form10q.htm

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

3. Investments in Master Funds (continued)

The following table displays the volume of derivative activities and fair value of derivative contracts held by the Master Funds based on their notional amounts and number of contracts at December 31, 2009 categorized by primary underlying risk. Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting.

	Graham Macro Directional LLC
	Long exposure						Short exposure
	Notional amounts		Number of contracts		Derivative Assets		Notional amounts			Number of contracts		Derivative Liabilities

Foreign currency exchange rate
Forwards	$	72,680,881		-	$	796,022	$	(92,523,752	)		-	$	(681,004	)
Total	$	72,680,881		-	$	796,022	$	(92,523,752	)		-	$	(681,004	)


Collateral balances supporting all derivative positions												$	1,504,495

Index

Graham Alternative Investment Trading LLC

Notes to 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 on investments in their statements of operations segregated by primary underlying risk and contract type for the three months ended June 30, 2010:

	Graham Commodity Strategies LLC			Graham Discretionary Energy Trading III LLC			Graham Fed Policy Ltd.			Graham Global Monetary Policy LLC		Graham GMP Securities LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC			Graham Short Term Global Macro LLC
Commodity price
Futures	$	(13,187,255	)	$	(5,186,347	)	$	3,979,881		$	2,862,473	$	-		$	(50,167,010	)	$	(603,690	)	$	(221,336	)
Options		-			1,874,590			-			-		-			-			-			-
		(13,187,255	)		(3,311,757	)		3,979,881			2,862,473		-			(50,167,010	)		(603,690	)		(221,336	)
Equity price
Futures		-			-			-			2,212,502		-			(29,055,274	)		2,484,139			334,113
		-			-			-			2,212,502		-			(29,055,274	)		2,484,139			334,113
Foreign currency exchange rate
Futures		-			-			-			-		-			2,398,505			-			-
Forwards		-			-			-			46,487,972		20,691			(9,137,401	)		4,509,743			395,464
Options		-			-			-			202,284		-			-			-			(2,679,231	)
		-			-			-			46,690,256		20,691			(6,738,896	)		4,509,743			(2,283,767	)
Interest rate
Bonds		-			-			-			-		-			-			769,659			86,547
Futures		-			-			(2,197,604	)		5,812,180		-			92,793,103			1,191,310			874,480
Interest rate swaps		-			-			3,821,203			-		(2,147,422	)		-			-			-
Options		-			-			-			-		-			-			-			-
		-			-			1,623,599			5,812,180		(2,147,422	)		92,793,103			1,960,969			961,027
Total	$	(13,187,255	)	$	(3,311,757	)	$	5,603,480		$	57,577,411	$	(2,126,731	)	$	6,831,923		$	8,351,161		$	(1,209,963	)

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

3. Investments in Master Funds (continued)

	Graham Commodity Strategies LLC			Graham Discretionary Energy Trading III LLC		Graham Fed Policy Ltd.		Graham Global Monetary Policy LLC			Graham GMP Securities LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC			Graham Short Term Global Macro LLC
Commodity price
Futures	$	(5,101,641	)	$	3,340,660	$	3,979,882	$	5,040,770		$	-		$	(73,935,555	)	$	(1,361,710	)	$	(1,014,186	)
Options		-			1,157,240		-		-			-			-			-			-
		(5,101,641	)		4,497,900		3,979,882		5,040,770			-			(73,935,555	)		(1,361,710	)		(1,014,186	)
Equity price
Futures		-			-		-		3,338,610			-			(61,669,638	)		2,272,190			158,138
		-			-		-		3,338,610			-			(61,669,638	)		2,272,190			158,138
Foreign currency exchange rate
Futures		-			-		-		-			-			3,110,816			-			-
Forwards		-			-		-		84,190,388			20,691			(9,218,276	)		13,689,981			1,947,897
Options		-			-		-		(3,317,727	)		-			-			-			(5,205,080	)
		-			-		-		80,872,661			20,691			(6,107,460	)		13,689,981			(3,257,183	)
Interest rate
Bonds		-			-		-		-			(45,362	)		-			-			-
Futures		-			-		858,476		6,254,151			-			105,319,873			1,191,310			874,480
Interest rate swaps		-			-		9,830,852		(403,000	)		(2,147,423	)		-			-			-
Options		-			-		-		(12,500	)		-			-			-			-
		-			-		10,689,328		5,838,651			(2,192,785	)		105,319,873			1,191,310			874,480
Total	$	(5,101,641	)	$	4,497,900	$	14,669,210	$	95,090,692		$	(2,172,094	)	$	(36,392,780	)	$	15,791,771		$	(3,238,751	)

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

3. Investments in Master Funds (continued)

	Graham Commodity Strategies LLC		Graham Fed Policy Ltd.			Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC
Commodity price
Futures	$	5,082,395	$	-		$	1,722,582		$	(21,576,351	)	$	540,498
		5,082,395		-			1,722,582			(21,576,351	)		540,498
Equity price
Futures		-		-			(76,401	)		(7,423,135	)		(197,375	)
Options		-		-						-			-
		-		-			(76,401	)		(7,423,135	)		(197,375	)
Foreign currency exchange rate
Futures		-		-			425,330			370,184			-
Forwards		-		512,837			11,609,700			17,287,755			9,237,403
Options		-		14,461,894			(851,100	)		-			(275,879	)
		-		14,974,731			11,183,930			17,657,939			8,961,524
Interest rate
Futures		-		18,319,607			5,633,691			(17,501,912	)		(796,258	)
Options		-		(27,699,052	)		-			-			-
		-		(9,379,445	)		5,633,691			(17,501,912	)		(796,258	)
Total	$	5,082,395	$	5,595,286		$	18,463,802		$	(28,843,459	)	$	8,508,389

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

3. Investments in Master Funds (continued)

	Graham Commodity Strategies LLC		Graham Fed Policy Ltd.		Graham Global Monetary Policy LLC			Graham K4D Trading Ltd.			Graham Macro Directional LLC
Commodity price
Futures	$	8,727,378	$	-	$	2,965,595		$	(35,187,009	)	$	943,978
		8,727,378		-		2,965,595			(35,187,009	)		943,978
Equity price
Futures		-		-		(853,781	)		(52,176,459	)		185,920
Options		-		-		(135,476	)		-			-
		-		-		(989,257	)		(52,176,459	)		185,920
Foreign currency exchange rate
Futures		-		-		425,330			(2,586,197	)		-
Forwards		-		512,837		24,214,452			4,965,566			9,023,345
Options		-		14,461,894		(851,100	)		-			(275,879	)
		-		14,974,731		23,788,682			2,379,369			8,747,466
Interest rate
Futures		-		-		5,577,162			(10,789,484	)		(3,399,636	)
Options		-		-		-			-			-
		-		-		5,577,162			(10,789,484	)		(3,399,636	)
Total	$	8,727,378	$	14,974,731	$	31,342,182		$	(95,773,583	)	$	6,477,728

Index

Graham Alternative Investment Trading LLC

Notes to 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 three to thirty months. GCA also maintains cash and cash equivalents on deposit with major U.S. institutions. GAIT’s investment in GCA is valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP. GAIT records its proportionate share of GCA’s investment income and expenses on a monthly basis. For the three months ended June 30, 2010, the total amount recognized by GAIT with respect to its investment in GCA was $466,353. For the six months ended June 30, 2010, the total amount recognized by GAIT with respect to its investment in GCA was $881,848. For the three months ended June 30, 2009, the total amount recognized by GAIT with respect to its investment in GCA was $170,006. For the six months ended June 30, 2009, the total amount recognized by GAIT with respect to its investment in GCA was $227,696. These amounts are included in interest income in the statements of operations and managing member allocation. At June 30, 2010 and December 31, 2009, GAIT owned approximately 14.97% and 15.15%, respectively, of GCA. The following table summarizes the financial position of GCA as of June 30, 2010 and December 31, 2009:

	June 30, 2010		December 31, 2009
Assets:
Cash and cash equivalents	$	517,286,644	$	485,846,462
Investments in fixed income securities		1,739,320,224		1,421,913,802
Redemptions receivable		-		-
Accrued interest income		5,566,668		4,848,122
Total assets		2,262,173,536		1,912,608,386

Liabilities:
Other payables		20,000		-
Total liabilities		20,000		-

Members’ capital		2,262,153,536		1,912,608,386
Total liabilities and members’ capital	$	2,262,173,536	$	1,912,608,386

The following table summarizes the results of operations of GCA for the three and six months ended June 30, 2010 and 2009:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Investment income
Interest income	$	3,036,438	$	1,109,092	$	5,659,711	$	1,928,768
Net investment income		3,036,438		1,109,092		5,659,711		1,928,768
Net income	$	3,036,438	$	1,109,092	$	5,659,711	$	1,928,768

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

GCA reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. The following table shows the fair value classification of each investment type held by GCA as of June 30, 2010 and December 31, 2009:

	June 30, 2010		December 31, 2009
Long positions
Level 2:
Fixed income securities
FDIC Guaranteed Bonds	$	1,087,370,922	$	667,900,290
Government Bonds		651,949,302		754,013,512
Fixed income securities		1,739,320,224		1,421,913,802
Total Level 2		1,739,320,224		1,421,913,802
Total long positions	$	1,739,320,224	$	1,421,913,802

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 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 will equal 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.

Addition of Manager and Managing Members

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

Subscriptions

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

Redemptions

Units are not subject to any minimum holding period. Members may redeem Units at the Net Asset Value thereof as of each Valuation Day 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 Units with a total Net Asset Value of less than $25,000. The redemption proceeds will normally be remitted within 15 days after the Valuation Day, without interest for the period from the Valuation Day to the payment date.

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

5. Capital Accounts (continued)

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 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. Class 0 Units are not subject to a redemption fee. Redemption fees are payable to the Manager upon redemption of Units.

6. Fees

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.

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 GAIT’s 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 those amounts. These reimbursements are included in other income in the statements of operations and managing member allocation.

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

6. Fees (continued)

Brokerage Fees (continued)

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.

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.

8. Related Party Transactions

The Manager, due to its relationship with its affiliates, may enter into certain related party transactions.

