10-Q

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 ( ) 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 0-53967

GRAHAM ALTERNATIVE INVESTMENT FUND II LLC

(Exact name of registrant as specified in its charter)

Delaware	20-4897149
(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, 235,823.414 Units of the Systematic Strategies Portfolio were outstanding.

As of October 1, 2012, 1,029,846.693 Units of the Blended Strategies Portfolio were outstanding. 

GRAHAM ALTERNATIVE INVESTMENT FUND II LLC

FORM 10-Q

INDEX

			Page Number
PART I - Financial Information:
	Item 1.	Financial Statements:
		Graham Alternative Investment Fund II LLC
		ConsolidatedStatements of Financial Condition at September 30, 2012 (unaudited) and December 31, 2011 (audited)	1
		Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited)	2
		Consolidated Statements of Changes in Members’ Capital for the nine months ended September 30, 2012 and 2011 (unaudited)	3
		Consolidated Statements of Cash Flows for the nine monthsended September 30, 2012 and 2011 (unaudited)	5
		Notes to Unaudited Consolidated Financial Statements	6
		Graham Alternative Investment Trading LLC
		Statements of Financial Condition at September 30, 2012 (unaudited) and December 31, 2011 (audited)	15
		Condensed Schedules of Investments at September 30, 2012 (unaudited) and December 31, 2011 (audited)	16
		Statements of Operations and Managing Member Allocation for the three and nine months ended September 30, 2012 and 2011 (unaudited)	17
		Statements of Changes in Members’ Capital for the nine months ended September 30, 2012 and 2011 (unaudited)	18
		Statements of Cash Flows for the nine monthsended September 30, 2012 and 2011 (unaudited)	19
		Notes to Unaudited Financial Statements	20
		Graham Alternative Investment Trading II LLC
		Statements of Financial Condition at September 30, 2012 (unaudited) and December 31, 2011 (audited)	63

		Statements of Operations and Managing Member Allocation for the three and nine months ended September 30, 2012 and 2011 (unaudited)	64
		Statements of Changes in Members’ Capital for the nine months ended September 30, 2012 and 2011 (unaudited)	65
		Statements of Cash Flows for the nine monthsended September 30, 2012 and 2011 (unaudited)	66
		Notes to Unaudited Financial Statements	67
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	90
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	102
	Item 4.	Controls and Procedures	103
PART II - Other Information			104

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

PART I

Item 1. Financial Statements

Graham Alternative Investment Fund II LLC

Consolidated Statements of Financial Condition

	September 30, 2012 (Unaudited)		December 31, 2011 (Audited)
Assets
Investment in Graham Alternative Investment Trading LLC, at fair value	$	113,349,406	$	146,634,313
Investment in Graham Alternative Investment Trading II LLC, at fair value		17,656,094		23,346,984
Redemptions receivable from Graham Alternative Investment Trading LLC		10,999,238		4,335,458
Redemptions receivable from Graham Alternative Investment Trading II LLC		583,592		575,408
Total assets	$	142,588,330	$	174,892,163
Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	11,582,830	$	4,910,866
Total liabilities		11,582,830		4,910,866
Members’ capital:
Blended Strategies Portfolio
Class 0 Units (793,290.657 and 966,888.461 units issued and outstanding at $116.90 and $123.17, respectively)		92,738,587		119,087,637
Class 2 Units (223,180.736 and 278,890.248 units issued and outstanding at $92.35 and $98.77, respectively)		20,610,819		27,546,676
Total Blended Strategies Portfolio		113,349,406		146,634,313
Systematic Strategies Portfolio
Class 0 Units (90,016.962 and 112,079.324 units issued and outstanding at $77.99 and $81.35, respectively)		7,020,422		9,117,153
Class 2 Units (145,806.452 and 184,238.954 units issued and outstanding at $72.94 and $77.24, respectively)		10,635,672		14,229,831
Total Systematic Strategies Portfolio		17,656,094		23,346,984
Total members’ capital		131,005,500		169,981,297
Total liabilities and members’ capital	$	142,588,330	$	174,892,163

See accompanying notes.

1

Graham Alternative Investment Fund II LLC

Consolidated Statements of Operations

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Net loss allocated from investments in other funds:
Net realized gain (loss) on investments	$	1,358,182		$	(295,249	)	$	4,406,162		$	(1,466,734	)
Net decrease in unrealized appreciation on investments		(1,585,489	)		(856,701	)		(5,889,065	)		(5,308,730	)
Net loss allocated from investments in other funds		(227,307	)		(1,151,950	)		(1,482,903	)		(6,775,464	)
Net investment loss allocated from investments in other funds:
Investment income:
Interest income		76,416			175,041			246,215			560,066
Expenses:
Brokerage fees		919,345			1,264,845			2,969,996			3,573,397
Advisory fees		748,197			1,028,087			2,402,286			2,920,386
Sponsor fees		374,098			514,044			1,201,143			1,460,194
Incentive allocation		-			-			-			14,461
Interest and other		16,035			26,071			36,603			55,374
Total expenses		2,057,675			2,833,047			6,610,028			8,023,812
Net investment loss allocated from investments in other funds		(1,981,259	)		(2,658,006	)		(6,363,813	)		(7,463,746	)
Net loss	$	(2,208,566	)	$	(3,809,956	)	$	(7,846,716	)	$	(14,239,210	)

See accompanying notes.

2

Graham Alternative Investment Fund II LLC

Consolidated 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
	Units			Capital			Units			Capital			Blended Strategies Portfolio
Members’ capital, December 31, 2010		875,825.668		$	121,701,356			230,452.833		$	26,198,813		$	147,900,169
Subscriptions		242,552.526			33,408,396			79,224.471			8,885,003			42,293,399
Redemptions		(58,046.780	)		(7,879,927	)		(24,457.680	)		(2,707,864	)		(10,587,791	)
Net loss		–			(7,711,265	)		–			(2,126,622	)		(9,837,887	)
Members’ capital, September 30, 2011		1,060,331.414		$	139,518,560			285,219.624		$	30,249,330		$	169,767,890
	Blended Strategies Portfolio
	Class 0 Units						Class 2 Units						Total
	Units			Capital			Units			Capital			Blended Strategies  Portfolio
Members’ capital, December 31, 2011		966,888.461		$	119,087,637			278,890.248		$	27,546,676		$	146,634,313
Subscriptions		88,488.116			10,894,754			19,176.245			1,890,854			12,785,608
Redemptions		(262,085.920	)		(31,828,251	)		(74,885.757	)		(7,334,618	)		(39,162,869	)
Net loss		–			(5,415,553	)		–			(1,492,093	)		(6,907,646	)
Members’ capital, September 30, 2012		793,290.657		$	92,738,587			223,180.736		$	20,610,819		$	113,349,406

See accompanying notes.

3

Graham Alternative Investment Fund II LLC

Consolidated 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
	Units			Capital			Units			Capital			Systematic Strategies Portfolio			Total Members’ Capital
Members’ capital, December 31, 2010		122,899.506		$	12,648,247			86,626.635		$	8,638,694		$	21,286,941		$	169,187,110
Subscriptions		43,311.027			4,369,009			106,334.600			10,261,585			14,630,594			56,923,993
Redemptions		(58,207.379	)		(5,281,272	)		(13,202.894	)		(1,248,863	)		(6,530,135	)		(17,117,926	)
Net loss		–			(2,082,580	)		–			(2,318,743	)		(4,401,323	)		(14,239,210	)
Members’ capital, September 30, 2011		108,003.154		$	9,653,404			179,758.341		$	15,332,673		$	24,986,077		$	194,753,967

	Systematic Strategies Portfolio
	Class 0 Units						Class 2 Units						Total
	Units			Capital			Units			Capital			Systematic Strategies Portfolio			Total Members’ Capital
Members’ capital, December 31, 2011		112,079.324		$	9,117,153			184,238.954		$	14,229,831		$	23,346,984		$	169,981,297
Subscriptions		4,452.995			363,279			3,074.637			236,000			599,279			13,384,887
Redemptions		(26,515.357	)		(2,152,721	)		(41,507.139	)		(3,198,378	)		(5,351,099	)		(44,513,968	)
Net loss		–			(307,289	)		–			(631,781	)		(939,070	)		(7,846,716	)
Members’ capital, September 30, 2012		90,016.962		$	7,020,422			145,806.452		$	10,635,672		$	17,656,094		$	131,005,500

See accompanying notes.

4

Graham Alternative Investment Fund II LLC

Consolidated Statements of Cash Flows

	Nine Months Ended September 30,
	2012 (Unaudited)			2011 (Unaudited)
Cash flows provided by (used in) operating activities
Net loss	$	(7,846,716	)	$	(14,239,210	)
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		6,907,646			9,837,887
Net loss allocated from investment in Graham Alternative Investment Trading II LLC		939,070			4,401,323
Proceeds from sale of investments in Graham Alternative Investment Trading LLC		32,499,089			9,922,856
Proceeds from sale of investments in Graham Alternative Investment Trading II LLC		5,342,915			2,547,321
Investments in Graham Alternative Investment Trading LLC		(12,785,608	)		(42,293,399	)
Investments in Graham Alternative Investment Trading II LLC		(599,279	)		(14,630,594	)
Net cash provided by (used in) operating activities		24,457,117			(44,453,816	)
Cash flows (used in) provided by financing activities
Subscriptions		13,384,887			56,923,993
Redemptions		(37,842,004	)		(12,470,177	)
Net cash (used in) provided by financing activities		(24,457,117	)		44,453,816
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 II LLC

Notes to Unaudited Consolidated Financial Statements

September 30, 2012

1. Organization and Business

Graham Alternative Investment Fund II 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 members Class 0 and Class 2 units of a Blended Strategies Portfolio, and Class 0 and Class 2 units of a Systematic Strategies Portfolio. Graham Alternative Investment Ltd. (“GAI”) is a British Virgin Islands business company which was formed on June 1, 2006 and commenced operations on August 1, 2006. 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 18, 2006 and commenced operations on August 1, 2006 through an investment in GAI. 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 formed on July 16, 2008 and commenced operations on January 4, 2009 through an investment in GAI. 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 Fund is the sole owner of GAI and GAI invests all of its assets into the GAIT Funds.  The Manager is the director of GAI and the sole investment advisor of GAI, 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, options 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”) serves as the independent administrator and transfer agent of the Fund and GAI.  SEI is responsible for certain matters pertaining to the administration of the Fund and GAI.

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”) of the Fund.

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

6

Graham Alternative Investment Fund II LLC

Notes to Unaudited Consolidated 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, GAI and the GAIT Funds.

2. Summary of Significant Accounting Policies

These consolidated 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 consolidated financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Principles of Consolidation

The Fund owns 100% of GAI and as such these consolidated financial statements include all the accounts of the Fund and GAI. Intercompany transactions and balances have been eliminated in consolidation. Creditors of the Fund have recourse to all assets of the Fund for amounts due to them, while creditors of GAI would have recourse only to the assets of GAI.

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 consolidated statements of operations. Purchases and sales of units in GAI and 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 35.37% and 35.15%, respectively of GAIT, and 37.17% and 33.67%, 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 consolidated statements of financial condition. Changes in these carrying amounts are included in the consolidated statements of operations.

7

Graham Alternative Investment Fund II LLC

Notes to Unaudited Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Fair Value (continued)

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.

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 month period 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 Level 1 and Level 2 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 Fund, the GAIT Funds, Graham Cash Assets LLC (“GCA”), and the Master Funds 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 todifferent 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.

8

Graham Alternative Investment Fund II LLC

Notes to Unaudited Consolidated 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 $10,000. 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 $10,000. 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 $7,412 and $5,081 were paid to the Manager for the nine month periods ended September 30, 2012 and 2011, respectively, and are included as redemptions in the consolidated 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.

9

Graham Alternative Investment Fund II LLC

Notes to Unaudited Consolidated 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 consolidated 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 consolidated 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 II LLC

Notes to Unaudited Consolidated 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 consolidated 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 consolidated 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 II LLC

Notes to Unaudited Consolidated 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 II LLC

Notes to Unaudited Consolidated 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

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.

