10-Q

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, 2008

OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-25921

SMITH BARNEY AAA ENERGY FUND L.P.

(Exact name of registrant as specified in its charter)


New York		13-3986032


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

c/o Citigroup Managed Futures LLC
55 E. 59^th Street – 10^th Floor
New York, New York 10022

(Address of principal executive offices) (Zip Code)

(212) 559-2011

(Registrant’s telephone number, including area code)

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

Yes X No

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


Large accelerated filer		Accelerated filer		Non-accelerated filer X

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

Yes No X

As of October 31, 2008, 29,225.2780 Limited Partnership Redeemable Units were outstanding.

PART I

Item 1. Financial Statements

Smith Barney AAA Energy Fund L.P.
Statements of Financial Condition

(Unaudited)


	September 30,		December 31,
	2008		2007

Assets:
Investment in Master, at fair value	$	296,410,700	$	241,670,802
Cash		159,040		63,818
Distribution receivable		134,622		329,051

Total assets	$	296,704,362	$	242,063,671

Liabilities and Partners’ Capital:
Liabilities:
Accrued expenses:
Brokerage commissions	$	1,570,973	$	834,962
Management fees		491,638		401,891
Other		150,644		93,935
Redemptions payable		10,727,008		1,391,840

Total liabilities		12,940,263		2,722,628

Partners’ Capital:
General Partner, 830.6049 Unit Equivalents outstanding in 2008 and 2007, respectively		7,703,113		5,863,414
Special Limited Partner, 1,093.6722 and 55.6523 Redeemable Units of Limited Partnership Interest outstanding in 2008 and 2007, respectively		10,142,825		392,861
Limited Partners, 28,673.2140 and 33,018.5334 Redeemable Units of Limited Partnership Interest outstanding in 2008 and 2007, respectively		265,918,161		233,084,768

Total partners’ capital		283,764,099		239,341,043

Total liabilities and partners’ capital	$	296,704,362	$	242,063,671

See accompanying notes to financial statements.

Smith Barney AAA Energy Fund L.P.
Statements of Income and Expenses and Partners’ Capital
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Income:
Net realized gains (losses) on closed positions allocated from Master	$	18,165,941		$	10,141,424		$	(19,398,664	)	$	22,172,867
Change in net unrealized gains (losses) on open positions allocated from Master		27,600,883			(3,773,764	)		113,745,592			4,798,962
Interest income allocated from Master		360,219			1,638,189			1,116,183			5,573,921
Expenses allocated from Master		(258,305	)		(252,814	)		(714,602	)		(718,433	)

Total income (loss)		45,868,738			7,753,035			94,748,509			31,827,317
Expenses:
Brokerage commissions		1,098,218			635,586			3,297,369			2,268,372
Management fees		1,430,317			1,293,139			3,910,888			3,813,811
Other		72,810			47,468			200,128			113,169

Total expenses		2,601,345			1,976,193			7,408,385			6,195,352

Net income (loss) before allocation to Special Limited Partner		43,267,393			5,776,842			87,340,124			25,631,965
Allocation to Special Limited Partner		(8,581,435	)		(831,530	)		(17,248,562	)		(4,099,328	)

Net income (loss) after allocation to Special Limited Partner		34,685,958			4,945,312			70,091,562			21,532,637
Additions — Special Limited Partner		8,581,435			831,530			17,248,562			4,099,328
Redemptions — Special Limited Partner		(9,000,001	)		—			(9,000,001	)		—
Redemptions — Limited Partners		(7,834,807	)		(11,533,943	)		(33,917,067	)		(28,431,345	)
Redemptions — General Partners		—			—			—			(531,546	)

Net increase (decrease) in Partners’ Capital		26,432,585			(5,757,101	)		44,423,056			(3,330,926	)
Partners’ Capital, beginning of period		257,331,514			259,485,318			239,341,043			257,059,143

Partners’ Capital, end of period	$	283,764,099		$	253,728,217		$	283,764,099		$	253,728,217

Net Asset Value per Unit (30,597.4911 and 36,352.8479 Units outstanding at September 30, 2008 and 2007, respectively)	$	9,274.10		$	6,979.60		$	9,274.10		$	6,979.60

Net income (loss) per Redeemable Unit of Limited Partnership Interest and General Partner Unit Equivalent	$	1,111.97		$	130.22		$	2,214.89		$	576.23

See accompanying notes to financial statements.

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)


1.	General:

Smith Barney AAA Energy Fund L.P. (the “Partnership”) is a Limited Partnership organized on January 5, 1998 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 options and commodity futures contracts on United States exchanges and certain foreign exchanges. The Partnership may trade commodity futures and options contracts of any kind. In addition, the Partnership may enter into swap contracts on energy-related products. During the initial offering period (February 12, 1998 through March 15, 1998), the Partnership sold 49,538 redeemable units of Limited Partnership Interest (“Redeemable Units”). The Partnership commenced trading on March 16, 1998. From March 16, 1998 to August 31, 2001, the Partnership engaged directly in the speculative trading of a diversified portfolio of commodity interests.

