Ceres Orion 10Q 2012 Q3 Quarterly report

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, 2012

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 Number0-50271

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)

(855) 672-4468

(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.

YesX 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).

YesX 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 filerX		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 NoX

As of October 31, 2012, 507,265.2648 Limited Partnership Class A Redeemable Units were outstanding and 2,190.0682 Limited Partnership Class Z Redeemable Units were outstanding.

ORION FUTURES FUND L.P.

FORM 10-Q

INDEX


			Page Number

PART I - Financial Information:

	Item 1.	Financial Statements:

		Statements of Financial Condition at September 30, 2012 (unaudited) and December 31, 2011	3

		Condensed Schedules of Investments at September 30, 2012 (unaudited) and December 31, 2011	4 – 5

		Statements of Income and Expenses for the three and nine months ended September 30, 2012 and 2011 (unaudited)	6

		Statements of Changes in Partners’ Capital for the nine months ended September 30, 2012 and 2011 (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

	Item 1.	Legal Proceedings	29 – 31

	Item 1A.	Risk Factors	32

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

	Item 5.	Other Information	33

	Item 6.	Exhibits	34 – 35

PART I

Item 1. Financial Statements

Orion Futures Fund L.P.

Statements of Financial Condition


	(Unaudited) September 30, 2012		December 31, 2011
Assets:
Investment in Funds, at fair value	$	1,444,585,241	$	1,378,190,701
Equity in trading account:
Cash		250,248		315,998
Cash margin		819,581		4,253,895

Total trading equity		1,445,655,070		1,382,760,594
Interest receivable		50		0

Total assets	$	1,445,655,120	$	1,382,760,594

Liabilities and Partners’ Capital:
Liabilities:
Net unrealized depreciation on open forward contracts	$	819,581	$	4,253,895
Accrued expenses:
Brokerage commissions		5,223,043		3,031,730
Management fees		1,347,618		1,335,280
Administrative fees		599,752		572,991
Other		59,393		148,616
Redemptions payable		12,915,505		16,732,473

Total liabilities		20,964,892		26,074,985

Partners’ Capital:
General Partner, Class Z, (14,402.6803 and 13,803.9229 unit equivalents outstanding at September 30, 2012 and December 31, 2011, respectively)		14,280,113		13,784,183
Limited Partners, Class A, (513,254.3548 and 481,521.5457 Redeemable Units outstanding at September 30, 2012 and December 31, 2011, respectively)		1,408,188,598		1,341,488,244
Limited Partners, Class Z, (2,240.6662 and 1,415.2385 Redeemable Units outstanding at September 30, 2012 and December 31, 2011, respectively)		2,221,517		1,413,182

Total partners’ capital		1,424,690,228		1,356,685,609

Total liabilities and partners’ capital	$	1,445,655,120	$	1,382,760,594

Class A, net asset value per unit	$	2,743.65	$	2,785.94

Class Z, net asset value per unit	$	991.49	$	998.57

See accompanying notes to financial statements.

Orion Futures Fund L.P.

Condensed Schedule of Investments

September 30, 2012

(Unaudited)


	Number of Contracts		Fair Value			% of Partners' Capital
Unrealized Appreciation on Open Forward Contracts
Metals		78	$	431,381			0.03	%

Total unrealized appreciation on open forward contracts				431,381			0.03

Unrealized Depreciation on Open Forward Contracts
Metals		138		(1,250,962	)		(0.09	)

Total unrealized depreciation on open forward contracts				(1,250,962	)		(0.09	)

Investment in Funds
AAA Master Fund LLC				425,781,580			29.89
CMF Winton Master Fund L.P.				513,362,498			36.03
Morgan Stanley Smith Barney TT II, LLC				505,441,163			35.48

Total investment in Funds				1,444,585,241			101.40

Net fair value			$	1,443,765,660			101.34	%

See accompanying notes to financial statements.

Orion Futures Fund L.P.

Condensed Schedule of Investments

December 31, 2011


	Number of Contracts		Fair Value			% of Partners’ Capital
Unrealized Appreciation on Open Forward Contracts
Metals		138	$	1,409,344			0.10	%

Total unrealized appreciation on open forward contracts				1,409,344			0.10

Unrealized Depreciation on Open Forward Contracts
Metals		238		(5,663,239	)		(0.42	)

Total unrealized depreciation on open forward contracts				(5,663,239	)		(0.42	)

Investment in Funds
AAA Master Fund LLC				398,463,176			29.37
CMF Winton Master Fund L.P.				539,264,494			39.75
Morgan Stanley Smith Barney TT II, LLC				440,463,031			32.47

Total investment in Funds				1,378,190,701			101.59

Net fair value			$	1,373,936,806			101.27	%

See accompanying notes to financial statements.

Orion Futures Fund L.P.

Statements of Income and Expenses

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Investment Income:
Interest income	$	149		$	199		$	576		$	53,981
Interest income from investment in Funds		132,295			24,742			334,769			304,088

Total investment income		132,444			24,941			335,345			358,069

Expenses:
Brokerage commissions including clearing fees		7,769,713			4,402,696			22,288,243			11,517,150
Management fees		6,344,305			5,703,113			18,664,659			16,738,405
Administrative fees		1,826,425			1,651,697			5,400,869			4,788,950
Incentive fees		9,052			5,368,913			811,930			7,504,897
Other		119,392			168,228			444,393			654,738

Total expenses		16,068,887			17,294,647			47,610,094			41,204,140

Net investment income (loss)		(15,936,443	)		(17,269,706	)		(47,274,749	)		(40,846,071	)


Trading Results:
Net gains (losses) on trading of commodity interests and investment in Funds:
Net realized gains (losses) on closed contracts		0			(1,438,435	)		(3,434,314	)		16,663,530
Net realized gains (losses) on investment in Funds		17,593,510			25,217,187			113,342,956			44,471,691
Change in net unrealized gains (losses) on open contracts		0			1,438,435			3,434,314			(15,066,862	)
Change in net unrealized gains (losses) on investment in Funds		11,789,612			11,613,696			(88,310,939	)		(3,242,142	)

Total trading results		29,383,122			36,830,883			25,032,017			42,826,217

Net income (loss)	$	13,446,679		$	19,561,177		$	(22,242,732	)	$	1,980,146


Net income (loss) allocation by class:
Class A	$	13,239,532		$	19,566,516		$	(22,116,625	)	$	1,985,485

Class Z	$	207,147		$	(5,339	)	$	(126,107	)	$	(5,339	)

Net asset value per unit:
Class A (513,254.3548 and 471,598.0191 units outstanding at September 30, 2012 and 2011, respectively)	$	2,743.65		$	2,761.58		$	2,743.65		$	2,761.58

Class Z (16,643.3465 and 700.3039 units outstanding at September 30, 2012 and 2011, respectively)	$	991.49		$	988.19		$	991.49		$	988.19

Net income (loss) per unit:*
Class A	$	26.38		$	41.75		$	(42.29	)	$	7.19

Class Z	$	12.32		$	(11.81	)	$	(7.08	)	$	(11.81	)

Weighted average units outstanding:
Class A		515,928.7948			472,737.9748			509,380.9400			456,813.7306

Class Z		16,660.2295			400.4765			16,383.7642			400.4765

*	Based on change in net asset value per unit.