13

Graham Alternative Investment Fund II LLC

Notes to Unaudited Consolidated 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 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.

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 $1.8 million and redemptions of approximately $2.4 million through November 14, 2012, the date through which subsequent events were evaluated by management.  These amounts have not been included in the consolidated financial statements.

14

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.

15

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.

16

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.

17

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.

18

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.

19

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.

20

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.

21

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.

22

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.

23

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 evaluatingthe impact that the adoption of ASU No. 2011-11 will have on the Fund’s financial statements.

24

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

25

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			-
CME Membership, at fair value		2,296,500			-			865,729
Subscriptions receivable		13,318			119			5,647
Total assets		348,730,675			108,792,919			299,904,647
Liabilities:
Derivative financial instruments, at fair value		61,439,760			251,642			44,441,143
Due to brokers		124,555,444			426,560			-
Options, at fair value		-			9,997,110			-
Redemptions payable		13,318			-			4,218
Total liabilities		186,008,522			10,675,312			44,445,361
Net assets	$	162,722,153		$	98,117,607		$	255,459,286
Percentage of Master Fund held by GAIT		10.75	%		9.82	%		13.38	%

26

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of September 30, 2012.

Description	Principal Amount / Number of Contracts		Fair Value			Percentage of Net Assets of Master Fund
Graham Commodity Strategies LLC
Long contracts
Bonds
United States
Treasury bill 12/06/12	$	75,000,000	$	74,990,031			46.08	%
Total United States				74,990,031			46.08	%
Total bonds *				74,990,031			46.08	%
Futures
Brent Crude November 2012 - March 2013		1,867		(564,860	)		(0.35	)%
Coffee December 2012		3,146		12,609,863			7.75	%
Gasoil November 2012 - December 2012		2,635		2,494,950			1.53	%
Heating Oil March 2013		1,456		(3,147,808	)		(1.93	)%
Natural Gas May 2013		3,137		12,081,900			7.42	%
Natural Gas November 2012 - January 2014		16,130		39,625,520			24.35	%
Nickel December 2012		3,741		16,777,014			10.31	%
Wheat December 2013		3,491		9,119,988			5.60	%
Wheat December 2012 - July 2013		7,277		8,341,788			5.13	%
WTI Crude November 2013		2,000		(12,188,000	)		(7.49	)%
WTI Crude January 2014		2,000		(11,606,000	)		(7.13	)%
WTI Crude June 2014		4,000		(15,901,970	)		(9.77	)%
WTI Crude November 2012 - December 2012		19,589		3,323,770			2.04	%
WTI Crude January 2013 - December 2014		2,073		(4,323,760	)		(2.66	)%
Zinc December 2012		160,068		11,849,545			7.28	%
Other commodity				15,646,236			9.62	%
Interest Rate				45,425			0.03	%
U.S. Bond				407,427			0.25	%
Foreign bond				1,912,266			1.18	%
U.S. index				324,500			0.20	%
Foreign index				(483,851	)		(0.30	)%
Total futures				86,343,943			53.06	%
Swaps
Natural Gas November 2012		30		33,150			0.02	%
Other commodity				65,000			0.04	%
Total swaps				98,150			0.06	%

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

27

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of September 30, 2012.

Description	Number of Contracts		Fair Value			Percentage of Net Assets of Master Fund
Graham Commodity Strategies LLC (continued)
Long contracts (continued)
Forwards
Foreign currency			$	(6,047,681	)		(3.72	)%
Total forwards				(6,047,681	)		(3.72	)%
Options
Natural Gas Futures Options January 2013-January 2015 Call $4.00 - $5.00		600		1,236,800			0.76	%
Natural Gas Futures Options December 2012 Put 3.00		1,000		281,000			0.17	%
Other commodity				1,576,000			0.97	%
Interest Rate Futures				1,134,303			0.70	%
Currency				2,327,184			1.42	%
U.S. Bond				468,750			0.29	%
Foreign Bond				64,255			0.04	%
U.S. Index				2,612,500			1.61	%
Total options				9,700,792			5.96	%

28

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of September 30, 2012.

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

29

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of September 30, 2012.

Description	Number of  Contracts			Fair Value			Percentage of  Net Assets of  Master Fund
Graham Commodity Strategies LLC (continued)
Short contracts (continued)
Options
Natural Gas Futures Option November 2012 Put $2.75		(1,000	)	$	(117,000	)		(0.07	)%
Natural Gas Futures Option January 2013 - January 2015 Call $4.50 - $5.50		(600	)		(560,800	)		(0.34	)%
Other commodity					(472,000	)		(0.29	)%
Currency					(988,542	)		(0.61	)%
U.S. index					(1,975,000	)		(1.21	)%
U.S. Bond					(312,500	)		(0.19	)%
Foreign Bond					(25,702	)		(0.02	)%
Interest rate					(506,913	)		(0.31	)%
Total options					(4,958,457	)		(3.04	)%
Total				$	22,085,475			13.57	%

30

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of September 30, 2012.

Description	Number of Contracts / Notional Amount	Fair Value			Percentage of Net Assets of Master Fund
Graham Global Monetary Policy LLC
Long contracts
Futures
Foreign bond		$	2,953,259			3.01	%
Commodity			245,570			0.25	%
U.S. index			73,750			0.08	%
Foreign index			(487,207	)		(0.50	)%
Total futures			2,785,372			2.84	%
Forwards
Foreign currency			(6,634,314	)		(6.76	)%
Total forwards			(6,634,314	)		(6.76	)%
Options
Currency			2,682,163			2.73	%
Total options			2,682,163			2.73	%
Short contracts
Futures
U.S. bond			156,250			0.16	%
Foreign bond			(1,932,287	)		(1.97	)%
Interest rate			(138,400	)		(0.14	)%
Total futures			(1,914,437	)		(1.95	)%
Forwards
Euro / Swiss Franc November 2012	CHF(1,098,071,175)		7,863,374			8.00	%
Euro / Swiss Franc December 2012	CHF(959,871,893)		6,884,271			7.02	%
Other foreign currency			2,713,942			2.77	%
Total forwards			17,461,587			17.79	%
Options
EUR/CHF November 2012 - December 2012 Call EUR 1.20 – EUR 1.22	(1,300,000,000)		(12,572,485	)		(12.81	)%
EUR/CHF October 2012 Put $1.20	(200,000,000)		(106,788	)		(0.11	)%
Total options			(12,679,273	)		(12.92	)%
Total		$	1,701,098			1.73	%

31

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

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

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

32

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

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

33

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

	Graham Commodity Strategies LLC			Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.
Assets
Level 1:
U.S. bond futures	$	531,146		$	156,250		$	7,916,629
Foreign bond futures		1,912,266			3,324,961			11,419,750
U.S. index futures		473,320			73,750			4,359,540
U.S. index futures options		2,612,500			-			-
Foreign index futures		-			-			784,169
Commodity futures		155,561,392			245,570			14,733,141
Commodity futures options		3,093,800			-			-
Commodity futures swaps		98,150			-			2,847,975
Interest rate futures		45,425			-			1,301,144
Interest rate futures options		1,667,308			-			-
Currency futures		-			-			316,292
Total Level 1		165,995,307			3,800,531			43,678,640
Level 2:
Foreign currency forwards		2,428,121			14,581,932			7,081,367
Foreign currency options		2,327,184			2,682,163			-
Treasury bills		74,990,031			-			174,981,321
Total Level 2		4,755,305			17,264,095			7,081,367
Total assets	$	254,740,643		$	21,064,626		$	225,741,328
Liabilities
Level 1:
U.S. bond futures	$	(9,094	)	$	-		$	(1,418,886	)
Foreign bond futures		(48,345	)		(2,303,989	)		(1,264,591	)
Foreign index futures		(483,851	)		(487,207	)		(11,948,736	)
U.S. index futures		(117,120	)		-			(1,003,341	)
U.S. index futures options		(1,975,000	)		-			-
Commodity futures		(217,101,150	)		-			(56,497,414	)
Commodity futures options		(1,149,800	)		-			-
Commodity futures swaps		(172,026	)		-			(3,736,935	)
Interest rate futures		-			(138,400	)		(195,205	)
Interest rate futures options		(845,115	)		-			-
Currency futures		(111,570	)		-			(600,188	)
Total Level 1		(223,001,613	)		(15,608,869	)		(76,665,296	)
Level 2:
Foreign currency forwards		(653,555	)		(3,754,659	)		(18,535,854	)
Foreign currency forwards		(988,542	)		(12,679,273	)		-
Total Level 2		(1,642,097	)		(16,433,932	)		(18,535,854	)
Total liabilities	$	(223,655,168	)	$	(19,363,528	)	$	(95,201,150	)

34

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at September 30, 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. The Master Funds trade futures and options on a leveraged basis.  Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the Master Funds’ 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	$	7,419,518,251		107,321	$	(7,431,229,139	)		(108,134	)	$	155,561,392	$	(217,101,150	)	$	63,860,400		360	$	-			-		$	245,570	$	-
Options		203,000,000		2,400		(211,500	)		(2,400	)		3,093,800		(1,149,800	)		-		-		-			-			-		-
Swaps		19,424,000		680		(20,865,000	)		(650	)		98,150		(172,026	)		-		-		-			-			-		-
		7,641,942,251		110,401		(7,452,305,639	)		(111,184	)		158,753,342		(218,422,976	)		63,860,400		360		-			-			245,570		-
Equity price
Futures		233,362,266		3,062		(155,462,785	)		(2,184	)		473,320		(600,971	)		51,630,853		1,000		-			-			73,750		(487,207	)
Options		334,375,000		4,500		(431,250,000	)		(5,750	)		2,612,500		(1,975,000	)		-		-		-			-			-		-
		567,737,266		7,562		(586,712,785	)		(7,934	)		3,085,820		(2,575,971	)		51,630,853		1,000		-			-			73,750		(487,207	)
Foreign currency exchange rate
Futures		-		-		(17,925,600	)		(224	)		-		(111,570	)		-		-		-			-			-		-
Forwards		719,869,337		N/A		(718,094,775	)		N/A			2,428,121		(653,555	)		2,408,031,879		N/A		(2,397,204,607	)		N/A			14,581,932		(3,754,659	)
Options		975,000,000		7		(825,000,000	)		(5	)		2,327,184		(988,542	)		1,650,000,000		10		(1,500,000,000	)		(10	)		2,682,163		(12,679,273	)
		1,694,869,337		7		(1,561,020,375	)		(229	)		4,755,305		(1,753,667	)		4,058,031,879		10		(3,897,204,607	)		(10	)		17,264,095		(16,433,932	)
Interest rate
Futures		1,646,780,129		11,880		(305,897,859	)		(2,218	)		2,488,837		(57,439	)		282,880,121		1,990		(2,690,286,702	)		(13,621	)		3,481,211		(2,442,389	)
Options		2,228,500,000		18,000		(3,067,062,500	)		(15,000	)		1,667,308		(845,115	)		-		-		-			-			-		-
		3,875,280,129		29,880		(3,372,960,359	)		(17,218	)		4,156,145		(902,554	)		282,880,121		1,990		(2,690,286,702	)		(13,621	)		3,481,211		(2,442,389	)
Total	$	13,779,828,983		147,850	$	(12,972,999,158	)		(136,565	)	$	170,750,612	$	(223,655,168	)	$	4,456,403,253		3,360	$	(6,587,491,309	)		(13,631	)	$	21,064,626	$	(19,363,528	)
Collateral balances supporting all derivative positions													$	213,330,209														$	96,416,390