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

9. Financial Highlights

The following is the per unit operating performance calculation for the three months ended June 30, 2010 and 2009:

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, March 31, 2009	$	131.20		$	110.41
Net loss:
Net investment loss		(1.74	)		(2.02	)
Net gain on investments		0.95			0.81
Net loss		(0.79	)		(1.21	)
Net asset value per unit, June 30, 2009	$	130.41		$	109.20

Net asset value per unit, March 31, 2010	$	134.58		$	111.36
Net gain (loss):
Net investment loss		(2.17	)		(1.81	)
Net gain on investments		2.39			1.45
Net gain (loss)		0.22			(0.36	)
Net asset value per unit, June 30, 2010	$	134.80		$	111.00

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the three months ended June 30, 2010 and 2009:

	Class 0						Class 2
	2010			2009			2010			2009

Total return before Incentive Allocation		0.16	%		(0.59	)%		(0.31	)%		(1.08	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		0.16	%		(0.59	)%		(0.31	)%		(1.08	)%

Net investment loss before Incentive Allocation		(1.20	)%		(1.06	)%		(1.24	)%		(1.60	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(1.20	)%		(1.06	)%		(1.24	)%		(1.60	)%

Total expenses before Incentive Allocation		1.29	%		1.28	%		1.81	%		1.83	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.29	%		1.28	%		1.81	%		1.83	%

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

9. Financial Highlights (continued)

The following is the per unit operating performance calculation for the six months ended June 30, 2010 and 2009:

	Class 0			Class 2
Per unit operating performance:
Net asset value per unit, December 31, 2008	$	132.12		$	111.74
Net loss:
Net investment loss		(3.09	)		(3.68	)
Net gain on investments		1.38			1.14
Net loss		(1.71	)		(2.54	)
Net asset value per unit, June 30, 2009	$	130.41		$	109.20

Net asset value per unit, December 31, 2009	$	135.56		$	112.73
Net loss:
Net investment loss		(4.11	)		(3.89	)
Net gain on investments		3.35			2.16
Net loss		(0.76	)		(1.73	)
Net asset value per unit, June 30, 2010	$	134.80		$	111.00

The following represents ratios to average Members’ capital, excluding the Managing Member, and total return for the six months ended June 30, 2010 and 2009:

	Class 0						Class 2
	2010			2009			2010			2009

Total return before Incentive Allocation		(0.56	)%		(1.28	)%		(1.53	)%		(2.26	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Total return after Incentive Allocation		(0.56	)%		(1.29	)%		(1.53	)%		(2.27	)%

Net investment loss before Incentive Allocation		(2.02	)%		(2.32	)%		(2.62	)%		(3.39	)%
Incentive Allocation		0.00			(0.01	)		0.00			(0.01	)
Net investment loss after Incentive Allocation		(2.02	)%		(2.33	)%		(2.62	)%		(3.40	)%

Total expenses before Incentive Allocation		2.55	%		2.54	%		3.57	%		3.62	%
Incentive Allocation		0.00			0.01			0.00			0.01
Total expenses after Incentive Allocation		2.55	%		2.55	%		3.57	%		3.63	%

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, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the year. 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 amounts allocated from Master Funds. The computation of such ratios is based on the amount of net investment loss, total expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of members’ capital of GAIT, excluding that of the Managing Member, for the three and six months ended June 30, 2010 and 2009.

Index

Graham Alternative Investment Trading LLC

Notes to Financial Statements (continued)

10. Subsequent Events

The Fund had subscriptions of approximately $20.6 million and redemptions of approximately $1.4 million through August 16, 2010, the date through which subsequent events were evaluated by the Manager. These amounts have not been included in the financial statements.

The Fund announced a reduction of the minimum initial subscription from $50,000 to $10,000 on July 1, 2010. The Fund also announced that a redemption request will now be accepted to the extent that it would not result in an investor owning less than $10,000 on July 1, 2010, a change from the prior amount of $25,000.

Index

Graham Alternative Investment Trading II LLC

Statements of Financial Condition

Assets	June 30, 2010 (Unaudited)		December 31, 2009 (Audited)
Cash and cash equivalents	$	6	$	770
Investment in Graham K4D Trading Ltd., at fair value		2,648,629		3,256,884
Investment in Graham Cash Assets LLC, at fair value		49,962,712		34,112,305
Accrued commission reimbursements		16,877		15,286
Receivable from Graham K4D Trading Ltd.		986		-
Total assets	$	52,629,210	$	37,385,245

Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	386,076	$	-
Accrued brokerage fees		119,616		88,838
Accrued advisory fees		86,433		63,502
Accrued sponsor fees		43,216		31,751
Accrued incentive allocation		-		479
Payable to Graham K4D Trading Ltd.		-		343
Total liabilities		635,341		184,913

Members’ capital:
Class 0 Units (336,335.874 and 222,427.212 units issued and outstanding at $95.72 and $100.59 per unit, respectively)		32,195,638		22,373,766
Class 2 Units (211,608.757 and 149,683.130 units issued and outstanding at $93.33 and $99.05 per unit, respectively)		19,749,010		14,826,566
Class M Units (500.000 and 0.000 units issued and outstanding at $98.44 and $0.00 per unit, respectively)		49,221		-
Total members’ capital		51,993,869		37,200,332
Total liabilities and members’ capital	$	52,629,210	$	37,385,245

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Condensed Schedules of Investments

June 30, 2010 (Unaudited)

Unaudited condensed schedule of investments for Graham K4D Trading Ltd.

Description	Number of Contracts / Principal Amount		Fair Value			Percentage of Net Assets
Graham K4D Trading Ltd.
Long contracts
Futures
Eurodollar December 2011		460	$	5,939,277			8.21	%
Japanese bond September 2010		460		5,137,465			7.10	%
U.S. bond				8,966,861			12.39	%
Foreign bond				5,423,348			7.49	%
U.S. index				(6,055,774	)		(8.37	)%
Foreign index				(7,452,918	)		(10.30	)%
Commodity				(9,315,138	)		(12.87	)%
Other interest rate				4,674,829			6.46	%
Currency				281,979			0.39	%
Total futures				7,599,929			10.50	%

Forwards
Australian Dollar / Japanese Yen 07/21/2010	AUD 103,978,992			(3,663,231	)		(5.06	)%
Australian Dollar / U.S. Dollar 07/21/2010	AUD 234,651,041			(3,699,776	)		(5.11	)%
British Pound / Japanese Yen 07/21/2010	GBP 325,018,437			(6,599,831	)		(9.12	)%
British Pound / U.S. Dollar 07/21/2010	GBP 512,395,638			7,151,839			9.88	%
Canadian Dollar / Euro 07/21/2010	CAD 160,277,343			(3,877,387	)		(5.36	)%
Canadian Dollar / U.S. Dollar 07/21/2010	CAD 358,673,446			(9,288,917	)		(12.84	)%
Euro / Japanese Yen 07/21/2010	EUR 318,795,158			(9,247,548	)		(12.78	)%
Japanese Yen / U.S. Dollar 07/21/2010	JPY 109,427,758,492			28,353,929			39.19	%
Swiss Franc / U.S. Dollar 07/21/2010	CHF 1,191,931,599			39,088,132			54.02	%
Other foreign currency				(5,665,516	)		(7.83	)%
Total forwards				32,551,694			44.99	%

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Condensed Schedules of Investments (continued)

June 30, 2010 (Unaudited)

Unaudited condensed schedule of investments for Graham K4D Trading Ltd.

Description	Number of Contracts / Principal Amount	Fair Value			Percentage of Net Assets
Graham K4D Trading Ltd. (continued)
Short contracts
Futures
U.S. bond		$	(3,903,659	)		(5.40	)%
Foreign bond			(3,667,236	)		(5.07	)%
U.S. index			4,466,697			6.17	%
Foreign index			7,055,421			9.75	%
Commodity			7,543,825			10.43	%
Interest rate			(2,311,775	)		(3.19	)%
Currency			686,167			0.95	%
Total futures			9,869,440			13.64	%

Forwards
British Pound / Japanese Yen 07/21/2010	GBP (339,634,394)		6,523,982			9.02	%
British Pound / U.S. Dollar 07/21/2010	GBP (578,479,361)		(8,565,134	)		(11.84	)%
Canadian Dollar / U.S. Dollar 07/21/2010	CAD (277,958,026)		6,749,800			9.33	%
Euro / Japanese Yen 07/21/2010	EUR (354,804,470)		10,213,729			14.12	%
Japanese Yen / U.S. Dollar 07/21/2010	JPY (106,083,180,233)		(28,631,237	)		(39.57	)%
Swiss Franc / U.S. Dollar 07/21/2010	CHF (1,232,353,374)		(43,802,489	)		(60.54	)%
Swiss Franc / Japanese Yen 07/21/2010	CHF (297,489,508)		(4,501,820	)		(6.22	)%
Other foreign currency			14,668,682			20.27	%
Total forwards			(47,344,487	)		(65.43	)%

Total		$	2,676,576			3.70	%

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Condensed Schedules of Investments (continued)

June 30, 2010 (Unaudited)

Unaudited condensed schedule of investments for Graham Cash Assets LLC

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Graham Cash Assets LLC
Investments in Fixed Income Securities (cost $1,739,320,224)
United States
FDIC Guaranteed Bonds (cost $1,087,370,922)
Bank of America 0.57% – 1.70% Floating Rate Notes due 09/13/10 – 06/22/12	$	175,000,000	$	175,701,242		7.77	%
Citibank 1.25% – 1.63% due 03/30/11 – 11/15/11		200,000,000		201,011,318		8.89	%
Citigroup 1.25% – 1.38% due 05/05/11 – 09/22/11		150,000,000		150,716,127		6.66	%
JP Morgan Chase 1.65% – 2.63% due 12/01/10 – 02/23/11		125,000,000		125,653,797		5.55	%
Other FDIC Guaranteed Bonds				434,288,438		19.20	%
Total FDIC Guaranteed Bonds				1,087,370,922		48.07	%

Government Bonds (cost $651,949,302)
U.S. Treasury 0.00% – 2.75% due 07/15/10 – 06/30/11		650,000,000		651,949,302		28.82	%
Total Government Bonds				651,949,302		28.82	%

Total Investments in Fixed Income Securities			$	1,739,320,224		76.89	%

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Condensed Schedules of Investments

December 31, 2009

Condensed schedule of investments for Graham K4D Trading Ltd.

Description	Number of Contracts/Principal Amount		Fair Value			Percentage of Net Assets
Graham K4D Trading Ltd.
Long contracts
Futures
LME Aluminum January 2010		1,302	$	6,972,938			5.92	%
LME Copper January 2010		366		6,743,091			5.72	%
Other commodity				21,454,287			18.21	%
U.S. bond				(4,526,734	)		(3.84	)%
Foreign bond				(6,607,015	)		(5.61	)%
U.S. index				5,331,432			4.53	%
Foreign index				8,908,434			7.56	%
Interest rate				(8,722,161	)		(7.40	)%
Currency				355,993			0.30	%
Total futures				29,910,265			25.39	%

Forwards
British Pound / Japanese Yen 01/20/10	GBP 224,750,683			11,529,834			9.79	%
Euro / U.S. Dollar 01/20/10	EUR 593,968,247			(12,238,099	)		(10.39	)%
Japanese Yen / U.S. Dollar 01/20/10	JPY 51,561,122,880			(17,479,840	)		(14.84	)%
Other foreign currency				9,230,717			7.84	%
Total forwards				(8,957,388	)		(7.60	)%

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Condensed Schedules of Investments (continued)

December 31, 2009

Condensed schedule of investments for Graham K4D Trading Ltd.

