UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 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 x  No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer ­o Smaller reporting company x

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

Yes o  No x

As of October 1, 2012, 396,015.059 Units of the Systematic Strategies Portfolio were outstanding.

As of October 1, 2012, 1,798,048.561 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 September 30, 2012 (unaudited) and December 31, 2011 (audited)	1
		Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited)	2
		Statements of Changes in Members’ Capital for the nine months ended September 30, 2012 and 2011 (unaudited)	3
		Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited)	5
		Notes to Unaudited Financial Statements	6
		Graham Alternative Investment Trading LLC
		Statements of Financial Condition at September 30, 2012 (unaudited) and December 31, 2011 (audited)	16
		Condensed Schedules of Investments at September 30, 2012 (unaudited) and December 31, 2011 (audited)	17
		Statements of Operations and Managing Member Allocation for the three and nine months ended September 30, 2012 and 2011 (unaudited)	18
		Statements of Changes in Members’ Capital for the nine months ended September 30, 2012 and 2011 (unaudited)	19
		Statements of Cash Flows for the nine monthsended September 30, 2012 and 2011 (unaudited)	20
		Notes to Unaudited Financial Statements	21
		Graham Alternative Investment Trading II LLC
		Statements of Financial Condition at September 30, 2012 (unaudited) and December 31, 2011 (audited)	64

		Statements of Operations and Managing Member Allocation for the three and nine months ended September 30, 2012 and 2011 (unaudited)	65
		Statements of Changes in Members’ Capital for the nine monthsended  September 30, 2012 and 2011 (unaudited)	66
		Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited)	67
		Notes to Unaudited Financial Statements	68
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	91
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	103
	Item 4.	Controls and Procedures	104
PART II - Other Information			105
Exhibits

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

PART I

Item 1. Financial Statements

Graham Alternative Investment Fund I LLC

Statements of Financial Condition

	September 30, 2012 (Unaudited)		December 31, 2011 (Audited)
Assets
Investment in Graham Alternative Investment Trading LLC, at fair value	$	201,253,658	$	263,929,118
Investment in Graham Alternative Investment Trading II LLC, at fair value		29,805,907		45,955,612
Redemption receivable from Graham Alternative Investment Trading LLC		13,824,992		8,563,194
Redemption receivable from Graham Alternative Investment Trading II LLC		6,875,155		2,164,043
Total assets	$	251,759,712	$	320,611,967
Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	20,700,147	$	10,727,237
Total liabilities		20,700,147		10,727,237
Members’ capital:
Blended Strategies Portfolio:
Class 0 Units (1,460,395.038 and 1,814,039.586 units issued and outstanding at $116.90 and $123.17, respectively)		170,725,531		223,427,719
Class 2 Units (330,568.757 and 410,047.431 units issued and outstanding at $92.35 and $98.77, respectively)		30,528,127		40,501,399
Total Blended Strategies Portfolio		201,253,658		263,929,118
Systematic Strategies Portfolio:
Class 0 Units (187,087.600 and 322,756.427 units issued and outstanding at $77.99 and $81.35, respectively)		14,590,957		26,254,798
Class 2 Units (208,584.729 and 255,073.907 units issued and outstanding at $72.94 and $77.24, respectively)		15,214,950		19,700,814
Total Systematic Strategies Portfolio		29,805,907		45,955,612
Total members’ capital		231,059,565		309,884,730
Total liabilities and members’ capital	$	251,759,712	$	320,611,967

See accompanying notes.

1

Graham Alternative Investment Fund I LLC

Statements of Operations

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Net gain (loss) allocated from investments in other funds:
Net realized gain (loss) on investments	$	2,303,408		$	(506,903	)	$	7,748,714		$	(2,945,410	)
Net decrease in unrealized appreciation on investments		(2,263,461	)		(1,522,238	)		(10,423,487	)		(10,345,755	)
Net gain (loss) allocated from investments in other funds		39,947			(2,029,141	)		(2,674,773	)		(13,291,165	)
Net investment loss allocated from investments in other funds:
Investment income:
Interest income		136,648			339,914			443,289			1,124,247
Expenses:
Brokerage fees		1,587,246			2,369,990			5,127,313			6,943,514
Advisory fees		1,338,009			2,008,742			4,321,594			5,870,238
Sponsor fees		669,003			1,004,372			2,160,796			2,935,120
Incentive allocation		-			-			-			42,993
Interest and other		29,289			48,654			66,237			107,044
Total expenses		3,623,547			5,431,758			11,675,940			15,898,909
Net investment loss allocated from investments in other funds		(3,486,899	)		(5,091,844	)		(11,232,651	)		(14,774,662	)
Net loss	$	(3,446,952	)	$	(7,120,985	)	$	(13,907,424	)	$	(28,065,827	)

See accompanying notes.

