FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended June 30, 2004
-------------
Commission File Number 0-50271
-------
SALOMON SMITH BARNEY ORION FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York 22-3644546
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Citigroup Managed Futures LLC
399 Park Avenue. - 7th Fl.
New York, New York 10022
(Address and Zip Code of principal executive offices)
(212) 559-2011
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No__
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No__
Salomon Smith Barney Orion Futures Fund L.P.
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
June 30, 2004 and December 31,
2003 (unaudited). 3
Condensed Schedules of Investments
at June 30, 2004 and December 31,
2003 (unaudited). 4 - 5
Statements of Income and Expenses
and Partners' Capital for the three and six
months ended June 30, 2004
and 2003 (unaudited). 6
Statements of Cash Flows for the three
and six months ended June 30, 2004 and
2003 (unaudited). 7
Notes to Financial Statements,
including the Financial Statements
of SB AAA Master Fund LLC (unaudited). 8 - 18
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 19 - 22
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 23 - 25
Item 4. Controls and Procedures 26
PART II - Other Information 27
2
PART I
Item 1. Financial Statements
Salomon Smith Barney Orion Futures Fund L.P.
Statements of Financial Condition
(Unaudited)
June 30, December 31,
2004 2003
------------ -------------
Assets:
Investment in Master, at fair value $39,595,768 $ 33,531,892
Cash (restricted $8,966,106 and $13,779,146 in 2004 and 2003,
respectively) in commodity futures trading account 58,781,018 50,594,930
Net unrealized appreciation on open futures positions 207,079 5,706,691
Unrealized appreciation on open forward positions 49,484 1,928,011
----------- -----------
98,633,349 91,761,524
Interest receivable 50,821 40,059
---------- -----------
$98,684,170 $ 91,801,583
=========== ============
Liabilities and Partners' Capital:
Liabilities:
Unrealized depreciation on open forward positions $ 214,437 $ 638,809
Accrued expenses:
Commissions 96,372 160,866
Management fees 148,992 142,083
Administrative fees 40,298 38,612
Incentive fees - 539,454
Other 48,284 76,910
Redemptions payable 863,642 2,735,869
--------- ---------
1,412,025 4,332,603
--------- ----------
Partners' Capital:
General Partner, 865.3542 and 499.8084 Unit equivalents
outstanding in 2004 and 2003, respectively 981,476 549,884
Limited Partners, 84,898.0532 and 79,003.6728 Redeemable Units of
Limited Partnership Interest outstanding in 2004 and 2003, respectively 96,290,669 86,919,096
---------- ----------
97,272,145 87,468,980
---------- ----------
$98,684,170 $ 91,801,583
========== ===========
See Accompanying Notes to Unaudited Financial Statements.
3
Salomon Smith Barney Orion Futures Fund L.P.
Condensed Schedule of Investments
June 30, 2004
(Unaudited)
Sector Contract Fair Value
- ------------------------------------ ------------------------------------------------------ ---------------------
Currencies
Futures contracts purchased (0.11)% $ (104,205)
Futures contracts sold (0.11)%
(111,167)
---------------------
Total Currencies (0.22)% (215,372)
---------------------
Energy
Futures contracts purchased 0.38% 374,458
Futures contracts sold 0.00%* 200
---------------------
Total Energy 0.38% 374,658
---------------------
Grains
Futures contracts purchased (0.02)% (16,620)
Futures contracts sold 0.12% 113,019
---------------------
Total Grains 0.10% 96,399
---------------------
Interest Rates U.S.
Futures contracts purchased 0.13% 126,563
Futures contracts sold (0.33)% (322,551)
---------------------
Total Interest Rates U.S. (0.20)% (195,988)
---------------------
Interest Rates Non-U.S.
Futures contracts purchased 0.02% 18,602
Futures contracts sold (0.15)% (145,902)
---------------------
Total Interest Rates Non-U.S. (0.13)% (127,300)
---------------------
Total Lumber (0.01)% Futures contracts purchased (0.01)% (5,412)
---------------------
Livestock
Futures contracts purchased (0.02)% (24,175)
Futures contracts sold (0.02)% (17,640)
---------------------
Total Livestock (0.04)% (41,815)
---------------------
Metals
Futures contracts purchased (0.10)% (101,110)
Futures contracts sold (0.05)% (46,500)
---------------------
Total futures contracts (0.15)% (147,610)
---------------------
Unrealized appreciation on forward contracts 0.05% 49,484
Unrealized depreciation on forward contracts (0.22)% (214,437)
---------------------
Total forward contracts (0.17)% (164,953)
---------------------
Total Metals (0.32)% (312,563)
---------------------
Softs
Futures contracts purchased (0.11)% (102,920)
Futures contracts sold 0.28% 269,282
---------------------
Total Softs 0.17% 166,362
---------------------
Indices
Futures contracts purchased 0.31% 304,357
Futures contracts sold (0.00)%* (1,200)
---------------------
Total Indices 0.31% 303,157
---------------------
Total Fair Value 0.04% $ 42,126
=====================
% of Investment
Country Composition Investments at Fair Value at Fair Value
- --------------------- ---------------------- ---------------
Australia $ 22,735 53.97%
Canada (6,863) (16.29)
France (28,972) (68.77)
Germany 51,085 121.27
Hong Kong 7,026 16.68
Italy 13,549 32.16
Japan 61,741 146.56
Spain 1,199 2.85
United Kingdom (186,334) (442.33)
United States 106,960 253.90
------------- -------
$ 42,126 100.00 %
============== ========
Percentages are based on Partners' Capital unless otherwise indicated
*Due to rounding
See Accompanying Notes to Unaudited Financial Statements
4
Salomon Smith Barney Orion
Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2003
Sector Contract Fair Value
- ------- -------- -----------
Currencies Futures contracts sold (0.04)% $(34,802)
Futures contracts purchased 3.12% 2,726,064
----------
Total Currencies 3.08% 2,691,262
---------
Total Energy (0.05)% Futures contracts purchased (0.05)% (47,000)
---------
Grains Futures contracts sold (0.12)% (107,275)
Futures contracts purchased 1.70% 1,487,795
----------
Total Grains 1.58% 1,380,520
---------
Total Interest Rates U.S. (0.15)% Futures contracts purchased (0.15)% (129,958)
---------
Interest Rates Non-U.S.