See accompanying notes to financial statements.

Orion Futures Fund L.P.

Statements of Changes in Partners’ Capital

For the Nine Months Ended September 30, 2012 and 2011

(Unaudited)


	Class A						Class Z						Total
	Amount			Units			Amount			Units			Amount			Units
Partners’ Capital at December 31, 2011	$	1,341,488,244			481,521.5457		$	15,197,365			15,219.1614		$	1,356,685,609			496,740.7071
Net income (loss)		(22,116,625	)		0			(126,107	)		0			(22,242,732	)		0
Subscriptions - Limited Partners		219,734,885			78,648.3210			942,584			936.0767			220,677,469			79,584.3977
Subscriptions - General Partner		0			0			600,000			598.7574			600,000			598.7574
Redemptions - Limited Partners		(130,917,906	)		(46,915.5119	)		(112,212	)		(110.6490	)		(131,030,118	)		(47,026.1609	)

Partners’ Capital at September 30, 2012	$	1,408,188,598			513,254.3548		$	16,501,630			16,643.3465		$	1,424,690,228			529,897.7013


	Class A						Class Z						Total
	Amount			Units			Amount			Units			Amount			Units
Partners’ Capital at December 31, 2010	$	1,169,565,735			424,619.0987		$	0			0		$	1,169,565,735			424,619.0987
Net income (loss)		1,985,485			0			(5,339	)		0			1,980,146			0
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
Redemptions - Limited Partners		(121,587,590	)		(43,752.3153	)		0			0			(121,587,590	)		(43,752.3153	)

Partners’ Capital at September 30, 2011	$	1,302,354,648			471,598.0191		$	692,032			700.3039		$	1,303,046,680			472,298.3230

See accompanying notes to financial statements.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(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, lumber, 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 privatelyand continuously offers redeemable units (“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 Inc. indirectly owns a minority equity interest in MSSB Holdings. Citigroup Inc. also indirectly owns Citigroup Global Markets Inc. (“CGM”), the commodity broker and a selling agent for the Partnership. 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 Inc.

As of September 30, 2012, 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. Willowbridge Associates Inc. (“Willowbridge”) also directly traded a managed account in the Partnership’s name until it was terminated as an advisor to the Partnership on May 31, 2011.

On June 1, 2011, the Partnership began offering “Class A” Redeemable Units and “Class Z” Redeemable Units pursuant to the offering memorandum. All Redeemable Units issued prior to June 1, 2011, were deemed Class A Redeemable Units. The rights, powers, duties and obligations associated with investment in Class A Redeemable Units were not changed. On August 1, 2011, Class Z Redeemable Units were first issued to certain employees of Morgan Stanley Smith Barney LLC and its affiliates (and their family members). Class A Redeemable Units and Class Z Redeemable Units 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 status of the limited partner, 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 is liable for obligations of the Partnership in excess of its capital contribution and profits or losses, 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, 2012, and December 31, 2011, and the results of its operations for the three and nine months ended September 30, 2012 and 2011 and changes in partners’ capital for the nine months ended September 30, 2012 and 2011. 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, 2011.

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.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

2. Financial Highlights:

Changes in the net asset value per unit for each Class for the three and nine months ended September 30, 2012 and 2011 were as follows:


	Three Months Ended September 30, 2012						Three Months Ended September 30, 2011			For the period August 1, 2011 (commencement of operations) to September 30, 2011			Nine Months Ended September 30, 2012						Nine Months Ended September 30, 2011			For the period August 1, 2011 (commencement of operations) to September 30, 2011
	Class A			Class Z			Class A			Class Z			Class A			Class Z			Class A			Class Z
Net realized and unrealized gains (losses)*	$	42.09		$	17.97		$	68.98		$	(6.17	)	$	6.26		$	10.36		$	71.44		$	(6.17	)
Interest income		0.26			0.09			0.06			0.01			0.65			0.23			0.82			0.01
Expenses**		(15.97	)		(5.74	)		(27.29	)		(5.65	)		(49.20	)		(17.67	)		(65.07	)		(5.65	)

Increase (decrease) for the period		26.38			12.32			41.75			(11.81	)		(42.29	)		(7.08	)		7.19			(11.81	)
Net asset value per unit, beginning of period		2,717.27			979.17			2,719.83			1,000.00			2,785.94			998.57			2,754.39			1,000.00

Net asset value per unit, end of period	$	2,743.65		$	991.49		$	2,761.58		$	988.19		$	2,743.65		$	991.49		$	2,761.58		$	988.19

*	Includes brokerage commissions

**	Excludes brokerage commissions


	Three Months Ended September 30, 2012						Three Months Ended September 30, 2011***			For the period August 1, 2011 (commencement of operations) to September 30, 2011***			Nine Months Ended September 30, 2012						Nine Months Ended September 30, 2011***			For the period August 1, 2011 (commencement of operations) to September 30, 2011***
	Class A			Class Z			Class A			Class Z			Class A			Class Z			Class A			Class Z
Ratios to average net assets:****
Net investment income (loss)		(4.4	)%		(3.0	)%		(4.1	)%		(3.3	)%		(4.4	)%		(3.8	)%		(4.2	)%		(3.3	)%
Incentive fees		0.0	%******		0.0	%******		0.4	%		0.1	%		0.0	%******		0.1	%		0.6	%		0.1	%

Net investment income (loss) before incentive fees*****		(4.4	)%		(3.0	)%		(3.7	)%		(3.2	)%		(4.4	)%		(3.7	)%		(3.6	)%		(3.2	)%


Operating expense		4.5	%		3.3	%		3.7	%		3.2	%		4.4	%		3.7	%		3.6	%		3.2	%
Incentive fees		0.0	%******		0.0	%******		0.4	%		0.1	%		0.0	%******		0.1	%		0.6	%		0.1	%

Total expenses		4.5	%		3.3	%		4.1	%		3.3	%		4.4	%		3.8	%		4.2	%		3.3	%

Total return:
Total return before incentive fees		1.0	%		1.3	%		2.0	%		(1.1	)%		(1.5	)%		(0.6	)%		0.8	%		(1.1	)%
Incentive fees		0.0	%******		0.0	%******		(0.5	)%		(0.1	)%		(0.0	)%******		(0.1	)%		(0.5	)%		(0.1	)%

Total return after incentive fees		1.0	%		1.3	%		1.5	%		(1.2	)%		(1.5	)%		(0.7	)%		0.3	%		(1.2	)%

***	The ratios are shown net and gross of incentive fees to conform to current period presentation.

****	Annualized (other than incentive fees).

*****

Interest income less total expenses.

