0.59)%
U.S. bond      (519,563)  (0.33)%
U.S. index      (375,780)  (0.24)%
Total futures      26,082,839   16.63%

 
2926

 
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, 2012.March 31, 2013:
Description 
Number of
Contracts
  Fair Value  
Percentage
of Net Assets
of Master
Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Short contracts (continued)         
Swaps         
Commodity    $1,850,000   1.18%
Total swaps     1,850,000   1.18%
            
Forwards           
Foreign currency     (6,289,929)  (4.01)%
Total forwards     (6,289,929)  (4.01)%
            
Options (cost $68,717,027)           
U.S. dollar / Japanese Yen May 2013 Call $85.00  (2)  (14,576,964)  (9.30)%
U.S. dollar / Japanese Yen May 2013 Call $87.00  (2)  (11,525,668)  (7.35)%
U.S. dollar / Japanese Yen May 2013 Call $89.00  (1)  (8,623,775)  (5.50)%
U.S. dollar / Japanese Yen May 2013 Call $94.00  (3)  (9,940,786)  (6.34)%
Other U.S. dollar / Japanese Yen April 2013 - August 2013 Call $90.00 - $105.00  (15)  (16,592,830)  (10.56)%
Other U.S. dollar / Japanese Yen April 2013 Put $93.00  (1)  (659,576)  (0.42)%
Other currency      (3,680,017)  (2.35)%
Interest rate      (2,784,040)  (1.78)%
U.S. bond      (1,093,750)  (0.70)%
U.S. index      (400,000)  (0.26)%
Total options      (69,877,406)  (44.56)%
Total derivative financial instruments     $14,095,683   8.99%

Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Short contracts         
Futures         
Coffee March 2013  (2,905) $(12,978,994)  (7.98)%
Coffee December 2012  (565)  (1,089,113)  (0.67)%
Brent Crude December 2012  (1,899)  (18,686,050)  (11.48)%
Brent Crude January 2013 – June 2013  (2,365)  (3,219,540)  (1.98)%
Gasoil October 2012 - September 2013  (4,278)  7,470,300   4.59%
Heating Oil November 2012 - January 2013  (7,102)  (10,202,006)  (6.27)%
Natural Gas January 2013  (4,228)  (9,491,650)  (5.83)%
Natural Gas April 2013  (5,876)  (18,504,190)  (11.37)%
Natural Gas October 2013  (2,779)  (9,103,920)  (5.59)%
Natural Gas November 2012 - December 2013  (6,572)  (17,962,730)  (11.03)%
Nickel December 2012  (4,065)  (22,254,273)  (13.68)%
Wheat July 2013  (5,708)  (18,958,350)  (11.65)%
Wheat December 2012  (3,433)  623,850   0.38%
Wheat December 2012 - May 2013  (4,295)  (932,675)  (0.57)%
WTI Crude January 2013  (9,266)  15,184,060   9.33%
WTI Crude March 2013  (50)  174,510   0.11%
WTI Crude November 2012 - December 2015  (19,888)  (13,632,110)  (8.38)%
Zinc December 2012  (14,108)  (8,360,017)  (5.14)%
Other commodity      (3,755,036)  (2.31)%
Currency      (111,570)  (0.07)%
U.S. index      31,700   0.02%
U.S. bond      114,625   0.07%
Foreign bond      (48,345)  (0.03)%
Total futures      (145,691,524)  (89.53)%
             
Swaps            
Commodity futures      (172,026)  (0.11)%
Total swaps      (172,026)  (0.11)%
             
Forwards            
Foreign currency      7,822,247   4.81%
Total forwards      7,822,247   4.81%
 
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, 2012.March 31, 2013:

Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Short contracts (continued)         
Options         
Natural Gas Futures Option November 2012 Put $2.75  (1,000) $(117,000)  (0.07)%
Natural Gas Futures Option January 2013 - January 2015 Call $4.50 - $5.50  (600)  (560,800)  (0.34)%
Other commodity      (472,000)  (0.29)%
Currency      (988,542)  (0.61)%
U.S. index      (1,975,000)  (1.21)%
U.S. Bond      (312,500)  (0.19)%
Foreign Bond      (25,702)  (0.02)%
Interest rate      (506,913)  (0.31)%
Total options      (4,958,457)  (3.04)%
             
Total     $22,085,475   13.57%
Description
Notional
Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Global Monetary Policy LLC       
Derivative financial instruments       
Long contracts       
Futures       
Commodity  $(345,600)  (0.21)%
Foreign bond   2,532,977   1.52%
Foreign index   2,697,007   1.63%
Interest rate   (731,250)  (0.44)%
U.S. bond   1,375   0.00%
U.S. index   199,650   0.12%
Total futures   4,354,159   2.62%
          
Forwards         
Foreign currency   7,107,495   4.27%
Total forwards   7,107,495   4.27%
          
Options (cost $3,484,579)         
Foreign currency   37,973   0.02%
Interest rate   328,125   0.20%
Total options   366,098   0.22%
          
Short contracts         
Futures         
Commodity   603,600   0.36%
Foreign bond   (1,613,144)  (0.97)%
Foreign index   (3,754,535)  (2.25)%
Interest rate   1,679,463   1.01%
U.S. bond   (2,208,688)  (1.33)%
U.S. index   (1,616,325)  (0.97)%
Total futures   (6,909,629)  (4.15)%
          
Forwards         
Foreign currency   (2,687,210)  (1.62)%
Total forwards   (2,687,210)  (1.62)%
          
Options (cost $12,934,391)         
Foreign currency   (10,319,022)  (6.20)%
Interest rate   (171,875)  (0.10)%
Total options   (10,490,897)  (6.30)%
Total derivative financial instruments  $(8,259,984)  (4.96)%

 
3128

 
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, 2012.March 31, 2013:
 
Description
Number of
Contracts / Notional
Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
  Principal Amount  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Global Monetary Policy LLC       
Graham K4D Trading Ltd.         
Fixed income securities         
Bonds (cost $124,973,143)         
United States         
U.S. Treasury bill 0.00% due 06/13/2013 $125,000,000  $124,985,964   61.97%
Total United States      124,985,964   61.97%
Total bonds      124,985,964   61.97%
Total fixed income securities     $124,985,964   61.97%
            
Derivative financial instruments            
Long contracts                   
Futures                   
Commodity     $(7,896,824)  (3.92)%
Currency      851,699   0.42%
Interest rate      (932,395)  (0.46)%
Foreign bond  $2,953,259   3.01%      19,685,680   9.76%
Commodity   245,570   0.25%
Foreign index      (2,546,292)  (1.26)%
U.S. bond      6,146,713   3.05%
U.S. index   73,750   0.08%      13,149,000   6.52%
Foreign index   (487,207)  (0.50)%
Total futures   2,785,372   2.84%      28,457,581   14.11%
                     
Forwards                     
Foreign currency   (6,634,314)  (6.76)%      1,016,425   0.50%
Total forwards   (6,634,314)  (6.76)%      1,016,425   0.50%
                     
Options         
Currency   2,682,163   2.73%
Total options   2,682,163   2.73%
         
Short contracts                     
Futures                     
Commodity      16,169,706   8.02%
Currency      140,392   0.07%
Interest rate      (31,761)  (0.02)%
Foreign bond      (1,683,088)  (0.83)%
Foreign index      176,922   0.09%
U.S. bond   156,250   0.16%      (1,485,323)  (0.74)%
Foreign bond   (1,932,287)  (1.97)%
Interest rate   (138,400)  (0.14)%
U.S. index      (247,924)  (0.12)%
Total futures   (1,914,437)  (1.95)%      13,038,924   6.47%
                     
Forwards                     
Euro / Swiss Franc November 2012CHF(1,098,071,175)  7,863,374   8.00%
Euro / Swiss Franc December 2012CHF(959,871,893)  6,884,271   7.02%
Other foreign currency   2,713,942   2.77%
Foreign currency      (12,302,712)  (6.10)%
Total forwards   17,461,587   17.79%      (12,302,712)  (6.10)%
         
Options         
EUR/CHF November 2012 - December 2012 Call EUR 1.20 – EUR 1.22(1,300,000,000)  (12,572,485)  (12.81)%
EUR/CHF October 2012 Put $1.20(200,000,000)  (106,788)  (0.11)%
Total options   (12,679,273)  (12.92)%
         
Total  $1,701,098   1.73%
Total derivative financial instruments     $30,210,218   14.98%

 
3229

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)
 
The following schedule displays the condensed schedule of investments for the Master Funds as of September 30, 2012.

Description Principal Amount  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Long contracts         
Bonds         
United States         
Treasury bill 11/23/12 $175,000,000  $174,981,321   68.50%
Total United States      174,981,321   68.50%
Total bonds *      174,981,321   68.50%
             
Futures            
U.S. bond      6,861,412   2.69%
Foreign bond      11,962,581   4.68%
U.S. index      3,335,419   1.31%
Foreign index      (12,174,169)  (4.78)%
Commodity      1,529,719   0.60%
Interest rate      1,318,819   0.52%
Currency      (340,477)  (0.13)%
Total futures      12,493,304   4.89%
             
Swaps            
Commodity futures      (1,120,153)  (0.44)%
Total swaps      (1,120,153)  (0.44)%
             
Forwards            
Foreign currency      1,077,464   0.42%
Total forwards      1,077,464   0.42%

*- The position is posted as collateral and is included in Due from broker on the Master Fund’s Statement of Financial Condition
33


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following schedule displays the condensed schedule of investments for the Master Funds as of September 30, 2012.
Description 
Number
of Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd. (continued)         
Short contracts         
Futures         
U.S. bond    $(363,669)  (0.14)%
Foreign bond     (1,807,422)  (0.71)%
U.S. index     20,780   0.01%
Foreign index     1,009,602   0.40%
Aluminum December 2012  (2,927)  (13,999,420)  (5.48)%
Copper December 2012  (1,087)  (15,653,292)  (6.13)%
Other commodity      (13,641,280)  (5.34)%
Interest rate      (212,880)  (0.08)%
Currency      56,581   0.02%
Total futures      (44,591,000)  (17.45)%
             
Swaps            
Commodity futures      231,193   0.09%
Total swaps      231,193   0.09%
             
Forwards            
Foreign currency      (12,531,951)  (4.91)%
Total forwards      (12,531,951)  (4.91)%
             
Total     $130,540,178   51.10%

34

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, 2012:March 31, 2013:
 
  
Graham
Commodity
Strategies LLC
  
Graham Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
 
Assets         
Level 1:         
U.S. bond futures $531,146  $156,250  $7,916,629 
Foreign bond futures  1,912,266   3,324,961   11,419,750 
U.S. index futures  473,320   73,750   4,359,540 
U.S. index futures options  2,612,500   -   - 
Foreign index futures  -   -   784,169 
Commodity futures  155,561,392   245,570   14,733,141 
Commodity futures options  3,093,800   -   - 
Commodity futures swaps  98,150   -   2,847,975 
Interest rate futures  45,425   -   1,301,144 
Interest rate futures options  1,667,308   -   - 
Currency futures  -   -   316,292 
Total Level 1  165,995,307   3,800,531   43,678,640 
             
Level 2:            
Foreign currency forwards  2,428,121   14,581,932   7,081,367 
Foreign currency options  2,327,184   2,682,163   - 
Treasury bills  74,990,031   -   174,981,321 
Total Level 2  79,745,336   17,264,095   182,062,688 
Total assets $245,740,643  $21,064,626  $225,741,328 
             
Liabilities            
Level 1:            
U.S. bond futures $(9,094) $-  $(1,418,886)
Foreign bond futures  (48,345)  (2,303,989)  (1,264,591)
Foreign index futures  (483,851)  (487,207)  (11,948,736)
U.S. index futures  (117,120)  -   (1,003,341)
U.S. index futures options  (1,975,000)  -   - 
Commodity futures  (217,101,150)  -   (56,497,414)
Commodity futures options  (1,149,800)  -   - 
Commodity futures swaps  (172,026)  -   (3,736,935)
Interest rate futures  -   (138,400)  (195,205)
Interest rate futures options  (845,115)  -   - 
Currency futures  (111,570)  -   (600,188)
Total Level 1  (222,013,071)  (2,929,596)  (76,665,296)
             
Level 2:            
Foreign currency forwards  (653,555)  (3,754,659)  (18,535,854)
Foreign currency options  (988,542)  (12,679,273)  - 
Total Level 2  (1,642,097)  (16,433,932)  (18,535,854)
Total liabilities $(223,655,168) $(19,363,528) $(95,201,150)
  
Graham
Commodity
Strategies LLC
  
Graham Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
 
Assets         
Level 1:         
Commodity futures $106,814,417  $983,800  $20,586,959 
Commodity futures options  311,000   -   - 
Commodity futures swaps  1,850,000   -   - 
Currency futures  -   -   1,260,054 
Equity securities  2,365,700   -   855,250 
Foreign bond futures  1,719,665   2,545,799   18,592,047 
Foreign index futures  75,136   2,861,349   9,609,819 
Interest rate futures  712,788   1,679,463   71,324 
Interest rate futures options  3,705,889   328,125   - 
U.S. bond futures  602,092   167,125   6,146,713 
U.S. bond futures options  1,859,375   -   - 
U.S. index futures  616,430   199,650   13,149,000 
U.S. index futures options  750,000   -   - 
Total Level 1  121,382,492   8,765,311   70,271,166 
             
Level 2:            
Fixed income securities  49,994,385   -   124,985,964 
Foreign currency forwards  13,213,676   33,304,178   5,380,832 
Foreign currency options  88,469,537   37,973   - 
Total Level 2  151,677,598   33,342,151   130,366,796 
Total assets $273,060,090  $42,107,462  $200,637,962 
Liabilities            
Level 1:            
Commodity futures $(115,283,010) $(725,800) $(12,314,077)
Commodity futures swaps  (317,650)  -   - 
Currency futures  (259,388)  -   (267,963)
Foreign bond futures  (25,746)  (1,625,966)  (589,455)
Foreign index futures  (461,547)  (3,918,877)  (11,979,189)
Interest rate futures  (1,091,605)  (731,250)  (1,035,480)
Interest rate futures options  (2,784,040)  (171,875)  - 
U.S. bond futures  (530,656)  (2,374,438)  (1,485,323)
U.S. bond futures options  (1,093,750)  -   - 
U.S. index futures  (386,630)  (1,616,325)  (247,924)
U.S. index futures options  (400,000)  -   - 
Total Level 1  (122,634,022)  (11,164,531)  (27,919,411)
             
Level 2:            
Foreign currency forwards  (18,370,684)  (28,883,893)  (16,667,119)
Foreign currency options  (65,599,616)  (10,319,022)  - 
Total Level 2  (83,970,300)  (39,202,915)  (16,667,119)
Total liabilities $(206,604,322) $(50,367,446) $(44,586,530)

 
3530

 
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 September 30, 2012March 31, 2013 categorized by primary underlying risk and is representative of the derivative positionsDerivative Instruments held by the Master Funds throughout the period. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on the Master Funds’ statementstatements of financial condition.
 
 Graham Commodity Strategies LLC  Graham Global Monetary Policy LLC  Graham Commodity Strategies 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 $7,419,518,251   107,321  $(7,431,229,139)  (108,134) $155,561,392  $(217,101,150) $63,860,400   360  $-   -  $245,570  $-  $4,516,766,981   70,286  $(4,571,551,601)  (66,777) $106,814,417  $(115,283,010)
Options  203,000,000   2,400   (211,500)  (2,400)  3,093,800   (1,149,800)  -   -   -   -   -   - 
Swaps  19,424,000   680   (20,865,000)  (650)  98,150   (172,026)  -   -   -   -   -   -   8,915,625   250   (43,187,500)  (1,250)  1,850,000   (317,650)
Options (a)  13,545,076   1,800   -   -   311,000   - 
  7,641,942,251   110,401   (7,452,305,639)  (111,184)  158,753,342   (218,422,976)  63,860,400   360   -   -   245,570   -   4,539,227,682   72,336   (4,614,739,101)  (68,027)  108,975,417   (115,600,660)
                                                                        
Equity price                                                                        
Futures  233,362,266   3,062   (155,462,785)  (2,184)  473,320   (600,971)  51,630,853   1,000   -   -   73,750   (487,207)  319,703,527   3,817   (73,448,589)  (1,426)  507,659   (664,270)
Options  334,375,000   4,500   (431,250,000)  (5,750)  2,612,500   (1,975,000)  -   -   -   -   -   - 
Options (a)  20,788,326   2,000   (38,792,612)  (2,000)  750,000   (400,000)
  567,737,266   7,562   (586,712,785)  (7,934)  3,085,820   (2,575,971)  51,630,853   1,000   -   -   73,750   (487,207)  340,491,853   5,817   (112,241,201)  (3,426)  1,257,659   (1,064,270)
                                                                        
Foreign currency exchange rate                                                Foreign currency exchange rate                     
Futures  -   -   (17,925,600)  (224)  -   (111,570)  -   -   -   -   -   -   -   -   (73,300,000)  (500)  -   (259,388)
Forwards  719,869,337   N/A   (718,094,775)  N/A   2,428,121   (653,555)  2,408,031,879   N/A   (2,397,204,607)  N/A   14,581,932   (3,754,659)  1,446,220   N/A   (6,603,228)  N/A   13,213,676   (18,370,684)
Options  975,000,000   7   (825,000,000)  (5)  2,327,184   (988,542)  1,650,000,000   10   (1,500,000,000)  (10)  2,682,163   (12,679,273)
Options (a)  1,772,334,519   59   (2,348,755,220)  (42)  88,469,537   (65,599,616)
  1,694,869,337   7   (1,561,020,375)  (229)  4,755,305   (1,753,667)  4,058,031,879   10   (3,897,204,607)  (10)  17,264,095   (16,433,932)  1,773,780,739   59   (2,428,658,448)  (542)  101,683,213   (84,229,688)
                                                                        
Interest rate                                                                        
Futures  1,646,780,129   11,880   (305,897,859)  (2,218)  2,488,837   (57,439)  282,880,121   1,990   (2,690,286,702)  (13,621)  3,481,211   (2,442,389)  2,617,417,246   14,040   (1,010,151,938)  (4,194)  3,008,799   (1,622,261)
Options  2,228,500,000   18,000   (3,067,062,500)  (15,000)  1,667,308   (845,115)  -   -   -   -   -   - 
Options (a)  2,648,257,934   33,000   (2,709,080,052)  (37,000)  5,565,264   (3,877,790)
  3,875,280,129   29,880   (3,372,960,359)  (17,218)  4,156,145   (902,554)  282,880,121   1,990   (2,690,286,702)  (13,621)  3,481,211   (2,442,389)  5,265,675,180   47,040   (3,719,231,990)  (41,194)  8,574,063   (5,500,051)
Total $13,779,828,983   147,850  $(12,972,999,158)  (136,565) $170,750,612  $(223,655,168) $4,456,403,253   3,360  $(6,587,491,309)  (13,631) $21,064,626  $(19,363,528) $11,919,175,454   125,252  $(10,874,870,740)  (113,189) $220,490,352  $(206,394,669)
                                                                        
(a) Notional amounts for options are based on the delta-adjusted positions.(a) Notional amounts for options are based on the delta-adjusted positions. 
                 
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $213,330,209                      $96,416,390 Collateral balances supporting all derivative positions              $140,329,774 
 
 
3631

 
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 September 30, 2012March 31, 2013 categorized by primary underlying risk and is representative of the derivative positionsDerivative Instruments held by the Master Funds throughout the period. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on the Master Funds’ statementstatements of financial condition.
 
 Graham K4D Trading Ltd.  Graham Global Monetary Policy 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 $1,198,556,564   14,445  $(713,150,209)  (11,271) $14,733,141  $(56,497,414) $33,509,700   210  $(47,535,675)  (530) $983,800  $(725,800)
Swaps  99,585,522   2,240   (5,016,150)  (142)  2,847,975   (3,736,935)
  1,298,142,086   16,685   (718,166,359)  (11,413)  17,581,116   (60,234,349)  33,509,700   210   (47,535,675)  (530)  983,800   (725,800)
                                                
Equity price                                                
Futures  1,540,721,894   20,511   (67,010,421)  (630)  5,143,709   (12,952,077)  143,543,838   1,210   (311,994,347)  (4,688)  2,861,349   (5,335,552)
  1,540,721,894   20,511   (67,010,421)  (630)  5,143,709   (12,952,077)  143,543,838   1,210   (311,994,347)  (4,688)  2,861,349   (5,335,552)
                                                
Foreign currency exchange rate                        Foreign currency exchange rate                     
Futures  244,905,230   2,329   (43,730,800)  (272)  316,292   (600,188)
Forwards  893,770,434   N/A   (905,224,921)  N/A   7,081,367   (18,535,854)  15,832,896   N/A   (11,412,611)  N/A   33,304,178   (28,883,893)
Options (a)  366,219,351   15   (484,826,175)  (21)  37,971   (10,319,020)
  1,138,675,664   2,329   (948,955,721)  (272)  7,397,659   (19,136,042)  382,052,247   15   (496,238,786)  (21)  33,342,149   (39,202,913)
                                                
Interest rate                                                
Futures  15,754,946,513   77,089   (529,612,076)  (1,744)  20,637,523   (2,878,682)  3,944,598,156   16,140   (4,478,152,012)  (21,072)  3,872,966   (4,212,233)
Options (a)  174,418,681   7,500   (312,555,660)  (7,500)  328,125   (171,875)
  15,754,946,513   77,089   (529,612,076)  (1,744)  20,637,523   (2,878,682)  4,119,016,837   23,640   (4,790,707,672)  (28,572)  4,201,091   (4,384,108)
Total $19,732,486,157   116,614  $(2,263,744,577)  (14,059) $50,760,007  $(95,201,150) $4,678,122,622   25,075  $(5,646,476,480)  (33,811) $41,388,389  $(49,648,373)
                                                
(a) Notional amounts for options are based on the delta-adjusted positions.(a) Notional amounts for options are based on the delta-adjusted positions. 
                 
