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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2011
 
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 0-50271
 
ORION FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
 
     
New York   22-3644546
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
 
c/o Ceres Managed Futures LLC
522 Fifth Avenue – 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
 
(212) 296-1999
 
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes X  No  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer    Accelerated filer    Non-accelerated filer X Smaller reporting company   
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes    No X
 
As of October 31, 2011, 468,945.6549 Limited Partnership Redeemable Units of Class A were outstanding and 1,134.5959 Limited Partnership Redeemable Units of Class Z were outstanding.


 

ORION FUTURES FUND L.P.
 
FORM 10-Q
 
INDEX
 
                 
            Page
            Number
 
   
               
      Item 1.     Financial Statements:    
               
            Statements of Financial Condition at
September 30, 2011 (unaudited) and December 31, 2010
  3
               
            Condensed Schedules of Investments at
September 30, 2011 (unaudited) and December 31, 2010
  4 – 5
               
            Statements of Income and Expenses
for the three and nine months
ended September 30, 2011 and 2010 (unaudited)
  6
               
            Statements of Changes in Partners’ Capital
for the three and nine months
ended September 30, 2011 and 2010 (unaudited)
  7
               
               
            Notes to Financial Statements (unaudited)   8 – 20
               
      Item 2.     Management’s Discussion and Analysis
of Financial Condition and Results of Operations
  21 – 23
               
      Item 3.     Quantitative and Qualitative
Disclosures about Market Risk
  24 – 27
               
      Item 4.     Controls and Procedures   28
     
PART II - Other Information   29 – 33
     
Exhibits    
 
31.1       Certification
   
 
31.2       Certification
   
 
32.1       Certification
   
 
32.2       Certification
 
 EX-10.4
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calcutaion Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.


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Table of Contents

 
PART I
Item 1. Financial Statements
Orion Futures Fund L.P.
Statements of Financial Condition
 
                 
    (Unaudited)
September 30,
    December 31,
 
    2011     2010  
   
Assets:
               
Investment in Funds, at fair value
  $ 1,321,289,585     $ 981,904,411  
Equity in trading account:
               
Cash
    271,177       172,054,703  
Cash margin
    4,850,189       22,755,878  
Net unrealized appreciation on open forward contracts
    0       13,090,568  
Options purchased, at fair value (cost $0 and $2,992,890 at
September 30, 2011 and December 31, 2010, respectively)
    0       5,335,173  
 
           
Total trading equity
    1,326,410,951       1,195,140,733  
Interest receivable
    0       15,672  
 
           
Total assets
  $ 1,326,410,951     $ 1,195,156,405  
 
           
Liabilities and Partners’ Capital:
               
Liabilities:
               
Options premium received, at fair value (premium $0 and $45,720 at September 30, 2011 and December 31, 2010, respectively)
  $ 0     $ 14,130  
Net unrealized depreciation on open futures contracts
    0       5,247,768  
Net unrealized depreciation on open forward contracts
    4,850,189       0  
Accrued expenses:
               
Brokerage commissions
    2,981,689       2,109,769  
Management fees
    1,327,804       1,751,605  
Administrative fees
    549,309       494,865  
Incentive fees
    5,368,914       4,494,823  
Other
    89,361       109,373  
Redemptions payable
    8,197,005       11,368,337  
 
           
Total liabilities
    23,364,271       25,590,670  
 
           
Partners’ Capital:
               
General Partner, Class A, (4,832.1591 and 4,276.0755 unit equivalents outstanding at September 30, 2011 and December 31, 2010, respectively)
    13,344,394       11,777,980  
General Partner, Class Z, (0.0000 units equivalents outstanding at September 30, 2011 and December 31, 2010)
    0       0  
Limited Partners, Class A, (466,765.8600 and 420,343.0232 Redeemable Units outstanding at September 30, 2011 and December 31, 2010, respectively)
    1,289,010,254       1,157,787,755  
Limited Partners, Class Z, (700.3039 and 0.0000 Redeemable Units outstanding at September 30, 2011 and December 31, 2010, respectively)
    692,032       0  
Total partners’ capital
    1,303,046,680       1,169,565,735  
 
           
Total liabilities and partners’ capital
  $ 1,326,410,951     $ 1,195,156,405  
 
           
Net asset value per unit:
       
 
           
Class A
  $ 2,761.58     $ 2,754.39  
 
           
Class Z
  $ 988.19     $ 0  
 
           
 
 
See accompanying notes to financial statements.


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Table of Contents

Orion Futures Fund L.P.
Condensed Schedule of Investments
September 30, 2011

(Unaudited)
                         
    Number of             % of Partners’  
    Contracts     Fair Value     Capital  
Unrealized Appreciation on Open Forward Contracts
                       
Metals
    600     $ 14,384,375       1.10 %
 
                   
Total unrealized appreciation on open forward contracts
            14,384,375       1.10  
 
                   
Unrealized Depreciation on Open Forward Contracts
                       
Metals
    640       (19,234,564 )     (1.48 )
 
                   
Total unrealized depreciation on open forward contracts
            (19,234,564 )     (1.48 )
 
                   
Investment in Funds
                       
AAA Master Fund LLC
            383,200,905       29.41  
CMF Winton Master Fund LP
            553,873,965       42.51  
Morgan Stanley Smith Barney TT II, LLC
            384,214,715       29.49  
 
                   
Total investment in Funds
            1,321,289,585       101.41  
 
                   
Net fair value
          $ 1,316,439,396       101.03 %
 
                   
 
See accompanying notes to financial statements.

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Table of Contents

Orion Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2010
 
                         
    Notional ($)/
          % of Partners’
 
    Number of Contracts     Fair Value     Capital  
 
Futures Contracts Purchased
                       
Currencies
    520     $ 953,808       0.08 %
Energy
    407       1,063,222       0.09  
Grains
    1,143       2,154,944       0.18  
Interest Rates U.S. 
    380       35,017       0.00 *
Interest Rates Non-U.S. 
    238       8,350       0.00 *
Livestock
    111       95,380       0.01  
Metals
    390       3,589,090       0.31  
Softs
    518       2,648,939       0.23  
                         
Total futures contracts purchased
            10,548,750       0.90  
                         
Futures Contracts Sold
                       
Currencies
    95       26,292       0.00 *
Grains
    240       (123,200 )     (0.01 )
Interest Rates U.S. 
    12       (6,375 )     (0.00 )*
Interest Rates Non-U.S. 
    95       102,828       0.01  
Metals
    1,428       (15,796,063 )     (1.35 )
                         
Total futures contracts sold
            (15,796,518 )     (1.35 )
                         
Unrealized Appreciation on Open Forward Contracts
                       
Metals
    3,976       67,511,368       5.77  
                         
Total unrealized appreciation on open forward contracts
            67,511,368       5.77  
                         
Unrealized Depreciation on Open Forward Contracts
                       
Currencies
  $ 75,375       (313 )     0.00 *
Metals
    3,256       (54,420,487 )     (4.65 )
                         
Total unrealized depreciation on open forward contracts
            (54,420,800 )     (4.65 )
                         
Options Purchased
                       
Calls
                       
Grains
    200       55,000       0.00 *
Metals
    225       5,280,173       0.45  
                         
Total options purchased
            5,335,173       0.45  
                         
Options Premium Received
                       
Calls
                       
Metals
    60       (14,130 )     (0.00 )*
                         
Total options premium received
            (14,130 )     (0.00 )*
                         
Investment in Funds
                       
AAA Master Fund LLC
            283,238,250       24.22  
CMF Willowbridge Argo Master Fund LP
            151,432,714       12.95  
CMF Winton Master Fund LP
            547,233,447       46.79  
                         
Total investment in Funds
            981,904,411       83.96  
                         
Net fair value
          $ 995,068,254       85.08 %
                         
 
 
* Due to rounding.
See accompanying notes to financial statements.