******

Due to rounding

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.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(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.

The customer agreements between the Partnership/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, exchange-cleared swaps and open forward contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification (“ASC”) 210 - 20, “Balance Sheet,” have been met.

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, 2012 and 2011 were 0. The monthly average number of futures contracts traded directly by the Partnership during the nine months ended September 30, 2012 and 2011 were 0 and 2,101, respectively. The monthly average number of metal forward contracts traded directly by the Partnership during the three months ended September 30, 2012 and 2011 were 216 and 1,727, respectively. The monthly average number of metal forward contracts traded directly by the Partnership during the nine months ended September 30, 2012 and 2011 were 249 and 6,053, respectively. The monthly average number of option contracts traded directly by the Partnership during the three months ended September 30, 2012 and 2011 was 0. The monthly average number of option contracts traded directly by the Partnership during the nine months ended September 30, 2012 and 2011 were 0 and 152, respectively. The monthly average notional value of currency forward contracts held by the Partnership during the three months ended September 30, 2012 and 2011 was $0. The monthly average notional value of currency forward contracts held by the Partnership during the nine months ended September 30, 2012 and 2011 were $0 and $8,588,266, respectively.

Brokerage commissions are based on the number of trades executed by the Advisors and the Partnership’s ownership of the Funds.

The following tables indicate the gross fair values of derivative instruments of forward contracts traded directly by the Partnership as separate assets and liabilities as of September 30, 2012 and December 31, 2011.


	September 30, 2012
Assets
Forward Contracts
Metals	$	431,381

Total unrealized appreciation on open forward contracts	$	431,381


Liabilities
Forward Contracts
Metals	$	(1,250,962	)

Total unrealized depreciation on open forward contracts	$	(1,250,962	)

Net unrealized depreciation on open forward contracts	$	(819,581	)*


	December 31, 2011
Assets
Forward Contracts
Metals	$	1,409,344

Total unrealized appreciation on open forward contracts	$	1,409,344


Liabilities
Forward Contracts
Metals		(5,663,239	)

Total unrealized depreciation on open forward contracts	$	(5,663,239	)

Net unrealized depreciation on open forward contracts	$	(4,253,895	)*

*	This amount is in “Net unrealized depreciation on open forward contracts” on the Statements of Financial Condition.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

The following tables indicate the Partnership’s trading gains and losses, by market sector, on derivative instruments traded directly by the Partnership for the three and nine months ended September 30, 2012 and 2011.


Sector	Three Months Ended September 30, 2012 Gain (loss) from trading			Three Months Ended September 30, 2011 Total trading results			Nine Months Ended September 30, 2012 Gain (loss) from trading			Nine Months Ended September 30, 2011 Gain (loss) from trading
Currencies	$	0		$	0		$	0		$	(1,297,551	)
Energy		0			0			0			2,902,797
Grains		0			0			0			(4,633,963	)
Indices		0			0			0			(29,043	)
Interest Rates U.S.		0			0			0			(1,476,338	)
Interest Rates Non-U.S.		0			0			0			248,513
Livestock		0			0			0			(435,160	)
Metals		0			0			0			4,745,428
Softs		0			0			0			1,571,985

Total	$	0	**	$	0	**	$	0	**	$	1,596,668	**

**	This amount is included in “Total trading results” on the Statements of Income and Expenses.

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 Partnership’s and the Funds’ 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 Partnership’s and the Funds’ Statements of Income and Expenses.

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 use of 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.

Effective January 1, 2012, the Partnership adopted Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (“IFRS”)”. The amendments within this ASU change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between GAAP and IFRS. However, some of the amendments clarify the Financial Accounting Standards Board’s (the “FASB”) 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. This new guidance did not have a significant impact on the Partnership’s financial statements.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

The Partnership/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 and liabilities (Level 1). The values of non-exchange-traded forward, swaps and options contracts for which market quotations are not readily available, are priced by broker-dealers that derive fair values for those assets and liabilities 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, 2012, and December 31, 2011, 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). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.


	September 30, 2012		Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Forwards	$	431,381	$	431,381		$	0	$	0
Investment in Funds		1,444,585,241		0			1,444,585,241		0

Total assets	$	1,445,016,622	$	431,381		$	1,444,585,241	$	0

Liabilities
Forwards	$	1,250,962	$	1,250,962		$	0	$	0

Total liabilities	$	1,250,962	$	1,250,962		$	0	$	0

Net fair value	$	1,443,765,660	$	(819,581	)	$	1,444,585,241	$	0


	December 31, 2011		Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Forwards	$	1,409,344	$	1,409,344		$	0	$	0
Investment in Funds		1,378,190,701		0			1,378,190,701		0

Total assets	$	1,379,600,045	$	1,409,344		$	1,378,190,701	$	0

Liabilities
Forwards	$	5,663,239	$	5,663,239		$	0	$	0

Total liabilities	$	5,663,239	$	5,663,239		$	0	$	0

Net fair value	$	1,373,936,806	$	(4,253,895	)	$	1,378,190,701	$	0

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(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 at 150% leverage, 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. 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 $384,370,435 to Morgan Stanley Smith Barney TT II, LLC (“Transtrend Master”), a limited liability company organized under the limited liability company 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 non-managing members 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, 2012.

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.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

A limited partner/non-managing member of the Funds 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 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. Such withdrawals 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 Funds. All other fees, including CGM’s direct brokerage commissions, are charged at the Partnership level.

At September 30, 2012, the Partnership owned approximately 45.7% of AAA Master, 93.5% of Transtrend Master and 66.4% of Winton Master. At December 31, 2011, the Partnership owned approximately 40.8% of AAA Master, 92.5% of Transtrend Master and 65.6% 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 of the Funds are shown in the following tables.


	September 30, 2012
	Total Assets		Total Liabilities		Total Capital
AAA Master	$	1,026,645,435	$	94,748,021	$	931,897,414
Transtrend Master		541,370,529		848,848		540,521,681
Winton Master		779,216,183		5,928,303		773,287,880

Total	$	2,347,232,147	$	101,525,172	$	2,245,706,975


	December 31, 2011
	Total Assets		Total Liabilities		Total Capital
AAA Master	$	1,079,318,861	$	102,808,269	$	976,510,592
Transtrend Master		477,312,353		696,440		476,615,913
Winton Master		822,377,909		104,133		822,273,776

Total	$	2,379,009,123	$	103,608,842	$	2,275,400,281

Summarized information reflecting the net investment income (loss), total trading results and net income (loss) of the Funds are shown in the following tables.


