FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended June 30, 2004
-------------
Commission File Number 0-50272
-------
SALOMON SMITH BARNEY AAA ENERGY FUND L.P. II
(Exact name of registrant as specified in its charter)
New York 03-0407557
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Citigroup Managed Futures LLC
399 Park Avenue. - 7th Fl.
New York, New York 10022
(Address and Zip Code of principal executive offices)
(212) 559-2011
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No___
SALOMON SMITH BARNEY AAA ENERGY FUND L.P. II
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
June 30, 2004 and December 31,
2003 (unaudited). 3
Statements of Income and Expenses
and Partners' Capital for the three and six
months ended June 30, 2004 and
2003 (unaudited). 4
Statements of Cash Flows for the three and six
months ended June 30, 2004
and 2003 (unaudited) 5
Notes to Financial Statements,
including the Financial Statements of
SB AAA Master Fund LLC (unaudited). 6 - 16
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 17 - 19
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 20 - 21
Item 4. Controls and Procedures 22
PART II - Other Information 23
2
PART I
Item 1. Financial Statements
Salomon Smith Barney AAA Energy Fund L.P. II
Statements of Financial Condition
(Unaudited)
June 30, December 31,
2004 2003
---------- -----------
Assets:
Investment in the Master, at fair value $95,107,429 $98,995,554
Cash 49,844 42,632
----------- -----------
$95,157,273 $99,038,186
========== ===========
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Management fees $ 155,968 $ 168,162
Administrative fees 38,992 42,041
Other 17,066 39,589
Redemptions payable 1,096,066 2,185,482
---------- -----------
1,308,092 2,435,274
---------- -----------
Partners' Capital:
General Partner, 2,501.2826 and 2,476.2826 Unit equivalents
outstanding in 2004 and 2003, respectively 2,209,033 1,954,753
Limited Partners, 103,764.3489 and 119,900.7712 Redeemable Units of
Limited Partnership Interest outstanding in 2004 and 2003, respectively 91,640,148 94,648,159
----------- -----------
93,849,181 96,602,912
---------- -----------
$95,157,273 $99,038,186
========== ===========
See Accompanying Notes to Unaudited Financial Statements.
3
Salomon Smith Barney AAA Energy Fund L.P. II
Statements of Income and Expenses and Partners' Capital
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------------------
2004 2003 2004 2003
----------------------------------------------------------------
Income:
Realized gains (losses) on closed positions from Master $ 1,344,673 $ 20,482,216 $ 10,742,762 $(38,472,726)
Change in unrealized gains (losses) on open
positions from Master 3,021,287 (1,838,130) 2,525,904 11,343,372
Income allocated from Master 179,639 231,951 348,990 577,240
Expenses allocated from Master (820,821) (1,312,684) (1,699,651) (4,176,750)
------------- ----------- ----------- ------------
3,724,778 17,563,353 11,918,005 (30,728,864)
------------- ----------- ---------- -------------
Expenses:
Management fee 477,650 543,984 957,636 1,121,128
Administrative fee 119,412 135,995 239,409 280,280
Other expenses 35,011 11,808 62,803 23,912
------------- ---------- ---------- ------------
632,073 691,787 1,259,848 1,425,320
------------- ---------- ---------- ------------
Net income (loss) 3,092,705 16,871,566 10,658,157 (32,154,184)
Additions - Limited Partners - 50,000 - 22,491,000
Redemptions -Limited Partners (4,535,997) (1,400,058) (13,411,888) (4,327,700)
-------------- ----------- ---------- ------------
Net increase (decrease) in Partners' capital (1,443,292) 15,521,508 (2,753,731) (13,990,884)
Partners' capital, beginning of period 95,292,473 97,332,890 96,602,912 126,845,282
------------- ------------ ---------- -------------
Partners' capital, end of period $ 93,849,181 $ 112,854,398 $ 93,849,181 $112,854,398
============= ============ ============ =============
Net asset value per Unit
(106,265.6315 and 133,557.5013 Redeemable
Units outstanding at June 30, 2004
2003, respectively) $ 883.16 $ 844.99 $ 883.16 $ 844.99
============ ========== ========== ===========
Net income (loss) per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 27.97 $ 127.27 $ 93.77 $ (233.67)
============ =========== ========== ===========
Redemption Net asset value per Redeemable Unit $ 883.16 $ 845.00 $ 883.16 $ 845.00
============ =========== ========== ===========
See Accompanying Notes to Unaudited Financial Statements.
4
Salomon Smith Barney AAA Energy Fund L.P. II
Statements of Cash Flows
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------
2004 2003 2004 2003
----------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $3,092,705 $16,871,566 $10,658,157 $(32,154,184)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Investment in Master, at fair value 3,032,893 (13,243,345) 3,888,125 17,086,026
Accrued expenses:
Increase (decrease) in management fees (10,336) 16,274 (12,194) (35,233)
Increase (decrease) in administrative fees (2,584) 4,068 (3,049) (8,809)
Decrease in due to CGM - (22,718) - (28,571)
Increase (decrease) in other (44,314) 11,467 (22,523) 23,129
Decrease in redemptions payable (1,576,735) (2,275,567) (1,089,416) (3,015,304)
----------- ---------- ----------- -----------
Net cash provided by (used in)
operating activities 4,491,629 1,361,745 13,419,100 (18,132,946)
---------- --------- ---------- ------------
Cash flows from financing activities:
Proceeds from additions - 50,000 - 22,491,000
Payments for redemptions (4,535,997) (1,400,058) (13,411,888) (4,327,700)
------------ ---------- ---------- ------------
Net cash provided by (used in)
financing activities (4,535,997) (1,350,058) (13,411,888) 18,163,300
----------- --------- ----------- -----------
Net change in cash (44,368) 11,687 7,212 30,354
Cash, at beginning of period 94,212 50,624 42,632 31,957
---------- --------- ----------- ----------
Cash, at end of period $ 49,844 $ 62,311 $ 49,844 $ 62,311
========== ========= =========== ==========
See Accompanying Notes to Unaudited Financial Statements.
5
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
1. General:
Salomon Smith Barney AAA Energy Fund L.P. II (the "Partnership") is a
limited partnership organized on March 25, 2002 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 commodity
options and commodity futures contracts on United States exchanges and certain
foreign exchanges. The Partnership may trade commodity futures and options
contracts of any kind but currently trades solely energy and energy-related
products. In addition, the Partnership may enter into swap contracts on
energy-related products. The commodity interests that are traded by the
Partnership are volatile and involve a high degree of market risk. During the
initial offering period (May 31, 2002 through July 1, 2002), the Partnership
sold 93,975 redeemable units of Limited Partnership Interest ("Redeemable
Units"). The Partnership commenced trading on July 1, 2002.
Citigroup Managed Futures LLC, formerly Smith Barney Futures Management
LLC, acts as the General Partner (the "General Partner") of the Partnership and
the managing member of the Master, as defined below. The Partnership's/Master's
commodity broker is Citigroup Global Markets Inc. ("CGM"), formerly Salomon
Smith Barney Inc. CGM is an affiliate of the General Partner. The General
Partner is wholly owned by Citigroup Global Markets Holdings Inc. ("CGMHI"),
formerly Smith Barney Holdings Inc., which is the sole owner of CGM. CGMHI is a
wholly owned subsidiary of Citigroup Inc. ("Citigroup").
Effective July 1, 2002, the Partnership allocated all of its capital to SB
AAA Master Fund LLC, a New York limited liability company (the "Master"). With
this cash, the Partnership purchased 64,945.0387 Units of the Master with a fair
value of $94,925,000. The Master was formed in order to permit commodity pools
managed by AAA Capital Management, Inc. (the "Advisor") using the Energy with
Swaps Program, the Advisor's proprietary trading program, to invest together in
one trading vehicle. In addition, the Advisor is a Special Limited Partner of
the Partnership, an employee of CGM and a related party. Individual and pooled
accounts currently managed by the Advisor, including the Partnership
(collectively, the "Feeder Funds"), are permitted to be non-managing members of
the Master. The General Partner and the Advisor, believe that trading through
this master/feeder structure should promote efficiency and economy in the
trading process. Expenses to investors as a result of the investment in the
Master are approximately the same and redemption rights are not affected.
As of June 30, 2004, the Partnership owned approximately 36.4% of the
Master. It is the Partnership's intention to continue to invest substantially
all of its assets in the Master. The performance of the Partnership is directly
affected by the performance of the Master. The Master's Statements of Financial
Condition, Statements of Income and Expenses and Members' Capital, Condensed
Schedules of Investments and Statements of Cash Flows are included herein.
6
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
The accompanying financial statements are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Partnership's financial
condition at June 30, 2004 and December 31, 2003 and the results of its
operations and cash flows for the three and six months ended June 30, 2004 and
2003. These financial statements present the results of interim periods and do
not include all disclosures normally provided in annual financial statements.
You should read these financial statements together with the financial
statements and notes included in the Partnership's annual report on Form 10-K
filed with the Securities and Exchange Commission for the year ended December
31, 2003.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
7
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
The Master's Statements of Financial Condition and Condensed Schedules of
Investments as of June 30, 2004 and December 31, 2003 and Statements of Income
and Expenses and Members' Capital and Statements of Cash Flows for the three and
six months ended June 30, 2004 and 2003 are presented below:
SB AAA Master Fund LLC
Statements of Financial Condition
(Unaudited)
June 30, December 31,
2004 2003
-------------- ------------
Assets:
Equity in commodity futures trading account:
Cash (restricted $32,548,811 and $48,471,997, respectively) $246,443,750 $ 231,361,103
Net unrealized appreciation on open futures positions 15,310,591 8,845,539
Unrealized appreciation on open swaps positions 56,926,392 50,093,912
Commodity options owned, at fair value
(cost $27,220,225 and $49,687,512, respectively) 33,541,142 42,630,230
------------- ------------
352,221,875 332,930,784
Due from brokers 4,841,914 2,148,690
Interest receivable 184,111 159,050
------------- -------------
$357,247,900 $ 335,238,524
============= =============
Liabilities and Members' Capital:
Liabilities:
Unrealized depreciation on open swap positions $ 53,255,398 $18,654,566
Commodity options written, at market value
(premium received $42,707,960 and $47,549,852, respectively) 38,180,640 57,804,597
Accrued expenses:
Commissions 1,674,819 1,670,425
Professional fees 42,540 59,625
Due to brokers 2,371,013 1,815,015
Due to CGM 22,978 22,978
Distribution payable 182,583 153,681
------------ ------------
95,729,971 80,180,887
------------ ------------
Members' Capital:
Members' Capital, 191,545.8749 and 211,023.7320 Units
outstanding in 2004 and 2003, respectively 261,517,929 255,057,637
------------ -----------
$357,247,900 $ 335,238,524
============ ============
8
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Condensed Schedule of Investments
June 30, 2004
(Unaudited)
Number of
Sector Contracts Contract Fair Value
- ------ ----------- ----------------------------------- ------------
Energy
Futures contracts purchased 4.29% $ 11,210,090
Futures contracts sold 1.56%
4,100,501
-------------
Total futures contracts 5.85% 15,310,591
Options owned 12.83%
2,117 NYMEX Natural Gas Aug. 04 - May 05 5.58% 14,584,160
Other 7.25% 18,956,982
-------------
33,541,142
Options written (14.60)%
1,647 NYMEX Natural Gas Aug. 04 - Feb. 05 (7.15)% (18,705,710)
Other (7.45)% (19,474,930)
-------------
(38,180,640)
Unrealized appreciation on Swaps contracts 21.77% 56,926,392
Unrealized depreciation on Swaps contracts (20.37)% (53,255,398)
------------
Total Energy Fair Value 5.48% $ 14,342,087
============
Investment at % of Investment at
Country Composition Fair Value Fair Value
- -------------------- ---------- -----------------
United Kingdom $ 422,630 2.95%
United States 13,919,457 97.05
---------- --------
$14,342,087 100.00%
========== ===========
Percentages are based on Members' Capital unless otherwise indicated.
9
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Condensed Schedule of Investments
December 31, 2003
Number of
Sector Contracts Contract Fair Value
- ----------- ----------- -------------------------------------------- -------------
Energy Futures contracts purchased 5.35% $13,637,465
Futures contracts sold (1.88)% (4,791,926)
-----------
Total futures contracts 3.47% 8,845,539
Options owned 16.71%
6,488 NYMEX Natural Gas Put Feb. 04 - Oct. 04 8.98% 22,900,060
Other 7.73% 19,730,170
-----------
42,630,230
Options written (22.66)%
7,335 NYMEX Natural Gas Call Feb. 04 - Dec. 04 (16.04)% (40,916,710)
Other (6.62)% (16,887,887)
------------
(57,804,597)
Unrealized appreciation on Swaps contracts 19.64%
1,000 HH Natural Gas Feb. 04 8.22% 20,967,521
Other 11.42% 29,126,391
------------
50,093,912
Unrealized depreciation on Swaps contracts (7.31)% (18,654,566)
------------
Total Energy Fair Value 9.85% $25,110,518
============
Investments at % of Investments at
Country Composition Fair Value Fair Value
- -------------------- ----------- ----------------
United Kingdom $(113,943) (0.45)%
United States 25,224,461 100.45
----------- ------
$25,110,518 100.00%
=========== =======
Percentages are based on Members' Capital unless otherwise indicated.
10
SMITH BARNEY AAA ENERGY FUND L.P.
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Statements of Income and Expenses and Members' Capital
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------------------
Income:
Net gains (losses) on trading of commodity interests:
Realized gains (losses) on closed positions $ 3,978,261 $ 51,205,109 $ 28,569,544 $ (92,568,712)
Change in unrealized gains (losses) on open
positions 7,896,158 (4,955,814) 6,856,964 27,054,699
------------ ---------- ---------- -------------
11,874,419 46,249,295 35,426,508 (65,514,013)
Interest income 506,446 721,637 965,959 1,686,957
------------ ---------- ---------- -------------
12,380,865 46,970,932 36,392,467 (63,827,056)
------------ ---------- ---------- -------------
Expenses:
Brokerage commissions including clearing fees
of $321,424, $398,062, $591,163 and
and $1,434,608, respectively 2,183,710 3,289,199 4,511,007 9,786,358
Professional fees 15,689 9,297 27,429 18,491
------------ ---------- ---------- -------------
2,199,399 3,298,496 4,538,436 9,804,849
------------ ---------- ---------- -------------
Net income (loss) 10,181,466 43,672,436 31,854,031 (73,631,905)
Additions 4,371,518 12,193,128 5,911,026 45,179,314
Redemptions (13,073,006) (17,378,056) (30,355,980) (38,872,082)
Distribution of interest to feeder funds (498,827) (706,482) (948,785) (1,629,621)
------------ ---------- ---------- -------------
Net increase (decrease) in Members' Interest 981,151 37,781,026 6,460,292 (68,954,294)
Members' capital, beginning of period 260,536,778 243,548,133 255,057,637 350,283,453
------------ ---------- ---------- -------------
Members' capital, end of period $ 261,517,929 $ 281,329,159 $ 261,517,929 $ 281,329,159
============ =========== =========== ===========
Net asset value per Unit
(191,545.8749 and 219,606.2204 Units outstanding
in June 30, 2004 and 2003, respectively) $ 1,365.30 $ 1,281.06 $ 1,365.30 $ 1,281.06
============ =========== =========== ===========
Net income (loss) per Unit of Member Interest $ 52.27 $ 197.61 $ 161.43 $ (332.01)
============ =========== =========== ===========
11
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
SB AAA Master Fund LLC
Statements of Cash Flows
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------------------------------------------------
2004 2003 2004 2003
----------------------------------------------------------------
Cash flows from operating activities:
Net Income (loss) $10,181,466 $43,672,436 $31,854,031 $(73,631,905)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Net unrealized appreciation (depreciation) on open
futures positions (7,201,122) (4,996,585) (6,465,052) 10,514,826
Unrealized appreciation on open swaps contracts (16,763,737) (8,859,120) (6,832,480) (16,059,909)
Commodity options owned, at fair value 2,576,851 49,556,337 9,089,088 31,530,521
Increase (decrease) in due from brokers (3,830,615) 9,058,112 (2,693,224) 7,726,979
Increase (decrease) in interest receivable (13,763) 44,407 (25,061) 88,756
Unrealized depreciation on open swap positions 25,262,360 (2,762,412) 34,600,832 (20,565,910)
Commodity options written, at fair value (7,144,971) (12,072,266) (19,623,957) (25,614,907)
Accrued expenses:
Increase (decrease) in commissions (58,429) (616,808) 4,394 (2,288,904)
Increase (decrease) in professional fees (8,525) 9,296 (17,085) 18,489
Increase (decrease) in due to brokers 2,034,138 (5,291,253) 555,998 1,871,989
Increase (decrease) in distribution payable 14,881 (44,429) 28,902 (86,928)
------------- ----------- ----------- ------------
Net cash provided by (used in) operating activities 5,048,534 67,697,715 40,476,386 (86,496,903)
------------- ----------- ----------- ------------
Cash flows from financing activities:
Proceeds from additions 4,371,518 12,193,128 5,911,026 45,179,314
Payments for redemptions (13,073,006) (17,378,056) (30,355,980) (38,872,082)
Distribution of interest to feeder funds (498,827) (706,482) (948,785) (1,629,621)
------------- ----------- ------------ ------------
Net cash provided by (used in) financing activities (9,200,315) (5,891,410) (25,393,739) 4,677,611
------------- ----------- ------------ ------------
Net change in cash (4,151,781) 61,806,305 15,082,647 (81,819,292)
Cash, at beginning of period 250,595,531 186,592,480 231,361,103 330,218,077
------------ ----------- ------------ -------------
Cash, at end of period $246,443,750 $248,398,785 $246,443,750 $248,398,785
============ =========== =========== =============
12
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
2. Financial Highlights:
Changes in Net Asset Value per Redeemable Unit for the three and six
months ended June 30, 2004 and 2003 were as follows:
Three Months Ended Six Months Ended
------------------------------------- ------------------------------------
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
------------------ ------------------ ----------------- -----------------
Net realized and unrealized gains (losses) * $ 32.14 $ 130.73 $ 101.86 $ (227.32)
Interest income 1.64 1.73 3.07 4.28
Expenses ** (5.81) (5.19) (11.16) (10.63)
------------------ ------------------ ----------------- -----------------
Increase (decrease) for the period 27.97 127.27 93.77 (233.67)
Net Asset Value per Redeemable Unit, beginning of
period 855.19 717.72 789.39 1,078.66
------------------ ------------------ ----------------- -----------------
Net Asset Value per Redeemable Unit, end of period $ 883.16 $ 844.99 $ 883.16 $ 844.99
================== ================== ================= =================
Redemption / subscription value per unit versus net
asset
value per Redeemable Unit $ - $ 0.01 $ - $ 0.01
------------------ ------------------ ----------------- -----------------
Redemption / subscription value per unit, end of
period*** $ 883.16 $ 845.00 $ 883.16 $ 845.00
================== ================== ================= =================
* Includes brokerage commissions allocated from the Master.
** Excludes brokerage commissions allocated from the Master.
*** For the purpose of a redemption/subscription, any remaining accrued
liability for reimbursement of offering costs will not reduce
redemption/subscription net asset value per Redeemable Unit.
Ratios to average net assets:****
Net investment income (loss) before incentive
fee allocation***** (5.4)% (6.7)% (5.5)% (8.9)%
================== ================== ================= =================
Operating expense 6.2 % 7.6 % 6.3 % 9.9%
Incentive fee allocation - % - % - % -%
------------------ ------------------ ----------------- -----------------
Total expenses and incentive fee allocation 6.2 % 7.6 % 6.3 % 9.9%
================== ================== ================= =================
Total return:
Total return before incentive fee allocation 3.3 % 17.5 % 11.9 % (21.7)%
Incentive fee allocation - % - % - % -%
------------------ ------------------ ----------------- -----------------
Total return after incentive fee allocation 3.3 % 17.5 % 11.9 % (21.7)%
================== ================== ================= =================
**** Annualized (except for incentive fee allocation)
***** Interest income less total expenses (exclusive of incentive fee
allocation)
The above ratios may vary for individual investors based on the timing of
capital transactions during the year. Additionally, these ratios are calculated
for the Limited Partner class using the Limited Partners' share of income,
expenses and average net assets.
13
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
Financial Highlights of the Master:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
2004 2003 2004 2003
---------------------- -----------------------
Net realized and unrealized gains (losses) * $ 49.73 $ 194.36 $156.69 $(339.61)
Interest Income 2.61 3.29 4.89 7.68
Expenses ** (0.07) (0.04) (0.15) (0.08)
--------- --------- --------- ---------
Increase (decrease) for the period 52.27 197.61 161.43 (332.01)
Distributions (2.58) (3.22) (4.80) (7.42)
Net Asset Value per Unit, beginning of period 1,315.61 1,086.67 1,208.67 1,620.49
--------- --------- --------- ---------
Net Asset Value per Unit, end of period $ 1,365.30 $ 1,281.06 $ 1,365.30 $ $1,281.06
========= ========= ========= =========
* Includes brokerage commissions
** Excludes brokerage commissions
Ratios to average net assets:***
Net investment income (loss)**** (2.6)% (3.4)% (2.7)% (5.4)%
==== ==== ==== ===
Operating expense 3.4% 4.4% 3.6% 6.5%
==== ==== ===== ====
Total return 4.0% 18.2% 13.4% (20.5)%
==== ==== ===== =====
*** Annualized
**** Interest income less total expenses
The above ratios may vary for individual investors based on the timing of
capital transactions during the year.
14
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The Partnership invests the majority of its
assets through a "master fund/feeder fund" structure. The results of the
Partnership's investment in the Master are shown in the Statements of Income and
Expenses and Partners' Capital and are discussed in Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations.
The respective Customer Agreements between the Partnership and CGM and the
Master and CGM give the Partnership and the Master, respectively, the legal
right to net unrealized gains and losses.
All of the commodity interests owned by the Master are held for trading
purposes. The average fair values of these interests during the six and twelve
months ended June 30, 2004 and December 31, 2003, based on a monthly
calculation, were $14,504,958 and $39,703,607, respectively. The fair values of
these commodity interests, including options and swaps thereon, if applicable,
at June 30, 2004 and December 31, 2003 were $14,342,087 and $25,110,518,
respectively. Fair values for exchange traded commodity futures and options are
based on quoted market prices for those futures and options. Fair values for all
other financial instruments for which market quotations are not readily
available are based on calculations approved by the General Partner.
4. Financial Instrument Risks:
In the normal course of its business, the Partnership, through its
investment in the Master, is party to financial instruments with off-balance
sheet risk, including derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards, futures, options
and swaps, whose values are based upon an underlying asset, index, or reference
rate, and generally represent future commitments to exchange currencies or cash
flows, to purchase or sell other financial instruments at specific terms at
specified future dates, or, in the case of derivative commodity instruments, to
have a reasonable possibility to be settled in cash, through physical delivery
or with another financial instrument. These instruments may be traded on an
exchange or over-the-counter ("OTC"). Exchange-traded instruments are
standardized and include futures and certain option contracts. OTC contracts are
negotiated between contracting parties and include forwards and certain options.
Each of these instruments is subject to various risks similar to those related
to the underlying financial instruments including market and credit risk. In
general, the risks associated with OTC contracts are greater than those
associated with exchange-traded instruments because of the greater risk of
default by the counterparty to an OTC contract. The Master's swaps contracts are
OTC contracts.
15
Salomon Smith Barney AAA Energy Fund L.P. II
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
Market risk is the potential for changes in the value of the financial
instruments traded by the Master due to market changes, including interest and
foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's/Master's risk of loss in the event of counterparty default is
typically limited to the amounts recognized in the statements of financial
condition and not represented by the contract or notional amounts of the
instruments. The Partnership, through its investment in the Master, has
concentration risk because the sole counterparty or broker with respect to the
Master's assets is CGM.
The General Partner monitors and controls the Partnership's/Master's risk
exposure on a daily basis through financial, credit and risk management
monitoring systems, and accordingly believes that it has effective procedures
for evaluating and limiting the credit and market risks to which the
Partnership/Master is subject. These monitoring systems allow the General
Partner to statistically analyze actual trading results with risk adjusted
performance indicators and correlation statistics. In addition, on-line
monitoring systems provide account analysis of futures, forwards and options
positions by sector, margin requirements, gain and loss transactions and
collateral positions.
The majority of these instruments mature within one year of June 30, 2004.
However, due to the nature of the Partnership's/Master's business, these
instruments may not be held to maturity.
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. Its only
assets are its investment in the Master and cash. The Master does not engage in
the sale of goods or services. 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 decrease in liquidity, no such losses occurred during the second
quarter of 2004.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by its investment in the Master, expenses,
interest income, redemptions of Redeemable Units and distributions of profits,
if any.
For the six months ended June 30, 2004, Partnership capital decreased 2.9%
from $96,602,912 to $93,849,181. This decrease was attributable to the
redemptions of 16,111.4223 Redeemable Units totaling $13,411,888, which was
partially offset by the net income from operations of $10,658,157. Future
redemptions can impact the amount of funds available for investment in the
Master in subsequent periods.
The Master's capital consists of the capital contributions of the members
as increased or decreased by realized and/or unrealized gains or losses on
commodity futures trading, expenses, interest income, redemptions of Units and
distributions of profits, if any.
For the six months ended June 30, 2004, the Master's capital increased 2.5%
from $255,057,637 to $261,517,929. This increase was attributable to net income
from operations of $31,854,031, coupled with the addition of 4,524.1504 Units
totaling $5,911,026 which was partially offset by the redemptions of 24,002.0075
Units totaling $30,355,980 and distributions of interest of $948,785 to the
non-managing members of the Master. Future redemptions can impact the amount of
funds available for investments in commodity contract positions in subsequent
periods.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The commodity
interests are recorded on their respective trade dates and open contracts are
recorded in the statement of financial condition at fair value on the last
business day of the period, which represents market value for those commodity
interests for which market quotations are readily available or other measures of
fair value deemed appropriate by management of the General Partner for those
commodity interests and foreign currencies for which market quotations are not
readily available, including dealer quotes for swaps and certain option
contracts. Investments in commodity interests denominated in foreign currencies
are translated into U.S. dollars at the exchange rates prevailing on the last
17
business day of the period. Realized gains (losses) and changes in unrealized
values on commodity interests and foreign currencies are recognized in the
period in which the contract is closed or the changes occur and are included in
net gains (losses) on trading of commodity interests.
Results of Operations
During the Partnership's second quarter of 2004, the Net Asset Value per
Redeemable Unit increased 3.3% from $855.19 to $883.16 as compared to an
increase of 17.7% in the second quarter of 2003. The Partnership experienced a
net trading gain before brokerage commissions and related fees in the second
quarter of 2004 of $4,365,960. Gains were primarily attributable to the Master's
trading of commodity futures in NYMEX Heating Oil and NYMEX Natural Gas and were
partially offset by losses in energy swaps, IPE Gas Oil, NYMEX Unleaded Gas and
NYMEX Crude Oil. The Partnership experienced a net trading gain before
commissions and related fees in the second quarter of 2003 of $18,644,086. Gains
were primarily attributable to the Master's trading of commodity futures in
NYMEX Crude Oil, NYMEX Natural Gas and energy swaps and were partially offset by
losses in NYMEX Unleaded Gas, IPE Brent Crude Oil and NYMEX Heating Oil.
During the six months ended June 30, 2004, the Net Asset Value per
Redeemable Unit increased 11.9% from $789.39 to $883.16 as compared to a
decrease of 21.7% in the same period of 2003. The Partnership experienced a net
trading gain before brokerage commissions and related fees in the six months
ended June 30, 2004 of $13,268,666. Gains were primarily attributable to the
Master's trading of commodity futures in NYMEX Crude Oil, NYMEX Heating Oil,
NYMEX Natural Gas and NYMEX Unleaded Gas and were partially offset by losses in
IPE Brent Crude Oil. The Partnership experienced a net trading loss before
brokerage commissions and related fees in the six months ended June 30, 2003 of
$27,129,354. Losses were primarily attributable to the Master's trading of
commodity futures in NYMEX Natural Gas, NYMEX Unleaded Gas and NYMEX Heating Oil
and were partially offset by gains in NYMEX Crude Oil and IPE Gas Oil.
The second quarter of 2004 saw significant price action across nearly all
sectors of the energy markets traded by the Advisor. Profits were earned in
crude oil, natural gas and gasoline in particular.
The quarter started off mixed with sector-wide price weakness but as April
progressed, a recovery in U.S. petroleum markets moved crude towards $40/barrel.