35

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at September 30, 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. The Master Funds trade futures and options on a leveraged basis.  Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the Master Funds’ 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	$	1,198,556,564		14,445	$	(713,150,209	)		(11,271	)	$	14,733,141	$	(56,497,414	)
Swaps		99,585,522		2,240		(5,016,150	)		(142	)		2,847,975		(3,736,935	)
		1,298,142,086		16,685		(718,166,359	)		(11,413	)		17,581,116		(60,234,349	)
Equity price
Futures		1,540,721,894		20,511		(67,010,421	)		(630	)		5,143,709		(12,952,077	)
		1,540,721,894		20,511		(67,010,421	)		(630	)		5,143,709		(12,952,077	)
Foreign currency exchange rate
Futures		244,905,230		2,329		(43,730,800	)		(272	)		316,292		(600,188	)
Forwards		893,770,434		N/A		(905,224,921	)		N/A			7,081,367		(18,535,854	)
		1,138,675,664		2,329		(948,955,721	)		(272	)		7,397,659		(19,136,042	)
Interest rate
Futures		15,754,946,513		77,089		(529,612,076	)		(1,744	)		20,637,523		(2,878,682	)
		15,754,946,513		77,089		(529,612,076	)		(1,744	)		20,637,523		(2,878,682	)
Total	$	19,732,486,157		116,614	$	(2,263,744,577	)		(14,059	)	$	50,760,007	$	(95,201,150	)
Collateral balances supporting all derivative positions													$	299,033,271

36

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

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

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

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

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

37

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

	Graham Commodity Strategies LLC			Graham Energy Focus LLC		Graham Energy Fundamental LLC		Graham  Fed Policy Ltd.		Graham  Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional  LLC		Graham Macro Technical  Ltd.
Commodity price
Futures	$	(23,903,897	)	$	-	$	-	$	-	$	(152,555	)	$	(63,225,657	)	$	-	$	-
Options		826,590			-		-		-		-			-			-		-
Swaps		(912,810	)		-		-		-		-			19,663,691			-		-
		(23,990,117	)		-		-		-		(152,555	)		(43,561,966	)		-		-
Equity price
Futures		(2,584,375	)		-		-		-		80,296			41,401,204			-		-
CME Membership		150,840			-		-		-		-			(96,021	)		-		-
Options		(708,925	)		-		-		-		-			-			-		-
		(3,142,460	)		-		-		-		80,296			41,305,183			-		-
Foreign currency exchange rate
Futures		(143,330	)		-		-		-		-			(3,214,982	)		-		-
Forwards		(22,494,300	)		-		-		-		34,250,250			(9,449,834	)		-		-
Options		257,530			-		-		-		(11,369,942	)		-			-		-
		(22,380,100	)		-		-		-		22,880,308			(12,664,816	)		-		-
Interest rate
Futures		2,354,473			-		-		-		(6,556,382	)		29,557,675			-		-
Options		(224,292	)		-		-		-		377,169			-			-		-
Treasury bills		17,584			-		-		-		-			33,273			-		-
		2,147,765			-		-		-		(6,179,213	)		29,590,948			-		-
Total	$	(47,364,912	)	$	-	$	-	$	-	$	16,628,836		$	14,669,349		$	-	$	-

38

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

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

39

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	%

40

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 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	)%

41

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

 3. Investments in Master Funds (continued)

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

Description	Number of  Contracts			Fair Value			Percentage of  Net Assets of  Master Fund
Graham Commodity Strategies LLC (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	)%

42

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Number of Contracts		Fair Value			Percentage of Net Assets of Master Fund
Graham 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	)%

43

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Number of Contracts			Fair Value			Percentage of Net Assets of Master Fund
Graham Energy Focus LLC (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	)%

44

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	Number  of Contracts			Fair Value			Percentage of  Net Assets of  Master Fund
Graham 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	%

45

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	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	%

46

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	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	%

47

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

Description	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	)%

48

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	)

49

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 period.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis.  Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the Master Funds’ 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

50

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Funds at December 31, 2011 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. The Master Funds trade futures and options on a leveraged basis.  Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the Master Funds’ 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

51

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 period.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade futures and options on a leveraged basis.  Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT. Amounts presented below as collateral balances supporting all derivative positions are included in due from brokers on the Master Funds’ 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

52

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

	Graham Commodity Strategies LLC (Delaware)			Graham Discretionary  Energy Trading III LLC (Delaware)			Graham Energy Focus  LLC  (Delaware)			Graham Fed Policy  Ltd. (BVI)			Graham Global Monetary Policy LLC (Delaware)			Graham K4D Trading Ltd. (BVI)			Graham Macro  Directional LLC (Delaware)			Graham Short Term Global Macro LLC (Delaware)
	Three Months Ended September 30, 2011
Net investment loss	$	(6,206	)	$	(55,848	)	$	(2,697	)	$	(1,155	)	$	(193,112	)	$	(169,883	)	$	(25,923	)	$	-
Net realized gain (loss) on investments		30,418,977			3,615,278			17,235,451			13,785,707			15,742,755			(161,048,924	)		59,995,650			-
Net increase (decrease) in unrealized appreciation on investments		(19,631,421	)		(7,651,291	)		(19,062,821	)		(6,309,319	)		7,460,723			26,144,203			7,067,429			-
Brokerage commissions and fees		(2,014,171	)		(584,559	)		(279,564	)		(660,278	)		(1,568,140	)		(3,638,203	)		(307,298	)		-
Net gain (loss) on investments		8,773,385			(4,620,572	)		(2,106,934	)		6,816,110			21,635,338			(138,542,924	)		66,755,781			-
Net income (loss)	$	8,767,179		$	(4,676,420	)	$	(2,109,631	)	$	6,814,955		$	21,442,226		$	(138,712,807	)	$	66,729,858		$	-

	Nine Months Ended September 30, 2011
Net investment income (loss)	$	(15,072	)	$	(76,722	)	$	(18,181	)	$	(5,185	)	$	(259,745	)	$	(460,227	)	$	(34,346	)	$	1,186
Net realized gain (loss) on investments		107,512,168			(11,935,802	)		11,284,560			36,091,667			27,117,821			(229,474,772	)		36,579,778			3,960,455
Net increase (decrease) in unrealized appreciation on investments		(39,487,473	)		(16,614,276	)		(13,480,668	)		(5,573,405	)		8,351,654			(38,951,376	)		6,017,971			(1,898,136	)
Brokerage commissions and fees		(5,487,343	)		(2,187,662	)		(921,141	)		(1,960,811	)		(2,941,908	)		(10,568,353	)		(1,328,069	)		(548,562	)
Net gain (loss) on investments		62,537,352			(30,737,740	)		(3,117,249	)		28,557,451			32,527,567			(278,994,501	)		41,269,680			1,513,757
Net income (loss)	$	62,522,280		$	(30,814,462	)	$	(3,135,430	)	$	28,552,266		$	32,267,822		$	(279,454,728	)	$	41,235,334		$	1,514,943

53

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 September 30, 2011:

	Graham Commodity  Strategies LLC			Graham Discretionary Energy Trading III LLC			Graham Energy Focus LLC			Graham Fed  Policy Ltd.			Graham Global Monetary Policy LLC			Graham K4D  Trading Ltd.			Graham Macro Directional LLC		Graham Short Term Global  Macro LLC
Commodity price
Futures	$	(2,162,171	)	$	8,177,697		$	23,788,172		$	-		$	20,206,590		$	(5,164,850	)	$	2,146,040	$	-
Options		-			(13,924,790	)		321,900			-			-			-			-		-
Swaps		12,949,727			1,711,080			(25,927,942	)		-			-			2,104,346			-		-
		10,787,556			(4,036,013	)		(1,817,870	)		-			20,206,590			(3,060,504	)		2,146,040		-
Equity price
Futures		-			-			(9,500	)		-			12,459,295			(134,617,931	)		9,331,261		-
Options		-			-			-			-			(1,416,863	)		-			-		-
		-			-			(9,500	)		-			11,042,432			(134,617,931	)		9,331,261		-
Foreign currency exchange rate
Futures		-			-			-			-			-			10,223,770			-		-
Forwards		-			-			-			-			(14,623,359	)		(94,513,839	)		30,284,014		-
Options		-			-			-			-			(5,309,085	)		-			-		-
		-			-			-			-			(19,932,444	)		(84,290,069	)		30,284,014		-
Interest rate
Futures		-			-			-			15,147,183			11,886,900			87,063,783			24,433,838		-
Options		-			-			-			(7,670,795	)		-			-			867,926		-
		-			-			-			7,476,388			11,886,900			87,063,783			25,301,764		-
Total	$	10,787,556		$	(4,036,013	)	$	(1,827,370	)	$	7,476,388		$	23,203,478		$	(134,904,721	)	$	67,063,079	$	-

54

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)

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

	Graham Commodity  Strategies LLC		Graham Discretionary  Energy Trading III  LLC			Graham Energy Focus  LLC			Graham Fed Policy Ltd.			Graham  Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham  Macro Directional LLC		Graham Short  Term Global Macro LLC
Commodity price
Futures	$	55,169,468	$	(11,954,168	)	$	25,711,084		$	-		$	28,841,545		$	(48,151,690	)	$	1,414,568	$	3,852,769
Options		-		(19,066,205	)		3,023,965			-			(87,120	)		-			-		(223,490	)
Swaps		12,855,227		2,470,295			(30,921,657	)		-			-			2,104,346			-		-
		68,024,695		(28,550,078	)		(2,186,608	)		-			28,754,425			(46,047,344	)		1,414,568		3,629,279
Equity price
Futures		-		-			(9,500	)		-			6,973,569			(202,948,060	)		4,644,280		1,134,945
Options		-		-			-			-			(1,416,863	)		-			-		(427,187	)
		-		-			(9,500	)		-			5,556,706			(203,948,060	)		4,644,280		707,758
Foreign currency exchange rate
Futures		-		-			-			-			-			227,767			-		-
Forwards		-		-			-			-			29,853,154			(113,092,112	)		1,577,627		5,706,028
Options		-		-			-			-			(26,148,114	)		-			-		(7,400,670	)
		-		-			-			-			3,705,040			(112,864,345	)		1,577,627		(1,694,642	)
Interest rate
Futures		-		-			-			43,708,133			(1,838,883	)		93,433,601			34,093,348		(580,076	)
Options		-		-			-			(13,189,871	)		(707,813	)		-			867,926		-
		-		-			-			30,518,262			(2,546,696	)		93,433,601			34,961,274		(580,076	)
Total	$	68,024,695	$	(28,550,078	)	$	(2,196,108	)	$	30,518,262		$	35,469,475		$	(268,426,148	)	$	42,597,749	$	2,062,319

55

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 September 30, 2012, the total amount recognized by GAIT with respect to its investment in GCA was $185,718.  For the nine months ended September 30, 2012, the total amount recognized by GAIT with respect to its investment in GCA was $598,677.  For the three months ended September 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $439,886.  For the nine months ended September 30, 2011, the total amount recognized by GAIT with respect to its investment in GCA was $1,453,597.  These amounts are included in interest income in the statements of operations and managing member allocation.  At September 30, 2012 and December 31, 2011, GAIT owned approximately 6.67% and 11.59%, respectively, of GCA.  The following table summarizes the financial position of GCA as of September 30, 2012 and December 31, 2011:

	September 30, 2012		December 31, 2011
Assets:
Cash and cash equivalents	$	904,800,764	$	556,557,151
Investments in fixed income securities (cost $3,366,638,679 and $2,412,672,700, respectively)		3,366,638,679		2,412,672,700
Accrued interest income		7,792,911		4,670,722
Total assets		4,279,232,354		2,973,900,573
Liabilities:
Other liabilities		9,990		29,450
Total liabilities		9,990		29,450
Net assets	$	4,279,222,364	$	2,973,871,123

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Investment income
Interest income	$	2,748,540	$	3,492,406	$	7,600,101	$	11,203,532
Total investment income		2,748,540		3,492,406		7,600,101		11,203,532
Expenses:
Bank fee expense		30,845		127,380		92,482		386,034
Total expenses		30,845		127,380		92,482		386,034
Net investment income		2,717,695		3,365,026		7,507,619		10,817,498
Net income	$	2,717,695	$	3,365,026	$	7,507,619	$	10,817,498

56

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 September 30, 2012:

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Investments in Fixed Income Securities (cost $3,366,638,679)
United States
FDIC Guaranteed Bonds (cost $328,522,436)
FDIC guaranteed bonds			$	328,522,436		7.68	%
Total FDIC Guaranteed Bonds				328,522,436		7.68	%
Government Bonds (cost $3,038,116,243)
U.S. Treasury 0.13% - 2.50% due 10/31/2012 – 09/15/2014	$	3,025,000,000		3,038,116,243		71.00	%
Total Government Bonds				3,038,116,243		71.00	%
Total Investments in Fixed Income Securities			$	3,366,638,679		78.68	%

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	%

57

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 September 30, 2012 and December 31, 2011:

	September 30, 2012		December 31, 2011
Assets
Level 2:
Fixed income securities
FDIC Guaranteed Bonds	$	328,522,436	$	623,918,691
Government Bonds		3,038,116,243		1,788,754,009
Total fixed income securities		3,366,638,679		2,412,672,700
Total Level 2		3,366,638,679		2,412,672,700
Total assets	$	3,366,638,679	$	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.

58

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.

59

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 September 30, 2012 and 2011:

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, June 30, 2011	$	132.67		$	107.48
Net loss:
Net investment loss		(2.50	)		(2.54	)
Net gain on investments		1.41			1.12
Net loss		(1.09	)		(1.42	)
Net asset value per unit, September 30, 2011	$	131.58		$	106.06
Net asset value per unit, June 30, 2012	$	118.77		$	94.30
Net loss:
Net investment loss		(1.27	)		(1.49	)
Net loss on investments		(0.60	)		(0.46	)
Net loss		(1.87	)		(1.95	)
Net asset value per unit, September 30, 2012	$	116.90		$	92.35

60

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 September 30, 2012 and 2011:

	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 6), which represent 0.20% of average members’ capital for 2012 and 0.20% of average members’ capital for 2011.

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

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

61

Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

8. Financial Highlights (continued)

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

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

*- The percentages above represent total gross expenses before commission reimbursements (See Note 6), which represent 0.70% of average members’ capital for 2012 and 0.79% of average members’ capital for 2011.

Total return is calculated for Class 0 and Class 2 units taken as a whole. Total return is calculated as the change in total members’ capital, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the period. 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 nine month periods ended September 30, 2012 and 2011.

9.  Subsequent Events

GAIT had subscriptions of approximately $3.3 million and redemptions of approximately $9.7 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.

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Graham Alternative Investment Trading II LLC

Statements of Financial Condition

Assets	September 30, 2012 (Unaudited)		December 31, 2011 (Audited)
Investment in Graham K4D Trading Ltd., at fair value	$	9,459,856	$	13,021,233
Investment in Graham Cash Assets LLC, at fair value		45,764,391		59,403,888
Accrued commission reimbursements		10,824		29,549
Receivable from Graham K4D Trading Ltd.		123		532
Total assets	$	55,235,194	$	72,455,202
Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	7,458,747	$	2,739,451
Accrued brokerage fees		133,432		183,148
Accrued advisory fees		90,475		122,997
Accrued sponsor fees		45,238		61,499
Total liabilities		7,727,892		3,107,095
Members’ capital:
Class 0 Units (277,104.562 and 434,835.751 units issued and outstanding at $77.99 and $81.35 per unit, respectively)		21,611,379		35,371,951
Class 2 Units (354,391.181 and 439,312.861 units issued and outstanding at $72.94 and $77.24 per unit, respectively)		25,850,622		33,930,645
Class M Units (500.000 and 500.000 units issued and outstanding at $90.60 and $91.02 per unit, respectively)		45,301		45,511
Total members’ capital		47,507,302		69,348,107
Total liabilities and members’ capital	$	55,235,194	$	72,455,202

See accompanying notes.

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

See accompanying notes.

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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		397,859.944		$	40,945,899			288,630.496		$	28,783,191			500.000	$	54,780		$	69,783,870
Subscriptions		183,283.943			18,535,267			196,372.704			18,976,245			–		–			37,511,512
Redemptions		(132,316.205	)		(12,190,510	)		(38,757.393	)		(3,667,699	)		–		(8,810	)		(15,867,019	)
Incentive allocation		–			(4,821	)		–			(3,989	)		–		8,810			–
Netloss		–			(7,169,283	)		–			(6,024,751	)		–		(5,401	)		(13,199,435	)
Members’ capital, September 30, 2011		448,827.682		$	40,116,552			446,245.807		$	38,062,997			500.000	$	49,379		$	78,228,928

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

See accompanying notes.

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Statements of Cash Flows

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

See accompanying notes.

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Notes to Unaudited Financial Statements

September 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.

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

Graham Alternative Investment Fund I LLC and Graham Alternative Investment Fund II LLC 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.

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Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Investment in Graham K4D Trading Ltd.

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

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 nine months ended September 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.

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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 gain (loss) and net increase (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.

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Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Forward Contracts

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

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

Swap Contracts

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

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

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

Options

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

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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

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

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.

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Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd.

As of September 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.

September 30, 2012
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Income (three months then ended)		Net Loss (nine months then ended)
Systematic Macro
Graham K4D Trading Ltd.		19.91	%	$	9,459,856	$	746,961	$	(99,529	)
		19.91	%	$	9,459,856	$	746,961	$	(99,529	)

December 31, 2011
Investment – Objective	Percent of  Members’ Capital			Fair Value		Net Loss (nine months ended September 30, 2011)			Net Loss (nine months ended September 30, 2011)
Systematic Macro
Graham K4D Trading Ltd.		18.78	%	$	13,021,233	$	(5,152,483	)	$	(10,023,730	)
		18.78	%	$	13,021,233	$	(5,152,483	)	$	(10,023,730	)

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

Assets:
Due from brokers	$	299,033,271
Derivative financial instruments, at fair value		-
CME Membership, at fair value		865,729
Subscriptions receivable		5,647
Total assets		299,904,647
Liabilities:
Derivative financial instruments, at fair value		44,441,143
Redemptions payable		4,218
Total liabilities		44,445,361
Net assets	$	255,459,286
Percentage of K4D Trading held by GAIT II		3.70	%

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Notes to Unaudited Financial Statements (continued)

3. Investment in Master Funds (continued)

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

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

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

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Notes to Unaudited Financial Statements (continued)

3. Investment in Master Funds (continued)

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

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

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Notes to Unaudited Financial Statements (continued)

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

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

Assets
Level 1:
U.S. bond futures	$	7,916,629
Foreign bond futures		11,419,750
U.S. index futures		4,359,540
Foreign index futures		784,169
Commodity futures		14,733,141
Commodity futures swaps		2,847,975
Interest rate futures		1,301,144
Currency futures		316,292
Total Level 1		43,678,640
Level 2:
Foreign currency forwards		7,081,367
Treasury bills		174,981,321
Total Level 2		182,062,688
Total assets	$	225,741,328
Liabilities
Level 1:
U.S. bond futures	$	(1,418,886	)
Foreign bond futures		(1,264,591	)
Foreign index futures		(11,948,736	)
U.S. index futures		(1,003,341	)
Commodity futures		(56,497,414	)
Commodity futures swaps		(3,736,935	)
Interest rate futures		(195,205	)
Currency futures		(600,188	)
Total Level 1		(76,665,296	)
Level 2:
Foreign currency forwards		(18,535,854	)
Total Level 2		(18,535,854	)
Total liabilities	$	(95,201,150	)

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Notes to Unaudited Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd. (continued

The following table displays the gross volume of derivative activities based on their notional amounts and number of contracts and fair value of derivative contracts held by the Master Fund at September 30, 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. K4D Trading trades futures and options on a leveraged basis.  Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of K4D Trading by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Fund and GAIT. 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	$	1,198,556,564		14,445	$	(713,150,209	)		(11,271	)	$	14,733,141	$	(56,497,414	)
Swaps		99,585,522		2,240		(5,016,150	)		(142	)		2,847,975		(3,736,935	)
		1,298,142,086		16,685		(718,166,359	)		(11,413	)		17,581,116		(60,234,349	)
Equity price
Futures		1,540,721,894		20,511		(67,010,421	)		(630	)		5,143,709		(12,952,077	)
		1,540,721,894		20,511		(67,010,421	)		(630	)		5,143,709		(12,952,077	)
Foreign currency exchange rate
Futures		244,905,230		2,329		(43,730,800	)		(272	)		316,292		(600,188	)
Forwards		893,770,434		N/A		(905,224,921	)		N/A			7,081,367		(18,535,854	)
		1,138,675,664		2,329		(948,955,721	)		(272	)		7,397,659		(19,136,042	)
Interest rate
Futures		15,754,946,513		77,089		(529,612,076	)		(1,744	)		20,637,523		(2,878,682	)
		15,754,946,513		77,089		(529,612,076	)		(1,744	)		20,637,523		(2,878,682	)
Total	$	19,732,486,157		116,614	$	(2,263,744,577	)		(14,059	)	$	50,760,007	$	(95,201,150	)
Collateral balances supporting all derivative positions													$	299,033,271

76

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

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

	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
Net investment loss	$	(6,308	)	$	(251,276	)
Net realized gain on investments		71,425,119			66,459,854
Net decrease in unrealized appreciation on investments		(56,755,770	)		(72,542,140	)
Brokerage commissions and fees		(727,408	)		(3,683,095	)
Net gain (loss) on investments		13,941,941			(9,765,381	)
Net income (loss)	$	13,935,633		$	(10,016,657	)

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

	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
Commodity price
Futures	$	(63,225,657	)	$	(81,607,114	)
Swaps		19,663,691			14,841,875
		(43,561,966	)		(66,765,239	)
Equity price
Futures		(96,021	)		45,742,293
CME Membership		41,401,204			(178,371	)
		41,305,183			45,563,922
Foreign currency exchange rate
Futures		(3,214,982	)		(17,885,349	)
Forwards		(9,449,834	)		(58,357,586	)
		(12,664,816	)		(76,242,935	)
Interest rate
Futures		29,557,675			91,272,499
Treasury bills		33,273			89,467
		29,590,948			91,361,966
Total	$	14,669,349		$	(6,082,286	)

77

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	%

78

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	%

79

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	)

80

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 period.  Derivatives denominated in foreign currencies have been converted to U.S. dollars.  Derivative asset and liability balances are presented on a gross basis, prior to the application of counterparty netting. K4D Trading trades futures and options on a leveraged basis.  Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of K4D Trading by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Fund and GAIT II. 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

81

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

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

The following table summarizes the results of operations of K4D Trading for the three and nine month periods ended September 30, 2011.

	Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
Net investment loss	$	(169,883	)	$	(460,227	)
Net realized loss on investments		(161,048,924	)		(229,474,772	)
Net increase (decrease) in unrealized appreciation on investments		26,144,203			(38,951,376	)
Brokerage commissions and fees		(3,638,203	)		(10,568,353	)
Net loss on investments		(138,542,924	)		(278,994,501	)
Net loss	$	(138,712,807	)	$	(279,454,728	)

The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net realized loss and net increase (decrease) in unrealized appreciation on investments in its statement of operations segregated by primary underlying risk and contract type for the three and nine month periods ended September 30, 2011:

	Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
Commodity price
Futures	$	(5,164,850	)	$	(48,151,690	)
Swaps		2,104,346			2,104,346
		(3,060,504	)		(46,047,344	)
Equity price
Futures		(134,617,931	)		(202,948,060	)
		(134,617,931	)		(202,948,060	)
Foreign currency exchange rate
Futures		10,223,770			227,767
Forwards		(94,513,839	)		(113,092,112	)
		(84,290,069	)		(112,864,345	)
Interest rate
Futures		87,063,783			93,433,601
		87,063,783			93,433,601
Total	$	(134,904,721	)	$	(268,426,148	)

82

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 September 30, 2012, the total amount recognized by GAIT II with respect to its investment in GCA was $30,492. For the nine months ended September 30, 2012, the total amount recognized by GAIT II with respect to its investment in GCA was $100,644. For the three months ended September 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $81,771. For the nine months ended September 30, 2011, the total amount recognized by GAIT II with respect to its investment in GCA was $255,251.  These amounts are included in interest income in the statements of operations and managing member allocation. At September 30, 2012 and December 31, 2011, GAIT II owned approximately 1.07% and 2.00%, respectively, of GCA. The following table summarizes the financial position of GCA as of September 30, 2012 and December 31, 2011:

	September 30, 2012		December 31, 2011
Assets:
Cash and cash equivalents	$	904,800,764	$	556,557,151
Investments in fixed income securities (cost $3,366,638,679 and $2,412,672,700, respectively)		3,366,638,679		2,412,672,700
Accrued interest income		7,792,911		4,670,722
Total assets		4,279,232,354		2,973,900,573
Liabilities:
Other liabilities		9,990		29,450
Total liabilities		9,990		29,450
Net assets	$	4,279,222,364	$	2,973,871,123