	For the three months ended September 30, 2012
	Net Investment Income (Loss)			Total Trading Results			Net Income (Loss)
AAA Master	$	(799,515	)	$	60,107,931		$	59,308,416
Transtrend Master		(3,021,720	)		(6,472,573	)		(9,494,293	)
Winton Master		(104,610	)		12,887,957			12,783,347

Total	$	(3,925,845	)	$	66,523,315		$	62,597,470


	For the nine months ended September 30, 2012
	Net Investment Income (Loss)			Total Trading Results			Net Income (Loss)
AAA Master	$	(2,472,056	)	$	31,510,989		$	29,038,933
Transtrend Master		(9,527,037	)		32,450,682			22,923,645
Winton Master		(403,260	)		(30,088,509	)		(30,491,769	)

Total	$	(12,402,353	)	$	33,873,162		$	21,470,809

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)


	For the three months ended September 30, 2011
	Net Investment Income (Loss)			Total Trading 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 Income (Loss)			Total Trading 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 the Partnership fully redeemed its interest in Willowbridge Master.

Summarized information reflecting the Partnership’s investments in, and the operations of, the Funds are as shown in the following tables.


	September 30, 2012					For the three months ended September 30, 2012
	% of Partnership’s			Fair		Income			Expenses				Management				Net			Investment	Redemptions
Funds	Net Assets			Value		(Loss)			Commissions		Other		Fee		Incentive Fee		Income (Loss)			Objective	Permitted
AAA Master		29.89	%	$	425,781,580	$	27,213,443		$	398,662	$	9,663	$	0.00	$	0.00	$	26,805,118		Energy Markets	Monthly
Transtrend Master		35.48	%		505,441,163		(6,157,408	)		480,353		0		2,294,167		9,052		(8,940,980	)	Commodity Portfolio	Monthly
Winton Master		36.03	%		513,362,498		8,459,382			133,260		11,356		0.00		0.00		8,314,766		Commodity Portfolio	Monthly

Total				$	1,444,585,241	$	29,515,417		$	1,012,275	$	21,019	$	2,294,167	$	9,052	$	26,178,904


	September 30, 2012					For the nine months ended September 30, 2012
	% of Partnership’s			Fair		Income			Expenses				Management				Net			Investment	Redemptions
Funds	Net Assets			Value		(Loss)			Commissions		Other		Fee		Incentive Fee		Income (loss)			Objective	Permitted
AAA Master		29.89	%	$	425,781,580	$	14,970,646		$	1,096,186	$	84,550	$	0	$	0	$	13,789,910		Energy Markets	Monthly
Transtrend Master		35.48	%		505,441,163		29,909,175			1,323,222		0		6,658,508		811,931		21,115,514		Commodity Portfolio	Monthly
Winton Master		36.03	%		513,362,498		(19,513,035	)		418,719		38,109		0		0		(19,969,863	)	Commodity Portfolio	Monthly

Total				$	1,444,585,241	$	25,366,786		$	2,838,127	$	122,659	$	6,658,508	$	811,931	$	14,935,561



	December 31, 2011					For the three months ended September 30, 2011
	% of Partnership’s			Fair		Income			Expenses				Management				Net			Investment	Redemptions
Funds	Net Assets			Value		(Loss)			Commissions		Other		Fee		Incentive Fee		Income (Loss)			Objective	Permitted
AAA Master		29.37	%	$	398,463,176	$	8,381,422		$	202,731	$	51,907	$	0	$	0	$	8,126,784		Energy Markets		Monthly
Transtrend Master		32.47	%		440,463,031		(13,395,345	)		313,596		0		1,738,778		0		(15,447,719	)	Commodity Portfolio		Monthly
Winton Master		39.75	%		539,264,494		41,869,548			79,876		13,907		0		0		41,775,765		Commodity Portfolio		Monthly

Total				$	1,378,190,701	$	36,855,625		$	596,203	$	65,814	$	1,738,778	$	0	$	34,454,830


	December 31, 2011					For the nine months ended September 30, 2011
	% of Partnership’s			Fair		Income			Expenses				Management				Net			Investment	Redemptions
Funds	Net Assets			Value		(Loss)			Commissions		Other		Fee		Incentive Fee		Income (loss)			Objective	Permitted
AAA Master		29.37	%	$	398,463,176	$	5,140,821		$	643,899	$	176,910	$	0	$	0	$	4,320,012		Energy Markets		Monthly
Transtrend Master		32.47	%		440,463,031		(24,781,090	)		453,128		112,108		2,299,318		0		(27,645,644	)	Commodity Portfolio		Monthly
Willowbridge Master (a)		0	%		—		13,236,598			47,521		27,695		0		0		13,161,382		Commodity Portfolio		Monthly
Winton Master		39.75	%		539,264,494		47,937,308			240,927		44,179		0		0		47,652,202		Commodity Portfolio		Monthly

Total				$	1,378,190,701	$	41,553,637		$	1,385,475	$	360,892	$	2,299,318	$	0	$	37,487,952

(a)	From January 1, 2011 through May 31, 2011, the date the Partnership fully redeemed its interest in Willowbridge Master.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

6. Financial Instrument Risks:

In the normal course of business, the Partnership and the Funds are 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 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 and certain forward and option contracts. OTC contracts are negotiated between contracting parties and include swaps and certain forward and option 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 relating 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 General Partner estimates at any given time approximately 7.0% to 17.0% of its contracts are traded OTC.

The risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net 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, as MS & Co., MSIP, CGM or a CGM affiliate is the sole counterparty or broker with respect to the Partnership and the Funds assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MS & Co. MSIP or 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 bears 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 financial 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.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(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 Partnership and the Funds’ 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 Partnership and the Funds’ Statements of Income and Expenses.

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 and liabilities (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 that derive fair values for those assets and liabilities 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, 2012 and December 31, 2011, 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). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(Unaudited)

Futures Contracts. 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 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 Funds. When the contract is closed, 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 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 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 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 income (loss) 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.

Options. The 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 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 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.

Orion Futures Fund L.P.

Notes to Financial Statements

September 30, 2012

(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. The 2009 through 2011 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.

Subsequent Events. The General Partner 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 were no subsequent events requiring adjustment of or disclosure in the financial statements.

Recent Accounting Pronouncements. In October 2011, the 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 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. In August 2012, the FASB updated the proposed ASU to state that entities regulated under the Investment Company Act of 1940 should qualify to be investment companies within the proposed investment company guidance. The Partnership will evaluate the impact that this proposed update would have on the financial statements once the pronouncement is issued.

