Graham Alternative Investment Fund I 10Q 2012 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number 0-53965

GRAHAM ALTERNATIVE INVESTMENT FUND I LLC

(Exact name of registrant as specified in its charter)

Delaware		20-4897069
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o GRAHAM CAPITAL MANAGEMENT, L.P.

40 Highland Avenue

Rowayton, CT 06853

(Address of principal executive offices) (Zip Code)

Paul Sedlack

Graham Capital Management, L.P.

40 Highland Avenue

Rowayton, CT 06853

(203) 899-3400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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

Yes o No o

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

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

Yes o No x

As of July 1, 2012, 513,306.630 Units of the Systematic Strategies Portfolio were outstanding.

As of July 1, 2012, 1,973,465.129 Units of the Blended Strategies Portfolio were outstanding.

GRAHAM ALTERNATIVE INVESTMENT FUND I LLC

FORM 10-Q

INDEX

		Page
		Number

PART I - Financial Information:

Item 1.	Financial Statements:

	Graham Alternative Investment Fund I LLC

	Statements of Financial Condition at June 30, 2012 (unaudited) and December 31, 2011 (audited)	1

	Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited)	2

	Statements of Changes in Members’ Capital for the six months ended June 30, 2012 and 2011 (unaudited)	3

	Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)	5

	Notes to Unaudited Financial Statements	6

	Graham Alternative Investment Trading LLC

	Statements of Financial Condition at June 30, 2012 (unaudited) and December 31, 2011 (audited)	17

	Condensed Schedules of Investments at June 30, 2012 (unaudited) and December 31, 2011 (audited)	18

	Statements of Operations and Managing Member Allocation for the three and six months ended June 30, 2012 and 2011 (unaudited)	19

	Statements of Changes in Members’ Capital for the six months ended June 30, 2012 and 2011 (unaudited)	20

	Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)	21

	Notes to Unaudited Financial Statements	22

	Graham Alternative Investment Trading II LLC

	Statements of Financial Condition at June 30, 2012 (unaudited) and December 31, 2011 (audited)	66

Index

	Statements of Operations and Managing Member Allocation for the three and six months ended June 30, 2012 and 2011 (unaudited)	67

	Statements of Changes in Members’ Capital for the six months ended June 30, 2012 and 2011 (unaudited)	68

	Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)	69

	Notes to Unaudited Financial Statements	70

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	94

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	106

Item 4.	Controls and Procedures	107

PART II - Other Information		108

Exhibits

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

Index

PART I

Item 1. Financial Statements

Graham Alternative Investment Fund I LLC

Statements of Financial Condition

	June 30, 2012 (Unaudited)		December 31, 2011 (Audited)

Assets
Investment in Graham Alternative Investment Trading LLC, at fair value	$	225,286,271	$	263,929,118
Investment in Graham Alternative Investment Trading II LLC, at fair value		39,052,950		45,955,612
Redemption receivable from Graham Alternative Investment Trading LLC		9,553,546		8,563,194
Redemption receivable from Graham Alternative Investment Trading II LLC		1,005,013		2,164,043
Total assets	$	274,897,780	$	320,611,967

Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	10,558,559	$	10,727,237
Total liabilities		10,558,559		10,727,237

Members’ capital:
Blended Strategies Portfolio:
Class 0 Units (1,624,107.167 and 1,814,039.586 units issued and outstanding at $118.77 and $123.17, respectively)		192,892,075		223,427,719
Class 2 Units (343,528.613 and 410,047.431 units issued and outstanding at $94.30 and $98.77, respectively)		32,394,196		40,501,399
Total Blended Strategies Portfolio		225,286,271		263,929,118

Systematic Strategies Portfolio:
Class 0 Units (290,260.430 and 322,756.427 units issued and outstanding at $78.23 and $81.35, respectively)		22,706,095		26,254,798
Class 2 Units (222,298.264 and 255,073.907 units issued and outstanding at $73.54 and $77.24, respectively)		16,346,855		19,700,814
Total Systematic Strategies Portfolio		39,052,950		45,955,612
Total members’ capital		264,339,221		309,884,730
Total liabilities and members’ capital	$	274,897,780	$	320,611,967

See accompanying notes.

Index

Graham Alternative Investment Fund I LLC

Statements of Operations

	Three Months Ended June 30,						Six Months Ended June 30,
	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Net loss allocated from investments in other funds:
Net realized (loss) gain on investments	$	(9,079,011	)	$	(3,486,735	)	$	5,445,306		$	(2,438,507	)
Net decrease in unrealized appreciation on investments		(4,215,058	)		(6,570,840	)		(8,160,026	)		(8,823,517	)
Net loss allocated from investments in other funds		(13,294,069	)		(10,057,575	)		(2,714,720	)		(11,262,024	)

Net investment loss allocated from investments in other funds:
Investment income:
Interest income		144,786			395,604			306,641			784,333

Expenses:
Brokerage fees		1,699,957			2,348,648			3,540,067			4,573,524
Advisory fees		1,435,515			1,988,117			2,983,585			3,861,496
Sponsor fees		717,758			994,059			1,491,793			1,930,748
Incentive allocation		-			32,173			-			42,993
Interest and other		6,987			49,580			36,948			58,390
Total expenses		3,860,217			5,412,577			8,052,393			10,467,151
Net investment loss allocated from investments in other funds		(3,715,431	)		(5,016,973	)		(7,745,752	)		(9,682,818	)
Net loss	$	(17,009,500	)	$	(15,074,548	)	$	(10,460,472	)	$	(20,944,842	)

See accompanying notes.

Index

Graham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital

For the six months ended June 30, 2012 (unaudited) and 2011 (unaudited)

	Blended Strategies Portfolio
	Class 0 Units						Class 2 Units						Total
	Units			Capital			Units			Capital			Blended Strategies Portfolio

Members’ capital, December 31, 2010		1,752,436.237		$	243,511,752			409,129.824		$	46,511,568		$	290,023,320
Subscriptions		440,148.711			61,465,602			61,045.543			6,893,865			68,359,467
Redemptions		(72,590.320	)		(10,130,845	)		(42,570.051	)		(4,761,164	)		(14,892,009	)
Net loss		–			(13,579,315	)		–			(2,684,918	)		(16,264,233	)
Members’ capital, June 30, 2011		2,119,994.628		$	281,267,194			427,605.316		$	45,959,351		$	327,226,545

	Blended Strategies Portfolio
	Class 0 Units						Class 2 Units						Total
	Units			Capital			Units			Capital			Blended Strategies Portfolio

Members’ capital, December 31, 2011		1,814,039.586		$	223,427,719			410,047.431		$	40,501,399		$	263,929,118
Subscriptions		29,565.329			3,685,929			15,289.711			1,516,540			5,202,469
Redemptions		(219,497.748	)		(27,026,309	)		(81,808.529	)		(8,085,512	)		(35,111,821	)
Net loss		–			(7,195,264	)		–			(1,538,231	)		(8,733,495	)
Members’ capital, June 30, 2012		1,624,107.167		$	192,892,075			343,528.613		$	32,394,196		$	225,286,271

See accompanying notes.

Index

Graham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital (continued)

For the six months ended June 30, 2012 (unaudited) and 2011 (unaudited)

	Systematic Strategies Portfolio
	Class 0 Units						Class 2 Units
	Units			Capital			Units			Capital			Total Systematic Strategies Portfolio			Total Members’ Capital

Members’ capital, December 31, 2010		274,960.438		$	28,297,652			202,003.861		$	20,144,497		$	48,442,149		$	338,465,469
Subscriptions		123,185.035			12,558,260			67,198.874			6,616,363			19,174,623			87,534,090
Redemptions		(26,651.552	)		(2,635,677	)		(17,808.386	)		(1,737,274	)		(4,372,951	)		(19,264,960	)
Net loss		–			(2,707,282	)		–			(1,973,327	)		(4,680,609	)		(20,944,842	)
Members’ capital, June 30, 2011		371,493.921		$	35,512,953			251,394.349		$	23,050,259		$	58,563,212		$	385,789,757

	Systematic Strategies Portfolio
	Class 0 Units						Class 2 Units
	Units			Capital			Units			Capital			Total Systematic Strategies Portfolio			Total Members’ Capital

Members’ capital, December 31, 2011		322,756.427		$	26,254,798			255,073.907		$	19,700,814		$	45,955,612		$	309,884,730
Subscriptions		6,404.671			528,000			–			–			528,000			5,730,469
Redemptions		(38,900.668	)		(3,182,374	)		(32,775.643	)		(2,521,311	)		(5,703,685	)		(40,815,506	)
Net loss		–			(894,329	)		–			(832,648	)		(1,726,977	)		(10,460,472	)
Members’ capital, June 30, 2012		290,260.430		$	22,706,095			222,298.264		$	16,346,855		$	39,052,950		$	264,339,221

See accompanying notes.

Index

Graham Alternative Investment Fund I LLC

Statements of Cash Flows

	Six Months Ended June 30,
	2012 (Unaudited)			2011 (Unaudited)
Cash flows provided by (used in) operating activities
Net loss	$	(10,460,472	)	$	(20,944,842	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss allocated from investment in Graham Alternative Investment Trading LLC		8,733,495			16,264,233
Net loss allocated from investment in Graham Alternative Investment Trading II LLC		1,726,977			4,680,609
Proceeds from sale of investments in Graham Alternative Investment Trading LLC		34,121,469			15,550,438
Proceeds from sale of investments in Graham Alternative Investment Trading II LLC		6,862,715			2,942,711
Investments in Graham Alternative Investment Trading LLC		(5,202,469	)		(68,359,467	)
Investments in Graham Alternative Investment Trading II LLC		(528,000	)		(19,174,623	)
Net cash provided by (used in) operating activities		35,253,715			(69,040,941	)

Cash flows (used in) provided by financing activities
Subscriptions		5,730,469			87,534,090
Redemptions		(40,984,184	)		(18,493,149	)
Net cash (used in) provided by financing activities		(35,253,715	)		69,040,941

Net change in cash and cash equivalents		–			–

Cash and cash equivalents, beginning of period		–			–
Cash and cash equivalents, end of period	$	–		$	–

See accompanying notes.

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements

June 30, 2012

1. Organization and Business

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

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

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

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

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

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

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

1. Organization and Business (continued)

Duties of the Manager

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

2. Summary of Significant Accounting Policies

These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The preparation of these financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Investment in Graham Alternative Investment Trading LLC and Graham Alternative Investment Trading II LLC

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

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

At June 30, 2012 and December 31, 2011, the Fund owned 63.36% and 63.27%, respectively of GAIT, and 66.57% and 66.27%, respectively of GAIT II.

Fair Value

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

The Fund follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. 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.

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Fair Value (continued)

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

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

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

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

The Fund reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. In accordance with this hierarchy, the Fund’s investments in the GAIT Funds have been classified as a Level 2 valuation. There were no Level 3 assets or liabilities held at any point during the six months ended June 30, 2012 or the year ended December 31, 2011 by the Fund, the GAIT Funds, or the Master Funds, and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized on the actual date of the event or change in circumstances that cause the transfer.

Indemnifications

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

3. Capital Accounts

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

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

Subscriptions

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

Index

Graham Alternative Investment Fund I LLC

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. Redemption fees of $6,066 and $2,478 were paid to the Manager for the six months ended June 30, 2012 and 2011, respectively, and are included as redemptions in the statements of changes in members’ capital.

4. Fees and Related Party Transactions

Advisory Fees

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

Sponsor Fees

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

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

4. Fees and Related Party Transactions (continued)

Incentive Allocation

At the end of each calendar quarter, the Manager of the GAIT Funds will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class of the GAIT Funds, as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter. Additionally, any loss carryforward attributable to any class of the GAIT Funds shall be proportionately reduced effective as of the date of any redemption of any Units of such class by multiplying the loss carryforward by the ratio that the amount of assets redeemed from such class bears to the net assets of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made to the Manager.

Brokerage Fees

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

Class	Annual Rate
Class 0	2%
Class 2	4%

In consideration of the Brokerage Fee, the Manager bears all of the GAIT Funds’ trading commissions (including exchange, clearing and regulatory fees relating to its trades), routine legal expenses, internal and external accounting, audit and tax preparation expenses, fees and expenses of an external or internal administrator, and expenses and costs of printing and mailing reports and notices, together with the costs incurred in connection with the organization of the GAIT Funds and the Fund and the continuous offering of Units. To the extent the GAIT Funds are allocated any of these expenses from the Master Funds in which they invest, the Manager will reimburse the GAIT Funds for those amounts. These reimbursements are included in commission reimbursements in the GAIT Funds’ statements of operations and managing member allocation. As a result, there is no impact to the Fund’s statement of operations.

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.

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

5. Income Taxes (continued)

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

6. Financial Highlights

The following is the per Unit operating performance calculation for the three month periods ended June 30, 2012 and 2011:

	Blended Strategies Portfolio						Systematic Strategies Portfolio
	Class 0			Class 2			Class 0			Class 2
Per share operating performance
Net asset value per unit, March 31, 2011	$	137.45		$	111.91		$	100.08		$	96.48
Net loss:
Net investment loss		(1.55	)		(1.87	)		(1.26	)		(1.74	)
Net loss on investments		(3.23	)		(2.56	)		(3.23	)		(3.05	)
Net loss		(4.78	)		(4.43	)		(4.49	)		(4.79	)
Net asset value per unit, June 30, 2011	$	132.67		$	107.48		$	95.59		$	91.69


Net asset value per unit, March 31, 2012	$	126.14		$	100.65		$	82.32		$	77.77
Net loss:
Net investment loss		(1.21	)		(1.47	)		(0.92	)		(1.26	)
Net loss on investments		(6.16	)		(4.88	)		(3.17	)		(2.97	)
Net loss		(7.37	)		(6.35	)		(4.09	)		(4.23	)
Net asset value per unit, June 30, 2012	$	118.77		$	94.30		$	78.23		$	73.54

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Financial Highlights (continued)

The following represents ratios to average members’ capital and total return for the three month periods ended June 30, 2012 and 2011 for the Blended Strategies Portfolio:

	Blended Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(5.84	)%		(3.48	)%		(6.31	)%		(3.96	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(5.84	)%		(3.48	)%		(6.31	)%		(3.96	)%

Net investment loss before Incentive Allocation		(0.96	)%		(1.13	)%		(1.46	)%		(1.67	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(0.96	)%		(1.13	)%		(1.46	)%		(1.67	)%

Total expenses before Incentive Allocation		1.26	%		1.55	%		1.78	%		2.06	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.26	%*		1.55	%*		1.78	%*		2.06	%*

*- The percentages above represent total gross expenses before commission reimbursements, which represent 0.23% of average members’ capital for 2012 and 0.13% of average members’ capital for 2011.

The following represents ratios to average members’ capital and total return for the three month periods ended June 30, 2012 and 2011 for the Systematic Strategies Portfolio:

	Systematic Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(4.97	)%		(4.49	)%		(5.44	)%		(4.96	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(4.97	)%		(4.49	)%		(5.44	)%		(4.96	)%

Net investment loss before Incentive Allocation		(1.12	)%		(1.26	)%		(1.62	)%		(1.80	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(1.12	)%		(1.26	)%		(1.62	)%		(1.80	)%

Total expenses before Incentive Allocation		1.26	%		1.46	%		1.76	%		1.99	%`
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.26	%*		1.46	%*		1.76	%*		1.99	%*

*- The percentages above represent total gross expenses before commission reimbursements, which represent 0.08% of average members’ capital for 2012 and 0.08% of average members’ capital for 2011.

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Financial Highlights (continued)

The following is the per Unit operating performance calculation for the six month periods ended June 30, 2012 and 2011:

	Blended Strategies Portfolio						Systematic Strategies Portfolio
	Class 0			Class 2			Class 0			Class 2
Per unit operating performance
Net asset value per unit, December 31, 2010	$	138.96		$	113.68		$	102.92		$	99.72
Net loss:
Net investment loss		(2.82	)		(3.44	)		(2.31	)		(3.24	)
Net loss on investments		(3.47	)		(2.76	)		(5.02	)		(4.79	)
Net loss		(6.29	)		(6.20	)		(7.33	)		(8.03	)
Net asset value per unit, June 30, 2011	$	132.67		$	107.48		$	95.59		$	91.69


Net asset value per unit, December 31, 2011	$	123.17		$	98.77		$	81.35		$	77.24
Net loss:
Net investment loss		(2.41	)		(2.95	)		(1.84	)		(2.53	)
Net loss on investments		(1.99	)		(1.52	)		(1.28	)		(1.17	)
Net loss		(4.40	)		(4.47	)		(3.12	)		(3.70	)
Net asset value per unit, June 30, 2012	$	118.77		$	94.30		$	78.23		$	73.54

Index

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Financial Highlights (continued)

The following represents ratios to average members’ capital and total return for the six month periods ended June 30, 2012 and 2011 for the Blended Strategies Portfolio:

	Blended Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(3.57	)%		(4.52	)%		(4.53	)%		(5.44	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01)
Total return after Incentive Allocation		(3.57	)%		(4.53	)%		(4.53	)%		(5.45	)%

Net investment loss before Incentive Allocation		(1.96	)%		(2.02	)%		(2.99	)%		(3.02	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01)
Net investment loss after Incentive Allocation		(1.96	)%		(2.03	)%		(2.99	)%		(3.03	)%

Total expenses before Incentive Allocation		2.54	%		2.55	%		3.57	%		3.57	%
Incentive Allocation		0.00			0.01			0.00			0.01
Total expenses after Incentive Allocation		2.54	%*		2.56	%*		3.57	%*		3.58	%*

*- The percentages above represent total gross expenses before commission reimbursements, which represent 0.50% of average members’ capital for 2012 and 0.52% of average members’ capital for 2011.