Futures contracts sold (0.00)%* (343)
Futures contracts purchased 0.70% 617,411
----------
Total Interest Rates Non-U.S. 0.70% 617,068
---------
Total Lumber 0.01% Futures contracts purchased 0.01% 6,402
---------
Livestock
Futures contracts sold 0.01% 5,570
Futures contracts purchased (0.03)% (25,410)
----------
Total Livestock (0.02)% (19,840)
---------
Metals
Futures contracts sold (0.00)%* (3,655)
Futures contracts purchased 0.96% 842,863
----------
Total futures contracts 0.96% 839,208
Unrealized depreciation on forward contracts (0.73)% (638,809)
Unrealized appreciation on forward contracts 2.20% 1,928,011
----------
Total forward contracts 1.47% 1,289,202
---------
Total Metals 2.43% 2,128,410
----------
Softs Futures contracts sold 0.06% 56,990
Futures contracts purchased (0.18)% (159,535)
----------
Total Softs (0.12)% (102,545)
---------
Total Indices 0.54% Futures contracts purchased 0.54% 471,574
----------
Total Fair Value 8.00% $6,995,893
=========
Country Investments at Fair % of Investments at Fair
Composition Value Value
- ------------------ ----------------- -----------
Australia $141,159 2.02%
Canada 83,342 1.19
France 30,769 0.44
Germany 309,378 4.42
Hong Kong 7,903 0.11
Italy (20,955) (0.30)
Japan 44,926 0.64
Spain 22,028 0.32
United Kingdom 1,802,208 25.76
United States 4,575,135 65.40
---------- -------
$6,995,893 100.00%
========== =======
Percentages are based on Partners' Capital unless otherwise indicated.
* Due to rounding.
See Accompanying Notes to Unaudited Financial Statements.
5
Salomon Smith Barney Orion Futures Fund L.P.
Statements of Income and Expenses and Partners' Capital
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------
2004 2003 2004 2003
----------------------------------------------------
Income:
Realized gains (losses) on closed positions from Master $687,730 $6,161,897 $4,017,881 $(5,734,827)
Change in unrealized gains (losses) on open positions
from Master 1,066,465 (950,472) 999,773 1,293,625
Interest Income allocated from Master 89,428 81,674 164,989 163,476
Expenses allocated from Master (347,971) (343,144) (667,242) (1,029,319)
Net gains (losses) on trading of commodity interests: (1,618,140) (539,413) 8,713,674 10,090,157
Realized gains (losses) on closed positions
Change in unrealized gains (losses) on open positions (8,003,615) (422,502) (6,953,767) (6,988,909)
----------- --------- --------- -----------
(8,126,103) 3,988,040 6,275,308 (2,205,797)
Interest income 143,931 129,787 287,942 272,699
------------ --------- --------- -----------
(7,982,172) 4,117,827 6,563,250 (1,933,098)
------------ --------- --------- ----------
Expenses:
Brokerage commissions including clearing fees
of $94,090, $81,847, $179,977 and $199,975, respectively 426,685 621,741 1,025,305 939,893
Management fees 455,022 381,278 916,496 752,558
Administrative fees 123,232 97,963 249,076 190,784
Incentive fees - - 1,579,063 298,424
Other expenses 43,575 24,450 72,797 49,862
------------ --------- ---------- ----------
1,048,514 1,125,432 3,842,737 2,231,521
------------ --------- ---------- ----------
Net income (loss) (9,030,686) 2,992,395 2,720,513 (4,164,619)
Additions - Limited Partners 6,607,000 8,360,000 15,124,000 31,960,000
- General Partner 160,000 - 440,051 -
Redemptions (2,784,187) (3,551,462) (8,481,399) (11,373,908)
------------ ---------- ---------- -----------
Net increase (decrease) in Partners' capital (5,047,873) 7,800,933 9,803,165 16,421,473
Partners' capital, beginning of period 102,320,018 70,773,339 87,468,980 62,152,799
------------ ---------- ---------- ----------
Partners' capital, end of period $97,272,145 $78,574,272 $97,272,145 $78,574,272
============ ========== =========== ===========
Net asset value per Redeemable Unit
(85,763.4074 and 70,589.4936 Redeemable Units outstanding
at June 30, 2004 and 2003, respectively) $1,134.19 $1,113.12 $1,134.19 $1,113.12
============ ========== =========== ===========
Net income (loss) per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent
$(106.09) $42.77 $34.00 $(47.70)
============ ========== =========== ===========
See Accompanying Notes to Unaudited Financial Statements.
6
Salomon Smith Barney Orion Futures Fund L.P.
Statements of Cash Flows
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------------------------------------------
2004 2003 2004 2003
---------------------------------------------------------
Cash flows from operating activities:
Net income (loss) (9,030,686) $2,992,395 $2,720,513 $(4,164,619)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Investment in Master, at fair value (3,241,399) (11,263,417) (6,063,876) (8,651,598)
Net unrealized appreciation (depreciation) on open futures
positions 7,558,443 315,455 5,499,612 6,881,861
Unrealized appreciation (depreciation) on open forward contracts 371,956 (53,672) 1,878,527 (53,672)
Increase (decrease) in interest receivable 4,895 (12,698) (10,762) (8,001)
Unrealized depreciation on open forward contracts 73,937 160,720 (424,372) 160,720
Accrued expenses:
Increase (decrease) in commissions (98,496) 12,548 (64,494) 8,549
Increase (decrease) in management fees (16,341) (3,650) 6,909 17,012
Increase (decrease) in administrative fees (4,763) 702 1,686 5,868
Increase in incentive fees (1,579,063) (298,424) (539,454) (272,957)
Increase (decrease) in other (54,348) 29,678 (28,626) 49,864
Increase (decrease) in redemptions payable (1,428,580) (3,284,292) (1,872,227) 208,186
---------------------------------------------------------
Net cash provided by (used in) operating activities (7,444,445) (11,404,755) 1,103,436 (5,818,787)
---------------------------------------------------------
Cash flows from financing activities:
Proceeds from additions Limited Partners 6,607,000 8,360,000 15,124,000 31,960,000
Proceeds from additions General Partner 160,000 - 440,051 -
Payments for redemptions (2,784,187) (3,551,462) (8,481,399) (11,373,908)
---------------------------------------------------------
Net cash provided by financing activities 3,982,813 4,808,538 7,082,652 20,586,092
---------------------------------------------------------
Net change in cash (3,461,632) (6,596,217) 8,186,088 14,767,305
Cash, at beginning of period 62,242,650 54,060,829 50,594,930 32,697,307
---------------------------------------------------------
Cash, at end of period $58,781,018 $47,464,612 $58,781,018 $47,464,612
=========================================================
See Accompanying Notes to Unaudited Financial Statements.