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Table of Contents

                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Investment Income:
                               
Interest income
  $ 199     $ 66,476     $ 53,981     $ 139,740  
Interest income from investment in Funds
    24,742       263,509       304,088       605,235  
 
                       
Total investment income
    24,941       329,985       358,069       744,975  
 
                       
 
                               
Expenses:
                               
Brokerage commissions including clearing fees
    4,402,696       2,943,794       11,517,150       9,197,994  
Management fees
    5,703,113       4,798,415       16,738,405       13,327,364  
Administrative fees
    1,651,697       1,342,505       4,788,950       3,711,971  
Incentive fees
    5,368,913       2,506,281       7,504,897       4,395,222  
Other
    168,228       185,478       654,738       624,841  
 
                       
Total expenses
    17,294,647       11,776,473       41,204,140       31,257,392  
 
                       
Net investment income (loss)
    (17,269,706 )     (11,446,488 )     (40,846,071 )     (30,512,417 )
 
                       
 
                               
Trading Results:
                               
Net gains (losses) on trading of commodity interests and investment in Funds:
                               
Net realized gains (losses) on closed contracts
    (1,438,435 )     4,805,257     16,663,530       (5,657,154 )
Net realized gains (losses) on investment in Funds
    25,217,187       4,857,297       44,471,691       (2,120,921 )
Change in net unrealized gains (losses) on open contracts
    1,438,435       6,187,480       (15,066,862 )     7,003,584  
Change in net unrealized gains (losses) on investment in Funds
    11,613,696       11,659,900     (3,242,142 )     16,884,531  
 
                       
Total trading results
    36,830,883       27,509,934     42,826,217       16,110,040
 
                       
Net income (loss)
  $ 19,561,177     $ 16,063,446   $ 1,980,146   $ (14,402,377 )
 
                       
 
                               
Net income (loss) allocation by class:
                               
Class A
  $ 19,566,516     $ 16,063,446     $ 1,985,485     $ (14,402,377
 
                       
Class Z
  $ (5,339   $ 0     $ (5,339 )   $ 0  
 
                       
Net asset value per redeemable unit:
                               
Class A (471,598.0191 and 410,331.2069 units outstanding at September 30, 2011 and 2010, respectively)
  $ 2,761.58     $ 2,642.21     $ 2,761.58     $ 2,642.21  
 
                   
Class Z (700.3039 and 0 units outstanding at September 30, 2011 and 2010, respectively)
  $ 988.19     $ 0     $ 988.19     $ 0  
 
                   
Net income (loss) per unit: *
                               
Class A
  $ 41.75     $ 39.10     $ 7.19     $ (50.97 )
 
                       
Class Z
  $ (11.81   $ 0     $ (11.81 )   $ 0  
 
                       
Weighted average units outstanding:
                               
Class A
    472,737.9748       408,058.2249       456,813.7306       376,423.8169  
 
                       
Class Z
    400.4765       0.0000       400.4765       0.0000  
 
                       
 
*   Based on change in net asset value per unit.
See accompanying notes to financial statements.

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Table of Contents

Orion Futures Fund L.P.
Statements of Changes in Partners’ Capital
For the Nine Months Ended September 30, 2011 and 2010
(Unaudited)
                                                 
    Class A     Class Z     Total  
    Amount     Units     Amount     Units     Amount     Units  
Partners’ Capital December 31, 2010
  $ 1,169,565,735     424,619.0987     $ 0       0     $ 1,169,565,735       424,619.0987  
Subscriptions — Limited Partners
    250,841,018       90,175.1521       697,371       700.3039       251,538,389       90,875.4560  
Subscriptions — General Partner
    1,550,000       556.0836       0       0       1,550,000       556.0836  
Net income (loss)
    1,985,485       0       (5,339 )     0       1,980,146       0  
Redemptions — Limited Partners
    (121,587,590 )     (43,752.3153 )     0       0       (121,587,590 )     (43,752.3153 )
 
                                   
Partners’ Capital September 30, 2011
  $ 1,302,354,648       471,598.0191     $ 692,032       700.3039     $ 1,303,046,680       472,298.3230  
 
                                   
                                                 
    Class A     Class Z     Total  
    Amount     Units     Amount     Units     Amount     Units  
Partners’ Capital December 31, 2009
  $ 815,786,554       302,908.4228     $ 0       0     $ 815,786,554       302,908.4228  
Subscriptions — Limited Partners
    364,108,030       138,427.6992       0       0       364,108,030       138,427.6992  
Subscriptions — General Partner
    2,975,000       1,134.0389       0       0       2,975,000       1,134.0389  
Net income (loss)
    (14,402,377 )     0       0       0       (14,402,377 )     0  
Redemptions — Limited Partners
    (84,284,242 )     (32,138.9540 )     0       0       (84,284,242 )     (32,138.9540 )
 
                                   
Partners’ Capital September 30, 2010
  $ 1,084,182,965       410,331.2069     $ 0       0     $ 1,084,182,965       410,331.2069  
 
                                   
See accompanying notes to financial statements.

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Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
1.   General:
 
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 futures contracts, options, swaps and forward contracts. The sectors traded include currencies, energy, grains, livestock, indices, U.S. and non-U.S. interest rates, softs and metals. The commodity interests that are traded by the Partnership and the Funds (as defined in Note 5 “Investment in Funds”) are volatile and involve a high degree of market risk. The Partnership commenced trading on June 10, 1999. The Partnership privately and continuously offers 600,000 redeemable units of limited partnership interest (“Redeemable Units”) to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
 
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is wholly owned by Morgan Stanley Smith Barney Holdings LLC (“MSSB Holdings”). Morgan Stanley, indirectly through various subsidiaries, owns a majority equity interest in MSSB Holdings. Citigroup Global Markets Inc. (“CGM”), the commodity broker and a selling agent for the Partnership, owns a minority equity interest in MSSB Holdings. Citigroup Inc. (“Citigroup”), indirectly through various subsidiaries, wholly owns CGM. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner, the General Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned subsidiary of Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup.
 
As of September 30, 2011, all trading decisions are made for the Partnership by Transtrend B.V. (“Transtrend”), Winton Capital Management Limited (“Winton”) and AAA Capital Management Advisors, Ltd. (“AAA”) (each an “Advisor” and, collectively, the “Advisors”), each of which is a registered commodity trading advisor.
 
On June 1, 2011, the units offered pursuant to the offering memorandum were deemed “Class A” units. The rights, powers, duties and obligations associated with investment in Class A units were not changed. Beginning August 1, 2011, Class Z units were offered to certain employees of Morgan Stanley Smith Barney and its affiliates (and their family members). Class A and Class Z will each be referred to as a “Class” and collectively referred to as the “Classes”. The Class of Redeemable Units that a Limited Partner receives upon a subscription will generally depend upon the amount invested in the Partnership, although the General Partner may determine to offer Redeemable Units to investors at its discretion.
 
The General Partner and each limited partner of the Partnership share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no Limited Partner shall be liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions.
 
The accompanying financial statements and accompanying notes are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at September 30, 2011 and December 31, 2010, and the results of its operations and changes in partners’ capital for the three and nine months ended September 30, 2011 and 2010. 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 (the “SEC”) for the year ended December 31, 2010.
 
The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
 
 
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.
 


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Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
2.   Financial Highlights:
 
Changes in the net asset value per unit for Class A for the three and nine months ended September 30, 2011 and 2010 and changes in the net asset value per unit for Class Z for the period were as follows:
                                                 
            For the period                     For the period        
            August 1, 2011                     August 1, 2011        
            (commencement of                     (commencement of        
    Three Months Ended     operations) to     Three Months Ended     Nine Months Ended     operations) to     Nine Months Ended  
    September 30, 2011     September 30, 2011     September 30, 2010     September 30, 2011     September 30, 2011     September 30, 2010  
    Class A     Class Z     Class A     Class A     Class Z     Class A  
Net realized and unrealized gains (losses) *
  $ 68.98     $ (6.17 )   $ 59.91     $ 71.44     $ (6.17 )   $ 5.10  
Interest income
    0.06       0.01       0.81       0.82       0.01       1.94  
Expenses **
    (27.29 )     (5.65 )     (21.62 )     (65.07 )     (5.65 )     (58.01 )
 
                                   
Increase (decrease) for the period
    41.75       (11.81 )     39.10       7.19       (11.81 )     (50.97 )
Net asset value per unit, beginning of period
    2,719.83       1,000.00       2,603.11       2,754.39       1,000.00       2,693.18  
 
                                   
Net asset value per unit, end of period
  $ 2,761.58     $ 988.19     $ 2,642.21     $ 2,761.58     $ 988.19     $ 2,642.21  
 
                                   
 
 
*   Includes brokerage commissions
 
**   Excludes brokerage commissions
 
            For the period                     For the period        
            August 1, 2011                     August 1, 2011        
            (commencement of                     (commencement of        
    Three Months Ended     operations) to     Three Months Ended     Nine Months Ended     operations) to     Nine Months Ended  
    September 30, 2011     September 30, 2011     September 30, 2010     September 30, 2011     September 30, 2011     September 30, 2010  
Ratios to average net assets:***
                                               
Net investment loss before incentive fees****
    (3.7) %     (3.2 )%     (3.4 )%     (3.6 )%     (3.2 )%     (3.6 )%
 
                                   
 
                                               
Operating expense
    3.7 %     3.2 %     3.5 %     3.6 %     3.2 %     3.7 %
Incentive fees
    0.4 %     0.1 %     0.2 %     0.6 %     0.1 %     0.5 %
 
                                   
Total expenses
    4.1 %     3.3 %     3.7 %     4.2 %     3.3 %     4.2 %
 
                                   
 
                                               
Total return:
                                               
Total return before incentive fees
    2.0 %     (1.1 )%     1.7 %     0.8 %     (1.1 )%     (1.5 )%
Incentive fees
    (0.5 )%     (0.1 )%     (0.2 )%     (0.5 )%     (0.1 )%     (0.4 )%
 
                                   
Total return after incentive fees
    1.5 %     (1.2 )%     1.5 %     0.3 %     (1.2 )%     (1.9 )%
 
                                   
 
***   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 period. Additionally, these ratios are calculated for the limited partner Classes using the limited partners’ share of income, expenses and average net assets.


