Company Quick10K Filing
⚲
Graham Alternative Investment Fund II
Filings
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-03-30
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-03-29
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-29
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-30
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-14
10-K 2014-12-31 Filed 2015-03-30
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-28
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-03-28
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-30
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-16
Reports
8-K 2019-02-28 Officers

GAIFB 10Q Quarterly Report

Content
Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities - None
Item 4. Mine Safety Disclosures - None
Item 5. Other Information - None
Item 6. Exhibits
Exhibits
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32.1 ex32_1.htm

Graham Alternative Investment Fund II Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10-Q 1 form10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2020

OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission File Number 0-53967

GRAHAM ALTERNATIVE INVESTMENT FUND II LLC
BLENDED STRATEGIES PORTFOLIO
(Exact name of registrant as specified in its charter)

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

c/o GRAHAM CAPITAL MANAGEMENT, L.P.
40 Highland Avenue
Rowayton, CT  06853
(Address of principal executive offices) (Zip Code)

Brian Douglas
Graham Capital Management, L.P.
40 Highland Avenue
Rowayton, CT  06853
(203) 899-3400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None
N/A
None

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

Yes ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒  No  ☐

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

Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☒
Emerging Growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐  No ☒

As of May 1, 2020, 198,666.927 Units of the Blended Strategies Portfolio were outstanding.

GRAHAM ALTERNATIVE INVESTMENT FUND II LLC

BLENDED STRATEGIES PORTFOLIO
FORM 10-Q

INDEX

   
Page
Number
       
PART I - Financial Information:
  
       
 
Item 1.
Financial Statements:
  
       
   
Graham Alternative Investment Fund II LLC Blended Strategies Portfolio
  
       
   
1
       
   
2
       
   
3
       
   
4
       
   
5
       
   
Graham Alternative Investment Trading LLC
  
       
   
12
       
   
13
       
   
14
       
   
15
       
   
16
       
   
17
       
 
Item 2.
51
       
 
Item 3.
57
       
 
Item 4.
58
     
59
     
 
60


Certification

EX - 31.2
Certification

EX - 32.1
Certification

PART I

Item 1. Financial Statements
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Consolidated Statements of Financial Condition


   
March 31, 2020
(Unaudited)
    
December 31, 2019
(Audited)
  
             
Assets
            
Investment in Graham Alternative Investment Trading LLC, at fair value
  
$
27,677,400
    
$
27,344,100
  
Redemptions receivable from Graham Alternative Investment Trading LLC
    
545,624
      
241,412
  
Total assets
  
$
28,223,024
    
$
27,585,512
  
                 
Liabilities and members’ capital
                
Liabilities:
                
Redemptions payable
  
$
545,624
    
$
241,412
  
Total liabilities
    
545,624
      
241,412
  
                 
Members’ capital:
                
Class 0 Units (106,189.149 and 109,215.865 units issued and outstanding at $159.32 and $152.04, respectively)
    
16,917,644
      
16,605,529
  
Class 2 Units (94,555.617 and 99,110.353 units issued and outstanding at $113.79 and $108.35, respectively)
    
10,759,756
      
10,738,571
  
Total members’ capital
    
27,677,400
      
27,344,100
  
Total liabilities and members’ capital
  
$
28,223,024
    
$
27,585,512
  

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

1
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Unaudited Consolidated Statements of Operations

   
Three Months Ended
March 31,
  
   
2020
    
2019
  
Net gain allocated from investment in Graham Alternative Investment Trading LLC:
            
Net realized gain (loss) on investment
  
$
586,541
    
$
(241,083
)
Net increase in unrealized appreciation on investment
    
924,641
      
326,777
  
Brokerage commissions and fees
    
(50,108
)
    
(48,638
)
Net gain allocated from investment in Graham Alternative Investment Trading LLC
    
1,461,074
      
37,056
  
                 
Net investment loss allocated from investment in Graham Alternative Investment Trading LLC:
                
Investment income:
                
Interest income
    
106,663
      
134,503
  
                 
Expenses:
                
Advisory fees
    
101,551
      
102,095
  
Incentive allocation
    
71,227
      
–
  
Sponsor fees
    
53,786
      
54,113
  
Professional fees
    
27,174
      
29,111
  
Administrator’s fees
    
8,599
      
9,250
  
Interest expense
    
1,647
      
1,449
  
Total expenses
    
263,984
      
196,018
  
Net investment loss allocated from investment in Graham Alternative Investment Trading LLC
    
(157,321
)
    
(61,515
)
Net income (loss)
  
$
1,303,753
    
$
(24,459
)

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

2
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Unaudited Consolidated Statements of Changes in Members’ Capital

For the Three Months Ended March 31, 2020 and 2019

   
Class 0 Units
    
Class 2 Units
        
   
Units
    
Capital
    
Units
    
Capital
    
Total Members’
Capital
  
                               
Members’ capital, December 31, 2018
    
125,660.811
    
$
16,801,362
      
116,424.562
    
$
11,177,397
    
$
27,978,759
  
Subscriptions
    
1,882.369
      
250,000
      
775.525
      
73,500
      
323,500
  
Redemptions
    
(4,231.016
)
    
(563,529
)
    
(7,277.581
)
    
(694,270
)
    
(1,257,799
)
Net loss
    
–
      
(1,083
)
    
–
      
(23,376
)
    
(24,459
)
Members’ capital, March 31, 2019
    
123,312.164
    
$
16,486,750
      
109,922.506
    
$
10,533,251
    
$
27,020,001
  

   
Class 0 Units
    
Class 2 Units
        
   
Units
    
Capital
    
Units
    
Capital
    
Total Members’
Capital
  
                               
Members’ capital, December 31, 2019
    
109,215.865
    
$
16,605,529
      
99,110.353
    
$
10,738,571
    
$
27,344,100
  
Subscriptions
    
–
      
–
      
–
      
–
      
–
  
Redemptions
    
(3,026.716
)
    
(461,116
)
    
(4,554.736
)
    
(509,337
)
    
(970,453
)
Net income
    
–
      
773,231
      
–
      
530,522
      
1,303,753
  
Members’ capital, March 31, 2020
    
106,189.149
    
$
16,917,644
      
94,555.617
    
$
10,759,756
    
$
27,677,400
  

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

3
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Unaudited Consolidated Statements of Cash Flows

   
Three Months Ended
March 31,
  
   
2020
    
2019
  
Cash flows provided by operating activities
            
Net income (loss)
  
$
1,303,753
    
$
(24,459
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                
Net (income) loss allocated from investment in Graham Alternative Investment Trading LLC
    
(1,303,753
)
    
24,459
  
Proceeds from sale of investment in Graham Alternative Investment Trading LLC
    
666,241
      
926,582
  
Purchases of investment in Graham Alternative Investment Trading LLC
    
–
      
(323,500
)
Net cash provided by operating activities
    
666,241
      
603,082
  
                 
Cash flows used in financing activities
                
Subscriptions
    
–
      
323,500
  
Redemptions
    
(666,241
)
    
(926,582
)
Net cash used in financing activities
    
(666,241
)
    
(603,082
)
                 
Net change in cash and cash equivalents
    
–
      
–
  
                 
Cash and cash equivalents, beginning of period
    
–
      
–
  
Cash and cash equivalents, end of period
  
$
–
    
$
–
  

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

4
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Notes to Unaudited Consolidated Financial Statements

March 31, 2020

1. Organization and Business
 
The Blended Strategies Portfolio (the “Fund”) is a series of Graham Alternative Investment Fund II LLC (“GAIF II”), a Delaware Series Limited Liability Company established through an amendment to the certificate of formation, effective March 28, 2013. Prior to March 28, 2013, GAIF II was organized as a Delaware Limited Liability Company which was formed on May 16, 2006 and commenced operations on August 1, 2006. Prior to October 31, 2019, investors in GAIF II had the choice to invest in either or both of two different portfolios, the Blended Strategies Portfolio or the Systematic Strategies Portfolio. The Systematic Strategies Portfolio ceased trading operations on October 31, 2019. GAIF II is registered as a commodity pool and as such is subject to the oversight and jurisdiction of the U.S. Commodity Futures Trading Commission (“CFTC”).
 