In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities,” which creates a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangements associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparisons between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of IFRS. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Partnership would also provide the disclosures retrospectively for all comparative periods presented. The Partnership is currently evaluating the impact that the pronouncement 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.”

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 (iii) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the third quarter of 2012.

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, 2012, Partnership capital increased 5.0% from $1,356,685,609 to $1,424,690,228. This increase was attributable to the subscriptions of 78,648.3210 Class A Redeemable Units totaling $219,734,885, subscriptions of 936.0767 Class Z Redeemable Units totaling $942,584 and General Partner contributions representing 598.7574 Class Z unit equivalents totaling $600,000, which was partially offset by a net loss of $22,242,732, coupled with the redemptions of 46,915.5119 Class A Redeemable Units totaling $130,917,906 and 110.6490 Class Z Redeemable Units totaling $112,212. 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 and assumptions 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 their 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.

Results of Operations

During the Partnership’s third quarter of 2012, the net asset value per unit for Class A increased 1.0% from $2,717.27 to $2,743.65, as compared to an increase of 1.5% in the third quarter of 2011. During the Partnership’s third quarter of 2012, the net asset value per unit for Class Z increased 1.3% from $979.17 to $991.49. The Partnership experienced a net trading gain before brokerage commissions and related fees in the third quarter of 2012 of $29,383,122. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, grains, U.S. and non-U.S. interest rates, currencies, and indices, and were partially offset by losses in metals and agricultural commodities. 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, metals, U.S. and non-U.S. interest rates and softs, and were partially offset by losses in currencies, grains, livestock and indices.

During the third quarter of 2012, the most significant gains were recorded in global interest rate futures during July from long futures positions in Euro bonds as prices rallied as investors sought “safe haven” assets given the continued concern about the euro zone debt crisis. Further gains were recorded from long futures positions in U.S. Treasury notes during July. Global stock indices recorded gains during September from long futures positions in the S&P 500 Index as equity prices rallied due to speculative buying on the back of the announcement that the U.S. Federal Reserve would continue with a third round of quantitative easing. Additional gains were recorded in energies from long futures positions in RBOB gasoline as prices trended higher and demand for refined products increased during July and August. Further gains were recorded in energies from short futures positions in natural gas as prices declined during August due to seasonably mild temperatures throughout the United States.

Gains were also recorded in currencies during July from short positions in the Euro as its value declined versus the U.S. dollar given concerns about the financial “health” of the euro zone and Europe’s ability to service its debt burden. A portion of the Partnership’s gains for the quarter was offset by losses from trading in metals and agricultural commodities. The most significant losses were incurred during August in metals trading from short futures positions in copper and lead, which rallied on news that China, the world’s largest consumer of industrial metals, would look to economic stimulus to help boost their economy, thus pushing industrial metals prices higher. Additional losses were incurred during September from short futures in aluminum as prices rallied after the U.S. Federal Reserve announced a third round of quantitative easing to boost the economy, which benefited prices of metals. Losses were also incurred in agricultural commodities during September from long futures positions in soybeans as prices fell on speculation that slowing growth in China and Europe will cut demand. Further losses were incurred from long futures positions in corn as grain prices also fell on speculation that Midwest rain during August limited crop damage caused by the severe drought in June and July in the U.S.

During the Partnership’s nine months ended September 30, 2012, the net asset value per unit for Class A decreased 1.5% from $2,785.94 to $2,743.65, as compared to an increase of 0.3% during the nine months ended September 30, 2011. During the nine months ended September 30, 2012, the net asset value per unit for Class Z decreased 0.7% from $998.57 to $991.49. The Partnership experienced a net trading gain before brokerage commissions and related fees for the nine months ended September 30, 2012 of $25,032,017. Gains were primarily attributable to the Partnership’s/Funds trading of commodity futures in U.S. and non-U.S. interest rates and indices, and were partially offset by losses in currencies, energy, metals and agricultural commodities. 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, metals, softs, U.S. and non-U.S. interest rates and were partially offset by losses in currencies, grains, livestock and indices.

During the nine months ended September 30, 2012, the most significant trading losses were incurred in currencies during February, from long positions in the Japanese yen as the value of the yen declined relative to the U.S. dollar after the Bank of Japan said it would increase the size of its asset-purchase fund, damping demand for the Japanese currency. Additional currency losses were incurred during March from long positions in the Australian and Canadian dollar. Losses were also incurred in currencies during June, August and September from short positions in the Euro as the value of the Euro zone currency advanced versus the U.S. dollar given a potential resolution to the debt crisis in Greece. Trading in agricultural commodities incurred losses during June as short futures positions in soybeans and corn were negatively impacted as prices rallied on speculation China will increase purchases from the U.S. In metals trading, losses were recorded in March from long futures positions in silver and gold as prices declined as concerns over an economic slowdown in China pushed precious metals prices lower. Trading in energies during April and May also incurred losses from short futures positions in Brent crude oil, which were negatively impacted as prices moved lower given concerns about the euro zone and the overall health of the global economy. Additional losses were incurred during May from long futures positions in RBOB gasoline as prices fell due to a weakening global economy and a general sell-off of “risk assets” throughout global markets. The Partnership’s losses incurred during the first nine months of the year were offset by gains in global interest rate futures from long futures positions in U.S. 30-year Treasury bonds and U.S. 10-year Treasury notes, which benefited from investors seeking “safe haven” assets. Further gains were recorded from long futures positions in the German 10-year bund and U.K. 10-year gilt as European investors sought the “relative safety” of government debt during May as concerns over Greece and Spain developed.

Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increases the risks involved in commodity trading, but also increase 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/Funds expects to increase capital through operations.

Interest income is earned on 100% of the average daily equity maintained in cash in the Partnership’s (or the 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. will pay monthly interest to Transtrend Master Fund on 100% of the average daily equity maintained in cash in Transtrend Master Fund’s account during each month at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount less 0.15% during such month. Interest income earned by the Partnership for the three months ended September 30, 2012, increased by $107,503, as compared to the corresponding period in 2011. The increase in interest income was primarily due to higher U.S. Treasury bill rates during the three months ended September 30, 2012, as compared to the corresponding period in 2011. Interest income for the nine months ended September 30, 2012 decreased by $22,724, as compared to the corresponding period in 2011. The decrease in interest income is primarily due to lower U.S. Treasury bill rates for the Partnership during the nine months ended September 30, 2012, as compared to the corresponding period in 2011. 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 clearing fees for the three and nine months ended September 30, 2012, increased by $3,367,017 and $10,771,093, respectively, as compared to the corresponding periods in 2011. 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, 2012, as compared to the corresponding periods in 2011.

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 the 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, 2012, increased by $641,192 and $1,926,254, respectively, as compared to the corresponding periods in 2011. The increase in management fees is due to higher average adjusted net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.