The following represents ratios to average members’ capital and total return for the six month periods ended June 30, 2012 and 2011 for the Systematic Strategies Portfolio:

	Systematic Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(3.83	)%		(7.11	)%		(4.79	)%		(8.04
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)%
Total return after Incentive Allocation		(3.83	)%		(7.12	)%		(4.79	)%		(8.05	)%

Net investment loss before Incentive Allocation		(2.26	)%		(2.23	)%		(3.28	)%		(3.24	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Net investment loss after Incentive Allocation		(2.26	)%		(2.24	)%		(3.28	)%		(3.25	)%

Total expenses before Incentive Allocation		2.53	%		2.58	%		3.54	%		3.63	%
Incentive Allocation		0.00			0.01			0.00			0.01
Total expenses after Incentive Allocation		2.53	%*		2.59	%*		3.54	%*		3.64	%*

*- The percentages above represent total gross expenses before commission reimbursements, which represent 0.19% of average members’ capital for 2012 and 0.32% of average members’ capital for 2011.

Index

Graham Alternative Investment Fund I LLC

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 and has not been annualized. 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, Brokerage Fees, Sponsor Fees and the Incentive Allocation. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for Class 0 and Class 2 Units taken as a whole and include net amounts allocated from the GAIT Funds. 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 month periods ended June 30, 2012 and 2011.

7. Subsequent Events

The Fund had subscriptions of approximately $2.2 million and redemptions of approximately $6.4 million through August 14, 2012, the date through which subsequent events were evaluated by management. These amounts have not been included in the financial statements.

Index

Administrator

SEI Global Services Inc.

1 Freedom Valley Drive

Oaks, PA 19456

U.S.A

Managing Member

Graham Capital Management, L.P.

40 Highland Avenue

Rowayton, CT 06853

U.S.A.

Legal and Tax Advisors

Proskauer Rose LLP

1585 Broadway

New York, NY 10036

U.S.A.

Registered Address

Corporation Service Company

2711 Centerville Road

Suite 400

Wilmington, DE 19808

U.S.A.

Independent Registered Public Accounting Firm

Ernst & Young LLP

300 First Stamford Place

Stamford, CT 06902

U.S.A.

Index

Graham Alternative Investment Trading LLC

Statements of Financial Condition

	June 30, 2012 (Unaudited)		December 31, 2011 (Audited)
Assets
Investments in Master Funds, at fair value	$	59,209,571	$	87,903,988
Investment in Graham Cash Assets LLC, at fair value		309,923,658		344,807,748
Accrued commission reimbursements		295,680		331,720
Receivable from Master Funds		3,673		18,287
Total assets	$	369,432,582	$	433,061,743

Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	12,243,576	$	13,947,652
Accrued brokerage fees		697,979		852,551
Accrued advisory fees		604,235		734,211
Accrued sponsor fees		302,118		367,106
Payable to Master Funds		35,658		2,155
Total liabilities		13,883,566		15,903,675

Members’ capital:
Class 0 Units (2,525,453.651 and 2,827,795.124 units issued and outstanding at $118.77 and $123.17 per unit, respectively)		299,943,255		348,287,779
Class 2 Units (581,058.599 and 688,937.679 units issued and outstanding at $94.30 and $98.77 per unit, respectively)		54,792,903		68,048,075
Class M Units (4,671.470 and 4,671.470 units issued and outstanding at $174.00 and $176.01 per unit, respectively)		812,858		822,214
Total members’ capital		355,549,016		417,158,068
Total liabilities and members’ capital	$	369,432,582	$	433,061,743

See accompanying notes.

Index

Graham Alternative Investment Trading LLC

Condensed Schedules of Investments

	June 30, 2012 (Unaudited)					December 31, 2011 (Audited)
Description	Fair Value		Percentage of Members’ Capital			Fair Value		Percentage of Members’ Capital

Investments in Master Funds, at fair value
Graham Commodity Strategies LLC	$	19,913,985		5.60	%	$	19,823,897		4.75	%
Graham Energy Focus LLC		-		0.00	%		4,391,910		1.05	%
Graham Fed Policy Ltd.		-		0.00	%		5,956,632		1.43	%
Graham Global Monetary Policy LLC		10,043,320		2.82	%		10,693,175		2.56	%
Graham K4D Trading Ltd.		29,252,266		8.23	%		45,101,309		10.82	%
Graham Macro Directional LLC		-		0.00	%		1,937,065		0.46	%
Total investments in Master Funds	$	59,209,571		16.65	%	$	87,903,988		21.07	%

See accompanying notes.

Index

Graham Alternative Investment Trading LLC

Statements of Operations and Managing Member Allocation

	Three Months Ended June 30,						Six Months Ended June 30,
	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Net loss allocated from investments in Master Funds:
Net realized (loss) gain on investments	$	(11,717,406	)	$	(4,583,377	)	$	8,896,891		$	(1,164,783	)
Net decrease in unrealized appreciation on investments		(6,613,866	)		(7,541,929	)		(12,211,680	)		(11,306,518	)
Brokerage commissions and fees		(899,863	)		(1,296,235	)		(1,991,193	)		(2,546,312	)
Net loss allocated from investments in Master Funds		(19,231,135	)		(13,421,541	)		(5,305,982	)		(15,017,613	)

Net investment loss allocated from investments in Master Funds		(1,717	)		(39,216	)		(37,665	)		(56,587	)

Investment income:
Interest income		195,327			498,565			412,959			1,013,711
Total investment income		195,327			498,565			412,959			1,013,711

Expenses:
Brokerage fees		2,247,916			2,954,528			4,671,226			5,755,634
Advisory fees		1,944,187			2,561,166			4,034,132			4,982,119
Sponsor fees		972,094			1,280,583			2,017,066			2,491,059
Interest and other		4,245			13,947			7,565			18,504
Commission reimbursements		(899,863	)		(1,296,235	)		(1,991,192	)		(2,546,312	)
Total expenses		4,268,579			5,513,989			8,738,797			10,701,004
Net investment loss of the Fund		(4,073,252	)		(5,015,424	)		(8,325,838	)		(9,687,293	)

Net loss		(23,306,104	)		(18,476,181	)		(13,669,485	)		(24,761,493	)

Incentive allocation		-			(41,791	)		-			(51,877	)

Net loss available for pro-rata allocation to all members	$	(23,306,104	)	$	(18,517,972	)	$	(13,669,485	)	$	(24,813,370	)

See accompanying notes.

Index

Graham Alternative Investment Trading LLC

Statements of Changes in Members’ Capital

For the six months ended June 30, 2012 (unaudited) and 2011 (unaudited)

	Class 0						Class 2						Class M					Total
	Units			Capital			Units			Capital			Units		Capital			Capital

Members’ capital, December 31, 2010		2,685,172.128		$	373,121,130			639,582.657		$	72,710,381			4,671.470	$	882,328		$	446,713,839
Subscriptions		615,242.795			85,834,953			128,144.215			14,467,508			–		–			100,302,461
Redemptions		(109,681.668	)		(15,236,183	)		(57,910.324	)		(6,485,638	)		–		(51,877	)		(21,773,698	)
Incentive allocation		–			(44,314	)		–			(7,563	)		–		51,877			–
Net loss		–			(20,349,710	)		–			(4,393,048	)		–		(18,735	)		(24,761,493	)
Members’ capital, June 30, 2011		3,190,733.255		$	423,325,876			709,816.548		$	76,291,640			4,671.470	$	863,593		$	500,481,109

	Class 0						Class 2						Class M					Total
	Units			Capital			Units			Capital			Units		Capital			Capital

Members’ capital, December 31, 2011		2,827,795.124		$	348,287,779			688,937.679		$	68,048,075			4,671.470	$	822,214		$	417,158,068
Subscriptions		73,385.932			9,124,683			27,719.628			2,756,894			–		–			11,881,577
Redemptions		(375,727.405	)		(46,428,648	)		(135,598.708	)		(13,392,496	)		–		–			(59,821,144	)
Incentive allocation		–			–			–			–			–		–			–
Net loss		–			(11,040,559	)		–			(2,619,570	)		–		(9,356	)		(13,669,485	)
Members’ capital, June 30, 2012		2,525,453.651		$	299,943,255			581,058.599		$	54,792,903			4,671.470	$	812,858		$	355,549,016

See accompanying notes.

Index

Graham Alternative Investment Trading LLC

Statements of Cash Flows

	Six Months Ended June 30,
	2012 (Unaudited)			2011 (Unaudited)
Cash flows provided by (used in) operating activities
Net loss	$	(13,669,485	)	$	(24,761,493	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss allocated from investment in Master Funds		5,343,647			15,074,200
Net income allocated from investment in Graham Cash Assets LLC		(412,959	)		(1,013,711	)
Proceeds from sale of investments in Master Funds		374,752,376			408,360,589
Proceeds from sale of investments in Graham Cash Assets LLC		326,976,254			346,064,942
Investments in Master Funds		(351,353,489	)		(455,040,070	)
Investments in Graham Cash Assets LLC		(291,679,205	)		(364,551,126	)
Changes in assets and liabilities:
Accrued commission reimbursements		36,040			(254,733	)
Accrued brokerage fees		(154,572	)		60,999
Accrued advisory fees		(129,976	)		59,601
Accrued sponsor fees		(64,988	)		29,800
Net cash provided by (used in) operating activities		49,643,643			(75,971,002	)

Cash flows (used in) provided by financing activities
Subscriptions		11,881,577			100,302,461
Redemptions		(61,525,220	)		(24,331,459	)
Net cash (used in) provided by financing activities		(49,643,643	)		75,971,002

Net change in cash and cash equivalents		-			-

Cash and cash equivalents, beginning of period		-			-
Cash and cash equivalents, end of period	$	-		$	-

Supplemental non cash operating activities

Purchases and proceeds related to investments in Master Funds consolidated into��Master Funds not included above: $1,362,929 for 2012 and $0 for 2011 (See Note 2)

See accompanying notes.

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements

June 30, 2012

1. Organization and Business

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

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

Graham Alternative Investment Fund I LLC, Graham Alternative Investment Fund II LLC, and Graham Alternative Investment III Ltd. are the primary investors of GAIT.

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

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

Duties of the Managing Member

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

2. Summary of Significant Accounting Policies

These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The preparation of these financial statements requires the Managing Member to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Investments in Master Funds

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

During the period ended June 30, 2012 certain Master Funds in which GAIT invested consolidated their assets under Graham Commodity Strategies LLC and then ceased operations. The dates of the consolidation were as follows:

Master Fund	Consolidation Date
Graham Fed Policy Ltd.	May 29, 2012
Graham Energy Fundamental LLC	May 29, 2012
Graham Macro Directional LLC	May 30, 2012
Graham Macro Technical Ltd.	May 30, 2012
Graham Macro Data Driven LLC	May 31, 2012

Fair Value

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

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

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

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

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

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

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Fair Value (continued)

GAIT reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. In accordance with this hierarchy, GAIT’s investments in Master Funds and Graham Cash Assets LLC (“GCA”) have been classified as Level 2. These investments are discussed in Notes 3 and 4. The Master Funds record all of their derivative financial instruments at fair value, which is derived in accordance with U.S. GAAP. There were no Level 3 assets or liabilities held at any point during the six months ended June 30, 2012 or the twelve months ended December 31, 2011 by GAIT, the Master Funds, or GCA, and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized on the actual date of the event or change in circumstances that cause the transfer.

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.

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Futures Contracts (continued)

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

Forward Contracts

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

Exchange traded forward contracts are valued based upon the settlement prices as of the valuation date, established by the primary exchange upon which they are traded. All other forward contracts are valued based upon a forward curve constructed using independently quoted forward points. Changes in fair value of each forward contract are recognized as unrealized gains or losses.

Swap Contracts

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

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Swap Contracts (continued)

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

Exchange traded swaps are valued based upon the closing prices established by the primary exchange upon which they are traded. Total return swaps are valued based upon the exchange published settle price of the underlying reference instrument. Changes in fair value of each swap are recognized as unrealized gains or losses. The Master Funds record realized gains or losses when a swap contract is terminated. Interest is calculated and accrued throughout the life of each swap. Payments received at the end of each reset period are recorded against such accruals.

Options

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

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

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

Recent Accounting Pronouncements

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

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Indemnifications

In the normal course of business, the Master Funds, GCA, and GAIT enter into contracts that contain a variety of indemnifications. Such contracts include those by GCA 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.

3. Investments in Master Funds

As of June 30, 2012 and December 31, 2011, GAIT invested in various Master Funds, all of which were managed by the Manager. GAIT’s investments in these Master Funds, as well as the investment objectives of each Master Fund, are summarized below. Master Funds in which GAIT invested 5% or more of its members’ capital are individually identified, while smaller investments are aggregated under the caption “Other Master Funds.” The number of Master Funds included for the period in each aggregated category is disclosed parenthetically next to each name. All of the Master Funds and GAIT are related parties. The Master Funds do not charge management or incentive fees and all offer monthly subscriptions and redemptions.

June 30, 2012
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Loss (three months then ended)			Net Loss (six months then ended)

Graham K4D Trading Ltd. – (a)		8.23	%	$	29,252,266	$	(8,679,106	)	$	(3,087,208	)
Graham Commodity Strategies LLC – (e)		5.60	%		19,913,985		(17,090,957	)		(7,188,480	)
Other Master Funds (5) – (b) (c) (d)		2.82	%		10,043,320		6,537,211			4,932,041
		16.65	%	$	59,209,571	$	(19,232,852	)	$	(5,343,647	)

December 31, 2011
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Loss (three months ended June 30, 2011)			Net Loss (six months ended June 30, 2011)

Graham K4D Trading Ltd. – (a)		10.82	%	$	45,101,309	$	(10,254,289	)	$	(16,745,050	)
Other Master Funds (7) – (b) (c) (d) (e)		10.25	%		42,802,679		(3,206,468	)		1,670,850
		21.07	%	$	87,903,988	$	(13,460,757	)	$	(15,074,200	)

(a) – Systematic Macro

(b) – Fixed Income

(d) – Energy Related

(e) – Commodities

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table summarizes the financial position of each Master Fund as of June 30, 2012:

	Graham Commodity Strategies LLC (Delaware)			Graham Global Monetary Policy LLC (Delaware)			Graham K4D Trading Ltd. (BVI)
Assets:
Due from brokers	$	348,876,406		$	93,235,656		$	204,005,139
Options, at fair value		3,791,896			-			-
Derivative financial instruments, at fair value		209,088			4,430,607			11,942,533
CME Membership, at fair value		2,145,660			-			961,750
Subscriptions receivable		-			120			1,427
Total assets		355,023,050			97,666,383			216,910,849

Liabilities:
Derivative financial instruments, at fair value		82,801,827			-			-
Due to brokers		106,570,950			-			13,248,917
Redemptions payable		142			-			-
Total liabilities		189,372,919			-			13,248,917
Net assets	$	165,650,131		$	97,666,383		$	203,661,932

Percentage of Master Fund held by GAIT		12.02	%		10.28	%		14.36	%

Index

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, 2012.

Description	Principal Amount / Number of Contracts		Fair Value			Percentage of Net Assets of Master Fund
Graham Commodity Strategies LLC
Long contracts
Bonds
United States
Treasury bill 09/06/12	$	75,000,000	$	74,991,406			45.27	%
Total United States				74,991,406			45.27	%
Total bonds *				74,991,406			45.27	%

Futures
Foreign bond				37,216			0.02	%
Interest rate				(374,809	)		(0.23	)%
Brent Crude August 2012		5,023		11,655,370			7.04	%
Brent Crude December 2013		30		100,910			0.06	%
Brent Crude September 2012 - December 2012		7,358		15,794,860			9.53	%
Copper September 2012		3,218		16,370,525			9.88	%
Gasoline RBOB December 2012		750		(11,900,700	)		(7.18	)%
Gasoline RBOB August 2012 - October 2012		2,980		12,819,962			7.74	%
Heating Oil August 2012-December 2012		3,117		13,905,247			8.39	%
Heating Oil October 2012		1,991		9,086,326			5.48	%
Natural Gas August 2012		6,968		10,215,050			6.17	%
Natural Gas October 2012		7,742		15,704,930			9.48	%
Natural Gas November 2012 - January 2015		13,374		16,799,290			10.14	%
Soybean January 2013		4,140		18,398,663			11.11	%
Soybean March 2013		2,703		9,369,213			5.66	%
Soybean November 2012 - November 2013		3,642		4,655,425			2.81	%
Wheat September 2012		4,257		10,511,875			6.35	%
Wheat December 2012 - December 2013		7,950		9,388,963			5.67	%
WTI Crude August 2012		11,541		24,497,500			14.79	%
WTI Crude September 2012		3,618		20,747,980			12.52	%
WTI Crude November 2013		2,000		(22,148,000	)		(13.37	)%
WTI Crude December 2013		1,427		6,477,230			3.91	%
WTI Crude December 2013		50		(11,000	)		(0.01	)%
WTI Crude January 2014		2,000		(21,126,000	)		(12.75	)%
WTI Crude June 2014		4,000		(31,941,970	)		(19.28	)%
Other commodity				25,635,868			15.48	%
Total futures				164,669,924			99.41	%

*- This position is posted as collateral for margin and is included in Due from broker on the Statement of Financial Condition

Index

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, 2012.