7
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
1. General:
Salomon Smith Barney Orion Futures Fund L.P. (the "Partnership") is a
limited partnership organized on March 22, 1999 under the partnership laws of
the State of New York to engage, directly or indirectly, in the speculative
trading of a diversified portfolio of commodity interests, including options,
commodity futures and forward contracts on United States exchanges and certain
foreign exchanges. The Partnership may trade commodity futures and options
contracts of any kind but currently trades solely energy and energy related
products. In addition, the Partnership may enter into swap contracts on energy
related products. The commodity interests that are traded by the Partnership are
volatile and involve a high degree of market risk.
Between March 31, 1999 (commencement of the offering period) and June 10,
1999, 10,499 redeemable units of Limited Partnership Interest ("Redeemable
Units") and 106 Unit equivalents representing the general partner's contribution
were sold at $1,000 per Redeemable Unit. The proceeds of the offering were held
in an escrow account until June 10, 1999, at which time they were turned over to
the Partnership for trading. The Partnership continues to offer Redeemable
Units.
Citigroup Managed Futures LLC, formerly Smith Barney Futures Management
LLC, a Delaware limited liability company, is the Partnership's general partner
and commodity pool operator ("the General Partner"). The Partnership's/Master's
commodity broker is Citigroup Global Markets Inc. ("CGM"), formerly Salomon
Smith Barney Inc. CGM is an affiliate of the General Partner. The General
Partner is wholly owned by Citigroup Global Markets Holdings Inc. ("CGMHI"),
formerly Salomon Smith Barney Holdings Inc., which is the sole owner of CGM.
CGMHI is a wholly owned subsidiary of Citigroup Inc. ("Citigroup"). As of June
30, 2004, all trading decisions are made by Willowbridge Associates Inc., Winton
Capital Management and AAA Capital Management, Inc. (collectively, the
"Advisors").
Effective September 1, 2001, the Partnership allocated the portion of the
Partnership's capital that was allocated to AAA Capital Management, Inc. ("AAA")
for trading to the SB AAA Master Fund LLC, a New York limited liability company
(the "Master"). With this cash, the Partnership purchased 5,173.4381 Units of
the Master at a fair value of $5,173,438. The Master was formed in order to
permit commodity pools managed now or in the future by AAA using the Energy with
Swaps Program, to invest together in one trading vehicle. The General Partner is
the managing member of the Master. Individual and pooled accounts currently
managed by AAA, including the Partnership (collectively, the "Feeder Funds"),
are permitted to be non-managing members of the Master. The General Partner and
AAA believe that trading through this master/feeder structure should promote
efficiency and economy in the trading process. Expenses to investors as a result
of the investment in the Master are approximately the same and redemption rights
are not affected.
8
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
As of June 30, 2004, the Partnership owns approximately 15.1% of the
Master. The performance of the Partnership is directly affected by the
performance of the Master. The Master's Statements of Financial Condition,
Statements of Income and Expenses and Members' Capital, Condensed Schedules of
Investments and Statements of Cash Flows are included herein.
The accompanying financial statements are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Partnership's financial
condition at June 30, 2004 and December 31, 2003 and the results of its
operations and cash flows for the three and six months ended June 30, 2004 and
2003. These financial statements present the results of interim periods and do
not include all disclosures normally provided in annual financial statements.
You should read these financial statements together with the financial
statements and notes included in the Partnership's Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended December
31, 2003.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
9
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
The Master's Statements of Financial Condition and Condensed Schedules of
Investments as of June 30, 2004 and December 31, 2003 and Statements of Income
and Expenses and Members' Capital and Statements of Cash Flows for the three and
six months ended June 30, 2004 and 2003 are presented below:
SB AAA Master Fund LLC
Statements of Financial Condition
(Unaudited)
June 30, December 31,
2004 2003
-------------- ------------
Assets:
Equity in commodity futures trading account:
Cash (restricted $32,548,811 and $48,471,997, respectively) $246,443,750 $ 231,361,103
Net unrealized appreciation on open futures positions 15,310,591 8,845,539
Unrealized appreciation on open swaps positions 56,926,392 50,093,912
Commodity options owned, at fair value
(cost $27,220,225 and $49,687,512, respectively) 33,541,142 42,630,230
------------- ------------
352,221,875 332,930,784
Due from brokers 4,841,914 2,148,690
Interest receivable 184,111 159,050
------------- -------------
$357,247,900 $ 335,238,524
============= =============
Liabilities and Members' Capital:
Liabilities:
Unrealized depreciation on open swap positions $ 53,255,398 $18,654,566
Commodity options written, at market value
(premium received $42,707,960 and $47,549,852, respectively) 38,180,640 57,804,597
Accrued expenses:
Commissions 1,674,819 1,670,425
Professional fees 42,540 59,625
Due to brokers 2,371,013 1,815,015
Due to CGM 22,978 22,978
Distribution payable 182,583 153,681
------------ ------------
95,729,971 80,180,887
------------ ------------
Members' Capital:
Members' Capital, 191,545.8749 and 211,023.7320 Units
outstanding in 2004 and 2003, respectively 261,517,929 255,057,637
------------ -----------
$357,247,900 $ 335,238,524
============ ============
10
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Condensed Schedule of Investments
June 30, 2004
(Unaudited)
Number of
Sector Contracts Contract Fair Value
- ------ ----------- ----------------------------------- ------------
Energy
Futures contracts purchased 4.29% $ 11,210,090
Futures contracts sold 1.56%
4,100,501
-------------
Total futures contracts 5.85% 15,310,591
Options owned 12.83%
2,117 NYMEX Natural Gas Aug. 04 - May 05 5.58% 14,584,160
Other 7.25% 18,956,982
-------------
33,541,142
Options written (14.60)%
1,647 NYMEX Natural Gas Aug. 04 - Feb. 05 (7.15)% (18,705,710)
Other (7.45)% (19,474,930)
-------------
(38,180,640)
Unrealized appreciation on Swaps contracts 21.77% 56,926,392
Unrealized depreciation on Swaps contracts (20.37)% (53,255,398)
------------
Total Energy Fair Value 5.48% $ 14,342,087
============
Investment at % of Investment at
Country Composition Fair Value Fair Value
- -------------------- ---------- -----------------
United Kingdom $ 422,630 2.95%
United States 13,919,457 97.05
---------- --------
$14,342,087 100.00%
========== ===========
Percentages are based on Members' Capital unless otherwise indicated.