As a Series Limited Liability Company each series is legally segregated, and the assets associated with each series are held separately and accounted for in separate and distinct records from the assets of any other series of GAIF II. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series are enforceable against the assets of such series only, and not against the assets of GAIF II generally or any other series thereof. Further, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to GAIF II are enforceable against the assets of any other series.
 
The Fund offers members Class 0 and Class 2 Units (collectively the “Units”). Graham Alternative Investment Ltd. (“GAI”) is a British Virgin Islands business company which was formed on June 1, 2006 and commenced operations on August 1, 2006. The Fund invests all of its assets dedicated to trading in Graham Alternative Investment Trading LLC (“GAIT”), a Delaware Limited Liability Company which was formed on May 18, 2006 and commenced operations on August 1, 2006, through an investment in GAI’s Blended Strategies Portfolio. GAIT invests in various master trading vehicles (“Master Funds”) and Graham Cash Assets LLC (“Cash Assets”), all of which are managed by Graham Capital Management, L.P. (the “Advisor” or “Manager”). The Fund is the sole owner of GAI’s Blended Strategies Portfolio and GAI’s Blended Strategies Portfolio invests all of its assets into GAIT. The Manager is the director of GAI and the sole investment advisor of GAI, GAIT and the Fund. The Manager is registered as a Commodity Pool Operator and Commodity Trading Advisor with the CFTC and is a member of the National Futures Association. The Manager is also registered with the Securities and Exchange Commission as an investment adviser. The Fund’s Units are registered under Section 12 of the Securities Exchange Act of 1934.
 
The investment objective of the Fund is to achieve long-term capital appreciation through professionally managed trading in both U.S. and foreign markets primarily in futures contracts, forwards contracts, spot currency contracts, and associated derivative instruments, such as options and swaps, through its investment in GAIT, which in turn invests in various Master Funds. The Master Funds seek to profit from opportunities in the global financial markets, including interest rate futures, foreign exchange, global stock indices and energy, metals and agricultural futures, as professionally managed multi-strategy investment vehicles. Each of the investment programs consists of multiple trading strategies of the Manager, which the Manager has combined in an effort to diversify the Fund’s investment exposure and to make the Fund’s performance returns less volatile and more consistently profitable.
 
SEI Global Services, Inc. (“SEI”) is the Fund’s independent administrator and transfer agent. SEI is responsible for certain matters pertaining to the administration of the Fund.
 
The Fund will terminate on December 31, 2050 or at an earlier date if certain conditions occur as outlined in the Limited Liability Company Agreement (“LLC Agreement”) of the Fund.
 
See attached financial statements of Graham Alternative Investment Trading LLC.

5
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Notes to Unaudited Consolidated Financial Statements (continued)

1. Organization and Business (continued)
 
The performance of the Fund is directly affected by the performance of GAIT; therefore, these consolidated financial statements should be read in conjunction with the attached financial statements of GAIT, including the condensed schedules of investments.
 
Duties of the Manager
 
Subject to the terms and conditions of the LLC Agreement, the Manager has complete and exclusive responsibility for managing and administering the affairs of the Fund and for directing the investment and reinvestment of the assets of the Fund, GAI, and GAIT.
 
2. Summary of Significant Accounting Policies
 
These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. The Fund is an investment company and applies specialized accounting guidance as outlined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. The preparation of these consolidated financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
 
Principles of Consolidation
 
The Fund owns 100% of GAI’s Blended Strategies Portfolio and as such these consolidated financial statements include all the accounts of the Fund and GAI’s Blended Strategies Portfolio. Intercompany transactions and balances have been eliminated in consolidation. Creditors of the Fund have recourse to all assets of the Fund for amounts due to them, while creditors of GAI would have recourse only to the assets of GAI.
 
Investment in Graham Alternative Investment Trading LLC
 
The Fund records its investment in GAIT at fair value based upon the Fund’s proportionate share of GAIT’s reported net asset value in accordance with U.S. GAAP. In determining its net asset value, GAIT records its investments in the Master Funds at fair value based upon GAIT’s proportionate share of the Master Funds’ reported net asset value. The Fund records its proportionate share of GAIT’s investment income and loss, expenses, fees, and realized and unrealized gains and losses on a monthly basis and includes them in the consolidated statements of operations. Purchases and sales of units in GAIT are recorded on a trade date basis. The accounting policies of GAIT are described in its attached financial statements.
 
GAIT charges its investors, including the Fund, an advisory fee, sponsor fee, and incentive allocation, all of which are described in detail in Note 4. The Fund does not charge any additional fees; however, each investor in the Fund indirectly bears a portion of the advisory fee, sponsor fee, and incentive allocation charged by GAIT.

At March 31, 2020 and December 31, 2019, the Fund owned 48.81% and 49.24%, respectively of GAIT.

See attached financial statements of Graham Alternative Investment Trading LLC.


6
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Notes to Unaudited Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
 
Fair Value
 
The fair value of the assets and liabilities of the Fund and GAIT, which qualify as financial instruments under U.S. GAAP, approximates the carrying amounts presented in the consolidated statements of financial condition. Changes in these carrying amounts are included in the consolidated statements of operations.
 
The Fund follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. The Fund reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. U.S. GAAP uses a three-level hierarchy for fair value measurement based on the activeness of the market and the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.

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

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

•
Level 2 inputs include quoted prices for similar assets and liabilities obtained from independent brokers and/or market makers in each security.

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

The Fund’s investment in GAIT has been valued at net asset value using the practical expedient. Accordingly, under U.S. GAAP, this investment is excluded from categorization in the fair value hierarchy. There were no Level 3 assets or liabilities held at any point during the three months ended March 31, 2020 or the year ended December 31, 2019 by the Fund, GAIT, the Master Funds or Cash Assets.
 
Cash and Cash Equivalents
 
The Fund classifies all highly liquid investments with a maturity of three months or less at the time of purchase as cash equivalents on the statements of financial condition. Cash deposited with a bank is subject to credit risk. In the event of the bank’s insolvency, recovery of the Fund’s cash would be limited to account insurance or other protection afforded by such deposit, which could be substantially less than the amount deposited. At March 31, 2020 and December 31, 2019, the Fund did not have any cash or cash equivalents.
 
Indemnifications
 
In the normal course of business, the Master Funds, GAIT, Cash Assets, and the Fund enter into contracts that contain a variety of indemnifications. Such contracts may include those by Cash Assets and the Master Funds with their brokers and trading counterparties. The Fund’s maximum exposure under these arrangements is unknown; however, the Fund has not had prior claims or losses with respect to such indemnifications and considers the risk of loss to be remote. At March 31, 2020 and December 31, 2019, no accruals have been recorded by the Fund for indemnifications.
 
See attached financial statements of Graham Alternative Investment Trading LLC.

7
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Notes to Unaudited Consolidated Financial Statements (continued)

3. Capital Accounts
 
The Fund offers two classes (each a “Class”) of Units, being Class 0 Units and Class 2 Units. The Fund may issue additional Classes in the future subject to different fees, expenses or other terms, or may invest in other investment programs or combinations of investment programs managed by the Manager.
 