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions              $299,033,271 Collateral balances supporting all derivative positions              $174,649,891 

 
3732

 
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 nine month periods ended September 30, 2012:
  
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham
Energy
Focus LLC*
(Delaware)
  
Graham Energy
Fundamental
LLC **
(Delaware)
  
Graham Fed
Policy Ltd. **
(BVI)
  
Graham Global
Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham Macro
Directional
LLC ***
(Delaware)
  
Graham Macro
Technical
Ltd. ***
(BVI)
 
    
  Three Months Ended September 30, 2012 
Net investment loss $(10,991) $-  $-  $-  $(21,003) $(6,308) $-  $- 
                                 
Net realized gain (loss) on investments  (81,819,610)  -   -   -   11,407,726   71,425,119   -   - 
Net increase (decrease) in unrealized appreciation on investments  34,454,698   -   -   -   5,221,110   (56,755,770)  -   - 
Brokerage commissions and fees  (4,743,379)  -   -   -   (592,033)  (727,408)  -   - 
Net gain (loss) on investments  (52,108,291)  -   -   -   16,036,803   13,941,941   -   - 
Net income (loss) $(52,119,282) $-  $-  $-  $16,015,800  $13,935,633  $-  $- 
                                 
  Nine Months Ended September 30, 2012 
Net investment income (loss) $178,917  $6,738  $(154) $(1,576) $(258,182) $(251,276) $(1,941) $(2,653)
                                 
Net realized gain (loss) on investments  (37,980,662)  (3,769,417)  699,173   5,613,230   20,042,369   66,459,854   25,666,911   1,923,109 
Net increase (decrease) in unrealized appreciation on investments  (63,711,065)  5,355,406   763,033   (6,791,394)  3,436,812   (72,542,140)  14,493,872   (56,547)
Brokerage commissions and fees  (13,753,662)  (205,978)  (520,725)  (252,116)  (2,154,822)  (3,683,095)  (411,391)  (117,463)
Net gain (loss) on investments  (115,445,389)  1,380,011   941,481   (1,430,280)  21,324,359   (9,765,381)  39,749,392   1,749,099 
Net income (loss) $(115,266,472) $1,386,749  $941,327  $(1,431,856) $21,066,177  $(10,016,657) $39,747,451  $1,746,446 

* For the period from January 1, 2012 to February 29, 2012 (date of dissolution)
** For the period from January 1, 2012 to May 29, 2012 (date of dissolution)
*** For the period from January 1, 2012 to May 30, 2012 (date of dissolution)
38

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 realized gain (loss) and net increase (decrease) in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the three month period ended September 30, 2012:
  
Graham
Commodity
Strategies
LLC
  
Graham
Energy
Focus LLC
  
Graham
Energy
Fundamental
LLC
  
Graham
Fed Policy
Ltd.
  
Graham
Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
  
Graham
Macro
Technical Ltd.
 
Commodity price                        
Futures $(23,903,897) $-  $-  $-  $(152,555) $(63,225,657) $-  $- 
Options  826,590   -   -   -   -   -   -   - 
Swaps  (912,810)  -   -   -   -   19,663,691   -   - 
   (23,990,117)  -   -   -   (152,555)  (43,561,966)  -   - 
Equity price                                
Futures  (2,584,375)  -   -   -   80,296   41,401,204   -   - 
CME Membership  150,840   -   -   -   -   (96,021)  -   - 
Options  (708,925)  -   -   -   -   -   -   - 
   (3,142,460)  -   -   -   80,296   41,305,183   -   - 
Foreign currency exchange rate                                
Futures  (143,330)  -   -   -   -   (3,214,982)  -   - 
Forwards  (22,494,300)  -   -   -   34,250,250   (9,449,834)  -   - 
Options  257,530   -   -   -   (11,369,942)  -   -   - 
   (22,380,100)  -   -   -   22,880,308   (12,664,816)  -   - 
Interest rate                                
Futures  2,354,473   -   -   -   (6,556,382)  29,557,675   -   - 
Options  (224,292)  -   -   -   377,169   -   -   - 
Treasury bills  17,584   -   -   -   -   33,273   -   - 
   2,147,765   -   -   -   (6,179,213)  29,590,948   -   - 
Total $(47,364,912) $-  $-  $-  $16,628,836  $14,669,349  $-  $- 

39

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 realized gain (loss) and net increase (decrease) in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the nine month period ended September 30, 2012:
  
Graham
Commodity
Strategies LLC
  
Graham
Energy Focus
LLC
  
Graham
Energy
Fundamental
LLC
  
Graham Fed
Policy Ltd.
  
Graham
Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
  
Graham
Macro
Technical Ltd.
 
Commodity price                        
Futures $(36,854,995) $12,682,853  $1,464,936  $-  $1,189,567  $(81,607,114) $(865,110) $174,280 
Options  1,356,730   789,330   (26,230)  -   -   -   -   3,050 
Swaps  1,347,557   (11,744,944)  23,500   -   -   14,841,875   -   - 
   (34,150,708)  1,727,239   1,462,206   -   1,189,567   (66,765,239)  (865,110)  177,330 
Equity price                                
Futures  (9,868,887)  (141,250)  -   17,313   4,426,845   45,742,293   1,981,489   754,753 
CME Membership  (1,420)  -   -   -   -   (178,371)  -   - 
Options  (798,925)  -   -   -   -   -   -   (248,800)
   (10,669,232)  (141,250)  -   17,313   4,426,845   45,563,922   1,981,489   505,953 
Foreign currency exchange rate                                
Futures  2,842,050   -   -   -   -   (17,885,349)  -   (25)
Forwards  (62,323,952)  -   -   -   23,654,065   (58,357,586)  33,756,168   1,033,665 
Options  (1,647,201)  -   -   -   (16,376,531)  -   1,335,000   375,203 
   (61,129,103)  -   -   -   7,277,534   (76,242,935)  35,091,168   1,408,843 
Interest rate                                
Futures  2,074,599   -   -   (4,431,351)  10,333,066   91,272,499   4,218,861   (144,332)
Options  2,155,022   -   -   3,235,874   252,169   -   (265,625)  (81,232)
Treasury bills  27,695   -   -   -   -   89,467   -   - 
   4,257,316   -   -   (1,195,477)  10,585,235   91,361,966   3,953,236   (225,564)
Total $(101,691,727) $1,585,989  $1,462,206  $(1,178,164) $23,479,181  $(6,082,286) $40,160,783  $1,866,562 
40

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, 2011:
  
Graham
Commodity
Strategies 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 $142,601,701  $29,432,093  $37,426,188  $73,168,865  $307,111,336  $12,363,794 
Options, at fair value  -   6,085,420   -   -   -   - 
Derivative financial instruments, at fair value  -   -   4,895,517   2,556,238   41,337,536   - 
CME Membership, at fair value  2,000   -   -   -   355,000   - 
Subscriptions receivable  5,925   1,048   882   40,815   34,651   2,311 
Total assets  142,609,626   35,518,561   42,322,587   75,765,918   348,838,523   12,366,105 
                         
Liabilities:                        
Options, at fair value  -   -   3,048,431   296,433   -   - 
Derivative financial instruments, at fair value  10,834,559   13,573,247   -   -   15,255,976   1,521,488 
Redemptions payable  5,925   1,048   1,024   40,370   34,651   2,311 
Total liabilities  10,840,484   13,574,295   3,049,455   336,803   15,290,627   1,523,799 
Net assets $131,769,142  $21,944,266  $39,273,132  $75,429,115  $333,547,896  $10,842,306 
                         
Percentage of Master Fund held by GAIT  15.04%  20.01%  15.17%  14.18%  13.52%  17.87%
41

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, 2011.

Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC         
Long contracts         
Futures         
Brent Crude February 2012-May 2012  5,558  $(1,566,650)  (1.19)%
Coffee May 2012-July 2012  1,865   (7,800,506)  (5.92)%
Corn July 2012  3,693   6,097,513   4.63%
Gasoline RBOB December 2012  750   (7,893,900)  (5.99)%
Other Gasoline RBOB February 2012  1,638   (93,072)  (0.07)%
Natural Gas February 2012-January 2013  6,254   (11,037,040)  (8.38)%
Wheat July 2012  2,504   (7,274,588)  (5.52)%
Wheat December 2012  888   (8,308,563)  (6.31)%
Other Wheat March 2012  710   (2,154,100)  (1.63)%
Other Wheat March 2012 - December 2012  1,674   3,218,225   2.44%
WTI Crude April 2012  8,991   36,997,150   28.08%
Other WTI Crude December 2012 - December 2013  3,523   6,861,280   5.21%
Other WTI Crude September 2013  1,000   (2,660,000)  (2.02)%
Other commodity      12,325,498   9.35%
Foreign currency      (39,300)  (0.03)%
U.S. index      (30,612)  (0.02)%
Total futures      16,641,335   12.63%
             
Swaps            
Wheat future May 2012  269   903,018   0.69%
Other commodity futures      (2,762,970)  (2.10)%
Total swaps      (1,859,952)  (1.41)%

42

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, 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) $(9,057,530)  (6.87)%
Other Brent Crude April 2012 - December 2013  (2,581)  (4,752,620)  (3.61)%
Coffee March 2012  (1,799)  (1,080,731)  (0.82)%
Corn December 2012  (1,074)  1,099,575   0.83%
Gasoil June 2012 - December 2012  (3,748)  (10,964,450)  (8.32)%
Natural Gas April 2012  (7,358)  12,529,350   9.51%
Other Natural Gas October 2012  (275)  2,387,340   1.81%
Wheat July 2012  (2,919)  23,443,525   17.79%
Other Wheat May 2012  (765)  (792,350)  (0.60)%
WTI Crude October 2012  (1,500)  (18,800,000)  (14.27)%
Other WTI Crude February 2012 - December 2014  (12,649)  (2,116,630)  (1.60)%
Other commodity      (9,868,200)  (7.49)%
U.S. index      (11,021)  (0.01)%
Total futures      (17,983,742)  (13.65)%
             
Swaps            
Wheat future March 2012  (1,539)  (6,067,775)  (4.60)%
Other Wheat future July 2012  (427)  (1,435,788)  (1.09)%
Other commodity futures      (128,637)  (0.10)%
Total swaps      (7,632,200)  (5.79)%
             
Total     $(10,834,559)  (8.22)%

43

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, 2011.

Description 
Number
of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Energy Focus LLC         
Long contracts         
Futures         
Henry Hub Penultimate March 2012  4,031  $(11,345,235)  (51.70)%
Henry Hub Penultimate April 2013  2,550   (4,180,875)  (19.05)%
Other Henry Hub Penultimate February 2012 - December 2012  5,156   (7,521,975)  (34.28)%
Natural Gas December 2012  1,083   (1,437,960)  (6.55)%
Natural Gas January 2013  2,083   (5,207,770)  (23.73)%
Other Natural Gas March 2013 - October 2013  200   (1,204,420)  (5.49)%
Other commodity      (25,000)  (0.12)%
Total futures      (30,923,235)  (140.92)%
             
Options            
Natural Gas EURO February 2012, $4.80 Put  100   1,810,600   8.25%
Natural Gas EURO March 2012, $4.80 Put  100   1,784,000   8.13%
Natural Gas EURO April 2012 - October 2012, $0.20 - $4.50 Put  850   5,012,500   22.84%
Total options      8,607,100   39.22%
             
Swaps            
Natural Gas February 2012  3,915   (11,572,885)  (52.74)%
Natural Gas March 2012  1,767   (6,214,880)  (28.32)%
Natural Gas April 2012  1,250   (1,615,525)  (7.36)%
Natural Gas May 2012  930   (1,610,140)  (7.34)%
Natural Gas June 2012  900   (1,443,450)  (6.58)%
Natural Gas July 2012  930   (1,349,740)  (6.15)%
Natural Gas August 2012  930   (1,273,015)  (5.80)%
Natural Gas September 2012  900   (1,216,200)  (5.54)%
Natural Gas November 2012  1,630   (1,596,325)  (7.27)%
Other Natural Gas January 2012 - November 2013  1,765   (916,000)  (4.18)%
Total swaps      (28,808,160)  (131.28)%

44

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2011.

Description 
Number
of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Energy Focus LLC (continued)         
Short contracts         
Futures         
Henry Hub Penultimate February 2012  (3,971) $11,724,378   53.43%
Henry Hub Penultimate October 2012  (2,124)  4,157,730   18.95%
Henry Hub Penultimate April 2012  (1,340)  1,845,850   8.41%
Other Henry Hub Penultimate June 2012 - September 2012  (612)  2,458,900   11.21%
Natural Gas March 2012  (1,709)  6,557,620   29.88%
Natural Gas April 2012  (1,318)  2,137,030   9.74%
Natural Gas May 2012  (197)  1,589,960   7.25%
Natural Gas June 2012  (188)  1,293,180   5.89%
Natural Gas October 2012  (1,011)  1,398,270   6.37%
Natural Gas November 2012  (1,355)  2,352,710   10.72%
Natural Gas April 2013  (696)  3,780,580   17.23%
Other Natural Gas February 2012 - November 2013  (703)  3,128,470   14.26%
Other commodity      95,180   0.43%
Total futures      42,519,858   193.77%
             
Options            
Natural Gas EURO February 2012 - December 2012, $4.00 - $6.50 Call  (3,100)  (769,600)  (3.51)%
Natural Gas EURO February 2012 - March 2012, $3.00 - $3.25 Put  (800)  (1,436,100)  (6.54)%
Other commodity      (315,980)  (1.44)%
Total options      (2,521,680)  (11.49)%
             
Swaps            
Natural Gas January 2013  (1,116)  1,752,508   7.99%
Natural Gas May 2012 - September 2012  (1,983)  1,910,892   8.70%
Other Natural Gas December 2013  (62)  (25,110)  (0.11)%
Total swaps      3,638,290   16.58%
             
Total     $(7,487,827)  (34.12)%

45

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, 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 June 2012  8,547  $2,324,519   5.92%
Other 30 Day Fed Fund January 2012 - December 2013  26,631   2,594,437   6.60%
Other 30 Day Fed Fund November 2012 - October 2013  1,598   (23,439)  (0.06)%
Total futures      4,895,517   12.46%
             
Options            
Interest rate futures      549,104   1.40%
Total options      549,104   1.40%
             
Short contracts            
Options            
Fed Fund futures February 2012 - June 2012, $99.88 Call  (12,650)  (2,304,872)  (5.87)%
Fed Fund futures January 2012 - June 2012, $99.75 - $99.88 Put  (25,162)  (1,255,163)  (3.19)%
Other interest rate futures      (37,500)  (0.10)%
Total options      (3,597,535)  (9.16)%
             
Total     $1,847,086   4.70%

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 December 31, 2011.
Description
Notional
Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Global Monetary Policy LLC       
Long contracts       
Futures       
Foreign bond  $298,460   0.40%
Total futures   298,460   0.40%
          
Options         
Foreign currency   339,824   0.45%
Total options   339,824   0.45%
          
Forwards         
Chinese Yuan / U.S. dollar January 2012 – December 2012CNY 3,296,537,500  4,745,926   6.29%
Other foreign currency   4,716,017   6.25%
Total forwards   9,461,943   12.54%
          
Short contracts         
Futures         
Interest rate   94,330   0.13%
Total futures   94,330   0.13%
          
Options         
Foreign currency   (636,257)  (0.84)%
Total options   (636,257)  (0.84)%
          
Forwards         
Chinese Yuan / U.S. dollar January 2012 – December 2012CNY (3,619,150,000)  (3,949,883)  (5.24)%
Other foreign currency   (3,348,612)  (4.44)%
Total forwards   (7,298,495)  (9.68)%
Total  $2,259,805   3.00%

47

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, 2011.
Description Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.      
Long contracts      
Futures      
U.S. bond $5,555,669   1.67%
Foreign bond  15,262,571   4.58%
U.S. index  2,281,203   0.68%
Foreign index  1,698,637   0.51%
Commodity  (255,745)  (0.08)%
Interest rate  903,752   0.27%
Currency  839,900   0.25%
Total futures  26,285,987   7.88%
         
Forwards        
Foreign currency  8,206,755   2.46%
Total forwards  8,206,755   2.46%
         
Short contracts        
Futures        
Foreign bond  (7,404)  (0.00)%
U.S. index  5,540   0.00%
Foreign index  (1,563,165)  (0.47)%
Commodity  615,434   0.18%
Interest rate  (1,288,252)  (0.38)%
Currency  337,837   0.10%
Total futures  (1,900,010)  (0.57)%
         
Swaps        
Commodity  (15,255,976)  (4.57)%
Total swaps  (15,255,976)  (4.57)%
         
Forwards        
Foreign currency  8,744,804   2.62%
Total forwards  8,744,804   2.62%
         
Total $26,081,560   7.82%

48

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, 2011.
DescriptionNotional Amount Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Macro Directional LLC       
Long contracts       
Futures       
Foreign bond  $(21,390)  (0.20)%
Total forwards   (21,390)  (0.20)%
          
Forwards         
Foreign currency   227,165   2.10%
Total forwards   227,165   2.10%
          
Short contracts         
Futures         
U.S. index   (22,500)  (0.21)%
Total futures   (22,500)  (0.21)%
          
Forwards         
Australian dollar / U.S. dollar 01/03/12AUD (40,000,000)  (555,000)  (5.12)%
Other foreign currency   (1,149,763)  (10.60)%
Total forwards   (1,704,763)  (15.72)%
          
Total  $(1,521,488)  (14.03)%

49

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, 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
 
Assets                  
Level 1:                  
U.S. bond futures $-  $-  $-  $-  $5,807,164  $- 
Foreign bond futures  -   -   -   385,999   15,262,571   - 
U.S. index futures  -   -   -   -   3,038,693   - 
Foreign index futures  -   -   -   -   1,954,287   - 
Commodity futures  121,643,778   42,519,858   -   -   15,602,465   - 
Commodity futures options  -   8,607,100   -   -   -   - 
Commodity futures swaps  2,117,443   3,663,400   -   -   -   - 
Interest rate futures  -   -   4,918,956   94,330   1,693,157   - 
Interest rate futures options  -   -   549,104   -   -   - 
Currency futures  -   -   -   -   1,406,611   - 
Total Level 1  123,761,221   54,790,358   5,468,060   480,329   44,764,948   - 
                         
Level 2:                        
Foreign currency forwards  -   -   -   8,341,253   21,958,196   37,206 
Foreign currency options  -   -   -   339,824   -   - 
Total Level 2  -   -   -   8,681,077   21,958,196   37,206 
Total assets $123,761,221  $54,790,358  $5,468,060  $9,161,406  $66,723,144  $37,206 
                         
Liabilities                        
Level 1:                        
U.S. bond futures $-  $-  $-  $-  $(251,495) $- 
Foreign bond futures  -   -   -   (87,539)  (7,404)  (21,390)
Foreign index futures  -   -   -   -   (1,818,815)  - 
U.S. index futures  (41,633)  -   -   -   (751,950)  (22,500)
Commodity futures  (122,905,252)  (30,923,235)  -   -   (15,242,776)  - 
Commodity futures options  -   (2,521,680)  -   -   -   - 
Commodity futures swaps  (11,609,595)  (28,833,270)  -   -   (15,255,976)  - 
Interest rate futures  -   -   (23,439)  -   (2,077,657)  - 
Interest rate futures options  -   -   (3,597,535)  -   -   - 
Currency futures  (39,300)  -   -   -   (228,874)  - 
Total Level 1  (134,595,780)  (62,278,185)  (3,620,974)  (87,539)  (35,634,947)  (43,890)
                         
Level 2:                        
Foreign currency forwards  -   -   -   (6,177,805)  (5,006,637)  (1,514,804)
Foreign currency options  -   -   -   (636,257)  -   - 
Total Level 2  -   -   -   (6,814,062)  (5,006,637)  (1,514,804)
Total liabilities $(134,595,780) $(62,278,185) $(3,620,974) $(6,901,601) $(40,641,584) $(1,558,694)
50

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 DecemberMarch 31, 20112013 categorized by primary underlying risk and is representative of the derivative positionsDerivative Instruments held by the Master Funds throughout the period. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on the Master Funds’ statementstatements of financial condition.
 