The initial reversal in prices was not initially favorable for the Partnership's
positions but natural gas trading provided sufficient profits to finish the
month slightly positive overall for the Partnership.
May saw continuing momentum in crude oil, distillates and favorable price
movement for natural gas spreads. Crude oil surpassed $42/barrel in May, the
highest price ever witnessed for the New York futures contract. Such high prices
while producing profit for the Partnership did not persist long and by early
June, prices had retreated by nearly $6/barrel. Performance during May was most
18
positively affected by the Partnership's natural gas position which has
anticipated price stability in the near-term but declining prices in the long
term.
Performance was slightly weaker in June with the strong trading performance
in natural gas offset by short heating oil spread positions. Profits in natural
gas resulted from the continued flattening and weakening of the natural gas
price curve while fixed prices persistently located solid support near the $6/MM
BTU level. A stronger than expected showing in the summer's heating oil relative
value to other products undermined the Partnership's position in petroleum
resulting in an overall net loss in these positions.
Fundamentals both in the U.S. and Europe, however, look favorable for
continued price strength in both crude and natural gas over the intermediate
term and should provide opportunities for the Advisor.
Commodity futures markets are highly volatile. The potential for broad and
rapid price fluctuations increases the risks involved in commodity trading, but
also increases the possibility of profit. The profitability of the Partnership
(and the Master Fund) depends on the Advisor's ability to forecast price changes
in energy and energy-related commodities. Such price changes 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 the Advisor correctly makes such forecasts, the Partnership
(and the Master Fund) expects to increase capital through operations.
Interest income on 80% of the Partnership's average daily equity allocated
to it by the Master was earned 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. CGM may continue to maintain the Master's
assets in cash and/or place all of the Master's assets in 90-day Treasury bills
and pay the Partnership its allocated share of 80% of the interest earned on the
Treasury bills purchased. CGM will retain 20% of any interest earned on Treasury
bills purchased. Interest income allocated from Master for the three and six
months ended June 30, 2004 decreased by $52,312 and $228,250, respectively, as
compared to the corresponding periods in 2003. The decrease in interest income
is primarily due to a decrease in interest rates during the three and six months
ended June 30, 2004.
Management fees are calculated as a percentage of the Partnership's net
asset value as of the end of each month and are affected by trading performance
and redemptions. Management fees for the three and six months ended June 30,
2004 decreased by $66,334 and $163,492, respectively, as compared to the
corresponding periods in 2003. The decrease in management fees is due to a
decrease in assets during the three and six months ended June 30, 2004.
Administrative fees are calculated as a percentage of the Partnership's net
asset value as of the end of each month and are affected by trading performance
and redemptions. Administrative fees for the three and six months ended June 30,
2004 decreased by $16,583 and $40,871, as compared to the corresponding periods
in 2003. The decrease in administrative fees is due to a decrease in assets
during the three and six months ended June 30, 2004.
Special limited partner profit share allocations are based on the new
trading profits generated by the Advisor at the end of the year, as defined in
the advisory agreements between the Partnership, the General Partner and the
Advisor. There were no allocations accrued for the three and six months ended
June 30, 2004 and 2003.
19
Item 3. Quantitative and Qualitative Disclosures about Market Risk
All of the Partnership's assets are subject to the risk of trading loss
through its investment in the Master. The Master is a speculative commodity
pool. The market sensitive instruments held by it are acquired for speculative
trading purposes, and all or substantially all of the Master's assets are
subject to the risk of trading loss. Unlike an operating company, the risk of
market sensitive instruments is integral, not incidental, to the Master's main
line of business.
Market movements result in frequent changes in the fair value of the
Master's open positions and, consequently, in its earnings and cash flow. The
Master's market risk is influenced by a wide variety of factors, including the
level and volatility of interest rates, exchange rates, equity price levels, the
value of financial instruments and contracts, the diversification effects of the
Master's open positions and the liquidity of the markets in which it trades.
The Master rapidly acquires and liquidates both long and short positions in
a range of different markets. Consequently, it is not possible to predict how a
particular future market scenario will affect performance, and the Master's past
performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Master could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Master's speculative trading and the recurrence in the
markets traded by the Master of market movements far exceeding expectations
could result in actual trading or non-trading losses far beyond the indicated
Value at Risk or the Master's experience to date (i.e., "risk of ruin"). In
light of the foregoing as well as the risks and uncertainties intrinsic to all
future projections, the inclusion of the quantification in this section should
not be considered to constitute any assurance or representation that the
Master's losses in any market sector will be limited to Value at Risk or by the
Master's attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the Master as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
interval. Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a credit risk
component, which is not relevant to Value at Risk.
20
The following table indicates the trading Value at Risk associated with the
Master's open positions by market category as of June 30, 2004 and the highest,
lowest and average value during the three months ended June 30, 2004. All open
position trading risk exposures of the Master have been included in calculating
the figures set forth below. As of June 30, 2004, the Master's total
capitalization was $261,517,929. There has been no material change in the
trading Value at Risk information previously disclosed in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2003.