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Investment income
Interest income	$	2,748,540	$	3,492,406	$	7,600,101	$	11,203,532
Total investment income		2,748,540		3,492,406		7,600,101		11,203,532
Expenses:
Bank fee expense		30,845		127,380		92,482		386,034
Total expenses		30,845		127,380		92,482		386,034
Net investment income		2,717,695		3,365,026		7,507,619		10,817,498
Net income	$	2,717,695	$	3,365,026	$	7,507,619	$	10,817,498

83

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 September 30, 2012:

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Investments in Fixed Income Securities (cost $3,366,638,679)
United States
FDIC Guaranteed Bonds (cost $328,522,436)
FDIC guaranteed bonds			$	328,522,436		7.68	%
Total FDIC Guaranteed Bonds				328,522,436		7.68	%
Government Bonds (cost $3,038,116,243)
U.S. Treasury 0.13% - 2.50% due 10/31/2012 – 09/15/2014	$	3,025,000,000		3,038,116,243		71.00	%
Total Government Bonds				3,038,116,243		71.00	%
Total Investments in Fixed Income Securities			$	3,366,638,679		78.68	%

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	%

84

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

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

	September 30, 2012		December 31, 2011
Assets
Level 2:
Fixed income securities
FDIC Guaranteed Bonds	$	328,522,436	$	623,918,691
Government Bonds		3,038,116,243		1,788,754,009
Total fixed income securities		3,366,638,679		2,412,672,700
Total Level 2		3,366,638,679		2,412,672,700
Total assets	$	3,366,638,679	$	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 inother investment programs or combinations of investment programs managed by the Manager. GAIT II also has Management Units (“Class M units”) which are solely for the investment of the Manager.

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

Subscriptions

Units may be purchased at a price equal to the Net Asset Value per Unit of the relevant Class as of the immediately preceding Valuation Day, as defined in the LLC Agreement. There is no minimum subscription amount.

Units are available for subscription as of the first business day of each month upon written notice of at least three business days prior to the last business day of the preceding month.

Redemptions

Units are not subject to any minimum holding period. Members may redeem Units at the Net Asset Value thereof as of the last business day of each month upon not less than three business days’ prior written notice to the administrator.

85

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.

86

Graham Alternative Investment Trading II LLC

Notes to Unaudited Financial Statements (continued)

6. Fees and Related Party Transactions

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

7. Income Taxes

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

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

8. Financial Highlights

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

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

87

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 September 30, 2012 and 2011:

	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 6), which represent 0.05% of average members’ capital for 2012 and 0.12% of average members’ capital for 2011.

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

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, December 31, 2010	$	102.92		$	99.72
Net loss:
Net investment loss		(3.43	)		(4.73	)
Net loss on investments		(10.11	)		(9.69	)
Net loss		(13.54	)		(14.42	)
Net asset value per unit, September 30, 2011	$	89.38		$	85.30
Net asset value per unit, December 31, 2011	$	81.35		$	77.24
Net loss:
Net investment loss		(2.89	)		(3.83	)
Net loss on investments		(0.47	)		(0.47	)
Net loss		(3.36	)		(4.30	)
Net asset value per unit, September 30, 2012	$	77.99		$	72.94

88

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 nine month periods ended September 30, 2012 and 2011:

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

*- The percentages above represent total gross expenses before commission reimbursements (See Note 6), which represent 0.25% of average members’ capital for 2012 and 0.48% of average members’ capital for 2011.

Total return is calculated for Class 0 and Class 2 units taken as a whole. Total return is calculated as the change in total members’ capital, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the period. 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 nine month periods ended September 30, 2012 and 2011.

9. Subsequent Events

GAIT II had subscriptions of approximately $0.1 million and redemptions of approximately $1.5 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.

89

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. For the purposes of this filing, the term “Fund” shall include each of GAIF II, the GAIT Funds and the master funds in which they invest, unless the context implies otherwise.  The Fund does not engage in the sale of goods or services. The Fund’s capital consists of capital contributions of the members, as increased or decreased by gains and losses from its investments in the Master Funds, interest, expenses and redemptions. Its only assets are its investments in the Master Funds. The Master Funds do not engage in the sale of goods or services. Their assets are comprised of the equity in their accounts with clearing brokers and OTC counterparties, in each case consisting of cash, open trade equity on derivatives and the net option premium paid or received. In the case of Graham Cash Assets LLC (“Cash Assets”), the assets consist of investments in debt obligations guaranteed by the U.S. federal government, as well as cash and cash equivalents.

For the three months ended September 30, 2012 the Fund’s net asset value decreased by $12,859,652 or -8.9%. This decrease was attributable to a $10,952,013 or -7.6% net decrease in the Blended Strategies Portfolio and a $1,907,639 or -1.3% net decrease in the Systematic Strategies Portfolio.  The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $7,106,500 or 4.9% offset by redemptions totaling $15,895,546 or -11.0% and a net loss of $2,162,967 or -1.5% for the period. The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptions of $63,245 or 0.1% offset by redemptions totaling $1,925,285 or -1.3% and a net loss of $45,599 or -0.1% for the period.

For the nine months ended September 30, 2012 the Fund’s net asset value decreased by $38,975,797 or -22.9%. This decrease was attributable to a $33,284,907 or -19.6% net decrease in the Blended Strategies Portfolio and a $5,690,890 or -3.3% net decrease in the Systematic Strategies Portfolio.  The net decrease in the Blended Strategies Portfolio was attributable to total subscriptions of $12,785,608 or 7.5% offset by redemptions totaling $39,162,869 or -23.0% and net a loss of $6,907,646 or -4.1%, for the period. The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptions of $599,279 or 0.4% offset by redemptions totaling $5,351,099 or -3.1% and a net loss of $939,070 or -0.6%, for the period.

For the three months ended September 30, 2011 the Fund’s net asset value increased by $1,603,746 or 0.8%. This increase was attributable to a $4,409,229 or 2.3% net increase in the Blended Strategies Portfolio partially offset by a $2,805,483 or -1.5% net decrease in the Systematic Strategies Portfolio. The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $10,415,408 or 5.4% partially offset by redemptions totaling $4,347,978 or -2.2% and net a loss of $1,658,201 or -0.9%, for the period. The net decrease in the Systematic Strategies Portfolio was attributable to total subscriptions of $4,432,875 or 2.2% offset by redemptions totaling $5,086,603 or -2.6% and a net loss of $2,151,755 or -1.1%, for the period.

For the nine months ended September 30, 2011 the Fund’s net asset value increased by $25,566,857 or 15.1%. This increase was attributable to a $21,867,721 or 12.9% net increase in the Blended Strategies Portfolio and a $3,699,136 or 2.2% net increase in the Systematic Strategies Portfolio.  The net increase in the Blended Strategies Portfolio was attributable to total subscriptions of $42,293,399 or 25.0% partially offset by redemptions totaling $10,587,791 or -6.3% and net a loss of $9,837,887 or -5.8%, for the period. The net increase in the Systematic Strategies Portfolio was attributable to total subscriptions of $14,630,594 or 8.7% partially offset by redemptions totaling $6,530,135 or -3.9% and a net loss of $4,401,323 or -2.6%, 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.

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Blended Strategies Portfolio

2012 Summary

Three Months Ended September 30, 2012

For the three months ended September 30, 2012, the Blended Strategies Portfolio experienced net trading losses of $487,378. This amount includes a reimbursement from the Advisor of $247,919 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $735,297 which are attributable to the following sectors:

Agriculture / Softs	$	(526,518	)
Base metals		(2,356,978	)
Energy		(277,483	)
Equities		2,231,715
Foreign exchange		(790,190	)
Long term / intermediate rates		279,886
Precious metals		(660,452	)
Short term rates		1,364,723
	$	(735,297	)

The Blended Strategies Portfolio posted a net loss from trading for the third quarter of 2012, with the largest losses driven by systematic trading in metals. The portfolio incurred smaller losses in precious metals as gains in gold were more than offset by losses in silver. Currency trading negatively impacted the Portfolio as the euro and Swiss franc reversed their recent trend lower and strengthened sharply versus the U.S. dollar. The portfolio incurred losses in soft commodities as coffee and cocoa prices increased while sugar prices declined during the quarter. Small losses also resulted in energy as gains in gasoline were more than offset by losses in heating oil and crude oil. The portfolio benefitted from the equity rally, with gains in the U.S. and European stock index futures that helped mitigate a portion of the overall losses for the quarter. Modest profits also resulted from trading U.S. and European fixed income futures.

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

For the three months ended September 30, 2012, Brokerage Fees decreased by $271,583 or -26.3%, Advisory Fees decreased by $226,112 or -25.9% and Sponsor Fees decreased by $113,057 or -25.9% 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 redemptions and a net loss partially offset by subscriptions for the period. During the same period interest income decreased by $81,265 or -55.1%. Interest was earned on free cash at an average annualized yield of 0.25% for the three months ended September 30, 2012 compared to 0.42% for the same period in 2011.

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

91

Nine Months Ended September 30, 2012

For the nine months ended September 30, 2012, the Blended Strategies Portfolio experienced net trading losses of $1,515,654. This amount includes a reimbursement from the Advisor of $953,338 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $2,468,992 which are attributable to the following sectors:

Agriculture / Softs	$	(1,387,484	)
Base metals		(3,426,574	)
Energy		628,739
Equities		1,817,825
Foreign exchange		(4,715,402	)
Long term / intermediate rates		3,989,795
Precious metals		(785,789	)
Short term rates		1,409,898
	$	(2,468,992	)

The Blended Strategies Portfolio posted a net loss from trading for the first three quarters of 2012. The largest losses resulted from trading European currencies. The portfolio also experienced losses in metals as short positions in aluminum, zinc, gold and silver negatively impacted the portfolio. Trading in agricultural commodities led to losses, particularly in livestock and sugar. Positions in the fixed income sector benefitted the portfolio, with gains in European, Australian, Asian and U.S. fixed income futures.  The rally in U.S. and European equity indices generated profits for the portfolio, which also helped to mitigate a portion of the year-to-date losses.

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

For the nine months ended September 30, 2012, Brokerage Fees decreased by $494,017 or -16.7%, Advisory Fees decreased by $421,329 or -16.8% and Sponsor Fees decreased by $210,666 or -16.8% in the Blended Strategies Portfolio over the corresponding period of the preceding year. These decreases are all attributable to lower net assets of the portfolio resulting from redemptions and a net loss partially offset by subscriptions for the period. During the same period interest income decreased by $266,115 or -55.6%. Interest was earned on free cash at an average annualized yield of 0.26% for the nine months ended September 30, 2012 compared to 0.46% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the nine months ended September 30, 2012, there was no Incentive Allocation compared to $17,473 for the corresponding period of 2011 due to the portfolio’s lack of year to date profitability in 2012.

92

The following table illustrates the sector distribution of the Blended Strategies Portfolio’s investments in Master Funds as of September 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	11.0	%
Base metals	44.9	%
Energy	34.9	%
Equities	5.7	%
Foreign exchange	20.8	%
Long Term / intermediate rates	(11.7	%)
Precious metals	(2.9	%)
Short term rates	(2.7	%)
	100.0	%

2011 Summary

Three Months Ended September 30, 2011

For the three months ended September 30, 2011, the Blended Strategies Portfolio experienced net trading gains of $560,296. This amount includes a reimbursement from the Advisor of $440,506 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a gain of $119,790 which are attributable to the following sectors:

Agriculture	$	(855,953	)
Energy		(753,039	)
Foreign exchange		(1,747,170	)
Interest rates		4,616,590
Metals		2,684,521
Softs		(408,380	)
Stock index		(3,416,779	)
	$	119,790

The portfolio recognized the most significant trading gains in interest rates amidst increased safe haven demand during the period. Gains were recorded in metals as gold and silver reached record highs before falling off in the later part of the period. The portfolio recorded losses in stock indices as prices fell on a retreating appetite for risk among investors. Losses were recognized in foreign exchange trading as the U.S. dollar strengthened against most emerging market and commodity currencies in the middle of the period. Smaller losses were recorded in agriculture, softs and energy on dramatic price moves in corn and soybeans as well as plummeting prices in energy products.