  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 $433,953,216   6,764  $(745,232,168)  (12,587) $20,586,959  $(12,314,077)
   433,953,216   6,764   (745,232,168)  (12,587)  20,586,959   (12,314,077)
                         
Equity price                        
Futures  1,603,347,336   21,498   (13,450,196)  (293)  22,510,895   (11,979,189)
   1,603,347,336   21,498   (13,450,196)  (293)  22,510,895   (11,979,189)
                         
Foreign currency exchange rate                     
Futures  241,477,410   2,794   (67,067,688)  (455)  1,260,054   (267,963)
Forwards  1,769,220   N/A   (13,055,508)  N/A   5,380,832   (16,667,119)
   243,246,630   2,794   (80,123,196)  (455)  6,640,886   (16,935,082)
                         
Interest rate                        
Futures  12,653,597,920   63,775   (181,044,311)  (1,092)  23,823,836   (2,124,010)
   12,653,597,920   63,775   (181,044,311)  (1,092)  23,823,836   (2,124,010)
Total $14,934,145,102   94,831  $(1,019,849,871)  (14,427) $73,562,576  $(43,352,358)
                         
Collateral balances supporting all derivative positions              $170,611,559 
  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 $5,222,568,696   73,089  $(5,055,686,350)  (73,848) $121,643,778  $(122,905,252) $231,604,970   15,138  $(297,888,138)  (15,304) $42,519,858  $(30,923,235)
Options  -   -   -   -   -   -   26,350,000   1,050   (112,935,000)  (4,022)  8,607,100   (2,521,680)
Swaps  176,282,548   5,469   (252,954,190)  (7,895)  2,117,443   (11,609,595)  119,063,430   14,917   (31,672,403)  (3,161)  3,663,400   (28,833,270)
   5,398,851,244   78,558   (5,308,640,540)  (81,743)  123,761,221   (134,514,847)  377,018,400   31,105   (442,495,541)  (22,487)  54,790,358   (62,278,185)
                                                 
Equity price                                                
Futures  42,835,500   684   (24,380,400)  (330)  -   (41,633)  -   -   -   -   -   - 
   42,835,500   684   (24,380,400)  (330)  -   (41,633)  -   -   -   -   -   - 
                                                 
Foreign currency exchange rate                                                
Futures  12,233,700   230   -   -   -   (39,300)  -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   -   -   -   -   -   - 
   12,233,700   230   -   -   -   (39,300)  -   -   -   -   -   - 
                                                 
Interest rate                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
   -   -   -   -   -   -   -   -   -   -   -   - 
Total $5,453,920,444   79,472  $(5,333,020,940)  (82,073) $123,761,221  $(134,595,780) $377,018,400   31,105  $(442,495,541)  (22,487) $54,790,358  $(62,278,185)
                                                 
Collateral balances supporting all derivative positions          $142,601,701                      $29,432,093 

 
5133

 
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 month period ended March 31, 2013:
  
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham
Global Monetary
Policy LLC
(Delaware)
  
Graham
K4D Trading
Ltd.
(BVI)
 
          
Net investment income (loss) $19,321  $(9,933) $5,727 
             
Net realized gain on investments  48,652,796   51,104,416   97,907,052 
Net (decrease) increase in unrealized appreciation on investments  (14,063,987)  (9,355,745)  5,166,618 
Brokerage commissions and fees  (4,722,980)  (722,451)  (486,361)
Net gain on investments  29,865,829   41,026,220   102,587,309 
Net income $29,885,150  $41,016,287  $102,593,036 

34


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 realized gain on investments and net increase (decrease) in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the three month period ended March 31, 2013:
  
Graham
Commodity
Strategies LLC
  
Graham
Global
Monetary
Policy LLC
  
Graham
K4D Trading
Ltd.
 
Commodity price         
Futures $(30,429,236) $(7,314,955) $(17,404,730)
Options  (1,960,880)  -   - 
Swaps  1,625,558   -   (577,404)
   (30,764,558)  (7,314,955)  (17,982,134)
Equity price            
Equities  365,400   -   61,994 
Futures  1,889,027   10,440,783   101,503,652 
Options  37,188   (508,058)  - 
   2,291,615   9,932,725   101,565,646 
Foreign currency exchange rate            
Forwards  46,415,211   46,368,216   6,982,321 
Futures  (412,375)  -   3,389,816 
Options  15,244,889   (1,249,162)  - 
   61,247,725   45,119,054   10,372,137 
Interest rate            
Bonds  8,826   -   22,066 
Futures  2,054,268   (5,221,023)  9,095,955 
Options  (601,190)  (767,130)  - 
Swaps  352,123   -   - 
   1,814,027   (5,988,153)  9,118,021 
Total $34,588,809  $41,748,671  $103,073,670 

35

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, 2012:
  
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham
Global Monetary
Policy LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
 
Assets:         
Due from brokers $114,206,522  $76,261,597  $29,961,942 
Fixed income securities, at fair value  49,996,302   -   124,990,755 
Derivative financial instruments, at fair value  34,869,226   13,475,515   25,424,116 
CME membership, at fair value  2,000,300   -   793,453 
Dividends receivable  52,500   -   - 
Other assets  -   107   - 
Total assets  201,124,850   89,737,219   181,170,266 
             
Liabilities:            
Derivative financial instruments, at fair value  17,032,718   1,950,294   - 
Due to brokers  -   -   1,750,659 
Redemptions payable  5,369   -   - 
Total liabilities  17,038,087   1,950,294   1,750,659 
Net assets $184,086,763  $87,786,925  $179,419,607 
             
Percentage of Master Fund held by GAIT  8.87%  8.27%  13.54%

36


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
When multiple derivative contracts are held with the same counterparty, the Master Funds will net the contracts in an asset position with the contracts in a liability position when covered by a master netting agreement or similar arrangements, for presentation in the statements of financial condition. The table below displays the amounts by which the fair values of both derivative assets and derivative liabilities were reduced within the Master Funds’ statements of financial condition as a result of this netting. Collateral pledged represents the further amounts by which derivative assets and liabilities could have been reduced on the statements of financial condition. The Master Funds elect to display the amounts in due from (to) brokers on the statements of financial condition.
Description 
Gross
Amount
  
Gross Amount
Offset in the
Statements of
Financial Condition
  
Net Amount
Presented in the
Statements of
Financial Condition
  
 
Collateral
Pledged
  Net Amount 
                     
Graham Commodity Strategies LLC                    
Derivative assets $199,106,163  $(164,236,937) $34,869,226  $  $34,869,226 
Derivative liabilities  (181,269,655)  164,236,937   (17,032,718)  17,032,718    
  $17,836,508  $  $17,836,508  $17,032,718  $34,869,226 
                     
Graham Global Monetary Policy LLC                    
Derivative assets $43,728,176  $(30,252,661) $13,475,515  $  $13,475,515 
Derivative liabilities  (32,202,955)  30,252,661   (1,950,294)  1,950,294    
  $11,525,221  $  $11,525,221  $1,950,294  $13,475,515 
                     
Graham K4D Trading Ltd.                    
Derivative assets $66,291,346  $(40,867,230) $25,424,116  $1,750,659  $23,673,457 
Derivative liabilities  (40,867,230)  40,867,230          
  $25,424,116  $  $25,424,116  $1,750,659  $23,673,457 

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 December 31, 2012.
Description 
Principal Amount /
Notional Amount /
Number of Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC         
Fixed income securities         
Bonds (cost $49,989,111)         
United States         
U.S. Treasury bill 0.00% due 03/14/13 $50,000,000  $49,996,302   27.16%
Total United States      49,996,302   27.16%
Total bonds      49,996,302   27.16%
             
Derivative financial instruments            
Long contracts            
Futures            
Brent Crude March 2013 - September 2013  9,543   14,516,600   7.89%
Natural Gas May 2013  7,931   (14,959,620)  (8.13)%
Natural Gas July 2013  6,351   (11,052,940)  (6.00)%
Other Natural Gas February 2013 - January 2014  11,510   (4,945,000)  (2.69)%
Wheat March 2013 - December 2013  8,992   (7,496,000)  (4.07)%
WTI Crude April 2013  6,643   10,201,020   5.54%
WTI Crude November 2013  1,999   (12,183,290)  (6.62)%
WTI Crude January 2014  1,999   (11,361,590)  (6.17)%
Other WTI Crude February 2013 - June 2014  8,570   13,477,380   7.32%
Other commodity      (24,499,577)  (13.31)%
Total futures      (48,303,017)  (26.24)%
             
Swaps            
Commodity futures      (162,119)  (0.09)%
Total swaps      (162,119)  (0.09)%
             
Forwards            
Japanese Yen / U.S. dollar 01/04/13 
JPY180,218,436,000
   (15,289,285)  (8.31)%
Japanese Yen / U.S. dollar 01/07/13 
JPY73,665,968,900
   (5,778,001)  (3.14)%
Other foreign currency      1,376,864   0.75%
Total forwards      (19,690,422)  (10.70)%

38

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, 2012.
Description 
Number of
Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Long contracts (continued)         
Options         
Natural Gas Futures February 2013 - January 2015 Call $3.75 - $5.00  2,150  $1,591,150   0.86%
Natural Gas Futures March 2013 - April 2013 Put $0.00 - $3.25  4,100   1,971,000   1.07%
Other commodity      521,780   0.28%
U.S. dollar / Japanese Yen February 2013 - May 2013 Call $85.00 - $88.00  4   16,385,856   8.90%
Other currency      1,195,163   0.66%
U.S. bond      574,219   0.31%
U.S. index      1,856,250   1.01%
Total options      24,095,418   13.09%

39

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, 2012.
Description 
Number of Contracts /
Notional Amount
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Short contracts         
Futures         
Brent Crude February 2013 - December 2014  (8,330) $(10,374,090)  (5.64)%
Natural Gas March 2013  (5,467)  16,116,840   8.76%
Natural Gas April 2013  (10,618)  27,581,820   14.99%
Other Natural Gas February 2013 - April 2014  (9,670)  5,062,300   2.75%
Wheat March 2013 - July 2013  (8,999)  8,924,988   4.85%
WTI Crude March 2013  (5,663)  (9,638,060)  (5.24)%
WTI Crude June 2013  (3,787)  (12,403,880)  (6.74)%
Other WTI Crude February 2013 - December 2015  (10,649)  (15,529,960)  (8.44)%
Other commodity      22,886,444   12.44%
U.S. bond      45,313   0.02%
U.S. index      7,500   0.00%
Total futures      32,679,215   17.75%
             
Swaps            
Commodity futures      59,748   0.03%
Total swaps      59,748   0.03%
             
Forwards            
U.S. dollar / Japanese Yen 01/04/13 JPY(179,649,983,200)  21,846,045   11.87%
U.S. dollar / Japanese Yen 01/07/13 JPY(186,460,696,800)  14,713,710   7.99%
U.S. dollar / Japanese Yen 01/07/13 JPY(2,602,098,000)  (14,672)  (0.01)%
Other foreign currency      (798,071)  (0.43)%
Total forwards      35,747,012   19.42%
             
Options            
Natural Gas Futures April 2013 Put $3.00  (250)  (182,500)  (0.10)%
Natural Gas Futures February 2013 - January 2015 Call $0.10 - $5.50  (3,350)  (979,700)  (0.53)%
Other commodity      (21,000)  (0.01)%
Currency      (5,242,064)  (2.84)%
U.S. bond      (164,063)  (0.09)%
Total options      (6,589,327)  (3.57)%
             
Total     $67,832,810   36.85%

40

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, 2012.
Description
Notional
Amount
 Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham Global Monetary Policy LLC       
Derivative financial instruments       
Long contracts       
Futures       
Foreign bond  $145,741   0.17%
Foreign index   2,401,384   2.73%
Interest rate   (1,575,000)  (1.79)%
Total futures   972,125   1.11%
          
Forwards         
Brazilian Real / U.S. dollar 01/03/13
BRL838,687,500
  10,278,835   11.71%
Chinese Yuan / U.S. dollar 01/03/13 - 06/27/13   4,523,387   5.15%
Mexican Peso / U.S. dollar 01/02/13 - 01/03/13   7,159,228   8.16%
Other foreign currency   (963,799)  (1.10)%
Total forwards   20,997,651   23.92%
          
Options         
Interest rate   625,000   0.71%
U.S. index   158,750   0.18%
Foreign currency   529,605   0.61%
Total options   1,313,355   1.50%
          
Short contracts         
Futures         
Foreign index   (328,287)  (0.37)%
Foreign bond   492,734   0.56%
Interest rate   2,371,123   2.70%
U.S. bond   759,204   0.86%
Total futures   3,294,774   3.75%
          
Forwards         
U.S. dollar / Brazilian Real 01/03/13
BRL(838,687,500)
  (6,955,653)  (7.92)%
Other foreign currency   (4,833,382)  (5.51)%
Total forwards   (11,789,035)  (13.43)%
          
Options         
Interest rate   (468,750)  (0.53)%
Foreign currency   (2,794,899)  (3.19)%
Total options   (3,263,649)  (3.72)%
          
Total  $11,525,221   13.13%

41

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, 2012.
Description 
Principal Amount /
Notional Amount /
Number of Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Long securities         
Bonds (cost $124,963,438)         
United States         
U.S. Treasury bill 0.00% due 03/14/13 $125,000,000  $124,990,755   69.66%
Total United States      124,990,755   69.66%
Total bonds      124,990,755   69.66%
             
Derivative financial instruments            
Long contracts            
Futures            
Nikkei 225 Index March 2013  2,254   11,197,084   6.24%
Topix Index March 2013  1,383   11,116,231   6.20%
Other foreign index      (1,641,221)  (0.92)%
Commodity      40,893   0.02%
Currency      19,615   0.01%
Interest rate      989,629   0.55%
Foreign bond      3,888,306   2.17%
U.S. bond      372,289   0.21%
U.S. index      345,055   0.19%
Total futures      26,327,881   14.67%
             
Forwards            
Foreign currency      (1,692,952)  (0.94)%
Total forwards      (1,692,952)  (0.94)%

42


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, 2012.
DescriptionNotional Amount Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd. (continued)       
Derivative financial instruments (continued)       
Short contracts       
Futures       
Foreign index  $(73,012)  (0.04)%
Commodity   (7,643,113)  (4.27)%
Currency   1,060,981   0.59%
Interest rate   (39,202)  (0.02)%
Foreign bond   (241,205)  (0.13)%
U.S. bond   243,652   0.14%
U.S. index   (353,828)  (0.20)%
Total futures   (7,045,727)  (3.93)%
          
Forwards         
U.S. dollar / Japanese Yen 03/21/13JPY(24,575,106,969)  9,839,401   5.48%
Other U.S. dollar / Japanese Yen 01/04/13 - 01/07/13  JPY(2,181,627,007)  105,135   0.06%
Other foreign currency   (2,109,622)  (1.17)%
Total forwards   7,834,914   4.37%
          
Total  $150,414,871   83.83%

43

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, 2012:
  
Graham
Commodity
Strategies LLC
  
Graham Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
 
Assets         
Level 1:         
U.S. bond futures $45,313  $921,438  $927,920 
U.S. bond futures options  574,219   -   - 
Foreign bond futures  -   638,475   7,253,098 
Foreign index futures  -   2,401,384   23,920,199 
U.S. index futures  7,500   -   1,461,396 
U.S. index futures options  1,856,250   158,750   - 
Commodity futures  136,583,500   -   10,650,606 
Commodity futures options  4,083,930   -   - 
Commodity futures swaps  59,748   -   - 
Interest rate futures  -   2,202,373   1,735,617 
Interest rate futures options  -   625,000   - 
Currency futures  -   -   1,104,266 
Equity securities  2,000,300   -   793,453 
Total Level 1  145,210,760   6,947,420   47,846,554 
             
Level 2:            
Foreign currency forwards  38,314,684   36,251,151   19,238,245 
Foreign currency options  17,581,019   529,605   - 
Treasury bills  49,996,302   -   124,990,755 
Total Level 2  105,892,005   36,780,756   144,229,000 
Total assets $251,102,765  $43,728,176  $192,075,554 
Liabilities            
Level 1:            
U.S. bond futures $-  $(162,234) $(311,979)
U.S. bond futures options  (164,063)  -   - 
Foreign bond futures  -   -   (3,605,997)
Foreign index futures  -   (328,287)  (3,321,117)
U.S. index futures  -   -   (1,470,168)
Commodity futures  (152,260,115)  -   (18,252,826)
Commodity futures options  (1,183,200)  -   - 
Commodity futures swaps  (162,119)  -   - 
Interest rate futures  -   (1,406,250)  (785,190)
Interest rate futures options  -   (468,750)  - 
Currency futures  -   -   (23,670)
Total Level 1  (153,769,497)  (2,365,521)  (27,770,947)
             
Level 2:            
Foreign currency forwards  (22,258,094)  (27,042,535)  (13,096,283)
Foreign currency options  (5,242,064)  (2,794,899)  - 
Total Level 2  (27,500,158)  (29,837,434)  (13,096,283)
Total liabilities $(181,269,655) $(32,202,955) $(40,867,230)

44

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, 20112012 categorized by primary underlying risk and is representative of the derivative positions held by the Master Funds throughout the period.year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on the Master Funds’ statementstatements of financial condition.
 
  Graham Commodity Strategies LLC 
  Long exposure  Short exposure       
  
Notional
amounts
  
Number of
contracts
  
Notional
amounts
  
Number of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
 
Commodity price                  
Futures $6,957,172,641   102,887  $(6,812,506,601)  (100,934) $136,583,500  $(152,260,115)
Options (a)  35,431,382   7,568   (17,122,694)  (3,700)  4,083,930   (1,183,200)
Swaps  5,039,580   142   (4,869,180)  (142)  59,748   (162,119)
   6,997,643,603   110,597   (6,834,498,475)  (104,776)  140,727,178   (153,605,434)
                         
Equity price                        
Futures  -   -   (10,650,000)  (150)  7,500   - 
Options (a)  61,067,207   3,000   -   -   1,856,250   - 
   61,067,207   3,000   (10,650,000)  (150)  1,863,750   - 
                         
Foreign currency exchange rate                     
Forwards  1,898,423,498   N/A   (1,882,366,909)  N/A   38,314,684   (22,258,094)
Options (a)  475,390,150   8   (245,955,750)  (4)  17,581,019   (5,242,064)
   2,373,813,648   8   (2,128,322,659)  (4)  55,895,703   (27,500,158)
                         
Interest rate                        
Futures  -   -   (33,195,313)  (250)  45,313   - 
Options (a)  84,078,349   3,500   (32,955,244)  (3,500)  574,219   (164,063)
   84,078,349   3,500   (66,150,557)  (3,750)  619,532   (164,063)
Total $9,516,602,807   117,105  $(9,039,621,691)  (108,680) $199,106,163  $(181,269,655)
                  
(a) Notional amounts for options are based on the delta-adjusted positions. 
                  
Collateral balances supporting all derivative positions              $164,202,824 
  Graham Fed Policy Ltd.  Graham Global Monetary Policy 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 $-   -  $-   -  $-  $-  $-   -  $-   -  $-  $- 
Swaps  -   -   -   -   -   -   -   -   -   -   -   - 
   -   -   -   -   -   -   -   -   -   -   -   - 
                                                 
Equity price                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
   -   -   -   -   -   -   -   -   -   -   -   - 
                                                 
Foreign currency exchange rate                                                
Futures  -   -   -   -   -   -   -   -   -   -   -   - 
Forwards  -   -   -   -   -   -   2,504,581,338   N/A   (2,502,417,890)  N/A   8,341,253   (6,177,805)
Options  -   -   -   -   -   -   200,000,000   1   (100,000,000)  (1)  339,824   (636,257)
   -   -   -   -   -   -   2,704,581,338   1   (2,602,417,890)  (1)  8,681,077   (6,814,062)
                                                 
Interest rate                                                
Futures  14,640,919,492   35,178   -   -   4,918,956   (23,439)  216,273,337   1,940   (514,021,011)  (2,100)  480,329   (87,539)
Options  2,155,189,586   5,981   (17,228,752,250)  (43,812)  549,104   (3,597,535)  -   -   -   -   -   - 
   16,796,109,078   41,159   (17,228,752,250)  (43,812)  5,468,060   (3,620,974)  216,273,337   1,940   (514,021,011)  (2,100)  480,329   (87,539)
Total $16,796,109,078   41,159  $(17,228,752,250)  (43,812) $5,468,060  $(3,620,974) $2,920,854,675   1,941  $(3,116,438,901)  (2,101) $9,161,406  $(6,901,601)
                                      
                                      
Collateral balances supporting all derivative positions          $37,426,188                      $73,168,865 

 
5245

 
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, 20112012 categorized by primary underlying risk and is representative of the derivative positions held by the Master Funds throughout the period.year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on the Master Funds’ statementstatements of financial condition.
 