Citigroup Managed Futures LLC (“CMF”), a Delaware Limited Liability Company, acts as the general partner (the “General Partner”) of the Partnership. The Partnership’s commodity broker is Citigroup Global Markets Inc. (“CGM”). CGM is an affiliate of the General Partner. The General Partner is wholly owned by Citigroup Global Markets Holdings Inc. (“CGMHI”), which is the sole owner of CGM. CGMHI is a wholly owned subsidiary of Citigroup Inc.

On September 1, 2001, the Partnership allocated substantially all of its capital to the Citigroup AAA Master Fund LLC, (formerly known as SB AAA Master Fund LLC), a New York Limited Liability Company (the “Master”). The Partnership purchased 128,539.1485 Units of the Master with cash equal to $121,215,820 and a contribution of open commodity futures and forward positions with a fair value of $7,323,329. The Master was formed in order to permit commodity pools managed now or in the future by AAA Capital Management Advisors, Ltd. (successor to AAA Capital Management, Inc.) (the “Advisor”) using the Energy Program—Futures and Swaps, the Advisor’s proprietary trading program, to invest together in one trading vehicle. In addition, the Advisor is a Special Limited Partner of the Partnership. The General Partner and the Advisor believe that trading through this master/feeder structure should promote efficiency and economy in the trading process. Expenses to investors as a result of the investment in the Master are approximately the same and redemption rights are not affected. The Master’s commodity broker is CGM and its managing member is CMF. The Master may trade commodity futures and options contracts of any kind, but trades solely energy, energy-related products and grains. In addition, the Master may enter into swap contracts or trade in energy-related products. The commodity interests that are traded by the Master are volatile and involve a high degree of market risk.

As of September 30, 2008, the Partnership owned approximately 23.6% of the Master. On December 31, 2007, the Partnership owned approximately 24.2%, of the Master. It is the Partnership’s intention to continue to invest substantially all of its assets in the Master. The performance of the Partnership is directly affected by the performance of the Master. The Master’s Statements of Financial Condition, including Schedules of Investments and Statements of Income and Expenses and Members’ Capital are included herein.

The accompanying financial statements are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at September 30, 2008 and December 31, 2007 and the results of its operations for the three and nine months ended September 30, 2008 and 2007. 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, 2007.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The Partnership has elected not to provide a Statement of Cash Flows as permitted by Statement of Financial Accounting Standards No. 102 “Statement of Cash Flows-Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale” (“FAS 102”).

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.

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)

The Master’s Statements of Financial Condition and Schedules of Investments as of September 30, 2008 and December 31, 2007 and Statements of Income and Expenses and Members’ Capital for the three and nine months ended September 30, 2008 and 2007 are presented below:

Citigroup AAA Master Fund LLC
Statements of Financial Condition
(Unaudited)


	September 30,		December 31,
	2008		2007

Assets:
Equity in commodity futures trading account:
Cash	$	453,374,331	$	708,737,391
Cash margin		1,620,046		1,620,046
Net unrealized appreciation on open futures contracts		393,480,649		—
Unrealized appreciation on open swap contracts		120,495,587		92,444,714
Commodity options owned, at fair value (cost $851,610,737 and $359,627,764, respectively)		907,003,503		349,972,959

		1,875,974,116		1,152,775,110
Due from brokers		—		5,911,586
Interest receivable		603,558		1,444,226

Total assets	$	1,876,577,674	$	1,160,130,922

Liabilities and Members’ Capital:
Liabilities:
Net unrealized depreciation on open futures contracts	$	—	$	42,694,277
Unrealized depreciation on open swap contracts		46,638,172		15,443,679
Commodity options written, at fair value (premium $623,575,513 and $163,294,959, respectively)		573,237,614		91,112,724
Accrued expenses:
Other		196,955		94,011
Due to brokers		1,024,100		5,772,030
Distribution payable		601,069		1,438,406
Redemptions payable		—		4,122,259

Total liabilities		621,697,910		160,677,386

Members’ Capital:
Members’ Capital, 162,045.1284 and 184,668.8591 Units outstanding in 2008 and 2007, respectively		1,254,879,764		999,453,536

Total liabilities and members’ capital	$	1,876,577,674	$	1,160,130,922

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)

Citigroup AAA Master Fund LLC
Schedule of Investments
September 30, 2008
(Unaudited)


	Number of						% of Members'
	Contracts			Fair Value			Capital
Futures Contracts Purchased
Energy
IPE Gas Oil Nov 08 - Dec 10		5,991		$	(139,145,700	)		(11.09	)%
NYMEX Heating Oil Feb 09 - Aug 11		8,121			(177,536,440	)		(14.15	)
NYMEX LS Crude Oil Nov 08 - Dec 14		7,370			(70,535,684	)		(5.62	)
NYMEX Natural Gas Nov 08 - Dec 13		7,962			(73,183,040	)		(5.83	)
NYMEX NYH RBOB Gas Dec 08 - Dec 09		4,828			(81,312,063	)		(6.48	)
Other					(157,497,300	)		(12.55	)

Total Futures Contracts Purchased					(699,210,227	)		(55.72	)