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

For the three months ended September 30, 2011, Brokerage Fees increased by $294,135 or 39.9%, Advisory Fees increased by $236,786 or 37.2% and Sponsor Fees increased by $118,394 or 37.2% 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 $176,569 or -54.5%. Interest was earned on free cash at an average annualized yield of 0.42% for the three months ended September 30, 2011 compared to 0.60% for the same period in 2010.

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The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended September 30, 2011, there was no Incentive Allocation compared to $396,552for the corresponding period of 2010 due to the portfolio’s lack of year to date profitability when compared to the corresponding period of 2010.

Nine Months Ended September 30, 2011

For the nine months ended September 30, 2011, the Blended Strategies Portfolio experienced net trading losses of $3,548,469. This amount includes a reimbursement from the Advisor of $1,271,936 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $4,820,405 which are attributable to the following sectors:

Agriculture	$	(1,014,425	)
Energy		(2,382,850	)
Foreign exchange		(4,547,249	)
Interest rates		7,208,115
Metals		4,539,831
Softs		(709,474	)
Stock index		(7,914,353	)
	$	(4,820,405	)

The portfolio recorded a net loss from trading for the period in stock indices as gains in the early portion of the first quarter on the heels of improved investor confidence were offset in March when the earthquake and tsunami in Japan generated risk aversion. Market reversals generated significant losses particularly in European stock indices. Losses were also recognized in the second quarter as advances early in the quarter on encouraging earnings data and hopes of a global economic recovery were reversed causing prices to fall in a sharp reduction of risk across various markets. This pattern continued in the third quarter as the portfolio recorded losses as stock prices fell due to a retreating appetite for risk. Foreign exchange posted losses early in the period from trading in Asian currencies in March and later in the period as gains recognized when the U.S. dollar fell to multi-year lows against most major global currencies was offset as the risk aversion led to a stronger U.S. dollar versus most emerging markets and commodity currencies.  The portfolio recorded a net loss for the period in energy as gains from the first quarter recorded on rising oil prices amid increasing political tensions in the Middle East and Libya were overshadowed by losses in the second quarter as prices moved sharply downward in reaction to the announced release of strategic oil reserves in June. The portfolio generated gains in interest rates led by gains in the U.S. fixed income markets as prices climbed amid the diminishing appetite for risk assets and increased safe haven demand.  Gains were recognized in metals as prices rose in the beginning of the second quarter and continued into the third quarter with gold and silver reaching record highs before falling off in the latter part of the third quarter. The portfolio also recognized small losses in agriculture and soft commodities.

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

For the nine months ended September 30, 2011, Brokerage Fees increased by $925,422 or 45.7%, Advisory Fees increased by $760,568 or 43.7% and Sponsor Fees increased by $380,285 or 43.7% 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 $443,285 or -48.1%. Interest was earned on free cash at an average annualized yield of 0.46% for the nine months ended September 30, 2011 compared to 0.61% for the same period in 2010.

94

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the nine months ended September 30, 2011, the Incentive Allocation decreased by $384,811 or -95.7% when compared to the corresponding period of 2010 due to the portfolio’s lack of year to date profitability when compared to the corresponding period of 2010.

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

Agriculture	(35.9	%)
Energy	56.8	%
Foreign exchange	(16.9	%)
Interest rates	(73.6	%)
Metals	68.2	%
Softs	116.5	%
Stock index	(15.1	%)
	100.0	%

Systematic Strategies Portfolio

2012 Summary

Three Months Ended September 30, 2012

For the three months ended September 30, 2012, the Systematic Strategies Portfolio experienced net trading gains of $260,071. This amount includes a reimbursement from the Advisor of $9,442 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a gain of $250,629 which are attributable to the following sectors:

Agriculture / Softs	$	137,765
Base metals		(457,267	)
Energy		(103,044	)
Equities		519,231
Foreign exchange		(150,612	)
Long Term / intermediate rates		137,038
Precious metals		(101,333	)
Short term rates		268,851
	$	250,629

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

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

95

For the three months ended September 30, 2012, Brokerage Fees decreased by $73,917 or -31.7%, Advisory Fees decreased by $53,778 or -34.9% and Sponsor Fees decreased by $26,889 or -34.9% 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 redemptions and a net loss partially offset by subscriptions for the period. During the same period interest income decreased by $17,360 or -63.0%.  Interest was earned on free cash at an average annualized yield of 0.25% for the three months ended September 30, 2012 compared to 0.42% for the same period in 2011.

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

Nine Months Ended September 30, 2012

For the nine months ended September 30, 2012, the Systematic Strategies Portfolio experienced net trading gains of $32,751. This amount includes a reimbursement from the Advisor of $51,093 for trading commissions allocated from the aster Funds. The trading results, prior to the commission reimbursement, were a loss of $18,342 which is attributable to the following sectors:

Agriculture / Softs	$	(23,706	)
Base metals		(356,257	)
Energy		(50,494	)
Equities		327,997
Foreign exchange		(578,767	)
Long term / intermediate rates		573,481
Precious metals		(46,215	)
Short term rates		135,619
	$	(18,342	)

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

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

For the nine months ended September 30, 2012, Brokerage Fees decreased by $109,384 or -17.6%, Advisory Fees decreased by $96,771 or -23.1% and Sponsor Fees decreased by $48,385 or -23.1% 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 redemptions and a net loss partially offset by subscriptions for the period. During the same period interest income decreased by $47,736 or -58.6%. Interest was earned on free cash at an average annualized yield of 0.26% for the nine months ended September 30, 2012 compared to 0.46% for the same period in 2011.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the nine months ended September 30, 2012 there was no Incentive Allocation compared to a decrease of $3,012 in the corresponding period of 2011 due to the reversal of allocated Incentive Allocation in the last month of the second quarter in 2011.

96

The following table illustrates the sector distribution of the Systematic Strategies Portfolio’s investments in Master Funds as of September 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	25.2	%
Base metals	80.7	%
Energy	(1.4	%)
Equities	17.6	%
Foreign exchange	26.4	%
Long Term / intermediate rates	(37.5	%)
Precious metals	(8.5	%)
Short term rates	(2.5	%)
	100.0	%

2011 Summary

Three Months Ended September 30, 2011

For the three months ended September 30, 2011, the Systematic Strategies Portfolio experienced net trading losses of $1,712,246. This amount includes a reimbursement from the Advisor of $46,145 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $1,758,391 which is attributable to the following sectors:

Agriculture	$	(188,391	)
Energy		(347,796	)
Foreign exchange		(1,057,897	)
Interest rates		1,076,937
Metals		603,687
Softs		(140,748	)
Stock index		(1,704,183	)
	$	(1,758,391	)

The portfolio recognized significant losses in stock indices as the magnitude of declines in global stock indices in reaction to the S&P downgrade of the U.S. debt heightened concern both in U.S. and European markets.  Losses were recorded in foreign exchange as early gains were erased mid quarter when entrenched, long-term market trends reversed and investors sold commodity currencies aggressively in favor of the U.S. dollar. While positions in the Swiss franc provided some safe haven for the portfolio in the early part of the period, those gains were reversed amid speculation the Swiss National Bank would and later did seek to limit the strength of the currency relative to the euro.  Losses were recognized in energy, agriculture, and softs as the lack of sustained directionality in these markets proved to be a difficult trading environment for the portfolio. The portfolio posted gains in U.S. and European interest rate trading as prices rallied when investors sought safe haven investments as well as price appreciation on the heels of the U.S. Federal Reserve’s “operation twist.”  Gains were recognized in metals as gold and silver reached new highs by the middle of the quarter. A portion of these gains were reversed later in the period as prices retreated, but the portfolio still posted an overall gain.

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

97

For the three months ended September 30, 2011, Brokerage Fees increased by $120,132 or 106.0%, Advisory Fees increased by $68,741 or 80.6% and Sponsor Fees increased by $34,370 or 80.6% in the Systematic Strategies Portfolio over the corresponding period of the preceding year. These increases are all attributable to higher net assets of the portfolio resulting from subscriptions, partially offset by redemptions and a net loss for the period. During the same period interest income decreased by $15,518 or -36.0%. Interest was earned on free cash at an average annualized yield of 0.42% for the three months ended September 30, 2011 compared to 0.60% for the same period in 2010.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended September 30, 2011 and 2010, there was no Incentive Allocation due to the portfolios lack of profitability.

Nine Months Ended September 30, 2011

For the nine months ended September 30, 2011, the Systematic Strategies Portfolio experienced net trading losses of $3,226,995. This amount includes a reimbursement from the Advisor of $128,787 for trading commissions allocated from the Master Funds. The trading results, prior to the commission reimbursement, were a loss of $3,355,782 which is attributable to the following sectors:

Agriculture	$	(359,773	)
Energy		(669,499	)
Foreign exchange		(1,391,740	)
Interest rates		1,069,138
Metals		652,174
Softs		(185,135	)
Stock index		(2,470,947	)
	$	(3,355,782	)

Stock indices generated overall losses for the period despite recognizing gains early in the year amid rising equity prices driven by improved global economic output and improved investor optimism. Significant losses, notably in European indices, were recognized in March as the earthquake and tsunami in Japan generated dramatic market reversals. Stock indices also generated losses as advances early in the second quarter on encouraging earnings data fueled hope of a global economic recovery were reversed causing prices to fall in a sharp reduction of risk across various markets. The portfolio recognized significant losses in the third quarter as the magnitude of declines in global stock indices in reaction to the S&P downgrade of the U.S. debt heightened concern both in the U.S. and European markets. Foreign exchange generated losses during the period as the U.S. dollar abruptly reversed its declining trend early in the first quarter and strengthened following the release of favorable employment data. The losses were slightly offset as trading for the remainder of the quarter generated modest gains notably in commodity currencies such as the Canadian and Australian dollars. Gains were recognized in foreign exchange in the second quarter despite significant volatility during the quarter as the U.S. dollar fell then rose sharply against European and commodity currencies as the oscillating outlook for the eurozone debt crisis and conflicting economic reports drove the markets. Losses were recorded in the third quarter as early gains were erased mid quarter when entrenched, long-term market trends reversed and investors sold commodity currencies aggressively in favor of the U.S. dollar. While positions in the Swiss franc provided some safe haven for the portfolio in the early part of the period, gains were reversed amid speculation the Swiss National Bank would and later did seek to limit the strength of the currency relative to the euro. The portfolio was able to generate profits in energy in the first quarter notably in crude and heating oil as continued tensions in the Middle East drove energy price higher. These profits were offset by larger losses generated in the second quarter as prices moved sharply downward in reaction to the announced release of strategic oil reserves in June. Losses were recognized in the third quarter as well as the lack of sustained direction in the energy sector proved to be a difficult trading environment for the portfolio. Losses were also recognized in the agriculture and softs sectors during the period.  The portfolio was able to post gains in the metals sector benefiting from the rising price of silver which rose amid steep demand on tight supply levels during the first quarter. These gains were mitigated by losses in the second quarter as prices reversed, notably in gold, late in the quarter when investors unloaded safe haven assets in favor of riskier ones. Gains were generated in the third quarter as gold and silver reached new highs on investor concerns over sovereign debt and global economic growth. A portion of these gains were reversed later in the period as prices retreated but the portfolio posted an overall gain for the quarter. The portfolio was able to generate profits in the interest rates sector led by gains in the U.S. interest rates markets in the second quarter as prices climbed amid the diminishing appetite for risk assets in the beginning of the quarter offset by losses later in the quarter as the appetite for risk returned. The portfolio was able to post some gains in the European fixed income markets despite the sharp market reversals at the end of the quarter. The portfolio also posted gains in the third quarter in the U.S. and European interest rates sectors when prices rallied as investors sought safe haven investments and price appreciation on the heels of the U.S. Federal Reserve’s “operation twist.”