 Graham K4D Trading Ltd.  Graham Macro Directional LLC  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 $549,621,961   6,056  $(748,131,689)  (17,936) $15,602,465  $(15,242,776) $-   -  $-   -  $-  $-  $-   -  $-   -  $-  $- 
Swaps  -   -   (232,232,146)  (6,040)  -   (15,255,976)  -   -   -   -   -   - 
  549,621,961   6,056   (980,363,835)  (23,976)  15,602,465   (30,498,752)  -   -   -   -   -   -   -   -   -   -   -   - 
                                                                        
Equity price                                                                        
Futures  532,726,507   8,449   (283,517,405)  (4,519)  4,992,980   (2,570,765)  -   -   (12,525,000)  (200)  -   (22,500)  41,877,970   450   (9,872,405)  (165)  2,401,384   (328,287)
Options (a)  -   -   (6,152,186)  (1,500)  158,750   - 
  532,726,507   8,449   (283,517,405)  (4,519)  4,992,980   (2,570,765)  -   -   (12,525,000)  (200)  -   (22,500)  41,877,970   450   (16,024,591)  (1,665)  2,560,134   (328,287)
                                                                        
Foreign currency exchange rate                                                Foreign currency exchange rate                     
Futures  263,535,156   2,886   (55,089,450)  (348)  1,406,611   (228,874)                        
Forwards  1,473,161,901   N/A   (1,456,210,342)  N/A   21,958,196   (5,006,637)  378,520,504   N/A   (379,998,102)  N/A   37,206   (1,514,804)  3,622,783,412   N/A   (3,613,574,796)  N/A   36,251,151   (27,042,535)
Options (a)  197,455,675   10   (259,686,600)  (11)  529,605   (2,794,899)
  1,736,697,057   2,886   (1,511,299,792)  (348)  23,364,807   (5,235,511)  378,520,504   -   (379,998,102)  -   37,206   (1,514,804)  3,820,239,087   10   (3,873,261,396)  (11)  36,780,756   (29,837,434)
                                                                        
Interest rate                                                                        
Futures  11,861,168,194   60,131   (3,335,791,712)  (13,264)  22,762,892   (2,336,556)  22,151,552   200   -   -   -   (21,390)  2,689,682,667   10,913   (4,622,750,125)  (19,386)  3,762,286   (1,568,484)
Options (a)  289,162,168   5,000   (370,156,922)  (5,000)  625,000   (468,750)
  11,861,168,194   60,131   (3,335,791,712)  (13,264)  22,762,892   (2,336,556)  22,151,552   200   -   -   -   (21,390)  2,978,844,835   15,913   (4,992,907,047)  (24,386)  4,387,286   (2,037,234)
Total $14,680,213,719   77,522  $(6,110,972,744)  (42,107) $66,723,144  $(40,641,584) $400,672,056   200  $(392,523,102)  (200) $37,206  $(1,558,694) $6,840,961,892   16,373  $(8,882,193,034)  (26,062) $43,728,176  $(32,202,955)
                                       
(a) Notional amounts for options are based on the delta-adjusted positions.(a) Notional amounts for options are based on the delta-adjusted positions. 
 
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $307,111,336                      $12,363,794 Collateral balances supporting all derivative positions  $76,261,597 

 
5346

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)
 
The following table summarizesdisplays the resultsgross volume of operationsderivative activities based on their notional amounts and number of eachcontracts and fair value of derivative contracts held by the Master FundFunds at December 31, 2012 categorized by primary underlying risk and is representative of the derivative positions held by the Master Funds throughout the year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the threegross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and nine month periods ended September 30, 2011:substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on the Master Funds’ statements of financial condition.
 
  
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 K4D Trading Ltd. 
  Long exposure  Short exposure       
  
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
 
Commodity price                  
Futures $364,319,244   4,414  $(883,588,505)  (13,712) $10,650,606  $(18,252,826)
   364,319,244   4,414   (883,588,505)  (13,712)  10,650,606   (18,252,826)
                         
Equity price                        
Futures  1,226,779,876   13,036   (106,770,515)  (1,893)  25,381,594   (4,791,285)
   1,226,779,876   13,036   (106,770,515)  (1,893)  25,381,594   (4,791,285)
                         
Foreign currency exchange rate                     
Futures  36,929,900   352   (136,511,977)  (1,624)  1,104,266   (23,670)
Forwards  1,526,791,218   N/A   (1,520,649,257)  N/A   19,238,245   (13,096,283)
   1,563,721,118   352   (1,657,161,234)  (1,624)  20,342,511   (13,119,953)
                         
Interest rate                        
Futures  9,571,876,106   45,765   (16,351,154)  (81)  9,916,635   (4,703,166)
   9,571,876,106   45,765   (16,351,154)  (81)  9,916,635   (4,703,166)
Total $12,726,696,344   63,567  $(2,663,871,408)  (17,310) $66,291,346  $(40,867,230)
                         
Collateral balances supporting all derivative positions              $153,202,038 
 
 
5447

 
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 month period ended March 31, 2012:
  
Graham
Commodity
Strategies 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)
 
                   
Net investment income (loss) $48,651  $6,738  $(621) $(183,235) $(163,316) $(1,557)
                         
Net realized gain (loss) on investments  97,207,797   (3,769,417)  2,820,547   8,743,554   58,121,648   (10,190,191)
Net (decrease) increase in unrealized appreciation on investments  (16,699,287)  5,355,406   (11,309,018)  (2,050,197)  (19,255,098)  545,825 
Brokerage commissions and fees  (4,631,328)  (205,978)  (149,960)  (750,439)  (1,724,083)  (168,365)
Net gain (loss) on investments  75,877,182   1,380,011   (8,638,431)  5,942,918   37,142,467   (9,812,731)
Net income (loss) $75,925,833  $1,386,749  $(8,639,052) $5,759,683  $36,979,151  $(9,814,288)
* For the period from January 1, 2012 to February 29, 2012
48

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 realized gain (loss) on investments and net increase (decrease) in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the three monthsmonth period ended September 30, 2011:March 31, 2012:
 
 
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
Energy Focus
LLC
  
Graham Fed
Policy Ltd.
  
Graham
Global
Monetary
Policy LLC
  
Graham K4D
Trading Ltd.
  
Graham
Macro
Directional
LLC
 
Commodity price                                          
Futures $(2,162,171) $8,177,697  $23,788,172  $-  $20,206,590  $(5,164,850) $2,146,040  $-  $84,567,986  $12,682,853  $-  $2,393,663  $23,543,861  $(640,236)
Options  -   (13,924,790)  321,900   -   -   -   -   -   -   789,330   -   -   -   - 
Swaps  12,949,727   1,711,080   (25,927,942)  -   -   2,104,346   -   -   4,138,309   (11,744,944)  -   -   1,355,801   - 
  10,787,556   (4,036,013)  (1,817,870)  -   20,206,590   (3,060,504)  2,146,040   -   88,706,295   1,727,239   -   2,393,663   24,899,662   (640,236)
Equity price                                                        
Equities  26,760   -   -   -   -   - 
Futures  -   -   (9,500)  -   12,459,295   (134,617,931)  9,331,261   -   (10,251,455)  (141,250)  (1,750)  (997,388)  118,769,741   (3,172,188)
IMM shares  11,000   -   -   -   -     
NYMEX shares  -   -   -   -   (18,000)    
Options  -   -   -   -   (1,416,863)  -   -   -   -   -   -   -   -   - 
  -   -   (9,500)  -   11,042,432   (134,617,931)  9,331,261   -   (10,213,695)  (141,250)  (1,750)  (997,388)  118,751,741   (3,172,188)
Foreign currency exchange rate                                                        
Futures  -   -   -   -   -   10,223,770   -   -   2,985,381   -   -   -   (9,299,984)  - 
Forwards  -   -   -   -   (14,623,359)  (94,513,839)  30,284,014   -   (566,879)  -   -   2,519,129   (25,296,450)  (2,755,673)
Options  -   -   -   -   (5,309,085)  -   -   -   -   -   -   112,443   -   - 
  -   -   -   -   (19,932,444)  (84,290,069)  30,284,014   -   2,418,502   -   -   2,631,572   (34,596,434)  (2,755,673)
Interest rate                                                        
Futures  -   -   -   15,147,183   11,886,900   87,063,783   24,433,838   -   (409,272)  -   (11,357,110)  2,665,510   (70,205,252)  (3,076,269)
Options  -   -   -   (7,670,795)  -   -   867,926   -   -   -   2,870,389   -   -   - 
Treasury bills  6,680   -   -   -   16,833   - 
  -   -   -   7,476,388   11,886,900   87,063,783   25,301,764   -   (402,592)  -   (8,486,721)  2,665,510   (70,188,419)  (3,076,269)
Total $10,787,556  $(4,036,013) $(1,827,370) $7,476,388  $23,203,478  $(134,904,721) $67,063,079  $-  $80,508,510  $1,585,989  $(8,488,471) $6,693,357  $38,866,550  $(9,644,366)

 
5549

 
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 

56

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,Cash Assets, an entity for which the Manager is also the sole investment advisor. GCACash Assets 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 one to twenty-four months. GCACash Assets also maintains cash and cash equivalents on deposit with major U.S. institutions. GCACash Assets values all fixed income securities at amortized cost which approximates fair value. GAIT’s investment in GCACash Assets 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’sCash Assets’ reported net asset value. GAIT records its proportionate share of GCA’sCash Assets’ investment income and expenses on a monthly basis. For the three months ended September 30,March 31, 2013, the total amount recognized by GAIT with respect to its investment in Cash Assets was $124,162. For the three months ended March 31, 2012, the total amount recognized by GAIT with respect to its investment in GCACash Assets was $185,718.  For the nine months ended September 30, 2012, the total amount recognized by GAIT with respect to its investment in GCA was $598,677.  For the three months ended September 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $439,886.  For the nine months ended September 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $1,453,597.$217,632. These amounts are included in interest income in the statements of operations and managing member allocation. At September 30, 2012March 31, 2013 and December 31, 2011,2012, GAIT owned approximately 6.67%5.49% and 11.59%6.02%, respectively, of GCA.Cash Assets. The following table summarizes the financial position of GCACash Assets as of September 30, 2012March 31, 2013 and December 31, 2011:2012:
 
 September 30, 2012  December 31, 2011  March 31, 2013  December 31, 2012 
Assets:            
Cash and cash equivalents $904,800,764  $556,557,151  $876,832,743  $968,228,634 
Investments in fixed income securities (cost $3,366,638,679 and $2,412,672,700 respectively)  3,366,638,679   2,412,672,700 
Accrued interest income  7,792,911   4,670,722 
Investments in fixed income securities (cost $2,917,185,054 and $3,041,387,608, respectively)  2,917,185,054   3,041,387,608 
Accrued interest receivable  7,023,150   5,989,305 
Total assets  4,279,232,354   2,973,900,573   3,801,040,947   4,015,605,547 
                
Liabilities:                
Other liabilities  9,990   29,450   15,004   9,300 
Total liabilities  9,990   29,450   15,004   9,300 
Net assets $4,279,222,364  $2,973,871,123  $3,801,025,943  $4,015,596,247 
 
The following table summarizes the results of operations of GCACash Assets for the three months ended March 31, 2013 and nine month periods ended September 30, 2012 and 2011:2012:
 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2012  2011  2012  2011  2013 ��2012 
Investment income                  
Interest income $2,748,540  $3,492,406  $7,600,101  $11,203,532  $2,127,133  $2,361,852 
Total investment income  2,748,540   3,492,406   7,600,101   11,203,532   2,127,133   2,361,852 
                        
Expenses:                        
Bank fee expense  30,845   127,380   92,482   386,034   33,653   24,103 
Total expenses  30,845   127,380   92,482   386,034   33,653   24,103 
Net investment income  2,717,695   3,365,026   7,507,619   10,817,498   2,093,480   2,337,749 
Net income $2,717,695  $3,365,026  $7,507,619  $10,817,498  $2,093,480  $2,337,749 

 
5750

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
4. Graham Cash Assets LLC (continued)
 
The following represents the condensed schedule of investments of GCACash Assets as of September 30, 2012:March 31, 2013:
 
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $3,366,638,679)         
United States         
FDIC Guaranteed Bonds (cost $328,522,436)         
FDIC guaranteed bonds     $328,522,436   7.68%
Total FDIC Guaranteed Bonds      328,522,436   7.68%
             
Government Bonds (cost $3,038,116,243)            
U.S. Treasury 0.13% - 2.50% due 10/31/2012 – 09/15/2014 3,025,000,000   3,038,116,243   71.00%
Total Government Bonds      3,038,116,243   71.00%
             
Total Investments in Fixed Income Securities     $3,366,638,679   78.68%
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $2,917,185,054)         
United States         
Government Bonds (cost $2,917,185,054)         
U.S. Treasury 0.50% due 05/31/13 $200,000,000  $200,100,675   5.26%
U.S. Treasury 0.13% - 2.75% due 04/15/13 – 02/15/15  2,700,000,000   2,717,084,379   71.49%
Total Government Bonds      2,917,185,054   76.75%
             
Total Investments in Fixed Income Securities     $2,917,185,054   76.75%
 
The following represents the condensed schedule of investments of GCACash Assets as of December 31, 2011:2012:
 
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $2,412,672,700)         
United States         
FDIC Guaranteed Bonds (cost $623,918,691)         
Citigroup Funding 1.88% – 2.25% due 04/30/12 –12/10/12 $374,364,000  $378,090,518   12.71%
Other FDIC guaranteed bonds      245,828,173   8.27%
Total FDIC Guaranteed Bonds      623,918,691   20.98%
             
Government Bonds (cost $1,788,754,009)            
U.S. Treasury 0.13% – 1.38% due 01/31/12 – 11/15/13  1,785,000,000   1,788,754,009   60.15%
Total Government Bonds      1,788,754,009   60.15%
             
Total Investments in Fixed Income Securities     $2,412,672,700   81.13%
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $3,041,387,608)         
United States         
Government Bonds (cost $3,041,387,608)         
U.S. Treasury 0.13% - 2.63% due 01/15/13 – 12/31/14 $3,025,000,000  $3,041,387,608   75.74%
Total Government Bonds      3,041,387,608   75.74%
             
Total Investments in Fixed Income Securities     $3,041,387,608   75.74%

 
5851

 
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
4. Graham Cash Assets LLC (continued)
 
GCACash Assets 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 GCACash Assets as of September 30, 2012March 31, 2013 and December 31, 2011:2012:
 
 September 30, 2012  December 31, 2011  March 31, 2013  December 31, 2012 
Assets            
Level 2:            
Fixed income securities            
FDIC Guaranteed Bonds $328,522,436  $623,918,691 
Government Bonds  3,038,116,243   1,788,754,009  $2,917,185,054  $3,041,387,608 
Total fixed income securities  3,366,638,679   2,412,672,700   2,917,185,054   3,041,387,608 
Total Level 2  3,366,638,679   2,412,672,700   2,917,185,054   3,041,387,608 
Total assets $3,366,638,679  $2,412,672,700  $2,917,185,054  $3,041,387,608 
 
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 member’s 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.
 
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.
 
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.
 
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.
 
 
5952


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
6. Fees and Related Party Transactions
 
Advisory Fees
 
EachFor the three months ended March 31, 2013 and 2012 each Class of GAIT other than Class M pays the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate equal to 1.75% and 2%, respectively, 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
 
EachFor the three months ended March 31, 2013 and 2012, each Class of GAIT other than Class M payspaid the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of 1% of its Net Asset Value,specified in the table below. This Sponsor Fee was payable monthly in arrears determinedcalculated as of the last business day of each month in the same manner as the Advisory Fee.For the three months ended March 31, 2013 the Sponsor Fee listed below for Class 2 included a selling agent fee (the “Selling Agent Fee”) of 2%. The Selling Agent Fee represented a fee for initial and on-going service fees to the Feeder Funds selling agents.
Class2013 Annual Rate2012 Annual Rate
   
Class 00.75%1.00%
Class 22.75%1.00%
 
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. Additionally, any loss carryforward attributable to any class of GAIT shall be proportionately reduced effective as of the date of any redemption of any Units of such class by multiplying the loss carryforward by the ratio that the amount of assets redeemed from such class bears to the net assets of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made to the Manager.
 
Brokerage Fees
 
EachFor the three months ended March 31, 2012, each Class of GAIT other than Class M payspaid the Manager a brokerage fee (the “Brokerage Fee”) at thean annual rate specified in the table below. This Brokerage Fee iswas 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%
53


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
6. Fees and Related Party Transactions (continued)
Brokerage Fees (continued)
In consideration of the Brokerage Fee, the Manager bearsassumed 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 iswas allocated any of these expenses from the Master Funds in which it invests,invested, the Manager will reimbursereimbursed GAIT for those amounts. These reimbursements are included in commission reimbursements in the statements of operations and managing member allocation.
 
As of January 1, 2013 GAIT eliminated the Brokerage Fee and GAIT incurred directly all costs previously covered by the Brokerage Fee.
Administrator’s Fee
For the three month period ended March 31, 2013, GAIT paid SEI a monthly administrator’s fee based GAIT’s net asset value, calculated as of the last business day of each month. In addition, GAIT reimbursed SEI for reasonable out-of-pocket expenses incurred on behalf of GAIT. The total administrator’s fees incurred by GAIT for the three month periods ended March 31, 2013 and 2012 were $82,841 and $0, respectively, of which $25,799 and $0 were accrued as of March 31, 2013 and 2012, respectively.
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.
 
60

Index7. Income Taxes
 
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.
 
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.
  
54


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
8. Financial Highlights
 
The following is the per unit operating performance calculation for the three month periods ended September 30, 2012March 31, 2013 and 2011:2012:
 
  Class 0  Class 2 
Per unit operating performance:      
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 
         
Net asset value per unit, June 30, 2012 $118.77  $94.30 
Net loss:        
Net investment loss  (1.27)  (1.49)
Net loss on investments  (0.60)  (0.46)
Net loss  (1.87)  (1.95)
Net asset value per unit, September 30, 2012 $116.90  $92.35 

61


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

8. Financial Highlights (continued)
  Class 0  Class 2 
Per unit operating performance      
Net asset value per unit, December 31, 2011 $123.17  $98.77 
Net gain:        
Net investment loss  (1.20)  (1.48)
Net gain on investments  4.17   3.36 
Net gain  2.97   1.88 
Net asset value per unit, March 31, 2012 $126.14  $100.65 
         
Net asset value per unit, December 31, 2012 $114.88  $90.29 
Net gain:        
Net investment loss  (0.88)  (1.14)
Net gain on investments  8.47   6.65 
Net gain  7.59   5.51 
Net asset value per unit, March 31, 2013 $122.47  $95.80 

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the three month periods ended September 30, 2012March 31, 2013 and 2011:2012:
 
 Class 0 Class 2 Class 0  Class 2 
 2012 2011 2012 2011 2013  2012  2013  2012 
                        
Total return before Incentive Allocation  (1.57)%  (0.82)%  (2.07)%  (1.32)%  6.61%  2.41%  6.10%  1.90%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (1.57)%  (0.82)%  (2.07)%  (1.32)%  6.61%  2.41%  6.10%  1.90%
                                
Net investment loss before Incentive Allocation  (1.06)%  (1.88)%  (1.57)%  (2.36)%  (0.77)%  (0.97)%  (1.22)%  (1.50)%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.06)%  (1.88)%  (1.57)%  (2.36)%  (0.77)%  (0.97)%  (1.22)%  (1.50)%
                                
Total expenses before Incentive Allocation  1.31%  1.32%  1.81%  1.80%  0.79%  1.27%  1.27%  1.79%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.31%*  1.32%*  1.81%*  1.80%*  0.79%  1.27%*  1.27%  1.79%*
 
*- The percentages noted above represent total gross expenses before commission reimbursements, (see Note 6), which represent 0.20%0.27% of average members’ capital for 2012 and 0.20% of average members’ capital for 2011.the three month period ended March 31, 2012.
 