Futures Contracts Sold
Energy
IPE Brent Crude Oil Dec 08 - Dec 14		(9,288	)		174,633,200			13.92
IPE Gas Oil Oct 08 - Jun 10		(12,491	)		169,793,975			13.53
NYMEX Heating Oil Nov 08 - Dec 09		(7,038	)		141,253,178			11.26
NYMEX Natural Gas Dec 08 - Dec 14		(18,454	)		467,345,620			37.24
Other					139,664,903			11.13

Total Futures Contracts Sold					1,092,690,876			87.08


Net Unrealized Appreciation on Open Futures Contracts					393,480,649			31.36


Options Owned
Energy
IPE Gas Oil C Dec 08 - Dec 10		6,976			68,083,335			5.43
NYMEX Crude Oil EC Dec 08 - Dec 11		6,905			119,258,920			9.50
NYMEX Crude Oil EP Dec 08 - Dec 16		6,112			75,028,840			5.98
NYMEX LS Crude Oil C Dec 08 - Dec 10		9,560			95,097,360			7.58
NYMEX LS Crude Oil P Nov 08 - Dec 10		7,903			116,771,830			9.31
NYMEX Natural Gas EC Nov 08 - May 13		28,017			224,912,929			17.92
Other					207,850,289			16.56

Total Options Owned					907,003,503			72.28


Options Written
Energy
NYMEX LS Crude Oil C Nov 08 - Dec 10		(15,452	)		(64,209,880	)		(5.12	)
NYMEX Natural Gas EP Nov 08 - Mar 11		(5,462	)		(146,399,091	)		(11.66	)
Other					(362,628,643	)		(28.90	)

Total Options Written					(573,237,614	)		(45.68	)


Unrealized Appreciation on Swap Contracts

Energy					120,495,587			9.60

Total Unrealized Appreciation on Swap Contracts					120,495,587			9.60


Unrealized Depreciation on Swap Contracts

Energy					(46,638,172	)		(3.72	)

Total Unrealized Depreciation on Swap Contracts					(46,638,172	)		(3.72	)


Total Fair Value				$	801,103,953			63.84	%

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)

Citigroup AAA Master Fund LLC
Statements of Income and Expenses and Members’ Capital
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Income:
Net gains (losses) on trading of commodity interests:
Net realized gains (losses) on closed positions	$	77,034,339		$	40,752,530		$	(79,595,884	)	$	88,155,998
Change in net unrealized gains (losses) on open positions		116,281,516			(15,786,591	)		475,132,002			18,419,406

Gain (loss) from trading, net		193,315,855			24,965,939			395,536,118			106,575,404
Interest income		1,604,109			6,832,489			4,884,179			22,834,413

Total income (loss)		194,919,964			31,798,428			400,420,297			129,409,817

Expenses:
Brokerage commissions, including clearing fees of $656,578, $592,632, $1,923,105 and $1,691,040, respectively		841,449			834,049			2,388,638			2,445,595
Other		249,870			173,750			598,673			381,249

Total expenses		1,091,319			1,007,799			2,987,311			2,826,844

Net income (loss)		193,828,645			30,790,629			397,432,986			126,582,973
Additions		59,095,923			37,999,813			113,493,965			119,572,352
Redemptions		(108,969,906	)		(75,973,488	)		(250,644,209	)		(195,138,028	)
Distribution of interest income to feeder funds		(1,596,428	)		(6,770,209	)		(4,856,514	)		(22,648,644	)

Net increase (decrease) in Members’ Capital		142,358,234			(13,953,255	)		255,426,228			28,368,653
Members’ Capital, beginning of period		1,112,521,530			1,035,681,807			999,453,536			993,359,899

Members’ Capital, end of period	$	1,254,879,764		$	1,021,728,552		$	1,254,879,764		$	1,021,728,552

Net Asset Value per Unit (162,045.1284 and 192,003.7928 Units outstanding at September 30, 2008 and 2007, respectively)	$	7,744.01		$	5,321.40		$	7,744.01		$	5,321.40

Net income (loss) per Unit of Member Interest	$	1,181.98		$	156.94		$	2,359.78		$	639.09

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)


2.	Financial Highlights:

Changes in Net Asset Value per Redeemable Unit of Limited Partnership Interest for the three and nine months ended September 30, 2008 and 2007 were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Net realized and unrealized gains (losses)*	$	1,425.67		$	144.92		$	2,858.48		$	643.63
Interest income		11.62			44.17			34.31			145.93
Expenses and allocation to Special Limited Partner**		(325.32	)		(58.87	)		(677.90	)		(213.33	)

Increase (decrease) for the period		1,111.97			130.22			2,214.89			576.23
Net Asset Value per Redeemable Unit, beginning of period		8,162.13			6,849.38			7,059.21			6,403.37

Net Asset Value per Redeemable Unit, end of period	$	9,274.10		$	6,979.60		$	9,274.10		$	6,979.60


*		Includes Partnership commissions and expenses allocated from the Master.