A separate capital account is maintained for each member with respect to each member’s Class of Units. The initial balance of each Members’ Capital account is equal to the initial subscription to the Fund by such member with respect to the Class to which such capital account relates. Each Members’ Capital account is increased by any additional subscription and decreased by any redemption by such member of Units of such Class to which the capital account relates. All income and expenses of the Fund are allocated among the Members’ Capital accounts in proportion to the balance that each capital account bears to the balance of all capital as of the beginning of such fiscal period.
 
Subscriptions
 
Units may be purchased at a price equal to the Net Asset Value per Unit of the relevant Class as of the immediately preceding Valuation Day, as defined in the LLC Agreement. The minimum initial subscription from each investor in each Class is $10,000. Members may subscribe for additional Units in a minimum amount of not less than $5,000.
 
Units are available for subscription as of the first business day of each month upon written notice of at least three business days prior to the last business day of the preceding month.
 
Redemption of Units
 
Units are not subject to any minimum holding period. Members may redeem Units at the Net Asset Value thereof as of each Valuation Day, as defined in the LLC Agreement, upon not less than three business days’ prior written notice to the administrator. A partial redemption request for an amount less than $10,000 will not be accepted, nor will a redemption request be accepted to the extent that it would result in an investor owning less than $10,000. The redemption proceeds will normally be remitted within 15 business days after the Valuation Day, without interest for the period from the Valuation Day to the payment date.
 
4. Fees and Related Party Transactions
 
Advisory Fees
 
Each Class of GAIT other than Class M paid the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate of 1.50% of the Members’ Capital 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 affected with respect to Units of such Class during the month. For the three months ended March 31, 2020 and 2019, the Advisory Fees allocated to the Fund by each Class of GAIT totaled $101,551 and $102,095, respectively.
 
See attached financial statements of Graham Alternative Investment Trading LLC.

8
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Notes to Unaudited Consolidated Financial Statements (continued)

4. Fees and Related Party Transactions (continued)
 
Sponsor Fees
 
Each Class of GAIT other than Class M paid the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of the Members’ Capital specified in the table below. The Sponsor Fee is payable monthly in arrears calculated as of the last business day of each month in the same manner as the Advisory Fee. For the three months ended March 31, 2020 and 2019, the Sponsor Fees allocated to the Fund by each Class of GAIT totaled $53,786 and $54,113, respectively.
 
Class 0
Class 2
0.50%
1.25%
 
Incentive Allocation
 
At the end of each calendar quarter, Graham Capital LLC, an affiliate of the Manager, will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class of GAIT, as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter. Additionally, any loss carryforward attributable to any class of GAIT shall be proportionately reduced, effective as of the date of any redemption of any Units of such class, by multiplying the loss carryforward by the ratio that the amount of Members’ Capital redeemed from such class bears to the Members’ Capital of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made to Graham Capital LLC. For the three months ended March 31, 2020, $71,227 of Incentive Allocation was allocated to the Fund by GAIT.  There was no Incentive Allocation allocated to the Fund by GAIT for the three months ended March 31, 2019.
 
Any portion of any of the above fees, including the Incentive Allocation, may be paid by the Manager to third parties as compensation for selling activities in connection with the Fund.
 
Administrator’s Fee

For the three months ended March 31, 2020 and 2019, GAIT paid SEI a monthly administrator’s fee based on GAIT’s Members’ Capital, calculated as of the last business day of each month. In addition, GAIT reimbursed SEI for reasonable out-of-pocket expenses incurred on behalf of GAIT. The total administrator’s fees, including out-of-pocket expenses, allocated to the Fund by GAIT for the three months ended March 31, 2020 and 2019 were $8,599 and $9,250, respectively.
 
5. Income Taxes
 
No provision for income taxes has been made in the accompanying consolidated financial statements, as members are individually responsible for reporting income or loss based upon their respective share of the Fund’s income and expenses for income tax purposes.
 
See attached financial statements of Graham Alternative Investment Trading LLC.

9
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Notes to Unaudited Consolidated Financial Statements (continued)

5. Income Taxes (continued)
 
U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a “more-likely-than-not” threshold would be recorded as a tax expense in the current year. The Fund identifies its major tax jurisdictions as the U.S. for Federal tax purposes and Connecticut for state tax purposes. The Manager has evaluated the Fund’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement or disclosure in the consolidated financial statements for open tax years 2017 through 2019 or expected to be taken in the Fund’s 2020 tax returns. The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months. Tax years which are considered open by the relevant jurisdiction are subject to potential examination. Any assessment for interest or penalties on taxes related to uncertain tax positions, when present, would be included in interest and penalties on tax on the consolidated statements of operations. No such interest and/or penalties were assessed to the Fund for the three months ended March 31, 2020 and 2019.
 
6. Financial Highlights
 
The following is the per Unit operating performance calculation for the three months ended March 31, 2020 and 2019:
 
   
Class 0
    
Class 2
  
Per unit operating performance
            
Net asset value per Unit, December 31, 2018
  
$
133.70
    
$
96.01
  
Net loss:
                
Net investment loss
    
(0.20
)
    
(0.32
)
Net gain on investments
    
0.20
      
0.13
  
Net loss
    
0.00
      
(0.19
)
Net asset value per Unit, March 31, 2019
  
$
133.70
    
$
95.82
  
                 
Net asset value per Unit, December 31, 2019
  
$
152.04
    
$
108.35
  
Net income:
                
Net investment loss
    
(1.03
)
    
(0.47
)
Net gain on investments
    
8.31
      
5.91
  
Net income
    
7.28
      
5.44
  
Net asset value per Unit, March 31, 2020
  
$
159.32
    
$
113.79
  

See attached financial statements of Graham Alternative Investment Trading LLC.

10
Graham Alternative Investment Fund II LLC

Blended Strategies Portfolio

Notes to Unaudited Consolidated Financial Statements (continued)

6. Financial Highlights (continued)
 
The following represents ratios to average Members’ Capital, excluding the Managing Member, and total return for the three months ended March 31, 2020 and 2019:
 
   
Class 0
  
Class 2
  
   
2020
  
2019
  
2020
  
2019
  
                   
Total return before Incentive Allocation
  
    5.21%
  
   0.00%
  
    5.02%
  
   (0.20)%
Incentive Allocation
  
(0.43)
  
0.00
  
0.00
  
0.00
  
Total return after Incentive Allocation
  
    4.78%
  
   0.00%
  
    5.02%
  
   (0.20)%
                   
Net investment loss before Incentive Allocation
  
    (0.25)%
  
   (0.15)%
  
    (0.44)%
  
   (0.34)%

Incentive Allocation
  
(0.43)
  
0.00
  
0.00
  
0.00
  
Net investment loss after Incentive Allocation
  
    (0.68)%
  
   (0.15)%
  
    (0.44)%
  
   (0.34)%

                   
Total expenses before Incentive Allocation
  
    0.64%
  
   0.64%
  
    0.83%
  
   0.83%

Incentive Allocation
  
0.43
  
0.00
  
0.00
  
0.00
  
Total expenses after Incentive Allocation
  
    1.07%
  
   0.64%
  
    0.83%
  
   0.83%


Total return is calculated for Class 0 and Class 2 Units taken as a whole. Total return is calculated as the change in total Members’ Capital adjusted for subscriptions or redemptions during the period. An individual member’s return may vary from these returns based on the timing of capital transactions. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for Class 0 and Class 2 Units taken as a whole and include net amounts allocated from GAIT. The computation of such ratios is based on the amount of net investment loss, expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of Members’ Capital for Class 0 and Class 2 Units of the Fund for the three months ended March 31, 2020 and 2019 and are not annualized.
 
7. Subsequent Events
 
The Fund had no subscriptions and redemptions of approximately $0.3 million from April 1, 2020 through May 15, 2020, the date through which subsequent events were evaluated by management and the consolidated financial statements were available for issuance. These amounts have not been included in the consolidated financial statements.