The following is the per unit operating performance calculation for the nine month periods ended September 30, 2012 and 2011:

  Class 0  Class 2 
Per unit operating performance:      
Net asset value per unit, December 31, 2010 $138.96  $113.68 
Net loss:        
Net investment loss  (5.32)  (5.98)
Net loss on investments  (2.06)  (1.64)
Net loss  (7.38)  (7.62)
Net asset value per unit, September 30, 2011 $131.58  $106.06 
         
Net asset value per unit, December 31, 2011 $123.17  $98.77 
Net loss:        
Net investment loss  (3.68)  (4.43)
Net loss on investments  (2.59)  (1.99)
Net loss  (6.27)  (6.42)
Net asset value per unit, September 30, 2012 $116.90  $92.35 

 
6255


Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

8. Financial Highlights (continued)

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the nine month periods ended September 30, 2012 and 2011:

  Class 0 Class 2
  2012 2011 2012 2011
             
Total return before Incentive Allocation  (5.09)%  (5.30)%  (6.50)%  (6.69)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Total return after Incentive Allocation  (5.09)%  (5.31)%  (6.50)%  (6.70)%
                 
Net investment loss before Incentive Allocation  (2.99)%  (3.82)%  (4.52)%  (5.25)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Net investment loss after Incentive Allocation  (2.99)%  (3.83)%  (4.52)%  (5.26)%
                 
Total expenses before Incentive Allocation  3.83%  3.87%  5.36%  5.37%
Incentive Allocation  0.00   0.01   0.00   0.01 
Total expenses after Incentive Allocation  3.83%*  3.88%*  5.36%*  5.38%*
*- The percentages above represent total gross expenses before commission reimbursements (see Note 6), which represent 0.70% of average members’ capital for 2012 and 0.79% of average members’ capital for 2011.
 
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 period.period and have not been annualized. 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 net investment loss and expenses allocated from Master Funds and GCA.investment income from Cash Assets. These ratios have not been annualized. 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 nine month periods ended September 30, 2012March 31, 2013 and 2011.2012.
 
9. Subsequent Events
 
GAIT had subscriptions of approximately $3.3$3.4 million and redemptions of approximately $9.7$5.7 million through November 14, 2012,May 15, 2013, the date through which subsequent events were evaluated by management. These amounts have not been included in the financial statements.
 
 
6356

Graham Alternative Investment Trading II LLC

Statements of Financial Condition
Assets 
March 31, 2013
(Unaudited)
  
December 31, 2012
(Audited)
 
Investment in Graham K4D Trading Ltd., at fair value $5,963,038  $6,984,957 
Investment in Graham Cash Assets LLC, at fair value  25,296,983   34,050,873 
Accrued commission reimbursements     8,466 
Receivable from Graham K4D Trading Ltd.  1,379   1,764 
Other receivable  26,481    
Total assets $31,287,881  $41,046,060 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $1,266,893  $8,098,182 
Accrued advisory fees  41,900   69,458 
Accrued brokerage fees     106,515 
Accrued sponsor fees  45,737   34,729 
Accrued professional fees  64,504    
Accrued administrator’s fees  3,117    
Total liabilities  1,422,151   8,308,884 
         
Members’ capital:        
Class 0 Units (159,719.612 and 182,134.590 units issued and outstanding at $80.62 and $73.46  per unit, respectively)  12,876,599   13,380,170 
Class 2 Units (226,896.395 and 282,516.243 units issued and outstanding at $74.67 and $68.36 per unit, respectively)  16,941,368   19,313,793 
Class M Units (500.000 and 500.000 units issued and outstanding at $95.53 and $86.43 per unit, respectively)  47,763   43,213 
Total members’ capital  29,865,730   32,737,176 
Total liabilities and members’ capital $31,287,881  $41,046,060 

See accompanying notes.
57

 
Graham Alternative Investment Trading II LLC

StatementsStatements of Financial ConditionOperations and Managing Member Allocation

Assets 
September 30, 2012
(Unaudited)
  
December 31, 2011
(Audited)
 
Investment in Graham K4D Trading Ltd., at fair value $9,459,856  $13,021,233 
Investment in Graham Cash Assets LLC, at fair value  45,764,391   59,403,888 
Accrued commission reimbursements  10,824   29,549 
Receivable from Graham K4D Trading Ltd.  123   532 
Total assets $55,235,194  $72,455,202 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $7,458,747  $2,739,451 
Accrued brokerage fees  133,432   183,148 
Accrued advisory fees  90,475   122,997 
Accrued sponsor fees  45,238   61,499 
Total liabilities  7,727,892   3,107,095 
         
Members’ capital:        
Class 0 Units (277,104.562 and 434,835.751 units issued and outstanding at $77.99 and $81.35 per unit, respectively)  21,611,379   35,371,951 
Class 2 Units (354,391.181 and 439,312.861 units issued and outstanding at $72.94 and $77.24 per unit, respectively)  25,850,622   33,930,645 
Class M Units (500.000 and 500.000 units issued and outstanding at $90.60 and $91.02 per unit, respectively)  45,301   45,511 
Total members’ capital  47,507,302   69,348,107 
Total liabilities and members’ capital $55,235,194  $72,455,202 
  
Three Months Ended
March 31,
 
  
2013
(Unaudited)
  
2012
(Unaudited)
 
Net gain allocated from investment in Graham K4D Trading Ltd.:      
Net realized gain on investments $2,973,567  $2,323,627 
Net increase (decrease) in unrealized appreciation on investments  220,676   (649,916)
Brokerage commissions and fees  (15,220)  (73,759)
Net gain allocated from investment in Graham K4D Trading Ltd.  3,179,023   1,599,952 
         
Net investment income (loss) allocated from investment in Graham K4D Trading Ltd.  166   (6,903)
         
Investment income:        
Interest income  15,257   37,236 
         
Expenses:        
Advisory fees  134,660   344,030 
Brokerage fees     509,052 
Sponsor fees  148,565   172,015 
Professional fees and other  78,315   933 
Administrator’s fees  10,028    
Commission reimbursements     (73,759)
Total expenses  371,568   952,271 
Net investment loss of the Fund  (356,311)  (915,035)
         
Net income  2,822,878   678,014 
         
Incentive allocation      
         
Net income available for pro-rata allocation to all members $2,822,878  $678,014 

See accompanying notes.
 
 
6458

 
Graham Alternative Investment Trading II LLC

Statements of OpCerationhanges and Managing Member Allocationin Members’ Capital

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  
2012
(Unaudited)
  
2011
(Unaudited)
  
2012
(Unaudited)
  
2011
(Unaudited)
 
Net gain (loss) allocated from investment in Graham K4D Trading Ltd.:            
Net realized gain (loss) on investments $2,645,605  $(6,145,327) $2,386,690  $(8,597,423)
Net increase (decrease) in unrealized appreciation on investments  (1,870,678)  1,135,707   (2,323,849)  (1,007,154)
Brokerage commissions and fees  (27,743)  (136,481)  (151,886)  (401,873)
Net gain (loss) allocated from investment  in Graham K4D Trading Ltd.  747,184   (5,146,101)  (89,045)  (10,006,450)
                 
Net investment loss allocated from investment in Graham K4D Trading Ltd.  (223)  (6,382)  (10,484)  (17,280)
                 
Investment income:                
Interest income  30,492   81,771   100,644   255,251 
Total investment income  30,492   81,771   100,644   255,251 
                 
Expenses:                
Brokerage fees  441,989   656,221   1,418,017   1,860,993 
Advisory fees  299,315   455,698   959,394   1,305,702 
Sponsor fees  149,658   227,850   479,697   652,851 
Interest and other  17,624   1,438   20,372   13,283 
Commission reimbursements  (27,743)  (136,481)  (151,886)  (401,873)
Total expenses  880,843   1,204,726   2,725,594   3,430,956 
Net investment loss of the Fund  (850,351)  (1,122,955)  (2,624,950)  (3,175,705)
                 
Net loss  (103,390)  (6,275,438)  (2,724,479)  (13,199,435)
                 
Incentive allocation  -   -   -   (8,810)
                 
Net loss available for pro-rata allocation to all members $(103,390) $(6,275,438) $(2,724,479) $(13,208,245)
For the three months ended March 31, 2013 (unaudited) and 2012 (unaudited)

  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                      
Members’ capital, December 31, 2011  434,835.751  $35,371,951   439,312.861  $33,930,645   500.000  $45,511  $69,348,107 
Subscriptions  5,073.642   414,000   1,294.902   100,000         514,000 
Redemptions  (30,265.303)  (2,506,412)  (40,752.106)  (3,169,153)    ­­­–   (5,675,565)
Incentive allocation                ­–    
Net income
     441,704      235,189      1,121   678,014 
Members’ capital, March 31, 2012  409,644.090  $33,721,243   399,855.657  $31,096,681   500.000  $46,632  $64,864,556 
                             
  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                             
Members’ capital, December 31, 2012  182,134.590  $13,380,170   282,516.243  $19,313,793   500.000  $43,213  $32,737,176 
Subscriptions  67.173   5,000               5,000 
Redemptions  (22,482.151)  (1,700,797)  (55,619.848)  (3,998,527)        (5,699,324)
Incentive allocation                     
Net income     1,192,226      1,626,102      4,550   2,822,878 
Members’ capital, March 31, 2013  159,719.612  $12,876,599   226,896.395  $16,941,368   500.000  $47,763  $29,865,730 
See accompanying notes.
 
 
6559

 
Graham Alternative Investment Trading II LLC

StatementsStatements of Changes in Members’ CapitalCash Flows

For the nine months ended September 30, 2012 (unaudited) and 2011 (unaudited)
  
Three Months Ended
March 31,
 
  
2013
(Unaudited)
  
2012
(Unaudited)
 
Cash flows provided by operating activities      
Net income $2,822,878  $678,014 
Adjustments to reconcile net income to net cash provided by operating activities:        
Net income allocated from investment in Graham K4D Trading Ltd.  (3,179,189)  (1,593,049)
Net income allocated from investment in Graham Cash Assets LLC  (15,257)  (37,236)
Proceeds from sale of investments in Graham K4D Trading Ltd.  9,510,317   21,749,577 
Proceeds from sale of investments in Graham Cash Assets LLC  18,255,435   26,562,481 
Investments in Graham K4D Trading Ltd.  (5,308,824)  (19,713,913)
Investments in Graham Cash Assets LLC  (9,486,288)  (22,025,717)
Changes in assets and liabilities:        
Accrued commission reimbursements  8,466   4,467 
Other receivable  (26,481)   
Accrued advisory fees  (27,558)  (8,718)
Accrued brokerage fees  (106,515)  (14,534)
Accrued sponsor fees  11,008   (4,359)
Accrued professional fees  64,504    
Accrued administrator’s fees  3,117    
Net cash provided by operating activities  12,525,613   5,597,013 
         
Cash flows used in financing activities        
Subscriptions  5,000   514,000 
Redemptions  (12,530,613)  (6,111,013)
Net cash used in financing activities  (12,525,613)  (5,597,013)
         
Net change in cash and cash equivalents      
         
Cash and cash equivalents, beginning of period      
Cash and cash equivalents, end of period $  $ 
 
  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 

  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                      
Members’ capital, December 31, 2011  434,835.751  $35,371,951   439,312.861  $33,930,645   500.000  $45,511  $69,348,107 
Subscriptions  10,857.666   891,279   4,141.355   316,000         1,207,279 
Redemptions  (168,588.855)  (13,461,546)  (89,063.035)  (6,862,059)    ­­­–   (20,323,605)
Incentive allocation                ­–    
Net loss
     (1,190,305)     (1,533,964)     (210)  (2,724,479)
Members’ capital, September 30, 2012  277,104.562  $21,611,379   354,391.181  $25,850,622   500.000  $45,301  $47,507,302 
See accompanying notes.
 
 
6660

 
Graham Alternative Investment Trading II LLC

Statements of Cash Flows

  
Nine Months Ended
September 30,
 
  
2012
(Unaudited)
  
2011
(Unaudited)
 
Cash flows provided by (used in) operating activities      
Net loss $(2,724,479) $(13,199,435)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Net loss allocated from investment in Graham K4D Trading Ltd.  99,529   10,023,730 
Net income allocated from investment in Graham Cash Assets LLC  (100,644)  (255,251)
Proceeds from sale of investments in Graham K4D Trading Ltd.  50,429,361   78,991,608 
Proceeds from sale of investments in Graham Cash Assets LLC  64,635,792   99,937,666 
Investments in Graham K4D Trading Ltd.  (46,967,104)  (91,053,750)
Investments in Graham Cash Assets LLC  (50,895,651)  (113,578,197)
Changes in assets and liabilities:        
Accrued commission reimbursements  18,725   (22,345)
Accrued brokerage fees  (49,716)  36,268 
Accrued advisory fees  (32,522)  22,328 
Accrued sponsor fees  (16,261)  11,164 
Net cash provided by (used in) operating activities  14,397,030   (29,086,214)
         
Cash flows (used in) provided by financing activities        
Subscriptions  1,207,279   37,511,512 
Redemptions  (15,604,309)  (8,425,298)
Net cash (used in) provided by financing activities  (14,397,030)  29,086,214 
         
Net change in cash and cash equivalents      
         
Cash and cash equivalents, beginning of period      
Cash and cash equivalents, end of period $  $ 
See accompanying notes.
67

Graham Alternative Investment Trading II LLC

Notes toto Unaudited Financial Statements

September 30, 2012March 31, 2013
 
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 Managing Member is also registered as a Registered Investment Advisor with the Securities and Exchange Commission.
 
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 derivative instruments such as currency forward and futures contracts; bond, interest rate, and index futures contracts; commodity forward and futures contracts, and options and swaps thereon traded on U.S. and foreign exchanges, as well as over-the-counter.
 
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 Exchange (“Eurex”), the Hong Kong Exchanges and Clearing Ltd. (“HKEX”), the Intercontinental Exchange (“ICE”), the London Metal Exchange (“LME”), the Montreal Exchange (“ME”), the Mercado de Futuros Financieros (“MEFF”), the NYSE Euronext (“Euronext”), the Osaka Securities Exchange (“OSE”), the Singapore Exchange (“SGX”), the South African Exchange (“SAFEX”), the Sydney Futures Exchange Ltd. (“SFE”), the Tokyo Commodity Exchange (“TOCOM”), the Tokyo Financial Exchange (“TFX”), and the Tokyo Stock Exchange (“TSE”).
Graham Alternative Investment Fund I LLC and Graham Alternative Investment Fund II LLC (collectively the Feeder Funds) are the soleprimary investors of GAIT II.
 
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.
 
68

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
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 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.
 
61

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
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. GAIT II reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. U.S. GAAP uses a three-level hierarchy for fair value measurement based on the activeness of the market and 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”Cash Assets”) have been classified as Level 2 valuations. The Master Fund records all its derivative financial instruments at fair value, which is derived in accordance with U.S. GAAP. There were no Level 3 assets or liabilities held at any point during the ninethree months ended September 30, 2012March 31, 2013 or the twelve months ended December 31, 20112012 by GAIT II, K4D Trading, or GCA,Cash Assets, and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized on the actual date of the event or change in circumstances that cause the transfer.

69

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, 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.
 
62

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Derivative Instruments (continued)
Unrealized gains and losses from derivative financial instruments are recorded based on changes in their fair value. Realized gains and losses are recorded when the positions are closed. All unrealized and realized gains and losses related to derivative financial instruments are included in net realized gain (loss) and net (decrease) increase (decrease) in unrealized 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.
 
70


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 forward contracts in an attempt to take advantage of changes in exchange rates. Forward currency transactions are contracts or agreements for delivery of specific currencies 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. Changes in fair value of each forward contract are recognized as unrealized gains or losses.
63

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Derivative Instruments (continued)
 
Swap Contracts
 
The Master Fund 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. 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 any 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 reference instrument. Changes in fair value of each swap are recognized as unrealized gains or losses. The Master Fund records realized gains or losses when a swap contract is terminated. Interest is calculated and accrued throughout the life of each swap. Payments received at the end of each reset period are recorded against such accruals.
 
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.
71

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 unrealized gains 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 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.
 
Recent Accounting Pronouncements
64


Graham Alternative Investment Trading II LLC

In December 2011, the FASB issuedNotes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU No. 2011-11”). The amendments in ASU No. 2011-11 affect all entities that have financial instruments that are either offset or are subject to an enforceable master netting arrangement or similar agreement in accordance with authoritative guidance under U.S. GAAP. Entities will be required to disclose both gross information and net information about instruments and transactions eligible for offset or subject to an agreement similar to a master netting arrangement in the statement of financial position to enable users of its financial statements to understand the effect of those arrangements on its financial position. The disclosure is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Manager is evaluating the impact that the adoption of ASU No. 2011-11 will have on the Fund's financial statements.Policies (continued)
 
Indemnifications

In the normal course of business, the Master Fund, GCA,Cash Assets, and GAIT II enter into contracts that contain a variety of indemnifications. Such contracts may include those by the Master Fund and GCACash Assets with their 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.
 
72


Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
3. Investment in Graham K4D Trading Ltd.
 
As of September 30, 2012March 31, 2013 and December 31, 2011,2012, 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.
 
September 30, 2012 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Income
(three months
then ended)
  
Net Loss
(nine months
then ended)
 
             
Systematic Macro                
Graham K4D Trading Ltd.  19.91% $9,459,856  $746,961  $(99,529)
   19.91% $9,459,856  $746,961  $(99,529)
                 
December 31, 2011         
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Loss
(nine months ended
September 30, 2011)
  
Net Loss
(nine months ended
September 30, 2011)
 
                 
Systematic Macro                
Graham K4D Trading Ltd.  18.78% $13,021,233  $(5,152,483) $(10,023,730)
   18.78% $13,021,233  $(5,152,483) $(10,023,730)
The following table summarizes the financial position of K4D Trading as of September 30, 2012.
Assets:   
Due from brokers $299,033,271 
Derivative financial instruments, at fair value  - 
CME Membership, at fair value  865,729 
Subscriptions receivable  5,647 
Total assets  299,904,647 
     
Liabilities:    
Derivative financial instruments, at fair value  44,441,143 
Redemptions payable  4,218 
Total liabilities  44,445,361 
Net assets $255,459,286 
     
Percentage of K4D Trading held by GAIT II  3.70%
March 31, 2013 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Income
(three months
then ended)
 
          
Systematic Macro         
Graham K4D Trading Ltd.  19.97% $5,963,038  $3,179,189 
   19.97% $5,963,038  $3,179,189 
      
December 31, 2012     
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Income
(three months ended
March 31, 2012)
 
             
Systematic Macro            
Graham K4D Trading Ltd.  21.34% $6,894,957  $1,593,049 
   21.34% $6,894,957  $1,593,049 

 
7365

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Graham K4D Trading Ltd. (continued)
 
The following table summarizes the financial position of K4D Trading as of March 31, 2013:
Assets:   
Due from brokers $45,625,595 
Fixed income securities, at fair value (cost $124,973,143)  124,985,964 
Derivative financial instruments, at fair value  41,487,936 
CME Membership, at fair value  855,250 
Total assets  212,954,745 
     
Liabilities:    
Derivative financial instruments, at fair value  11,277,718 
Total liabilities  11,277,718 
Net assets $201,677,027 
     
Percentage of K4D Trading held by GAIT II  2.96%
When multiple derivative contracts are held with the same counterparty, K4D Trading will net the contracts in an asset position with the contracts in a liability position when covered by a master netting agreement or similar arrangements, for presentation in the statement of financial condition. The table below displays the amounts by which the fair values of both derivative assets and derivative liabilities were reduced within K4D Trading’s statement of financial condition as a result of this netting. Collateral pledged represents the further amounts by which derivative assets and liabilities could have been reduced on the statement of financial condition. K4D Trading elects to display the amounts in due from brokers on the statement of financial condition.
Description 
Gross
Amount
  
Gross Amount
Offset in the
Statement of
Financial Condition
  
Net Amount
Presented in the
Statement of
Financial Condition
  
Collateral
Pledged
  Net Amount 
                
Derivative assets $73,562,576  $(32,074,640) $41,487,936  $  $41,487,936 
Derivative liabilities  (43,352,358)  32,074,640   (11,277,718)  11,277,718    
  $30,210,218  $  $30,210,218  $11,277,718  $41,487,936 

66

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
3. InvestmentInvestments in Master FundsGraham K4D Trading Ltd. (continued)
 
The following schedule displays the condensed schedule of investments for K4D Trading as of September 30, 2012.March 31, 2013:
Description Principal Amount  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Fixed income securities         
Bonds (cost $124,973,143)         
United States         
U.S. Treasury bill 0.00% due 06/13/2013 $125,000,000  $124,985,964   61.97%
Total United States      124,985,964   61.97%
Total bonds      124,985,964   61.97%
Total fixed income securities     $124,985,964   61.97%
             