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Table of Contents

 
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
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 trading activities are shown in the Statements of Income and Expenses and Changes in Partners’ Capital.
 
The customer agreements between the Partnership and CGM and the Funds and CGM or Morgan Stanley & Co. LLC (“MS & Co”) or Morgan Stanley & Co. International PLC (“MSIP”) as applicable, give the Partnership and the Funds, respectively, the legal right to net unrealized gains and losses on open futures, exchange — cleared swaps and open forward contracts. The Partnership and the Funds net, for financial reporting purposes, the unrealized gains and losses on open futures and open forward contracts on the Statements of Financial Condition.
 
        All of the commodity interests owned by the Partnership and the Funds are held for trading purposes. The monthly average number of futures contracts traded directly by the Partnership, during the three months ended September 30, 2011 and 2010 were 0 and 6,949, respectively. The monthly average number of futures contracts traded directly by the Partnership, during the nine months ended September 30, 2011 and 2010 were 2,101 and 5,408, respectively. The monthly average number of metal forward contracts traded directly by the Partnership, during the three months ended September 30, 2011 and 2010 were 1,727 and 5,869, respectively. The monthly average number of metal forward contracts traded directly by the Partnership, during the nine months ended September 30, 2011 and 2010 were 6,053 and 3,969, respectively. The monthly average number of option contracts traded directly by the Partnership, during the three months ended September 30, 2011 and 2010 were 0 and 777, respectively. The monthly average number of option contracts traded directly by the Partnership, during the nine months ended September 30, 2011 and 2010 were 152 and 386, respectively. The monthly average notional value of currency forward contracts, held directly by the Partnership, during the three months ended September 30, 2011 and 2010 were $0 and $24,207, respectively. The monthly average notional value of currency forward contracts, held directly by the Partnership, during the nine months ended September 30, 2011 and 2010 were $8,588,266 and $25,789,844, respectively.
 
Brokerage commissions are based on the number of trades executed by the Advisors for the Partnership and the Funds.
 
The following tables indicate the gross fair values of derivative instruments of futures, forward and options contracts traded directly by the Partnership as separate assets and liabilities as of September 30, 2011 and December 31, 2010.
         
    September 30, 2011  
Assets
       
Forward Contracts
       
Metals
  $ 14,384,375  
 
     
Total unrealized appreciation on open forward contracts
  $ 14,384,375  
 
     
 
       
Liabilities
       
Forward Contracts
       
Metals
  $ (19,234,564 )
 
     
Total unrealized depreciation on open forward contracts
  $ (19,234,564 )
 
     
Net unrealized depreciation on open forward contracts
  $ (4,850,189) *
 
     
 
*   This amount is in “Net unrealized depreciation on open forward contracts” on the Statements of Financial Condition.  
 


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Table of Contents

 
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
         
    December 31,
 
    2010  
 
Assets
       
Futures Contracts
       
Currencies
  $ 1,023,400  
Energy
    1,076,962  
Grains
    2,158,741  
Interest Rates U.S. 
    35,017  
Interest Rates Non-U.S. 
    113,936  
Livestock
    95,380  
Metals
    3,589,089  
Softs
    2,714,932  
         
Total unrealized appreciation on open futures contracts
  $ 10,807,457  
         
Liabilities
       
Futures Contracts
       
Currencies
  $ (43,300 )
Energy
    (13,740 )
Grains
    (126,997 )
Interest Rates U.S. 
    (6,375 )
Interest Rates Non-U.S. 
    (2,758 )
Metals
    (15,796,062 )
Softs
    (65,993 )
         
Total unrealized depreciation on open futures contracts
  $ (16,055,225 )
         
Net unrealized depreciation on open futures contracts
  $ (5,247,768 )*
         
 
 
This amount is in “Net unrealized depreciation on open futures contracts” on the Statements of Financial Condition.
         
    December 31,
 
    2010  
 
Assets
       
Forward Contracts
       
Metals
  $ 67,511,368  
         
Total unrealized appreciation on open forward contracts
  $ 67,511,368  
         
Liabilities
       
Forward Contracts
       
Currencies
  $ (313 )
Metals
    (54,420,487 )
         
Total unrealized depreciation on open forward contracts
  $ (54,420,800 )
         
Net unrealized appreciation on open forward contracts
  $ 13,090,568 **
         
Assets
       
Options Purchased
       
Grains
  $ 55,000  
Metals
    5,280,173  
         
Total options purchased
  $ 5,335,173 ***
         
Liabilities
       
Options Premium Received
       
Metals
  $ (14,130 )
         
Total options premium received
  $ (14,130 )****
         
 
 
**  This amount is in “Net unrealized appreciation on open forward contracts” on the Statements of Financial Condition.
 
***  This amount is in “Options purchased, at fair value” on the Statements of Financial Condition.
 
****  This amount is in “Options premium received, at fair value” on the Statements of Financial Condition.
 
 


11


Table of Contents

 
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
The following tables indicate the Partnership’s trading results, by market sector, on derivative instruments traded directly by the Partnership for the three and nine months ended September 30, 2011 and 2010.
                                 
    Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  
    September 30, 2011     September 30, 2010     September 30, 2011     September 30, 2010  
Sector   Gain (loss) from trading     Total trading results     Gain (loss) from trading     Total trading results  
Currencies
  $     $ 5,945,510     $ (1,297,551 )   $ 7,830,169  
Energy
          (9,037,904 )     2,902,797       (19,387,924 )
Grains
          8,711,776       (4,633,963 )     5,713,050
Indices
          (60,251 )     (29,043 )     (55,528
Interest Rates U.S.
          1,057,562       (1,476,338 )     2,266,651  
Interest Rates Non-U.S.
          622,283       248,513       5,324,703  
Livestock
          87,970     (435,160 )     (429,080 )
Metals
          3,411,538     4,745,428       (1,189,164 )
Softs
          254,253     1,571,985       1,273,553  
 
                       
Total
  $     $ 10,992,737   $ 1,596,668     $ 1,346,430
 
                       
   
4.   Fair Value Measurements:
 
Partnership’s and the Funds’ Investments.  All commodity interests held by the Partnership and the Funds (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Income and Expenses and Changes in Partners’ Capital.

Partnership’s and the Funds’ Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Partnership’s and the Funds’ Level 1 assets and liabilities are actively traded.
GAAP also requires the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the markets become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s and the Funds’ Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases, sales, issuances and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required by GAAP.
 

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Table of Contents

 
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
The Partnership and the Funds consider prices for exchange-traded commodity futures, forward and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non-exchange-traded forward, swaps and certain options contracts for which market quotations are not readily available, are priced by broker-dealers that derive fair values for those assets from observable inputs (Level 2). Investments in funds (other commodity pools) where there are no other rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value (Level 2). The value of the Partnership’s investments in the Funds reflects its proportional interest in the Funds. As of and for the periods ended September 30, 2011 and December 31, 2010, the Partnership and the Funds did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).
 
                                 
          Quoted Prices in
             
          Active Markets
    Significant Other
    Significant
 
          for Identical
    Observable Inputs
    Unobservable
 
    September 30, 2011     Assets (Level 1)     (Level 2)     Inputs (Level 3)  
 
Assets
                               
Forwards
  $ 14,384,375     $ 14,384,375     $     $  
Investment in Funds
  1,321,289,585         1,321,289,585        
 
                       
Total assets
  $ 1,335,673,960     $ 14,384,375     $ 1,321,289,585     $  
 
                       
Liabilities
                               
Forwards
  $ 19,234,564   $ 19,234,564            
 
                       
Total liabilities
  $ 19,234,564   $ 19,234,564            
 
                       
Net fair value
  $ 1,316,439,396     $ (4,850,189 )   $ 1,321,289,585     $  
 
                       
 
   
          Quoted Prices in
             
          Active Markets
    Significant Other
    Significant
 
          for Identical
    Observable Inputs
    Unobservable
 
    December 31, 2010*     Assets (Level 1)     (Level 2)     Inputs (Level 3)  
 
Assets
                               
Options purchased
  $ 5,335,173     $ 5,335,173     $     $  
Futures
    10,807,457       10,807,457              
Forwards
  67,511,368     67,511,368                        —  
Investment in Funds
    981,904,411             981,904,411        
                                 
Total assets
  $ 1,065,558,409     $ 83,653,998     $ 981,904,411     $  
                                 
Liabilities
                               
Futures
  $ 16,055,225     $ 16,055,225     $     $  
Forwards
    54,420,800       54,420,487       313        
Options premium received
    14,130       14,130              
                                 
Total liabilities
    70,490,155       70,489,842       313        
                                 
Net fair value
  $ 995,068,254     $ 13,164,156     $ 981,904,098     $  
                                 
 
*    The amounts have been reclassified from the December 31, 2010 prior year financial statements to conform to current year presentation.