See attached financial statements of Graham Alternative Investment Trading LLC.

11
Graham Alternative Investment Trading LLC

Statements of Financial Condition

   
March 31, 2020
(Unaudited)
    
December 31, 2019
(Audited)
  
Assets
            
Cash and cash equivalents
  
$
53
    
$
–
  
Investments in Master Funds, at fair value
    
4,888,425
      
7,251,243
  
Investment in Graham Cash Assets LLC, at fair value
    
52,823,943
      
48,977,607
  
Receivable from Master Funds
    
–
      
167
  
Total assets
  
$
57,712,421
    
$
56,229,017
  
                 
Liabilities and members’ capital
                
Liabilities:
                
Redemptions payable
  
$
774,646
    
$
386,119
  
Accrued professional fees
    
114,025
      
195,023
  
Accrued advisory fees
    
71,412
      
69,712
  
Accrued sponsor fees
    
38,189
      
37,281
  
Accrued administrator’s fee
    
6,198
      
6,032
  
Payable to Master Funds
    
519
      
195
  
Total liabilities
    
1,004,989
      
694,362
  
                 
Members’ capital:
                
Class 0 Units (207,796.269 and 213,162.414 units issued and outstanding at $159.32 and $152.04 per unit, respectively)
    
33,105,301
      
32,409,897
  
Class 2 Units (195,258.141 and 201,355.180 units issued and outstanding at $113.79 and $108.35 per unit, respectively)
    
22,218,992
      
21,816,766
  
Class M Units (4,671.470 units issued and outstanding at $296.08 and $279.99 per unit, respectively)
    
1,383,139
      
1,307,992
  
Total members’ capital
    
56,707,432
      
55,534,655
  
Total liabilities and members’ capital
  
$
57,712,421
    
$
56,229,017
  

See accompanying notes.
 
12
Graham Alternative Investment Trading LLC

Condensed Schedules of Investments

   
March 31, 2020
(Unaudited)
  
December 31, 2019
(Audited)
  
Description
  
Fair Value
    
Percentage of
Members’
Capital
  
Fair Value
    
Percentage of
Members’
Capital
  
                       
Investments in Master Funds, at fair value
                      
Graham Commodity Strategies LLC
  
$
2,397,479
    
4.23%
  
$
3,714,431
    
6.69%

Graham K4D Trading Ltd.
    
2,490,946
    
4.39%
    
3,536,812
    
6.37%

Total investments in Master Funds
  
$
4,888,425
    
8.62%
  
$
7,251,243
    
13.06%

 
See accompanying notes.
 
13
Graham Alternative Investment Trading LLC

Unaudited Statements of Operations and Incentive Allocation

   
Three Months Ended
March 31,
  
   
2020
    
2019
  
Net gain allocated from investments in Master Funds:
            
Net realized gain (loss) on investments
  
$
1,191,386
    
$
(512,037
)
Net increase in unrealized appreciation on investments
    
1,879,868
      
678,788
  
Brokerage commissions and fees
    
(101,748
)
    
(103,761
)
Net gain allocated from investments in Master Funds
    
2,969,506
      
62,990
  
                 
Net investment income allocated from investments in Master Funds
    
17,733
      
25,584
  
                 
Investment income:
                
Interest income
    
198,834
      
261,666
  
Total investment income
    
198,834
      
261,666
  
                 
Expenses:
                
Advisory fees
    
201,293
      
213,900
  
Sponsor fees
    
107,597
      
113,970
  
Professional fees
    
55,179
      
62,070
  
Administrator’s fee
    
17,460
      
19,758
  
Interest expense
    
3,344
      
3,095
  
Total expenses
    
384,873
      
412,793
  
Net investment loss of the Fund
    
(186,039
)
    
(151,127
)
                 
Net income (loss)
    
2,801,200
      
(62,553
)
                 
Incentive allocation
    
(139,069
)
    
-
  
                 
Net income (loss) available for pro-rata allocation to all members
  
$
2,662,131
    
$
(62,553
)

See accompanying notes.

14
Graham Alternative Investment Trading LLC

Unaudited Statements of Changes in Members’ Capital

For the Three Months Ended March 31, 2020 and 2019

   
Class 0
    
Class 2
    
Class M
    
Total
  
   
Units
    
Capital
    
Units
    
Capital
    
Units
    
Capital
    
Capital
  
                                           
Members’ capital, December 31, 2018
    
263,114.613
    
$
35,179,498
      
251,175.400
    
$
24,114,225
      
4,671.470
    
$
1,127,501
    
$
60,421,224
  
Subscriptions
    
2,447.080
      
325,000
      
775.525
      
73,500
      
–
      
–
      
398,500
  
Redemptions
    
(15,238.411
)
    
(2,029,083
)
    
(23,162.529
)
    
(2,203,496
)
    
–
      
–
      
(4,232,579
)
Incentive allocation
    
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Net (loss) income
    
–
      
(7,364
)
    
–
      
(60,726
)
    
–
      
5,537
      
(62,553
)
Members’ capital, March 31, 2019
    
250,323.282
    
$
33,468,051
      
228,788.396
    
$
21,923,503
      
4,671.470
    
$
1,133,038
    
$
56,524,592
  
                                                         
                                                         
   
Class 0
    
Class 2
    
Class M
    
Total
  
   
Units
    
Capital
    
Units
    
Capital
    
Units
    
Capital
    
Capital
  
                                                         
Members’ capital, December 31, 2019
    
213,162.414
    
$
32,409,897
      
201,355.180
    
$
21,816,766
      
4,671.470
    
$
1,307,992
    
$
55,534,655
  
Subscriptions
    
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Redemptions
    
(5,366.145
)
    
(816,202
)
    
(6,097.039
)
    
(673,152
)
    
–
      
(139,069
)
    
(1,628,423
)
Incentive allocation
    
–
      
(139,069
)
    
–
      
–
      
–
      
139,069
      
–
  
Net income
    
–
      
1,650,675
      
–
      
1,075,378
      
–
      
75,147
      
2,801,200
  
Members’ capital, March 31, 2020
    
207,796.269
    
$
33,105,301
      
195,258.141
    
$
22,218,992
      
4,671.470
    
$
1,383,139
    
$
56,707,432
  
 
See accompanying notes.
 
15
Graham Alternative Investment Trading LLC

Unaudited Statements of Cash Flows

   
Three Months Ended March 31,
  
   
2020
    
2019
  
Cash flows provided by operating activities
            
Net income (loss)
  
$
2,801,200
    
$
(62,553
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                
Net (income) allocated from investments in Master Funds
    
(2,987,239
)
    
(88,574
)
Net (income) allocated from investment in Graham Cash Assets LLC
    
(198,834
)
    
(261,666
)
Proceeds from sale of investments in Master Funds
    
19,043,220
      
16,696,438
  
Proceeds from sale of investment in Graham Cash Assets LLC
    
9,733,960
      
15,919,947
  
Purchases of investments in Master Funds
    
(13,714,245
)
    
(16,328,318
)
Purchases of investment in Graham Cash Assets LLC
    
(13,359,889
)
    
(12,891,795
)
Changes in assets and liabilities:
                
Decrease in accrued professional fees
    
(80,998
)
    
(15,835
)
Increase (decrease)  in accrued advisory fees
    
1,700
      
(3,867
)
Increase (decrease)  in accrued sponsor fees
    
908
      
(2,709
)
Increase (decrease)  in accrued administrator’s fee
    
166
      
(280
)
Net cash provided by operating activities
    
1,239,949
      
2,960,788
  
                 
Cash flows used in financing activities
                
Subscriptions
    
–
      
398,500
  
Redemptions
    
(1,239,896
)
    
(3,359,288
)
Net cash used in financing activities
    
(1,239,896
)
    
(2,960,788
)
                 
Net change in cash and cash equivalents
    
53
      
–
  
                 
Cash and cash equivalents, beginning of period
    
–
      
–
  
Cash and cash equivalents, end of period
  
$
53
    
$
–
  
                 
Supplemental cash flow information
                
Interest paid
   $
3,344
     $
3,095
  

See accompanying notes.
 