11
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Condensed Schedule of Investments
December 31, 2003
Number of
Sector Contracts Contract Fair Value
- ----------- ----------- -------------------------------------------- -------------
Energy Futures contracts purchased 5.35% $13,637,465
Futures contracts sold (1.88)% (4,791,926)
-----------
Total futures contracts 3.47% 8,845,539
Options owned 16.71%
6,488 NYMEX Natural Gas Put Feb. 04 - Oct. 04 8.98% 22,900,060
Other 7.73% 19,730,170
-----------
42,630,230
Options written (22.66)%
7,335 NYMEX Natural Gas Call Feb. 04 - Dec. 04 (16.04)% (40,916,710)
Other (6.62)% (16,887,887)
------------
(57,804,597)
Unrealized appreciation on Swaps contracts 19.64%
1,000 HH Natural Gas Feb. 04 8.22% 20,967,521
Other 11.42% 29,126,391
------------
50,093,912
Unrealized depreciation on Swaps contracts (7.31)% (18,654,566)
------------
Total Energy Fair Value 9.85% $25,110,518
============
Investments at % of Investments at
Country Composition Fair Value Fair Value
- -------------------- ----------- ----------------
United Kingdom $(113,943) (0.45)%
United States 25,224,461 100.45
----------- ------
$25,110,518 100.00%
=========== =======
Percentages are based on Members' Capital unless otherwise indicated.
12
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Statements of Income and Expenses and Members' Capital
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------------------
Income:
Net gains (losses) on trading of commodity interests:
Realized gains (losses) on closed positions $ 3,978,261 $ 51,205,109 $ 28,569,544 $ (92,568,712)
Change in unrealized gains (losses) on open
positions 7,896,158 (4,955,814) 6,856,964 27,054,699
------------ ---------- ---------- -------------
11,874,419 46,249,295 35,426,508 (65,514,013)
Interest income 506,446 721,637 965,959 1,686,957
------------ ---------- ---------- -------------
12,380,865 46,970,932 36,392,467 (63,827,056)
------------ ---------- ---------- -------------
Expenses:
Brokerage commissions including clearing fees
of $321,424, $398,062, $591,163 and
and $1,434,608, respectively 2,183,710 3,289,199 4,511,007 9,786,358
Professional fees 15,689 9,297 27,429 18,491
------------ ---------- ---------- -------------
2,199,399 3,298,496 4,538,436 9,804,849
------------ ---------- ---------- -------------
Net income (loss) 10,181,466 43,672,436 31,854,031 (73,631,905)
Additions 4,371,518 12,193,128 5,911,026 45,179,314
Redemptions (13,073,006) (17,378,056) (30,355,980) (38,872,082)
Distribution of interest to feeder funds (498,827) (706,482) (948,785) (1,629,621)
------------ ---------- ---------- -------------
Net increase (decrease) in Members' Interest 981,151 37,781,026 6,460,292 (68,954,294)
Members' capital, beginning of period 260,536,778 243,548,133 255,057,637 350,283,453
------------ ---------- ---------- -------------
Members' capital, end of period $ 261,517,929 $ 281,329,159 $ 261,517,929 $ 281,329,159
============ =========== =========== ===========
Net asset value per Unit
(191,545.8749 and 219,606.2204 Units outstanding
in June 30, 2004 and 2003, respectively) $ 1,365.30 $ 1,281.06 $ 1,365.30 $ 1,281.06
============ =========== =========== ===========
Net income (loss) per Unit of Member Interest $ 52.27 $ 197.61 $ 161.43 $ (332.01)
============ =========== =========== ===========
13
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Statements of Cash Flows
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------------------------------------------------
2004 2003 2004 2003
----------------------------------------------------------------
Cash flows from operating activities:
Net Income (loss) $10,181,466 $43,672,436 $31,854,031 $(73,631,905)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Net unrealized appreciation (depreciation) on open
futures positions (7,201,122) (4,996,585) (6,465,052) 10,514,826
Unrealized appreciation on open swaps contracts (16,763,737) (8,859,120) (6,832,480) (16,059,909)
Commodity options owned, at fair value 2,576,851 49,556,337 9,089,088 31,530,521
Increase (decrease) in due from brokers (3,830,615) 9,058,112 (2,693,224) 7,726,979
Increase (decrease) in interest receivable (13,763) 44,407 (25,061) 88,756
Unrealized depreciation on open swap positions 25,262,360 (2,762,412) 34,600,832 (20,565,910)
Commodity options written, at fair value (7,144,971) (12,072,266) (19,623,957) (25,614,907)
Accrued expenses:
Increase (decrease) in commissions (58,429) (616,808) 4,394 (2,288,904)
Increase (decrease) in professional fees (8,525) 9,296 (17,085) 18,489
Increase (decrease) in due to brokers 2,034,138 (5,291,253) 555,998 1,871,989
Increase (decrease) in distribution payable 14,881 (44,429) 28,902 (86,928)
------------- ----------- ----------- ------------
Net cash provided by (used in) operating activities 5,048,534 67,697,715 40,476,386 (86,496,903)
------------- ----------- ----------- ------------
Cash flows from financing activities:
Proceeds from additions 4,371,518 12,193,128 5,911,026 45,179,314
Payments for redemptions (13,073,006) (17,378,056) (30,355,980) (38,872,082)
Distribution of interest to feeder funds (498,827) (706,482) (948,785) (1,629,621)
------------- ----------- ------------ ------------
Net cash provided by (used in) financing activities (9,200,315) (5,891,410) (25,393,739) 4,677,611
------------- ----------- ------------ ------------
Net change in cash (4,151,781) 61,806,305 15,082,647 (81,819,292)
Cash, at beginning of period 250,595,531 186,592,480 231,361,103 330,218,077
------------ ----------- ------------ -------------
Cash, at end of period $246,443,750 $248,398,785 $246,443,750 $248,398,785
============ =========== =========== =============
14
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
2. Financial Highlights:
Changes in Net Asset Value per Redeemable Unit for the three and six months
ended June 30, 2004 and 2003 were as follows:
Three Months Ended Six Months Ended
------------------------------------ ------------------------------------
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
----------------- ----------------- ----------------- -----------------
Net realized and unrealized gains (losses) * $ (101.54) $ 47.04 $ 62.13 $ (31.36)
Interest income 2.72 2.98 5.33 6.53
Expenses ** (7.27) (7.25) (33.46) (22.87)
----------------- ----------------- ----------------- -----------------
Increase (decrease) for the period (106.09) 42.77 34.00 (47.70)
Net Asset Value per Redeemable Unit, beginning of period 1,240.28 1,070.35 1,100.19 1,160.82
----------------- ----------------- ----------------- -----------------
Net Asset Value per Redeemable Unit, end of period $ 1,134.19 $ 1,113.12 $ 1,134.19 $ 1,113.12
================= ================= ================= =================
* Includes Partnership brokerage commissions and brokerage commissions allocated from the Master.