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Table of Contents

 
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
5.   Investment in Funds:
 
On September 1, 2001, the assets allocated to AAA for trading were invested in AAA Master Fund LLC, (“AAA Master”), a limited liability company organized under the limited liability company laws of the State of New York. The Partnership purchased 5,173.4381 units of AAA Master with cash equal to $5,173,438. AAA Master was formed in order to permit accounts managed now or in the future by AAA using the Energy Program – Futures and Swaps, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the managing member of AAA Master. Individual and pooled accounts currently managed by AAA, including the Partnership, are permitted to be non-managing members of AAA Master. The General Partner and AAA believe that trading through this structure should promote efficiency and economy in the trading process.
 
On November 1, 2004, the assets allocated to Winton for trading were invested in CMF Winton Master L.P. (“Winton Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 35,389.8399 units of Winton Master with cash equal to $33,594,083 and a contribution of open commodity futures and forward contracts with a fair value of $1,795,757. Winton Master was formed in order to permit accounts managed now or in the future by Winton using the Diversified Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Winton Master. Individual and pooled accounts currently managed by Winton, including the Partnership, are permitted to be limited partners of Winton Master. The General Partner and Winton believe that trading through this structure should promote efficiency and economy in the trading process.
 
On July 1, 2005, a portion of the assets allocated to Willowbridge for trading were invested in CMF Willowbridge Argo Master Fund L.P. (“Willowbridge Master”), a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 33,529.1186 units of Willowbridge Master with cash equal to $29,866,194 and a contribution of open commodity futures and forward contracts with a fair value of $3,662,925. Willowbridge Master was formed in order to permit accounts managed now or in the future by Willowbridge using the Argo Trading System, a proprietary, systematic trading system, to invest together in one trading vehicle. The Partnership fully redeemed its investment in Willowbridge Master on May 31, 2011 for cash equal to $97,339,043.
 
On June 1, 2011, the Partnership allocated a portion of its assets, with cash equal to $384,387,625 to Morgan Stanley Smith Barney TT II, LLC, (“Transtrend Master”), a limited liability company organized under the partnership laws of the State of Delaware. Transtrend Master was formed in order to permit accounts managed now or in the future by Transtrend using the Diversified Trend Program-Enhanced Risk Portfolio (US Dollar), a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the managing member of Transtrend Master. Individual and pooled accounts managed by Transtrend, including the Partnership are permitted to be a non managing member of Transtrend Master. The General Partner and Transtrend believe that trading through this structure should promote efficiency and economy in the trading process.
 
The General Partner is not aware of any material changes to the trading programs discussed above during the fiscal quarter ended September 30, 2011.
 
AAA Master’s, Transtrend Master’s and Winton Master’s (collectively, the “Funds”) and the Partnership’s trading of futures, forwards, swaps and options contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges and foreign commodity exchanges. The Funds and the Partnership engage in such trading through commodity brokerage accounts maintained with CGM, except for Transtrend Master which trades through MS & Co. and MSIP, the commodity broker.
 
A limited partner/non-managing member may withdraw all or part of its capital contribution and undistributed profits, if any, from the Funds in multiples of the net asset value per unit

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Table of Contents

 
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
as of the end of any day (the “Redemption Date”) after a request for redemption has been made to the general partner/managing member at least three days in advance of the Redemption Date. The units are classified as a liability when the limited partner/non-managing member elects to redeem and informs the Funds.
 
Management, administrative and incentive fees are charged at the Partnership level, except for fees payable to Transtrend which are charged at the Transtrend Master level. All exchange, clearing, user, give-up, floor brokerage and National Futures Association fees (collectively the “clearing fees”) are borne by the Partnership directly and through its investments in the Funds. All other fees, including CGM’s direct brokerage commission, are charged at the Partnership level.
 
At September 30, 2011, the Partnership owned approximately 40.6% of AAA Master, 91.7% of Transtrend Master and 66.7% of Winton Master. At December 31, 2010, the Partnership owned approximately 28.7% of AAA Master, 70.0% of Willowbridge Master and 61.9% of Winton Master. It is the Partnership’s intention to continue to invest in the Funds. The performance of the Partnership is directly affected by the performance of the Funds. Expenses to investors as a result of the investment in the Funds are approximately the same and redemption rights are not affected.
 
Summarized information reflecting the Total Assets, Liabilities and Capital for the Funds are shown in the following tables.
                         
    September 30, 2011  
    Total Assets     Total Liabilities     Total Capital  
AAA Master
  $ 1,182,343,740     $ 237,749,412     $ 944,594,328  
Transtrend Master
    419,583,945       646,370       418,937,575  
Winton Master
    830,305,813       289,479       830,016,334  
 
                 
Total
  $ 2,432,233,498     $ 238,685,261     $ 2,193,548,237  
 
                 
 
    December 31, 2010  
    Total Assets     Total Liabilities     Total Capital  
AAA Master
  $ 1,234,677,140     $ 254,307,502     $ 980,369,638  
Willowbridge Master
    216,360,362       61,729       216,298,633  
Winton Master
    883,842,483       122,612       883,719,871  
 
                 
Total
  $ 2,334,879,985     $ 254,491,843     $ 2,080,388,142  
 
                 
 
Summarized information reflecting the net investment income (loss) from trading, total trading results and net income (loss) for the Funds are shown in the following tables.
 
    For the three months ended September 30, 2011  
    Net Investment     Total Trading        
    Income (Loss)     Results     Net income (Loss)  
AAA Master
  $ (608,827 )   $ 20,925,811     $ 20,316,984  
Transtrend Master
    (2,263,834 )     (14,676,082 )     (16,939,916 )
Winton Master
    (115,599 )     65,557,693       65,442,094  
 
                 
Total
  $ (2,988,260 )   $ 71,807,422     $ 68,819,162  
 
                 
 
    For the nine months ended September 30, 2011  
    Net Investment     Total Trading        
    Income (Loss)     Results     Net income (Loss)  
AAA Master
  $ (1,998,001 )   $ 16,706,074     $ 14,708,073  
Transtrend Master
    (3,661,569 )     (28,176,397 )     (31,837,966 )
Winton Master
    (172,947 )     76,099,292       75,926,345  
Willowbridge Master (a)
    (58,428 )     18,287,865       18,229,437  
 
                 
Total
  $ (5,890,945 )   $ 82,916,834     $ 77,025,889  
 
                 
 
(a)   From January 1, 2011 through May 31, 2011, the date Willowbridge Master was terminated.
 


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Table of Contents

 
Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
                         
    For the three months ended September 30, 2010  
    Net Investment     Total Trading        
    Income (Loss)     Results     Net income (Loss)  
AAA Master
  $ (596,513 )   $ 9,489,985     $ 8,893,472  
Willowbridge Master
    (28,204 )     (2,263,514 )     (2,291,718 )
Winton Master
    63,386       26,050,805       26,114,191  
 
                 
Total
  $ (561,331 )   $ 33,277,276     $ 32,715,945  
 
                 
 
                       
                         
    For the nine months ended September 30, 2010  
    Net Investment     Total Trading        
    Income (Loss)     Results     Net income (Loss)  
AAA Master
  $ (2,428,159 )   $ (34,508,985 )   $ (36,937,144 )
Willowbridge Master
    (146,867 )     (36,147,175 )     (36,294,042 )
Winton Master
    (46,631 )     80,520,886       80,474,255  
 
                 
Total
  $ (2,621,657 )   $ 9,864,726     $ 7,243,069  
 
                 
 
Summarized information reflecting the Partnership’s investments in, and the operations of, the Funds are as shown in the following tables.
                                                                 
    September 30, 2011     For the three months ended September 30, 2011          
    % of                                            
    Partnership’s     Fair     Income     Expenses     Management     Net     Investment   Redemptions
Investment   Net Assets     Value     (Loss)     Commissions     Other     Fee     Income (Loss)     Objective   Permitted
AAA Master
    29.41 %   $ 383,200,905     $ 8,381,422     $ 202,731     $ 51,907     $     $ 8,126,784     Energy Markets   Monthly
Transtrend Master
    29.49 %     384,214,715       (13,395,345 )     313,596       0       1,738,778       (15,447,719 )   Commodity Portfolio   Monthly
Winton Master
    42.51 %     553,873,965       41,869,548       79,876       13,907             41,775,765     Commodity Portfolio   Monthly
 