Derivative financial instruments            
Long contracts            
Futures            
Commodity     $(7,896,824)  (3.92)%
Currency      851,699   0.42%
Interest rate      (932,395)  (0.46)%
Foreign bond      19,685,680   9.76%
Foreign index      (2,546,292)  (1.26)%
U.S. bond      6,146,713   3.05%
U.S. index      13,149,000   6.52%
Total futures      28,457,581   14.11%
             
Forwards            
Foreign currency      1,016,425   0.50%
Total forwards      1,016,425   0.50%
             
Short contracts            
Futures            
Commodity      16,169,706   8.02%
Currency      140,392   0.07%
Interest rate      (31,761)  (0.02)%
Foreign bond      (1,683,088)  (0.83)%
Foreign index      176,922   0.09%
U.S. bond      (1,485,323)  (0.74)%
U.S. index      (247,924)  (0.12)%
Total futures      13,038,924   6.47%
             
Forwards            
Foreign currency      (12,302,712)  (6.10)%
Total forwards      (12,302,712)  (6.10)%
Total derivative financial instruments     $30,210,218   14.98%

Description Principal Amount  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Long contracts         
Bonds         
United States         
Treasury bill 11/23/12 $175,000,000  $174,981,321   68.50%
Total United States      174,981,321   68.50%
Total bonds *      174,981,321   68.50%
             
Futures            
U.S. bond      6,861,412   2.69%
Foreign bond      11,962,581   4.68%
U.S. index      3,335,419   1.31%
Foreign index      (12,174,169)  (4.78)%
Commodity      1,529,719   0.60%
Interest rate      1,318,819   0.52%
Currency      (340,477)  (0.13)%
Total futures      12,493,304   4.89%
             
Swaps            
Commodity futures      (1,120,153)  (0.44)%
Total swaps      (1,120,153)  (0.44)%
             
Forwards            
Foreign currency      1,077,464   0.42%
Total forwards      1,077,464   0.42%

*- The position is posted as collateral and is included in Due from broker on the Master Fund’s Statement of Financial Condition
 
7467

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investment in Master Funds (continued)
The following schedule displays the condensed schedule of investments for K4D Trading as of September 30, 2012.
Description 
Number
of Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd. (continued)         
Short contracts         
Futures         
U.S. bond    $(363,669)  (0.14)%
Foreign bond     (1,807,422)  (0.71)%
U.S. index     20,780   0.01%
Foreign index     1,009,602   0.40%
Aluminum December 2012  (2,927)  (13,999,420)  (5.48)%
Copper December 2012  (1,087)  (15,653,292)  (6.13)%
Other commodity      (13,641,280)  (5.34)%
Interest rate      (212,880)  (0.08)%
Currency      56,581   0.02%
Total futures      (44,591,000)  (17.45)%
             
Swaps            
Commodity futures      231,193   0.09%
Total swaps      231,193   0.09%
             
Forwards            
Foreign currency      (12,531,951)  (4.91)%
Total forwards      (12,531,951)  (4.91)%
             
Total     $130,540,178   51.10%

75

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 September 30, 2012:March 31, 2013:
 
Assets      
Level 1:      
Commodity futures $20,586,959 
Currency futures  1,260,054 
Equity securities  855,250 
Foreign bond futures  18,592,047 
Foreign index futures  9,609,819 
Interest rate futures  71,324 
U.S. bond futures $7,916,629   6,146,713 
Foreign bond futures  11,419,750 
U.S. index futures  4,359,540   13,149,000 
Foreign index futures  784,169 
Commodity futures  14,733,141 
Commodity futures swaps  2,847,975 
Interest rate futures  1,301,144 
Currency futures  316,292 
Total Level 1  43,678,640   70,271,166 
        
Level 2:        
Fixed income securities  124,985,964 
Foreign currency forwards  7,081,367   5,380,832 
Treasury bills  174,981,321 
Total Level 2  182,062,688   130,366,796 
Total assets $225,741,328  $200,637,962 
        
Liabilities        
Level 1:        
U.S. bond futures $(1,418,886)
Commodity futures $(12,314,077)
Currency futures  (267,963)
Foreign bond futures  (1,264,591)  (589,455)
Foreign index futures  (11,948,736)  (11,979,189)
Interest rate futures  (1,035,480)
U.S. bond futures  (1,485,323)
U.S. index futures  (1,003,341)  (247,924)
Commodity futures  (56,497,414)
Commodity futures swaps  (3,736,935)
Interest rate futures  (195,205)
Currency futures  (600,188)
Total Level 1  (76,665,296)  (27,919,411)
        
Level 2:        
Foreign currency forwards  (18,535,854)  (16,667,119)
Total Level 2  (18,535,854)  (16,667,119)
Total liabilities $(95,201,150) $(44,586,530)

 
7668

 
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 September 30, 2012March 31, 2013 categorized by primary underlying risk and is representative of the derivative positions held by K4D Trading throughout the period. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. K4D Trading trades futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of K4D Trading by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master FundK4D Trading and GAIT.GAIT II. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on K4D Trading’s statement of financial condition.
 
 Graham K4D Trading Ltd. 
 Long exposure  Short exposure        Graham K4D Trading Ltd. 
 
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative 
Assets
  
Derivative
Liabilities
  Long exposure  Short exposure       
                   
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
 
Commodity price                                    
Futures $1,198,556,564   14,445  $(713,150,209)  (11,271) $14,733,141  $(56,497,414) $433,953,216   6,764  $(745,232,168)  (12,587) $20,586,959  $(12,314,077)
Swaps  99,585,522   2,240   (5,016,150)  (142)  2,847,975   (3,736,935)
  1,298,142,086   16,685   (718,166,359)  (11,413)  17,581,116   (60,234,349)  433,953,216   6,764   (745,232,168)  (12,587)  20,586,959   (12,314,077)
                                                
Equity price                                                
Futures  1,540,721,894   20,511   (67,010,421)  (630)  5,143,709   (12,952,077)  1,603,347,336   21,498   (13,450,196)  (293)  22,510,895   (11,979,189)
  1,540,721,894   20,511   (67,010,421)  (630)  5,143,709   (12,952,077)  1,603,347,336   21,498   (13,450,196)  (293)  22,510,895   (11,979,189)
                                                
Foreign currency exchange rate                        Foreign currency exchange rate                     
Futures  244,905,230   2,329   (43,730,800)  (272)  316,292   (600,188)  241,477,410   2,794   (67,067,688)  (455)  1,260,054   (267,963)
Forwards  893,770,434   N/A   (905,224,921)  N/A   7,081,367   (18,535,854)  1,769,220   N/A   (13,055,508)  N/A   5,380,832   (16,667,119)
  1,138,675,664   2,329   (948,955,721)  (272)  7,397,659   (19,136,042)  243,246,630   2,794   (80,123,196)  (455)  6,640,886   (16,935,082)
                                                
Interest rate                                                
Futures  15,754,946,513   77,089   (529,612,076)  (1,744)  20,637,523   (2,878,682)  12,653,597,920   63,775   (181,044,311)  (1,092)  23,823,836   (2,124,010)
  15,754,946,513   77,089   (529,612,076)  (1,744)  20,637,523   (2,878,682)  12,653,597,920   63,775   (181,044,311)  (1,092)  23,823,836   (2,124,010)
Total $19,732,486,157   116,614  $(2,263,744,577)  (14,059) $50,760,007  $(95,201,150) $14,934,145,102   94,831  $(1,019,849,871)  (14,427) $73,562,576  $(43,352,358)
                                                
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions              $299,033,271 Collateral balances supporting all derivative positions              $170,611,559 

 
7769

 
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 nine month periodsperiod ended September 30, 2012.March 31, 2013:
 
  
Three Months Ended
September 30, 2012
  
Nine Months Ended
September 30, 2012
 
       
Net investment loss $(6,308) $(251,276)
         
Net realized gain on investments  71,425,119   66,459,854 
Net decrease in unrealized appreciation on investments  (56,755,770)  (72,542,140)
Brokerage commissions and fees  (727,408)  (3,683,095)
Net gain (loss) on investments  13,941,941   (9,765,381)
Net income (loss) $13,935,633  $(10,016,657)
Net investment income $5,727 
     
Net realized gain on investments  97,907,052 
Net increase in unrealized appreciation on investments  5,166,618 
Brokerage commissions and fees  (486,361)
Net gain on investments  102,587,309 
Net income $102,593,036 
 
The following table shows the gains and losses on all financial instruments held by the Master FundK4D Trading reported in net realized gain on investments and net decreaseincrease in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three and nine month periodsperiod ended September 30, 2012:March 31, 2013:
 
 
Three Months Ended
September 30, 2012
  
Nine Months Ended
September 30, 2012
 
      
Commodity price         
Futures $(63,225,657) $(81,607,114) $(17,404,730)
Swaps  19,663,691   14,841,875   (577,404)
  (43,561,966)  (66,765,239)  (17,982,134)
            
Equity price            
Equities  61,994 
Futures  (96,021)  45,742,293   101,503,652 
CME Membership  41,401,204   (178,371)
  41,305,183   45,563,922   101,565,646 
            
Foreign currency exchange rate            
Forwards  6,982,321 
Futures  (3,214,982)  (17,885,349)  3,389,816 
Forwards  (9,449,834)  (58,357,586)
  (12,664,816)  (76,242,935)  10,372,137 
            
Interest rate            
Bonds  22,066 
Futures  29,557,675   91,272,499   9,095,955 
Treasury bills  33,273   89,467 
  29,590,948   91,361,966   9,118,021 
Total $14,669,349  $(6,082,286) $103,073,670 

 
7870

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
3. InvestmentInvestments in Graham K4D Trading Ltd. (continued)
 
The following table summarizes the financial position of K4D Trading as of December 31, 2011.2012.
 
Assets:      
Due from brokers $307,111,336  $29,961,942 
Fixed income securities, at fair value  124,990,755 
Derivative financial instruments, at fair value  41,337,536   25,424,116 
CME Membership, at fair value  355,000   793,453 
Subscriptions receivable  34,651 
Total assets  348,838,523   181,170,266 
        
Liabilities:        
Derivative financial instruments, at fair value  15,255,976 
Redemptions payable  34,651 
Due to brokers  1,750,659 
Total liabilities  15,290,627   1,750,659 
Net assets $333,547,896  $179,419,607 
        
Percentage of K4D Trading held by GAIT II  3.90%  3.89%
When multiple derivative contracts are held with the same counterparty, K4D Trading will net the contracts in an asset position with the contracts in a liability position when covered by a master netting agreement or similar arrangements, for presentation in the statement of financial condition. The table below displays the amounts by which the fair values of both derivative assets and derivative liabilities were reduced within K4D Trading’s statement of financial condition as a result of this netting. Collateral pledged represents the further amounts by which derivative assets and liabilities could have been reduced on the statement of financial condition. K4D Trading elects to display the amounts in due to brokers on the statement of financial condition.
Description 
Gross
Amount
  
Gross Amount
Offset in the
Statement of
Financial Condition
  
Net Amount
Presented in the
Statement of
Financial Condition
  
Collateral
Pledged
  Net Amount 
                
Derivative assets $66,291,346  $(40,867,230) $25,424,116  $(1,750,659) $23,673,457 
Derivative liabilities  (40,867,230)  40,867,230          
  $25,424,116  $  $25,424,116  $(1,750,659) $23,673,457 

 
7971

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
3. InvestmentInvestments in Graham K4D Trading Ltd. (continued)
 
The following schedule displaysschedules display the condensed schedule of investments for K4D Trading as of December 31, 2011.2012.
 
Description Fair Value  
Percentage of
Net Assets of
K4D Trading
  
Principal Amount /
Number of Contracts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.               
Fixed income securities         
Bonds (cost $124,963,438)         
United States         
U.S. Treasury bill 0.00% due 03/14/13 $125,000,000  $124,990,755   69.66%
Total United States      124,990,755   69.66%
Total bonds      124,990,755   69.66%
            
Derivative financial instruments            
Long contracts                  
Futures                  
Nikkei 225 Index March 2013  2,254   11,197,084   6.24%
Topix Index March 2013  1,383   11,116,231   6.20%
Other foreign index      (1,641,221)  (0.92)%
Commodity      40,893   0.02%
Currency      19,615   0.01%
Interest rate      989,629   0.55%
Foreign bond      3,888,306   2.17%
U.S. bond $5,555,669   1.67%      372,289   0.21%
Foreign bond  15,262,571   4.58%
U.S. index  2,281,203   0.68%      345,055   0.19%
Foreign index  1,698,637   0.51%
Commodity  (255,745)  (0.08)%
Interest rate  903,752   0.27%
Currency  839,900   0.25%
Total futures  26,285,987   7.88%      26,327,881   14.67%
                    
Forwards                    
Foreign currency  8,206,755   2.46%      (1,692,952)  (0.94)%
Total forwards  8,206,755   2.46%      (1,692,952)  (0.94)%
        
Short contracts        
Futures        
Foreign bond  (7,404)  (0.00)%
U.S. index  5,540   0.00%
Foreign index  (1,563,165)  (0.47)%
Commodity  615,434   0.18%
Interest rate  (1,288,252)  (0.38)%
Currency  337,837   0.10%
Total futures  (1,900,010)  (0.57)%
        
Swaps        
Commodity  (15,255,976)  (4.57)%
Total swaps  (15,255,976)  (4.57)%
        
Forwards        
Foreign currency  8,744,804   2.62%
Total forwards  8,744,804   2.62%
        
Total $26,081,560   7.82%

 
8072

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Graham K4D Trading Ltd. (continued)
The following schedules display the condensed schedule of investments for K4D Trading as of December 31, 2012.
DescriptionNotional Amount Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd. (continued)       
Derivative financial instruments (continued)       
Short contracts       
Futures       
Foreign index  $(73,012)  (0.04)%
Commodity   (7,643,113)  (4.27)%
Currency   1,060,981   0.59%
Interest rate   (39,202)  (0.02)%
Foreign bond   (241,205)  (0.13)%
U.S. bond   243,652   0.14%
U.S. index   (353,828)  (0.20)%
Total futures   (7,045,727)  (3.93)%
          
Forwards         
U.S. dollar / Japanese Yen 03/21/13JPY(24,575,106,969)  9,839,401   5.48%
Other U.S. dollar / Japanese Yen 01/04/13 - 01/07/13  JPY(2,181,627,007)  105,135   0.06%
Other foreign currency   (2,109,622)  (1.17)%
Total forwards   7,834,914   4.37%
          
Total  $150,414,871   83.83%

73

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, 2011.2012:
 
Assets      
Level 1:      
U.S. bond futures $5,807,164  $927,920 
Foreign bond futures  15,262,571   7,253,098 
U.S. index futures  3,038,693   1,461,395 
Foreign index futures  1,954,287   23,920,199 
Commodity futures  15,602,465   10,650,606 
Interest rate futures  1,693,157   1,735,617 
Currency futures  1,406,611   1,104,266 
Equity securities  793,453 
Total Level 1  44,764,948   47,846,554 
        
Level 2:        
Foreign currency forwards  21,958,196   19,238,245 
Fixed income security  124,990,755 
Total Level 2  21,958,196   144,229,000 
Total assets $66,723,144  $192,075,554 
        
Liabilities        
Level 1:        
U.S. bond futures $(251,495) $(311,979)
Foreign bond futures  (7,404)  (3,605,997)
Foreign index futures  (3,321,117)
U.S. index futures  (751,950)  (1,470,168)
Foreign index futures  (1,818,815)
Commodity futures  (15,242,776)  (18,252,826)
Commodity swaps  (15,255,976)
Interest rate futures  (2,077,657)  (785,190)
Currency futures  (228,874)  (23,670)
Total Level 1  (35,634,947)  (27,770,947)
        
Level 2:        
Foreign currency forwards  (5,006,637)  (13,096,283)
Total Level 2  (5,006,637)  (13,096,283)
Total liabilities $(40,641,584) $(40,867,230)

 
8174

 
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, 20112012 categorized by primary underlying risk and is representative of the derivative positions held by K4D Trading throughout the period.year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. K4D Trading trades futures and options on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of K4D Trading by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master FundK4D Trading and GAIT II. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers and fixed income securities on K4D Trading’s statement of financial condition.
 
 Graham K4D Trading Ltd. 
 Long exposure  Short exposure        Graham K4D Trading Ltd. 
 
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
  Long exposure  Short exposure       
                   
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
 
Commodity price                                    
Futures $549,621,961   6,056  $(748,131,689)  (17,936) $15,602,465  $(15,242,776) $364,319,244   4,414  $(883,588,505)  (13,712) $10,650,606  $(18,252,826)
Swaps  -   -   (232,232,146)  (6,040)  -   (15,255,976)
  549,621,961   6,056   (980,363,835)  (23,976)  15,602,465   (30,498,752)  364,319,244   4,414   (883,588,505)  (13,712)  10,650,606   (18,252,826)
                                                
Equity price                                                
Futures  532,726,507   8,449   (283,517,405)  (4,519)  4,992,980   (2,570,765)  1,226,779,876   13,036   (106,770,515)  (1,893)  25,381,594   (4,791,285)
  532,726,507   8,449   (283,517,405)  (4,519)  4,992,980   (2,570,765)  1,226,779,876   13,036   (106,770,515)  (1,893)  25,381,594   (4,791,285)
                                                
Foreign currency exchange rate                        Foreign currency exchange rate                     
Futures  263,535,156   2,886   (55,089,450)  (348)  1,406,611   (228,874)  36,929,900   352   (136,511,977)  (1,624)  1,104,266   (23,670)
Forwards  1,473,161,901   N/A   (1,456,210,342)  N/A   21,958,196   (5,006,637)  1,526,791,218   N/A   (1,520,649,257)  N/A   19,238,245   (13,096,283)
  1,736,697,057   2,886   (1,511,299,792)  (348)  23,364,807   (5,235,511)  1,563,721,118   352   (1,657,161,234)  (1,624)  20,342,511   (13,119,953)
                                                
Interest rate                                                
Futures  11,861,168,194   60,131   (3,335,791,712)  (13,264)  22,762,892   (2,336,556)  9,571,876,106   45,765   (16,351,154)  (81)  9,916,635   (4,703,166)
  11,861,168,194   60,131   (3,335,791,712)  (13,264)  22,762,892   (2,336,556)  9,571,876,106   45,765   (16,351,154)  (81)  9,916,635   (4,703,166)
Total $14,680,213,719   77,522  $(6,110,972,744)  (42,107) $66,723,144  $(40,641,584) $12,726,696,344   63,567  $(2,663,871,408)  (17,310) $66,291,346  $(40,867,230)
                                     
Collateral balances supporting all derivative positionsCollateral balances supporting all derivative positions          $307,111,336 Collateral balances supporting all derivative positions              $153,202,038 

 
8275

 
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 nine month periodsperiod ended September 30, 2011.March 31, 2012.
 