2

Graham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital

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

	Blended Strategies Portfolio
	Class 0 Units						Class 2 Units						Total Blended
	Units			Capital			Units			Capital			Strategies Portfolio
Members’ capital, December 31, 2010		1,752,436.237		$	243,511,752			409,129.824		$	46,511,568		$	290,023,320
Subscriptions		520,007.272			72,113,602			80,016.088			8,938,865			81,052,467
Redemptions		(400,792.103	)		(53,393,928	)		(55,715.918	)		(6,177,414	)		(59,571,342	)
Net loss		–			(15,959,262	)		–			(3,305,044	)		(19,264,306	)
Members’ capital, September 30, 2011		1,871,651.406		$	246,272,164			433,429.994		$	45,967,975		$	292,240,139

	Blended Strategies Portfolio
	Class 0 Units						Class 2 Units						Total Blended
													Strategies
	Units			Capital			Units			Capital			Portfolio
Members’ capital, December 31, 2011		1,814,039.586		$	223,427,719			410,047.431		$	40,501,399		$	263,929,118
Subscriptions		48,855.838			6,045,929			28,300.003			2,758,540			8,804,469
Redemptions		(402,500.386	)		(48,798,913	)		(107,778.677	)		(10,558,791	)		(59,357,704	)
Net loss		–			(9,949,204	)		–			(2,173,021	)		(12,122,225	)
Members’ capital, September 30, 2012		1,460,395.038		$	170,725,531			330,568.757		$	30,528,127		$	201,253,658

See accompanying notes.

3

Graham Alternative Investment Fund I LLC

Statements of Changes in Members’ Capital (continued)

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

	Systematic Strategies Portfolio
	Class 0 Units						Class 2 Units						Total Systematic
													Strategies			Total Members’
	Units			Capital			Units			Capital			Portfolio			Capital
Members’ capital, December 31, 2010		274,960.438		$	28,297,652			202,003.861		$	20,144,497		$	48,442,149		$	338,465,469
Subscriptions		139,972.911			14,166,260			90,038.065			8,714,658			22,880,918			103,933,385
Redemptions		(74,108.877	)		(6,909,240	)		(25,554.483	)		(2,418,836	)		(9,328,076	)		(68,899,418	)
Net loss		–			(5,091,523	)		–			(3,709,998	)		(8,801,521	)		(28,065,827	)
Members’ capital, September 30, 2011		340,824.472		$	30,463,149			266,487.443		$	22,730,321		$	53,193,470		$	345,433,609

	Systematic Strategies Portfolio
	Class 0 Units						Class 2 Units						Total Systematic
													Strategies			Total Members’
	Units			Capital			Units			Capital			Portfolio			Capital
Members’ capital, December 31, 2011		322,756.427		$	26,254,798			255,073.907		$	19,700,814		$	45,955,612		$	309,884,730
Subscriptions		6,404.671			528,000			1,066.718			80,000			608,000			9,412,469
Redemptions		(142,073.498	)		(11,308,825	)		(47,555.896	)		(3,663,681	)		(14,972,506	)		(74,330,210	)
Net loss		–			(883,016	)		–			(902,183	)		(1,785,199	)		(13,907,424	)
Members’ capital, September 30, 2012		187,087.600		$	14,590,957			208,584.729		$	15,214,950		$	29,805,907		$	231,059,565

See accompanying notes.

4

Graham Alternative Investment Fund I LLC

Statements of Cash Flows

	Nine Months Ended September 30,
	2012 (Unaudited)			2011 (Unaudited)
Cash flows provided by (used in) operating activities
Net loss	$	(13,907,424	)	$	(28,065,827	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss allocated from investment in Graham Alternative Investment Trading LLC		12,122,225			19,264,306
Net loss allocated from investment in Graham Alternative Investment Trading II LLC		1,785,199			8,801,521
Proceeds from sale of investments in Graham Alternative Investment Trading LLC		54,095,906			21,324,106
Proceeds from sale of investments in Graham Alternative Investment Trading II LLC		10,261,394			5,330,402
Investments in Graham Alternative Investment Trading LLC		(8,804,469	)		(81,052,467	)
Investments in Graham Alternative Investment Trading II LLC		(608,000	)		(22,880,918	)
Net cash provided by (used in) operating activities		54,944,831			(77,278,877	)
Cash flows (used in) provided by financing activities
Subscriptions		9,412,469			103,933,385
Redemptions		(64,357,300	)		(26,654,508	)
Net cash (used in) provided by financing activities		(54,944,831	)		77,278,877
Net change in cash and cash equivalents		–			–
Cash and cash equivalents, beginning of period		–			–
Cash and cash equivalents, end of period	$	–		$	–

See accompanying notes.