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, 2012, increased by $174,728 and $611,919, respectively, as compared to the corresponding periods in 2011. The increase in administrative fees is due to higher average adjusted net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.

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, 2012 resulted in incentive fees of $9,052 and $811,930, respectively. 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.

In allocating the assets of the Partnership among the trading Advisors, the General Partner considers each Advisor’s 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.

As of September 30, 2012 and June 30, 2012, the Partnership’s assets were allocated among the trading Advisors in the following approximate percentages:


Advisor	September 30, 2012			June 30, 2012
AAA Capital Management Advisors, Ltd.		29	%		28	%
Winton Capital Management Limited		36	%		37	%
Transtrend BV		35	%		35	%

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 limited partners will not be liable for losses exceeding the current net asset value of their investment.

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. 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, 2011.

The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of September 30, 2012, and December 31, 2011. As of September 30, 2012, the Partnership’s total capitalization was $1,424,690,228.

September 30, 2012


Market Sector	Value at Risk		% of Total Capitalization
Commodities	$	76,555,579		5.37	%
Currencies		43,690,488		3.07	%
Indices		35,585,975		2.50	%
Interest Rates		38,569,444		2.71	%

Total	$	194,401,486		13.65	%

As of December 31, 2011, the Partnership’s total capitalization was $1,356,685,609.

December 31, 2011


Market Sector	Value at Risk		% of Total Capitalization
Commodities	$	38,048,435		2.81	%
Currencies		19,717,887		1.45	%
Indices		7,247,962		0.53	%
Interest Rates		17,278,795		1.28	%

Total	$	82,293,079		6.07	%

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, 2012, and December 31, 2011, and the highest, lowest and average value at any point during the three months ended September 30, 2012, and for the twelve months ended December 31, 2011. All open positions trading risk exposures have been included in calculating the figures set forth below.

As of September 30, 2012, AAA Master’s total capitalization was $931,897,414. The Partnership owned approximately 45.7% of AAA Master. As of September 30, 2012, 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, 2012


						Three months ended September 30, 2012
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Energy	$	95,561,580		10.26	%	$	95,561,580	$	53,403,879	$	74,013,255
Grains		4,692		0.00	%**		12,420		1,863		4,577

Total	$	95,566,272		10.26	%

*	Average of month-end Values at Risk.

**	Due to rounding.

As of December 31, 2011, AAA Master’s total capitalization was $976,510,592. The Partnership owned approximately 40.8% of AAA Master. As of December 31, 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:

December 31, 2011


						Twelve months ended December 31, 2011
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Energy	$	55,102,501		5.64	%	$	94,389,860	$	26,234,892	$	59,052,953
Grains		296,485		0.03	%		301,619		53,188		150,902
Indices		1,456,343		0.15	%		2,900,159		17,268		1,177,895
Lumber		41,000		0.01	%		156,000		1,600		50,692
Softs		2,042,500		0.21	%		2,261,000		108,000		1,188,141

Total	$	58,938,829		6.04	%

*	Annual average of month-end Values at Risk.

As of September 30, 2012, Winton Master’s total capitalization was $773,287,880. The Partnership owned approximately 66.4% of Winton Master. As of September 30, 2012, 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, 2012


						Three months ended September 30, 2012
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	34,190,052		4.42	%	$	34,827,068	$	29,367,863	$	32,782,808
Energy		4,444,303		0.58	%		5,408,240		2,290,040		3,876,437
Grains		7,985,391		1.03	%		8,043,023		5,816,299		7,107,620
Indices		25,066,468		3.24	%		25,066,468		6,373,580		16,304,465
Interest Rates U.S.		12,862,800		1.66	%		13,743,425		12,519,050		13,117,117
Interest Rates Non-U.S.		18,406,417		2.38	%		19,637,084		17,185,649		18,409,717
Livestock		468,800		0.06	%		474,550		426,615		461,695
Lumber		6,250		0.00	%**		16,250		1,250		6,250
Metals		6,963,454		0.90	%		11,535,119		5,176,271		8,139,101
Softs		1,793,839		0.23	%		2,076,289		1,793,839		1,911,806

Total	$	112,187,774		14.50	%

*	Average of month-end Values at Risk.

**	Due to rounding.

As of December 31, 2011, Winton Master’s Value total capitalization was $822,273,776. The Partnership owned approximately 65.6% of Winton Master. As of December 31, 2011, 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, 2011


						Twelve months ended December 31, 2011
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	19,312,483		2.35	%	$	19,312,483	$	6,398,762	$	12,470,587
Energy		1,525,274		0.19	%		4,524,046		1,245,529		2,842,674
Grains		2,535,708		0.31	%		4,371,245		540,481		2,326,464
Indices		6,526,149		0.79	%		17,629,694		3,776,392		10,297,535
Interest Rates U.S.		5,466,250		0.67	%		8,976,950		539,209		4,614,681
Interest Rates Non-U.S.		12,924,419		1.57	%		15,134,879		2,448,536		8,402,040
Livestock		262,550		0.03	%		340,400		42,650		213,377
Metals		6,253,557		0.76	%		7,869,347		3,994,864		5,990,862
Softs		1,583,804		0.19	%		2,456,982		329,218		1,207,483

Total	$	56,390,194		6.86	%

*	Annual average of month-end Values at Risk.

As of September 30, 2012, Transtrend Master’s total capitalization was $540,521,681. The Partnership owned approximately 93.5% of Transtrend Master. As of September 30, 2012, 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, 2012


						Three months ended September 30, 2012
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Commodity	$	18,498,200		3.42	%	$	26,394,721	$	16,056,904	$	20,887,520
Currencies		20,988,293		3.88	%		26,135,453		15,067,991		20,234,918
Equity		18,941,840		3.50	%		20,130,770		12,348,081		15,543,776
Interest Rates		17,806,684		3.29	%		29,213,144		11,522,871		21,439,596

Total	$	76,235,017		14.09	%

*	Average of month-end Values at Risk.

As of December 31, 2011, Trandstrend Master total capitalization was $476,615,913. The Partnership owned 92.5% of Transtrend Master. As of December 31, 2011, Trandstrend Master’s Value at Risk for its assets (including the portion of the Partnerships’s assets allocated to Transtrend for trading) was as follows:

December 31, 2011


						Twelve months ended December 31, 2011
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Commodity	$	17,904,472		3.76	%	$	26,711,030	$	512,564	$	9,752,503
Currencies		9,977,318		2.09	%		22,372,356		688,683		7,090,978
Equity		4,335,111		0.91	%		9,307,243		778,042		2,729,767
Interest Rates		14,916,316		3.13	%		15,002,665		398,638		5,207,746

Total	$	47,133,217		9.89	%

*	Annual average of month-end Values at Risk.