** Excludes Partership brokerage commissions brokerage commissions allocated from the Master.
Ratios to average net assets:***
Net investment income (loss) before incentive fee
allocation**** (4.7)% (6.0)% (5.4)% (6.0)%
================= ================= ================= ================
Operating expense 5.7% 7.4% 6.1% 7.5%
Incentive fee allocation -% -% 1.6% 0.8%
----------------- ---------------- ---------------- -----------------
Total expenses 5.7% 7.4% 7.7% 8.3%
================= ================ ================ =================
Total return:
Total return before incentive fees (8.6)% 4.0% 4.9% (3.7)%
Incentive fees -% -% (1.8)% (0.4)%
----------------- ---------------- ---------------- -----------------
Total return after incentive fees (8.6)% 4.0% 3.1% (4.1)%
================= ================ ================ =================
*** Annualized (other than incentive fees)
**** Interest income less total expenses (exclusive of incentive fees )
The above ratios may vary for individual investors based on the timing of
capital transactions during the year. Additionally, these ratios are calculated
for the Limited Partner class using the Limited Partners' share of income,
expenses and average net assets.
15
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
Financial Highlights of the Master:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
2004 2003 2004 2003
---------------------- -----------------------
Net realized and unrealized gains (losses) * $ 49.73 $ 194.36 $156.69 $(339.61)
Interest Income 2.61 3.29 4.89 7.68
Expenses ** (0.07) (0.04) (0.15) (0.08)
--------- --------- --------- ---------
Increase (decrease) for the period 52.27 197.61 161.43 (332.01)
Distributions (2.58) (3.22) (4.80) (7.42)
Net Asset Value per Unit, beginning of period 1,315.61 1,086.67 1,208.67 1,620.49
--------- --------- --------- ---------
Net Asset Value per Unit, end of period $ 1,365.30 $ 1,281.06 $ 1,365.30 $ $1,281.06
========= ========= ========= =========
* Includes brokerage commissions
** Excludes brokerage commissions
Ratios to average net assets:***
Net investment income (loss)**** (2.6)% (3.4)% (2.7)% (5.4)%
==== ==== ==== ===
Operating expense 3.4% 4.4% 3.6% 6.5%
==== ==== ===== ====
Total return 4.0% 18.2% 13.4% (20.5)%
==== ==== ===== =====
*** Annualized
**** Interest income less total expenses
The above ratios may vary for individual investors based on the timing of
capital transactions during the year.
16
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's/Master's
trading activities are shown in the Statements of Income and Expenses and
Partners' Capital and are discussed in Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations.
The respective Customer Agreements between the Partnership and CGM and the
Master and CGM give the Partnership and the Master, respectively, the legal
right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are held for
trading purposes. The average fair values of these interests during the six and
twelve months ended June 30, 2004 and December 31, 2003, based on a monthly
calculation, were $4,962,850 and $4,553,850, respectively. The fair values of
these commodity interests, including options and swaps thereon, if applicable,
at June 30, 2004 and December 31, 2003 were $42,126 and $6,995,893,
respectively. Fair values for exchange traded commodity futures and options are
based on quoted market prices for those futures and options. Fair values for all
other financial instruments for which market quotations are not readily
available are based on calculations approved by the General Partner.
4. Financial Instrument Risk:
In the normal course of its business the Partnership directly, and through
its investment in the Master, is party to financial instruments with off-balance
sheet risk, including derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards, futures, options
and swaps, whose values are based upon an underlying asset, index, or reference
rate, and generally represent future commitments to exchange currencies or cash
flows, or to purchase or sell other financial instruments at specific terms at
specified future dates, or, in the case of derivative commodity instruments to
have a reasonable possibility to be settled in cash, through physical delivery
or with another financial instrument. These instruments may be traded on an
exchange or over-the-counter ("OTC"). Exchange traded instruments are
standardized and include futures and certain option contracts. OTC contracts are
negotiated between contracting parties and include forwards and certain options.
Each of these instruments is subject to various risks similar to those related
to the underlying financial instruments including market and credit risk. In
general, the risks associated with OTC contracts are greater than those
17
Salomon Smith Barney Orion Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
associated with exchange traded instruments because of the greater risk of
default by the counterparty to an OTC contract. The Master's swap contracts are
OTC contracts.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership/Master due to market changes, including
interest and foreign exchange rate movements and fluctuations in commodity or
security prices. Market risk is directly impacted by the volatility and
liquidity in the markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's/Master's risk of loss in the event of counterparty default is
typically limited to the amounts recognized as unrealized appreciation in the
statements of financial condition and not represented by the contract or
notional amounts of the instruments. The Partnership/Master has concentration
risk because the sole counterparty or broker with respect to the
Partnership's/Master's assets is CGM.