**		Excludes Partnership commissions, expenses allocated from the Master and includes allocation to Special Limited Partner in 2008 and 2007.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Ratios to average net assets:***
Net investment income (loss) before allocation to Special Limited Partner****		(3.7	)%		(0.9	)%		(3.7	)%		(0.7	)%

Operating expense		4.2	%		3.5	%		4.3	%		3.7	%
Allocation to Special Limited Partner		3.2	%		0.3	%		6.8	%		1.6	%

Total expenses and allocation to Special Limited Partner		7.4	%		3.8	%		11.1	%		5.3	%

Total return:
Total return before allocation to Special Limited Partner		17.1	%		2.2	%		39.4	%		10.8	%
Allocation to Special Limited Partner		(3.5	)%		(0.3	)%		(8.0	)%		(1.8	)%

Total return after allocation to Special Limited Partner		13.6	%		1.9	%		31.4	%		9.0	%


***		Annualized (except for allocation to Special Limited Partner, if applicable)

****		Interest income allocated from Master less total expenses (exclusive of allocation to Special Limited Partner, if applicable)

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 class using the Limited Partners’ share of income, expenses and average net assets.

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)

Financial Highlights of the Master:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Net realized and unrealized gains (losses)*	$	1,173.66		$	122.84		$	2,335.24		$	526.93
Interest income		9.84			35.00			28.07			114.08
Expenses**		(1.52	)		(0.90	)		(3.53	)		(1.92	)

Increase (decrease) for the period		1,181.98			156.94			2,359.78			639.09
Distribution of interest income to feeder funds		(9.80	)		(34.67	)		(27.91	)		(113.15	)
Net Asset Value per Unit of Member Interest, beginning of period		6,571.83			5,199.13			5,412.14			4,795.46

Net Asset Value per Unit of Member Interest, end of period	$	7,744.01		$	5,321.40		$	7,744.01		$	5,321.40


*		Includes brokerage commissions

**		Excludes brokerage commissions


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Ratios to average net assets:***
Net investment income (losses)****		0.2	%		2.2	%		0.2	%		2.7	%

Operating expense		0.4	%		0.4	%		0.4	%		0.4	%

Total return		18.0	%		3.0	%		43.6	%		13.3	%


***		Annualized

****		Interest income less total expenses

The above ratios may vary for individual investors based on the timing of capital transactions during the period.

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(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 Partnership invests substantially all of its assets through a “master/feeder” structure. The results of the Partnership’s investment in the Master are shown in the Statements of Income and Expenses and Partners’ Capital.

The customer agreement between the Partnership and CGM and the Master and CGM give the Partnership and the Master, respectively, the legal right to net unrealized gains and losses on open futures positions.

All of the commodity interests owned by the Master are held for trading purposes. The average fair values of these interests during the nine and twelve months ended September 30, 2008 and December 31, 2007, based on a monthly calculation, were $632,536,016 and $276,061,299, respectively. The fair values of these commodity interests, including options and swaps thereon, if applicable, at September 30, 2008 and December 31, 2007 were $801,103,953 and $293,166,993, respectively. Fair values for exchange-traded commodity futures and options are based on quoted market prices for those futures and options. Fair values for all other financial instruments for which market quotations are not readily available are based on other measures of fair value deemed appropriate by the General Partner.

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


4.	Fair Value Measurements:

Investments. The Partnership values its investment in the Master at its net asset value per unit as calculated by the Master. The Master values its investments as described in note 2 of the Master’s notes to the annual financial statements as of December 31, 2007.

Fair Value Measurements. The Partnership adopted Statements of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”) as of January 1, 2008. SFAS 157 defines fair value 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. This statement establishes a framework for measuring fair value and expands disclosures regarding fair value measurements in accordance with GAAP. 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. The Partnership did not apply the deferral allowed by FASB Staff Positions No. FAS 157-2, Effective Date of FASB Statement No. 157, for nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

The Partnership values investments in master partnerships (other commodity pools) where there are no other rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Master (Level 2). The value of the Partnership’s investment in the Master reflects its proportional interest in the Master. As of September 30, 2008, the Partnership did not directly hold any derivative instruments that are based on quoted prices in active markets for identical assets (Level 1) or unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).


			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
	9/30/2008		(Level 1)		(Level 2)		(Level 3)

Assets
Investment in Master	$	296,410,700	$	—	$	296,410,700	$	—

Total fair value	$	296,410,700	$	—	$	296,410,700	$	—

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)

Investments. All commodity interests of the Master (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 in equity in commodity futures trading account. Any change in net unrealized gain or loss from the preceding period is reported in the Statements of Income and Expenses and Members’ Capital.

Fair Value Measurements. The Master adopted Statements of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”) as of January 1, 2008. SFAS 157 defines fair value 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. This statement establishes a framework for measuring fair value and expands disclosures regarding fair value measurements in accordance with GAAP. 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. The Master did not apply the deferral allowed by FASB Staff Positions No. FAS 157-2, Effective Date of FASB Statement No. 157, for nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

The Master considers prices for exchange traded commodity futures and options contracts to be based on quoted prices in active markets for identical assets (Level 1). The values of forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets from observable inputs (Level 2). Investments in partnerships (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). As of September 30, 2008, the Master did not hold any derivative instruments that are priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).