5

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements

September 30, 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 which was formed on May 16, 2006 and commenced operations on August 1, 2006.  The Fund invests all of its Systematic Strategies Portfolio assets dedicated to trading in Graham Alternative Investment Trading II LLC (“GAIT II”), a Delaware LLC which was formed on July 16, 2008 and commenced operations on January 4, 2009. GAIT and GAIT II (collectively the “GAIT 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.

6

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

1. Organization and Business (continued)

Duties of the Manager

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

2. Summary of Significant Accounting Policies

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

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

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

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

At September 30, 2012 and December 31, 2011, the Fund owned 62.80% and 63.27%, respectively of GAIT, and 62.74% 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.

7

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Fair Value (continued)

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

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

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

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

The 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 nine months ended September 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 contributionto the Fund by such Member with respect to the Class to which such Capital Account relates. Each Member’s Capital Account is increased by any additional subscription, and decreased by any redemption by such Member of Units of such Class to which the Capital Account relates. All income and expenses of the Fund are allocated among the Members’ Capital Accounts in proportion to the balance that each Capital Account bears to the balance of all Capital Accounts as of the beginning of such fiscal period.

8

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

3. Capital Accounts (continued)

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.

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 $7,041 and $3,919 were paid to the Manager for the nine months ended September 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 ofwhich any subscription or redemption is effected with respect to Units of such Class during the month.

Sponsor Fees

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

9

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

4. Fees 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.

10

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

5. Income Taxes (continued)

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

6. Financial Highlights

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

	Blended Strategies Portfolio						Systematic Strategies Portfolio
	Class 0			Class 2			Class 0			Class 2
Per unit operating performance
Net asset value per unit, June 30, 2011	$	132.67		$	107.48		$	95.59		$	91.69
Net loss:
Net investment loss		(2.50	)		(2.54	)		(1.12	)		(1.49	)
Net gain (loss) on investments		1.41			1.12			(5.09	)		(4.90	)
Net loss		(1.09	)		(1.42	)		(6.21	)		(6.39	)
Net asset value per unit, September 30, 2011	$	131.58		$	106.06		$	89.38		$	85.30
Net asset value per unit, June 30, 2012	$	118.77		$	94.30		$	78.23		$	73.54
Net loss:
Net investment loss		(1.27	)		(1.49	)		(1.04	)		(1.31	)
Net gain (loss) on investments		(0.60	)		(0.46	)		0.80			0.71
Net loss		(1.87	)		(1.95	)		(0.24	)		(0.60	)
Net asset value per unit, September 30, 2012	$	116.90		$	92.35		$	77.99		$	72.94

11

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Financial Highlights (continued)

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

	Blended Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011
Total return before Incentive Allocation		(1.57	)%		(0.82	)%		(2.07	)%		(1.32	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(1.57	)%		(0.82	)%		(2.07	)%		(1.32	)%
Net investment loss before Incentive Allocation		(1.06	)%		(1.88	)%		(1.57	)%		(2.36	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(1.06	)%		(1.88	)%		(1.57	)%		(2.36	)%
Total expenses before Incentive Allocation		1.31	%		1.32	%		1.81	%		1.80	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.31	%*		1.32	%*		1.81	%*		1.80	%*

*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.20% of average members’ capital for 2012 and 0.20% of average members’ capital for 2011.

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

	Systematic Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011
Total return before Incentive Allocation		(0.31	)%		(6.50	)%		(0.82	)%		(6.97	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(0.31	)%		(6.50	)%		(0.82	)%		(6.97	)%
Net investment loss before Incentive Allocation		(1.29	)%		(1.17	)%		(1.74	)%		(1.63	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(1.29	)%		(1.17	)%		(1.74	)%		(1.63	)%
Total expenses before Incentive Allocation		1.37	%		1.35	%		1.81	%		1.82	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.37	%*		1.35	%*		1.81	%*		1.82	%*

*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.05% of average members’ capital for 2012 and 0.12% of average members’ capital for 2011.