Description	Number of Contracts		Fair Value		Percentage of Net Assets of Master Fund
Graham Commodity Strategies LLC (continued)
Long contracts (continued)
Swaps
Natural Gas futures October 2012			$	1,801,800		1.09	%
Other Natural Gas futures November 2012				15,975		0.01	%
Other commodity futures				123,699		0.07	%
Total swaps				1,941,474		1.17	%

Forwards
Foreign currency				16,234,716		9.80	%
Total forwards				16,234,716		9.80	%

Options
Foreign currency				7,062,304		4.26	%
Interest rate futures				782,066		0.47	%
Crude oil futures August 2012 Call $90.00 – $95.00		364		96,960		0.06	%
Natural Gas futures August 2012 Call $2.55 – $2.75		700		2,137,700		1.29	%
Natural Gas futures August 2012 Put $2.00		300		9,300		0.01	%
Natural Gas futures January 2013 – January 2015 Call $4.00 – $5.00		600		1,350,300		0.82	%
Natural Gas futures October 2012 Call $0.40 – $0.70		1,400		1,773,000		1.07	%
Total options				13,211,630		7.98	%

Index

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, 2012.

Description	Number of Contracts			Fair Value			Percentage of Net Assets of Master Fund
Graham Commodity Strategies LLC (continued)
Short contracts
Futures
Brent Crude December 2013		(4,141	)	$	11,581,290			6.99	%
Brent Crude August 2012 - December 2015		(11,658	)		(25,697,160	)		(15.51	)%
Gas Oil July 2012 - September 2012		(5,927	)		(10,040,250	)		(6.06	)%
Gasoline RBOB August 2012 - October 2012		(2,601	)		(11,838,414	)		(7.15	)%
Heating Oil August 2012		(2,346	)		(14,979,758	)		(9.03	)%
Heating Oil September 2012 - October 2012		(1,743	)		(7,431,942	)		(4.49	)%
LME Copper 09/19/2012		(1,744	)		(9,323,338	)	��	(5.63	)%
Natural Gas September 2012		(14,425	)		(34,581,240	)		(20.88	)%
Natural Gas January 2013		(565	)		127,750			0.08	%
Natural Gas August 2012 - December 2013		(12,442	)		(13,493,340	)		(8.15	)%
Soybean November 2012		(8,493	)		(29,630,650	)		(17.89	)%
Soybean January 2013		(166	)		(163,625	)		(0.10	)%
Wheat September 2012		(4,434	)		(12,643,225	)		(7.63	)%
Wheat December 2012 – July 2013		(7,299	)		(12,678,000	)		(7.65	)%
WTI Crude August 2012		(3,545	)		(17,697,230	)		(10.68	)%
WTI Crude October 2012		(9,855	)		(22,191,900	)		(13.40	)%
WTI Crude September 2012 - December 2014		(2,897	)		(10,319,210	)		(6.23	)%
WTI Crude December 2012 - December 2015		(6,871	)		5,992,380			3.62	%
Other commodity					(27,854,680	)		(16.82	)%
U.S. index					(518,750	)		(0.31	)%
U.S. bond					19,219			0.01	%
Foreign bond					(31,013	)		(0.02	)%
Total futures					(243,393,086	)		(146.93	)%

Swaps
Natural Gas futures August 2012		(3,276	)		(2,325,960	)		(1.40	)%
Natural Gas futures September 2012		(2,200	)		(1,369,500	)		(0.83	)%
Other commodity futures					(2,299,258	)		(1.39	)%
Total swaps					(5,994,718	)		(3.62	)%

Forwards
Foreign currency					(16,051,049	)		(9.69	)%
Total forwards					(16,051,049	)		(9.69	)%

Index

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, 2012.

Description	Number of Contracts			Fair Value			Percentage of Net Assets of Master Fund
Graham Commodity Strategies LLC (continued)
Short contracts (continued)
Options
Foreign currency				$	(4,999,207	)		(3.02	)%
Interest rate futures					(526,427	)		(0.32	)%
Natural Gas futures August 2012 Call $2.80 – $3.00		(950	)		(1,614,500	)		(0.97	)%
Natural Gas futures August 2012 Put $1.75		(600	)		(6,000	)		(0.00	)%
Natural Gas futures January 2013 – January 2015 Call $4.50 – $5.50		(600	)		(755,600	)		(0.46	)%
Natural Gas futures October 2012 Call $0.50		(2,200	)		(1,518,000	)		(0.92	)%
Total options					(9,419,734	)		(5.69	)%

Total				$	(3,809,437	)		(2.30	)%

Index

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, 2012.

Description	Number of Contracts / Notional Amount	Fair Value			Percentage of Net Assets of Master Fund
Graham Global Monetary Policy LLC
Long contracts
Futures
Foreign bond		$	(730,264	)		(0.75	)%
Commodity			3,715,845			3.81	%
U.S. index			(129,062	)		(0.13	)%
Foreign index			2,748,578			2.81	%
Total futures			5,605,097			5.74	%

Forwards
Chinese Yuan/ U.S. dollar August 2012 – May 2013	CNY 2,850,967,500		(2,670,825	)		(2.73	)%
Other foreign currency			11,237,040			11.50	%
Total forwards			8,566,215			8.77	%

Short contracts
Futures
U.S. bond			1,273,781			1.30	%
Foreign bond			1,760,203			1.80	%
Commodity			(5,065,929	)		(5.18	)%
Foreign index			(745,934	)		(0.76	)%
Total futures			(2,777,879	)		(2.84	)%

Forwards
Chinese Yuan/ U.S. dollar July 2012 – June 2013	CNY (2,977,062,500)		(2,780,079	)		(2.85	)%
Other foreign currency			(4,182,747	)		(4.28	)%
Total forwards			(6,962,826	)		(7.13	)%

Total		$	4,430,607			4.54	%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedule displays the condensed schedule of investments for the Master Funds as of June 30, 2012.

Description	Principal Amount / Number of Contracts		Fair Value			Percentage of Net Assets of Master Fund
Graham K4D Trading Ltd.
Long contracts
Bonds
United States
Treasury bill 08/23/12	$	175,000,000		174,989,257			85.92	%
Total United States				174,989,257			85.92	%
Total bonds *				174,989,257			85.92	%

Futures
U.S. bond			$	2,469,145			1.21	%
Foreign bond				(4,702,813	)		(2.31	)%
DJIA Mini E-CBOT September 2012		3,413		11,681,108			5.74	%
Other U.S. index				15,925,984			7.82	%
Foreign index				7,251,772			3.56	%
Soybean November 2012		1,048		7,386,303			3.63	%
Other commodity				465,651			0.23	%
Interest rate				5,057,356			2.48	%
Currency				(549,247	)		(0.27	)%
Total futures				44,985,259			22.09	%

Swaps
Soybean future November 2012		480		3,614,500			1.77	%
Commodity futures				4,677,704			2.30	%
Total swaps				8,292,204			4.07	%

Forwards
Foreign currency				8,494,428			4.17	%
Total forwards				8,494,428			4.17	%

*- This position is posted as collateral for margin and is included in Due from broker on the Statement of Financial Condition

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedule displays the condensed schedule of investments for the Master Funds as of June 30, 2012.

Description	Fair Value			Percentage of Net Assets of Master Fund
Graham K4D Trading Ltd. (continued)
Short contracts
Futures
U.S. index		(89,100	)		(0.04	)%
Foreign index		(14,759,905	)		(7.25	)%
Commodity		(24,380,774	)		(11.97	)%
Interest rate		(732,501	)		(0.36	)%
Currency		(727,519	)		(0.36	)%
Total futures		(40,689,799	)		(19.98	)%

Swaps
Commodity futures		(1,395,907	)		(0.69	)%
Total swaps		(1,395,907	)		(0.69	)%

Forwards
Foreign currency		(7,743,652	)		(3.80	)%
Total forwards		(7,743,652	)		(3.80	)%

Total	$	186,931,790			91.78	%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table shows the fair value classification of each investment type by Master Fund as of June 30, 2012:

	Graham Commodity Strategies LLC			Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.
Assets
Level 1:
U.S. bond futures	$	19,219		$	1,273,781		$	2,730,242
Foreign bond futures		37,216			1,760,203			4,929,731
U.S. index futures		-			-			27,607,092
Foreign index futures		-			2,748,578			7,251,772
Commodity futures		211,087,324			3,755,004			14,780,860
Commodity futures options		5,367,260			-			-
Commodity futures swaps		1,941,474			-			8,512,029
Interest rate futures		-			-			6,112,854
Interest rate futures options		782,066			-			-
Currency futures		-			-			878,845
Common stock		2,145,660			-			961,750
Total Level 1		221,380,219			9,537,566			73,765,175

Level 2:
Foreign currency forwards		4,013,115			7,123,698			6,433,543
Foreign currency options		7,062,304			-		��	-
Total Level 2		11,075,419			7,123,698			6,433,543
Total assets	$	232,455,638		$	16,661,264		$	80,198,718

Liabilities
Level 1:
U.S. bond futures	$	-		$	-		$	(261,097	)
Foreign bond futures		(31,013	)		(730,264	)		(9,632,544	)
Foreign index futures		-			(745,934	)		(14,759,905	)
U.S. index futures		(518,750	)		(129,062	)		(89,100	)
Commodity futures		(288,942,349	)		(5,105,088	)		(31,309,680	)
Commodity futures options		(3,894,100	)		-			-
Commodity futures swaps		(5,994,718	)		-			(1,615,732	)
Interest rate futures		(374,809	)		-			(1,787,999	)
Interest rate futures options		(526,427	)		-			-
Currency futures		-			-			(2,155,611	)
Total Level 1		(300,282,166	)		(6,710,348	)		(61,611,668	)

Level 2:
Foreign currency forwards		(3,829,448	)		(5,520,309	)		(5,682,767	)
Foreign currency options		(4,999,207	)		-			-
Total Level 2		(8,828,655	)		(5,520,309	)		(5,682,767	)
Total liabilities	$	(309,110,821	)	$	(12,230,657	)	$	(67,294,435	)

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at June 30, 2012 categorized by primary underlying risk and is representative of the derivative positions held by the Master Funds throughout the period. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the respective Master Fund’s statement of financial condition.

	Graham Commodity Strategies LLC															Graham Global Monetary Policy LLC
	Long exposure				Short exposure											Long exposure				Short exposure
	Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities			Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities

Commodity price
Futures	$	8,154,118,199		133,291	$	(7,830,529,564	)		(130,182	)	$	211,087,324	$	(288,942,349	)	$	148,082,990		1,925	$	(122,311,563	)		(1,575	)	$	3,755,004	$	(5,105,088	)
Options		91,880,000		3,364		(76,500,000	)		(4,350	)		5,367,260		(3,894,100	)		-		-		-			-			-		-
Swaps		29,168,535		3,414		(101,151,340	)		(6,772	)		1,941,474		(5,994,718	)		-		-		-			-			-		-
		8,275,166,734		140,069		(8,008,180,904	)		(141,304	)		218,396,058		(298,831,167	)		148,082,990		1,925		(122,311,563	)		(1,575	)		3,755,004		(5,105,088	)

Equity price
Futures		-		-		(172,953,750	)		(2,550	)		-		(518,750	)		84,302,720		2,685		(30,434,990	)		(150	)		2,748,578		(874,996	)
		-		-		(172,953,750	)		(2,550	)		-		(518,750	)		84,302,720		2,685		(30,434,990	)		(150	)		2,748,578		(874,996	)

Foreign currency exchange rate
Futures		-		-		-			-			-		-			-		-		-			-			-		-
Forwards		3,975,908,190		N/A		(3,975,724,523	)		N/A			4,013,115		(3,829,448	)		1,255,383,104		N/A		(1,253,779,715	)		N/A			7,123,698		(5,520,309	)
Options		873,478,261		8		(4,999,207	)		(6	)		7,062,304		(4,999,207	)		-		-		-			-			-		-
		4,849,386,451		8		(3,980,723,730	)		(6	)		11,075,419		(8,828,655	)		1,255,383,104		-		(1,253,779,715	)		-			7,123,698		(5,520,309	)

Interest rate
Futures		1,015,807,499		2,466		(51,676,653	)		(320	)		56,435		(405,822	)		107,963,639		578		(492,748,998	)		(2,899	)		3,033,984		(730,264	)
Options		759,593,100		4,500		(875,454,545	)		(4,500	)		782,066		(526,427	)		-		-		-			-			-		-
		1,775,400,599		6,966		(927,131,198	)		(4,820	)		838,501		(932,249	)		107,963,639		578		(492,748,998	)		(2,899	)		3,033,984		(730,264	)
Total	$	14,899,953,784		147,043	$	(13,088,989,582	)		(148,680	)	$	230,309,978	$	(309,110,821	)	$	1,595,732,453		5,188	$	(1,899,275,266	)		(4,624	)	$	16,661,264	$	(12,230,657	)

Collateral balances supporting all derivative positions													$	242,305,456														$	93,235,656

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

	Graham K4D Trading Ltd.
	Long exposure				Short exposure
	Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities

Commodity price
Futures	$	148,925,588		2,784	$	(979,606,115	)		(15,955	)	$	14,780,860	$	(31,309,680	)
Swaps		148,755,895		3,367		(30,337,429	)		(933	)		8,512,029		(1,615,732	)
		297,681,483		6,151		(1,009,943,544	)		(16,888	)		23,292,889		(32,925,412	)

Equity price
Futures		917,302,974		13,847		(301,476,326	)		(5,561	)		34,858,864		(14,849,005	)
		917,302,974		13,847		(301,476,326	)		(5,561	)		34,858,864		(14,849,005	)

Foreign currency exchange rate
Futures		197,077,496		2,184		(87,143,200	)		(552	)		878,845		(2,155,611	)
Forwards		1,113,484,652		N/A		(1,112,733,876	)		N/A			6,433,543		(5,682,767	)
		1,310,562,148		2,184		(1,199,877,076	)		(552	)		7,312,388		(7,838,378	)

Interest rate
Futures		14,683,475,731		68,594		(554,703,608	)		(2,247	)		13,772,827		(11,681,640	)
		14,683,475,731		68,594		(554,703,608	)		(2,247	)		13,772,827		(11,681,640	)
Total	$	17,209,022,336		90,776	$	(3,066,000,554	)		(25,248	)	$	79,236,968	$	(67,294,435	)

Collateral balances supporting all derivative positions													$	190,756,222

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table summarizes the results of operations of each Master Fund for the three and six month periods ended June 30, 2012:

	Graham Commodity Strategies LLC (Delaware)			Graham Energy Focus LLC* (Delaware)			Graham Energy Fundamental LLC ** (Delaware)			Graham Fed Policy Ltd. ** (BVI)			Graham Global Monetary Policy LLC (Delaware)			Graham K4D Trading Ltd. (BVI)			Graham Macro Directional LLC *** (Delaware)			Graham Macro Technical Ltd. *** (BVI)

	Three Months Ended June 30, 2012
Net investment income (loss)	$	141,257		$	-		$	(102	)	$	(955	)	$	(53,944	)	$	(81,652	)	$	(384	)	$	(2,617	)

Net realized gain (loss) on investments		(53,368,849	)		-			(1,319,470	)		2,792,683			(108,911	)		(63,086,913	)		35,857,102			1,514,586
Net increase (decrease) in unrealized appreciation on investments		(81,466,476	)		-			1,360,981			4,517,624			265,899			3,468,728			13,948,047			(59,512	)
Brokerage commissions and fees		(4,378,955	)		-			(380,310	)		(102,156	)		(812,350	)		(1,231,604	)		(243,026	)		(70,739	)
Net gain (loss) on investments		(139,214,280	)		-			(338,799	)		7,208,151			(655,362	)		(60,849,789	)		49,562,123			1,384,335
Net income (loss)	$	(139,073,023	)	$	-		$	(338,901	)	$	7,207,196		$	(709,306	)	$	(60,931,441	)	$	49,561,739		$	1,381,718

	Six Months Ended June 30, 2012
Net investment income (loss)	$	189,908		$	6,738		$	(154	)	$	(1,576	)	$	(237,179	)	$	(244,968	)	$	(1,941	)	$	(2,653	)

Net realized gain (loss) on investments		43,838,948			(3,769,417	)		699,173			5,613,230			8,634,643			(4,965,265	)		25,666,911			1,923,109
Net increase (decrease) in unrealized appreciation on investments		(98,165,763	)		5,355,406			763,033			(6,791,394	)		(1,784,298	)		(15,786,370	)		14,493,872			(56,547	)
Brokerage commissions and fees		(9,010,283	)		(205,978	)		(520,725	)		(252,116	)		(1,562,789	)		(2,955,687	)		(411,391	)		(117,463	)
Net gain (loss) on investments		(63,337,098	)		1,380,011			941,481			(1,430,280	)		5,287,556			(23,707,322	)		39,749,392			1,749,099
Net income (loss)	$	(63,147,190	)	$	1,386,749		$	941,327		$	(1,431,856	)	$	5,050,377		$	(23,952,290	)	$	39,747,451		$	1,746,446

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

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

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table shows the gains and losses on all financial instruments held by the Master Funds reported in net realized gain (loss) and net increase (decrease) in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the three month period ended June 30, 2012:

	Graham Commodity Strategies LLC			Graham Energy Focus LLC		Graham Energy Fundamental LLC		Graham Fed Policy Ltd.		Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC			Graham Macro Technical Ltd.
Commodity price
Futures	$	(97,519,084	)	$	-	$	9,291	$	-	$	(1,051,541	)	$	(41,925,318	)	$	(224,874	)	$	109,160
Options		530,140			-		26,720		-		-			-			-			21,500
Swaps		(1,877,942	)		-		5,500		-		-			(6,177,617	)		-			-
		(98,866,886	)		-		41,511		-		(1,051,541	)		(48,102,935	)		(224,874	)		130,660
Equity price
Futures		2,966,943			-		-		19,063		5,343,937			(114,428,652	)		5,153,677			532,447
CME Membership		(190,020	)		-		-		-		-			(64,350	)		-			-
Options		(90,000	)		-		-		-		-			-			-			(100,625	)
		2,686,923			-		-		19,063		5,343,937			(114,493,002	)		5,153,677			431,822
Foreign currency exchange rate
Futures		-			-		-		-		-			(5,370,383	)		-			-
Forwards		(39,262,774	)		-		-		-		(13,115,314	)		(23,611,302	)		36,511,841			918,648
Options		(1,904,731	)		-		-		-		(5,119,032	)		-			1,335,000			335,283
		(41,167,505	)		-		-		-		(18,234,346	)		(28,981,685	)		37,846,841			1,253,931
Interest rate
Futures		129,398			-		-		6,925,759		14,223,938			131,920,076			7,295,130			(181,597	)
Options		2,379,314			-		-		365,485		(125,000	)		-			(265,625	)		(179,742	)
Treasury bills		3,431			-		-		-		-			39,361			-			-
		2,512,143			-		-		7,291,244		14,098,938			131,959,437			7,029,505			(361,339	)
Total	$	(134,835,325	)	$	-	$	41,511	$	7,310,307	$	156,988		$	(59,618,185	)	$	49,805,149		$	1,455,074

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

	Graham Commodity Strategies LLC			Graham Energy Focus LLC			Graham Energy Fundamental LLC			Graham Fed Policy Ltd.			Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC			Graham Macro Technical Ltd.
Commodity price
Futures	$	(12,951,098	)	$	12,682,853		$	1,464,936		$	-		$	1,342,122		$	(18,381,457	)	$	(865,110	)	$	174,280
Options		530,140			789,330			(26,230	)		-			-			-			-			3,050
Swaps		2,260,367			(11,744,944	)		23,500			-			-			(4,821,816	)		-			-
		(10,160,591	)		1,727,239			1,462,206			-			1,342,122			(23,203,273	)		(865,110	)		177,330
Equity price
Futures		(7,284,512	)		(141,250	)		-			17,313			4,346,549			4,341,089			1,981,489			754,753
CME Membership		(152,260	)		-			-			-			-			(82,350	)		-			-
Options		(90,000	)		-			-			-			-			-			-			(248,800	)
		(7,526,772	)		(141,250	)		-			17,313			4,346,549			4,258,739			1,981,489			505,953
Foreign currency exchange rate
Futures		2,985,380			-			-			-			-			(14,670,367	)		-			(25	)
Forwards		(39,829,652	)		-			-			-			(10,596,185	)		(48,907,752	)		33,756,168			1,033,665
Options		(1,904,731	)		-			-			-			(5,006,589	)		-			1,335,000			375,203
		(38,749,003	)		-			-			-			(15,602,774	)		(63,578,119	)		35,091,168			1,408,843
Interest rate
Futures		(279,874	)		-			-			(4,431,351	)		16,889,448			61,714,824			4,218,861			(144,332	)
Options		2,379,314			-			-			3,235,874			-			-			(265,625	)		(81,232	)
Treasury bills		10,111			-			-			-			(125,000	)		56,194			-			-
		2,109,551			-			-			(1,195,477	)		16,764,448			61,771,018			3,953,236			(225,564	)
Total	$	(54,326,815	)	$	1,585,989		$	1,462,206		$	(1,178,164	)	$	6,850,345		$	(20,751,635	)	$	40,160,783		$	1,866,562

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table summarizes the financial position of each Master Fund as of December 31, 2011:

	Graham Commodity Strategies LLC (Delaware)			Graham Energy Focus LLC (Delaware)			Graham Fed Policy Ltd. (BVI)			Graham Global Monetary Policy LLC (Delaware)			Graham K4D Trading Ltd. (BVI)			Graham Macro Directional LLC (Delaware)
Assets:
Due from brokers	$	142,601,701		$	29,432,093		$	37,426,188		$	73,168,865		$	307,111,336		$	12,363,794
Options, at fair value		-			6,085,420			-			-			-			-
Derivative financial instruments, at fair value		-			-			4,895,517			2,556,238			41,337,536			-
CME Membership, at fair value		2,000			-			-			-			355,000			-
Subscriptions receivable		5,925			1,048			882			40,815			34,651			2,311
Total assets		142,609,626			35,518,561			42,322,587			75,765,918			348,838,523			12,366,105

Liabilities:
Options, at fair value		-			-			3,048,431			296,433			-			-
Derivative financial instruments, at fair value		10,834,559			13,573,247			-			-			15,255,976			1,521,488
Redemptions payable		5,925			1,048			1,024			40,370			34,651			2,311
Total liabilities		10,840,484			13,574,295			3,049,455			336,803			15,290,627			1,523,799
Net assets	$	131,769,142		$	21,944,266		$	39,273,132		$	75,429,115		$	333,547,896		$	10,842,306

Percentage of Master Fund held by GAIT		15.04	%		20.01	%		15.17	%		14.18	%		13.52	%		17.87	%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

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

Swaps
Wheat future May 2012		269		903,018			0.69	%
Other commodity futures				(2,762,970	)		(2.10	)%
Total swaps				(1,859,952	)		(1.41	)%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Number of Contracts			Fair Value			Percentage of Net Assets of Master Fund
Graham Commodity Strategies LLC (continued)
Short contracts
Futures
Brent Crude Penultimate Financial December 2012		(1,097	)	$	(9,057,530	)		(6.87	)%
Other Brent Crude April 2012 - December 2013		(2,581	)		(4,752,620	)		(3.61	)%
Coffee March 2012		(1,799	)		(1,080,731	)		(0.82	)%
Corn December 2012		(1,074	)		1,099,575			0.83	%
Gasoil June 2012 - December 2012		(3,748	)		(10,964,450	)		(8.32	)%
Natural Gas April 2012		(7,358	)		12,529,350			9.51	%
Other Natural Gas October 2012		(275	)		2,387,340			1.81	%
Wheat July 2012		(2,919	)		23,443,525			17.79	%
Other Wheat May 2012		(765	)		(792,350	)		(0.60	)%
WTI Crude October 2012		(1,500	)		(18,800,000	)		(14.27	)%
Other WTI Crude February 2012-December 2014		(12,649	)		(2,116,630	)		(1.60	)%
Other commodity					(9,868,200	)		(7.49	)%
U.S. index					(11,021	)		(0.01	)%
Total futures					(17,983,742	)		(13.65	)%

Swaps
Wheat future March 2012		(1,539	)		(6,067,775	)		(4.60	)%
Other Wheat future July 2012		(427	)		(1,435,788	)		(1.09	)%
Other commodity futures					(128,637	)		(0.10	)%
Total swaps					(7,632,200	)		(5.79	)%

Total				$	(10,834,559	)		(8.22	)%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Number of Contracts		Fair Value			Percentage of Net Assets of Master Fund
Graham Energy Focus LLC
Long contracts
Futures
Henry Hub Penultimate March 2012		4,031	$	(11,345,235	)		(51.70	)%
Henry Hub Penultimate April 2013		2,550		(4,180,875	)		(19.05	)%
Other Henry Hub Penultimate February 2012 - December 2012		5,156		(7,521,975	)		(34.28	)%
Natural Gas December 2012		1,083		(1,437,960	)		(6.55	)%
Natural Gas January 2013		2,083		(5,207,770	)		(23.73	)%
Other Natural Gas March 2013 - October 2013		200		(1,204,420	)		(5.49	)%
Other commodity				(25,000	)		(0.12	)%
Total futures				(30,923,235	)		(140.92	)%

Options
Natural Gas EURO February 2012, $4.80 Put		100		1,810,600			8.25	%
Natural Gas EURO March 2012, $4.80 Put		100		1,784,000			8.13	%
Natural Gas EURO April 2012 - October 2012, $0.20 - $4.50 Put		850		5,012,500			22.84	%
Total options				8,607,100			39.22	%

Swaps
Natural Gas February 2012		3,915		(11,572,885	)		(52.74	)%
Natural Gas March 2012		1,767		(6,214,880	)		(28.32	)%
Natural Gas April 2012		1,250		(1,615,525	)		(7.36	)%
Natural Gas May 2012		930		(1,610,140	)		(7.34	)%
Natural Gas June 2012		900		(1,443,450	)		(6.58	)%
Natural Gas July 2012		930		(1,349,740	)		(6.15	)%
Natural Gas August 2012		930		(1,273,015	)		(5.80	)%
Natural Gas September 2012		900		(1,216,200	)		(5.54	)%
Natural Gas November 2012		1,630		(1,596,325	)		(7.27	)%
Other Natural Gas January 2012 - November 2013		1,765		(916,000	)		(4.18	)%
Total swaps				(28,808,160	)		(131.28	)%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Number of Contracts			Fair Value			Percentage of Net Assets of Master Fund
Graham Energy Focus LLC (continued)
Short contracts
Futures
Henry Hub Penultimate February 2012		(3,971	)	$	11,724,378			53.43	%
Henry Hub Penultimate October 2012		(2,124	)		4,157,730			18.95	%
Henry Hub Penultimate April 2012		(1,340	)		1,845,850			8.41	%
Other Henry Hub Penultimate June 2012 - September 2012		(612	)		2,458,900			11.21	%
Natural Gas March 2012		(1,709	)		6,557,620			29.88	%
Natural Gas April 2012		(1,318	)		2,137,030			9.74	%
Natural Gas May 2012		(197	)		1,589,960			7.25	%
Natural Gas June 2012		(188	)		1,293,180			5.89	%
Natural Gas October 2012		(1,011	)		1,398,270			6.37	%
Natural Gas November 2012		(1,355	)		2,352,710			10.72	%
Natural Gas April 2013		(696	)		3,780,580			17.23	%
Other Natural Gas February 2012 - November 2013		(703	)		3,128,470			14.26	%
Other commodity					95,180			0.43	%
Total futures					42,519,858			193.77	%

Options
Natural Gas EURO February 2012 - December 2012, $4.00 - $6.50 Call		(3,100	)		(769,600	)		(3.51	)%
Natural Gas EURO February 2012 - March 2012, $3.00 - $3.25 Put		(800	)		(1,436,100	)		(6.54	)%
Other commodity					(315,980	)		(1.44	)%
Total options					(2,521,680	)		(11.49	)%

Swaps
Natural Gas January 2013		(1,116	)		1,752,508			7.99	%
Natural Gas May 2012 - September 2012		(1,983	)		1,910,892			8.70	%
Other Natural Gas December 2013		(62	)		(25,110	)		(0.11	)%
Total swaps					3,638,290			16.58	%

Total				$	(7,487,827	)		(34.12	)%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Number of Contracts			Fair Value			Percentage of Net Assets of Master Fund
Graham Fed Policy Ltd.
Long contracts
Futures
30 Day Fed Fund June 2012		8,547		$	2,324,519			5.92	%
Other 30 Day Fed Fund January 2012 - December 2013		26,631			2,594,437			6.60	%
Other 30 Day Fed Fund November 2012 - October 2013		1,598			(23,439	)		(0.06	)%
Total futures					4,895,517			12.46	%

Options
Interest rate futures					549,104			1.40	%
Total options					549,104			1.40	%

Short contracts
Options
Fed Fund futures February 2012 - June 2012, $99.88 Call		(12,650	)		(2,304,872	)		(5.87	)%
Fed Fund futures January 2012 - June 2012, $99.75 - $99.88 Put		(25,162	)		(1,255,163	)		(3.19	)%
Other interest rate futures					(37,500	)		(0.10	)%
Total options					(3,597,535	)		(9.16	)%

Total				$	1,847,086			4.70	%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Notional Amount	Fair Value			Percentage of Net Assets of Master Fund
Graham Global Monetary Policy LLC
Long contracts
Futures
Foreign bond		$	298,460			0.40	%
Total futures			298,460			0.40	%

Options
Foreign currency			339,824			0.45	%
Total options			339,824			0.45	%

Forwards
Chinese Yuan / U.S. dollar January 2012 – December 2012	CNY 3,296,537,500		4,745,926			6.29	%
Other foreign currency			4,716,017			6.25	%
Total forwards			9,461,943			12.54	%

Short contracts
Futures
Interest rate			94,330			0.13	%
Total futures			94,330			0.13	%

Options
Foreign currency			(636,257	)		(0.84	)%
Total options			(636,257	)		(0.84	)%

Forwards
Chinese Yuan / U.S. dollar January 2012 – December 2012	CNY (3,619,150,000)		(3,949,883	)		(5.24	)%
Other foreign currency			(3,348,612	)		(4.44	)%
Total forwards			(7,298,495	)		(9.68	)%
Total		$	2,259,805			3.00	%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedule displays the condensed schedule of investments for the Master Funds as of December 31, 2011.

Description	Fair Value			Percentage of Net Assets of Master Fund
Graham K4D Trading Ltd.
Long contracts
Futures
U.S. bond	$	5,555,669			1.67	%
Foreign bond		15,262,571			4.58	%
U.S. index		2,281,203			0.68	%
Foreign index		1,698,637			0.51	%
Commodity		(255,745	)		(0.08	)%
Interest rate		903,752			0.27	%
Currency		839,900			0.25	%
Total futures		26,285,987			7.88	%

Forwards
Foreign currency		8,206,755			2.46	%
Total forwards		8,206,755			2.46	%

Short contracts
Futures
Foreign bond		(7,404	)		(0.00	)%
U.S. index		5,540			0.00	%
Foreign index		(1,563,165	)		(0.47	)%
Commodity		615,434			0.18	%
Interest rate		(1,288,252	)		(0.38	)%
Currency		337,837			0.10	%
Total futures		(1,900,010	)		(0.57	)%

Swaps
Commodity		(15,255,976	)		(4.57	)%
Total swaps		(15,255,976	)		(4.57	)%

Forwards
Foreign currency		8,744,804			2.62	%
Total forwards		8,744,804			2.62	%

Total	$	26,081,560			7.82	%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Notional Amount	Fair Value			Percentage of Net Assets of Master Fund
Graham Macro Directional LLC
Long contracts
Futures
Foreign bond		$	(21,390	)		(0.20	)%
Total forwards			(21,390	)		(0.20	)%

Forwards
Foreign currency			227,165			2.10	%
Total forwards			227,165			2.10	%

Short contracts
Futures
U.S. index			(22,500	)		(0.21	)%
Total futures			(22,500	)		(0.21	)%

Forwards
Australian dollar / U.S. dollar 01/03/12	AUD (40,000,000)		(555,000	)		(5.12	)%
Other foreign currency			(1,149,763	)		(10.60	)%
Total forwards			(1,704,763	)		(15.72	)%

Total		$	(1,521,488	)		(14.03	)%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table shows the fair value classification of each investment type by Master Fund as of December 31, 2011:

	Graham Commodity Strategies LLC			Graham Energy Focus LLC			Graham Fed Policy Ltd.			Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC
Assets
Level 1:
U.S. bond futures	$	-		$	-		$	-		$	-		$	5,807,164		$	-
Foreign bond futures		-			-			-			385,999			15,262,571			-
U.S. index futures		-			-			-			-			3,038,693			-
Foreign index futures		-			-			-			-			1,954,287			-
Commodity futures		121,643,778			42,519,858			-			-			15,602,465			-
Commodity futures options		-			8,607,100			-			-			-			-
Commodity futures swaps		2,117,443			3,663,400			-			-			-			-
Interest rate futures		-			-			4,918,956			94,330			1,693,157			-
Interest rate futures options		-			-			549,104			-			-			-
Currency futures		-			-			-			-			1,406,611			-
Total Level 1		123,761,221			54,790,358			5,468,060			480,329			44,764,948			-

Level 2:
Foreign currency forwards		-			-			-			8,341,253			21,958,196			37,206
Foreign currency options		-			-			-			339,824			-			-
Total Level 2		-			-			-			8,681,077			21,958,196			37,206
Total assets	$	123,761,221		$	54,790,358		$	5,468,060		$	9,161,406		$	66,723,144		$	37,206

Liabilities
Level 1:
U.S. bond futures	$	-		$	-		$	-		$	-		$	(251,495	)	$	-
Foreign bond futures		-			-			-			(87,539	)		(7,404	)		(21,390	)
Foreign index futures		-			-			-			-			(1,818,815	)		-
U.S. index futures		(41,633	)		-			-			-			(751,950	)		(22,500	)
Commodity futures		(122,905,252	)		(30,923,235	)		-			-			(15,242,776	)		-
Commodity futures options		-			(2,521,680	)		-			-			-			-
Commodity futures swaps		(11,609,595	)		(28,833,270	)		-			-			(15,255,976	)		-
Interest rate futures		-			-			(23,439	)		-			(2,077,657	)		-
Interest rate futures options		-			-			(3,597,535	)		-			-			-
Currency futures		(39,300	)		-			-			-			(228,874	)		-
Total Level 1		(134,595,780	)		(62,278,185	)		(3,620,974	)		(87,539	)		(35,634,947	)		(43,890	)

Level 2:
Foreign currency forwards		-			-			-			(6,177,805	)		(5,006,637	)		(1,514,804	)
Foreign currency options		-			-			-			(636,257	)		-			-
Total Level 2		-			-			-			(6,814,062	)		(5,006,637	)		(1,514,804	)
Total liabilities	$	(134,595,780	)	$	(62,278,185	)	$	(3,620,974	)	$	(6,901,601	)	$	(40,641,584	)	$	(1,558,694	)

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2011 categorized by primary underlying risk and is representative of the derivative positions held by the Master Funds throughout the year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the respective Master Fund’s statement of financial condition.