The General Partner monitors and controls the Partnership's/Master's risk
exposure on a daily basis through financial, credit and risk management
monitoring systems, and accordingly believes that it has effective procedures
for evaluating and limiting the credit and market risks to which the
Partnership/Master is subject. These monitoring systems allow the General
Partner to statistically analyze actual trading results with risk adjusted
performance indicators and correlation statistics. In addition, on-line
monitoring systems provide account analysis of futures, forwards and options
positions by sector, margin requirements, gain and loss transactions and
collateral positions.
The majority of these instruments mature within one year of June 30, 2004.
However, due to the nature of the Partnership's/Master's business, these
instruments may not be held to maturity.
18
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Partnership/Master does not engage in the sale of goods or services.
The Partnership's only assets are its equity in its commodity futures trading
account consisting of cash, investment in Master, net unrealized appreciation
(depreciation) on open futures and forward contracts, commodity options, if
applicable, and interest receivable. The Master's only assets are its equity in
its commodity futures trading account consisting of cash, net unrealized
appreciation (depreciation) on open futures and forward contracts, commodity
options, if applicable, and interest receivable. Because of the low margin
deposits normally required in commodity futures trading, relatively small price
movements may result in substantial losses to the Partnership/Master. While
substantial losses could lead to a decrease in liquidity, no such losses
occurred in the second quarter of 2004.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by realized and/or unrealized gains or losses
on commodity futures trading, expenses, interest income, redemptions of
Redeemable Units and distributions of profits, if any.
For the six months ended June 30, 2004, Partnership capital increased 11.2%
from $87,468,980 to $97,272,145. This increase was attributable to net income
from operations of $2,720,513 coupled with additional sales of 13,063.6197
Redeemable Units of Limited Partnership totaling $15,124,000 and 365.5458
General Partner unit equivalents totaling $440,051, which was partially offset
by redemption of 7,169.2392 Redeemable Units resulting in an outflow of
$8,481,399. Future redemptions can impact the amount of funds available for
investment in the Partnership/Master in subsequent periods.
The Master's capital consists of the capital contributions of the members
as increased or decreased by realized and/or unrealized gains or losses on
commodity futures trading, expenses, interest income, redemptions of Units and
distributions of profits, if any.
For the six months ended June 30, 2004, the Master's capital increased 2.5%
from $255,057,637 to $261,517,929. This increase was attributable to net income
from operations of $31,854,031 coupled with additions of 4,524.1504 Units
totaling $5,911,026, which was partially offset by the redemptions of
24,002.0075 Units totaling $30,355,980 and distributions of interest of $948,785
to the non-managing members of the Master. Future redemptions can impact the
amount of funds available for investments in commodity contract positions in
subsequent periods.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
19
All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The commodity
interests are recorded on trade date and open contracts are recorded in the
statement of financial condition at fair value on the last business day of the
period, which represents market value for those commodity interests for which
market quotations are readily available or other measures of fair value deemed
appropriate by management of the General Partner for those commodity interests
and foreign currencies for which market quotations are not readily available,
including dealer quotes for swaps and certain option contracts. Investments in
commodity interests denominated in foreign currencies are translated into U.S.
dollars at the exchange rates prevailing on the last business day of the period.
Realized gains (losses) and changes in unrealized values on commodity interests
and foreign currencies are recognized in the period in which the contract is
closed or the changes occur and are included in net gains (losses) on trading of
commodity interests.
Foreign currency contracts are those contracts where the Partnership agrees
to receive or deliver a fixed quantity of foreign currency for an agreed-upon
price on an agreed future date. Foreign currency contracts are valued daily, and
the Partnership's net equity therein, representing unrealized gain or loss on
the contracts as measured by the difference between the forward foreign exchange
rates at the dates of entry into the contracts and the forward rates at the
reporting dates, is included in the statement of financial condition. Realized
gains (losses) and changes in unrealized values on foreign currency contracts
are recognized in the period in which the contract is closed or the changes
occur and are included in the statements of income and expenses and partners'
capital.
Results of Operations
During the Partnership's second quarter of 2004, the net asset value per
Redeemable Unit decreased 8.6% from $1,240.28 to $1,134.19 as compared to an
increase of 4.0% in the second quarter of 2003. The Partnership experienced a
net trading loss before brokerage commissions and related fees in the second
quarter of 2004 of $7,867,560. Losses were primarily attributable to the
Partnership's trading of commodity futures in currencies, metals, grains, softs,
indices and U.S. and non-U.S. interest rates and were partially offset by gains
in energy and livestock. The Partnership experienced a net trading gain before
brokerage commissions and related fees in the second quarter of 2003 of
$4,249,510. Gains were primarily attributable to the Partnership's trading of
commodity futures in currencies, grains, indices and U.S. interest rates and
were partially offset by losses in energy, softs, livestock, metal and non-U.S.
interest rates.
During the six months ended June 30, 2004, the net asset value per
Redeemable Unit increased 3.1% from $1,100.19 to $1,134.19 as compared to a
decrease of 4.1% during the six months ended June 30, 2003. Gains were primarily
attributable to the Partnership's trading of commodity futures in energy,
grains, livestock, indices and lumber and were partially offset by losses in
currencies, U.S. and non-U.S. interest rates, metals and softs.
The lack of persistent trends resulted in a difficult environment for the
Advisors (except AAA) which began precisely as the second quarter of 2004 got
underway. Trends in both financial and commodity futures markets had been clear
for the previous three quarters. In the second quarter of 2004, however,
substantially opposing fundamental considerations along with benign short-term
volatility greatly reduced the opportunities for Advisors resulting in a
particularly difficult trading environment.
20
The directionless behavior of so many markets can be explained in terms of
a perception that a significant change may be underway in the global economic
cycle. Some of the primary drivers of these conditions have been: softer than
expected U.S. economic data creating confusion with regard to forecasting the
pace of Federal Reserve tightening; U.S. and international bonds, equity and
currency markets coping with indications of rising inflation, but at the same
time, an apparent pause in growth; and a fragile Eurozone recovery keeping
European Central Bank monetary intervention on hold.