			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
	9/30/2008		(Level 1)		(Level 2)		(Level 3)

Assets
Futures	$	393,480,649	$	393,480,649	$	—	$	—
Options owned		907,003,503		907,003,503		—		—
Swaps		120,495,587		—		120,495,587		—

Total assets		1,420,979,739		1,300,484,152		120,495,587		—

Liabilities
Options written	$	573,237,614	$	573,237,614	$	—	$	—
Swaps		46,638,172		—		46,638,172		—

Total liabilities		619,875,786		573,237,614		46,638,172		—

Total fair value	$	801,103,953	$	727,246,538	$	73,857,415	$	—

Smith Barney AAA Energy Fund L.P.
Notes to Financial Statements
September 30, 2008
(Unaudited)


5.	Financial Instrument Risks:

In the normal course of its business, the Partnership, through its investment in the Master, is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps, whose values are based upon an underlying asset, index or reference rate, and generally represent future commitments to exchange currencies or cash flows or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter (“OTC”). Exchange-traded instruments are standardized and include futures and certain option contracts. OTC contracts are negotiated between contracting parties and include forwards, swaps and certain options. Specific market movements of the commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer, or seller, of an option has unlimited risk. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange traded instruments because of the greater risk of default by the counterparty to an OTC contract. The Master’s swap contracts are OTC contracts.

Market risk is the potential for changes in the value of the financial instruments traded by the Master due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership is 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. Credit risk with respect to exchange-traded instruments is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transactions. The Master’s risk of loss in the event of counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and not represented by the contract or notional amounts of the instruments. The Master has credit risk and concentration risk because the sole counterparty or broker with respect to the Master’s assets is CGM.

The Advisor will concentrate the Partnership’s trading in energy related markets. Concentration in a limited number of commodity interests may subject the Partnership’s account to greater volatility than if a more diversified portfolio of contracts were traded on behalf of the Partnership.

As both a buyer and seller of options, the Partnership pays or receives 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 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 does not consider these contracts to be guarantees as described in FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees” (“FIN 45”).

The General Partner/Managing Member monitors and controls the Master’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Master is subject. These monitoring systems allow the General Partner/Managing Member to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, on-line monitoring systems provide account analysis of futures, forwards and options positions by sector, margin requirements, gain and loss transactions and collateral positions.

The majority of these instruments mature within one year of the inception date. However, due to the nature of the Master’s business, these instruments may not be held to maturity.


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. Its only assets are its investment in the Master, cash and distribution receivable. The Master does not engage in the sale of goods or services. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Master. While substantial losses could lead to a material decrease in liquidity, no such losses occurred during the third quarter of 2008.

The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by its investment in the Master, expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

For the nine months ended September 30, 2008, Partnership capital increased 18.6% from $239,341,043 to $283,764,099. This increase was attributable to net income from operations of $70,091,562, coupled with the addition of 2,008.4646 Redeemable Units of Special Limited Partnership Interest totaling $17,248,562, which was partially offset by the redemptions of 4,345.3194 Redeemable Units of Limited Partnership Interest resulting in an outflow of $33,917,067 and 970.4447 Redeemable Units of Special Limited Partnership Interest totaling $9,000,001. Future redemptions could impact the amount of funds available for investment in the Master in subsequent periods.

The Master’s capital consists of the capital contributions of the members as increased or decreased by realized and/or unrealized gains or losses on commodity futures trading, expenses, interest income, redemptions of Units and distributions of profits, if any.

For the nine months ended September 30, 2008, the Master’s capital increased 25.6% from $999,453,536 to $1,254,879,764. This increase was attributable to net income from operations of $397,432,986, coupled with the addition of 18,066.1741 Redeemable Units totaling $113,493,965, which was partially offset by the redemptions of 40,689.9048 Redeemable Units totaling $250,644,209 and distribution of interest income to feeder funds totaling $4,856,514 to the non-managing members of the Master. Future redemptions can impact the amount of funds available for investments in commodity contract positions in subsequent periods.

Critical Accounting Policies

Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Investments. The Partnership values its investment in the Master at its net asset value per unit as calculated by the Master. The Master values its investments as described in Note 2 of the Master’s notes to the annual financial statements as of December 31, 2007.

Fair Value Measurements. For disclosures related to fair value measurements pursuant to SFAS 157, refer to note 4 in the notes to financial statements.

Income and Expenses Recognition. All of the income and expenses and unrealized and realized gains and losses from the commodity transactions of the Master are allocated pro rata among the investors at the time of such determination. The Master’s income and expense recognition is discussed in note 2 of the Master’s notes to the annual financial statements as of December 31, 2007.

Options. The Master may purchase and write (sell) options. 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 Master writes an option, the premium received is recorded as a liability in the Statements of Financial Condition and marked to market daily. When the Master purchases an option, the premium paid is recorded as an asset in the Statements of Financial Condition and marked to market daily.

Forward Foreign Currency Contracts. Foreign currency contracts are those contracts where the Partnership agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Foreign currency contracts are valued daily, and the Partnership’s net equity therein, representing unrealized gain or loss on the contracts, as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting dates, is included in the Statements of Financial Condition. Realized gains (losses) and changes in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur and are included in the Statements of Income and Expenses and Partners’ Capital.

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.

In 2007, the Partnership adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 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” of being 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 has concluded that the adoption of FIN 48 had no impact on the operations of the Partnership for the nine months ended September 30, 2008 and that no provision for income tax is required in the Partnership’s financial statements.