 
Three Months Ended
September 30, 2011
  
Nine Months Ended
September 30, 2011
 
      
Net investment loss $(169,883) $(460,227) $(163,316)
            
Net realized loss on investments  (161,048,924)  (229,474,772)
Net increase (decrease) in unrealized appreciation on investments  26,144,203   (38,951,376)
Net realized gain on investments  58,121,648 
Net decrease in unrealized appreciation on investments  (19,255,098)
Brokerage commissions and fees  (3,638,203)  (10,568,353)  (1,724,083)
Net loss on investments  (138,542,924)  (278,994,501)  37,142,467 
Net loss $(138,712,807) $(279,454,728)
Net income $36,979,151 
 
The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net realized lossgain on investments and net increase (decrease)decrease in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three and nine month periodsperiod ended September 30, 2011:March 31, 2012:
 
 
Three Months Ended
September 30, 2011
  
Nine Months Ended
September 30, 2011
 
      
Commodity price         
Futures $(5,164,850) $(48,151,690) $23,543,861 
Swaps  2,104,346   2,104,346   1,355,801 
  (3,060,504)  (46,047,344)  24,899,662 
            
Equity price            
Futures  (134,617,931)  (202,948,060)  118,769,741 
NYMEX shares  (18,000)
  (134,617,931)  (202,948,060)  118,751,741 
            
Foreign currency exchange rate            
Futures  10,223,770   227,767   (9,299,984)
Forwards  (94,513,839)  (113,092,112)  (25,296,450)
  (84,290,069)  (112,864,345)  (34,596,434)
            
Interest rate            
Futures  87,063,783   93,433,601   (70,205,252)
Treasury bills  16,833 
  87,063,783   93,433,601   (70,188,419)
Total $(134,904,721) $(268,426,148) $38,866,550 

 
8376

 
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,Cash Assets, an entity for which the Manager is also the sole investment advisor. GCACash Assets 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 one to twenty-four months. GCACash Assets also maintains cash and cash equivalents on deposit with major U.S. institutions. GCACash Assets values all fixed income securities at amortized cost which approximates fair value. GAIT II’s investment in GCACash Assets 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’sCash Assets’ reported net asset value. GAIT II records its proportionate share of GCA’sCash Assets’ investment income and expenses on a monthly basis. For the three months ended September 30,March 31, 2013, the total amount recognized by GAIT II with respect to its investment in Cash Assets was $15,257. For the three months ended March 31, 2012, the total amount recognized by GAIT II with respect to its investment in GCA was $30,492. For the nine months ended September 30, 2012, the total amount recognized by GAIT II with respect to its investment in GCA was $100,644. For the three months ended September 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $81,771. For the nine months ended September 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $255,251.$37,236. These amounts are included in interest income in the statements of operations and managing member allocation. At September 30, 2012March 31, 2013 and December 31, 2011,2012, GAIT II owned approximately 1.07%0.67% and 2.00%0.85%, respectively, of GCA.Cash Assets. The following table summarizes the financial position of GCACash Assets as of September 30, 2012March 31, 2013 and December 31, 2011:2012:
 
 September 30, 2012  December 31, 2011  March 31, 2013  December 31, 2012 
Assets:            
Cash and cash equivalents $904,800,764  $556,557,151  $876,832,743  $968,228,634 
Investments in fixed income securities (cost $3,366,638,679 and $2,412,672,700 respectively)  3,366,638,679   2,412,672,700 
Accrued interest income  7,792,911   4,670,722 
Investments in fixed income securities (cost $2,917,185,054 and $3,041,387,608, respectively)  2,917,185,054   3,041,387,608 
Accrued interest receivable  7,023,150   5,989,305 
Total assets  4,279,232,354   2,973,900,573   3,801,040,947   4,015,605,547 
                
Liabilities:                
Other liabilities  9,990   29,450   15,004   9,300 
Total liabilities  9,990   29,450   15,004   9,300 
Net assets $4,279,222,364  $2,973,871,123  $3,801,025,943  $4,015,596,247 
 
The following table summarizes the results of operations of GCACash Assets for the three months ended March 31, 2013 and nine month periods ended September 30, 2012 and 2011:2012:
 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2012  2011  2012  2011  2013  2012 
Investment income                  
Interest income $2,748,540  $3,492,406  $7,600,101  $11,203,532  $2,127,133  $2,361,852 
Total investment income  2,748,540   3,492,406   7,600,101   11,203,532   2,127,133   2,361,852 
                        
Expenses:                        
Bank fee expense  30,845   127,380   92,482   386,034   33,653   24,103 
Total expenses  30,845   127,380   92,482   386,034   33,653   24,103 
Net investment income  2,717,695   3,365,026   7,507,619   10,817,498   2,093,480   2,337,749 
Net income $2,717,695  $3,365,026  $7,507,619  $10,817,498  $2,093,480  $2,337,749 

 
8477

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
4. Graham Cash Assets LLC (continued)
 
The following represents the condensed schedule of investments of GCACash Assets as of September 30, 2012:March 31, 2013:
 
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $3,366,638,679)         
United States         
FDIC Guaranteed Bonds (cost $328,522,436)         
FDIC guaranteed bonds     $328,522,436   7.68%
Total FDIC Guaranteed Bonds      328,522,436   7.68%
             
Government Bonds (cost $3,038,116,243)            
U.S. Treasury 0.13% - 2.50% due 10/31/2012 – 09/15/2014 3,025,000,000   3,038,116,243   71.00%
Total Government Bonds      3,038,116,243   71.00%
             
Total Investments in Fixed Income Securities     $3,366,638,679   78.68%
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $2,917,185,054)         
United States         
Government Bonds (cost $2,917,185,054)         
U.S. Treasury 0.50% due 05/31/13 $200,000,000  $200,100,675   5.26%
U.S. Treasury 0.13% - 2.75% due 04/15/13 – 02/15/15  2,700,000,000   2,717,084,379   71.49%
Total Government Bonds      2,917,185,054   76.75%
             
Total Investments in Fixed Income Securities     $2,917,185,054   76.75%
 
The following represents the condensed schedule of investments of GCACash Assets as of December 31, 2011:2012:
 
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $2,412,672,700)         
United States         
FDIC Guaranteed Bonds (cost $623,918,691)         
Citigroup Funding 1.88% – 2.25% due 04/30/12 –12/10/12 $374,364,000  $378,090,518   12.71%
Other FDIC guaranteed bonds      245,828,173   8.27%
Total FDIC Guaranteed Bonds      623,918,691   20.98%
             
Government Bonds (cost $1,788,754,009)            
U.S. Treasury 0.13% – 1.38% due 01/31/12 – 11/15/13  1,785,000,000   1,788,754,009   60.15%
Total Government Bonds      1,788,754,009   60.15%
             
Total Investments in Fixed Income Securities     $2,412,672,700   81.13%
Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities (cost $3,041,387,608)         
United States         
Government Bonds (cost $3,041,387,608)         
U.S. Treasury 0.13% - 2.63% due 01/15/13 – 12/31/14 $3,025,000,000  $3,041,387,608   75.74%
Total Government Bonds      3,041,387,608   75.74%
             
Total Investments in Fixed Income Securities     $3,041,387,608   75.74%

 
8578

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
4. Graham Cash Assets LLC (continued)
 
GCACash Assets 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 GCACash Assets as of September 30, 2012March 31, 2013 and December 31, 2011:2012:
 
 September 30, 2012  December 31, 2011  March 31, 2013  December 31, 2012 
Assets            
Level 2:            
Fixed income securities            
FDIC Guaranteed Bonds $328,522,436  $623,918,691 
Government Bonds  3,038,116,243   1,788,754,009  $2,917,185,054  $3,041,387,608 
Total fixed income securities  3,366,638,679   2,412,672,700   2,917,185,054   3,041,387,608 
Total Level 2  3,366,638,679   2,412,672,700   2,917,185,054   3,041,387,608 
Total assets $3,366,638,679  $2,412,672,700  $2,917,185,054  $3,041,387,608 
 
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.
 
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.
 
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.
 
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.
 
 
8679

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
6. Fees and Related Party Transactions
 
Advisory Fees
 
EachFor the three months ended March 31, 2013 and 2012 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 1.75% and 2%, respectively, 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
 
EachFor the three months ended March 31, 2013 and 2012, each Class of GAIT II other than Class M payspaid the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of 1% of its Net Asset Value,specified in the table below. This Sponsor Fee was payable monthly in arrears determinedcalculated as of the last business day of each month in the same manner as the Advisory Fee.
For the three months ended March 31, 2013 the Sponsor Fee listed below for Class 2 included a selling agent fee (the “Selling Agent Fee”) of 2%. The Selling Agent Fee represented a fee for initial and on-going service fees to the Feeder Funds selling agents.
  
Class2013 Annual Rate2012 Annual Rate
   
Class 00.75%1.00%
Class 22.75%1.00%
   
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. Additionally, any loss carryforward attributable to any class of GAIT II shall be proportionately reduced effective as of the date of any redemption of any Units of such class by multiplying the loss carryforward by the ratio that the amount of assets redeemed from such class bears to the net assets of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made to the Manager.
 
Brokerage Fees
 
EachFor the three months ended March 31, 2012, each Class of GAIT II other than Class M payspaid the Manager a brokerage fee (the “Brokerage Fee”) at thean annual rate specified in the table below. This Brokerage Fee iswas 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%
80


Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
6. Fees and Related Party Transactions (continued)
Brokerage Fees (continued)
In consideration of the Brokerage Fee, the Manager bearsassumed 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’sthe continuous offering of Units. To the extent GAIT II iswas allocated any of these expenses from the Master Fund,Funds in which it invested, the Manager will reimbursereimbursed GAIT II for those amounts. This reimbursement isThese reimbursements are included in commission reimbursements in the statements of operations and managing member allocation.
 

Graham Alternative Investment TradingAs of January 1, 2013 GAIT II LLC

Notes to Unaudited Financial Statements (continued)eliminated the Brokerage Fee and GAIT II incurred directly all costs previously covered by the Brokerage Fee.
 
6. Fees
Administrator’s Fee
For the three month period ended March 31, 2013, GAIT II paid SEI a monthly administrator’s fee based GAIT II’s net asset value, calculated as of the last business day of each month. In addition, GAIT II reimbursed SEI for reasonable out-of-pocket expenses incurred on behalf of GAIT II. The total administrator’s fees incurred by GAIT II for the three month periods ended March 31, 2013 and Related Party Transactions (continued)2012 were $10,028 and $0, respectively, of which $3,117 and $0 were accrued as of March 31, 2013 and 2012, respectively.
 
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.
 
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. Financial Highlights
The following is the per unit operating performance calculation for the three month periods ended September 30, 2012 and 2011:

  Class 0  Class 2 
Per unit operating performance:      
Net asset value per unit, June 30, 2011 $95.59  $91.69 
Net loss:        
Net investment loss  (1.12)  (1.49)
Net loss on investments  (5.09)  (4.90)
Net loss  (6.21)  (6.39)
Net asset value per unit, September 30, 2011 $89.38  $85.30 
         
Net asset value per unit, June 30, 2012 $78.23  $73.54 
Net loss:        
Net investment loss  (1.04)  (1.31)
Net gain on investments  0.80   0.71 
Net loss  (0.24)  (0.60)
Net asset value per unit, September 30, 2012 $77.99  $72.94 

 
8881

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
8. Financial Highlights (continued)
 
The following is the per unit operating performance calculation for the three month periods ended March 31, 2013 and 2012:

  Class 0  Class 2 
Per unit operating performance      
Net asset value per unit, December 31, 2011 $81.35  $77.24 
Net gain:        
Net investment loss  (0.92)  (1.27)
Net gain on investments  1.89   1.80 
Net gain  0.97   0.53 
Net asset value per unit, March 31, 2012 $82.32  $77.77 
         
Net asset value per unit, December 31, 2012 $73.46  $68.36 
Net gain:        
Net investment loss  (0.65)  (0.93)
Net gain on investments  7.81   7.24 
Net gain  7.16   6.31 
Net asset value per unit, March 31, 2013 $80.62  $74.67 

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the three month periods ended September 30, 2012March 31, 2013 and 2011:2012:
 
 Class 0 Class 2 Class 0  Class 2 
 2012 2011 2012 2011 2013  2012  2013  2012 
                        
Total return before Incentive Allocation  (0.31)%  (6.50)%  (0.82)%  (6.97)%  9.75%  1.19%  9.23%  0.69%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (0.31)%  (6.50)%  (0.82)%  (6.97)%  9.75%  1.19%  9.23%  0.69%
                                
Net investment loss before Incentive Allocation  (1.29)%  (1.17)%  (1.74)%  (1.63)%  (0.88)%  (1.13)%  (1.36)%  (1.64)%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.29)%  (1.17)%  (1.74)%  (1.63)%  (0.88)%  (1.13)%  (1.36)%  (1.64)%
                                
Total expenses before Incentive Allocation  1.37%  1.35%  1.81%  1.82%  0.90%  1.27%  1.40%  1.78%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.37%*  1.35%*  1.81%*  1.82%*  0.90%  1.27%*  1.40%  1.78%*
 
*- The percentages noted above represent total gross expenses before commission reimbursements, (See Note 6), which represent 0.05%0.11% of average members’ capital for 2012 and 0.12% of average members’ capital for 2011.the three month period ended March 31, 2012.
 
The following is the per unit operating performance calculation for the nine month periods ended September 30, 2012 and 2011:
  Class 0  Class 2 
Per unit operating performance:      
Net asset value per unit, December 31, 2010 $102.92  $99.72 
Net loss:        
Net investment loss  (3.43)  (4.73)
Net loss on investments  (10.11)  (9.69)
Net loss  (13.54)  (14.42)
Net asset value per unit, September 30, 2011 $89.38  $85.30 
         
Net asset value per unit, December 31, 2011 $81.35  $77.24 
Net loss:        
Net investment loss  (2.89)  (3.83)
Net loss on investments  (0.47)  (0.47)
Net loss  (3.36)  (4.30)
Net asset value per unit, September 30, 2012 $77.99  $72.94 

 
8982

 
Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)
 
9.8. Financial Highlights (continued)
 
The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the nine month periods ended September 30, 2012 and 2011:
  Class 0 Class 2
  2012 2011 2012 2011
             
Total return before Incentive Allocation  (4.13)%  (13.15)%  (5.57)%  (14.45)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Total return after Incentive Allocation  (4.13)%  (13.16)%  (5.57)%  (14.46)%
                 
Net investment loss before Incentive Allocation  (3.53)%  (3.32)%  (4.98)%  (4.73)%
Incentive Allocation  0.00   (0.01)  0.00   (0.01)
Net investment loss after Incentive Allocation  (3.53)%  (3.33)%  (4.98)%  (4.74)%
                 
Total expenses before Incentive Allocation  3.89%  3.93%  5.33%  5.45%
Incentive Allocation  0.00   0.01   0.00   0.01 
Total expenses after Incentive Allocation  3.89%*  3.94%*  5.33%*  5.46%*
*- The percentages above represent total gross expenses before commission reimbursements (See Note 6), which represent 0.25% of average members’ capital for 2012 and 0.48% of average members’ capital for 2011.
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 period.period and has not been annualized. 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 net investment lossincome (loss) and expenses allocated from the Master Fund and GCA.investment income from Cash Assets. These ratios have not been annualized. The computation of such ratios is based on the amount of net investment loss,income (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 nine month periods ended September 30, 2012March 31, 2013 and 2011.2012.
 
9. Subsequent Events
 
GAIT II had subscriptions of approximately $0.1 million$10,000 and redemptions of approximately $1.5$0.5 million through November 14, 2012,May 15, 2013, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.

 
9083

 
Item 2. Management’s Discussion

Forward-Looking Statements

Certain statements within this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA, and, Analysisother than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical facts. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of Financial Conditionwords such as “may,” “will,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “continue,” “further,” “seek,” “plan,” or “project” and Resultsvariations of Operationsthese words or comparable words or phrases of similar meaning. These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside our control that may cause actual results to differ materially from those projected. We undertake no obligation to update publicly or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

(a)Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
ReferenceThe following is made toa discussion of our current financial position and results of operations. This discussion should be read together with our Annual Report on Form 10-K, dated March 28, 2013.  This discussion should also be read in conjunction with “Item 1: Financial Statements.”  The information contained therein is essential to, and should be read in conjunction with, the following analysis.  For the purposes of this filing, the term “Fund” shall include each of GAIF I, the GAIT Funds and the master funds in which they invest, unless the context implies otherwise.  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 (“Cash Assets”), 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 September 30, 2012March 31, 2013 the Fund’s net asset value decreased by $33,279,656$19,025,042 or -12.6%-10.2%.  This decrease was attributable to a $24,032,613$18,103,430 or -9.1%-9.7% net decrease in the Blended Strategies Portfolio and a $9,247,043$921,612 or -3.5%-0.5% net decrease in the Systematic Strategies Portfolio.  The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $3,602,000$2,296,886 or 1.4%1.2% and net income of $10,586,996 or 5.7% offset by redemptions totaling $24,245,883$30,987,312 or -9.2% and a net loss of $3,388,730 or -1.3%-16.6%, for the period.  The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptionsnet income of $80,000$1,626,538 or 0.1%0.9% offset by redemptions totaling $9,268,821$2,548,150 or -3.5% and a net loss of $58,222 or -0.1%-1.4%, for the period.

For the ninethree months ended September 30,March 31, 2012 the Fund’s net asset value decreased by $78,825,165$12,999,726 or -25.4%-4.2%.  This decrease was attributable to a $62,675,460$10,168,316 or -20.2%-3.3% net decrease in the Blended Strategies Portfolio and a $16,149,705$2,831,410 or -5.2%-0.9% net decrease in the Systematic Strategies Portfolio.  The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $8,804,469$1,636,540 or 2.8%0.5% and net income of $6,089,653 or 2.0% offset by redemptions totaling $59,357,704$17,894,509 or -19.1% and net a loss of $12,122,225 or -3.9%-5.8%, for the period.  The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptions of $608,000$178,000 or 0.2%0.1% and net income of $459,375 or 0.1% offset by redemptions totaling $14,972,506 or -4.8% and a net loss of $1,785,199 or -0.6%, for the period.

For the three months ended September 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$3,468,785 or -1.1%, for the period.

For the nine months ended September 30, 2011 the Fund’s net asset value increased by $6,968,140 or 2.1%.  This increase was attributable to a $2,216,819 or 0.7% net increase in the Blended Strategies Portfolio and a $4,751,321 or 1.4% net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $81,052,467 or 24.0% partially offset by redemptions totaling $59,571,342 or -17.6% and net a loss of $19,264,306 or -5.7%, for the period.  The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $22,880,918 or 6.8% partially offset by redemptions totaling $9,328,076 or -2.8% and a net loss of $8,801,521 or -2.6%, for the period.


 (i)(ii) 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.

Blended Strategies Portfolio

20122013 Summary

Three Months Ended September 30, 2012March 31, 2013

For the three months ended September 30, 2012,March 31, 2013, the Blended Strategies Portfolio experienced net trading lossesgains of $474,488. This amount includes a reimbursement from the Advisor of $435,168 for trading commissions allocated from the Master Funds.$12,234,308. The trading results prior to the commission reimbursement, were a loss of $909,656 which isare attributable to the following sectors:

Agriculture / Softs $(651,370) $(800,458)
Base metals  (2,915,882)  (334,208)
Energy  (343,282)  (3,065,286)
Equities  2,760,915   9,287,432 
Foreign exchange  (977,565)  6,239,752 
Long term / intermediate rates  346,255   121,003 
Precious metals  (817,063)  582,534 
Short term rates  1,688,336   203,539 
 $(909,656) $12,234,308 

The Blended Strategies Portfolio postedrecorded a solid net lossgain for the first quarter of 2013. The majority of the gains were driven by positions in Asian, U.S. and European equity index futures. The portfolio recorded profits from trading forforeign exchange, with noteworthy gains from positions in the third quarter of 2012, with the largest losses driven by systematic trading in metals. The portfolio incurred smaller losses in precious metals as gains in gold were more than offset by losses in silver. Currency trading negatively impacted the Portfolio as the euroJapanese yen, Mexican peso and Swiss franc reversed their recent trend lower and strengthened sharplyCanadian dollar versus the U.S. dollar.  The portfolio incurred losses in soft commodities as coffee and cocoa prices increased while sugar prices declined during the quarter. Small losses also resulted in energy as gains in gasoline were more than offset by losses in heating oil and crude oil. The portfolio benefitted from the equity rally, withSmaller gains in the U.S.foreign exchange sector were recorded from trading various European currency crosses. Trading in precious metals also led to modest gains for the portfolio, while losses in energy, base metals, and European stock index futures that helped mitigateagricultural commodities offset a portion of the overall lossesgains for the quarter. Modest profits also resulted from trading U.S. and European fixed income futures.

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, 2012,March 31, 2013, Advisory Fees decreased by $619,599 or -46.9%, Brokerage Fees decreased by $642,429$1,515,874 or -33.0%, Advisory Fees decreased by $568,127 or -33.3%-100.0% and Sponsor Fees decreased by $284,065$236,274 or -33.3%-35.8% in the Blended Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions and net income offset by redemptions and a net loss for the period. Additionally, the Brokerage Fees were eliminated in 2013 and the Advisory Fees were reduced by 0.25% for each class of units from 2% in 2012 to 1.75% in 2013. During the same period interest income decreased by $169,369$59,101 or -59.3%-43.1%. Interest was earned on free cash at an average annualized yield of 0.25%0.23% for the three months ended September 30, 2012March 31, 2013 compared to 0.42%0.25% for the same period in 2011.2012.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended September 30,March 31, 2013 and 2012 and 2011the portfolio has not yet recovered previous losses. As a result, there was no Incentive Allocation due to the portfolio’s lack of profitability.
Nine Months Ended September 30, 2012

For the nine months ended September 30, 2012, the Blended Strategies Portfolio experienced net trading losses of $2,705,122. This amount includes a reimbursement from the Advisor of $1,689,009 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $4,394,131 which is attributable to the following sectors:

Agriculture / Softs $(2,469,342)
Base metals  (6,098,364)
Energy  1,118,984 
Equities  3,235,232 
Foreign exchange  (8,392,127)
Long term / intermediate rates  7,100,745 
Precious metals  (1,398,489)
Short term rates  2,509,230 
  $(4,394,131)

The Blended Strategies Portfolio posted a net loss from trading for the first three quarters of 2012. The largest losses resulted from trading European currencies. The portfolio also experienced losses in metals as short positions in aluminum, zinc, gold and silver negatively impacted the portfolio. Trading in agricultural commodities led to losses, particularly in livestock and sugar. Positions in the fixed income sector benefitted the portfolio, with gains in European, Australian, Asian and U.S. fixed income futures.  The rally in U.S. and European equity indices generated profits for the portfolio, which also helped to mitigate a portion of the year-to-date 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 nine months ended September 30, 2012, Brokerage Fees decreased by $1,482,609 or -26.0%, Advisory Fees decreased by $1,299,106 or -26.1% and Sponsor Fees decreased by $649,555 or -26.1% in the Blended Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions offset by redemptions and a net loss for the period. During the same period interest income decreased by $574,172 or -60.4%. Interest was earned on free cash at an average annualized yield of 0.26% for the nine months ended September 30, 2012 compared to 0.46% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio.  For the nine months ended September 30, 2012, there was no Incentive Allocation compared to $31,172 for the corresponding period in 2011 due to the portfolio’s lack of year to date profitability when compared to the corresponding period in 2011.those periods.

 
9385


The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of September 30, 2012March 31, 2013 based on the fair value of the underlying assets and liabilities in each master fundMaster Fund including both long and short positions. Positive percentages represent net assets whereas negative percentages represent a net liability.

Agriculture / Softs  11.01.5%
Base metals  44.9(2.7)%
Energy  34.9(0.4)%
Equities  5.710.9%
Foreign exchange  20.820.6%
Long term / intermediate rates  (11.772.4%)
Precious metals  (2.91.1%)
Short term rates  (2.73.4)%)
   100.0%

20112012 Summary

Three Months Ended September 30, 2011

For the three months ended September 30, 2011,March 31, 2012, the Blended Strategies Portfolio experienced net trading gains of $1,265,419. This amount includes a reimbursement from the Advisor of $859,315 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a gain of $406,104 which is$9,472,909 attributable to the following sectors:

Agriculture $(2,901,794)
Energy  (2,552,902)
Foreign exchange  (5,923,140)
Interest rates  15,650,854 
Metals  9,100,883 
Softs  (1,384,464)
Stock index  (11,583,333)
  $406,104 
Agriculture / Softs $(1,008,654)
Base metals  (3,329,971)
Energy  15,135,640 
Equities  10,623,609 
Foreign exchange  (3,404,428)
Long Term / intermediate rates  (7,667,567)
Precious metals  (640,089)
Short term rates  (235,631)
  $9,472,909 
 
The portfolio recognizedBlended Strategies Portfolio posted a net gain for the most significantfirst quarter of 2012 with profits from both systematic and discretionary trading.  The majority of the positive performance resulted from trading gains in interest rates amidst increased safe haven demand during the period.  Gains were recorded in metals as gold and silver reached record highs before falling off in the later part ofenergy markets due to the period.steep drop in natural gas prices that resulted from unseasonably mild weather in the U.S. and abundant supply.  The portfolio also recorded profits from trading crude oil as prices climbed due to rising tensions in the Middle East.  Additional gains resulted from positions in U.S., Asian and European equity indices as the portfolio benefitted from the rally in risk assets. The portfolio recorded losses in stock indices as prices fell on a retreating appetiteother sectors, which offset some of the overall gains for risk among investors.the quarter.  Losses were recognizedresulted from fixed income trading amidst declining prospects of quantitative easing in the U.S. The portfolio also incurred losses in foreign exchange, trading as the U.S. dollar strengthened against most emerging market and commodity currenciesparticularly in the middle of the period. Smaller losses were recorded in agriculture, softsEuro, Swiss franc and energy on dramatic price moves in corn and soybeansBritish pound as well as plummetingin base metals amidst rising prices.  Trading in agricultural and soft commodities led to modest losses as prices in energy products.were mixed during the quarter.

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,March 31, 2012, Brokerage Fees increaseddecreased by $500,563$317,520 or 34.6%-17.3%, Advisory Fees increaseddecreased by $465,372$273,219 or 37.5%-17.2% and Sponsor Fees increaseddecreased by $232,686$136,609 or 37.5%-17.2%% in the Blended Strategies Portfolio over the corresponding period of the preceding year.   These increasesdecreases are all attributable to higherlower net assets of the portfolio resulting from subscriptionsredemptions partially offset by redemptionssubscriptions and a net lossincome for the period. During the same period interest income decreased by $346,239$194,260 or -54.8%-58.6%.  Interest was earned on free cash at an average annualized yield of 0.42%0.28% for the three months ended September 30, 2011March 31, 2012 compared to 0.60%0.49% for the same period in 2010.2011.

 
9486


The Incentive Allocation is based on the New High Net Trading Profits of the portfolio.  For the three months ended September 30, 2011March 31, 2012 there was no Incentive Allocation compared to $762,334$7,813 for the corresponding period in 20102011 due to the portfolio’s lack of year to date profitability when compared to the corresponding period in 2010.

Nine Months Ended September 30, 2011

For the nine months ended September 30, 2011, the Blended Strategies Portfolio experienced net trading losses of $6,917,017. This amount includes a reimbursement from the Advisor of $2,529,940 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $9,446,957 which is attributable to the following sectors:
Agriculture $(1,988,054)
Energy  (4,669,873)
Foreign exchange  (8,911,630)
Interest rates  14,126,354 
Metals  8,897,093 
Softs  (1,390,417)
Stock index  (15,510,430)
  $(9,446,957)
The portfolio recorded a net loss from trading for the period in stock 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.  Market reversals generated significant losses particularly in European stock indices. Losses were also recognized in the second quarter as advances early in the quarter on encouraging earnings data and hopes of a global economic recovery were reversed causing prices to fall in a sharp reduction of risk across various markets.  This pattern continued in the third quarter and the portfolio recorded losses as stock prices fell due to a retreating appetite for risk. Foreign exchange posted losses early in the period from trading in Asian currencies in March and later in the period as gains recognized when the U.S. dollar fell 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 market and commodity currencies.  The portfolio recorded a net loss for the period in energy as gains from the first quarter on rising oil prices amid increasing political tensions in the Middle East and Libya were overshadowed by losses in the second quarter as prices moved sharply downward in reaction to the announced release of strategic oil reserves in June. The portfolio generated gains in interest rates led by gains in the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets and increased safe haven demand.  Gains were recognized in metals as prices rose in the beginning of the second quarter and continued into the third quarter with gold and silver reaching record highs before falling off in the latter part of the third quarter. The portfolio also recognized small 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 nine months ended September 30, 2011, Brokerage Fees increased by $1,826,817 or 47.1%, Advisory Fees increased by $1,679,227 or 50.8% and Sponsor Fees increased by $839,615 or 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 $797,307 or -45.6%.  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 nine months ended September 30, 2011, the Incentive Allocation decreased by $730,620 when compared to the corresponding period of 2010 due to the portfolio’s lack of year to date profitability when compared to the corresponding period of 2010.2012.

The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of September 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(35.9%)
Energy56.8%
Foreign exchange(16.9%)
Interest rates(73.6%)
Metals68.2%
Softs116.5%
Stock index(15.1)%
100.0%

Systematic Strategies Portfolio

2012 Summary

Three Months Ended September 30, 2012

For the three months ended September 30, 2012, the Systematic Strategies Portfolio experienced net trading gains of $514,435. This amount includes a reimbursement from the Advisor of $18,753 for trading commissions allocated from the Master funds. The trading results, prior to the commission reimbursement, were a gain of $495,682 which is attributable to the following sectors:

Agriculture / Softs $272,464 
Base metals  (904,361)
Energy  (203,796)
Equities  1,026,910 
Foreign exchange  (297,873)
Long term / intermediate rates  271,027 
Precious metals  (200,411)
Short term rates  531,722 
  $495,682 

The Systematic Strategies Portfolio posted a net gain from trading for the third quarter of 2012, with the largest gains resulting from the equity rally, with gains in U.S. and European stock index futures which helped mitigate a portion of the overall losses for the quarter. The portfolio recorded profits in agricultural commodities, including gains in wheat, soybeans, and corn. Profits also resulted from positions in U.S. and European fixed income futures. The largest losses resulted from short positions in base metals as renewed confidence in Europe sparked rallies in copper, aluminum, and zinc prices. The portfolio also incurred smaller losses in precious metals as gains in gold were more than offset by losses in silver. Currency trading negatively impacted the Fund as the euro and Swiss franc reversed their recent trend lower and strengthened sharply versus the U.S. dollar. Small losses resulted in energy as profits in gasoline were more than offset by losses from trading heating oil, natural gas, and crude oil.

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, 2012, Brokerage Fees decreased by $140,315 or -33.2%, Advisory Fees decreased by $102,606 or -34.0% and Sponsor Fees decreased by $51,304 or -34.0% in the Systematic Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions offset by redemptions and a net loss for the period. During the same period interest income decreased by $33,897 or -62.6%. Interest was earned on free cash at an average annualized yield of 0.25% for the three months ended September 30, 2012 compared to 0.42% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended September 30, 2012 and 2011 there was no Incentive Allocation due to the portfolio’s lack of profitability.

Nine Months Ended September 30, 2012

For the nine months ended September 30, 2012, the Systematic Strategies Portfolio experienced net trading gains of $30,349. This amount includes a reimbursement from the Advisor of $101,159 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $70,810 which is attributable to the following sectors:

Agriculture / Softs $(91,516)
Base metals  (1,375,343)
Energy  (194,933)
Equities  1,266,244 
Foreign exchange  (2,234,353)
Long term / intermediate rates  2,213,945 
Precious metals  (178,416)
Short term rates  523,562 
  $(70,810)

The Systematic Strategies Portfolio posted a net loss from trading for the first three quarters of 2012, prior to the commission reimbursement. The largest losses resulted from positions in European currencies. The Fund also incurred losses from trading in base metals as aluminum, zinc and copper prices moved in a trendless pattern for most of the period.  Trading in gas oil, heating oil and crude oil led to losses in the energy sector for the portfolio. The portfolio recorded gains in European, Australian, Asian and U.S. fixed income futures on a year-to-date basis, which helped to offset a portion of the overall losses during the period. Through September, the global equity rally also benefitted the portfolio, with gains in the U.S. and European stock index futures.

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, 2012, Brokerage Fees decreased by $333,592 or -26.9%, Advisory Fees decreased by $249,538 or -28.1% and Sponsor Fees decreased by $124,769 or -28.1% in the Systematic Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions offset by redemptions and a net loss for the period. During the same period interest income decreased by $106,786 or -61.5%. Interest was earned on free cash at an average annualized yield of 0.26% for the nine months ended September 30, 2012 compared to 0.46% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio.  For the nine months ended September 30, 2012 there was no Incentive Allocation compared to $11,821 for the corresponding period in 2011 due to the portfolio’s lack of year to date profitability when compared to the corresponding period in 2011.
The following table illustrates the sector distribution of the Systematic Strategies Portfolio’s investments in Master Funds as of September 30,March 31, 2012 based on the fair value of the underlying assets and liabilities in each master fundMaster Fund including both long and short positions.  Positive percentages represent net assets whereas negative percentages represent a net liability.

Agriculture / Softs  25.225.5%
Base metals  80.714.7%
Energy  (1.460.7%)
Equities  17.6174.1%
Foreign exchange  26.457.1%
Long Term / intermediate rates  (37.572.1%)
Precious metals  (8.50.4%)
Short term rates  (2.538.2%)
   100.0%

2011Systematic Strategies Portfolio

2013 Summary

Three Months Ended September 30, 2011March 31, 2013

For the three months ended September 30, 2011,March 31, 2013, the Systematic Strategies Portfolio experienced net trading lossesgains of $3,294,560. This amount includes a reimbursement from the Advisor of $90,257 for trading commissions allocated from the Master Funds.$1,840,706. The trading results prior to the commission reimbursement, were a loss of $3,384,817 which isare attributable to the following sectors:

Agriculture $(362,644)
Energy  (669,491)
Foreign exchange  (2,036,400)
Interest rates  2,073,051 
Metals  1,162,069 
Softs  (270,931)
Stock index  (3,280,471)
  $(3,384,817)
Agriculture / Softs $28,594 
Base metals  (75,439)
Energy  (480,173)
Equities  1,890,253 
Foreign exchange  197,488 
Long term / intermediate rates  98,058 
Precious metals  186,374 
Short term rates  (4,449)
  $1,840,706 

The Systematic Strategies Portfolio posted a net gain for the first quarter of 2013. The majority of the gains were driven by positions in U.S., Asian and European equity index futures. The portfolio recognized significant lossesalso recorded gains in stock indices 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 U.S. and European markets.  Losses were recorded in foreign exchange as early gains were erased mid quarter when entrenched, long-term market trends reversedsector, particularly from positions in the Japanese yen, Mexican peso, and investors sold commodity currencies aggressively in favor ofCanadian dollar versus the U.S. dollar. While positionsTrading in precious metals also contributed to gains. Losses from trading in the Swiss franc provided some safe havenenergy and base metals sectors offset a portion of the overall gains 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.

 
9887


For the three months ended September 30, 2011,March 31, 2013 Advisory Fees decreased by $150,898 or -66.1%, Brokerage Fees increaseddecreased by $131,505$324,236 or 45.2%, Advisory Fees increased by $96,822 or 47.3%-100.0% and Sponsor Fees increaseddecreased by $48,411$27,968 or 47.3%-24.5% in the Systematic Strategies Portfolio over the corresponding period of the preceding year. These increasesdecreases are all attributable to higherlower net assets of the portfolio resulting from subscriptions partiallyand net income offset by redemptions and a net loss for the period. Additionally, the Brokerage Fees were eliminated in 2013 and the Advisory Fees were reduced by 0.25% for each class of units from 2% in 2012 to 1.75% in 2013. During the same period, interest income decreased by $49,563$15,935 or -47.8%-64.6%. Interest was earned on free cash at an average annualized yield of 0.42%0.23% for the three months ended September 30, 2011March 31, 2013 compared to 0.60%0.25% for the same period in 2010.2012.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period.portfolio. For the three months ended September 30, 2011March 31, 2013 and 20102012 the portfolio has not yet recovered previous losses. As a result, there was no Incentive Allocation due to the portfolio's lack of profitability.for those periods.

Nine Months Ended September 30, 2011The following table illustrates the sector distribution of the Systematic Strategies Portfolio’s investments in Master Funds as of March 31, 2013 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 / Softs4.5%
Base metals(1.2)%
Energy0.3%
Equities6.8%
Foreign exchange(6.6)%
Long Term / intermediate rates95.1%
Precious metals1.7%
Short term rates(0.6)%
100.0%

2012 Summary

For the ninethree months ended September 30, 2011,March 31, 2012, the Systematic Strategies Portfolio experienced net trading lossesgains of $6,374,148. This amount includes a reimbursement from the Advisor of $272,840 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $6,646,988 which is$1,106,440 attributable to the following sectors:

Agriculture $(712,624)
Energy  (1,326,115)
Foreign exchange  (2,756,699)
Interest rates  2,117,703 
Metals  1,291,799 
Softs  (366,707)
Stock index  (4,894,344)
  $(6,646,988)
Agriculture / Softs $(392,773)
Base metals  (782,181)
Energy  2,154,434 
Equities  3,456,959 
Foreign exchange  (1,048,694)
Long Term / intermediate rates  (1,867,517)
Precious metals  (315,654)
Short term rates  (98,134)
  $1,106,440 

Stock indices generated overall lossesThe Systematic Strategies Portfolio posted a net gain 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 volatility2012. Performance 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.  Whilewas primarily driven by profitable 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.global equity indices. The portfolio was ablealso recorded gains from trading crude oil and oil products as prices rose due to generate profits in energy in the first quarter notably in crudeconcerns over inventory levels and heating oil as continuedrising tensions in the Middle East drove energy price higher.  These profits were offset by larger losses generatedEast. The steep drop in natural gas prices also benefitted the portfolio on the back of warmer weather and ample supplies, which fueled further gains in the second quarter as prices moved sharply downwardenergy sector. Losses resulted from trading global fixed income, particularly in reaction to the announced releaseU.S., amidst diminished hopes for further quantitative easing, which offset some of strategic oil reserves in June.the portfolio’s overall gain. Losses were recognizedalso incurred in the third quartermetals markets amidst rising base metal prices and a sharp sell-off in gold on the last day of February.  Losses from positions in the Euro, Swiss franc and British pound as well as agricultural and soft commodities also offset a portion of the lack of sustained direction in the energy sector provided a difficult trading environmentportfolio’s net gains 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 riskier 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.

 
9988

 
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 ninethree months ended September 30, 2011,March 31, 2012, Brokerage Fees increaseddecreased by $466,456$67,246 or 60.4%-17.2%, Advisory Fees increaseddecreased by $338,319$52,090 or 61.6%-18.6% and Sponsor Fees increaseddecreased by $169,159$26,045 or 61.6%-18.6% in the Systematic Strategies Portfolio over the corresponding period of the preceding year.   These increasesdecreases are all attributable to higherlower net assets of the portfolio resulting from subscriptions,redemptions partially offset by redemptionssubscriptions and a net lossincome for the period. During the same period interest income decreased by $111,308$32,614 or -39.1%-56.9%.  Interest was earned on free cash at an average annualized yield of 0.46%0.28% for the ninethree months ended September 30, 2011March 31, 2012 compared to 0.61%0.49% for the same period in 2010.2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period.portfolio.  For the ninethree months ended September 30, 2011March 31, 2012 there was no Incentive Allocation increased by $11,821,due to unrecovered previous losses compared to zero,$3,007 for the corresponding period of 2010 related to shares redeemed when the portfolio was in a period of New High Net Trading Profits.2011.

The following table illustrates the sector distribution of the SystematicBlended Strategies Portfolio’s investments in Master Funds as of September 30, 2011March 31, 2012 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 / Softs  55.368.6%
Base metals38.5%
Energy  125.9(151.5%)
Equities412.6%
Foreign exchange  (86.1190.6%)
InterestLong Term / intermediate rates  (210.19.3%)
Metals259.3%
Softs6.3%
Stock indexPrecious metals  (50.613.5%)
Short term rates(54.8%)
   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
 
There are no known demands, commitments, events or uncertainties that will result in or are reasonably likely to result in the Fund’s liquidity increasing or decreasing in any material way.

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
 
September 30, 2012  17.38%   16.83% 
December 31, 2011  21.61%   18.83% 
September 30, 2011  14.98%   9.42% 
  
Blended Strategies
Portfolio
  
Systematic Strategies
Portfolio
 
March 31, 2013 19.18%  19.07% 
December 31, 2012 16.47%  17.00% 
March 31, 2012 22.70%  18.67% 

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 September 30, 2012,March 31, 2013, 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.
 
 
10291

 
No disclosure is required hereunder as the Fund is a “smaller reporting company”, as defined in Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Required.10(f)(1) of regulation S-K.
 
 
10392

 


 
PART II. OTHER INFORMATION
Item 1.
Item 1.
None

Item 1A.
Item 1A.
Not Required

For the three months ended September 30, 2012,March 31, 2013, the Fund issued 32,300.80120,175.437 Units in exchange for $3,602,000$2,296,886 with respect to the Blended Strategies Portfolio and 1,066.7180.000 Units in exchange for $80,000 with respect to the Systematic Strategies Portfolio, in each case in a transaction that was not registered under the Securities Act of 1933, as amended (the “Act”). The Units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Act and Section 506 of Regulation D promulgated thereunder.

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

  Blended Strategies Portfolio Systematic Strategies Portfolio
  Total Total
  Number of Number of
  Units Purchased Units Purchased
Period (as of)     
July 1, 2012  5,829.349   747.936 
August 1, 2012  12,945.975   318.782 
September 1, 2012  13,525.477   0.000 
Item 3. Defaults Upon Senior Securities – None
  Blended Strategies Portfolio Systematic Strategies Portfolio 
  Total Total 
  Number of Number of 
  Units Purchased Units Purchased 
Period (as of)     
January 1, 2013 7,038.866 0.000 
February 1, 2013 1,843.129 0.000 
March 1, 2013 11,293.442 0.000 

Item 4. [Removed and Reserved]
Item 3.

Item 5. Other Information – None
Item 4.


 
10594

 
Item 6. Exhibits

Item 6.
* 3.1Amendment to Certificate 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
* 10.10Safekeeping Account Agreement between Graham Cash Assets LLC and Bank of America, N.A.
Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief ExecutiveOperating Officer)
Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer)
Section 1350 Certification (Certification of Chief ExecutiveOperating Officer and Chief Financial Officer)
 
Incorporated by reference to the Fund’s Form 8-K previously filed on April 11, 2013
 
10695

 
 
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:  November 14, 2012May 15, 2013GRAHAM ALTERNATIVE INVESTMENT FUND I LLC
 
By:  GRAHAM CAPITAL MANAGEMENT, L.P.
 its Manager
  
By:  /s/ Paul Sedlack
Paul Sedlack, Chief Executive Officer
  
 By:  
By:  /s/ Jeff Baisley/s/ Paul Sedlack
 Jeff Baisley,Paul Sedlack, Chief Operating Officer
By:  /s/ Brian Douglas
Brian Douglas, Chief Financial Officer
 
 
 10796