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 (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 President 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 President 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, 2012, and, based on that evaluation, the General Partner’s President and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.

The Partnership’sinternal control over financial reportingis a process under the supervision of the General Partner’s President 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, 2012, that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II. OTHER INFORMATION

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, 2011, as updated by the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012.

This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which CGM or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.

CGM (together with Citigroup Inc. and its other subsidiaries, “Citigroup”) (formerly known as Salomon Smith Barney Inc.) is a New York corporation with its principal place of business at 388 Greenwich St., New York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant (“FCM”), and provides futures brokerage and clearing services for institutional and retail participants in the futures markets. CGM and its affiliates also provide investment banking and other financial services for clients worldwide.

There have been no material administrative, civil or criminal actions within the past five years against CGM or any of its individual principals and no such actions are currently pending, except as follows.

RMBS Litigation and Other Matters

On May 4, 2012, the district court in FEDERAL HOUSING FINANCE AGENCY v. UBS AMERICAS, INC., ET AL., a parallel case to FEDERAL HOUSING FINANCE AGENCY v. ALLY FINANCIAL INC., ET AL., FEDERAL HOUSING FINANCE AGENCY v. CITIGROUP INC., ET AL., and FEDERAL HOUSING FINANCE AGENCY v. JPMORGAN CHASE & CO., ET AL., denied defendants’ motion to dismiss plaintiff’s securities law claims and granted defendants’ motion to dismiss plaintiff’s negligent misrepresentation claims. On June 19, 2012, the district court granted defendants’ motion to certify an interlocutory appeal to the United States Court of Appeals for the Second Circuit from the court’s statutes of repose and limitations rulings.

On May 15, 2012, Woori Bank filed a complaint in the United States District Court for the Southern District of New York against Citigroup alleging actionable misstatements and omissions in connection with Woori Bank’s $95 million investment in five collateralized debt obligations.

On May 18, 2012, the Federal Deposit Insurance Corporation filed (“FDIC”) complaints in the United States District Courts for the Southern District of New York and the Central District of California against various defendants, including Citigroup Global Markets Inc., Citicorp Mortgage Securities Inc., and CitiMortgage Inc., in connection with purchases of residential mortgage-backed securities (“RMBS”) by two failed banks for which the FDIC is acting as receiver.

On June 6, 2012, the court granted in part and denied in part defendants’ motions to dismiss in WESTERN & SOUTHERN LIFE INS. CO., ET AL. v. RESIDENTIAL FUNDING CO., LLC, ET AL.

On June 26, 2012, the court overruled defendants’ demurrer to plaintiff’s amended complaint in FEDERAL HOME LOAN BANK OF CHICAGO v. BANC OF AMERICA SECURITIES, LLC, ET AL.

On July 27, 2012, John Hancock Life Insurance Co. and several affiliated entities filed a complaint in the United States District Court for the District of Minnesota against various defendants, including CGM, asserting disclosure claims arising out of purchases of RMBS.

On August 29, 2012, the United States District Court for the Southern District of New York issued an order preliminarily approving the parties’ settlement in IN RE CITIGROUP INC. SECURITIES LITIGATION, pursuant to which Citigroup has agreed to pay $590 million. A fairness hearing is scheduled for January 15, 2013.

On August 30, 2012, Rentokil-Initial Pension Scheme filed a putative class action complaint against Citigroup on behalf of purchasers of 26 Citigroup offerings of medium term Euro Notes issued between October 12, 2005 and February 25, 2009. The complaint asserts claims under Section 90 of the Financial Services and Markets Act 2000 and includes allegations similar to those asserted in IN RE CITIGROUP INC. BOND LITIGATION.

On October 15, 2012, the United States District Court for the Southern District of New York granted lead plaintiffs’ amended motion for class certification in NEW JERSEY CARPENTERS HEALTH FUND v. RESIDENTIAL CAPITAL LLC, ET AL., having previously denied lead plaintiffs’ motion for class certification on January 18, 2011. Plaintiffs in this action allege violations of Sections 11, 12, and 15 of the Securities Act of 1933, as amended, and assert disclosure claims on behalf of a putative class of purchasers of mortgage-backed securities issued by Residential Accredited Loans, Inc. pursuant or traceable to prospectus materials filed on March 3, 2006 and April 3, 2007. CGM is one of the underwriter defendants.

Other Matters

Citigroup and Citibank, N.A., along with other U.S. Dollar (USD) LIBOR panel banks, are defendants in the multidistrict litigation (MDL) proceeding before Judge Buchwald in the United States District Court for the Southern District of New York captioned IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION. Judge Buchwald has appointed interim lead class counsel for, and consolidated amended complaints have been filed on behalf of, three separate putative classes of plaintiffs: (1) OTC purchasers of derivative instruments tied to USD LIBOR; (2) purchasers of exchange-traded derivative instruments tied to USD LIBOR; and (3) indirect OTC purchasers of U.S. debt securities. Each of these putative classes alleges that the panel bank defendants conspired to suppress USD LIBOR in violation of the Sherman Act and/or the Commodity Exchange Act, thereby causing plaintiffs to suffer losses on the instruments they purchased. Also consolidated into the MDL proceeding are individual civil actions commenced by various Charles Schwab entities that allege that the panel bank defendants conspired to suppress the USD LIBOR rates in violation of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act, and California state law, causing the Schwab entities to suffer losses on USD LIBOR-linked financial instruments that they owned. Plaintiffs in these actions seek compensatory damages and restitution for losses caused by the alleged violations, as well as treble damages under the Sherman Act. The Schwab and OTC plaintiffs also seek injunctive relief.

In the course of its business, CGM, as a major futures commission merchant and broker-dealer, is a party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of CGM. GCM may establish reserves from time to time in connections with such actions.

Unless the context otherwise requires, for purposes of this section, the terms the “Company,” “we,” “us” and “our” mean Morgan Stanley and its consolidated subsidiaries. In addition to the matters described in the Form 10-K, those described in the Partnership’s Quarterly Report on Form 10-Q for the quarterly period ending June 30, 2012 (the “Second Quarter Form 10-Q”), and those described below, in the normal course of business, the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or in financial distress.

The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company’s business, including, among other matters, accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.

The Company contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the condensed consolidated financial statements and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to income.

In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. The Company cannot predict with certainty if, how or when such proceedings will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings that are in their early stages of development or where plaintiffs seek substantial or indeterminate damages. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for any proceeding. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings could be material to the Company’s operating results and cash flows for a particular period depending on, among other things, the level of the Company’s revenues or income for such period.