16
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements

March 31, 2020

1. Organization and Business
 
Graham Alternative Investment Trading LLC (“GAIT”) was formed on May 18, 2006, commenced operations on August 1, 2006 and is organized as a Delaware Limited Liability Company. Graham Capital Management, L.P. (the “Managing Member” or “Manager”) is the Managing Member and the sole investment advisor. The Managing Member is registered as a Commodity Pool Operator and Commodity Trading Advisor with the U.S. Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association. The Managing Member is also registered with the Securities and Exchange Commission as an investment adviser. GAIT is a commodity pool, and as such is subject to the oversight and jurisdiction of the CFTC.
 
The investment objective of GAIT is to achieve long-term capital appreciation through professionally managed trading through its investment in various master trading vehicles (“Master Funds”). As more fully described in Notes 2 and 3, these Master Funds invest in a broad range of derivative instruments such as currency forward and futures contracts; bond, interest rate, and index futures contracts; commodity forward and futures contracts, and options and swaps thereon traded on U.S. and foreign exchanges, as well as over-the-counter (“OTC”).
 
Graham Alternative Investment Fund I LLC Blended Strategies Portfolio and Graham Alternative Investment Fund II LLC Blended Strategies Portfolio (through its investment in Graham Alternative Investment Ltd.) are the primary investors of GAIT.
 
SEI Global Services, Inc. (“SEI”) is GAIT’s independent administrator and transfer agent. SEI is responsible for certain matters pertaining to the administration of GAIT.
 
GAIT will terminate on December 31, 2050 or at an earlier date if certain conditions occur as outlined in the Limited Liability Company Agreement (“LLC Agreement”) 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 and for directing the investment and reinvestment of the assets of GAIT.
 
2. Summary of Significant Accounting Policies
 
These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. GAIT is an investment company and applies specialized accounting guidance as outlined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. The preparation of these financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
Investments in Master Funds
 
GAIT invests in various Master Funds which are managed by the Managing Member. These investments are valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon GAIT’s proportionate share of the Master Funds’ reported net asset values. Gains and losses are allocated monthly by each Master Fund to GAIT based upon GAIT’s proportionate share of the net asset value of each Master Fund and are included in the statements of operations and incentive allocation.
 
17
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
 
Due from/to Brokers
 
Due from/to brokers on the Master Funds’ financial statements primarily consist of cash balances carried as margin deposits with clearing brokers for the purpose of trading in futures contracts, foreign currency contracts and other derivative financial instruments and securities, and receivables/payables for unsettled transactions. Substantially all of the Master Funds’ cash and investments are held as collateral by its brokers to secure derivative instruments and securities.
 
Revenue Recognition
 
All positions in financial instruments are recorded on the trade date at fair value. Net unrealized appreciation or depreciation on open derivative financial instruments is included in the Master Funds’ statements of financial condition as the difference between the original purchase price and the current market value at year end. Any change in net unrealized appreciation or depreciation from the preceding period is reported in the Master Funds’ statements of operations. Interest income and expense are recorded on the accrual basis. Dividends are recorded on the ex-dividend date and are net of applicable withholding taxes. All other expenses are recorded on the accrual basis. Realized gains and losses are calculated based on the specific identification method.
 
Brokerage Commissions and Fees
 
Brokerage commissions and fees on the Master Funds’ financial statements represent all brokerage commissions and other fees incurred in connection with the Master Funds’ trading activity and are recorded on the accrual basis.
 
Foreign Currency Translation
 
Assets and liabilities denominated in foreign currencies are translated using the exchange rates at March 31, 2020 and December 31, 2019. Gains and losses resulting from foreign currency transactions are calculated using daily exchange rates prevailing on the transaction date. The Master Funds do not isolate the portion of results of operations from changes in foreign exchange rates on investments and cash from fluctuations arising from changes in market prices held. The Master Funds’ currency translation gains and losses are included in the statements of operations and incentive allocation within net realized gain (loss) and net increase in unrealized appreciation on investments.
 
Fair Value
 
The fair value of GAIT’s assets and liabilities, which qualify as financial instruments under U.S. GAAP, approximates the carrying amounts presented in the statements of financial condition. Changes in these carrying amounts are included in the statements of operations and incentive allocation.
 
GAIT follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAIT reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. U.S. GAAP uses a three-level hierarchy for fair value measurement based on the activeness of the market and the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.
 
18
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
 
Fair Value (continued)
 
The fair value hierarchy categorizes asset and liability positions into one of three levels, as summarized below, based on the inputs and assumptions used in deriving fair value.
 

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

•
Level 2 inputs include quoted prices for similar assets and liabilities obtained from independent brokers and/or market makers in each security.

•
Level 3 inputs are those which are considered unobservable and are significant in arriving at fair value.
 
GAIT’s investments in the Master Funds and Graham Cash Assets LLC (“Cash Assets”) have been valued at net asset value using the practical expedient. Accordingly, under U.S. GAAP, these investments are excluded from categorization in the fair value hierarchy. GAIT’s investments in the Master Funds and Cash Assets are discussed in Notes 3 and 4. There were no Level 3 assets or liabilities held at any point during the three months ended March 31, 2020 or the year ended December 31, 2019 by GAIT, the Master Funds, or Cash Assets.
 
Derivative Instruments
 
In the normal course of business, the Master Funds utilize derivative financial instruments in connection with their trading activities. Derivative instruments derive their value from underlying assets, indices, reference rates or a combination of these factors. Investments in derivative financial instruments are subject to additional risks that can result in a loss of all or part of an investment. The Master Funds’ derivative financial instruments are classified by the following primary underlying risks: interest rate, foreign currency exchange rate, commodity price, and equity price risks. These risks can be in excess of the amounts recognized in the statements of financial condition. In addition, the Master Funds are also subject to additional counterparty risk should their counterparties fail to meet the terms of their contracts. Management of counterparty risk involves a number of considerations, such as the financial profile of the counterparty, specific terms and duration of the contractual agreement, and the value of collateral held, if any. The Master Funds have established initial credit approval, credit limits, and collateral requirements and may reduce their exposure to any counterparties they deem necessary. Trading in non-U.S. dollar denominated derivative instruments may subject the value of, and gains and losses associated with, such contracts to additional risks related to adverse changes in the applicable exchange rates.
 
Unrealized appreciation and depreciation from derivative financial instruments are recorded based on changes in their fair value. Realized gains and losses are recorded when the positions are closed. All unrealized and realized gains and losses related to derivative financial instruments are included in net realized gain (loss) on investments in the Master Funds’ statements of operations.
 
Futures Contracts
 
The Master Funds use futures contracts in an attempt to take advantage of changes in the value of equities, commodities, interest rates, bonds and foreign currencies. Futures contracts are valued based upon the closing price as of the valuation date established by the primary exchange upon which they are traded.