Trading in all market sectors was unprofitable for the Partnership except
in the energy, grains and base metal sectors. The interest rate, stock index,
currency, grains and precious metals were the primary contributors to the
losses. Trading in crude oil, soybeans, copper and aluminum provided profits to
the Partnership to mitigate the other losses.
Commodity futures markets are highly volatile. The potential for broad and
rapid price fluctuations increase the risks involved in commodity trading, but
also increase the possibility of profit. The profitability of the
Partnership/Master depends on the existence of major price trends and the
ability of the Advisors to correctly identify those price trends. Price trends
are influenced by, among other things, changing supply and demand relationships,
weather, governmental, agricultural, commercial and trade programs and policies,
national and international political and economic events and changes in interest
rates. To the extent that market trends exist and the Advisors are able to
identify them, the Partnership expects to increase capital through operations.
AAA is aware of price trends but does not trade upon trends. AAA often makes
profits in positions with specific trends even though that trend may still be
intact or perhaps even stronger. AAA occasionally establishes positions that are
counter-trend.
Interest income is earned on 100% of the Partnership's average daily equity
maintained in cash in its account during each month at a 30-day U.S. Treasury
bill rate determined weekly by CGM based on the average non-competitive yield on
3-month U.S. Treasury bills maturing in 30 days from the date on which such
weekly rate is determined. Interest income for the three and six months ended
June 30, 2004 increased by $14,144 and 15,243, respectively as compared to the
corresponding periods in 2003. Interest income allocated from the Master for the
three and six months ended June 30, 2004 increased by $7,754 and $1,513,
respectively as compared to the corresponding periods in 2003. The increase in
interest income and interest income allocated from Master are primarily due to
an increase in net assets during the three and six months ended June 30, 2004.
Brokerage commissions are based on the number of trades executed by the
Advisor. Brokerage commissions and fees for the three months ended June 30, 2004
decreased by $195,056 as compared to the corresponding period in 2003. The
decrease in commissions and fees is primarily due to a decrease in the number of
trades during the three months ended June 30, 2004 as compared to the
corresponding periods in 2003.
Management fees are calculated as a percentage of the Partnership's net
asset value as of the end of each month and are affected by trading performance,
additions and redemptions. Management fees for the three and six months ended
June 30, 2004 increased by $73,744 and $163,938, respectively, as compared to
the corresponding periods in 2003. The increase of management fees is due to an
increase in net assets during the three and six months ended June 30, 2004 as
compared to the corresponding periods in 2003.
21
Administrative fees are paid to the General Partner for administering the
business and affairs of the Partnership. These fees are calculated as a
percentage of the Partnership's net asset value as of the end of each month and
are affected by trading performance and redemptions. Administrative fees for the
three and six months ended June 30, 2004 increased by $25,269 and $58,292,
respectively, as compared to the corresponding periods in 2003. The increase in
administrative fees is due to higher average net assets during the three and six
months ended June 30, 2004 as compared to the corresponding periods in 2003.
Incentive fees paid by the Partnership are based on the new trading profits
generated by each Advisor at the end of the quarter, as defined in the
management agreements between the Partnership, the General Partner and each
Advisor. Trading performance for the three and six months ended June 30, 2004
and 2003 resulted in incentive fees of $0, $0, $1,579,063 and $298,424,
respectively.
22
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership/Master are speculative commodity pools. The market
sensitive instruments held by it are acquired for speculative trading purposes,
and all or substantially all of the Partnership's/Master's assets are subject to
the risk of trading loss. Unlike an operating company, the risk of market
sensitive instruments is integral, not incidental, to the Partnership's/
Master's main line of business.
Market movements result in frequent changes in the fair value of the
Partnership's/Master's open positions and, consequently, in its earnings and
cash flow. The Partnership's/Master's market risk is influenced by a wide
variety of factors, including the level and volatility of interest rates,
exchange rates, equity price levels, the value of financial instruments and
contracts, the diversification effects of the Partnership's/Master's open
positions and the liquidity of the markets in which it trades.
The Partnership/Master rapidly acquires and liquidates both long and short
positions in a range of different markets. Consequently, it is not possible to
predict how a particular future market scenario will affect performance, and the
Partnership's/Master's past performance is not necessarily indicative of its
future results.
Value at Risk is a measure of the maximum amount which the
Partnership's/Master's could reasonably be expected to lose in a given market
sector. However, the inherent uncertainty of the Partnership's/Master's
speculative trading and the recurrence in the markets traded by the
Partnership/Master of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Partnership's/Master's experience to date (i.e., "risk of ruin"). In
light of the foregoing as well as the risks and uncertainties intrinsic to all
future projections, the inclusion of the quantification in this section should
not be considered to constitute any assurance or representation that the
Partnership's/Master's losses in any market sector will be limited to Value at
Risk or by the Partnership's/Master's attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the
Partnership/Master as the measure of its Value at Risk. Maintenance margin
requirements are set by exchanges to equal or exceed the maximum losses
reasonably expected to be incurred in the fair value of any given contract in
95%-99% of any one-day interval. Maintenance margin has been used rather than
the more generally available initial margin, because initial margin includes a
credit risk component, which is not relevant to Value at Risk.
23
The following table indicates the trading Value at Risk associated with the
Partnership's open positions by market category as of June 30, 2004 and the
highest, lowest and average value during the three months ended June 30, 2004.
All open position trading risk exposures of the Partnership have been included
in calculating the figures set forth below. As of June 30, 2004, the
Partnership's total capitalization was $97,272,145. There has been no material
change in the trading Value at Risk information previously disclosed in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 2003.