                                             
Total
          $ 1,321,289,585     $ 36,855,625     $ 596,203     $ 65,814     $ 1,738,778     $ 34,454.830          
 
                                                   
                                                                 
    September 30, 2011     For the nine months ended September 30, 2011          
    % of                                            
    Partnership’s     Fair     Income     Expenses     Management     Net     Investment   Redemptions
Investment   Net Assets     Value     (Loss)     Commissions     Other     Fee     Income (Loss)     Objective   Permitted
AAA Master
    29.41 %   $ 383,200,905     $ 5,140,821     $ 643,899     $ 176,910     $     $ 4,320,012     Energy Markets   Monthly
Transtrend Master
    29.49 %     384,214,715       (24,781,090 )     453,128       112,108       2,299,318       (27,645,644 )   Commodity Portfolio   Monthly
Willowbridge Master
    0.00 %   $       13,236,598       47,521       27,695             13,161,382     Commodity Portfolio   Monthly
Winton Master
    42.51 %     553,873,965       47,937,308       240,927       44,179             47,652,202     Commodity Portfolio   Monthly
 
                                                   
Total
          $ 1,321,289,585     $ 41,533,637     $ 1,385,475     $ 360,892     $ 2,299,318     $ 37,487,952          
 
                                                   
                                                         
    December 31, 2010     For the three months ended September 30, 2010          
    % of                        
    Partnership’s     Fair     Income     Expenses     Net     Investment   Redemptions
Investment   Net Assets     Value     (Loss)     Commissions     Other     Income (Loss)     Objective   Permitted
AAA Master
    24.22 %   $ 283,238,250     $ 2,523,600     $ 161,584     $ 48,436     $ 2,313,580     Energy Markets   Monthly
Willowbridge Master
    12.95 %     151,432,714       (1,413,593 )     47,967       16,136       (1,477,696 )   Commodity Portfolio   Monthly
Winton Master
    46.79 %     547,233,447       15,670,699       87,075       16,606       15,567,018     Commodity Portfolio   Monthly
 
                                             
Total
          $ 981,904,411     $ 16,780,706     $ 296,626     $ 81,178     $ 16,402,902          
 
                                             
                                                         
    December 31, 2010     For the nine months ended September 30, 2010          
    % of                                  
    Partnership’s     Fair     Income     Expenses     Net     Investment   Redemptions
Investment   Net Assets     Value     (Loss)     Commissions     Other     Income (Loss)     Objective   Permitted
AAA Master
    24.22 %   $ 283,238,250     $ (8,424,424 )   $ 611,829     $ 137,958     $ (9,174,211 )   Energy Markets   Monthly
Willowbridge Master
    12.95 %     151,432,714       (22,466,180 )     160,329       42,223       (22,668,732 )   Commodity Portfolio   Monthly
Winton Master
    46.79 %     547,233,447       46,259,449       284,257       45,968       45,929,224     Commodity Portfolio   Monthly
 
                                             
Total
          $ 981,904,411     $ 15,368,845     $ 1,056,415     $ 226,149     $ 14,086,281          
 
                                             

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Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
6. Financial Instrument Risks:
 
In the normal course of business, the Partnership and the Funds are parties 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 balances, or to purchase or sell other financial instruments on 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, forwards and option contracts. OTC contracts are negotiated between contracting parties and include swaps and certain forward and options contracts. Specific market movements of commodities or futures contracts underlying an option cannot be accurately predicted. 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 associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract.
 
The risk to the limited partners that have purchased interests in the Partnership is limited to the amount of their capital contributions to the Partnership and their share of the Partnership’s assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
 
Market risk is the potential for changes in the value of the financial instruments traded by the Partnership/Funds 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. The Partnership/Funds are exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.
 
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. The Partnership’s/Funds’ risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s/Funds’ risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Funds to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Funds have credit risk and concentration risk because the sole counterparty or broker with respect to the Partnership’s/Funds’ assets is MS & Co., MSIP, CGM or a CGM affiliate. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MS & Co. and CGM, the Partnership’s/Funds’ counterparty is an exchange or clearing organization.
 
As both a buyer and seller of options, the Partnership/Funds pay or receive a premium at the outset and then bear the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership/Funds to potentially unlimited liability; for purchased options, the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Partnership/Funds do not consider these contracts to be guarantees.
 
The General Partner/managing member monitors and attempts to control the Partnership’s/Funds’ 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/Funds may be subject. These monitoring systems generally allow the General Partner/managing member to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, exchange-cleared swaps 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 the inception date. However, due to the nature of the Partnership’s/Funds’ businesses, these instruments may not be held to maturity.

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Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
7. Critical Accounting Policies:
 
Use of Estimates.  The preparation of financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
 
Partnership’s and the Funds’ Investments.  All commodity interests held by the Partnership and the Funds (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Income and Expenses and Changes in Partners’ Capital.
 
Partnership’s and the Funds’ Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Partnership’s and the Funds’ Level 1 assets and liabilities are actively traded.
GAAP also requires the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the markets become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s and the Funds’ Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases, sales, issuances and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
The Partnership and the Funds consider prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets from observable inputs (Level 2). Investments in funds (other commodity pools) where there are no other rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value (Level 2). The value of the Partnership’s investments in the Funds reflects its proportional interest in the Funds. As of and for the periods ended September 30, 2011 and December 31, 2010, the Partnership and the Funds did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).


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Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
Futures Contracts.  The Partnership and the Funds trade futures contracts and exchange-cleared swaps. Exchange-cleared swaps are swaps that are traded as futures. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date, or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Partnership and the Funds each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Partnership and Funds. When the contract is closed, the Partnership and the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Statements of Income and Expenses.
 
Forward Foreign Currency Contracts. Forward foreign currency contracts are those contracts where the Partnership and the Funds agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Forward foreign currency contracts are valued daily, and the Partnership’s and the Funds’ 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 date, is included in the Statements of Financial Condition. Net realized gains (losses) and changes in net unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Statements of Income and Expenses.
 
The Partnership and the Funds do not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in net gain (loss) on investments in the Statements of Income and Expenses.
 
London Metals Exchange Forward Contracts.  Metal contracts traded on the London Metals Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by the Partnership and the Funds are cash settled based on prompt dates published by the LME. Payments (“variation margin”) may be made or received by the Partnership and the Funds each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Partnership and the Funds. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Partnership and the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Net realized gains (losses) and changes in net unrealized gains (losses) on metal contracts are included in the Statements of Income and Expenses and Changes in Partners’ Capital.
 
Options.  The Partnership and Funds may purchase and write (sell) both exchange-listed and OTC options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Partnership and the Funds write an option, the premium received is recorded as a liability in the Statements of Financial Condition and marked to market daily. When the Partnership and the Funds purchase an option, the premium paid is recorded as an asset in the Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes in net unrealized gains (losses) on options contracts are included in the Statements of Income and Expenses.
 
Brokerage Commissions.  Commission charges to open and close futures and exchange-traded swap contracts are expensed at the time the positions are opened. Commission charges on option contracts are expensed at the time the position is established and when the option contract is closed.
 
Income Taxes.  Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses.


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Orion Futures Fund L.P.
Notes to Financial Statements
September 30, 2011
(Unaudited)
 
GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. The General Partner concluded that no provision for income tax is required in the Partnership’s financial statements.
 
The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. Generally, the 2008 through 2010 tax years remain subject to examination by U.S. federal and most state tax authorities. Management does not believe that there are any uncertain tax positions that require recognition of a tax liability.
 
Subsequent Events. The General Partners evaluates events that occur after the balance sheet date but before financial statements are filed. The General Partner has assessed the subsequent events through the date of filing and determined that there no subsequent events requiring adjustment of or disclosure in the financial statements.
 
Recent Accounting Pronouncements. In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU ”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards” (“ IFRS”). The amendments within this ASU change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between U.S. GAAP and IFRS. However, some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The ASU is effective for annual and interim periods beginning after December 15, 2011 for public entities. This new guidance is not expected to have a material impact on the Partnership’s financial statements.
 
In October 2011, FASB issued a proposed ASU intended to improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company. Under longstanding U.S. GAAP, investment companies carry all of their investments at fair value, even if they hold a controlling interest in another company. The primary changes being proposed by the FASB relate to which entities would be considered investment companies as well as certain disclosure and presentation requirements. In addition to the changes to the criteria for determining whether an entity is an investment company, the FASB also proposes that an investment company consolidate another investment company if it holds a controlling financial interest in the entity. The Partnership is currently evaluating the impact that this proposed update would have on the financial statements.
 