98

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

For the nine months ended September 30, 2011, Brokerage Fees increased by $360,806 or 138.2%, Advisory Fees increased by $220,298 or 111.1% and Sponsor Fees increased by $110,149 or 111.1% 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 $20,384 or -20.0%. Interest was earned on free cash at an average annualized yield of 0.46% for the nine months ended September 30, 2011 compared to 0.61% for the same period in 2010.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the nine months ended September 30, 2011 Incentive Allocation decreased by $3,012, compared to zero for the corresponding period of 2010.

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

Agriculture	55.3	%
Energy	125.9	%
Foreign exchange	(86.1	%)
Interest rates	(210.1	%)
Metals	259.3	%
Softs	6.3	%
Stock index	(50.6	%)
	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.

99

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

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

(ii)  Liquidity

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

	Blended Strategies  Portfolio			Systematic Strategies  Portfolio
September 30, 2012		17.38	%		16.83	%
December 31, 2011		21.61	%		18.83	%
September 30, 2011		14.98	%		9.42	%

Other than any potential market-imposed limitations on liquidity, the Fund’s assets are highly liquid and are expected to remain so.  Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Fund’s futures trading.  Through September 30, 2012, 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.

100

(iv)  Critical Accounting Policies

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

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

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

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

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

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

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

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

(v)  Off-Balance Sheet Arrangements

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

101

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Required.

102

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 September 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 September 30, 2012. 

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

103

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 September 30, 2012, the Fund issued 59,521.713 Units in exchange for $7,106,500 with respect to the Blended Strategies Portfolio and 839.251 Units in exchange for $63,245 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 Number of Units Purchased	Total Number of Units Purchased
Period (as of)
July 1, 2012	7,825.856	709.192
August 1, 2012	41,900.066	0.000
September 1, 2012	9,795.791	130.059

Item 3. Defaults Upon Senior Securities – None

Item 4. [Removed and Reserved]

Item 5. Other Information – None

104

+

Item 6. Exhibits

* 3.1	Certificate of Formation of Graham Alternative Investment Fund II LLC
* 4.1	Amended and Restated Limited Liability Company Agreement of Graham Alternative Investment Fund II 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)

105

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:  November 14, 2012	GRAHAM ALTERNATIVE INVESTMENT FUND II 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

106

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Paul Sedlack, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Graham Alternative Investment Fund II LLC (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2012

/s/ Paul Sedlack

Paul Sedlack

Chief Executive Officer

Graham Capital Management L.P.

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Jeff Baisley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Graham Alternative Investment Fund II LLC (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2012

/s/ Jeff Baisley

Jeff Baisley

Chief Financial Officer

Graham Capital Management L.P.

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO

SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

I, Jeff Baisley, Chief Financial Officer of Graham Capital Management L.P. and I, Paul Sedlack, Chief Executive Officer of Graham Capital Management L.P., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of Graham Alternative Investment Fund II LLC (the “registrant”) for the period ended  September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

Date: November 14, 2012

/s/ Jeff Baisley

Jeff Baisley

Chief Financial Officer

Graham Capital Management L.P.

/s/ Paul Sedlack

Paul Sedlack

Chief Executive Officer

Graham Capital Management L.P.

XML

Capital Accounts

9 Months Ended

Sep. 30, 2012

Capital Accounts [Abstract]

Capital Accounts

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 todifferent 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 $10,000. 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 $10,000. 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 $7,412 and $5,081 were paid to the Manager for the nine month periods ended September 30, 2012 and 2011, respectively, and are included as redemptions in the consolidated statements of changes in members' capital.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

These consolidated 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 consolidated financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Principles of Consolidation

The Fund owns 100% of GAI and as such these consolidated financial statements include all the accounts of the Fund and GAI. Intercompany transactions and balances have been eliminated in consolidation. Creditors of the Fund have recourse to all assets of the Fund for amounts due to them, while creditors of GAI would have recourse only to the assets of GAI.

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 consolidated statements of operations. Purchases and sales of units in GAI and 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 35.37% and 35.15%, respectively of GAIT, and 37.17% and 33.67%, 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 consolidated statements of financial condition. Changes in these carrying amounts are included in the consolidated 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.

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 month period 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 Level 1 and Level 2 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 Fund, the GAIT Funds, Graham Cash Assets LLC ("GCA"), and the Master Funds 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.

XML

Consolidated Statements of Financial Condition (Unaudited) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Assets
Total assets	$ 142,588,330	$ 174,892,163
Liabilities:
Accrued redemptions	11,582,830	4,910,866
Total liabilities	11,582,830	4,910,866
Members' capital:
Members' capital	131,005,500	169,981,297
Total liabilities and members' capital	142,588,330	174,892,163
Blended Strategies Portfolio [Member]
Members' capital:
Members' capital	113,349,406	146,634,313
Blended Strategies Portfolio [Member] | Class 0 Units [Member]
Members' capital:
Members' capital	92,738,587	119,087,637
Blended Strategies Portfolio [Member] | Class 2 Units [Member]
Members' capital:
Members' capital	20,610,819	27,546,676
Systematic Strategies Portfolio [Member]
Members' capital:
Members' capital	17,656,094	23,346,984
Systematic Strategies Portfolio [Member] | Class 0 Units [Member]
Members' capital:
Members' capital	7,020,422	9,117,153
Systematic Strategies Portfolio [Member] | Class 2 Units [Member]
Members' capital:
Members' capital	10,635,672	14,229,831
Graham Alternative Investment Trading LLC [Member]
Assets
Investment, at fair value	113,349,406	146,634,313
Redemptions receivable	10,999,238	4,335,458
Graham Alternative Investment Trading II LLC [Member]
Assets
Investment, at fair value	17,656,094	23,346,984
Redemptions receivable	$ 583,592	$ 575,408

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows provided by (used in) operating activities
Net loss	$ (7,846,716)	$ (14,239,210)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net cash provided by (used in) operating activities	24,457,117	(44,453,816)
Cash flows (used in) provided by financing activities
Subscriptions	13,384,887	56,923,993
Redemptions	(37,842,004)	(12,470,177)
Net cash (used in) provided by financing activities	(24,457,117)	44,453,816
Net change in cash and cash equivalents	0	0
Cash and cash equivalents, beginning of period	0	0
Cash and cash equivalents, end of period	0	0
Graham Alternative Investment Trading LLC [Member]
Cash flows provided by (used in) operating activities
Net loss	6,907,646	9,837,887
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Proceeds from sale of investments	32,499,089	9,922,856
Investments	(12,785,608)	(42,293,399)
Graham Alternative Investment Trading II LLC [Member]
Cash flows provided by (used in) operating activities
Net loss	939,070	4,401,323
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Proceeds from sale of investments	5,342,915	2,547,321
Investments	$ (599,279)	$ (14,630,594)

XML

Organization and Business

9 Months Ended

Sep. 30, 2012

Organization and Business [Abstract]

Organization and Business

1. Organization and Business

Graham Alternative Investment Fund II 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 members Class 0 and Class 2 units of a Blended Strategies Portfolio, and Class 0 and Class 2 units of a Systematic Strategies Portfolio. Graham Alternative Investment Ltd. ("GAI") is a British Virgin Islands business company which was formed on June 1, 2006 and commenced operations on August 1, 2006. 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 18, 2006 and commenced operations on August 1, 2006 through an investment in GAI. 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 formed on July 16, 2008 and commenced operations on January 4, 2009 through an investment in GAI. 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 Fund is the sole owner of GAI and GAI invests all of its assets into the GAIT Funds. The Manager is the director of GAI and the sole investment advisor of GAI, 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, options 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") serves as the independent administrator and transfer agent of the Fund and GAI. SEI is responsible for certain matters pertaining to the administration of the Fund and GAI.

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") of the Fund.

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

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, GAI and the GAIT Funds.

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Consolidated Statements of Financial Condition (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Blended Strategies Portfolio [Member] | Class 0 Units [Member]
Members' capital:
Capital units, issued (in units)	793,290.657	966,888.461
Capital units, outstanding (in units)	793,290.657	966,888.461
Capital units, value (in dollars per unit)	$ 116.90	$ 123.17
Blended Strategies Portfolio [Member] | Class 2 Units [Member]
Members' capital:
Capital units, issued (in units)	223,180.736	278,890.248
Capital units, outstanding (in units)	223,180.736	278,890.248
Capital units, value (in dollars per unit)	$ 92.35	$ 98.77
Systematic Strategies Portfolio [Member] | Class 0 Units [Member]
Members' capital:
Capital units, issued (in units)	90,016.962	112,079.324
Capital units, outstanding (in units)	90,016.962	112,079.324
Capital units, value (in dollars per unit)	$ 77.99	$ 81.35
Systematic Strategies Portfolio [Member] | Class 2 Units [Member]
Members' capital:
Capital units, issued (in units)	145,806.452	184,238.954
Capital units, outstanding (in units)	145,806.452	184,238.954
Capital units, value (in dollars per unit)	$ 72.94	$ 77.24

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Summary of Significant Accounting Policies (Details)	Sep. 30, 2012	Dec. 31, 2011
Graham Alternative Investment Ltd. [Abstract]
Percentage of ownership interest (in hundredths)	100.00%
Graham Alternative Investment Trading LLC [Member]
Schedule of Equity Method Investments [Line Items]
Ownership Percentage (in hundredths)	35.37%	35.15%
Graham Alternative Investment Trading II LLC [Member]
Schedule of Equity Method Investments [Line Items]
Ownership Percentage (in hundredths)	37.17%	33.67%

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 01, 2012 Systematic Strategies Portfolio [Member]	Oct. 01, 2012 Blended Strategies Portfolio [Member]
Entity Registrant Name	GRAHAM ALTERNATIVE INVESTMENT FUND II LLC
Entity Central Index Key	0001461237
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		235,823.414	1,029,846.693
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012

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Capital Accounts (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Capital Accounts [Abstract]
Minimum Initial Subscription Amount	$ 10,000
Minimum cost for additional units	5,000
Minimum notice period for units subscription	3 days
Minimum notice period for units redemption	3 days
Minimum amount for partial redemption request	10,000
Minimum holding post partial redemption	10,000
Period of remittance redemption proceeds	15 days
Capital Unit [Line Items]
Redemption and conversion policies	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.
Maximum applicable redemption fee - holding period, description	within six months from their subscription date
Minimum applicable redemption fee - holding period, description	more than six and less than twelve months from their subscription date
Fees Paid to the Mananger for Redemptions	$ 7,412	$ 5,081
Maximum [Member]
Capital Unit [Line Items]
Redemption fee (in hundredths)	2.00%
Minimum [Member]
Capital Unit [Line Items]
Redemption fee (in hundredths)	1.00%

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net loss allocated from investments in other funds:
Net realized gain (loss) on investments	$ 1,358,182	$ (295,249)	$ 4,406,162	$ (1,466,734)
Net decrease in unrealized appreciation on investments	(1,585,489)	(856,701)	(5,889,065)	(5,308,730)
Net loss allocated from investments in other funds	(227,307)	(1,151,950)	(1,482,903)	(6,775,464)
Investment income:
Interest income	76,416	175,041	246,215	560,066
Expenses:
Brokerage fees	919,345	1,264,845	2,969,996	3,573,397
Advisory fees	748,197	1,028,087	2,402,286	2,920,386
Sponsor fees	374,098	514,044	1,201,143	1,460,194
Incentive allocation	0	0	0	14,461
Interest and other	16,035	26,071	36,603	55,374
Total expenses	2,057,675	2,833,047	6,610,028	8,023,812
Net investment loss allocated from investments in other funds	(1,981,259)	(2,658,006)	(6,363,813)	(7,463,746)
Net loss	$ (2,208,566)	$ (3,809,956)	$ (7,846,716)	$ (14,239,210)

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Financial Highlights

9 Months Ended

Sep. 30, 2012

Financial Highlights [Abstract]

Financial Highlights

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

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.

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

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.

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.

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

5. Income Taxes

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

U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated 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 consolidated 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.

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Fees and Related Party Transactions (Details)	9 Months Ended
	Sep. 30, 2012
Fees and Related Party Transactions [Abstract]
Annual advisory fee percentage (in hundredths)	2.00%
Annual sponsor fee percentage (in hundredths)	1.00%
Incentive allocation percentage (in hundredths)	20.00%
Class 0 Units [Member]
Brokerage Fees [Abstract]
Annual brokerage fee percentage (in hundredths)	2.00%
Class 2 Units [Member]
Brokerage Fees [Abstract]
Annual brokerage fee percentage (in hundredths)	4.00%

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Fees and Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2012

Fees and Related Party Transactions [Abstract]

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%

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

7. Subsequent Events

The Fund had subscriptions of approximately $1.8 million and redemptions of approximately $2.4 million through November 14, 2012, the date through which subsequent events were evaluated by management. These amounts have not been included in the consolidated financial statements.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Fair Value

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 consolidated statements of financial condition. Changes in these carrying amounts are included in the consolidated 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.

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 month period 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 Level 1 and Level 2 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

Indemnifications

In the normal course of business, the Fund, the GAIT Funds, Graham Cash Assets LLC ("GCA"), and the Master Funds 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.

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Financial Highlights (Tables)

9 Months Ended

Sep. 30, 2012

Financial Highlights [Abstract]

Unit Operating Performance

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

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

Capital and Total Return for Blended Strategies Portfolio

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 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.

Capital And Total Return For Systematic Strategies Portfolio [Text Block]

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.

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.

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Subsequent Events (Details) (Subsequent Event [Member], USD $) In Millions, unless otherwise specified	1 Months Ended
	Nov. 14, 2012
Subsequent Event [Member]
Subsequent Event [Line Items]
Fund subscriptions	$ 1.8
Fund redemptions	$ 2.4

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Consolidated Statements of Changes in Members' Capital (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Members' capital, beginning balance			$ 169,981,297	$ 169,187,110
Subscriptions			13,384,887	56,923,993
Redemptions			(44,513,968)	(17,117,926)
Net loss	(2,208,566)	(3,809,956)	(7,846,716)	(14,239,210)
Members' capital, ending balance	131,005,500	194,753,967	131,005,500	194,753,967
Blended Strategies Portfolio [Member]
Members' capital, beginning balance			146,634,313	147,900,169
Subscriptions			12,785,608	42,293,399
Redemptions			(39,162,869)	(10,587,791)
Net loss			(6,907,646)	(9,837,887)
Members' capital, ending balance	113,349,406	169,767,890	113,349,406	169,767,890
Blended Strategies Portfolio [Member] | Class 0 Units [Member]
Members' capital, beginning balance			119,087,637	121,701,356
Members' capital, beginning balance (in units)			966,888.461	875,825.668
Subscriptions			10,894,754	33,408,396
Subscriptions (in units)			88,488.116	242,552.526
Redemptions			(31,828,251)	(7,879,927)
Redemptions (in units)			(262,085.920)	(58,046.780)
Net loss			(5,415,553)	(7,711,265)
Members' capital, ending balance	92,738,587	139,518,560	92,738,587	139,518,560
Members' capital, ending balance (in units)	793,290.657	1,060,331.414	793,290.657	1,060,331.414
Blended Strategies Portfolio [Member] | Class 2 Units [Member]
Members' capital, beginning balance			27,546,676	26,198,813
Members' capital, beginning balance (in units)			278,890.248	230,452.833
Subscriptions			1,890,854	8,885,003
Subscriptions (in units)			19,176.245	79,224.471
Redemptions			(7,334,618)	(2,707,864)
Redemptions (in units)			(74,885.757)	(24,457.680)
Net loss			(1,492,093)	(2,126,622)
Members' capital, ending balance	20,610,819	30,249,330	20,610,819	30,249,330
Members' capital, ending balance (in units)	223,180.736	285,219.624	223,180.736	285,219.624
Systematic Strategies Portfolio [Member]
Members' capital, beginning balance			23,346,984	21,286,941
Subscriptions			599,279	14,630,594
Redemptions			(5,351,099)	(6,530,135)
Net loss			(939,070)	(4,401,323)
Members' capital, ending balance	17,656,094	24,986,077	17,656,094	24,986,077
Systematic Strategies Portfolio [Member] | Class 0 Units [Member]
Members' capital, beginning balance			9,117,153	12,648,247
Members' capital, beginning balance (in units)			112,079.324	122,899.506
Subscriptions			363,279	4,369,009
Subscriptions (in units)			4,452.995	43,311.027
Redemptions			(2,152,721)	(5,281,272)
Redemptions (in units)			(26,515.357)	(58,207.379)
Net loss			(307,289)	(2,082,580)
Members' capital, ending balance	7,020,422	9,653,404	7,020,422	9,653,404
Members' capital, ending balance (in units)	90,016.962	108,003.154	90,016.962	108,003.154
Systematic Strategies Portfolio [Member] | Class 2 Units [Member]
Members' capital, beginning balance			14,229,831	8,638,694
Members' capital, beginning balance (in units)			184,238.954	86,626.635
Subscriptions			236,000	10,261,585
Subscriptions (in units)			3,074.637	106,334.600
Redemptions			(3,198,378)	(1,248,863)
Redemptions (in units)			(41,507.139)	(13,202.894)
Net loss			(631,781)	(2,318,743)
Members' capital, ending balance	$ 10,635,672	$ 15,332,673	$ 10,635,672	$ 15,332,673
Members' capital, ending balance (in units)	145,806.452	179,758.341	145,806.452	179,758.341

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Fees and Related Party Transactions

9 Months Ended

Sep. 30, 2012

Fees and Related Party Transactions [Abstract]

Fees and Related Party Transactions

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.

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 consolidated 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.

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Financial Highlights (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011		Sep. 30, 2012		Sep. 30, 2011
Blended Strategies Portfolio [Member] | Class 0 Units [Member]
Per unit operating performance
Net asset value per unit, beginning balance (in dollars per units)	$ 118.77		$ 132.67		$ 123.17		$ 138.96
Net income (loss):
Net investment loss (in dollars per unit)	$ (1.27)		$ (2.50)		$ (3.68)		$ (5.32)
Net gain (loss) on investments (in dollars per unit)	$ (0.60)		$ 1.41		$ (2.59)		$ (2.06)
Net loss (in dollars per unit)	$ (1.87)		$ (1.09)		$ (6.27)		$ (7.38)
Net asset value per unit, ending balance (in dollars per unit)	$ 116.90		$ 131.58		$ 116.90		$ 131.58
Ratios to average members' capital and total return [Abstract]
Total return before Incentive Allocation (in hundredths)	(1.57%)		(0.82%)		(5.09%)		(5.30%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Total return after Incentive Allocation (in hundredths)	(1.57%)		(0.82%)		(5.09%)		(5.31%)
Net investment loss before Incentive Allocation (in hundredths)	(1.06%)		(1.88%)		(2.99%)		(3.82%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Net investment loss after Incentive Allocation (in hundredths)	(1.06%)		(1.88%)		(2.99%)		(3.83%)
Total expenses before Incentive Allocation (in hundredths)	1.31%		1.32%		3.83%		3.87%
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		1.00%
Total expenses after Incentive Allocation (in hundredths)	1.31%	[1]	1.32%	[1]	3.83%	[2]	3.88%	[2]
Commission reimbursements (in hundredths)	0.20%		0.20%		0.70%		0.79%
Blended Strategies Portfolio [Member] | Class 2 Units [Member]
Per unit operating performance
Net asset value per unit, beginning balance (in dollars per units)	$ 94.30		$ 107.48		$ 98.77		$ 113.68
Net income (loss):
Net investment loss (in dollars per unit)	$ (1.49)		$ (2.54)		$ (4.43)		$ (5.98)
Net gain (loss) on investments (in dollars per unit)	$ (0.46)		$ 1.12		$ (1.99)		$ (1.64)
Net loss (in dollars per unit)	$ (1.95)		$ (1.42)		$ (6.42)		$ (7.62)
Net asset value per unit, ending balance (in dollars per unit)	$ 92.35		$ 106.06		$ 92.35		$ 106.06
Ratios to average members' capital and total return [Abstract]
Total return before Incentive Allocation (in hundredths)	(2.07%)		(1.32%)		(6.50%)		(6.69%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Total return after Incentive Allocation (in hundredths)	(2.07%)		(1.32%)		(6.50%)		(6.70%)
Net investment loss before Incentive Allocation (in hundredths)	(1.57%)		(2.36%)		(4.52%)		(5.25%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Net investment loss after Incentive Allocation (in hundredths)	(1.57%)		(2.36%)		(4.52%)		(5.26%)
Total expenses before Incentive Allocation (in hundredths)	1.81%		1.80%		5.36%		5.37%
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		1.00%
Total expenses after Incentive Allocation (in hundredths)	1.81%	[1]	1.80%	[1]	5.36%	[2]	5.38%	[2]
Commission reimbursements (in hundredths)	0.20%		0.20%		0.70%		0.79%
Systematic Strategies Portfolio [Member] | Class 0 Units [Member]
Per unit operating performance
Net asset value per unit, beginning balance (in dollars per units)	$ 78.23		$ 95.59		$ 81.35		$ 102.92
Net income (loss):
Net investment loss (in dollars per unit)	$ (1.04)		$ (1.12)		$ (2.89)		$ (3.43)
Net gain (loss) on investments (in dollars per unit)	$ 0.80		$ (5.09)		$ (0.47)		$ (10.11)
Net loss (in dollars per unit)	$ (0.24)		$ (6.21)		$ (3.36)		$ (13.54)
Net asset value per unit, ending balance (in dollars per unit)	$ 77.99		$ 89.38		$ 77.99		$ 89.38
Ratios to average members' capital and total return [Abstract]
Total return before Incentive Allocation (in hundredths)	(0.31%)		(6.50%)		(4.13%)		(13.15%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Total return after Incentive Allocation (in hundredths)	(0.31%)		(6.50%)		(4.13%)		(13.16%)
Net investment loss before Incentive Allocation (in hundredths)	(1.29%)		(1.17%)		(3.53%)		(3.32%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Net investment loss after Incentive Allocation (in hundredths)	(1.29%)		(1.17%)		(3.53%)		(3.33%)
Total expenses before Incentive Allocation (in hundredths)	1.37%		1.35%		3.89%		3.93%
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		1.00%
Total expenses after Incentive Allocation (in hundredths)	1.37%	[3]	1.35%	[3]	3.89%	[4]	3.94%	[4]
Commission reimbursements (in hundredths)	0.05%		0.12%		0.25%		0.48%
Systematic Strategies Portfolio [Member] | Class 2 Units [Member]
Per unit operating performance
Net asset value per unit, beginning balance (in dollars per units)	$ 73.54		$ 91.69		$ 77.24		$ 99.72
Net income (loss):
Net investment loss (in dollars per unit)	$ (1.31)		$ (1.49)		$ (3.83)		$ (4.73)
Net gain (loss) on investments (in dollars per unit)	$ 0.71		$ (4.90)		$ (0.47)		$ (9.69)
Net loss (in dollars per unit)	$ (0.60)		$ (6.39)		$ (4.30)		$ (14.42)
Net asset value per unit, ending balance (in dollars per unit)	$ 72.94		$ 85.30		$ 72.94		$ 85.30
Ratios to average members' capital and total return [Abstract]
Total return before Incentive Allocation (in hundredths)	(0.82%)		(6.97%)		(5.57%)		(14.45%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Total return after Incentive Allocation (in hundredths)	(0.82%)		(6.97%)		(5.57%)		(14.46%)
Net investment loss before Incentive Allocation (in hundredths)	(1.74%)		(1.63%)		(4.98%)		(4.73%)
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		(1.00%)
Net investment loss after Incentive Allocation (in hundredths)	(1.74%)		(1.63%)		(4.98%)		(4.74%)
Total expenses before Incentive Allocation (in hundredths)	1.81%		1.82%		5.33%		5.45%
Incentive Allocation (in hundredths)	0.00%		0.00%		0.00%		1.00%
Total expenses after Incentive Allocation (in hundredths)	1.81%	[3]	1.82%	[3]	5.33%	[4]	5.46%	[4]
Commission reimbursements (in hundredths)	0.05%		0.12%		0.25%		0.48%

[1] 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.

[2] 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.

[3] 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.

[4] 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.