June 30, 2004
(Unaudited)
Three Months Ended June 30, 2004
------------------------------------------
% of Total High Low Average Value
Market Sector Value at Risk Capitalization Value at Risk Value at Risk at Risk
- ------------- --------------------------------------------------------------------------
Currencies
- Exchange Traded Contracts $ 710,618 0.73% $1,414,062 $ 710,618 $ 952,173
Energy 1,326,550 1.36% 3,586,630 1,326,550 2,355,040
Grains 189,572 0.20% 1,266,731 189,572 456,853
Interest Rates U.S. 752,050 0.77% 1,385,650 104,450 815,800
Interest Rates Non-U.S. 1,680,067 1.73% 2,696,681 1,134,891 1,611,647
Livestock 298,100 0.31% 298,100 201,688 245,240
Metals
- Exchange Traded Contracts 353,000 0.36% 970,100 190,000 258,250
- OTC Contracts 136,860 0.14% 258,765 77,950 119,207
Softs 402,696 0.41% 567,860 340,395 375,209
Indices 1,648,407 1.70% 1,648,407 687,682 1,273,040
Lumber 1,100 0.00% 4,400 1,100 3,300
-----------------------------
Totals $ 7,499,020 7.71%
=============================
24
The following table indicates the trading Value at Risk associated with the
Master's open positions by market category as of June 30, 2004 and the highest,
lowest and average value during the three months ended June 30, 2004. All open
position trading risk exposures of the Master have been included in calculating
the figures set forth below. As of June 30, 2004, the Master's total
capitalization was $261,517,929. There has been no material change in the
trading Value at Risk information previously disclosed in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2003.
June 30, 2004
Three Months Ended June 30, 2004
----------------- -------------------- -----------------
Market Sector Value at Risk % of Total High Low Average Value
Capitalization Value at Risk Value at Risk at Risk
- ------------------------ ------------------- ----------------- ----------------- -------------------- -----------------
Energy $22,034,533 8.43% $22,385,986 $10,664,222 $18,027,882
Energy Swaps 1,700,000 0.65% $1,988,189 $1,698,904 $1,699,635
--------- -----
Total $23,734,533 9.08%
=========== =====
25
Item 4. Controls and Procedures
Based on their evaluation of the Partnership's disclosure controls and
procedures as of June 30, 2004, the Chief Executive Officer and Chief Financial
Officer have concluded that such controls and procedures are effective.
During the Partnership's last fiscal quarter, no changes occurred in the
Partnership's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Partnership's
internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The following information supplements and amends our discussion set forth
under Item 3 "Legal Proceedings" in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2003 under Part II, Item 1. "Legal Proceedings"
in the Partnership's Quarterly Report on Form 10Q for the quarter ended March
31, 2004.
WorldCom, Inc.
On May 10, 2004, Citigroup announced that it had agreed to settle the
WorldCom class action suits.
27
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
For the three months ended June 30, 2004 there were additional sales
of 5,525.1988 Redeemable Units of Limited Partnership totaling
$6,607,000 and contributions by the General Partner representing
139.7490 Unit equivalents totaling $160,000. For the three months
ended June 30, 2003 there were additional sales of 7,661.9837
Redeemable Units of Limited Partnership totaling $8,360,000.
Proceeds from the sale of additional Redeemable Units are used in the trading of
commodity interests including futures contracts, options, forwards and swap
contracts. The following chart sets forth the purchases of Redeemable Units by
the Partnership.
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Period (a) Total Number of (b) Average Price (c) Total Number of (d) Maximum Number
Shares (or Units) Paid per Share (or Shares (or Units) (or Approximate
Purchased* Unit)** Purchased as Part of Dollar Value) of
Publicly Announced Shares (or Units)
Plans or Programs that May Yet Be
Purchased Under the
Plans or Programs
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
April 1, 2004 - April 30, 2004 254.5261 $1,144.91 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
May 1, 2004 - May 31, 2004 1,382.7442 $1,178.19 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
June 1, 2004 - June 30, 2004 761.4613 $1,134.19 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Total 2,398.7316 $1,152.43 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
* Generally, Limited Partners are permitted to redeem their Redeemable Units as
of the end of each month on 10 days' notice to the General Partner. Under
certain circumstances, the General Partner can compel redemption but to date the
General Partner has not exercised this right. Purchases of Redeemable Units by
the Partnership reflected in the chart above were made in the ordinary course of
the Partnership's business in connection with effecting redemptions for Limited
Partners.
** Redemptions of Redeemable Units are effected as of the last day of each month
at the Net Asset Value per Redeemable Unit as of that day.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
28
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed by Item 601 of Regulation S-K are
incorporated herein by reference to the exhibit index of the
Partnership's Annual Report on Form 10-K for the period ended December
31, 2003.
Exhibit - 31.1 - Rule 13a-14(a)/15d-14(a) Certification (Certification
of President and Director).
Exhibit - 31.2 - Rule 13a-14(a)/15d-14(a) Certification (Certification
of Chief Financial Officer and Director).
Exhibit - 32.1 - Section 1350 Certification (Certification of
President and Director).
Exhibit - 32.2 - Section 1350 Certification (Certification of Chief
Financial Officer and Director).
(b) Reports on Form 8-K - None
29
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.
SALOMON SMITH BARNEY ORION FUTURES FUND L.P.
By: Citigroup Managed Futures LLC
-----------------------------
(General Partner)
By: /s/ David J. Vogel
David J. Vogel
President and Director
Date: August 6, 2004
By: /s/ Daniel R. McAuliffe, Jr.
----------------------------------
Daniel R. McAuliffe, Jr.
Chief Financial Officer and Director
Date: August 6, 2004
30
Exhibit 31.1
CERTIFICATIONS
I, David J. Vogel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salomon Smith Barney
Orion Futures Fund L.P. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004
/s/ David J. Vogel
----------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
31
Exhibit 31.2
CERTIFICATIONS
I, Daniel R. McAuliffe, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salomon Smith Barney
Orion Futures Fund L.P. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004
/s/ Daniel R. McAuliffe, Jr.
-----------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
32
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Salomon Smith Barney Orion Futures
Fund L.P. (the "Partnership") on Form 10-Q for the period ending June 30, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David J. Vogel, President and Director of Citigroup Managed
Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership.
/s/ David J. Vogel
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David J. Vogel
Citigroup Managed Futures LLC
President and Director
August 6, 2004
33
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Salomon Smith Barney Orion Futures
Fund L.P. (the "Partnership") on Form 10-Q for the period ending June 30, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Daniel R. McAuliffe, Jr., Chief Financial Officer and Director of
Citigroup Managed Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Partnership.
/s/ Daniel R. McAuliffe, Jr.
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Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
August 6, 2004
34