Net income (loss) per Unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 2, “Financial Highlights”.


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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Liquidity and Capital Resources
 
The Partnership does not engage in sales of goods or services. The Partnership’s assets are its (i) investment in Funds, and (ii) equity in its trading account, consisting of cash and cash equivalents and net unrealized depreciation on open forward contracts. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the third quarter of 2011.
 
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 trading and by expenses, interest income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any.
 
For the nine months ended September 30, 2011, Partnership capital increased 11.4% from $1,169,565,735 to $1,303,046,680. This increase was attributable to the subscriptions of 90,175.1521 Redeemable Units of Class A totaling $250,841,018, subscriptions of 700.3039 Redeemable Units of Class Z totaling $697,371 and 556.0836 Class A General Partner unit equivalents totaling $1,550,000, coupled with a net income from operations of $1,980,146, which was partially offset by the redemptions of 43,752.3153 Redeemable Units of Class A totaling $121,587,590. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.
 
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP 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 income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 7 of the Financial Statements.
The Partnership/Funds records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners’ Capital.
 
Results of Operations
 
During the Partnership’s third quarter of 2011, the net asset value per unit for Class A increased 1.5% from $2,719.83 to $2,761.58 as compared to an increase of 1.5% in the third quarter of 2010. During the Partnership’s third quarter of 2011, the net asset value per unit for Class Z decreased 1.2% from $1,000.00 to $988.19 from August 1, 2011 to September 30, 2011. The Partnership experienced a net trading gain before brokerage commissions and related fees in the third quarter of 2011 of $36,830,883. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, U.S. and non-U.S. interest rates, metals and softs, and were partially offset by losses in currencies, grains, livestock and indices. The Partnership experienced a net trading gain before brokerage commissions and related fees in the third quarter of 2010 of $27,509,934. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in currencies, grains, livestock, metals, U.S. and non-U.S. interest rates and softs and were partially offset by losses in energy and indices.
During July, long futures positions in U.S. Treasury bonds, U.S. Treasury notes, and the Eurobund profited as investors sought “flight to quality” assets after concerns over a slowing global economy and the inability of the U.S. debt ceiling issue to be resolved saw investors seek “safe haven” assets. Further gains were recorded in currencies as long Swiss franc and Japanese yen versus short U.S. dollar positions made a profit for the Partnership as investors perceived these currencies to be “safe haven” assets. Additional gains were recorded in the energy markets in July came from long futures positions in Brent crude oil and WTI crude oil as oil prices moved higher. The Partnership also profited from long futures positions in gold and silver as prices rallied amidst concerns over a slowing global economy. Lastly, long futures positions in sugar recorded gains in July as prices rose on renewed concerns that the crop in Brazil may decline. The Partnership’s gains in July were offset by losses in August and September. Long Australian dollar, Canadian dollar and euro positions versus short U.S. dollar incurred losses as concerns over slowing global demand for commodities weighed on the value of currencies. Further losses were incurred in August from long futures positions in global stock indices as prices declined after a Standard & Poor’s downgrade of the United States’ sovereign credit rating, as well as concerns about the European debt crisis. Long futures positions in corn and soybeans incurred losses as grains prices declined on a more favorable United States Department of Agriculture report citing better-than-expected yields. Lastly, short futures positions in coffee incurred losses as prices rallied in August.


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Table of Contents

 
During the Partnership’s nine months ended September 30, 2011, the net asset value per unit for Class A increased 0.3% from $2,754.39 to $2,761.58 as compared to a decrease of 1.9% for the nine months ended September 30, 2010. The Partnership experienced a net trading gain before brokerage commissions and related fees for the nine months ended September 30, 2011 of $42,826,217. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, U.S. and non U.S. interest rates, metals and softs, and were partially offset by losses in currencies, grains, livestock and indices. The Partnership experienced a net trading gain before brokerage commissions and related fees for the nine months ended September 30, 2010 of $16,110,040. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in currencies, grains, U.S. and non-U.S. interest rates and softs and were partially offset by losses in livestock, energy, metals and indices.
During the first quarter, long futures positions in WTI crude oil and Brent crude oil performed well as prices generally appreciated given confidence in the continued growth of China, as well as that of the broader global economy. Additional upward price pressure resulted from political tensions in the Middle East and North Africa. Further gains were recorded from long futures positions in heating oil as a colder-than-expected winter in the United States helped to drive prices higher throughout February and March. Gains were also experienced in the metals complex during February from long futures positions in gold, silver, nickel, and zinc profited from prices trending higher. Further gains were recorded during March and April in the metals complex as long futures positions in gold and silver as prices strengthened continuing their upward trend from February. Further gains in April were recorded in the energy markets from long futures positions in WTI crude oil, as well as in RBOB gasoline, gasoil, and heating oil as oil prices rose during the month. Lastly, gains were recorded from long positions in the currency markets during April as the British pound, euro, Australian dollar, Swiss franc and Canadian dollar all strengthened against the U.S. dollar. Performance in July also benefited the Partnership as long futures positions in U.S. Treasury bonds and U.S. Treasury notes profited as investors sought out “flight to quality” assets given a weaker global economic outlook and continued concerns about the U.S. debt ceiling. Further gains in July were recorded in currencies as long positions in the Swiss franc and Japanese yen versus the U.S. dollar benefited the Partnership as these currencies were viewed as “safe haven” assets by investors. Additional gains were recorded in the metals complex in July as long futures positions in gold and silver benefited from rising prices. A portion of the Partnership’s gains during the first nine months of the year was offset by trading losses in January as short futures positions in U.S. and European interest rates detracted from performance as prices increased over concerns about the unrest in the Middle East, which spurred demand for the relative “safety” of government debt. Further losses in February came in currencies as long Australian dollar, Swiss franc, Japanese yen, and Canadian dollar positions weakened against the U.S. dollar as renewed optimism about the U.S. economic recovery was aided by better-than-expected U.S. factory data. The Partnership incurred additional losses in May and June as a sharp reversal lower in energy prices negatively impacted long futures positions in WTI crude oil, RBOB gasoline, gasoil, heating oil and natural gas. Further losses in May came from long futures positions in the metals markets as gold and silver prices reversed sharply lower, as did palladium, platinum and copper prices. Losses were also recorded in the agricultural commodities in May and June as the prices of corn, soybeans and wheat futures all traded lower, thus negatively impacting long positions in these markets. The Partnership also incurred losses in global stock indices as prices continued to decline throughout May and June amidst fears the crisis in Greece and Portugal would spread to other European countries. Additional losses came from the currency markets in August and September as long Australian dollar, Canadian dollar and euro positions versus the U.S. dollar were negatively impacted as concerns over slowing global demand for commodities and the European debt crisis pushed the values of these currencies lower. Further losses were incurred in August from long futures positions in global stock indices as prices declined after a Standard & Poor’s downgrade of the United States’ sovereign credit rating. Long futures positions in corn and soybeans also incurred further losses in August and September as grains prices declined on better-than-expected yields in the United States.


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Commodity futures markets are highly volatile. Broad price fluctuations and rapid inflation increases the risks involved in commodity trading, but also increases the possibility for profit. The profitability of the Partnership/Funds 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.
 
Interest income is earned on 100% of the Partnership’s average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of the AAA Master or Winton Master) brokerage account 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. MS & Co. and MSIP credits Transtrend Master at each month-end with interest income on the assets on deposit with MS & Co. and MSIP. Interest income earned by the Partnership for the three and nine months ended September 30, 2011 decreased by $305,044 and $386,906, respectively, as compared to the corresponding periods in 2010. The decrease in interest income is primarily due to lower U.S. Treasury bill rates for the Partnership during the three and nine months ended September 30, 2011, as compared to the corresponding periods in 2010. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership’s and the Funds’ accounts and upon interest rates over which neither the Partnership/Funds nor CGM/MS & Co. has control.
 
Brokerage commissions are based on the number of trades executed by the Advisors. Accordingly, they must be compared in relation to the number of trades executed during the period. Brokerage commissions and fees for the three and nine months ended September 30, 2011 increased by $1,458,902 and $2,319,156, respectively, as compared to the corresponding periods in 2010. The increase in brokerage commissions and fees is primarily due to an increase in the number of trades during the three and nine months ended September 30, 2011, as compared to the corresponding periods in 2010.
 
Management fees, except fees payable to Transtrend, are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Management fees payable to Transtrend are charged at Transtrend Master level and are affected by trading performance, subscriptions and redemptions of Transtrend Master. Management fees for the three and nine months ended September 30, 2011 increased by $904,698 and $3,411,041, respectively, as compared to the corresponding periods in 2010. The increase in management fees is due to higher average adjusted net assets during the three and nine months ended September 30, 2011, as compared to the corresponding periods in 2010.
 