19
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Derivative Instruments (continued)
 
Futures Contracts (continued)
 
A futures contract represents a commitment for the future purchase or sale of an asset or cash settlement based on the value of an asset on a specified date. The purchase and sale of futures contracts are executed on an exchange which requires margin deposits with a Futures Commission Merchant (“FCM”). Subsequent payments are made or received by the Master Funds each day, depending on the daily fluctuations in the value of the contract. These changes in valuation are recorded for financial statement purposes as unrealized appreciation and depreciation by the Master Funds. Relative to over-the-counter derivative financial instruments, futures contracts provide reduced counterparty risk to the Master Funds since futures are exchange-traded and the exchanges’ clearing house guarantees the futures against default. However, some non-U.S. exchanges are “principals’ markets” in which no common clearing facility exists, and the Master Funds may look only to the clearing broker for performance of the contract. The U.S. Commodity Exchange Act requires an FCM to segregate all funds received from such FCM’s customers in respect of regulated futures transactions. If the FCM were not to do so to the full extent required by law, the assets of the Master Funds might not be fully protected in the event of the bankruptcy or insolvency of the FCM. In that case, the Master Funds would be limited to recovering only a pro-rata share of all available funds segregated on behalf of the FCM’s combined customer accounts, even though certain property specifically traceable to the Master Funds was held by the FCM. In addition, in the event of bankruptcy or insolvency of an exchange or an affiliated clearing house, the Master Funds might experience a loss of funds deposited through its FCM as margin with such exchange or affiliated clearing house, the loss of unrealized profits on its open positions, and the loss of funds owed to it as realized profits on closed positions.
 
Forward Contracts
 
The Master Funds enter into foreign currency forward contracts in an attempt to take advantage of changes in exchange rates. Forward currency transactions are contracts or agreements for delivery of specific currencies or the cash equivalent value at a specified future date and an agreed upon price. Forward contracts are not guaranteed by an exchange or clearing house and therefore the risks include the inability of counterparties to meet their obligations under the terms of the contracts as well as the risks associated with movements in fair value.
 
Exchange-traded forward contracts are valued based upon the settlement prices as of the valuation date, established by the primary exchange upon which they are traded. All other forward contracts are valued based upon a forward curve constructed using independently quoted forward points. Changes in fair value of each forward contract are recognized as unrealized appreciation and depreciation.
 
20
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
 
Derivative Instruments (continued)
 
Swap Contracts
 
The Master Funds may enter into various swap contracts in an attempt to take advantage of changes in interest rates and asset values. Exchange-traded interest rate swap contracts are executed on an exchange which requires margin deposits with a Central Clearing Counterparty (“CCP”). Subsequent payments are made or received by the Master Funds each day, depending on the daily fluctuations in the value of the contract. These changes in valuation are recorded for financial statement purposes as unrealized appreciation or depreciation by the Master Funds. Relative to over-the-counter interest rate swap contracts, exchange-traded interest rate swap contracts provide reduced counterparty risk since they are exchange-traded and the exchange’s clearinghouse guarantees against default. The Commodity Exchange Act requires a CCP to segregate all funds received from such CCP’s customers in respect of exchange-traded interest rate swaps. If the CCP were not to do so to the full extent required by law, the assets of the Master Funds might not be fully protected in the event of the bankruptcy or insolvency of the CCP. In that case, the Master Funds would be limited to recovering only a pro-rata share of all available funds segregated on behalf of the CCP’s combined customer accounts, even though certain property specifically traceable to the Master Funds is held by the CCP. In addition, in the event of bankruptcy or insolvency of an exchange or an affiliated clearing house, the Master Funds could experience a loss of funds deposited through its CCP as margin with such exchange or affiliated clearing house, the loss of unrealized profits on its open positions, and the loss of funds owed to it as realized profits on closed positions. All funds deposited with both U.S. and non-U.S. CCPs are included in due from brokers on the statements of financial condition. Over the counter swap contracts are not guaranteed by an exchange or an affiliated clearing house or regulated by any U.S. or foreign government authorities. Failure of a counterparty to meet its obligation under the terms of the swap contract could result in the loss of any unrealized appreciation on open positions. It may not be possible to dispose of or close out a swap position without the consent of the counterparty, and the Master Funds may not be able to enter into an offsetting contract in order to cover its risk.
 
An interest rate swap contract is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified rates for a specified notional amount of the underlying assets. The payment flows are usually netted against each other, with the difference being paid by one party to another. Interest rate swap positions are generally valued as the present value of the net future cash flows as estimated by the Manager using a discount curve constructed from independently obtained future interest rate assumptions.
 
A total return swap contract is an agreement that obligates two parties to exchange cash flows calculated by reference to changes in specified prices for a specified notional amount of the underlying assets. The payment flows are usually netted against each other, with the difference being paid by one party to another. Total return swaps are generally valued based upon the value of the underlying instruments as determined by the primary exchange on which they are traded.
 
Exchange-traded swaps are valued based upon the closing prices established by the primary exchange upon which they are traded. Changes in fair value of each swap are recognized as unrealized appreciation or depreciation. The Master Funds record realized gains or losses when a swap contract resets or is terminated.

21
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
 
Derivative Instruments (continued)
 
Options

The Master Funds may buy and sell covered and uncovered exchange-traded and over-the-counter options on futures, foreign currencies, commodities, interest rates and equities to take advantage of the price movements of the financial instrument underlying the option or to hedge positions in the underlying assets. Option contracts give one party the right, but not the obligation, to buy or sell within a limited time or on a specified date, a financial instrument, commodity or currency at a contracted price. Options may also be settled in cash, based on differentials between specified indices or prices.
 
When purchasing options, the Master Funds are exposed to counterparty risk to the extent that a seller of an over-the-counter option does not meet its obligations under the terms of the option contract. The maximum risk of loss to the Master Funds is the unrealized appreciation of the contracts and the premiums paid to purchase its open option contracts. Relative to over-the-counter options, exchange-traded options provide reduced counterparty risk to the Master Funds since the exchanges’ clearinghouse guarantees the option against default.
 
Selling uncovered options may subject the Master Funds to unlimited risk of loss. As the writer of an option, the Master Funds bear the market risk of an unfavorable change in the price of the underlying instrument.
 
Exchange-traded options are valued based upon the settlement prices published as of the valuation date by the principal exchange upon which they are traded. In the absence of an exchange published settlement price, the option will be valued using the last reported sales price reported on the exchange for the valuation date. Over-the-counter options and exchange-traded options with no reported sales price on the valuation date will generally be valued at the average of the last reported bid and offer quotes from independent brokers or from the exchange, respectively.
 
Credit Risk Related Contingent Features
 
OTC derivative instruments are subject to ISDA Master Agreements which generally require among other things, that the Master Funds maintain a predetermined level of net assets or rate of return and provide limits with respect to any decline in value over 1-month, 3-month and 12-month periods. If the Master Funds were to violate such provisions, the counterparty to these instruments could demand liquidation of the outstanding positions. There were no events that occurred throughout the three months ended March 31, 2020 and the year ended December 31, 2019 which caused any counterparty to demand liquidation of any outstanding positions. Graham K4D Trading Ltd. had derivative instruments subject to credit risk related contingent features in a net liability position in the amount of $122,644 and $2,477,323 at March 31, 2020 and December 31, 2019, respectively. Graham Commodity Strategies LLC had no derivative instruments subject to credit risk related contingent features in a net liability position at March 31, 2020 and December 31, 2019.
 
New York Mercantile Exchange Corporate Membership
 
Graham Commodity Strategies LLC, a Master Fund in which GAIT invests, is a member of the New York Mercantile Exchange (“NYMEX”). As a result of its membership, Graham Commodity Strategies LLC owns two NYMEX seats and 30,000 shares of the CME Group. Graham Commodity Strategy LLC’s policy is to value the NYMEX seats and the shares of the CME Group at fair value. As of March 31, 2020 and December 31, 2019, the two NYMEX seats were valued at $179,000 and $189,500, respectively, and the 30,000 shares of CME Group were valued at $5,187,300 and $6,021,600, respectively, both of which are included within Exchange memberships on Graham Commodity Strategies LLC’s statements of financial condition. The NYMEX seats and CME Group shares are considered Level 1 assets as described in the Fair Value section of Note 2.
 