12

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Financial Highlights (continued)

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

	Blended Strategies Portfolio						Systematic Strategies Portfolio
	Class 0			Class 2			Class 0			Class 2
Per unit operating performance
Net asset value per unit, December 31, 2010	$	138.96		$	113.68		$	102.92		$	99.72
Net loss:
Net investment loss		(5.32	)		(5.98	)		(3.43	)		(4.73	)
Net loss on investments		(2.06	)		(1.64	)		(10.11	)		(9.69	)
Net loss		(7.38	)		(7.62	)		(13.54	)		(14.42	)
Net asset value per unit, September 30, 2011	$	131.58		$	106.06		$	89.38		$	85.30
Net asset value per unit, December 31, 2011	$	123.17		$	98.77		$	81.35		$	77.24
Net loss:
Net investment loss		(3.68	)		(4.43	)		(2.89	)		(3.83	)
Net loss on investments		(2.59	)		(1.99	)		(0.47	)		(0.47	)
Net loss		(6.27	)		(6.42	)		(3.36	)		(4.30	)
Net asset value per unit, September 30, 2012	$	116.90		$	92.35		$	77.99		$	72.94

13

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Financial Highlights (continued)

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

	Blended Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011
Total return before Incentive Allocation		(5.09	)%		(5.30	)%		(6.50	)%		(6.69	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Total return after Incentive Allocation		(5.09	)%		(5.31	)%		(6.50	)%		(6.70	)%
Net investment loss before Incentive Allocation		(2.99	)%		(3.82	)%		(4.52	)%		(5.25	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Net investment loss after Incentive Allocation		(2.99	)%		(3.83	)%		(4.52	)%		(5.26	)%
Total expenses before Incentive Allocation		3.83	%		3.87	%		5.36	%		5.37	%
Incentive Allocation		0.00			0.01			0.00			0.01
Total expenses after Incentive Allocation		3.83	%*		3.88	%*		5.36	%*		5.38	%*

*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.70% of average members’ capital for 2012 and 0.79% of average members’ capital for 2011.

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

	Systematic Strategies Portfolio
	Class 0						Class 2
	2012			2011			2012			2011
Total return before Incentive Allocation		(4.13	)%		(13.15	)%		(5.57	)%		(14.45	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Total return after Incentive Allocation		(4.13	)%		(13.16	)%		(5.57	)%		(14.46	)%
Net investment loss before Incentive Allocation		(3.53	)%		(3.32	)%		(4.98	)%		(4.73	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Net investment loss after Incentive Allocation		(3.53	)%		(3.33	)%		(4.98	)%		(4.74	)%
Total expenses before Incentive Allocation		3.89	%		3.93	%		5.33	%		5.45	%
Incentive Allocation		0.00			0.01			0.00			0.01
Total expenses after Incentive Allocation		3.89	%*		3.94	%*		5.33	%*		5.46	%*

*- The percentages above represent total gross expenses before commission reimbursements (see Note 4), which represent 0.25% of average members’ capital for 2012 and 0.48% of average members’ capital for 2011.

14

Graham Alternative Investment Fund I LLC

Notes to Unaudited Financial Statements (continued)

6. Financial Highlights (continued)

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 nine month periods ended September 30, 2012 and 2011.

7. Subsequent Events

The Fund had subscriptions of approximately $1.4 million and redemptions of approximately $8.1 million through November 14, 2012, the date through which subsequent events were evaluated by management.  These amounts have not been included in the financial statements.

15

Graham Alternative Investment Trading LLC

Statements of Financial Condition

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

See accompanying notes.

16

Graham Alternative Investment Trading LLC

Condensed Schedules of Investments

	September 30, 2012 (Unaudited)					December 31, 2011 (Audited)
Description	Fair Value		Percentage of Members’ Capital			Fair Value		Percentage of Members’ Capital
Investments in Master Funds, at fair value
Graham Commodity Strategies LLC	$	17,490,643		5.46	%	$	19,823,897		4.75	%
Graham Energy Focus LLC		-		0.00	%		4,391,910		1.05	%
Graham Fed Policy Ltd.		-		0.00	%		5,956,632		1.43	%
Graham Global Monetary Policy LLC		9,631,317		3.01	%		10,693,175		2.56	%
Graham K4D Trading Ltd.		34,171,169		10.66	%		45,101,309		10.82	%
Graham Macro Directional LLC		-		0.00	%		1,937,065		0.46	%
Total investments in Master Funds	$	61,293,129		19.13	%	$	87,903,988		21.07	%

See accompanying notes.

17

Graham Alternative Investment Trading LLC

Statements of Operations and Managing Member Allocation

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

See accompanying notes.