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 adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Administrative fees for the three and nine months ended September 30, 2011 increased by $309,192 and $1,076,979, respectively, as compared to the corresponding periods in 2010. The increase in administrative fees is due to higher average adjusted net assets during the three and nine months ended September 30, 2011, as compared to the corresponding periods in 2010.
 
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 each management agreement among the Partnership, the General Partner and each Advisor. Trading performance for the three and nine months ended September 30, 2011 resulted in incentive fees of $5,368,913 and $7,504,897, respectively. Trading performance for the three and nine months ended September 30, 2010 resulted in incentive fees of $2,506,281 and $4,395,222, respectively.
 
     In allocating the assets of the Partnership among the trading Advisors, the General Partner considers each Advisors past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets among trading advisors and may allocate assets to additional advisors at any time.


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Item 3.   Quantitative and Qualitative Disclosures about Market Risk
 
The Partnership/Funds are speculative commodity pools. The market sensitive instruments held by the Partnership/Funds are acquired for speculative trading purposes, and all or substantially all of the Partnership’s/Funds’ 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/Funds’ main line of business.
 
     The risk to the Limited Partners that have purchased interests in the Partnership is limited to the amount of their capital contributions to the Partnership and their share of the Partnership’s assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
 
Market movements result in frequent changes in the fair value of the Partnership’s/Funds’ open contracts and, consequently, in their earnings and cash balances. The Partnership’s/Funds’ market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s/Funds’ open contracts and the liquidity of the markets in which they trade.
 
The Partnership/Funds rapidly acquire and liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s/Funds’ past performances are not necessarily indicative of their future results.
 
“Value at Risk” is a measure of the maximum amount which the Partnership/Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s/Funds’ speculative trading and the recurrence in the markets traded by the Partnership/Funds 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/Funds’ 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/Funds’ losses in any market sector will be limited to Value at Risk or by the Partnership’s/Funds’ attempts to manage their market risk.
 
Exchange maintenance margin requirements have been used by the Partnership/Funds as the measure of their 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.
 
      Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The Advisors currently trade the Partnership’s assets indirectly in master fund managed accounts over which they have been granted limited authority to make trading decisions. Through May 31, 2011. Willowbridge directly traded managed accounts in the Partnership’s name. Willowbridge was terminated as an Advisor to the Partnership effective May 31, 2011. The first two trading Value at Risk tables reflect the market sensitive instruments held by the Partnership indirectly, through its investments in the Funds. The remaining trading Value at Risk tables reflect the market sensitive instruments held by each Fund separately. 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, 2010.
     The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of September 30, 2011 and December 31, 2010. As of September 30, 2011, the Partnership’s total capitalization was $1,303,046,680.
 
September 30, 2011
 
                 
            % of Total  
Market Sector   Value at Risk     Capitalization  
Commodities
  $ 40,643,915       3.12 %
Currencies
    11,316,872       0.87 %
Indices
    6,399,580       0.49 %
Interest Rates
    14,803,842       1.13 %
 
           
Total
  $ 73,164,209       5.61 %
 
           


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     As of December 31, 2010, the Partnership’s total capitalization was $1,169,565,735.
December 31, 2010
                 
            % of Total  
Market Sector   Value at Risk     Capitalization  
Currencies
  $ 8,784,775       0.75 %
Energy
    20,307,536       1.74 %
Grains
    5,909,516       0.50 %
Indices
    9,896,381       0.85 %
Interest Rates U.S.
    1,998,797       0.17 %
Interest Rates Non-U.S.
    4,235,023       0.36 %
Livestock
    358,716       0.03 %
Lumber
    26,863       0.00 %*
Metals
    21,262,991       1.82 %
Softs
    4,072,438       0.35 %
 
           
Total
  $ 76,853,036       6.57 %
 
           
 
* Due to rounding.
 
     The following tables indicate the trading Value at Risk associated with the Partnership’s investments in the Funds by market category as of September 30, 2011 and December 31, 2010, and the highest, lowest and average values at any point during the three months ended September 30, 2011 and for the twelve months ended December 31, 2010. All open positions trading risk exposures have been included in calculating the figures set forth below.


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As of September 30, 2011, AAA Master’s total capitalization was $944,594,328. The Partnership owned approximately 40.6% of AAA Master. As of September 30, 2011, AAA Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to AAA for trading) was as follows:
 
September 30, 2011
                                         
                    Three months ended September 30, 2011  
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Energy
  $ 66,869,289       7.08 %   $ 70,499,917     $ 46,927,837     $ 65,683,069  
Grains
    135,214       0.01       254,707       61,250       122,947  
Lumber
    89,500       0.01       156,000       11,000       88,333  
Softs
    634,837       0.07       1,625,000       330,000       899,529  
 
                                   
Total
  $ 67,728,840       7.17 %                        
 
                                   
 
Average of month-end Values at Risk.
     As of December 31, 2010, AAA Master’s total capitalization was $980,369,638. The Partnership owned approximately 28.7% of AAA Master. As of December 31, 2010, AAA Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to AAA for trading) was as follows:
December 31, 2010
                                         
                Twelve months ended December 31, 2010  
    Value at     % of Total     High     Low     Average  
Market Sector   Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Energy
  $ 51,518,525       5.26 %   $ 143,609,109     $ 51,518,525     $ 94,568,057  
Lumber
    93,600       0.01 %     126,800       22,200       57,792  
 
                                   
Total
  $ 51,612,125       5.27 %                        
 
                                   
 
*   Annual average of month-end Values at Risk.


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As of September 30, 2011, Winton Master’s total capitalization was $830,016,334. The Partnership owned approximately 66.7% of Winton Master. As of September 30, 2011, Winton Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Winton for trading) was as follows:
 
September 30, 2011
 
                                         
                    Three months ended September 30, 2011
            % of Total     High     Low     Average  
Market Sector   Value at Risk     Capitalization     Value at Risk     Value at Risk     Value at Risk*  
Currencies
  $ 6,398,762       0.77 %   $ 17,770,593     $ 6,398,762     $ 12,628,909  
Energy
    2,254,997       0.27 %     3,682,308       1,861,063       2,726,371  
Grains
    760,796       0.09 %     1,916,355       540,481       1,325,661  
Indices
    5,146,585       0.62 %     11,849,454       5,146,585       8,662,893  
Interest Rates U.S.
    5,172,100       0.63 %     8,420,650       5,172,100       6,643,483  
Interest Rates Non-U.S.
    9,204,700       1.11 %     15,134,879       9,204,700       11,303,280  
Livestock
    197,650       0.03 %     287,050       171,300       236,217  
Metals
    4,588,241       0.55 %     6,271,309       3,994,864       5,107,472  
Softs
    1,023,363       0.12 %     2,456,982       826,937       1,463,424  
 
                                   
Total
  $ 34,747,194       4.19 %                        
 
                                   
 
  Average of month-end Values at Risk.
     As of December 31, 2010, Winton Master’s Value total capitalization was $883,719,871. The Partnership owned approximately 61.9% of Winton Master. As of December 31, 2010, Winton’s Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Winton for trading) was as follows:
December 31, 2010
                                         
                Twelve months ended December 31, 2010  
    Value at     % of Total     High     Low     Average Value  
Market Sector   Risk     Capitalization     Value at Risk     Value at Risk     at Risk*  
Currencies
  $ 8,969,665       1.01 %   $ 13,529,797     $ 3,127,432     $ 9,858,603  
Energy
    3,277,769       0.37 %     4,944,082       236,988       2,213,508  
Grains
    3,992,796       0.45 %     4,064,389       556,164       2,285,359  
Indices
    15,987,691       1.81 %     22,020,780       2,382,812       12,021,182  
Interest Rates U.S.
    1,387,025       0.16 %     10,348,050       275,672       5,195,958  
Interest Rates Non-U.S.
    3,521,207       0.40 %     13,490,861       1,949,046       7,347,287  
Livestock
    268,200       0.03 %     437,350       158,080       263,226  
Metals
    6,416,979       0.73 %     8,963,451       3,939,668       5,989,765  
Softs
    1,393,632       0.16 %     2,071,953       538,916       1,029,710  
 
                                   
Total
  $ 45,214,964       5.12 %                        
 
                                   
 
*   Annual average of month-end Value at Risk.
     As of September 30, 2011, Transtrend Master’s total capitalization was $418,937,575. The Partnership owned approximately 91.7% of Transtrend Master. As of September 30, 2011 Transtrend Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Transtrend for trading) was as follows:
September 30, 2011
                                         
                    Three months ended September 30, 2011
            % of Total   High   Low   Average
Market Sector   Value at Risk   Capitalization   Value at Risk   Value at Risk   Value at Risk*
Commodities
  $ 8,256,922       1.97 %   $ 26,711,030     $ 7,742,656     $ 16,758,176  
Currencies
    5,685,937       1.36 %     22,372,356       3,660,330       13,443,197  
Indices
    3,235,024       0.77 %     9,307,243       1,321,801       5,048,513  
Interest Rates
    7,686,157       1.83 %     10,161,497       3,032,740       5,588,026  
                             
TOTAL
  $ 24,864,040       5.93 %                        
                             
 
*   Average of month-end Values at Risk.