	Graham Commodity Strategies LLC															Graham Energy Focus LLC
	Long exposure				Short exposure											Long exposure				Short exposure
	Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities			Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities

Commodity price
Futures	$	5,222,568,696		73,089	$	(5,055,686,350	)		(73,848	)	$	121,643,778	$	(122,905,252	)	$	231,604,970		15,138	$	(297,888,138	)		(15,304	)	$	42,519,858	$	(30,923,235	)
Options		-		-		-			-			-		-			26,350,000		1,050		(112,935,000	)		(4,022	)		8,607,100		(2,521,680	)
Swaps		176,282,548		5,469		(252,954,190	)		(7,895	)		2,117,443		(11,609,595	)		119,063,430		14,917		(31,672,403	)		(3,161	)		3,663,400		(28,833,270	)
		5,398,851,244		78,558		(5,308,640,540	)		(81,743	)		123,761,221		(134,514,847	)		377,018,400		31,105		(442,495,541	)		(22,487	)		54,790,358		(62,278,185	)

Equity price
Futures		42,835,500		684		(24,380,400	)		(330	)		-		(41,633	)		-		-		-			-			-		-
		42,835,500		684		(24,380,400	)		(330	)		-		(41,633	)		-		-		-			-			-		-

Foreign currency exchange rate
Futures		12,233,700		230		-			-			-		(39,300	)		-		-		-			-			-		-
Forwards		-		-		-			-			-		-			-		-		-			-			-		-
		12,233,700		230		-			-			-		(39,300	)		-		-		-			-			-		-

Interest rate
Futures		-		-		-			-			-		-			-		-		-			-			-		-
		-		-		-			-			-		-			-		-		-			-			-		-
Total	$	5,453,920,444		79,472	$	(5,333,020,940	)		(82,073	)	$	123,761,221	$	(134,595,780	)	$	377,018,400		31,105	$	(442,495,541	)		(22,487	)	$	54,790,358	$	(62,278,185	)

Collateral balances supporting all derivative positions													$	142,601,701														$	29,432,093

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2011 categorized by primary underlying risk and is representative of the derivative positions held by the Master Funds throughout the year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the respective Master Fund’s statement of financial condition.

	Graham Fed Policy Ltd.															Graham Global Monetary Policy LLC
	Long exposure				Short exposure											Long exposure				Short exposure
	Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities			Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities

Commodity price
Futures	$	-		-	$	-			-		$	-	$	-				$					$			$		$	-
Swaps		-		-		-			-			-		-			-		-		-			-			-		-
		-		-		-			-			-		-			-		-		-						-		-

Equity price
Futures		-		-		-			-			-		-			-		-		-			-			-		-
		-		-		-			-			-		-			-		-		-			-			-		-

Foreign currency exchange rate
Futures		-		-		-			-			-		-			-		-		-			-			-		-
Forwards		-		-		-			-			-		-			2,504,581,338		N/A		(2,502,417,890	)		N/A			8,341,253		(6,177,805	)
Options		-		-		-			-			-		-			200,000,000		1		(100,000,000	)		(1	)		339,824		(636,257	)
		-		-		-			-			-		-			2,704,581,338		1		(2,602,417,890	)		(1	)		8,681,077		(6,814,062	)

Interest rate
Futures		14,640,919,492		35,178		-			-			4,918,956		(23,439	)		216,273,337		1,940		(514,021,011	)		(2,100	)		480,329		(87,539	)
Options		2,155,189,586		5,981		(17,228,752,250	)		(43,812	)		549,104		(3,597,535	)		-		-		-			-			-		-
		16,796,109,078		41,159		(17,228,752,250	)		(43,812	)		5,468,060		(3,620,974	)		216,273,337		1,940		(514,021,011	)		(2,100	)		480,329		(87,539	)
Total	$	16,796,109,078		41,159	$	(17,228,752,250	)		(43,812	)	$	5,468,060	$	(3,620,974	)	$	2,920,854,675		1,941	$	(3,116,438,901	)		(2,101	)	$	9,161,406	$	(6,901,601	)

Collateral balances supporting all derivative positions													$	37,426,188														$	73,168,865

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2011 categorized by primary underlying risk and is representative of the derivative positions held by the Master Funds throughout the year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the respective Master Fund’s statement of financial condition.

	Graham K4D Trading Ltd.															Graham Macro Directional LLC
	Long exposure				Short exposure											Long exposure				Short exposure
	Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities			Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities

Commodity price
Futures	$	549,621,961		6,056	$	(748,131,689	)		(17,936	)	$	15,602,465	$	(15,242,776	)	$	-		-	$	-			-		$	-	$	-
Swaps		-		-		(232,232,146	)		(6,040	)		-		(15,255,976	)		-		-		-			-			-		-
		549,621,961		6,056		(980,363,835	)		(23,976	)		15,602,465		(30,498,752	)		-		-		-			-			-		-

Equity price
Futures		532,726,507		8,449		(283,517,405	)		(4,519	)		4,992,980		(2,570,765	)		-		-		(12,525,000	)		(200	)		-		(22,500	)
		532,726,507		8,449		(283,517,405	)		(4,519	)		4,992,980		(2,570,765	)		-		-		(12,525,000	)		(200	)		-		(22,500	)

Foreign currency exchange rate
Futures		263,535,156		2,886		(55,089,450	)		(348	)		1,406,611		(228,874	)
Forwards		1,473,161,901		N/A		(1,456,210,342	)		N/A			21,958,196		(5,006,637	)		378,520,504		N/A		(379,998,102	)		N/A			37,206		(1,514,804	)
		1,736,697,057		2,886		(1,511,299,792	)		(348	)		23,364,807		(5,235,511	)		378,520,504		-		(379,998,102	)		-			37,206		(1,514,804	)

Interest rate
Futures		11,861,168,194		60,131		(3,335,791,712	)		(13,264	)		22,762,892		(2,336,556	)		22,151,552		200		-			-			-		(21,390	)
		11,861,168,194		60,131		(3,335,791,712	)		(13,264	)		22,762,892		(2,336,556	)		22,151,552		200		-			-			-		(21,390	)
Total	$	14,680,213,719		77,522	$	(6,110,972,744	)		(42,107	)	$	66,723,144	$	(40,641,584	)	$	400,672,056		200	$	(392,523,102	)		(200	)	$	37,206	$	(1,558,694	)

Collateral balances supporting all derivative positions													$	307,111,336														$	12,363,794

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table summarizes the results of operations of each Master Fund for the three and six month periods ended June 30, 2011:

	Graham Commodity Strategies LLC (Delaware)			Graham Discretionary Energy Trading III LLC (Delaware)			Graham Energy Focus LLC (Delaware)			Graham Fed Policy Ltd. (BVI)			Graham Global Monetary Policy LLC (Delaware)			Graham K4D Trading Ltd. (BVI)			Graham Macro Directional LLC (Delaware)			Graham Short Term Global Macro LLC (Delaware)
	Three Months Ended June 30, 2011
Net investment loss	$	(4,386	)	$	(21,842	)	$	(6,663	)	$	(2,910	)	$	(38,503	)	$	(206,478	)	$	(7,866	)	$	-

Net realized gain (loss) on investments		6,750,578			(16,112,867	)		(2,018,687	)		6,717,130			(9,593,084	)		(21,262,016	)		(1,633,982	)		-
Net increase (decrease) in unrealized appreciation on investments		5,564,570			(12,797,859	)		7,684,531			2,089,673			(2,852,943	)		(70,349,041	)		(1,329,149	)		-
Brokerage commissions and fees		(1,639,470	)		(752,389	)		(255,097	)		(715,972	)		(660,192	)		(3,638,222	)		(701,773	)		-
Net gain (loss) on investments		10,675,678			(29,663,115	)		5,410,747			8,090,831			(13,106,219	)		(95,249,279	)		(3,664,904	)		-
Net income (loss)	$	10,671,292		$	(29,684,957	)	$	5,404,084		$	8,087,921		$	(13,144,722	)	$	(95,455,757	)	$	(3,672,770	)	$	-

	Six Months Ended June 30, 2011
Net investment income (loss)	$	(8,866	)	$	(20,874	)	$	(15,484	)	$	(4,030	)	$	(66,633	)	$	(290,344	)	$	(8,423	)	$	1,186

Net realized gain (loss) on investments		77,093,191			(15,551,080	)		(5,950,891	)		22,305,960			11,375,066			(68,425,848	)		(23,415,872	)		3,960,455
Net increase (decrease) in unrealized appreciation on investments		(19,856,052	)		(8,962,985	)		5,582,153			735,914			890,931			(65,095,579	)		(1,049,458	)		(1,898,136	)
Brokerage commissions and fees		(3,473,172	)		(1,603,103	)		(641,577	)		(1,300,533	)		(1,373,768	)		(6,930,150	)		(1,020,771	)		(548,562	)
Net gain (loss) on investments		53,763,967			(26,117,168	)		(1,010,315	)		21,741,341			10,892,229			(140,451,577	)		(25,486,101	)		1,513,757
Net income (loss)	$	53,755,101		$	(26,138,042	)	$	(1,025,799	)	$	21,737,311		$	10,825,596		$	(140,741,921	)	$	(25,494,524	)	$	1,514,943

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table shows the gains and losses on all financial instruments held by the Master Funds reported in net gain (loss) on investments in their statements of operations segregated by primary underlying risk and contract type for the three months ended June 30, 2011:

	Graham Commodity Strategies LLC			Graham Discretionary Energy Trading III LLC			Graham Energy Focus LLC			Graham Fed Policy Ltd.			Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC			Graham Short Term Global Macro LLC
Commodity price
Futures	$	12,699,898		$	(27,398,379	)	$	13,273,438		$	-		$	2,837,354		$	(87,798,352	)	$	(96,992	)	$	-
Options		-			(1,337,727	)		(303,114	)		-			(295,000	)		-			-			-
Swaps		(384,750	)		(174,620	)		(7,304,480	)		-			-			-			-			-
		12,315,148			(28,910,726	)		5,665,844			-			2,542,354			(87,798,352	)		(96,992	)		-
Equity price
Futures		-			-			-			-			(538,540	)		(28,028,918	)		(4,385,320	)		-
Options		-			-			-			-			-			-			-			-
		-			-			-			-			(538,540	)		(28,028,918	)		(4,385,320	)		-
Foreign currency exchange rate
Futures		-			-			-			-			-			(4,534,058	)		-			-
Forwards		-			-			-			-			2,968,389			5,477,710			(16,428,584	)		-
Options		-			-			-			-			(8,260,446	)		-			-			-
		-			-			-			-			(5,292,057	)		943,652			(16,428,584	)		-
Interest rate
Bonds		-			-			-			-			-			-			-			-
Futures		-			-			-			11,348,100			(8,895,284	)		23,272,561			17,947,765			-
Options		-			-			-			(2,541,297	)		(262,500	)		-			-			-
		-			-			-			8,806,803			(9,157,784	)		23,272,561			17,947,765			-
Total	$	12,315,148		$	(28,910,726	)	$	5,665,844		$	8,806,803		$	(12,446,027	)	$	(91,611,057	)	$	(2,963,131	)	$	-

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

	Graham Commodity Strategies LLC			Graham Discretionary Energy Trading III LLC			Graham Energy Focus LLC			Graham Fed Policy Ltd.			Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC			Graham Short Term Global Macro LLC
Commodity price
Futures	$	57,331,639		$	(20,131,865	)	$	1,922,912		$	-		$	8,634,955		$	(42,986,840	)	$	(731,472	)	$	3,852,769
Options		-			(5,141,415	)		2,702,065			-			(87,120	)		-			-			(223,490	)
Swaps		(94,500	)		759,215			(4,993,715	)		-			-			-			-			-
		57,237,139			(24,514,065	)		(368,738	)		-			8,547,835			(42,986,840	)		(731,472	)		3,629,279
Equity price
Futures		-			-			-			-			(5,485,726	)		(68,330,129	)		(4,686,981	)		1,134,945
Options		-			-			-			-			-			-			-			(427,187	)
		-			-			-			-			(5,485,726	)		(68,330,129	)		(4,686,981	)		707,758
Foreign currency exchange rate
Futures		-			-			-			-			-			(9,996,003	)		-			-
Forwards		-			-			-			-			44,476,513			(18,578,273	)		(28,706,387	)		5,706,028
Options		-			-			-			-			(20,839,029	)		-			-			(7,400,670	)
		-			-			-			-			23,637,484			(28,574,276	)		(28,706,387	)		(1,694,642	)
Interest rate
Futures		-			-			-			28,560,950			(13,725,783	)		6,369,818			9,659,510			(580,076	)
Options		-			-			-			(5,519,076	)		(707,813	)		-			-			-
		-			-			-			23,041,874			(14,433,596	)		6,369,818			9,659,510			(580,076	)
Total	$	57,237,139		$	(24,514,065	)	$	(368,738	)	$	23,041,874		$	12,265,997		$	(133,521,427	)	$	(24,465,330	)	$	2,062,319

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC

GAIT invests a portion of its excess liquidity in GCA, an entity for which the Manager is also the sole investment advisor. GCA commenced operations on June 22, 2005, and was formed as a Delaware Limited Liability Company for the purpose of consolidating investment activity of multiple funds managed by the Manager. Its objective is to preserve capital while enhancing return on cash balances and providing daily liquidity. It invests in debt obligations guaranteed by the U.S. federal government which range in maturity from one to twenty-four months. GCA also maintains cash and cash equivalents on deposit with major U.S. institutions. GCA values all fixed income securities at amortized cost which approximates fair value. GAIT’s investment in GCA is valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon GAIT’s proportionate share of GCA’s reported net asset value. GAIT records its proportionate share of GCA’s investment income and expenses on a monthly basis. For the three months ended June 30, 2012, the total amount recognized by GAIT with respect to its investment in GCA was $195,327. For the six months ended June 30, 2012, the total amount recognized by GAIT with respect to its investment in GCA was $412,959. For the three months ended June 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $498,565. For the six months ended June 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $1,013,711. These amounts are included in interest income in the statements of operations and managing member allocation. At June 30, 2012 and December 31, 2011, GAIT owned approximately 7.02% and 11.59%, respectively, of GCA. The following table summarizes the financial position of GCA as of June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
Assets:
Cash and cash equivalents	$	1,112,162,285	$	556,557,151
Investments in fixed income securities (cost $3,293,667,941 and $2,412,672,700 respectively)		3,293,667,941		2,412,672,700
Accrued interest income		6,324,878		4,670,722
Total assets		4,412,155,104		2,973,900,573

Liabilities:
Other liabilities		24,270		29,450
Total liabilities		24,270		29,450
Net assets	$	4,412,130,834	$	2,973,871,123

The following table summarizes the results of operations of GCA for the three and six month periods ended June 30, 2012 and 2011:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Investment income
Interest income	$	2,489,709	$	3,850,625	$	4,851,561	$	7,711,127
Total investment income		2,489,709		3,850,625		4,851,561		7,711,127

Expenses:
Bank fee expense		37,534		126,225		61,637		259,809
Total expenses		37,534		126,225		61,637		259,809
Net investment income		2,452,175		3,724,400		4,789,924		7,451,318
Net income	$	2,452,175	$	3,724,400	$	4,789,924	$	7,451,318

Index

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 GCA as of June 30, 2012:

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Investments in Fixed Income Securities (cost $3,293,667,941)
United States
FDIC Guaranteed Bonds (cost $429,904,994)
Citigroup Funding 1.88% - 2.25% due 07/12/12 – 12/10/12	$	259,364,000	$	260,505,140		5.90	%
Other FDIC guaranteed bonds				169,399,854		3.84	%
Total FDIC Guaranteed Bonds				429,904,994		9.74	%

Government Bonds (cost $2,863,762,947)
U.S. Treasury 0.63% - 2.25% due 08/31/12 – 06/15/14				2,863,762,947		64.91	%
Total Government Bonds				2,863,762,947		64.91	%

Total Investments in Fixed Income Securities			$	3,293,667,941		74.65	%

The following represents the condensed schedule of investments of GCA as of December 31, 2011:

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Investments in Fixed Income Securities (cost $2,412,672,700)
United States
FDIC Guaranteed Bonds (cost $623,918,691)
Citigroup Funding 1.88% – 2.25% due 04/30/12 –12/10/12	$	374,364,000	$	378,090,518		12.71	%
Other FDIC guaranteed bonds				245,828,173		8.27	%
Total FDIC Guaranteed Bonds				623,918,691		20.98	%

Government Bonds (cost $1,788,754,009)
U.S. Treasury 0.13% – 1.38% due 01/31/12 – 11/15/13		1,785,000,000		1,788,754,009		60.15	%
Total Government Bonds				1,788,754,009		60.15	%

Total Investments in Fixed Income Securities			$	2,412,672,700		81.13	%

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

GCA reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. The following table shows the fair value classification of each investment type held by GCA as of June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
Assets
Level 2:
Fixed income securities
FDIC Guaranteed Bonds	$	429,904,994	$	623,918,691
Government Bonds		2,863,762,947		1,788,754,009
Total fixed income securities		3,293,667,941		2,412,672,700
Total Level 2		3,293,667,941		2,412,672,700
Total assets	$	3,293,667,941	$	2,412,672,700

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.