June 30, 2004
Three Months Ended June 30, 2004
----------------- -------------------- -----------------
Market Sector Value at Risk % of Total High Low Average Value
Capitalization Value at Risk Value at Risk at Risk
- ------------------------ ------------------- ----------------- ----------------- -------------------- -----------------
Energy $22,034,533 8.43% $22,385,986 $10,664,222 $18,027,882
Energy Swaps 1,700,000 0.65% $1,988,189 $1,698,904 $1,699,635
--------- -----
Total $23,734,533 9.08%
=========== =====
21
Item 4. Controls and Procedures
Based on their evaluation of the Partnership's disclosure controls and
procedures as of June 30, 2004, the President and Chief Financial Officer of the
General Partner have concluded that such controls and procedures are effective.
During the Partnership's last fiscal quarter, no changes occurred in the
Partnership's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Partnership's
internal control over financial reporting.
22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The following information supplements and updates our discussion set
forth under Item 3 "Legal Proceedings" in the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003 and under Part II, Item 1
"Legal Proceedings" in the Partnership's Quarterly Report on Form 10Q for the
quarter ended March 31, 2004.
WorldCom, Inc.
On May 10, 2004, Citigroup announced that it had agreed to pay $2.65
billion to settle the Worldcom class action suits.
23
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
The Partnership no longer offers Redeemable Units at the net asset
value per Redeemable Units at the end of each month.
Proceeds from the sale of additional Redeemable Units are used in the
trading of commodity interests including futures contracts, options,
forwards and swap contracts.
The following chart sets forth the purchases of Redeemable Units by
the Partnership.
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Period (a) Total Number of (b) Average Price (c) Total Number of (d) Maximum Number
Shares (or Units) Paid per Share (or Shares (or Units) (or Approximate
Purchased* Unit)** Purchased as Part of Dollar Value) of
Publicly Announced Shares (or Units)
Plans or Programs that May Yet Be
Purchased Under the
Plans or Programs
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
April 1, 2004 - April 30, 2004 838.5141 $850.08 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
May 1, 2004 - May 31, 2004 3,082.6843 $884.66 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
June 1, 2004 - June 30, 2004 1,241.0727 $883.16 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Total 5,162.2711 $872.63 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
* Generally, Limited Partners are permitted to redeem their Redeemable Units
as of the end of each month on 10 days' notice to the General Partner.
Under certain circumstances, the General Partner can compel redemption but
to date, the General Partner has not exercised this right. Purchases of
Redeemable Units by the Partnership reflected in the chart above were made
in the ordinary course of the Partnership's business in connection with
effecting redemptions for Limited Partners.
** Redemptions of Redeemable Units are effected as of the last day of each month
at the Net Asset Value per Redeemable Unit as of that day.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
24
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed by Item 601 of Regulation S-K
are incorporated herein by reference to the exhibit index of the
Partnership's Annual Report on Form 10-K for the period ended
December 31, 2003.
Exhibit - 31.1 - Rule 13a-14(a)/15d-14(a) Certification
(Certification of President and Director).
Exhibit - 31.2 - Rule 13a-14(a)/15d-14(a) Certification
(Certification of Chief Financial Officer and Director).
Exhibit - 32.1 - Section 1350 Certification (Certification of
President and Director).
Exhibit - 32.2 - Section 1350 Certifications (Certification of
Chief Financial Officer and Director).
(b) Reports on Form 8-K - None
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SALOMON SMITH BARNEY AAA ENERGY FUND L.P. II
By: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel
---------------
David J. Vogel
President and Director
Date: August 6, 2004
------------------
By: /s/ Daniel R. McAuliffe, Jr.
-----------------------
Daniel R. McAuliffe, Jr.
Chief Financial Officer and
Director
Date: August 6, 2004
------------------
26
Exhibit 31.1
CERTIFICATIONS
I, David J. Vogel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salomon Smith Barney
AAA Energy Fund L.P. II (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004
/s/ David J. Vogel
----------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
27
Exhibit 31.2
CERTIFICATIONS
I, Daniel R. McAuliffe, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salomon Smith Barney
AAA Energy Fund L.P. II (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004
/s/ Daniel R. McAuliffe, Jr.
-----------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
28
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Salomon Smith Barney AAA Energy Fund
L.P. II (the "Partnership") on Form 10-Q for the period ending June 30, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David J. Vogel, President and Director of Citigroup Managed
Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership.
/s/ David J. Vogel
- -----------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
August 6, 2004
29
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Salomon Smith Barney AAA Energy Fund
L.P. II (the "Partnership") on Form 10-Q for the period ending June 30, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Daniel R. McAuliffe, Jr., Chief Financial Officer and Director of
Citigroup Managed Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Partnership.
/s/ Daniel R. McAuliffe, Jr.
- -----------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
August 6, 2004
30