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Item 4.   Controls and Procedures
 
The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.
 
The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.
 
The General Partner’s CEO and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2011 and, based on that evaluation, the General Partner’s CEO and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.
 
The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:
 
  •     pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;
 
  •     provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and
 
  •     provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.
 
There were no changes in the Partnership’s internal control over the financial reporting process during the fiscal quarter ended September 30, 2011 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.


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Table of Contents

 
Item 1.   Legal Proceedings.
      The following information supplements and amends the discussion set forth under Part I, Item 3 “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as updated by the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011.
Subprime-Mortgage Related Actions
On October 19, 2011, the SEC and Citigroup announced a settlement, subject to judicial approval, in connection with the SEC’s investigation into the structuring and sale of CDOs. Pursuant to the proposed settlement, CGM agreed to pay $160 million in disgorgement, $30 million in prejudgment interest, and a civil penalty of $95 million relating to CGM’s role in the structuring and sale of the Class V Funding III CDO transaction. Additional information relating to this matter is publicly available in court filings under the docket number 11 Civ. 7387 (S.D.N.Y.) (Rakoff, J.).


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Table of Contents

 
Item 1A.   Risk Factors.
 
There have been no material changes to the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and under Part II, Item 1A, “Risk Factors” in the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011.
 
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.
 
For the three months ended September 30, 2011 there were subscriptions of 26,531.9655 Redeemable Units totaling $72,086,242 and 161.0110 General Partner unit equivalents totaling $450,000. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and Section 506 of Regulation D promulgated thereunder. These Redeemable Units were purchased by accredited investors as defined in Regulation D.
 
Proceeds of net offering were 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.
 
                                         
                              (d) Maximum Number
 
                      (c) Total Number of
      (or Approximate
 
              Class A
      Redeemable
      Dollar Value) of
 
      Class A
      (b) Average
      Units Purchased
      Redeemable Units
 
      (a) Total Number of
      Price Paid per
      as Part of
      that May Yet Be
 
      Redeemable
      Redeemable
      Publicly Announced
      Purchased Under the
 
Period     Units Purchased*       Unit**       Plans or Programs       Plans or Programs  
July 1, 2011 –
July 31, 2011
      5,626.5062       $ 2,799.14         N/A         N/A  
                                         
August 1, 2011 –
August 31, 2011
      7,091.1172       $ 2,783.72         N/A         N/A  
                                         
September 1, 2011 –
September 30, 2011
      2,968.2300       $ 2,761.58         N/A         N/A  
                                         
Total       15,685.8534       $ 2,785.06                      
                                         
 
* Generally, Limited Partners are permitted to redeem their Redeemable Units as of the last day of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although 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. No fee will be charged for redemptions.
 
Item 3.   Defaults Upon Senior Securities.  None.
 
Item 4.   [Removed and Reserved]
 
Item 5.   Other Information.  None.


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Item 6.   Exhibits
3.1   Third Amendment and Restated Agreement of Limited Partnership, dated June 1, 2011 (filed as Exhibit 3.1 to the Form 10-Q filed on August 15, 2011) and incorporated herein by reference.
 
3.2   Second Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.1 to current report on Form 8-K/A filed on December 28, 2009) and incorporated herein by reference.
 
3.3   Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of the State of New York (filed as Exhibit 3.(I) to the general form for registration of securities on Form 10 filed on May 1, 2003) and incorporated herein by reference.
  (a)   1st Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated April 3, 2001 (filed as Exhibit 3.(I) to the general form for registration of securities on Form 10 filed on May 1, 2003) and incorporated herein by reference.
 
  (b)   2nd Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated May 21, 2003 (filed as Exhibit 3.2(b) to the Form 10-Q filed on November 16, 2009) and incorporated herein by reference.
 
  (c)   3rd Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 21, 2005 (filed as Exhibit 3.2(c) to the Form 10-Q filed on November 16, 2009) and incorporated herein by reference.
 
  (d)   4th Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 27, 2008 (filed as Exhibit 99.1 to current report on Form 8-K filed on September 2, 2008) and incorporated herein by reference.
 
  (e)   5th Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.2(e) to the Form 10-Q filed on November 16, 2009) and incorporated herein by reference.
 
  (f)   6th Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 30, 2009 (filed as Exhibit 99.1(a) to current report on Form 8-K filed on September 30, 2009) and incorporated herein by reference.
 
  (g)   1st Certificate of Change to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated January 31, 2000 (filed as Exhibit 3.2(g) to the Form 10-Q filed on November 16, 2009) and incorporated herein by reference.
 
  (h)   Certificate of Amendment of the Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York, dated June 29, 2010 (filed as exhibit 3.1(h) to the Form 8-K filed on July 2, 2010) and incorporated herein by reference.
 
  (i)   Certificate of Amendment to the Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 31 to the Form
8-K filed on September 7, 2011 and incorporated herein by reference).
10.1   Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and AAA Capital Management Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003) and incorporated herein by reference.
  (a)   First Amendment to the Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and AAA Capital Management Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003) and incorporated herein by reference.

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  (b)   Second Amendment to the Management Agreement among Citigroup Managed Futures LLC and AAA Capital Management Inc. (filed as Exhibit 33 to the quarterly report on Form 10-Q filed on August 14, 2006) and incorporated herein by reference.
 
  (c)   Letter extending the Management Agreements between the General Partner and AAA Capital Management Inc. from June 30, 2010 to June 30, 2011 (filed as Exhibit 10.1(c) to the annual report on Form 10-K filed on March 31, 2011) and incorporated herein by reference.
10.2   Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and Willowbridge Associates Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003) and incorporated herein by reference.
  (a)   First Amendment to the Management Agreement among the Partnership, Smith Barney Futures Management Inc., SFG Global Investments, Inc. and Willowbridge Associates Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003) and incorporated herein by reference.
 
  (b)   Letter extending the Management Agreement between the General Partner and Willowbridge Associates Inc. from June 30, 2010 to June 30, 2011 (filed as Exhibit 10.2(b) to the annual report on Form 10-K filed on March 31, 2011) and incorporated herein by reference.
10.3   Management Agreement among the Partnership, Citigroup Managed Futures LLC and Winton Capital Management Limited (filed as Exhibit 10 to the annual report on Form 10-K filed on March 15, 2004) and incorporated herein by reference.
  (a)   Letter extending the Management Agreement between the General Partner and Winton Capital Management Limited from June 30, 2010 to June 30, 2011 (filed as Exhibit 10.3(b) to the annual report on Form 10-K filed on March 31, 2011) and incorporated herein by reference.
10.4   Amended and Restated Customer Agreement between the Partnership and Salomon Smith Barney Inc. (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003) and incorporated herein by reference.
 
10.5   Second Amended and Restated Agency Agreement between the Partnership, Ceres Managed Futures LLC, Morgan Stanley Smith Barney LLC and CGM Inc. (filed as Exhibit 10.5 to the Form 10-Q filed on November 16, 2009) and incorporated herein by reference.
 
10.6   Selling Agreement among the Partnership, the General Partner, CGM and Credit Suisse Securities (USA) LLC (filed herein).
 
10.7   Form of Subscription Agreement (filed as Exhibit 10.5 to the Form 10-Q filed on November 16, 2009) and incorporated herein by reference.
 
10.8   Form of Third-Party Subscription Agreement (filed as Exhibit 10.5 to the Form 10-Q filed on November 16, 2009) and incorporated herein by reference.
 
10.9   Joinder Agreement among Citigroup Managed Futures LLC, CGM Inc. and Morgan Stanley Smith Barney LLC (filed as Exhibit 10 to the quarterly report on Form 10-Q filed on August 14, 2009) and incorporated herein by reference.
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)
Exhibit 32.1 — Section 1350 Certification (Certification of President and Director)
Exhibit 32.2 — Section 1350 Certification (Certification of Chief Financial Officer)
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calcutaion Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
ORION FUTURES FUND L.P.
 
By:    Ceres Managed Futures LLC
(General Partner)
 
By:   
/s/  Walter Davis
Walter Davis
President and Director
 
Date:  November 14, 2011
 
 
By:   
/s/ Brian Centner
Brian Centner
Chief Financial Officer
(Principal Accounting Officer)
 
Date:  November 14, 2011
 


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