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

6. Fees and Related Party Transactions

Advisory Fees

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

Sponsor Fees

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

Incentive Allocation

At the end of each calendar quarter, the Manager will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter. Additionally, any loss carryforward attributable to any class of GAIT shall be proportionately reduced effective as of the date of any redemption of any Units of such class by multiplying the loss carryforward by the ratio that the amount of assets redeemed from such class bears to the net assets of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made to the Manager.

Brokerage Fees

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

Class	Annual Rate

Class 0	2%
Class 2	4%

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

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

Index

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

7. Income Taxes

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

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

8. Financial Highlights

The following is the per unit operating performance calculation for the three month periods ended June 30, 2012 and 2011:

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, March 31, 2011	$	137.45		$	111.91
Net loss:
Net investment loss		(1.55	)		(1.87	)
Net loss on investments		(3.23	)		(2.56	)
Net loss		(4.78	)		(4.43	)
Net asset value per unit, June 30, 2011	$	132.67		$	107.48

Net asset value per unit, March 31, 2012	$	126.14		$	100.65
Net loss:
Net investment loss		(1.21	)		(1.47	)
Net loss on investments		(6.16	)		(4.88	)
Net loss		(7.37	)		(6.35	)
Net asset value per unit, June 30, 2012	$	118.77		$	94.30

Index

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 month periods ended June 30, 2012 and 2011:

	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(5.84	)%		(3.48	)%		(6.31	)%		(3.96	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(5.84	)%		(3.48	)%		(6.31	)%		(3.96	)%

Net investment loss before Incentive Allocation		(0.96	)%		(1.13	)%		(1.46	)%		(1.67	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(0.96	)%		(1.13	)%		(1.46	)%		(1.67	)%

Total expenses before Incentive Allocation		1.26	%		1.55	%		1.78	%		2.06	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.26	%*		1.55	%*		1.78	%*		2.06	%*

*The percentages above represent total gross expenses before commission reimbursements, which represent 0.23% of average members’ capital for 2012 and 0.13% of average members’ capital for 2011.

The following is the per unit operating performance calculation for the six month periods ended June 30, 2012 and 2011:

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, December 31, 2010	$	138.96		$	113.68
Net loss:
Net investment loss		(2.82	)		(3.44	)
Net loss on investments		(3.47	)		(2.76	)
Net loss		(6.29	)		(6.20	)
Net asset value per unit, June 30, 2011	$	132.67		$	107.48

Net asset value per unit, December 31, 2011	$	123.17		$	98.77
Net loss:
Net investment loss		(2.41	)		(2.95	)
Net loss on investments		(1.99	)		(1.52	)
Net loss		(4.40	)		(4.47	)
Net asset value per unit, June 30, 2012	$	118.77		$	94.30

Index

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 month periods ended June 30, 2012 and 2011:

	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(3.57	)%		(4.52	)%		(4.53	)%		(5.44	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Total return after Incentive Allocation		(3.57	)%		(4.53	)%		(4.53	)%		(5.45	)%

Net investment loss before Incentive Allocation		(1.96	)%		(2.02	)%		(2.99	)%		(3.02	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Net investment loss after Incentive Allocation		(1.96	)%		(2.03	)%		(2.99	)%		(3.03	)%

Total expenses before Incentive Allocation		2.54	%		2.55	%		3.57	%		3.57	%
Incentive Allocation		0.00			0.01			0.00			0.01
Total expenses after Incentive Allocation		2.54	%*		2.56	%*		3.57	%*		3.58	%*

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, Brokerage Fees, Sponsor Fees and the Incentive Allocation. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for the Class 0 and Class 2 units taken as a whole and include amounts from GAIT and net investment loss allocated from Master Funds and GCA. The computation of such ratios is based on the amount of net investment loss, total expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of members’ capital of GAIT, excluding that of the Managing Member, for the three and six month periods ended June 30, 2012 and 2011.

9. Subsequent Events

GAIT had subscriptions of approximately $8.1 million and redemptions of approximately $7.2 million through August 14, 2012, the date through which subsequent events were evaluated by management. These amounts have not been included in the financial statements.

Index

Manager

Graham Capital Management, L.P.

40 Highland Avenue

Rowayton, CT 06853

U.S.A.

Administrator

SEI Global Services Inc.

1 Freedom Valley Drive

Oaks, PA 19456

U.S.A.

Legal and Tax Advisors

Proskauer Rose LLP

1585 Broadway

New York, NY 10036

U.S.A.

Registered Address

Corporation Service Company

2711 Centerville Road

Suite 400

Wilmington, DE 19808

U.S.A.

Independent Registered Public Accounting Firm

Ernst & Young LLP

300 First Stamford Place

Stamford, CT 06902

U.S.A.

Index

Graham Alternative Investment Trading II LLC

Statements of Financial Condition

Assets	June 30, 2012 (Unaudited)		December 31, 2011 (Audited)
Investment in Graham K4D Trading Ltd., at fair value	$	8,163,283	$	13,021,233
Investment in Graham Cash Assets LLC, at fair value		52,256,309		59,403,888
Accrued commission reimbursements		14,841		29,549
Receivable from Graham K4D Trading Ltd.		664		532
Total assets	$	60,435,097	$	72,455,202

Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	1,479,067	$	2,739,451
Accrued brokerage fees		145,977		183,148
Accrued advisory fees		99,000		122,997
Accrued sponsor fees		49,500		61,499
Total liabilities		1,773,544		3,107,095

Members’ capital:
Class 0 Units (393,182.293 and 434,825.751 units issued and outstanding at $78.23 and $81.35 per unit, respectively)		30,757,326		35,371,951
Class 2 Units (378,854.852 and 439,312.861 units issued and outstanding at $73.54 and $77.24 per unit, respectively)		27,859,357		33,930,645
Class M Units (500.000 and 500.000 units issued and outstanding at $89.74 and $91.02 per unit, respectively)		44,870		45,511
Total members’ capital		58,661,553		69,348,107
Total liabilities and members’ capital	$	60,435,097	$	72,455,202

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Statements of Operations and Managing Member Allocation

	Three Months Ended June 30,						Six Months Ended June 30,
	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Net loss allocated from investment in Graham K4D Trading Ltd.:
Net realized loss on investments	$	(2,582,542	)	$	(696,018	)	$	(258,915	)	$	(2,452,096	)
Net increase (decrease) in unrealized appreciation on investments		196,745			(2,444,950	)		(453,171	)		(2,142,861	)
Brokerage commissions and fees		(50,384	)		(134,536	)		(124,143	)		(265,392	)
Net loss allocated from investment in Graham K4D Trading Ltd.		(2,436,181	)		(3,275,504	)		(836,229	)		(4,860,349	)

Net investment loss allocated from investment in Graham K4D Trading Ltd.		(3,358	)		(7,641	)		(10,261	)		(10,898	)

Investment income:
Interest income		32,916			88,652			70,152			173,480
Total investment income		32,916			88,652			70,152			173,480

Expenses:
Brokerage fees		466,976			634,470			976,028			1,204,772
Advisory fees		316,049			446,361			660,079			850,004
Sponsor fees		158,024			223,180			330,039			425,001
Interest and other		1,815			10,526			2,748			11,845
Commission reimbursements		(50,384	)		(134,536	)		(124,143	)		(265,392	)
Total expenses		892,480			1,180,001			1,844,751			2,226,230
Net investment loss of the Fund		(859,564	)		(1,091,349	)		(1,774,599	)		(2,052,750	)

Net loss		(3,299,103	)		(4,374,494	)		(2,621,089	)		(6,923,997	)

Incentive allocation		-			(6,623	)		-			(8,810	)

Net loss available for pro-rata allocation to all members	$	(3,299,103	)	$	(4,381,117	)	$	(2,621,089	)	$	(6,932,807	)

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Statements of Changes in Members’ Capital

For the six months ended June 30, 2012 (unaudited) and 2011 (unaudited)

	Class 0						Class 2						Class M					Total
	Units			Capital			Units			Capital			Units		Capital			Capital
Members’ capital, December 31, 2010		397,859.944		$	40,945,899			288,630.496		$	28,783,191			500.000	$	54,780		$	69,783,870
Subscriptions		154,152.633			15,741,470			138,074.621			13,630,873			–		–			29,372,343
Redemptions		(32,542.338	)		(3,240,853	)		(26,485.078	)		(2,575,629	)		–		(8,810	)		(5,825,292	)
Incentive allocation		–			(4,821	)		–			(3,989	)		–		8,810			–
Net loss		–			(3,782,954	)		–			(3,138,415	)		–		(2,628	)		(6,923,997	)
Members’ capital, June 30, 2011		519,470.239		$	49,658,741			400,220.039		$	36,696,031			500.000	$	52,152		$	86,406,924

	Class 0						Class 2						Class M					Total
	Units			Capital			Units			Capital			Units		Capital			Capital
Members’ capital, December 31, 2011		434,835.751		$	35,371,951			439,312.861		$	33,930,645			500.000	$	45,511		$	69,348,107
Subscriptions		10,624.433			873,034			2,468.619			191,000			–		–			1,064,034
Redemptions		(52,277.891	)		(4,276,833	)		(62,926.628	)		(4,852,666	)		–	–				(9,129,499	)
Incentive allocation		–			–			–			–			–	–				–
Net loss		–			(1,210,826	)		–			(1,409,622	)		–		(641	)		(2,621,089	)
Members’ capital, June 30, 2012		393,182.293		$	30,757,326			378,854.852		$	27,859,357			500.000	$	44,870		$	58,661,553

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Statements of Cash Flows

	Six Months Ended June 30,
	2012 (Unaudited)			2011 (Unaudited)
Cash flows provided by (used in) operating activities
Net loss	$	(2,621,089	)	$	(6,923,997	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss allocated from investment in Graham K4D Trading Ltd.		846,490			4,871,247
Net income allocated from investment in Graham Cash Assets LLC		(70,152	)		(173,480	)
Proceeds from sale of investments in Graham K4D Trading Ltd.		38,174,032			55,865,805
Proceeds from sale of investments in Graham Cash Assets LLC		46,077,166			69,988,773
Investments in Graham K4D Trading Ltd.		(34,162,704	)		(63,097,946	)
Investments in Graham Cash Assets LLC		(38,859,435	)		(84,415,676	)
Changes in assets and liabilities:
Accrued commission reimbursements		14,708			(21,127	)
Accrued brokerage fees		(37,171	)		35,546
Accrued advisory fees		(23,997	)		24,000
Accrued sponsor fees		(11,999	)		12,000
Net cash provided by (used in) operating activities		9,325,849			(23,834,855	)

Cash flows (used in) provided by financing activities
Subscriptions		1,064,034			29,372,343
Redemptions		(10,389,883	)		(5,537,488	)
Net cash (used in) provided by financing activities		(9,325,849	)		23,834,855

Net change in cash and cash equivalents		-			-

Cash and cash equivalents, beginning of period		-			-
Cash and cash equivalents, end of period	$	-		$	-

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements

June 30, 2012

1. Organization and Business

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

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

Graham Alternative Investment Fund I LLC and Graham Alternative Investment Fund II LLC are the sole investors of GAIT II.

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

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

Duties of the Managing Member

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

2. Summary of Significant Accounting Policies

These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The preparation of these financial statements requires the Managing Member to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Investment in Graham K4D Trading Ltd.

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

Fair Value

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

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

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

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

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

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

GAIT II reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. In accordance with this hierarchy, GAIT II’s investments in K4D Trading and Graham Cash Assets LLC (“GCA”) have been classified as Level 2 valuations. The Master Fund records all its derivative financial instruments at fair value, which is derived in accordance with U.S. GAAP. There were no Level 3 assets or liabilities held at any point during the six months ended June 30, 2012 or the twelve months ended December 31, 2011 by GAIT II, K4D Trading, or GCA, and there were no transfers between levels during those periods. Transfers between levels, if any, are recognized on the actual date of the event or change in circumstances that cause the transfer.

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Derivative Instruments

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

Unrealized gains and losses from derivative financial instruments are recorded based on changes in their fair value. Realized gains and losses are recorded when the positions are closed. All unrealized and realized gains and losses related to derivative financial instruments are included in net realized loss and net decrease in appreciation on investments in the Master Fund’s statements of operations.

Futures Contracts

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

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

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Forward Contracts

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

Swap Contracts

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

Exchange traded swaps are valued based upon the closing prices established by the primary exchange upon which they are traded. Total return swaps are valued based upon the exchange published settle price of the underlying reference instrument. Changes in fair value of each swap are recognized as unrealized gains or losses. The Master Fund records realized gains or losses when a swap contract is terminated. Interest is calculated and accrued throughout the life of each swap. Payments received at the end of each reset period are recorded against such accruals.

Options

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

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Options (continued)

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

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

Recent Accounting Pronouncements

Indemnifications

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

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd.

As of June 30, 2012 and December 31, 2011, GAIT II invested in K4D Trading, a master trading vehicle also managed by the Managing Manager. GAIT II’s investment in K4D Trading, as well as its investment objective, is summarized below. K4D Trading and GAIT II are related parties. K4D Trading does not charge any management or incentive fees, and offers monthly subscriptions and redemptions.

	June 30, 2012
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Loss (three months then ended)			Net Loss (six months then ended)

Systematic Macro
Graham K4D Trading Ltd.		13.92	%	$	8,163,283	$	(2,439,539	)	$	(846,490	)
		13.92	%	$	8,163,283	$	(2,439,539	)	$	(846,480	)

December 31, 2011
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Loss (three months ended June 30, 2011)			Net Loss (six months ended June 30, 2011)

Systematic Macro
Graham K4D Trading Ltd.		18.78	%	$	13,021,233	$	(3,283,145	)	$	(4,871,247	)
		18.78	%	$	13,021,233	$	(3,283,145	)	$	(4,871,247	)

The following table summarizes the financial position of K4D Trading as of June 30, 2012.

Assets:
Due from brokers	$	204,005,139
Derivative financial instruments, at fair value		11,942,533
CME Membership, at fair value		961,750
Subscriptions receivable		1,427
Total assets		216,910,849

Liabilities:
Derivative financial instruments, at fair value		-
Due to brokers		13,248,917
Redemptions payable		-
Total liabilities		13,248,917
Net assets	$	203,661,932

Percentage of K4D Trading held by GAIT II		4.01	%

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following schedule displays the condensed schedule of investments for K4D Trading as of June 30, 2012.

Description	Principal Amount / Number of Contracts		Fair Value			Percentage of Net Assets of Master Fund
Graham K4D Trading Ltd.
Long contracts
Bonds
United States
Treasury bill 08/23/12	$	175,000,000	$	174,989,257			85.92	%
Total United States				174,989,257			85.92	%
Total bonds *				174,989,257			85.92	%

Futures
U.S. bond				2,469,145			1.21	%
Foreign bond				(4,702,813	)		(2.31	)%
DJIA Mini E-CBOT September 2012		3,413		11,681,108			5.74	%
Other U.S. index				15,925,984			7.82	%
Foreign index				7,251,772			3.56	%
Soybean November 2012		1,048		7,386,303			3.63	%
Other commodity				465,651			0.23	%
Interest rate				5,057,356			2.48	%
Currency				(549,247	)		(0.27	)%
Total futures				44,985,259			22.09	%

Swaps
Soybean future November 2012		480		3,614,500			1.77	%
Commodity futures				4,677,704			2.30	%
Total swaps				8,292,204			4.07	%

Forwards
Foreign currency				8,494,428			4.17	%
Total forwards				8,494,428			4.17	%

*- This position is posted as collateral for margin and is included in Due from broker on the Statement of Financial Condition

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following schedule displays the condensed schedule of investments for K4D Trading as of June 30, 2012.

Description	Fair Value			Percentage of Net Assets of Master Fund
Graham K4D Trading Ltd. (continued)
Short contracts
Futures
U.S. index	$	(89,100	)		(0.04	)%
Foreign index		(14,759,905	)		(7.25	)%
Commodity		(24,380,774	)		(11.97	)%
Interest rate		(732,501	)		(0.36	)%
Currency		(727,519	)		(0.36	)%
Total futures		(40,689,799	)		(19.98	)%

Swaps
Commodity futures		(1,395,907	)		(0.69	)%
Total swaps		(1,395,907	)		(0.69	)%

Forwards
Foreign currency		(7,743,652	)		(3.80	)%
Total forwards		(7,743,652	)		(3.80	)%

Total	$	186,931,790			91.78	%

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following table shows the fair value classification of each investment type for K4D Trading as of June 30, 2012:

Assets
Level 1:
U.S. bond futures	$	2,730,242
Foreign bond futures		4,929,731
U.S. index futures		27,607,092
Foreign index futures		7,251,772
Commodity futures		14,780,860
Commodity futures swaps		8,512,029
Interest rate futures		6,112,854
Currency futures		878,845
Common stock		961,750
Total Level 1		73,765,175

Level 2:
Foreign currency forwards		6,433,543
Total Level 2		6,433,543
Total assets	$	80,198,718

Liabilities
Level 1:
U.S. bond futures	$	(261,097	)
Foreign bond futures		(9,632,544	)
Foreign index futures		(14,759,905	)
U.S. index futures		(89,100	)
Commodity futures		(31,309,680	)
Commodity futures swaps		(1,615,732	)
Interest rate futures		(1,787,999	)
Currency futures		(2,155,611	)
Total Level 1		(61,611,668	)

Level 2:
Foreign currency forwards		(5,682,767	)
Total Level 2		(5,682,767	)
Total liabilities	$	(67,294,435	)

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Fund at June 30, 2012 categorized by primary underlying risk and is representative of the derivative positions held by K4D Trading throughout the period. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on K4D Trading’s statement of financial condition.