The following are the major tax jurisdictions for the Partnership and the earliest tax year subject to examination: United States – 2004.

Recent Accounting Pronouncement. On March 19, 2008, Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The application of FAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The standard expands the disclosure requirements for derivatives and hedged items and has no impact on how the Partnership accounts for derivatives (the Partnership does not have hedged items). Management is evaluating the enhanced disclosure requirements and does not believe that there will be any material impact on the financial statement disclosures.

Results of Operations

During the Partnership’s third quarter of 2008, the Net Asset Value per Redeemable Unit increased 13.6% from $8,162.13 to $9,274.10 as compared to an increase of 1.9% in the same period of 2007. The Partnership, for its own account, through its investment in the Master experienced a net trading gain before brokerage commissions and related fees in the third quarter of 2008 of $45,766,824. Gains were primarily attributable to the Master’s trading of commodity futures in NYMEX Energy Swaps, NYMEX Natural Gas, NYMEX Crude Oil, NYMEX Gasoline, NYMEX Heating Oil and Brent Crude Oil and Corn, and were partially offset by losses in Unleaded Gasoline, IPE Gas Oil, and OTC Energy Swaps. The Partnership, for its own account through its investment in the Master experienced a net trading gain before brokerage commissions and related fees in the third quarter of 2007 of $6,367,660. Gains were primarily attributable to the Master’s trading of commodity futures in NYMEX Energy Swaps, NYMEX Gasoline, NYMEX Heating Oil, NYMEX Natural Gas, IPE Gas Oil, IPE Freight Index and Corn, and were partially offset by losses in NYMEX Crude Oil, NYMEX Unleaded Gas and OTC Energy Swaps.

The third quarter of 2008 finished with one of the most unstable and volatile months in the history of the U.S. financial and commodity markets. During the quarter, the world's credit markets virtually seized up, commodity prices plunged and most major equity indices declined significantly, while some of the largest U.S. financial institutions were under pressure. High volatility across most market sectors was a manifestation of investor fears and anxiety. The lingering but still powerful effect of the housing and sub-prime credit crisis continued to wreak havoc on Wall Street, while generating social and political acrimony across the U.S. as the nation debated the cost and merit of the government's policy response. Despite these events, the Partnership returned gains every month for the quarter as volatility jumped and prices expectedly declined.

In July, the Partnership realized its largest monthly gains in the quarter as prices tumbled. The deterioration in demand side fundamentals in oil materialized and prices dropped more than 15% in two weeks after reaching a record level of $146.43 per barrel. Accumulation of refined product inventory in Asia and surplus in global oil at sea also added to the weakening fundamentals, providing profits for the Partnership. While oil prices consolidated in August, profits were realized primarily in petroleum spread strategies and refined product spreads. Weakness in the distillate markets also proved fruitful in September. Spread positions in favor of a short bias in low sulfur diesel and weakness in European distillate market relative to their U.S. counterparts continued to generate profits for the Partnership.

During the nine months ended September 30, 2008, the Net Asset Value per Redeemable Unit increased 31.4% from $7,059.21 to $9,274.10 as compared to an increase of 9.0% in the same period of 2007. The Partnership experienced a net trading gain before brokerage commissions and related fees in the nine months ended September 30, 2008 of $94,346,928. Gains were primarily attributable to the Master’s trading of commodity futures in NYMEX Energy Swaps, NYMEX Natural Gas, NYMEX Crude Oil, NYMEX Heating Oil, Brent Crude Oil, IPE Gas Oil and Corn, and were partially offset by losses in NYMEX Gasoline, Unleaded Gasoline and OTC Energy Swaps. The Partnership experienced a net trading gain before brokerage commissions and related fees in the nine months ended September 30, 2007 of $26,971,829. Gains were primarily attributable to the Master’s trading of commodity futures in NYMEX Energy Swaps, NYMEX Gasoline, NYMEX Heating Oil, NYMEX Natural Gas, NYMEX Unleaded Gas, IPE Gas Oil, IPE Freight Index, Corn and OTC Energy Swaps, and were partially offset by losses in NYMEX Crude Oil.

Commodity futures markets are highly volatile. The potential for broad and rapid price fluctuations increases the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Partnership (and the Master) depends on the Advisor’s ability to forecast price changes in energy and energy-related commodities. Such price changes are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that the Advisor correctly makes such forecasts, the Partnership (and the Master) expects to increase capital through operations.

Brokerage commissions are based on the number of trades executed by the Advisor and the Partnership’s ownership percentage. Brokerage commissions and fees for the three and nine months ended September 30, 2008 increased by $462,632 and $1,028,997, respectively as compared to the corresponding periods in 2007. The increase in commissions and fees is primarily due to an increase in the number of trades during the three and nine months ended September 30, 2008 as compared to the corresponding periods in 2007.

Interest income on 80% of the Partnership’s average daily equity allocated to it by the Master was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days. CGM may continue to maintain the Master’s assets in cash and/or place all of the Master’s assets in 90-day Treasury bills and pay the Partnership its allocated shares of 80% of the interest earned on the Treasury bills purchased. CGM will retain 20% of any interest earned on Treasury bills purchased. Interest income allocated from the Master for the three and nine months ended September 30, 2008 decreased by $1,277,970 and $4,457,738, respectively as compared to the corresponding periods in 2007. The decrease in interest income is primarily due to lower U.S. Treasury Bill rates for the Partnership during the three and nine months ended September 30, 2008, as compared to the corresponding periods in 2007.