Description	Number of Contracts/Principal Amount	Fair Value			Percentage of Net Assets
Graham K4D Trading Ltd. (continued)
Short contracts
Futures
U.S. bond		$	1,217,531			1.03	%
Foreign bond			2,267,786			1.93	%
U.S. index			(2,810,098	)		(2.39	)%
Foreign index			(3,726,222	)		(3.16	)%
Commodity			(14,721,246	)		(12.50	)%
Interest rate			2,493,009			2.12	%
Currency			(32,595	)		(0.03	)%
Total futures			(15,311,835	)		(13.00	)%

Forwards
Japanese Yen / U.S. Dollar 01/20/10	JPY(52,960,960,701)		18,321,239			15.55	%
Euro / U.S. Dollar 01/20/10	EUR (604,603,018)		12,851,322			10.91	%
British Pound / Japanese Yen 01/20/10	GBP (207,438,849)		(11,260,219	)		(9.56	)%
Other foreign currency			(7,624,210	)		(6.47	)%
Total forwards			12,288,132			10.43	%

Total		$	17,929,174			15.22	%

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Condensed Schedules of Investments (continued)

December 31, 2009

Condensed schedule of investments for Graham Cash Assets LLC

Description	Principal Amount		Fair Value		Percentage of Members’ Capital
Graham Cash Assets LLC
Investments in Fixed Income Securities (cost $1,421,913,802)
United States
FDIC Guaranteed Bonds (cost $667,900,290)
Bank of America 0.28% Floating Rate Note due 09/13/10	$	100,000,000	$	100,177,559		5.24	%
Other Bank of America 0.63% - 1.70% Floating Rate Notes due 12/23/10 - 06/22/12		75,000,000		75,931,110		3.97	%
Citibank 1.25% - 1.63% due 03/30/11 - 11/15/11		125,000,000		125,481,266		6.56	%
JPMorgan Chase 1.65% - 2.63% due 12/01/10 - 02/23/11		125,000,000		126,280,415		6.60	%
Other FDIC guaranteed bonds				240,029,940		12.55	%
Total FDIC Guaranteed Bonds				667,900,290		34.92	%

Government Bonds (cost $754,013,512)
U.S. Treasury 0.00% - 2.75% due 01/31/10 - 06/30/11		750,000,000		754,013,512		39.42	%
Total Government Bonds				754,013,512		39.42	%

Total Investments in Fixed Income Securities			$	1,421,913,802		74.34	%

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Statements of Operations and Managing Member Allocation

	Three Months Ended June 30,						Six Months Ended June 30,
	2010 (Unaudited)			2009 (Unaudited)			2010 (Unaudited)			2009 (Unaudited)
Net gain (loss) allocated from investment in Graham K4D Trading Ltd.:
Net realized gain (loss) on investments	$	1,981,644		$	(25,538	)	$	(138,593	)	$	(82,766	)
Net decrease in unrealized appreciation on investments		(1,771,166	)		(102,590	)		(561,450	)		(111,144	)
Brokerage commissions and fees		(54,578	)		(8,188	)		(100,540	)		(10,080	)
Net gain (loss) allocated from investment in Graham K4D Trading Ltd.		155,900			(136,316	)		(800,583	)		(203,990	)

Net investment loss allocated from investment in Graham K4D Trading Ltd.		(1,202	)		(246	)		(3,260	)		(326	)

Investment income:
Interest income		67,524			5,400			121,117			7,651
Other income		54,578			8,188			100,540			10,080
Total investment income		122,102			13,588			221,657			17,731

Expenses:
Brokerage fees		353,595			38,697			629,142			49,966
Advisory fees		256,548			23,867			456,950			30,741
Sponsor fees		128,274			11,934			228,475			15,371
Interest and other		3,714			941			4,910			1,741
Total expenses		742,131			75,439			1,319,477			97,819
Net investment loss of the Fund		(620,029	)		(61,851	)		(1,097,820	)		(80,088	)

Net loss		(465,331	)		(198,413	)		(1,901,663	)		(284,404	)

Incentive allocation		-			(42	)		-			(42	)

Net loss available for pro-rata allocation to all members	$	(465,331	)	$	(198,455	)	$	(1,901,663	)	$	(284,446	)

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Statements of Changes in Members’ Capital

For the six months ended June 30, 2010 (unaudited) and 2009 (unaudited)

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

Members’ capital, January 4, 2009		–	$	–			–		$	–			–	$	–	$	–
Initial subscriptions		2,240.000		224,000			5,750.000			575,000			–		–		799,000
Subscriptions		20,910.138		2,030,000			35,339.448			3,430,597			–		–		5,460,597
Redemptions		–		–			(500.000	)		(48,951	)		–		–		(48,951	)
Incentive allocation		–		–			–			42			–		–		42
Net loss available for pro-rata allocation		–		(87,637	)		–			(196,809	)		–		–		(284,446	)
Members’ capital, June 30, 2009		23,150.138	$	2,166,363			40,589.448		$	3,759,879			–	$	–	$	5,926,242

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

Members’ capital, December 31, 2009		222,427.212		$	22,373,766			149,683.130		$	14,826,566			–	$	–		$	37,200,332
Subscriptions		119,836.004			11,326,000			70,361.090			6,673,010			500.000		50,000			18,049,010
Redemptions		(5,927.342	)		(569,567	)		(8,435.463	)		(784,243	)		–		–			(1,353,810	)
Net loss available for pro-rata allocation		–			(934,561	)		–			(966,323	)		–		(779	)		(1,901,663	)
Members’ capital, June 30, 2010		336,335.874		$	32,195,638			211,608.757		$	19,749,010			500.000	$	49,221		$	51,993,869

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Statements of Cash Flows

For the six months ended June 30, 2010 (unaudited) and 2009 (unaudited)

	Six Months Ended June 30,
	2010 (Unaudited)			2009 (Unaudited)
Cash flows used in operating activities
Net loss	$	(1,901,663	)	$	(284,404	)
Adjustments to reconcile net loss to net cash used in operating activities:
Net loss allocated from investment in Graham K4D Trading Ltd.		803,843			204,316
Net income allocated from investment in Graham Cash Assets LLC		(121,117	)		(4,168	)
Net income allocated from investment in Graham Cash Assets II LLC		-			(3,483	)
Proceeds from sale of investments in Graham K4D Trading Ltd.		22,879,428			1,565,627
Proceeds from sale of investments in Graham Cash Assets LLC		24,766,140			3,104,431
Proceeds from sale of investments in Graham Cash Assets II LLC		-			4,786,414
Investments in Graham K4D Trading Ltd.		(23,076,345	)		(2,228,260	)
Investments in Graham Cash Assets LLC		(40,495,430	)		(8,593,914	)
Investments in Graham Cash Assets II LLC		-			(4,782,931	)
Changes in assets and liabilities:
Accrued commission reimbursements		(1,591	)		(4,258	)
Accrued brokerage fees		30,778			16,009
Accrued advisory fees		22,931			9,792
Accrued sponsor fees		11,465			4,896
Accrued incentive allocation		(479	)		42
Net cash used in operating activities		(17,082,040	)		(6,209,891	)

Cash flows provided by financing activities
Subscriptions		18,049,010			6,259,597
Redemptions		(967,734	)		(48,951	)
Net cash provided by financing activities		17,081,276			6,210,646

Net (decrease) increase in cash and cash equivalents		(764	)		755

Cash and cash equivalents, beginning of period		770			–
Cash and cash equivalents, end of period	$	6		$	755

See accompanying notes.

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements

June 30, 2010 (unaudited)

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 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 operation of January 1, 1999 and is organized as a British Virgin Islands business company. As more fully described in Note 2, this Master Fund invests in a broad range of currency forward and futures contracts; bond, interest rate, and index futures contracts; commodity forward and futures contracts, and swaps thereon (collectively referred to as “Derivative Positions”) traded on U.S. and foreign exchanges.

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 Deutschland (“EUREX”), Euronext Paris (“MONEP”), the Hong Kong Exchanges and Clearing Ltd. (“HKEX”), the Intercontinental Exchange (“ICE”), the London Commodity Exchange (“LCE”), the London International Financial Futures and Options Exchange Ltd. (“LIFFE”), the London Metal Exchange (“LME”), the Marché à Terme International de France (“MATIF”), the Montreal Exchange (“ME”), the Osaka Securities Exchange (“OSE”), the Sydney Futures Exchange Ltd. (“SFE”), the Singapore International Monetary Exchange (“SIMEX”), the South African Exchange (“SAFEX”), the Tokyo International Financial Futures Exchange (“TIFFE”), the Tokyo Commodity Exchange (“TOCOM”) and the Tokyo Stock Exchange (“TSE”).

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”) of the Fund.

Duties of the Managing Member

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

2. Summary of Significant Accounting Policies

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

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Amounts included in the financial statements and accompanying notes related to June 30, 2010 and 2009 and the three and six month periods then ended are unaudited. Amounts included herein as of December 31, 2009 have been taken from the December 31, 2009 audited financial statements and accompanying notes of GAIT II.

In July 2009, the Financial Accounting Standards Board (“FASB”) issued “The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles” (the “Codification”). The Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. All existing accounting standard documents are superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification does not change current U.S. GAAP. The adoption of the Codification does not impact GAIT II’s financial statements except for references made to authoritative accounting literature in the footnotes.

Cash and Cash Equivalents

GAIT II considers cash and cash equivalents to include all highly liquid investments with a maturity of three months or less when acquired. At June 30, 2010 and December 31, 2009, these amounts are primarily invested in overnight deposits with major U.S. financial institutions.

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 statement of financial condition at fair value in accordance with U.S. GAAP. Gains and losses are allocated by K4D Trading to GAIT II based upon GAIT II’s proportionate share of the net assets 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 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.

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

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Fair Value (continued)

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 based on the release of ASU 2009-12 in December 2009. As of June 30, 2010 and December 31, 2009, neither K4D Trading nor GCA held any Level 3 investments.

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, credit, foreign currency exchange rate, commodity price, and equity price risks. These risks can be in excess of the amounts recognized in the statement 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. To the extent the Master Fund is deemed to be insolvent, all positions could be subject to liquidation.

The Master Fund records all its derivative 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 on investments in the Master Fund’s statement 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.

Index

Graham Alternative Investment Trading II LLC

Notes to 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 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.

Forward Contracts

The Master Fund enters into foreign currency and commodity forward contracts in an attempt to take advantage of changes in exchange rates and commodity prices.

Forward currency and commodities transactions are contracts or agreements for delivery of specific currencies and commodities or the cash equivalent value at a specified future date and an agreed upon price. Forward contracts are not guaranteed by an exchange or clearing house and therefore the risks include the inability of counterparties to meet their obligations under the terms of the contracts as well as the risks associated with movements in fair value.

Swap Contracts

The Master Fund may enter into various swap contracts. 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 and force the Master Fund to cover its resale commitments, if any, at the current market price. 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 a 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.

An interest rate swap contract is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified 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.

Index

Graham Alternative Investment Trading II LLC

Notes to 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.

During the term of the swaps, changes in value are recognized as unrealized gains or losses by marking the contracts to fair value. Additionally, the Master Fund records a realized gain (loss) when a swap contract is terminated and when periodic payments are received or made at the end of each measurement period, but prior to termination. The Master Fund determines the estimated fair value of all swaps in accordance with U.S. GAAP.

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.

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 fair value 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.

Indemnifications

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

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

3. Investment in Graham K4D Trading Ltd.

As of June 30, 2010 and December 31, 2009, GAIT II invested in K4D Trading, a master trading vehicle also managed by the Managing Manager. GAIT II’s investment in K4D Trading, as well as its investment objective, is summarized below. K4D Trading and GAIT II are related parties. K4D Trading does not charge any management or incentive fees, and offers monthly subscriptions and redemptions.

June 30, 2010
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Income (three months then ended)		Net Income (six months then ended)

Graham K4D Trading Ltd. (a)		5.09	%	$	2,648,629	$	154,698	$	(803,843	)
		5.09	%	$	2,648,629	$	154,698	$	(803,843	)

(a) – Systematic macro

December 31, 2009
Investment – Objective	Percent of Members’ Capital			Fair Value		Net Income (twelve months then ended)

Graham K4D Trading Ltd. (a)		8.75	%	$	3,256,884	$	1,203,633
		8.75	%	$	3,256,884	$	1,203,633

(a) – Systematic macro

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

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

The following table summarizes the financial position of K4D Trading as of June 30, 2010 and December 31, 2009:

	June 30, 2010			December 31, 2009
Assets:
Cash and cash equivalents	$	9		$	425
Due from brokers		69,895,643			99,865,289
Derivative financial instruments, at fair value		17,469,369			17,929,174
Subscriptions receivable		-			4,331
Interest receivable		5,753			293
Total assets		87,370,774			117,799,512

Liabilities:
Derivative financial instruments, at fair value		14,792,793			-
Due to brokers		217,908			-
Redemptions payable		-			4,331
Total liabilities		15,010,701			4,331
Net assets	$	72,360,073		$	117,795,181

Percentage of Master Fund held by the Fund		3.66	%		2.76	%

The following table summarizes the results of operations of K4D Trading for the three and six months ended June 30, 2010 and 2009:

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009

Net investment loss	$	(33,308	)	$	(61,998	)	$	(101,716	)	$	(81,619	)

Net realized gain (loss) on investments		56,094,201			(27,997,936	)		(21,798,070	)		(71,431,667	)
Net decrease in appreciation on investments		(49,262,278	)		(845,523	)		(14,594,710	)		(24,341,916	)
Brokerage commissions and fees		(1,525,901	)		(2,028,200	)		(3,006,196	)		(2,915,095	)
Net gain (loss) on investments		5,306,022			(30,871,659	)		(39,398,976	)		(98,688,678	)
Net gain (loss)	$	5,272,714		$	(30,933,657	)	$	(39,500,692	)	$	(98,770,297	)

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

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

The following table shows the fair value classification of each investment type for K4D Trading as of June 30, 2010 and December 31, 2009:

	June 30, 2010			December 31, 2009
Long Contracts
Level 1:
U.S. bond futures	$	8,966,861		$	(4,526,734	)
Foreign bond futures		10,560,813			(6,607,015	)
U.S. index futures		(6,055,774	)		5,331,432
Foreign index futures		(7,452,918	)		8,908,434
Commodity futures		(9,315,138	)		35,170,316
Interest rate futures		10,614,106			(8,722,161	)
Currency futures		281,979			355,993
Total Level 1		7,599,929			29,910,265

Level 2:
Foreign currency forwards		32,551,694			(8,957,388	)
Total Level 2		32,551,694			(8,957,388	)
Total long contracts	$	40,151,623		$	20,952,877

Short Contracts
Level 1:
U.S. bond futures	$	(3,903,659	)	$	1,217,531
Foreign bond futures		(3,667,236	)		2,267,786
U.S. index futures		4,466,697			(2,810,098	)
Foreign index futures		7,055,421			(3,726,222	)
Commodity futures		7,543,825			(14,721,246	)
Interest rate futures		(2,311,775	)		2,493,009
Currency futures		686,167			(32,595	)
Total Level 1		9,869,440			(15,311,835	)

Level 2:
Foreign currency forwards		(47,344,487	)		12,288,132
Total Level 2		(47,344,487	)		12,288,132
Total short contracts	$	(37,475,047	)	$	(3,023,703	)

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

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

The following table displays the notional exposure and fair value of derivative contracts held by K4D Trading based on their notional amounts and number of contracts at June 30, 2010 categorized by primary underlying risk. Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting.

	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	$	852,878,745		13,825	$	(610,698,194	)		(12,919	)	$	17,970,218	$	(19,741,531	)
		852,878,745		13,825		(610,698,194	)		(12,919	)		17,970,218		(19,741,531	)

Equity price
Futures		6,261,586,751		7,005		(4,533,067,349	)		(5,910	)		11,561,817		(13,548,391	)
		6,261,586,751		7,005		(4,533,067,349	)		(5,910	)		11,561,817		(13,548,391	)

Foreign currency exchange rate
Futures		203,120,789		1,970		(147,847,465	)		(1,423	)		2,845,220		(1,877,074	)
Forwards		986,837,671		-		(1,130,612,360	)		-			14,923,765		(29,716,558	)
		1,189,958,460		1,970		(1,278,459,825	)		(1,423	)		17,768,985		(31,593,632	)

Interest rate
Futures		71,563,288,992		38,241		(11,383,856,485	)		(13,663	)		30,621,720		(10,362,610	)
Interest rate swaps		-		-		-			-			-		-
		71,563,288,992		38,241		(11,383,856,485	)		(13,663	)		30,621,720		(10,362,610	)
Total	$	79,867,712,948		61,041	$	(17,806,081,853	)		(33,915	)	$	77,922,740	$	(75,246,164	)

Collateral balances supporting all derivative positions													$	69,677,735

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

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

The following table displays the notional exposure and fair value of derivative contracts held by K4D Trading based on their notional amounts and number of contracts at
December 31, 2009 categorized by primary underlying risk. Derivative assets and liability balances are presented on a gross basis, prior to the application of counterparty netting.

	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	$	1,281,924,053		21,625	$	(699,668,279	)		(11,135	)	$	42,918,544	$	(22,469,474	)
		1,281,924,053		21,625		(699,668,279	)		(11,135	)		42,918,544		(22,469,474	)

Equity price
Futures		6,321,952,643		16,319		(3,918,741,020	)		(5,980	)		14,812,534		(7,108,988	)
		6,321,952,643		16,319		(3,918,741,020	)		(5,980	)		14,812,534		(7,108,988	)

Foreign currency exchange rate
Futures		30,156,168		359		(108,869,583	)		(1,006	)		757,620		(434,222	)
Forwards		6,096,436,526		-		(5,707,147,861	)		-			78,435,771		(75,105,027	)
		6,126,592,694		359		(5,816,017,444	)		(1,006	)		79,193,391		(75,539,249	)

Interest rate
Futures		66,489,448,610		25,046		(83,222,672,828	)		(13,820	)		7,611,075		(21,488,659	)
		66,489,448,610		25,046		(83,222,672,828	)		(13,820	)		7,611,075		(21,488,659	)
Total	$	80,219,918,000		63,349	$	(93,657,099,571	)		(31,941	)	$	144,535,544	$	(126,606,370	)


Collateral balances supporting all derivative positions													$	99,865,289

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

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

The following table shows the gains and losses on all financial instruments held by the Master Fund reported in net gain on investments in its statement of operations segregated by primary underlying risk and contract type for the six months ended June 30, 2010 and 2009:

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009

Commodity price
Futures	$	(50,167,010	)	$	(21,576,351	)	$	(73,935,555	)	$	(35,187,009	)
		(50,167,010	)		(21,576,351	)		(73,935,555	)		(35,187,009	)

Equity price
Futures		(29,055,274	)		(7,423,135	)		(61,669,638	)		(52,176,459	)
		(29,055,274	)		(7,423,135	)		(61,669,638	)		(52,176,459	)

Foreign currency exchange rate
Futures		2,398,505			370,184			3,110,816			(2,586,197	)
Forwards		(9,137,401	)		17,287,755			(9,218,276	)		4,965,566
		(6,738,896	)		17,657,939			(6,107,460	)		2,379,369

Interest rate
Futures		92,793,103			(17,501,912	)		105,319,873			(10,789,484	)
		92,793,103			(17,501,912	)		105,319,873			(10,789,484	)
Total	$	6,831,923		$	(28,843,459	)	$	(36,392,780	)	$	(95,773,583	)

Index

Graham Alternative Investment Trading II LLC

Notes to 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 three to thirty months. GCA also maintains cash and cash equivalents on deposit with major U.S. institutions. GAIT II’s investment in GCA is valued in the accompanying statement of financial condition at fair value in accordance with U.S. GAAP. GAIT II records its proportionate share of GCA’s investment income and expenses on a monthly basis. For the three months ended June 30, 2010, the total amount recognized by GAIT II with respect to its investment in GCA was $67,524. For the six months ended June 30, 2010, the total amount recognized by GAIT II with respect to its investment in GCA was $121,117. For the three months ended June 30, 2009, the total amount recognized by GAIT II with respect to its investment in GCA was $3,564. For the six months ended June 30, 2009, the total amount recognized by GAIT II with respect to its investment in GCA was $4,168. These amounts are included in interest income in the statements of operations and managing member allocation. At June 30, 2010 and December 31, 2009, GAIT II owned approximately 2.21% and 1.78%, respectively, of GCA. The following table summarizes the financial position of GCA as of June 30, 2010 and December 31, 2009:

	June 30, 2010		December 31, 2009
Assets:
Cash and cash equivalents	$	517,286,644	$	485,846,462
Investments in fixed income securities		1,739,320,224		1,421,913,802
Redemptions receivable		-		-
Accrued interest income		5,566,668		4,848,122
Total assets		2,262,173,536		1,912,608,386

Liabilities:
Other payables		20,000		-
Total liabilities		20,000		-

Members’ capital		2,262,153,536		1,912,608,386
Total liabilities and members’ capital	$	2,262,173,536	$	1,912,608,386

The following table summarizes the results of operations of GCA for the three and six months ended June 30, 2010 and 2009:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Investment income
Interest income	$	3,036,438	$	1,109,092	$	5,659,711	$	1,928,768
Net investment income		3,036,438		1,109,092		5,659,711		1,928,768
Net income	$	3,036,438	$	1,109,092	$	5,659,711	$	1,928,768

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

4. Graham Cash Assets LLC (continued)

	June 30, 2010		December 31, 2009
Long positions
Level 2:
Fixed income securities
FDIC Guaranteed Bonds	$	1,087,370,922	$	667,900,290
Government Bonds		651,949,302		754,013,512
Fixed income securities		1,739,320,224		1,421,913,802
Total Level 2		1,739,320,224		1,421,913,802
Total long positions	$	1,739,320,224	$	1,421,913,802

5. Capital Accounts

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

Addition of Limited and Managing Members

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

Subscriptions

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

5. Capital Accounts (continued)

Redemptions

Redemption Fees

6. Fees

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

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

6. Fees (continued)

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 those amounts. This reimbursement is included in other income in the statement of operations and managing member allocation.

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

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.

8. Related Party Transactions

The Manager, due to its relationship with its affiliates, may enter into certain related party transactions.

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

9. Financial Highlights

The following is the per unit operating performance calculation for the three months ended June 30, 2010 and 2009:

	Class 0			Class 2
Per unit operating performance:
Initial net asset value per unit, March 31, 2009	$	97.09		$	96.60
Net loss:
Net investment loss		(1.65	)		(1.77	)
Net loss on investments		(1.86	)		(2.20	)
Net loss		(3.51	)		(3.97	)
Net asset value per unit, June 30, 2009	$	93.58		$	92.63

Net asset value per unit, March 31, 2010	$	96.29		$	94.36
Net loss:
Net investment loss		(1.66	)		(1.78	)
Net gain on investments		1.09			0.75
Net loss		(0.57	)		(1.03	)
Net asset value per unit, June 30, 2010	$	95.72		$	93.33

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the three months ended June 30, 2010 and 2009:

	Class 0						Class 2
	2010			2009			2010			2009

Total return before Incentive Allocation		(0.57	)%		(3.51	)%		(1.03	)%		(3.97	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(0.57	)%		(3.51	)%		(1.03	)%		(3.97	)%

Net investment loss before Incentive Allocation		(1.61	)%		(0.87	)%		(1.70	)%		(1.38	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(1.61	)%		(0.87	)%		(1.70	)%		(1.38	)%

Total expenses before Incentive Allocation		1.30	%		1.26	%		(3.51	)%		1.78	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		1.30	%		1.26	%		(3.51	)%		1.78	%

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

9. Financial Highlights (continued)

The following is the per unit operating performance calculation for the six months ended June 30, 2010 and 2009:

	Class 0			Class 2
Per unit operating performance:
Initial net asset value per unit, January 4, 2009	$	100.00		$	100.00
Net loss:
Net investment loss		(2.23	)		(2.63	)
Net loss on investments		(4.19	)		(4.74	)
Net loss		(6.42	)		(7.37	)
Net asset value per unit, June 30, 2009	$	93.58		$	92.63

Net asset value per unit, December 31, 2009	$	100.59		$	99.05
Net loss:
Net investment loss		(3.50	)		(3.50	)
Net loss on investments		(1.37	)		(2.22	)
Net loss		(4.87	)		(5.72	)
Net asset value per unit, June 30, 2010	$	95.72		$	93.33

The following represents ratios to average members’ capital, excluding the Managing Member, and total return for the six months ended June 30, 2010 and for the period from January 4, 2009 (commencement of operations) to June 30, 2009:

	Class 0						Class 2
	2010			2009			2010			2009

Total return before Incentive Allocation		(4.84	)%		(6.42	)%		(5.77	)%		(7.37	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Total return after Incentive Allocation		(4.84	)%		(6.42	)%		(5.77	)%		(7.37	)%

Net investment loss before Incentive Allocation		(2.37	)%		(2.17	)%		(3.39	)%		(3.19	)%
Incentive Allocation		0.00			0.00			0.00			0.00
Net investment loss after Incentive Allocation		(2.37	)%		(2.17	)%		(3.39	)%		(3.19	)%

Total expenses before Incentive Allocation		2.58	%		2.50	%		3.61	%		3.53	%
Incentive Allocation		0.00			0.00			0.00			0.00
Total expenses after Incentive Allocation		2.58	%		2.50	%		3.61	%		3.53	%

Index

Graham Alternative Investment Trading II LLC

Notes to Financial Statements (continued)

9. Financial Highlights (continued)

Total return is calculated for Class 0 and Class 2 units taken as a whole and has not been annualized. Total return is calculated as the change in total Members’ capital, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the year. 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 amounts allocated from the Master Fund. The computation of such ratios is based on the amount of net investment loss, expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of Members’ capital of GAIT II, excluding that of the Managing Member, for the three and six months ended June 30, 2010 and the three months ended June 30, 2009 and the period from January 4, 2009 (commencement of operations) to June 30, 2009.

10. Subsequent Events

The Fund had subscriptions of approximately $4.4 million and redemptions of approximately $0.1 million through August 16, 2010, the date through which subsequent events were evaluated by the Manager. These amounts have not been included in the financial statements.

Index

Investment Advisor

Graham Capital Management, L.P.

40 Highland Avenue

Rowayton, CT 06853

U.S.A.

Administrator

SEI Global Services Inc.

1 Freedom Valley Drive

Oaks, PA 19456

U.S.A.

Legal and Tax Advisors

Proskauer Rose LLP

1585 Broadway

New York, NY 10036

U.S.A.

Registered Address

Corporation Service Company

2711 Centerville Road

Suite 400

Wilmington, DE 19808

U.S.A.

Independent Registered Public Accounting Firm

Ernst & Young LLP

300 First Stamford Place

Stamford, CT 06902

U.S.A.

Index

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

Reference is made to “Item 1: Financial Statements.” The information contained therein is essential to, and should be read in conjunction with, the following analysis. The Fund does not engage in the sale of goods or services. 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 their 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 for options on futures.

Liquidity and Capital Resources

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 Manager generally expresses its margin requirements for the portfolios in terms of the capital usage ratio, which is calculated as the aggregate of the margin requirements for the underlying strategies plus the net option premium costs for the underlying strategies over the total equity for the portfolio. For the periods ended June 30, 2010, December 31, 2009 and December 31, 2008, the capital usage ratio for the Blended Strategies Portfolio was 5.4%, 5.3% and 4.0%, respectively, and with respect to the Systematic Strategies Portfolio for the periods ended June 30, 2010 and December 31, 2009 the capital usage ratio was 5.4% and 9.2%, respectively.

Other than any potential market-imposed limitations on liquidity, the Fund’s assets are highly liquid and are expected to remain so. Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Fund’s futures trading. Through June 30, 2010, the Fund experienced no meaningful periods of illiquidity in any of the markets traded by the Manager on behalf of the Fund.

The Fund raises additional capital only 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.

Index

Critical Accounting Policies

Use of Estimates – The Fund’s financial statements have been prepared in conformity with 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 GCA, an entity for which the Manager is also the sole investment advisor. The financial information of GCA is included in the notes to the Financial Statements of the GAIT Funds.

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.

Index

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.

Off-Balance Sheet Arrangements

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

Results of Operations

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

Blended Strategies Portfolio

Three Months Ended June 30, 2010

For the three months ended June 30, 2010 the Fund’s net asset value increased by $6,466,177, a 5.2% net increase. This increase was attributable to a $5,128,166, or 4.1%, net increase in the Blended Strategies Portfolio and a $1,388,011, or 1.1%, net increase in the Systematic Strategies Portfolio.

The net increase of $5,128,166, or 4.1%, in the Blended Strategies Portfolio was attributable to total subscriptions of $8,119,658, or 6.6%, and net income of $71,069, or 0.1%, partially offset by redemptions totaling $3,062,561, or -2.6%, for the three months ended June 30, 2010.

For the second quarter of 2010, the portfolio experienced net trading gains of $1,330,888 attributable to the following sectors: (i) agriculture (-$263,532); (ii) energy (-$1,761,664); (iii) foreign exchange ($812,325); (iv) interest rates ($4,344,224); (v) metals (-$596,000); (vi) softs (-$164,443); and (vii) stock indices (-$1,040,022). The portfolio recorded a gain during April. The majority of the portfolio’s profits were attributable to positions in the fixed income markets, which benefited from rising prices in Europe. Additional gains also stemmed from lower equity prices in Europe and rising crude oil prices. In the commodity markets, trading in metals produced relatively flat results, while positions in the grains markets, specifically corn and wheat, resulted in minor losses. The portfolio had net gains in the month of May. Profits were primarily attributable to positions in the fixed income and currency markets, with the portfolio benefitting as investors sought a safe haven and purchased global bonds, while the euro weakened. The portfolio’s overall gain was partially offset by losses that resulted from price declines in crude oil, global equity indices, and industrial metals. The portfolio recorded a modest loss during June. The majority of these losses resulted from trading in currencies amid general U.S. dollar weakness and in the energy markets from trading in natural gas and crude oil. The portfolio experienced smaller losses in base metals, soft commodities and global stock index futures. Gains recorded in the fixed income sector as yields fell sharply during the month offset a majority of the month’s losses.

Index

For the three months ended June 30, 2010, Brokerage Fees increased by $218,351, or 47.9%, Advisory Fees increased by $187,962, or 48.1%, and Sponsor Fees increased by $93,982, or 48.1%, in the portfolio over the corresponding period of the preceding year. These increases are all attributable to higher net assets of the portfolio resulting from subscriptions and a net gain for the period partially offset by redemptions.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the three months ended June 30, 2010, the Incentive Allocation decreased by $1,792, or -23.8%, in the portfolio over the corresponding period of the preceding year due to lower trading profits.

Three Months Ended June 30, 2009

For the three months ended June 30, 2009 the Fund’s net asset value decreased by $5,511,511, or -6.7%. This decrease was attributable to a $5,630,753, or -6.9%, net decrease in the Blended Strategies Portfolio and offset by a net increase of $119,242, or 0.2%, in the Systematic Strategies Portfolio.

The net decrease of $5,630,753, or -6.9%, in the Blended Strategies Portfolio was attributable to total subscriptions of $6,746,000, or 8.2%, offset by redemptions totaling $11,823,011, or -14.4%, and a net loss of $553,742, or -0.7%, for the three months ended June 30, 2009.

For the second quarter of 2009, the portfolio experienced net trading gains of $399,617 attributable to the following sectors: (i) agriculture (-$139,172); (ii) energy (-$125,680); (iii) foreign exchange ($1,515,508); (iv) interest rates (-$265,443); (v) metals (-$148,393); (vi) softs (-$124,172); and (vii) stock indices (-$313,031). The portfolio recorded net losses in April as gains from trading in the energy and fixed income sectors were more than offset by losses in global equity indices and metals. The portfolio profited from short positions in natural gas and calendar spreads in crude oil, while in fixed income gains were recorded as yields on short-term instruments continued to decline. Smaller losses for the month were recorded from volatility in currencies and metals prices. During May, the portfolio's performance benefitted from gains in the foreign exchange component as the U.S. dollar trended lower verses most other global currencies. The portfolio also recorded profits in May by taking advantage of strength in global equity index futures and commodities. Trading in stock index futures also contributed to positive performance as equity prices continued their recent upward trend. The portfolio experienced losses in June due primarily to trend reversals in the fixed income, currency, and commodity markets. These markets experienced sudden reversals as the recent bullish tone of the markets moderated during June, and the markets reversed to a more cautious sentiment with decreased risk taking.

Six Months Ended June 30, 2010

For the six months ended June 30, 2010 the Fund’s net asset value increased by $18,441,127, or 16.5%. This increase was attributable to a $11,791,347, or 10.6%, net increase in the Blended Strategies Portfolio and an $6,649,780, or 5.9%, net increase in the Systematic Strategies Portfolio.

The net increase of $11,791,347, or 10.6%, in the Blended Strategies Portfolio was attributable to total subscriptions of $16,710,318, or 15.0%, partially offset by redemptions totaling $4,265,676, or -3.8%, and a net loss of $653,295, or -0.6%, for the six months ended June 30, 2010.

For the six months ended June 30, 2010, the portfolio experienced net trading gains of $1,716,167 attributable to the following sectors: (i) agriculture (-$81,862); (ii) energy (-$1,548,074); (iii) foreign exchange ($2,170,572); (iv) interest rates ($5,244,678); (v) metals (-$908,255); (vi) softs (-$766,518); and (vii) stock indices (-$2,394,374). The portfolio recorded a gain during April. The majority of the portfolio’s profits were attributable to positions in the fixed income markets, which benefited from rising prices in Europe. Additional gains also stemmed from lower equity prices in Europe and rising crude oil prices. In the commodity markets, trading in metals produced relatively flat results, while positions in the grains markets, specifically corn and wheat, resulted in minor losses. The portfolio had net gains in the month of May. Profits were primarily attributable to positions in the fixed income and currency markets, with the portfolio benefitting as investors sought a safe haven and purchased global bonds, while the euro weakened. The portfolio’s overall gain was partially offset by losses that resulted from price declines in crude oil, global equity indices, and industrial metals. The portfolio recorded a modest loss during June. The majority of these losses resulted from trading in currencies amid general U.S. dollar weakness and in the energy markets from trading in natural gas and crude oil. The portfolio experienced smaller losses in base metals, soft commodities and global stock index futures. Gains recorded in the fixed income sector as yields fell sharply during the month offset a majority of the month’s losses. For the month of March, trading gains were recorded in global stock indices as equities rallied, and in energy amid falling natural gas prices. The portfolio also generated profits in currencies, agriculturals and industrial metals. Losses in the U.S. fixed income markets detracted from the portfolio's overall profits. During February, the portfolio was profitable in both systematic and discretionary trading in foreign exchange, including positions in European currencies and the Australian dollar. Additional gains stemmed from positions in the European fixed income and industrial metals markets. Smaller losses, from trading in global stock indices and commodities offset a portion of the month’s gains. The portfolio recorded a net loss during January due primarily to sharp reversals in global equity indices, currencies and commodities. These losses were partially offset by gains in the fixed income sector from both the discretionary and systematic portion of the portfolio. The discretionary portion of the portfolio also contributed gains in currencies, which were generated by short positions in the euro as well as short crosses in the Swiss franc and Australian and New Zealand dollars.

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For the six months ended June 30, 2010, Brokerage Fees increased by $363,490, or 39.3%, Advisory Fees increased by $304,043, or 38.0%, and Sponsor Fees increased by $152,023, or 38.0%, in the 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.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the six months ended June 30, 2010, the Incentive Allocation decreased by $6,264, or -52.2%, in the portfolio over the corresponding period of the preceding year due to lower trading profits.

Six Months Ended June 30, 2009

For the six months ended June 30, 2009 the Fund’s net asset value decreased by $3,319,648, or -4.2%. This decrease was attributable to a $3,443,744, or -4.4%, net decrease in the Blended Strategies Portfolio and a $124,096, or 0.2%, net increase in the Systematic Strategies Portfolio.

The net decrease of $3,443,744, or -4.4%, in the Blended Strategies Portfolio was attributable to total subscriptions of $10,894,381, or 13.6%, offset by redemptions totaling $13,142,336, or -16.5%, and a net loss of $1,195,789, or -1.5%, for the six months ended June 30, 2009.

For the six months ended June 30, 2009, the portfolio experienced net trading gains of $684,153 attributable to the following sectors: (i) agriculture (-$303,053); (ii) energy ($134,426); (iii) foreign exchange ($1,831,093); (iv) interest rates ($100,049); (v) metals (-$410,332); (vi) softs (-$251,736); and (vii) stock indices (-$416,294). The portfolio recorded net losses in April as gains from trading in the energy and fixed income sectors were more than offset by losses in global equity indices and metals. The portfolio profited from short positions in natural gas and calendar spreads in crude oil, while in fixed income gains were recorded as yields on short-term instruments continued to decline. Smaller losses for the month were recorded from volatility in currencies and metals prices. During May, the portfolio's performance benefitted from gains in the foreign exchange component as the U.S. dollar trended lower verses most other global currencies. The portfolio also recorded profits in May by taking advantage of strength in global equity index futures and commodities. Trading in stock index futures also contributed to positive performance as equity prices continued their recent upward trend. The portfolio experienced losses in June due primarily to trend reversals in the fixed income, currency, and commodity markets. These markets experienced sudden reversals as the recent bullish tone of the markets moderated during June, and the markets reversed to a more cautious sentiment with decreased risk taking. The portfolio experienced losses in March due primarily to dramatic trend reversals in global equity indices. Positions in currencies also adversely impacted performance. The U.S. dollar reversed and weakened against other currencies as equity markets strengthened. In particular, commodity currencies appreciated against the dollar as commodity prices rebounded. The discretionary strategies of the portfolio posted gains in March from various trades in global fixed income and currencies. Gains from favorable fixed income positions in U.S. and European interest rate futures helped offset a portion of the losses recorded in other asset classes. During February, the portfolio benefitted from the trend in the equity index markets, as equity prices plunged in the wake of deteriorating economic conditions and lingering doubts concerning the effectiveness of global stimulus measures. Additional gains were from trading in the agricultural commodities and energy markets, as food and energy prices generally declined amid shifting supply and demand fundamentals. A portion of the portfolio's overall gain for the month was offset by losses experienced from trading in the currency markets, as the U.S. dollar continued to strengthen versus many of the world’s major currencies, as well as from trading in the metals and soft commodities markets. In January, the portfolio recorded gains primarily from trading in the equity index and currency markets, as global equity prices plummeted and the U.S. dollar rallied on the heels of heightened recessionary fears and persistent “safe haven” buying of the greenback. Additional gains were recorded across the energy and agricultural commodities markets, as prices retreated in the wake of slowing global demand for many raw materials. A portion of the gains for the month were offset by losses experienced across the fixed income markets, as global bond prices reversed their recent bullish trend and moved sharply lower, as well as from trading in the metals and soft commodities markets.

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Index

Systematic Strategies Portfolio

Three Months Ended June 30, 2010

The net increase of $1,338,011, or 1.1%, in the Systematic Strategies Portfolio was attributable to total subscriptions of $1,785,268, or 1.4%, partially offset by redemptions totaling $332,818, or -0.2%, and a net loss of $114,439, or -0.1%, for the three months ended June 30, 2010.

For the second quarter of 2010, the portfolio experienced net trading gains of $42,567 attributable to the following sectors: (i) agriculture (-$84,177); (ii) energy (-$304,083); (iii) foreign exchange (-$71,533); (iv) interest rates ($879,528); (v) metals (-$70,581); (vi) softs (-$20,043); and (vii) stock indices (-$286,544). The portfolio posted a solid gain in April. Profits were largely the result of positions in the fixed income markets as investors bought bonds as a safe haven. In foreign exchange, the portfolio took advantage of the euro's decline against virtually all currencies, while positions in the Australian and Canadian dollars benefited the portfolio earlier in the month. Positions in the energy and soft markets also resulted in gains as crude oil and cotton prices rose. Gains in these commodity markets partially mitigated negative results from the metals and agricultural markets, as falling base metals prices and rising wheat prices generated losses. The portfolio recorded a modest loss in May. Losses were incurred amid volatile conditions in global equity indices and crude oil, as prices fell sharply. Similarly, steep declines in industrial metals resulted in modest losses. However, the portfolio recorded offsetting gains in the fixed income markets as investors bought bonds in a flight to safety. Additional profits stemmed from positions in the foreign exchange markets as our models benefitted from the euro’s decline against other major currencies. The portfolio recorded a loss in June. Global markets witnessed multiple price reversals during the month. Strengthening European currencies versus the U.S. dollar, predominately the Swiss franc, and choppiness in global stock indices led to the majority of the portfolio’s losses. Trading in commodities also resulted in losses as prices moved in a choppy range for most of the month. The portfolio captured offsetting profits from trading in fixed income, as benchmark yields continued to decline in the U.S., Europe and Asia, with the most significant gains coming from U.S. instruments.

For the three months ended June 30, 2010, Brokerage Fees increased by $87,379, Advisory Fees increased by $68,315, and Sponsor Fees increased by $14,157 in the 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.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the three months ended June 30, 2010, there was no Incentive Allocation earned due to the portfolio experiencing a net loss for the period.

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Index

Three Months Ended June 30, 2009

The net increase of $119,242, or 0.2%, in the Systematic Strategies Portfolio was attributable to total subscriptions of $125,000, or 0.2%, partially offset by a net loss of $5,758 for the three months ended June 30, 2009.

For the second quarter of 2009, the portfolio experienced net trading losses of $5,079 attributable to the following sectors: (i) agriculture (-$299); (ii) energy (-$2,235); (iii) foreign exchange ($2,478); (iv) interest rates (-$3,109); (v) metals (-$740); (vi) softs (-$1,026); and (vii) stock indices (-$148). The portfolio recorded net losses in April as gains from trading in the energy and fixed income sectors were more than offset by losses in global equity indices and metals. The portfolio profited from short positions in natural gas and calendar spreads in crude oil, while in fixed income gains were recorded as yields on short-term instruments continued to decline. Smaller losses for the month were recorded from volatility in currencies and metals prices. During May, the portfolio's performance benefitted from gains in the foreign exchange component as the U.S. dollar trended lower verses most other global currencies. The portfolio also recorded profits in May by taking advantage of strength in global equity index futures and commodities. Trading in stock index futures also contributed to positive performance as equity prices continued their recent upward trend. The portfolio experienced losses in June due primarily to trend reversals in the fixed income, currency, and commodity markets. These markets experienced sudden reversals as the recent bullish tone of the markets moderated during June, and the markets reversed to a more cautious sentiment with decreased risk taking.

Six Months Ended June 30, 2010

The net increase of $6,649,780, or 5.9%, in the Systematic Strategies Portfolio was attributable to total subscriptions of $7,245,768, or 6.4%, partially offset by redemptions totaling $337,724, or -0.3%, and a net loss of $258,264, or -0.2%, for the six months ended June 30, 2010.

For the six months ended June 30, 2010, the portfolio experienced net trading gains of $1,551 attributable to the following sectors: (i) agriculture ($232); (ii) energy ($2,122); (iii) foreign exchange ($308); (iv) interest rates (-$7,061); (v) metals ($985); (vi) softs ($1,295); and (vii) stock indices ($3,670). The portfolio posted a solid gain in April. Profits were largely the result of positions in the fixed income markets as investors bought bonds as a safe haven. In foreign exchange, the portfolio took advantage of the euro's decline against virtually all currencies, while positions in the Australian and Canadian dollars benefited the portfolio earlier in the month. Positions in the energy and soft markets also resulted in gains as crude oil and cotton prices rose. Gains in these commodity markets partially mitigated negative results from the metals and agricultural markets, as falling base metals prices and rising wheat prices generated losses. The portfolio recorded a modest loss in May. Losses were incurred amid volatile conditions in global equity indices and crude oil, as prices fell sharply. Similarly, steep declines in industrial metals resulted in modest losses. However, the portfolio recorded offsetting gains in the fixed income markets as investors bought bonds in a flight to safety. Additional profits stemmed from positions in the foreign exchange markets as our models benefitted from the euro’s decline against other major currencies. The portfolio recorded a loss in June. Global markets witnessed multiple price reversals during the month. Strengthening European currencies versus the U.S. dollar, predominately the Swiss franc, and choppiness in global stock indices led to the majority of the portfolio’s losses. Trading in commodities also resulted in losses as prices moved in a choppy range for most of the month. The portfolio captured offsetting profits from trading in fixed income, as benchmark yields continued to decline in the U.S., Europe and Asia, with the most significant gains coming from U.S. instruments. During the month of March, profits were recorded in U.S. equity indices, as well as across Asian and European equity indices. The portfolio also experienced gains in foreign exchange, with notable profits from long positions in the Canadian and Australian dollars. Smaller gains were recorded in commodities trading. Losses in the U.S. and Asian fixed income markets offset a portion of the portfolio’s overall gain for the month. The portfolio experienced gains in February as trends emerged in currencies and the fixed income markets. The portfolio generated profits in foreign exchange, particularly from trading the Australian dollar, euro, yen and British pound. Similarly, a rally in the fixed income markets resulted in gains for the portfolio in European fixed income, particularly from positions in Euribor and BOBL. The portfolio incurred smaller losses for the month from trading commodities, including sugar, corn, wheat and crude oil. The portfolio recorded a loss during January due primarily to sharp price trend reversals across virtually all macro sectors. Specifically, losses occurred as the European equity index markets declined, while the U.S. dollar rallied against the Swiss franc, Australian and New Zealand dollars and the euro. In the commodity sector, losses resulted as prices declined in industrial metals, crude oil and soybeans. Smaller gains in the fixed income sector offset a portion of the month’s losses.

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Index

For the six months ended June 30, 2010, Brokerage Fees increased by $147,353, Advisory Fees increased by $112,685, and Sponsor Fees increased by $56,342 in the 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.

The Incentive Allocation is based on the New High Net Trading Profits of the portfolio for the period. For the six months ended June 30, 2010 there was no Incentive Allocation earned due to the portfolio experiencing a net loss for the period.

Six Months Ended June 30, 2009

The net increase of $124,096, or 0.2%, in the Systematic Strategies Portfolio was attributable to total subscriptions of $130,000, or 0.2%, partially offset by a net loss of $5,904 for the six months ended June 30, 2009.

For the six months ended June 30, 2009, the portfolio experienced net trading losses of $5,158 attributable to the following sectors: (i) agriculture (-$440); (ii) energy (-$1,473); (iii) foreign exchange ($917); (iv) interest rates (-$1,481); (v) metals (-$775); (vi) softs (-$815); and (vii) stock indices (-$1,091). The portfolio recorded net losses in April as gains from trading in the energy and fixed income sectors were more than offset by losses in global equity indices and metals. The portfolio profited from short positions in natural gas and calendar spreads in crude oil, while in fixed income gains were recorded as yields on short-term instruments continued to decline. Smaller losses for the month were recorded from volatility in currencies and metals prices. During May, the portfolio's performance benefitted from gains in the foreign exchange component as the U.S. dollar trended lower verses most other global currencies. The portfolio also recorded profits in May by taking advantage of strength in global equity index futures and commodities. Trading in stock index futures also contributed to positive performance as equity prices continued their recent upward trend. The portfolio experienced losses in June due primarily to trend reversals in the fixed income, currency, and commodity markets. These markets experienced sudden reversals as the recent bullish tone of the markets moderated during June, and the markets reversed to a more cautious sentiment with decreased risk taking. The portfolio experienced losses in March due primarily to dramatic trend reversals in global equity indices. Positions in currencies also adversely impacted performance. The U.S. dollar reversed and weakened against other currencies as equity markets strengthened. In particular, commodity currencies appreciated against the dollar as commodity prices rebounded. Gains from favorable fixed income positions in U.S. and European interest rate futures helped offset a portion of the losses recorded in other asset classes. During February, the portfolio benefitted from the trend in the equity index markets, as equity prices plunged in the wake of deteriorating economic conditions and lingering doubts concerning the effectiveness of global stimulus measures. Smaller gains were made across the fixed-income markets on the heels of “safe haven” buying of government debt, as well as from trading in the agricultural commodities and energy markets, as food and energy prices generally declined amid shifting supply and demand fundamentals. A portion of the portfolio 's overall gain for the month was offset by losses experienced from trading in the currency and metals markets. In January, the portfolio recorded gains primarily from trading in the equity index and currency markets, as global equity prices plummeted and the U.S. dollar rallied on the heels of heightened recessionary fears and persistent “safe haven” buying of the greenback. Additional gains were recorded across the energy and agricultural commodities markets, as prices retreated in the wake of slowing global demand for many raw materials. A portion of the gains for the month were offset by losses experienced across the fixed income markets, as global bond prices reversed their recent bullish trend and moved sharply lower, as well as from trading in the metals and soft commodities markets.

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Index

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Required.

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Index

Item 4. Controls and Procedures

The Advisor’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of June 30, 2010. Based on that evaluation, the Advisor’s Chief Executive Officer and Chief Financial Officer concluded that the Fund’s disclosure controls and procedures were effective as of June 30, 2010.

There were no changes to the Fund’s internal controls over financial reporting during the second quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Fund’s internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

Not Required

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

For the three months ended June 30, 2010, the Fund issued 60,216 Units in exchange for $7,911,000 with respect to the Blended Strategies Portfolio and 16,557 Units in exchange for $1,591,657 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)
April 1, 2010	20,735	7,690
May 1, 2010	15,569	1,019
June 1, 2010	23,912	7,848

Item 3. Defaults Upon Senior Securities – None

Item 4. [Removed and Reserved]

Item 5. Other Information – None

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Item 6. Exhibits

* 3.1	Certificate of Formation of Graham Alternative Investment Fund 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)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 16, 2010	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

109

Delaware		20-4897149
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

			Page Number

PART I - Financial Information:

	Item 1.	Financial Statements:

		Graham Alternative Investment Fund II LLC

		Statements of Financial Condition at June 30, 2010 and December 31, 2009 (unaudited)	1

		Statements of Operations for the three months and six months ended June 30, 2010 and 2009 (unaudited)	2

		Statements of Changes in Members’ Capital for the six months ended June 30, 2010 and 2009 (unaudited)	3

		Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)	5

		Notes to Financial Statements (unaudited)	6

		Graham Alternative Investment Trading LLC

		Statements of Financial Condition at June 30, 2010 (unaudited) and December 31, 2009 (audited)	15

		Condensed Schedules of Investments at June 30, 2010 (unaudited) and December 31, 2009 (audited)	16

		Statements of Operations and Managing Member Allocation for the three months and six months ended June 30, 2010 and 2009 (unaudited)	36

		Statements of Changes in Members’ Capital for the six months ended June 30, 2010 and 2009 (unaudited)	37

		Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)	38

		Notes to Financial Statements (unaudited)	39

		Graham Alternative Investment Trading II LLC

		Statements of Financial Condition at June 30, 2010 (unaudited) and December 31, 2009 (audited)	68

		Condensed Schedules of Investments at June 30, 2010 (unaudited) and December 31, 2009 (audited)	69

	June 30, 2010 (Unaudited)		December 31, 2009 (Audited)
Assets
Investment in Graham Alternative Investment Trading LLC, at fair value	$	116,260,630	$	104,469,283
Investment in Graham Alternative Investment Trading II LLC, at fair value		13,896,385		7,246,605
Redemptions receivable from Graham Alternative Investment Trading LLC		668,716		179,735
Redemptions receivable from Graham Alternative Investment Trading II LLC		124,750		-
Total assets	$	130,950,481	$	111,895,623

Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	793,466	$	179,735
Total liabilities		793,466		179,735

Members’ capital:
Blended Strategies Portfolio
Class 0 Units (723,392.324 and 636,284.928 units issued and outstanding at $134.80 and $135.56, respectively)		97,515,580		86,253,313
Class 2 Units (168,875.471 and 161,590.940 units issued and outstanding at $111.00 and $112.73, respectively)		18,745,050		18,215,970
Total Blended Strategies Portfolio		116,260,630		104,469,283

Systematic Strategies Portfolio
Class 0 Units (105,358.435 and 41,862.245 units issued and outstanding at $95.72 and $100.59, respectively)		10,085,400		4,210,889
Class 2 Units (40,834.341 and 30,647.378 units issued and outstanding at $93.33 and $99.05, respectively)		3,810,985		3,035,716
Total Systematic Strategies Portfolio		13,896,385		7,246,605
Total members’ capital		130,157,015		111,715,888
Total liabilities and members’ capital	$	130,950,481	$	111,895,623

	Three Months Ended June 30,						Six Months Ended June 30,
	2010 (Unaudited)			2009 (Unaudited)			2010 (Unaudited)			2009 (Unaudited)
Blended Strategies Portfolio:
Net gain allocated from investment in Graham Alternative Investment Trading LLC:
Net realized gain on investments	$	3,610,941		$	1,508,555		$	1,668,233		$	2,530,860
Net (decrease) increase in unrealized appreciation on investments		(2,280,053	)		(1,108,938	)		47,934			(1,846,707	)
Net gain allocated from investment in Graham Alternative Investment Trading LLC		1,330,888			399,617			1,716,167			684,153

Net investment gain (loss) allocated from investment in Graham Alternative Investment Trading LLC:
Investment income:
Interest income		300,145			96,748			597,832			257,990

Expenses:
Brokerage fees		674,063			455,712			1,288,791			925,301
Advisory fees		579,088			391,126			1,103,985			799,942
Sponsor fees		289,544			195,562			551,993			399,970
Incentive allocation		5,732			7,524			5,732			11,996
Interest and other		11,537			183			16,793			723
Total expenses		1,559,964			1,050,107			2,967,294			2,137,932
Net investment loss allocated from investment in Graham Alternative Investment Trading LLC		(1,259,819	)		(953,359	)		(2,369,462	)		(1,879,942	)
Net gain (loss) for Blended Strategies Portfolio		71,069			(553,742	)		(653,295	)		(1,195,789	)

Systematic Strategies Portfolio:
Net gain (loss) allocated from investment in Graham Alternative Investment Trading II LLC:
Net realized gain on investments		530,963			2,747			204,061			2,671
Net decrease in unrealized appreciation on investments		(488,396	)		(7,826	)		(202,510	)		(7,829	)
Net gain (loss) allocated from investment in Graham Alternative Investment Trading II LLC		42,567			(5,079	)		1,551			(5,158	)

Net investment loss allocated from investment in Graham Alternative Investment Trading II LLC:
Investment income:
Interest income		34,694			62			58,775			67

Expenses:
Brokerage fees		87,801			422			147,800			447
Advisory fees		68,580			265			112,975			290
Sponsor fees		34,290			133			56,487			145
Incentive allocation		-			(79	)		-			(69	)
Interest and other		1,029			-			1,328			-
Total expenses		191,700			741			318,590			813
Net investment loss allocated from investment in Graham Alternative Investment Trading II LLC		(157,006	)		(679	)		(259,815	)		(746	)
Net loss for Systematic Strategies Portfolio		(114,439	)		(5,758	)		(258,264	)		(5,904	)

Net loss	$	(43,370	)	$	(559,500	)	$	(911,559	)	$	(1,201,693	)

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

Members’ capital, December 31, 2008		516,925.720		$	68,295,291			103,563.227		$	11,572,329		$	79,867,620
Subscriptions		56,268.516			7,464,500			30,728.086			3,429,881			10,894,381
Redemptions		(92,359.371	)		(12,175,120	)		(8,656.441	)		(967,216	)		(13,142,336	)
Net loss		–			(879,750	)		–			(316,039	)		(1,195,789	)
Members’ capital, June 30, 2009		480,834.865		$	62,704,921			125,634.872		$	13,718,955		$	76,423,876

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

Members’ capital, December 31, 2009		636,284.928		$	86,253,313			161,590.940		$	18,215,970		$	104,469,283
Subscriptions		109,024.263			14,591,489			19,076.923			2,118,829			16,710,318
Redemptions		(21,916.867	)		(2,956,776	)		(11,792.392	)		(1,308,900	)		(4,265,676	)
Net loss		–			(372,446	)		–			(280,849	)		(653,295	)
Members’ capital, June 30, 2010		723,392.324		$	97,515,580			168,875.471		$	18,745,050		$	116,260,630

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

	June 30, 2010 (Unaudited)		December 31, 2009 (Audited)
Assets
Cash and cash equivalents	$	5	$	49
Investments in Master Funds, at fair value		18,636,158		16,210,863
Investment in Graham Cash Assets LLC, at fair value		338,612,780		289,831,323
Accrued commission reimbursements		164,355		137,079
Receivable from Master Funds		1,607		2,825
Total assets	$	357,414,905	$	306,182,139

Liabilities and members’ capital
Liabilities:
Accrued redemptions	$	1,073,297	$	572,512
Accrued brokerage fees		681,176		608,084
Accrued advisory fees		586,159		518,693
Accrued sponsor fees		293,080		259,346
Accrued incentive allocation		5,692		341,592
Total liabilities		2,639,404		2,300,227

Members’ capital:
Class 0 Units (2,202,704.468 and 1,851,259.271 units issued and outstanding at $134.80 and $135.56 per unit, respectively)		296,931,655		250,952,480
Class 2 Units (513,649.527 and 462,314.824 units issued and outstanding at $111.00 and $112.73 per unit, respectively)		57,014,758		52,116,241
Class M Units (4,671.470 and 4,671.470 units issued and outstanding at $177.48 and $174.08 per unit, respectively)		829,088		813,191
Total members’ capital		354,775,501		303,881,912
Total liabilities and members’ capital	$	357,414,905	$	306,182,139

	Graham Commodity Strategies LLC (Delaware)			Graham Discretionary Energy Trading III LLC (Delaware)			Graham Fed Policy Ltd. (BVI)			Graham Global Monetary Policy LLC (Delaware)			Graham GMP Securities LLC (Delaware)			Graham K4D Trading Ltd. (BVI)			Graham Macro Directional LLC (Delaware)			Graham Short Term Global Macro LLC (Delaware)
Assets:
Cash and cash equivalents	$	2		$	4		$	7		$	9		$	6		$	9		$	9		$	2
Due from brokers		20,792,000			8,845,494			-			9,421,904			13,059			69,895,643			6,800,064			511,501
Options, at fair value		-			621,750			63,493,289			-			-			-			-			1,318,500
Derivative financial instruments, at fair value		-			-			10,037,945			-			-			17,469,369			887,260			52,558
Subscriptions receivable		-			-			-			572			34,996			-			-			-
Interest receivable		-			-			-			505			2			5,753			132			-
Total assets		20,792,002			9,467,248			73,531,241			9,422,990			48,063			87,370,774			7,687,465			1,882,561

Liabilities:
Options, at fair value		-			-			15,512,111			-			-			-			-			-
Derivative financial instruments, at fair value		8,045,974			3,585,012			-			74,618			-			14,792,793			-			-
Due to brokers		-			-			13,186,805			-			-			217,908			-			112,313
Redemptions payable		-			-			142			452			34,996			-			-			-
Total liabilities		8,045,974			3,585,012			28,699,058			75,070			34,996			15,010,701			-			112,313
Net assets	$	12,746,028		$	5,882,236		$	44,832,183		$	9,347,920		$	13,067		$	72,360,073		$	7,687,465		$	1,770,248

Percentage of Master Fund held by the Fund		10.49	%		13.15	%		11.76	%		6.73	%		6.39	%		12.31	%		16.43	%		25.71	%

	Six Months Ended June 30, 2010
Net investment income (loss)	$	(8,144	)	$	(31,238	)	$	(2,985	)	$	(18,706	)	$	(25,701	)	$	(101,716	)	$	(99,109	)	$	189

Net realized gain (loss) on investments		3,431,671			8,776,238			(7,939,681	)		92,414,929			(4,026,599	)		(21,798,070	)		14,917,121			(5,165,377	)
Net increase (decrease) in appreciation on investments		(8,533,312	)		(4,278,338	)		22,608,891			2,675,763			1,854,505			(14,594,710	)		874,650			1,926,626
Brokerage commissions and fees		(2,193,090	)		(515,104	)		(2,341,707	)		(1,155,368	)		(1,157	)		(3,006,196	)		(304,195	)		(132,308	)
Net gain (loss) on investments		(7,294,731	)		3,982,796			12,327,503			93,935,324			(2,173,251	)		(39,398,976	)		15,487,576			(3,371,059	)
Net income (loss)	$	(7,302,875	)	$	3,951,558		$	12,324,518		$	93,916,618		$	(2,198,952	)	$	(39,500,692	)	$	15,388,467		$	(3,370,870	)

	Graham Commodity Strategies LLC (Delaware)			Graham Fed Policy Ltd. (BVI)			Graham Global Macro Focus LLC (Delaware)			Graham Global Monetary Policy LLC (Delaware)			Graham K4D Trading Ltd. (BVI)			Graham Macro Directional LLC (Delaware)
Assets:
Cash and cash equivalents	$	1,000		$	218		$	-		$	661		$	425		$	644
Due from brokers		9,338,086			15,446,856						4,369,612			99,865,289			1,504,495
Options, at fair value		-			13,752,876			-			4,562,737			-			-
Derivative financial instruments, at fair value		487,337			2,862,031			-			1,507,026			17,929,174			115,018
Subscriptions receivable		1,288			9,630			-			4,169			4,331			2,017
Interest receivable		-			-			-			105			293			-
Total assets		9,827,711			32,071,611			-			10,444,310			117,799,512			1,622,174

Liabilities:
Options, at fair value		-			9,228,344			-			1,568,611			-			-
Derivative financial instruments, at fair value		-			-			-			186,163			-			-
Due to brokers		-			48,333			-			-			-			-
Redemptions payable		1,288			9,772			-			13,305			4,331			2,017
Total liabilities		1,288			9,286,449			-			1,768,079			4,331			2,017
Net assets	$	9,826,423		$	22,785,162		$	-		$	8,676,231		$	117,795,181		$	1,620,157

Percentage of Master Fund held by the Fund		7.77	%		11.63	%		0.00	%		9.97	%		9.95	%		12.85	%

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

	Three Months Ended June 30, 2009
Net investment income (loss)	$	(803	)	$	29		$	-	$	(13,037	)	$	(61,998	)	$	(1,098	)

Net realized gain (loss) on investments		1,916,348			43,078,858			-		16,920,208			(27,997,936	)		9,597,137
Net increase (decrease) in appreciation on investments		3,166,047			(37,483,572	)		-		1,543,594			(845,523	)		(1,088,748	)
Brokerage commissions and fees		(674,920	)		(328,859	)		-		(231,202	)		(2,028,200	)		(110,635	)
Net gain (loss) on investments		4,407,475			5,266,427			-		18,232,600			(30,871,659	)		8,397,754
Net income (loss)	$	4,406,672		$	5,266,456		$	-	$	18,219,563		$	(30,933,657	)	$	8,396,656

	Six Months Ended June 30, 2009
Net investment income (loss)	$	(1,394	)	$	(5,669	)	$	33		$	(15,381	)	$	(81,619	)	$	(818	)

Net realized gain (loss) on investments		(4,873,042	)		86,903,589			(299,050	)		31,433,062			(71,431,667	)		6,147,123
Net increase (decrease) in appreciation on investments		13,600,420			(71,928,858	)		299,050			(90,880	)		(24,341,916	)		330,605
Brokerage commissions and fees		(1,337,017	)		(714,404	)		-			(391,727	)		(2,915,095	)		(224,615	)
Net gain (loss) on investments		7,390,361			14,260,327			-			30,950,455			(98,688,678	)		6,253,113
Net income (loss)	$	7,388,967		$	14,254,658		$	33		$	30,935,074		$	(98,770,297	)	$	6,252,295

Description	Number of Contracts		Fair Value			Percentage of Members' Capital
Graham Commodity Strategies LLC
Long contracts
Futures
Brent Crude Oil June 2011		203	$	(1,284,750	)		(10.08	)%
Brent Crude Penultimate Financial June 2011		771		(4,447,230	)		(34.89	)%
Coffee December 2010		850		2,196,656			17.23	%
Copper March 2011		931		(4,647,663	)		(36.46	)%
Corn December 2010		1,583		853,425			6.70	%
Gas Oil December 2010		222		(1,268,125	)		(9.95	)%
LME Aluminum July 2010		418		(1,324,900	)		(10.39	)%
LME Copper July 2010		146		(1,333,038	)		(10.46	)%
LME Lead July 2010		193		(1,368,556	)		(10.74	)%
LME Nickel July 2010		143		(2,035,596	)		(15.97	)%
LME Zinc July 2010		270		(1,000,475	)		(7.85	)%
Natural Gas January 2011		1,675		(4,244,360	)		(33.30	)%
Natural Gas March 2011		687		(1,706,410	)		(13.39	)%
Wheat December 2010		554		(737,275	)		(5.78	)%
Wheat March 2011		1,114		(1,901,300	)		(14.92	)%
WTI Crude October 2010		1,918		(1,104,940	)		(8.67	)%
WTI Crude December 2010		400		(2,399,750	)		(18.83	)%
Other commodity				(1,485,829	)		(11.66	)%
Total futures				(29,240,116	)		(229.41	)%

Swaps
Gasoil Swap December 2010		109		(3,622,750	)		(28.42	)%
Total swaps				(3,622,750	)		(28.42	)%

Description	Number of Contracts			Fair Value			Percentage of Members' Capital
Graham Commodity Strategies LLC (continued)
Short contracts
Futures
Brent Crude Oil December 2011		(380	)	$	1,636,210			12.84	%
Brent Crude Penultimate Financial December 2010		(771	)		4,539,140			35.61	%
Coffee September 2010		(1,077	)		(2,498,850	)		(19.61	)%
Copper September 2010		(1,018	)		3,645,712			28.60	%
Corn September 2010		(1,656	)		(790,750	)		(6.20	)%
Gas Oil June 2011		(272	)		1,359,350			10.66	%
Globex Crude Oil December 2010		(300	)		987,000			7.74	%
LME Zinc July 2010		(256	)		1,051,173			8.25	%
Natural Gas October 2010		(1,275	)		3,406,320			26.72	%
Natural Gas December 2010		(1,087	)		3,013,400			23.64	%
Wheat December 2010		(554	)		955,775			7.50	%
WTI Crude August 2010		(2,103	)		1,173,410			9.21	%
Other commodity					2,550,002			20.01	%
Total futures					21,027,892			164.97	%

Swaps
Gasoil Swap December 2010		(104	)		3,789,000			29.73	%
Total swaps					3,789,000			29.73	%

Total				$	(8,045,974	)		(63.13	)%

Description	Number of Contracts		Fair Value			Percentage of Members' Capital
Graham Discretionary Energy Trading III LLC
Long contracts
Futures
Globex Crude Oil December 2011		500	$	(513,500	)		(8.73	)%
Heating Oil June 2011		200		(657,720	)		(11.18	)%
Natural Gas April 2011		150		(1,317,000	)		(22.39	)%
WTI Crude December 2010		625		(4,028,750	)		(68.49	)%
WTI Crude January 2011		200		(477,900	)		(8.13	)%
Other commodity				92,920			1.58	%
Total futures				(6,901,950	)		(117.34	)%

Options
Natural Gas European August 2010, 4.50 Put		250		471,750			8.02	%
Other commodity				150,000			2.55	%
Total swaps				621,750			10.57	%

Swaps
Natural Gas Swap September 2010		2,000		660,000			11.22	%
Natural Gas ICE Swap August 2010		1,744		(975,355	)		(16.58	)%
Natural Gas ICE Swap October 2010		4,034		1,086,093			18.46	%
Total swaps				770,738			13.10	%

Description	Number of Contracts			Fair Value			Percentage of Members' Capital
Graham Discretionary Energy Trading III LLC (continued)
Short contracts
Futures
Heating Oil January 2011		(200	)	$	676,200			11.50	%
Natural Gas October 2010		(305	)		334,540			5.69	%
WTI Crude June 2011		(200	)		539,000			9.16	%
WTI Crude December 2011		(500	)		3,289,770			55.93	%
Other commodity					115,990			1.97	%
Total futures					4,955,500			84.25	%

Swaps
Natural Gas ICE Swap September 2010		(4,140	)		(1,623,300	)		(27.60	)%
Natural Gas Swap October 2010		(2,400	)		(905,000	)		(15.38	)%
Other commodity					119,000			2.02	%
Total swaps					(2,409,300	)		(40.96	)%

Total				$	(2,963,262	)		(50.38	)%