18

Graham Alternative Investment Trading LLC

Statements of Changes in Members’ Capital

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

	Class 0						Class 2						Class M					Total
	Units			Capital			Units			Capital			Units		Capital			Capital
Members’ capital, December 31, 2010		2,685,172.128		$	373,121,130			639,582.657		$	72,710,381			4,671.470	$	882,328		$	446,713,839
Subscriptions		763,027.691			105,586,997			159,240.404			17,823,871			–		–			123,410,868
Redemptions		(463,051.112	)		(61,843,890	)		(79,285.065	)		(8,791,036	)		–		(51,877	)		(70,686,803	)
Incentive allocation		–			(44,314	)		–			(7,563	)		–		51,877			–
Net loss		–			(24,033,627	)		–			(5,424,119	)		–		(14,966	)		(29,472,712	)
Members’ capital, September 30, 2011		2,985,148.707		$	392,786,296			719,537.996		$	76,311,534			4,671.470	$	867,362		$	469,965,192

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

See accompanying notes.

19

Graham Alternative Investment Trading LLC

Statements of Cash Flows

	Nine Months Ended September 30,
	2012 (Unaudited)			2011 (Unaudited)
Cash flows provided by (used in) operating activities
Net loss	$	(19,304,618	)	$	(29,472,712	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss allocated from investments in Master Funds		7,026,793			14,600,791
Net income allocated from investment in Graham Cash Assets LLC		(598,677	)		(1,453,597	)
Proceeds from sale of investments in Master Funds		476,843,495			613,324,164
Proceeds from sale of investments in Graham Cash Assets LLC		442,227,109			477,724,559
Investments in Master Funds		(457,246,660	)		(666,147,665	)
Investments in Graham Cash Assets LLC		(382,110,304	)		(497,643,390	)
Changes in assets and liabilities:
Accrued commission reimbursements		108,398			(217,827	)
Accrued brokerage fees		(199,119	)		75,611
Accrued advisory fees		(167,000	)		73,559
Accrued sponsor fees		(83,500	)		36,779
Net cash provided by (used in) operating activities		66,495,917			(89,099,728	)
Cash flows (used in) provided by financing activities
Subscriptions		22,590,077			123,410,868
Redemptions		(89,085,994	)		(34,311,140	)
Net cash (used in) provided by financing activities		(66,495,917	)		89,099,728
Net change in cash and cash equivalents		-			-
Cash and cash equivalents, beginning of period		-			-
Cash and cash equivalents, end of period	$	-			-

Supplemental non cash operating activities

Investments and proceeds related to investments in Master Funds consolidated into Graham Commodity Strategies LLC not included above:  $1,362,929 (See Note 2)

See accompanying notes.

20

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements

September 30, 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.

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

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

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

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

Duties of the Managing Member

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

2. Summary of Significant Accounting Policies

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

21

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Investments in Master Funds

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

During the period ended September 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.

22

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Fair Value (continued)

GAIT reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.  In accordance with this hierarchy, GAIT’s investments in Master Funds and Graham Cash Assets LLC (“GCA”) 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 nine months ended September 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.

23

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Futures Contracts (continued)

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

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.

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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 offsetting or subject to an agreement similar to a master netting arrangement in the statement of financial position, to enable users of its financial statements to understand the effect of those arrangements on its financial position. The disclosure is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Manager of the Fund is evaluating the impact that the adoption of ASU No. 2011-11 will have on the Fund’s financial statements.

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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 September 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.

September 30, 2012
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Loss  (three months then ended)			Net Loss  (nine months then ended)
Graham K4D Trading Ltd. –  (a)		10.66	%	$	34,171,169	$	2,483,427		$	(603,781	)
Graham Commodity Strategies LLC – (c)		5.46	%		17,490,643		(5,745,948	)		(12,934,428	)
Other Master Funds (6) –  (b) (c) (d)		3.01	%		9,631,317		1,579,375			6,511,416
		19.13	%	$	61,293,129	$	(1,683,146	)	$	(7,026,793	)
December 31, 2011
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Gain (three months ended September 30, 2011)			Net Loss (nine months ended September 30, 2011)
Graham K4D Trading Ltd. –  (a)		10.82	%	$	45,101,309	$	(16,837,697	)	$	(33,582,747	)
Other Master Funds (8) –  (b) (c) (d) (e)		10.25	%		42,802,679		17,311,106			18,981,956
		21.07	%	$	87,903,988	$	473,409		$	(14,600,791	)

(a) – Systematic Macro (b) – Fixed Income (c) – Global Macro (d) – Energy Related (e) – Commodities

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Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

	Graham Commodity Strategies LLC (Delaware)		Graham Global Monetary Policy LLC (Delaware)		Graham K4D Trading Ltd. (BVI)
Assets:
Due from brokers	$	337,885,653	$	96,842,950	$	299,033,271
Options, at fair value		4,742,335		-		-
Derivative financial instruments, at fair value		3,792,869		11,949,850