Management fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Management fees for the three and nine months ended September 30, 2008 increased by $137,178 and $97,077, respectively as compared to the corresponding periods in 2007. The increase in management fees is due to higher average net assets during the three and nine months ended September 30, 2008 as compared to the corresponding periods in 2007.

Special Limited Partner profit share allocations (incentive fees) are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the advisory agreement between the Partnership, the General Partner and the Advisor. The profit share allocation accrued for the three and nine months ended September 30, 2008 was $8,581,435 and $17,248,562, respectively. The profit share allocation accrued for the three and nine months ended September 30, 2007 was $831,530 and $4,099,328.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

All of the Partnership’s assets are subject to the risk of trading loss through its investment in the Master. The Master is a speculative commodity pool. The market sensitive instruments held by the Master are acquired for speculative trading purposes, and all or substantially all of the Partnership’s capital is subject to the risk of trading loss through its investment in the Master. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Master’s and the Partnership’s main line of business.

Market movements result in frequent changes in the fair value of the Master’s open positions and, consequently, in its earnings and cash flow. The Master’s and the Partnership’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the value of financial instruments and contracts, the diversification results among the Master’s open positions and the liquidity of the markets in which the Master trades.

The Master rapidly acquires and liquidates both long and short positions in a range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Master’s past performance is not necessarily indicative of its future results.

Value at Risk is a measure of the maximum amount which the Master could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Master’s speculative trading and the recurrence in the markets traded by the Master of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Master’s experience to date (i.e., “risk of ruin”). In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Master’s losses in any market sector will be limited to Value at Risk or by the Master’s attempts to manage its market risk.

Exchange maintenance margin requirements have been used by the Master as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.

The following table indicates the trading Value at Risk associated with the Master’s open positions by market category as of September 30, 2008 and the highest, lowest and average value during the three months ended September 30, 2008. All open position trading risk exposures of the Master have been included in calculating the figures set forth below. As of September 30, 2008, the Master’s total capital was $1,254,879,764. 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, 2007.

September 30, 2008
(Unaudited)


						Three Months Ended September 30, 2008
			% of Total			High		Low		Average
Market Sector	Value at Risk		Capital			Value at Risk		Value at Risk		Value at Risk*

Energy	$	271,550,416		21.64	%	$	347,331,891	$	160,617,551	$	244,071,688
Energy Swaps		1,620,046		0.13	%		1,620,046		1,620,046		1,620,046

Total	$	273,170,462		21.77	%

*Average monthly Values at Risk


Item 4T.	Controls and Procedures

The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934 (the “Exchange Act”) is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

Management is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.

The General Partner’s CEO and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2008 and, based on that evaluation, the CEO and CFO have concluded that at that date the Partnership’s disclosure controls and procedures were effective.

The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. 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 U.S. generally accepted accounting principles, 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 financial reporting during the fiscal quarter ended September 30, 2008 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 our discussion set forth under Part I, Item 3 “Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as updated by our Quarterly Report on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008.

Research Analyst Litigation

On September 30, 2008, the Court of Appeals for the Second Circuit vacated the District Court’s order granting class certification in the matter IN RE SALOMON ANALYST METROMEDIA. Thereafter, on October 1, 2008, the parties reached a settlement pursuant to which Citigroup will pay $35 million to members of the settlement class that purchased or otherwise acquired MFN securities during the class period. The settlement is subject to judicial approval. The proposed settlement amount is covered by existing litigation reserves.

Subprime-Mortgage-Related Litigation

Citigroup Inc., Citigroup Global Markets Inc. and several current and former officers and directors, and numerous other financial institutions, have been named as defendants in a class action lawsuit filed on September 30, 2008, alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 arising out of offerings of Citigroup securities issued in 2006 and 2007. This action, LOUISIANA SHERIFFS’ PENSION AND RELIEF FUND v. CITIGROUP INC., et al., is currently pending in New York state court.

Citigroup Global Markets Inc., along with numerous other firms, has been named as a defendant in several lawsuits by shareholders of Ambac Financial Group, Inc. for which CGMI underwrote securities offerings. These actions assert that CGMI violated Sections 11 and 12 of the Securities Act of 1933 arising out of allegedly false and misleading statements contained in the registration statements and prospectuses issued in connection with those offerings. Several of these actions have been consolidated under the caption IN RE AMBAC FINANCIAL GROUP, INC. SECURITIES LITIGATION, pending in the United States District Court for the Southern District of New York, and in which a consolidated amended class action complaint was filed on August 22, 2008.

On September 12, 2008, defendants, including Citigroup Inc. and Citigroup Global Markets Inc., moved to dismiss the complaint in IN RE AMERICAN HOME MORTGAGE SECURITIES LITIGATION.

Auction Rate Securities-Related Litigation

On September 19, 2008, MILLER v. CALAMOS GLOBAL DYNAMIC INCOME FUND, et al., which had been pending in the United States District Court for the Southern District of New York and in which Citigroup Global Markets Inc. had been named as a defendant, was voluntarily dismissed.