Over the last several years, the level of litigation and investigatory activity focused on residential mortgage and credit crisis related matters has increased materially in the financial services industry. As a result, the Company expects that it may become the

subject of increased claims for damages and other relief regarding residential mortgages and related securities in the future and, while the Company has identified below certain proceedings that the Company believes to be material, individually or collectively, there can be no assurance that additional material losses will not be incurred from residential mortgage claims that have not yet been notified to the Company or are not yet determined to be material.

The following developments have occurred with respect to certain matters previously reported in the Form 10-K or the Second Quarter Form 10-Q or concern new actions that have been filed since the Second Quarter Form 10-Q:

The Company

Residential Mortgage and Credit Crisis Related Matters.

Class Actions.

On September 12, 2012, the Company filed its answer to the third amended complaint in In re Morgan Stanley Pass-Through Certificates Litigation. On September 20, 2012, the plaintiffs filed a motion seeking to expand the offerings at issue in the litigation, relying on recent precedent from the United States Court of Appeals for the Second Circuit (“Second Circuit”). Defendants have opposed the motion. If the motion is granted, plaintiffs will be purporting to represent investors who purchased approximately $7.82 billion in mortgage pass through certificates issued in 2006 by thirteen trusts.

Other Litigation.

On August 17, 2012, the court in Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. granted the Company’s motion for summary judgment with respect to the plaintiffs’ fraud claim, denied the Company’s motion for summary judgment with respect to the plaintiffs’ aiding and abetting fraud claim, and ordered plaintiffs to show cause why the negligent misrepresentation claim should not be dismissed. The court dismissed all or part of the claims of three of the fifteen plaintiffs based on lack of standing or reliance and plaintiffs have moved for reconsideration of the dismissal. On September 17, 2012, plaintiffs filed expert reports with the court alleging that they are seeking $713 million in compensatory damages on behalf of all fifteen plaintiffs. On October 5, 2012, the court ruled that plaintiffs sufficiently showed cause as to why the negligent misrepresentation claim against the Company should not be dismissed.

On October 2, 2012, the court in Cambridge Place Investment Management Inc. v. Morgan Stanley & Co., Inc. et al. denied, in substantial part, defendants’ motion to dismiss plaintiff’s amended complaints.

On October 11, 2012, defendants filed motions to dismiss the amended complaint in Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al.

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, 2011, and under Part II, Item 1A. “Risk Factors” in the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012, other than as set forth below.

Speculative position and trading limits may reduce profitability.

The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions which any person may hold or control in particular futures and options on futures. The trading instructions of an advisor may have to be modified, and positions held by the Partnership may have to be liquidated in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Partnership by increasing transaction costs to liquidate positions and foregoing potential profits.

In October 2011, the CFTC adopted new rules governing position limits. In September 2012, these rules were vacated by the United States District Court for the District of Columbia and remanded to the CFTC for further consideration. It is possible, nevertheless, that these rules may take effect in some form via re-promulgation or a successful appeal by the CFTC of the District Court’s ruling. The vacated rules established position limits on certain futures contracts and any economically equivalent futures, options and swaps.

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

For the three months ended September 30, 2012, there were subscriptions of 20,421.1173 Class A Redeemable Units totaling $56,808,668. There were no Class Z Redeemable Units purchased for the three months ended September 30, 2012. 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. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.

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 for each Class by the Partnership.


Period	Class A (a) Total Number of Redeemable Units Purchased*		Class A (b) Average Price Paid per Redeemable Unit**		Class Z (a) Total Number of Redeemable Units Purchased*		Class Z (b) Average Price Paid Per Redeemable Unit*		(c) Total Number of Redeemable Units Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Redeemable Units that May Yet Be Purchased Under the Plans or Programs
July 1, 2012 – July 31, 2012		3,486.7900	$	2,834.10		50.6490	$	1,021.97		N/A		N/A
August 1, 2012 – August 31, 2012		5,224.9220	$	2,810.48		00.0000	$	1,014.41		N/A		N/A
September 1, 2012 – September 30, 2012		4,707.4170	$	2,743.65		00.0000	$	991.49		N/A		N/A
Total		13,419.1290	$	2,793.17		50.6490	$	1,021.97

* Generally, limited partners are permitted to redeem their Redeemable Units as of the end 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.

Item

3. Defaults Upon Senior Securities. None.

Item

4. Mine Safety Disclosures. None

Item

5. Other Information.

The registrant does not have a board of directors. The General Partner is managed by a board of directors.

Effective November 14, 2012, Mr. Damian George was appointed a director of the General Partner.

Damian George, age 45, has been a Director of the General Partner since November 2012. Since June 2012, Mr. George has been the Chief Financial Officer and a principal of the General Partner and is an associate member of the National Futures Association. Since August 2009, Mr. George has been employed by Morgan Stanley Smith Barney LLC, a financial services firm, where his responsibilities include oversight of budgeting, finance and Sarbanes-Oxley testing for the Alternative Investments–Managed Futures group. Since August 2009, Mr. George has been registered as an associated person of Morgan Stanley Smith Barney LLC. From November 2005 through July 2009, Mr. George was employed by Citi Alternative Investments, a division of Citigroup Inc. (“Citigroup”), a financial services firm, which administered Citigroup’s hedge fund and fund of funds business, where he served as Director and was responsible for budgeting, finance and Sarbanes-Oxley testing for the Hedge Fund Management group. From November 2004 through July 2009, Mr. George was registered as an associated person of CGM. Mr. George earned his Bachelor of Science degree in Accounting in May 1989 from Fordham University and his Master of Business Administration degree in International Finance in February 1998 from Fordham University. Mr. George is a Certified Public Accountant.

Item 6. Exhibits



3.1		Fourth Amended and Restated Limited Partnership Agreement, dated August 31, 2012 (filed as Exhibit 3.2 to the current report on Form 8-K filed on September 5, 2012) and incorporated herein by reference.

3.2		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)	1^st 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)	2^nd 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)	3^rd 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)	4^th 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)	5^th 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)	6^th 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)	1^st 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)	7^th 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)	8^th 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 3.1 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.



	(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, 2011 to June 30, 2012 (filed as Exhibit 10.1(c) to the annual report on Form 10-K filed on March 30, 2012) 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.

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, 2011 to June 30, 2012 (filed as Exhibit 10.3(b) to the annual report on Form 10-K filed on March 30, 2012) 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		Form of Subscription Agreement (filed herein).

10.7		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.

10.8		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 and Director)

Exhibit 32.1 — Section 1350 Certification (Certification of President and Director)

Exhibit 32.2 — Section 1350 Certification (Certification of Chief Financial Officer and Director)

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Document.

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, 2012



By:		/s/ Damian George
		Damian George
		Chief Financial Officer and Director
		(Principal Accounting Officer)

Date: November 14, 2012

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Avg

Ceres Orion (OFFLP) 10-Q2012 Q3 Quarterly report

Content analysis

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents