UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,June 30, 2017

OR ☐ 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
BLENDED STRATEGIES PORTFOLIO
(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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,”filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ☐Accelerated filer   ☐Non-accelerated filer ☐Smaller reporting company ☒Emerging Growth company ☐company☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)7(a)(2)(B) of the ExchangeSecurities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of MayAugust 1, 2017, 523,756.248493,127.548 Units of the Blended Strategies Portfolio were outstanding.
 


GRAHAM ALTERNATIVE INVESTMENT FUND I LLC
 
BLENDED STRATEGIES PORTFOLIO
FORM 10-Q

INDEX
 
  
Page
Number
    
PART I - Financial Information:
 
    
 
Item 1.
 
    
  Graham Alternative Investment Fund I LLC Blended Strategies Portfolio 
    
  1
    
  2
    
  3
    
  4
    
  5
    
  Graham Alternative Investment Trading LLC 
    
  12
13
    
  14
    
  15
    
  16
1617
    
  1718
    
 
Item 2.
5054
    
 
Item 3.
5662
    
 
Item 4.
5763
  
5864
 
   
 Certification
 Certification
 Certification
 


PART I

Item 1.Financial Statements

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Statements of Financial Condition

  
June 30, 2017
(Unaudited)
  
December 31, 2016
(Audited)
 
Assets      
Investment in Graham Alternative Investment Trading LLC, at fair value $61,206,192  $72,903,383 
Redemption receivable from Graham Alternative Investment Trading LLC  895,804   1,207,986 
Total assets $62,101,996  $74,111,369 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $895,804  $1,207,986 
Total liabilities  895,804   1,207,986 
         
Members’ capital:        
Class 0 Units (300,904.327 and 331,592.087 units issued and outstanding at
$137.79 and $146.92, respectively)
  41,462,646   48,718,754 
Class 2 Units (197,303.967 and 225,124.868 units issued and outstanding at
$100.07 and $107.43, respectively)
  19,743,546   24,184,629 
Total members’ capital  61,206,192   72,903,383 
Total liabilities and members’ capital $62,101,996  $74,111,369 
  
March 31, 2017
(Unaudited)
  
December 31, 2016
(Audited)
 
Assets      
Investment in Graham Alternative Investment Trading LLC, at fair value $69,085,208  $72,903,383 
Redemption receivable from Graham Alternative Investment Trading LLC  1,013,929   1,207,986 
Total assets $70,099,137  $74,111,369 
         
Liabilities and members’ capital        
Liabilities:        
Accrued redemptions $1,013,929  $1,207,986 
Total liabilities  1,013,929   1,207,986 
         
Members’ capital:        
Class 0 Units (324,231.083 and 331,592.087 units issued and outstanding at $144.35 and $146.92, respectively)  46,802,919   48,718,754 
Class 2 Units (212,160.968 and 225,124.868 units issued and outstanding at $105.03 and $107.43, respectively)  22,282,289   24,184,629 
Total members’ capital  69,085,208   72,903,383 
Total liabilities and members’ capital $70,099,137  $74,111,369 

See accompanying notes and the attached financial statements of Graham Alternative Investment Trading LLC.
 
1

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Unaudited Statements of Operations

 
Three Months Ended
March 31,
  
Three months ended
June 30,
  
Six Months Ended
June 30,
 
 2017  2016  2017  2016  2017  2016 
Net loss allocated from investment in Graham Alternative Investment Trading LLC      
Net realized gain (loss) on investments $391,322  $(2,013,811)
Net (loss) gain allocated from investment in Graham
Alternative Investment Trading LLC
            
Net realized loss on investments $(1,386,441) $(599,409) $(995,119) $(2,613,220)
Net (decrease) increase in unrealized appreciation on investments  (1,163,102)  612,671   (1,181,931)  1,842,874   (2,345,033)  2,455,545 
Brokerage commissions and fees  (102,910)  (137,117)  (99,738)  (118,677)  (202,648)  (255,794)
Net loss allocated from investment in Graham Alternative Investment Trading LLC  (874,690)  (1,538,257)
Net (loss) gain allocated from investment in Graham Alternative Investment Trading LLC  (2,668,110)  1,124,788   (3,542,800)  (413,469)
                        
Net investment loss allocated from investment in Graham Alternative Investment Trading LLC                        
Investment income                        
Interest income  113,669   93,237   125,836   92,637   239,505   185,874 
                        
Expenses                        
Advisory fees  306,401   372,652   285,495   348,452   591,896   721,104 
Sponsor fees  246,540   293,089   162,617   275,133   409,157   568,222 
Professional fees and other  58,847   16,563   83,623   64,920   142,470   81,483 
Administrator’s fees  23,593   29,326   21,628   27,394   45,221   56,720 
Incentive allocation  -   -   -   -   -   - 
Total expenses  635,381   711,630   553,363   715,899   1,188,744   1,427,529 
Net investment loss allocated from investment in Graham Alternative Investment Trading LLC  (521,712)  (618,393)  (427,527)  (623,262)  (949,239)  (1,241,655)
Net loss $(1,396,402) $(2,156,650)
Net (loss) income $(3,095,637) $501,526  $(4,492,039) $(1,655,124)

See accompanying notes and the attached financial statements of Graham Alternative Investment Trading LLC.
 
2

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Unaudited Statements of Changes in Members’ Capital

For the threesix months ended March 31,June 30, 2017 and 2016

 Class 0 Units  Class 2 Units     Class 0 Units  Class 2 Units    
 Units  Capital  Units  Capital  
Total Members’
Capital
  Units  Capital  Units  Capital  
Total Members’
Capital
 
                                
Members’ capital, December 31, 2015  400,877.751  $59,064,584   244,435.571  $26,866,727  $85,931,311   400,877.751   $59,064,584   244,435.571   $26,866,727  $85,931,311 
Subscriptions  332.503   50,000   682.355   75,000   125,000   3,289.583    475,000   6,734.863    709,739   1,184,739 
Redemptions  (13,842.372)  (2,054,821)  (6,967.720)  (764,651)  (2,819,472)  (23,406.500)   (3,405,216)  (12,092.608)    (1,301,116)  (4,706,332)
Net loss     (1,386,144)     (770,506)  (2,156,650)  -    (964,966)  -    (690,158)  (1,655,124)
Members’ capital, March 31, 2016  387,367.882  $55,673,619   238,150.206  $25,406,570  $81,080,189 
                    
 Class 0 Units  Class 2 Units     
 Units  Capital  Units  Capital  
Total Members’
Capital
 
                    
Members’ capital, December 31, 2016  331,592.087  $48,718,754   225,124.868  $24,184,629  $72,903,383 
Subscriptions  11,039.703   1,602,500         1,602,500 
Redemptions  (18,400.707)  (2,662,638)  (12,963.900)  (1,361,635)  (4,024,273)
Net loss     (855,697)     (540,705)  (1,396,402)
Members’ capital, March 31, 2017  324,231.083  $46,802,919   212,160.968  $22,282,289  $69,085,208 
Members’ capital, June 30, 2016  380,760.834   $55,169,402   239,077.826   $25,585,192  $80,754,594 
 
  Class 0 Units  Class 2 Units     
  Units  Capital  Units  Capital  
Total Members’
Capital
 
                       
Members’ capital, December 31, 2016  331,592.087   $48,718,754   225,124.868   $24,184,629  $72,903,383 
Subscriptions  12,640.298    1,832,500   2,380.376    250,000   2,082,500 
Redemptions  (43,328.058)    (6,167,314)  (30,201.277)    (3,120,338)  (9,287,652)
Net loss  -    (2,921,294)  -    (1,570,745)  (4,492,039)
Members’ capital, June 30, 2017  300,904.327   $41,462,646   197,303.967   $19,743,546  $61,206,192 

See accompanying notes and the attached financial statements of Graham Alternative Investment Trading LLC.
 
3

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Unaudited Statements of Cash Flows

 
Three Months Ended
March 31,
  
Six Months Ended
June 30,
 
 2017  2016  2017  2016 
Cash flows provided by operating activities            
Net loss $(1,396,402) $(2,156,650) $(4,492,039) $(1,655,124)
Adjustments to reconcile net loss to net cash provided by operating activities:                
Net loss allocated from investment in Graham Alternative Investment Trading LLC  1,396,402   2,156,650   4,492,039   1,655,124 
Proceeds from sale of investments in Graham Alternative Investment Trading LLC  4,218,330   4,918,778   9,599,834   7,258,211 
Investments in Graham Alternative Investment Trading LLC  (1,602,500)  (125,000)  (2,082,500)  (1,184,739)
Net cash provided by operating activities  2,615,830   4,793,778   7,517,334   6,073,472 
                
Cash flows used in financing activities                
Subscriptions  1,602,500   125,000   2,082,500   1,184,739 
Redemptions  (4,218,330)  (4,918,778)  (9,599,834)  (7,258,211)
Net cash used in financing activities  (2,615,830)  (4,793,778)  (7,517,334)  (6,073,472)
                
Net change in cash and cash equivalents            
                
Cash and cash equivalents, beginning of period            
Cash and cash equivalents, end of period $  $  $  $ 

See accompanying notes and the attached financial statements of Graham Alternative Investment Trading LLC.
 
4

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Notes to Unaudited Financial Statements

March 31,June 30, 2017

1. Organization and Business

The Blended Strategies Portfolio (the “Fund”) is a series of Graham Alternative Investment Fund I LLC (“GAIF I”), a Delaware Series Limited Liability Company established through an amendment to the certificate of formation, effective March 28, 2013. Prior to March 28, 2013, GAIF I was organized as a Delaware Limited Liability Company which was formed on May 16, 2006 and commenced operations on August 1, 2006. GAIF I has one other active series in addition to the Fund, the Systematic Strategies Portfolio. GAIF I is registered as a commodity pool and as such is subject to the oversight and jurisdiction of the U.S. Commodity Futures Trading Commission (“CFTC”).

As a Series Limited Liability Company each series is legally segregated, and the assets associated with each series are held separately and accounted for in separate and distinct records from the assets of any other series of GAIF I. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series are enforceable against the assets of such series only, and not against the assets of GAIF I generally or any other series thereof. Further, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to GAIF I are enforceable against the assets of any other series.

The Fund offers investors Class 0 and Class 2 units. The Fund invests all of its assets dedicated to trading in Graham Alternative Investment Trading LLC (“GAIT”), a Delaware Limited Liability Company which was formed on May 18, 2006 and commenced operations on August 1, 2006. GAIT invests in various master trading vehicles (“Master Funds”) and Graham Cash Assets LLC (“Cash Assets”), 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 GAIT and the Fund. The Manager is registered as a Commodity Pool Operator and Commodity Trading Advisor with the U.S. CFTC and is a member of the National Futures Association. The Manager is also registered with the Securities and Exchange Commission as an investment adviser. The Fund’s Units are registered under Section 12 of the Securities Exchange Act of 1934.

The investment objective of the Fund is to achieve long-term capital appreciation through professionally managed trading in both U.S. and foreign markets primarily in futures contracts, forwards contracts, spot currency contracts, and associated derivative instruments, such as options and swaps, through its investment in GAIT, which in turn invests 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.

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 GAIT; therefore these financial statements should be read in conjunction with the attached financial statements of GAIT.
 
5

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

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 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 Fund is an investment company and applies specialized accounting guidance as outlined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. 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.

Investment in Graham Alternative Investment Trading LLC

The Fund records its investment in GAIT at fair value based upon the Fund’s proportionate share of GAIT’s reported net asset value in accordance with U.S. GAAP. In determining its net asset value, GAIT records its investments in Master Funds at fair value based upon GAIT’s proportionate share of the Master Funds’ reported net asset value. The Fund records its proportionate share of GAIT’s 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 GAIT are recorded on a trade date basis. The accounting policies of GAIT are described in its attached financial statements.

GAIT charges its investors, including the Fund, an advisory 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 a portion of the advisory fee, sponsor fee, and incentive allocation charged by GAIT.

At March 31,June 30, 2017 and December 31, 2016, the Fund owned 54.99%54.44% and 52.99%, respectively of GAIT.

Fair Value

The fair value of the assets and liabilities of the Fund and GAIT, 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.
 
6

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

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

The Fund’s investment in GAIT has been valued at net asset value using the practical expedient. Accordingly under U.S. GAAP, these investments are excluded from categorization in the fair value hierarchy. There were no Level 3 assets or liabilities held at any point during the threesix months ended March 31,June 30, 2017 or the year ended December 31, 2016 by the Fund, GAIT, the Master Funds, or Cash Assets and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized as of the beginning of the year.

Indemnifications

In the normal course of business, the Master Funds, GAIT, Cash Assets, and the Fund enter into contracts that contain a variety of indemnifications. Such contracts may include those by Cash 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. At March 31,June 30, 2017 and December 31, 2016, no accruals have been recorded by the Fund for indemnifications.

3. Capital Accounts

The Fund offers two classes (each a “Class”) of Units (collectively the “Units”), being Class 0 Units and Class 2 Units. The Fund may issue additional Classes in the future subject to different fees, expenses or other terms, or to invest in other investment programs or combinations of investment programs managed by the Manager.

A separate capital account is maintained for each member with respect to each member’s Class of Units. The initial balance of each member’s capital account is equal to the initial contribution to the Fund by such member with respect to the Class to which such capital account relates. Each member’s capital account is increased by any additional subscription, and decreased by any redemption by such member of Units of such Class to which the capital account relates. All income and expenses of the Fund are allocated among the members’ capital accounts in proportion to the balance that each capital account bears to the balance of all capital 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. The minimum initial subscription from each investor in each Class is $10,000. Members may subscribe for additional Units in a minimum amount of not less than $5,000.
 
7

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

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

Subscriptions (continued)

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.

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. No redemption fees were paid to the Manager for the threesix months ended March 31,June 30, 2017 and 2016.

4. Fees and Related Party Transactions

Advisory Fees

For the threesix months ended March 31,June 30, 2017 and 2016, each Class of GAIT other than Class M paid the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate equal to 1.75% 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. For the threesix months ended March 31,June 30, 2017 and 2016, the Advisory Fees allocated to the Fund by each Class of GAIT totaled $306,401$591,896 and $372,652,$721,104, respectively.

Sponsor Fees

For the three months ended March 31, 2017 and 2016, eachEach Class of GAIT other than Class M paid the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of the Net Asset Value specified for the periods in the table below. The Sponsor Fee is payable monthly in arrears calculated as of the last business day of each month in the same manner as the Advisory Fee.

ClassAnnual Rate
Class 00.75%
Class 22.75%
For the three months ended March 31, 2017 and 2016, the Sponsor Fees allocated to the Fund by each Class of GAIT totaled $246,540 and $293,089, respectively.
PeriodClass 0Class 2
   
For the period from January 1, 2016 through March 31, 20170.75%2.75%
For the period from April 1, 2017 through June 30, 20170.75%1.50%
 
8

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Notes to Unaudited Financial Statements (continued)

4. Fees and Related Party Transactions (continued)

Sponsor Fees (continued)

For the six months ended June 30, 2017 and 2016, the Sponsor Fees allocated to the Fund by each Class of GAIT totaled $409,157 and $568,222, respectively.

Incentive Allocation

At the end of each calendar quarter, Graham Capital LLC, an affiliate of 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 of GAIT, 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. There was no Incentive Allocation allocated to the Fund by GAIT for the threesix months ended March 31,June 30, 2017 and 2016.

Administrator’s Fee

For the threesix months ended March 31,June 30, 2017 and 2016, GAIT paid SEI a monthly administrator’s fee based on 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, including out-of-pocket expenses, allocated to the Fund by GAIT for the threesix months ended March 31,June 30, 2017 and 2016 were $23,593$45,221 and $29,326,$56,720, 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.

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 and the Fund identifies its major tax jurisdictions as U.S. Federal and Connecticut State. 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 for open tax years 2014 through 2016 or expected to be taken in the Fund’s 2017 tax returns. 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.
 
9

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Notes to Unaudited Financial Statements (continued)
 
6. Financial Highlights

The following is the per Unit operating performance calculation for the three months ended March 31,June 30, 2017 and 2016:
 
 Class 0  Class 2  Class 0  Class 2 
Per unit operating performance            
Net asset value per unit, December 31, 2015 $147.34  $109.91 
Net asset value per unit, March 31, 2016 $143.72  $106.68 
Net income:        
Net investment loss  (0.89)  (1.19)
Net gain on investments  2.06   1.53 
Net income  1.17   0.34 
Net asset value per unit, June 30, 2016 $144.89  $107.02 
        
Net asset value per unit, March 31, 2017 $144.35  $105.03 
Net loss:                
Net investment loss  (0.84)  (1.18)  (0.84)  (0.81)
Net loss on investments  (2.78)  (2.05)  (5.72)  (4.15)
Net loss  (3.62)  (3.23)  (6.56)  (4.96)
Net asset value per unit, March 31, 2016 $143.72  $106.68 
        
Net asset value per unit, December 31, 2016 $146.92  $107.43 
Net loss:        
Net investment loss  (0.84)  (1.14)
Net loss on investments  (1.73)  (1.26)
Net loss  (2.57)  (2.40)
Net asset value per unit, March 31, 2017 $144.35  $105.03 
Net asset value per unit, June 30, 2017 $137.79  $100.07 

The following represents ratios to average members’ capital, excluding the Manager, and total return for the three months ended March 31,June 30, 2017 and 2016:

  Class 0  Class 2 
  2017  2016  2017  2016 
             
Total return before Incentive Allocation  (4.54)%  0.81%  (4.72)%  0.32%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (4.54)%  0.81%  (4.72)%  0.32%
                 
Net investment loss before Incentive Allocation  (0.60)%  (0.62)%  (0.79)%  (1.13)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (0.60)%  (0.62)%  (0.79)%  (1.13)%
                 
Total expenses before Incentive Allocation  0.79%  0.74%  0.98%  1.24%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  0.79%  0.74%  0.98%  1.24%
 
  Class 0  Class 2 
  2017  2016  2017  2016 
             
Total return before Incentive Allocation  (1.75)%  (2.46)%  (2.23)%  (2.94)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (1.75)%  (2.46)%  (2.23)%  (2.94)%
                 
Net investment loss before Incentive Allocation  (0.58)%  (0.57)%  (1.07)%  (1.07)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (0.58)%  (0.57)%  (1.07)%  (1.07)%
                 
Total expenses before Incentive Allocation  0.74%  0.68%  1.24%  1.18%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  0.74%  0.68%  1.24%  1.18%
10

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Notes to Unaudited Financial Statements (continued)
6. Financial Highlights (continued)

The following is the per Unit operating performance calculation for the six months ended June 30, 2017 and 2016:

  Class 0  Class 2 
Per unit operating performance      
Net asset value per unit, December 31, 2015 $147.34  $109.91 
Net loss:        
Net investment loss  (1.73)  (2.36)
Net loss on investments  (0.72)  (0.53)
Net loss  (2.45)  (2.89)
Net asset value per unit, June 30, 2016 $144.89  $107.02 
         
Net asset value per unit, December 31, 2016 $146.92  $107.43 
Net loss:        
Net investment loss  (1.68)  (1.96)
Net loss on investments  (7.45)  (5.40)
Net loss  (9.13)  (7.36)
Net asset value per unit, June 30, 2017 $137.79  $100.07 

The following represents ratios to average members’ capital, excluding the Manager, and total return for the six months ended June 30, 2017 and 2016:

  Class 0  Class 2 
  2017  2016  2017  2016 
             
Total return before Incentive Allocation  (6.21)%  (1.66)%  (6.85)%  (2.63)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (6.21)%  (1.66)%  (6.85)%  (2.63)%
                 
Net investment loss before Incentive Allocation  (1.18)%  (1.19)%  (1.88)%  (2.19)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.18)%  (1.19)%  (1.88)%  (2.19)%
                 
Total expenses before Incentive Allocation  1.53%  1.42%  2.23%  2.42%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.53%  1.42%  2.23%  2.42%
11

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Notes to Unaudited Financial Statements (continued)
6. Financial Highlights (continued)

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 adjusted for subscriptions or redemptions during the period. An individual member’s return may vary from these returns based on the timing of capital transactions and the applicability of Advisory Fees, Sponsor Fees, Administrator’s 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 GAIT. 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 six months ended March 31,June 30, 2017 and 2016, and are not annualized.
10

Graham Alternative Investment Fund I LLC

Blended Strategies Portfolio

Notes to Unaudited Financial Statements (continued)
7. Subsequent Events

Effective July 1, 2017, the annual Advisory Fee charged to Class 0 and Class 2 Units of GAIT was reduced from 1.75% to 1.50%. The annual Sponsor Fee charged to Class 0 Units of GAIT was reduced from 0.75% to 0.50%. The annual Sponsor Fee charged to Class 2 Units of GAIT was reduced from 1.50% to 1.25%.

The Fund had subscriptions of approximately $0.4$0.1 million and redemptions of approximately $2.1$0.8 million from AprilJuly 1, 2017 through May 15,August 14, 2017, the date through which subsequent events were evaluated by management. These amounts have not been included in the financial statements.
 
1112

Graham Alternative Investment Trading LLC

Statements of Financial Condition

  
March 31, 2017
(Unaudited)
    
December 31, 2016
(Audited)
   
June 30, 2017
(Unaudited)
  
December 31, 2016
(Audited)
 
Assets            
Investments in Master Funds, at fair value $15,355,770  $16,404,782  $14,803,728  $16,404,782 
Investment in Graham Cash Assets LLC, at fair value  112,110,712   123,316,812   99,318,745   123,316,812 
Receivable from Master Funds  44   45   83   45 
Total assets $127,466,526  $139,721,639  $114,122,556  $139,721,639 
                
Liabilities and members’ capital                
Liabilities:                
Accrued redemptions $1,276,139  $1,570,542  $1,272,825  $1,570,542 
Accrued professional fees  219,479   184,381   163,999   184,381 
Accrued advisory fees  187,361   205,048   162,274   205,048 
Accrued sponsor fees  146,384   158,099   91,124   158,099 
Accrued administrator’s fee  14,600   13,455   12,223   13,455 
Payable to Master Funds  55   85   2   85 
Total liabilities  1,844,018   2,131,610   1,702,447   2,131,610 
                
Members’ capital:                
Class 0 Units (598,637.269 and 650,889.077 units issued and outstanding at $144.35 and $146.92 per unit, respectively)  86,413,585   95,631,060 
Class 2 Units (362,151.491 and 379,525.982 units issued and outstanding at $105.03 and $107.43 per unit, respectively)  38,035,092   40,771,563 
Class M Units (4,671.470 units issued and outstanding at $251.28 and $254.18 per unit, respectively)  1,173,831   1,187,406 
Class 0 Units (558,321.325 and 650,889.077 units issued and outstanding at
$137.79 and $146.92 per unit, respectively)
  76,933,018   95,631,060 
Class 2 Units (343,366.942 and 379,525.982 units issued and outstanding at
$100.07 and $107.43 per unit, respectively)
  34,359,568   40,771,563 
Class M Units (4,671.470 units issued and outstanding at $241.36 and
$254.18 per unit, respectively)
  1,127,523   1,187,406 
Total members’ capital  125,622,508   137,590,029   112,420,109   137,590,029 
Total liabilities and members’ capital $127,466,526  $139,721,639  $114,122,556  $139,721,639 

See accompanying notes.
12

Graham Alternative Investment Trading LLC

Condensed Schedules of Investments

    
March 31, 2017
(Unaudited)
    
December 31, 2016
(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 $6,799,105   5.41% $7,580,654   5.51%
Graham K4D Trading Ltd.  8,556,665   6.81%  8,824,128   6.41%
Total investments in Master Funds $15,355,770   12.22% $16,404,782   11.92%
See accompanying notes.
 
13

Graham Alternative Investment Trading LLC

Unaudited StatementsCondensed Schedules of Operations and Incentive AllocationInvestments

  
Three Months Ended
March 31,
 
  2017  2016 
Net loss allocated from investments in Master Funds      
Net realized gain (loss) on investments $641,679  $(3,858,347)
Net (decrease) increase in unrealized appreciation on investments  (2,174,213)  1,164,019 
Brokerage commissions and fees  (188,486)  (261,589)
Net loss allocated from investments in Master Funds  (1,721,020)  (2,955,917)
         
Net investment gain (loss) allocated from investments in Master Funds  10,541   (3,702)
         
Investment income        
Interest income  197,825   177,903 
Total investment income  197,825   177,903 
         
Expenses        
Advisory fees  556,945   705,897 
Sponsor fees  433,210   530,040 
Professional fees and other  108,197   55,952 
Administrator’s fees  43,269   27,903 
Total expenses  1,141,621   1,319,792 
Net investment loss of the Fund  (943,796)  (1,141,889)
         
Net loss  (2,654,275)  (4,101,508)
         
Incentive allocation  -   - 
         
Net loss available for pro-rata allocation to all members $(2,654,275) $(4,101,508)
  
June 30, 2017
(Unaudited)
  
December 31, 2016
(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 $7,060,296   6.28% $7,580,654   5.51%
Graham K4D Trading Ltd.  7,743,432   6.89%  8,824,128   6.41%
Total investments in Master Funds $14,803,728   13.17% $16,404,782   11.92%

See accompanying notes.
 
14

Graham Alternative Investment Trading LLC

Unaudited Statements of Changes in Members’ CapitalOperations and Incentive Allocation

For the three months ended March 31, 2017 and 2016

  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                      
Members’ capital, December 31, 2015  791,620.850  $116,635,944   415,606.489  $45,680,694   4,671.470  $1,161,324  $163,477,962 
Subscriptions  1,856.175   275,000   1,781.360   197,000         472,000 
Redemptions  (22,158.787)  (3,297,469)  (8,694.376)  (954,399)        (4,251,868)
Incentive allocation                     
Net loss     (2,757,422)     (1,322,661)     (21,425)  (4,101,508)
Members’ capital, March 31, 2016  771,318.238  $110,856,053   408,693.473  $43,600,634   4,671.470  $1,139,899  $155,596,586 
                             
  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                             
Members’ capital, December 31, 2016  650,889.077  $95,631,060   379,525.982  $40,771,563   4,671.470  $1,187,406  $137,590,029 
Subscriptions  13,184.142   1,911,500               1,911,500 
Redemptions  (65,435.950)  (9,399,947)  (17,374.491)  (1,824,799)        (11,224,746)
Incentive allocation                     
Net loss     (1,729,028)     (911,672)     (13,575)  (2,654,275)
Members’ capital, March 31, 2017  598,637.269  $86,413,585   362,151.491  $38,035,092   4,671.470  $1,173,831  $125,622,508 
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
  2017  2016  2017  2016 
Net (loss) gain allocated from investments in Master Funds            
Net realized loss on investments $(2,522,525) $(1,184,883) $(1,880,846) $(5,043,230)
Net (decrease) increase in unrealized appreciation on investments  (2,156,639)  3,490,082   (4,330,852)  4,654,101 
Brokerage commissions and fees  (181,804)  (225,690)  (370,290)  (487,279)
Net (loss) gain allocated from investments in Master Funds  (4,860,968)  2,079,509   (6,581,988)  (876,408)
                 
Net investment gain (loss) allocated from investments in Master Funds  22,879   (5,885)  33,420   (9,587)
                 
Investment income                
Interest income  206,382   176,984   404,207   354,887 
                 
Expenses                
Advisory fees  515,272   660,756   1,072,217   1,366,653 
Sponsor fees  289,702   498,596   722,912   1,028,636 
Professional fees and other  152,619   117,595   260,816   145,498 
Administrator’s fees  39,410   52,332   82,679   108,284 
Total expenses  997,003   1,329,279   2,138,624   2,649,071 
Net investment loss of the Fund  (790,621)  (1,152,295)  (1,734,417)  (2,294,184)
                 
Net (loss) income  (5,628,710)  921,329   (8,282,985)  (3,180,179)
                 
Incentive allocation            
                 
Net (loss) income available for pro-rata allocation to all members $(5,628,710) $921,329  $(8,282,985) $(3,180,179)

See accompanying notes.
 
15

Graham Alternative Investment Trading LLC

Unaudited Statements of Cash FlowsChanges in Members’ Capital

  Three Months Ended March 31, 
  2017  2016 
Cash flows provided by operating activities      
Net loss $(2,654,275) $(4,101,508)
Adjustments to reconcile net loss to net cash provided by operating activities:        
Net loss allocated from investments in Master Funds  1,710,479   2,959,619 
Net income allocated from investment in Graham Cash Assets LLC  (197,825)  (177,903)
Proceeds from sale of investments in Master Funds  33,401,656   39,761,345 
Proceeds from sale of investments in Graham Cash Assets LLC  41,249,565   39,551,967 
Investments in Master Funds  (34,063,152)  (41,003,663)
Investments in Graham Cash Assets LLC  (29,845,640)  (30,183,348)
Changes in assets and liabilities:        
Decrease in accrued advisory fees  (17,687)  (16,783)
Decrease in accrued sponsor fees  (11,715)  (10,715)
Increase (decrease) in accrued professional fees  35,098   (19,507)
Increase (decrease) in accrued administrator’s fee  1,145   (1,475)
Net cash provided by operating activities  9,607,649   6,758,029 
         
Cash flows used in financing activities        
Subscriptions  1,911,500   472,000 
Redemptions  (11,519,149)  (7,230,029)
Net cash used in financing activities  (9,607,649)  (6,758,029)
         
Net change in cash and cash equivalents      
         
Cash and cash equivalents, beginning of period      
Cash and cash equivalents, end of period $  $ 
For the six months ended June 30, 2017 and 2016

  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                      
Members’ capital, December 31, 2015  791,620.850  $116,635,944   415,606.489  $45,680,694   4,671.470  $1,161,324  $163,477,962 
Subscriptions  6,659.057   965,000   9,431.374   1,001,239         1,966,239 
Redemptions  (57,868.196)  (8,332,102)  (15,790.648)  (1,699,383)        (10,031,485)
Incentive allocation                     
Net loss     (1,988,721)     (1,186,483)     (4,975)  (3,180,179)
Members’ capital, June 30, 2016  740,411.711  $107,280,121   409,247.215  $43,796,067   4,671.470  $1,156,349  $152,232,537 
  Class 0  Class 2  Class M  Total 
  Units  Capital  Units  Capital  Units  Capital  Capital 
                             
Members’ capital, December 31, 2016  650,889.077  $95,631,060   379,525.982  $40,771,563   4,671.470  $1,187,406  $137,590,029 
Subscriptions  14,784.737   2,141,500   3,734.542   390,000         2,531,500 
Redemptions  (107,352.489)  (15,297,967)  (39,893.582)  (4,120,468)        (19,418,435)
Incentive allocation                     
Net loss     (5,541,575)     (2,681,527)     (59,883)  (8,282,985)
Members’ capital, June 30, 2017  558,321.325  $76,933,018   343,366.942  $34,359,568   4,671.470  $1,127,523  $112,420,109 

See accompanying notes.
 
16

Graham Alternative Investment Trading LLC

 Unaudited Statements of Cash Flows

  Six Months Ended June 30, 
  2017  2016 
Cash flows provided by operating activities      
Net loss $(8,282,985) $(3,180,179)
Adjustments to reconcile net loss to net cash provided by operating activities:        
Net loss allocated from investments in Master Funds  6,548,568   885,995 
Net income allocated from investment in Graham Cash Assets LLC  (404,207)  (354,887)
Proceeds from sale of investments in Master Funds  60,188,555   69,612,773 
Proceeds from sale of investments in Graham Cash Assets LLC  74,872,087   66,991,701 
Investments in Master Funds  (65,136,190)  (71,189,770)
Investments in Graham Cash Assets LLC  (50,469,813)  (52,148,641)
Changes in assets and liabilities:        
Decrease in accrued advisory fees  (42,774)  (28,403)
Decrease in accrued sponsor fees  (66,975)  (17,974)
Decrease in accrued professional fees  (20,382)  (20,377)
Decrease in accrued administrator’s fee  (1,232)  (2,319)
Net cash provided by operating activities  17,184,652   10,547,919 
         
Cash flows used in financing activities        
Subscriptions  2,531,500   1,966,239 
Redemptions  (19,716,152)  (12,514,158)
Net cash used in financing activities  (17,184,652)  (10,547,919)
         
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

March 31,June 30, 2017
 
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 U.S. Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association. The Managing Member is also registered with the Securities and Exchange Commission as an investment adviser. GAIT is a commodity pool, and as such is subject to the oversight and jurisdiction of the CFTC.

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.

Graham Alternative Investment Fund I LLC Blended Strategies Portfolio and Graham Alternative Investment Fund II LLC Blended Strategies Portfolio 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. GAIT is an investment company and applies specialized accounting guidance as outlined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. 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 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 incentive allocation.
 
1718

Graham Alternative Investment Trading LLC

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

Due from/to Brokers

Due from/to brokers on the Master Funds’ financial statements primarily consist of cash balances carried as margin deposits with clearing brokers for the purpose of trading in futures contracts, foreign currency contracts and other derivative instruments and securities, and receivables/payables for unsettled transactions. Substantially all of the Master Funds’ cash and investments are held as collateral by its brokers to secure derivative instruments and securities.

Revenue Recognition

All financial instruments are recorded on the trade date at fair value. Net unrealized gain or loss on open derivative instruments is included in the Master Funds’ statements of financial condition as the difference between the original purchase price and the current market value at the end of the period. Any change in net unrealized gain or loss from the preceding period is reported in the Master Funds’ statements of operations. Interest income and expense are recorded on the accrual basis. Dividends are recorded on the ex-dividend date and are net of related withholding taxes. All other expenses are recorded on the accrual basis. Realized gains and losses are calculated based on the specific identification method.

Brokerage Commissions and Fees

Brokerage commissions and fees on the Master Funds’ financial statements represent all brokerage commissions and other fees incurred in connection with the Master Funds’ trading activity and are recorded on the accrual basis.

Foreign Currency Translation

Assets and liabilities denominated in foreign currencies are translated using the exchange rates at March 31,June 30, 2017 and December 31, 2016. Gains and losses resulting from foreign currency transactions are calculated using daily exchange rates prevailing on the transaction date. The Master Funds do not isolate the portion of results of operations from changes in foreign exchange rates on investments and cash from fluctuations arising from changes in market prices held. Currency translation gains and losses are included in the statement of operations within net realized gain (loss)loss and net (decrease) increase (decrease) in unrealized appreciation on investments.

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 incentive 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.
 
1819

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

GAIT’s investments in Master Funds and Graham Cash Assets LLC (“Cash Assets”) have been valued at net asset value using the practical expedient. Accordingly under U.S. GAAP, these investments are excluded from categorization in the fair value hierarchy. GAIT’s investments in Master Funds and Cash Assets are discussed in Notes 3 and 4. There were no Level 3 assets or liabilities held at any point during the threesix months ended March 31,June 30, 2017 or the year ended December 31, 2016 by GAIT, the Master Funds, or Cash Assets, and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized as of the beginning of the year.

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.
 
1920

Graham Alternative Investment Trading LLC

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

Derivative Instruments (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.

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.
 
2021

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Derivative Instruments (continued)

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. Exchange traded interest rate swap contracts are executed on an exchange which requires margin deposits with a Central Clearing Counterparty (“CCP”). 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 interest rate swap contracts, exchange traded interest rate swap contracts provide reduced counterparty risk since they are exchange-traded and the exchange’s clearinghouse guarantees against default. The Commodity Exchange Act requires a CCP to segregate all funds received from such CCP’s customers in respect of exchange traded interest rate swaps. If the CCP 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 CCP. 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 CCP’s combined customer accounts, even though certain property specifically traceable to the Master Funds is held by the CCP. In addition, in the event of bankruptcy or insolvency of an exchange or an affiliated clearing house, the Master Funds could experience a loss of funds deposited through its CCP 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. All funds deposited with both U.S. and non-U.S. CCPs are included in due from brokers on the statements of financial condition. Over the counter 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 Funds may not be able to enter into an offsetting contract in order to cover its risk.

An interest rate swap contract is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified 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. Interest rate swap positions are generally valued as the present value of the net future cash flows as estimated by the AdvisorManager using a discount curve constructed from independently obtained future interest rate assumptions.

A total return swap contract is an agreement that obligates two parties to exchange cash flows calculated by reference to changes in specified prices 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. Total return swaps are generally valued based upon the value of the underlying instruments as determined by the primary exchange on which they are traded.

Exchange traded swaps are valued based upon the closing prices established by the primary exchange upon which they are traded. 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.
 
2122

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Derivative Instruments (continued)

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.

When purchasing options, 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.

Selling uncovered options may subject the Master Funds to unlimited risk of loss. As the writer of an option, the Master Funds bear the market risk of an unfavorable change in the price of the underlying instrument.

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.

Credit Risk Related Contingent Features

OTC derivative instruments are subject to ISDA Master Agreements which generally require among other things, that the Master Funds maintain a predetermined level of net assets or rate of return, and provide limits with respect to any decline in value over 1-month, 3-month and 12-month periods. If the Master Funds were to violate such provisions, the counterparty to these instruments could demand liquidation of the outstanding positions. There were no events that occurred throughout the threesix month period ended March 31,June 30, 2017 or the year ended December 31, 2016 which caused any counterparty to demand liquidation of any outstanding positions. At March 31,June 30, 2017 and December 31, 2016, there were no derivative instruments subject to credit risk related contingent features in a net liability position for either of the Master Funds in which GAIT invests except for Graham K4D Trading Ltd.invests. Graham K4D Trading Ltd. had derivative instruments subject to credit risk related contingent features in a net liability position in the amount of $14,828,010$45,226,633 and $0 at MarchJune 30, 2017 and December 31, 2016, respectively. Graham Commodity Strategies LLC had derivative instruments subject to credit risk related contingent features in a net liability position in the amount of $2,143,049 and $0 at June 30, 2017 and December 31, 2016, respectively.
 
23

Graham Alternative Investment Trading LLC

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

New York Mercantile Exchange Corporate Membership

Graham Commodity Strategies LLC, a Master Fund in which GAIT invests, is a member of the New York Mercantile Exchange (“NYMEX”). As a result of its membership, Graham Commodity Strategies LLC owns two NYMEX seats and 30,000 shares of the CME Group. Graham Commodity Strategy LLC’s policy is to value the NYMEX memberships and the shares of the CME Group at fair value. As of March 31,June 30, 2017 and December 31, 2016, the two NYMEX memberships were valued at $330,500$301,000 and $398,000, respectively, and the 30,000 shares of CME Group were valued at $3,564,000$3,757,200 and $3,460,500, respectively, both of which are contained within Exchange Memberships on Graham Commodity Strategies LLC’s statements of financial condition. The NYMEX seats and shares are considered Level 1 assets as described in the Fair Value section of Note 2.
22

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Chicago Board of Trade Membership

Graham K4D Trading Ltd., a Master Fund in which GAIT invests, is a member of the Chicago Board of Trade (“CBOT”) under Rule 106.S and owns two B-1/Full seats and one B-2/Associate seat. Graham K4D Trading Ltd.’s policy is to value the CBOT memberships at fair value. As of March 31,June 30, 2017 and December 31, 2016, the B-1/Full memberships were valued at $514,500$445,500 and $404,000, respectively, and the B-2/Associate memberships were valued at $73,000$61,500 and $62,750, respectively, both of which are included in CMEExchange Membership on the statements of financial condition. Additionally, Graham K4D Trading Ltd. owns a Chicago Mercantile Exchange (“CME”) seat valued at $230,000$210,750 and $200,000 at March 31,June 30, 2017 and December 31, 2016, respectively, which is also included in Exchange Membership on the statements of financial condition. The CBOT memberships and shares and CME seat are considered Level 1 assets as described in the Fair Value section of Note 2.

Indemnifications

In the normal course of business, the Master Funds, Cash Assets, and GAIT enter into contracts that contain a variety of indemnifications. Such contracts may include those by Cash 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. At March 31,June 30, 2017 and December 31, 2016, no accruals have been recorded by GAIT for indemnifications.
 
2324

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds

As of March 31,June 30, 2017 and December 31, 2016, 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. All of the Master Funds and GAIT are related parties. The Master Funds do not charge management or incentive fees and all offer monthly subscriptions and redemptions.

March 31, 2017 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Loss
(three months
ended)
 
          
Systematic Macro Funds
         
Graham K4D Trading Ltd.  6.81% $8,556,665  $(441,751)
             
Global Macro Funds
            
Graham Commodity Strategies LLC  5.41%  6,799,105   (1,268,728)
   12.22% $15,355,770  $(1,710,479)
             
December 31, 2016     
Investment – Objective 
Percent of
Members’
Capital
   Fair Value   
Net Loss
(three months ended
March 31, 2016) 
 
       
Systematic Macro Funds
       
Graham K4D Trading Ltd.  6.41% $8,824,128  $(1,960,831)
             
Global Macro Funds
            
Graham Commodity Strategies LLC  5.51%  7,580,654   (998,788)
   11.92% $16,404,782  $(2,959,619)
24

Graham Alternative Investment Trading LLC
June 30, 2017 
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Loss
(six months ended)
 
          
Systematic Macro Funds
         
Graham K4D Trading Ltd.  6.89% $7,743,432  $(3,052,374)
             
Global Macro Funds
            
Graham Commodity Strategies LLC  6.28%  7,060,296   (3,496,194)
   13.17% $14,803,728  $(6,548,568)
      

December 31, 2016    
Investment – Objective 
Percent of
Members’
Capital
  Fair Value  
Net Loss
(six months ended
June 30, 2016)
 
          
Systematic Macro Funds
         
Graham K4D Trading Ltd.  6.41% $8,824,128  $145,642 
             
Global Macro Funds
            
Graham Commodity Strategies LLC  5.51%  7,580,654   (1,031,637)
   11.92% $16,404,782  $(885,995)
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 March 31,June 30, 2017:

 
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
  
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
 
Assets:            
Due from brokers $128,223,707  $129,319,638  $165,787,814  $164,569,974 
Derivative financial instruments, at fair value  46,184,282   -   32,364,568   - 
Exchange membership, at fair value  3,894,500   817,500   4,058,200   717,750 
Total assets  178,302,489   130,137,138   202,210,582   165,287,724 
                
Liabilities:                
Derivative financial instruments, at fair value  -   14,828,010   2,143,049   45,226,633 
Total liabilities  -   14,828,010   2,143,049   45,226,633 
Net assets $178,302,489  $115,309,128 
Members’ Capital / Net Assets $200,067,533  $120,061,091 
                
Percentage of Master Fund held by GAIT  3.81%  7.42%  3.53%  6.45%
 
25

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2017.
Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC         
Derivative financial instruments         
Long contracts         
Futures         
Brent crude oil August 2017 – December 2017  2,053  $3,534,070   1.98%
Coffee Robusta July 2017  7,047   (991,960)  (0.56)%
Live cattle April 2017  325   (287,260)  (0.16)%
Natural gas May 2017  336   128,160   0.07%
Soybean May 2017  5,299   (3,219,938)  (1.81)%
Soybean oil May 2017  778   (55,644)  (0.03)%
WTI crude oil May 2017 - June 2018  1,110   1,823,280   1.02%
Other commodity      (4,894,659)  (2.75)%
Foreign bond      208,594   0.12%
Foreign index      (2,671,583)  (1.50)%
Fed fund 30 day April 2017  9,709   (7,013,394)  (3.93)%
Other interest rate      725,190   0.41%
U.S. index      (329,360)  (0.18)%
Total futures      (13,044,504)  (7.32)%
             
Forwards            
Mexican Peso / U.S. dollar 04/17/2017 - 05/24/2017 MXN 2,633,024,245   14,844,660   8.32%
Other foreign currencies      8,249,601   4.63%
Total forwards      23,094,261   12.95%
             
Options (cost $150,054,768)            
Coffee future May 2017, $170.00 Call  2   12,094   0.01%
Coffee Robusta July 2017 - September 2017, $2,250.00 - $2,550.00 Call  9   (7,807,700)  (4.38)%
Coffee Robusta September 2017, $1,820.00 - $2,050.00 Put  2   (202,000)  (0.11)%
Crude oil May 2017 - December 2018, $49.00 - $73.00 Call  10   10,414,250   5.84%
Crude oil June 2018, $40.00 - $45.00 Put  2   931,000   0.52%
Live cattle June 2017, $100.00 - $119.00 Call  6   12,207,500   6.85%
Natural gas Euro option May 2017 - March 2018, $3.20 - $4.00 Call  11   17,008,500   9.54%
Soybean option May 2017, $980.00 Put  1   9,500,000   5.33%
Other commodity futures      9,311,326   5.22%
Currency      23,726,105   13.31%
Foreign index      190,948   0.11%
IMM Eurodollar December 2017, $98.50 Put  1   9,218,750   5.17%
IMM Eurodollar June 2017, $98.63 Put  3   4,625,000   2.59%
Other interest rate futures      5,975,491   3.35%
U.S. bond futures      4,093,750   2.29%
U.S. index      157,500   0.09%
Total options      99,362,514   55.73%
26

Graham Alternative Investment Trading LLC

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

The following schedules display the condensed schedules of investments for the Master Funds as of March 31,June 30, 2017.

Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC         
Derivative financial instruments         
Long contracts         
Futures         
Brent crude oil March 2018  600  $82,190   0.04%
KC HRW wheat September 2017  11,000   36,825,175   18.41%
KC HRW wheat December  2017  1,047   396,375   0.20%
Mill wheat Euro September 2017 - December 2017  28,000   3,052,400   1.53%
Natural gas August 2017  628   750,550   0.38%
Wheat September 2017  2,000   3,784,188   1.89%
WTI crude oil August 2017  290   804,580   0.40%
Other commodity futures      3,760,660   1.88%
Foreign bond      (3,030,157)  (1.52)%
Foreign index      (14,989)  (0.01)%
Interest rate      (1,382,048)  (0.69)%
U.S. bond      (4,788,813)  (2.39)%
U.S. index      128,900   0.06%
Total futures      40,369,011   20.18%
             
Forwards            
Euro / U.S. dollar 07/05/2017 EUR903,787,129   1,046,016   0.52%
Other foreign currency      8,043,931   4.02%
Total forwards      9,089,947   4.54%
             
Options (cost $154,270,498)            
Crude oil August 2017 - December 2018, $47.00 - $73.00 Call  12   10,927,750   5.46%
Crude oil August 2017 - June 2018, $40.00 - $51.00 Put  6   8,122,500   4.06%
Natural gas Euro option August 2017 - March 2018, $3.25 - $4.00 Call  11   8,978,000   4.49%
Other commodity futures options      10,624,440   5.31%
Euro / U.S. dollar May 2018, $1.20 Call  2   10,276,800   5.14%
Euro / U.S. dollar November 2017, $1.15 Call  2   10,270,800   5.13%
Euro / U.S. dollar July 2017 - November 2017, $1.13 - $1.17 Call  5   13,412,852   6.71%
Euro / U.S. dollar July 2017 - October 2017, $0.97 - $1.11 Put  7   39,847   0.02%
Other currency future options      20,031,469   10.01%
Euro-bund August 2017, $164.50 Call  1   (116,952)  (0.06)%
Euro-bund August 2017 - September 2017, $159.00 - $161.50 Put  2   2,763,374   1.38%
Interest rate futures      6,614,824   3.31%
U.S. bond futures      460,938   0.23%
U.S. index      6,422,500   3.21%
Total options      108,829,142   54.40%
 
Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage
of Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Short contracts         
Futures         
Brent crude oil October 2017 - December 2018  (2,053) $(3,338,800)  (1.87)%
Coffee Robusta September 2017  (1,288)  115,920   0.07%
Live cattle June 2017  (133)  33,150   0.02%
Soybean meal May 2017  (469)  324,400   0.18%
WTI crude oil September 2017 - December 2017  (815)  (1,062,430)  (0.60)%
Other commodity      3,086,890   1.73%
Foreign bond      (254,343)  (0.14)%
Foreign index      (942,136)  (0.53)%
Fed fund 30 Day April 2017  (23,951)  19,365,424   10.86%
Fed fund 30 Day January 2017  (30,584)  7,349,046   4.12%
Other interest rate      (4,264,843)  (2.39)%
U.S. bond      (2,835,047)  (1.59)%
U.S. index      197,463   0.11%
Total futures      17,774,694   9.97%
             
Forwards            
U.S. dollar / Mexican peso 04/17/2017 - 05/24/2017 MXN(2,585,477,155)  (12,318,606)  (6.91)%
Other foreign currencies      (12,041,372)  (6.75)%
Total forwards      (24,359,978)  (13.66)%
             
Options (proceeds $90,469,290)            
Coffee future May 2017, $195.00 - $200.00 Call  (2)  (10,875)  (0.01)%
Coffee Robusta May 2017, $2,000.00 Put  (1)  140,000   0.08%
Coffee Robusta July 2017, $2,600.00 Call  (2)  1,768,500   0.99%
Crude oil May 2017 - December 2018, $52.00 - $80.00 Call  (9)  (14,015,000)  (7.86)%
Crude oil May 2017 - December 2017, $45.00 - $53.50 Put  (11)  (9,058,900)  (5.08)%
Live cattle June 2017  (4)  (1,195,500)  (0.67)%
Natural gas Euro May 2017 - March 2018, $3.40 - $5.00 Call  (11)  (8,322,250)  (4.67)%
Natural gas Euro July 2017 - December 2018, $2.75 - $3.00 Put  (17)  (7,589,375)  (4.26)%
Other commodity futures      (2,693,460)  (1.51)%
U.S. dollar / Mexican peso June 2017, $18.55 Put  (1)  (727,155)  (0.41)%
Other currency futures      (4,527,543)  (2.54)%
IMM Eurodollar December 2017 - December 2018, $97.25 - $ 98.38 Put  (4)  (7,562,500)  (4.24)%
Other interest rate futures      (1,023,647)  (0.57)%
U.S. bond future      (1,750,000)  (0.98)%
U.S. index      (75,000)  (0.04)%
Total options      (56,642,705)  (31.77)%
Total derivative financial instruments     $46,184,282   25.90%
26

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2017.

Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage
of Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Short contracts         
Futures         
Brent crude oil December 2017  (300) $(656,000)  (0.33)%
KC HRW wheat December 2017  (9,047)  (30,455,750)  (15.22)%
KC HRW wheat March 2018  (3,000)  (5,877,513)  (2.94)%
Mill wheat Euro September 2017  (1,000)  (500)  (0.00)%
Wheat March 2018  (2,000)  (7,973,263)  (3.98)%
WTI crude oil August 2017 - December 2017  (1,450)  (3,061,670)  (1.53)%
Other commodity futures      846,850   0.43%
Euro bund September 2017  (6,266)  13,728,555   6.86%
Euro buxl 30 Year bond September 2017  (100)  419,941   0.21%
Euro bobl September 2017  (600)  9,135   0.00%
Other foreign bond future      813,073   0.41%
Foreign index      765,252   0.38%
Interest rate      11,906,714   5.95%
U.S. bond      3,027,719   1.51%
U.S. index      1,139,900   0.57%
Total futures      (15,367,557)  (7.68)%
             
Forwards            
U.S. dollar / Euro 07/05/2017 EUR(351,995,936)   (628,961)  (0.31)%
Other foreign currency      (2,631,131)  (1.32)%
Total forwards      (3,260,092)  (1.63)%
             
Options (proceeds $107,270,855)            
Crude oil September 2017 - December 2019, $45.00 - $80.00 Call  (13)  (29,917,750)  (14.96)%
Crude oil August 2017 - June 2018, $37.50 - $50.00 Put  (12)  (20,435,640)  (10.21)%
Natural gas Euro option August 2017 - March 2018, $3.40 - $5.00 Call  (7)  (3,887,375)  (1.94)%
Natural gas Euro option August 2017 - December 2018, $2.50 - $3.00 Put  (20)  (9,239,750)  (4.62)%
Other commodity futures      (16,864,223)  (8.43)%
Euro / U.S. dollar July 2017 - May 2018, $1.15 - $1.30 Call  (8)  (12,641,368)  (6.32)%
Euro / U.S. dollar July 2017, $1.00 Put  (1)  (20)  (0.00)%
Other currency futures      (10,485,330)  (5.24)%
Euro bund September 2017, $157.50 Put  (1)  (685,134)  (0.34)%
Euro bund August 2017, $160.00 Put  (1)  (645,168)  (0.32)%
Interest rate      (1,589,986)  (0.79)%
U.S. bond future      (210,938)  (0.11)%
U.S. index      (2,836,250)  (1.42)%
Total options      (109,438,932)  (54.70)%
Total derivative financial instruments     $30,221,519   15.11%
 
27

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2017.

Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Derivative financial instruments         
Long contracts         
Futures         
Commodity    $3,448,381   2.87%
Japanese yen September 2017  1   (39)  (0.00)%
Other currency      (22,360)  (0.02)%
Canadian 10yr bond future September 2017  2,694   (8,832,359)  (7.35)%
Other foreign bond      (12,713,783)  (10.59)%
Foreign index      (10,542,329)  (8.78)%
Interest rate      (3,916,218)  (3.26)%
U.S. bond      (2,764,431)  (2.30)%
U.S. index      (704,030)  (0.59)%
Total futures      (36,047,168)  (30.02)%
             
Forwards            
Canadian dollar / U.S. dollar 07/05/2017 - 09/20/2017 CAD326,568,013   3,446,311   2.87%
Japanese yen / U.S. dollar  07/05/2017 - 09/20/2017 JPY27,546,965,000   (6,497,502)  (5.41)%
Other foreign currency      13,211,901   11.00%
Total forwards      10,160,710   8.46%
             
Short contracts            
Futures            
Commodity      (14,571,753)  (12.14)%
Canadian dollar September 2017  (14)  (4,446)  (0.00)%
Japanese yen September 2017  (8)  12,326   0.01%
Other currency      659,578   0.55%
Canadian 10yr bond future September 2017  (221)  502,886   0.42%
Other foreign bond      835,313   0.70%
Foreign index      380,982   0.32%
Interest rate      110   0.00%
U.S. bond      736,876   0.61%
U.S. index      183,102   0.15%
Total futures      (11,265,026)  (9.38)%
             
Forwards            
U.S. dollar / Canadian dollar 07/05/2017 - 09/20/2017 CAD(292,444,000)   (7,938,024)  (6.61)%
U.S. dollar / Japanese yen 07/05/2017 - 09/20/2017 JPY(40,926,773,025)   8,534,789   7.11%
Other foreign currency      (8,671,914)  (7.23)%
Total forwards      (8,075,149)  (6.73)%
Total derivative financial instruments     $(45,226,633)  (37.67)%
28

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
 
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2017.
Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Derivative financial instruments         
Long contracts         
Futures         
Commodity    $(941,338)  (0.82)%
British pound June 2017  4   (8)  (0.00)%
Other currency      (567,246)  (0.49)%
Foreign bond      2,491,375   2.16%
Foreign index      2,116,126   1.84%
Interest rate      (447,422)  (0.39)%
U.S. bond      434,127   0.38%
U.S. index      139,966   0.12%
Total futures      3,225,580   2.80%
             
Forwards            
British pound / U.S. dollar 06/21/2017 GBP19,259,000   222,167   0.19%
Other foreign currency      3,290,546   2.86%
Total forwards      3,512,713   3.05%
             
Short contracts            
Futures            
Commodity      (3,525,502)  (3.06)%
Currency      (57,974)  (0.05)%
Foreign bond      (2,484,657)  (2.16)%
Foreign index      (85,478)  (0.07)%
Interest rate      1,428,631   1.24%
U.S. bond      (5,304,374)  (4.60)%
U.S. index      (760)  0.00%
Total futures      (10,030,114)  (8.70)%
             
Forwards            
U.S. dollar / British pound 06/21/2017 GBP(189,037,000)  (6,029,077)  (5.23)%
Other foreign currency      (5,507,112)  (4.78)%
Total forwards      (11,536,189)  (10.01)%
Total derivative financial instruments     $(14,828,010)  (12.86)%
28

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)
3. Investments in Master Funds (continued)
The following table shows the fair value classification of each investment type by Master Fund as of March 31,June 30, 2017:

 
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
Assets            
Level 1:            
Commodity futures $10,339,760  $6,312,433  $52,722,161  $8,698,525 
Commodity futures options  61,293,170   -   40,410,690   - 
Currency futures  -   36,730   -   739,905 
Foreign bond futures  224,619   3,845,143   14,970,704   1,338,198 
Foreign bond futures options  2,763,374   - 
Foreign index futures  -   5,746,540   799,737   1,008,341 
Foreign index futures options  190,948   - 
Interest rate futures  27,499,868   1,442,539   12,010,889   110 
Interest rate futures options  21,392,471   -   8,824,666   - 
U.S. bond futures  613,719   434,127   3,027,719   736,876 
U.S. bond futures options  4,093,750   -   460,938   - 
U.S. index futures  198,103   1,302,952   1,359,980   1,083,672 
U.S. index futures options  157,500   -   6,422,500   - 
Total Level 1  126,003,908   19,120,464   143,773,358   13,605,627 
                
Level 2:                
Foreign currency forwards  24,863,211   6,286,240   20,516,799   25,248,462 
Foreign currency options  23,726,105   -   54,031,768   - 
Total Level 2  48,589,316   6,286,240   74,548,567   25,248,462 
Total investment related assets $174,593,224  $25,406,704  $218,321,925  $38,854,089 
                
Liabilities                
Level 1:                
Commodity futures $(15,144,581) $(10,779,273) $(50,443,889) $(19,821,897)
Commodity futures options  (50,895,060)  -   (82,102,738)  - 
Currency futures  -   (661,958)  -   (94,846)
Foreign bond futures  (270,368)  (3,838,425)  (3,030,157)  (21,546,141)
Foreign bond futures options  (1,447,254)  - 
Foreign index futures  (3,613,719)  (3,715,892)  (49,474)  (11,169,688)
Interest rate futures  (11,338,445)  (461,330)  (1,486,223)  (3,916,218)
Interest rate futures options  (10,159,377)  -   (3,799,828)  - 
U.S. bond futures  (3,448,766)  (5,304,374)  (4,788,813)  (2,764,431)
U.S. bond futures options  (1,750,000)  -   (210,938)  - 
U.S. index futures  (330,000)  (1,163,746)  (91,180)  (1,604,600)
U.S. index futures options  (75,000)  -   (2,836,250)  - 
Total Level 1  (97,025,316)  (25,924,998)  (150,286,744)  (60,917,821)
                
Level 2:                
Foreign currency forwards  (26,128,928)  (14,309,716)  (14,686,944)  (23,162,901)
Foreign currency options  (5,254,698)  -   (23,126,718)  - 
Total Level 2  (31,383,626)  (14,309,716)  (37,813,662)  (23,162,901)
Total investment related liabilities $(128,408,942) $(40,234,714) $(188,100,406) $(84,080,722)
 
29

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 categorized by primary underlying risk of Graham Commodity Strategies LLC based on its average quarterly notional amounts and number of contracts for the threesix months ended March 31,June 30, 2017. The table also displays the fair value of derivative contracts held by Graham Commodity Strategies LLC at March 31,June 30, 2017 categorized by primary underlying risk. 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 derivative instruments 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.

 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 $853,771,229   23,872  $(324,318,010)  (7,665) $10,339,760  $(15,144,581) $848,127,917  35,022  $(484,941,767)  (15,663) $52,722,161  $(50,443,889)
Options(a)  580,113,964   66,655   (496,141,133)  (63,346)  61,293,170   (50,895,060)  653,444,958  59,479   (537,375,949)  (62,992)  40,410,690   (82,102,738)
  1,433,885,193   90,527   (820,459,143)  (71,011)  71,632,930   (66,039,641)  1,501,572,875  94,501   (1,022,317,716)  (78,655)  93,132,851   (132,546,627)
Equity price                                               
Futures  219,937,062   2,342   (250,497,253)  (3,821)  198,103   (3,943,719)  131,290,921  1,655   (377,303,705)  (3,942)  2,159,717   (140,654)
Options(a)  8,599,284   4,250   (21,799,008)  (3,000)  348,448   (75,000)  67,848,267  3,750   (50,854,946)  (3,750)  6,422,500   (2,836,250)
  228,536,346   6,592   (272,296,261)  (6,821)  546,551   (4,018,719)  199,139,188  5,405   (428,158,651)  (7,692)  8,582,217   (2,976,904)
                                              
Foreign currency exchange rate                  Foreign currency exchange rate                 
Forwards  926,156,191   N/A   (773,395,982)  N/A   24,863,211   (26,128,928)  9,976,869,139  N/A   (1,790,252,236)  N/A   20,516,799   (14,686,944)
Options(a)  707,035,950   49   (541,440,650)  (36)  23,726,105   (5,254,698)  1,221,083,575  42   (886,495,775)  (37)  54,031,768   (23,126,718)
  1,633,192,141   49   (1,314,836,632)  (36)  48,589,316   (31,383,626)  11,197,952,714  42   (2,676,748,011)  (37)  74,548,567   (37,813,662)
Interest rate                                               
Futures  7,460,412,596   25,972   (35,787,448,220)  (108,903)  28,338,206   (15,057,579)  8,637,860,263  32,112   (33,145,798,345)  (111,282)  30,009,312   (9,305,193)
Options(a)  5,773,957,844   180,150   (10,197,131,732)  (141,000)  25,486,221   (11,909,377)  4,588,146,628  154,200   (9,678,066,305)  (131,720)  12,048,978   (5,458,020)
  13,234,370,440   206,122   (45,984,579,952)  (249,903)  53,824,427   (26,966,956)  13,226,006,891  186,312   (42,823,864,650)  (243,002)  42,058,290   (14,763,213)
Total $16,529,984,120   303,290  $(48,392,171,988)  (327,771) $174,593,224  $(128,408,942) $26,124,671,668  286,260  $(46,951,089,028)  (329,386) $218,321,925  $(188,100,406)

(a)  – Notional amounts for options are based on the delta-adjusted positions.
 
30

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 categorized by primary underlying risk of Graham K4D Trading Ltd. based on its average quarterly notional amounts and number of contracts for the threesix months ended March 31,June 30, 2017. The table also displays the fair value of derivative contracts held by Graham K4D Trading Ltd. at March 31,June 30, 2017 categorized by primary underlying risk. 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 derivative instruments 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.

 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 $317,971,448   4,301  $(420,218,065)  (10,133) $6,312,433  $(10,779,273) $282,078,272   4,040  $(550,644,768)  (12,237) $8,698,525  $(19,821,897)
  317,971,448   4,301   (420,218,065)  (10,133)  6,312,433   (10,779,273)  282,078,272   4,040   (550,644,768)  (12,237)  8,698,525   (19,821,897)
                                                
Equity price                                                
Futures  977,178,097   9,773   (31,936,004)  (670)  7,049,492   (4,879,638)  1,023,605,889   10,563   (44,696,826)  (893)  2,092,013   (12,774,288)
  977,178,097   9,773   (31,936,004)  (670)  7,049,492   (4,879,638)  1,023,605,889   10,563   (44,696,826)  (893)  2,092,013   (12,774,288)
Foreign currency exchange rate                      Foreign currency exchange rate                     
Forwards  808,522,734   N/A   (720,315,032)  N/A   6,286,240   (14,309,716)  1,232,264,627   N/A   (904,526,287)  N/A   25,248,462   (23,162,901)
Futures  54,910,157   554   (13,727,883)  (140)  36,730   (661,958)  29,569,924   300   (38,649,046)  (400)  739,905   (94,846)
  863,432,891   554   (734,042,915)  (140)  6,322,970   (14,971,674)  1,261,834,551   300   (943,175,333)  (400)  25,988,367   (23,257,747)
                                                
Interest rate                                                
Futures  2,261,833,812   13,846   (3,496,791,656)  (17,915)  5,721,809   (9,604,129)  3,985,350,225   23,617   (2,279,253,250)  (12,426)  2,075,184   (28,226,790)
  2,261,833,812   13,846   (3,496,791,656)  (17,915)  5,721,809   (9,604,129)  3,985,350,225   23,617   (2,279,253,250)  (12,426)  2,075,184   (28,226,790)
Total $4,420,416,248   28,474  $(4,682,988,640)  (28,858) $25,406,704  $(40,234,714) $6,552,868,937   38,520  $(3,817,770,177)  (25,956) $38,854,089  $(84,080,722)
 
31

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 at March 31,June 30, 2017 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. Gross amounts below correspond to the total derivative asset and derivative liability balances categorized by primary underlying risk and product type in the preceding tables. Collateral pledged (received) for derivative assets and liabilities represent the cash amounts which are included in due from brokers on the statements of financial condition. Actual collateral pledged or received by the Master Funds may exceed these amounts.

Description 
Gross
Amount
  
Gross Amount
Offset in
the Statements
of Financial
Condition
  
Net Amount
Presented in
the Statements
of Financial
Condition
  
Collateral
(Received) /
Pledged
  Net Amount  
Gross
Amount
  
Gross Amount
Offset in
the Statements
of Financial
Condition
  
Net Amount
Presented in
the Statements
of Financial
Condition
  
Collateral
(Received) /
Pledged
  Net Amount 
                              
Graham Commodity Strategies LLC1
              
Graham Commodity Strategies LLC1
             
Derivative assets $174,593,224  $(128,408,942) $46,184,282  $-  $46,184,282  $218,321,925  $(185,957,357) $32,364,568  $-  $32,364,568 
Derivative liabilities  (128,408,942)  128,408,942   -   -   -   (188,100,406)  185,957,357   (2,143,049)  2,143,049   - 
                                        
Graham K4D Trading Ltd.2
                                        
Derivative assets $25,406,704  $(25,406,704) $-  $-  $-  $38,854,089  $(38,854,089) $-  $-  $- 
Derivative liabilities  (40,234,714)  25,406,704   (14,828,010)  14,828,010   -   (84,080,722)  38,854,089   (45,226,633)  45,226,633   - 
 
1 Net derivative asset and liability amounts presented in the statement of financial condition are held with three counterparties. The Master Fund has not received any offsetting collateral from these counterparties. At March 31,June 30, 2017, additional collateral pledged in the amount of $128,209,847$163,630,905 was posted in support of derivative positions and is included in due from brokers on the statement of financial condition.

2 Net derivative liability amounts presented in the statement of financial condition are held with two counterparties. The Master Fund has pledged offsetting collateral to these counterparties as of March 31,June 30, 2017. At March 31,June 30, 2017, additional collateral pledged in the amount of $114,491,628$119,343,341 was posted in support of derivative positions and is included in due from brokers on the statement of financial condition.
 
32

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 months ended March 31,June 30, 2017:

  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
       
Net investment income $212,447  $224,176 
         
Net realized loss on investments  (49,754,190)  (10,427,010)
Net decrease in unrealized appreciation on investments  (6,218,367)  (30,439,859)
Brokerage commissions and fees  (4,404,984)  (277,769)
Net loss on investments  (60,377,541)  (41,144,638)
Net income (loss) $(60,165,094) $(40,920,462)

  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
       
Net investment income $120,920  $76,333 
         
Net realized (loss) gain on investments  (21,031,676)  21,272,398 
Net decrease in unrealized appreciation on investments  (5,273,949)  (25,476,053)
Brokerage commissions and fees  (4,408,320)  (223,099)
Net loss on investments  (30,713,945)  (4,426,754)
Net loss $(30,593,025) $(4,350,421)
The following table summarizes the results of operations of each Master Fund for the six months ended June 30, 2017:

  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
       
Net investment income $333,367  $300,510 
         
Net realized (loss) gain on investments  (70,785,866)  10,845,388 
Net decrease in unrealized appreciation on investments  (11,492,316)  (55,915,912)
Brokerage commissions and fees  (8,813,304)  (500,868)
Net loss on investments  (91,091,486)  (45,571,392)
Net loss $(90,758,119) $(45,270,882)
33

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 months ended March 31,June 30, 2017:

 
Graham
Commodity
Strategies LLC
  
Graham
K4D Trading
Ltd.
  
Graham
Commodity
Strategies LLC
  
Graham
K4D Trading
Ltd.
 
Commodity price            
Futures $7,100,782  $(29,744,883) $5,172,061  $(11,957,092)
Options  (5,826,840)  -   (36,678,144)  - 
  1,273,942   (29,744,883)  (31,506,083)  (11,957,092)
Equity price                
Equities  36,000   150,750   163,700   (99,750)
Futures  (22,117,541)  43,830,965   (13,020,443)  30,790,784 
Options  (6,684,558)  -   (3,508,423)  - 
  (28,766,099)  43,981,715   (16,365,166)  30,691,034 
Foreign currency exchange rate                
Forwards  (1,484,455)  (11,299,620)  35,016,222   (37,722,743)
Futures  -   (1,182,042)  -   856,638 
Options  (25,335,902)  -   (10,397,073)  - 
  (26,820,357)  (12,481,662)  24,619,149   (36,866,105)
Interest rate                
Futures  38,823,823   (5,958,825)  (18,318,452)  (22,734,706)
Options  (10,816,934)  -   (14,402,005)  - 
  28,006,889   (5,958,825)  (32,720,457)  (22,734,706)
Total $(26,305,625) $(4,203,655) $(55,972,557) $(40,866,869)
 
3334

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 six months ended June 30, 2017:

  
Graham
Commodity
Strategies LLC
  
Graham
K4D Trading
Ltd.
 
Commodity price      
Futures $12,272,843  $(41,701,975)
Options  (42,504,984)  - 
   (30,232,141)  (41,701,975)
Equity price        
Equities  199,700   51,000 
Futures  (35,137,984)  74,621,749 
Options  (10,192,981)  - 
   (45,131,265)  74,672,749 
Foreign currency exchange rate        
Forwards  33,531,767   (49,022,363)
Futures  -   (325,404)
Options  (35,732,975)  - 
   (2,201,208)  (49,347,767)
Interest rate        
Futures  20,505,371   (28,693,531)
Options  (25,218,939)  - 
   (4,713,568)  (28,693,531)
Total $(82,278,182) $(45,070,524)
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, 2016:

  
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
 
Assets:      
Due from brokers $106,497,715  $89,715,477 
Derivative financial instruments, at fair value  59,863,776   10,834,324 
Exchange membership, at fair value  3,858,500   666,750 
Dividends receivable  68,250   - 
Total assets  170,288,241   101,216,551 
         
Liabilities:        
Derivative financial instruments, at fair value  -   - 
Total liabilities  -   - 
Net assets $170,288,241  $101,216,551 
         
Percentage of Master Fund held by GAIT  4.45%  8.72%
34

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, 2016.
Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC         
Derivative financial instruments         
Long contracts         
Futures         
Brent crude oil March 2017 – December 2017  420  $323,780   0.19%
Coffee May 2017  32   (65,400)  (0.04)%
Coffee Robusta March 2017  4,325   5,634,070   3.31%
Natural gas March 2017  500   619,660   0.36%
WTI crude oil April 2017 – June 2017  1,800   1,031,760   0.61%
Other commodity      2,391,795   1.39%
Foreign index      678,522   0.40%
Interest rate      163,377   0.10%
U.S. bond      1,290,594   0.76%
U.S. index      (159,638)  (0.09)%
Total futures      11,908,520   6.99%
             
Forwards            
Chinese yuan / U.S. dollar 01/09/2017 - 10/31/2017 CNY1,858,354,550   (5,082,907)  (2.99)%
Euro / U.S. dollar 01/03/2017 EUR45,000,000   424,786   0.25%
Japanese yen / U.S. dollar 01/04/2017 - 01/05/2017 JPY24,025,706,717   370,501   0.22%
Other foreign currency      (992,700)  (0.58)%
Total forwards      (5,280,320)  (3.10)%
             
Options (cost $148,645,305)            
Coffee Robusta March 2017, $2,050.00 - $2,200.00 Call  3   1,469,500   0.86%
Coffee Robusta March 2017, $1,900.00 - $2,000.00 Put  2   (331,000)  (0.19)%
Coffee future March - May 2017, $170.00 Call  2   1,948,500   1.14%
Crude oil March 2017 - December 2018, $50.00 - $73.00 Call  6   15,410,500   9.05%
Natural gas Euro February 2017 - October 2017, $3.25 - $4.00 Call  11   20,719,250   12.17%
Other commodity futures      17,080,628   10.03%
Foreign bond futures      371,034   0.22%
Euro / U.S. dollar 01/13/2017, $1.13 - $1.12 Call  2   5,580   0.00%
Euro / U.S. dollar 01/10/2017 - 05/19/2017, $0.93 - $1.03 Put  9   4,748,294   2.79%
U.S. dollar / Chinese yuan 01/23/2017 - 09/17/2017, $6.90 - $7.60 Call  11   7,954,932   4.67%
U.S. dollar / Japanese yen 02/03/2017, $109.00 Call  1   13,245,000   7.78%
U.S. dollar / Japanese yen 01/04/2017 - 03/30/2017, $112.50 - $122.48 Call  11   17,623,072   10.35%
U.S. dollar / Japanese yen 02/03/2017 - 02/28/2017, $104.50 - $122.98 Put  2   293,183   0.17%
Other currency      10,789,649   6.34%
IMM Eurodollar June 2017, $99.00 Put  1   24,750,000   14.53%
IMM Eurodollar December 2017, $98.50 Put  1   11,093,750   6.51%
35

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, 2016.
Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage
of Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Long contracts (continued)         
Options (continued)         
IMM Eurodollar June 2017 - December 2018, $97.75 - $98.63 Put  2  $6,312,500   3.71%
IMM Eurodollar March 2017, $99.38 Call  1   46,875   0.03%
Other interest rate futures      4,715,625   2.77%
U.S. bond futures      1,476,563   0.87%
U.S. index futures      2,475,000   1.45%
Total options      162,198,435   95.25%
             
Short contracts            
Futures            
Brent crude oil December 2018  (150)  (170,790)  (0.10)%
WTI crude oil February - March 2017  (1,500)  (590,670)  (0.35)%
Other commodity      2,116,601   1.25%
Foreign bond      (1,640,883)  (0.96)%
Interest rate      1,901,210   1.12%
U.S. bond      (2,580,891)  (1.52)%
U.S. index      430,525   0.25%
Total futures      (534,898)  (0.31)%
             
Forwards            
Chinese yuan / U.S. dollar 01/09/2017 - 10/31/2017 CNY(1,995,485,204)  4,111,234   2.41%
Euro / U.S. dollar 01/03/2017 EUR(1,814,750,514)  (8,472,386)  (4.97)%
Japanese yen / U.S. dollar 01/04/2017 - 01/05/2017 JPY(36,516,967,351)  (279,864)  (0.16)%
Other foreign currency      (285,428)  (0.17)%
Total forwards      (4,926,444)  (2.89)%
  
Graham
Commodity
Strategies LLC
(Delaware)
  
Graham K4D
Trading Ltd.
(BVI)
 
Assets:      
Due from brokers $106,497,715  $89,715,477 
Derivative financial instruments, at fair value  59,863,776   10,834,324 
Exchange membership, at fair value  3,858,500   666,750 
Dividends receivable  68,250   - 
Total assets  170,288,241   101,216,551 
         
Liabilities:        
Derivative financial instruments, at fair value  -   - 
Total liabilities  -   - 
Members’ Capital / Net Assets $170,288,241  $101,216,551 
         
Percentage of Master Fund held by GAIT  4.45%  8.72%
 
36

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, 2016.

Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage
of Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Short contracts         
Options (proceeds $91,934,878)         
Coffee Robusta March 2017, $2,400.00 Call  (1) $(17,000)  (0.01)%
Coffee Robusta March 2017, $1,900.00 - $1,950.00 Put  (2)  196,500   0.12%
Coffee future March - May 2017, $185.00 - $200.00 Call  (3)  (635,250)  (0.37)%
Crude oil future February 2017 - December 2018, $52.50 - $80.00 Call  (10)  (17,391,000)  (10.21)%
Crude oil future February 2017 - December 2017, $45.00 - $54.00 Put  (12)  (7,941,520)  (4.66)%
Natural gas Euro February 2017 - October 2017, $3.50 - $5.00 Call  (20)  (15,652,875)  (9.19)%
Natural gas Euro February 2017 - August 2017, $2.75 - $3.50 Put  (5)  (2,718,750)  (1.60)%
Other commodity futures      (2,090,590)  (1.24)%
Euro / U.S. dollar 01/13/2017, $1.13 - $1.12 Call  (2)  (5,580)  (0.00)%
Euro / U.S. dollar 01/10/2017 - 05/19/2017, $0.93 - $1.01 Put  (4)  (2,800,870)  (1.64)%
U.S. dollar / Chinese yuan 01/23/2017 - 09/17/2017, $7.20 - $7.90 Call  (4)  (917,033)  (0.54)%
U.S. dollar / Japanese yen 02/03/2017, $109.00 Call  (1)  (13,245,000)  (7.78)%
U.S. dollar / Japanese yen 01/13/2017 - 02/02/2017, $116.50 - $122.52 Call  (5)  (5,196,358)  (3.05)%
U.S. dollar / Japanese yen 01/23/2017 - 02/03/2017, $104.50 - $113.75 Put  (3)  (455,030)  (0.27)%
Other currency      (1,596,719)  (0.94)%
IMM Eurodollar June 2017, $98.88 Put  (1)  (14,062,500)  (8.26)%
IMM Eurodollar March 2017, $99.63 Call  (1)  (46,875)  (0.03)%
IMM Eurodollar June 2017 - December 2018, $97.25 - $98.75 Put  (3)  (15,656,250)  (9.19)%
Other interest rate futures      (2,187,500)  (1.29)%
Foreign bond futures      (265,692)  (0.16)%
U.S. bond futures      (328,125)  (0.19)%
U.S. index futures      (487,500)  (0.29)%
Total options      (103,501,517)  (60.79)%
Total derivative financial instruments     $59,863,776   35.15%
Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC         
Derivative financial instruments         
Long contracts         
Futures         
Brent crude oil March 2017 – December 2017  420  $323,780   0.19%
Coffee May 2017  32   (65,400)  (0.04)%
Coffee Robusta March 2017  4,325   5,634,070   3.31%
Natural gas March 2017  500   619,660   0.36%
WTI crude oil April 2017 – June 2017  1,800   1,031,760   0.61%
Other commodity      2,391,795   1.39%
Foreign index      678,522   0.40%
Interest rate      163,377   0.10%
U.S. bond      1,290,594   0.76%
U.S. index      (159,638)  (0.09)%
Total futures      11,908,520   6.99%
             
Forwards            
Chinese yuan / U.S. dollar 01/09/2017 - 10/31/2017 CNY1,858,354,550   (5,082,907)  (2.99)%
Euro / U.S. dollar 01/03/2017 EUR45,000,000   424,786   0.25%
Japanese yen / U.S. dollar 01/04/2017 - 01/05/2017 JPY24,025,706,717   370,501   0.22%
Other foreign currency      (992,700)  (0.58)%
Total forwards      (5,280,320)  (3.10)%
             
Options (cost $148,645,305)            
Coffee Robusta March 2017, $2,050.00 - $2,200.00 Call  3   1,469,500   0.86%
Coffee Robusta March 2017, $1,900.00 - $2,000.00 Put  2   (331,000)  (0.19)%
Coffee future March - May 2017, $170.00 Call  2   1,948,500   1.14%
Crude oil March 2017 - December 2018, $50.00 - $73.00 Call  6   15,410,500   9.05%
Natural gas Euro February 2017 - October 2017, $3.25 - $4.00 Call  11   20,719,250   12.17%
Other commodity futures      17,080,628   10.03%
Foreign bond futures      371,034   0.22%
Euro / U.S. dollar 01/13/2017, $1.13 - $1.12 Call  2   5,580   0.00%
Euro / U.S. dollar 01/10/2017 - 05/19/2017, $0.93 - $1.03 Put  9   4,748,294   2.79%
U.S. dollar / Chinese yuan 01/23/2017 - 09/17/2017, $6.90 - $7.60 Call  11   7,954,932   4.67%
U.S. dollar / Japanese yen 02/03/2017, $109.00 Call  1   13,245,000   7.78%
U.S. dollar / Japanese yen 01/04/2017 - 03/30/2017, $112.50 - $122.48 Call  11   17,623,072   10.35%
U.S. dollar / Japanese yen 02/03/2017 - 02/28/2017, $104.50 - $122.98 Put  2   293,183   0.17%
Other currency      10,789,649   6.34%
IMM Eurodollar June 2017, $99.00 Put  1   24,750,000   14.53%
IMM Eurodollar December 2017, $98.50 Put  1   11,093,750   6.51%
 
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, 2016.
Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Derivative financial instruments         
Long contracts         
Futures         
Commodity    $(3,650,299)  (3.61)%
Canadian dollar March 2017  17   (24,477)  (0.02)%
Other currency      296,075   0.28%
Foreign bond      3,609,660   3.57%
Foreign index      4,228,909   4.18%
Interest rate      (90,443)  (0.09)%
U.S. bond      (276,795)  (0.27)%
U.S. index      (1,187,357)  (1.17)%
Total futures      2,905,273   2.87%
             
Forwards            
Canadian dollar / U.S. dollar 03/15/2017 CAD53,947,000   (349,056)  (0.35)%
Australian dollar / U.S. dollar 03/15/2017 AUD199,857,000   (5,618,079)  (5.55)%
Australian dollar / U.S. dollar 01/03/2017 – 03/15/2017 AUD43,303,274   (108,700)  (0.11)%
Other foreign currency      (3,545,034)  (3.50)%
Total forwards      (9,620,869)  (9.51)%
             
Short contracts            
Futures            
Commodity      4,381,482   4.33%
Australian dollar March 2017  (10)  6,093   0.01%
Other currency      (13,007)  (0.01)%
Foreign bond      (947,794)  (0.94)%
Foreign index      (749,021)  (0.74)%
Interest rate      1,325,779   1.31%
U.S. bond      1,255,178   1.24%
U.S. index      34,730   0.03%
Total futures      5,293,440   5.23%
             
Forwards            
Canadian dollar / U.S. dollar 03/15/2017 CAD(287,093,000)  5,336,391   5.27%
Australian dollar / U.S. dollar 01/03/2017 – 03/15/2017 AUD(90,861,000)  35,674   0.04%
Other foreign currency      6,884,415   6.80%
Total forwards      12,256,480   12.11%
Total derivative financial instruments     $10,834,324   10.70%
38

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, 2016:

  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
Assets      
Level 1:      
Commodity futures $14,319,838  $8,742,664 
Commodity futures options  56,824,878   - 
Currency futures  -   302,492 
Foreign bond futures  48,225   3,822,421 
Foreign bond futures options  371,034   - 
Foreign index futures  985,283   4,321,716 
Interest rate futures  3,317,486   1,882,466 
Interest rate futures options  46,918,750   - 
U.S. bond futures  1,290,594   1,432,048 
U.S. bond futures options  1,476,563   - 
U.S. index futures  430,525   1,249,198 
U.S. index futures options  2,475,000   - 
Total Level 1  128,458,176   21,753,005 
         
Level 2:        
Foreign currency forwards  10,689,404   14,142,320 
Foreign currency options  54,659,710   - 
Total Level 2  65,349,114   14,142,320 
Total investment related assets $193,807,290  $35,895,325 
         
Liabilities        
Level 1:        
Commodity futures $(3,029,032) $(8,011,481)
Commodity futures options  (46,777,985)  - 
Currency futures  -   (37,808)
Foreign bond futures  (1,689,108)  (1,160,555)
Foreign bond futures options  (265,692)  - 
Foreign index futures  (306,761)  (841,828)
Interest rate futures  (1,252,899)  (647,130)
Interest rate futures options  (31,953,125)  - 
U.S. bond futures  (2,580,891)  (453,665)
U.S. bond futures options  (328,125)  - 
U.S. index futures  (159,638)  (2,401,825)
U.S. index futures options  (487,500)  - 
Total Level 1  (88,830,756)  (13,554,292)
         
Level 2:        
Foreign currency forwards  (20,896,168)  (11,506,709)
Foreign currency options  (24,216,590)  - 
Total Level 2  (45,112,758)  (11,506,709)
Total investment related liabilities $(133,943,514) $(25,061,001)
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, 2016.

Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage
of Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Long contracts (continued)         
Options (continued)         
IMM Eurodollar June 2017 - December 2018, $97.75 - $98.63 Put  2  $6,312,500   3.71%
IMM Eurodollar March 2017, $99.38 Call  1   46,875   0.03%
Other interest rate futures      4,715,625   2.77%
U.S. bond futures      1,476,563   0.87%
U.S. index futures      2,475,000   1.45%
Total options      162,198,435   95.25%
             
Short contracts            
Futures            
Brent crude oil December 2018  (150)  (170,790)  (0.10)%
WTI crude oil February - March 2017  (1,500)  (590,670)  (0.35)%
Other commodity      2,116,601   1.25%
Foreign bond      (1,640,883)  (0.96)%
Interest rate      1,901,210   1.12%
U.S. bond      (2,580,891)  (1.52)%
U.S. index      430,525   0.25%
Total futures      (534,898)  (0.31)%
             
Forwards            
Chinese yuan / U.S. dollar 01/09/2017 - 10/31/2017 CNY(1,995,485,204)   4,111,234   2.41%
Euro / U.S. dollar 01/03/2017 EUR(1,814,750,514)   (8,472,386)  (4.97)%
Japanese yen / U.S. dollar 01/04/2017 - 01/05/2017 JPY(36,516,967,351)   (279,864)  (0.16)%
Other foreign currency      (285,428)  (0.17)%
Total forwards      (4,926,444)  (2.89)%
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, 2016.

Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage
of Members’
Capital of
Master Fund
 
Graham Commodity Strategies LLC (continued)         
Derivative financial instruments (continued)         
Short contracts         
Options (proceeds $91,934,878)         
Coffee Robusta March 2017, $2,400.00 Call  (1) $(17,000)  (0.01)%
Coffee Robusta March 2017, $1,900.00 - $1,950.00 Put  (2)  196,500   0.12%
Coffee future March - May 2017, $185.00 - $200.00 Call  (3)  (635,250)  (0.37)%
Crude oil future February 2017 - December 2018, $52.50 - $80.00 Call  (10)  (17,391,000)  (10.21)%
Crude oil future February 2017 - December 2017, $45.00 - $54.00 Put  (12)  (7,941,520)  (4.66)%
Natural gas Euro February 2017 - October 2017, $3.50 - $5.00 Call  (20)  (15,652,875)  (9.19)%
Natural gas Euro February 2017 - August 2017, $2.75 - $3.50 Put  (5)  (2,718,750)  (1.60)%
Other commodity futures      (2,090,590)  (1.24)%
Euro / U.S. dollar 01/13/2017, $1.13 - $1.12 Call  (2)  (5,580)  (0.00)%
Euro / U.S. dollar 01/10/2017 - 05/19/2017, $0.93 - $1.01 Put  (4)  (2,800,870)  (1.64)%
U.S. dollar / Chinese yuan 01/23/2017 - 09/17/2017, $7.20 - $7.90 Call  (4)  (917,033)  (0.54)%
U.S. dollar / Japanese yen 02/03/2017, $109.00 Call  (1)  (13,245,000)  (7.78)%
U.S. dollar / Japanese yen 01/13/2017 - 02/02/2017, $116.50 - $122.52 Call  (5)  (5,196,358)  (3.05)%
U.S. dollar / Japanese yen 01/23/2017 - 02/03/2017, $104.50 - $113.75 Put  (3)  (455,030)  (0.27)%
Other currency      (1,596,719)  (0.94)%
IMM Eurodollar June 2017, $98.88 Put  (1)  (14,062,500)  (8.26)%
IMM Eurodollar March 2017, $99.63 Call  (1)  (46,875)  (0.03)%
IMM Eurodollar June 2017 - December 2018, $97.25 - $98.75 Put  (3)  (15,656,250)  (9.19)%
Other interest rate futures      (2,187,500)  (1.29)%
Foreign bond futures      (265,692)  (0.16)%
U.S. bond futures      (328,125)  (0.19)%
U.S. index futures      (487,500)  (0.29)%
Total options      (103,501,517)  (60.79)%
Total derivative financial instruments     $59,863,776   35.15%
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, 2016.

Description 
Number of
Contracts / Notional
Amounts
  Fair Value  
Percentage of
Net Assets of
Master Fund
 
Graham K4D Trading Ltd.         
Derivative financial instruments         
Long contracts         
Futures         
Commodity    $(3,650,299)  (3.61)%
Canadian dollar March 2017  17   (24,477)  (0.02)%
Other currency      296,075   0.28%
Foreign bond      3,609,660   3.57%
Foreign index      4,228,909   4.18%
Interest rate      (90,443)  (0.09)%
U.S. bond      (276,795)  (0.27)%
U.S. index      (1,187,357)  (1.17)%
Total futures      2,905,273   2.87%
             
Forwards            
Canadian dollar / U.S. dollar 03/15/2017 CAD53,947,000   (349,056)  (0.35)%
Australian dollar / U.S. dollar 03/15/2017 AUD199,857,000   (5,618,079)  (5.55)%
Australian dollar / U.S. dollar 01/03/2017 – 03/15/2017 AUD43,303,274   (108,700)  (0.11)%
Other foreign currency      (3,545,034)  (3.50)%
Total forwards      (9,620,869)  (9.51)%
             
Short contracts            
Futures            
Commodity      4,381,482   4.33%
Australian dollar March 2017  (10)  6,093   0.01%
Other currency      (13,007)  (0.01)%
Foreign bond      (947,794)  (0.94)%
Foreign index      (749,021)  (0.74)%
Interest rate      1,325,779   1.31%
U.S. bond      1,255,178   1.24%
U.S. index      34,730   0.03%
Total futures      5,293,440   5.23%
             
Forwards            
Canadian dollar / U.S. dollar 03/15/2017 CAD(287,093,000)   5,336,391   5.27%
Australian dollar / U.S. dollar 01/03/2017 – 03/15/2017 AUD(90,861,000)   35,674   0.04%
Other foreign currency      6,884,415   6.80%
Total forwards      12,256,480   12.11%
Total derivative financial instruments     $10,834,324   10.70%
40

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, 2016:
  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
Assets      
Level 1:      
Commodity futures $14,319,838  $8,742,664 
Commodity futures options  56,824,878   - 
Currency futures  -   302,492 
Foreign bond futures  48,225   3,822,421 
Foreign bond futures options  371,034   - 
Foreign index futures  985,283   4,321,716 
Interest rate futures  3,317,486   1,882,466 
Interest rate futures options  46,918,750   - 
U.S. bond futures  1,290,594   1,432,048 
U.S. bond futures options  1,476,563   - 
U.S. index futures  430,525   1,249,198 
U.S. index futures options  2,475,000   - 
Total Level 1  128,458,176   21,753,005 
         
Level 2:        
Foreign currency forwards  10,689,404   14,142,320 
Foreign currency options  54,659,710   - 
Total Level 2  65,349,114   14,142,320 
Total investment related assets $193,807,290  $35,895,325 
         
Liabilities        
Level 1:        
Commodity futures $(3,029,032) $(8,011,481)
Commodity futures options  (46,777,985)  - 
Currency futures  -   (37,808)
Foreign bond futures  (1,689,108)  (1,160,555)
Foreign bond futures options  (265,692)  - 
Foreign index futures  (306,761)  (841,828)
Interest rate futures  (1,252,899)  (647,130)
Interest rate futures options  (31,953,125)  - 
U.S. bond futures  (2,580,891)  (453,665)
U.S. bond futures options  (328,125)  - 
U.S. index futures  (159,638)  (2,401,825)
U.S. index futures options  (487,500)  - 
Total Level 1  (88,830,756)  (13,554,292)
         
Level 2:        
Foreign currency forwards  (20,896,168)  (11,506,709)
Foreign currency options  (24,216,590)  - 
Total Level 2  (45,112,758)  (11,506,709)
Total investment related liabilities $(133,943,514) $(25,061,001)
41

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 categorized by primary underlying risk of Graham Commodity Strategies LLC based on its average quarterly notional amounts and number of contracts for the year ended December 31, 2016. The table also displays the fair value of derivative contracts held by Graham Commodity Strategies LLC at December 31, 2016 categorized by primary underlying risk. 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 derivative instruments 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.

  Long exposure  Short exposure       
  
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
 
Commodity price                  
Futures $594,473,573   18,890  $(378,174,689)  (10,348) $14,319,838  $(3,029,032)
Options(a)  645,422,049   43,618   (422,143,840)  (28,650)  56,824,878   (46,777,985)
Swaps(b)  27,685,864   595   -   -   -   - 
   1,267,581,486   63,103   (800,318,529)  (38,998)  71,144,716   (49,807,017)
Equity price                        
Futures  93,578,564   1,005   (62,056,131)  (781)  1,415,808   (466,399)
Options(a)  64,008,276   7,398   (12,900,694)  (4,998)  2,475,000   (487,500)
   157,586,840   8,403   (74,956,825)  (5,779)  3,890,808   (953,899)
Foreign currency exchange rate                     
Forwards  9,482,312,254   N/A   (4,518,659,130)  N/A   10,689,404   (20,896,168)
Options(a)  1,178,965,223   50   (1,118,794,294)  (50)  54,659,710   (24,216,590)
   10,661,277,477   50   (5,637,453,424)  (50)  65,349,114   (45,112,758)
Interest rate                        
Futures  18,154,657,514   59,205   (15,921,789,404)  (49,300)  4,656,305   (5,522,898)
Options(a)  8,496,802,913   147,025   (9,037,141,028)  (124,875)  48,766,347   (32,546,942)
Swaps(b)  559,814   1   (2,624,769)  (2)  -   - 
   26,652,020,241   206,231   (24,961,555,201)  (174,177)  53,422,652   (38,069,840)
Total $38,738,466,044   277,787  $(31,474,283,979)  (219,004) $193,807,290  $(133,943,514)

(a) – Notional amounts for options are based on the delta-adjusted positions.
(b) – Notional amounts and number of contracts for these swaps are calculated based on the average amount of each swap transaction that occurred during the year ended December 31, 2016, as a result of no open contracts at any quarter end.
 
4042

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 categorized by primary underlying risk of the Graham K4D Trading Ltd. based on its average quarterly notional amounts and number of contracts for the year ended December 31, 2016. The table also displays the fair value of derivative contracts held by Graham K4D Trading Ltd. at December 31, 2016 categorized by primary underlying risk. 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 derivative instruments 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.

  Long exposure  Short exposure       
  
Notional
amounts
  
Number
of
contracts
  
Notional
amounts
  
Number
of
contracts
  
Derivative
Assets
  
Derivative
Liabilities
 
Commodity price                  
Futures $369,934,460   7,477  $(256,322,203)  (5,940) $8,742,664  $(8,011,481)
   369,934,460   7,477   (256,322,203)  (5,940)  8,742,664   (8,011,481)
                         
Equity price                        
Futures  574,565,900   5,873   (135,885,108)  (2,117)  5,570,914   (3,243,653)
   574,565,900   5,873   (135,885,108)  (2,117)  5,570,914   (3,243,653)
                         
Foreign currency exchange rate                     
Forwards  654,891,983   N/A   (815,502,972)  N/A   14,142,320   (11,506,709)
Futures  21,012,235   210   (53,944,482)  (552)  302,492   (37,808)
   675,904,218   210   (869,447,454)  (552)  14,444,812   (11,544,517)
                         
Interest rate                        
Futures  3,085,056,458   17,936   (1,804,155,003)  (8,701)  7,136,935   (2,261,350)
   3,085,056,458   17,936   (1,804,155,003)  (8,701)  7,136,935   (2,261,350)
Total $4,705,461,036   31,496  $(3,065,809,768)  (17,310) $35,895,325  $(25,061,001)
 
4143

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 at December 31, 2016 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. Gross amounts below correspond to the total derivative asset and derivative liability balances categorized by primary underlying risk and product type in the preceding tables. Collateral pledged (received) for derivative assets and liabilities represent the cash amounts which are included in due from brokers on the statements of financial condition. Actual collateral pledged or received by the Master Funds may exceed these amounts.

Description 
Gross
Amount
  
Gross Amount
Offset in
the Statements
of Financial
Condition
  
Net Amount
Presented in
the Statements
of Financial
Condition
  
Collateral
(Received) /
Pledged
  Net Amount 
                
Graham Commodity Strategies LLC1
             
Derivative assets $193,807,290  $(133,943,514) $59,863,776  $-  $59,863,776 
Derivative liabilities  (133,943,514)  133,943,514   -   -   - 
                     
Graham K4D Trading Ltd.2
                    
Derivative assets $35,895,325  $(25,061,001) $10,834,324  $-  $10,834,324 
Derivative liabilities  (25,061,001)  25,061,001   -   -   - 

1 Net derivative asset and liability amounts presented in the statement of financial condition are held with five counterparties. The Master Fund did not receive collateral from of these counterparties that may have been used to offset these derivative amounts as of December 31, 2016.  At December 31, 2016, additional collateral pledged in the amount of $106,497,715 was posted in support of derivative positions and is included in due from brokers on the statement of financial condition.

2 Net derivative asset amounts presented in the statement of financial condition are held with two counterparties. The Master Fund did not receive collateral from of these counterparties that may have been used to offset these derivative amounts as of December 31, 2016.  At December 31, 2016, additional collateral pledged in the amount of $89,715,477 was posted in support of derivative positions and is included in due from brokers on the statement of financial condition
 
4244

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 yearthree months ended December 31,June 30, 2016:

 
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
            
Net investment income $252,436  $67,766  $52,403  $15,442 
                
Net realized (loss) gain on investments  205,015,671   (77,423,253)
Net realized loss on investments  (12,192,367)  (4,870,236)
Net increase in unrealized appreciation on investments  26,938,318   3,619,734   16,960,920   28,968,759 
Brokerage commissions and fees  (16,236,638)  (839,619)  (3,995,592)  (224,053)
Net loss on investments  215,717,351   (74,643,138)
Net loss $215,969,787  $(74,575,372)
Net gain on investments  772,961   23,874,470 
Net income $825,364  $23,889,912 

The following table summarizes the results of operations of each Master Fund for the six months ended June 30, 2016:

  
Graham
Commodity
Strategies LLC
  
Graham K4D
Trading Ltd.
 
       
Net investment income $72,946  $17,315 
         
Net realized loss on investments  (47,379,082)  (23,469,553)
Net increase in unrealized appreciation on investments  40,472,541   27,020,608 
Brokerage commissions and fees  (8,680,172)  (459,063)
Net (loss) gain on investments  (15,586,713)  3,091,992 
Net (loss) income $(15,513,767) $3,109,307 
45

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 year ended December 31, 2016:

  
Graham
Commodity
Strategies LLC
  
Graham
K4D Trading
Ltd.
 
Commodity price      
Futures $85,195,708  $(96,510,977)
Options  63,910,871   - 
Swaps  (5,443,954)  - 
   143,662,625   (96,510,977)
Equity price        
Equities  835,500   (85,250)
Futures  10,397,961   (10,239,849)
Options  (14,874,092)  - 
   (3,640,631)  (10,325,099)
Foreign currency exchange rate        
Forwards  59,099,687   913,138 
Futures  (78,885)  (4,847,264)
Options  4,530,160   - 
   63,550,962   (3,934,126)
Interest rate        
Futures  26,958,886   36,966,683 
Options  2,127,453   - 
Swaps  (705,306)  - 
   28,381,033   36,966,683 
Total $231,953,989  $(73,803,519)
 
4346

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 Cash Assets, an entity for which the Manager is also the sole investment advisor. Cash 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-six months. Cash Assets also maintains cash and cash equivalents on deposit with major U.S. institutions. Cash Assets values all fixed income securities at amortized cost which approximates fair value. GAIT’s investment in Cash 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 Cash Assets’ reported net asset value. GAIT records its proportionate share of Cash Assets’ investment income and expenses on a monthly basis. For the three months and six months ended March 31,June 30, 2017, the total amount recognized by GAIT with respect to its investment in Cash Assets was $206,382 and $404,207, respectively. For the three months and six months ended June 30, 2016, the total amount recognized by GAIT with respect to its investment in Cash Assets was $197,825$176,984 and $177,903,$354,887, respectively. These amounts are included in interest income in the statements of operations and incentive allocation. At March 31,June 30, 2017 and December 31, 2016, GAIT owned approximately 2.61%2.02% and 2.55%, respectively, of Cash Assets. The following table summarizes the financial position of Cash Assets as of March 31,June 30, 2017 and December 31, 2016:

  March 31, 2017  December 31, 2016 
Assets:      
Cash and cash equivalents $461,215,475  $613,789,536 
Investments in fixed income securities (amortized cost $3,832,997,533 and $4,208,763,924, respectively)  3,832,997,533   4,208,763,924 
Accrued interest receivable  8,868,329   8,117,639 
Total assets  4,303,081,337   4,830,671,099 
Members’ capital $4,303,081,337  $4,830,671,099 
  June 30, 2017  December 31, 2016 
Assets:      
Cash and cash equivalents $565,294,380  $613,789,536 
Investments in fixed income securities (amortized cost $4,352,351,648 and $4,208,763,924, respectively)  4,352,351,648   4,208,763,924 
Accrued interest receivable  8,726,315   8,117,639 
Total assets  4,926,372,343   4,830,671,099 
Members’ capital $4,926,372,343  $4,830,671,099 
         
The following table summarizes the results of operations of Cash Assets for the three and six months ended March 31,June 30, 2017 and 2016:

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
 2017  2016  2017  2016  2017  2016 
Investment income                  
Interest income $7,594,812  $4,682,200  $9,542,673  $4,967,225  $17,137,485  $9,649,425 
Total investment income  7,594,812   4,682,200   9,542,673   4,967,225   17,137,485   9,649,425 
                        
Expenses:                        
Bank fee expense  14,666   23,318   18,045   12,020   32,711   35,338 
Total expenses  14,666   23,318   18,045   12,020   32,711   35,338 
Net investment income  7,580,146   4,658,882   9,524,628   4,955,205   17,104,774   9,614,087 
Net income $7,580,146  $4,658,882  $9,524,628  $4,955,205  $17,104,774  $9,614,087 
 
4447

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 Cash Assets as of March 31,June 30, 2017:

Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
  
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities
(amortized cost $3,832,997,533)
         
Investments in Fixed Income Securities
(amortized cost $4,352,351,648)
         
United States                  
Government Bonds (amortized cost $3,358,070,642)         
U.S. Treasury bonds 0.50% – 3.13% due 04/15/2017 – 05/15/2019 $3,350,000,000  $3,358,070,642   78.04%
Government Bonds (amortized cost $3,702,544,758)         
U.S. Treasury bonds 0.50% – 3.13% due 07/15/2017 – 08/31/2019 $3,700,000,000  $3,702,544,758   75.16%
Total Government Bonds      3,358,070,642   78.04%      3,702,544,758   75.16%
                        
Treasury Bills (amortized cost $474,926,891)            
U.S. Treasury bill 0.00% due 04/06/2017  225,000,000   224,981,450   5.23%
U.S. Treasury bill 0.00% due 04/13/2017  250,000,000   249,945,441   5.81%
Treasury Bills (amortized cost $649,806,890)            
U.S. Treasury bill 0.00% due 07/20/2017  250,000,000   249,887,708   5.07%
U.S. Treasury bills 0.00% due 07/06/2017 – 07/13/2017  400,000,000   399,919,182   8.12%
Total Treasury Bills      474,926,891   11.04%      649,806,890   13.19%
Total United States      3,832,997,533   89.08%      4,352,351,648   88.35%
Total Investments in Fixed Income Securities     $3,832,997,533   89.08%     $4,352,351,648   88.35%

The following represents the condensed schedule of investments of Cash Assets as of December 31, 2016:

Description 
Principal
Amount
  Fair Value  
Percentage of
Members’
Capital
 
Investments in Fixed Income Securities
(amortized cost $4,208,763,924)
         
United States         
Government Bonds (amortized cost $3,533,849,051)         
U.S. Treasury bonds 0.50% – 3.25% due 01/15/2017 – 04/15/2019 $3,525,000,000  $3,533,849,051   73.16%
Total Government Bonds      3,533,849,051   73.16%
             
Treasury Bills (amortized cost $674,914,873)            
U.S. Treasury bill 0.00% due 01/12/2017  275,000,000   274,964,768   5.69%
U.S. Treasury bills 0.00% due 01/5/2017 – 01/19/2017  400,000,000   399,950,105   8.28%
Total Treasury Bills      674,914,873   13.97%
Total United States      4,208,763,924   87.13%
Total Investments in Fixed Income Securities     $4,208,763,924   87.13%
 
4548

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

Cash 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 Cash Assets as of March 31,June 30, 2017 and December 31, 2016:

 March 31, 2017  December 31, 2016  June 30, 2017  December 31, 2016 
Assets            
Level 2:            
Fixed income securities            
Government bonds $3,358,070,642  $3,533,849,051  $3,702,544,758  $3,533,849,051 
Treasury bills  474,926,891   674,914,873   649,806,890   674,914,873 
Total fixed income securities  3,832,997,533   4,208,763,924   4,352,351,648   4,208,763,924 
Total Level 2  3,832,997,533   4,208,763,924   4,352,351,648   4,208,763,924 
Total assets $3,832,997,533  $4,208,763,924  $4,352,351,648  $4,208,763,924 

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.
 
4649

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

6. Fees and Related Party Transactions

Advisory Fees

For the threesix months ended March 31,June 30, 2017 and 2016, each Class of GAIT other than Class M paid the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate equal to 1.75% 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. The Advisory Fees paid to the Manager for the threesix months ended March 31,June 30, 2017 and 2016 were $556,945$1,072,217 and $705,897,$1,366,653, respectively.

Sponsor Fees

For the three months ended March 31, 2017 and 2016, eachEach Class of GAIT other than Class M paid the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of the Net Asset Value specified for the periods in the table below. The Sponsor Fee is payable monthly in arrears calculated as of the last business day of each month in the same manner as the Advisory Fee.

ClassAnnual Rate
Class 00.75%
Class 22.75%
PeriodClass 0Class2
   
For the period from January 1, 2016 through March 31, 20170.75%2.75%
For the period from April 1, 2017 through June 30, 20170.75%1.50%

The Sponsor Fees paid to the Manager for the threesix months ended March 31,June 30, 2017 and 2016 were $433,209$722,912 and $530,040,$1,028,636, respectively.

Incentive Allocation

At the end of each calendar quarter, Graham Capital LLC, an affiliate of 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. There was no Incentive Allocation for the three months or six months ended March 31,June 30, 2017 and 2016.

Administrator’s Fee

For the threesix months ended March 31,June 30, 2017 and 2016, GAIT paid SEI a monthly administrator’s fee based on 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, including out-of-pocket expenses, incurred by GAIT were $43,269$82,679 and $27,903,$108,284, respectively, of which $14,600$12,223 and $13,455$17,428 was accrued as of March 31,June 30, 2017 and December 31, 2016, 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.
 
4750

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 and GAIT identifies its major tax jurisdictions as U.S. Federal and Connecticut State. 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 for open tax years 2014 through 2016 or expected to be taken in GAIT’s 2017 tax returns. 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 months ended March 31,June 30, 2017 and 2016:

  Class 0  Class 2 
Per unit operating performance      
Net asset value per unit, December 31, 2015 $147.34  $109.91 
Net loss:        
Net investment loss  (0.84)  (1.18)
Net loss on investments  (2.78)  (2.05)
Net loss  (3.62)  (3.23)
Net asset value per unit, March 31, 2016 $143.72  $106.68 
  Class 0  Class 2 
Per unit operating performance      
Net asset value per unit, March 31, 2016 $143.72  $106.68 
Net income:        
Net investment loss  (0.89)  (1.18)
Net gain on investments  2.06   1.52 
Net income  1.17   0.34 
Net asset value per unit, June 30, 2016 $144.89  $107.02 

Net asset value per unit, December 31, 2016 $146.92  $107.43 
Net asset value per unit, March 31, 2017 $144.35  $105.03 
Net loss:                
Net investment loss  (0.84)  (1.13)  (0.84)  (0.81)
Net loss on investments  (1.73)  (1.27)  (5.72)  (4.15)
Net loss  (2.57)  (2.40)  (6.56)  (4.96)
Net asset value per unit, March 31, 2017 $144.35  $105.03 
Net asset value per unit, June 30, 2017 $137.79  $100.07 
 
4851

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 three months ended March 31,June 30, 2017 and 2016:

 Class 0  Class 2  Class 0  Class 2 
 2017  2016  2017  2016  2017  2016  2017  2016 
                        
Total return before Incentive Allocation  (1.75)%  (2.46)%  (2.23)%  (2.94)%  (4.54)%  0.81%  (4.72)%  0.32%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (1.75)%  (2.46)%  (2.23)%  (2.94)%  (4.54)%  0.81%  (4.72)%  0.32%
                                
Net investment loss before Incentive Allocation  (0.58)%  (0.57)%  (1.07)%  (1.07)%  (0.60)%  (0.63)%  (0.79)%  (1.13)%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (0.58)%  (0.57)%  (1.07)%  (1.07)%  (0.60)%  (0.63)%  (0.79)%  (1.13)%
                                
Total expenses before Incentive Allocation  0.73%  0.68%  1.22%  1.18%  0.79%  0.74%  0.98%  1.24%
Incentive Allocation  0.00   0.00   0.00   0.00   0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  0.73%  0.68%  1.22%  1.18%  0.79%  0.74%  0.98%  1.24%

The following is the per Unit operating performance calculation for the six months ended June 30, 2017 and 2016:

  Class 0  Class 2 
Per unit operating performance      
Net asset value per unit, December 31, 2015 $147.34  $109.91 
Net loss:        
Net investment loss  (1.73)  (2.36)
Net loss on investments  (0.72)  (0.53)
Net loss  (2.45)  (2.89)
Net asset value per unit, June 30, 2016 $144.89  $107.02 

Net asset value per unit, December 31, 2016 $146.92  $107.43 
Net loss:        
Net investment loss  (1.68)  (1.95)
Net loss on investments  (7.45)  (5.41)
Net loss  (9.13)  (7.36)
Net asset value per unit, June 30, 2017 $137.79  $100.07 
52

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 six months ended June 30, 2017 and 2016:

  Class 0  Class 2 
  2017  2016  2017  2016 
             
Total return before Incentive Allocation  (6.21)%  (1.66)%  (6.85)%  (2.63)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total return after Incentive Allocation  (6.21)%  (1.66)%  (6.85)%  (2.63)%
                 
Net investment loss before Incentive Allocation  (1.18)%  (1.19)%  (1.87)%  (2.19)%
Incentive Allocation  0.00   0.00   0.00   0.00 
Net investment loss after Incentive Allocation  (1.18)%  (1.19)%  (1.87)%  (2.19)%
                 
Total expenses before Incentive Allocation  1.53%  1.42%  2.23%  2.42%
Incentive Allocation  0.00   0.00   0.00   0.00 
Total expenses after Incentive Allocation  1.53%  1.42%  2.23%  2.42%

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. An individual member’s return may vary from these returns based on the timing of capital transactions and the applicability of Advisory Fees, Sponsor Fees, Administrator’s 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 investment income from Cash Assets. The computation of such ratios is based on the amount of net investment loss, total expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of members’ capital of GAIT, excluding that of the Managing Member, for the three and six months ended March 31,June 30, 2017 and 2016, and are not annualized.

9. Subsequent Events

Effective July 1, 2017, the annual Advisory Fee charged to Class 0 and Class 2 Units was reduced from 1.75% to 1.50%. The annual Sponsor Fee charged to Class 0 Units was reduced from 0.75% to 0.50%. The annual Sponsor Fee charged to Class 2 Units was reduced from 1.50% to 1.25%.

GAIT had subscriptions of approximately $0.5$0.1 million and redemptions of approximately $3.2$1.5 million from AprilJuly 1, 2017 through May 15,August 14, 2017, the date through which subsequent events were evaluated by management. These amounts have not been included in the financial statements.
 
4953

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

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, other 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 words such as “may,” “will,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “continue,” “further,” “seek,” “plan,” or “project” and variations of these 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, including the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2016 under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our annual financial statements and the notes thereto for the fiscal year ended December 31, 2016 included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 30, 2017. 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 beginning with Item 2, the term “Fund” shall include the Blended Strategies Portfolio of GAIF I, GAIT 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 March 31,June 30, 2017, the Blended Strategies Portfolio’s net asset value decreased by $3,818,175$7,879,016 or -5.2%-11.4% over the corresponding period of the preceding year. The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $1,602,500$480,000 or 2.2%0.7% offset by redemptions totaling $4,024,273$5,263,379 or -5.5%-7.6% and a net loss of $1,396,402$3,095,637 or -1.9%-4.5%, for the period.

For the threesix months ended March 31, 2016,June 30, 2017, the Blended Strategies Portfolio’s net asset value decreased by $4,851,122$11,697,191 or -5.6%-16.0% over the corresponding period of the preceding year. The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $125,000$2,082,500 or 0.2%2.9% offset by redemptions totaling $2,819,472$9,287,652 or -3.3%-12.7% and a net loss of $2,156,650$4,492,039 or -2.5%-6.2%, for the period.

(i)For the three months ended June 30, 2016, the Blended Strategies Portfolio’s net asset value decreased by $325,595 or -0.4%. The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $1,059,739 or 1.3% and net income of $501,526 of 0.6% offset by redemptions totaling $1,886,860 or -2.3%, for the period.
For the six months ended June 30, 2016, the Blended Strategies Portfolio’s net asset value decreased by $5,176,717 or -6.0%. The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $1,184,739 or 1.4% offset by redemptions totaling $4,706,332 or -5.5% and a net loss of $1,655,124 or -1.9%, for the period.

(i) Results of Operations

The Fund’s success depends primarily upon the Manager’s ability to recognize and capitalize on market trends in the different and varied sectors of the global financial markets in which it trades.
50


2017 Summary

Three Months Ended March 31,June 30, 2017

For the three months ended March 31,June 30, 2017, the Blended Strategies Portfolio experienced net trading losses of $771,780.$2,568,372. The trading results are attributable to the following sectors:

Agriculture / Softs $785,746  $78,543 
Base metals  (19,733)  (433,079)
Energy  (1,815,851)  (124,746)
Equities  896,619   (537,483)
Foreign exchange  (188,045)  (98,624)
Long term / Intermediate rates  (628,349)  (1,421,693)
Precious metals  (1,061,027)  (81,807)
Short term rates  1,258,860   50,517 
 $(771,780) $(2,568,372)

The Blended Strategies Portfolio recorded a net loss for the firstsecond quarter of 2017. In commodities, lossesLosses resulted primarily from long positions across the fixed income yield curve in the energy complex,U.S. In the agriculture and softs sector, the portfolio experienced losses in coffee, and gold more than offset gains from positions in base metals and grains. Trading in currencies also resulted innatural gas.  The portfolio recorded losses in the foreign exchange, sector, particularly from trading the U.S. dollar versusin the Japanese yen, Australian dollar and CanadianBritish pound sterling versus the U.S. dollar. In fixed income futures,The portfolio recorded gains from long positions in the U.S. and Europe resulted in gains for the portfolio. Positions in equity indexindices futures, most notably in Asia and the U.S. and Europe, resulted in profits in, which helped offset the equities sector that further offset a portion ofoverall losses for the portfolio’s overall loss during the quarter.period.

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

For the three months ended March 31,June 30, 2017, Advisory Fees decreased by $66,251$62,957 or -17.8%-18.1%, Sponsor Fees decreased by $46,549$112,516 or -15.9%-40.9%, and Administrator’s Fees decreased by $5,733$5,766 or -19.5%-21.0% in the Fund over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from redemptions and a net loss partially offset by subscriptions for the period. The decrease in Sponsor Fees is also attributable to a reduction of the Class 2 Sponsor Fee rate from 2.75% to 1.50% in the second quarter of 2017. During the same period, interest income increased by $20,432$33,199 or 21.9%35.8%. Interest was earned on free cash at an average annualized yield of 0.68%0.78% for the three months ended March 31,June 30, 2017 compared to 0.30%0.52% for the same period in 2016.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended March 31,June 30, 2017 and 2016, the portfolio has not yet recovered previous losses. As a result, there was no Incentive Allocation for those periods.
55

Six Months Ended June 30, 2017

For the six months ended June 30, 2017, the Blended Strategies Portfolio experienced net trading losses of $3,340,152. The trading results are attributable to the following sectors:

Agriculture / Softs $(292,156)
Base metals  (233,177)
Energy  (1,317,638)
Equities  1,974,491 
Foreign exchange  (1,963,192)
Long term / Intermediate rates  (982,446)
Precious metals  (352,986)
Short term rates  (173,048)
  $(3,340,152)

The Blended Strategies Portfolio recorded a net loss for the first half of 2017. The majority of the portfolio's losses resulted from positions in foreign exchange, particularly in the Japanese yen versus the U.S. dollar. The portfolio also experienced losses in the agriculture and softs sector, particularly in natural gas, coffee, gold and zinc and from long positions in U.S. fixed income futures. Long positions in equity index futures, most notably in the U.S. and Asia, resulted in profits that offset a portion of the portfolio’s overall loss for the year.

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

For the six months ended June 30, 2017, Advisory Fees decreased by $129,208 or -17.9%, Sponsor Fees decreased by $159,065 or -28.0%, and Administrator’s Fees decreased by $11,499 or -20.3% in the Fund over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from redemptions and a net loss partially offset by subscriptions for the period. The decrease in Sponsor Fees is also attributable to a reduction of the Class 2 Sponsor Fee rate from 2.75% to 1.50% in the second quarter of 2017. During the same period, interest income increased by $53,631 or 28.9%. Interest was earned on free cash at an average annualized yield of 0.73% for the six months ended June 30, 2017 compared to 0.50% for the same period in 2016.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the six months ended June 30, 2017 and 2016, the portfolio has not yet recovered previous losses. As a result, there was no Incentive Allocation for those periods.

The following table illustrates the sector distribution of the Fund’s investments in Master Funds as of March 31,June 30, 2017 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  5.84.3%
Base metals  3.64.2%
Energy  10.3(57.5)%
Equities  (4.919.0)%
Foreign exchange  47.957.0%
Long term / Intermediate rates  17.647.7%
Precious metals  2.2(0.3)%
Short term rates  17.525.6%
   100.0%
 
5156

2016 Summary

Three Months Ended March 31,June 30, 2016

For the three months ended March 31,June 30, 2016, the Blended Strategies Portfolio experienced net trading lossesgains of $1,401,140.$1,243,465. The trading results are attributable to the following sectors:

Agriculture / Softs $(459,286) $1,025,949 
Base metals  (331,123)  (584,255)
Energy  1,460,870   (386,531)
Equities  (659,646)  (1,125,662)
Foreign exchange  (1,176,368)  82,044 
Long term / Intermediate rates  19,775   1,797,479 
Precious metals  (292,177)  1,152,514 
Short term rates  36,815   (718,073)
 $(1,401,140) $1,243,465 

The Blended Strategies Portfolio recorded a net lossgain for the firstsecond quarter of 2016. The majority of the lossesgains resulted from positions in foreign exchange, particularlycommodities, most notably from a long biaspositions in gold and silver as precious metals rallied with additional gains from long positions in soybeans. The portfolio also recorded gains in fixed income, primarily from long positions on the long end of the yield curve in the U.S. dollarand Europe as bond futures rallied. Smaller profits resulted in foreign exchange, primarily from long positions in the Japanese yen versus the euro with smallerU.S. dollar. The portfolio experienced losses in the Swiss franc, Japanese yen, New Zealand dollar, and emerging market currencies. Smaller losses resulted in equity index futures, particularlyprimarily from positions in the U.S. and Asia as prices reversed duringEuropean benchmark indices, which offset a portion of the period. The portfolio finishedoverall gains for the period relatively flat in fixed income futures as gains in European bonds were offset by losses in the U.S. In commodities, the Blended Strategies Portfolio recorded profits in the energy complex, primarily due to positions in crude oil and natural gas.period.

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

For the three months ended March 31,June 30, 2016, Advisory Fees decreased by $42,673$58,869 or -10.3%-14.5%, Sponsor Fees decreased by $24,379$36,206 or -7.7%-11.6%, and Administrator’s Fees decreased by $3,502$4,944 or -10.7%-15.3% in the Fund over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from redemptions and partially offset by subscriptions and net income for the period. During the same period, interest income increased by $22,500 or 32.1%. Interest was earned on free cash at an average annualized yield of 0.52% for the three months ended June 30, 2016 compared to 0.34% for the same period in 2015.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended June 30, 2016 and June 30, 2015, the portfolio has not yet recovered previous losses. As a result, there was no Incentive Allocation for those periods.

Six Months Ended June 30, 2016

For the six months ended June 30, 2016, the Blended Strategies Portfolio experienced net trading losses of $157,675. The trading results are attributable to the following sectors:

Agriculture / Softs $131,801 
Base metals  (297,831)
Energy  434,409 
Equities  (581,970)
Foreign exchange  (417,824)
Long term / Intermediate rates  540,810 
Precious metals  232,170 
Short term rates  (199,240)
  $(157,675)
57

The Blended Strategies Portfolio recorded a net loss for the first half of 2016. The portfolio experienced losses in equity index futures, primarily from positions in U.S., Asian and European benchmark indices. Losses also resulted from positions in foreign exchange, particularly from a long bias in the U.S. dollar versus the euro and Swiss franc with smaller losses in the New Zealand dollar and emerging market currencies. The portfolio recorded gains in commodities, primarily from positions in crude oil, natural gas, soybeans and gold. Additional profits resulted from long positions on the long end of the fixed income yield curve in Europe and Asia as bond futures rallied, which offset a portion of the overall losses for the period.

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

For the six months ended June 30, 2016, Advisory Fees decreased by $101,542 or -12.3%, Sponsor Fees decreased by $60,585 or -9.6%, and Administrator’s Fees decreased by $8,446 or -13.0% in the Fund over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from redemptions and a net loss partially offset by subscriptions for the period. During the same period, interest income increased by $34,185$56,685 or 57.9%43.9%. Interest was earned on free cash at an average annualized yield of 0.48%0.50% for the threesix months ended March 31,June 30, 2016 compared to 0.30%0.32% for the same period in 2015.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the threesix months ended March 31,June 30, 2016, the Incentive Allocation decreased by $1,550,824 over the corresponding period of the preceding year. This was the result of a net loss before incentive allocation for the threesix months ended March 31,June 30, 2016 compared to a net gain before incentive allocation for the threesix months ended March 31,June 30, 2015.
52


The following table illustrates the sector distribution of the Fund’s investments in Master Funds as of March 31,June 30, 2016 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  40.062.1%
Base metals  (55.313.8)%
Energy  (75.259.6)%
Equities  52.23.4%
Foreign exchange  75.741.1%
Long term / Intermediate rates  (4.945.6)%
Precious metals  5.322.6%
Short term rates  62.2(1.4)%
   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.

58

Advisory, Sponsor, and Administrator’s 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.
53


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 FX clearing broker, on an almost daily basis. The Manager generally expresses its margin requirements for the portfolios in terms of the aggregate of the margin requirements for the underlying strategies plus the net option premium costs for the underlying strategies. The following table shows these amounts as of the date indicated:

 
Blended Strategies
Portfolio
March 31,June 30, 201712.09%13.01%
December 31, 201611.88%11.88%
March 31,June 30, 201610.08%11.82%

Other than any potential market-imposed limitations on liquidity, the Fund’s assets are highly liquid and are expected to remain so. Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Fund’s futures trading. Through March 31,June 30, 2017, 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.
 
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(iv) Critical Accounting Policies

Presentation – Graham Alternative Investment Fund I LLC is a series Limited Liability Company under Delaware law. The financial statements and corresponding footnotes are presented solely for the Blended Strategies Portfolio, except where otherwise noted.

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 except where noted. 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.
54


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

Investment CompanyThe Fund is an investment company and applies specialized accounting guidance as outlined in Financial Accounting Standards Board Accounting Standards Update 2013-08, Financial Services – Investment Companies (Topic 946), Amendments to the Scope, Measurement, and Disclosure Requirements. The Manager has evaluated this guidance and has determined the Fund meets the criteria to be classified as an investment company.

Cash Assets – GAIT invests a portion of its 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 GAIT.

Income TaxesNo 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.
 
60

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 and the Fund identifies its major tax jurisdictions as U.S. Federal and Connecticut State. 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 for open tax years 2014 through 2016 or expected to be taken in the Fund’s 2017 tax returns. 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.

(v)(v) Off-Balance Sheet Arrangements

The Fund does not engage in off-balance sheet arrangements with other entities.
 
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Item 3.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk

No disclosure is required hereunder as the Fund is a “smaller reporting company”, as defined in Item 10(f)(1) of Regulation S-K.
 
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Item 4.
Item 4.
Controls and Procedures

Evaluation of Disclosure Control and Procedures

The Fund has established disclosure controls and procedures to ensure that the information required to be disclosed by the Fund in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Manager and the Fund’s management, as appropriate, to allow timely decisions regarding required disclosure.

Based on their evaluation as of March 31,June 30, 2017, the Manager, along with the Manager’s principal executive officer and principal financial officer, has concluded that the Fund’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective.

Changes in Internal Control Over Financial Reporting

There were no changes to the Fund’s internal control over financial reporting during the firstsecond quarter of 2017 that have materially affected, or are reasonably likely to materially affect, the Fund’s internal control over financial reporting.
 
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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

None

Item 1A.Risk Factors

There have been no material changes to the risk factors disclosed in our 2016 Form 10-K.

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

For the three months ended March 31,June 30, 2017, the Fund issued 11,039.7033,980.971 Units in exchange for $1,602,500$480,000 with respect to the Blended 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(a)(2) of the Act and Rule 506 of Regulation D promulgated thereunder. All purchasers of the Units were accredited investors, as that term is defined under Rule 501 of Regulation D.

The following chart sets forth the purchases of Units of the Fund during each month of the quarter covered by this report.
 
 
 
 
Period (as of)
 
Blended Strategies Portfolio
Total
Number of
Units Issued
 
JanuaryApril 2017  850.7823,627.341 
FebruaryMay 2017  192.091- 
MarchJune 2017  9,996.830353.630 
 
Issuer Purchases of Units

Date
 
(a) Total
Number of
Units
Purchased1
  
(b) Average
Price Paid
per Unit
  
(c) Total Number of
Units Purchased
as Part of Publicly
Announced Plans
or Programs
  
(d) Maximum Number
of Approximate
Dollar Value of
Units that May Yet
Be Purchased
Under the Plans or
Programs
 
January 1 - January 31, 2017  6,187.773   119.47   N/A   N/A 
February 1 - February 28, 2017  16,487.193   137.75   N/A   N/A 
March 1 - March 31, 2017  8,689.641   116.68   N/A   N/A 
TOTAL  31,364.607   128.31   N/A   N/A 
Date
 
(a) Total
Number of
Units Purchased1
  
(b) Average Price Paid per
Unit
  
(c) Total Number of Units
Purchased
as Part of Publicly
Announced Plans or Programs
  
(d) Maximum Number of
Approximate
Dollar Value of Units
that May Yet Be Purchased Under the
Plans or
Programs
 
April 1 – April 30, 2017 16,263.170    129.48   N/A   N/A 
May 1 - May 31, 2017 18,358.574    123.20   N/A   N/A 
June 1 - June 30, 2017 7,542.984    118.76   N/A   N/A 
TOTAL 42,164.728    124.83   N/A   N/A 

1 Represents number of Units redeemed by Members of the Fund in accordance with the LLC Agreement.

Item 3.
Defaults Upon Senior Securities – None

Item 4.
Mine Safety Disclosures – None

Item 5.
Other Information – None
 
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Item 6.
Exhibits

** 3.1Certificate of Formation of Graham Alternative Investment Fund I LLC
* 3.2Amendment 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
Rule 13a-14(a)/15d-14(a) Certification (Certification of Principal Executive Officer)
Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer)
Section 1350 Certification (Certification of Principal Executive Officer and Chief Financial Officer)
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase

 *Incorporated by reference to the Fund’s Form 8-K previously filed on April 11, 2013

**Incorporated by reference to the Fund’s Form 10 previously filed on April 30, 2010
 
***Filed herewith
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  May 15,August 14, 2017GRAHAM ALTERNATIVE INVESTMENT FUND I LLC
 BLENDED STRATEGIES PORTFOLIO
   
 By:GRAHAM CAPITAL MANAGEMENT, L.P.
  its Manager
 By:/s/ Paul Sedlack
    Paul Sedlack, Principal Executive Officer
   
 By:/s/ Brian Douglas
    Brian Douglas, Chief Financial Officer
 
 
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