On August 25, 2008, Lead Plaintiffs in IN RE CITIGROUP AUCTION RATE SECURITIES LITIGATION, pending in the United States District Court for the Southern District of New York, filed an amended consolidated class action complaint.

Citigroup Inc. and Citigroup Global Markets Inc., along with numerous other financial institutions, have been named as defendants in several lawsuits alleging that defendants artificially restrained trade in the market for auction rate securities in violation of the Sherman Act. These actions are (1) MAYOR AND CITY COUNCIL OF BALTIMORE, MARYLAND v. CITIGROUP INC., et al., and (2) MAYFIELD v. CITIGROUP INC., et al., and both are pending in the United States District Court for the Southern District of New York.

On August 7, 2008, Citigroup reached a settlement with the New York Attorney General, the Securities and Exchange Commission, and other state regulatory agencies, pursuant to which Citigroup agreed to offer to purchase at par ARS that are not auctioning from all Citigroup individual investors, small institutions (as defined by the terms of the settlement), and charities that purchased ARS from Citigroup prior to February 11, 2008. In addition, Citigroup agreed to pay a $50 million fine to the State of New York and a $50 million fine to the other state regulatory agencies.

A consolidated amended class action complaint was filed in IN RE MAT FIVE SECURITIES LITIGATION on October 2, 2008.

On July 21, 2008, the Court approved the voluntary dismissal without prejudice of FERGUSON FAMILY TRUST v. FALCON STRATEGIES TWO LLC, et al.

Citigroup and its administration and investment committees filed a motion to dismiss the purported class action complaint in LEBER v. CITIGROUP, INC., et al., on August 29, 2008. The motion is currently pending.


Item 1A.	Risk Factors

There are no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and under Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008.

In June 2008, several bills were proposed in the U.S. Congress in response to record energy and agricultural prices. Some of the pending legislation, if enacted, could limit trading by speculators in futures markets. Other potentially adverse regulatory initiatives could develop suddenly and without notice. At this time Management is unable to determine the potential impact on the Partnership.


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

The following chart sets forth the purchases of Redeemable Units by the Partnership.

These units were purchased by accredited investors as defined in Regulation D.

(d) Maximum Number

(or Approximate

(c) Total Number

Dollar Value) of

of Redeemable Units

Redeemable Units that

(a) Total Number

(b) Average

Purchased as Part

May Yet Be

of Redeemable Units

Price Paid per

of Publicly Announced

Purchased Under the

Period

Purchased*

Redeemable Unit**

Plans or Programs

July 1, 2008 –
July 31, 2008

562.2854

8,685.31

N/A

August 1, 2008 –
August 31, 2008

136.3546

8,977.89

N/A

September 1, 2008 –
September 30, 2008

186.2183

9,274.10

N/A

884.8583

8,854.31

N/A


		Page
		Number

PART I - Financial Information:

Item 1.	Financial Statements:

	Statements of Financial Condition at September 30, 2008 and December 31, 2007 (unaudited)	3

	Statements of Income and Expenses and Partners’ Capital for the three and nine months ended September 30, 2008 and 2007 (unaudited)	4

	Notes to Financial Statements, including the Financial Statements of Citigroup AAA Master Fund LLC (unaudited)	5 – 14

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15 – 18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

Item 4T.	Controls and Procedures	20

PART II - Other Information		21 – 25


	Number of					% of Members’
	Contracts		Fair Value			Capital

Futures Contracts Purchased
Energy			$	162,833,367			16.29	%


Futures Contracts Sold
Energy
IPE Brent Crude Oil Feb 08 - Dec 10		6,602		(77,608,996	)		(7.76	)
Other				(126,738,498	)		(12.68	)
Grains				(1,180,150	)		(0.12	)

Total Futures Contracts Sold				(205,527,644	)		(20.56	)


Net Unrealized Depreciation on Open Futures Contracts				(42,694,277	)		(4.27	)


Options Owned
Energy
NYMEX Crude Oil Mar 08 - Dec 11		6,694		62,612,920			6.27
NYMEX Natural Gas Feb 08 - Oct 12		27,108		218,208,060			21.83
Other				66,409,454			6.65
Grains				2,742,525			0.27

Total Options Owned				349,972,959			35.02


Options Written
Energy				(91,112,724	)		(9.12	)


Unrealized Appreciation on Swap Contracts
Energy				92,444,714			9.25


Unrealized Depreciation on Swap Contracts
Energy				(15,443,679	)		(1.55	)

Total fair value			$	293,166,993			29.33	%


		/s/ Jerry Pascucci

		Jerry Pascucci
		Citigroup Managed Futures LLC
		President and Director


		/s/ Jennifer Magro

		Jennifer Magro
		Citigroup Managed Futures LLC
		Chief Financial Officer and Director


Item 4.	Submission of Matters to a Vote of Security Holders – None


1.	I have reviewed this quarterly report on Form 10-Q of Smith Barney AAA Energy Fund L.P. (the “registrant”);

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition and results of operations of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Item 6.	Exhibits


Date:	November 14, 2008