	Graham K4D Trading Ltd.
	Long exposure				Short exposure
	Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities

Commodity price
Futures	$	148,925,588		2,784	$	(979,606,115	)		(15,955	)	$	14,780,860	$	(31,309,680	)
Swaps		148,755,895		3,367		(30,337,429	)		(933	)		8,512,029		(1,615,732	)
		297,681,483		6,151		(1,009,943,544	)		(16,888	)		23,292,889		(32,925,412	)

Equity price
Futures		917,302,974		13,847		(301,476,326	)		(5,561	)		34,858,864		(14,849,005	)
		917,302,974		13,847		(301,476,326	)		(5,561	)		34,858,864		(14,849,005	)

Foreign currency exchange rate
Futures		197,077,496		2,184		(87,143,200	)		(552	)		878,845		(2,155,611	)
Forwards		1,113,484,652		N/A		(1,112,733,876	)		N/A			6,433,543		(5,682,767	)
		1,310,562,148		2,184		(1,199,877,076	)		(552	)		7,312,388		(7,838,378	)

Interest rate
Futures		14,683,475,731		68,594		(554,703,608	)		(2,247	)		13,772,827		(11,681,640	)
		14,683,475,731		68,594		(554,703,608	)		(2,247	)		13,772,827		(11,681,640	)
Total	$	17,209,022,336		90,776	$	(3,066,000,554	)		(25,248	)	$	79,236,968	$	(67,294,435	)

Collateral balances supporting all derivative positions													$	190,756,222

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following table summarizes the results of operations of K4D Trading for the three and six month periods ended June 30, 2012.

	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012

Net investment loss	$	(81,652	)	$	(244,968	)

Net realized loss on investments		(63,086,913	)		(4,965,265	)
Net increase (decrease) in unrealized appreciation on investments		3,468,728			(15,786,370	)
Brokerage commissions and fees		(1,231,604	)		(2,955,687	)
Net loss on investments		(60,849,789	)		(23,707,322	)
Net loss	$	(60,931,441	)	$	(23,952,290	)

The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net realized gain and net increase in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three and six month periods ended June 30, 2012:

	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012

Commodity price
Futures	$	(41,925,318	)	$	(18,381,457	)
Swaps		(6,177,617	)		(4,821,816	)
		(48,102,935	)		(23,203,273	)

Equity price
Futures		(114,428,652	)		4,341,089
CME Membership		(64,350	)		(82,350	)
		(114,493,002	)		4,258,739

Foreign currency exchange rate
Futures		(5,370,383	)		(14,670,367	)
Forwards		(23,611,302	)		(48,907,752	)
		(28,981,685	)		(63,578,119	)

Interest rate
Futures		131,920,076			61,714,824
Treasury bills		39,361			56,194
		131,959,437			61,771,018
Total	$	(59,618,185	)	$	(20,751,635	)

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following table summarizes the financial position of K4D Trading as of December 31, 2011.

Assets:
Due from brokers	$	307,111,336
Derivative financial instruments, at fair value		41,337,536
CME Membership, at fair value		355,000
Subscriptions receivable		34,651
Total assets		348,838,523

Liabilities:
Derivative financial instruments, at fair value		15,255,976
Redemptions payable		34,651
Total liabilities		15,290,627
Net assets	$	333,547,896

Percentage of K4D Trading held by GAIT II		3.90	%

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following schedule displays the condensed schedule of investments for K4D Trading as of December 31, 2011.

Description	Fair Value			Percentage of Net Assets of K4D Trading
Graham K4D Trading Ltd.
Long contracts
Futures
U.S. bond	$	5,555,669			1.67	%
Foreign bond		15,262,571			4.58	%
U.S. index		2,281,203			0.68	%
Foreign index		1,698,637			0.51	%
Commodity		(255,745	)		(0.08	)%
Interest rate		903,752			0.27	%
Currency		839,900			0.25	%
Total futures		26,285,987			7.88	%

Forwards
Foreign currency		8,206,755			2.46	%
Total forwards		8,206,755			2.46	%

Short contracts
Futures
Foreign bond		(7,404	)		(0.00	)%
U.S. index		5,540			0.00	%
Foreign index		(1,563,165	)		(0.47	)%
Commodity		615,434			0.18	%
Interest rate		(1,288,252	)		(0.38	)%
Currency		337,837			0.10	%
Total futures		(1,900,010	)		(0.57	)%

Swaps
Commodity		(15,255,976	)		(4.57	)%
Total swaps		(15,255,976	)		(4.57	)%

Forwards
Foreign currency		8,744,804			2.62	%
Total forwards		8,744,804			2.62	%

Total	$	26,081,560			7.82	%

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

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

Assets
Level 1:
U.S. bond futures	$	5,807,164
Foreign bond futures		15,262,571
U.S. index futures		3,038,693
Foreign index futures		1,954,287
Commodity futures		15,602,465
Interest rate futures		1,693,157
Currency futures		1,406,611
Total Level 1		44,764,948

Level 2:
Foreign currency forwards		21,958,196
Total Level 2		21,958,196
Total assets	$	66,723,144

Liabilities
Level 1:
U.S. bond futures	$	(251,495	)
Foreign bond futures		(7,404	)
U.S. index futures		(751,950	)
Foreign index futures		(1,818,815	)
Commodity futures		(15,242,776	)
Commodity swaps		(15,255,976	)
Interest rate futures		(2,077,657	)
Currency futures		(228,874	)
Total Level 1		(35,634,947	)

Level 2:
Foreign currency forwards		(5,006,637	)
Total Level 2		(5,006,637	)
Total liabilities	$	(40,641,584	)

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Fund at December 31, 2011 categorized by primary underlying risk and is representative of the derivative positions held by K4D Trading throughout the year. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on K4D Trading’s statement of financial condition.

	Graham K4D Trading Ltd.
	Long exposure				Short exposure
	Notional amounts		Number of contracts		Notional amounts			Number of contracts			Derivative Assets		Derivative Liabilities

Commodity price
Futures	$	549,621,961		6,056	$	(748,131,689	)		(17,936	)	$	15,602,465	$	(15,242,776	)
Swaps		-		-		(232,232,146	)		(6,040	)		-		(15,255,976	)
		549,621,961		6,056		(980,363,835	)		(23,976	)		15,602,465		(30,498,752	)

Equity price
Futures		532,726,507		8,449		(283,517,405	)		(4,519	)		4,992,980		(2,570,765	)
		532,726,507		8,449		(283,517,405	)		(4,519	)		4,992,980		(2,570,765	)

Foreign currency exchange rate
Futures		263,535,156		2,886		(55,089,450	)		(348	)		1,406,611		(228,874	)
Forwards		1,473,161,901		N/A		(1,456,210,342	)		N/A			21,958,196		(5,006,637	)
		1,736,697,057		2,886		(1,511,299,792	)		(348	)		23,364,807		(5,235,511	)

Interest rate
Futures		11,861,168,194		60,131		(3,335,791,712	)		(13,264	)		22,762,892		(2,336,556	)
		11,861,168,194		60,131		(3,335,791,712	)		(13,264	)		22,762,892		(2,336,556	)
Total	$	14,680,213,719		77,522	$	(6,110,972,744	)		(42,107	)	$	66,723,144	$	(40,641,584	)

Collateral balances supporting all derivative positions													$	307,111,336

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following table summarizes the results of operations of K4D Trading for the three and six months ended June 30, 2011.

	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011

Net investment loss	$	(206,478	)	$	(290,344	)

Net realized loss on investments		(21,262,016	)		(68,425,848	)
Net decrease in unrealized appreciation on investments		(70,349,041	)		(65,095,579	)
Brokerage commissions and fees		(3,638,222	)		(6,930,150	)
Net loss on investments		(95,249,279	)		(140,451,577	)
Net loss	$	(95,455,757	)	$	(140,741,921	)

	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011

Commodity price
Futures	$	(87,798,352	)	$	(42,986,840	)
		(87,798,352	)		(42,986,840	)

Equity price
Futures		(28,028,918	)		(68,330,129	)
		(28,028,918	)		(68,330,129	)

Foreign currency exchange rate
Futures		(4,534,058	)		(9,996,003	)
Forwards		5,477,710			(18,578,273	)
		943,652			(28,574,276	)

Interest rate
Futures		23,272,561			6,369,818
		23,272,561			6,369,818
Total	$	(91,611,057	)	$	(133,521,427	)

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC

GAIT II invests a portion of its excess liquidity in GCA, an entity for which the Manager is also the sole investment advisor. GCA commenced operations on June 22, 2005 and was formed as a Delaware Limited Liability Company for the purpose of consolidating investment activity of multiple funds managed by the Manager. Its objective is to preserve capital while enhancing return on cash balances and providing daily liquidity. It invests in debt obligations guaranteed by the U.S. federal government, which range in maturity from one to twenty-four months. GCA also maintains cash and cash equivalents on deposit with major U.S. institutions. GCA values all fixed income securities at amortized cost which approximates fair value. GAIT II’s investment in GCA is valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon GAIT II’s proportionate share of GCA’s reported net asset value. GAIT II records its proportionate share of GCA’s investment income and expenses on a monthly basis. For the three months ended June 30, 2012, the total amount recognized by GAIT II with respect to its investment in GCA was $32,916. For the six months ended June 30, 2012, the total amount recognized by GAIT II with respect to its investment in GCA was $70,152. For the three months ended June 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $88,652. For the six months ended June 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $173,480. These amounts are included in interest income in the statements of operations and managing member allocation. At June 30, 2012 and December 31, 2011, GAIT II owned approximately 1.18% and 2.00%, respectively, of GCA. The following table summarizes the financial position of GCA as of June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
Assets:
Cash and cash equivalents	$	1,112,162,285	$	556,557,151
Investments in fixed income securities (cost $3,293,667,941 and $2,412,672,700, respectively)		3,293,667,941		2,412,672,700
Accrued interest income		6,324,878		4,670,722
Total assets		4,412,155,104		2,973,900,573

Liabilities:
Other liabilities		24,270		29,450
Total liabilities		24,270		29,450
Net assets	$	4,412,130,834	$	2,973,871,123

The following table summarizes the results of operations of GCA for the three and six month periods ended June 30, 2012 and 2011:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Investment income
Interest income	$	2,489,709	$	3,850,625	$	4,851,561	$	7,711,127
Total investment income		2,489,709		3,850,625		4,851,561		7,711,127

Expenses:
Bank fee expense		37,534		126,225		61,637		259,809
Total expenses		37,534		126,225		61,637		259,809
Net investment income		2,452,175		3,724,400		4,789,924		7,451,318
Net income	$	2,452,175	$	3,724,400	$	4,789,924	$	7,451,318

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

The following represents the condensed schedule of investments of GCA as of June 30, 2012:

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Investments in Fixed Income Securities (cost $3,293,667,941)
United States
FDIC Guaranteed Bonds (cost $429,904,994)
Citigroup Funding 1.88% - 2.25% due 07/12/12 – 12/10/12	$	259,364,000	$	260,505,140		5.90	%
Other FDIC guaranteed bonds				169,399,854		3.84	%
Total FDIC Guaranteed Bonds				429,904,994		9.74	%

Government Bonds (cost $2,863,762,947)
U.S. Treasury 0.63% - 2.25% due 08/31/12 – 06/15/14				2,863,762,947		64.91	%
Total Government Bonds				2,863,762,947		64.91	%

Total Investments in Fixed Income Securities			$	3,293,667,941		74.65	%

The following represents the condensed schedule of investments of GCA as of December 31, 2011:

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Investments in Fixed Income Securities (cost $2,412,672,700)
United States
FDIC Guaranteed Bonds (cost $623,918,691)
Citigroup Funding 1.88% – 2.25% due 04/30/12 –12/10/12	$	374,364,000	$	378,090,518		12.71	%
Other FDIC guaranteed bonds				245,828,173		8.27	%
Total FDIC Guaranteed Bonds				623,918,691		20.98	%

Government Bonds (cost $1,788,754,009)
U.S. Treasury 0.13% – 1.38% due 01/31/12 – 11/15/13		1,785,000,000		1,788,754,009		60.15	%
Total Government Bonds				1,788,754,009		60.15	%

Total Investments in Fixed Income Securities			$	2,412,672,700		81.13	%

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

	June 30, 2012		December 31, 2011
Assets
Level 2:
Fixed income securities
FDIC Guaranteed Bonds	$	429,904,994	$	623,918,691
Government Bonds		2,863,762,947		1,788,754,009
Total fixed income securities		3,293,667,941		2,412,672,700
Total Level 2		3,293,667,941		2,412,672,700
Total assets	$	3,293,667,941	$	2,412,672,700

5. Capital Accounts

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

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

Subscriptions

Units 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

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

6. Fees and Related Party Transactions

Advisory Fees

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

Sponsor Fees

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

Incentive Allocation

At the end of each calendar quarter, the Manager will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter. Additionally, any loss carryforward attributable to any class of GAIT II shall be proportionately reduced effective as of the date of any redemption of any Units of such class by multiplying the loss carryforward by the ratio that the amount of assets redeemed from such class bears to the net assets of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made to the Manager.

Brokerage Fees

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

Class	Annual Rate

Class 0	2%
Class 2	4%

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

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

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

7. Income Taxes

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

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

8. Financial Highlights

The following is the per unit operating performance calculation for the three month periods ended June 30, 2012 and 2011:

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, March 31, 2011	$	100.08		$	96.48
Net loss:
Net investment loss		(1.26	)		(1.74	)
Net loss on investments		(3.23	)		(3.05	)
Net loss		(4.49	)		(4.79	)
Net asset value per unit, June 30, 2011	$	95.59		$	91.69

Net asset value per unit, March 31, 2012	$	82.32		$	77.77
Net loss:
Net investment loss		(0.92	)		(1.26	)
Net gain on investments		(3.17	)		(2.97	)
Net loss		(4.09	)		(4.23	)
Net asset value per unit, June 30, 2012	$	78.23		$	73.54

Index

Graham Alternative Investment Trading II 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 month periods ended June 30, 2012 and 2011:

	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(4.97	)%		(4.49	)%		(5.44	)%		(4.96	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(4.97	)%		(4.49	)%		(5.44	)%		(4.96	)%

Net investment loss before Incentive Allocation		(1.12	)%		(1.26	)%		(1.62	)%		(1.80	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(1.12	)%		(1.26	)%		(1.62	)%		(1.80	)%

Total expenses before Incentive Allocation		1.26	%		1.46	%		1.76	%		1.99	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.26	%*		1.46	%*		1.76	%*		1.99	%*

*The percentages above represent total gross expenses before commission reimbursements, which represent 0.08% of average members’ capital for 2012 and 0.08% of average members’ capital for 2011.

The following is the per unit operating performance calculation for the six month periods ended June 30, 2012 and 2011:

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, December 31, 2010	$	102.92		$	99.72
Net loss:
Net investment loss		(2.31	)		(3.24	)
Net loss on investments		(5.02	)		(4.79	)
Net loss		(7.33	)		(8.03	)
Net asset value per unit, June 30, 2011	$	95.59		$	91.69

Net asset value per unit, December 31, 2011	$	81.35		$	77.24
Net loss:
Net investment loss		(1.84	)		(2.53	)
Net loss on investments		(1.28	)		(1.17	)
Net loss		(3.12	)		(3.70	)
Net asset value per unit, June 30, 2012	$	78.23		$	73.54

Index

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

9. Financial Highlights (continued)

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

	Class 0						Class 2
	2012			2011			2012			2011

Total return before Incentive Allocation		(3.83	)%		(7.11	)%		(4.79	)%		(8.04	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Total return after Incentive Allocation		(3.83	)%		(7.12	)%		(4.79	)%		(8.05	)%

Net investment loss before Incentive Allocation		(2.26	)%		(2.23	)%		(3.28	)%		(3.24	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Net investment loss after Incentive Allocation		(2.26	)%		(2.24	)%		(3.28	)%		(3.25	)%

Total expenses before Incentive Allocation		2.53	%		2.58	%		3.54	%		3.63	%
Incentive Allocation		0.00			0.01			0.00			0.01
Total expenses after Incentive Allocation		2.53	%*		2.59	%*		3.54	%*		3.64	%*

*The percentages above represent total gross expenses before commission reimbursements, which represent 0.19% of average members’ capital for 2012 and 0.32% of average members’ capital for 2011.

Total return is calculated for Class 0 and Class 2 units taken as a whole. Total return is calculated as the change in total members’ capital, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the period. An individual member’s return may vary from these returns based on the timing of capital transactions and the applicability of Advisory Fees, Brokerage Fees, Sponsor Fees, and the Incentive Allocation. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for the Class 0 and Class 2 units taken as a whole and include amounts from GAIT II and net investment loss allocated from the Master Fund and GCA. The computation of such ratios is based on the amount of net investment loss, expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of members’ capital of GAIT II, excluding that of the Managing Member, for the three and six month periods ended June 30, 2012 and 2011.