22
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)
 
Chicago Board of Trade Membership
 
Graham K4D Trading Ltd., a Master Fund in which GAIT invests, is a member of the Chicago Board of Trade (“CBOT”) under Rule 106.S and owns two B-1/Full seats and one B‑2/Associate seat (“collectively, “CBOT memberships”). Graham K4D Trading Ltd.’s policy is to value the CBOT memberships at fair value. As of March 31, 2020 and December 31, 2019, the two B-1/Full seats were valued at a total of $386,000 and $333,000, respectively, and the B-2/Associate seat was valued at $47,750 and $37,750, respectively, all of which are included in Exchange memberships on the statements of financial condition. Additionally, Graham K4D Trading Ltd. owns a Chicago Mercantile Exchange (“CME”) seat valued at $80,000 and $62,500 at March 31, 2020 and December 31, 2019, respectively, which is also included in Exchange memberships on the statements of financial condition. The CBOT memberships and CME seat are considered Level 1 assets as described in the Fair Value section of Note 2.
 
Fixed Income Securities

The fixed income securities positions are valued at the mean between the last reported bid and ask quotations received from independent brokers. GAIT is exposed to credit risk relating to whether the issuers will meet their obligations when they come due until the fixed income securities are sold or reach maturity.
 
Cash and Cash Equivalents
 
GAIT classifies all highly liquid investments with a maturity of three months or less at the time of purchase as cash equivalents on the statements of financial condition. Cash deposited with a bank is subject to credit risk. In the event of the bank’s insolvency, recovery of the GAIT’s cash would be limited to account insurance or other protection afforded by such deposit, which could be substantially less than the amount deposited. At March 31, 2020, GAIT held $53 in cash and no cash equivalents. At December 31, 2019, GAIT did not have any cash or cash equivalents.
 
Indemnifications
 
In the normal course of business, the Master Funds, Cash Assets, and GAIT enter into contracts that contain a variety of indemnifications. Such contracts may include those by Cash Assets and the Master Funds with their brokers and trading counterparties. GAIT’s maximum exposure under these arrangements is unknown; however, GAIT has not had prior claims or losses with respect to such indemnifications and considers the risk of loss to be remote. At March 31, 2020 and December 31, 2019, no accruals have been recorded by GAIT for indemnifications.
 
23
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds
 
As of March 31, 2020 and December 31, 2019, GAIT invested in various Master Funds, all of which were managed by the Manager. GAIT’s investments in these Master Funds, as well as the investment objectives of each Master Fund, are summarized below. Master Funds in which GAIT invested 5% or more of its Members’ Capital are individually identified. All of the Master Funds and GAIT are related parties. The Master Funds do not charge management fees or incentive allocation, and all offer monthly subscriptions and redemptions.
 
March 31, 2020
  
Investment – Objective
  
Percent of
Members’
Capital
  
Fair Value
    
Net Income (Loss)
(three months
ended March 2020)
  
                 
Global Macro Funds
                
Graham Commodity Strategies LLC
  
4.23%
  
$
2,397,479
    
$
5,693,182
  
                     
Systematic Macro Funds
                    
Graham K4D Trading Ltd.
  
4.39%
    
2,490,946
      
(2,727,516
)
   
8.62%
  
$
4,888,425
    
$
2,965,666
  

December 31, 2019
  
Investment – Objective
  
Percent of
Members’
Capital
  
Fair Value
    
Net Income (Loss)
(three months
ended March 2019)
  
                     
Global Macro Funds
                    
Graham Commodity Strategies LLC
  
6.69%
  
$
3,714,431
    
$
(1,133,640
)
                     
Systematic Macro Funds
                    
Graham K4D Trading Ltd.
  
6.37%
    
3,536,812
      
1,222,214
  
   
13.06%
  
$
7,251,243
    
$
88,574
  

The following table summarizes the financial position of each Master Fund as of March 31, 2020:
 
   
Graham
Commodity
Strategies LLC
(Delaware)
    
Graham K4D
Trading Ltd.
(BVI)
  
Assets:
            
Fixed income securities, at fair value (cost $29,490,781)
  
$
–
    
$
29,623,877
  
Due from brokers
    
55,194,475
      
1,556,525
  
Derivative financial instruments, at fair value
    
44,895,378
      
11,425,205
  
Exchange memberships, at fair value
    
5,366,300
      
513,750
  
Interest receivable
    
33,715
      
98,170
  
Total assets
    
105,489,868
      
43,217,527
  
                 
Liabilities:
                
Derivative financial instruments, at fair value
    
1,628,548
      
122,644
  
Due to brokers
    
1,428,330
      
12,448,824
  
Interest payable
    
1,968
      
1,128
  
Total liabilities
    
3,058,846
      
12,572,596
  
Members’ Capital / Net Assets
  
$
102,431,022
    
$
30,644,931
  
                 
Percentage of Master Fund held by GAIT
    
2.34
%
    
8.13
%
 
24
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)
 
The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2020:
 
Description
  
Number of
Contracts / Notional
Amounts
    
Fair Value
    
Percentage
of Members’
Capital of
Master Fund
  
Graham Commodity Strategies LLC
                  
Exchange memberships (cost $2,146,960)
                  
United States (cost $2,146,960)
                  
Financial services (cost $2,146,960)
        
$
5,366,300
      
5.24
%
Total exchange memberships
        
$
5,366,300
      
5.24
%
                       
Derivative financial instruments
                      
Long contracts
                      
Futures
                      
Commodity
                      
Gold 100 Oz June 2020
    
1,344
      
(7,664,770
)
    
(7.48
)%
Other commodity
            
535,069
      
0.52
%
Foreign bond
            
(685,789
)
    
(0.67
)%
Interest rate
                        
Fed Fund 30 day March 2020
    
11,285
      
24,582,446
      
24.00
%
U.S. bond
                        
U.S. 5 yr note (CBT) June 2020
     6,684
      2,137,266
       2.08
 %
Other U.S. bond
            
1,541,937
      
1.51
%
U.S. index
            
(1,519,992
)
    
(1.48
)%
Total futures
            
18,926,167
      
18.48
%
                         
Forwards
                        
Foreign currency
            
(10,435,731
)
    
(10.19
)%
Total forwards
            
(10,435,731
)
    
(10.19
)%
                         
Options (cost $76,230,696)
                        
Commodity futures
                        
Gold May 2020, $1,770.00 Call
    
1
      
1,435,480
      
1.40
%
Other commodity futures
            
573,220
      
0.56
%
Currency futures
                        
British pound / U.S. dollar April 2020, $1.27 Put
    
1
      
7,104,268
      
6.94
%
British pound / U.S. dollar May 2020 – January 2021, $1.27 – $1.34 Call
    
6
      
3,467,892
      
3.38
%
U.S. dollar / Canadian dollar April 2020, $1.36 Call
    
1
      
5,386,379
      
5.26
%
U.S. dollar / Canadian dollar April 2020, $1.37 Call
    
1
      
5,559,715
      
5.43
%
U.S. dollar / Canadian dollar April 2020 - June 2020, $1.35 – $1.49 Call
    
2
      
4,184,608
      
4.09
%
Other currency futures
            
24,551,008
      
23.96
%
Interest rate futures
                        
IMM Euro June 2020 - December 2020, $99.38 – $99.75 Call
    
2
      
2,089,419
      
2.04
%
IMM Euro April 2020 - December 2020, $95.50 – $99.00 Put
    
2
      
815,750
      
0.80
%
IMM Euro December 2020, $99.25 Call
    
1
      
7,486,350
      
7.31
%
Other interest rate futures
            
1,231,713
      
1.20
%
U.S. bond futures
                        
U.S. 5 yr future June 2020, $126.00 Call
     1       4,771,696       4.66 %
Other U.S. bond futures
            