9. Subsequent Events

GAIT II had subscriptions of approximately $0.1 million and redemptions of approximately $1.6 million through August 14, 2012, the date through which subsequent events were evaluated by management. These amounts have not been included in the financial statements.

Index

Manager

Graham Capital Management, L.P.

40 Highland Avenue

Rowayton, CT 06853

U.S.A.

Administrator

SEI Global Services Inc.

1 Freedom Valley Drive

Oaks, PA 19456

U.S.A

Legal and Tax Advisors

Proskauer Rose LLP

1585 Broadway

New York, NY 10036

U.S.A.

Registered Address

Corporation Service Company

2711 Centerville Road

Suite 400

Wilmington, DE 19808

U.S.A.

Independent Registered Public Accounting Firm

Ernst & Young LLP

300 First Stamford Place

Stamford, CT 06902

U.S.A.

Index

Item 2.

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

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

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

For the three months ended June 30, 2012 the Fund’s net asset value decreased by $32,545,783 or -11.0%. This decrease was attributable to a $28,474,531 or -9.6% net decrease in the Blended Strategies Portfolio and a $4,071,252 or -1.4% net decrease in the Systematic Strategies Portfolio. The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $3,565,929 or 1.2% offset by redemptions totaling $17,217,312 or -5.8% and a net loss of $14,823,148 of -5.0%, for the period. The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptions of $350,000 or 0.1% offset by redemptions totaling $2,234,900 or -0.8% and a net loss of $2,186,352 or -0.7%, for the period.

For the six months ended June 30, 2012 the Fund’s net asset value decreased by $45,545,509 or -14.7%. This decrease was attributable to a $38,642,847 or -12.5% net decrease in the Blended Strategies Portfolio and a $6,902,662 or -2.2% net decrease in the Systematic Strategies Portfolio. The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $5,202,469 or 1.7% offset by redemptions totaling $35,111,821 or -11.4% and net a loss of $8,733,495 or -2.8%, for the period. The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptions of $528,000 or 0.2% offset by redemptions totaling $5,703,685 or -1.8% and a net loss of $1,726,977 or -0.6%, for the period.

For the three months ended June 30, 2011 the Fund’s net asset value increased by $3,529,807 or 0.9%. This increase was attributable to a $1,202,353 or 0.3% net increase in the Blended Strategies Portfolio and a $2,327,454 or 0.6% net increase in the Systematic Strategies Portfolio. The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $23,104,766 or 6.0% partially offset by redemptions totaling $9,763,180 or -2.5% and net a loss of $12,139,233 or -3.2%, for the period. The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $8,187,958 or 2.2% partially offset by redemptions totaling $2,925,189 or -0.8% and a net loss of $2,935,315 or -0.8%, for the period.

For the six months ended June 30, 2011 the Fund’s net asset value increased by $47,324,288 or 14.0%. This increase was attributable to a $37,203,225 or 11.0% net increase in the Blended Strategies Portfolio and a $10,121,063 or 3.0% net increase in the Systematic Strategies Portfolio. The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $68,359,467 or 20.2% partially offset by redemptions totaling $14,892,009 or -4.4% and net a loss of $16,264,233 or -4.8%, for the period. The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $19,174,623 or 5.7% partially offset by redemptions totaling $4,372,951 or -1.3% and a net loss of $4,680,609 or -1.4%, 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.

Index

Blended Strategies Portfolio

2012 Summary

Three Months Ended June 30, 2012

For the three months ended June 30, 2012, the Blended Strategies Portfolio experienced net trading losses of $11,703,543 attributable to the following sectors:

Agriculture / Softs	$	(772,934	)
Base metals		308,075
Energy		(12,021,753	)
Equities		(9,425,606	)
Foreign exchange		(4,036,714	)
Long term / intermediate rates		13,361,970
Precious metals		127,204
Short term rates		756,215
	$	(11,703,543	)

The Blended Strategies Portfolio posted a net loss for the second quarter of 2012. The majority of the portfolio’s performance was driven by trading in the energy complex as sharp moves in crude oil, gasoline, and natural gas led to losses for the quarter. Trading in global equities also resulted in losses due to falling equity prices in Asia and the U.S. Foreign exchange trading negatively impacted the Fund as the portfolio was challenged by short-term volatility in various currencies. Gains from trading in the European, U.S., and Australian long term and intermediate rates sector amidst falling yields helped to mitigate some of the overall losses for the quarter. The portfolio recorded modest profits from trading metals, including aluminum, zinc and silver, as prices declined during the quarter.

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

For the three months ended June 30, 2012, Brokerage Fees decreased by $522,660 or -27.2%, Advisory Fees decreased by $457,760 or -27.2% and Sponsor Fees decreased by $228,881 or -27.2%% in the Blended Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions offset by redemptions and a net loss for the period. During the same period interest income decreased by $210,543 or -63.1%. Interest was earned on free cash at an average annualized yield of 0.26% for the three months ended June 30, 2012 compared to 0.47% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended June 30, 2012 there was no Incentive Allocation compared to $23,359 for the corresponding period in 2011 due to the portfolio’s lack of year to date profitability when compared to the corresponding period in 2011.

Index

Six Months Ended June 30, 2012

For the six months ended June 30, 2012, the Blended Strategies Portfolio experienced net trading losses of $2,230,634 attributable to the following sectors:

Agriculture / Softs	$	(1,145,642	)
Base metals		(1,823,132	)
Energy		1,010,564
Equities		32,758
Foreign exchange		(4,844,947	)
Long term / intermediate rates		4,469,540
Precious metals		(303,871	)
Short term rates		374,096
	$	(2,230,634	)

The Blended Strategies Portfolio posted a net loss for the first half of 2012. The majority of the portfolio’s losses resulted from foreign exchange due primarily to short-term volatility in European currencies. Losses also resulted from trading base metals amidst declining prices in aluminum and rising prices in copper and zinc. The portfolio also recorded losses in agricultural commodities as prices climbed amidst drought concerns in the U.S. Losses resulted from trading Asian equity indices amidst the year-to-date rally in risk assets; however these losses were offset by gains from euro and U.S. equity indices. The portfolio recorded solid gains in the global fixed income markets, including Europe and Australia, as rates fell during the first half of the year. Additional gains resulted from trading natural gas, which also helped to mitigate some of the overall loss for the first half of 2012.

For the six months ended June 30, 2012, Brokerage Fees decreased by $840,180 or -22.4%, Advisory Fees decreased by $730,979 or -22.3% and Sponsor Fees decreased by $365,490 or -22.3% in the Blended Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions offset by redemptions and a net loss for the period. During the same period interest income decreased by $404,803 or -60.9%. Interest was earned on free cash at an average annualized yield of 0.27% for the six months ended June 30, 2012 compared to 0.48% for the same period in 2011.

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

Index

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

Agriculture / Softs	37.5	%
Base metals	5.3	%
Energy	(59.7	%)
Equities	90.2	%
Foreign exchange	3.0	%
Long term / intermediate rates	(9.4	%)
Precious metals	6.2	%
Short term rates	26.9	%
	100.0	%

2011 Summary

Three Months Ended June 30, 2011

For the three months ended June 30, 2011, the portfolio experienced net trading losses of $7,964,381 attributable to the following sectors:

Agriculture	$	(919,456	)
Energy		(6,012,015	)
Foreign exchange		(1,988,409	)
Interest rates		3,933,290
Metals		1,111,580
Softs		(1,449,973	)
Stock index		(2,639,398	)
	$	(7,964,381	)

The portfolio recorded a net loss for the period with the energy sector contributing most significantly. Gains in the energy sector during the early portion of the quarter due to an upward movement in prices, were offset when prices reversed and continued sharply downward in reaction to the announced release of strategic oil reserves in June. Losses were also recognized in the equity sector as gains early in the quarter on encouraging earnings data and continued low interest rates fueled hope of a global economic recovery, were reversed when prices declined in a sharp reduction of risk in various markets. The foreign exchange sector posted losses for the quarter. Early gains as the U.S. dollar fell to multi-year lows against most major global currencies, were offset as risk aversion led to a safe haven demand resulting in a stronger U.S. dollar, generating losses for the portfolio. The portfolio also incurred losses in the agriculture and softs sectors. The portfolio generated gains in the interest rates sector led by gains in the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets. Gains were recognized in metals as prices moved sharply up in the beginning of the quarter which outpaced losses later in the quarter as prices reversed.

Index

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

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended June 30, 2011, the Incentive Allocation increased by $23,901 when compared to the corresponding period of 2010 related to shares redeemed when the portfolio was in a period of New High Net Trading Profits.

Six Months Ended June 30, 2011

For the six months ended June 30, 2011, the portfolio experienced net trading losses of $8,182,436 attributable to the following sectors:

Agriculture	$	112,080
Energy		(2,354,187	)
Foreign exchange		(3,847,059	)
Interest rates		2,253,817
Metals		1,883,879
Softs		(317,616	)
Stock index		(5,913,350	)
	$	(8,182,436	)

The portfolio recorded a net loss for the period in the equity sector. Gains in the early portion of the first quarter were offset in March when the earthquake and tsunami in Japan generated risk aversion and market reversals, resulting in significant losses with the largest losses stemming from the European stock indices. Losses were recognized in the second quarter as gains early in the quarter on encouraging earnings data and continued low interest rates fueled hope of a global economic recovery were reversed when prices declined in a sharp reduction of risk in various markets. The foreign exchange sector posted losses in Asian currencies in March and later in the period as risk aversion led to a safe haven demand resulting in a stronger U.S. dollar offsetting previous gains from the U.S. dollar’s decline to multi-year lows against most major global currencies. The portfolio recorded a net loss for the period in the energy sector as gains in the first quarter from increasing oil prices amid rising political tensions in the Middle East and Libya were overshadowed by losses in the second quarter as prices reversed and continued sharply downward in reaction to the announced release of strategic oil reserves in June. The portfolio generated gains in the interest rate sector led by the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets. Gains were recognized in the metals sector as prices moved sharply up in the beginning of the second quarter which outpaced losses later in the quarter as prices reversed. The portfolio also recognized small gains in the agriculture sector, partially offset by losses in soft commodities.

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

Index

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

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

Agriculture	8.0	%
Energy	2.9	%
Foreign exchange	(5.7	%)
Interest rates	75.9	%
Metals	41.0	%
Softs	(1.3	%)
Stock index	(20.8	)%
	100.0	%

Systematic Strategies Portfolio

2012 Summary

Three Months Ended June 30, 2012

For the three months ended June 30, 2012, the Systematic Strategies Portfolio experienced net trading losses of $1,590,526 attributable to the following sectors:

Agriculture / Softs	$	17,213
Base metals		363,669
Energy		(2,000,683	)
Equities		(3,094,888	)
Foreign exchange		(768,514	)
Long term / intermediate rates		3,513,774
Precious metals		329,885
Short term rates		49,018
	$	(1,590,526	)

The Systematic Strategies Portfolio posted a net loss for the second quarter of 2012. The majority of the portfolio’s performance was driven by trading in global equity indices amidst declining prices in Asia, U.S., and Europe. Trading in the energy complex also led to losses as sharp moves in crude oil, gasoline, and natural gas prices negatively impacted the portfolio. Foreign exchange trading resulted in losses as the portfolio was impacted by short-term volatility in various currencies. Gains from trading in the European, U.S., and Australian long term and intermediate rates sector amidst falling yields mitigated some of the overall losses for the quarter. The portfolio recorded modest profits from trading metals, including aluminum, silver, gold, and zinc as prices declined during the quarter.

Index

For the three months ended June 30, 2012, Brokerage Fees decreased by $126,031 or -29.7%, Advisory Fees decreased by $94,842 or -31.1% and Sponsor Fees decreased by $47,420 or -31.1% in the Systematic Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions offset by redemptions and a net loss for the period. During the same period interest income decreased by $40,275 or -64.8%. Interest was earned on free cash at an average annualized yield of 0.26% for the three months ended June 30, 2012 compared to 0.47% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended June 30, 2012 there was no Incentive Allocation compared to $8,814 for the corresponding period in 2011 due to the portfolio’s lack of year to date profitability when compared to the corresponding period in 2011.

Six Months Ended June 30, 2012

For the six months ended June 30, 2012, the Systematic Strategies Portfolio experienced net trading losses of $484,086 attributable to the following sectors:

Agriculture / Softs	$	(308,328	)
Base metals		(325,080	)
Energy		19,098
Equities		131,841
Foreign exchange		(1,537,668	)
Long term / intermediate rates		1,544,417
Precious metals		29,446
Short term rates		(37,812	)
	$	(484,086	)

The Systematic Portfolio posted a net loss for the first half of 2012. The majority of the losses resulted from short-term volatility in foreign exchange, particularly in European and commodity-driven countries. The portfolio also incurred losses from trading in the agriculture and base metals sectors. Higher wheat prices amidst a severe drought in the U.S., and mixed prices in base metals led to losses for the portfolio. Losses resulted from trading Asian equity indices amidst the year-to-date rally in risk assets; however these losses were offset by gains from euro and U.S. equity indices. The portfolio recorded gains in global long term and intermediate rates, including Asia, Australia and Europe, which helped to offset a portion of the overall year-to-date loss.

For the six months ended June 30, 2012, Brokerage Fees decreased by $193,277 or 23.7%, Advisory Fees decreased by $146,932 or -25.1% and Sponsor Fees decreased by $73,465 or -25.1% in the Systematic Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from subscriptions offset by redemptions and a net loss for the period. During the same period interest income decreased by $72,889 or -61.1%. Interest was earned on free cash at an average annualized yield of 0.27% for the six months ended June 30, 2012 compared to 0.48% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the six months ended June 30, 2012 there was no Incentive Allocation compared to $11,821 for the corresponding period in 2011 due to the portfolio’s lack of year to date profitability when compared to the corresponding period in 2011.

100

Index

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

Agriculture / Softs	76.0	%
Base metals	16.7	%
Energy	(185.4	%)
Equities	167.6	%
Foreign exchange	(4.4	%)
Long Term / intermediate rates	(18.7	%)
Precious metals	12.0	%
Short term rates	36.2	%
	100.0	%

2011 Summary

Three Months Ended June 30, 2011

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

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

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

101

Index

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

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the three months ended June 30, 2011 Incentive Allocation increased by 8,814, compared to zero for the corresponding period of 2010 related to shares redeemed when the portfolio was in a period of New High Net Trading Profits.

Six Months Ended June 30, 2011

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

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

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

102

Index

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

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

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

Agriculture	3.0	%
Energy	5.5	%
Foreign exchange	(1.6	%)
Interest rates	117.7	%
Metals	28.5	%
Softs	(4.1	%)
Stock index	(49.0	%)
	100.0	%

Variables Affecting Performance

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

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

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

103

Index

(ii) Liquidity

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

	Blended Strategies Portfolio	Systematic Strategies Portfolio
June 30, 2012	17.48%	15.51%
December 31, 2011	21.61%	18.83%
June 30, 2011	16.04%	11.18%

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 June 30, 2012, the Fund experienced no meaningful periods of illiquidity in any of the markets traded by the Manager on behalf of the Fund.

(iii) Capital Resources

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

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

(iv) Critical Accounting Policies

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

104

Index

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

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

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

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

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

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

(v) Off-Balance Sheet Arrangements

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

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Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Not Required.

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Item 4.

Controls and Procedures

The Advisor’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of June 30, 2012. Based on that evaluation, the Advisor’s Chief Executive Officer and Chief Financial Officer concluded that the Fund’s disclosure controls and procedures were effective as of June 30, 2012.

There were no changes to the Fund’s internal controls over financial reporting during the second quarter of 2012 that have materially affected, or are reasonably likely to materially affect, the Fund’s internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

None

Item 1A.

Risk Factors

Not Required

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

For the three months ended June 30, 2012, the Fund issued 30,330.575 Units in exchange for $3,565,929 with respect to the Blended Strategies Portfolio and 4,226.993 Units in exchange for $350,000 with respect to the Systematic Strategies Portfolio, in each case in a transaction that was not registered under the Securities Act of 1933, as amended (the “Act”). The Units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Act and Section 506 of Regulation D promulgated thereunder.

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

	Blended Strategies Portfolio		Systematic Strategies Portfolio
	Total		Total
	Number of		Number of
	Units Purchased		Units Purchased
Period (as of)
April 1, 2012		11,347.775		607.393
May 1, 2012		11,562.800		3,619.600
June 1, 2012		7,420.000		0.000

Item 3.

Defaults Upon Senior Securities –None

Item4.

[Removed and Reserved]

Item 5.

Other Information –None

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Item 6.

Exhibits

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

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

The exhibits required to be filed by Item 601 of regulation S-K are incorporated herein by reference

31.1	—	Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Executive Officer)

31.2	—	Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer)

32.1	—	Section 1350 Certification (Certification of Chief Executive Officer and Chief Financial Officer)

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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: August 14, 2012	GRAHAM ALTERNATIVE INVESTMENT FUND I LLC

	By:	GRAHAM CAPITAL MANAGEMENT, L.P
		its Manager

		By: /s/ Paul Sedlack
		Paul Sedlack, Chief Executive Officer

		By: /s/ Jeff Baisley
		Jeff Baisley, Chief Financial Officer

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Graham Alternative Investment Fund I 10-Q2012 Q2 Quarterly report

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