31,281
      
0.03
%
U.S. index futures
            
346,123
      
0.34
%
Total options
            
69,034,902
      
67.40
%

25
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)
 
The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2020:
 
Description
  
Number of
Contracts / Notional
Amounts
    
Fair Value
    
Percentage
of Members’
Capital of
Master Fund
  
Graham Commodity Strategies LLC (continued)
                  
Derivative financial instruments (continued)
                  
Short contracts
                  
Futures
                  
Commodity
        
$
515,368
      
0.50
%
Foreign bond
          
(2,005
)
    
(0.00
)%
Foreign index
          
(1,334,238
)
    
(1.30
)%
Interest rate
          
(160,563
)
    
(0.16
)%
U.S. bond
          
4,039,906
      
3.94
%
U.S. index
          
3,426,940
      
3.35
%
Total futures
          
6,485,408
      
6.33
%
                       
Forwards
                      
Foreign currency
          
8,164,859
      
7.97
%
Total forwards
          
8,164,859
      
7.97
%
                       
Options (proceeds $44,403,539)
                      
Commodity futures
                      
Gold May 2020, $1,870.00 - $1,930.00 Call
    
(2
)
  
$
(1,014,800
)
    
(0.99
)%
Other commodity futures
            
(296,815
)
    
(0.29
)%
Currency futures
                        
U.S. dollar / Canadian dollar April 2020, $1.37 Call
    
(1
)
    
(5,559,715
)
    
(5.43
)%
U.S. dollar / Canadian dollar April 2020, $1.35 – $1.38 Call
    
(2
)
    
(7,422,670
)
    
(7.25
)%
British pound / U.S. dollar April 2020, $1.27 Put
    
(1
)
    
(7,104,268
)
    
(6.94
)%
British pound / U.S. dollar January 2021, $1.39 Call
    
(1
)
    
(2,174,295
)
    
(2.12
)%
Other currency futures
            
(13,510,181
)
    
(13.19
)%
Interest rate futures
                        
IMM Euro December 2020, $99.50 Call
    
(1
)
    
(7,406,750
)
    
(7.23
)%
IMM Euro December 2020, $95.00 Put
    
(1
)
    
(31,250
)
    
(0.03
)%
IMM Euro June 2020, $99.50 Call
    
(1
)
    
(733,956
)
    
(0.72
)%
Other interest rate futures
            
(1,377,652
)
    
(1.34
)%
U.S. bond futures
                        
U.S. 5 yr future June 2020, $126.50 – $127.50 Call
    
(2)
      
(1,992,344
 )
   
(1.95
)%
Other U.S. bond futures
            
(25,594
)
    
(0.02
)%
U.S. index futures
            
(258,485
)
    
(0.25
)%
Total options
            
(48,908,775
)
    
(47.75
)%
Total derivative financial instruments
          
$
43,266,830
      
42.24
%

26
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)
 
The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2020:
 
Description
  
Principal / Number
of Contracts /
Notional Amounts
    
Fair Value
    
Percentage of
Net Assets of
Master Fund
  
Graham K4D Trading Ltd.
                  
Fixed income securities owned (cost $29,490,781)
                  
Government bonds (cost $29,490,781)
                  
United States (cost $29,490,781)
                  
Treasury Bonds (cost $29,490,781)
                  
U.S. Treasury bond 1.50% due 07/15/2020
  
$
29,500,000
    
$
29,623,877
      
96.67
%
Total United States
            
29,623,877
      
96.67
%
Total government bonds
            
29,623,877
      
96.67
%
Total fixed income securities owned
          
$
29,623,877
      
96.67
%
                         
Exchange memberships (cost $1,051,100)
                        
United States (cost $1,051,100)
                        
Financial services (cost $1,051,100)
          
$
513,750
      
1.68
%
Total exchange memberships
          
$
513,750
      
1.68
%
                         
Derivative financial instruments
                        
Long contracts
                        
Futures
                        
Commodity
                        
LME aluminum June 2020
    
238
    
$
(1,089,065
)
    
(3.55
)%
LME copper June 2020
    
163
      
(2,346,793
)
    
(7.66
)%
Other commodity
            
(1,710,887
)
    
(5.58
)%
Currency
            
27,833
      
0.09
%
Foreign bond
            
351,884
      
1.15
%
Foreign index
            
1,315,094
      
4.29
%
Interest rate
                        
90 day Euro June 2021
    
983
      
1,687,611
      
5.51
%
Other interest rate
            
904
      
0.00
%
U.S. bond
            
2,318,753
      
7.57
%
U.S. index
            
(60,409
)
    
(0.20
)%
Total futures
            
494,925
      
1.62
%
                         
Forwards
                        
Foreign currency
            
(1,777,465
)
    
(5.80
)%
Total forwards
            
(1,777,465
)
    
(5.80
)%

27
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)
 
The following schedules display the condensed schedules of investments for the Master Funds as of March 31, 2020:
 
Description
  
Number of
Contracts / Notional
Amounts
    
Fair Value
    
Percentage of
Net Assets of
Master Fund
  
Graham K4D Trading Ltd. (continued)
                  
Derivative financial instruments (continued)
                  
Short contracts
                  
Futures
                  
Commodity
                  
LME aluminum June 2020
    
(300
)
  
$
1,645,575
      
5.37
%
LME copper June 2020
    
(213
)
    
4,419,700
      
14.42
%
Other commodity
            
4,631,625
      
15.11
%
Currency
            
(1,749
)
    
(0.01
)%
Foreign bond
            
468,328
      
1.53
%
Foreign index
            
(183,612
)
    
(0.60
)%
Interest rate
            
(49,587
)
    
(0.16
)%
Total futures
            
10,930,280
      
35.66
%
 
                        
Forwards
                        
Foreign currency
            
1,654,821
      
5.40
%
Total forwards
            
1,654,821
      
5.40
%
Total derivative financial instruments
          
$
11,302,561
      
36.88
%

28
Graham Alternative Investment Trading LLC

Notes to Unaudited Financial Statements (continued)

3. Investments in Master Funds (continued)
 
The following table shows the fair value classification of each investment type by Master Fund as of  March 31, 2020:
 
   
Graham
Commodity
Strategies LLC
    
Graham K4D Trading Ltd.
  
Assets
            
Level 1:
            
Commodity futures
  
$
2,852,090
    
$
10,966,685
  
Commodity futures options
    
2,008,700
      
–
  
Currency futures
    
–
      
45,916
  
Exchange memberships
    
5,366,300
      
513,750
  
Foreign bond futures
    
125,708
      
1,173,101
  
Foreign index futures
    
1,796
      
1,581,118
  
Interest rate futures
    
24,582,446
      
1,727,272
  
Interest rate futures options
    
11,623,230
      
–
  
U.S. bond futures
    
7,889,586
      
2,318,753
  
U.S. bond futures options
    
4,802,977
      
–
  
U.S. index futures
    
3,426,940
      
115,469
  
U.S. index futures options
    
346,123
      
–
  
Total Level 1
    
63,025,896
      
18,442,064
  
                 
Level 2:
                
Foreign currency forwards
    
15,622,289
      
2,988,839
  
Foreign currency futures options
    
50,253,871
      
–
  
Government bonds*
    
–
      
29,623,877
  
Total Level 2
    
65,876,160
      
32,612,716
  
Total investment related assets
  
$
128,902,056
    
$
51,054,780
  
                 
Liabilities
                
Level 1:
                
Commodity futures
  
$
(9,466,423
)
  
$
(5,416,530
)
Commodity futures options
    
(1,311,615
)
    
–
  
Currency futures
    
–
      
(19,832
)
Foreign bond futures
    
(813,502
)
    
(352,889
)
Foreign index futures
    
(1,336,034